-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DQJVCNW4iGs8WM+gejvzttErVZfhFRIYqqdJU2zqA1BO6mTE4Uu8qhOf0S0Nf+Ji T6F7iK/7GInXEq/5gfAebg== 0000912057-97-003767.txt : 19970221 0000912057-97-003767.hdr.sgml : 19970221 ACCESSION NUMBER: 0000912057-97-003767 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 73 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970210 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLYMPIC FINANCIAL LTD CENTRAL INDEX KEY: 0000879674 STANDARD INDUSTRIAL CLASSIFICATION: SHORT-TERM BUSINESS CREDIT INSTITUTIONS [6153] IRS NUMBER: 411664848 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-20526 FILM NUMBER: 97521281 BUSINESS ADDRESS: STREET 1: 7825 WASHINGTON AVE S CITY: MINNEAPOLIS STATE: MN ZIP: 55439-2435 BUSINESS PHONE: 6129429880 MAIL ADDRESS: STREET 1: 7825 WASHINGTON AVENUE S CITY: MINNEAPOLIS STATE: MN ZIP: 55439-2435 10-K405 1 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-20526 ------------------------ OLYMPIC FINANCIAL LTD. (Exact name of registrant as specified in its charter) MINNESOTA 41-1664848 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 7825 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55439-2435 (Address of principal executive offices) Registrant's telephone number, including area code: (612) 942-9880 ------------------------ Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK ($.01 PAR VALUE) CLASS A PREFERRED STOCK ($.01 PAR VALUE) RIGHTS (Title of Class) Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing sale price of the Common Stock as quoted on the New York Stock Exchange on January 14, 1997 was approximately $614.7 million. The number of shares of the registrant's Common Stock outstanding as of January 14, 1997 was 37,431,189. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the documents listed below have been incorporated by reference into the indicated part of this Form 10-K.
DOCUMENT INCORPORATED PART OF FORM 10-K - ----------------------------------------------------------------- -------------------------- Proxy Statement for 1997 Annual Meeting of Shareholders Items 10, 11, 12 and 13 to be held April 28, 1997 of Part III
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 10-K INDEX PART I Item 1. Business........................................................................ 3 Item 2. Properties...................................................................... 19 Item 3. Legal Proceedings............................................................... 19 Item 4. Submission of Matters to a Vote of Security Holders............................. 19 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........... 20 Item 6. Selected Financial Data......................................................... 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................... 23 Item 8. Financial Statements and Supplementary Data..................................... 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................................... 60 PART III Item 10. Directors and Executive Officers of the Registrant.............................. 60 Item 11. Executive Compensation.......................................................... 60 Item 12. Security Ownership of Certain Beneficial Owners and Management.................. 60 Item 13. Certain Relationships and Related Transactions.................................. 60 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................ 60
2 PART I. ITEM 1. BUSINESS GENERAL The Company purchases, securitizes and services consumer automobile loans originated primarily by car dealers affiliated with major foreign and domestic manufacturers. At December 31, 1996, the Company had purchased loans from more than 7,700 dealers in 39 states, a substantial majority of which sell loans to the Company on a regular basis. Loans are purchased through 17 regional buying centers serving as "hubs" in 14 states, supplemented by a network of dealer development representatives ("DDRs"). DDRs generate loans in their assigned markets, or "spokes," while credit approval and loan processing are generally performed at the "hub" or at the Company's headquarters in Minneapolis, Minnesota. As a result of this strategy, the Company has expanded the number of dealers in its network and has significantly increased its annual volume of automobile loans purchased, from $743.3 million in 1994 to $2.8 billion in 1996, without incurring the additional costs that would be associated with establishing a proportionate number of new buying centers. The Company services loans primarily through four regional servicing and collection centers. The Company purchases each loan in accordance with its underwriting procedures, which focus on a borrower's qualifications and collateral value. The Company's underwriting criteria do not distinguish between new and used vehicles, which represented approximately 28.7% and 71.3%, respectively, of the Company's loan purchases in 1996. The Company seeks to maximize gross interest rate spreads relative to expected net losses by maintaining a tiered pricing system based on the borrower's credit characteristics as measured by the Company's underwriting and proprietary credit scoring criteria. The Company markets its loan products to dealers under two programs, designated Premier and Classic. "Premier" and "Classic" are proprietary trademarks of the Company. Premier borrowers generally have stronger credit characteristics than those of Classic borrowers. At December 31, 1996, the Company was purchasing approximately 50% of its aggregate loans under each of the Classic and the Premier programs. The Company may change its loan purchase mix at any time and from time to time. The Company considers substantially all of the loans it purchases under both the Premier and Classic programs to be in the "prime" or "non-prime" loan categories, but does not consider the loans it purchases to be in the "sub-prime" loan category. In accordance with prevailing industry practice, the Company pays an up-front dealer participation to the originating dealer for each loan purchased. These dealer participations vary in amount among the Company's loan products and are generally greater under the Premier program than under the Classic program. The Company primarily uses warehouse facilities to fund the initial purchase of loans. The Company securitizes purchased loans as asset-backed securities, generally on a quarterly or more frequent basis. In its securitizations, the Company, through a special purpose subsidiary, transfers loans to newly-formed securitization trusts which issue one or more classes of asset-backed securities. The asset-backed securities are simultaneously sold to investors and the Company recognizes a gain on the sale of the loans. Each month, collections of principal and interest on the securitized loans are used by the trustee to pay the holders of the related asset-backed securities, to establish and maintain spread accounts as a source of cash to cover shortfalls in collections and to pay expenses associated with the securitizations and subsequent servicing. After such application by the trustee, amounts in excess of those necessary to satisfy requirements associated with the asset-backed securities are generally distributed to the Company, subject to its agreements with Financial Security Assurance Inc. ("FSA"). All of the Company's securitization trusts and one of the Company's warehouse facilities are credit-enhanced through financial guaranty insurance policies, issued by FSA, which insure payments of principal and interest due on the related asset-backed securities. Asset-backed securities insured by FSA have been rated AAA by Standard & Poor's and Aaa by Moody's Investors Service, Inc. 3 The Company acts as the servicer of all loans originated by it and securitized in return for a monthly servicing fee. Until October 1996, servicing and collection functions were provided through the Company's national servicing and collections center located in Minneapolis, Minnesota, and in each of its 17 "hubs." In response to the rapid growth of its servicing portfolio, continued expansion of its Classic program (which generally requires greater collection efforts than its Premier program), and increases in delinquencies and default rates on its servicing portfolio, the Company substantially increased its servicing and collection staff, and in October 1996, implemented a strategy to regionalize its servicing and collection capabilities into four new locations: Charlotte, North Carolina; Dallas, Texas; Denver, Colorado and Minneapolis, Minnesota. STRATEGIES The Company's business objective is to maximize the volume and profitability of loans it purchases, securitizes and services. To achieve this objective, the Company employs the following strategies: - EMPHASIS ON DEALER RELATIONSHIPS -- The Company believes that one of its key competitive advantages is its ability to identify and meet a dealer's financing needs. When presented with a loan application, the Company attempts to notify the dealer within one hour or less whether it will approve, conditionally approve or deny the automobile loan for purchase from the dealer. The Company's business hours generally coincide with those of the dealership and, in some cases, the Company will provide loan processing on the dealer's premises during dealer promotions. When the Company considers a borrower's credit quality to be adequate, the Company may provide the dealer with flexibility in developing loan structures to accommodate a borrower's needs, such as extended payment terms or low down-payment requirements. To further assist the dealer, the Company may perform more in-depth underwriting analysis when warranted by special circumstances. A DDR maintains frequent contacts with the dealer and recommends service enhancements from time to time. By employing consistent loan underwriting and purchasing procedures, the Company believes that it provides the dealer with a reliable and consistent source of financing. - TIERED PRICING STRATEGY -- The Company maintains a tiered pricing system, allowing it to price different loan products according to the profiles of borrowers' credit characteristics as measured by the Company's proprietary credit scoring system. The Company's tiered pricing system seeks to (i) maximize gross interest rate spreads relative to expected net losses within each credit tier, (ii) provide a greater opportunity to expand its automobile loan market share through loan products that address a greater variety of customer needs, and (iii) reduce initial cash requirements relative to the Premier program because the Company offers lower dealer participations on Classic loans. - MAINTENANCE OF UNDERWRITING PROCEDURES -- The Company has developed a proprietary credit scoring system designed to maintain consistent underwriting procedures for its loan authorizations. The Company's credit scoring system monitors six evaluation criteria, including debt-to-income, payment-to-income, loan-to-value, bankruptcy score, credit score and loan size. Based on the results of the credit scoring system, each loan application is reviewed by one of the Company's credit specialists and, as appropriate under the Company's underwriting procedures, one or more credit managers, to determine whether the loan should be approved. To monitor the integrity of the underwriting procedures, management tracks on a daily basis the approval rates and delinquency and loss rates by credit specialist, buying center and dealer. - SERVICING -- The Company has regionalized its servicing and collection functions and in 1996 established four regional centers located in Charlotte, North Carolina; Dallas, Texas; Denver, Colorado and Minneapolis, Minnesota. These centers are staffed with trained personnel responsible for various servicing, collection and repossession activities. They are assisted by highly automated telephone dialing systems which improve the Company's ability to make early contact with delinquent obligors. In addition the Company utilizes a computerized collection system to aid its servicing and collection centers. The Company regularly monitors and periodically evaluates its 4 servicing and collection resources with a view to improving their procedures and anticipating expansion of purchase volume or changes in product mix. - FUNDING AND LIQUIDITY THROUGH WAREHOUSING AND SECURITIZATIONS -- The Company funds the acquisition of automobile loans principally through several warehouse facilities including a bank credit facility and two facilities with asset-backed commercial paper programs. Currently, these facilities provide sufficient capacity to handle the Company's loan purchases. The Company securitizes purchased loans as asset-backed securities and uses such securitizations as a cost competitive source of capital compared to traditional sources of corporate debt financing. Securitization enables the Company to sell automobile loans on a regular basis, while retaining the right to receive future servicing fees and excess cash flows. Securitization also allows the Company to use the net proceeds from such sales to fund the purchase of additional automobile loans. - RETAILING OF REPOSSESSED AUTOMOBILES -- The Company channels a substantial majority of its repossession inventory through retail markets, primarily retail used car consignment lots. The Company believes that the greater recoveries available from the retail market justify the costs of maintaining unsold repossession inventory and managing the retail program. In addition, the use of retail markets provides the Company with an opportunity to finance the sale of repossessed automobiles to new buyers. AUTOMOBILE DEALER PROGRAM OVERVIEW. The following table describes the growth in the number of dealers with whom the Company has entered into a dealer agreement during the three years ended December 31, 1996. A substantial majority of these dealers sell loans to the Company on a regular basis.
OPENING REGIONAL BUYING CENTER DATE 1994 1995 1996 - ---------------------------------------------------------- ----------- --------- --------- --------- Minnesota................................................. 6/90 340 645 823 Colorado.................................................. 4/92 240 414 500 North Texas............................................... 11/92 334 467 534 Washington................................................ 3/93 248 409 532 Arizona................................................... 7/93 136 266 344 Florida................................................... 8/93 169 332 477 Georgia................................................... 11/93 250 395 499 South Texas (1)........................................... 2/94 175 333 311 Northern California....................................... 6/94 115 286 424 Missouri.................................................. 6/94 163 403 547 Massachusetts............................................. 8/94 123 400 581 Tennessee................................................. 10/94 51 218 300 Ohio...................................................... 3/95 -- 208 395 North Carolina............................................ 5/95 -- 309 513 Southern California....................................... 12/95 -- 25 303 New York.................................................. 3/96 -- -- 339 West Texas (1)............................................ 7/96 -- -- 305 --------- --------- --------- Totals................................................ 2,344 5,110 7,727 --------- --------- --------- --------- --------- ---------
- ------------------------ (1) Prior to July 1996, the West Texas region was included in the South Texas region. The Company believes that the volume and quality of the loans it acquires depends upon its ability to establish and maintain satisfactory relationships with automobile dealers. The Company's DDRs and other loan purchasing personnel emphasize dealer service. The Company attempts to identify the particular service 5 needs of dealers and to provide a reliable source of financing for qualified automobile buyers. DDRs are the Company's primary contact with its dealers and are responsible for prospecting new dealerships, selling the Company's programs, and cultivating dealer relationships. DDRs train dealer personnel in the Company's programs and meet with dealer management periodically in an effort to ensure the dealer's needs and expectations are being satisfied. DDRs serving in the Company's "spokes" typically operate within a 200-mile radius of a regional buying center. The Company's cost in maintaining DDRs is limited to compensation determined solely on the basis of loan volume generated in their respective territories. LOAN PURCHASES AND UNDERWRITING LOAN PURCHASES. Retail automobile buyers are customarily directed to a dealer's finance and insurance department to finalize their purchase agreement and to review potential financing sources and rates available from the dealer. If the customer elects to pursue financing through the dealer, an application is taken for submission to the dealer's financing sources. The Company's agreements with its dealers are non-exclusive and, typically, a dealer will submit the purchaser's application to more than one financing source for review. The dealer in consultation with the borrower will decide which source will finance the automobile purchase based upon the rates being offered, the terms for approval, dealer participations or certain incentives offered from time to time in accordance with captive wholesale financing arrangements with the dealer's primary supplier of automobiles. When presented with a loan application, the Company attempts to notify the dealer within an hour or less whether it will approve, conditionally approve or deny the loan for purchase from the dealer. A loan purchase by the Company generally occurs simultaneously with the purchase by the buyer of the related automobile and the making of the loan to the buyer by the dealer. The buyer's purchase generally is not completed until the Company or another financing source approves a loan. If the application is approved by the Company and the buyer accepts the terms of the financing, the buyer enters into an installment contract or secured note with the dealer on a form prepared and provided to the dealer by the Company. At the bottom or reverse of the contract or note is an assignment of the loan to the Company which is signed by the dealer. UNDERWRITING. The Company purchases each loan in accordance with its established underwriting procedures. The Company's underwriting procedures include scoring the borrower's loan application in accordance with the Company's proprietary credit scoring system and comparing such credit scores to established underwriting criteria. For borrowers with credit scores falling outside predetermined criteria, the Company requires additional review and approval by supervisory personnel in order to determine whether to approve such loans. These procedures are intended to assess the applicant's ability to repay the amounts due on the loan and the adequacy of the financed vehicle as collateral. The Company's underwriting procedures do not distinguish between new and used vehicles. The Company maintains a tiered pricing system, allowing it to price loans according to the borrower's credit characteristics. The Company markets its loan products to automobile dealers through its Premier and Classic programs. Premier borrowers generally have stronger credit characteristics than those of Classic borrowers. Each applicant for a loan is required to complete and sign an application which lists the applicant's assets, liabilities, income, credit and employment history and other personal information. Upon receipt of the completed loan application, the Company's administrative personnel order a credit bureau report on the applicant to document the applicant's credit history. The application and the credit bureau report are given to one of the Company's credit specialists for analysis under the Company's proprietary credit scoring system. The Company's credit scoring system evaluates the credit applicant with an emphasis on cash flow as a principal indicator of repayment capability and provides credit scores which are utilized by the Company as a basis to determine if the applicant initially falls within the parameters of the Company's underwriting criteria for a particular loan product. Assuming that the applicant qualifies, the Company will expand its credit review by preparing an analysis of the applicant's debt-to-income and payment-to-income ratios, and 6 purchasing from a credit bureau an additional credit score which attempts to assess the likelihood of borrower bankruptcies. If the applicant meets the Company's underwriting standards, the Company generally will approve the application. For Classic borrowers (and, if certain scoring criteria are not satisfied, for Premier borrowers), this data is subject to further investigation. This investigation typically consists of direct telephone confirmations, when feasible, of the applicant's employment and may also include direct credit references from banks and financial institutions noted on the application. Once scoring and verifications have been completed, one of the Company's credit specialists reviews the application to ensure that it meets the requirements of the Company's internal system and also reviews the various banking and employment verifications obtained. The credit specialist also considers the amount to be financed in relation to the purchase price and market value of the automobile. If the vehicle is used, the Company determines market value based upon the Kelly Blue Book value or the National Automobile Dealers Association's ("NADA") Guide on Retail and Wholesale Values. Consistent with industry standards, this assessment does not include inspection of the automobile. The Company does not reject an applicant solely because of the age of the automobile. Objective credit scoring criteria provide the factual background for lending decisions, but such decisions frequently require the credit judgment of the Company's credit specialists. To the extent an applicant fails to meet one or more of the scoring benchmarks for the proposed loan, the Company requires higher levels of management scrutiny before such loans are approved. In 1996, a substantial majority of Classic loans and a substantial number of Premier loans purchased by the Company failed to meet at least one applicable scoring benchmark and required additional management review before approval of these loans. Upon completion of the credit analysis, the Company decides whether it will approve, conditionally approve or deny the loan application as submitted. Conditioning approval of the application involves amending the dealer's proposed terms of the loan to qualify the application according to Company procedures. Typical conditions include, but are not limited to, requiring a co-applicant, amending the length of the proposed term, requiring additional down payment, substantiating certain credit information, or requiring proof of resolution of certain credit deficiencies as noted on the applicant's credit history. Approved, declined or conditioned application decisions are promptly communicated to the dealer by phone or facsimile. Additionally, the applicant is informed by the Company of any credit denial or other adverse action by mail, in compliance with applicable statutory requirements. The Company regularly reviews the quality of the loans it purchases and conducts internal compliance reviews on a monthly basis. RESALE AND FINANCING OF REPOSSESSIONS. The Company channels a substantial majority of its repossession inventory through retail markets, primarily retail used car consignment lots. The Company believes that the greater recoveries available from the retail market justify the costs of maintaining higher levels of unsold repossession inventory and managing the retail program. In addition, the use of retail markets provides the Company with an opportunity to finance the repossessed vehicles with new buyers. During 1996, the Company sold approximately 70% of its repossession inventory through retail markets and the Company financed approximately 90% of these sales. At December 31, 1996, the Company had arrangements with 67 smaller consignment lots compared with ten large retail consignment lots at December 31, 1995. The Company also sells repossessed automobiles in the wholesale auction markets from time to time to maintain its repossession inventory at acceptable levels as determined by management. The Company applies the same underwriting methodology and procedures to the financing of repossessed automobiles as it applies to the purchase of other loan products, but it allows credit specialists and managers greater latitude in the financed repossession product to approve exceptions (with appropriate management authorization) to underwriting criteria as compared to other products in the Premier and Classic programs. The principal amount of retail repossession sales financed by the Company increased from $25.7 million (1.13% of the total servicing portfolio) at December 31, 1995 to $96.9 million (2.56% of the 7 total servicing portfolio) at December 31, 1996. Principally as a result of an inventory reduction effort in the fourth quarter of 1995 and the first quarter of 1996, together with improper practices by certain of the initial consignment dealers (with which the Company has since terminated its business relationships), the delinquency, default and loss rates of the Company's portfolio of repossessed automobile loans have significantly exceeded the rates of the Company's other loan products, accounting for a disproportionate amount of the Company's overall delinquencies, defaults and losses in 1996. The Company has instituted more comprehensive controls over its financed repossession product for the purpose of reducing delinquency, default and loss rates to acceptable levels. Acceptable levels of delinquencies, defaults and losses in the repossession loan portfolio, as determined by management, may exceed levels typically experienced in the Company's other loan products. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." DEALER PARTICIPATIONS. The Company remits to the dealer the amount financed pursuant to the terms of the loan and, consistent with industry practice, a dealer participation for selling such loan to the Company. The Company computes the dealer participation by calculating the amount of cash flow arising from the rate differential between the interest rate charged by the automobile dealer to the borrower and the rate offered by the Company to the dealer. The Company generally offers two alternative methods for payment of the dealer participation. Under the "shared participation" method, the dealer generally receives a percentage of the total participation at the time of sale in exchange for a shorter charge back period. During the charge-back period the Company is entitled to recover the upfront percentage received by the dealer in the event of a prepayment or default during the first 90 to 180 days. Under an alternative method, the Company pays the full participation to the dealer less approximately 1% of the outstanding loan balance which is held in reserve to allow for future charges to the dealer in the event of early prepayment or default. Under the alternative method, the Company is entitled to recover from the dealer the unearned portion of the dealer participation in the event of a prepayment or default in excess of the amount withheld at any point prior to contractual maturity and the entire reserve amount if the loan defaults within its first 12 months. A substantial majority of the Company's dealers elect the "shared participation" method. 8 MARKETS AND EXPANSION The following table illustrates the loan purchasing volume and percentage of total loan purchases by regional buying center during the three years ended December 31, 1996:
(Dollars in thousands) REGIONAL BUYING CENTER 1994 1995 1996 - --------------------------------------- ------------------------ ------------------------ ------------------------ Minnesota.............................. $ 61,135 8.23% $ 117,253 5.71% $ 160,376 5.83% Colorado............................... 77,982 10.49 145,552 7.09 161,880 5.89 North Texas............................ 109,624 14.75 260,775 12.71 299,673 10.90 Washington............................. 75,218 10.12 176,241 8.59 198,580 7.22 Arizona................................ 71,936 9.68 124,921 6.09 204,717 7.44 Florida................................ 79,598 10.71 123,308 6.01 144,042 5.24 Georgia................................ 95,123 12.80 143,289 6.98 189,346 6.88 South Texas (1)........................ 98,699 13.28 335,317 16.34 278,457 10.12 Northern California.................... 23,822 3.21 149,291 7.27 192,794 7.01 Missouri............................... 33,267 4.48 172,569 8.41 173,381 6.30 Massachusetts.......................... 12,359 1.66 108,090 5.27 131,794 4.79 Tennessee.............................. 4,493 0.59 99,951 4.87 141,491 5.15 Ohio................................... -- -- 9,844 0.48 57,267 2.08 North Carolina......................... -- -- 85,978 4.18 202,255 7.35 Southern California.................... -- -- 34 -- 57,858 2.10 New York............................... -- -- -- -- 44,516 1.62 West Texas (1)......................... -- -- -- -- 112,126 4.08 ------------ --------- ------------ --------- ------------ --------- Totals............................. $ 743,256 100.00% $ 2,052,413 100.00% $ 2,750,553 100.00% ------------ --------- ------------ --------- ------------ --------- ------------ --------- ------------ --------- ------------ ---------
- ------------------------ (1) Prior to July 1996, the West Texas region was included in the South Texas region. The Company regularly evaluates its "hub and spoke" strategy and from time to time has expanded into new markets through the establishment of additional regional buying centers and "spoke" operations. The Company's expansion program is directed by personnel with backgrounds in credit administration, finance and operations, information systems, facilities development, sales and marketing and human resources. In considering potential markets for expansion, the Company reviews such factors as population, income per capita, retail sales per capita, city work force, number of households, average annual income, automobile registrations, driver licenses issued and number of dealerships in the state and standard metropolitan statistical areas and the competitive environment for automobile financing. The Company also considers other general expansion criteria, including but not limited to, recruiting and staffing, training, compensation and benefits, policies and procedures, demographics, and legal and licensing requirements. The Company also reviews the performance of existing buying centers to evaluate their continuing contribution to the Company's strategy. FINANCING WAREHOUSE FACILITIES. The Company uses warehouse facilities to finance its purchase of loans on a short-term basis pending securitization. At December 31, 1996, the Company had an aggregate borrowing capacity of $800.0 million under three primary warehouse facilities, of which $688.9 million was available. The Company may borrow, on a revolving basis, up to $170.0 million pursuant to a credit agreement (the "Credit Agreement") with a syndicate of banking institutions (the "Banks") led by Bank of America National Trust and Savings Association (the "Agent"). In addition, the Company, through a wholly-owned 9 special purpose subsidiary, Olympic Receivables Finance Corp. ("ORFC"), has a $300.0 million receivables warehouse facility (the "BofA Facility") with Receivables Capital Corporation ("RCC"), a commercial paper conduit sponsored by Bank of America. At December 31, 1996, the Company, through another wholly-owned special purpose subsidiary, Olympic Receivables Finance Corp. II ("ORFC II"), had a $330.0 million receivables warehouse facility (the "J.P. Morgan Facility" and, together with the Credit Agreement and the BofA Facility, the "Warehouse Facilities") with Delaware Funding Corporation ("DFC"), a commercial paper conduit sponsored by J.P. Morgan. Amounts outstanding under the Credit Agreement are secured by the automobile loans pledged to the Agent as collateral for borrowings under the Credit Agreement. Under the Credit Agreement, the Company may borrow 95% of the outstanding principal amount of eligible automobile loans pledged to secure the indebtedness. The Company pays a commitment fee to the Banks on the unused portion of the facility and pays an annual agent's fee to the Agent. The notes issued to the Banks in respect of borrowings under the Credit Agreement bear interest at rates determined by reference to the reserve-adjusted interbank offered rates or the base rate of Bank of America Illinois in effect from time to time, depending upon the type of advance the Company elects under the Credit Agreement. The Company's notes issued under the Credit Agreement mature no later than July 10, 1997. Under the Credit Agreement, the Company is subject to certain financial and other covenants customary in such financings, including a minimum capital base requirement and loss ratio and delinquency ratio requirements for the automobile loans serviced by the Company. In connection with the BofA Facility, the Company, through ORFC, sells loans to another wholly-owned special purpose subsidiary, Arcadia Receivables Conduit Corp. ("ARCC"), and ARCC purchases the loans from ORFC and agrees to transfer the loans back to ORFC on ORFC's demand (at the time, and for the purpose, of securitization). ORFC is also obligated to repurchase loans from ARCC on or before the date which is twelve months following their conveyance to ARCC and upon the occurrence of a default or certain other events. The BofA Facility provides for the purchase of loans for an aggregate purchase price outstanding at any time not to exceed $300.0 million. ARCC finances its purchase of loans from ORFC by issuing asset-backed notes (the "ARCC Notes"). FSA provides credit enhancement with respect to the BofA Facility in the form of a financial guaranty insurance policy guaranteeing certain payments on the ARCC Notes. The BofA Facility will continue until the earlier of December 2, 1999 or the occurrence of certain events, subject to early termination as described below. The purchase price payable to ORFC by ARCC is 98% of the principal balance of each loan except in the case of loans used to finance the purchase of vehicles previously repossessed by the Company, in which the case the purchase price is 85% of the principal balance of the loan. Proceeds of the loans, the loan purchase price payable to ORFC and the repurchase price payable by ORFC are deposited in a collection account. The collection account is pledged to secure payment of the ARCC Notes. Any excess in the collection account over certain amounts required to be retained in the account is released to a spread account. The spread account is cross-collateralized with the spread accounts established in connection with the Company's securitization trusts. If no default exists with respect to the BofA Facility, all amounts deposited into the spread account in excess of 1% of the outstanding balance of loans in the BofA Facility are released to ORFC. RCC's purchase of the ARCC Notes and concurrent issuance of commercial paper is supported by a liquidity facility provided by financial institutions (the "BofA liquidity banks"). This liquidity facility is a revolving obligation that must be renewed annually. Failure by the BofA liquidity banks to renew this liquidity facility would lead to an early termination of the BofA Facility. The BofA Facility also includes eligibility criteria for loans warehoused, normal and customary representations, warranties, covenants and portfolio performance triggers designed to protect RCC, FSA and the BofA liquidity banks from various risks relating to the pool of automobile loans supporting the BofA Facility. The Company pays a usage fee to FSA, and usage and non-usage fees to Bank of America, in connection with the BofA Facility. The ARCC Notes bear an interest rate equal to the rate at which funds are obtained by RCC from time to time in the commercial paper market plus a margin. In the event the 10 ARCC Notes are funded by the BofA liquidity banks, the rate of interest will be the reserve-adjusted interbank offered rate in effect from time to time plus a margin. Under the JP Morgan Facility, the Company, through ORFC II, may from time to time warehouse automobile loans by selling them to an owner trust (the "Owner Trust"). The Company may obtain up to 99.9% of the principal balance of the receivables sold to the Owner Trust, but must deposit 4% of such principal balance (subject to increase upon the occurrence of certain events) into a spread account. The Owner Trust simultaneously issues a Variable Funding Note ("VFN") to DFC, representing 91% of the outstanding principal balance of the receivables, and issues investor certificates (the "Investor Certificates") to institutional investors, representing 8.9% of the outstanding principal balance of the receivables. The purchase of the VFN is funded through the issuance of commercial paper by DFC. The JP Morgan Facility will continue until the earlier of December 19, 1997 or the occurrence of certain events, subject to early termination as described below. At the time the Company accesses the public asset-backed securitization market, the Company's securitization subsidiary (currently ORFC) purchases the loans using the proceeds from the securitization and the VFN and the Investor Certificates are redeemed by the Owner Trust. The Company may use the JP Morgan Facility as a source of permanent funding for a designated pool of automobile loans, but the pricing on the facility would be increased under those circumstances. DFC's purchase of the VFNs and concurrent issuance of commercial paper is supported by a liquidity facility provided by financial institutions (the "JP Morgan liquidity banks"). The liquidity facility is a revolving obligation that must be renewed annually. In addition, the JP Morgan liquidity banks or the institutional investors that have committed to purchase the Investor Certificates may terminate the JP Morgan Facility, effective as of June 30, 1997, upon prior written notice to the Company. In addition to credit enhancement through the subordination of the Investor Certificates, the spread account and the liquidity facility, the JP Morgan Facility includes eligibility criteria for loans warehoused, normal and customary representations and warranties, covenants, and portfolio triggers designed to protect DFC, the liquidity providers, and the private investors purchasing the Investor Certificates from various risks relating to the automobile loans supporting the warehouse facility. In addition, the JP Morgan Facility contains a capital base covenant with respect to the Company, which is identical to the covenant in the Credit Agreement. The Company pays a commitment fee on the daily unused portion of the JP Morgan Facility. The VFNs bear an interest rate equal to the rate at which funds are obtained by DFC from time to time in the commercial paper market plus a margin. The Investor Certificates require a higher market rate. In the event the VFN is purchased by the JP Morgan liquidity banks, the rate of interest will be the applicable adjusted Eurodollar rate or base rate (as defined) plus a margin, if applicable. SECURITIZATION OF LOANS. The Company pursues a strategy of securitizing loans through the sale of asset-backed securities on a quarterly or more frequent basis, based on the availability of loans, profitability and other relevant factors. Securitization is used as a cost-competitive source of capital compared to traditional corporate debt financing alternatives. The Company utilizes the net proceeds from securitizations to purchase additional automobile loans and to pay down outstanding warehouse facilities, thereby making such short-term sources available for future loan purchases. In its securitizations, the Company (through its special purpose subsidiary, ORFC) transfers automobile loans to newly-formed securitization trusts which issue one or more classes of asset-backed securities. The asset-backed securities are simultaneously sold to investors. To ensure that the securitization trust is not itself a taxable entity, the Company typically retains 1% of the subordinated class of securities through wholly-owned subsidiaries of the Company. Such investments, included in other assets in the Company's Consolidated Financial Statements, totaled $4.3 million at December 31, 1996 compared with $2.8 million at December 31, 1995. Each month, collections of principal and interest on the automobile loans are used by the trustee to pay the holders of the related asset-backed securities, to fund spread accounts as a source 11 of cash to cover shortfalls in collections, if any, and to pay expenses. The Company continues to act as the servicer of the automobile loans held by the trust in return for a monthly fee. To improve the level of profitability from the sale of securitized loans, the Company uses credit enhancement to achieve a desired credit rating on the asset-backed securities issued. The credit enhancement for the Company's securitizations has generally taken the form of subordinated tranches of asset- backed securities and financial guaranty insurance policies issued by FSA. FSA insures payments of principal and interest due on the asset-backed securities. Asset-backed securities insured by FSA have been rated AAA by Standard & Poor's and Aaa by Moody's Investors Service, Inc. The Company has limited reimbursement obligations to FSA related only to violations of representations and warranties and not credit performance. However, spread accounts established in connection with the securitizations provide a source of cash to cover shortfalls in collections (as described below) and to reimburse FSA for claims made under the policies issued with respect to the Company's securitizations. The Company's agreements with FSA provide that the Company must maintain specified levels of excess cash in a spread account for each insured securitization trust during the life of the trust. The spread account for any securitization trust is generally funded with the interest collected on the loans that exceeds the sum of the interest payable to holders of asset-backed securities and certain other amounts. In certain securitization trusts, the spread account is also funded in part through initial deposits by the Company. Funds may be withdrawn from the spread account to cover any shortfalls in amounts payable on insured asset-backed securities or to reimburse FSA for draws or advances under its financial guaranty insurance policy. In addition, under cross-collateralization arrangements with FSA, the funds on deposit in the spread account for any one securitization may be used to cover shortfalls in amounts payable or to reimburse FSA in connection with other FSA-insured securitizations. ORFC is entitled to receive excess cash monthly from securitization trusts to the extent that, after payments to holders of asset-backed securities, the amounts deposited in spread accounts exceed predetermined required minimum levels. The spread accounts cannot be accessed by the Company or ORFC without the consent of FSA until such levels have been reached. Each month, excess cash from each securitization trust is used to fund the Company's spread account obligations related to that securitization trust and to replenish any spread account deficiencies under other securitization trusts before distribution of any remaining excess cash flow from that securitization to ORFC. The spread account for each securitization is cross-collateralized to the spread accounts established in connection with the Company's other securitization trusts and the BofA Facility such that excess cash flow from a performing securitization trust may be used to support negative cash flow from, or to replenish a deficient spread account in connection with, a nonperforming securitization trust, thereby further restricting excess cash flow available to ORFC. If excess cash flow from all insured securitization trusts in any month is not sufficient to fund current spread account obligations or replenish any prior deficiencies in all such spread accounts, no cash flow would be available to ORFC for that month. Otherwise, excess cash flow from the securitization trusts is distributed to ORFC and is available for dividends to the Company by ORFC. Each insured securitization trust has certain portfolio performance tests relating to the following: (i) the average delinquency ratio; (ii) the cumulative default rate; and (iii) the cumulative net loss rate. In each case, these portfolio performance tests will be triggered if the above ratios equal or exceed an agreed-upon percentage of the principal balance of loans included in the securitization trust related to such series for a given time period. For the cumulative default rate and the cumulative net loss rate, the ratios applicable to the securitization trusts reflect the relationship between loan delinquencies and repossession rates at various stages of a loan repayment term, including the fact that the probability of a loan becoming delinquent or going into default is highest during the six- to fourteen-month period from the date of origination of the loan. If any of these levels are exceeded, the amount required to be retained in the related spread account, and not passed through to ORFC, may be increased. There can be no assurance that such levels will not be exceeded in the future or that, if exceeded, waivers will be available from FSA 12 permitting such payments to ORFC. In addition, certain adverse events with respect to the Company (including insolvency and default on certain long-term obligations) or more adverse portfolio performance with respect to the tests described above, would cause the Company to be in default under its insurance agreement with FSA and distributions of cash flow to ORFC from the related securitization trust may be suspended until the asset-backed securities have been paid in full or redeemed. There can be no assurance that such thresholds will not be exceeded in the future or that, if exceeded, waivers will be available from FSA permitting such payments to ORFC. FSA also has a collateral security interest in the stock of ORFC. If FSA were to foreclose on such security interest following an event of default under an insurance agreement with respect to a securitization trust, FSA could preclude payment of dividends by ORFC to the Company, thereby eliminating the Company's right to receive distributions of excess cash flow from all the FSA-insured securitization trusts. SERVICING Under the terms of its warehouse facilities and securitizations, the Company acts as servicer with respect to the automobile loans warehoused or securitized. The Company receives servicing fees for servicing securitized loans and loans held under certain warehouse facilities equal to one percent per annum of the outstanding principal balance of the loans. The Company services the loans by collecting payments due from the obligors and remitting these payments to the trusts or warehouse facility in accordance with the terms of servicing agreements for pass through to holders of asset-backed securities and holders of warehouse debt. The Company maintains computerized records with respect to each loan to record all receipts and disbursements. The Company is permitted to perform servicing activities through subcontractors, but has not delegated servicing activities, except for the repossession of automobiles. Delegation of duties does not relieve the Company of its responsibility to the trusts with respect to those duties. 13 The following table represents the amount of the Company's servicing portfolio and the percentage of the total servicing portfolio by state.
AT DECEMBER 31, ------------------------------------------------------------------------------ (Dollars in thousands) 1994 1995 1996 ------------------------ ------------------------ ------------------------ Arizona................... $ 74,125 8.86% $ 127,292 5.61% $ 201,965 5.33% California................ 16,162 1.93 99,278 4.38 226,381 5.97 Colorado.................. 90,805 10.85 132,570 5.85 156,637 4.13 Connecticut............... 190 0.02 29,769 1.31 50,090 1.32 Florida................... 73,482 8.78 146,629 6.47 213,209 5.62 Georgia................... 73,555 8.79 161,260 7.12 269,600 7.11 Illinois.................. 2,149 0.26 20,741 0.91 45,209 1.19 Kentucky.................. 343 0.04 7,287 0.32 38,585 1.02 Massachusetts............. 11,668 1.39 63,752 2.81 103,221 2.72 Minnesota................. 93,752 11.20 105,386 4.65 107,971 2.85 Missouri.................. 26,780 3.20 124,541 5.49 186,624 4.92 Nevada.................... 8,270 0.99 52,683 2.32 102,734 2.71 New Mexico................ 5,410 0.65 27,760 1.22 65,641 1.73 New York.................. 532 0.06 1,970 0.09 44,806 1.18 North Carolina............ 4,321 0.52 34,035 1.50 101,957 2.69 Oklahoma.................. 10,334 1.23 88,334 3.90 173,531 4.58 Oregon.................... 8,821 1.05 61,971 2.73 106,208 2.80 South Carolina............ 10,075 1.20 54,282 2.39 118,738 3.13 Tennessee................. 4,964 0.59 81,380 3.59 160,930 4.24 Texas..................... 228,223 27.26 564,606 24.91 826,749 21.80 Washington................ 68,098 8.14 128,859 5.68 163,707 4.32 Wisconsin................. 4,226 0.50 26,497 1.17 57,035 1.50 All Other States.......... 20,810 2.49 126,225 5.58 270,329 7.14 ------------ --------- ------------ --------- ------------ --------- Total................. $ 837,095 100.00% $ 2,267,107 100.00% $ 3,791,857 100.00% ------------ --------- ------------ --------- ------------ --------- ------------ --------- ------------ --------- ------------ ---------
DELINQUENCY, COLLECTION AND REPOSSESSION ACTIVITIES. As servicer, the Company is responsible for monitoring collections, collecting delinquent accounts and, when necessary, repossessing and selling automobiles. Delinquency rates for all loans purchased by each loan buyer are monitored, and loan buyers are incentivized to maintain loan quality. In response to the rapid growth of its servicing portfolio, continued expansion of its Classic program (which generally requires greater collection efforts than its Premier program), and increases in delinquencies and default rates on its servicing portfolio, the Company substantially increased its servicing and collection staff and, in October 1996, implemented a strategy to regionalize its servicing and collection activities into four new locations: Charlotte, North Carolina; Dallas, Texas; Denver, Colorado and Minneapolis, Minnesota. At December 31, 1996, the Company employed 510 service representatives and collection associates who are responsible for various aspects of the collection and repossession procedures, compared with 188 and 38 at December 31, 1995 and 1994, respectively. The Company also substantially expanded the capacity of its highly automated telephone dialing systems (the "autodialer") in connection with its establishment of four regional servicing and collection centers. In addition, the Company uses a computerized collection system to aid its service and collection associates. The Company regularly evaluates its servicing staffing needs based on anticipated growth in its servicing portfolio and estimated delinquency and repossession rates. The Company generally utilizes the autodialer initially to contact delinquent obligors. Based on parameters established by the Company for each of its loan programs, the autodialer will phone the obligor within five to ten days after a past due date. Once the call is answered, the autodialer will immediately 14 transfer the call to an available customer service representative located in one of the Company's four regional service and collection centers and will automatically display the obligor's loan information on the representative's computer screen. The autodialer will continue to follow up with obligors at various times throughout the first 24 days after a past due date (typically every third day) if previous efforts do not result in the account deficiency being cured. In addition to telephone inquiries, the Company's computerized collection system generates past due notices which are mailed to the obligor at various intervals during the first 30 days after a past due date. The first such correspondence is generally sent approximately 13 days after a past due date. If the collection effort during the first 20 days after a past due date does not result in a satisfactory resolution of the delinquent account, then the account is forwarded to collection specialists. These collection specialists will typically send a final demand letter to the delinquent obligor allowing the obligor a specified number of days to bring the account current. During this period, the collection specialist generally will make a recommendation as to whether the automobile should be repossessed or other action, such as a contract extension, should be taken. The Company, like other consumer finance companies, grants extensions in the ordinary course of business, following a re-evaluation of the obligor's creditworthiness and approval by a collection department manager. The terms of the Company's securitization trusts restrict the number of contract extensions that the Company may grant. When an extension is granted, the maturity of the loan is extended for one month and the interest for the delinquent period is added to the loan balance. Contract extensions are more frequently granted with respect to Classic and financed repossession loans than with respect to Premier loans, and are seasonally highest during the Christmas holiday period. Under special circumstances, the Company, like other consumer finance companies, may agree to contract modifications, such as lengthening the term to maturity or adjusting interest rates, subject to limitations set forth in securitization trusts and agreements with FSA. The Company uses independent contractors to perform repossessions. Once an automobile is repossessed, a letter is sent giving the obligor a specified number of days to pay the entire loan balance in order to recover the automobile. At the expiration of this time period, the Company will prepare the automobile for sale and determine the method of sale. The Company has historically sold repossessed automobiles through wholesale auto auctions and retail consignment lots. Beginning in 1995, the Company has primarily utilized retail consignment lots to sell its repossessed inventory. Under this method the Company retains control of repossessed automobiles on behalf of the relevant securitization trust until resold through independent dealers. The Company has a remarketing department responsible for the management of its repossession inventory, which decides whether to sell each vehicle repossessed in the retail or wholesale market, manages reconditioning and repairs when necessary, tracks vehicles until sold and selects and monitors the retail consignment lots used by the Company. At December 31, 1996, the Company had arrangements with 67 smaller retail consignment lots compared to 10 large retail consignment lots at December 31, 1995. PROPRIETARY INFORMATION The Company has developed a credit scoring system for evaluating loan applications submitted by dealers. The credit scoring system ranks the credit quality of the applicant. The system is intended by the Company to act as a predictor of loan repayment probability or loan defaults and serves as the basis for the Company's underwriting procedures. Although asset-based lenders utilize a variety of scoring and credit evaluation systems, the Company considers its credit scoring system to be proprietary and attempts to maintain the system as a trade secret. COMPETITION Competition in the field of financing retail automobile sales is intense. Competitors include banks, savings and loans, small loan companies, credit unions, a variety of local, regional and national consumer financing institutions and captive finance companies of automobile manufacturers, such as Ford Motor 15 Credit Company, Chrysler Credit Corp. and General Motors Acceptance Corporation. Many of these competitors have substantially greater capital resources than the Company and a number offer other forms of financing to automobile dealers, including, but not limited to, vehicle floor plan financing and leasing. Captive automobile finance companies also, from time to time, have national promotions offering below-market interest rates on select vehicles to automobile purchasers. The Company believes it competes on the basis of providing a high level of service, offering flexible loan terms which meet dealers' needs and maintaining good relationships with its dealers. From time to time, competing finance companies may offer to refinance borrowers' loans originally purchased by the Company. As a result of such an offer, a borrower may refinance and prepay an existing loan, or the Company may agree to amend the terms of the borrower's loan. REGULATION The Company's operations are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations. At December 31, 1996 the Company's business operations were conducted in 39 states, the laws and regulations of which govern the Company's operations conducted therein. The Company is required to be, and is, licensed as a sales finance company in 27 states. The Company is required to be, and is, licensed under the Ohio Mortgage Loan Act. To the extent the Company expands its operations into additional states, it will be required to comply with the laws of those states. CONSUMER PROTECTION LAWS. Numerous federal and state consumer protection laws and related regulations impose substantive disclosure requirements upon lenders and servicers involved in consumer finance. The Federal Trade Commission ("FTC") has adopted the so-called "holder-in-due-course" rule which has the effect of subjecting persons who finance consumer credit transactions (and certain related lenders and their assignees) to all claims and defenses which the purchaser could assert against the seller of the goods and services. The FTC's Rule on Sale of Used Vehicles requires that all sellers of used vehicles prepare, complete and display a "Buyer's Guide" which explains the warranty coverage (if any) for such vehicles. The "Credit Practices Rule" of the FTC imposes additional restrictions on loan provisions and credit practices. A majority of states in which the Company operates have adopted motor vehicle retail installment sales acts or variations thereof. These laws regulate, among other things, the interest rate and terms and conditions of motor vehicle retail installment loans. These laws also impose restrictions on consumer transactions, and some require loan disclosures in addition to those required under federal law. These requirements impose specific statutory liabilities upon creditors who fail to comply. In addition, the laws of certain states grant to the purchasers of vehicles certain rights of rescission under so-called "lemon laws". Under such statutes, purchasers of motor vehicles may be able to seek recoveries from, or assert defenses against, the Company. A number of states impose interest rate limitations under applicable usury laws and regulate the Company's ability to collect late fees and other charges. SECURED PARTY RIGHTS AND OBLIGATIONS. In the event of default by an obligor, the Company has all the remedies of a secured party under the Uniform Commercial Code ("UCC"), except where specifically limited by other state laws. The remedies of a secured party under the UCC include the right of repossession by self-help means, unless such means would constitute a breach of the peace. In the event of default by the obligor, some jurisdictions require that the obligor be notified of the default and be given a period of time in which to cure the default prior to repossession. In addition, courts have applied general equitable principles to secured parties pursuing repossession or litigation involving deficiency balances. The obligor also has the right to redeem the collateral prior to actual sale. The proceeds from resale of financed vehicles generally will be applied first to the expenses of repossession and resale and then to the satisfaction of the automobile loans. A deficiency judgment can be sought in most states subject to satisfaction of statutory procedural requirements by the secured party and 16 certain limitations as to the initial sale price of the motor vehicle. Certain state laws require the secured party to remit the surplus to any holder of a lien with respect to the vehicle, or, if no such lienholder exists, the UCC requires the secured party to remit the surplus to the former owner of the financed vehicle. In addition to laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including Federal bankruptcy laws and related state laws, may interfere with or affect the ability of the Company to realize upon collateral or enforce a deficiency judgment. The repossession process and the costs thereof generally result in losses on the underlying automobile loans, and such losses generally reduce the amounts available for distribution from the related spread accounts of securitized loan pools. SERVICE MARKS; THE NAME "OLYMPIC" Federal law grants to the United States Olympic Committee ("USOC") the exclusive right to use the word "Olympic" and certain variations thereof. In September 1996, the USOC notified the Company that it must cease using Olympic in the Company's name by June 1, 1997. In compliance with such notice, the Company intends to change its name to, will begin operating under the name of, Arcadia Financial Ltd. The Company currently uses the trade name "Arcadia Financial" for its operations in 21 states. The Company has registered its "Arcadia Financial Ltd." service mark with the United States Patent and Trademark Office. EMPLOYEES The Company employs personnel experienced in all areas of loan origination, documentation, collection and administration. The Company employs and trains specialists in loan processing and servicing with minimal cross-over of duties. As of December 31, 1996, the Company had 1,193 full-time employees and 37 part-time employees. None of the Company's employees is covered by a collective bargaining agreement. EXECUTIVE OFFICERS On August 26, 1996, Jeffrey C. Mack resigned as President, Chief Executive Officer and director of the Company. Warren Kantor, a director of the Company, was appointed to the position of Chairman of the Executive Committee of the Board of Directors and served as acting chief executive officer. Following an executive search, on January 6, 1997 the Company entered into an employment agreement with Richard A. Greenawalt to serve as Chief Executive Officer of the Company. Mr. Greenawalt had served as President and Chief Operating Officer of Advanta Corporation ("Advanta"), a consumer finance firm, since 1987. On December 18, 1996, Warren Kantor was elected Chairman of the Board. On January 27, 1997, Mr. Greenawalt was elected President of the Company and was appointed as a director by the Board of Directors. 17 Set forth below are the names, ages and positions of the executive officers of the Company.
NAME AGE POSITION - -------------------------- --- -------------------------------------------------------------- Warren Kantor 55 Chairman of the Board Richard A. Greenawalt 53 Director, President and Chief Executive Officer Scott H. Anderson 39 Director, Vice Chairman and Chief Credit Officer John A. Witham 45 Executive Vice President, Chief Financial Officer A. Mark Berlin, Jr. 40 Director and Executive Vice President, Strategic Development Robert A. Barbee, Jr. 38 Executive Vice President, Sales and Marketing James D. Atkinson III 48 Senior Vice President, Corporate Counsel and Secretary
WARREN KANTOR, was appointed Chairman of the Board of Directors in December 1996 and has served as a Director of the Company since December 1994. From August 1996 until January 1997, Mr. Kantor served as the Chairman of the Executive Committee of the Company's Board of Directors and as the Company's acting chief executive officer. Mr. Kantor is the Chief Executive Officer of Society Hill Capital Corporation, a money management company of which he is the sole owner. Mr. Kantor was a director of Advanta from April 1986 through December 1996 and served as Advanta's Vice Chairman from November 1993 through September 1994 and as Executive Vice President and Chief Financial Officer from April 1986 through November 1993. Prior to his employment with Advanta, Mr. Kantor was employed by Arthur Andersen & Co., in charge of the Financial Services Division of its Philadelphia office. RICHARD A. GREENAWALT was appointed a Director and elected President and Chief Executive Officer of the Company on January 27, 1997 and commenced employment with the Company on January 29, 1997. Prior to joining the Company Mr. Greenawalt served as President, Chief Operating Officer, and a Director of Advanta from November 1987. Prior to joining Advanta, Mr. Greenawalt served as President of Transamerica Financial Corp. from May 1986. SCOTT H. ANDERSON was appointed Vice Chairman in December 1995. Mr. Anderson had previously functioned as Executive Vice President and has been the Company's Chief Credit Officer since April 1991. From 1987 until joining the Company, he served as Vice President, Division Manager of Loan Administration for Marquette Bank Minneapolis, N.A. Prior thereto he served as a Regional Vice President for First Bank System, Inc. He has held both direct lending positions and lending supervision positions for over 15 years. JOHN A. WITHAM was appointed Executive Vice President in December 1995 and has served as Chief Financial Officer of the Company since February 1994. From January 1985 to January 1994, Mr. Witham held various management positions with subsidiaries of PHH Corporation, a diversified financial services company, including Senior Vice President, Finance of PHH Relocation and Real Estate from August 1992 to January 1994, Senior Vice President, Finance of PHH Europe PLC, in Swindon, England from August 1989 to August 1992 and Senior Vice President, Finance of PHH FleetAmerica from January 1985 to August 1989. A. MARK BERLIN, JR. became a Director of the Company in January 1992 and was employed by the Company as its Senior Vice President, Strategic Development in December 1994. In December 1995, Mr. Berlin was appointed Executive Vice President, Strategic Development. Mr. Berlin was employed by the investment banking firm of Wessels, Arnold & Henderson LLC from March 1993 through December 1994. From June 1991 to March 1993, Mr. Berlin was a Senior Vice President of Kidder, Peabody & Co. Incorporated. From 1980 until June 1991, Mr. Berlin was employed by Merrill Lynch & Co., most recently as a Director in Investment Banking. 18 ROBERT A. BARBEE, JR. was employed by the Company as Senior Vice President, Sales and Marketing in September 1994. In December 1995, Mr. Barbee was appointed Executive Vice President, Sales and Marketing. From June 1983 to September 1994, he was employed as a Regional Vice President for Pat Ryan & Associates, a provider of specialty insurance products. JAMES D. ATKINSON III was appointed Senior Vice President, Corporate Counsel in December 1995 and Secretary of the Company in January 1995. Mr. Atkinson had previously served as Vice President, corporate counsel since September 1994 and as outside corporate counsel since 1990. Prior to joining the Company, Mr. Atkinson practiced law for sixteen years, specializing in corporate legal issues and compliance. All executive officers of the Company hold office until they are removed or their successors are elected and qualify. ITEM 2. PROPERTIES The Company's executive offices are located at Olympic Financial Place, 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435. These facilities consist of 52,000 square feet of leased space pursuant to a lease expiring in 2002. Additionally, the Company leases a 21,000 square foot operations facility in Eden Prairie, Minnesota (a suburb of Minneapolis) which is utilized for customer service and loan document processing. The Company also leases offices for its regional buying centers in Atlanta, Boston, Buffalo, Charlotte, Cincinnati, Dallas, Denver, Houston, Minneapolis, Nashville, New York, Orlando, Phoenix, Sacramento, San Antonio, San Diego, Seattle and St. Louis. The size of these offices range from 5,000 square feet to 13,000 square feet. Regional buying center leases are generally for a term of five to seven years. Furthermore, the Company leases offices for its Regional Service and Collection Centers in Charlotte, Dallas, Denver, and Minneapolis. The size of these centers range from 15,000 to 37,000 square feet and have lease terms ranging from 5 to 10 years. See Note 9 of Notes to Consolidated Financial Statements for a description of the Company's rental obligations under these leases. ITEM 3. LEGAL PROCEEDINGS The Company is party to litigation in the ordinary course of business, generally involving actions against borrowers to collect amounts on loans or recover vehicles. The Company does not expect any pending proceedings to have a material adverse effect on the Company or its financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders through the solicitation of proxies or otherwise during the quarter ended December 31, 1996. 19 PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY The Company's Common Stock is traded on the New York Stock Exchange under the symbol "OLM." The following table provides quarterly high and low sales prices for the Company's Common Stock for the two years ended December 31, 1996. The Company's Common Stock began trading on the New York Stock Exchange on March 27, 1996. The Company's Common Stock had been traded on the Nasdaq National Market since January 30, 1992.
HIGH LOW --------- --------- 1995 First quarter....................................................... $ 9.38 $ 5.88 Second quarter...................................................... 17.63 8.88 Third quarter....................................................... 27.50 14.00 Fourth quarter...................................................... 30.63 14.25 1996 First quarter....................................................... 19.63 12.50 Second quarter...................................................... 26.25 18.25 Third quarter....................................................... 26.63 15.38 Fourth quarter...................................................... 25.00 13.13
The Company has not paid dividends on its Common Stock and may not (except under limited circumstances with the consent of certain of its lenders) pay any dividend or make any other distribution on its Common Stock, nor may the Company redeem or purchase any of its Common Stock. In addition, the current policy of the Company's Board of Directors is to retain earnings to provide for the Company's growth. Consequently, no cash dividends are expected to be paid on the Company's Common Stock in the foreseeable future. The terms of each of the Company's Warehouse Facilities and 13% Senior Notes due 2000 (the "Senior Term Notes") prohibit the making of certain payments with respect to the Common Stock, including cash dividends on the Common Stock, unless certain financial tests are met. Under the most restrictive of these restrictive covenants, no amounts were available for cash dividends on the Common Stock as of December 31, 1996. Additional indebtedness incurred by the Company in the future may include similar restrictions. In October 1996, the Board of Directors adopted a Shareholder Rights Plan in which Preferred Stock Purchase Rights were distributed as a dividend at the rate of one Right for each share of the Company's Common Stock on November 22, 1996 to shareholders of record as of such date. All shares of Common Stock issued thereafter will be issued together with one Right per share. At January 14, 1997, the Company had 927 shareholders of record. 20 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected consolidated financial data and other operating information of the Company. The following selected consolidated information, except for selected cash flow data, for each of the five years in the period ended December 31, 1996, is derived from the consolidated financial statements of the Company. The selected consolidated financial information should be read in conjunction with the Consolidated Financial Statements and Notes thereto and other financial information included herein.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------- (Dollars in thousands except per share amounts) 1992 1993 1994 1995 1996 --------- ----------- ----------- ----------- ----------- STATEMENT OF INCOME DATA: Net interest margin................................ $ 752 $ 2,525 $ 9,828 $ 31,192 $ 62,963 Gain on sale of loans.............................. 2,698 7,650 13,579 62,182 115,773 Servicing fee income............................... 408 1,685 4,502 13,987 28,284 Other non-interest income.......................... -- 24 879 1,371 6,475 --------- ----------- ----------- ----------- ----------- Total revenues................................. 3,858 11,884 28,788 108,732 213,495 Operating expenses................................. 4,390 8,691 17,342 42,727 92,298 Long term debt and other interest expense.......... 810 1,798 5,416 17,170 25,193 --------- ----------- ----------- ----------- ----------- Total expenses................................. 5,200 10,489 22,758 59,897 117,491 --------- ----------- ----------- ----------- ----------- Operating income (loss) before income taxes and extraordinary item............................... (1,342) 1,395 6,030 48,835 96,004 Provision for income taxes......................... -- -- 1,845 19,518 35,688 --------- ----------- ----------- ----------- ----------- Net income (loss) before extraordinary items....... (1,342) 1,395 4,185 29,317 60,316 Extraordinary items (1)............................ (458) -- -- (3,856) -- --------- ----------- ----------- ----------- ----------- Net income (loss).................................. $ (1,800) $ 1,395 $ 4,185 $ 25,461 $ 60,316 --------- ----------- ----------- ----------- ----------- --------- ----------- ----------- ----------- ----------- PRIMARY EARNINGS PER SHARE: Net income (loss) per common share before extraordinary items.............................. $ (0.24) $ 0.11 $ 0.17 $ 1.35 $ 1.79 Extraordinary items per common share (1)........... (0.08) -- -- (0.19) -- --------- ----------- ----------- ----------- ----------- Net income (loss) per common share................. $ (0.32) $ 0.11 $ 0.17 $ 1.16 $ 1.79 --------- ----------- ----------- ----------- ----------- --------- ----------- ----------- ----------- ----------- FULLY DILUTED EARNINGS PER SHARE: Net income (loss) per share before extraordinary items............................................ $ (0.24) $ 0.11 $ 0.17 $ 1.11 $ 1.65 Extraordinary items per share (1).................. (0.08) -- -- (0.15) -- --------- ----------- ----------- ----------- ----------- Net income (loss) per share........................ $ (0.32) $ 0.11 $ 0.17 $ 0.96 $ 1.65 --------- ----------- ----------- ----------- ----------- --------- ----------- ----------- ----------- ----------- WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Primary............................................ 5,668,272 10,996,536 10,818,908 20,029,769 33,065,473 Fully diluted...................................... 5,668,272 11,186,033 16,683,380 26,455,876 36,449,995 FINANCIAL RATIOS AND OTHER DATA: Ratio of earnings to fixed charges (2)............. -- 1.72x 2.06x 3.75x 4.64x Deficiency in earnings to fixed charges............ $ 1,342 -- -- -- -- SELECTED CASH FLOW DATA: Total cash used in operating activities............ $ (17,991) $ (51,056) $ (78,774) $ (135,659) $ (253,127) Total cash used in investing activities............ (1,104) (455) (917) (2,588) (6,157) Total cash provided by financing activities........ 41,372 31,040 93,572 122,970 274,001 --------- ----------- ----------- ----------- ----------- Net increase (decrease) in cash.................... $ 22,277 $ (20,471) $ 13,881 $ (15,277) $ 14,717 --------- ----------- ----------- ----------- ----------- --------- ----------- ----------- ----------- -----------
21
YEAR ENDED DECEMBER 31, ------------------------------------------------------------- (Dollars in thousands) 1992 1993 1994 1995 1996 --------- ----------- ----------- ----------- ----------- BALANCE SHEET DATA (AT PERIOD END): Cash and cash equivalents.......................... $ 23,207 $ 2,736 $ 16,617 $ 1,340 $ 16,507 Finance income receivable.......................... 6,133 26,247 58,540 186,001 362,916 Cash in restricted spread accounts................. 5,207 15,109 21,408 63,580 142,977 Total long-term debt............................... 15,626 33,506 46,804 161,929 206,418 Total preferred shareholders' equity............... -- 27,289 27,279 25,379 -- Total common shareholders' equity.................. 30,072 31,410 33,583 155,434 393,093 OPERATING DATA: Automobile dealer relationships (at period end).... 339 857 2,344 5,110 7,727 Automobile loan purchases.......................... $ 97,819 $ 305,823 $ 743,256 $ 2,052,413 $ 2,750,553 Automobile loan securitizations.................... $ 79,759 $ 336,077 $ 712,211 $ 1,933,525 $ 2,787,412 Operating expenses as a percentage of average servicing portfolio.............................. 6.52% 4.39% 3.28% 2.78% 3.06% FIXED CHARGE COVERAGE RATIO CASH FLOW DATA (3): Operating cash receipts: Excess cash flow received from securitization trusts......................................... $ -- $ 11 $ 17,737 $ 21,054 $ 43,351 Servicing fee income............................. 408 1,685 4,502 12,693 27,018 Other cash income................................ -- 24 879 2,142 7,959 --------- ----------- ----------- ----------- ----------- Total operating cash receipts.................. 408 1,720 23,118 35,889 78,328 Less cash expenses: Payment of dealer participations................. 4,206 13,524 29,566 86,476 94,938 Cash operating expenses.......................... 5,373 11,490 21,454 48,120 98,644 Interest paid on warehouse and other debt........ 4,061 3,790 6,386 19,630 33,448 Preferred dividends.............................. -- 192 2,300 2,213 1,688 --------- ----------- ----------- ----------- ----------- Total cash expenses............................ 13,640 28,996 59,706 156,439 228,718 --------- ----------- ----------- ----------- ----------- Consolidated cash flow............................. $ (13,232) $ (27,276) $ (36,588) $ (120,550) $ (150,390) --------- ----------- ----------- ----------- ----------- --------- ----------- ----------- ----------- ----------- SERVICING DATA: Servicing portfolio (at period end)................ $ 103,507 $ 316,933 $ 837,095 $ 2,267,107 $ 3,791,857 Average servicing portfolio during the period...... $ 67,339 $ 198,018 $ 528,577 $ 1,534,720 $ 3,015,411 Delinquencies of more than 30 days as a percentage of servicing portfolio (at period end)........... 0.36% 0.96% 0.82% 1.33% 2.64% Net losses as a percentage of average servicing portfolio........................................ 0.22% 0.52% 0.66% 0.67% 0.99%
- -------------------------- (1) Extraordinary items relate to prepayment fees and charge-off of capitalized debt financing costs in connection with early extinguishment of certain debt obligations. (2) For purposes of calculating the ratio of earnings to fixed charges, earnings are defined as income before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of debt discount and the interest factor in rental expenses. (3) The Company has included Fixed Charge Coverage Ratio Cash Flow Data (which is not a measure of financial performance under generally accepted accounting principles) because comparable criteria will be the basis for certain debt incurrence and restricted payment tests included in the indenture governing the Senior Term Notes. On January 21, 1997, the Company solicited the consent of the holders of the Senior Term Notes to eliminate the tests related to the Fixed Charge Coverage Ratio Cash Flow Data from the governing Indenture and sought the tender of the Senior Term Notes. The Fixed Charge Coverage Ratio Cash Flow Data should not be considered by an investor to be an alternative to cash flows determined in accordance with generally accepted accounting principles as a measure of liquidity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Capital Resources." 22 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company derives substantially all of its earnings from the purchase, securitization and servicing of automobile loans. At the time of purchase of each loan, the Company pays a portion of the annual rate of interest paid by the obligor ("APR") to the dealer for originating the loan ("dealer participation"). To fund the purchase of loans prior to securitization, the Company utilizes its available cash balances and short-term borrowing and repurchase arrangements with financial institutions and institutional lenders ("warehouse facilities"). Pending securitization, automobile loans held for sale by the Company generate net interest income resulting from the difference between the interest rate earned on automobile loans held for sale and the interest costs associated with the Company's short-term borrowings (the "net interest rate spread"). The Company purchases loans under a tiered pricing system, allowing it to price loans according to the borrower's credit characteristics. The Company prices its loan products in order to maximize gross interest rate spreads relative to expected net losses within each tier. Classic loans purchased in 1996 represented 36% of total purchasing volume compared with 17% during 1995 and 4% during 1994 and had APRs typically ranging from 16% to 23% while loans purchased under the Premier program had APRs typically ranging from 8% to 16%. The higher APRs of the Classic program are intended to compensate the Company for anticipated higher delinquency, default and loss rates associated with the Classic program, which the Company addresses through higher reserves for loan losses. At December 31, 1996, the Company maintained $95.0 million in loan loss reserves, or 2.51% of its servicing portfolio, compared to $42.3 million, or 1.86%, respectively at December 31, 1995. The Company aggregates the automobile loans it purchases and sells them to a trust, which in turn sells asset-backed securities to investors. By securitizing its loans, the Company is able to fix the initial difference ("gross interest rate spread") between the APR on automobile loans purchased and the interest rate on the asset-backed securities sold ("securitization rate"). When the Company securitizes its automobile loans, it records a gain on sale and establishes an asset referred to as finance income receivable. Gain on sale represents the present value of the estimated future cash flows to be received by the Company, discounted at a market-based rate, and takes into account the Company's historical loan portfolio experience and its methods for disposing of repossessed vehicles. The calculation of gain on sale takes into consideration (i) contractual obligations of the obligors, (ii) amounts due to the investors in asset-backed securities, (iii) amounts paid to dealers for dealer participations, (iv) various costs of the securitizations, including the effects of hedging transactions, and (v) adjustments to the cash flows to reflect estimated prepayments of loans, losses incurred in connection with defaults, and corresponding reductions in the weighted average APR of loans sold. Subsequent to securitization, the Company continues to service the securitized loans, for which it recognizes servicing fee income over the life of the securitization as earned. In addition to the present value of estimated future cash flows from securitizations (gain on sale), finance income receivable includes (i) accrued interest receivable on automobile loans held for sale, but not yet collected through the date of sale, (ii) interest earned on spread and other cash accounts established in connection with the Company's securitizations, and (iii) the interest earned on previously discounted cash flows, calculated at the present value discount rate used in determining gain on sale. As noted above, future servicing fee income is recognized as earned and is not included in finance income receivable. Finance income receivable is reduced based on distributions to the Company of excess cash flows from spread accounts. The Company uses a combination of its own historical experience, industry statistics and expectations of future performance to estimate the amount and timing of prepayments, losses upon defaults and corresponding changes in the weighted average APR. The Company regularly reviews the carrying amount of its finance income receivable to assess the impact of actual prepayment and loss experience compared with the Company's estimates. In accordance with generally accepted accounting 23 principles, the Company does not increase the carrying amount of finance income receivable for favorable variances from original estimates, but to the extent actual prepayment or loss experience exceeds the Company's estimates, any required decrease to the finance income receivable is reflected as a reduction of current period earnings. YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 RESULTS OF OPERATIONS NET INTEREST MARGIN. The Company's net interest margin represents the sum of (i) net interest on loans held for sale based on the net interest rate spread, (ii) investment earnings on short-term investments, spread accounts and other cash accounts established in connection with the Company's securitizations and (iii) the recognition of the interest component of previously discounted cash flows, calculated at the present value discount rate used in determining the gain on sale. The components of net interest margin for each of the three years in the period ended December 31, 1996 were:
(Dollars in thousands) 1994 1995 1996 --------- --------- --------- Interest income on loans, net........................................... $ 3,544 $ 16,038 $ 29,614 Interest income on short-term investments, spread accounts and other cash accounts......................................................... 3,620 7,942 15,233 Recognition of present value discount................................... 2,664 7,368 18,890 Provision for credit losses on loans held for sale...................... -- (156) (774) --------- --------- --------- Net interest margin................................................. $ 9,828 $ 31,192 $ 62,963 --------- --------- --------- --------- --------- ---------
Net interest margin increased 102% during 1996 and 217% during 1995. The rise in net interest margin is primarily due to (i) growth in the average balances of loans held for sale pending securitization, (ii) increased net interest rates earned on loans held for sale pending securitization and (iii) increases in the volume of the Company's securitization transactions. Increased purchasing volume is primarily due to the Company's continued geographic expansion and improved market penetration through growth in its dealer network. As of December 31, 1996, the Company had 17 regional buying centers, up from 15 at December 31, 1995 and 12 at December 31, 1994 and had increased its dealer network to 7,727 dealers at December 31, 1996 from 5,110 and 2,344 dealers at December 31, 1995 and 1994, respectively. The Company's loan purchasing and securitization volume for each of the three years ended December 31, 1996 are set forth in the table below.
(Dollars in thousands) 1994 1995 1996 ---------- ------------ ------------ Premier............................................... $ 716,308 $ 1,699,874 $ 1,768,933 Classic............................................... 26,948 352,539 981,620 ---------- ------------ ------------ Total automobile loan purchases................... $ 743,256 $ 2,052,413 $ 2,750,553 ---------- ------------ ------------ ---------- ------------ ------------ Automobile loans securitized.......................... $ 712,211 $ 1,933,525 $ 2,787,412
In 1995, the Company initiated a program to increase the proportion of Classic loans in its loan purchase mix in order to maximize gross interest rate spreads relative to expected net losses within each credit tier, to expand its share of the automobile loan market and to reduce initial cash requirements relative to the Premier program because the Company offers lower dealer participations on Classic loans. At December 31, 1996, approximately half of the Company's aggregate loan purchases were being made under the Classic program. The Company may change its loan purchase mix at any time and from time to time. 24 The rise in loan purchasing volume resulted in an increase in the average monthly balance of loans held for sale to $219.5 million during 1996, up from $162.7 million and $41.1 million during 1995 and 1994, respectively, on which the Company earns net interest rate spread until such loans are securitized. The weighted average net interest rate spread earned during 1996 rose to 7.84% compared with 6.71% and 6.59% during 1995 and 1994, respectively. The rise in net interest spread earned on loans held for sale is principally due to higher average annual percentage rates ("APR") paid by obligors resulting from expansion of the Company's higher rate Classic loan program. Interest income on short-term investments, spread accounts and other cash accounts established in connection with securitization transactions increased 92% between 1995 and 1996 and 119% between 1994 and 1995. This increase is primarily due to growth in the average balances of spread accounts and other securitization related cash accounts resulting form higher securitization volume. Income from the recognition of present value discount also grew due to the increased volume of securitizations. GAIN ON SALE OF LOANS. Gain on sale of loans provided net revenues of $115.8 million, $62.2 million and $13.6 million during 1996, 1995 and 1994, respectively, representing increases of 86.2% between 1995 and 1996 and 357% between 1994 and 1995. The rise in gain on sale of loans primarily resulted from growth in the volume of loans securitized as discussed above, increased gross interest rate spreads, and a decline in the participation rate paid to dealers for loan originations but was offset in part by an increase in the reserve for loan losses. The following table summarizes the Company's gross interest rate spreads for each of the three years in the period ended December 31, 1996.
1994 1995 1996 --------- --------- --------- Weighted average APR of loans securitized................................... 12.50% 14.22% 14.56% Weighted average securitization rate........................................ 6.32 6.38 6.31 --------- --------- --------- Gross interest rate spread (1).......................................... 6.18% 7.84% 8.25% --------- --------- --------- --------- --------- ---------
- ------------------------ (1) Before gains/losses on hedge transactions. The rise in the gross interest rate spread during 1995 and 1996 is primarily due to an increased proportion of higher-yielding Classic loans, resulting in an increased APR earned on loans purchased and subsequently securitized. The increase in the weighted average APR resulting from the growth in the Classic loan volume during 1996 was partially offset by a general market decline in consumer interest rates during the first few months of the year. The unamortized balance of participations paid to dealers is expensed at the time the related loans are securitized and recorded as a reduction to the gain on sale. Due to the increased proportion of Classic loan purchases, which generally require lower participation rates, and a reduction of the maximum participation rate allowable under the Premier program, participations paid as a percentage of the principal balance of loan purchases declined to 3.45% during 1996 from 4.21% and 3.98% during 1995 and 1994, respectively, resulting in increased gain on sale. Gains on sale of loans were further increased by $4.7 million and $1.4 million of gross realized gains on hedging transactions during 1996 and 1994, respectively, and decreased by $5.0 million, $11.7 million and $0.5 million of gross realized losses on hedging transactions during 1996, 1995 and 1994, respectively. There were no gross realized hedging gains during 1995. See "--Capital Resources--Hedging and Pre-funding Strategy." SERVICING FEE INCOME. The Company earns servicing fee income for servicing loans sold to investors through securitizations. The stated percent for servicing fees (1% per annum on the remaining balance of 25 loans serviced) is consistent with the industry standard for servicing automobile loans. Servicing fee income increased to $28.3 million in 1996 from $14.0 million in 1995 and $4.5 million in 1994. The following table reflects the growth in the Company's servicing portfolio from 1994 to 1996.
AT DECEMBER 31, -------------------------------------- (Dollars in thousands, except as noted) 1994 1995 1996 ---------- ------------ ------------ Principal balance of automobile loans held for sale....................... $ 22,918 $ 113,840 $ 35,365 Principal balance of loans serviced under securitizations................. 814,177 2,153,267 3,756,492 ---------- ------------ ------------ Servicing portfolio................................................... $ 837,095 $ 2,267,107 $ 3,791,857 ---------- ------------ ------------ ---------- ------------ ------------ Average outstanding principal balance (actual dollars).................... $ 11,271 $ 12,239 $ 12,537 Number of loans serviced.................................................. 74,267 185,241 302,450
The Company's servicing portfolio increased 67% from 1995 to 1996 and 171% between 1994 and 1995, reflecting continued growth in the volume of the Company's loan purchases and subsequent securitizations. The rise in average outstanding principal balance of loans reflects general price increases in the automobile industry. OTHER NON-INTEREST INCOME. Other non-interest income rose to $6.5 million during 1996 from $1.4 million and $0.9 million during 1995 and 1994, respectively, representing increases of 372% during 1996 and 56% during 1995. The rise in other non-interest income is principally due to increases in income from late fees and insufficient fund charges reflecting the increase in delinquency rates. See "--Delinquency, Loan Loss and Repossession Experience." SALARIES AND BENEFITS EXPENSE. Salaries and benefits increased to $40.8 million during 1996 from $20.1 million and $9.1 million during 1995 and 1994, respectively, representing an increase of 103% during 1996 and 122% during 1995. This increase is primarily due to growth in number of associates. The Company employed 1,230 associates at December 31, 1996, compared with 650 and 304 at December 31, 1995 and 1994, respectively. These increases are in response to, and in anticipation of, continued growth in loan purchasing volume and related servicing portfolio. The Company expects these expenses to continue to increase in 1997 compared with 1996 due in part to the Company's opening of four regional servicing and collection centers in October 1996. The rapid growth of the Company's servicing portfolio and the decision to expand the proportion of loans purchased through its Classic program have resulted in increased demands on the Company's personnel and systems. The Company's ability to support, manage and control continued growth is dependent upon, among other things, its ability to hire, train, supervise and manage its larger work force. Furthermore, the Company's ability to manage portfolio delinquency and loss rates is dependent upon the maintenance of efficient collection and repossession procedures and adequate staffing. See "--Delinquency, Loan Loss and Repossession Experience." GENERAL AND ADMINISTRATIVE AND OTHER OPERATING EXPENSES ("OTHER OPERATING EXPENSES"). Other operating expenses increased during 1996 to $51.5 million up from $22.6 million in 1995 and $8.3 million in 1994. Other operating expenses include occupancy and equipment leasing charges, depreciation, outside professional fees, communication costs, servicing and collection expenses, marketing expenses, recruiting and staffing fees, travel, office supplies and other. Many of these expenses, such as communications, service and collection and office supplies, increase incrementally with growth in loan purchasing volume and the Company's servicing portfolio. Occupancy and equipment charges increased due to continued geographic expansion through the opening of additional regional buying centers during 1995 and 1996 and the regionalization of the Company's servicing and collection operations during 1996. The Company also experienced significant increases in outside professional fees during 1996 primarily related to development costs associated with a potential leasing product and various information system enhancements. During 26 1996 the Company incurred increases in recruiting and staffing fees in connection with its search for various key collection, servicing and management personnel. As a result of the items noted above, total operating expenses, including salaries and benefits, rose to 3.06% of average servicing portfolio compared with 2.78% in 1995, but remained lower than 3.28% in 1994. LONG TERM DEBT AND OTHER INTEREST EXPENSE. Long-term debt and other interest expense rose 46.7% during 1996 and 217% in 1995. These increases are primarily due to the issuance of $145.0 million of 13.0% Senior Term Notes in April 1995 and $30.0 million of 10.125% Subordinated Notes in March 1996. INCOME TAX EXPENSE. During the third quarter of 1994, the Company fully utilized its book net operating loss carryforwards and incurred income tax expense for book purposes. No income tax expense was incurred in earlier periods. Because of the difference in the basis of the finance income receivable for financial reporting purposes and income tax purposes, the Company continues to have available $74.1 million of net tax operating loss carryforwards, a portion of which may be available to offset against income taxes in 1997 and future years, subject to applicable limitations. The $35.7 million income tax expense during 1996 primarily reflects the Company's estimated addition to its deferred tax liability as of December 31, 1996. EXTRAORDINARY ITEMS. In February 1995, the Company entered into a temporary financing facility under which it was able to borrow up to $70.0 million through the issuance of Senior Notes. Of the $50.0 million in gross proceeds from the Company's initial issuance of Senior Notes, $34.6 million was used to retire $30.0 million of 11.75% Senior Secured Notes, including accrued interest of $0.5 million and prepayment fees of approximately $4.1 million. The Company issued an additional $5.0 million in Senior Notes in April 1995. On April 28, 1995, the Company received aggregate net proceeds from the issuance of Common Stock and Senior Term Notes of approximately $231.0 million and applied $56.2 million of such proceeds to retire its Senior Notes at par plus accrued interest and $15.6 million to retire the Company's 9.875% Senior Subordinated Notes including accrued interest of $0.1 million and prepayment fees of $0.5 million. The prepayment fees for the early extinguishment of debt and the charge-off of capitalized debt financing costs associated with the 11.75% Senior Secured Notes and the 9.875% Senior Subordinated Notes were accounted for as extraordinary items. The Company has commenced a tender offer for the Senior Term Notes and a related consent solicitation for elimination of substantially all of the financial covenants in the indenture under which such Senior Term Notes were issued. See "--Capital Resources." PREFERRED DIVIDENDS. The Company paid dividends on its outstanding preferred stock (which was converted to Common Stock in December 1996) of $1.2 million, $2.2 million and $2.3 million for 1996, 1995 and 1994, respectively. The decrease in dividends paid from 1995 to 1996 is due to the conversion of preferred shares into common stock of the Company. As of December 31, 1996, all preferred shares had been redeemed or converted. FINANCIAL CONDITION DUE FROM SECURITIZATION TRUST. At December 31, 1996, the Company had delivered $177.1 million of loans into a securitization trust for which the Company received cash from the trust concurrent with the legal closing of the transaction in January 1997. There were no loans delivered into securitization trusts pending legal closing at December 31, 1995. AUTOMOBILE LOANS HELD FOR SALE. The Company holds automobile loans for sale in its portfolio prior to securitization. The Company's portfolio of loans held for sale decreased to $36.3 million at December 31, 1996 from $118.6 million at December 31, 1995, due to the timing in delivery of loans associated with the Company's securitizations. 27 FINANCE INCOME RECEIVABLE. Finance income receivable increased to $362.9 million at December 31, 1996 from $186.0 million at December 31, 1995. This 95% increase represents amounts capitalized upon completion of securitization transactions during 1996 related to the present value of estimated cash flows. The amounts capitalized were offset by excess cash flows released from the securitization trusts to the Company through its wholly-owned subsidiary, Olympic Receivables Finance Corp. ("ORFC"). Reserve for losses on securitized loans is included as a component of finance income receivable. FURNITURE, FIXTURES AND EQUIPMENT. Furniture, fixtures and equipment increased 115% to $13.6 million at December 31, 1996 from $6.3 million at December 31, 1995, primarily due to the opening of two additional regional buying centers and relocation of the Company's servicing and collection operations into four regional facilities during 1996 to enhance the Company's collection activities. CAPITAL LEASE OBLIGATIONS. Capital lease obligations increased 97% to $7.7 million at December 31, 1996, from $3.9 million at December 31, 1995, primarily due to continued geographic expansion as discussed above. DEFERRED INCOME TAXES. The Company began recording income tax expense in the third quarter of 1994 as the net tax benefit of net operating loss carryforwards for financial reporting purposes was fully utilized. Deferred income tax assets and liabilities reflect the tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes principally net operating loss carryforwards for income tax purposes and the finance income receivable, respectively. The Company's estimated net deferred tax liability at December 31, 1996, was $54.4 million, compared to $18.7 million at December 31, 1995. OTHER LIABILITIES. Accounts payable and accrued liabilities increased to $13.2 million at December 31, 1996 compared to $9.8 million at December 31, 1995. This 34% increase is primarily due to increased trade payables and other operating accruals reflecting the growth in the Company's operations and related operating expenses. DELINQUENCY, LOAN LOSS AND REPOSSESSION EXPERIENCE The Company's operating performance, financial condition and liquidity are materially affected by the performance of the automobile loans purchased and securitized by the Company. In connection with the servicing of automobile loans, the Company is responsible for managing delinquent loans, repossessing the underlying collateral in the event of default and selling repossessed collateral. The Company provides an allowance for automobile loan credit losses at a rate which, in the opinion of management, provides adequately for current and probable future losses that may be incurred by the Company. The Company provides an allowance for credit losses for sold loans in accordance with Emerging Issues Task Force 92-2, Measuring Loss Accounts by Transferors for Transfers of Receivables with Recourse, at the time of securitization. The provision for credit losses is netted against the calculated gain on sale amount for loans sold. The related allowance for these credit losses is a component of the finance income receivable. 28 The following tables describe the delinquency and credit loss and repossession experience, respectively, of the Company's servicing portfolio for the three years in the period ended December 31, 1996. A delinquent loan may result in the repossession and foreclosure of the collateral for the loan. Losses resulting from repossession and disposition of automobiles are charged against applicable allowances, which management reviews on a monthly basis.
DECEMBER 31, --------------------------------------------------------------------------------- DELINQUENCY EXPERIENCE (1): 1994 1995 1996 ------------------------- ------------------------- ------------------------- NUMBER OF NUMBER OF NUMBER OF LOANS BALANCES LOANS BALANCES LOANS BALANCES ----------- ----------- ----------- ----------- ----------- ----------- (Dollars in thousands) Servicing portfolio at end of period........................ 74,267 $ 837,095 185,241 $ 2,267,107 302,450 $ 3,791,857 Delinquencies: 31-60 days.................... 393 $ 4,142 1,536 $ 17,667 3,884 $ 47,225 61-90 days.................... 129 1,557 520 5,694 1,255 15,877 91 days or more............... 113 1,197 614 6,881 2,911 37,019 ----------- ----------- ----------- ----------- ----------- ----------- Total automobile loans delinquent 31 or more days.... 635 $ 6,896 2,670 $ 30,242 8,050 $ 100,121 Delinquencies as a percentage of number of loans and amount outstanding at end of period (2)........................... 0.86% 0.82% 1.44% 1.33% 2.66% 2.64% Amount in repossession (3)...... 102 $ 570 1,489 $ 17,676 4,651 $ 64,929 ----------- ----------- ----------- ----------- ----------- ----------- Total delinquencies and amount in repossession (2)........... 737 $ 7,466 4,159 $ 47,918 12,701 $ 165,050 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------ (1) All amounts and percentages are based on the principal amount scheduled to be paid on each loan. The information in the table includes previously sold loans which the Company continues to service. (2) Amounts shown do not include loans which are less than 31 days delinquent. (3) Amount in repossession represents financed automobiles which have been repossessed but not yet liquidated. 29
YEAR ENDED DECEMBER 31, ------------------------------------------ CREDIT LOSS/REPOSSESSION EXPERIENCE (1): 1994 1995 1996 ------------ ------------ ------------ (Dollars in thousands) Average servicing portfolio outstanding during the period................................................. $ 528,577 $ 1,534,720 $ 3,015,411 Average number of loans outstanding during the period.... 49,566 128,783 242,419 Number of repossessions.................................. 1,005 5,020 14,403 Repossessions as a percentage of average number of loans outstanding............................................ 2.03% 3.90% 5.94% Gross charge-offs (2).................................... $ 4,446 $ 11,247 $ 35,642 Recoveries (3)........................................... 974 911 5,653 ------------ ------------ ------------ Net losses............................................... $ 3,472 $ 10,336 $ 29,989 ------------ ------------ ------------ ------------ ------------ ------------ Gross charge-offs as a percentage of average servicing portfolio.............................................. 0.84% 0.73% 1.18% Net losses as a percentage of average servicing portfolio.............................................. 0.66% 0.67% 0.99%
- ------------------------ (1) All amounts and percentages are based on the principal amount scheduled to be paid on each loan. The information in the table includes previously sold loans which the Company continues to service. (2) Gross charge-offs represent principal amounts which management estimated to be uncollectable after the consideration of anticipated proceeds from the disposition of repossessed assets and selling expenses. When estimating the value of repossessed inventory, management utilizes industry published reports listing retail and wholesale values of used automobiles and determines estimated proceeds within a range that management believes reflects the then current market conditions and the Company's disposition strategy for such inventory. (3) Includes post-disposition amounts received on previously charged off loans. The increase in the rate of delinquencies, gross charge-offs, net losses and repossessions during 1996, experienced by both the Premier and Classic programs, was primarily due to (i) increased demands on the Company's servicing and collection resources as the result of rapid growth in its servicing portfolio and as a result of continued expansion of the Classic loan program (which generally required greater collection efforts than the Premier program), (ii) the performance of the Company's discontinued Classic product for first time automobile buyers and the Company's financed repossession program, which experienced significantly higher delinquencies, repossessions and losses than the Company's other products and programs and (iii) the continued seasoning of the Company's servicing portfolio to include a greater proportion of loans, particularly Classic loans, in the period of highest probability for delinquencies and defaults (generally six to 14 months from the origination date). To handle the increased demands on its servicing and collection operations, the Company began to take steps in 1996 to enhance its servicing and collection capabilities. Since December 1995, the Company has more than doubled its servicing and collection staff and, in October 1996, regionalized its servicing and collection operations into four locations across the United States. Additionally, the Company has engaged outside consultants to evaluate the Company's current collection strategy and assist in the design and implementation of a new collection system. During 1996, loans made under the Company's financed repossession program and its Classic product for first time automobile buyers (discontinued in March 1996) had significantly higher rates of delinquencies, gross charge-offs, net losses and repossessions than other products within the Company's servicing portfolio. These programs aggregated 4.3% of the total servicing portfolio at December 31, 1996, but accounted for approximately 20% of delinquencies, gross charge-offs and net losses in 1996. Management believes that the performance of the financed repossession loans is primarily attributable to an inventory reduction program during the fourth quarter of 1995 and the first quarter of 1996 and improper practices 30 at certain of the Company's initial consignment dealers, with which the Company has since terminated its business relationships. The Company has instituted more comprehensive management of its financed repossession program, including the dedication of trained staff located in the Company's four regional servicing and collection centers for the underwriting and purchasing of such loans. The significant rise in repossession inventory levels shown on the Delinquency Experience table was the result of the growth in the Company's servicing portfolio and due to changes to the Company's approach to retailing its repossessed automobiles. During 1995 and early 1996, the Company relied heavily on a few large retail consignment lots to sell its inventory. Turnover of repossession inventory was not at levels deemed acceptable by the Company under this approach. In early 1996 the Company terminated its relationship with certain consignment lots and decided to expand its repossession distribution channels to multiple smaller locations throughout the United States. The Company expanded its remarketing department in order to develop and manage relationships with additional retail outlets and to expedite disposition of repossessed vehicles. At December 31, 1996, the Company had arrangements with 67 smaller retail consignment lots to dispose of its repossessions compared with 10 large retail consignment lots at December 31, 1995. It is actively pursuing additional relationships to further increase its remarketing capacity. During 1996, the Company sold approximately 70% of its repossession inventory through retail markets and the Company financed approximately 90% of these sales. The Company may dispose of repossession inventory at wholesale auctions from time to time. Increases in loan delinquency and repossession rates may cause the Company to exceed certain pool performance tests established in agreements governing the Company's outstanding Senior Term Notes. If at any month-end the amount of charge-offs (net of recoveries) of automobile loans in the Company's servicing portfolio during the preceding six month periods, times two, exceeds 1.65% of the average servicing portfolio in the preceding seven months ("Portfolio Loss Ratio"), the Company will be prohibited from purchasing new automobile loans in excess of 20% of the Company's Adjusted Consolidated Cash Flow (as defined in the indenture governing the Senior Term Notes) plus proceeds of warehouse facilities and certain other available cash. If the Portfolio Loss Ratio exceeds 1.65% for two consecutive months, then 50% of such Adjusted Consolidated Cash Flow (as defined in the indenture governing the Senior Term Notes) must be used to offer to repurchase Senior Term Notes at par. In addition, if at the end of any month the Portfolio Loss Ratio exceeds 2.5% or the Company's delinquency level exceeds 3.5%, an event of default will occur under two of the Company's outstanding warehouse facilities. The delinquency level is calculated as a percentage, by outstanding principal balance, of all automobile loans owned or securitized by the Company as to which a payment is more than thirty days past due. Upon the occurrence of an event of default under such warehouse facilities, the lending banks under such facilities may accelerate the payment of amounts outstanding thereunder and would have no further obligation to extend additional credit. Furthermore, any such event of default may trigger cross-defaults under other outstanding indebtedness of the Company and may result in the acceleration of amounts due thereunder. On January 21, 1997 the Company made a tender offer to purchase all of its outstanding Senior Term Notes. See Note 14 to the Company's Consolidated Financial Statements. LIQUIDITY The Company's business requires substantial cash to support its operating activities. The principal cash requirements include (i) amounts necessary to purchase and finance automobile loans pending securitization, (ii) dealer participations, (iii) cash held from time to time in restricted spread accounts to support securitizations and warehouse facilities and other securitization expenses, (iv) interest advances to securitization trusts, (v) repossession inventory, and (vi) interest expense. The Company also uses significant amounts of cash for operating expenses. The Company receives cash principally from interest on loans held pending securitization, excess cash flow received from securitization trusts and fees earned through servicing of loans held by such trusts. The Company has operated on a negative operating cash flow basis and expects to continue to do so for so long as the Company continues to experience significant 31 growth in its volume of loan purchases. The Company has historically funded, and expects to continue to fund, these negative operating cash flows, subject to limitations in various debt covenants, principally through borrowings from financial institutions, sales of equity securities and sales of senior and subordinated notes, among other resources, although there can be no assurance that the Company will have access to capital markets in the future or that financing will be available to satisfy the Company's operating and debt service requirements or to fund its future growth. See "--Capital Resources". PRINCIPAL USES OF CASH IN OPERATING ACTIVITIES PURCHASES AND FINANCING OF AUTOMOBILE LOANS. Automobile loan purchases represent the Company's most significant cash requirement. The Company funds the purchase price of loans primarily through the use of warehouse facilities. However, because advance rates under the warehouse facilities generally provide funds ranging from 95% to 97% of the principal balance of the loans, the Company is required to fund the remainder of all purchases with other available cash resources. The Company purchased $2.8 billion of loans in 1996, compared with $2.1 billion in 1995 and $743.3 million in 1994. Amounts borrowed under warehouse facilities are repaid upon securitization of the loans. The Company regularly completes securitizations to optimize its use of available warehouse facilities and the Company's cash investment in loans held for sale. DEALER PARTICIPATIONS. Consistent with industry practice, the Company pays dealers participations for selling loans to the Company. When loans are securitized, the related dealer participation is expensed and subsequently recovered over the estimated life of the underlying loans through the return to the Company of excess cash flow from securitization trusts. Participations paid by the Company to dealers in 1996 were $94.9 million, compared with $86.5 million in 1995 and $29.6 million in 1994. These participations typically require the Company to advance an up-front amount to dealers, which represented 3.45% of the principal balance of loans purchased during 1996 compared to 4.21% in 1995 and 3.98% in 1994. The decrease in percentage of dealer participations paid reflects the growth in volume of loans purchased under the Classic program, which generally requires a lower participation rate and a reduction in the cap on participation rates paid on Premier loans implemented during 1995. The Company has some limited ability to recover these amounts from the dealers by offset against future participations in the event of prepayment or default on the loan within a specified period of time. However, to the extent the loan does not prepay or default within that period of time, the Company expects to recover the cash used to pay dealer commissions over the estimated life of the underlying loans through the return to the Company of excess cash flows from securitization spread accounts. This relationship between the up-front payment of cash to the dealers and the deferred recovery through collection of excess cash flow will continue to represent a significant demand on capital resources to the extent the Company continues to expand the volume of loan purchases. SECURITIZATION OF AUTOMOBILE LOANS. In connection with securitizations, the Company is required to fund spread accounts related to each transaction. The Company funds these spread accounts by foregoing receipt of excess cash flow until these spread accounts exceed predetermined levels (generally within 14 months of the formation of the securitization trust). In certain securitizations, the Company also has been required to provide initial cash deposits into such accounts. The amount of time required to initially fund each spread account varies depending on numerous factors, including, but not limited to (i) the size of the initial deposit, (ii) the gross interest rate spread, (iii) defaults, (iv) delinquencies, (v) losses and (vi) turnover of repossession inventory. The Company had $143.0 million of restricted cash in spread accounts at December 31, 1996, compared with $63.6 million at December 31, 1995. The Company also incurs certain expenses in connection with securitizations, including underwriting fees, credit enhancement fees, trustee fees and other costs, which approximate 0.55% per annum of the principal amount of the asset-backed securities. 32 NET INTEREST MARGIN. Although the Company records net interest margin as it is earned, the interest income component is generally received in cash from excess cash flow over the life of the securitization trust, while the interest expense component (primarily warehousing interest) is paid prior to securitization. ADVANCES DUE TO SERVICER. As the servicer of loans sold in securitizations, the Company periodically makes interest advances to the securitization trusts to provide for temporary delays in the receipt of required interest payments by borrowers. In accordance with servicing agreements, the Company makes advances only in the event that it expects to recover such advances through the ultimate payments from the obligor over the life of the loan. Beginning in December 1996, the Company's servicing agreements were modified to require interest advances only when the related loan is 31 days delinquent or greater. REPOSSESSION INVENTORY. At December 31, 1996, the Company's inventory of repossessed automobiles held for resale was $64.9 million, compared with $17.7 million at December 31, 1995. The rate of repossession inventory turnover impacts cash available for spread accounts under securitization trusts and, consequently, the excess cash available for distribution to ORFC. At December 31, 1996, repossessed inventory was 1.7% of total servicing portfolio compared with 0.8% at December 31, 1995. PRINCIPAL SOURCES OF CASH IN OPERATING ACTIVITIES EXCESS CASH FLOW. The Company receives excess cash flow from securitization trusts, including the realization of gain on sale, the recovery of dealer participation, and the recovery of accrued interest receivable earned, but not yet collected, on loans held for sale. Recovery of dealer participation and accrued interest receivable, which occur throughout the life of the securitization, result in a reduction of the finance income receivable and, because they have been considered in the original determination of the gain on sale of loans, have no effect on the Company's results of operations in the year in which the participations and interest are recovered from the securitization trust. During 1996, the Company received $43.4 million of excess cash flow, compared with $21.1 million in 1995 and $17.7 million in 1994. The rate of increase in excess cash flow during 1996 exceeded the rate of increase in loans securitized principally because spread accounts related to 1995 securitizations have reached required reserve levels and have begun releasing cash during the current year. These obligations generally reach pre-determined spread account levels within 14 months following the formation of the securitization trust. The excess cash flow released from securitization trusts during 1996 was reduced by the slower turnover of the Company's repossession inventory resulting from the utilization of its retail repossession strategy. SERVICING FEES. The Company also receives servicing fee income with respect to loans held by securitization trusts equal to 1% per annum of the remaining principal balance. The Company received cash for such services in the amount of $27.0 million, $12.7 million and $4.5 million during 1996, 1995 and 1994, respectively, and is reflected in the Company's revenues as earned. CAPITAL RESOURCES The Company finances the acquisition of automobile loans primarily through (i) warehouse facilities, pursuant to which loans are sold or financed generally on a temporary basis and (ii) the securitization of loans, pursuant to which loans are sold as asset-backed securities. Additional financing is required to fund the Company's operations. WAREHOUSE FACILITIES. Automobile loans held for sale are funded on a short-term basis primarily through warehouse facilities. At December 31, 1996, the Company had three warehouse facilities in place with various financial institutions and institutional lenders with an aggregate capacity of $800 million, of which $688.9 million was unused. These facilities are subject to renewal or extension, at various times in 1997 at the option of the lenders. Proceeds from securitizations, generally received within seven to ten days following the cut-off date established for the securitization transaction, are utilized to invest in additional loan purchases and applied to repay amounts outstanding under warehouse facilities. 33 SECURITIZATION PROGRAM. An important capital resource for the Company has been its ability to sell automobile loans in the secondary markets through securitizations. The following table summarizes the Company's securitizations during the three years ended December 31, 1996, all of which have been publicly issued and were rated "AAA/Aaa".
REMAINING REMAINING BALANCE AS BALANCE AS A CURRENT WEIGHTED GROSS OF PERCENTAGE WEIGHTED AVERAGE INTEREST ORIGINAL DECEMBER 31, OF ORIGINAL AVERAGE SECURITIZATION RATE DATE BALANCE 1996 BALANCE APR RATE SPREAD - -------------------- ------------ ------------ --------------- ----------- ----------------- ----------- March 94 $ 260,000 $ 72,580 27.92% 11.13% 5.66% 5.47% September 94 430,000 165,351 38.45 12.80 6.81 5.99 February 95 158,400 68,650 43.34 13.87 7.88 5.99 March 95 300,000 134,341 44.78 14.41 7.31 7.10 June 95 470,000 242,987 51.70 14.19 6.20 7.99 September 95 525,000 307,926 58.65 13.77 6.03 7.74 December 95 600,000 389,884 64.98 13.77 5.88 7.89 March 96 600,000 437,653 72.94 13.72 5.81 7.91 June 96 650,000 540,368 83.13 14.46 6.62 7.84 September 96 725,000 664,248 91.62 14.83 6.75 8.08 December 96 (1) 730,000 683,333 93.61 15.19 6.08 9.11 ------------ ------------ $ 5,448,400 $ 3,707,321 ------------ ------------ ------------ ------------
- ------------------------------ (1) At December 31, 1996, $692.6 million of automobile loans had been delivered to the trust and $37.4 million cash remained in the pre-funded portion of the trust. In January 1997, the Company delivered sufficient loans to the trust and obtained the release of the remaining cash in the pre-funded portion of the trust. See "--Hedging and Pre-funding Strategy" below. The Company utilizes net proceeds from securitizations to invest in additional loan purchases and to repay warehouse indebtedness, thereby making its warehouse facilities available for further purchases of automobile loans. At December 31, 1996, the Company had securitized approximately $5.8 billion of automobile loans since its inception in 1990 with remaining balances of approximately $3.8 billion. All of the Company's securitization trusts and the BofA Facility are credit-enhanced through financial guaranty insurance policies, issued by FSA which insure payment of principal and interest due on the related asset-backed securities. Asset-backed securities insured by FSA have been rated AAA by Standard & Poor's and Aaa by Moody's Investors Service, Inc. At December 31, 1996, FSA had insured approximately $5.8 billion original principal amount of Company-sponsored asset-backed securities. During 1996, the Company agreed to use FSA as insurer of the asset-backed securities issued in its insured securitizations through December 1998 in consideration for certain limitations on FSA insurance premiums. FSA is not obligated to provide insurance for the Company's future securitizations. In order to obtain FSA insurance, the Company is obligated to establish spread accounts, and to maintain such spread accounts at pre-determined levels, in connection with each insured securitization through the collection and restriction of excess cash flow from the loans securitized. These spread accounts are funded through initial deposits, when required, and out of excess cash flow from the related securitization trust. Thereafter, during each month excess cash flow due to ORFC from all insured securitization trusts is first used to replenish spread accounts to predetermined levels and is then distributed to the Company. If excess cash flow from all insured securitization trusts is not sufficient to replenish all spread accounts, no cash flow would be available to the Company from ORFC for that month. Spread accounts are also replenished through cash received from the liquidation of repossessions under defaulted receivables. However, such cash is generally received in months subsequent to default and can therefore result in timing differences as to when excess cash flows are released to the Company. The spread account for each insured securitization trust is cross-collateralized with the spread accounts established for the Company's other insured securitization trusts. Excess cash flow from performing securitization trusts insured by FSA may be used to support negative cash flow from, or to replenish a deficit spread account in connection with, non-performing securitization trusts insured by FSA. The Company's obligations to FSA in respect of insured securitizations and the BofA Facility are limited to the amounts on deposit in the spread accounts and excess cash flow. 34 In connection with its securitizations, the Company continually seeks to improve its structures to reduce up-front costs and to maximize excess cash flow available to the Company. The Company may consider alternative securitization structures, including senior/subordinated tranches, and alternative forms of credit enhancement, such as letters of credit and surety bonds. For example, during 1995 and 1994, the Company realized a portion of its finance income receivable by selling an interest-only strip in its September 1995 and September 1994 securitizations. Proceeds from the sale of the interest-only strips were approximately $6.1 million in 1995 and approximately $7.0 million in 1994. There were no interest-only strips sold during 1996. The structure of each securitized sale of loans will depend on market conditions, costs of securitization and the availability of credit enhancement options to the Company. HEDGING AND PRE-FUNDING STRATEGY. The Company employs hedging strategies to manage its gross interest rate spread. Through the use of these hedging strategies, the Company is able to determine its approximate financing cost prior to, or near to, the purchase of loans and thereby maintain its gross interest rate spread within a desired range. Because interest rates on asset-backed securities for automobile loans generally tend to rise or fall when other short-term interest rates fluctuate, a material increase in interest rates prior to securitization could adversely affect the profitability of such securitization to the Company in the absence of a hedging strategy. The Company also mitigates its exposure to interest rate risk through a pre-funding strategy in which it securitizes a portion of its loans held for sale while selling future loans in a pre-funded securitization. In a pre-funded securitization, the principal amount of the asset-backed securities issued in the securitization exceeds the principal balance of loans initially delivered to the securitization trust. The proceeds from the pre-funded portion are held in trust earning money market yields until released upon delivery of additional loans. The Company agrees to deliver additional loans into the securitization trust from time to time (generally monthly) equal in the aggregate to the amount by which the principal balance of the asset-backed securities exceeds the principal balance of the loans initially delivered. In pre-funded securitizations, the Company predetermines the borrowing costs with respect to loans it subsequently purchases and delivers into the securitization trust. However, the Company incurs an expense in pre-funding securitizations equal to the difference between the money market yields earned on the proceeds held in trust prior to the subsequent delivery of loans and the interest rate paid on the asset-backed securities. The Company also has some interest rate exposure to falling interest rates to the extent that the Company's offered rates decline after the Company has engaged in a pre-funded securitization, although the Company's offered rates generally respond less rapidly to rate fluctuations than financing costs. The Company also sells forward U.S. Treasuries that most closely parallel the average life of its portfolio of loans held for sale. By doing so, the Company is able to obtain an inverse relationship between the loans being hedged and the U.S. Treasury market. The hedging gain or loss is netted against the gain on sale of loans. Such hedges include certain risks created by the cash versus non-cash relationship of the hedging instrument and the related securitization. This relationship arises because U.S. Treasury forward contracts are settled with current cash payments and the gain on sale of loans represents the present value of estimated future cash flows. To the extent hedging gains or losses resulting from U.S. Treasury forward contracts are significant, the resulting cash payments or receipts may impact the Company's liquidity. Hedging transactions required a net use of cash of $0.3 million and $11.7 million during 1996 and 1995, respectively, and provided cash of $0.8 million in 1994. Management has controls and policies in place to assess and monitor its risk from hedging activities. Management follows its policy of hedging loan amounts purchased or expected to be delivered within the next 120 days. Management reviews the interest rate movements in the U.S. Treasury markets and receives a daily internal report tracking such movements. Monthly, management receives an interest rate report that describes not only interest rate movements, but also the amount of corresponding increase or decrease in the value of its hedged securitizations. Most of the Company's hedging transactions have been for a period of 75 days or less. The amount and timing of hedging transactions are determined by members of 35 the Company's senior management, and subject to approval by the Company's Chief Executive Officer. Management assesses factors including the interest rate environment, loan production levels and open positions of current hedging positions. OTHER CAPITAL RESOURCES Historically, the Company has utilized various debt and equity financings to offset negative operating cash flows and support the continued growth in loan volume, increased dollar amount of dealer participations, securitizations and general operating expenses. During 1996, the Company completed a public offering of 8,050,000 shares of Common Stock and received net proceeds of approximately $146.0 million. In March 1996, the Company issued to the public $30.0 million aggregate principal amount of 10.125% Subordinated Notes Series 1996-A, due 2001 and received net proceeds of approximately $29.0 million. Proceeds from the 1996 offerings were available as working capital for loan purchases and general operations. In February 1995, the Company entered into a temporary financing facility (the "Facility") in order to provide cash pending completion of the common stock and senior debt offerings described below and to repay $30.0 million of outstanding Senior Secured Notes. Under the Facility, the Company borrowed $55.0 million through the issuance of Senior Unsecured Increasing Rate Notes. In April 1995, proceeds from the common stock and senior term debt offerings described below were used to retire the notes issued under the Facility at par plus accrued interest. In April 1995, the Company issued to the public 9,849,900 shares of Common Stock and $145.0 million principal amount of Senior Term Notes. The Company received aggregate net proceeds from the issuance of the Common Stock and Senior Term Notes of approximately $231.0 million and applied $56.2 million of such proceeds to retire its temporary financing facility plus accrued interest, $15.6 million to retire the Company's 9.875% Senior Subordinated Notes (including a prepayment fee of $0.5 million and accrued interest of $0.1 million), and $9.4 million to fund a reserve account established for future payment of interest on the Senior Term Notes. The remaining proceeds of $149.8 million were available as working capital for loan purchases and general operations. The Company pays interest on the Senior Term Notes semi-annually on November 1 and May 1 of each year. The Senior Term Notes are not callable prior to May 1, 1998. Thereafter, the Senior Term Notes are redeemable, in whole or in part, at the option of the Company, at 108.5% and 104.25% if redeemed during the twelve month periods beginning May 1, 1998, and 1999, respectively, together with accrued and unpaid interest to the date of redemption. The Company will be obligated to make an offer to purchase all outstanding Senior Term Notes at a price of 101% of the principal amount thereof, together with accrued and unpaid interest to the date of purchase if certain covenants (as defined within the Senior Term Note indenture) regarding sales of assets, change in control or annualized net losses are violated. The Senior Term Notes are unsecured obligations of the Company (except for a reserve fund equal to one interest payment on the outstanding principal balance of the Senior Term Notes) and rank senior to all outstanding subordinated notes of the Company and pari passu in right of payment with all unsecured and unsubordinated indebtedness of the Company. On January 21, 1997 the Company made a tender offer to purchase all of its outstanding Senior Term Notes. See Note 14 to the Company's Consolidated Financial Statements. Pursuant to demand registration rights of certain holders of warrants issued by the Company between 1992 and 1994 in connection with its issuance of Senior Secured and Senior Subordinated Notes, the Company filed separate registration statements during April and October 1995 covering 213,000 and 3,871,364 shares of Common Stock, respectively, issuable upon exercise of the warrants for secondary sale at market should the holders decide to do so. The Company would receive aggregate proceeds of approximately $17.0 million assuming exercise of all of the warrants. As of December 31, 1996, 2,405,089 36 shares of Common Stock had been issued in connection with exercise of such warrants for aggregate proceeds of $10.0 million. In September 1994, the Company began a program to sell up to $50.0 million of unsecured subordinated notes (the "Junior Subordinated Notes") to be offered to the public from time to time (the "Note Program"). Issuance of Junior Subordinated Notes under the Note Program is subject to restrictions under the Senior Term Note indenture. The Note Program includes Junior Subordinated Notes extendible by the investor having maturities of 30, 60, 90 and 180 days and one year after the date of issue and fixed-term Junior Subordinated Notes having maturities of one, two, three, four, five and 10 years after the date of issue. Interest rates on any unsold Junior Subordinated Notes are subject to change by the Company from time to time based on market conditions. Interest rates on extendible Junior Subordinated Notes may be adjusted at any roll-over date. At December 31, 1996, the Company had $23.7 million of Junior Subordinated Notes outstanding. The terms of the Senior Term Note indenture, among other things, limit, subject to certain other requirements and with certain exceptions, certain payments, including dividends on common or preferred stock, to 50% of Consolidated Cash Flow (as defined). Consolidated Cash Flow is defined as Operating Cash Receipts less Cash Expenses for the four quarterly periods preceding a proposed restricted payment. The Company has had and expects to continue to have negative Consolidated Cash Flow for so long as the rapid growth of its loan purchase volume continues. Consolidated Cash Flow for the four-quarter period ended December 31, 1996, is as follows:
FOR THE FOUR QUARTERS ENDED DECEMBER 31, 1996 ----------------- (IN THOUSANDS) Operating Cash Receipts: Excess cash flows received from securitization trusts............................ $ 43,351 Servicing fee income............................................................. 27,018 Other cash income................................................................ 7,959 ----------------- Total Operating Cash Receipts.................................................. 78,328 Less Cash Expenses: Payment of dealer commissions.................................................... 94,938 Cash operating expenses.......................................................... 98,644 Interest paid on warehouse and other debt........................................ 33,448 Preferred dividends.............................................................. 1,688 ----------------- Total Cash Expenses............................................................ 228,718 ----------------- Consolidated Cash Flow............................................................. $ (150,390) ----------------- -----------------
At December 31, 1996 the Company's Portfolio Loss Ratio (as defined in the Senior Term Note indenture) was 1.12% and the Company's Consolidated Net Worth (as defined in the Senior Term Note indenture) was $388.7 million. FORWARD LOOKING STATEMENTS The preceding Management's Discussion and Analysis of the Company's Financial Condition and Results of Operations contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," "should" or "continue" or the negative thereof or other variations thereon or comparable terminology. The matters set forth under the caption "Cautionary Statements" in Exhibit 99.1 to this Annual Report on Form 10-K constitute cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from those in such forward-looking statements. 37 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT AUDITORS Board of Directors Olympic Financial Ltd. We have audited the accompanying consolidated balance sheets of Olympic Financial Ltd. as of December 31, 1996 and 1995 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Olympic Financial Ltd. at December 31, 1996 and 1995 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Minneapolis, Minnesota January 21, 1997 38 OLYMPIC FINANCIAL LTD. CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, -------------------- (Dollars in thousands, except share amounts) 1995 1996 --------- --------- ASSETS Cash and cash equivalents............................................... $ 1,340 $ 16,057 Due from securitization trust........................................... -- 177,076 Auto loans held for sale................................................ 118,556 36,285 Finance income receivable............................................... 186,001 362,916 Restricted cash in spread accounts...................................... 63,580 142,977 Furniture, fixtures and equipment....................................... 6,346 13,630 Other assets............................................................ 21,971 29,289 --------- --------- Total assets........................................................ $ 397,794 $ 778,230 --------- --------- --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Amounts due under warehouse facilities.................................. $ 26,530 $ 111,140 Senior term notes....................................................... 145,000 145,000 Subordinated notes...................................................... 13,005 53,689 Capital lease obligations............................................... 3,924 7,729 Deferred income taxes................................................... 18,700 54,387 Accounts payable and accrued liabilities................................ 9,822 13,192 --------- --------- Total liabilities................................................... 216,981 385,137 Commitments and contingencies Shareholders' equity: Capital stock, $.01 par value, 100,000,000 shares authorized: 8% Cumulative Convertible Exchangeable Preferred Stock, 1,071,036 shares issued and outstanding....................................... 11 -- Common Stock 22,038,567 and 36,416,802 shares, respectively, issued and outstanding........................................................... 220 364 Additional paid-in capital.............................................. 157,204 310,187 Retained earnings....................................................... 23,378 82,542 --------- --------- Total shareholders' equity.......................................... 180,813 393,093 --------- --------- $ 397,794 $ 778,230 --------- --------- --------- ---------
See notes to consolidated financial statements. 39 OLYMPIC FINANCIAL LTD. CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, --------------------------------------------- (Dollars in thousands, except per share amounts) 1994 1995 1996 ------------- ------------- ------------- REVENUES: Net interest margin...................................... $ 9,828 $ 31,192 $ 62,963 Gain on sale of loans.................................... 13,579 62,182 115,773 Servicing fee income..................................... 4,502 13,987 28,284 Other non-interest income................................ 879 1,371 6,475 ------------- ------------- ------------- Total revenues....................................... 28,788 108,732 213,495 EXPENSES: Salaries and benefits.................................... 9,060 20,079 40,751 General and administrative and other operating expense... 8,282 22,648 51,547 ------------- ------------- ------------- Total operating expenses............................. 17,342 42,727 92,298 Long-term debt and other interest expense................ 5,416 17,170 25,193 ------------- ------------- ------------- Total expenses....................................... 22,758 59,897 117,491 ------------- ------------- ------------- Operating income before income taxes and extraordinary items.................................................. 6,030 48,835 96,004 Provision for income taxes............................... 1,845 19,518 35,688 ------------- ------------- ------------- Income before extraordinary items........................ 4,185 29,317 60,316 Extraordinary items...................................... -- (3,856) -- ------------- ------------- ------------- Net income............................................... $ 4,185 $ 25,461 $ 60,316 ------------- ------------- ------------- ------------- ------------- ------------- PRIMARY EARNINGS PER SHARE: Net income per common share before extraordinary items... $ 0.17 $ 1.35 $ 1.79 Extraordinary items per common share..................... -- (0.19) -- ------------- ------------- ------------- Net income per common share.......................... $ 0.17 $ 1.16 $ 1.79 ------------- ------------- ------------- ------------- ------------- ------------- FULLY DILUTED EARNINGS PER SHARE: Net income per share before extraordinary items.......... $ 0.17 $ 1.11 $ 1.65 Extraordinary items per share............................ -- (0.15) -- ------------- ------------- ------------- Net income per share................................. $ 0.17 $ 0.96 $ 1.65 ------------- ------------- ------------- ------------- ------------- ------------- Weighted average common and common equivalent shares outstanding: Primary................................................ 10,818,908 20,029,769 33,065,473 Fully diluted.......................................... 16,683,380 26,455,876 36,449,995
See notes to consolidated financial statements. 40 OLYMPIC FINANCIAL LTD. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NUMBER OF NUMBER OF PREFERRED COMMON PREFERRED COMMON (Dollars in thousands, except share amounts) SHARES SHARES PAR VALUE PAR VALUE ------------ ------------ ------------ ------------ BALANCES AT DECEMBER 31, 1993................... 1,150,000 9,816,434 $ 12 $ 98 Cost of issuance of 8% Convertible Preferred Stock.......................................... -- -- -- -- Exercise of warrants by shareholders............ -- 71,429 -- 1 Issuance of Common Stock through the Employee Stock Purchase Plan............................ -- 32,847 -- -- Payment of dividends on 8% Convertible Preferred Stock.......................................... -- -- -- -- Net income...................................... -- -- -- -- ------------ ------------ --- ----- BALANCES AT DECEMBER 31, 1994................... 1,150,000 9,920,710 12 99 Issuance of Common Stock: Public offering............................... -- 9,849,900 -- 98 Benefit plans................................. -- 163,094 -- 2 Amortization of deferred compensation........... -- -- -- -- Exercise of options and warrants................ -- 1,736,735 -- 17 Preferred Stock conversion to Common Stock...... (78,964) 368,128 (1) 4 Payment of dividends on 8% Convertible Preferred Stock.......................................... -- -- -- -- Net income...................................... -- -- -- -- ------------ ------------ --- ----- BALANCES AT DECEMBER 31, 1995 1,071,036 22,038,567 11 220 Exercise of options and warrants................ -- 1,101,269 -- 11 Issuance of Common Stock: Public offering............................... -- 8,050,000 -- 81 Benefit plans................................. -- 234,752 -- 2 Amortization of deferred compensation........... -- -- -- -- Preferred Stock redemption and conversion to Common Stock................................... (1,071,036) 4,992,214 (11) 50 Payment of dividends on 8% Convertible Preferred Stock.......................................... -- -- -- -- Net income...................................... -- -- -- -- ------------ ------------ --- ----- BALANCES AT DECEMBER 31, 1996................... -- 36,416,802 $ -- $ 364 ------------ ------------ --- ----- ------------ ------------ --- ----- ADDITIONAL RETAINED PAID IN EARNINGS (Dollars in thousands, except share amounts) CAPITAL (DEFICIT) TOTAL ------------ ------------ ------------ BALANCES AT DECEMBER 31, 1993................... $ 60,344 $ (1,755) $ 58,699 Cost of issuance of 8% Convertible Preferred Stock.......................................... (10) -- (10) Exercise of warrants by shareholders............ 137 -- 138 Issuance of Common Stock through the Employee Stock Purchase Plan............................ 150 -- 150 Payment of dividends on 8% Convertible Preferred Stock.......................................... -- (2,300) (2,300) Net income...................................... -- 4,185 4,185 ------------ ------------ ------------ BALANCES AT DECEMBER 31, 1994................... 60,621 130 60,862 Issuance of Common Stock: Public offering............................... 87,559 -- 87,657 Benefit plans................................. 934 -- 936 Amortization of deferred compensation........... 837 -- 837 Exercise of options and warrants................ 7,256 -- 7,273 Preferred Stock conversion to Common Stock...... (3) -- -- Payment of dividends on 8% Convertible Preferred Stock.......................................... -- (2,213) (2,213) Net income...................................... -- 25,461 25,461 ------------ ------------ ------------ BALANCES AT DECEMBER 31, 1995 157,204 23,378 180,813 Exercise of options and warrants................ 4,902 -- 4,913 Issuance of Common Stock: Public offering............................... 145,925 -- 146,006 Benefit plans................................. 1,163 -- 1,165 Amortization of deferred compensation........... 1,038 -- 1,038 Preferred Stock redemption and conversion to Common Stock................................... (45) -- (6) Payment of dividends on 8% Convertible Preferred Stock.......................................... -- (1,152) (1,152) Net income...................................... -- 60,316 60,316 ------------ ------------ ------------ BALANCES AT DECEMBER 31, 1996................... $ 310,187 $ 82,542 $ 393,093 ------------ ------------ ------------ ------------ ------------ ------------
See notes to consolidated financial statements. 41 OLYMPIC FINANCIAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, --------------------------------------------- (Dollars in thousands) 1994 1995 1996 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................................. $ 4,185 $ 25,461 $ 60,316 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization............................................ 553 1,881 4,286 Loss on sale of furniture, fixtures and equipment........................ -- 153 119 (Increase) decrease in assets: Automobile loans held for sale: Purchases of automobile loans.......................................... (743,256) (2,052,413) (2,750,553) Sales of automobile loans.............................................. 712,211 1,933,525 2,787,412 Repayments of automobile loans......................................... 7,849 24,200 45,412 Finance income receivable................................................ (32,293) (127,461) (176,916) Restricted cash in spread accounts....................................... (6,299) (42,172) (79,397) Due from securitization trusts........................................... (22,095) 88,481 (177,076) Prepaid expenses and other assets........................................ (3,121) (10,402) (5,787) Increase (decrease) in liabilities: Deferred income taxes.................................................. 1,845 16,947 35,688 Accounts payable and accrued liabilities............................... 1,647 6,141 3,369 ------------- ------------- ------------- Total cash used in operating activities......................... (78,774) (135,659) (253,127) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of furniture, fixtures and equipment................... 68 37 26 Purchase of furniture, fixtures and equipment.............................. (362) (1,089) (5,108) Purchase of subordinated certificates...................................... (962) (2,046) (2,596) Collections on subordinated certificates................................... 339 510 1,078 ------------- ------------- ------------- Total cash used in investing activities......................... (917) (2,588) (6,600) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of Common Stock................................. 288 95,866 152,079 Net proceeds from issuance of 8% Convertible Preferred Stock............... (10) -- -- Payment of dividends on 8% Convertible Preferred Stock..................... (2,300) (2,213) (1,152) Proceeds from borrowings under warehouse facilities........................ 426,161 1,605,583 2,159,523 Repayment of borrowings under warehouse facilities......................... (342,082) (1,685,241) (2,074,913) Unsecured subordinated notes, net.......................................... 306 12,699 40,684 Proceeds from issuance of long-term debt................................... 12,000 -- -- Repayments of long-term debt............................................... -- (30,000) -- Proceeds from issuance of Senior Notes..................................... -- 55,000 -- Repayment of Senior Notes.................................................. -- (55,000) -- Proceeds from issuance of Senior Term Notes................................ -- 145,000 -- Repayments of Senior Subordinated Notes.................................... -- (15,000) -- Deferred debt issuance cost, net........................................... (259) (2,541) (13) Reduction of capital lease obligations..................................... (532) (1,183) (1,764) ------------- ------------- ------------- Total cash provided by financing activities..................... 93,572 122,970 274,444 ------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents....................... 13,881 (15,277) 14,717 Cash and cash equivalents at beginning of period........................... 2,736 16,617 1,340 ------------- ------------- ------------- Cash and cash equivalents at end of period................................. $ 16,617 $ 1,340 $ 16,057 ------------- ------------- ------------- ------------- ------------- ------------- Supplemental disclosures of cash flow information: Non cash activities: Additions to capital leases............................................ $ 1,524 $ 3,609 $ 5,569 Cash paid for: Interest............................................................... 6,386 19,630 33,448 Taxes.................................................................. -- 92 --
See notes to consolidated financial statements. 42 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Olympic Financial Ltd. (the "Company") operates in a single industry, purchases, securitizes and services consumer automobile retail installment loans originated primarily by car dealers affiliated with major foreign and domestic manufacturers. The Company provides a competitive and consistent alternative source of retail financing to more than 7,700 automobile dealers for their customers' purchases of new and used automobiles and light trucks. The Company does not purchase more than 1.0% of its loans from any one dealer. Since its founding in March 1990, the Company has established 17 regional buying centers in Arizona, Northern and Southern California, Colorado, Florida, Georgia, Massachusetts, Minnesota, Missouri, New York, North Carolina, Ohio, Tennessee, North, South and West Texas, and Washington. The Company's dealer network includes dealers in 39 states. At December 31, 1996, the Company's only significant geographic concentration in its servicing portfolio was to borrowers in the state of Texas which consisted of approximately 22% of the total servicing portfolio. Management does not believe that the Company has any current material exposures to geographic or dealer concentrations. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. Certain reclassifications have been made to the December 31, 1995 and 1994 balances to conform to current period presentation. CASH AND CASH EQUIVALENTS The Company considers all significant investments with an original maturity of three months or less to be cash equivalents. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. DUE FROM SECURITIZATION TRUST Under Olympic's securitization structures, the Company delivers loans to a securitization trust and subsequently receives cash from the trust for such loans concurrent with the legal closing of the transaction typically six to 10 days after delivery. All terms of the transfer of assets to the trust are fixed and determinable at the time of delivery. AUTOMOBILE LOANS HELD FOR SALE Loans are carried at the lower of their principal amount outstanding (amortized cost), including related unearned dealer participations, or market value. Market value is estimated based on the characteristics of the loans held for sale and the terms of recent sales of similar loans completed by the Company. 43 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Interest on these loans is accrued and credited to interest income based upon the daily principal amount outstanding. In accordance with Emerging Issues Task Force ("EITF") Issue 92-10, LOAN ACQUISITIONS INVOLVING TABLE FUNDING ARRANGEMENTS, the EITF set forth specific criteria providing the distinction between purchasers and originators of loans. For financial reporting purposes, the Company is in substance an originator of automobile loans. Therefore, participations paid to dealers are deferred and amortized over the life of the underlying loan in accordance with Statement of Financial Accounting Standards ("SFAS") No. 91, "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases." Any unamortized deferred costs remaining at the time the loan is sold is considered a portion of the basis of loans held for sale and charged to expense as a component of any subsequent gain or loss on sale. Dealer participations are calculated by amortizing the customer loan at the interest rate charged by the automobile dealer to the automobile purchaser and at the rate offered by the Company to the dealer and recognizing the difference between these two aggregate interest amounts as the dealer participation. This amount is paid to the dealer at or near the original purchase date of the loan. A portion of this amount is generally recoverable from the dealer in the event of a default or prepayment within a time period specified in the dealer agreement. The balance is recovered over time as a portion of excess cash flows released from securitization trusts. FINANCE INCOME RECEIVABLE Finance income receivable includes (i) the estimated present value of future cash flows from securitization transactions ("gain on sale of loans"), (ii) accrued interest receivable on loans held for sale, but not yet collected through the date of sale, (iii) interest earned on spread accounts and other cash accounts established in connection with the Company's securitizations and (iv) interest earned on previously discounted cash flows. The components of finance income receivable are recovered by the Company, and finance income receivable is reduced, over the life of the securitized loans through the return of cash flows in excess of spread account requirements. Finance income receivable excludes deferred service fee income which represents the amount of future cash flows to be recognized as earned over the period for which the Company services the securitized loans. Reserve for loan losses included in finance income receivable represents the estimated amount of loan losses expected to be incurred over the life of the underlying loans included in the securitization transactions. The carrying amount of finance income receivable is reviewed periodically to determine if differences exist between estimated and actual credit losses, prepayment rates and weighted average APR at each balance sheet date using the discount factor applied in the original determination of the receivable. In addition, at the same dates, the Company assesses the effect of changes in estimates, if any, on the carrying amount of the finance income receivable. The Company's analysis determines that the finance income receivable is not recorded in excess of the present value of the estimated remaining excess cash flows. The Company does not increase the carrying amount of finance income receivable for favorable variances from original estimates, but to the extent that actual results exceed the Company's prepayment or loss estimates, or there is a greater than anticipated decline in the weighted average APR of loans sold, any required 44 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) decrease to finance income receivable is reflected as a reduction of current period earnings. There were no material adjustments to the carrying amount of finance income receivable during the three years ended December 31, 1996. Adjustments due to modification of future estimates are determined on a disaggregated basis according to each asset securitization transaction. CASH RESTRICTED IN SPREAD ACCOUNTS The Company is required to maintain spread accounts to protect investors in securitization transactions and credit enhancers against credit losses. The initial deposit, if required, and excess cash flows from securitization transactions are retained for each securitization until the spread account balance increases to a specified percentage of the underlying loans included in the securitization. Funds in excess of specified percentages are remitted to the Company, through its wholly-owned subsidiary Olympic Receivables Finance Corp. ("ORFC"), over the remaining life of the securitization. For each securitization trust, there is no recourse to the Company beyond the balance in the spread accounts or the trust's future earnings. FURNITURE, FIXTURES AND EQUIPMENT Furniture, fixtures and equipment are stated at cost less accumulated depreciation and amortization. Owned properties are depreciated on a straight-line basis over their useful lives. Capital lease assets are amortized over their lease terms on a straight line basis. ADVANCES DUE TO SERVICER As servicer of loans sold in securitizations, the Company periodically makes interest advances to the securitization trusts to provide for temporary delays in the receipt of required interest payments by borrowers. In accordance with the Company's servicing agreements, the Company makes advances only in the event it expects to recover them through the ultimate payments from the obligor on the loan. DEFERRED DEBT ISSUANCE COSTS The Company capitalizes costs incurred related to the issuance of long-term debt. These costs are deferred and amortized on a straight-line basis over the contractual maturity of the related debt and recognized as a component of interest expense. SERVICING FEE RECEIVABLE The Company earns a servicing fee for servicing loans sold to investors through securitization. These fees are paid to the Company by the securitization trust on a monthly basis. INCOME TAXES Deferred tax assets and liabilities are recognized for future tax consequences related to differences between the current carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured based on enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 45 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NET INTEREST MARGIN The Company's net interest margin represents the sum of (i) net interest on loans held for sale based on the net interest rate spread, (ii) investment earnings on short-term investments and spread accounts and other cash accounts established in connection with the Company's securitizations and (iii) the recognition of the interest component of previously discounted cash flows, calculated at the present value discount rate used in determining the gain on sale. NET INCOME PER SHARE Income for primary earnings per share is adjusted for dividends on 8% Convertible Preferred Stock and is computed based on the weighted average number of common and dilutive common stock equivalents arising from the assumed exercise of outstanding warrants and stock options (calculated using the treasury stock method). Fully diluted earnings per share data for annual periods prior to 1996, is computed by using such weighted average common stock and common stock equivalents increased by the assumed conversion of the 8% Convertible Preferred Stock into shares of Common Stock. All of the Company's 8% Convertible Preferred Stock had been redeemed or converted at December 31, 1996. If all of the Company's 8% Convertible Preferred Stock had converted at the beginning of 1996, primary earnings per share for the year ended December 31, 1996 would have been $1.67. The effect on quarterly primary earnings per share would have been immaterial. For the purpose of computing the net income per common share equivalent data, all warrants and options issued are treated as if exercised for shares of Common Stock on their respective date of original issuance. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments as defined by SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," including cash and cash equivalents, due from securitization trusts, finance income receivable, restricted cash in spread accounts, amounts due under warehouse facilities and Junior Subordinated Notes are accounted for on a historical cost basis which, due to the nature of these financial instruments, approximates fair value. Automobile loans held for sale are accounted for at the lower of amortized cost or market value. Fair value of the Company's Senior Term Notes and 10.125% Senior Subordinated Notes is determined using available market quotes. At December 31, 1996 and 1995, the Company had $145.0 million of Senior Term Notes outstanding with an estimated fair value of $161.0 million at December 31, 1996 and $158.1 million at December 31, 1995. The Company also had $30.0 million of Senior Subordinated Notes issued during 1996 and outstanding at December 31, 1996. The carrying amount of the Senior Subordinated Notes approximates fair value. 2. ACCOUNTING CHANGES STOCK BASED COMPENSATION PLANS SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), was issued by the Financial Accounting Standards Board in October 1995 and is effective for fiscal years beginning after December 15, 1995. SFAS 123 provides for companies to recognize compensation expense associated with stock based compensation plans over the anticipated service period based on the fair value of the award on the date of grant. As allowed by SFAS 123, however, the Company has elected to continue to measure compensation costs as prescribed by APB Opinion No. 25 "Accounting for Stock Issued to Employees." 46 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. ACCOUNTING CHANGES (CONTINUED) See Footnote No. 11, for pro forma disclosures of net income and earnings per share, as if SFAS 123 had been adopted. TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 125"), was issued by the Financial Accounting Standards Board in June 1996 and is effective on a prospective basis for all transactions after December 31, 1996. SFAS 125 was issued to clarify certain aspects of previously issued statements regarding transfers of financial assets and to create guidance on a wider spectrum of financial assets. The Company will adopt the provisions of SFAS 125 on January 1, 1997 and does not believe that this statement will have a material effect on its statement of operations or financial position. 3. AUTOMOBILE LOANS HELD FOR SALE The weighted average interest rate on automobile loans held for sale was 15.22% and 14.04% at December 31, 1996 and 1995, respectively. Accrued interest receivable on automobile loans held for sale aggregated $0.2 million and $0.6 million as of December 31, 1996 and 1995, respectively. 4. FINANCE INCOME RECEIVABLE The following table sets forth the components of finance income receivable as of December 31:
(Dollars in thousands) 1995 1996 ---------- ---------- Estimated cash flows on loans sold, net of estimated prepayments.............. $ 285,517 $ 549,876 Deferred servicing income..................................................... (37,780) (59,473) Reserve for loan losses....................................................... (42,270) (95,005) ---------- ---------- Undiscounted cash flows on loans sold, net of estimated prepayments......... 205,467 395,398 Discount to present value..................................................... (19,466) (32,482) ---------- ---------- $ 186,001 $ 362,916 ---------- ---------- ---------- ---------- Reserve for loan losses as a percentage of servicing portfolio................ 1.86% 2.51%
47 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. FINANCE INCOME RECEIVABLE (CONTINUED) The following represents the roll-forward of the finance income receivable balance for the two years ended December 31, 1996:
(Dollars in thousands) Balance, December 31, 1994.................................................................. $ 58,540 Excess cash flows on loans sold, net of estimated prepayments............................... 141,147 Return of excess cash flows............................................................... (21,054) Recognition of present value effect of cash flows......................................... 7,368 ---------- Balance, December 31, 1995.................................................................. 186,001 Excess cash flows on loans sold, net of estimated prepayments............................. 201,376 Return of excess cash flows............................................................... (43,351) Recognition of present value effect of cash flows......................................... 18,890 ---------- Balance, December 31, 1996.................................................................. $ 362,916 ---------- ----------
5. FURNITURE, FIXTURES AND EQUIPMENT Furniture, fixtures and equipment, as of December 31, consists of the following:
(Dollars in thousands) 1995 1996 --------- ---------- OWNED Office furniture and equipment.................................................... $ 2,385 $ 6,637 Automobiles....................................................................... 220 313 Computer equipment................................................................ 319 1,003 --------- ---------- Total......................................................................... 2,924 7,953 CAPITALIZED LEASES Office furniture and equipment.................................................... 2,677 4,280 Computer equipment................................................................ 2,621 5,545 --------- ---------- Total......................................................................... 5,298 9,825 --------- ---------- Total furniture, fixtures and equipment (at cost)................................. 8,222 17,778 Less: Accumulated depreciation and amortization....................................... (1,876) (4,148) --------- ---------- Furniture, fixtures and equipment, net............................................ $ 6,346 $ 13,630 --------- ---------- --------- ----------
Depreciation expense including amortization of assets under capital lease obligations for the years ended December 31, 1996, 1995 and 1994 was $3.2 million, $1.0 million and $0.5 million, respectively. 48 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. OTHER ASSETS Other assets, as of December 31, consists of the following:
(Dollars in thousands) 1995 1996 --------- --------- Advances due to servicer.......................................................... $ 9,046 $ 8,140 Deferred debt issuance costs...................................................... 4,444 4,438 Investment in subordinated certificates........................................... 2,811 4,329 Servicing fee receivable.......................................................... 1,855 3,121 Prepaid expenses.................................................................. 1,545 2,755 Repossessed assets................................................................ 431 1,577 Other assets...................................................................... 1,839 4,929 --------- --------- $ 21,971 $ 29,289 --------- --------- --------- ---------
7. AMOUNTS DUE UNDER WAREHOUSE FACILITIES At December 31, 1996, the Company had three warehouse facilities with an aggregate capacity of $800.0 million in place with various financial institutions and institutional lenders of which $688.9 million was available. Borrowings under these facilities are collateralized by certain loans held for sale. The weighted average interest rate on outstanding borrowings under the warehouse facilities was 6.27% and 7.23% at December 31, 1996 and 1995, respectively. In December 1996, the Company entered into a commercial paper conduit facility sponsored by Bank of America. Under this facility, the Company's wholly-owned special purpose subsidiary, may sell up to $300.0 million in retail automobile contracts to Arcadia Receivables Conduit Corporation ("ARCC"), a special purpose corporation owned by the Company. The purchase price to ARCC is funded through borrowings from Receivables Capital Corporation ("RCC"), a special purpose corporation administered by Bank of America, which in turn funds such borrowings through the issuance of commercial paper. This facility is subject to annual renewals through December 1999. Also during 1996, the Company entered into a Credit Agreement with banks led by Bank of America. Under this agreement, the Company may borrow up to $170.0 million. The Company may borrow an amount equal to 95% of the outstanding principal amount of eligible automobile loans pledged to secure the indebtedness depending on certain portfolio performance tests. The Company's Credit Agreement matures in July, 1997. Additionally, the Company, through its special purpose subsidiary, Olympic Receivables Finance Corp. II ("ORFC II"), participates in a $330.0 million receivables warehouse facility which utilizes a commercial paper conduit sponsored by J.P. Morgan. Under a receivables purchase agreement between the Company and ORFC II, the Company has agreed to sell automobile loans to ORFC which funds the purchase by selling the automobile loans to an owner trust (the "Owner Trust") under repurchase agreements. The Owner Trust is funded through borrowings from Delaware Funding Corporation ("DFC"), a J.P. Morgan commercial paper company which in turn funds such borrowers through the issuance of commercial paper. In January 1997, the Company agreed to reduce the capacity of the J.P. Morgan Facility from $300 million to approximately $250 million and to extend such facility through December 1997 with annual renewal options through December 1998. 49 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. LONG-TERM DEBT SENIOR TERM NOTES In April 1995, the Company issued to the public $145.0 million principal amount of 13% Senior Notes due 2000 (the "Senior Term Notes"). Interest on the Senior Term Notes is payable semi-annually on November 1 and May 1 of each year, commencing November 1, 1995. The Senior Term Notes are not callable prior to May 1, 1998. Thereafter, the Senior Term Notes are redeemable, in whole or in part, at the option of the Company, at 108.5% and 104.25% if redeemed during the twelve month periods beginning May 1, 1998, and 1999, respectively, together with accrued and unpaid interest to the date of redemption. The Company will be obligated to make an offer to purchase all outstanding Senior Term Notes at a price of 101% of the principal amount thereof, together with accrued and unpaid interest to the date of purchase if certain covenants (as defined within the Senior Term Note Indenture) regarding sales of assets, change in control or annualized net losses are not met. Except for a reserve fund equal to one interest payment on the outstanding principal balance of the Senior Term Notes, the Senior Term Notes are unsecured obligations to the Company and will rank senior to all outstanding subordinated notes of the Company and PARI PASSU in right of payment with all unsecured and unsubordinated indebtedness of the Company. The reserve fund may be used by the Company to purchase automobile loans at an advance rate of 90% of principal balance of the loans purchased which are pledged against the Senior Term Notes. See Note No. 14, Subsequent Events. SUBORDINATED NOTES Subordinated notes outstanding as of December 31, are as follows:
(Dollars in thousands) 1995 1996 --------- --------- Senior subordinated notes, Series 1996-A................................ $ -- $ 30,000 Junior subordinated notes............................................... 13,005 23,689 --------- --------- $ 13,005 $ 53,689 --------- --------- --------- ---------
In March 1996, the Company sold to the public $30.0 million aggregate principal amount of its 10.125% Subordinated Notes, Series 1996-A due 2001 (the "Senior Subordinated Notes"). Interest on the Senior Subordinated Notes is payable monthly beginning May 15, 1996. The Senior Subordinated Notes may not be redeemed prior to May 15, 1998. At any time on such date or thereafter, the Company may at its option elect to redeem the Senior Subordinated Notes, in whole or in part, at 101.5% of the principal amount of Senior Subordinated Notes redeemed, or 100% thereof on or after May 15, 1999, plus accrued interest to and including the redemption date. The Senior Subordinated Notes are unsecured general obligations of the Company and are subordinated in right of payment to all existing and future Senior Debt (as defined in the indenture governing the Senior Subordinated Notes). In September 1994, the Company completed a shelf registration to issue up to $50.0 million of Junior Subordinated Notes. The Junior Subordinated Notes are issued in minimum denominations of $1,000 and include extendible notes having maturities ranging from 30 days to one year from the date of issue and fixed term notes having maturities of one to ten years from date of issue. The Company may adjust interest rates on unsold notes prior to sale and on extendible notes at any roll-over date based on current market conditions. As of December 31, 1996, the weighted average maturity and interest rate of the Unsecured Subordinated Notes were 14.2 months and 9.50%, respectively. 50 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. LONG-TERM DEBT (CONTINUED) Maturities of long-term debt outstanding at December 31, 1996 were:
(Dollars in thousands) YEAR ENDING 1997........................................................................ $ 12,516 1998........................................................................ 7,747 1999........................................................................ 522 2000........................................................................ 145,616 2001........................................................................ 32,018 2002 and thereafter......................................................... 270 ---------- Total................................................................... $ 198,689 ---------- ----------
9. COMMITMENTS AND CONTINGENCIES The Company leases furniture, fixtures and equipment under capital and operating leases with terms in excess of one year. Additionally, the Company leases its office space under operating leases. Total rent expense on operating leases was $4.7 million, $1.8 million and $0.9 million for the years ended December 31, 1996, 1995, and 1994, respectively. Future minimum lease payments required under capital and noncancelable operating leases with terms of one year or more, at December 31, 1996 were:
CAPITAL OPERATING (Dollars in thousands) LEASES LEASES --------- ----------- YEAR ENDING 1997............................................................ $ 3,168 $ 6,337 1998............................................................ 2,924 6,405 1999............................................................ 1,371 5,874 2000............................................................ 1,089 4,559 2001............................................................ 697 3,240 2002 and thereafter............................................. 44 2,574 --------- ----------- Total......................................................... 9,293 $ 28,989 ----------- ----------- Less amounts representing interest................................ (1,564) --------- Present value of net minimum lease payments....................... $ 7,729 --------- ---------
Under the terms of sales of automobile loans completed through securitization transactions, the Company may be obligated to repurchase certain automobile loans due to failure of the assets to meet specifically defined criteria. The Company may substitute other assets for those repurchased because of failure to meet the specifically defined criteria. The Company's potential obligation for defaulted automobile loans, if realized, is expected to be satisfied through the use of cash collateral accounts included in the securitization transactions. The Company may not substitute other assets for defaulted automobile loans. Proceeds of transfers of automobile loans with limited recourse, accounted for as sales, during the years ended December 31, 1996, 1995 and 1994 were $2.8 billion, $1.9 billion and $712.2 million, respectively. The outstanding balance of automobile loans transferred and serviced for others in connection with securitization transactions since the Company's inception was $3.8 billion at December 31, 1996. 51 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. SHAREHOLDERS' EQUITY On May 18, 1995, the shareholders approved an amendment to the Company's Articles of Incorporation which increased its authorized capital stock from 35,714,286 to 100,000,000 shares. The Company had reserved shares of authorized but unissued Common Stock at December 31, 1996, as follows: Warrants......................................... 1,756,273 Restricted stock election plans.................. 592,348 Employee stock purchase plan..................... 276,891 Stock options.................................... 2,854,585 --------- 5,480,097 --------- ---------
COMMON STOCK In April 1996, the Company completed a public offering of 8,050,000 shares of its Common Stock at $19.25 per share, including an over-allotment option of 1,050,000 shares. In April 1995, the Company completed a secondary public offering of 9,849,900 shares of its Common Stock at $10.00 per share including an over-allotment option of 1,284,900 shares and 65,000 shares pursuant to the exercise of warrants. Additionally, pursuant to demand registration rights of certain warrants issued by the Company between 1992 and 1994 in connection with its issuance of 11.75% Senior Secured and 9.875% Senior Subordinated Notes, the Company filed separate registration statements during April and October 1995, covering 213,000 and 3,871,364 shares of Common Stock, respectively, issuable upon exercise of the warrants for secondary sale at market should the holders decide to do so. During 1995 and 1996, 1,650,569 and 754,520 shares of Common Stock had been issued in connection with the exercise of warrants for aggregate proceeds of $6.9 million and $3.1 million, respectively. As of December 31, 1996, the Company had remaining warrants outstanding for the purchase of 1,756,273 shares of Common Stock at exercise prices ranging from $4.13 to $4.75 per share. Additionally, in December 1995, the Company's Board of Directors authorized the issuance of 10 shares of Common Stock to each employee as a reward for current year results. An aggregate 6,180 shares were issued. 8% CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK In December 1993, the Company sold 1,150,000 shares of its 8% Cumulative Convertible Exchangeable Preferred Stock (the "Preferred Stock") at $25 per share (listed on the Nasdaq National Market under the trading symbol "OLYMP"). In October 1996, the Company called for redemption on December 2, 1996, all of its outstanding Preferred Stock. The total redemption price (including accrued and unpaid dividends) was $27.12 per share. As an alternative to having their preferred stock redeemed for cash, all but 200 shares of preferred stock converted into common stock at a rate of 4.662 shares of common stock for each share of preferred prior to the redemption date. SHAREHOLDER RIGHTS PLAN In October 1996, the Board of Directors adopted a Shareholder Rights Plan in which Preferred Stock Purchase Rights were distributed as a dividend at the rate of one Right for each share of the Company's Common Stock held on November 22, 1996. The Rights expire on October 28, 2006. Each Right generally will entitle shareholders, in certain circumstances, to buy one-thousandth of a newly issued share of Class A Preferred Stock of the Company at an exercise price of $90.00 per share. The Rights generally will be exerciseable and transferable apart from Common Stock only if a person or group would beneficially own 15% or more of the Common Stock. If any person becomes the beneficial owner of 15% or more of 52 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. SHAREHOLDERS' EQUITY (CONTINUED) the Company's Common Stock, then each Right not owned by a 15% or more shareholder or certain related parties will generally entitle its holders to purchase, at the Right's then-current exercise price, shares of Common Stock (or, in certain circumstances as determined by the Board, cash, other property or other securities) having a value of twice the Right's exercise price. In addition, if, after any person has become a 15% or more shareholder, the Company is involved in a merger or other business combination transaction with another person in which its Common Stock is changed or converted, or sells 50% or more of its assets or earning power to another person, each Right will entitle its holder to purchase, at the Right's then-current exercise price, shares of Common Stock of such other person having a value twice the Right's exercise price. The Company will generally be entitled to redeem the Rights at $.01 per Right at any time until the tenth day following public disclosure that a person or group has become the beneficial owner of 15% or more of the Company's Common Stock. COMMON STOCK DIVIDENDS Under the Company's debt agreements, the Company may not pay any dividend or make any other distribution on its Common Stock, nor may the Company redeem or repurchase any of its Common Stock. Consequently, no cash dividends are expected to be paid on the Common Stock in the foreseeable future. 11. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS RESTRICTED STOCK ELECTION PLANS In July of 1994, the Board of Directors of the Company adopted a Restricted Stock Election Plan (the "1994 Stock Election Plan"). The purpose of the 1994 Stock Election Plan is to reward management performance and to build each participant's equity interest in the stock of the Company by providing long-term incentives and rewards to officers and other key management employees of the Company and its subsidiaries. The 1994 Stock Election Plan allows certain employees of the Company to elect to receive all or a portion of certain bonuses they are entitled to receive from the Company in 1994 through 1997 in the form of shares of the Company's Common Stock. The 1994 Stock Election Plan authorizes the granting of awards in the form of restricted shares of the Company's Common Stock, subject to certain risks of forfeiture which may be eliminated over time based upon achievement of certain performance criteria by the eligible employee and/or the Company. A total of 800,000 shares of Common Stock are set aside for awards under the 1994 Stock Election Plan. As of December 31, 1996 there have been 523,466 shares granted under the plan with 316,519 shares remaining subject to restriction. In December 1995, the Board of Directors of the Company adopted a second Restricted Stock Election Plan (the "1998 Stock Election Plan"). The purpose of this Plan is the same as that of the 1994 Stock Election Plan except that it is applicable to bonuses which may be earned by certain key employees of the Company in the years 1998 through 2000. As with the 1994 Stock Election Plan, the 1998 Stock Election Plan authorizes the granting of awards in the form of restricted shares of the Company's Common Stock, subject to certain risks of forfeiture which may be eliminated over time based upon achievement of certain performance criteria by the eligible employee and/or the Company. A total of 600,000 shares of the Common Stock have been set aside for awards under the 1998 Stock Election Plan. As of December 31, 1996 there have been 284,186 shares granted under the 1998 Stock Election Plan, all of which remain subject to restriction. In accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees", the Company recorded deferred compensation as a reduction to shareholders' equity for the portion of the restricted 53 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS (CONTINUED) stock award not yet earned. The deferred compensation will be amortized and recognized as compensation expense ratably over the shorter of the period in which management anticipates restrictions will be lifted or the maximum vesting period. In connection with the 1994 Stock Election Plan, the Company recognized $1.0 million, $0.8 million and $0.3 million of compensation expense for the years ended December 31, 1996, 1995 and 1994, respectively. EMPLOYEE STOCK PURCHASE PLAN In July 1993, the Company adopted an Employee Stock Purchase Plan (the "Plan"). This Plan is available to all employees, including officers, who are employed for at least 20 hours per week and more than five months in a calendar year. All employees are eligible except those (i) who own and/or hold outstanding options to purchase stock possessing 5% or more of the total combined voting power of the capital stock of the Company, or (ii) who, for each calendar year, are entitled to purchase more than $25,000 of fair market value of such stock under all employee stock purchase plans. The participants purchase stock on each exercise date (June 30 and December 31), and the shares are issued within thirty days thereafter. The exercise price is determined to be 85% of the lower of the mean of the bid and ask prices of the Company's Common Stock on January 1, at the date the participant becomes eligible, or on each exercise date. A total of 500,000 shares of Common Stock has been reserved for issuance under the Plan. As of December 31, 1996, 223,109 shares of Common Stock have been issued to the Company's employees under the Plan. The Plan is noncompensatory and results in no expense to the Company. DIRECTOR OPTION PLAN The 1992 Director Stock Option Plan (the "DSOP") was approved by the shareholders at the 1992 Annual Meeting. The DSOP provides for the automatic grant of options to purchase the Company's Common Stock to outside directors according to fixed terms. The DSOP provides that a new outside director automatically receives options to purchase 15,000 shares upon first becoming an outside director and an additional 15,000 shares on each anniversary date of the original grant, up to a maximum of 120,000 shares. The maximum aggregate number of shares of the Company's Common Stock which may be issued pursuant to the DSOP is 840,000. As of December 31, 1996, 200,000 options to outside directors have been issued and remain outstanding at exercise prices ranging from $3.00 to $23.88. At December 31, 1996, 1995 and 1994 there were 175,000 options, 285,000 options and 195,000 options, respectively, exercisable under the DSOP. STOCK OPTION PLAN The Company has a Stock Option Plan (the "1990 Plan") which provides for the granting of incentive and nonqualified options to designated employees and non-employees, including consultants of the Company, to purchase up to a maximum of 2,000,000 shares of the Company's Common Stock. The 1990 Plan is administered by the Compensation Committee of the Board of Directors and has the authority and discretion to determine the employees, officers, directors and others who are to receive options, the type of option to be granted, the number of shares subject to each option and the exercise price of each option (not to be less than fair market value for incentive options). Options may not be granted under the 1990 Plan after January 17, 2001. The term of each option, which is fixed by the Compensation Committee, generally may not exceed ten years from the date the option is granted. The 1990 Plan is noncompensatory and results in no expense to the Company. At December 31, 1996, 1995 and 1994, there were 702,450 options, 548,165 options and 495,809 options, respectively, exercisable under the 1990 Plan. 54 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS (CONTINUED) A summary of stock option activity under the 1990 Plan is as follows:
OUTSTANDING OPTIONS -------------------------------------------- RESERVED SHARES NUMBER PRICE PER SHARE --------------- ---------- --------------- BALANCE, DECEMBER 31, 1993......................................... 1,000,000 530,566 $ 0.48-$6.00 Granted.......................................................... -- 371,571 4.63-5.38 Exercised........................................................ -- -- -- -- Canceled......................................................... -- (7,000) 4.63-5.88 --------------- ---------- --------------- BALANCE, DECEMBER 31, 1994......................................... 1,000,000 895,137 0.48-6.00 Granted.......................................................... 1,000,000 515,000 6.00-16.19 Exercised........................................................ -- (71,166) 3.00-6.00 Canceled......................................................... -- (48,000) 4.63-5.88 --------------- ---------- --------------- BALANCE, DECEMBER 31, 1995......................................... 2,000,000 1,290,971 0.48-16.19 Granted.......................................................... -- 520,000 14.06-20.75 Exercised........................................................ -- (116,749) 0.48-7.63 Canceled......................................................... -- -- -- -- --------------- ---------- --------------- BALANCE, DECEMBER 31, 1996......................................... 2,000,000 1,694,222 $ 0.48-$20.75 --------------- ---------- --------------- --------------- ---------- ---------------
In 1996, 1995 and 1994, the Company granted to a director options to purchase a total of 325,000, 40,000 and 100,000 shares, respectively, of the Company's Common Stock under Non-statutory Stock Option Agreements. These options were granted in connection with such director's appointment as Chairman of the Executive Committee of the Board of Directors and in consideration for certain consulting arrangements entered into between the Company and the director and have exercise prices ranging from $5.13 to $17.38. At December 31, 1996 and 1995, there were 240,000 and 100,000 options, respectively, exerciseable under the Non-statutory Stock Option Agreements. Effective January 1, 1996 the Company adopted Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123 provides for companies to recognize compensation expense associated with stock based compensation plans over the anticipated service period based on the fair value of the award on the date of grant. However, SFAS 123 allows companies to continue to measure compensation costs prescribed by APB Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25"). Companies electing to continue accounting for stock based compensation plans under APB 25 must make pro forma disclosures of net income and earnings per share, as if SFAS 123 had been adopted. The company has continued to account for stock-based compensation plans under APB 25. The pro forma disclosure of the effect of SFAS 123 on net income and earnings per share for the years ended December 31, is presented below. The fair value of the options was estimated at date of grant using a Black-Scholes option pricing model with the weighted-average risk-free interest rate assumptions for 1995 and 1996 at 6.7%, volatility factor of the expected market price of the Company's Common Stock of .68 and an option life of five or ten years. Fair value calculations assume no dividends will be paid on the Company's Common Stock.
1995 1996 --------- --------- Pro forma net income $ 24,697 $ 57,935 Pro forma earning per share: Primary............................................................... $ 1.12 $ 1.72 Fully diluted......................................................... $ 0.93 $ 1.59
55 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. EMPLOYEE BENEFITS AND STOCK INCENTIVE PLANS (CONTINUED) The weighted average fair value of options granted during 1996 was $13.53. Subsequent to December 31, 1996, the Company granted the option to purchase 1,200,000 shares of the Company's Common Stock under terms of an employment agreement with its newly elected Chief Executive Officer. The options are exercisable at $14.87 per share, ratably over a three year period beginning in 1998 and had a fair value, as computed under the provisions of SFAS 123, of $11.87 at the date of grant. CASH SURRENDER VALUE OF LIFE INSURANCE In October 1995, the Company entered into split-dollar insurance agreements with certain employees of the Company. Under the terms of the agreements, the Company pays the premium due on life insurance policies owned by the employee that build cash surrender value while also providing life insurance benefits for the employee. The Company is entitled to a refund of all previously paid premiums or the cash surrender value of the policy, whichever is lower, if the agreement or the policy is terminated. In the event of death of the insured, the Company will be entitled to a refund of all previously paid premiums. At December 31, 1996, these policies had cash surrender value of $958,000. There was no cash surrender value at December 31, 1995. 12. INCOME TAXES The components of income tax expense for the three years ended December 31, 1996 consist of the following:
(Dollars in thousands) 1994 1995 1996 --------- --------- --------- Provision for deferred taxes: Federal..................................................... $ 1,614 $ 17,078 $ 32,641 State....................................................... 231 2,440 3,047 --------- --------- --------- Provision for income taxes................................ 1,845 19,518 35,688 Tax effect of extraordinary items........................... -- (2,571) -- --------- --------- --------- Applicable income taxes, after extraordinary items........ $ 1,845 $ 16,947 $ 35,688 --------- --------- --------- --------- --------- ---------
The reconciliation between income tax expense and the amount computed by applying the statutory federal income tax rate of 35% for the three years ended December 31, 1996 is as follows:
(Dollars in thousands) 1994 1995 1996 --------- --------- --------- Federal tax at statutory rate................................. $ 2,054 $ 17,078 $ 33,601 State income tax, net of federal benefit...................... 253 2,440 3,715 Effect of reversal of valuation allowance..................... (688) -- -- Other......................................................... 226 -- (1,628) --------- --------- --------- Provision for income taxes.................................. 1,845 19,518 35,688 Tax effect of extraordinary items............................. -- (2,571) -- --------- --------- --------- Applicable income taxes, after extraordinary items.......... $ 1,845 $ 16,947 $ 35,688 --------- --------- --------- --------- --------- --------- Effective income tax rate................................... 40.0% 40.0% 37.2%
56 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. INCOME TAXES (CONTINUED) Deferred income taxes are provided for temporary differences between pretax income for financial reporting purposes and taxable income. The tax-effected temporary differences and carryforwards which comprise the significant components of the Company's deferred tax assets and liabilities are as follows:
DECEMBER 31, ---------------------- (Dollars in thousands) 1995 1996 ---------- ---------- Deferred Tax Assets: Securitization expenses....................................... $ 4,245 $ 5,089 Other......................................................... -- 1,364 ---------- ---------- Gross deferred tax assets..................................... 4,245 6,453 Deferred Tax Liabilities: Gain on securitizations....................................... (41,025) (84,595) Other......................................................... (411) (3,796) ---------- ---------- Gross deferred tax liabilities................................ (41,436) (88,391) ---------- ---------- Net temporary differences....................................... (37,191) (81,938) Net operating loss carryforwards (expiring 2006-2011)........... 18,491 27,551 ---------- ---------- Net deferred tax liability.................................... $ (18,700) $ (54,387) ---------- ---------- ---------- ----------
At December 31, 1996, the Company has net operating loss carryforwards for federal income tax purposes of approximately $74.1 million which are available to offset future federal taxable income and expire no earlier than 2006. No valuation allowance was required as of December 31, 1996 or 1995 because it is more likely than not that the deferred tax asset will be realized against future taxable income. The timing of the realization of the benefits related to a portion of the income tax net operating loss carryforwards is limited on an annual basis under Section 382 of the Internal Revenue Code. 13. DERIVATIVE ACTIVITIES AND OFF-BALANCE SHEET RISK During the three years ended December 31, 1996, the Company entered into several hedging transactions to manage its gross interest rate spread on loans held for sale. The Company agreed to sell forward US Treasuries that most closely parallel the average life of its portfolio of loans held for sale. Hedging gains and losses are recognized as a component of the gain on sale of loans on the date such loans are sold. As of December 31, 1996 and 1995, the Company had entered into the following agreements to sell forward Two Year Treasuries:
(Dollars in thousands) 1995 1996 ------------ ------------ Notional amount outstanding..................................... $ 450,000 $ 700,000 Unrealized gains (losses) on outstanding hedging transactions... $ (574) $ 484
The hedging transactions outstanding at December 31, 1996 are expected to close in March 1997. Hedging realized gains (losses) during the three year period ended December 31 1996 were:
(Dollars in thousands) 1994 1995 1996 ---------- ---------- ---------- Realized gains (losses).......................................... $ 821 $ (11,719) $ (349)
57 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. DERIVATIVE ACTIVITIES AND OFF-BALANCE SHEET RISK (CONTINUED) The Company generally maintains a margin cash account of approximately 0.5% of the amount hedged with its counterparty in hedging transactions. See discussion of the Company's hedging policy in "Management's Discussion and Analysis of Financial Condition and Results of Operation--Capital Resources--Hedging and Pre-funding Strategy." 14. SUBSEQUENT EVENT In January 1997, the Company offered to purchase all of its 13% Senior Term Notes, due 2000, at a price of $1,117.50 for each $1,000 principal amount thereof, together with accrued and unpaid interest up to the date of purchase. In connection with the offer to purchase, the Company is soliciting consent from the holders of the 13% Senior Term Notes to remove substantially all financial covenants applicable to such notes and is paying each holder of 13% Senior Term Notes $20.00 in cash for each $1,000 of principal amount thereof if the required consents are received. The Company will not be obligated to purchase any 13% Senior Term Notes unless (1) a majority of the 13% Senior Notes not owned by the Company or any of its affiliates are properly tendered, (2) consents sufficient to approve the amendments are obtained and (3) the Company has deposited funds with the depository sufficient to purchase all Senior Term Notes tendered, whether from proceeds of a proposed public offering of senior notes aggregating not less than $170 million or from other new financing sources acceptable to the Company. In connection therewith, the Company proposes to make a public offering of up to $300 million principal amount of senior notes. Proceeds from this transaction will be used to repurchase up to $145 million principal amount of the Company's outstanding 13% Senior Term Notes pursuant to the tender offer, as well as for general corporate purposes. The public offering, which is expected to commence during the week of February 3, 1997, will be made by means of a prospectus under the Company's shelf registration statement under the Securities Act of 1933, as amended. The Company's offer to purchase the 13% Senior Term Notes expires at 5:00 p.m. Eastern Standard Time, on February 20, 1997 unless extended. 15. UNAUDITED SELECTED QUARTERLY DATA FOURTH QUARTER RESULTS OF OPERATIONS The Company purchased $740.9 million of automobile loans in the fourth quarter of 1996 compared to $588.7 million for the same period in 1995, and securitized $720.2 million in 1996 compared to $574.5 million in 1995. Net income in the fourth quarter of 1996 was $17.4 million compared to $10.2 million in 1995. Increased average loans held for sale and a widening in the Company's net interest rate spread in the fourth quarter of 1996, resulted in an increase in net interest margin to $17.5 million from $9.4 million in the same period a year ago. Non-interest revenue increased to $1.9 million in the fourth quarter of 1996 compared to $0.6 million for same period in 1995 primarily due to late fees and insufficient fund charges. Operating expenses increased to $29.0 million in the fourth quarter of 1996 from $13.4 million in the same period of 1995 primarily due to increased salaries and benefits reflecting a twofold increase in associates as well as increased servicing and collection costs associated with an increased servicing portfolio and rise in volume of Classic loans. 58 OLYMPIC FINANCIAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15. UNAUDITED SELECTED QUARTERLY DATA (CONTINUED)
QUARTER ENDED --------------------------------------------------------------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, (Dollars in thousands) 1995 1995 1995 1995 1996 ------------- ----------- --------------- --------------- ------------- REVENUES: Net interest margin.............................. $ 4,538 $ 7,630 $ 9,601 $ 9,423 $ 12,300 Gain on sale of auto loans....................... 9,057 14,303 17,587 21,235 25,229 Service fee income............................... 2,300 3,003 3,872 4,812 5,743 Other non-interest income........................ 159 238 405 569 724 ------------- ----------- --------------- --------------- ------------- Total revenues................................. 16,054 25,174 31,465 36,039 43,996 EXPENSES: Salaries and benefits............................ 3,945 4,627 5,146 6,361 9,097 General and administrative and other operating expenses....................................... 4,495 4,973 6,097 7,083 10,919 Long-term debt and other interest expense........ 1,845 4,574 5,205 5,546 5,516 ------------- ----------- --------------- --------------- ------------- Total expenses................................. 10,285 14,174 16,448 18,990 25,532 ------------- ----------- --------------- --------------- ------------- Operating income before income tax and extraordinary items............................ 5,769 11,000 15,017 17,049 18,464 Provision for income taxes....................... 2,307 4,384 6,007 6,820 7,386 ------------- ----------- --------------- --------------- ------------- Income before extraordinary items................ 3,462 6,616 9,010 10,229 11,078 Extraordinary items.............................. (3,344) (512) -- -- -- ------------- ----------- --------------- --------------- ------------- Net income....................................... $ 118 $ 6,104 $ 9,010 $ 10,229 $ 11,078 ------------- ----------- --------------- --------------- ------------- ------------- ----------- --------------- --------------- ------------- PRIMARY EARNINGS PER SHARE: Net income per common share before extraordinary items.......................................... $ 0.23 $ 0.29 $ 0.34 $ 0.39 $ 0.41 Extraordinary items per common share............. (0.27) (0.02) -- -- -- ------------- ----------- --------------- --------------- ------------- Net income (loss) per common share............. $ (0.04) $ 0.27 $ 0.34 $ 0.39 $ 0.41 ------------- ----------- --------------- --------------- ------------- ------------- ----------- --------------- --------------- ------------- FULLY DILUTED EARNINGS PER SHARE: Net income per share before extraordinary items.......................................... $ 0.19 $ 0.25 $ 0.30 $ 0.34 $ 0.37 Extraordinary items per share.................... (0.18) (0.02) -- -- -- ------------- ----------- --------------- --------------- ------------- Net income per share........................... $ 0.01 $ 0.23 $ 0.30 $ 0.34 $ 0.37 ------------- ----------- --------------- --------------- ------------- ------------- ----------- --------------- --------------- ------------- Weighted average common and common equivalent shares outstanding: Primary........................................ 12,505,372 20,656,566 24,528,119 24,547,195 25,741,672 Fully diluted.................................. 18,185,965 26,661,621 30,406,065 30,368,723 30,218,329 JUNE 30, SEPTEMBER 30, DECEMBER 31, (Dollars in thousands) 1996 1996 1996 ----------- --------------- --------------- REVENUES: Net interest margin.............................. $ 15,085 $ 18,079 $ 17,499 Gain on sale of auto loans....................... 25,452 30,113 34,979 Service fee income............................... 6,557 7,474 8,510 Other non-interest income........................ 2,449 1,406 1,896 ----------- --------------- --------------- Total revenues................................. 49,543 57,072 62,884 EXPENSES: Salaries and benefits............................ 8,813 10,286 12,555 General and administrative and other operating expenses....................................... 11,124 13,107 16,397 Long-term debt and other interest expense........ 6,433 6,660 6,584 ----------- --------------- --------------- Total expenses................................. 26,370 30,053 35,536 ----------- --------------- --------------- Operating income before income tax and extraordinary items............................ 23,173 27,019 27,348 Provision for income taxes....................... 8,458 9,862 9,982 ----------- --------------- --------------- Income before extraordinary items................ 14,715 17,157 17,366 Extraordinary items.............................. -- -- -- ----------- --------------- --------------- Net income....................................... $ 14,715 $ 17,157 $ 17,366 ----------- --------------- --------------- ----------- --------------- --------------- PRIMARY EARNINGS PER SHARE: Net income per common share before extraordinary items.......................................... $ 0.43 $ 0.47 $ 0.46 Extraordinary items per common share............. -- -- -- ----------- --------------- --------------- Net income (loss) per common share............. $ 0.43 $ 0.47 $ 0.46 ----------- --------------- --------------- ----------- --------------- --------------- FULLY DILUTED EARNINGS PER SHARE: Net income per share before extraordinary items.......................................... $ 0.40 $ 0.44 $ 0.45 Extraordinary items per share.................... -- -- -- ----------- --------------- --------------- Net income per share........................... $ 0.40 $ 0.44 $ 0.45 ----------- --------------- --------------- ----------- --------------- --------------- Weighted average common and common equivalent shares outstanding: Primary........................................ 33,508,215 35,896,149 37,873,845 Fully diluted.................................. 37,205,287 39,423,446 38,935,961
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, (Dollars in thousands) 1995 1995 1995 1995 1996 ------------- ----------- --------------- --------------- ------------- ASSETS Cash and cash equivalents........................ $ 5,654 $ 14,839 $ 9,169 $ 1,340 $ 22,552 Due from securitization trust.................... 135,013 75,018 50,398 -- 115,000 Auto loans held for sale......................... 500 61,801 108,808 118,556 82,857 Finance income receivable........................ 86,848 118,113 150,538 186,001 232,007 Restricted cash in spread accounts............... 28,326 36,292 48,160 63,580 79,779 Other assets..................................... 12,647 16,971 23,663 28,317 33,542 ------------- ----------- --------------- --------------- ------------- Total assets................................... $ 268,988 $ 323,034 $ 390,736 $ 397,794 $ 565,737 ------------- ----------- --------------- --------------- ------------- ------------- ----------- --------------- --------------- ------------- LIABILITIES & EQUITY Amounts due under warehouse facilities........... $ 130,816 $ 226 $ 41,281 $ 26,530 $ 127,224 Senior notes..................................... 50,000 145,000 145,000 145,000 145,000 Subordinated notes............................... 17,321 4,706 9,191 13,005 46,595 Capital lease obligations........................ 1,737 1,898 2,822 3,924 6,635 Deferred income taxes............................ 1,924 5,966 11,880 18,700 26,085 Accounts payable and accrued liabilities......... 6,430 9,358 15,982 9,822 21,633 Shareholders' equity............................. 60,760 155,880 164,580 180,813 192,565 ------------- ----------- --------------- --------------- ------------- Total liabilities and equity................... $ 268,988 $ 323,034 $ 390,736 $ 397,794 $ 565,737 ------------- ----------- --------------- --------------- ------------- ------------- ----------- --------------- --------------- ------------- JUNE 30, SEPTEMBER 30, DECEMBER 31, (Dollars in thousands) 1996 1996 1996 ----------- --------------- --------------- ASSETS Cash and cash equivalents........................ $ 22,575 $ 3,593 $ 16,057 Due from securitization trust.................... 151,635 188,373 177,076 Auto loans held for sale......................... 52,300 18,925 36,285 Finance income receivable........................ 264,466 307,953 362,916 Restricted cash in spread accounts............... 101,948 122,071 142,977 Other assets..................................... 37,735 42,910 42,919 ----------- --------------- --------------- Total assets................................... $ 630,659 $ 683,825 $ 778,230 ----------- --------------- --------------- ----------- --------------- --------------- LIABILITIES & EQUITY Amounts due under warehouse facilities........... $ 17,837 $ 38,486 $ 111,140 Senior notes..................................... 145,000 145,000 145,000 Subordinated notes............................... 52,288 53,563 53,689 Capital lease obligations........................ 7,446 8,049 7,729 Deferred income taxes............................ 34,543 44,405 54,387 Accounts payable and accrued liabilities......... 16,748 20,059 13,192 Shareholders' equity............................. 356,797 374,263 393,093 ----------- --------------- --------------- Total liabilities and equity................... $ 630,659 $ 683,825 $ 778,230 ----------- --------------- --------------- ----------- --------------- ---------------
59 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding the directors of the Company is incorporated herein by reference to the descriptions set forth under the caption "Election of Directors" in the Proxy Statement for the Annual Meeting of Shareholders to be held April 28, 1997 (the "1997 Proxy Statement"). Information regarding executive officers of the Company is incorporated herein by reference to Item 1 of this Form 10-K under the caption "Executive Officers" on page 16. ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation is incorporated herein by reference to the descriptions set forth under the caption "Executive Compensation" in the 1997 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners and management of the Company is incorporated herein by reference to the information set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the 1997 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding certain relationships and related transactions with the Company is incorporated herein by reference to the information set forth under the caption "Certain Transactions" in the 1997 Proxy Statement. PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as a part of this report. (1) Financial Statements of Olympic Financial Ltd.: Report of Independent Auditors Consolidated Balance Sheets As of December 31, 1996 and 1995 Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements (2) Financial Statement Schedules Financial statement schedules have been omitted because they are not applicable or because the required information is contained in the financial statements or notes thereto. 60 (3) Exhibits 3.1 Restated Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit No. 4.1 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 3.2 Restated Bylaws of the Registrant, as amended (filed herewith). 4.1 Rights Agreement dated as of November 1, 1996, between the Registrant and Norwest Bank Minnesota, National Association, as Rights Agent (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A filed November 7, 1996). 4.2 First Amendment and Restatement, dated as of April 28, 1995, of Indenture, dated July 1, 1994, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's unsecured Extendible Notes and Fixed-Term Notes, including forms of Notes (incorporated by reference to Exhibit No. 4.8.1 to Post-Effective Amendment No. 2 on Form S-3 to Registrant's Registration Statement on Form S-1, File No. 33-81512). 4.3 Indenture, dated as of April 28, 1995, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's 13% Senior Notes due 2000 (incorporated by reference to Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 4.4 First Supplemental Indenture, dated as of August 11, 1995, to Indenture, dated as of April 28, 1995, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's 13% Senior Notes due 2000 (incorporated by reference to Exhibit 4.6 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 4.5 Indenture dated as of March 15, 1996, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's Subordinated Notes, Series 1996-A due 2001 (filed herewith). 4.6 First Supplemental Indenture, dated as of March 15, 1996, to Indenture, dated as of March 15, 1996, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's Subordinated Notes, Series 1996-A due 2001 (filed herewith). 10.1 Securities Purchase Agreement, dated May 29, 1992, between the Registrant and the Investors named therein, as amended by the First Amendment thereto dated August 11, 1992, the Second Amendment thereto dated October 19, 1992, the Third Amendment thereto dated September 14, 1993, the Fourth Amendment thereto dated November 22, 1993, the Fifth Amendment thereto dated August 29, 1992, the Sixth Amendment thereto dated September 8, 1994, the Seventh Amendment thereto dated December 28, 1994, and Eighth Amendment thereto, dated March 6, 1995 (incorporated by reference to Exhibit 10.3 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.2 Ninth Amendment to the Securities Purchase Agreement, dated as of March 31, 1996, by and among the Registrant and each of the investors named on the Investor Schedule attached thereto (filed herewith). 10.3 Credit Agreement dated as of July 11, 1996 among the Registrant, various financial institutions (the "Lenders"), Bank of America National Trust and Savings Association, as Agent for the Lenders and First Bank National Association, as Co-Manager (filed herewith).
61 10.4 First Amendment and Waiver to Credit Agreement dated as of September 18, 1996 among the Registrant, the Lenders and Bank of America National Trust and Savings Association, as Agent for the Lenders (filed herewith). 10.5 Trust Agreement dated as of December 28, 1995 between Olympic Receivables Finance Corp. II ("ORFC II") and Wilmington Trust Company, as owner trustee (the "Owner Trustee") (filed herewith). 10.6 Amendment dated as of June 12, 1996 to Trust Agreement dated as of December 28, 1995 between ORFC II and the Owner Trustee (filed herewith). 10.7 Indenture dated as of December 28, 1995 between Olympic Automobile Receivables Warehouse Trust (the "Warehouse Trust") and Norwest Bank Minnesota, National Association, as indenture trustee (in such capacity, the "Indenture Trustee") (filed herewith). 10.8 Supplemental Indenture dated as of June 12, 1996 to Indenture dated as of December 28, 1995 between the Warehouse Trust, the Indenture Trustee and Morgan Guaranty Trust Company of New York, as successor to J.P. Morgan Delaware, as administrative agent (in such capacity, the "Administrative Agent") for Delaware Funding Corporation ("DFC") (filed herewith). 10.9 Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II, as Purchaser, and the Registrant, as Seller (filed herewith). 10.10 Amendment dated as of June 12, 1996 to Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II and the Registration (filed herewith). 10.11 Amendment No. 2 dated as of September 30, 1996 to Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II and the Registrant (filed herewith). 10.12 Amendment No. 3 dated as of January 17, 1997 to Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II and the Registrant (filed herewith). 10.13 Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant, in its individual capacity and as Servicer, the Norwest Bank Minnesota, National Association, as Backup Servicer (in such capacity, the "Backup Servicer") (filed herewith). 10.14 Amendment dated as of June 12, 1996 to Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer (filed herewith). 10.15 Amendment No. 2 dated as of September 30, 1996 to Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer (filed herewith). 10.16 Amendment No. 3 dated as of January 17, 1997 to Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer (filed herewith). 10.17 Note Purchase Agreement dated as of December 28, 1995 among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and the Administrative Agent (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
62 10.18 Agreement to Increase Purchase Commitment and Consent dated as of June 12, 1996 relating to Note Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and the Administrative Agent (filed herewith). 10.19 Agreement to Extend Purchase Commitment Expiration Date dated as of December 20, 1996 relating to Note Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and the Administrative Agent (filed herewith). 10.20 First Amendment and Consent dated as of January 17, 1997 relating to Note Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and the Administrative Agent (filed herewith). 10.21 Certificate Purchase Agreement dated as of December 28, 1995 among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, the Note Purchasers party thereto (the "Note Purchasers") and Morgan Guaranty Trust Company of New York as successor to J.P. Morgan Delaware, as Agent for the Note Purchasers (in such capacity, the "Purchasers' Agent") (incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.22 Agreement to Increase Aggregate Purchase Commitment and Consent relating to Certificate Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, the Note Purchasers and the Purchasers' Agent (filed herewith). 10.23 First Amendment and Consent dated as of December 20, 1996 relating to Certificate Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, the Note Purchasers and the Purchasers' Agent (filed herewith). 10.24 Second Amendment and Consent dated as of January 17, 1997 relating to Certificate Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, the Note Purchasers and the Purchasers' Agent (filed herewith). 10.25 Asset Purchase Agreement dated as of December 28, 1995 among the Administrative Agent and each of the "APA Purchasers" party thereto (filed herewith). 10.26 First Amendment to Asset Purchase Agreement dated as of June 12, 1996 among the Administrative Agent and the APA Purchasers (filed herewith). 10.27 Second Amendment and Consent to Asset Purchase Agreement dated as of December 20, 1996 among the Administrative Agent and the APA Purchasers (filed herewith). 10.28 Third Amendment and Consent relating to Asset Purchase Agreement dated as of January 17, 1997 among the Administrative Agent and the Asset Purchasers (filed herewith). 10.29 Receivables Purchase Agreement and Assignment between Olympic Receivables Finance Corp. ("ORFC") and the Registrant (filed herewith). 10.30 Repurchase Agreement dated as of December 3, 1996 among Arcadia Receivables Conduit Corp. ("ARCC") and ORFC (filed herewith).
63 10.31 Servicing Agreement dated as of December 3, 1996 among ARCC, ORFC, the Registrant, in its individual capacity and as Servicer, Bank of America National Trust and Savings Association, as agent, and Norwest Bank Minnesota, National Association, as backup servicer, collateral agent and indenture trustee (filed herewith). 10.32 Third Amended and Restated Stock Pledge Agreement dated as of December 3, 1996 among the Registrant and Norwest Bank Minnesota, National Association, as collateral agent (filed herewith). 10.33 Security Agreement dated as of December 3, 1996 among the Registrant, ORFC, ARCC, Financial Security Assurance Inc. ("FSA"), Bank of America National Trust and Savings Association and Norwest Bank Minnesota, National Association, as indenture trustee and collateral agent (filed herewith). 10.34 Indenture dated as of December 3, 1996 between ARCC and Norwest Bank Minnesota, National Association, as trustee and collateral agent (filed herewith). 10.35 Insurance and Indemnity Agreement dated as of December 3, 1996 among FSA, the Registrant, ORFC and ARCC (filed herewith). 10.36 US $300,000,000 Floating Rate FSA Insured Automobile Receivables-backed Note Purchase Agreement dated as of December 3, 1996 among ARCC, Receivables Capital Corporation, and Bank of America National Trust and Savings Association, as administrator of Receivables Capital Corporation and as agent for the liquidity providers (filed herewith). 10.37 Spread Account Agreement dated as of March 25, 1993, as amended and restated as of December 3, 1996, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, National Association, as trustee and collateral agent (the "Spread Account Agreement") (filed herewith). 10.38 Warehousing Series Supplement dated as of December 3, 1996 to Spread Account Agreement dated as of March 25, 1993, as amended and restated as of December 3, 1996, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, National Association, as trustee and collateral agent (filed herewith). 10.39 Series 1996-C Supplement, dated as of September 12, 1996, to the Spread Account Agreement (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996). 10.40 Amendment, dated as of September 12, 1996, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, National Association, to the Series 1996-B Supplement, Series 1996-A Supplement, Series 1995-E Supplement, Series 1995-D Supplement, Series 1995-C Supplement, Series 1995-B Supplement, Series 1995-A Supplement, Series 1994-B Supplement, Series 1994-A Supplement, Series 1993-C Supplement, and Series 1993-B Supplement to the Spread Account Agreement (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996). 10.41 Series 1996-D Supplement, dated as of December 12, 1996, to Spread Account Agreement (filed herewith). 10.42 Amendment, dated as of January 14, 1997, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, Natioanl Association, to the Series 1994-B Supplement, the Series 1994-A Supplement, the Series 1993-D Supplement, the Series 1993-C Supplement and the Series 1993-B Supplement (filed herewith).
64 10.43 Insurance and Indemnity Agreement, dated as of March 25, 1993, among FSA, ORFC and the Registrant (the "Series 1993-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.21 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.44 Insurance and Indemnity Agreement, dated as of June 11, 1993, among FSA, ORFC and the Registrant (the "Series 1993-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.22 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.45 Insurance and Indemnity Agreement, dated as of August 17, 1993, among FSA, Olympic Automobile Receivables Trust, 1993-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1993-C Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.23 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.46 Insurance and Indemnity Agreement, dated as of December 2, 1993, among FSA, Olympic Automobile Receivables Trust, 1993-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1993-D Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.24 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.47 Insurance and Indemnity Agreement, dated as of April 5, 1994, among FSA, Olympic Automobile Receivables Trust, 1994-A, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1994-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.25 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.48 Insurance and Indemnity Agreement, dated as of September 23, 1994, among FSA, Olympic Automobile Receivables Trust, 1994-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1994-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.26 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.49 Insurance and Indemnity Agreement, dated as of February 9, 1995, among FSA, ORFC and the Registrant (the "Series 1995-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.27 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.50 Insurance and Indemnity Agreement, dated as of March 15, 1995, among FSA, Olympic Automobile Receivables Trust, 1995-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.51 Insurance and Indemnity Agreement, dated as of June 15, 1995, among FSA, Olympic Automobile Receivables Trust, 1995-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-C Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.52 Insurance and Indemnity Agreement, dated as of September 21, 1995, among FSA, Olympic Automobile Receivables Trust, 1995-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-D Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
65 10.53 Insurance and Indemnity Agreement, dated as of December 6, 1995, among FSA, Olympic Automobile Receivables Trust, 1995-E, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-E Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.54 Insurance and Indemnity Agreement, dated as of March 14, 1996, among FSA, Olympic Automobile Receivables Trust, 1996-A, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996). 10.55 Insurance and Indemnity Agreement, dated as of June 14, 1996, among FSA, Olympic Automobile Receivables Trust, 1996-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996). 10.56 Insurance and Indemnity Agreement, dated as of September 12, 1996, among FSA, Olympic Automobile Receivables Trust, 1996-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-C Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996). 10.57 Amendment, dated as of September 12, 1996, to the Series 1996-B Insurance and Indemnity Agreement, the Series 1996-A Insurance and Indemnity Agreement, the Series 1995-E Insurance and Indemnity Agreement, the Series 1995-D Insurance and Indemnity Agreement, the Series 1995-C Insurance and Indemnity Agreement, the Series 1995-B Insurance and Indemnity Agreement, the Series 1995-A Insurance and Indemnity Agreement, the Series 1994-B Insurance and Indemnity Agreement, the Series 1994-A Insurance and Indemnity Agreement, the Series 1993-D Insurance and Indemnity Agreement, the Series 1993-C Insurance and Indemnity Agreement, the Series 1993-B Insurance and Indemnity Agreement and the Series 1993-A Insurance and Indemnity Agreement (filed herewith). 10.58 Insurance and Indemnity Agreement, dated as of December 12, 1996, among FSA, Olympic Automobile Receivables Trust, 1996-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-D Insurance and Indemnity Agreement") (filed herewith). 10.59 Employment Agreement, dated as of January 6, 1997, between the Registrant and Richard A. Greenawalt (filed herewith). 10.60 Employment Agreement, dated August 1, 1991, between the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit No. 10.27 to Registrant's Registration Statement on Form S-18, File No. 33-43270C). 10.61 Extension and Amendment of Employment Agreement, dated July 1, 1993, between the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit 10.106 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1994). 10.62 Extension and Amendment of Employment Agreement, dated July 1, 1994, by and between the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit No. 10.34 to Registrant's Registration Statement on Form S-4, File No. 33-81588).
66 10.63 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, by and between the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit 10.33 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.64 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and Jeffrey C. Mack (filed herewith). 10.65 Jeffrey C. Mack Severance Package, dated August 26, 1996 (filed herewith). 10.66 Addendum, dated November 11, 1996, to Agreement between the Registrant and Jeffrey C. Mack (filed herewith). 10.67 Employment Agreement, dated April 1, 1991, between the Registrant and Scott H. Anderson and Amendment, dated September 3, 1991 (incorporated by reference to Exhibit No. 10.29 to Registrant's Registration Statement on Form S-18, File No. 33-43270C). 10.68 Extension and Amendment of Employment Agreement, dated July 1, 1993, between the Registrant and Scott H. Anderson (incorporated by reference to Exhibit No. 10.107 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.69 Extension and Amendment of Employment Agreement, dated July 1, 1994, by and between Scott H. Anderson and the Registrant (incorporated by reference to Exhibit No. 10.36 to Registrant's Registration Statement on Form S-4, File No. 33-81588). 10.70 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, between the Registrant and Scott H. Anderson (incorporated by reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.71 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and Scott H. Anderson (filed herewith). 10.72 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and Scott H. Anderson (filed herewith). 10.73 Employment Agreement, dated February 1, 1994, between the Registrant and John A. Witham (incorporated by reference to Exhibit No. 10.111 to the Registrant's Registration Statement on Form S-1, File No. 33-81512). 10.74 Extension and Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and John A. Witham (incorporated by reference to Exhibit 10.39 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.75 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and John A. Witham (filed herewith). 10.76 Employment Agreement, dated December 5, 1994, between the Registrant and A. Mark Berlin, Jr. (incorporated by reference to Exhibit 10.35 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.77 Extension and Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and A. Mark Berlin, Jr. (incorporated by reference to Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.78 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and A. Mark Berlin, Jr. (filed herewith).
67 10.79 Employment and Non-Compete Agreement, dated August 29, 1994, by and between the Registrant and James D. Atkinson (incorporated by reference to Exhibit 10.43 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.80 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, by and between the Registrant and James D. Atkinson III (incorporated by reference to Exhibit 10.44 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.81 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and James D. Atkinson III (filed herewith). 10.82 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and James D. Atkinson III (filed herewith). 10.83 Amendment of Employment Retention Agreement, dated as of December 31, 1996, by and between the Registrant and James D. Atkinson III (filed herewith). 10.84 Employment and Non-Compete Agreement, dated September 21, 1994, by and between the Registrant and Robert A. Barbee (incorporated by reference to Exhibit 10.49 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.85 Extension and Amendment of Employment Agreement, dated as of November 1, 1995, by and between the Registrant and Robert A. Barbee (incorporated by reference to Exhibit 10.50 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.86 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and Robert A. Barbee (filed herewith). 10.87 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and Robert A. Barbee (filed herewith). 10.88 Consulting Agreement, dated December 19, 1994, between the Registrant and Warren Kantor (incorporated by reference to Exhibit 10.36 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.89 Consulting Agreement, dated as of January 1, 1996 between the Registrant and Warren Kantor (filed herewith). 10.90 Letter Agreement, dated August 26, 1996, between the Registrant and Warren Kantor (filed herewith). 10.91 Letter Agreement, dated December 18, 1996, between the Registrant and Warren Kantor (filed herewith). 10.92 Consulting Agreement, dated as of January 1, 1997, by and between the Registrant and Warren Kantor (filed herewith). 10.93 Non-Statutory Stock Option Agreement, dated December 19, 1994, between the Registrant and Warren Kantor (incorporated by reference to Exhibit 10.37 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.94 Non-Statutory Stock Option Agreement, dated January 1, 1996, by and between the Registrant and Warren Kantor (incorporated by reference to Exhibit 10.60 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.95 Non-Statutory Stock Option Agreement, dated August 26, 1996, between the Registrant and Warren Kantor (filed herewith).
68 10.96 Non-Statutory Stock Option Agreement, dated December 18, 1996, between the Registrant and Warren Kantor (filed herewith). 10.97 Non-Statutory Stock Option Agreement, dated January 1, 1997, between the Registrant and Warren Kantor (filed herewith). 10.98 Olympic Financial Ltd. 1990 Stock Option Plan, as amended to date (filed herewith). 10.99 1992 Director Option Plan, as amended to date (filed herewith). 10.100 Olympic Financial Ltd. Stock Purchase Plan (incorporated by reference to Exhibit No. 10.90 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.101 1994-1997 Restricted Stock Election Plan (incorporated by reference to Exhibit 10.41 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.102 1998-2000 Restricted Stock Election Plan, as amended to date (filed herewith). 10.103 Warrant to Purchase Common Stock, dated August 11, 1992, between the Registrant and Lincoln National Life Insurance Company (incorporated by reference to Exhibit No. 10.85 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.104 Warrant to Purchase Common Stock, dated August 11, 1992, between the Registrant and Security Connecticut Life Insurance Company (incorporated by reference to Exhibit No. 10.86 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.105 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and NAP & Company (incorporated by reference to Exhibit No. 10.87 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.106 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and Fuelship & Company (incorporated by reference to Exhibit No. 10.88 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.107 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and BCI Growth L.P. (incorporated by reference to Exhibit No. 10.89 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.108 Warrant to Purchase Common Stock, dated December 17, 1993, between the Registrant and John G. Kinnard and Company, Incorporated (incorporated by reference to Exhibit 10.47 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.109 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Cede & Co. (incorporated by reference to Exhibit 10.48 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.110 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Booth & Co. (incorporated by reference to Exhibit 10.49 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.111 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Sun Life Insurance Company of America (incorporated by reference to Exhibit 10.50 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 11.1 Computation of Earnings Per Share (filed herewith). 12.1 Computation of Ratio of Earnings to Fixed Charges (filed herewith). 12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends (filed herewith).
69 21.1 Subsidiaries of the Registrant (filed herewith). 23.1 Consent of Ernst & Young LLP (filed herewith). 27.1 Financial Data Schedule (filed herewith). 99.1 Cautionary Statement (filed herewith).
- ------------------------ (b) On October 7, 1996, the Company filed a current report on Form 8-K, dated September 30, 1996, announcing that the Company was amending and restating Section 4.1 of its by-laws defining the officers of the corporation. On October 17, 1996, the Company filed a current report on Form 8-K, dated October 16, 1996, announcing that the party which indicated interest to buy the Company as announced on August 26, 1996 and certain other interested parties have elected not to make a definitive offer. On October 10, 1996, the Company filed two current reports on Form 8-K, both dated August 5, 1996, reporting certain information with regard to the Company's performance as servicer of Olympic Automobile Receivables Trust, 1996-B and Olympic Automobiles Receivables Trust, 1996-A, respectively. On October 23, 1996, the Company filed a current report on Form 8-K, dated October 11, 1996, announcing that Richard A. Zona had resigned as a member of the Company's Board of Directors. On November 1, 1996, the Company filed a current report on Form 8-K, dated October 31, 1996, announcing that the Company had called for redemption on December 2, 1996 of all of its outstanding 8% Cumulative Convertible Exchangeable Preferred Stock, subject to the right of the holders of shares of preferred stock to convert such shares into shares of Common Stock prior to the close of business on December 2, 1996. On November 7, 1996, the Company filed a current report on Form 8-K, dated November 1, 1996, announcing that the Company had adopted a Shareholder Rights Plan. 70 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. OLYMPIC FINANCIAL LTD. Date: February 7, 1997 By: /s/ WARREN KANTOR ------------------------------------------ Warren Kantor CHAIRMAN OF THE BOARD AND DIRECTOR POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Greenawalt and John A. Witham, or either of them (with full power to act alone), as his true and lawful attorneys-in-fact and agents, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the date indicated.
SIGNATURES - ---------------------------------------------- /s/ RICHARD A. GREENAWALT President, Chief Executive Officer ----------------------------------- and Director (Principal Executive February 7, 1997 Richard A. Greenawalt Officer) /s/ JOHN A. WITHAM Executive Vice President and Chief ----------------------------------- Financial Officer (Principal February 7, 1997 John A. Witham Financial Officer) /s/ BRIAN S. ANDERSON Senior Vice President, Corporate ----------------------------------- Controller and Assistant Secretary February 7, 1997 Brian S. Anderson (Principal Accounting Officer) /s/ WARREN KANTOR ----------------------------------- Chairman of the Board and Director February 7, 1997 Warren Kantor /s/ SCOTT H. ANDERSON ----------------------------------- Director February 7, 1997 Scott H. Anderson /s/ A. MARK BERLIN ----------------------------------- Director February 7, 1997 A. Mark Berlin, Jr. ----------------------------------- Director February , 1997 Lawrence H. Bistodeau /s/ ROBERT J. CRESCI ----------------------------------- Director February 7, 1997 Robert J. Cresci /s/ JAMES L. DAVIS ----------------------------------- Director February 7, 1997 James L. Davis /s/ FREDERICK W. ZUCKERMAN ----------------------------------- Director February 7, 1997 Frederick W. Zuckerman
71 INDEX TO EXHIBITS
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 3.1 Restated Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit No. 4.1 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 3.2 Restated Bylaws of the Registrant, as amended (filed herewith)................................... 4.1 Rights Agreement dated as of November 1, 1996, between the Registrant and Norwest Bank Minnesota, National Association, as Rights Agent (incorporated by reference to Exhibit 1 to the Registrant's Registration Statement on Form 8-A filed November 7, 1996). 4.2 First Amendment and Restatement, dated as of April 28, 1995, of Indenture, dated July 1, 1994, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's unsecured Extendible Notes and Fixed-Term Notes, including forms of Notes (incorporated by reference to Exhibit No. 4.8.1 to Post-Effective Amendment No. 2 on Form S-3 to Registrant's Registration Statement on Form S-1, File No. 33-81512). 4.3 Indenture, dated as of April 28, 1995, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's 13% Senior Notes due 2000 (incorporated by reference to Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 4.4 First Supplemental Indenture, dated as of August 11, 1995, to Indenture, dated as of April 28, 1995, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's 13% Senior Notes due 2000 (incorporated by reference to Exhibit 4.6 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 4.5 Indenture dated as of March 15, 1996, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's Subordinated Notes, Series 1996-A due 2001 (filed herewith).......................................................................... 4.6 First Supplemental Indenture, dated as of March 15, 1996, to Indenture, dated as of March 15, 1996, between the Registrant and Norwest Bank Minnesota, National Association, as Trustee, relating to the Registrant's Subordinated Notes, Series 1996-A due 2001 (filed herewith)....... 10.1 Securities Purchase Agreement, dated May 29, 1992, between the Registrant and the Investors named therein, as amended by the First Amendment thereto dated August 11, 1992, the Second Amendment thereto dated October 19, 1992, the Third Amendment thereto dated September 14, 1993, the Fourth Amendment thereto dated November 22, 1993, the Fifth Amendment thereto dated August 29, 1992, the Sixth Amendment thereto dated September 8, 1994, the Seventh Amendment thereto dated December 28, 1994, and Eighth Amendment thereto, dated March 6, 1995 (incorporated by reference to Exhibit 10.3 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.2 Ninth Amendment to the Securities Purchase Agreement, dated as of March 31, 1996, by and among the Registrant and each of the investors named on the Investor Schedule attached thereto (filed herewith)...................................................................................... 10.3 Credit Agreement dated as of July 11, 1996 among the Registrant, various financial institutions (the "Lenders"), Bank of America National Trust and Savings Association, as Agent for the Lenders and First Bank National Association, as Co-Manager (filed herewith)....................
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 10.4 First Amendment and Waiver to Credit Agreement dated as of September 18, 1996 among the Registrant, the Lenders and Bank of America National Trust and Savings Association, as Agent for the Lenders (filed herewith)............................................................... 10.5 Trust Agreement dated as of December 28, 1995 between Olympic Receivables Finance Corp. II ("ORFC II") and Wilmington Trust Company, as owner trustee (the "Owner Trustee") (filed herewith)..... 10.6 Amendment dated as of June 12, 1996 to Trust Agreement dated as of December 28, 1995 between ORFC II and the Owner Trustee (filed herewith)...................................................... 10.7 Indenture dated as of December 28, 1995 between Olympic Automobile Receivables Warehouse Trust (the "Warehouse Trust") and Norwest Bank Minnesota, National Association, as indenture trustee (in such capacity, the "Indenture Trustee") (filed herewith)................................... 10.8 Supplemental Indenture dated as of June 12, 1996 to Indenture dated as of December 28, 1995 between the Warehouse Trust, the Indenture Trustee and Morgan Guaranty Trust Company of New York, as successor to J.P. Morgan Delaware, as administrative agent (in such capacity, the "Administrative Agent") for Delaware Funding Corporation ("DFC") (filed herewith).............. 10.9 Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II, as Purchaser, and the Registrant, as Seller (filed herewith)...................................... 10.10 Amendment dated as of June 12, 1996 to Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II and the Registration (filed herewith)........................ 10.11 Amendment No. 2 dated as of September 30, 1996 to Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II and the Registrant (filed herewith).............. 10.12 Amendment No. 3 dated as of January 17, 1997 to Receivables Purchase Agreement and Assignment dated as of December 28, 1995 between ORFC II and the Registrant (filed herewith).............. 10.13 Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant, in its individual capacity and as Servicer, the Norwest Bank Minnesota, National Association, as Backup Servicer (in such capacity, the "Backup Servicer") (filed herewith)...................................................................................... 10.14 Amendment dated as of June 12, 1996 to Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer (filed herewith).... 10.15 Amendment No. 2 dated as of September 30, 1996 to Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer (filed herewith)............................................................................... 10.16 Amendment No. 3 dated as of January 17, 1997 to Sale and Servicing Agreement dated as of December 28, 1995 among the Warehouse Trust, ORFC II, the Registrant and the Backup Servicer (filed herewith)...................................................................................... 10.17 Note Purchase Agreement dated as of December 28, 1995 among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and the Administrative Agent (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 10.18 Agreement to Increase Purchase Commitment and Consent dated as of June 12, 1996 relating to Note Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and the Administrative Agent (filed herewith).................................... 10.19 Agreement to Extend Purchase Commitment Expiration Date dated as of December 20, 1996 relating to Note Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and the Administrative Agent (filed herewith)......................... 10.20 First Amendment and Consent dated as of January 17, 1997 relating to Note Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, DFC and the Administrative Agent (filed herewith)...................................................... 10.21 Certificate Purchase Agreement dated as of December 28, 1995 among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, the Note Purchasers party thereto (the "Note Purchasers") and Morgan Guaranty Trust Company of New York as successor to J.P. Morgan Delaware, as Agent for the Note Purchasers (in such capacity, the "Purchasers' Agent") (incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.22 Agreement to Increase Aggregate Purchase Commitment and Consent relating to Certificate Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, the Note Purchasers and the Purchasers' Agent (filed herewith)....................... 10.23 First Amendment and Consent dated as of December 20, 1996 relating to Certificate Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, the Note Purchasers and the Purchasers' Agent (filed herewith)....................... 10.24 Second Amendment and Consent dated as of January 17, 1997 relating to Certificate Purchase Agreement among the Warehouse Trust, the Registrant, as Servicer and in its individual capacity, the Note Purchasers and the Purchasers' Agent (filed herewith)....................... 10.25 Asset Purchase Agreement dated as of December 28, 1995 among the Administrative Agent and each of the "APA Purchasers" party thereto (filed herewith)............................................ 10.26 First Amendment to Asset Purchase Agreement dated as of June 12, 1996 among the Administrative Agent and the APA Purchasers (filed herewith).................................................. 10.27 Second Amendment and Consent to Asset Purchase Agreement dated as of December 20, 1996 among the Administrative Agent and the APA Purchasers (filed herewith)................................... 10.28 Third Amendment and Consent relating to Asset Purchase Agreement dated as of January 17, 1997 among the Administrative Agent and the Asset Purchasers (filed herewith)....................... 10.29 Receivables Purchase Agreement and Assignment between Olympic Receivables Finance Corp. ("ORFC") and the Registrant (filed herewith)............................................................ 10.30 Repurchase Agreement dated as of December 3, 1996 among Arcadia Receivables Conduit Corp. ("ARCC") and ORFC (filed herewith)............................................................. 10.31 Servicing Agreement dated as of December 3, 1996 among ARCC, ORFC, the Registrant, in its individual capacity and as Servicer, Bank of America National Trust and Savings Association, as agent, and Norwest Bank Minnesota, National Association, as backup servicer, collateral agent and indenture trustee (filed herewith).........................................................
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 10.32 Third Amended and Restated Stock Pledge Agreement dated as of December 3, 1996 among the Registrant and Norwest Bank Minnesota, National Association, as collateral agent (filed herewith)...................................................................................... 10.33 Security Agreement dated as of December 3, 1996 among the Registrant, ORFC, ARCC, Financial Security Assurance Inc. ("FSA"), Bank of America National Trust and Savings Association and Norwest Bank Minnesota, National Association, as indenture trustee and collateral agent (filed herewith)...................................................................................... 10.34 Indenture dated as of December 3, 1996 between ARCC and Norwest Bank Minnesota, National Association, as trustee and collateral agent (filed herewith).................................. 10.35 Insurance and Indemnity Agreement dated as of December 3, 1996 among FSA, the Registrant, ORFC and ARCC (filed herewith)...................................................................... 10.36 US $300,000,000 Floating Rate FSA Insured Automobile Receivables-backed Note Purchase Agreement dated as of December 3, 1996 among ARCC, Receivables Capital Corporation, and Bank of America National Trust and Savings Association, as administrator of Receivables Capital Corporation and as agent for the liquidity providers (filed herewith).......................................... 10.37 Spread Account Agreement dated as of March 25, 1993, as amended and restated as of December 3, 1996, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, National Association, as trustee and collateral agent (the "Spread Account Agreement") (filed herewith)................. 10.38 Warehousing Series Supplement dated as of December 3, 1996 to Spread Account Agreement dated as of March 25, 1993, as amended and restated as of December 3, 1996, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, National Association, as trustee and collateral agent (filed herewith)...................................................................................... 10.39 Series 1996-C Supplement, dated as of September 12, 1996, to the Spread Account Agreement (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996). 10.40 Amendment, dated as of September 12, 1996, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, National Association, to the Series 1996-B Supplement, Series 1996-A Supplement, Series 1995-E Supplement, Series 1995-D Supplement, Series 1995-C Supplement, Series 1995-B Supplement, Series 1995-A Supplement, Series 1994-B Supplement, Series 1994-A Supplement, Series 1993-C Supplement, and Series 1993-B Supplement to the Spread Account Agreement (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996). 10.41 Series 1996-D Supplement, dated as of December 12, 1996, to Spread Account Agreement (filed herewith)...................................................................................... 10.42 Amendment, dated as of January 14, 1997, among the Registrant, ORFC, FSA and Norwest Bank Minnesota, Natioanl Association, to the Series 1994-B Supplement, the Series 1994-A Supplement, the Series 1993-D Supplement, the Series 1993-C Supplement and the Series 1993-B Supplement (filed herewith)............................................................................... 10.43 Insurance and Indemnity Agreement, dated as of March 25, 1993, among FSA, ORFC and the Registrant (the "Series 1993-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.21 to Registrant's Registration Statement on Form S-2, File No. 33-90108).
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 10.44 Insurance and Indemnity Agreement, dated as of June 11, 1993, among FSA, ORFC and the Registrant (the "Series 1993-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.22 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.45 Insurance and Indemnity Agreement, dated as of August 17, 1993, among FSA, Olympic Automobile Receivables Trust, 1993-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1993-C Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.23 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.46 Insurance and Indemnity Agreement, dated as of December 2, 1993, among FSA, Olympic Automobile Receivables Trust, 1993-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1993-D Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.24 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.47 Insurance and Indemnity Agreement, dated as of April 5, 1994, among FSA, Olympic Automobile Receivables Trust, 1994-A, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1994-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.25 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.48 Insurance and Indemnity Agreement, dated as of September 23, 1994, among FSA, Olympic Automobile Receivables Trust, 1994-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1994-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.26 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.49 Insurance and Indemnity Agreement, dated as of February 9, 1995, among FSA, ORFC and the Registrant (the "Series 1995-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.27 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.50 Insurance and Indemnity Agreement, dated as of March 15, 1995, among FSA, Olympic Automobile Receivables Trust, 1995-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.51 Insurance and Indemnity Agreement, dated as of June 15, 1995, among FSA, Olympic Automobile Receivables Trust, 1995-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-C Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.52 Insurance and Indemnity Agreement, dated as of September 21, 1995, among FSA, Olympic Automobile Receivables Trust, 1995-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-D Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.53 Insurance and Indemnity Agreement, dated as of December 6, 1995, among FSA, Olympic Automobile Receivables Trust, 1995-E, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1995-E Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 10.54 Insurance and Indemnity Agreement, dated as of March 14, 1996, among FSA, Olympic Automobile Receivables Trust, 1996-A, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-A Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996). 10.55 Insurance and Indemnity Agreement, dated as of June 14, 1996, among FSA, Olympic Automobile Receivables Trust, 1996-B, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-B Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996). 10.56 Insurance and Indemnity Agreement, dated as of September 12, 1996, among FSA, Olympic Automobile Receivables Trust, 1996-C, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-C Insurance and Indemnity Agreement") (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996). 10.57 Amendment, dated as of September 12, 1996, to the Series 1996-B Insurance and Indemnity Agreement, the Series 1996-A Insurance and Indemnity Agreement, the Series 1995-E Insurance and Indemnity Agreement, the Series 1995-D Insurance and Indemnity Agreement, the Series 1995-C Insurance and Indemnity Agreement, the Series 1995-B Insurance and Indemnity Agreement, the Series 1995-A Insurance and Indemnity Agreement, the Series 1994-B Insurance and Indemnity Agreement, the Series 1994-A Insurance and Indemnity Agreement, the Series 1993-D Insurance and Indemnity Agreement, the Series 1993-C Insurance and Indemnity Agreement, the Series 1993-B Insurance and Indemnity Agreement and the Series 1993-A Insurance and Indemnity Agreement (filed herewith)............................................................................... 10.58 Insurance and Indemnity Agreement, dated as of December 12, 1996, among FSA, Olympic Automobile Receivables Trust, 1996-D, Olympic First GP Inc., Olympic Second GP Inc., ORFC and the Registrant (the "Series 1996-D Insurance and Indemnity Agreement") (filed herewith)............ 10.59 Employment Agreement, dated as of January 6, 1997, between the Registrant and Richard A. Greenawalt (filed herewith).................................................................... 10.60 Employment Agreement, dated August 1, 1991, between the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit No. 10.27 to Registrant's Registration Statement on Form S-18, File No. 33-43270C). 10.61 Extension and Amendment of Employment Agreement, dated July 1, 1993, between the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit 10.106 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1994). 10.62 Extension and Amendment of Employment Agreement, dated July 1, 1994, by and between the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit No. 10.34 to Registrant's Registration Statement on Form S-4, File No. 33-81588). 10.63 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, by and between the Registrant and Jeffrey C. Mack (incorporated by reference to Exhibit 10.33 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.64 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and Jeffrey C. Mack (filed herewith)........................................................... 10.65 Jeffrey C. Mack Severance Package, dated August 26, 1996 (filed herewith)........................
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 10.66 Addendum, dated November 11, 1996, to Agreement between the Registrant and Jeffrey C. Mack (filed herewith)...................................................................................... 10.67 Employment Agreement, dated April 1, 1991, between the Registrant and Scott H. Anderson and Amendment, dated September 3, 1991 (incorporated by reference to Exhibit No. 10.29 to Registrant's Registration Statement on Form S-18, File No. 33-43270C). 10.68 Extension and Amendment of Employment Agreement, dated July 1, 1993, between the Registrant and Scott H. Anderson (incorporated by reference to Exhibit No. 10.107 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.69 Extension and Amendment of Employment Agreement, dated July 1, 1994, by and between Scott H. Anderson and the Registrant (incorporated by reference to Exhibit No. 10.36 to Registrant's Registration Statement on Form S-4, File No. 33-81588). 10.70 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, between the Registrant and Scott H. Anderson (incorporated by reference to Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.71 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and Scott H. Anderson (filed herewith)......................................................... 10.72 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and Scott H. Anderson (filed herewith)...................................................................... 10.73 Employment Agreement, dated February 1, 1994, between the Registrant and John A. Witham (incorporated by reference to Exhibit No. 10.111 to the Registrant's Registration Statement on Form S-1, File No. 33-81512). 10.74 Extension and Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and John A. Witham (incorporated by reference to Exhibit 10.39 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.75 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and John A. Witham (filed herewith)........................................................................ 10.76 Employment Agreement, dated December 5, 1994, between the Registrant and A. Mark Berlin, Jr. (incorporated by reference to Exhibit 10.35 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.77 Extension and Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and A. Mark Berlin, Jr. (incorporated by reference to Exhibit 10.41 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.78 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and A. Mark Berlin, Jr. (filed herewith)................................................................... 10.79 Employment and Non-Compete Agreement, dated August 29, 1994, by and between the Registrant and James D. Atkinson (incorporated by reference to Exhibit 10.43 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.80 Extension and Amendment of Employment Agreement, dated as of July 31, 1995, by and between the Registrant and James D. Atkinson III (incorporated by reference to Exhibit 10.44 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 10.81 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and James D. Atkinson III (filed herewith)..................................................... 10.82 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and James D. Atkinson III (filed herewith).................................................................. 10.83 Amendment of Employment Retention Agreement, dated as of December 31, 1996, by and between the Registrant and James D. Atkinson III (filed herewith).......................................... 10.84 Employment and Non-Compete Agreement, dated September 21, 1994, by and between the Registrant and Robert A. Barbee (incorporated by reference to Exhibit 10.49 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.85 Extension and Amendment of Employment Agreement, dated as of November 1, 1995, by and between the Registrant and Robert A. Barbee (incorporated by reference to Exhibit 10.50 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.86 Amendment of Employment Agreement, dated as of December 20, 1995, by and between the Registrant and Robert A. Barbee (filed herewith).......................................................... 10.87 Employment Retention Agreement, dated as of November 7, 1996, between the Registrant and Robert A. Barbee (filed herewith)..................................................................... 10.88 Consulting Agreement, dated December 19, 1994, between the Registrant and Warren Kantor (incorporated by reference to Exhibit 10.36 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.89 Consulting Agreement, dated as of January 1, 1996 between the Registrant and Warren Kantor (filed herewith)...................................................................................... 10.90 Letter Agreement, dated August 26, 1996, between the Registrant and Warren Kantor (filed herewith)...................................................................................... 10.91 Letter Agreement, dated December 18, 1996, between the Registrant and Warren Kantor (filed herewith)...................................................................................... 10.92 Consulting Agreement, dated as of January 1, 1997, by and between the Registrant and Warren Kantor (filed herewith)........................................................................ 10.93 Non-Statutory Stock Option Agreement, dated December 19, 1994, between the Registrant and Warren Kantor (incorporated by reference to Exhibit 10.37 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.94 Non-Statutory Stock Option Agreement, dated January 1, 1996, by and between the Registrant and Warren Kantor (incorporated by reference to Exhibit 10.60 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.95 Non-Statutory Stock Option Agreement, dated August 26, 1996, between the Registrant and Warren Kantor (filed herewith)........................................................................ 10.96 Non-Statutory Stock Option Agreement, dated December 18, 1996, between the Registrant and Warren Kantor (filed herewith)........................................................................ 10.97 Non-Statutory Stock Option Agreement, dated January 1, 1997, between the Registrant and Warren Kantor (filed herewith)........................................................................ 10.98 Olympic Financial Ltd. 1990 Stock Option Plan, as amended to date (filed herewith)............... 10.99 1992 Director Option Plan, as amended to date (filed herewith)...................................
EXHIBITS DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------- ----- 10.100 Olympic Financial Ltd. Stock Purchase Plan (incorporated by reference to Exhibit No. 10.90 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.101 1994-1997 Restricted Stock Election Plan (incorporated by reference to Exhibit 10.41 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.102 1998-2000 Restricted Stock Election Plan, as amended to date (filed herewith).................... 10.103 Warrant to Purchase Common Stock, dated August 11, 1992, between the Registrant and Lincoln National Life Insurance Company (incorporated by reference to Exhibit No. 10.85 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.104 Warrant to Purchase Common Stock, dated August 11, 1992, between the Registrant and Security Connecticut Life Insurance Company (incorporated by reference to Exhibit No. 10.86 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.105 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and NAP & Company (incorporated by reference to Exhibit No. 10.87 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.106 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and Fuelship & Company (incorporated by reference to Exhibit No. 10.88 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.107 Warrant to Purchase Common Stock, dated June 24, 1992, between the Registrant and BCI Growth L.P. (incorporated by reference to Exhibit No. 10.89 to Registrant's Annual Report on Form 10-K for the year ended June 30, 1992). 10.108 Warrant to Purchase Common Stock, dated December 17, 1993, between the Registrant and John G. Kinnard and Company, Incorporated (incorporated by reference to Exhibit 10.47 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.109 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Cede & Co. (incorporated by reference to Exhibit 10.48 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.110 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Booth & Co. (incorporated by reference to Exhibit 10.49 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 10.111 Warrant to Purchase Common Stock, dated September 1, 1994, between the Registrant and Sun Life Insurance Company of America (incorporated by reference to Exhibit 10.50 to Registrant's Registration Statement on Form S-2, File No. 33-90108). 11.1 Computation of Earnings Per Share (filed herewith)............................................... 12.1 Computation of Ratio of Earnings to Fixed Charges (filed herewith)............................... 12.2 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends (filed herewith)...................................................................................... 21.1 Subsidiaries of the Registrant (filed herewith).................................................. 23.1 Consent of Ernst & Young LLP (filed herewith).................................................... 27.1 Financial Data Schedule (filed herewith)......................................................... 99.1 Cautionary Statement (filed herewith)............................................................
EX-3.2 2 RESTATED BYLAWS OF REGISTRANT BYLAWS OF OLYMPIC FINANCIAL LTD. ARTICLE 1 OFFICES, CORPORATE SEAL Section 1.1 REGISTERED AND OTHER OFFICES. The registered office of the Corporation in Minnesota shall be that set forth in the Articles of Incorporation or in the most recent amendment of the Articles of Incorporation or statement of the Board of Directors filed with the Secretary of State of Minnesota changing the registered office in the manner prescribed by law. The Corporation may have such other offices, within or without the State of Minnesota, as the Board of Directors shall, from time to time, determine. Section 1.2 CORPORATE SEAL. If so directed by the Board of Directors by resolution, the Corporation may use a corporate seal. The failure to use such seal, however, shall not affect the validity of any documents executed on behalf of the Corporation. The seal need only include the word "seal", but it may also include, at the discretion of the Board, such additional wording as is permitted by law. Section 1.3 ARTICLES OF INCORPORATION. In the event of any conflict or inconsistency between these Bylaws, or any amendment thereto, and the Articles of Incorporation or any amendment thereto, whenever adopted, the Articles of Incorporation shall govern. ARTICLE 2 MEETINGS OF SHAREHOLDERS Section 2.1 TIME AND PLACE OF MEETINGS. Regular or special meetings of the shareholders, if any, shall be held on the date and at the time and place fixed by the Chief Executive Officer, the Chairman of the Board, or the Board, except that a regular or special meeting called by, or at the demand of a shareholder or shareholders, pursuant to Minnesota Statutes, Section 302A.431, Subd. 2, shall be held in the county where the principal executive office is located. Section 2.2 REGULAR MEETINGS. At any regular meeting of the shareholders, there shall be an election of qualified successors for directors who serve for an indefinite term or whose terms have expired or are due to expire within six months after the date of the meeting. Any business appropriate for action by the shareholders may be transacted at a regular meeting. No meeting shall be considered a regular meeting unless specifically designated as such in the notice of meeting or unless all the shareholders are present in person or by proxy and none of them objects to such designation. Regular meetings may be held no more frequently than once per year. 1 Section 2.3 DEMAND BY SHAREHOLDERS. Regular or special meetings may be demanded by a shareholder or shareholders, pursuant to the provisions of Minnesota Statutes, Sections 302A.431, Subd. 2, and 302A.433, Subd. 2, respectively. If a regular meeting of shareholders has not been held during the immediately preceding fifteen (15) months, a shareholder or shareholders holding three (3) percent or more of the voting power of all shares entitled to vote may demand a regular meeting of shareholders by written notice of demand given to the Chief Executive Officer or the Chief Financial Officer of the Corporation. A shareholder or shareholders holding ten (10) percent or more of the voting power of all shares entitled to vote may demand a special meeting of shareholders by written notice of demand given to the Chief Executive Officer or Chief Financial Officer of the Corporation and containing the purposes of the meeting. Within thirty (30) days after receipt of the demand by one of those officers, the Board shall cause a special meeting of shareholders to be called and held on notice no later than ninety (90) days after receipt of the demand, all at the expense of the Corporation. If the Board fails to cause a special meeting to be called and held as required by this subdivision, the shareholder or shareholders making the demand may call the meeting by giving notice as required by Minnesota Statutes, Section 302A.435, all at the expense of the Corporation. The business transacted at a special meeting is limited to the purposes stated in the notice of the meeting. Any business transacted at a special meeting that is not included in those stated purposes is voidable by or on behalf of the Corporation, unless all of the shareholders have waived notice of the meeting in accordance with Minnesota Statutes, Section 302A.435. Section 2.4 QUORUM; ADJOURNED MEETINGS. The holders of a majority of the voting power of the shares entitled to vote at a meeting constitute a quorum for the transaction of business; said holders may be present at the meeting either in person or by proxy. If a quorum is present when a duly called or held meeting is convened, the shareholders present may continue to transact business until adjournment, even though withdrawal of shareholders originally present leaves less than the proportion or number otherwise required for a quorum. In case a quorum shall not be present in person or by proxy at a meeting, those present in person or by proxy may adjourn to such day as they shall, by majority vote, agree upon, and a notice of such adjournment shall be mailed to each shareholder entitled to vote at least five (5) days before such adjourned meeting. If a quorum is present in person or by proxy, a meeting may be adjourned from time to time without notice, other than announcement at the meeting. At adjourned meetings at which a quorum is present in person or by proxy, any business may be transacted at the meeting as originally noticed. Section 2.5 VOTING. At each meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote either in person or by proxy. Unless otherwise provided by the Articles of Incorporation or a resolution of the Board of Directors filed with the Secretary of State, each shareholder shall have one vote for each share held. Upon demand of any shareholder, the vote upon any question before the meeting shall be by ballot. Section 2.6 NOTICE OF MEETINGS. Notice of all meetings of shareholders shall be given to every holder of voting shares, except where the meeting is an adjourned meeting and the date, time and place of the meeting were announced at the time of adjournment. Notice of regular 2 meetings of shareholders shall be given at least fourteen (14), but not more than sixty (60) days before the date of the meeting. Notice of special meetings of shareholders may be given upon not less than ten (10) nor more than sixty (60) days, except that written notice of meeting at which an agreement of merger or exchange is to be considered shall be given to all shareholders, whether entitled to vote or not, at least fourteen (14) days prior thereto. Every notice of any special meeting shall state the purpose or purposes for which the meeting has been called, and the business transacted at all special meetings shall be confined to the purpose stated in the call, unless all of the shareholders are present in person or by proxy and none of them objects to consideration of a particular item of business. Section 2.7 WAIVER OF NOTICE. A shareholder may waive notice of any meeting of shareholders. A waiver of notice by a shareholder entitled to notice is effective whether given before, at or after the meeting and whether given in writing, orally or by attendance. Section 2.8 NOTICE OF SHAREHOLDER BUSINESS (A) REGULAR MEETINGS OF SHAREHOLDERS. (1) The proposal of business, except nominations of persons for election to the Board of Directors of the Corporation, to be considered by the shareholders at a regular meeting of shareholders may be made by any shareholder of the Corporation who is entitled to vote at the meeting and who complies with the notice procedures set forth in clause (2) of this paragraph (A) of this Bylaw and who was a shareholder of record at the time such notice is delivered to the Secretary of the Corporation. (2) For business, except nominations of persons for election to the Board of Directors of the Corporation, to be properly brought before a regular meeting by shareholder pursuant to Paragraph (A) (1) of this Bylaw the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive office of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. Such shareholder's notice shall set forth (a) as to any business, except for nominations of persons for election to the Board of Directors of the Corporation, that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made and (b) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) 3 the name and address of such shareholder, as they appear on the Corporation's books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder and such beneficial owner. (B) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting pursuant to Section 2.6 of these Bylaws. (C) GENERAL. (1) Only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylaw. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, the chairman of the meeting shall have the power and duty to determine whether any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Bylaw, and, if any proposed business is not in compliance with this Bylaw, to declare that such defective proposal shall be disregarded. (2) For purposes of this Bylaw, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Bylaw, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-5 under the Exchange Act. Section 2.9 AUTHORIZATION WITHOUT A MEETING. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting as authorized by law. Section 2.10 RECORD DATE. The Board of Directors may fix a time, not exceeding sixty (60) days preceding the date of any meeting of shareholders, as a record date for the determination of the shareholders entitled to notice of and to vote at such meeting, notwithstanding any transfer of shares on the books of the Corporation after any record date so fixed. The Board of Directors may close the books of the Corporation against the transfer of shares during the whole or any part of such period. If the Board of Directors fails to fix a record date for the determination of the shareholders entitled to notice of and to vote at any meeting of the shareholders, the record date shall be the twentieth (20th) day preceding the date of such meeting. 4 ARTICLE 3 DIRECTORS Section 3.1 GENERAL. The business and affairs of the Corporation shall be managed by or shall be under the direction of the Board of Directors. Section 3.2 NUMBER, QUALIFICATIONS AND TERM OF OFFICE. The Board of Directors shall consist of four (4) persons. The Board of Directors may, however, increase the number of directors and fill the vacancy or vacancies created thereby. If the number of directors has been increased by the Board of Directors as provided herein, then at the next succeeding meeting of shareholders at which directors are elected, the number of directors to be elected shall be such increased number. Directors need not be shareholders. Each of the directors shall hold office until the regular meeting of the shareholders next held after his election, until his successor shall have been elected and shall qualify, or until he shall resign or shall have been removed as hereinafter provided. No person (other than a person nominated by or on behalf of the Board) shall be eligible for election as a director at any annual or special meeting of shareholders unless a written request that his or her name be placed in nomination is received from a shareholder of record by the Secretary of the Corporation not less than sixty (60) days prior to the date fixed for the meeting, together with the written consent of such person to serve as a director. Section 3.3 BOARD MEETINGS; PLACE AND NOTICE. Meetings of the Board of Directors may be held from time to time at any place within or without the State of Minnesota that the Board of Directors may designate. In the absence of designation by the Board of Directors, Board meetings shall be held at the principal executive office of the Corporation, except as may be otherwise unanimously agreed orally or in writing or by attendance, Special or regular meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer, or the Chief Financial Officer, upon not less than twenty-four (24) hours notice. Any director may call a Board meeting by giving not less than five (5) business days notice to all directors of the date and time of the meeting. The notice need not state the purpose of the meeting. Notice may be given by mail, telephone, telegram, telecopy or by personal service. If the meeting schedule is adopted by the Board, or if the date and time of a Board meeting has been announced at a previous meeting, no notice is required. Section 3.4 WAIVER OF NOTICE. A director may waive notice of a meeting of the Board. A waiver of notice by a director is effective, whether given before, at or after the meeting and whether given in writing, orally or by attendance. Section 3.5 QUORUM. A majority of the directors currently holding office is a quorum for the transaction of business. Section 3.6 VACANCIES. Vacancies on the Board resulting from the death, resignation or removal of a director, or by an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum. Each director elected under this Section to fill a vacancy holds office until a qualified successor is elected by the shareholders at the next regular or special meeting of the shareholders. 5 Section 3.7 COMMITTEES. The Board may by resolution establish committees in the manner provided by law. Committee members need not be directors. The following committees, if established by the Board, shall have the responsibilities set forth respectively, subject to enlargement or restriction of such responsibilities, as the Board, by resolutions, shall determine: a. AUDIT COMMITTEE *Recommending the appointment of independent auditors. *Consulting with the independent auditors on the plan of the auditors. *Reviewing, in consultation with the independent auditors, their report of audit or proposed report of audit and the accompanying management letter. *Consulting with the independent auditors on the adequacy of internal controls. b. COMPENSATION COMMITTEE *Strategically, considers how the achievement of the overall goals and objectives of the Corporation can be aided through adoption of an appropriate compensation philosophy and effective compensation program elements. *Administratively, reviews salary progression, bonus allocations, stock awards and the awards of supplemental benefits and perquisites for key executives against the compensation objectives of the Corporation and its overall performance. *Approves the compensation arrangements for the Corporation's senior management; also reviews and approves the adoption of any compensation plans in which officers and directors are eligible to participate. c. NOMINATING COMMITTEE *Searches for and screens candidates for Board vacancies. The Committee considers broader issues of composition and organization of the Board, including committee assignments and individual Board membership. *Evaluates the Board itself and its members and reviews the Corporation's management succession planning. d. EXECUTIVE COMMITTEE *Serves as a key link between the full Board and management. *Is usually granted broad powers to assure that important matters which arise between Board meetings, and cannot wait for the next scheduled meeting, receive timely attention. *Serves as a sounding board for general management problems on matters that affect the Corporation as a whole. 6 e. FINANCE COMMITTEE *Stays informed on a timely basis about the Corporation's financial status. *Evaluates the financial information it receives and develops conclusions as to any plan of action needed. *Advises corporate management and the full Board in financial matters. In some cases, the Finance Committee has the authority to act for the full Board between meetings, but generally it is not empowered to act on its own. f. PENSION REVIEW COMMITTEE *Reviews and approves corporate pension policy, formal pension plans and amendments. *Reviews actuarial recommendations and makes recommendations regarding the Corporation's contribution to the pension plans. *Selects asset managers and provides guidance on the specific investment philosophy to be applied to the ongoing management of the funds. *Monitors the performance of the corporate pension funds. *Monitors government actions with respect to pension governance and reporting requirements. g. STRATEGIC PLANNING (CORPORATE OBJECTIVES) *Ensures the proper future direction of the Corporation by defining the basic corporate and business unit long-term strategic goals vital to the mission of creating shareholder value for the Corporation. *Develops strategic plans as to how the Corporation will achieve these objectives. *Monitors the progress of the Corporation in achieving its long-term strategic goals. h. STOCK OPTION *Assures that the levels and forms of the executive long-term incentive compensation programs are adequate to motivate key management to achieve the corporate long-term strategic goals. *Involved in the design and approval of the executive long-term incentive compensation programs. *Administers the timing and determination of the size of grants; also interprets plan provisions with regard to setting performance goals and executing plan award agreements with individuals. i. INVESTMENTS *Reviews and approves all major allocations of corporate resources. 7 *Evaluates the financial implications of all merger, acquisition and divestiture activities. Section 3.8 ABSENT DIRECTORS. A director may give advance written consent or opposition to a proposal to be acted on at a Board meeting. If the director is not present at the meeting, consent or opposition to a proposal does not constitute presence for purposes of determining the existence of a quorum, but consent or opposition shall be counted as a vote in favor of, or against, the proposal and shall be entered in the minutes or other record of action of the meeting if the proposal acted on at the meeting is substantially the same or has substantially the same effect as the proposal to which the director has consented or objected. ARTICLE 4 OFFICERS Section 4.1 NUMBER. The officers of the Corporation shall consist of a Chief Executive Officer and a Chief Financial Officer. The term "Chief Executive Officer," as such term is used herein, shall include an individual who has all the authority, rights and powers as would ordinarily reside in a Chief Executive Officer of the Company (an "Acting Chief Executive Officer"). The Chief Executive Officer shall preside at all meetings of the shareholders and directors and shall have such other duties as may be prescribed from time to time by the Board of Directors. The Chief Executive Officer shall also see that all orders and resolutions of the Board are carried into effect. The Chief Executive Officer and Chief Financial Officer shall have such other duties as are prescribed by statute. The Board may elect or appoint any other officers it deems necessary for the operation and management of the Corporation, each of who shall have the powers, rights, duties, responsibilities and terms of office determined by the Board from time to time. Any number of offices or functions of those offices may be held or exercised by the same person. If specific persons have not been elected as President or Secretary, the Chief Executive Officer may execute instruments or documents in those capacities. If a specific person has not been elected to office of Treasurer, the Chief Financial Officer of the Corporation may sign instruments or documents in that capacity. Section 4.2 VICE PRESIDENT. Each Vice President, if one or more are elected, shall have such powers and shall perform such duties as may be specified in the Bylaws or prescribed by the Board of Directors or by the Chairman of the Board or by the Chief Executive Officer. In the event of the absence or disability of the Chief Executive Officer, Vice Presidents shall succeed to his power and duties in the order designated by the Board of Directors. Section 4.3 SECRETARY. The Secretary, if one is elected, shall be secretary of and shall attend all meetings of the shareholders and Board of Directors and shall record all proceedings of such meetings in the minute book of the Corporation. He shall give proper notice of meetings of shareholders and directors. He shall perform such other duties as may, from time to time, be prescribed by the Board of Directors, by the Chairman of the Board, or by the Chief Executive Officer. 8 Section 4.4 ELECTION AND TERM OF OFFICE. The Board of Directors shall from time to time elect a Chairman of the Board of Directors, Chief Executive Officer and Chief Financial Officer and any other officers or agents the Board deems necessary. Such officers shall hold office until they are removed or their successors are elected and qualified. Section 4.5 DELEGATION OF AUTHORITY. An officer elected or appointed by the Board may delegate some or all of the duties or powers of his office to other persons, provided that such delegation is in writing. Section 4.6 COMPENSATION OF OFFICERS. An officer shall be entitled only to such compensation as shall be established by written contract or agreement duly approved by or on behalf of the Corporation, or established or approved by resolution of the Board of Directors. Absent such written contract, agreement or resolution of the Board of Directors, no officer shall have a cause of action against the Corporation to recover any amount due or alleged to be due as compensation for services in his or her capacity as an officer of the Corporation. ARTICLE 5 SHARES AND THEIR TRANSFER Section 5.1 CERTIFICATE OF SHARES. Every shareholder of this Corporation shall be entitled to a certificate, to be in such form as prescribed by law and adopted by the Board of Directors, certifying the number of shares of the Corporation owned by him. The certificates shall be numbered in the order in which they are issued and shall be signed by the Chief Executive Officer and Secretary of the Corporation; provided, however, that when the certificate is signed by a transfer agent or registrar, the signatures of any of such officers upon the certificate may be facsimiles, engraved or printed thereon, if authorized by the Board of Directors. Such certificate shall also have typed or printed thereon such legend as may be required by any shareholder control agreement. Every certificate surrendered to the Corporation for exchange or transfer shall be canceled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so canceled. Section 5.2 TRANSFER OF SHARES. Transfer of shares on the books of the Corporation may be authorized only by the shareholder named in the certificate, or the shareholder's legal representative, or the shareholder's duly authorized attorney in fact, and upon surrender of the certificate or the certificates for such shares. The Corporation may treat, as the absolute owner of shares of the Corporation, the person or persons in whose name or names the shares are registered on the books of the Corporation. Section 5.3 LOST CERTIFICATES. Any shareholder claiming that a certificate for shares has been lost, destroyed or stolen shall make an affidavit of that fact in such form as the Board of Directors shall require and shall, if the Board of Directors so requires, give the Corporation a sufficient indemnity bond, in form, in an amount, and with one or more sureties satisfactory to the Board of Directors, to indemnify the Corporation against any claims which may be made against it on account of the reissue of such certificate. A new certificate shall then be issued to 9 said shareholder for the same number of shares as the one alleged to have been destroyed, lost or stolen. ARTICLE 6 INDEMNIFICATION Section 6.1 INDEMNIFICATION. The Corporation shall indemnify, in accordance with the terms and conditions of Minnesota Statutes, Section 302A.521, the following persons: (a) officers and former officers; (b) directors and former directors; (c) members and former members of committees appointed or designated by the Board of Directors; and (d) employees and former employees of the Corporation. The Corporation shall not be obligated to indemnify any other person or entity, except to the extent such obligation shall be specifically approved by resolution of the Board of Directors. This Section 6.1 is for the sole and exclusive benefit of the persons designated herein and no person, firm or entity shall have any rights under this Section by way of assignment, subrogation or otherwise and whether voluntarily, involuntarily or by operation of law. ARTICLE 7 MISCELLANEOUS Section 7.1 GENDER REFERENCES. All referenced in these Bylaws to a party in the masculine shall include the feminine and neuter. Section 7.2 PLURALS. All references in the plural shall, where appropriate, include the singular and all references in the singular shall, where appropriate, be deemed to include the plural. CERTIFICATION I, James D. Atkinson III, do hereby certify that I am the duly elected, qualified or acting Secretary of Olympic Financial Ltd., a corporation organized under the laws of the State of Minnesota, and that the foregoing is a true and correct copy of the Bylaws as of January 29, 1997. /s/ James D. Atkinson III ----------------------------- James D. Atkinson III Secretary 10 EX-4.5 3 INDENTURE DATED MARCH 15, 1996 - -------------------------------------------------------------------------------- OLYMPIC FINANCIAL LTD. to NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee _______________ SUBORDINATED NOTES ______________ INDENTURE Dated as of March 15, 1996 - -------------------------------------------------------------------------------- OLYMPIC FINANCIAL LTD. Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of March 15, 1996 Trust Indenture Act Section Indenture Section - ----------- ----------------- Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . 609 (a)(2) . . . . . . . . . . . . . . . . . . . . 609 (a) (3). . . . . . . . . . . . . . . . . . . . Not Applicable (a) (4). . . . . . . . . . . . . . . . . . . . Not Applicable (a)(5) . . . . . . . . . . . . . . . . . . . . 609 (b) . . . . . . . . . . . . . . . . . . . . 608, 610 Section 311 . . . . . . . . . . . . . . . . . . . . . 613 Section 312(a) . . . . . . . . . . . . . . . . . . . . . 701, 701(a) (b) . . . . . . . . . . . . . . . . . . . . . . 701(b) (c) . . . . . . . . . . . . . . . . . . . . . . 701(c) Section 313 . . . . . . . . . . . . . . . . . . . . . . 702 Section 314(a) . . . . . . . . . . . . . . . . . . . . . . 703 (b) . . . . . . . . . . . . . . . . . . . . . . Not Applicable (c)(1) . . . . . . . . . . . . . . . . . . . . . . 102 (c)(2) . . . . . . . . . . . . . . . . . . . . . . 102 (c)(3) . . . . . . . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . . . . . . Not Applicable (e) . . . . . . . . . . . . . . . . . . . . . . 102 Section 315(a) . . . . . . . . . . . . . . . . . . . . . . 601 (b) . . . . . . . . . . . . . . . . . . . . . . 602 (c) . . . . . . . . . . . . . . . . . . . . . . 601 (d) . . . . . . . . . . . . . . . . . . . . . . 601 (e) . . . . . . . . . . . . . . . . . . . . . . 514 Section 316(a) . . . . . . . . . . . . . . . . . . . . . . 101 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . 502, 512 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . 513 (a)(2) . . . . . . . . . . . . . . . . . . . . . . Not Applicable (b) . . . . . . . . . . . . . . . . . . . . . . 508 Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . 503 (a)(2) . . . . . . . . . . . . . . . . . . . . . 504 (b) . . . . . . . . . . . . . . . . . . . . . .1003 Section 318(a) . . . . . . . . . . . . . . . . . . . . . . 107 Note: This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. -i- TABLE OF CONTENTS Page RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . 1 SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . . 11 SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . . 12 SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . 15 SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . 15 SECTION 107. Compliance with Trust Indenture Act . . . . . . . . . . . . 16 SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . . 16 SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . . 16 SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . 17 SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . 17 SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE TWO SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 202. Form of Trustee's Certificate of Authentication . . . . . . 18 SECTION 203. Form of Legend for Global Securities. . . . . . . . . . . . 18 ARTICLE THREE THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 301. Amount Unlimited; Issuable in Series. . . . . . . . . . . . 19 SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 303. Execution, Authentication, Delivery and Dating. . . . . . . 22 SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . . . . 25 SECTION 305. Registration, Registration of Transfer and Exchange . . . . 26 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. . . . . . 27 SECTION 307. Payment of Interest; Interest Rights Preserved. . . . . . . 28 SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . 30 SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . 31 ARTICLE FOUR SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . 31 -ii- SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . . 32 SECTION 403. Defeasance and Discharge of Indenture . . . . . . . . . . . 33 ARTICLE FIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . 34 SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . . 36 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . 38 SECTION 505. Trustee May Enforce Claims Without Possession of Securities 39 SECTION 506. Application of Money Collected. . . . . . . . . . . . . . . 40 SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . 40 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. . . . . . . . . . . . . . . . . . . . 41 SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . . 41 SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . 41 SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . 42 SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . . 42 SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 42 SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . 43 SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . . . . . . . 43 ARTICLE SIX THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . 44 SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . 45 SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . 45 SECTION 604. Not Responsible for Recitals or Issuance of Securities. . . 47 SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . 47 SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . 47 SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . . 47 SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . 48 SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . 48 SECTION 610. Resignation and Removal; Appointment of Successor . . . . . 49 SECTION 611. Acceptance of Appointment by Successor. . . . . . . . . . . 50 SECTION 612. Merger, Conversion, Consolidation or Succession to Business 52 SECTION 613. Preferential Collection of Claims Against Company . . . . . 52 SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . 52 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY. . . . . . . . . . . . . 54 -iii- SECTION 701. Preservation of Information; Communications to Holders. . . 54 SECTION 702. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . 55 SECTION 703. Reports by Company. . . . . . . . . . . . . . . . . . . . . 55 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . . 56 SECTION 801. Company May Consolidate, Etc. Only on Certain Terms . . . . 56 SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . 57 ARTICLE NINE SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 901. Supplemental Indentures Without Consent of Holders. . . . 57 SECTION 902. Supplemental Indentures With Consent of Holders . . . . . . 58 SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . . 60 SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . 60 SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . 60 SECTION 906. Reference in Securities to Supplemental Indentures. . . . . 60 SECTION 907. Notice of Supplemental Indentures . . . . . . . . . . . . . 60 SECTION 908. Supplemental Indentures With Consent of Holders of Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . 61 ARTICLE TEN COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 1001. Payment of Principal, Premium and Interest. . . . . . . . . 61 SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . 61 SECTION 1003. Money for Securities Payments to Be Held in Trust . . . . . 62 SECTION 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 1005. Defeasance of Certain Obligations . . . . . . . . . . . . . 63 SECTION 1006. Waiver of Certain Covenants . . . . . . . . . . . . . . . . 65 ARTICLE ELEVEN REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 1101. Applicability of Article. . . . . . . . . . . . . . . . . . 65 SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . 65 SECTION 1103. Selection by Trustee of Securities to Be Redeemed . . . . . 66 SECTION 1104. Notice of Redemption. . . . . . . . . . . . . . . . . . . . 67 SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . 67 SECTION 1106. Securities Payable on Redemption Date . . . . . . . . . . . 68 SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . 68 -iv- ARTICLE TWELVE SINKING FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 1201. Applicability of Article. . . . . . . . . . . . . . . . . . 68 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities . . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 1203. Redemption of Securities for Sinking Fund . . . . . . . . . 69 ARTICLE THIRTEEN SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 1301. Agreement to Subordinate. . . . . . . . . . . . . . . . . . 70 SECTION 1302. Distribution on Dissolution, Liquidation and Reorganization. . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 1303. No Payment When Senior Debt in Default. . . . . . . . . . . 71 SECTION 1304. Payment to Holders of Senior Debt . . . . . . . . . . . . . 72 SECTION 1305. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 1306. Payment on Securities Permitted . . . . . . . . . . . . . . 73 SECTION 1307. Authorization of Holders to Trustee to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . 73 SECTION 1308. No Waiver of Subordination Provisions . . . . . . . . . . . 74 SECTION 1309. Trustee as Holder of Senior Debt. . . . . . . . . . . . . . 74 SECTION 1310. Notices to Trustee. . . . . . . . . . . . . . . . . . . . . 74 SECTION 1311. No Fiduciary Duty by Trustee to Holders of Senior Debt. . . 75 SECTION 1312. Paying Agent Treated as Trustee . . . . . . . . . . . . . . 75 ARTICLE FOURTEEN REPURCHASE OF SECURITIES AT OPTION OF HOLDERS. . . . . . . . . . . . . . . 76 SECTION 1401. Applicability of Article. . . . . . . . . . . . . . . . . . 76 SECTION 1402. Notice of Repurchase Date . . . . . . . . . . . . . . . . . 76 SECTION 1403. Deposit of Repurchase Price . . . . . . . . . . . . . . . . 76 SECTION 1404. Securities Payable on Repurchase Date . . . . . . . . . . . 77 SECTION 1405. Securities Repurchased in Part. . . . . . . . . . . . . . . 77 ARTICLE FIFTEEN CORPORATE OBLIGATION ONLY. . . . . . . . . . . . . . . . . . . . . . . . . 78 SECTION 1501. Indenture and Securities Solely Corporate Obligations . . . 78 -v- INDENTURE, dated as of March 15, 1996 between OLYMPIC FINANCIAL LTD., a corporation duly organized and existing under the laws of the State of Minnesota (herein called the "Company"), having its principal office at 7825 Washington Avenue South, Minneapolis, Minnesota 55439, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee (herein called the "Trustee"), having its principal office at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479. RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof (including holders from time to time of the Securities of any series held through a Holder which is a Depositary (as defined herein)), as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act or by Commission rule or regulation under the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) any gender used in this Indenture shall be deemed and construed to include correlative words of the masculine, feminine or neuter gender; (4) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP and, except as otherwise herein expressly provided, GAAP with respect to any computation required or permitted hereunder shall mean GAAP at the date of such computation; and (5) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Six, are defined in that Article. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means either the board of directors of the Company or any duly authorized (generally or in any particular respect) committee appointed by that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. Where any provision of this Indenture refers to action to be taken pursuant to a Board Resolution (including establishment of any series of the Securities and the forms and terms thereof), such action may be taken by any committee, officer or employee of the Company authorized to take such action (generally or in any particular respect) by a Board Resolution. "Business Day", when used with respect to any Place of Payment or other location, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions generally in that Place of Payment or other -2- location are authorized or obligated by law or executive order to close, unless otherwise specified in a form of Security. "Capital Lease Obligation" means, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real or personal property, which obligations are required to be classified and accounted for as capital lease obligations on the balance sheet of such Person under GAAP, and the amount of such obligations at the time any determination thereof is to be made for purposes of this Indenture shall be the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation, and any other obligor upon the Securities. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President, its Chief Executive Officer, its Chief Operating Officer, its Chief Financial Officer, a Vice President, its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, or by any other officer of the Company authorized to sign by Board Resolution, and delivered to the Trustee. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which at the date of original execution of the Indenture is Minneapolis, Minnesota. "Corporation" includes corporations, associations, companies, joint stock companies and business trusts. "Credit Enhancement Facility" means any document, instrument or agreement entered into by any Person for the purpose of providing credit support for Securitization Transactions and Warehouse Facilities. "Defaulted Interest" has the meaning specified in Section 307. -3- "Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the clearing agency registered under the Exchange Act, specified for that purpose as contemplated by Section 301 or any successor clearing agency registered under the Exchange Act as contemplated by Section 305, and if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any series shall mean the Depositary with respect to the Securities of such series. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles in the United States of America set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Security" means a Security bearing the legend specified in Section 202 evidencing all or part of a series of Securities, issued to the Depositary for such series or its nominee, and registered in the name of such Depositary or nominee. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indebtedness" means, as to any Person, any of the following obligations, contingent or otherwise, whether outstanding on the date of this Indenture or thereafter created, incurred, assumed or guaranteed by such Person: (a) all obligations for borrowed money or for the deferred purchase price of property or services (including, without limitation, any interest accruing subsequent to an event of default), except any such obligation that constitutes a trade payable or an accrued liability arising in the ordinary course of business, if and to the extent the foregoing Indebtedness would appear as a liability on a balance sheet of such Person prepared in accordance with GAAP; (b) all obligations evidenced by bonds, notes, debentures or other similar instruments issued by such Person; (c) all Indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller or lender under such agreement -4- in the event of default are limited to repossession or sale of such property), except any such obligation that constitutes a trade payable or an accrued liability arising in the ordinary course of business, if and to the extent the foregoing Indebtedness would appear as a liability on a balance sheet of such Person prepared in accordance with GAAP; (d) all Capital Lease Obligations; (e) all obligations for the payment of principal or interest, all commitment fees and all reimbursement obligations incurred, created or arising in connection with Securitization Transactions, Warehouse Facilities or Credit Enhancement Facilities; (f) all Indebtedness of the types referred to in the foregoing clauses (a) through (e) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or security interest in property of such Person (including, without limitation, accounts and contract rights), even though such Person has not assumed or become liable for the payment of such Indebtedness; (g) any guarantee of any Indebtedness of the types referred to in the foregoing clauses (a) through (f), regardless of whether such obligation would appear on a balance sheet of such Person prepared in accordance with GAAP; and (h) all renewals, extensions and refundings of any Indebtedness of the types referred to in any of the foregoing clauses (a) through (g). "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is acting as Trustee under this instrument due to the appointment of one or more separate Trustees for any one or more separate series of Securities pursuant to Section 610(e), "Indenture" shall mean, with respect to such series of Securities for which any such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities for which such Person is Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental -5- hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party. "Interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Junior Subordinated Debt" means the Indebtedness of the Company under its Subordinated Extendible Notes and Subordinated Fixed-Term Notes issued pursuant to the indenture dated as of July 1, 1994, by and between the Company and Norwest Bank Minnesota, National Association, as Trustee, as the same was amended and restated as of April 28, 1995. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Obligations" has the meaning specified in Section 1302. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President, the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, a Vice President or an Assistant Vice President of the Company, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or counsel for the Company. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; -6- (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether a quorum is present at a meeting of Holders of Securities, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal amount of a Security denominated in one or more foreign currencies or currency units that shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined in the manner provided as contemplated by Section 301 as of the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent, determined as of the date of original issuance of such Security, of the amount determined as provided in (i) above) of such Security as determined by the Company pursuant to Section 301, and (iii) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledges is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) and/or interest on any Securities on behalf of the Company. -7- "Periodic Offering" means an offering of Securities of a series from time to time the specific terms of which Securities, including without limitation the rate or rates of interest (or formula for determining the rate or rates of interest), if any, thereon, the Stated Maturity or Maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company or its agents upon the issuance of such Securities. "Person" means any individual, Corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and/or interest on the Securities of that series are payable. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security, and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Proceeding" has the meaning specified in Section 1302. "Redemption Date", when used with respect to any Security or portion thereof to be redeemed, means the date fixed for such redemption pursuant to this Indenture. "Redemption Price", when used with respect to any Security or portion thereof to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Responsible Officer", when used with respect to the Trustee, means any officer of the Trustee assigned by it to administer its corporate trust matters. "Repurchase Date", when used with respect to any Security or portion thereof to be repurchased, means the date fixed for such repurchase pursuant to this Indenture. -8- "Repurchase Price", when used with respect to any Security or portion thereof to be repurchased, means the price at which it is to be repurchased pursuant to this Indenture. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture; provided, however, that if at any time there is more than one Person acting as Trustee under this Indenture, "Securities" with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of any series as to which such Person is not Trustee. "Securities Payment" has the meaning specified in Section 1302. "Securitization Transaction" means a public or private transfer of installment sales contracts, loans, leases or other receivables by which the Company directly or indirectly securitizes a pool of specified installment sales contracts, loans, leases or other receivables. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Debt" means all Indebtedness of the Company, except Indebtedness created or evidenced by an instrument which expressly provides that such Indebtedness is subordinated in right of payment to any other Indebtedness of the Company. Without limiting the generality of the foregoing, Senior Debt shall include: (i) the guarantee by the Company of any Indebtedness of any other Person (including, without limitation, subordinated Indebtedness of another Person), unless such guarantee is expressly subordinated to any other Indebtedness of the Company; (ii) Indebtedness of the Company under its 13% Senior Notes due 2000 issued pursuant to the indenture dated as of April 28, 1995, by and between the Company and Norwest Bank Minnesota, National Association, as Trustee; and (iii) Indebtedness of the Company under that certain Amended and Restated Credit Agreement dated as of August 4, 1995, by and among the Company, First Bank National Association, as Administrative Bank, and certain other banks party thereto. Without limiting the generality of the foregoing, Senior Debt shall not include Indebtedness of the Company under the Securities or the Junior Subordinated Debt. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (x) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates and (y) any Indebtedness incurred for the purchase of goods or materials or for services obtained in the ordinary course of business (other than with the proceeds of revolving credit borrowings permitted hereby). -9- "Senior Payment Default" means any default in the payment of any Obligation on any Senior Debt when due, whether at the stated maturity of any such payment or by declaration of acceleration, call for redemption, mandatory repurchase, payment or prepayment or otherwise. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 905. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "U.S. Government Obligations" means direct obligations of the United States of America, or any Person controlled or supervised by and acting as an agency or instrumentality of such government, in each case where the payment or payments thereunder are unconditionally guaranteed as a full faith and credit obligation by such government and which are not callable or redeemable at the option of the issuer or issuers thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of or other amount with respect to any such U.S. Government Obligation held by such custodian for the account of the -10- holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of or other amount with respect to the U.S. Government Obligation evidenced by such depository receipt. "Vice President", when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock", when used with respect to a Corporation, means stock of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Corporation (irrespective of whether at the time stock or securities of any other class or classes shall have or might have voting power by reason of the happening of any contingency). "Warehouse Facility" means a funding arrangement with one or more financial institutions or other lenders or purchasers, either directly or through a special purpose vehicle, exclusively to finance for a period not to exceed six months the purchase of consumer installment sales contracts, loans, leases or other receivables pending Securitization Transactions, including, without limitation, so-called "pool bank" arrangements and repurchase agreements. SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee, if so requested by the Trustee, an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; -11- (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion whether such covenant or condition has been complied with; and (4) a statement whether, in the opinion of each such individual, such condition or covenant has been complied with. Every such certificate provided under this Indenture shall be without personal recourse to the individual executing the same and may include an express statement to such effect. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of any officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate, opinion or representations with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company. Any certificate or opinion of counsel may be stated to be based on the certificates or opinions of other counsel, in which event it shall be accompanied by a copy of such other certificates or opinions. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. All applications, requests, certificates, statements or other -12- instruments given under this Indenture shall be without personal recourse to any individual giving the same and may include an express statement to such effect. SECTION 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders (including Persons who hold their Securities through a Holder which is a Depositary) in person or by an agent duly appointed in writing, and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. Without limiting the generality of the foregoing, a Holder, including a Depositary that is a Holder of a Global Security, may make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be made, given or taken by the Holders, and a Depositary that is a Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interest in any such Global Security. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine, provided that, in any instance, the Trustee may require further proof with respect to any matter referred to in this Section. (c) The ownership of Securities shall be proved by the Security Register. (d) The Company may fix any day as the record date for the purpose of determining the Holders (including Persons who hold Securities through a Holder which is a Depositary) of Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders of Securities of such series. If not set by the Company prior to the first solicitation of a Holder of Securities of such series made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote -13- shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date for action to be taken by the Holders (including Persons who hold Securities through a Holder which is a Depositary) of one or more series of Securities, only the Holders of Securities of such series on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. With regard to any action that may be given or taken hereunder only by Holders (including Persons who hold their Securities through a Holder which is a Depositary) of a requisite principal amount of Outstanding Securities of any series (or their duly appointed agents) and for which a record date is set pursuant to this subsection (d), the Company may, at its option, set an expiration date after which no such action purported to be given or taken by any Holder shall be effective hereunder unless given or taken on or prior to such expiration date by Holders (including Persons who hold Securities through a Holder which is a Depositary) of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this Subsection (d), the Company may, on one or more occasions at its option, extend such date to any later date. Nothing in this subsection (d) shall prevent any Holder (or any duly appointed agent thereof) from giving or taking, after any expiration date, any action identical to, or, at any time, contrary to or different from any action given or taken, or purported to have been given and taken, hereunder by a Holder on or prior to such date, in which event the Company may set a record date in respect hereof pursuant to this subsection (d). Notwithstanding the foregoing, upon receipt by the Trustee, with respect to Securities of any series, of (i) any Notice of Default pursuant to Section 501, (ii) any declaration or acceleration, or any rescission and annulment of any such declaration, pursuant to Section 502, or (iii) any direction given pursuant to Section 512 (any such notice, declaration, rescission and annulment, or direction being referred to herein as a "Direction"), a record date shall automatically and without any other action by any Person be set for the purpose of determining the Holders (including Persons who hold Securities through a Holder which is a Depositary) of Outstanding Securities of such series entitled to join in such Direction, which record date shall be the close of business on the day the Trustee receives such Direction. The Holders (including Persons who hold Securities through a Holder which is a Depositary) of Outstanding Securities of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such Direction, whether or not such Holders remain Holders after record date; provided that, unless such Direction shall have become effective by virtue of Holders (including Persons who hold Securities through a Holder which is a Depositary) of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents) having joined therein on or prior to the -14- 90th day after such record date, such Direction shall automatically and without any action by any Person be canceled and be of no further effect. Nothing in this paragraph shall prevent a Holder (or duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a Direction contrary to or different from, or, after the expiration of such period, identical to, a Direction that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this subsection (d). (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if made, given, furnished or filed in writing to or with a Responsible Officer of the Trustee at its Corporate Trust Office, Attention: Corporate Trust Department, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument (Attention: Treasurer) or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder (including Persons who hold Securities through a Holder which is a Depositary if the name and address of such beneficial holder has been provided in writing to the Person required to give such notice prior to the date such notice is given) affected by such event, at such Holder's address as it appears in the Security Register or as provided in writing by the Depositary, not later than the latest date, and not earlier than the earliest date, -15- prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to the Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made by or with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Compliance with Trust Indenture Act. This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of this Indenture. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the provision of the Trust Indenture Act shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company or the Trustee shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. -16- SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto, any Authenticating Agent, any Paying Agent, any Securities Registrar, and their successors hereunder and the Holders (including Persons who hold Securities through a Holder which is a Depositary), any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of Minnesota. SECTION 113. Legal Holidays. Except as may be otherwise specified with respect to any particular Securities, in any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Securities of each series, including Global Securities representing Securities of such series, shall be in the form established, without the approval of any Holders or the Trustee, by or pursuant to a Board Resolution in accordance with Section 301 or by one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. -17- The definitive Securities may be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 202. Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein and issued pursuant to the within-mentioned Indenture. _______________________, as Trustee By________________________ Authorized Signature SECTION 203. Form of Legend for Global Securities. Any Global Security authenticated and delivered hereunder shall, in addition to the provisions established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto in accordance with Section 201, bear a legend in substantially the following form or such similar form as may be required by the Depositary: "Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or to its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein." ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. -18- The Securities may be issued in one or more series. There shall be established, without the approval of any Holders or the Trustee, by or pursuant to authority granted by one or more Board Resolutions, and, subject to Section 303, there shall be set forth in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series, all or any of the following, as applicable: (1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder) and the absence of such limitation shall mean that the Company may issue from time to time additional securities of such series without limitation as to aggregate principal amount; (3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates, or the method by which such date or dates are determined or extended, on which the principal or installments of principal and premium, if any, of the Securities of the series is or are payable; (5) the rate or rates (which may be fixed or variable) at which the Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable, the Regular Record Date for the interest payable on any Interest Payment Date and the circumstances, if any in which the Company may defer interest payments and the basis upon which interest shall be calculated if other than that of a 360-day year of twelve 30-day months; (6) the place or places, if any, where the principal of (and premium, if any) and interest on Securities of the series shall be payable, any Securities of the series may be surrendered for registration of transfer or exchange and notices and demands to or upon the Company with respect to the Securities -19- of the series and this Indenture may be served, other than or in addition to the Corporate Trust Office of the Trustee; (7) if applicable, the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) whether the Securities of the series will be convertible into shares of Common Stock and/or exchangeable for other securities, and if so, the terms and conditions upon which such Securities will be so convertible or exchangeable, and any deletions from or modifications or additions to this Indenture to permit or to facilitate the issuance of such convertible or exchangeable Securities or the administration thereof; (10) the identity of each Security Registrar and Paying Agent, if other than or in addition to the Trustee; (11) if the amount of principal of, or any premium or interest on, any Securities of the series may be determined by reference to an index or pursuant to a formula, the manner in which such amounts shall be determined; (12) the applicability of, and any addition to or change in, the covenants and definitions currently set forth in this Indenture; (13) if other than denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000, the denominations in which Securities of the series shall be issuable; (14) if other than the currency of the United States of America, the currency, currencies, currency units or composite currencies in which payment of the principal of and any premium and interest on any Securities of the series shall be payable and the manner of determining the U.S. dollar equivalent of the principal amount thereof for purposes of the definition of "Outstanding" in Section 101, and, if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies or currency units -20- other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made; (15) any other event or events of default applicable with respect to Securities of the series in addition to or in lieu of those provided in Section 501 and any change in the right of the Trustee or the Holders to declare the principal of or any premium or interest on such Securities due and payable; (16) if less than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; (17) whether the Securities of the series shall be issued in whole or in part in the form of one or more Global Securities and, if so, (a) the Depositary with respect to such Global Security or Securities and (b) the circumstances under which any such Global Security may be exchanged for Securities registered in the name of, and any transfer of such Global Security may be registered to, a Person other than such Depositary or its nominee, if other than as set forth in Section 305; (18) if applicable, that the Securities of the series, in whole or any specified part, shall not be defeasible pursuant to Section 403 or Section 1005 or both such Sections and, if other than by a Company Order, the manner in which any election by the Company to defend such Securities shall be evidenced; and (19) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)). All Securities of any one series (other than Securities offered in a Periodic Offering) shall be substantially identical except as to denomination and except as may otherwise be provided by or pursuant to the Board Resolution referred to above and, subject to Section 303, set forth, or determined in the manner provided, in the Officers' Certificate referred to above or in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time. Unless otherwise provided, Securities of a single series may have different terms, and a series may be reopened, without the consent of the Holders of Securities of such series, for issuance of additional Securities of such series. -21- If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. With respect to Securities of a series offered in a Periodic Offering, such Board Resolution and Officers' Certificate or supplemental indenture may provide general terms or parameters for Securities of such series and provide either that the specific terms of particular Securities of such series shall be specified in a Company Order or that such terms shall be determined by the Company or its agents in accordance with other procedures specified in a Company Order as contemplated by the third paragraph of Section 303. SECTION 302. Denominations. Unless otherwise provided in the applicable Officers' Certificate or supplemental indenture, the Securities of each series shall be issued in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President, its Chief Executive Officer, its Chief Operating Officer, its Chief Financial Officer or one of its Vice Presidents, under its corporate seal affixed thereto or reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, or, in the case of Securities offered in a Periodic Offering, from time to time in accordance with such other procedures (including, without limitation, the receipt by the Trustee of electronic instructions -22- from the Company or its duly authorized agents, promptly confirmed in writing by the Company) acceptable to the Trustee as may be specified from time to time by a Company Order for establishing the specific terms of particular Securities being so offered, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or forms or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon (a) an Opinion of Counsel stating: (1) that the form or forms of such Securities have been established in conformity with the provisions of this Indenture; (2) that the terms of such Securities have been established in conformity with the provisions of this Indenture; (3) that authentication and delivery of such Securities and the execution and delivery of the supplemental indenture, if any, by the Trustee will not violate the terms of the Indenture; (4) that the Company has the corporate power to issue, and has duly authorized, such Securities; (5) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles, provided that such Opinion of Counsel need express an opinion as to whether a court in the United States would render a money judgment in a currency other than that of the United States; and (6) that the issuance of such Securities will not contravene the certificate of incorporation or bylaws of the Company or result in any violation of any of the terms or provisions of any law or regulation or of any indenture, mortgage or other agreement known to such Counsel by which the Company is bound; -23- (b) an executed supplemental indenture, if any; (c) a copy of a Board Resolution; and (d) an Officers' Certificate; provided, however, that, with respect to Securities of a series offered in a Periodic Offering, the Trustee shall be entitled to receive such Opinion of Counsel in connection only with the first authentication of each form of Securities of such series and that the opinions described in clauses (a)(2) and (a)(5) above may state, respectively, that (2) if the terms of such Securities are to be established pursuant to a Company Order or pursuant to such procedures as may be specified from time to time by a Company Order, all as contemplated by a Board Resolution or action taken pursuant thereto, such terms will have been duly authorized by the Company and established in conformity with the provisions of this Indenture; and (5) that such Securities, when executed by the Company, completed, authenticated and delivered by the Trustee in accordance with this Indenture, and issued and delivered by the Company and paid for, all in accordance with any agreement of the Company relating to the offering, issuance and sale of such Securities, will be duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting generally the enforcement of creditors' rights and to general principles of equity. With respect to Securities of a series offered in a Periodic Offering, the Trustee may rely, as to the authorization by the Company of any of such Securities, the form or forms and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the Opinion of Counsel, Company Order and other documents delivered pursuant to Sections 201 and 301 and this Section, as applicable, in connection with the first authentication of a form of Securities of such series and it shall not be necessary for the Company to deliver such Opinion of Counsel and other documents (except as may be required by the specified other procedures, if any, referred to above) at or prior to the time of authentication of each Security of such series unless and until the Trustee receives notice that such Opinion of Counsel or other documents have been superseded or revoked, and may assume compliance with any conditions specified in such Opinion of Counsel (other than any conditions to be performed by the Trustee). If such form or forms or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the -24- Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. Pending the preparation of definitive Securities of any Series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in the form of Global Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable, subject to Section 305, for definitive Securities of like tenor of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series and of like tenor and of any authorized denominations. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. -25- SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" of each series of Securities for the purpose of registering Securities and transfers of Securities as herein provided at the Corporate Trust Office. Upon surrender for registration of transfer of any Security of any series at the office or agency of the Company in any Place of Payment for such series, the Company shall execute and the Trustee shall authenticate and deliver (in the name of the designated transferee or transferees) one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor and bearing a number not contemporaneously outstanding. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at the office or agency of the Company in any Place of Payment for such series. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or such Holder's attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. The Company may but shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities -26- of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part or (iii) to register the transfer of or exchange any certificated Securities during a period beginning five days before the date of Maturity with respect to such Security and ending on such date of Maturity. Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, no Global Security shall be exchangeable pursuant to this Section 305 for Securities registered in the name of, and no transfer of a Global Security of any series may be registered to, any Person other than the Depositary for such Security or its nominee, unless (i) such Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or the Company determines that the Depositary is unable to continue as Depositary and the Company thereafter fails to appoint a successor Depositary, (ii) the Company provides for such exchange or registration of transfer pursuant to Section 301 of this Indenture, (iii) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so exchangeable and the transfer thereof so registrable, or (iv) there shall have occurred and be continuing an Event of Default with respect to the Securities of such series which entitles the Holders of such Securities to accelerate the maturity thereof Upon the occurrence in respect of any Global Security of any series of any one or more of the conditions specified in clauses (i), (ii), (iii) or (iv) of the preceding sentence or such other conditions as may be specified as contemplated by Section 301 for such series, such Global Security may be exchanged for Securities not bearing the legend specified in Section 205 and registered in the names of such Persons as may be specified by the Depositary (including Persons other than the Depositary or its nominees). Notwithstanding any other provision of this Indenture, a Global Security may not be transferred except as a whole by the Depositary for such Global Security to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security, including a Global Security, is surrendered to the Trustee or the Company, together with such security, bond or indemnity as may be required by the Trustee or the Company to save each of them and any agent of either of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security, including a new Global Security if the mutilated Security was a Global Security, of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. -27- If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security, including a Global Security if the destroyed, lost or stolen Security was a Global Security, and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its written request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security, including a Global Security if the destroyed, lost or stolen Security was a Global Security, of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee), if any, connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. A new Security shall have such legends as appeared on the old Security unless the Company determines otherwise. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered in the Security Register at the close of business on the Regular Record Date for such Interest Payment Date. Any interest on any Security of any series which is payable but is not punctually paid or duly provided for on any Interest Payment Date (herein called -28- "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at such Holder's address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of, or in exchange for, or in lieu -29- of, any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered in the Security Register as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Sections 305 and 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. No holder of any beneficial interest in any Global Security held on its behalf by a Depositary (or its nominees) shall have any rights under this Indenture with respect to such Global security or any Security represented thereby, and such Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Security or any Security represented thereby for all purposes whatsoever. Notwithstanding the foregoing, with respect to any Global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary as Holder of such Global Security, or impair, as between a Depositary and the owners of beneficial interests in such Global Security, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominees) as Holder of such Global Security. SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. The Trustee is hereby directed by the Company to destroy the canceled Securities held by the Trustee, and the Trustee shall provide the Company with a certificate of a Responsible Officer certifying as to the destruction of such Securities. -30- SECTION 310. Computation of Interest. Except as otherwise specified pursuant to Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months and no interest will accrue with respect to the 31st day of any month. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect with respect to any series of Securities specified in a Company Request (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities of such series therefore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has therefore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all Securities of such series not therefore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, -31- and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount, in the currency in which such Securities are payable, sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the respective Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company, and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to the Securities of such series have been complied with. Notwithstanding the satisfaction and discharge of this Indenture with respect to a series of Securities, the obligations of the Company and the Trustee to the Holders of Securities of other series not so satisfied and discharged, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614, and, if money shall have been deposited with the Trustee pursuant to Subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive. SECTION 402. Application of Trust Money. Subject to provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities of each series and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee but such money need not be segregated from other funds except to the extent required by law. SECTION 403. Defeasance and Discharge of Indenture. If principal of and any premium and interest on Securities of any series are denominated and payable in U.S. Dollars, the Company shall be deemed to have paid and discharged the entire Indebtedness on all the Outstanding Securities of such series on the 91st day after the date of the deposit referred to in subparagraph (d) hereof, and the provisions of this Indenture, as it relates to such Outstanding -32- Securities, shall no longer be in effect (and the Trustee, at the request and expense of the Company, shall execute proper instruments acknowledging the same), except as to: (a) the rights of Holders of Securities of such series to receive, from the trust funds described in subparagraph (d) hereof, (i) payment of the principal of (and premium, if any) or interest on the Outstanding Securities of such series on the Stated Maturity of such principal or installment of principal or interest and (ii) the benefit of any mandatory sinking fund payments applicable to the Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and such Securities; (b) the Company's obligations with respect to such Securities under Sections 305, 306, 1002 and 1003; and (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder; provided that, the following conditions shall have been satisfied: (d) The Company has deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 609) as trust funds in the trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of such series, (i) U.S. Dollars in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (d) U.S. Dollars in an amount or (iii) a combination thereof, sufficient, in the opinion of a nationally-recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each installment of principal of (and premium, if any) and interest on the Outstanding Securities of such series on the Stated Maturity of such principal or installment of principal and interest and (B) any mandatory sinking fund or analogous payments applicable to the Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities; (e) such deposit shall not cause the Trustee with respect to the Securities of such series to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to such Securities; -33- (f) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (g) such provision would not cause any Outstanding Securities of such series then listed on the New York Stock Exchange or other securities exchange to be delisted as a result thereof; (h) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities of such series shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date; (i) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel to the effect that there has been a change in applicable federal law such that, or the Company has received from, or there has been published by, the Internal Revenue Service a ruling to the effect that, Holders of the Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such deposits, defeasance and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred; and (j) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the defeasance contemplated by this Section have been complied with. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, and unless otherwise provided with respect to Securities of any series pursuant to Section 301, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security of such series when it becomes due and payable, and continuance of such default for a period of 30 days; or -34- (2) default in the payment of the principal of (or premium, if any, on) any Security of such series when due and payable; or (3) default in the deposit of any sinking fund payment in respect of any Security of such series, when and as due by the terms of a Security of such series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture or the Securities of such series (other than a covenant or warranty a default in the performance or breach of which is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of a series of one or more Securities other than such series), and continuance of such default or breach for a period of 60 days after written notice thereof has been received by the Company from the Trustee or by the Company and the Trustee from the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of such series, specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) an event of default, as defined in any indenture or instrument under which the Company or any Subsidiary shall have outstanding at least $5,000,000 aggregate principal amount of Indebtedness (other than as part of a Securitization Transaction), shall happen and be continuing and such Indebtedness shall, as a result thereof, have been accelerated (or comparable event shall have occurred) so that the same shall have become due and payable prior to the date on which the same would otherwise have become due and payable and such acceleration has been in effect without rescission or annulment for a period of 60 days; provided, however, that if such event of default under such indenture or instrument shall be remedied or cured by the Company or waived by the holders of such Indebtedness, or if such acceleration under such indenture or instrument shall have been rescinded or annulled by the holders of such Indebtedness, then, unless the Securities of such series shall have been accelerated as provided in this Indenture, the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any Holders of the Securities of any series; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in -35- respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (8) a final judgment, judicial decree or order for the payment of money in excess of $5,000,000 shall be rendered against the Company or any Subsidiary, and such judgment, decree or order shall have remained unpaid, unvacated, unbonded or unstayed for a period of 60 days; or (9) any other Event of Default provided with respect to Securities of such series pursuant to Section 301. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Outstanding Securities of any series occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of such series may declare the principal amount (or, if any of the Securities of such series are Original Issue Discount Securities, such lesser portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified portion thereof) shall become immediately due and payable; provided that in the case of an Event of Default -36- described in Section 501(6) or (7) hereof, the principal amount of all Securities (or specified portion thereof) shall become due and payable immediately, without any notice to the Company or the Trustee. Upon payment of such principal amount (and premium, if any), such interest and interest on overdue principal and overdue interest to the extent prescribed therefor in the Securities of such series (to the extent payment of such interest is legally enforceable), all of the Company's obligations in respect of the payment of principal and interest on the Securities of such series shall terminate. At any time after such a declaration of acceleration with respect to Outstanding Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities of such series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of such series, (B) the principal of (and premium, if any, on) any Securities of such series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607; and (2) all Events of Default with respect to Securities of such series, other than the non-payment of the principal of Securities of such series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. -37- SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security of any series when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security of any series at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Security, the whole amount then due and payable on such Security for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest at the rate or rates prescribed therefor in such Security, and, in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities of any series or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) or such portion of the principal amount of any series of Original Issue Discount Securities as may be specified in the terms of such -38- series and interest owing and unpaid in respect of the Securities of such series and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Securities of such series to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities of any series or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and for any other amounts due the Trustee under Section 607, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the Trustee with respect to any series of Securities pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities of such series and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: -39- FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities of such series in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of such series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of such series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of such series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders -40- or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date, or, in the case of a repurchase right at the option of the Holder, if any, on the repurchase date specified pursuant to Section 301) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of Securities of any series to exercise any right or remedy accruing upon any Event of Default with respect to such series shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given -41- by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of any series may, on behalf of the Holders of all the Securities of such series, waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security of such series when due (other than amounts due and payable solely upon acceleration pursuant to Section 502), unless theretofore paid in full and cured in accordance with the terms of this Indenture, or (2) in respect of a covenant or provision hereof which under Section 902 cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in -42- its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of the affected series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date or, in the case of a repurchase right at the option of the Holder, if any, on the repurchase date specified pursuant to Section 301). SECTION 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. (a) With respect to Securities of any series, except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the -43- Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) With respect to Securities of any series, in case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith with respect to any series of Securities in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of such series, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Notes, provided such direction shall not be in conflict with any rule of law or with this Indenture; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. -44- Within 90 days after the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, therein "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of Indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or as otherwise expressly provided herein and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a maker be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete -45- authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of Indebtedness or other paper or document, but the Trustee, in its discretion, may make such furler inquiry or investigation into such fact or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company pertaining to the Securities, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture. SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities of each series, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities of any series, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture and any supplemental indenture, to authenticate such Securities and to perform its obligations under this Indenture and such Securities. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities of any series or the proceeds thereof. SECTION 605. May Hold Securities. -46- The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. SECTION 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee and its agents for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. (b) As security for the performance of the obligations of the Company under this Section, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of and interest on the Securities of any series. -47- "Trustee" for the purposes of this Section includes any predecessor Trustee, but negligence or bad faith of any Trustee shall not be attributable to any other Trustee. (c) When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(6) or (7), the expenses and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law. SECTION 608. Disqualification; Conflicting Interests. The provisions of TIA Section 310(b) shall apply to the Trustee. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act under TIA Section 310(a)(1) and whose parent shall have a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority. If such Corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Neither the Company, nor any Person directly or indirectly controlling, controlled by or under common control with the Company, shall act as Trustee hereunder. SECTION 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company specifying its intention to resign, the applicable series affected by such resignation, the reason therefor and the date upon which such resignation shall become effective. Notwithstanding the foregoing, unless the reason for such resignations is a conflict pursuant to Section 608, the Trustee must resign with respect to all Securities if the Trustee resigns with respect to any series of Securities. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 60 days after the giving of such notice of resignation, -48- the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. (d) The Trustee may be removed with respect to any or all series of Securities at any time upon 30 days notice by filing with it an instrument in writing signed on behalf of the Company by a duly authorized officer of the Company specifying such removal and the date on which it is to become effective. (e) If at any time: (1) the Trustee shall fail to comply with TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to any one or more series of Securities or all Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to such series of Securities and the appointment of a successor Trustee or Trustees. (f) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. -49- If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (g) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest -50- in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. Whenever there is a successor Trustee with respect to one or more (but less than all) series of securities issued pursuant to this Indenture, the terms "Indenture" and "Securities" shall have the meanings specified in the provisos to the respective definitions of those terms in Section 101 which contemplate such situation. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) and (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any Corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such Corporation -51- shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities; in case any of the Securities shall not have been authenticated by the Trustee then in office, any successor by merger, conversion or consolidation to such Trustee may authenticate such Securities either in the name of such predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 613. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a). A Trustee which has resigned or been removed is subject to TIA Section 311(a) to the extent indicated therein. SECTION 614. Appointment of Authenticating Agent. At any time when any of the Securities remain Outstanding the Trustee, with the concurrence of the Company, may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a Corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such -52- Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any Corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such Corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at anytime terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to reimbursement for such payments subject to Section 607. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication an alternate certificate of authentication in the following form: -53- This is one of the Securities of the series designated herein and issued pursuant to the within-mentioned Indenture. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By __________________________ Authorized Signature ____________________________, as Authenticating Agent By __________________________ Authorized Signature ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders of such series of Securities received by the Trustee in its capacity as Security Registrar. (b) The rights of Holders of any series of Securities to communicate with other Holders of such series with respect to their rights under this Indenture or under such Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by TIA Section 312(b). (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b). -54- SECTION 702. Reports by Trustee. Within 60 days after May 15 of each year commencing with the later of May 15, 1996 or the first May 15 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities of all series as provided in TIA Section 313(c) a brief report dated as of such May 15 if required by TIA Section 313(a). A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any series of Securities is listed on any stock exchange. SECTION 703. Reports by Company. The Company shall: (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (3) transmit by mail to all Holders of all series of Securities, as their names and addresses appear in the Security Register, reports as may be required by rules and regulations prescribed from time to time by the Commission; and (4) furnish to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a brief certificate of the -55- Company's principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. The Trustee has no duty to review the financial or other reports described in paragraphs (1) and (2) of this Section for purposes of determining compliance with this or any other provision of this Indenture. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc. Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person unless: (1) the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a Corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. -56- SECTION 802. Successor Substituted. Upon any consolidation of the Company with, or merger by the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of one or more specified series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are being included solely for the benefit of such series); or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities of any series in certificated or uncertificated form; or -57- (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (i) shall neither (A) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Security with respect to such provision or (ii) shall become effective only when there is no such Security Outstanding; or (6) to secure the Securities of any series; or (7) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 61 l(b); or (9) to cure any ambiguity or defect in or to correct or supplement any provision herein which may be inconsistent with any other provision in this Indenture or any Security of any series, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect. SECTION 902. Supplemental Indentures With Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series at the time Outstanding affected by such supplemental indenture (voting as one class), by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any such affected Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal -58- of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any such Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment, on or after the Redemption Date or any repayment date), or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any modifications or amendments to the Indenture with respect to such series or to the terms and conditions of such series or to approve a supplemental indenture with respect to such series, or the consent of whose Holders is required for any waiver with respect to such series of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section 902, Section 513 or Section 1005, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section 902 and Section 1005, or the deletion of this proviso, in accordance with the requirements of Sections 61l(b) and 901(8). A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the -59- execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities of the series affected thereby theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent provided therein. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in a form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security so affected, pursuant to Section 106, setting forth in general terms the substance of such supplemental indenture. SECTION 908. Supplemental Indentures With Consent of Holders of Senior Debt. Without the consent of the holders of all Senior Debt affected thereby, the Company and the Trustee shall not have the power to enter into an indenture or indentures supplemental hereto for the purpose of amending or modifying the -60- definition of "Senior Debt" in this Indenture in a manner adverse to the holders of such affected Senior Debt. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of such series in accordance with the terms of such Securities and this Indenture. In the absence of contrary provisions with respect to the Securities of any series, interest on the Securities of any series may, at the option of the Company, be paid by check mailed to the address of the Person entitled thereto as it appears on the Security Register. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of such series may be presented or surrendered for payment, where Securities of such series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of such series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location and any change in the location of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and -61- premium, if any) or interest on any of the Securities of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency in which such series of Securities is payable sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities of such series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of such series in trust for the benefit of the Holders of such Securities until such sums shall be paid to such Holders or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of such series) in the making of any payment of principal (and premium, if any) or interest on the Securities of such series; and (3) during the continuance of any such default by the Company (or any other obligor upon the Securities of such series) in the making of any payment of principal (and premium, if any) or interest on the Securities of such series, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent, and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. -62- Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company on Company Request. SECTION 1004. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any-such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1005. Defeasance of Certain Obligations. The following provisions shall apply to the Securities of each series unless specifically otherwise provided in a Board Resolution, Officers' Certificate or indenture supplemental hereto provided pursuant to Section 301. The Company may omit to comply with any term, provision or condition set forth in Article Ten and Section 301(12) and any such omission with respect Article Ten and to Section 301(12) shall not be an Event of Default, in each case with respect to the Securities of that series, provided that the following conditions have been satisfied: (1) with reference to this Section 1005, the Company has deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 609) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of that series, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect -63- thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (1) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally-recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each installment of principal (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installments of principal and interest and (B) any mandatory sinking fund payments or analogous payments applicable to the Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities; (2) such deposit shall not cause the Trustee with respect to the Securities of that series to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to the Securities of any series; (3) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (4) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities of that series shall have occurred and be continuing on the date of such deposit; (5) the Company has delivered to the Trustee an Opinion of Counsel to the effect that Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and (6) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance contemplated in this Section have been complied with. SECTION 1006. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Article Ten and Section 301(12), inclusive, with respect to the Securities of any series if before the time for such compliance the -64- Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to waive any such term, provision or condition. If a record date is fixed for such purpose, the Holders on such record date or their duly designated proxies, and only such Persons, shall be entitled to waive any such term, provision or condition hereunder, whether or not such Holders remain Holders after such record date; provided that unless the Holders of not less than a majority in principal amount of the Outstanding Securities of such series shall have waived such term, provision or condition prior to the date which is 90 days after such record date, any such waiver previously given shall automatically and without further action by any Holder be canceled and of no further effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem Securities of any series shall be evidenced by an Officers' Certificate. The Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of (1) such Redemption Date, (2) the Redemption Price, (3) if the Securities of such series have different terms and less than all of the Securities of such series are to be redeemed, the terms of the Securities to be redeemed, -65- (4) whether the redemption is pursuant to a mandatory or optional sinking fund, or both, if such is the case, and (5) if less than all the Securities of such series with identical terms are to be redeemed, the principal amount of such Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of like tenor of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of like tenor of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of like tenor of that series or any integral multiple thereof of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series). The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at each such Holder's address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, -66- (2) the Redemption Price, (3) if less than all the Outstanding Securities of like tenor of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Trustee in the name and at the expense of the Company, unless the Company notifies the Trustee of its intention to give such notice directly. SECTION 1105. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in immediately available funds sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the -67- relevant Regular Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. SECTION 1107. Securities Redeemed in Part. Any Security which is to be redeemed in part shall be surrendered at a Place of Payment for such series (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. To the extent a series of Securities represented by a Global Security is to be redeemed only in part, a notation of such redemption shall be made by the Trustee in the schedule of exchanges on the Global Security. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Outstanding Securities of like tenor of a series (other than any previously called for redemption) and (2) may apply as a credit -68- Securities of like tenor of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of like tenor of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Such Securities shall be first applied to the sinking fund payment next due and any excess shall be applied to the following sinking fund payments in the order they are due. SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for Securities of like tenor of a series, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for such Securities pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of like tenor of that series pursuant to Section 1202 and, at the time of delivery of such Officers' Certificate, will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given. the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. ARTICLE THIRTEEN SUBORDINATION SECTION 1301. Agreement to Subordinate. The Company covenants and agrees, and each Holder of Securities of each series, by such Holder's acceptance thereof, likewise covenants and agrees, that the indebtedness evidenced by the Securities of each series and the payment of the principal thereof, premium, if any, sinking fund requirements therefor and interest thereon shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter set forth, to the prior payment in full in cash or cash equivalents of all Senior Debt. -69- SECTION 1302. Distribution on Dissolution, Liquidation and Reorganization. Upon any distribution to creditors of the Company in a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its properties, or upon an assignment for the benefit of creditors or any other marshaling of the assets and liabilities of the Company (each such event, if any, herein sometimes referred to as a "Proceeding"): (a) all principal of, premium, if any, interest (including interest after the commencement of any such Proceeding at the rate specified in the applicable Senior Debt) and commitment fees (the "Obligations") due on, or to become due on or in respect of, all Senior Debt shall first be paid in full in cash or cash equivalents before any payment or distribution of any kind or character, whether in cash, property or securities, by set off or otherwise (including any payment or distribution which may be payable or deliverable by reason of the payment of any Junior Subordinated Debt), on account of the principal of (and premium, if any) or interest on any Securities or on account of any purchase, redemption, retirement or other acquisition of Securities by the Company, any Subsidiary of the Company, the Trustee or any Paying Agent or on account of any other obligation of the Company in respect of any Securities (all such payments, distributions, purchases, redemptions, retirements and acquisitions, whether or not in connection with a Proceeding, herein referred to, individually and collectively, as a "Securities Payment"), or before the Holders of the Securities shall be entitled to retain any assets so paid or distributed in respect thereof; and (b) until the Senior Debt is paid in full in cash or cash equivalents (as provided in subsection (a) above), any Securities Payment to which the Holders of the Securities or the Trustee for their benefit would be entitled except for the provisions of this Section 1302, shall be paid or delivered by the Company or any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution directly to the holders of Senior Debt or their representative or representatives or the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Debt may have been issued, as their respective interests may appear. For purposes of this Article Thirteen only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include (i) a payment or distribution of stock or securities of the Company provided for by a plan of reorganization or readjustment authorized by an order or decree of a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy law or of any other corporation provided for by -70- such plan of reorganization or readjustment which stock or securities are subordinated in right of payment to all then outstanding Senior Debt to the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article; or (ii) any deposit, or payment made therefrom, pursuant to Article Four or Section 1005, with respect to any series of Securities; provided that, in the case of any such payment from a defeasance trust, the assets deposited in trust to fund such payment have been so deposited for any period of at least 90 consecutive days without the occurrence of a blockage of payment on such series of Securities pursuant to this Section 1302 or Section 1303 hereof. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article Eight shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article Eight. SECTION 1303. No Payment When Senior Debt in Default. In the event that any Senior Payment Default shall have occurred, then no Securities Payment shall be made unless and until such Senior Payment Default shall have been cured or waived in writing or shall have ceased to exist or all Obligations in respect of such Senior Debt shall have been paid in full in cash or cash equivalents. The provisions of this Section shall not apply to any Securities Payment with respect to which Section 1302 hereof would be applicable. SECTION 1304. Payment to Holders of Senior Debt. Subject to the provisions of Section 1306, in the event that, notwithstanding the provisions of Section 1302 or Section 1303, any Securities Payment shall be received by the Trustee on behalf of the Holders of the Securities (i) from the Company in violation of such provisions, or (ii) from any other Person under such circumstances that such payment would, if made directly by the Company, be in violation of such provisions, such payment or distribution shall be held by the Trustee in trust for the benefit of, and shall immediately be paid over by the Trustee, upon written request by a Person entitled to give notice on behalf of such Senior Debt as specified in Section 1310, to the holders of Senior Debt or their representative or representatives, or to the trustee or trustees under any indenture under which any instrument evidencing any of such Senior Debt may have been -71- issued, as their respective interests may appear, for application to the payment of Senior Debt. Upon any payment or distribution of assets or securities of the Company referred to in Sections 1302 and 1303, the Trustee and the Holders of the Securities shall be entitled to rely upon any order or decree of a court of competent jurisdiction, or upon any certificate of any liquidating trustee or agent or other similar Person making any payment or distribution to the Trustee or to the Holders of the Securities, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Debt, the amount thereof or payment thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Thirteen. In the event that the Trustee determines, in good faith, that further evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution referred to in Sections 1302 and 1303, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, as to the extent to which such Person is entitled to participation in such payment or distribution, and as to other facts pertinent to the rights of such Person under Sections 1302 and 1303, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 1305. Subrogation. Subject to the payment in full in cash or cash equivalents of all Senior Debt at the time outstanding and, in the case of Warehouse Facilities, all outstanding fees and expenses required to be paid by the Company pursuant to the respective terms thereof, the Holders of the Securities shall be subrogated to the rights of each holder of Senior Debt (to the extent of the payments or distributions made to such holder pursuant to the provisions of Sections 1302, 1303 and 1304) to receive payments or distributions of cash, assets or securities of the Company applicable to the Senior Debt until the Securities shall be paid in full. No payments or distributions to holders of Senior Debt of cash, assets or securities of the Company to which Holders of Securities would be entitled except for the provisions of this Article Thirteen, and no payment over pursuant to the provisions of this Article Thirteen to holders of such Senior Debt by the Holders of Securities shall, as among the Company, its creditors other than the holders of Senior Debt, and the Holders of the Securities, be deemed to be a payment by the Company on account of the Senior Debt, it being understood that the provisions of this Article Thirteen are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Debt, on the other hand, and nothing contained in this Article Thirteen or elsewhere in this Indenture, or in the Securities, is intended to or shall impair, as between the Company, its creditors other than the -72- holders of Senior Debt, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of, premium, if any, and interest on the Securities, as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of Senior Debt, nor shall anything herein or therein prevent the Trustee or the Holder of any Securities from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Thirteen of the holders of Senior Debt in respect of cash, property or securities of the Company received upon the exercise of any such remedy. SECTION 1306. Payment on Securities Permitted. Nothing contained in this Article Thirteen or elsewhere in this Indenture, or in any of the Securities, shall prevent the Company from making payment of the principal of, sinking fund, if any, premium, if any, or interest on the Securities, at any time, except under the conditions described in Section 1303 and except during the pendency of any Proceeding within the meaning of Section 1302. Nothing contained in this Article Thirteen or elsewhere in this Indenture, or in any of the Securities, shall prevent the application by the Trustee of any moneys deposited with it hereunder for the purpose, to the payment of or on account of the principal of, sinking fund, if any, or premium, if any, or interest on the Securities, unless the Trustee shall have received written notice, directed to it at its Corporate Trust Office as provided in Section 1310. SECTION 1307. Authorization of Holders to Trustee to Effect Subordination. Each Holder of Securities, by such Holder's acceptance thereof, authorizes and directs the Trustee in such Holder's behalf to take such action as may be necessary or appropriate to effectuate, as between the Holders of the Securities and the holders of Senior Debt, the subordination provided in this Article Thirteen and appoints the Trustee his attorney-in-fact for any and all such purposes. SECTION 1308. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act by any such holder, or by any noncompliance by the Company with terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. -73- Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) permit the Company to borrow, repay and then reborrow any or all of the Senior Debt; (iii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iv) release any Person liable in any manner for the collection of Senior Debt; (v) exercise or refrain from exercising any rights against the Company and any other Person; and (vi) apply any sums received by them to Senior Debt. SECTION 1309. Trustee as Holder of Senior Debt. The Trustee shall be entitled to all the rights set forth in this Article Thirteen in respect of any Senior Debt at any time held by it, to the same extent as any other holder of Senior Debt, and nothing in Section 613 or elsewhere in this Indenture shall deprive or be construed to deprive the Trustee of its rights as such holder. Nothing in this Article Thirteen shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607 hereof. SECTION 1310. Notices to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities, but failure to give such notice shall not affect the subordination of the Securities to the extent herein provided if notice is otherwise given as hereinafter provided in this Section 1310. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company, any holder of Senior Debt or Qualified Senior Debt or any trustee, fiduciary or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601 hereof, shall be entitled in all respects to assume that no such facts exist. Any notice required or permitted to be given to the Trustee by a holder of Senior Debt or Qualified Senior Debt or a trustee, fiduciary or transfer agent therefor shall be in writing and shall be sufficient for every purpose hereunder in writing and either (i) sent via facsimile to the -74- Trustee, the receipt of which shall be confirmed via telephone, or (ii) mailed, first class postage prepaid, or sent overnight carrier, to the Trustee addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address furnished in writing to such holder of the Senior Debt or Qualified Senior Debt by the Trustee. Notwithstanding anything else contained herein, no notice, request or other communication to or with the Trustee shall be deemed given unless received by a Responsible Officer at the Trustee's principal corporate trust office. SECTION 1311. No Fiduciary Duty by Trustee to Holders of Senior Debt. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or the Company or any other Person moneys or assets to which any holders of Senior Debt shall be entitled by virtue of this Article Thirteen or otherwise. SECTION 1312. Paying Agent Treated as Trustee. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article Thirteen shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article Thirteen in place of the Trustee. ARTICLE FOURTEEN REPURCHASE OF SECURITIES AT OPTION OF HOLDERS SECTION 1401. Applicability of Article. Securities of any series which are repurchasable before their Stated Maturity at the option of the Holders shall be repurchasable in accordance with their terms and (except as otherwise specified pursuant to Section 301 for Securities of any series) in accordance with this Article. SECTION 1402. Notice of Repurchase Date. Notice of any Repurchase Date with respect to Securities of any series shall, unless otherwise specified by the terms of such Securities, be given by the Company not less than 45 nor more than 60 days prior to such Repurchase Date to each Holder of Securities of such series subject to repurchase in accordance with Section 105. The notice as to Repurchase Date shall state: -75- (1) the Repurchase Date; (2) the Repurchase Price; (3) the place or places where such Securities are to be surrendered for payment of the Repurchase Price and the date by which such Securities must be so surrendered in order to be repurchased; (4) a description of the procedure which a Holder must follow to exercise a repurchase right; and (5) that exercise of the option to elect repurchase is irrevocable. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. SECTION 1403. Deposit of Repurchase Price. On or prior to the Repurchase Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Repurchase Price of and (unless the Repurchase Date shall be an Interest Payment Date) accrued interest, if any, on all of the Securities of such series which are to be repurchased on that date. SECTION 1404. Securities Payable on Repurchase Date. The form of option to elect repurchase having been delivered as specified in the form of Security for such series as provided in Article Two, the Securities of such series so to be repurchased shall, on the Repurchase Date, become due and payable at the Repurchase Price applicable thereto and from and after such date (unless the Company shall default in the payment of the Repurchase Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for repurchase in accordance with said notice, such Security shall be paid by the Company at the Repurchase Price together with accrued interest to the Repurchase Date; provided, however, that installments of interest whose Stated Maturity is on or prior to such Repurchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular and Special Record Dates according to their terms and the provisions of Section 307. -76- If any such Security shall not be paid upon surrender thereof for repurchase, the principal (and premium, if any) shall, until paid, bear interest from the Repurchase Date at the rate prescribed therefor in such Security. SECTION 1405. Securities Repurchased in Part. Any Security which by its terms may be repurchased in part at the option of the Holder and which is to be repurchased only in part shall be surrendered at any office or agency of the Company designated for that purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. To the extent a series of Securities represented by a Global Security is to be repurchased in part only, a notation of such redemption shall be made by the Trustee in the schedule of exchanges on the Global Security. ARTICLE FIFTEEN CORPORATE OBLIGATION ONLY SECTION 1501. Indenture and Securities Solely Corporate Obligations. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, any indenture supplement, or in any Security, because of any Indebtedness evidenced thereby, shall be had against any incorporator, or against any past, present or future stockholder, employee, officer or director, as such, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or penalty or by any legal or equitable proceeding or otherwise, all such liability, whether at common law, in equity, by any constitution, statute or otherwise, of incorporators, stockholders, employees, officers or directors being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration of the issuance of the Securities. * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -77- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed all as of the day and year first above written. OLYMPIC FINANCIAL LTD. By /s/ B.S. Anderson ---------------------- Brian S. Anderson Senior Vice President and Chief Accounting Officer Attest: /s/ James Atkinson - -------------------- James D. Atkinson III Senior Vice President, Corporate Counsel and Secretary NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By /s/ Curtis D. Schwegman ----------------------- Curtis D. Schwegman Corporate Trust Officer Attest: /s/ Raymond S. Haverstock - --------------------------- Name: Raymond S. Haverstock Title: Assistant Secretary -78- STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) On the 27th day of March, 1996, before me personally came Brian S. Anderson, to me known, who, being by me duly sworn, did depose and say that he is Senior Vice President and Chief Accounting Officer of Olympic Financial Ltd., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. [SEAL] /s/ Maureen R. Sultan ---------------------- Notary Public STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) On the 28th day of March, 1996, before me personally came Curtis D. Schwegman, to me known, who, being by me duly sworn, did depose and say that he is a Corporate Trust Officer of Norwest Bank Minnesota, National Association, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. [SEAL] /s/ Jane Yun ----------------- Notary Public -79- EX-4.6 4 FIRST SUPP INDENTURE, DATED MARCH 15, 1996 _______________________________________________________________________________ OLYMPIC FINANCIAL LTD. to NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee _______________ SUBORDINATED NOTES ______________ FIRST SUPPLEMENTAL INDENTURE Dated as of March 15, 1996 TO Indenture dated as of March 15, 1996 _______________________________________________________________________________ FIRST SUPPLEMENTAL INDENTURE, dated as of March 15, 1996, between OLYMPIC FINANCIAL LTD., a corporation duly organized and existing under the laws of the State of Minnesota (herein called the "Company"), having its principal office at 7825 Washington Avenue South, Minneapolis, Minnesota 55439, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee (herein called the "Trustee"), having its principal office at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479. RECITALS OF THE COMPANY The Company has heretofore executed and delivered to the Trustee an Indenture, dated as of March 15, 1996 (the "Indenture") (all terms used in this First Supplemental Indenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture), pursuant to which the Company may from time to time issue one or more series of its unsecured debentures, notes or other evidences of indebtedness. The Company desires and has requested the Trustee to join with it in the execution and delivery of this First Supplemental Indenture for the purpose of amending certain of the provisions relating to subordination with respect to series of Securities that may be issued by the Company pursuant to this First Supplemental Indenture subsequent to the date hereof (the "First Supplemental Indenture Securities"). Section 901(5)(ii) of the Indenture permits the Company, when authorized by or pursuant to a Board Resolution, and the Trustee to enter into one or more indentures supplemental to the Indenture without the consent of any Holders for the purpose of adding to, changing or eliminating any of the provisions of the Indenture in respect of one or more series of Securities, provided that such addition, change or elimination shall become effective only when there is no such Security Outstanding. The Board of Directors of the Company, by Written Consent effective as of October 2, 1995, authorized the Capital and Funding Committee of the Board of Directors of the Company to negotiate, enter into, execute and deliver on behalf of the Company one or more indentures relating to the Securities, including any supplemental indentures. The Capital and Funding Committee of the Board of Directors of the Company, by Written Action effective as of March 15, 1996, authorized this First Supplemental Indenture. The Company has furnished the Trustee with copies of the Written Consent of the Board of Directors and the Written Action of the Capital and Funding Committee of the Board of Directors of the Company, certified by the Secretary of the Company. All things necessary to make this First Supplemental Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of First Supplemental Indenture Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of First Supplemental Indenture Securities or of any series thereof (including holders from time to time of First Supplemental Indenture Securities of any series held through a Holder which is a Depositary (as defined in the Indenture)), as follows: ARTICLE ONE SECTION 101. In addition to the definitions contained in Section 101 of the Indenture, the following definitions shall apply to this First Supplemental Indenture: "Payment Blockage Period" means the period (i) commencing on such date (the "Payment Blockage Commencement Date") as shall be specified in a written notice received by the Company and the Trustee from the holders (or a trustee, fiduciary or agent therefor) of Qualified Senior Debt, which notice shall state that a Senior Nonmonetary Default has occurred and specify the Payment Blockage Commencement Date, which date shall not be earlier than the date on which such notice is received, and (ii) ending (subject to any blockage of payments that may then or thereafter be in effect as the result of any Senior Payment Default) on the earlier of (A) the date on which such Senior Nonmonetary Default shall have been cured or waived in writing or shall have ceased to exist and any acceleration of Qualified Senior Debt to which such Senior Nonmonetary Default relates shall have been rescinded or annulled or the Qualified Senior Debt to which such Senior Nonmonetary Default relates shall have been discharged or (B) the 179th day after the Payment Blockage Commencement Date. "Qualified Senior Debt" means Senior Debt outstanding under either (i) an indenture pursuant to which $100,000,000 principal amount of Senior Debt is issued and outstanding or (b) a Warehouse Facility which by its terms authorizes at least $100,000,000 of Senior Debt to be borrowed by the Company from time to time. "Senior Nonmonetary Default" means the occurrence or existence and continuance of any event of default (including the lapse of any applicable grace period and the delivery of any required notice) under the terms of any instrument or agreement pursuant to which any Qualified Senior Debt is outstanding, -2- permitting one or more holders of such Qualified Senior Debt (or a trustee or agent on behalf of the holders thereof) to declare such Qualified Senior Debt due and payable prior to the date on which it would otherwise become due and payable, other than a Senior Payment Default. SECTION 102. In addition to the subordination provisions contained in Section 1303 of the Indenture, the following subordination provisions shall apply to First Supplemental Indenture Securities: "In the event that any Senior Nonmonetary Default shall have occurred and be continuing with respect to any Qualified Senior Debt, and the Company and the Trustee have received written notice from the holders (or a trustee, fiduciary or agent therefor) of such Qualified Senior Debt (in accordance with the terms of the instruments governing such Qualified Senior Debt) stating that a Senior Nonmonetary Default has occurred and specifying a Payment Blockage Commencement Date, then, during the Payment Blockage Period, no payment or distribution of any kind or character, whether in cash, property or securities, by set off or otherwise (including any payment or distribution which may be payable or deliverable by reason of the payment of any Junior Subordinated Debt), shall be made on account of the principal of any First Supplemental Indenture Securities or on account of any purchase, redemption, retirement or other acquisition of First Supplemental Indenture Securities by the Company. No more than one Payment Blockage Period may be commenced with respect to the First Supplemental Indenture Securities during any period of 360 consecutive days, and there shall be a period of at least 181 consecutive days in each period of 360 consecutive days when no Payment Blockage Period is in effect. For all purposes of this paragraph, no Senior Nonmonetary Default that existed or was continuing on any Payment Blockage Commencement Date with respect to the Qualified Senior Debt initiating such Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by holders of Qualified Senior Debt or their representatives unless such Senior Nonmonetary Default shall have been cured for a period of not less than 90 consecutive days. From and after a Payment Blockage Commencement Date or the occurrence of a Senior Payment Default, neither the Trustee nor the Holders of not less than 25% in aggregate principal amount of the Outstanding First Supplemental Indenture Securities of any series may declare the principal amount (or, if any of the First Supplemental Indenture Securities of such series are Original Issue Discount Securities, such lesser portion of the principal amount of such First Supplemental Indenture Securities as may be specified in the terms thereof) of all of the First Supplemental Indenture Securities of that series to be due and payable immediately, as provided in Section 502 of the Indenture, until the first to occur of the following: -3- (1) the related Senior Nonmonetary Default or Senior Payment Default is cured and, if such Qualified Senior Debt was previously accelerated, such acceleration has been rescinded or annulled, or (2) the related Senior Nonmonetary Default or Senior Payment Default is waived by the holders of such Qualified Senior Debt and, if such Qualified Senior Debt was previously accelerated, such acceleration has been rescinded or annulled, or (3) the expiration of 180 days after the Payment Blockage Commencement Date or the occurence of the Senior Payment Default, if the maturity of such Qualified Senior Debt has not been accelerated at such time or the holder or holders of not less than 51% in principal amount of the outstanding Qualified Senior Debt with respect to which a Senior Nonmonetary Default or Senior Payment Default then exists, or an agent, representative or trustee therefor, has not exercised any judicial or non-judicial remedy with respect to any collateral securing such Qualified Senior Debt at such time. Notwithstanding anything to the contrary in this paragraph, upon payment in full of the Qualified Senior Debt, payments and distributions may be made on account of the principal of the First Supplemental Indenture Securities or on account of any purchase, redemption, retirement or other acquisition of First Supplemental Indenture Securities by the Company. Nothing in this paragraph shall be deemed to prevent the automatic acceleration of the principal amount of all First Supplemental Indenture Securities (or specified portion thereof) immediately upon the occurrence of an Event of Default under Sections 501(6) or (7) of the Indenture pursuant to the proviso contained in the first paragraph of Section 502 of the Indenture. The provisions of this Section 102 shall not apply to any payments or distributions made on account of the principal of the First Supplemental Indenture Securities or on account of any purchase, redemption, retirement or other acquisition of First Supplemental Indenture Securities by the Company with respect to which Section 1302 of the Indenture would be applicable." SECTION 103. Without the consent of the holders of all Qualified Senior Debt affected thereby, the Company and the Trustee shall not have the power to enter into an indenture or indentures supplemental hereto for the purpose of amending or modifying the definition of "Qualified Senior Debt" in this First -4- Supplemental Indenture in a manner adverse to the holders of such affected Qualified Senior Debt. SECTION 104. The Company hereby certifies that the amendments to the Indenture set forth in this First Supplemental Indenture do not affect any series of Securities currently Outstanding. The Company hereby covenants and agrees that it shall comply with Section 1303 of the Indenture, as supplemented by Section 102 of this First Supplemental Indenture, as it applies by its terms to First Supplemental Indenture Securities of any series. ARTICLE TWO SECTION 201. For all purposes of this First Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (a) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (b) the words "herein," "hereof," "hereby" and other words of similar import used in this First Supplemental Indenture refer to this First Supplemental Indenture and not to any particular section hereof. SECTION 202. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. SECTION 203. This First Supplemental Indenture may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 204. The Trustee makes no representation as to the validity or sufficiency of this First Supplemental Indenture. SECTION 205. The Recitals contained herein shall be taken as the statements of the Company and the Trustee assumes no responsibility for their correctness. SECTION 206. This First Supplemental Indenture and the First Supplemental Indenture Securities shall be governed by and construed in accordance with the laws of the State of Minnesota. -5- IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed all as of the day and year first above written. OLYMPIC FINANCIAL LTD. By /s/ Brian S. ANDERSON --------------------------------- Brian S. Anderson Senior Vice President and Chief Accounting Officer Attest: /s/ JAMES D. ATKINSON III - --------------------------------- James D. Atkinson III Senior Vice President, Corporate Counsel and Secretary NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By /s/ CURTIS D. SCHWEGMAN --------------------------------- Curtis D. Schwegman Corporate Trust Officer Attest: /s/ RAYMOND S. HAVERSTOCK - ---------------------------------- Name: Raymond S. Haverstock --------------------------- Title: Assistant Secretary --------------------------- -6- STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) On the 27th day of March, 1996, before me personally came Brian S. Anderson, to me known, who, being by me duly sworn, did depose and say that he is Senior Vice President and Chief Accounting Officer of Olympic Financial Ltd., one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. [SEAL] /s/ MAUREEN R. SULTAN ------------------------------- Notary Public STATE OF MINNESOTA ) ) SS. COUNTY OF HENNEPIN ) On the 28th day of March, 1996, before me personally came Curtis D. Schwegman, to me known, who, being by me duly sworn, did depose and say that he is a Corporate Trust Officer of Norwest Bank Minnesota, National Association, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority. [SEAL] /s/ JANE YUN ------------------------------- Notary Public -7- EX-10.2 5 NINTH AMENDMENT TO SECURITIES PURCHASE AMENDMENT NINTH AMENDMENT TO THE SECURITIES PURCHASE AGREEMENT, dated as of March 31, 1995, by and among Olympic Financial Ltd., a Minnesota corporation (the "Company"), and each of the investors named on the Investor Schedule attached hereto (the "Investors"). WITNESSETH: WHEREAS, the Company and the Investors are party to that certain Securities Purchase Agreement dated as of May 29, 1992, as amended by First Amendment dated as of August 11, 1992, Second Amendment dated as of October 19, 1992, Third Amendment dated as of September 14, 1993, Fourth Amendment dated as of November 22, 1993, Fifth Amendment dated as of August 29, 1994, Sixth Amendment dated as of September 9, 1994, Amendment dated December 28, 1994 and Eighth Amendment dated as of March 6, 1995 (as so amended, the "Securities Purchase Agreement"); WHEREAS, the Company intends to adopt and amend certain stock option plans at its annual meeting to be held in May 1995 and has requested that the Investors agree to amend certain provisions of the Securities Purchase Agreement that will be affected by the adoption or the amendment of such plans and the issuance of shares of the Company's Common Stock pursuant to such plans; and WHEREAS, the Investors are willing to agree to such requested amendment on the terms set forth herein. NOW THEREFORE, in consideration of the covenants and agreements made herein, the parties hereto hereby agree to amend the Securities Purchase Agreement as follows: 1. AMENDMENT TO SECTION 11G OF THE SECURITIES PURCHASE AGREEMENT. SECTION 1.1. DELETION OF SECTION 11G. Section 11G of the Securities Purchase Agreement is deleted in its entirety. 2. MISCELLANEOUS. SECTION 2.1. SECURITIES PURCHASE AGREEMENT AMENDED. This Amendment shall be deemed to be an amendment to the Securities Purchase Agreement, and the Securities Purchase Agreement, as amended hereby, is hereby ratified, approved and confirmed in all respects. This Agreement shall be limited to the matters expressly set forth herein and shall not be deemed to amend or modify any other term or condition of the Securities Purchase Agreement or any other document incident thereto or to waive any right of any party thereunder. All references to the Securities Purchase Agreement in any other document, instrument, agreement or writing hereafter shall be deemed to refer to the Securities Purchase Agreement as amended hereby. SECTION 2.2. EFFECTIVENESS. This Amendment shall become effective when it has been executed and delivered by the Company, the holders of all outstanding Notes and the holders of all outstanding Warrants. SECTION 2.3. SUCCESSORS AND ASSIGNS ON TRANSFERABILITY. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SECTION 2.4. GOVERNING LAW. This Amendment and the rights and duties of the parties under this Amendment shall be governed by, and construed and interpreted in accordance with, the law of the State of New York, without regard to principles of conflicts of law. SECTION 2.5. COUNTERPARTS. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Amendment to produce or account for more than one such counterpart. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date and year first above written. OLYMPIC FINANCIAL LTD. By /s/ Jeffrey C. Mack --------------------------------- Jeffrey C. Mack Chairman, Chief Executive Officer and President -2- DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ICI AMERICAN HOLDINGS INC. By: Pecks Management Partners, Ltd., its Investment Advisor By /s/ Robert J. Cresci ----------------------------- Robert J. Cresci Managing Director DECLARATION OF TRUST FOR DEFINED BENEFIT PLANS OF ZENECA HOLDINGS INC. By: Pecks Management Partners Ltd., its Investment Advisor By /s/ Robert J. Cresci ----------------------------- Robert J. Cresci Managing Director DELAWARE STATE EMPLOYEES' RETIREMENT FUND By: Pecks Management Partners Ltd., its Investment Advisor By /s/ Robert J. Cresci ----------------------------- Robert J. Cresci Managing Director -3- BCI GROWTH, L.P. By: Teaneck Associates its General Partner By /s/ J. Barton Goodwin ------------------------------- J. Barton Goodwin General Partner THE LINCOLN NATIONAL LIFE INSURANCE COMPANY By: Lincoln National Investment Management Company, as its attorney-in-fact By /s/ Richard L. Corwin ------------------------------- Richard L. Corwin Second Vice President SECURITY-CONNECTICUT LIFE INSURANCE COMPANY By: Lincoln National Investment Management Company, as its attorney-in-fact By /s/ Richard L. Corwin ------------------------------- Richard L. Corwin Second Vice President -4- INVESTOR SCHEDULE 1. Declaration of Trust for Defined Benefit Plans of ICI American Holdings Inc. 2. Declaration of Trust for Defined Benefit Plans of ZENECA Holdings Inc. 3. Delaware State Employees' Retirement Fund 4. BCI Growth, L.P. 5. The Lincoln National Life Insurance Company 6. Security-Connecticut Life Insurance Company -5- EX-10.3 6 CREDIT AGREEMENT DATED JULY 11 CONFORMED COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CREDIT AGREEMENT DATED AS OF JULY 11, 1996 AMONG OLYMPIC FINANCIAL LTD., VARIOUS FINANCIAL INSTITUTIONS, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT, AND FIRST BANK NATIONAL ASSOCIATION, AS CO-MANAGER, ARRANGED BY BA SECURITIES, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Section Page ARTICLE I DEFINITIONS 1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . 1 1.2 Other Interpretive Provisions. . . . . . . . . . . . . . . . 24 1.3 Accounting Principles. . . . . . . . . . . . . . . . . . . . 25 ARTICLE II THE CREDITS 2.1 Amounts and Terms of Commitments . . . . . . . . . . . . . . 25 2.2 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . 26 2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . 26 2.4 Conversion and Continuation Elections for Borrowings . . . . 27 2.5 Voluntary Termination or Reduction of Commitments. . . . . . 29 2.6 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . 29 2.7 Repayment. . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.8 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 (a) Agent's and Arranger's Fees. . . . . . . . . . . . . . 31 (b) Commitment Fees. . . . . . . . . . . . . . . . . . . . 31 2.10 Computation of Fees and Interest . . . . . . . . . . . . . . 31 2.11 Payments by the Company. . . . . . . . . . . . . . . . . . . 31 2.12 Payments by the Lenders to the Agent . . . . . . . . . . . . 32 2.13 Sharing of Payments, etc . . . . . . . . . . . . . . . . . . 33 2.14 Additional Lenders; Increased Commitments. . . . . . . . . . 33 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . 35 3.3 Increased Costs and Reduction of Return. . . . . . . . . . . 36 3.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . 37 3.5 Inability to Determine Rates . . . . . . . . . . . . . . . . 38 3.6 Certificates of Lenders. . . . . . . . . . . . . . . . . . . 38 3.7 Substitution of Lenders. . . . . . . . . . . . . . . . . . . 38 3.8 Limitation on Recovery . . . . . . . . . . . . . . . . . . . 39 3.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE IV CONDITIONS PRECEDENT 4.1 Conditions of Initial Loans. . . . . . . . . . . . . . . . . 39 (a) Credit Agreement and Notes . . . . . . . . . . . . . . . 40 (b) Pledge and Security Agreement. . . . . . . . . . . . . . 40 -i- Section Page (c) Collateral Monitoring Agreement . . . . . . . . . . . . . . 40 (d) Counterpart to Agency Agreement and Retail Lockbox Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 40 (e) Resolutions; Incumbency; Articles; Bylaws; Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . 40 (f) Good Standing. . . . . . . . . . . . . . . . . . . . . . . . 41 (g) Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . 41 (h) Payment of Fees. . . . . . . . . . . . . . . . . . . . . . . 41 (i) No Material Adverse Change . . . . . . . . . . . . . . . . . 41 (j) Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 41 (k) Financing Statements . . . . . . . . . . . . . . . . . . . . 41 (l) Other Documents. . . . . . . . . . . . . . . . . . . . . . . 42 4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . 42 (a) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 (b) Continuation of Representations and Warranties . . . . . . . 42 (c) No Existing Default. . . . . . . . . . . . . . . . . . . . . 43 ARTICLE V REPRESENTATIONS AND WARRANTIES 5.1 Organization, Standing, Etc. . . . . . . . . . . . . . . . . 43 5.2 Authorization and Validity . . . . . . . . . . . . . . . . . 43 5.3 No Conflict, No Default. . . . . . . . . . . . . . . . . . . 43 5.4 Government Consent . . . . . . . . . . . . . . . . . . . . . 44 5.5 Financial Statements and Condition . . . . . . . . . . . . . 44 5.6 Litigation and Contingent Liabilities. . . . . . . . . . . . 44 5.7 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 44 5.8 Environmental, Health and Safety Laws. . . . . . . . . . . . 45 5.9 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.10 Ownership of Property; Liens . . . . . . . . . . . . . . . . 45 5.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.12 Trademarks, Patents, Etc . . . . . . . . . . . . . . . . . . 46 5.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 46 5.14 Partnerships and Joint Ventures. . . . . . . . . . . . . . . 46 5.15 Federal Reserve Regulations. . . . . . . . . . . . . . . . . 46 5.16 Regulated Entities . . . . . . . . . . . . . . . . . . . . . 46 5.17 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . 46 5.18 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 47 ARTICLE VI AFFIRMATIVE COVENANTS 6.1 Financial Statements and Reports . . . . . . . . . . . . . . 47 6.2 Corporate Existence. . . . . . . . . . . . . . . . . . . . . 49 6.3 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 50 6.4 Payment of Taxes and Claims. . . . . . . . . . . . . . . . . 50 6.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 50 -ii- Section Page 6.6 Maintenance of Properties. . . . . . . . . . . . . . . . . . 50 6.7 Books and Records. . . . . . . . . . . . . . . . . . . . . . 51 6.8 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 51 6.9 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 6.10 Environmental Matters. . . . . . . . . . . . . . . . . . . . 51 6.11 Collateral Monitor . . . . . . . . . . . . . . . . . . . . . 51 ARTICLE VII NEGATIVE COVENANTS 7.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 7.2 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . 52 7.3 Purchase of Assets . . . . . . . . . . . . . . . . . . . . . 53 7.4 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 7.5 Change in Nature of Business . . . . . . . . . . . . . . . . 53 7.6 Subsidiaries, Partnerships and Joint Ventures. . . . . . . . 53 7.7 Other Agreements . . . . . . . . . . . . . . . . . . . . . . 53 7.8 Restricted Payments. . . . . . . . . . . . . . . . . . . . . 54 7.9 Investments. . . . . . . . . . . . . . . . . . . . . . . . . 54 7.10 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 55 7.11 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 7.12 Contingent Liabilities . . . . . . . . . . . . . . . . . . . 56 7.13 Unconditional Purchase Obligations . . . . . . . . . . . . . 56 7.14 Transactions with Related Parties. . . . . . . . . . . . . . 57 7.15 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 57 7.16 Selection Procedures . . . . . . . . . . . . . . . . . . . . 57 7.17 Capital Base . . . . . . . . . . . . . . . . . . . . . . . . 57 7.18 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 58 7.19 Portfolio Loss Ratio . . . . . . . . . . . . . . . . . . . . 58 7.20 Delinquency Ratio. . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE VIII EVENTS OF DEFAULT 8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . 58 (a) Non-Payment . . . . . . . . . . . . . . . . . . . . . . 58 (b) Representation or Warranty. . . . . . . . . . . . . . . 58 (c) Certain Covenants . . . . . . . . . . . . . . . . . . . 58 (d) Other Defaults. . . . . . . . . . . . . . . . . . . . . 59 (e) Insolvency; Voluntary Proceedings . . . . . . . . . . . 59 (f) Involuntary Proceedings . . . . . . . . . . . . . . . . 59 (g) Judgments . . . . . . . . . . . . . . . . . . . . . . . 59 (h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 59 (i) Cross Default . . . . . . . . . . . . . . . . . . . . . 60 (j) Common Stock. . . . . . . . . . . . . . . . . . . . . . 60 (k) Finance Income Receivable . . . . . . . . . . . . . . . 60 (l) Change of Control . . . . . . . . . . . . . . . . . . . 60 -iii- Section Page (m) Senior Note Offers. . . . . . . . . . . . . . . . . . . 60 (n) Subordinated Debt Offers. . . . . . . . . . . . . . . . 60 8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 61 8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . 61 ARTICLE IX THE AGENT 9.1 Appointment and Authorization; "Agent" . . . . . . . . . . . 61 9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . 62 9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . 62 9.4 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . 62 9.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . 63 9.6 Credit Decision. . . . . . . . . . . . . . . . . . . . . . . 63 9.7 Indemnification of Agent . . . . . . . . . . . . . . . . . . 64 9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . 64 9.9 Resignation; Removal; Successor Agent. . . . . . . . . . . . 65 9.10 Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE X MISCELLANEOUS 10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . 67 10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 68 10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . 68 10.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . 69 10.5 Company Indemnification. . . . . . . . . . . . . . . . . . . 69 10.6 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . 70 10.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . 70 10.8 Assignments, Participations, Etc . . . . . . . . . . . . . . 70 10.9 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 72 10.10 Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . . 73 10.11 Automatic Debits of Fees . . . . . . . . . . . . . . . . . . 73 10.12 Notification of Addresses, Lending Offices, Etc. . . . . . . 74 10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 74 10.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . 74 10.15 No Third Parties Benefited . . . . . . . . . . . . . . . . . 74 10.16 Governing Law and Jurisdiction . . . . . . . . . . . . . . . 74 10.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 75 10.18 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 75 10.19 Use of Name. . . . . . . . . . . . . . . . . . . . . . . . . 75 - iv- SCHEDULES Schedule A List of States Where UCC Financing Statements are Required for Customers. Schedule 1.1 Pricing Schedule Schedule 2.1 Commitments and Pro Rata Shares Schedule 5.6 Litigation and Contingent Liabilities Schedule 5.13 Subsidiaries Schedule 5.14 Partnerships and Joint Ventures Schedule 7.9 Investments Schedule 7.10 Indebtedness Schedule 7.11 Liens Schedule 10.2 Offshore and Domestic Lending Offices; Addresses for Notices EXHIBITS Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C Form of Note Exhibit D Form of Borrowing Base Certificate Exhibit E Form of Agreed-upon Procedures Report Exhibit F Form of Pledge and Security Agreement Exhibit G-1 Form of Legal Opinion of Dorsey & Whitney LLP Exhibit G-2 Form of Legal Opinion of James D. Atkinson III Exhibit H Form of Assignment and Acceptance Exhibit I Form of Compliance Certificate -v- CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of July 11, 1996, among OLYMPIC FINANCIAL LTD., a Minnesota corporation (the "COMPANY"), the several financial institutions from time to time party to this Agreement (collectively the "LENDERS"; individually each a "LENDER"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent, and FIRST BANK NATIONAL ASSOCIATION, as Co-Manager. WHEREAS, the Lenders have agreed to make available to the Company a revolving credit facility upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.1 CERTAIN DEFINED TERMS. The following terms have the following meanings: ACQUISITION means the purchase, in one transaction or a series of related transactions, directly or indirectly (including by merger, tender offer, exchange offer, consolidation or otherwise) by the Company and/or any of its Subsidiaries of more than 50% of the assets or issued and outstanding stock of another Person. AFFECTED LENDER - see SECTION 3.7. AFFILIATE means, as to any Person, any other Person which, directly or indirectly, is in control of, or is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities or membership interests, by contract or otherwise. AGENCY AGREEMENT means the Agency Agreement, dated as of November 13, 1992, among the Company, Harris Trust and Savings Bank and the Program Parties (as therein defined). AGENT means BofA in its capacity as Agent for the Lenders hereunder, and any successor agent arising under SECTION 9.9. AGENT-RELATED PERSONS means the Agent and any successor thereto in such capacity hereunder, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates acting for or on behalf of the Agent. AGENT'S PAYMENT OFFICE means the address for payments set forth on SCHEDULE 10.2 or such other address as the Agent may from time to time specify. AGREED-UPON PROCEDURES means the procedures described in the Agreed-upon Procedures Report to be applied by the Collateral Monitor to the Pledged Auto Receivables and related Contract Files covered by the relevant Agreed-upon Procedures Report, as such procedures may be amended, modified or supplemented from time to time with the written consent of the Company, the Collateral Monitor and the Required Lenders. AGREED-UPON PROCEDURES REPORT means a report substantially in the form of EXHIBIT E attached hereto which is to be prepared by the Collateral Monitor and delivered to the Agent in accordance with SECTION 6.1(k). AGREED-UPON PROCEDURES REPORTING PERIOD means, with respect to any Agreed-upon Procedures Report, a period commencing on the last day covered by the last Agreed-upon Procedures Report delivered to the Agent (or, if no previous Agreed-upon Procedures Report has been delivered to the Agent, the Effective Date) and ending on a date which is not greater than 20 days prior to the delivery of such Agreed-upon Procedures Report. AGREEMENT means this Credit Agreement. APPLICABLE MARGIN means, (a) for any Base Rate Loan, zero, and (b) for any Offshore Rate Loan or Resetting Rate Loan, the applicable percentage set forth in SCHEDULE 1.1 beneath the then-current Level and opposite the then-current Usage. ARRANGER means BA Securities, Inc., a Delaware corporation. ASSIGNEE - see SUBSECTION 10.8(a). ASSIGNMENT AND ACCEPTANCE - see SUBSECTION 10.8(a). -2- ATTORNEY COSTS means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. AUTO LOAN SECURITIZATION means a public or private transfer of Auto Receivables in the ordinary course of business and by which the Company directly or indirectly securitizes a pool of specified Auto Receivables. AUTO RECEIVABLE means installment sales contracts and promissory notes purchased by the Company or a Subsidiary of the Company from motor vehicle dealers and secured by new and used automobiles and light trucks. AVERAGE SERVICING PORTFOLIO means, at any time, the quotient of (a) the sum of the aggregate Servicing Portfolio as of the last day of each of the Company's most recently completed seven fiscal months divided by (b) 7.0. BAI means Bank of America Illinois, an Illinois banking corporation. BANKRUPTCY CODE means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, ET SEQ.). BASE RATE means, for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate; and (b) the rate of interest in effect for such day as publicly announced from time to time by BAI in Chicago, Illinois, as its "reference rate." (The "reference rate" is a rate set by BAI based upon various factors including BAI's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate.) Any change in the reference rate announced by BAI shall take effect at the opening of business on the day specified in the public announcement of such change. BASE RATE LOAN means a Loan that bears interest based on the Base Rate. BofA means Bank of America National Trust and Savings Association, a national banking association. BORROWING means a borrowing hereunder made by the Lenders ratably according to their respective Pro Rata Shares consisting of Loans of the same Type made to the Company on the same day by the Lenders under ARTICLE II and, in the case of Offshore Rate Loans, having the same Interest Period. -3- BORROWING BASE means, at any date, an amount equal to 95% of the outstanding principal amount of all Eligible Auto Receivables. BORROWING BASE CERTIFICATE see SECTION 6.1(d). BORROWING DATE means any date on which a Borrowing occurs under SECTION 2.3. BUSINESS DAY means any day other than a Saturday, Sunday or other day on which commercial banks in New York City, Chicago or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. CAPITAL ADEQUACY REGULATION means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. CAPITAL BASE means, at any date, the Company's Tangible Net Worth at such date. CAPITAL BASE PROCEEDS, for any period, means the proceeds received by the Company from any sale of equity securities during such period (net of direct, out-of-pocket expenses incurred in connection with such sale). CAPITALIZED LEASE means any lease which is or should be capitalized on the books of the lessee in accordance with GAAP. CASH EQUIVALENT means: (a) Dollars; (b) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition; (c) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or better; (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in CLAUSES (b) and (c) above entered into with any financial institution meeting the qualifications specified in CLAUSE (c) above or with any other Person with a short-term unsecured credit rating of at least A-1 from S&P or P-1 from Moody's, which repurchase agreement is secured by a fully -4- perfected security interest in any obligation of the type described in CLAUSES (b) and (c) having a market value of not less than 100% of the repurchase obligation of the financial institution or other Person thereunder; (e). commercial paper having a rating of A-1 or P-1 (or higher) from Moody's or S&P, and in each case maturing within six months after the date of acquisition; (f) the amount of any liabilities (as shown on the Company's or any of its Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Subsidiary that are assumed by the transferee of Finance Income Receivable in any sale thereof permitted by SECTION 7.2(b); and (g) any notes or other obligations received by the Company or any such Subsidiary from such transferee that are immediately converted by the Company or such Subsidiary into Cash Equivalents (to the extent of the Cash Equivalents received). CHANGE OF CONTROL means: (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of the Company; or (b) the replacement of a majority of the Board of Directors of the Company, over a one-year period, from the directors who constituted the Board of Directors of the Company at the beginning of such period, which replacement shall not have been approved by the Board of Directors of the Company (or replacement directors approved by the Board of Directors of the Company), as constituted at the beginning of such period. CLOSING DATE means the date on which all conditions precedent set forth in SECTION 4.1 are satisfied or waived by all Lenders (or, in the case of SUBSECTION 4.1(h), waived by the Person entitled to receive the applicable payment). CODE means the Internal Revenue Code of 1986, and regulations promulgated thereunder. COLLATERAL has the meaning assigned thereto in the Pledge and Security Agreement. COLLATERAL MONITOR means Ernst & Young or other successor collateral monitor selected in accordance with SECTION 6.11. COLLATERAL MONITORING AGREEMENT - see SECTION 4.1(c). -5- COLLATERAL PAYMENTS has the meaning assigned thereto in the Pledge and Security Agreement. COLLECTION ACCOUNT has the meaning assigned thereto in the Pledge and Security Agreement. CO-MANAGER means First Bank National Association, in its capacity as Co-Manager for the Lenders. COMMITMENT - see SECTION 2.1. As of the Effective Date, the initial amount of the combined Commitments of all Lenders is $170,000,000. COMMITMENT FEE RATE means the applicable rate set forth in SCHEDULE 1.1 beneath the then-current Level and opposite the then-current Usage. COMPANY - see the PREAMBLE. COMPLIANCE CERTIFICATE means a certificate substantially in the form of EXHIBIT I. CONTRACT FILE means, with respect to each Auto Receivable, the original of such Auto Receivable and the following original documentation relating to such Auto Receivable: (a) a copy of the credit application of the Customer named in the Auto Receivable to the Dealer named in the Auto Receivable; (b) a copy of the certificate of title or the Dealer application for Certificate of Title or a certificate of title application for correction of title, in each case showing the Company as lien holder or a guaranty letter from the Dealer agreeing to repurchase the Auto Receivable if the required certificate of title is not received; (c) a copy of the executed representation letter from the Customer named in the Auto Receivable agreeing to provide physical damage insurance for the related Vehicle; (d) with respect to each Auto Receivable originated in any of the states listed on SCHEDULE A hereto, as amended from time to time by the Agent on behalf of the Lenders, an acknowledgment filed copy of UCC-1 Financing Statements showing the Company as secured party and the Customer obligated on such Auto Receivable as debtor, and an executed UCC-3 statement naming the Company as assignor and the Agent as assignee; -6- (e) a copy of a completed Credit Score Sheet showing Credit Score, DAS Score, Debt/Income Ratio and Payment/Income Ratio for the Customer and co-obligor (if any); and (f) a copy of a completed Comment Sheet showing Loan to Value Ratio. CONVERSION/CONTINUATION DATE means any date on which, under SECTION 2.4, the Company (a) converts Loans of one Type to another Type or (b) continues as Loans of the same Type, but with a new Interest Period, Loans having an Interest Period expiring on such date. CUSTOMER has the meaning assigned thereto in the Pledge and Security Agreement. DEALER has the meaning assigned thereto in the Pledge and Security Agreement. DEALER AGREEMENT has the meaning assigned thereto in the Pledge and Security Agreement. DEBENTURES means the Company's 8% Convertible Subordinated Debentures due 2008 into which the Preferred Stock may be exchanged in accordance with the terms of the Preferred Stock. DEFAULTED AUTO RECEIVABLE means any Auto Receivable with respect to which: (a) all or any portion of a Scheduled Payment has become delinquent for a number of days such that such Auto Receivable would be considered to be a defaulted Auto Receivable under the terms of any Auto Loan Securitization; (b) the automobile financed pursuant to such Auto Receivable has been repossessed (and any applicable redemption period has expired); or (c) the Company has determined in good faith that payments under such Auto Receivable are not likely to be resumed. DELINQUENCY RATIO means, at any time, the result (expressed as a percentage) obtained by dividing (a) the then outstanding principal amount of those Included Contracts which at such date have a Scheduled Payment which is more than thirty days past due by (b) the then outstanding principal amount of all Included Contracts. DOLLARS, DOLLARS and $ each mean lawful money of the United States. EFFECTIVE DATE means the date on which the Agent has received counterparts of this Agreement executed by the parties hereto. -7- ELIGIBLE AUTO RECEIVABLES means only such Auto Receivables of which the Company is the holder, which were originated by the Company in the normal course of business under one or more Dealer Agreements and which satisfy all of the following criteria as determined by the Required Lenders in their reasonable discretion: (a) such Auto Receivable had an original principal balance, has a remaining maturity, is fully amortizing with level payments, and has an interest rate and other economic terms that are consistent with the economic terms of the Company's most recent pool of Auto Receivables which the Company securitized or sold so that such Auto Receivable could have been included in such most recent securitization or sale; (b) such Auto Receivable is a Pledged Auto Receivable and the Agent for the benefit of the Lenders has a perfected, first priority security interest in such Auto Receivable and the proceeds from any foreclosure of the automobile financed pursuant to such Auto Receivable; (c) the number of days since such Auto Receivable was originated is not greater than 180 days; (d) such Auto Receivable has not been amended or modified in any manner which would prevent it from being included in a pool of Auto Receivables to be securitized and sold and such Auto Receivable has not been rejected for inclusion in any pool of Auto Receivables which have been or are to be securitized and sold; (e) no payment under such Auto Receivable is more than thirty days past due in accordance with the stated terms of such Auto Receivable; (f) such Auto Receivable is documented on the Company's standard documentation which has been properly completed and executed; (g) the Customer of such Auto Receivable is not the subject of any current bankruptcy or similar insolvency proceeding; (h) the Dealer has delivered a complete Contract File including the original of such Auto Receivable to the Company and, except for those periods when such original is being transmitted by one of the Company's offices to its main office or is being microfiched or otherwise copied or electronically imaged off of the -8- Company's premises, such original is in the possession of the Company; (i) if a Stage I Receivable, 10:00 a.m., Chicago time, on its Stage I Payment Date has not yet occurred; (j) the final payment under such Auto Receivable is not more than 72 months after the date such Auto Receivable was originated (PROVIDED, that this CLAUSE (j) shall not exclude Auto Receivables from being Eligible Auto Receivables so long as the Auto Receivables included by virtue of this proviso do not exceed 10% of all Eligible Auto Receivables); and (k) the Contract File for such Auto Receivable is not a Rejected File or the Agent has not determined that such Auto Receivable fails to satisfy the standards for eligibility set forth in this definition. ELIGIBLE ASSIGNEE means any of (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $500,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having a combined capital and surplus of at least $500,000,000, provided that such bank is acting through a branch or agency located in the United States; and (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary or (iii) a Person of which a Lender is a Subsidiary. ENVIRONMENTAL LAWS means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters. ERISA means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder. ERISA AFFILIATE means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). -9- EVENT OF DEFAULT -- see SECTION 8.1. EXCEPTION means, with respect to any Contract File, each exception listed in paragraph 6 or 7 of the Agreed-upon Procedures Report reviewing such Contract File. FEDERAL FUNDS RATE means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. FINANCE INCOME RECEIVABLE means the "Finance Income Receivable" appearing, and as determined in accordance with GAAP, on the audited consolidated balance sheet of the Company calculated in a manner consistent with the calculation of "Finance Income Receivable" shown on the Company's audited balance sheet as at December 31, 1995. FRB means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. FURTHER TAXES means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges (including net income taxes and franchise taxes), and all liabilities with respect thereto, imposed by any jurisdiction on account of amounts payable or paid pursuant to SECTION 3.1. GAAP means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of any determination. GOVERNMENTAL AUTHORITY means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to -10- government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. HEDGING OBLIGATIONS means, with respect to any Person, the obligations of such Person under interest rate swap, cap or collar agreements or other agreements or arrangements designed to protect such Person against fluctuations in interest rates. HOSTILE ACQUISITION means an Acquisition of a Person if such Person (or its Board of Directors or equivalent governing body) has (i) announced that it will oppose such Acquisition or (ii) commenced any litigation which alleges that such Acquisition violates, or will violate, any Requirement of Law. INCLUDED CONTRACTS means all Auto Receivables which are either owned by the Company or a Subsidiary of the Company or have been securitized and sold by the Company or a Subsidiary of the Company as part of a pool of Auto Receivables; PROVIDED, HOWEVER, that Defaulted Auto Receivables shall not be Included Contracts. INDEBTEDNESS means, with respect to any Person, without duplication, all obligations, contingent or otherwise, which in accordance with GAAP should be classified upon such Person's balance sheet as liabilities, but in any event including the following (whether or not they should be classified as liabilities upon such balance sheet): (a) all indebtedness for borrowed money of such Person and all obligations of such Person secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the obligation secured thereby shall have been assumed and whether or not the obligation secured is the obligation of such Person or another party; (b) any obligation of such Person on account of deposits or advances; (c) any obligation of such Person for the deferred purchase price of any property or services, except Trade Accounts Payable; (d) any obligation of such Person as lessee under any Capitalized Lease; (e) all guaranties, endorsements and other contingent obligations of such Person in respect to Indebtedness of others (other than endorsements of instruments for collection in the ordinary course of such Person's business); and (f) undertakings or agreements to reimburse or indemnify issuers of letters of credit issued for the account of such Person. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. -11- INDEMNIFIED LIABILITIES -- see SECTION 10.5. INDEMNIFIED PERSON -- see SECTION 10.5. INSOLVENCY PROCEEDING means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case undertaken under any U.S. Federal, state or foreign law, including the Bankruptcy Code. INTEREST PAYMENT DATE means, as to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan or Resetting Rate Loan, the first Business Day of each March, June, September and December. INTEREST PERIOD means, as to any Offshore Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which such Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one, two or three months thereafter as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation, as the case may be; PROVIDED that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period for any Loan shall extend beyond the Termination Date. INVESTMENT means the acquisition, purchase, making or holding of any stock or other security, any loan, advance, contribution to capital, extension of credit (except for trade -12- and customer accounts receivable for inventory sold or services rendered in the ordinary course of business and payable in accordance with customary trade terms), any acquisitions of real or personal property (other than real and personal property acquired in the ordinary course of business) and any purchase or commitment or option to purchase stock or other debt or equity securities of, or any interest in, another Person or any integral part of any business or the assets comprising such business or part thereof. IRS means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. LEVEL means either Level One or Level Two as set forth on SCHEDULE 1.1. LENDER -- see the PREAMBLE. LENDING OFFICE means, as to any Lender, the office or offices of such Lender specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on SCHEDULE 10.2, or such other office or offices as such Lender may from time to time notify the Company and the Agent. LEVERAGE RATIO -- see SECTION 7.18. LIEN means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, or any financing lease having substantially the same economic effect as any of the foregoing, but not including the interest of a lessor under an operating lease). LOAN means an extension of credit by a Lender to the Company under SECTION 2.3. A Loan may be an Offshore Rate Loan, a Resetting Rate Loan or a Base Rate Loan (each a "TYPE" of Loan). LOAN DOCUMENTS means this Agreement, any Notes, the Pledge and Security Agreement, the Collateral Monitoring Agreement, the Lock-Box Agreement, the Agency Agreement and all other documents delivered to the Agent or any Lender in connection herewith or therewith. -13- LOCK-BOX AGREEMENT means the Retail Lockbox Agreement dated as of November 13, 1992, among the Company, Harris Trust and Savings Bank and the Program Partners (as therein defined). MASTER SUBORDINATED INDENTURE NOTES means notes issued pursuant to the Master Subordinated Notes Indenture. MASTER SUBORDINATED NOTES INDENTURE means the Indenture dated March 15, 1996 between the Company and Norwest Bank Minnesota, National Association, as trustee, as the same may be amended, supplemented or restated from time to time. MATERIAL ADVERSE EFFECT means a material adverse change in, or a material adverse effect upon, the business, assets or condition, financial or otherwise, of the Company or on the ability of the Company or any other party obligated thereunder to perform its obligations under the Loan Documents. MOODY'S means Moody's Investors Service, Inc. or any successor thereto. MULTIEMPLOYER PLAN means a "multiemployer plan", within the meaning of Section 4001(a)(3) of ERISA, with respect to which the Company or any ERISA Affiliate may have any liability. NET INCOME means, for any period, the Company's after-tax net income for such period determined in accordance with GAAP but after deduction of dividend payments on the Preferred Stock. NET PORTFOLIO LOSSES means, for any period, the aggregate amount of gross charge-offs of Auto Receivables serviced by the Company or any of its Subsidiaries during such period, net of all recoveries with respect to any such Auto Receivables (including post-disposition amounts received on previously charged-off Auto Receivables), calculated in a manner consistent with the calculation of net losses in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. NET PROCEEDS means the aggregate Cash Equivalent proceeds received by the Company or any of its Subsidiaries in respect of any sale of Finance Income Receivable (including any Cash Equivalent received upon the sale or other disposition of any non-cash consideration received in such sale), net of the direct costs relating to such sale (including legal, accounting and investment banking fees and sales commissions) and taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any -14- tax sharing arrangements) and any reserve for adjustment in respect of the sale price of such asset established in accordance with GAAP. NET WORTH means, as to any Person, the total of all assets appearing on a balance sheet of such Person after deducting all proper reserves (including reserves for depreciation, obsolescence and amortization) minus all liabilities of such Person, in each case determined in accordance with GAAP. NOTE means a promissory note executed by the Company in favor of a Lender pursuant to SUBSECTION 2.2(b), in substantially the form of EXHIBIT C. NOTICE OF BORROWING means a notice in substantially the form of EXHIBIT A. NOTICE OF CONVERSION/CONTINUATION means a notice in substantially the form of EXHIBIT B. OBLIGATIONS means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Company to any Lender, the Agent or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, or now existing or hereafter arising. OFFSHORE RATE means, for any Interest Period, with respect to Offshore Rate Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward, if necessary, to the next 1/16th of 1%) determined by the Agent as follows: Offshore Rate = IBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage. Where, EURODOLLAR RESERVE PERCENTAGE means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward, if necessary, to the next 1/100th of 1%) in effect on such day and applicable to any Lender under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and -15- IBOR means the rate of interest per annum determined by the Agent as the rate at which dollar deposits in the approximate amount of BAI's Offshore Rate Loan are offered for such Interest Period based on information presented on the Telerate Screen page 3750 at approximately 11:00 a.m. (Chicago time) two Business Days prior to the commencement of such Interest Period; PROVIDED, that if at least two such offered rates appear on the Telerate Screen in respect of such Interest Period, the arithmetic mean of all such rates (as determined by the Agent) will be the rate used; PROVIDED, FURTHER, that if Telerate ceases to provide LIBOR quotations, such rate shall be the rate of interest determined by the Agent at which dollar deposits in the approximate amount of BAI's Offshore Rate Loan for such Interest Period would be offered by BofA's Grand Cayman Branch, Grand Cayman, B.W.I. (or such other office as may be designated for such purpose by BofA), to major banks in the offshore dollar market at their request at approximately 11:00 A.M. (New York City time) two Business Days prior to the commencement of such Interest Period. The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. OFFSHORE RATE LOAN means a Loan that bears interest based on the Offshore Rate. OTHER TAXES means any present or future stamp, court or documentary taxes or any other charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Document. PARTICIPANT - see SUBSECTION 10.8(c). PBGC means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. PERMITTED ACQUISITION means an Acquisition by the Company or any Subsidiary of any Person that is a going concern that satisfies the following conditions: (a) no Event of Default or Unmatured Event of Default is in existence at the time of such Acquisition or would result therefrom; -16- (b) the Person acquired in such Acquisition is in the same or a similar line of business as the Company is in on the Effective Date; (c) the Agent shall have received from the Company, in form and substance satisfactory to the Required Lenders, PRO FORMA calculations of the covenants in SECTIONS 7.17, 7.18, 7.19 and 7.20 showing compliance with such covenants as of the date of such Acquisition after giving effect thereto; (d) the Acquisition is not a Hostile Acquisition; and (e) the total consideration for all such Acquisitions (including cash and noncash purchase price, liabilities assumed, deferred or financed purchase price, purchase price characterized as consulting agreements, noncompetition payments and the like) does not exceed $100,000,000 in the aggregate. PERMITTED LIENS means: (i) Liens on Auto Receivables in connection with Auto Loan Securitizations or under Warehouse Facilities (PROVIDED that no such Lien attaches to any Pledged Auto Receivables); (ii) Liens in favor of the Agent for the benefit of the Lenders; (iii) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary (PROVIDED that such Liens were in existence prior to the contemplation of such acquisition); (iv) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (v) Liens to secure Indebtedness permitted under SECTION 7.10(h) covering only the assets acquired with such Indebtedness (PROVIDED that the Indebtedness secured thereby shall not exceed the lesser of the purchase price or the fair market value of such property at the time of its lease); (vi) Liens existing on the Effective Date and listed on SCHEDULE 7.11; (vii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (viii) Liens in favor of a monoline insurance company or other provider of credit enhancement in connection with any Auto Loan Securitization or Warehouse Facility (PROVIDED that no such Lien attaches to any Pledged Auto Receivables); (ix) Liens on Finance Income Receivable in connection with the sale of the same; (x) Liens associated with Hedging Obligations (provided that such Liens do not attach to any Pledged Auto Receivables); (xi) a Lien on -17- the "Reserve Fund" (under and as defined in the Senior Notes Indenture); and (xii) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company, with respect to obligations that do not exceed $1,000,000 at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances of credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Subsidiary. PERSON means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. PLAN means an employee benefit plan (as defined in Section 3(3) of ERISA), other than a Multiemployer Plan, with respect to which the Company may have any liability. PLEDGE AND SECURITY AGREEMENT means the Pledge and Security Agreement dated as of even date herewith between the Company and the Agent. PLEDGED AUTO RECEIVABLES has the meaning assigned thereto in the Pledge and Security Agreement. PORTFOLIO LOSS RATIO, at any time, means the result (expressed as a percentage) obtained by dividing (a) Net Portfolio Losses for the Company's most recent six fiscal months multiplied by 2.0 by (b) the Average Servicing Portfolio at such time. PREFERRED STOCK means up to 1,150,000 shares of the Company's Cumulative Convertible Exchangeable Preferred Stock as described in the Company's Amendment No. 3 to Form S-1 Registration Statement dated November 22, 1993. PRIOR CREDIT AGREEMENT - see SECTION 4.1. PRO RATA SHARE means, as to any Lender at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Lender's Commitment divided by the combined Commitments of all Lenders at such time. RELATED PARTY means any Person (other than a Subsidiary) (a) which directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company, (b) which beneficially owns -18- or holds 10% or more of the equity interest of the Company or (c) 10% or more of the equity interest of which is beneficially owned or held by the Company or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. REJECTED FILE means a Contract File which is identified in an Agreed-upon Procedures Report as having an Exception. REPLACEMENT LENDER - see SECTION 3.7. REPORTABLE EVENT means a reportable event, as described in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC, by regulation, has waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, that a failure to meet the minimum funding standard of Section 412 of the Code and Section 302 of ERISA shall be a reportable event regardless of the issuance of any such waivers in accordance with Section 412(d) of the Code. REQUIRED LENDERS means (a) prior to the Termination Date, Lenders holding at least 66-2/3% of the Commitments, and (b) on and after the Termination Date, Lenders holding at least 66-2/3% of the then aggregate unpaid principal amount of the Loans. REQUIREMENT OF LAW means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. RESETTING RATE means, on any date and with respect to all Resetting Rate Loans, the rate of interest, as determined by the Agent, equal to the Offshore Rate which would be applicable to a notional Offshore Rate Loan in the amount of BAI's Resetting Rate Loan having an Interest Period of one month and an interest determination date of such date. The Resetting Rate shall be adjusted automatically each day for any change in the applicable Offshore Rate for such day. RESETTING RATE LOAN means a Loan that bears interest based on the Resetting Rate. -19- RESPONSIBLE OFFICER means the Chairman, the President, any Vice President, the Treasurer or any Assistant Treasurer of the Company. S&P means Standard & Poor's, a division of The McGraw Hill Companies, Inc. SCHEDULED PAYMENT means, with respect to any period for any Auto Receivable, the amount set forth in such Auto Receivable as required to be paid by the obligor in such period. If the obligor's payment obligation under an Auto Receivable with respect to a period has been modified so as to differ from the amount specified in such Auto Receivable (a) as a result of the order of a court in an insolvency proceeding involving the obligor, (b) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (c) as a result of modifications or extensions of the Auto Receivable permitted by the agreement relating to the securitization of such Auto Receivable, the Scheduled Payment with respect to such period shall refer to the obligor's payment obligation with respect to such period as so modified. SEC means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. SENIOR NOTES means the $145,000,000 13% Senior Notes due 2000 issued by the Company under the Senior Notes Indenture. SENIOR NOTES INDENTURE means the Indenture dated as of April 28, 1995, by and between the Company and Norwest Bank Minnesota, National Association, as trustee, as supplemented by the First Supplemental Indenture thereto dated as of August 11, 1995, and as the same may be further amended, supplemented or restated from time to time with the prior written consent of the Required Lenders, PROVIDED, HOWEVER, that: (a) so long as none of the following actions adversely affects the Lenders' rights under the Loan Documents, the Senior Notes Indenture may be amended without the consent of any Lender to cure any ambiguity contained therein, to correct or supplement any provisions in the Senior Notes Indenture which may be inconsistent with any other provisions therein or to add any other provisions with respect to matters or questions arising under the Senior Notes Indenture which are not inconsistent with the provisions therein; (b) the Senior Notes Indenture may be amended, supplemented or otherwise modified without the consent of -20- any Lender so long as any such amendment, supplement or modification (1) does not increase the rate of or change the time for payment of interest payable with respect to the Senior Notes, (2) does not advance the maturity of the Senior Notes, (3) does not impose any covenant, default or repayment or redemption obligation on the Company less favorable to the Company than those in effect on the date hereof under the Senior Notes Indenture, (4) does not amend any Section of the Senior Notes Indenture (or any definition used in any such Section) expressly referred to herein in a manner less favorable to the Lenders than those in effect on the date hereof, (5) does not impose a Lien on any assets of the Company or any Subsidiary other than a Lien on the "Reserve Fund" (as defined in the Senior Notes Indenture) and (6) is not otherwise adverse to the Lenders; and (c) each reference in this Agreement to any provision of the Senior Notes Indenture shall be deemed to incorporate such provision (and all related definitions set forth in the Senior Notes Indenture) by reference and such incorporation by reference shall survive any termination, discharge or defeasance of the Senior Notes Indenture. SERVICING PORTFOLIO, at any time, means the aggregate principal balance of all Auto Receivables which have been purchased or otherwise acquired by the Company or any of its Subsidiaries (whether or not thereafter sold or disposed of) which are serviced by the Company or any of its Subsidiaries at such time, calculated in a manner consistent with the calculation of the components of Average Servicing Portfolio in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. STAGE I LOANS means, at any date, with respect to any Notice of Borrowing, the portion of the Loans requested pursuant to such Notice of Borrowing that is shown as being supported by Stage I Receivables comprising part of the Borrowing Base as shown on such Borrowing Base Certificate. STAGE I PAYMENT DATE - see SECTION 2.7. STAGE I RECEIVABLE means, at any date, a Pledged Auto Receivable which is not a Stage II Receivable. STAGE II LOANS means, at any date with respect to any Notice of Borrowing, the portion of the Loan being requested pursuant to such Notice of Borrowing which is shown as being supported by Stage II Receivables comprising part of the Borrowing Base as shown on such Notice of Borrowing. -21- STAGE II RECEIVABLE means, at any date, a Pledged Auto Receivable which has been completely processed by the Company at its Minneapolis, Minnesota principal place of business; I.E., (a) the Company has recorded such Auto Receivable and its related Contract File on microfiche or has otherwise copied or electronically imaged the same, (b) the Company has placed the legend on such Auto Receivable required by Section 3.16(b) of the Pledge and Security Agreement and (c) the Company has deposited the original of such Pledged Auto Receivable and its related Contract File in a segregated secure file cabinet containing only Pledged Auto Receivables and conspicuously identified as containing property subject to the Agent's security interest. SUBORDINATED DEBT means Indebtedness of the Company which is not secured by a Lien on the assets of the Company or any of its Subsidiaries and which is subordinated in right of payment to the Obligations. SUBSIDIARY of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by such Person, or one or more of the Subsidiaries of such Person, or a combination thereof. Without limiting the generality of the foregoing, the term "Subsidiary" specifically includes any special purpose vehicle or conduit formed by a Person that is otherwise within the ambit of the immediately preceding sentence. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Company. TANGIBLE NET WORTH means, as to any Person at any time, such Person's Net Worth at such time, excluding the value of goodwill (other than goodwill arising from a Permitted Acquisition), trademarks, trade names, copyrights, patents, licenses and similar intangibles but specifically including, in the case of the Company, all Finance Income Receivable as at such time. TAXES means any and all present or future taxes, levies, assessments, imposts, duties, deductions, charges, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, such taxes (including income taxes or franchise taxes) as are taxes imposed on or measured by each Lender's net income by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or the Agent, as the case may be, is organized or maintains a lending office. -22- TERMINATION DATE means the earlier to occur of: (a) July 10, 1997; and (b) the date on which the Commitments terminate in accordance with the provisions of this Agreement. TRADE ACCOUNTS PAYABLE means, as to any Person, the trade accounts payable of such Person with a maturity of not greater than 90 days incurred in the ordinary course of such Person's business. TYPE has the meaning specified in the definition of "Loan." UNITED STATES and U.S. each means the United States of America. UNMATURED EVENT OF DEFAULT means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. USAGE means, on any date, the ratio (expressed as a percentage) that the aggregate outstanding principal amount of the Loans on such date bears to the combined Commitments on such date. VEHICLE has the meaning assigned thereto in the Pledge and Security Agreement. WAREHOUSE DEBT means Indebtedness of the Company and its Subsidiaries outstanding under Warehouse Facilities including the repurchase price of any Auto Receivables sold to any other Person pursuant to the terms of any Warehouse Facility. WAREHOUSE FACILITY means the funding arrangements with financial institutions or other lenders or purchasers exclusively to finance the purchase of Auto Receivables by the Company or a Subsidiary of the Company for a period not to exceed six months in the ordinary course of business, including so-called "pool bank" arrangements and repurchase agreements for Auto Receivables. WEIGHTED AVERAGE LIFE TO MATURITY means, when applied to any Indebtedness at any time, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then-remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one- -23- twelfth) that will elapse between such time and the making of such payment by (ii) the then-outstanding principal amount of such Indebtedness. WHOLLY-OWNED SUBSIDIARY means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by the Company, or by one or more other Wholly-Owned Subsidiaries, or by a combination thereof. 1.2 OTHER INTERPRETIVE PROVISIONS. (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. (ii) The term "including" is not limiting and means "including without limitation." (iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. -24- (f) This Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. Unless otherwise expressly provided herein, any reference to any action of the Agent, the Lenders or the Required Lenders by way of consent, approval or waiver shall be deemed modified by the phrase "in its/their sole discretion." (g) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agent, the Company and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or the Agent merely because of the Agent's or Lenders' involvement in their preparation. 1.3 ACCOUNTING PRINCIPLES. (a) Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. (b) References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. ARTICLE II THE CREDITS 2.1 AMOUNTS AND TERMS OF COMMITMENTS. Each Lender severally agrees, on the terms and conditions set forth herein, to make Loans to the Company from time to time on any Business Day during the period from the Closing Date to the Termination Date, in an aggregate amount not to exceed at any time outstanding the amount set forth on SCHEDULE 2.1 with respect to such Lender (such amount, as the same may be reduced under SECTION 2.5, increased under SECTION 2.14 or changed as a result of one or more assignments under SECTION 10.8, such Lender's "COMMITMENT"); PROVIDED, HOWEVER, that the aggregate principal amount of all outstanding Loans shall not at any time exceed the lesser of (x) the combined Commitments at such time and (y) the Borrowing Base at such time as determined from the most recent Borrowing Base Certificate as modified by any Agreed-upon Procedures Report delivered to the Lenders after the date of such Borrowing Base Certificate; and PROVIDED, FURTHER, that the aggregate principal amount of the Loans of any Lender shall not at any time exceed such Lender's Commitment; and PROVIDED, FURTHER, that the aggregate outstanding principal amount of Stage I Loans at any time shall not exceed 40% of the combined Commitments at such time. Within the limits of each Lender's -25- Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this SECTION 2.1, prepay under SECTION 2.6 and reborrow under this SECTION 2.1. 2.2 LOAN ACCOUNTS. (a) The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender in the ordinary course of business. The accounts or records maintained by the Agent and each Lender shall be conclusive (absent manifest error) of the amount of the Loans made by the Lenders to the Company, and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans. (b) Upon the request of any Lender made through the Agent, the Loans made by such Lender may be evidenced by one or more Notes, instead of or in addition to loan accounts. Each such Lender shall endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Lender is irrevocably authorized by the Company to endorse the schedule to its Note(s) and each Lender's record shall be conclusive absent manifest error; PROVIDED, HOWEVER, that the failure of a Lender to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Lender. 2.3 PROCEDURE FOR BORROWING. (a) Each Borrowing shall be made upon the Company's irrevocable written notice delivered to the Agent in the form of a Notice of Borrowing, which notice must be received by the Agent prior to (i) 10:00 a.m. (Chicago time) two Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans, and (ii) 10:00 a.m. (Chicago time) on the requested Borrowing Date, in the case of Base Rate Loans or Resetting Rate Loans, specifying: (A) the amount of the Borrowing, which, in the case of any Borrowing consisting of Offshore Rate Loans or Resetting Rate Loans, shall be in an aggregate amount of $5,000,000 or a higher integral multiple of $1,000,000 or which, in the case of any Borrowing consisting of Base Rate Loans, shall be in an aggregate amount of $1,000,000 or a higher integral multiple of $1,000,000; (B) the requested Borrowing Date, which shall be a Business Day; (C) the Type of Loans comprising such Borrowing; and -26- (D) in the case of Offshore Rate Loans, the duration of the initial Interest Period therefor. Any request for a Loan that is not based on Pledged Auto Receivables described in a Notice of Borrowing shall be accompanied by a Borrowing Base Certificate as of the immediately preceding Business Day. (b) The Agent will promptly notify each Lender of its receipt of any Notice of Borrowing and of the amount of such Lender's Pro Rata Share of such Borrowing. (c) Subject to the conditions precedent set forth herein, each Lender will make the amount of its Pro Rata Share of each Borrowing available to the Agent for the account of the Company at the Agent's Payment Office by 12:00 noon (Chicago time) on the Borrowing Date requested by the Company in funds immediately available to the Agent. Such amounts will then be made available promptly to the Company by the Agent, at such account and office as the Company shall direct from time to time, in like funds as received by the Agent. (d) After giving effect to any Borrowing, unless the Agent otherwise consents, there may not be more than five different Interest Periods in effect for all Borrowings consisting of Offshore Rate Loans. 2.4 CONVERSION AND CONTINUATION ELECTIONS FOR BORROWINGS. (a) The Company may, upon irrevocable written notice to the Agent in accordance with SUBSECTION 2.4(b): (i) elect, as of any Business Day, in the case of Base Rate Loans or Resetting Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Loans (or any part thereof in an aggregate amount of (x) in the case of Offshore Rate Loans and Resetting Rate Loans, $5,000,000 or a higher integral multiple of $1,000,000 or (y) in the case of Base Rate Loans, $1,000,000 or a higher integral multiple of $1,000,000) into Loans of another Type; or (ii) elect, as of the last day of the applicable Interest Period, to continue any Loans having Interest Periods expiring on such day (or any part thereof in an aggregate amount of $5,000,000 or a higher integral multiple of $1,000,000); PROVIDED that if at any time the aggregate amount of Offshore Rate Loans or Resetting Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of any part thereof, -27- to be less than $5,000,000, such Offshore Rate Loans or Resetting Rate Loans shall automatically convert into Base Rate Loans. (b) The Company shall deliver a Notice of Conversion/Continuation to be received by the Agent not later than (i) 10:00 a.m. (Chicago time) at least two Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as Offshore Rate Loans; and (ii) 10:00 a.m. (Chicago time) on the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans or Resetting Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted or continued; (C) the Type of Loans resulting from the proposed conversion or continuation; and (D) in the case of conversions into Offshore Rate Loans, the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to Offshore Rate Loans, the Company has failed to select timely a new Interest Period to be applicable to such Offshore Rate Loans, the Company shall be deemed to have elected to convert such Offshore Rate Loans into Resetting Rate Loans effective as of the expiration date of such Interest Period. (d) The Agent will promptly notify each Lender of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Agent will promptly notify each Lender of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans held by each Lender with respect to which the notice was given. (e) Unless the Required Lenders otherwise consent, (x) during the existence of an Event of Default or Unmatured Event of Default, the Company may not elect to have a Loan converted into or continued as an Offshore Rate Loan and (Y) during the existence of an Event of Default, the Company may not elect to have a Loan converted into or continued as a Resetting Rate Loan and (z) all outstanding Resetting Rate Loans shall automatically convert to Base Rate Loans upon the occurrence of any Event of Default. (f) After giving effect to any conversion or continuation of Loans, unless the Agent shall otherwise consent, -28- there may not be more than five different Interest Periods in effect for Offshore Rate Loans. 2.5 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The Company may, upon not less than three Business Days' prior notice to the Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate amount of $5,000,000 or a higher integral multiple of $1,000,000; UNLESS, after giving effect thereto and to any payments or prepayments of Loans made on the effective date thereof, the aggregate principal amount of all Loans would exceed the amount of the combined Commitments then in effect. Once reduced in accordance with this Section, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Lender according to its Pro Rata Share. All accrued commitment fees to, but not including, the effective date of any reduction or termination of Commitments shall be paid on the effective date of such reduction or termination. 2.6 PREPAYMENTS. (a) OPTIONAL. In addition to prepayments made upon dates described in CLAUSE (i) of the definition of "Sweep Date" in the Pledge and Security Agreement, subject to SECTION 3.4, the Company may, from time to time, upon irrevocable notice to the Agent not later than 10:30 a.m. (Chicago time) on any Business Day, in the case of Base Rate Loans or Resetting Rate Loans, and on the day which is two Business Days prior to the date of prepayment, in the case of Offshore Rate Loans, ratably prepay Loans in whole or in part, in an aggregate amount of $5,000,000 or a higher integral multiple of $1,000,000. Such notice of prepayment shall specify the date and amount of such prepayment and the Loans to be prepaid. The Agent will promptly notify each Lender of its receipt of any such notice, and of such Lender's Pro Rata Share of such prepayment. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid and any amounts required pursuant to SECTION 3.4. (b) MANDATORY. (i) If at any time (A) the excess of (1) the outstanding principal balance of the Loans OVER (2) the amount of Collateral Payments deposited into the Collection Account exceeds (B) the lesser of (1) the aggregate amount of the combined Commitments at such time or (2) the Borrowing Base at such time as determined from the most recent Borrowing Base Certificate as modified by any Agreed-upon Procedures Report delivered to the Lenders after the date of such Borrowing Base Certificate, then the Company shall immediately make a principal prepayment of the Loans in an amount equal to such excess; and -29- (ii) The Company shall make payments of the Loans as required by the last sentence of SECTION 2.7 with respect to Stage I Loans, Article IV of the Pledge and Security Agreement and Section 7.7 of the Pledge and Security Agreement. 2.7 REPAYMENT. The Company shall repay all Loans on the Termination Date. The Company shall repay each Stage I Loan by 10:00 a.m., Chicago time, on the fourth Business Day (the "STAGE I PAYMENT DATE") after the date such Stage I Loan is made by either (a) converting the Stage I Loan to a Stage II Loan by delivering to the Agent a Notice of Borrowing requesting such conversion or (b) repaying such Stage I Loan. 2.8 INTEREST. (a) Each Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate, the Resetting Rate or the Base Rate, as the case may be (and subject to the Company's right to convert to another Type of Loan under SECTION 2.4), PLUS the Applicable Margin as in effect from time to time. Notwithstanding anything to the contrary herein, no Stage I Loan shall be an Offshore Rate Loan. (b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest also shall be paid on the date of any conversion of Offshore Rate Loans under SECTION 2.4 and prepayment of Loans under SECTION 2.6, in each case for the portion of the Loans so converted or prepaid. (c) Notwithstanding the foregoing provisions of this Section, after the occurrence and during the continuance of an Event of Default or after acceleration, THEN the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Loans and, to the extent permitted by applicable law, on any other amount payable hereunder or under any other Loan Document, at a rate per annum equal to the rate otherwise applicable thereto pursuant to the terms hereof (or, after the end of the applicable Interest Period for any Offshore Rate Loan, the Base Rate) plus 2%. All such interest shall be payable on demand. (d) Anything herein to the contrary notwithstanding, the obligations of the Company to any Lender hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Lender would he contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Lender, and in such circumstances the Company shall pay -30- such Lender interest at the highest rate permitted by applicable law. 2.9 FEES. (a) AGENT'S AND ARRANGER'S FEES. The Company agrees to pay to the Agent and the Arranger such fees at such times and in such amounts as are mutually agreed to from time to time by the Company and the Agent or the Arranger, as the case may be. (b) COMMITMENT FEES. The Company shall pay to the Agent for the account of each Lender a commitment fee computed at the Commitment Fee Rate on the average daily unused amount of such Lender's Commitment. Such commitment fee shall accrue from the Effective Date to the Termination Date and shall be due and payable quarterly in arrears on the first Business Day of each March, June, September and December, with the final payment to be made on the Termination Date; PROVIDED that, in connection with any reduction or termination of Commitments under SECTION 2.5, the accrued commitment fee calculated for the period ending on the date of such reduction or termination shall be paid on the date of such reduction or termination, with (in the case of any reduction) the following quarterly payment being calculated on the basis of the period from such reduction date to the quarterly payment date. The commitment fees shall continue to accrue notwithstanding that one or more conditions to borrowing in ARTICLE IV are not met. 2.10 COMPUTATION OF FEES AND INTEREST. (a) All computations of interest for Base Rate Loans when the Base Rate is determined by BAI's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of interest and fees shall be made on the basis of a 360-day year and actual days elapsed. Interest and fees shall accrue during each period during which such interest or such fees are computed from the first day thereof to the last day thereof. (b) Each determination of an interest rate by the Agent shall be conclusive and binding on the Company and the Lenders in the absence of manifest error. The Agent will, at the request of the Company or any Lender, deliver to the Company or such Lender, as the case may be, a statement showing the quotations used by the Agent in determining any interest rate and the resulting interest rate. 2.11 PAYMENTS BY THE COMPANY. (a) All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Agent for the account of the Lenders at the Agent's Payment Office, and shall be made in Dollars and in immediately available funds, no later than 12:00 noon (Chicago time) on the date specified herein. The Agent will -31- promptly distribute to each Lender its Pro Rata Share (or other applicable share as expressly provided herein) of such payment in like funds as received. Any payment received by the Agent later than 12:00 noon (Chicago time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. (b) Whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day (unless, in the case of an Offshore Rate Loan, the following Business Day is in another calendar month, in which case such payment shall be made on the preceding Business Day), and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. (c) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Lenders that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company has not made such payment in full to the Agent, each Lender shall repay to the Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid. 2.12 PAYMENTS BY THE LENDERS TO THE AGENT. (a) Unless the Agent receives notice from a Lender at least one Business Day prior to the date of a Borrowing that such Lender will not make available as and when required hereunder to the Agent for the account of the Company the amount of such Lender's Pro Rata Share of such Borrowing, the Agent may assume that such Lender has made such amount available to the Agent in immediately available funds on the Borrowing Date and the Agent may (but shall not be so required), in reliance upon. such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, such Lender shall on the Business Day following such Borrowing Date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Lender with respect to amounts owing under this SUBSECTION (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Lender's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the Borrowing Date, the -32- Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing. (b) The failure of any Lender to make any Loan on any Borrowing Date shall not relieve any other Lender of any obligation hereunder to make a Loan on such Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on any Borrowing Date. 2.13 SHARING OF PAYMENTS, ETC. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it any payment or other recovery (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of principal of or interest on any Loan, or any other amount payable hereunder, in excess of its Pro Rata Share, such Lender shall immediately (i) notify the Agent of such fact and (ii) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery pro rata with each of them; PROVIDED that if all or any portion of such excess payment or other recovery is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion of (A) the amount of such paying Lender's required repayment to (B) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to SECTION 10.10) with respect to such participation as fully as if such Lender were the direct creditor of the Company in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments. 2.14 ADDITIONAL LENDERS; INCREASED COMMITMENTS. The parties agree that any Lender may, by written agreement with the Company (a copy of which shall be delivered to the Agent), increase its Commitment and that additional financial institutions who are acceptable to the Company and the Agent may become Lenders party hereto and that, in each case, by virtue thereof, subject to SECTION 2.5, the Commitments may be increased; PROVIDED, that -33- (a) the Commitment of each such additional financial institution shall be not less than $10,000,000 and the aggregate Commitments shall in no event exceed $300,000,000 and (b) each such additional financial institution shall execute and deliver to the Company and the Agent a counterpart of this Agreement. Upon any Lender so agreeing to increase its Commitment or any additional financial institution executing a counterpart hereof, each such additional financial institution shall be a "Lender" for purposes hereof and the other Loan Documents and the aggregate amount of the Commitments shall be increased by an amount equal to the Commitment of the new Lender and/or by the increased Commitment of the existing Lender and the Lenders shall effect such purchases and sales among themselves as shall be necessary to result in each Lender having its ratable share of each outstanding Borrowing and Type of Loan as specified by the Agent (and SECTION 3.4 shall apply to losses and expenses incurred by any Lender as a consequence of such purchases and sales), and the Agent shall have received such other documents as it shall have reasonably requested. Upon any increase in the Commitments contemplated by CLAUSE (a) above, the Company and the Agent shall amend SCHEDULE 2.1 to reflect the increase in the Commitments. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.1 TAXES. (a) Any and all payments by the Company to each Lender and the Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, the Company shall pay all Other Taxes. (b) If the Company shall be required by law to deduct or withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, then: (i) the sum payable shall be increased as necessary so that, after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section), such Lender or the Agent, as the case may be, receives and retains an amount equal to the sum it would have received and retained had no such deductions or withholdings been made; (ii) the Company shall make such deductions and withholdings; (iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and -34- (iv) the Company shall also pay to the Agent for the account of the Agent or any applicable Lender, at the time interest is paid, all additional amounts which such Lender or the Agent reasonably determines as necessary to preserve the after-tax yield the Agent or such Lender would have received if such Taxes, Other Taxes or Further Taxes had not been imposed. (c) The Company agrees to indemnify and hold harmless each Lender and the Agent for the full amount of Taxes, Other Taxes and Further Taxes in the amount that the Agent or such Lender reasonably determines as necessary to preserve the after-tax yield such Lender would have received if such Taxes, Other Taxes or Further Taxes had not been imposed, and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were correctly or legally asserted. Payment under this indemnification shall be made upon demand therefor by the Agent or such Lender. (d) Within 30 days after the date of any payment by the Company of Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Lender and the Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to such Lender or the Agent. (e) If the Company is required to pay any amount to any Lender or the Agent pursuant to SUBSECTION (b) or (c) of this Section, then such Lender or such Agent shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office or other relevant office so as to eliminate any such additional payment by the Company which may thereafter accrue, if such change in the sole judgment of such Lender or the Agent is not otherwise disadvantageous to such Lender or the Agent. 3.2 ILLEGALITY. (a) If any Lender determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make Offshore Rate Loans or Resetting Rate Loans, then, on notice thereof by the Lender to the Company through the Agent, any obligation of such Lender to make Offshore Rate Loans and Resetting Rate Loans shall be suspended until the Lender notifies the Agent and the Company that the circumstances giving rise to such determination no longer exist. (b) If a Lender determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in -35- the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to maintain any Offshore Rate Loan or Resetting Rate Loan, the Company shall, upon its receipt of notice of such fact and demand from such Lender (with a copy to the Agent), prepay in full such Offshore Rate Loan or Resetting Rate Loan of such Lender then outstanding, together with interest accrued thereon and any amount required under SECTION 3.4, in the case of an Offshore Rate Loan, either on the last day of the Interest Period thereof or, if earlier, on the date on which such Lender may no longer lawfully continue to maintain such Offshore Rate Loan or Resetting Rate Loan or, in the case of a Resetting Rate Loan, immediately. If the Company is required to so prepay any Offshore Rate Loan or Resetting Rate Loan, then concurrently with such prepayment, the Company shall borrow from the affected Lender, in the amount of such repayment, a Base Rate Loan. (c) If the obligation of any Lender to make or maintain Offshore Rate Loans or Resetting Rate Loans has been so terminated or suspended, all Loans which would otherwise be made by such Lender as Offshore Rate Loans or Resetting Rate Loans shall be instead Base Rate Loans. (d) Before giving any notice to the Agent or demand upon the Company under this Section, the affected Lender shall designate a different Lending Office with respect to its Offshore Rate Loans or Resetting Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Lender, be illegal or otherwise disadvantageous to the Lender. 3.3 INCREASED COSTS AND REDUCTION OF RETURN. (a) If after the date hereof any Lender reasonably determines that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the Offshore Rate) in or in the interpretation of any law or regulation or (ii) the compliance by that Lender with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Offshore Rate Loan or Resetting Rate Loan (other than reserves included in the determination of the Offshore Rate), then the Company shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Agent), pay to the Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs. (b) If after the date hereof any Lender shall have reasonably determined that (i) the introduction of any Capital 36 Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof or (iv) compliance by the Lender (or its Lending Office) or any corporation controlling the Lender with any Capital Adequacy Regulation affects or would affect the amount of capital required or expected to be maintained by the Lender or any corporation controlling the Lender (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) and such Lender reasonably determines that the amount of such capital is required to be increased as a consequence of its Commitment, Loans, credits or obligations under this Agreement, then, upon demand of such Lender to the Company through the Agent, the Company shall pay to the Lender, from time to time as specified by the Lender, additional amounts sufficient to compensate the Lender for such increase. The Lenders may use reasonable averaging and attribution methods in determining compensation under this SECTION 3.3(b). (c) Before giving any notice to the Agent under this Section, the affected Lender shall use commercially reasonable efforts to designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Lender, be illegal or otherwise disadvantageous to the Lender. 3.4 FUNDING LOSSES. The Company shall reimburse each Lender and hold each Lender harmless from any reasonable loss or expense which the Lender may sustain or incur as a consequence of: (a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Loan; (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation with respect to an Offshore Rate Loan; (c) the failure of the Company to make any prepayment of an Offshore Rate Loan in accordance with any notice delivered under SECTION 2.6; (d) the prepayment or other payment (including after acceleration thereof) of an Offshore Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under SECTION 3.2 of any Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period; 37 including any such reasonable loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Company to the Lenders under this Section and under SUBSECTION 3.3(a), each Offshore Rate Loan made by a Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the IBOR used in determining the Offshore Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded. The Lenders may use reasonable averaging and attribution methods in determining losses and expenses under this SECTION 3.4. 3.5 INABILITY TO DETERMINE RATES. If (a) the Agent determines that for any reason adequate and reasonable means do not exist for determining the Offshore Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan or Resetting Rate Loan, or (b) the Required Lenders determine that the Offshore Rate applicable pursuant to SUBSECTION 2.8(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan or Resetting Rate Loan does not adequately and fairly reflect the cost to such Lender of funding such Loan, the Agent will promptly so notify the Company and each Lender. Thereafter, the obligation of the Lenders to make or maintain Offshore Rate Loans and Resetting Rate Loans shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Lenders shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of Offshore Rate Loans or Resetting Rate Loans. 3.6 CERTIFICATES OF LENDERS. Any Lender claiming reimbursement or compensation under this ARTICLE III shall deliver to the Company (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to the Lender hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error. 3.7 SUBSTITUTION OF LENDERS. Upon the receipt by the Company from any Lender (an "AFFECTED LENDER") of a claim for reimbursement or compensation under SECTION 3.1 or SECTION 3.3 or a notice described in SECTION 3.2, the Company may: (i) request the Affected Lender to use its best efforts to obtain a replacement bank or financial institution satisfactory to the Company to acquire and assume all or a ratable part of all of such Affected Lender's Loans and Commitment (a "REPLACEMENT LENDER"); (ii) 38 request one more of the other Lenders to acquire and assume all or part of such Affected Lender's Loans and Commitment; or (iii) designate a Replacement Lender. Any such designation of a Replacement Lender under CLAUSE (i) or (iii) shall be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld). Upon notice from the Company, the Affected Lender shall assign, pursuant to an Assignment and Acceptance, its Commitment, Loans and its other rights and obligations hereunder or a ratable share thereof to the Replacement Lender or Replacement Lenders designated by the Company for a purchase price equal to the sum of the principal amount of the Loans so assigned and all accrued and unpaid interest thereon. The Company shall, on the effective date of such assignment, pay to the Affected Lender its ratable share of all accrued and unpaid fees to which it is entitled. Any such assignment shall be made in accordance with SECTIONS 10.8(a) and (b). 3.8 LIMITATION ON RECOVERY. Notwithstanding SECTIONS 3.1, 3.3(a) and (b), if any Lender fails to notify the Company of any event which will entitle such Lender to reimbursement or compensation pursuant to SECTIONS 3.1 and 3.3 within 90 days after such Lender obtains knowledge of such event, then such Lender shall not be entitled to reimbursement of any Tax or any compensation from the Company for any increased cost or reduction of return arising prior to the date which is 90 days before the date on which such Lender notifies the Company of such event. 3.9 SURVIVAL. The agreements and obligations of the Company in this ARTICLE III shall survive the payment of all other Obligations. ARTICLE IV CONDITIONS PRECEDENT 4.1 CONDITIONS OF INITIAL LOANS. The obligation of each Lender to make its initial Loan is, in addition to the conditions precedent set forth in SECTION 4.2, subject to the conditions that (i) the Company shall have submitted evidence reasonably satisfactory to the Agent and the Lenders that all existing obligations of the Company under the Amended and Restated Credit Agreement dated as of August 4, 1995 with various financial institutions and First Bank National Association (the "PRIOR CREDIT AGREEMENT") have been (or concurrently with the initial Borrowing will be) paid in full and that all "Commitments" under and as defined in the Prior Credit Agreement have been terminated and (ii) the Agent shall have received all of the following, in form and substance satisfactory to the Agent and each Lender, and (except for the Notes) in sufficient copies for each Lender: -39- (a) CREDIT AGREEMENT AND NOTES. This Agreement executed by each party hereto and the Notes executed by the Company. (b) PLEDGE AND SECURITY AGREEMENT. The Pledge and Security Agreement executed by the Company. (c) COLLATERAL MONITORING AGREEMENT. An engagement letter between the Agent and the Collateral Monitor executed by the parties thereto pursuant to which the Agent engages the Collateral Monitor to perform the Agreed-upon Procedures on behalf of the Lenders and to deliver the Agreed-upon Procedures Reports in accordance with SECTION 6.1(k), which engagement letter shall be in form and substance satisfactory to the Agent and the Required Lenders (such engagement letter, as the same may be amended, supplemented or otherwise modified from time to time, the "COLLATERAL MONITORING AGREEMENT"). (d) COUNTERPART TO AGENCY AGREEMENT AND RETAIL LOCKBOX AGREEMENT. A Counterpart to Agency Agreement and Retail Lockbox Agreement executed by Harris Trust and Savings Bank in form and substance satisfactory to the Required Lenders and the Agent. (e) RESOLUTIONS; INCUMBENCY; ARTICLES; BYLAWS; OTHER DOCUMENTS. (i) Copies of the resolutions of the board of directors of the Company authorizing the execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby, certified as of the Closing Date by the Secretary or an Assistant Secretary of the Company; (ii) a certificate of the Secretary or Assistant Secretary of the Company certifying the names and true signatures of the officers and associates of the Company authorized to execute and deliver this Agreement, all other Loan Documents to be delivered by the Company hereunder and all Notices of Borrowing, Notices of Conversion/Continuation, Borrowing Base Certificates and Compliance Certificates; (iii) a copy of the articles of incorporation of the Company certified by the Secretary of State of Minnesota as of a date not more than ten days prior to the Effective Date; (iv) a copy of the bylaws of the Company, certified by the Secretary or an Assistant Secretary of the Company; and (v) copies, certified by the Secretary or an Assistant Secretary of the Company, of the Agency Agreement, the Lockbox Agreement and the Senior Notes Indenture, in each -40- case together with all amendments, supplements and other modifications thereto. (f) GOOD STANDING. A copy of a good standing certificate as of a recent date for the Company from the Secretary of State of Minnesota. (g) LEGAL OPINIONS. (i) An opinion of Dorsey & Whitney LLP, counsel to the Company, substantially in the form of EXHIBIT G-1 and (ii) an opinion of James D. Atkinson III, in-house corporate counsel to the Company, substantially in the form of EXHIBIT G-2. (h) PAYMENT OF FEES. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent due and payable on the Closing Date, together with Attorney Costs of the Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute the Agent's reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and the Agent), including any such costs, fees and expenses arising under or referenced in SECTIONS 2.11 and 10.4, but excluding Attorney Costs of in-house counsel to the Agent incurred prior to the Closing Date. (i) NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, no event shall have occurred which could have a Material Adverse Effect. (j) CERTIFICATE. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i) the representations and warranties contained in ARTICLE V and in the Pledge and Security Agreement are true and correct on and as of such date, as though made on and as of such date; and (ii) no Event of Default or Unmatured Event of Default exists or would result from a Borrowing on such date. (k) FINANCING STATEMENTS. (i) Acknowledgment copies of properly filed Uniform Commercial Code financing statements (Form UCC-1), or such other evidence of filing as may be acceptable to the Agent, naming the Company as the debtor and the Agent as the secured party, or other similar instruments or documents, filed under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Agent, desirable to perfect the security interest of the Agent pursuant to the Pledge and Security Agreement; -41- (ii) executed copies of proper Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens and other rights of any Person (1) in any collateral described in the Pledge and Security Agreement previously granted by any Person, and (2) securing any of the Indebtedness under the Prior Credit Agreement, together with such other Uniform Commercial Code Form UCC-3 termination statements as the Agent may reasonably request from the Company; and (iii) certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Agent, dated a date reasonably near to the date of the initial Borrowing, listing all effective financing statements which name the Company (under its present name and any previous names) as the debtor and which are filed in the jurisdictions in which filings were made pursuant to CLAUSE (i) above, together with copies of such financing statements (none of which (other than those described in CLAUSE (i), if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements described in CLAUSE (i)) shall cover any collateral described in the Pledge and Security Agreement). (l) OTHER DOCUMENTS. Such other approvals, opinions, documents or materials as the Agent or any Lender may reasonably request. 4.2 CONDITIONS TO ALL LOANS. The obligation of each Lender to make any Loan is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date: (a) NOTICE. The Agent shall have received a Notice of Borrowing. (b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The representations and warranties in ARTICLE V (other than as set forth in the last sentence of SECTION 5.5) and in the Pledge and Security Agreement shall be true and correct on and as of such Borrowing Date with the same effect as if made on and as of such Borrowing Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date). -42- (c) NO EXISTING DEFAULT. No Event of Default or Unmatured Event of Default shall exist or shall result from such Borrowing. Each Notice of Borrowing submitted by the Company hereunder shall constitute a representation and warranty by the Company that, as of the date of such notice or request and as of the applicable Borrowing Date, the conditions in this SECTION 4.2 are satisfied. ARTICLE V REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Agent and each Lender that: 5.1 ORGANIZATION, STANDING, ETC. The Company and each of its corporate Subsidiaries are corporations duly incorporated, validly existing and in good standing under the laws of the jurisdiction of their respective incorporation and have all requisite corporate power and authority to carry on their respective businesses as now conducted, and (in the case of the Company) to enter into the Loan Documents and to perform its obligations under the Loan Documents. Each of the Company and its Subsidiaries is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned, leased or operated by it or the business conducted by it makes such qualification necessary. 5.2 AUTHORIZATION AND VALIDITY. The execution, delivery and performance by the Company of the Loan Documents have been duly authorized by all necessary corporate action by the Company, and the Loan Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to limitations as to enforceability which might result from bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights generally and subject to general principles of equity. 5.3 NO CONFLICT, NO DEFAULT. The execution, delivery and performance by the Company of the Loan Documents will not (a) violate any provision of any law, statute, rule or regulation or any order, writ, judgment, injunction, decree, determination or award of any court, governmental agency or arbitrator presently in effect having applicability to the Company, (b) violate or contravene any provisions of the Articles of Incorporation or bylaws of the Company or (c) result in a breach of or constitute a default under any indenture, loan or credit agreement or any other agreement, lease or instrument to which the Company is a party or by which it or any of its properties may be bound or result in the -43- creation of any Lien on any asset of the Company or any Subsidiary. Neither the Company nor any Subsidiary is in default under or in violation of any such law, statute, rule or regulation, order, writ, judgment, injunction, decree, determination or award or any such indenture, loan or credit agreement or other agreement, lease or instrument in any case in which the consequences of such default or violation could have a Material Adverse Effect. No Unmatured Event of Default or Event of Default has occurred and is continuing. 5.4 GOVERNMENT CONSENT. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority is required on the part of the Company to authorize, or is required in connection with, the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, the Loan Documents, except for the filing of financing statements to perfect the Lien granted to the Agent under the Loan Documents. 5.5 FINANCIAL STATEMENTS AND CONDITION. The Company's audited consolidated financial statements as at December 31, 1995, and its unaudited consolidated financial statements as at March 31, 1996, as heretofore furnished to the Lenders, have been prepared in accordance with GAAP on a consistent basis and fairly present the financial condition of the Company and its consolidated Subsidiaries as at such dates and the results of their operations and changes in financial position for the respective periods then ended. As of the dates of such financial statements, neither the Company nor any Subsidiary had any material obligation, contingent liability, liability for taxes or long-term lease obligation which is not reflected in such financial statements or in the notes thereto. Since December 31, 1995, no event has occurred which could have a Material Adverse Effect. 5.6 LITIGATION AND CONTINGENT LIABILITIES. Except as described in SCHEDULE 5.6, there are no actions, suits, investigations or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any of their properties before any court or arbitrator, or any Governmental Authority which, if determined adversely to the Company or such Subsidiary, could have a Material Adverse Effect. Except as described in SCHEDULE 5.6, neither the Company nor any Subsidiary has any contingent liabilities which are material to the Company and the Subsidiaries as a consolidated enterprise. 5.7 COMPLIANCE. The Company and its Subsidiaries are in material compliance with all statutes and governmental rules and regulations applicable to them, except to the extent that the use of the name "Olympic" violates the provisions of 36 U.S.C. Section 380. -44- 5.8 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. There does not exist any violation by the Company or any Subsidiary of any applicable Environmental Laws which will or threatens to impose a material liability on the Company or a Subsidiary or which would require a material expenditure by the Company or such Subsidiary to cure. Neither the Company nor any Subsidiary has received any notice to the effect that any part of its operations or properties is not in material compliance with any such Environmental Law that it or its property is the subject of any governmental investigation evaluating whether any remedial action is needed to respond to any release of any toxic or hazardous waste or substance into the environment, the consequences of which noncompliance or remedial action could have a Material Adverse Effect. 5.9 ERISA. Each Plan complies with all material applicable requirements of ERISA and the Code and with all material applicable rulings and regulations issued under the provisions of ERISA and the Code setting forth those requirements. No Reportable Event has occurred and is continuing with respect to any Plan. All of the minimum funding standards applicable to such Plans have been satisfied and there exists no event or condition which would permit the institution of proceedings to terminate any Plan under Section 4042 of ERISA. The current value of the Plans' benefits guaranteed under Title IV of ERISA does not exceed the current value of the Plan's assets allocable to such benefits. 5.10 OWNERSHIIP OF PROLPERTY; LIENS. Each of the Company and the Subsidiaries has good and marketable title to its real properties and good and sufficient title to its other properties, including all properties and assets referred to as owned by the Company and its Subsidiaries in the audited financial statements of the Company referred to in SECTION 5.5 (other than property disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted hereunder). None of the properties, revenues or assets of the Company or any of its Subsidiaries is subject to a Lien, except for Permitted Liens. 5.11 TAXES. Each of the Company and the Subsidiaries has filed all federal, state and local tax returns required to be filed and has paid or made provision for the payment of all taxes due and payable pursuant to such returns and pursuant to any assessments made against it or any of its property and all other taxes, fees and other charges imposed on it or any of its property by any governmental authority (other than taxes, fees or charges the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books of the Company). No tax Liens have been filed and no material claims are being asserted with respect to any such taxes, fees or charges. The charges, accruals and reserves on the books of the Company in respect of taxes and other governmental charges are adequate. Each -45- of the Company and the Subsidiaries has made all required withholding payments. 5.12 TRADEMARKS, PATENTS, ETC. Each of the Company and the Subsidiaries possesses or has the right to use all of the patents, trademarks, trade names, service marks and copyrights, and applications therefor, and all technology, know-how, processes, methods and designs used in or necessary for the conduct of its business, without known conflict with the rights of others, except as set forth in SECTION 5.7. 5.13 SUBSIDIARIES. SCHEDULE 5.13 sets forth as of the Effective Date a list of all Subsidiaries and the number and percentage of the shares of each class of capital stock owned beneficially or of record by the Company or any Subsidiary therein and the jurisdiction of incorporation of each Subsidiary. 5.14 PARTNERSHIPS AND JOINT VENTURES. SCHEDULE 5.14 sets forth as of the Effective Date a list of all partnerships or joint ventures in which the Company or any Subsidiary is a partner (limited or general) or joint venturer. 5.15 FEDERAL RESERVE REGULATIONS. (a) The Company is not and will not be engaged principally in the business of extending credit for the purpose of "purchasing" or "carrying" (within the meaning of Regulation U or X of the FRB) any margin stock (as defined in Regulation U or X of the FRB). (b) No part of the proceeds of the Loans will be used for any purpose that violates, or which is inconsistent with, the provisions of Regulation U or X of the FRB. 5.16 REGULATED ENTITIES. None of the Company, any Person controlling the Company, or any Subsidiary is an "Investment Company" within the meaning of the Investment Company Act of 1940. The Company is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, any state public utilities code or to any other federal or state statue or regulation limiting its ability to incur indebtedness. 5.17 FULL DISCLOSURE. None of the representations or warranties made by the Company in this Agreement and in the Pledge and Security Agreement as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Company in connection with this Agreement (including the offering and disclosure materials delivered by or on behalf of the Company to the Lenders prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the -46- circumstances under which they are made, not misleading as of the time when made or deemed made. 5.18 USE OF PROCEEDS. The proceeds of the Loans will be used by the Company exclusively to finance Auto Receivables. ARTICLE VI AFFIRMATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Required Lenders waive compliance in writing the Company shall, and shall cause each Subsidiary (except in case of SECTION 6.1) to: 6.1 FINANCIAL STATEMENTS AND REPORTS. Furnish to each Lender: (a) As soon as available and in any event within 90 days after the end of each fiscal year, the annual audit report of the Company and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP, consisting of at least statements of income, cash flows and stockholders' equity, and a consolidated balance sheet as at the end of such year, setting forth in each case in comparative form corresponding figures from the previous annual audit, certified without qualification by Ernst & Young or other independent certified public accountants of recognized standing selected by the Company and acceptable to the Required Lenders, together with any management letters, management reports or other supplementary comments or reports to the Company or its board of directors furnished by such accountants. (b) As soon as available and in any event within 45 days after the end of each fiscal quarter, a copy of the unaudited financial statement of the Company and its Subsidiaries prepared in the same manner as the audit report referred to in SECTION 6.1(a), signed by the Company's chief financial officer, treasurer or controller, consisting of at least consolidated statements of income, cash flows and stockholders' equity for the Company and the Subsidiaries for such fiscal quarter and for the period from the beginning of such fiscal year to the end of such fiscal quarter, and a consolidated balance sheet of the Company as at the end of such fiscal quarter. (c) Together with the financial statements furnished by the Company under SECTIONS 6.1(a) and 6.1(b), a Compliance Certificate signed by the chief financial officer, treasurer or controller of the Company demonstrating in reasonable detail compliance (or noncompliance, as the case may be) with each of the -47- financial ratios and restrictions contained in ARTICLE VII and stating that as at the date of each such financial statements there did not exist any Unmatured Event of Default or Event of Default or, if such Unmatured Event of Default or Event of Default existed, specifying the nature and period of existence thereof and what action the Company proposes to take with respect thereto. (d) On the first day of each month, a borrowing base certificate in the form of EXHIBIT D attached hereto and made a part hereof (a "BORROWING BASE CERTIFICATE") as of the immediately preceding Business Day, together with a list of each Contract File relating to the Pledged Auto Receivables that the Collateral Monitor has determined to be a Rejected File subsequent to the delivery of the immediately preceding Borrowing Base Certificate to the Agent, certified as true and accurate by a designated financial officer of the Company. Notwithstanding any other provision of this SECTION 6.1(d), if, on any day on which a Borrowing Base Certificate would otherwise be required, the aggregate outstanding principal amount of the Loans is $0.00, then the Company shall not be required to deliver a Borrowing Base Certificate on such day. (e) Not later than the last day of each month, a calculation of the Portfolio Loss Ratio and Delinquency Ratio, an aging for all Pledged Auto Receivables, and a portfolio analysis of all Auto Receivables owned or serviced by the Company or any of its Subsidiaries detailing delinquency, default, loan loss and repossessed asset statistics, in each case as of the last day of the immediately preceding month, each certified as true and accurate by a designated financial officer of the Company. (f) Not later than 45 days after the end of each fiscal quarter of each fiscal year, a static pool analysis detailing delinquency, default, loan loss and repossessed asset statistics for each securitization trust, as of the last day of the immediately preceding fiscal quarter for all Auto Receivables owned or serviced by the Company or any of its Subsidiaries, certified as true and accurate by a designated financial officer of the Company. (g) Immediately upon becoming aware of any Unmatured Event of Default or Event of Default, a notice describing the nature thereof and the action the Company proposes to take with respect thereto. (h) Immediately upon becoming aware of the occurrence of (x) any Reportable Event or (y) to the extent the same is reasonably likely to have a Material Adverse Effect, any "prohibited transaction" (as defined in Section 4975 of the Code), a notice specifying the nature thereof and the action the Company proposes to take with respect thereto, and, when received, copies of any notice from the PBGC of intention to terminate or have a trustee appointed for any Plan. -48- (i) Promptly upon the mailing or filing thereof, copies of all financial statements, reports and proxy statements mailed to the Company's shareholders, and copies of all registration statements, periodic reports and other documents filed with the SEC (or any successor thereto) or any national securities exchange. (j) Immediately upon becoming aware of the occurrence thereof, notice of the institution of any litigation, arbitration or governmental investigation or proceeding, or the rendering of a judgment or decision in such litigation, investigation or proceeding, which is reasonably likely to, if adversely determined, have a Material Adverse Effect on the Company and its Subsidiaries as a consolidated enterprise, and the steps being taken by each Person affected by such proceeding. (k) On the first Business Day of each fiscal quarter, and at such other times as the Agent may request, cause the Collateral Monitor to deliver an Agreed-upon Procedures Report applying the Agreed-upon Procedures to Auto Receivables that are first pledged to the Agent by the Company during the relevant Agreed-upon Procedures Reporting Period; PROVIDED, that, so long as no Event of Default or Unmatured Event of Default exists, the Agent may not request an Agreed-upon Procedures Report more than six times in a fiscal year. Notwithstanding any other provision of this SECTION 6.1(k), if, on any day on which an Agreed-upon Procedures Report would otherwise be required, the aggregate outstanding principal amount of the Loans is $0.00, then the Company shall not be required to cause the delivery of such Agreed-upon Procedures Report on such day, but the Agreed-upon Procedures will be performed with respect to the next report no later than the first Business Day of the second week after any Loan is made subsequent to the date the report otherwise would be delivered or at such other time as the Agent and the Company shall mutually agree. (l) By no later than 90 days after the commencement of each fiscal year, projections for the then-current fiscal year consisting of monthly and year-to-date balance sheets, income statements and statements of cash flows, accompanied by a statement of the assumptions used in the preparation of such projections, certified by a designated financial officer of the Company as having been prepared in good faith on the basis of reasonable assumptions as to the course of the Company's business during such fiscal year. (m) From time to time, such other information regarding the business, operation and financial condition of the Company and the Subsidiaries as the Agent or any Lender may reasonably request. 6.2 CORPORATE EXISTENCE. Maintain its corporate existence in good standing under the laws of its jurisdiction of incorporation -49- and its qualification to transact business in each jurisdiction in which the character of the properties owned, leased or operated by it or the business conducted by it makes such qualification necessary. 6.3 INSURANCE. Maintain with financially sound and reputable insurance companies such insurance as may be required by law and such other insurance in such amounts and against such hazards as is customary in the case of reputable corporations engaged in the same or similar business and similarly situated. 6.4 PAYMENT OF TAXES AND CLAIMS. File all tax returns and reports which are required by law to be filed by it and pay before they become delinquent all taxes, assessments and governmental charges and levies imposed upon it or its property and all claims or demands of any kind (including those of suppliers, mechanics, carriers, warehousemen, landlords and other like Persons) which, if unpaid, might result in the creation of a Lien upon its property; PROVIDED that the foregoing items need not be paid if they are being diligently contested in good faith by appropriate proceedings, and as long as the Company's or such Subsidiary's title to its property is not materially adversely affected, its use of such property in the ordinary course of its business is not materially interfered with and adequate reserves with respect thereto have been set aside on the Company's or such Subsidiary's books in accordance with GAAP. 6.5 INSPECTION. Permit any Person designated by any Lender to visit and inspect any of its properties, corporate books and financial records, to examine and to make copies of its books of accounts and other financial records, and to discuss the affairs, finances and accounts of the Company and the Subsidiaries with, and to be advised as to the same by, its officers and by its independent public accountants (and by this provision, the Company authorizes its independent public accountants to participate in such discussions) at such reasonable times and intervals as any Lender may designate. So long as no Event of Default exists, the expenses of any Lender for such visits, inspections and examinations shall be at the expense of such Lender, but any such visits, inspections, and examinations made while any Event of Default is continuing shall be at the expense of the Company. 6.6 MAINTENANCE OF PROPERTIES. Maintain its properties used or useful in the conduct of its business in good condition, repair and working order, and supplied with all necessary equipment, and make all necessary repairs, renewals, replacements, betterments and improvements thereto, all as may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times. -50- 6.7 BOOKS AND RECORDS. Keep adequate and proper records and books of account in which full and correct entries will be made of its dealings, business and affairs. 6.8 COMPLIANCE. Comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject. 6.9 ERISA. Maintain each Plan in compliance with all material applicable requirements of ERISA and of the Code and with all material applicable rulings and regulations issued under the provisions of ERISA and of the Code. 6.10 ENVIRONMENTAL MATTERS. Observe and comply with all Environmental Laws to the extent noncompliance could result in a material liability or otherwise constitute or result in a Material Adverse Effect. 6.11 COLLATERAL MONITOR. The Agent shall engage on behalf of the Lenders a Collateral Monitor pursuant to the Collateral Monitoring Agreement to perform the Agreed-upon Procedures and to file with the Agent the Agreed-upon Procedures Reports required by SECTION 6.1(k) of this Agreement. In connection with such engagement, the Company agrees: (a) to permit the Collateral Monitor or any Person designated by the Collateral Monitor to visit and inspect any of the Company's properties, corporate books and financial records, to examine and to make copies of its books of accounts and other financial records, and to discuss the affairs, finances and accounts of the Company and the Subsidiaries with, and to be advised as to the same by, its officers in order to allow the Collateral Monitor to comply with SECTION 6.1(k); (b) to (i) pay the Collateral Monitor's compensation described in the Collateral Monitoring Agreement, as such compensation may be amended from time to time (but no more frequently than annually) by the Company and the Collateral Monitor, and if any Unmatured Event of Default or Event of Default has occurred and is continuing, with the Agent's prior written consent and (ii) provide the Agent with a copy of any such amendment; (c) not to remove or discharge the Collateral Monitor without the prior written consent of the Agent and the Required Lenders, PROVIDED, HOWEVER, that it is understood and agreed that the Agent's engagement of a successor collateral monitor satisfactory to the Agent and the Required Lenders, in their reasonable discretion, shall be a condition precedent to obtaining the Agent's and the Required Lenders' consent to such removal; and -51- (d) not to amend or modify any of the Agreed-upon Procedures or waive the Collateral Monitor's obligations to apply the Agreed-upon Procedures or deliver the Agreed-upon Procedures Reports in accordance with SECTION 6.1(k) without the prior written consent of the Agent and the Required Lenders. The Agent and the Required Lenders with cause or, after the occurrence of an Event of Default or Unmatured Event of Default, with or without cause, may remove and discharge the Collateral Monitor upon giving thirty days' prior notice to the Company and the Collateral Monitor. Having given notice of such removal, the Agent shall consult with the Company about the engagement of a successor collateral monitor. If the Agent, the Required Lenders and the Company agree to the engagement of a successor collateral monitor during the notice period, the Company shall engage such successor collateral monitor on terms satisfactory to the Agent and the Required Lenders. If the Agent, the Required Lenders and the Company cannot agree to the engagement of a successor collateral monitor, the Agent, in its sole discretion, but at the Company's sole cost and expense, may engage a successor collateral monitor which shall be a nationally recognized firm of independent public accountants or other entity routinely engaged in collateral auditing in the ordinary course of its business and which shall be acceptable to the Required Lenders. ARTICLE VII NEGATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Required Lenders waive compliance in writing, the Company will not, and will not permit any Subsidiary to: 7.1 MERGER. Merge or consolidate or enter into any analogous reorganization or transaction with any Person, except for mergers of Subsidiaries with and into the Company (provided that the Company is the surviving corporation), mergers of Subsidiaries with Wholly-Owned Subsidiaries (provided that a Wholly-Owned Subsidiary is the surviving corporation) and mergers of Persons with Wholly-Owned Subsidiaries to effect Permitted Acquisitions (provided that a Wholly-Owned Subsidiary is the survivor of any such merger). 7.2 SALE OF ASSETS. Sell, transfer, lease or otherwise convey all or any substantial part of its assets except for: (a) sales or pledges of Auto Receivables; (b) sales of Finance Income Receivable, PROVIDED that (i) the Company (or a Subsidiary, as the case may be) receives consideration at the time of such sale at least equal to the fair market value of the Finance Income Receivable sold (as evidenced by, among other things, a resolution -52- of the Company's board of directors if the consideration for a sale or related series of sales exceeds $500,000 in the aggregate), (ii) at least 90% of the consideration therefor received by the Company or such Subsidiary is in the form of Cash Equivalents and (iii) within ten Business Days after the Company's or such Subsidiary's receipt of the Net Proceeds from such sale, the Company applies such Net Proceeds first to the payment of the outstanding principal balance of the Loans in full or, if less, to the extent of such Net Proceeds and, after such payment, as permitted by the Senior Notes Indenture; and (c) any Subsidiary may sell, transfer, lease or convey all or a substantial part of its assets to the Company or a Wholly-Owned Subsidiary. 7.3 PURCHASE OF ASSETS. Purchase or lease or otherwise acquire all or substantially all of the assets of any Person, except for Permitted Acquisitions. 7.4 PLANS. Permit any condition to exist in connection with any Plan which might constitute grounds for the PBGC to institute proceedings to have such Plan terminated or a trustee appointed to administer such Plan; permit any Plan to terminate under any circumstances which would cause the lien provided for in Section 4068 of ERISA to attach to any property, revenue or assets of the Company or any Subsidiary; or permit the underfunded amount of Plan benefits guaranteed under Title IV of ERISA to exceed $100,000. 7.5 CHANGE IN NATURE OF BUSINESS. Make any material change in the nature of its business as carried on, or in its method of accounting as in effect, at the Effective Date. 7.6 SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES. Either: (a) form or acquire any corporation which would thereby become a Subsidiary other than Subsidiaries formed in the ordinary course of the Company's business in order to effect Auto Loan Securitizations or Permitted Acquisitions or which are in the same or similar line of business as the Company is in on the Effective Date; or (b) form or enter into any partnership as a limited or general partner or into any joint venture other than those permitted by SECTION 7.9. 7.7 OTHER AGREEMENTS. Enter into any agreement, bond, note or other instrument with or for the benefit of any Person other than the Lenders which would (a) prohibit the Company from granting, or otherwise limit the ability of the Company to grant to the Lenders any Lien on Pledged Auto Receivables and other Collateral, (b) impose any restriction or limitation on any of the Company's Subsidiaries that is prohibited to be imposed by Section 4.08 of the Senior Notes Indenture or (c) be violated or breached by the Company's performance of its obligations under the Loan Documents. -53- 7.8 RESTRICTED PAYMENTS. Purchase or redeem any shares of its stock, declare or pay any dividends thereon (other than dividends payable solely in the Company's common stock and dividends payable to the Company), make any distribution to stockholders as such (other than the Company) or set aside any funds for any such purpose, or prepay, purchase or redeem any Subordinated Debt; PROVIDED, HOWEVER, that, so long as no Event of Default has occurred and is continuing, the Company may (a) exchange shares of Preferred Stock for Debentures, (b) make regularly scheduled dividend payments on the Preferred Stock and (c) redeem Subordinated Debt in accordance with the mandatory redemption provisions thereof in effect on the date of issuance thereof and make any mandatory sinking fund payment on, any mandatory defeasance deposit with respect to, or any mandatory redemption payment on any series of Subordinated Debt in accordance with the stated terms of such series in effect on the date of issuance thereof. 7.9 INVESTMENTS. Acquire for value, make, have or hold any Investments, except: (a) Investments outstanding on the Effective Date and listed on SCHEDULE 7.9; (b) Travel advances to officers and employees in the ordinary course of business; (c) (i) Investments in readily marketable direct obligations of the United States of America (or guaranteed by the United States of America) having maturities of one year or less from the date of acquisition, (ii) money market funds investing solely in investments of the type described in CLAUSE (i), above and (iii) repurchase agreements or similar financial arrangements the payment of principal of and interest on which are fully secured by obligations of the type described in CLAUSE (i) above; (d) Certificates of deposit or bankers' acceptances, each maturing within one year from the date of acquisition, issued by any commercial bank described in CLAUSE (c) of the definition of "Cash Equivalent"; (e) Commercial paper maturing within 270 days from the date of issuance and given the highest rating by a nationally recognized rating service; (f) Auto Receivables created or acquired in the ordinary course of the Company's or a Subsidiary's business; -54- (g) Shares of stock, obligations or other securities received in settlement of claims arising in the ordinary course of business; (h) Investments in the ordinary course of the Company's business in connection with warehousing or securitizing Auto Receivables; (i) Investments, including Investments in general or limited partnerships and joint ventures, in an amount not to exceed $10,000,000 at any one time outstanding; (j) Investments that are Permitted Acquisitions; and (k) Other Investments in securities having a rating of at least BBB- from S&P or Baa3 from Moody's. 7.10 INDEBTEDNESS. Incur, create, issue, assume or suffer to exist any Indebtedness, except: (a) Indebtedness under this Agreement; (b) Indebtedness incurred by the Company or a Subsidiary in connection with warehousing and/or securitizing Auto Receivables in the ordinary course of its business; (c) (i) current liabilities, other than for borrowed money, incurred in the ordinary course of business and (ii) deferred taxes which, in accordance with GAAP, are shown as a liability on the Company's consolidated balance sheet; (d) Existing Indebtedness listed on SCHEDULE 7.10 hereto; (e) Indebtedness evidenced by the Debentures arising from the conversion of Preferred Stock in accordance with its terms; (f) Indebtedness evidenced by the Senior Notes and other Indebtedness incurred after the Effective Date that is not Subordinated Debt, is not secured by any Lien on any asset of the Company or any of its Subsidiaries and is issued pursuant to an instrument no less favorable to the Company and the Lenders than the Senior Notes Indenture (PROVIDED that any such Indebtedness in excess of $145,000,O0O outstanding at any time less the amount of any payments of principal of the Senior Notes must have a Weighted Average Life to Maturity after 2000); (g) Subordinated Debt so long as the aggregate outstanding principal amount of such Subordinated Debt does -55- not exceed at any time the amount set forth in Section 4.09(b)(xi) of the Senior Notes Indenture plus, in the event that no Unmatured Event of Default or Event of Default exists at the time of incurrence thereof, the additional amount of Subordinated Debt, if any, permitted to be incurred by the Company pursuant to Sections 4.09(a) and (b) of the Senior Notes Indenture (PROVIDED, HOWEVER, that (i) no series of Subordinated Debt shall require any repayment, redemption or sinking fund payment not permitted by the Senior Notes Indenture and (ii) the Company shall not optionally redeem, purchase or make a deposit to defease, or make an optional sinking fund payment on any Subordinated Debt without the prior written consent of the Required Lenders); (h) Indebtedness arising from now existing or hereafter arising Capitalized Leases which in the aggregate does not exceed $10,000,000 outstanding at any time (PROVIDED, that the aggregate principal amount of Capitalized Leases permitted by this CLAUSE (H) shall be $20,000,000 if and only if the Senior Notes Indenture has been amended to permit such increased principal amount of Capitalized Leases thereunder); (i) Indebtedness under Hedging Obligations entered into in the ordinary course that are bona fide and not for speculation and which relate to Indebtedness otherwise permitted by this SECTION 7.10 to be outstanding; and (j) Other Indebtedness which in the aggregate does not exceed $15,000,000 outstanding at any time. 7.11 LIENS. Create, incur, assume or suffer to exist any Lien with respect to any property, revenues or assets now owned or hereafter arising or acquired, except for Permitted Liens. 7.12 CONTINGENT LIABILITIES. Either: (a) endorse, guarantee, contingently agree to purchase or to provide funds for the payment of, or otherwise become contingently liable upon, any obligation of any other Person, except (i) the endorsement of negotiable instruments for deposit or collection (or similar transactions) in the ordinary course of business, (ii) warranties given in the ordinary course of warehousing and/or securitizing Auto Receivables and (iii) guaranties of Indebtedness of Subsidiaries which Indebtedness does not violate SECTION 7.10; or (b) agree to maintain the net worth or working capital of, or provide funds to satisfy any other financial test applicable to, any other Person. 7.13 UNCONDITIONAL PURCHASE OBLIGATIONS. Enter into or be a party to any contract for the purchase or lease of materials, supplies or other property or services, if such contract requires that payment be made by it regardless of whether or not delivery is -56- ever made of such materials, supplies or other property or services. 7.14 TRANSACTIONS WITH RELATED PARTIES. Enter into or be a party to any transaction or arrangement, including the purchase, sale, lease or exchange of property or the rendering of any service, with any Related Party, except in the ordinary course of and pursuant to the reasonable requirements of the Company's or the applicable Subsidiary's business and upon fair and reasonable terms which, except in the case of transactions in the ordinary course of the Company's business in connection with warehousing or securitizing Auto Receivables, shall be no less favorable to the Company or such Subsidiary than would be obtained in a comparable arm's-length transaction with a Person not a Related Party. 7.15 USE OF PROCEEDS. Use any portion of the proceeds of any Loan, directly or indirectly, (a) for the purpose, whether immediate, incidental or ultimate, of "purchasing or carrying any margin stock" within the meaning of FRB Regulation U, (b) to engage in any transaction having as its purpose the Acquisition of any Person if such Acquisition is a Hostile Acquisition or (c) to (i) knowingly purchase Ineligible Securities from the Arranger during any period in which the Arranger makes a market in such Ineligible Securities, (ii) knowingly purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by the Arranger or (iii) make payments of principal or interest on Ineligible Securities underwritten or privately placed by the Arranger and issued by or for the benefit of the Company or any Affiliate of the Company. The Arranger is a registered broker-dealer and permitted to underwrite and deal in certain Ineligible Securities; and "INELIGIBLE SECURITIES" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended. The Company will furnish to any Lender on request a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in FRB Regulation U. 7.16 SELECTION PROCEDURES. Make any material change in its underwriting standards from those in effect on the Effective Date (INTER ALIA, not enter the sub-prime market). 7.17 CAPITAL BASE. (a) Permit its consolidated Capital Base, on the last day of its fiscal year, to be less than the sum of (i) its consolidated Capital Base on the last day of the immediately preceding fiscal year, PLUS (ii) to the extent Net Income for such fiscal year is greater than zero, Net Income for such fiscal year PLUS (iii) Capital Base Proceeds for such fiscal year. -57- (b) Permit its consolidated Capital Base, on the last day of any fiscal quarter other than the last day of its fiscal year, to be less than the sum of (i) 95% of its consolidated Capital Base on the last day of the immediately preceding fiscal year PLUS (ii) Capital Base Proceeds since the last day of the immediately preceding fiscal year. 7.18 LEVERAGE RATIO. Permit the ratio (the "LEVERAGE RATIO") of (a) the Company's consolidated interest bearing Indebtedness (including (i) the portion of any Capitalized Lease allocable to principal in accordance with GAAP and (ii) all Indebtedness issued at any discount from face value) minus the Company's Warehouse Debt to (b) the Company's Net Worth to be greater than 2.0 on the last day of any fiscal quarter. 7.19 PORTFOLIO LOSS RATIO. Permit the Company's Portfolio Loss Ratio to exceed 2.50% as of the end of any month. 7.20 DELINQUENCY RATIO. Permit the Delinquency Ratio on the last day of any month to exceed 3.5%. ARTICLE VIII EVENTS OF DEFAULT 8.1 EVENT OF DEFAULT. Any of the following shall constitute an "EVENT OF DEFAULT": (a) NON-PAYMENT. The Company shall fail to make when due, whether by acceleration or otherwise, any payment of principal of any Loan or the Company shall fail (and such failure shall continue unremedied for a period of five days) to make when due, whether by acceleration or otherwise, any payment of interest on any Loan or any fee or other amount required to be made to the Agent or any Lender pursuant to the Loan Documents. (b) REPRESENTATION OR WARRANTY. Any representation or warranty made or deemed to have been made by or on behalf of the Company or any Subsidiary in any of the Loan Documents or by or on behalf of the Company or any Subsidiary in any certificate, statement, report or other writing furnished by or on behalf of the Company to the Agent or any Lender pursuant to the Loan Documents shall prove to have been false or misleading in any material respect on the date as of which the facts set forth are stated or certified or deemed to have been stated or certified. (c) CERTAIN COVENANTS. The Company shall fail to comply with SECTION 6.1, 6.2 or 6.11 or any provision of ARTICLE VII. -58- (d) OTHER DEFAULTS. The Company shall fail to comply with any agreement, covenant, condition, provision or term contained in the Loan Documents (and such failure shall not constitute an Event of Default under any of the other provisions of this SECTION 8.1) and such failure to comply shall continue for 30 days. (e) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Company or any Subsidiary: (i) generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing. (f) INVOLUNTARY PROCEEDINGS. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company or any Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process is issued or levied against a substantial part of the Company's or any Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded, within 30 days after commencement, filing, issuance or levy; (ii) the Company or any Subsidiary admits in writing the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business. (g) JUDGMENTS. A judgment or judgments for the payment of money in excess of the sum of $1,000,000 in the aggregate shall be rendered against the Company or a Subsidiary and the Company or such Subsidiary shall not discharge the same or provide for its discharge in accordance with its terms, or procure a stay of execution thereof, prior to any execution on such judgments by such judgment creditor, within 30 days from the date of entry thereof, and within said period of 30 days, or such longer period during which execution of such judgment shall be stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal. (h) ERISA. Steps to terminate any Plan shall be instituted by the Company or any ERISA Affiliate if, in order to effectuate such termination, the Company or any ERISA Affiliate would be required to make a contribution to such Plan, or would incur a liability or obligation to such Plan in excess of $1,000,000 or the PBGC shall institute steps to terminate any Plan. -59- (i) CROSS DEFAULT. The maturity of any Indebtedness in an amount in excess of $5,000,000 of the Company (other than Indebtedness under this Agreement) or a Subsidiary shall be accelerated, or the Company or a Subsidiary shall fail to pay any such Indebtedness when due or, in the case of such Indebtedness payable on demand, when demanded, or the Company or a Subsidiary shall fail to pay any installment of interest on any series of Master Subordinated Indenture Notes and such failure shall remain uncured for 20 days, or any event shall occur or condition shall exist and shall continue for more than the period of grace, if any, applicable thereto and shall have the effect of causing, or permitting (any required notice having been given and grace period having expired) the holder of any such Indebtedness or any trustee or other Person acting on behalf of such holder to cause such Indebtedness to become due prior to its stated maturity or to realize upon any collateral given as security therefor, or there shall occur any default or event or condition permitting the liquidation, winding-up or early termination of any Auto Loan Securitization of the Company or any Subsidiary. (j) COMMON STOCK. The Company's common stock shall cease to be either listed on a national securities exchange or authorized to be quoted on an inter-dealer quotation system of a registered national securities association. (k) FINANCE INCOME RECEIVABLE. The Company fails to reinvest the Net Proceeds arising from the sale of any Finance Income Receivable in any manner which requires the Company to make an offer to purchase any Senior Note under Section 4.10 of the Senior Notes Indenture. (l) CHANGE OF CONTROL. Any Change of Control shall occur. (m) SENIOR NOTE OFFERS. The Company is required to make one or more Portfolio Reduction Offers or Change of Control Offers (each as defined in the Senior Notes Indenture) pursuant to Sections 4.14 and 4.18 of the Senior Notes Indenture and Senior Notes in an aggregate principal amount greater than $20,000,000 are tendered from time to time to the Company in response to any such offer or offers. (n) SUBORDINATED DEBT OFFERS. The Company is required pursuant to the terms of any instrument governing any Subordinated Debt to make one or more offers to redeem or repurchase any Subordinated Debt prior to its expressed maturity and Subordinated Debt in an aggregate principal amount greater than $7,500,000 is tendered from time to time to the Company in response to any such offer or offers. -60- 8.2 REMEDIES. If any Event of Default occurs, the Agent shall at the request of, or may, with the consent of, the Required Lenders: (a) declare the Commitment of each Lender to make Loans to be terminated, whereupon such Commitments shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and (c) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under this Agreement, the other Loan Documents and applicable law; PROVIDED, HOWEVER, that upon the occurrence of any event specified in SUBSECTION (e) or (f) of SECTION 8.1 (in the case of CLAUSE (i) of SUBSECTION (f) upon the expiration of the 30-day period mentioned therein), the obligation of each Lender to make Loans shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Lender. 8.3 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE IX THE AGENT 9.1 APPOINTMENT AND AUTHORIZATION; "AGENT". Each Lender hereby irrevocably (subject to SECTION 9.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement and each other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or -61- liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. 9.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible to any of the Lenders for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct) or (b) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Company or any Subsidiary or Affiliate of the Company, or any officer thereof, contained in this Agreement, in any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or the existence, creation, validity, attachment, perfection, enforceability, value or sufficiency of any collateral security for the Obligations or for any failure of the Company or any other party hereto to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates. 9.4 RELIANCE BY AGENT. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in -62- failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in SECTION 4.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender. 9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default or Unmatured Event of Default (except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders) unless the Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Event of Default or Unmatured Event of Default and stating that such notice is a "notice of default." The Agent will notify the Lenders of its receipt of such notice. The Agent shall take such action with respect to such Event of Default or Unmatured Event of Default as may be requested by the Required Lenders in accordance with SECTION 8.2; PROVIDED, HOWEVER, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default or Unmatured Event of Default as it shall deem advisable or in the best interest of the Lenders. 9.6 CREDIT DECISION. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to -63- enter into this Agreement and to extend credit to the Company hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement or any other Loan Document, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, no Agent shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of any Agent-Related Person. 9.7 INDEMNIFICATION OF AGENT. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or an behalf of the Company and without limiting the obligation of the Company to do so), PRO RATA, from and against any and all Indemnified Liabilities; PROVIDED, HOWEVER, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of the Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 9.8 AGENT IN INDIVIDUAL CAPACITY. BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and Affiliates as though BofA were not the Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, BofA or its Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to -64- confidentiality obligations in favor of the Company or such Affiliates) and acknowledge that the Agent shall not be under any obligation to provide such information to them. With respect to their respective Loans, BofA and its Affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though BofA were not the Agent hereunder. 9.9 RESIGNATION; REMOVAL; SUCCESSOR AGENT. The Agent may, and at the request of the Required Lenders shall, resign as an Agent upon 30 days' notice to the Lenders. If the Agent resigns, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders; PROVIDED, HOWEVER, that at all times when an Event of Default or Unmatured Event of Default does not exist, the consent of the Company (not to be unreasonably withheld or delayed) shall be required to the appointment of any such successor agent. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Company, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor administrative and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this ARTICLE IX and SECTIONS 10.4 and 10.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties cf the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 9.10 WITHHOLDING TAX. (a) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the Code and such Lender claims exemption from, or a reduction of, U.S. withholding tax under Section 1441 or 1442 of the Code, such Lender agrees with and in favor of the Agent, to deliver to the Agent: (i) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8 before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement; (ii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and -65- executed copies of IRS Form 4224 before the payment of any interest is due in the first taxable year of such Lender and in each succeeding taxable year of such Lender during which interest may be paid under this Agreement, and IRS Form W-9; and (iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Each such Lender agrees to promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form 1001 and such Lender sells, assigns, grants a participation in, or otherwise transfers, all or part of the Obligations owed by the Company to such Lender, such Lender agrees to notify the Agent of the percentage amount in which it is no longer the beneficial owner of Obligations owed by the Company to such Lender. To the extent of such percentage amount, the Agent will treat such Lender's IRS Form 1001 as no longer valid. (c) If any Lender claiming exemption from United States withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a participation in, or otherwise transfers, all or part of the Obligations owed by the Company to such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (d) If any Lender is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by SUBSECTION (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax without deduction. (e) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify -66- the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Agent. 9.11 THE CO-MANAGER. The Co-Manager shall have no rights or duties in such capacity. ARTICLE X MISCELLANEOUS 10.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company or any applicable Subsidiary therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Agent at the written request of the Required Lenders) and the Company and acknowledged by the Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; PROVIDED that no such waiver, amendment or consent shall, unless in writing and signed by all of the Lenders and the Company and acknowledged by the Agent, do any of the following: (a) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document; (b) reduce the principal of, or the rate of interest specified herein on, any Loan, or reduce any fees (other than fees referred to in SUBSECTION 2.9(a)) or other amounts payable hereunder; (c) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Lenders or any of them to take any action hereunder; (d) release any material Collateral except as otherwise expressly permitted by the terms of the Loan Documents; or (e) amend this Section, or SECTION 2.13, or any provision herein providing for consent or other action by all Lenders; -67- and PROVIDED, FURTHER, that (i) no amendment, waiver or consent shall extend or increase the Commitment of any Lender, unless in writing and signed by such Lender, and (ii) no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Required Lenders or all Lenders, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document. 10.2 NOTICES. (a) All notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on SCHEDULE 10.2 and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered to the address or facsimile number specified for notices on SCHEDULE 10.2; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail; except that notices pursuant to ARTICLE II or IX to the Agent shall not be effective until actually received by the Agent. (c) Any agreement of the Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Lenders shall not have any liability to the Company or any other Person on account of any action taken or not taken in good faith by the Agent or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Lenders of a confirmation which is at variance with the terms understood by the Agent and the Lenders to be contained in the telephonic or facsimile notice. 10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or -68- further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.4 COSTS AND EXPENSES. The Company shall: (a) whether or not the transactions contemplated hereby are consummated, pay or reimburse the Agent and the Arranger within five Business Days after demand (subject to SUBSECTION 4.1(h)) for all reasonable costs and expenses incurred by the Agent and the Arranger in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any other Loan Document and any other document prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including Attorney Costs incurred by the Agent and the Arranger with respect thereto (excluding Attorney Costs of in-house counsel to the Agent and the Arranger incurred prior to the Effective Date); and (b) pay or reimburse the Agent, the Arranger and each Lender within five Business Days after demand for all reasonable costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans and including in any Insolvency Proceeding or any appellate proceeding). 10.5 COMPANY INDEMNIFICATION. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold harmless the Agent-Related Persons, and each Lender and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each an "INDEMNIFIED PERSON"), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby or thereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, -69- collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED that (a) the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities to the extent incurred by reason of the gross negligence or willful misconduct of such Indemnified Person and (b) the Company shall not be liable to any Indemnified Person for any such loss, claim, damage, liability or expense to the extent caused by or relating to any legal proceedings commenced against any Indemnified Person by any security holder, depositor or creditor of such Indemnified Person or his or her employer arising out of and based upon rights afforded any such security holder, depositor or creditor solely in its capacity as such. The agreements in this Section shall survive payment of all other Obligations. 10.6 PAYMENTS SET ASIDE. To the extent that the Company makes a payment to the Agent or any Lender, or the Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred and (b) each Lender severally agrees to pay to the Agent upon demand its pro rata share of any amount so recovered from or repaid by the Agent. 10.7 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Lender. 10.8 ASSIGNMENTS, PARTICIPATIONS, ETC. (a) Any Lender may, with the prior written consent of the Agent and the Company (which consents shall not be unreasonably withheld or delayed), at any time assign and delegate to one or more Eligible Assignees (PROVIDED that no written consent of the Agent shall be required in connection with any assignment and delegation by a Lender to an Eligible Assignee that is an Affiliate of such Lender) (each an "ASSIGNEE") all, or any ratable part of all, of the Loans, the Commitment and the other rights and obligations of such Lender hereunder, in a minimum amount equal to the lesser of (x) $10,000,000 and (y) all of such Lender's remaining rights and obligations hereunder (or, if assigning to another Lender or an Affiliate of any Lender, without regard to any minimum amount); PROVIDED, that the Company and the Agent may continue to deal -70- solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Company and the Agent an Assignment and Acceptance in the form of EXHIBIT H ("ASSIGNMENT AND ACCEPTANCE") together with any Note or Notes subject to such assignment and (iii) the assignor Lender or Assignee has paid to the Agent a processing fee in the amount of $3,500. (b) From and after the date that the Agent notifies the assignor Lender that it has received and provided its consent (and received, if applicable, the consent of the Company) with respect to an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents and (ii) the assignor Lender shall, to the extent that rights and obligations under the Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. (c) Any Lender may at any time sell to one or more Eligible Assignees that are commercial banks and not Affiliates of the Company (a "PARTICIPANT") participating interests in any Loans, the Commitment of such Lender and the other interests of such Lender (the "originating Lender") hereunder and under the other Loan Documents; PROVIDED, HOWEVER, that (i) the originating Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) the originating Lender shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender's rights and obligations under this Agreement and the other Loan Documents and (iv) no Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Lenders as described in CLAUSES (a) or (b) of the FIRST PROVISO to SECTION 10.1 or CLAUSE (i) of the SECOND PROVISO to SECTION 10.1 (if an increase in the originating Lender's Commitment would cause an increase in the Participant's commitment with respect to its participating interest). In the case of any such participation, the Participant shall be entitled to the benefit of SECTIONS 3.1, 3.3, 3.4, 10.4 and 10.5 as though it were also a Lender hereunder (PROVIDED that no Participant shall be -71- entitled to receive any greater amount pursuant to such Sections than the originating Lender would have been entitled to receive if no such participation had been sold), and if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. Each Lender may furnish any information concerning the Company and its Subsidiaries in the possession of such Lender from time to time to participants and prospective participants and may furnish information in response to credit inquiries consistent with general banking practice. (d) Notwithstanding any other provision in this Agreement, any Lender may at any time create a security interest in, or pledge,all or any portion of its rights under and interest in this Agreement and any Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 10.9 CONFIDENTIALITY. Each Lender agrees that all information concerning the Company or its Subsidiaries that is furnished or has previously been furnished to such Lender by or on behalf of the Company or any Subsidiary, or by the Agent or the Arranger on the Company's or such Subsidiary's behalf, in connection with this Agreement will be held in confidence and treated as confidential by such Lender and its Affiliates and will not, except as hereinafter provided, without the prior written consent of the Company, be disclosed by such Lender or its Affiliates in any manner whatsoever, in whole or in part, or be used by such Lender or its Affiliates other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated by such Lender or any of its Affiliates with the Company or any Subsidiary; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by such Lender or any of its Affiliates, or (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that, insofar as known to such Lender, such source is not prohibited from providing such information by any contractual, legal or fiduciary obligation to the Company; PROVIDED, HOWEVER, that any Lender may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which such Lender is subject or in connection with an examination of such Lender by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any -72- applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding relating to this Agreement to which the Agent or any Lender or any of their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Lender's independent auditors and other professional advisors (each of which shall be required to keep such information confidential to the extent provided in this SECTION 10.9); (G) to any Participant or Assignee, actual or prospective provided that such Person agrees in writing to keep such information confidential to the same extent required of the Lenders hereunder and (in the case of a prospective Participant or Assignee) agrees to return such information if such Person does not become a Participant or Assignee; (H) as to any Lender or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company or any Subsidiary is party with such Lender or such Affiliate; and (I) to its Affiliates (each of which shall be required to keep such information confidential to the extent provided in this SECTION 10.9). 10.10 SET-OFF. In addition to any rights and remedies of the Lenders provided by law, if an Event of Default exists, or the Loans have been accelerated, each Lender is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the Company against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Company and the Agent after any such set-off and application made by such Lender; PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. 10.11 AUTOMATIC DEBITS OF FEES. With respect to any commitment fee, arrangement fee or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Agent or BAI under the Loan Documents, the Company hereby irrevocably authorizes BofA (and, if requested by BofA, BAI) to debit any deposit account of the Company with BofA or BAI in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense; PROVIDED that BofA or BAI shall notify the Company one Business Day prior to any such debit. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in -73- BofA's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section shall be deemed a set-off. 10.12 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Lender shall notify the Agent in writing of any change in the address to which notices to such Lender should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request. 10.13 COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of which taken together shall be deemed to constitute but one and the same instrument. 10.14 SEVERABILITY. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or such instrument or agreement. 10.15 NO THIRD PARTIES BENEFITED. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Lenders, the Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other Loan Document. 10.16 GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. -74- 10.17 WAIVER OF JURY TRIAL. THE COMPANY, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THE COMPANY, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENT, RENEWAL, SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT. 10.18 ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Lenders and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. 10.19 USE OF NAME. The parties hereto agree that, so long as the Company is not enjoined, restrained or in any way prevented from conducting all or any material part of its business affairs, the use of the name "Olympic" by the Company, notwithstanding the provisions of 36 U.S.C. Section 380 or any similar or related provision of any federal, state or local law, shall not be deemed to constitute an Unmatured Event of Default or an Event of Default; PROVIDED, HOWEVER, that nothing contained in this Section shall be deemed to waive any Event of Default which arises after the date of this Agreement which would constitute a violation of SECTION 8.1(g) of this Agreement. -75- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. OLYMPIC FINANCIAL LTD. By: /s/ John A. Witham ------------------------------- Title: Executive Vice President ---------------------------- and Chief Financial Officer ---------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ Mark N. Hurley ------------------------------- Title: Managing Director ---------------------------- BANK OF AMERICA ILLINOIS, as a Lender BY: /s/ Mark N. Hurley ------------------------------- Title: Managing Director ---------------------------- FIRST BANK NATIONAL ASSOCIATION, as Co-Manager and as a Lender By: /s/ Carol M. Preisinger ------------------------------- Title: Senior Vice President ---------------------------- COMERICA BANK By: /s/ David L. Morrison ------------------------------- Title: Assistant Vice President ---------------------------- -76- DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLAND BRANCH By: /s/ Mark Connelly ------------------------------- Title: Vice President ---------------------------- By: /s/ Karen A. Brinkman ------------------------------- Title: Vice President ---------------------------- DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ ------------------------------- Title: Vice President ---------------------------- By: /s/ ------------------------------- Title: Associate Vice President ---------------------------- FIRST BANK NATIONAL ASSOCIATION By: /s/ Carol M. Preisinger ------------------------------- Title: Senior Vice President ---------------------------- THE SUMITOMO BANK, LIMITED By: /s/ Michael J. Philippe ------------------------------- Title: Vice President & Manager ---------------------------- By: /s/ Doug Pudvah ------------------------------- Title: Vice President ---------------------------- -77- EX-10.4 7 FIRST AMENDMENT AND WAIVER TO CREDIT AMENDMENT FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT THIS FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this "AMENDMENT") is entered into as of September 18, 1996 among OLYMPIC FINANCIAL LTD., a Minnesota corporation (the "COMPANY"), the financial institutions signatory hereto (collectively, the "LENDERS"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Lenders (the "AGENT"). W I T N E S S E T H: WHEREAS, the Company, the Agent and the Lenders are parties to a Credit Agreement dated as of July 11, 1996 (the "CREDIT AGREEMENT"); and WHEREAS, the Company has requested that the Credit Agreement be amended in certain respects and has also requested the waiver of certain provisions of the Credit Agreement. NOW, THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties hereto agree as follows: SECTION 1. DEFINED TERMS. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. SECTION 2. AMENDMENTS AND WAIVER TO CREDIT AGREEMENT. On the Effective Date (defined below): 2.1 AMENDMENTS TO CREDIT AGREEMENT. (i) Section 2.3(a)(A) of the Credit Agreement shall be amended to read in its entirety as follows: (A) the amount of the Borrowing, which shall be in an aggregate amount of $1,000,000 or a higher amount; (ii) Section 2.4(a)(i) of the Credit Agreement shall be amended to read in its entirety as follows: (i) elect, as of any Business Day, in the case of Base Rate Loans or Resetting Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Loans (or any part thereof in an aggregate amount of $1,000,000 or a higher amount) into Loans of another Type; 2.2 WAIVER TO CREDIT AGREEMENT. Effective the Effective Date, the Required Lenders waive compliance with the requirements of Section 7.8 of the Credit Agreement to the extent necessary to permit the Company to redeem for cash any or all of 701,353 shares of Preferred Stock for a redemption price not to exceed $26.875 per share, so long as (i) such redemption occurs on or prior to January 31, 1997 and (ii) the total amount of cash paid by the Company in such redemption does not exceed $18,848,861.88. SECTION 3. CONDITIONS PRECEDENT. The amendments and waiver to the Credit Agreement set forth in SECTION 2 of this Amendment shall become effective on such date (the "EFFECTIVE DATE") when the Agent shall have received all of the following, each duly executed and dated the date hereof, and each in a sufficient number of signed counterparts to provide one to each Lender: (a) AMENDMENT. An original of this Amendment, duly executed by the Company and the Required Lenders. (b) OTHER. Such other documents as the Agent or any Lender may reasonably request. SECTION 4. MISCELLANEOUS. 4.1 WARRANTIES TRUE AND ABSENCE OF DEFAULTS. In order to induce the Agent and the Lenders to enter into this Amendment, the Company hereby warrants to the Agent and the Lenders that, as of the date hereof and the Effective Date: (a) The representations and warranties set forth in Article V of the Credit Agreement (other than as set forth in the last sentence of Section 5.5 of the Credit Agreement) and in the Pledge and Security Agreement are true and correct (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date). (b) No Event of Default or Unmatured Event of Default exists. 4.2 GOVERNING LAW. This Amendment shall be a contract made under and governed by the law of the State of New York. -2- 4.3 COUNTERPARTS. This Amendment may be executed in any number of counterparts, and by the parties hereto on the same or separate counterparts, and each such counterpart, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 4.4 REFERENCES TO DOCUMENTS. Except as amended hereby, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. On and after the effectiveness hereof, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import, and each reference to the Credit Agreement in any Note or in any other Loan Document, shall be deemed a reference to the Credit Agreement, as amended hereby. -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date and year first above written. OLYMPIC FINANCIAL LTD. By: /s/ [Illegible] ------------------------------------ Title: Executive Vice President/CFO --------------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ [Illegible] ------------------------------------ Title: Managing Director --------------------------------- BANK OF AMERICA ILLINOIS, as a Lender By: /s/ [Illegible] ------------------------------------ Title: Managing Director --------------------------------- FIRST BANK NATIONAL ASSOCIATION, as Co-Manager and as a Lender By: /s/ Carol M. [Illegible] ------------------------------------ Title: Senior Vice President --------------------------------- COMERICA BANK By: /s/ David L. [Illegible] ------------------------------------ Title: Assistant Vice President --------------------------------- -4- DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLAND BRANCH By: /s/ [Illegible] --------------------------------- Title: Vice President ------------------------------ By: /s/ [Illegible] --------------------------------- Title: VP. ------------------------------ DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ [Illegible] --------------------------------- Title: Vice President ------------------------------ By: /s/ John W. Sweeney --------------------------------- Title: A.V.P. ------------------------------ THE SUMITOMO BANK, LIMITED By: /s/ Michael J. Philippe --------------------------------- Title: Vice President & Manager ------------------------------ By: /s/ John W. Howard, Jr. --------------------------------- Title: Vice President ------------------------------ -5- EX-10.5 8 TRUST AGREEMENT DATED DECEMBER 28, 1995 EXECUTION COPY TRUST AGREEMENT Dated as of December 28, 1995 between OLYMPIC RECEIVABLES FINANCE CORP. II and WILMINGTON TRUST COMPANY Owner Trustee OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST TABLE OF CONTENTS SECTION PAGE - ------- ---- ARTICLE I DEFINITIONS Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . 4 Section 1.3. Section References . . . . . . . . . . . . . . . . . . . 4 Section 1.4. Action by or Consent of Certificateholders . . . . . . . 5 ARTICLE II CREATION OF TRUST Section 2.1. Creation of Trust. . . . . . . . . . . . . . . . . . . . 5 Section 2.2. Office . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.3. Purposes and Powers. . . . . . . . . . . . . . . . . . . 5 Section 2.4. Appointment of Owner Trustee . . . . . . . . . . . . . . 6 Section 2.5. Initial Capital Contribution of Trust Estate . . . . . . 6 Section 2.6. Declaration of Trust . . . . . . . . . . . . . . . . . . 7 Section 2.7. Liability of the Certificateholders. . . . . . . . . . . 7 Section 2.8. Title to Trust Property. . . . . . . . . . . . . . . . . 8 Section 2.9. Situs of Trust . . . . . . . . . . . . . . . . . . . . . 8 Section 2.10. Representations and Warranties of the Depositor and the General Partner. . . . . . . . . . . . . . . . . . . . . 8 Section 2.11. Federal Income Tax Treatment . . . . . . . . . . . . . . 9 Section 2.12. Covenants of the General Partner . . . . . . . . . . . . 11 Section 2.13. Covenants of the Holders . . . . . . . . . . . . . . . . 12 ARTICLE III THE CERTIFICATES Section 3.1. Initial Ownership. . . . . . . . . . . . . . . . . . . . 13 Section 3.2. The Certificates . . . . . . . . . . . . . . . . . . . . 13 Section 3.3. Authentication of Certificates . . . . . . . . . . . . . 14 Section 3.4. Registration of Transfer and Exchange of Certificates. . 14 Section 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. . . . 15 Section 3.6. Persons Deemed Owners. . . . . . . . . . . . . . . . . . 15 Section 3.7. Maintenance of Office or Agency. . . . . . . . . . . . . 16 Section 3.8. Appointment of Paying Agent. . . . . . . . . . . . . . . 16 -i- ARTICLE IV ACTIONS BY OWNER TRUSTEE Section 4.1. Restriction on Power of Certificateholder. . . . . . . . 17 Section 4.2. Prior Notice to Certificateholders with Respect to Certain Matters. . . . . . . . . . . . . . . . . . . . . 17 Section 4.3. Action by Certificateholders with Respect to Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4.4. Restrictions on Certificateholders' Power. . . . . . . . 17 ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES Section 5.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . . 18 Section 5.2. Application of Funds in Certificate Distribution Account. . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 5.3. Method of Payment. . . . . . . . . . . . . . . . . . . . 22 Section 5.4. No Segregation of Monies; No Interest. . . . . . . . . . 22 Section 5.5. Accounting; Reports; Tax Returns . . . . . . . . . . . . 22 ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE Section 6.1. General Authority. . . . . . . . . . . . . . . . . . . . 23 Section 6.2. General Duties . . . . . . . . . . . . . . . . . . . . . 23 Section 6.3. Action upon Instruction. . . . . . . . . . . . . . . . . 24 Section 6.4. No Duties Except as Specified in this Agreement or in Instructions . . . . . . . . . . . . . . . . . . . . . . 25 Section 6.5. No Action Except under Specified Documents or Instructions . . . . . . . . . . . . . . . . . . . . . . 25 Section 6.6. Restrictions . . . . . . . . . . . . . . . . . . . . . . 25 Section 6.7. Administration Agreement . . . . . . . . . . . . . . . . 26 ARTICLE VII CONCERNING THE OWNER TRUSTEE Section 7.1. Acceptance of Trustee and Duties . . . . . . . . . . . . 26 Section 7.2. Furnishing of Documents. . . . . . . . . . . . . . . . . 28 Section 7.3. Representations and Warranties . . . . . . . . . . . . . 28 Section 7.4. Reliance; Advice of Counsel. . . . . . . . . . . . . . . 29 Section 7.5. Not Acting in Individual Capacity. . . . . . . . . . . . 29 Section 7.6. Owner Trustee Not Liable for Certificates, Notes or Receivables. . . . . . . . . . . . . . . . . . . . . . . 29 Section 7.7. Owner Trustee May Own Certificates and Notes . . . . . . 30 -ii- ARTICLE VIII COMPENSATION OF OWNER TRUSTEE Section 8.1. Owner Trustee's Fees and Expenses. . . . . . . . . . . . 30 Section 8.2. Indemnification. . . . . . . . . . . . . . . . . . . . . 30 Section 8.3. Non-recourse Obligations . . . . . . . . . . . . . . . . 31 ARTICLE IX TERMINATION; RECAPITALIZATION Section 9.1. Termination of the Trust . . . . . . . . . . . . . . . . 31 Section 9.2. Dissolution Events with respect to the General Partner . 33 Section 9.3. Securitized Offering . . . . . . . . . . . . . . . . . . 33 ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES Section 10.1. Eligibility Requirements for Owner Trustee . . . . . . . 34 Section 10.2. Resignation or Removal of Owner Trustee. . . . . . . . . 34 Section 10.3. Successor Owner Trustee. . . . . . . . . . . . . . . . . 35 Section 10.4. Merger or Consolidation of Owner Trustee . . . . . . . . 36 Section 10.5. Appointment of Co-Trustee or Separate Trustee. . . . . . 36 ARTICLE XI MISCELLANEOUS PROVISIONS Section 11.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . 37 Section 11.2. No Recourse. . . . . . . . . . . . . . . . . . . . . . . 39 Section 11.3. Governing Law. . . . . . . . . . . . . . . . . . . . . . 39 Section 11.4. Severability of Provisions . . . . . . . . . . . . . . . 39 Section 11.5. Certificates Nonassessable and Fully Paid. . . . . . . . 39 Section 11.6. Third-Party Beneficiaries. . . . . . . . . . . . . . . . 40 Section 11.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . 40 Section 11.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 40 -iii- EXHIBITS Exhibit A -- Form of Certificate of Trust Exhibit B -- Form of Certificate -iv- THIS TRUST AGREEMENT, dated as of December 28, 1995, is made between Olympic Receivables Finance Corp. II, a Delaware corporation (the "Seller") and Wilmington Trust Company, a Delaware corporation, as Owner Trustee (in such capacity, the "Owner Trustee"). In consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.1. DEFINITIONS. All terms defined in the Sale and Servicing Agreement (as defined below) shall have the same meaning in this Agreement. Whenever capitalized and used in this Agreement, the following words and phrases, unless otherwise specified, shall have the following meanings: ADMINISTRATION AGREEMENT: The Administration Agreement, dated as of December 28, 1995, between the Administrator and the Trust, as the same may be amended and supplemented from time to time. ADMINISTRATOR: Wilmington Trust Company, a Delaware corporation, or any successor Administrator under the Administration Agreement. AGREEMENT OR "THIS AGREEMENT": This Trust Agreement, all amendments and supplements thereto and all exhibits and schedules to any of the foregoing. AUTHENTICATION AGENT: Wilmington Trust Company, or its successor in interest, and any successor authentication agent appointed as provided in this Agreement. BENEFIT PLAN: The meaning assigned in Section 3.4(e). BUSINESS TRUST STATUTE: Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended from time to time. CERTIFICATE: A certificate executed by the Owner Trustee evidencing a fractional undivided interest in the Trust, substantially in the form of Exhibit B. CERTIFICATE BALANCE: At any time, as to any Certificate, the outstanding principal amount of that Certificate; as set forth in the records maintained by the Trustee; and as to the Certificates as a whole, the sum of the Certificate Balances for each outstanding Certificate. CERTIFICATE DISTRIBUTION ACCOUNT: The account designated as the Certificate Distribution Account in, and which is established and maintained pursuant to, Section 5.1. CERTIFICATE MAJORITY: The meaning assigned in Section 1.4(a); see also Section 1.4(b). CERTIFICATE OF TRUST: The Certificate of Trust in the form of Exhibit A hereto filed for the Trust pursuant to Section 3810(a) of the Business Trust Statute. CERTIFICATE PURCHASE AGREEMENT: The Certificate Purchase Agreement, if any, among the Trust, OFL, the investors who execute the signature pages thereto and J.P. Morgan Delaware, as agent for such investors, evidencing the commitment of the Investors to purchase Certificates,as the same may be amended and supplemented from time to time. CERTIFICATE REGISTER AND CERTIFICATE REGISTRAR: The register maintained and the registrar appointed pursuant to Section 3.4. CERTIFICATEHOLDER OR HOLDER: A Person in whose name a Certificate is registered in the Certificate Register. CODE: The Internal Revenue Code of 1986, as amended. CORPORATE TRUST OFFICE: The principal office of the Owner Trustee at which at any particular time its corporate trust business shall be administered, which office at the Closing Date is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration; the telecopy number for the Corporate Trust Office on the date of the execution of this Agreement is (302) 651-8882. DEMAND NOTE: The Demand Note, dated December 28, 1995, issued by OFL to the General Partner. DEPOSITOR: The Seller in its capacity as depositor hereunder. DISSOLUTION EVENT: With respect to the General Partner, means the withdrawal or expulsion of such Person as General Partner of the Trust or the termination or dissolution of such Person, or the occurrence of an Insolvency Event with respect to such Person. EXPENSES: The meaning assigned to such term in Section 8.2. GENERAL PARTNER: Initially, the Seller, or any subsequent Holder of a General Partner Certificate. -2- GENERAL PARTNER CERTIFICATES: The meaning assigned to such term in Section 3.2(a). INDEMNIFIED PARTIES: The meaning assigned to such term in Section 8.2. INVESTOR CERTIFICATE: Each Certificate (excluding the General Partner Certificates). INVESTOR CERTIFICATEHOLDER: Each Certificateholder (excluding the General Partner as Holder of the General Partner Certificates). MAXIMUM CERTIFICATE BALANCE: $19,800,000.00. MINIMUM NET WORTH: At any time of determination, and with respect to the General Partner, net worth equal to the sum of 7.7% of the Maximum Certificate Balance. For the purpose of the determination of Minimum Net Worth: (i) the Demand Note issued to the General Partner shall be valued at par, (ii) assets subject to a lien shall be valued at zero, (iii) Certificates or any other interests in any entity taxable as a partnership for federal income tax purposes shall be valued at zero, (iv) investments shall be valued at their respective purchase prices plus accrued interest and (v) demand notes of OFL issued as contributions to the General Partner in connection with its status as a general partner of any other partnership formed pursuant to trust agreements substantially similar to this Agreement shall be valued at an amount equal to the excess, if any, of (a) the aggregate current amount of all such demand notes over (b) 7.7% of the aggregate Certificate Balance (as such term is defined in the related trust agreement) of all certificates issued by such partnerships, as of such date of determination. NOTE OWNER: The meaning assigned to such term in the Indenture. OFL: Olympic Financial Ltd., a Minnesota corporation, and its successors in interest. OWNER TRUSTEE: Wilmington Trust Company, or its successor in interest, acting not individually but solely as trustee, and any successor trustee appointed as provided in this Agreement. PAYING AGENT: Any paying agent or co-paying agent appointed pursuant to Section 3.8, which initially shall be Wilmington Trust Company. RECORD DATE: With respect to any Distribution Date, the close of business on the last Business Day immediately preceding such Distribution Date. -3- RELATED DOCUMENTS: The Sale and Servicing Agreement, the Indenture, the Certificates, the Notes, the Purchase Agreement, each Transfer Agreement, each Assignment Agreement, the Custodian Agreement, the Administration Agreement, the Certificate Purchase Agreement and the Note Purchase Agreement. The Related Documents executed by any party are referred to herein as "such party's Related Documents," "its Related Documents" or by a similar expression. SALE AND SERVICING AGREEMENT: The Sale and Servicing Agreement, dated as of December 28, 1995 among the Trust, the Seller, OFL, in its individual capacity and as Servicer, and Norwest Bank Minnesota, National Association, as Backup Servicer, as the same may be amended and supplemented from time to time. SECRETARY OF STATE: The Secretary of State of the State of Delaware. SELLER: Olympic Receivables Finance Corp. II, a Delaware corporation, or its successor in interest. TRUST: The trust created by this Agreement, the estate of which consists of the Trust Property. TRUST PROPERTY: The property and proceeds of every description conveyed pursuant to Section 2.5 hereof and Section 2.1 of the Sale and Servicing Agreement, together with the Trust Accounts (including all Eligible Investments therein and all proceeds therefrom). Section 1.2. USAGE OF TERMS. With respect to all terms used in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to "writing" include printing, typing, lithography, and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all subsequent amendments thereto or changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the terms "include" or "including" mean "include without limitation" or "including without limitation." To the extent that definitions are contained in this Agreement, or in any such certificate or other document, such definitions shall control. Section 1.3. SECTION REFERENCES. All references to Articles, Sections, paragraphs, subsections, exhibits and schedules shall be to such portions of this Agreement unless otherwise specified. -4- Section 1.4. ACTION BY OR CONSENT OF CERTIFICATEHOLDERS. (a) Except as expressly provided herein (i) any action that may be taken by the Certificateholders under this Agreement may be taken by Certificateholders holding Certificates that evidence a majority of the Certificate Balance (a "Certificate Majority"), and (ii) any written notice or consent of the Certificateholders delivered pursuant to this Agreement shall be effective for such class if signed by Holders of Certificates evidencing not less than a majority of the Certificate Balance. (b) Whenever any provision of this Agreement refers to action to be taken, or consented to, by Certificateholders, such provision shall be deemed to refer to Certificateholders of record as of the Record Date immediately preceding the date on which such action is to be taken, or consent given, by Certificateholders. Solely for the purposes of any action to be taken, or consented to, by the Certificateholders (including for purposes of determining whether a Certificate Majority has approved any action), any Certificate registered in the name of the General Partner, OFL or any Affiliate thereof shall be deemed not to be outstanding, and the Certificate Balance represented thereby shall not be taken into account in determining whether the requisite percentage of the Certificate Balance necessary to effect any such action or consent has been obtained; PROVIDED, HOWEVER, that until any Investor Certificates are issued in accordance with the terms of this Agreement, all references herein or in any Related Document to a "Certificate Majority" shall mean the holders of the General Partner Certificates, PROVIDED, FURTHER, that, solely for the purpose of determining whether the Owner Trustee is entitled to rely upon any such action or consent, only Certificates which the Owner Trustee knows to be so owned shall be so disregarded. ARTICLE II CREATION OF TRUST Section 2.1. CREATION OF TRUST. There is hereby formed a trust to be known as "Olympic Automobile Receivables Warehouse Trust," in which name the Trust may conduct business, make and execute contracts and other instruments and sue and be sued. Section 2.2. OFFICE. The office of the Trust shall be in care of the Owner Trustee at the Corporate Trust Office or at such other address in Delaware as the Owner Trustee may designate by written notice to the Certificateholders and the Depositor. Section 2.3. PURPOSES AND POWERS. The purpose of the Trust is, and the Trust shall have the power and authority, to engage in the following activities: -5- (i) to issue the Notes pursuant to the Indenture and the Certificates pursuant to this Agreement and to sell the Notes and the Certificates; to redeem Notes and Certificates in accordance with the terms and conditions set forth herein and in the Indenture; (ii) with the proceeds of the sale of the Notes and the Certificates, to pay the organizational, start-up and transactional expenses of the Trust and to pay the balance to the Seller from time to time pursuant to the Sale and Servicing Agreement; (iii) to assign, grant, transfer, pledge, mortgage and convey the Trust Property to the Indenture Trustee pursuant to the Indenture for the benefit of the Noteholders and to hold, manage and distribute to the Certificateholders pursuant to the terms of the Sale and Servicing Agreement any portion of the Trust Property released from the Lien of, and remitted to the Trust pursuant to, the Indenture; and, in connection with a purchase of the Trust Property, to assign, grant, transfer, pledge, mortgage and convey the Trust Property to such purchaser or purchasers and upon receipt of proceeds from such sale release the Lien of the Indenture; (iv) to enter into and perform its obligations under the Related Documents to which it is to be a party; (v) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith; and (vi) subject to compliance with the Related Documents, to engage in such other activities as may be required in connection with conservation of the Trust Property and the making of distributions to the Certificateholders and the Noteholders. The Trust is hereby authorized to engage in the foregoing activities. The Trust shall not engage in any activity other than in connection with the foregoing or other than as required or expressly authorized by the terms of this Agreement or the Related Documents. Section 2.4. APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby appoints the Owner Trustee as trustee of the Trust effective as of the date hereof, to have all the rights, powers and duties set forth herein, and the Owner Trustee hereby accepts such appointment. Section 2.5. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE. The Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as of the date hereof, the sum of $10. The Owner Trustee hereby acknowledges receipt in trust from the Depositor, as of the date hereof, of the foregoing contribution, which shall constitute the -6- initial Trust Property and shall be deposited in the Certificate Distribution Account. The Depositor shall pay organizational expenses of the Trust as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. Section 2.6. DECLARATION OF TRUST. The Owner Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the use and benefit of the Holders, subject to the interests and rights in the Trust Property granted to other Persons by the Related Documents. It is the intention and agreement of the parties hereto that the Trust constitute a business trust under the Business Trust Statute and that this Agreement constitute the governing instrument of such business trust. It is the intention and agreement of the parties hereto that, solely for income and franchise tax purposes, the Trust shall be treated as a partnership. The parties agree that, unless otherwise required by appropriate tax authorities, the Trust will file or cause to be filed annual or other necessary returns, reports and other forms consistent with the characterization of the Trust as a partnership for such tax purposes. On the date hereof, the Owner Trustee shall file the Certificate of Trust required by Section 3810(a) of the Business Trust Statute in the Office of the Secretary of State. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set forth herein and in the Business Trust Statute with respect to accomplishing the purposes of the Trust. Section 2.7. LIABILITY OF THE CERTIFICATEHOLDERS. (a) The General Partner shall be liable directly to indemnify each injured party for all losses, claims, damages, liabilities and expenses of the Trust, to the extent not paid out of the Trust Property, to the extent that such Person would be liable if the Trust were a partnership under the Delaware Revised Uniform Limited Partnership Act and such Person were a general partner; PROVIDED, HOWEVER, that the General Partner shall not be liable for any losses incurred by a Certificateholder in the capacity of an investor in the Certificates or a Note Owner in the capacity of an investor in the Notes; PROVIDED, FURTHER, that the General Partner shall not be liable to indemnify any injured party if such party has agreed that its recourse against the Trust for any obligation or liability of the Trust to such party shall be limited to the assets of the Trust. In addition, any third party creditors of the Trust (other than in connection with the obligations described in the provisos to the preceding sentence for which the General Partner shall not be liable) shall be deemed third party beneficiaries of this paragraph. The obligations of the General Partner under this paragraph shall be evidenced by the General Partner Certificates, which for purposes of the Business Trust Statute shall be deemed to be a separate class of Certificates from the Investor Certificates. (b) No Certificateholder, other than to the extent set forth in paragraph (a), shall have any personal liability for any liability or obligation of the Trust or by -7- reason of any action taken by the parties to this Agreement pursuant to any provisions of this Agreement or any Related Document. Section 2.8. TITLE TO TRUST PROPERTY. (a) Legal title to all the Trust Property shall be vested at all times in the Trust as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Trust Property to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be. (b) The Certificateholders shall not have legal title to any part of the Trust Property. The Certificateholders shall be entitled to receive distributions with respect to their undivided ownership interest therein only in accordance with Articles V and IX. No transfer, by operation of law or otherwise, of any right, title or interest by any Certificateholder of its ownership interest in the Trust Property shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the Trust Property. Section 2.9. SITUS OF TRUST. The Trust will be located and administered in the State of Delaware. All bank accounts maintained by the Owner Trustee on behalf of the Trust shall be located in the State of Delaware. The Trust shall not have any employees in any state other than Delaware; PROVIDED, HOWEVER, that nothing herein shall restrict or prohibit the Owner Trustee, the Servicer or any agent of the Trust from having employees within or without the State of Delaware. Payments will be received by the Trust only in Delaware, and payments will be made by the Trust only from Delaware. The only office of the Trust will be at the Corporate Trust Office in Delaware. Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND THE GENERAL PARTNER. By execution of this Agreement, each of the Depositor and the General Partner makes the following representations and warranties with respect to itself on which the Owner Trustee relies in accepting the Trust Property in trust and issuing the Certificates. These representations and warranties shall be deemed to be repeated on each day on which Investor Certificates are issued pursuant to Section 3.2. (a) ORGANIZATION AND GOOD STANDING. It has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and as such business is currently conducted and is proposed to be conducted pursuant to this Agreement and the Related Documents. -8- (b) DUE QUALIFICATION. It is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of its property, the conduct of its business and the performance of its obligations under this Agreement and the Related Documents requires such qualification. (c) POWER AND AUTHORITY. It has the power and authority to execute and deliver this Agreement and its Related Documents and to perform its obligations pursuant thereto; and the execution, delivery and performance of this Agreement and its Related Documents have been duly authorized by all necessary corporate action. (d) NO CONSENT REQUIRED. No consent, license, approval or authorization or registration or declaration with, any Person or with any governmental authority, bureau or agency is required in connection with the execution, delivery or performance of this Agreement and the Related Documents, except for such as have been obtained, effected or made. (e) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and its Related Documents and the fulfillment of its obligations under this Agreement and its Related Documents shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice, lapse of time or both) a default under, its certificate of incorporation or by-laws, or any indenture, agreement, mortgage, deed of trust or other instrument to which it is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, or violate any law, order, rule or regulation applicable to it of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over it or any of its properties. (f) NO PROCEEDINGS. There are no proceedings or investigations pending or, to its knowledge threatened against it before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over it or its properties (A) asserting the invalidity of this Agreement or any of the Related Documents, (B) seeking to prevent the issuance of the Certificates or the Notes or the consummation of any of the transactions contemplated by this Agreement or any of the Related Documents, (C) seeking any determination or ruling that might materially and adversely affect its performance of its obligations under, or the validity or enforceability of, this Agreement or any of the Related Documents, or (D) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Certificates. Section 2.11. FEDERAL INCOME TAX TREATMENT. The Seller has structured this Agreement and the Investor Certificates with the intention that the Investor Certificates will -9- qualify under applicable federal, state, local and foreign tax law as indebtedness. The Seller, the Servicer, the Holder of the General Partner Certificate, and each Investor Certificateholder agree to treat and to take no action inconsistent with the treatment of the Investor Certificates (or beneficial interest therein) as indebtedness for purposes of federal, state, local and foreign income or franchise taxes and any other tax imposed on or measured by income. Each Investor Certificateholder, and the Holder of the General Partner Certificate, by acceptance of its Certificate, agree to be bound by the provisions of this Section 2.11. Furthermore, subject to Section 5.5, the Trustee shall treat the Trust as a security device only, and shall not file tax returns or obtain an employer identification number on behalf of the Trust. In the event that the Investor Certificates are deemed for federal income tax purposes to represent an equity interest in the Trust, the Trust shall be treated for federal income tax purposes as a partnership among the Holders of such Investor Certificates and the Seller. In the event such a partnership is deemed to exist, the net income of the Trust for any month as determined for Federal income tax purposes (and each item of income, gain, loss and deduction entering into the computation thereof) shall be allocated: (a) among the Investor Certificateholders as of the first Record Date following the end of such month, in proportion to their ownership of principal amount of Investor Certificates on such date, an amount of net income up to the Certificateholders' Interest Distributable Amount for such month; and (b) next, to the General Partner (with respect to the General Partner Certificates) in accordance with the Certificate Balance represented by the General Partner Certificates to the extent of any remaining net income. If the net income of the Trust for any month is insufficient for the allocations described in clause (a) above, subsequent net income shall first be allocated to make up such shortfall before being allocated as provided in clause (b). Net losses of the Trust, if any, for any month as determined for Federal income tax purposes (and each item of income, gain, loss and deduction entering into the computation thereof) shall be allocated to the General Partner to the extent it is reasonably expected to bear the economic burden of such net losses, then net losses shall be allocated among the other Certificateholders as of the first Record Date following the end of such month in proportion to their ownership of principal amount of Certificates on such Record Date until the total amount of losses allocated to those Certificateholders pursuant to this Section 2.11 plus the total principal amount distributed to them equals the aggregate initial principal balance of the Investor Certificates and any remaining net losses shall be allocated to the General Partner. Notwithstanding anything in this Agreement to the contrary, the General Partner shall be allocated an aggregate of at least 1% of each item of income, profit, gain or loss of the Trust. The General Partner is authorized to modify the allocations in this paragraph if necessary or appropriate, in its sole discretion, for the allocations to fairly reflect the economic income, gain or loss to the -10- General Partner or the other Certificateholders, or to comply with the provisions of the Code and the accompanying Treasury Regulations. Section 2.12. COVENANTS OF THE GENERAL PARTNER. The General Partner agrees and covenants for the benefit of each Certificateholder and the Owner Trustee, during the term of this Agreement, and to the fullest extent permitted by applicable law, that: (a) it shall not (i) assign, sell, convey, pledge, transfer, reconvey, cancel, forgive, compromise or otherwise dispose of the Demand Note held by it, in whole or in part, (ii) make any distribution other than to the Trust or unless the aggregate net worth of the General Partner following such distribution shall be at least equal to the Minimum Net Worth or (iii) except as specifically permitted by this Agreement, sell, transfer, assign, give or encumber by operation of law or otherwise any of its assets; (b) it shall not, except as permitted by Section 9.2, sell, assign, transfer, give or encumber, by operation of law or otherwise, in whole or in part, the interest evidenced by any General Partner Certificate; (c) it shall not create, incur or suffer to exist any indebtedness or engage in any business, except, in each case, as permitted by its certificate of incorporation and the Related Documents; (d) it shall not, for any reason, institute proceedings for the Trust to be adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against the Trust, or file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to the bankruptcy of the Trust, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trust or a substantial part of the property of the Trust or cause or permit the Trust to make any assignment for the benefit of creditors, or admit in writing the inability of the Trust to pay its debts generally as they become due, or declare or effect a moratorium on the debt of the Trust or take any action in furtherance of any such action; (e) it shall obtain from each counterparty to each Related Document to which it or the Trust is a party and each other agreement entered into on or after the date hereof to which it or the Trust is a party, an agreement by each such counterparty that prior to the occurrence of the event specified in Section 9.1(e) such counterparty shall not institute against, or join any other Person in instituting against, it or the Trust, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceedings under the laws of the United States or any state of the United States; and -11- (f) it shall not, for any reason, withdraw or attempt to withdraw from this Agreement, dissolve, institute proceedings for it to be adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against it, or file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of it or a substantial part of its property, or make any assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or declare or effect a moratorium on its debt or take any action in furtherance of any such action. Section 2.13. COVENANTS OF THE HOLDERS. Each Holder by purchasing its Certificate agrees: (a) to be bound by the terms and conditions of its Certificate and of this Agreement, including any supplements or amendments hereto and to perform the obligations of a Certificateholder as set forth therein or herein, in all respects as if it were a signatory hereto. This undertaking is made for the benefit of the Trust, the Owner Trustee and all other Certificateholders present and future. (b) to treat and to take no action inconsistent with the treatment of the Investor Certificates as indebtedness for purposes of federal, state, local and foreign income or franchise taxes and any other tax imposed on or measured by income. In the event the Investor Certificates are deemed for federal income tax purposes to represent an equity interest in the Trust, each Certificateholder hereby agrees to appoint the General Partner as such Certificateholder's agent and attorney-in-fact to sign any federal income tax information return filed on behalf of the Trust and agree that, if requested by the Trust, it will sign such federal income tax information return in its capacity as holder of an interest in the Trust. Each Certificateholder also hereby agrees that in its tax returns it will not take any position inconsistent with those taken in any tax returns filed by the Trust. (c) if such Certificateholder is other than an individual or other entity holding its Certificate through a broker who reports securities sales on Form 1099-B, to notify the Owner Trustee of any transfer by it of a Certificate in a taxable sale or exchange, within 30 days of the date of the transfer. (d) until the completion of the events specified in Section 9.1(e), not to, for any reason, institute proceedings for the Trust or a General Partner to be adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against the Trust, or file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, -12- sequestrator (or other similar official) of the Trust or a substantial part of its property, or cause or permit the Trust to make any assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or declare or effect a moratorium on its debt or take any action in furtherance of any such action. ARTICLE III THE CERTIFICATES Section 3.1. INITIAL OWNERSHIP. Upon the formation of the Trust by the contribution by the Depositor pursuant to Section 2.5 and until the issuance of the Certificates, the Depositor shall be the sole beneficiary of the Trust. Section 3.2. THE CERTIFICATES. Certificates shall be issued as follows: (a) On the Closing Date, Certificates (the "General Partner Certificates") shall be issued for adequate consideration to the General Partner with an aggregate initial principal balance of $200,000.00, representing in excess of 1% of the Maximum Certificate Balance. At all times following the Closing Date until a liquidation of the Trust, the General Partner Certificates shall represent in excess of 1% of the Maximum Certificate Balance. The General Partner shall retain beneficial and record ownership of such Certificates. The General Partner Certificates shall be non-transferable and any attempted transfer of the General Partner Certificates shall be void; PROVIDED that a General Partner Certificate may be transferred to a successor General Partner as provided in Section 9.2. The Owner Trustee shall cause each General Partner Certificate to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE, EXCEPT UNDER THE LIMITED CONDITIONS SPECIFIED IN THE TRUST AGREEMENT." (b) Upon Depositor's demand (with no less than five Business Days prior notice), Investor Certificates with Certificate Balances totalling up to the remaining Maximum Certificate Balance shall be issued to Persons designated by the Depositor to the Owner Trustee, PROVIDED, HOWEVER, that no Investor Certificates shall be issued unless and until General Partner Certificates in excess of 1% of the Maximum Certificate Balance shall have been issued. The Certificates shall be executed on behalf of the Owner Trustee by manual or facsimile signature of any authorized signatory of the Owner Trustee having such authority under the Owner Trustee's seal imprinted or otherwise affixed thereon and attested on behalf of the Owner Trustee by the manual or facsimile signature of any authorized signatory of the Owner Trustee. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures were affixed, authorized to sign on -13- behalf of the Owner Trustee shall be validly issued and entitled to the benefits of this Agreement, notwithstanding that such individuals or any of them have ceased to be so authorized prior to the authentication and delivery of such Certificates. The Investor Certificates shall be issued in initial denominations and in such integral multiples as are necessary to comply with the terms of this Agreement and of the Related Documents. Section 3.3. AUTHENTICATION OF CERTIFICATES. Simultaneously with the initial sale, assignment and transfer to the Trust of the Receivables and the delivery to the Owner Trustee of the Receivable Files and the other Trust Property pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause the General Partner Certificates, and upon Depositor's order (with no less than five Business Days prior notice) the Owner Trustee shall cause Investor Certificates as described in Section 3.2(b), to be executed on behalf of the Trust, authenticated and delivered to or upon the order of the Depositor. No Certificate shall entitle its holder to any benefit under this Agreement, or shall be valid for any purpose, unless there shall appear on such Certificate a certificate of authentication substantially in the form set forth in Exhibit B executed by the Owner Trustee or the Authentication Agent, by manual or facsimile signature; such authentication shall constitute conclusive evidence that such Certificate shall have been duly authenticated and delivered hereunder. Wilmington Trust Company is hereby initially appointed Authentication Agent. All Certificates shall be dated the date of their authentication. Section 3.4. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a) The Certificate Registrar shall maintain, or cause to be maintained, at the office or agency maintained pursuant to Section 3.7, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Owner Trustee shall provide for the registration of Certificates and of transfers and exchanges of Certificates as provided in this Agreement. Wilmington Trust Company is hereby initially appointed Certificate Registrar for the purpose of registering Certificates and transfers and exchanges of Certificates as provided in this Agreement. (b) Upon surrender for registration of transfer of any Certificate at the office or agency maintained pursuant to Section 3.7 (and subject to the transfer restrictions contained in the Certificate Purchase Agreement and in Section 9.2 with respect to General Partner Certificates), the Owner Trustee shall execute, authenticate and deliver (or shall cause the Authentication Agent to authenticate and deliver), in the name of the designated transferee or transferees, one or more new Certificates in authorized denominations of like Certificate Balance, dated the date of authentication by the Owner Trustee or any authenticating agent. At the option of a Holder, Certificates may be exchanged for other Certificates in authorized denominations of a like Certificate Balance upon surrender of the Certificates to be exchanged at the office or agency maintained pursuant to Section 3.7. -14- (c) Every Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Certificate Registrar duly executed by the Holder or his attorney duly authorized in writing. Each Certificate surrendered for registration of transfer or exchange shall be canceled and subsequently disposed of by the Owner Trustee in accordance with its customary practice. (d) No service charge shall be made for any registration of transfer or exchange of Certificates, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. (e) Notwithstanding anything in this Agreement to the contrary, the Investor Certificates shall be issued only in transactions which are not required to be registered under the Securities Act of 1933, and the Seller may prevent any transfer, participation or other disposition of any interest in any Investor Certificate if the Seller, in its sole and absolute discretion, determines that such transfer, participation or other disposition, if effected, would cause the Trust to be treated as a publicly traded partnership under Section 7704 of the Code or the Treasury Regulations issued thereunder. Section 3.5. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any mutilated Certificate is surrendered to the Certificate Registrar, or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (b) there is delivered to the Certificate Registrar and the Owner Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Certificate Registrar or the Owner Trustee that such Certificate has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute, authenticate and deliver (or the Authentication Agent shall authenticate and deliver), in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like Certificate Balance. In connection with the issuance of any new Certificate under this Section 3.5, the Owner Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Owner Trustee and the Certificate Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.5 shall constitute conclusive evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Section 3.6. PERSONS DEEMED OWNERS. Prior to due presentation of a Certificate for registration of transfer, the Owner Trustee, the Certificate Registrar and any agent of the Owner Trustee or the Certificate Registrar may treat the person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving -15- distributions pursuant to Section 5.2 and for all other purposes whatsoever, and neither the Owner Trustee, the Certificate Registrar, nor any agent of the Owner Trustee or the Certificate Registrar shall be affected by any notice to the contrary. Section 3.7. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall maintain in Wilmington, Delaware, an office or offices or agency or agencies where Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee in respect of the Certificates and the Related Documents may be served. The Owner Trustee initially designates Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001 as its principal corporate trust office for such purposes. The Owner Trustee shall give prompt written notice to the Depositor and to the Certificateholders of any change in the location of the Certificate Register or any such office of agency. Section 3.8. APPOINTMENT OF PAYING AGENT. The Paying Agent shall make distributions to Certificateholders from the Certificate Distribution Account pursuant to Section 5.2 and shall report the amounts of such distributions to the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Certificate Distribution Account for the purpose of making the distributions referred to above. The Owner Trustee may revoke such power and remove the Paying Agent if the Owner Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect. The Paying Agent shall initially be Wilmington Trust Company, and any co-paying agent chosen by Wilmington Trust Company and acceptable to the Owner Trustee. Wilmington Trust Company shall be permitted to resign as Paying Agent upon 30 days' written notice to the Owner Trustee. In the event that Wilmington Trust Company shall no longer be the Paying Agent, the Owner Trustee shall appoint a successor to act as Paying Agent (which shall be a bank or trust company). The Owner Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Owner Trustee that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders. The Paying Agent shall return all unclaimed funds to the Owner Trustee, and upon removal of a Paying Agent, such Paying Agent shall also return all funds in its possession to the Owner Trustee. The provisions of Sections 7.1, 7.3, 7.4 and 8.2 shall apply to the Owner Trustee also in its role as Paying Agent for so long as the Owner Trustee shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. -16- ARTICLE IV ACTIONS BY OWNER TRUSTEE Section 4.1. RESTRICTION ON POWER OF CERTIFICATEHOLDER. No Certificateholder shall have any right to vote or in any manner otherwise control the operation and management of the Trust except as expressly provided in this Agreement. Section 4.2. PRIOR NOTICE TO CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN MATTERS. The Owner Trustee shall not take any of the following actions unless, at least 30 days before the taking of such action, the Owner Trustee shall have notified the Certificateholders in writing of the proposed action and the Certificateholders shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Certificateholders have withheld consent or provided alternative direction: (a) the election by the Trust to file an amendment to the Certificate of Trust unless such amendment is required to be filed under the Business Trust Statute or unless such amendment would not materially and adversely affect the interests of the Certificateholders; (b) the amendment of the Indenture by a supplemental indenture in circumstances where the consent of any Noteholder is required unless (i) such amendment would not materially and adversely affect the interests of the Certificateholders or (ii) such amendment is made in connection with a Securitized Offering in accordance with the final sentence of Section 11.1; or (c) the amendment, change or modification of the Administration Agreement, unless (i) such amendment would not materially and adversely affect the interests of the Certificateholders or (ii) such amendment is made in connection with a Securitized Offering in accordance with the final sentence of Section 11.1. Section 4.3. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY. The Owner Trustee shall not have the power to commence a voluntary proceeding in bankruptcy relating to the Trust without the unanimous prior approval of all Certificateholders and the delivery to the Owner Trustee by each such Certificateholder of a certificate certifying that such Certificateholder reasonably believes that the Trust is insolvent. Section 4.4. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. No Certificateholder shall have any right by virtue or by availing itself of any provisions of this Agreement to institute any suit, action, or proceeding in equity or at law upon or under or with respect to this Agreement or any Related Document, unless such Certificateholder previously shall have given to the Owner Trustee a written notice of default and of the continuance thereof, as provided in this Agreement and unless Certificateholders evidencing not less than 25% of the Certificate Balance represented by the Certificates shall have made written request upon the -17- Owner Trustee to institute such action, suit or proceeding in its own name as Owner Trustee under this Agreement and shall have offered to the Owner Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Owner Trustee, for 30 days after its receipt of such notice, request, and offer of indemnity, shall have neglected or refused to institute any such action, suit, or proceeding, and during such 30-day period no request or waiver inconsistent with such written request has been given to the Owner Trustee pursuant to and in compliance with this Section or Section 6.3; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder and the Owner Trustee, that no one or more Holders of Certificates shall have any right in any manner whatever by virtue or by availing itself or themselves of any provisions of this Agreement to affect, disturb, or prejudice the rights of the Holders of any other of the Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Agreement, except in the manner provided in this Agreement and for the equal, ratable, and common benefit of all Certificateholders. For the protection and enforcement of the provisions of this Section 4.4, each and every Certificateholder and the Owner Trustee shall be entitled to such relief as can be given either at law or in equity. ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES Section 5.1. TRUST ACCOUNTS. (a) The Owner Trustee, for the benefit of the Certificateholders, shall establish and maintain the Certificate Distribution Account in the name of the Trust for the benefit of the Certificateholders. The Certificate Distribution Account shall be an Eligible Account and initially shall be a segregated trust account established with the Owner Trustee and maintained with the Owner Trustee. (b) The Owner Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Certificate Distribution Account and in all proceeds thereof. If, at any time, the Certificate Distribution Account ceases to be an Eligible Account, the Owner Trustee shall within 5 Business Days (or such longer period, not to exceed 30 calendar days, as to which each Rating Agency may consent) establish a new Certificate Distribution Account as an Eligible Account and shall transfer any cash and/or any investments to such new Certificate Distribution Account. (c) All amounts held in the Certificate Distribution Account shall, to the extent permitted by applicable laws, rules and regulations, be invested, by the Owner Trustee, in Eligible Investments that mature not later than one Business Day prior to the Distribution Date for the Monthly Period to which such amounts relate. Investments in Eligible Investments shall be made in the name of the Trust, and such -18- investments shall not be sold or disposed of prior to their maturity. Any investment of funds in the Trust Accounts shall be made in Eligible Investments held by a financial institution in accordance with the following requirements: (a) all Eligible Investments shall be held in an account with such financial institution in the name of the Trustee, (b) with respect to securities held in such account, such securities shall be (i) certificated securities (as such term is used in N.Y. UCC Section 8-313(d)(i)), securities deemed to be certificated securities under applicable regulations of the United States government, or uncertificated securities issued by an issuer organized under the laws of the State of New York or the State of Delaware, (ii) either (A) in the possession of such institution, (B) in the possession of a clearing corporation (as such term is used in Minn. Stat Section 336.8-313(g)) in the State of New York, registered in the name of such clearing corporation or its nominee, not endorsed for collection or surrender or any other purpose not involving transfer, not containing any evidence of a right or interest inconsistent with the Trustee's security interest therein, and held by such clearing corporation in an account of such institution, (C), held in an account of such institution with the Federal Reserve Bank of New York or the Federal Reserve Bank of Minneapolis, or (D) in the case of uncertificated securities, issued in the name of such institution, and (iii) identified, by book entry or otherwise, as held for the account of, or pledged to, the Trustee on the records of such institution, and such institution shall have sent the Trustee a confirmation thereof, (c) with respect to repurchase obligations held in such account, such repurchase obligations shall be identified by such institution, by book entry or otherwise, as held for the account of, or pledged to, the Trustee on the records of such institution, and the related securities shall be held in accordance with the requirements of clause (b) above, and (d) with respect to other Eligible Investments other than securities and repurchase agreements, such Eligible Investments shall be held in a manner acceptable to the Trustee. Subject to the other provisions hereof, the Trustee shall have sole control over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Trustee or its agent, together with each document of transfer, if any, necessary to transfer title to such investment to the Trustee in a manner which complies with this Section 5.1. All interest, dividends, gains upon sale and other income from, or earnings on investment of funds in the Certificate Distribution Account shall be distributed on the next Distribution Date pursuant to Section 4.6 of the Sale and Servicing Agreement. The Servicer shall deposit in the Certificate Distribution Account an amount equal to any net loss on such investments immediately as realized. Section 5.2. APPLICATION OF FUNDS IN CERTIFICATE DISTRIBUTION ACCOUNT. (a) On each Distribution Date the Owner Trustee will, based on the information contained in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 3.9(a) of the Sale and Servicing Agreement, distribute to the Certificateholders, on a pro rata basis, to the extent of the funds -19- available, amounts deposited in the Certificate Distribution Account pursuant to Section 4.6 of the Sale and Servicing Agreement on such Distribution Date in the following order of priority: (i) first, an amount equal to the Certificateholders' Interest Distributable Amount; (ii) second, (x) an amount equal to the Certificateholders' Percentage of any Principal Funding Excess Amount and (y) an amount equal to the Certificateholders' Principal Distributable Amount; and (iii) third, any amounts due and owing to any Indemnified Party (as such term is used in the Certificate Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Certificate Purchase Agreement. (b) On the date on which a Securitized Offering occurs, the Owner Trustee will, based on the information contained in the Servicer's Certificate delivered with respect to such Securitized Offering pursuant to Section 3.9(a) of the Sale and Servicing Agreement, distribute to the Investor Certificateholders, on a pro rata basis, to the extent of the funds available, amounts deposited in the Certificate Distribution Account pursuant to Section 4.6 of the Sale and Servicing Agreement on such Distribution Date in the following order of priority taking into account any concurrent distribution made pursuant to Section 5.2(a): (i) first, an amount equal to the Certificateholders' Interest Distributable Amount; (ii) second, an amount equal to the Certificate Balance (excluding any portion thereof attributable to the General Partner Certificates); and (iii) third, any amounts due and owing to any Indemnified Party (as such term is used in the Certificate Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Certificate Purchase Agreement. On such date, the Owner Trustee shall also, after making the distributions referred to above, distribute to the General Partner such funds and/or replacement certificates as shall be called for in the agreements pursuant to which the Securitized Offering is completed. (c) On the Distribution Date (i) following the date on which amounts received in respect of the Seller's or the Servicer's exercise of its option to purchase the corpus of the Trust pursuant to Sections 9.1(a) or (b) of the Sale and Servicing Agreement are deposited in the Certificate Distribution Account, (ii) on which Insolvency -20- Proceeds are deposited in the Certificate Distribution Account pursuant to Section 9.1(c) of the Sale and Servicing Agreement (or on the Distribution Date immediately following such deposit if such proceeds are not deposited in the Certificate Distribution Account on a Distribution Date), or (iii) following the date on which the Indenture Trustee makes payments of money or property in respect of liquidation of the Trust Property pursuant to Section 5.06 of the Indenture and deposits funds received in connection with such liquidation in the Certificate Distribution Account, in each case based upon information contained in a Servicer's Certificate delivered pursuant to Section 3.9(b) of the Sale and Servicing Agreement, the Owner Trustee will distribute to the Certificateholders, on a pro rata basis, such amounts taking into account any concurrent distribution made pursuant to Section 5.2(a): (i) first, an amount equal to the Certificateholders' Interest Distributable Amount; (ii) second, an amount equal to the Certificate Balance; and (iii) third, any amounts due and owing to any Indemnified Party (as such term is used in the Certificate Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Certificate Purchase Agreement. (d) On each Distribution Date, the Owner Trustee shall send to each Certificateholder the statement required pursuant to Section 4.9 of the Sale and Servicing Agreement. (e) In the event that any withholding tax is imposed on the Trust's payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to the Certificateholder in accordance with this Section. The Owner Trustee is hereby authorized and directed to retain from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Owner Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Trust and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution (such as a distribution to a non-U.S. Certificateholder), the Owner Trustee may in its sole discretion withhold such amounts in accordance with this paragraph (e). In the event that a Certificateholder wishes to apply for a refund of any such withholding tax, the Owner Trustee shall reasonably cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees to reimburse the Owner Trustee for any out-of-pocket expenses incurred. -21- (f) Upon final liquidation of the Trust, by notice given to the Owner Trustee by the Seller or the Servicer pursuant to Section 9.1 of the Sale and Servicing Agreement, any funds remaining in the Certificate Distribution Account after distribution of all amounts specified in this Section 5.2 shall be distributed to the General Partner. Section 5.3. METHOD OF PAYMENT. Subject to Section 9.1(c) and 9.3(b), distributions required to be made to Certificateholders on any Distribution Date shall be made to each Certificateholder of record on the preceding Record Date by wire transfer, in immediately available funds, to the account of such Holder at a bank or other entity having appropriate facilities therefor, which such Certificateholder shall have designated to the Certificate Registrar, with appropriate written wire transfer instructions, at least five Business Days prior to such Distribution Date. Section 5.4. NO SEGREGATION OF MONIES; NO INTEREST. Subject to Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not be segregated in any manner except to the extent required by law or by the Sale and Servicing Agreement and may be deposited under such general conditions as may be prescribed by law, and the Owner Trustee shall not be liable for any interest thereon. Section 5.5. ACCOUNTING; REPORTS; TAX RETURNS. (a) The Administrator has agreed pursuant to the Administration Agreement that the Administrator shall (i) maintain (or cause to be maintained) the books of the Trust on a calendar year basis on the accrual method of accounting, (ii) deliver to each Certificateholder, as may be required by the Code and applicable Treasury Regulations, such information as may be required (including Form 1099 or Schedule K-1) to enable each Certificateholder to prepare its Federal and state income tax returns, (iii) if the Investor Certificates are deemed for federal income tax purposes to represent an equity interest in the Trust, to file or cause to be filed such tax returns relating to the Trust (including a partnership information return, Form 1065), and direct the Owner Trustee to make such elections as may from time to time be required or appropriate under any applicable state or Federal statute or rule or regulation thereunder so as to maintain the Trust's characterization as a partnership for Federal income tax purposes, (iv) collect or cause to be collected any withholding tax as described in and in accordance with Section 5.2(c) with respect to income or distributions to Certificateholders and (v) file or cause to be filed all documents required to be filed by the Trust with the Securities and Exchange Commission and otherwise take or cause to be taken all such actions as are notified by the Servicer to the Administrator as being required for the Trust's compliance with all applicable provisions of state and federal securities laws. -22- (b) The Owner Trustee shall make all elections pursuant to this Section 5.5 as directed in writing by the General Partner, with the consent of JPMD. The Owner Trustee shall elect under Section 1278 of the Code to include in income currently any market discount that accrues with respect to the Receivables. The Owner Trustee shall not make the election provided under Section 754 of the Code. (c) The Owner Trustee shall sign on behalf of the Trust the tax returns of the Trust, unless applicable law requires a Certificateholder to sign such documents, in which case such documents shall be signed by the General Partner. In signing any tax return of the Trust, the Owner Trustee shall rely entirely upon, and shall have no liability for, information or calculations provided by the General Partner. (d) The General Partner shall be the "tax matters partner" of the Trust pursuant to the Code. ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE Section 6.1. GENERAL AUTHORITY. The Owner Trustee is authorized and directed to execute and deliver the Related Documents to which the Trust is to be a party and each certificate or other document attached as an exhibit to or contemplated by the Related Documents to which the Trust is to be a party and any amendment thereto (including any amendment entered into in connection with a Securitized Offering in accordance with the final sentence of Section 11.1 and any additional agreements called for by each such amendment), and on behalf of the Trust, to direct the Indenture Trustee to authenticate and deliver the Notes in the aggregate maximum principal amount of $200,000,000. In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Trust pursuant to the Related Documents. The Owner Trustee is further authorized, on behalf of the Trust, to enter into the Administration Agreement, to appoint, with the consent of JPMD, a successor Administrator and to take from time to time such action as JPMD recommends with respect to the Related Documents so long as such actions are consistent with the terms of the Related Documents. Section 6.2. GENERAL DUTIES. It shall be the duty of the Owner Trustee to discharge (or cause to be discharged through the Administrator or such agents as shall be appointed with the consent of JPMD) all of its responsibilities pursuant to the terms of this Agreement and the Related Documents and to administer the Trust in the interest of the Certificateholders, subject to the Related Documents and in accordance with the provisions of this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed to have discharged its duties and responsibilities hereunder and under the Related Documents to the extent the Administrator has agreed in the Administration Agreement to perform any act or to discharge any duty of the Owner Trustee hereunder or under any Related Document, and -23- the Owner Trustee shall not be liable for the default or failure of the Administrator to carry out its obligations under the Administration Agreement. Section 6.3. ACTION UPON INSTRUCTION. (a) Subject to Article IV, the Certificate Majority shall have the exclusive right to direct the actions of the Owner Trustee in the management of the Trust, so long as such instructions are not inconsistent with the express terms set forth herein or in any Related Document. The Certificate Majority shall not instruct the Owner Trustee in a manner inconsistent with this Agreement or the Related Documents. (b) The Owner Trustee shall not be required to take any action hereunder or under any Related Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is contrary to the terms hereof or of any Related Document or is otherwise contrary to law. (c) Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or any Related Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction received from the Certificate Majority, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within ten days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the Related Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or inaction. (d) In the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any Related Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement permits any determination by the Owner Trustee or is silent or is incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction and, to the extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received from a Certificate Majority, the Owner Trustee shall not be liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not have received appropriate instruction within 10 days of such notice (or -24- within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the Related Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or inaction. Section 6.4. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to manage, make any payment with respect to, register, record, sell, dispose of, or otherwise deal with the Trust Property, or to otherwise take or refrain from taking any action under, or in connection with, any document contemplated hereby to which the Trust is a party, except as expressly provided by the terms of this Agreement (including as provided in Section 6.2) or in any written instruction received by the Owner Trustee pursuant to Section 6.3; and no implied duties or obligations shall be read into this Agreement or any Related Document against the Owner Trustee. The Owner Trustee shall have no responsibility for preparing, monitoring or filing any financing or continuation statements in any public office at any time or otherwise to perfect or maintain the perfection of any security interest or lien granted to it hereunder or to record this Agreement or any Related Document; however, the Owner Trustee will from time to time execute and deliver such financing or continuation statements as are prepared by the Servicer and delivered to the Owner Trustee for its execution on behalf of the Trust for the purpose of perfecting or maintaining the perfection of such a security interest or lien or effecting such a recording. The Owner Trustee nevertheless agrees that it will, at its own cost and expense (and not at the expense of the Trust), promptly take all action as may be necessary to discharge any liens on any part of the Trust Property that are attributable to claims against the Owner Trustee in its individual capacity that are not related to the ownership or the administration of the Trust Property. Section 6.5. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal with any part of, the Trust Property except (i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) in accordance with the Related Documents and (iii) in accordance with any document or instruction delivered to the Owner Trustee pursuant to Section 6.3. Section 6.6. RESTRICTIONS. The Owner Trustee shall not take any action (a) that is inconsistent with the purposes of the Trust set forth in Section 2.3 or (b) that, to the actual knowledge of the Owner Trustee, would result in the Trust's becoming taxable as a corporation for Federal income tax purposes. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section. -25- Section 6.7. ADMINISTRATION AGREEMENT. (a) The Administrator is authorized to execute on behalf of the Trust all documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Trust to prepare, file or deliver pursuant to the Related Documents. Upon written request, the Owner Trustee shall execute and deliver to the Administrator a power of attorney appointing the Administrator its agent and attorney-in-fact to execute all such documents, reports, filings, instruments, certificates and opinions. (b) If the Administrator shall resign or be removed pursuant to the terms of the Administration Agreement, the Owner Trustee may, and is hereby authorized and empowered to, subject to obtaining the prior written consent of JPMD, appoint or consent to the appointment of a successor Administrator pursuant to the Administration Agreement. (c) If the Administration Agreement is terminated, the Owner Trustee may, and is hereby authorized and empowered to, subject to obtaining the prior written consent of JPMD, appoint or consent to the appointment of a Person to perform substantially the same duties as are assigned to the Administrator in the Administration Agreement pursuant to an agreement containing substantially the same provisions as are contained in the Administration Agreement. (d) The Owner Trustee shall promptly notify each Certificateholder of any default by or misconduct of the Administrator under the Administration Agreement of which the Owner Trustee has received written notice or of which a Responsible Officer has actual knowledge. ARTICLE VII CONCERNING THE OWNER TRUSTEE Section 7.1. ACCEPTANCE OF TRUSTEE AND DUTIES. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts but only upon the terms of this Agreement. The Owner Trustee also agrees to disburse all monies actually received by it constituting part of the Trust Property upon the terms of the Related Documents and this Agreement. The Owner Trustee shall not be answerable or accountable hereunder or under any Related Document under any circumstances, except (i) for its own willful misconduct or gross negligence, (ii) in the case of the inaccuracy of any representation or warranty contained in Section 7.3, (iii) for liabilities arising from the failure of the Owner Trustee to perform obligations expressly undertaken by it in the last sentence of Section 6.4 hereof, (iv) for any investments issued by the Owner Trustee or any branch or affiliate thereof in its commercial capacity or (v) for taxes, fees or other charges on, based on or measured by, any fees, commissions or compensation received by the Owner -26- Trustee in connection with any of the transactions contemplated by this Agreement or any Related Document. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): (a) the Owner Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Owner Trustee; (b) the Owner Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the instructions of the Certificate Majority; (c) no provision of this Agreement or any Related Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any Related Document if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (d) under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under this Agreement or any of the Related Documents, including the principal of and interest on the Certificates or the Notes; (e) the Owner Trustee shall not be responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by the Depositor or the General Partner or for the form, character, genuineness, sufficiency, value or validity of any of the Trust Property or for or in respect of the validity or sufficiency of the Related Documents, other than the certificate of authentication on the Certificates, and the Owner Trustee shall in no event assume or incur any liability, duty, or obligation to the Custodian, the Indenture Trustee, any Noteholder or to any Certificateholder, other than as expressly provided for herein and in the Related Documents; (f) the Owner Trustee shall not be liable for the default or misconduct of the Administrator, the Custodian, the Indenture Trustee or the Servicer under any of the Related Documents or otherwise and the Owner Trustee shall have no obligation or liability to perform the obligations of the Trust under this Agreement or the Related Documents that are required to be performed by the Administrator under the Administration Agreement, the Custodian under the Custodian Agreement, the Indenture Trustee under the Indenture or the Servicer under the Sale and Servicing Agreement; and (g) the Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any -27- litigation under this Agreement or otherwise or in relation to this Agreement or any Related Document, at the request, order or direction of the Certificate Majority, unless such Certificate Majority has offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any Related Document shall not be construed as a duty, and the Owner Trustee shall not be answerable for other than its gross negligence or willful misconduct in the performance of any such act. Section 7.2. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish to the Certificateholders promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Related Documents unless the Certificateholders have previously received such items. Section 7.3. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby represents and warrants to the Depositor and the Certificateholders that: (a) It is a banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware. It has all requisite corporate power and authority and all franchises, grants, authorizations, consents, orders and approvals from all governmental authorities necessary to execute, deliver and perform its obligations under this Agreement and each Related Document to which the Trust is a party. (b) It has taken all corporate action necessary to authorize the execution and delivery by it of this Agreement and each Related Document to which the Trust is a party, and this Agreement and each Related Document will be executed and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf. (c) Neither the execution nor the delivery by it of this Agreement, nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terms or provisions hereof will contravene any Federal or Delaware law, governmental rule or regulation governing the banking or trust powers of the Owner Trustee or any judgment or order binding on it, or constitute any default under its charter documents or by-laws or any indenture, mortgage, contract, agreement or instrument to which it is a party or by which any of its properties may be bound or result in the creation or imposition of any lien, charge or encumbrance on the Trust Property resulting from actions by or claims against the Owner Trustee individually which are unrelated to this Agreement or the Related Documents. -28- Section 7.4. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond, or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of the determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. (b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or the Related Documents, the Owner Trustee (i) may act directly or through its agents or attorneys pursuant to agreements entered into with any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Owner Trustee with reasonable care, and (ii) may consult with counsel, accountants and other skilled persons to be selected with reasonable care and employed by it. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written opinion or advice of any such counsel, accountants or other such persons and not contrary to this Agreement or any Related Document. Section 7.5. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in this Article VII, in accepting the trusts hereby created Wilmington Trust Company acts solely as Owner Trustee hereunder and not in its individual capacity and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any Related Document shall look only to the Trust Property for payment or satisfaction thereof. Section 7.6. OWNER TRUSTEE NOT LIABLE FOR CERTIFICATES, NOTES OR RECEIVABLES. The recitals contained herein and in the Certificates (other than the signature and counter-signature of the Owner Trustee on the Certificates) shall be taken as the statements of the Depositor (other than the signature or countersignature of the Owner Trustee on the Notes), and the Owner Trustee assumes no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, of any Related Document or of the Certificates (other than the signature and counter-signature of the Owner Trustee on the Certificates) or the Notes (other than the -29- signature or counter-signature of the Owner Trustee on the Notes), or of any Receivable or related documents. The Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Receivable, or the perfection and priority of any security interest created by any Receivable in any Financed Vehicle or the maintenance of any such perfection and priority of any security interest created by any Receivable in any Financed Vehicle or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Trust Property or its ability to generate the payments to be distributed to Certificateholders under this Agreement or the Noteholders under the Indenture, including, without limitation: the existence, condition and ownership of any Financed Vehicle; the existence and enforceability of any insurance thereon; the existence and contents of any Receivable or any computer or other record thereof; the validity of the assignment of any Receivable to the Trust or of any intervening assignment; the completeness of any Receivable; the performance or enforcement of any Receivable; the compliance by the Seller or the Servicer with any warranty or representation made under any Related Document or in any related document or the accuracy of any such warranty or representation or any action of the Indenture Trustee, the Custodian or the Servicer taken in the name of the Owner Trustee. Section 7.7. OWNER TRUSTEE MAY OWN CERTIFICATES AND NOTES. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of Certificates or Notes and may deal with the Depositors, the Seller, the Indenture Trustee and the Servicer in banking or other transactions with the same rights as it would have if it were not Owner Trustee. ARTICLE VIII COMPENSATION OF OWNER TRUSTEE Section 8.1. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between OFL and the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by OFL for its other reasonable expenses hereunder, including the reasonable compensation, expenses and disbursements of such agents, representatives, experts and counsel as the Owner Trustee may employ in connection with the exercise and performance of its rights and its duties hereunder; PROVIDED, HOWEVER, that the Owner Trustee shall only be entitled to reimbursement for expenses hereunder to the extent such expenses (i) are fees of outside counsel engaged by the Owner Trustee in respect of the performance of its obligations hereunder or (ii) relate to the performance of its obligations pursuant to Section 5.5 hereof. Section 8.2. INDEMNIFICATION. OFL shall be liable as primary obligor for, and shall indemnify the Owner Trustee in its individual capacity and its successors, assigns, agents and servants, and any co-trustee (including William J. Wade) (collectively, the -30- "Indemnified Parties") from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "Expenses") which may at any time be imposed on, incurred by, or asserted against the Owner Trustee or any Indemnified Party in any way relating to or arising out of this Agreement, the Related Documents, the Trust Property, the administration of the Trust Property or the action or inaction of the Owner Trustee hereunder, except only that OFL shall not be liable for or required to indemnify the Owner Trustee from and against Expenses arising or resulting from any of the matters described in the third sentence of Section 7.1. The indemnities contained in this Section shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. Section 8.3. NON-RECOURSE OBLIGATIONS. Notwithstanding anything in this Agreement or any Related Document, the Owner Trustee agrees in its individual capacity and in its capacity as Owner Trustee for the Trust that all obligations of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust shall be recourse to the Trust Property only and specifically shall not be recourse to the assets of any Certificateholder. ARTICLE IX TERMINATION; RECAPITALIZATION Section 9.1. TERMINATION OF THE TRUST. (a) The respective obligations and responsibilities of the Depositor, the General Partner and the Owner Trustee created by this Agreement and the Trust created by this Agreement shall terminate upon the latest of (i) the maturity or other liquidation of the last Receivable (including the purchase as of any Accounting Date by the Seller or the Servicer at its option of the corpus of the Trust as described in Section 9.1(a) and, if so specified by the Seller in writing, Section 9.1(b) of the Sale and Servicing Agreement) and the subsequent distribution of amounts in respect of such Receivables as provided in the Related Documents, (ii) the payment to Certificateholders of all amounts required to be paid to them pursuant to this Agreement (other than in connection with a Securitized Offering and an optional purchase under Section 9.1(b) of the Sale and Servicing Agreement where the Seller has not indicated that the Trust will terminate), or (iii) at the time provided in Section 9.2. In any case, there shall be delivered to the Owner Trustee, the Indenture Trustee and the Rating Agencies an Opinion of Counsel that all applicable preference periods under federal, state and local bankruptcy, insolvency and similar laws have expired with respect to the payments pursuant to clause (ii); PROVIDED, HOWEVER, that in no event shall the trust created by this Agreement continue beyond the expiration of 21 years from the death of the last survivor of the descendants living on the date of this Agreement of Rose Kennedy of the Commonwealth of Massachusetts; and PROVIDED, -31- FURTHER, that the rights to indemnification under Section 8.2 shall survive the termination of the Trust. The Servicer shall promptly notify the Owner Trustee of any prospective termination pursuant to this Section 9.1. Except as provided in Section 9.2, the bankruptcy, liquidation, dissolution, termination, resignation, expulsion, withdrawal, death or incapacity of any Certificateholder, shall not (x) operate to terminate this Agreement or the Trust, nor (y) entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of all or any part of the Trust or Trust Property nor (z) otherwise affect the rights, obligations and liabilities of the parties hereto. (b) Except as provided in Section 9.1(a), neither the Depositor nor any Certificateholder shall be entitled to revoke or terminate the Trust. (c) Promptly upon receipt of notice of final distribution on the Certificates from the Seller or the Servicer given pursuant to Section 9.1 of the Sale and Servicing Agreement, the Owner Trustee shall mail written notice to the Certificateholders specifying (i) the Distribution Date upon which final payment of the Certificates shall be made upon presentation and surrender of Certificates at the office of the Paying Agent therein specified, (ii) the amount of any such final payment, and (iii) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office of the Paying Agent therein specified. The Owner Trustee shall give such notice to the Certificate Registrar at the time such notice is given to Certificateholders. In the event such notice is given, the Indenture Trustee shall make deposits into the Certificate Distribution Account in accordance with Section 4.6 of the Sale and Servicing Agreement, or, in the case of an optional purchase of Receivables pursuant to Section 9.1 of the Sale and Servicing Agreement, shall deposit the amount specified in Section 9.1 of the Sale and Servicing Agreement. Upon presentation and surrender of the Certificates, the Paying Agent shall cause to be distributed to Certificateholders amounts distributable on such Distribution Date pursuant to Section 5.2. (d) In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Owner Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Certificates shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds and other assets that remain subject to this Agreement. Any funds which are payable to Certificateholders remaining in -32- the Trust after exhaustion of such remedies shall be distributed by the Owner Trustee to The United Way (but only upon termination of this Agreement), and the Certificateholders, by acceptance of their Certificates, hereby waive any rights with respect to such funds. (e) Upon the winding up of the Trust and its termination, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Business Trust Statute. Section 9.2. DISSOLUTION EVENTS WITH RESPECT TO THE GENERAL PARTNER. In the event that a Dissolution Event shall occur with respect to the General Partner, the Trust will terminate unless, within 90 days after the occurrence of the Dissolution Event with respect to the General Partner (x) a Certificate Majority agrees in writing to continue the business of the Trust and to the appointment of a Person to hold the General Partner Certificates and to assume the liabilities incident thereto and (y) the Owner Trustee requests and obtains an opinion of counsel to the effect that a failure to terminate the Trust upon the occurrence of such Dissolution Event (and the transfer, if any, of the General Partner Certificates held by the General Partner that has suffered such Dissolution Event) will not cause the Trust to be treated as an association (or publicly traded partnership) taxable as a corporation for federal income tax purposes. Promptly after the occurrence of the events referred to in the preceding sentence, (i) the General Partner shall give the Indenture Trustee and the Owner Trustee written notice of the occurrence of such event, (ii) the Owner Trustee shall, upon the receipt of such written notice, give prompt written notice to the Certificateholders and the Indenture Trustee of the occurrence of such event and (iii) the Indenture Trustee shall, upon receipt of written notice of the occurrence of such event from the Owner Trustee or the Seller, give prompt written notice to the Noteholders of the occurrence of such event; PROVIDED, HOWEVER, that any failure to give a notice required by this sentence shall not prevent or delay, in any manner, a termination of the Trust pursuant to the first sentence of this Section 9.2. Upon a termination pursuant to this Section, the Owner Trustee shall direct the Indenture Trustee to sell the assets of the Trust (other than the Trust Accounts) at one or more private or public sales conducted in any manner permitted by law. The proceeds of such a sale of the assets of the Trust shall be distributed as provided in Section 9.1(b) of the Sale and Servicing Agreement. Section 9.3. SECURITIZED OFFERING. (a) The Certificates shall be subject to redemption, upon not less than ten days prior notice from the General Partner to the Owner Trustee, in connection with a Securitized Offering, PROVIDED that funds sufficient to repay the Certificate Balance of the Investor Certificates and all accrued interest on the Certificates are deposited in the Certificate Distribution Account on or prior to the date of such Securitized Offering and distributed to the Certificateholders in accordance with Section 5.2(b). -33- (b) Promptly upon receipt of notice of a Securitized Offering from the General Partner, the Owner Trustee shall notify the Certificateholders specifying (i) the date upon which final payment of the Certificates shall be made upon presentation and surrender of Certificates at the office of the Paying Agent therein specified, (ii) the amount of any such final payment, and (iii) that the Record Date otherwise applicable to any concurrent Distribution Date is not applicable, payments being made only (unless such condition is waived by the General Partner) upon presentation and surrender of the Certificates at the office of the Paying Agent therein specified. Upon presentation and surrender of the Certificates (or without presentation and surrender, if waived by the General Partner), the Paying Agent shall cause to be distributed to Certificateholders amounts distributable in connection with such Securitized Offering pursuant to Section 5.2. Following any such distribution in connection with a Securitized Offering, each Investor Certificateholder that has not presented and surrendered its Certificate as described above shall do so promptly, and the Investor Certificates shall be of no further force and effect, whether or not so presented and surrendered. ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES Section 10.1. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner Trustee shall at all times be a corporation (i) satisfying the provisions of Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise corporate trust powers; (iii) having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or State authorities; and (iv) having (or having a parent which has) a rating of at least Baa3 by Moody's or BBB by Standard & Poor's. If such corporation shall publish reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 10.2. Section 10.2. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the General Partner and the Servicer at least 30 days before the date specified in such instrument. Upon receiving such notice of resignation, the General Partner shall promptly appoint a successor Owner Trustee meeting the qualifications set forth in Section 10.1 by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment -34- within 30 days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 10.1 and shall fail to resign after written request therefor by the General Partner or if at any time the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the General Partner, with the consent of JPMD may remove the Owner Trustee. If the General Partner shall remove the Owner Trustee under the authority of the immediately preceding sentence, the General Partner shall promptly appoint a successor Owner Trustee meeting the qualification requirements of Section 10.1 by written instrument, in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee and payment of all fees owed to the outgoing Owner Trustee. Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section shall not become effective until all fees and expenses, including any indemnity payments, due to the outgoing Owner Trustee have been paid and until acceptance of appointment by the successor Owner Trustee pursuant to Section 10.3. The General Partner shall provide notice of such resignation or removal of the Owner Trustee to each of the Rating Agencies. Section 10.3. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the General Partner and to its predecessor Owner Trustee an instrument accepting such appointment under this Agreement, and thereupon the resignation or removal of the predecessor Owner Trustee shall become effective and such successor Owner Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties, and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner Trustee shall deliver to the successor Owner Trustee all documents and statements and monies held by it under this Agreement; and the General Partner and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties, and obligations. No successor Owner Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee shall be eligible pursuant to Section 10.1. -35- Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section, the General Partner shall mail notice of the successor of such Owner Trustee to all Certificateholders, the Indenture Trustee, the Noteholders and the Rating Agencies. If the General Partner shall fail to mail such notice within 10 days after acceptance of appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the General Partner. Section 10.4. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation into which the Owner Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided such corporation shall be eligible pursuant to Section 10.1, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding, and provided further that the Owner Trustee shall mail notice of such merger or consolidation to the Rating Agencies. Section 10.5. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Property or any Financed Vehicle may at the time be located, the Administrator and the Owner Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or separate trustee or separate trustees, of all or any part of the Trust Property, and to vest in such Person, in such capacity, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Administrator and the Owner Trustee may consider necessary or desirable. If the Administrator shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, the Owner Trustee shall have the power to make such appointment. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor trustee pursuant to Section 10.1 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 10.1. Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties, and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any -36- jurisdiction in which any particular act or acts are to be performed the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties, and obligations (including the holding of title to the Trust Property or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee; (ii) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and (iii) the Administrator and the Owner Trustee acting jointly may at any time accept the resignation of or remove any separate trustee or co-trustee. Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a copy thereof given to the Administrator. Any separate trustee or co-trustee may at any time appoint the Owner Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. ARTICLE XI MISCELLANEOUS PROVISIONS Section 11.1. AMENDMENT. (a) This Agreement may be amended by the Depositor, the General Partner and the Owner Trustee, but without the consent of any of the Investor Certificateholders or Noteholders, (i) to cure any ambiguity, or (ii) to correct, supplement or modify any provisions in this Agreement; PROVIDED, HOWEVER, that such -37- action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder or Noteholder. In addition, this Agreement and any Related Document may be amended by the Depositor, the General Partner and the Owner Trustee (or, in the case of a Related Document, the parties thereto), but without the consent of any of the Investor Certificateholders, in connection with any Securitized Offering, so long as it is a condition precedent to the effectiveness of such amendment that the Certificate Balance and all interest accrued on the Certificates be paid in full and that any commitment to purchase additional Certificates or Notes under the Certificate Purchase Agreement or the Note Purchase Agreement, respectively, has been terminated. (b) This Agreement may also be amended from time to time by the Depositor, the General Partner and the Owner Trustee with the consent of a Certificate Majority and, if such amendment materially and adversely affects the interests of Noteholders, the consent of a Note Majority (which consent of any Holder of a Certificate or Note given pursuant to this Section or pursuant to any other provision of this Agreement shall be conclusive and binding on such Holder and on all future Holders of such Investor Certificate or Note and of any Investor Certificate or Note issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Investor Certificate or Note) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the rights of the Holders of Certificates or Notes; PROVIDED, HOWEVER, that, no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made on any Certificate or Note or the Certificate Rate or the Note Interest Rate or (b) reduce the aforesaid percentage required to consent to any such amendment or any waiver hereunder, without the consent of the Holders of all Certificates and Notes then outstanding. (c) Prior to the execution of any such amendment or consent (other than an amendment described in the final sentence of Section 11.1(a)), the General Partner shall furnish written notification of the substance of such amendment or consent to each Rating Agency. (d) Promptly after the execution of any such amendment or consent (other than an amendment described in the final sentence of Section 11.1(a)), the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder and the Indenture Trustee unless such parties have previously received such notification. (e) It shall not be necessary for the consent of Certificateholders or Noteholders pursuant to Section 11.1(b) to approve the particular form of any -38- proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Certificateholders and Noteholders provided for in this Agreement) and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe, including the establishment of record dates. (f) Prior to the execution of any amendment to this Agreement (other than an amendment described in the final sentence of Section 11.1(a)), the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent to the execution and delivery of such amendment have been satisfied. The Owner Trustee may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee's own rights, duties or immunities under this Agreement or otherwise. Section 11.2. NO RECOURSE. Each Certificateholder by accepting a Certificate acknowledges that such Certificateholder's Certificates represent beneficial interests in the Trust only and do not represent interests in or obligations of the Seller, the General Partner, the Servicer, the Owner Trustee, the Indenture Trustee or any Affiliate of any of the foregoing and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Certificates or the Related Documents. Section 11.3. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of laws thereof and the obligations, rights and remedies of the parties under this Agreement shall be determined in accordance with such laws. Section 11.4. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders thereof. Section 11.5. CERTIFICATES NONASSESSABLE AND FULLY PAID. Certificateholders shall not, except as expressly provided for herein with respect to the General Partner, be personally liable for obligations of the Trust, the fractional undivided interests in the Trust represented by the Certificates shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever, and Certificates upon execution thereof by the Owner Trustee pursuant to Section 3.3 are and shall be deemed fully paid. -39- Section 11.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Except as otherwise provided in this Agreement, no other Person shall have any right or obligation hereunder. Section 11.7. COUNTERPARTS. For the purpose of facilitating its execution and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 11.8. NOTICES. All demands, notices and communications under this Agreement shall be in writing, personally delivered or mailed by certified mail-return receipt requested, and shall be deemed to have been duly given upon receipt (a) in the case of the General Partner or the Depositor, at the following address: 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, with copies to: Olympic Financial Ltd., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention: President, (b) in the case of the Owner Trustee, at the Corporate Trust Office and (c) in the case of JPMD, at the following address: 902 Market Street, Wilmington, Delaware 19801, Attention: Asset Finance Group, or at such other address as shall be designated by any such party in a written notice to the other parties. Notwithstanding the foregoing, any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register, and any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. -40- IN WITNESS WHEREOF, the Depositor, the General Partner and the Owner Trustee have caused this Trust Agreement to be duly executed by their respective officers as of the day and year first above written. OLYMPIC RECEIVABLES FINANCE CORP. II By /s/ John A. Witham ---------------------------------------------------- Name: John A. Witham Title: Senior Vice President and Chief Financial Officer WILMINGTON TRUST COMPANY By____________________________________________________ Name: Emmett R. Harmon Title: Vice President IN WITNESS WHEREOF, the Depositor, the General Partner and the Owner Trustee have caused this Trust Agreement to be duly executed by their respective officers as of the day and year first above written. OLYMPIC RECEIVABLES FINANCE CORP. II By____________________________________________________ Name: John A. Witham Title: Senior Vice President and Chief Financial Officer WILMINGTON TRUST COMPANY By /s/ Emmett R. Harmon ---------------------------------------------------- Name: Emmett R. Harmon Title: Vice President EXHIBIT A CERTIFICATE OF TRUST OF OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST THIS Certificate of Trust of OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST (the "Trust"), dated as of December 28, 1995, is being duly executed and filed by Wilmington Trust Company, a Delaware corporation, as trustee, to form a business trust under the Delaware Business Trust Act (12 DEL. CODE, Section 3801 ET SEQ.). 1. NAME. The name of the business trust formed hereby is OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST. 2. DELAWARE TRUSTEE. The name and business address of the trustee of the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. 3. This Certificate of Trust will be effective December 28, 1995. IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust, has executed this Certificate of Trust as of the date first above written. Wilmington Trust Company, not in its individual capacity but solely as owner trustee under a Trust Agreement dated as of December 28, 1995. By____________________________________________________ Name: Emmett R. Harmon Title: Vice President EXHIBIT B [FORM OF CERTIFICATE] OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST VARIABLE FUNDING CERTIFICATE THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS UNDER STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH PROVISIONS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE TRUST AGREEMENT REFERRED TO HEREIN. THE CERTIFICATES MAY NOT BE ACQUIRED BY (A) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE 1 OF ERISA, (B) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE CODE OR (C) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH, A "BENEFIT PLAN"). BY ACCEPTING AND HOLDING THIS CERTIFICATE, THE HOLDER HEREOF SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN. OLYMPIC RECEIVABLES FINANCE CORP. II MAY PREVENT ANY TRANSFER, PARTICIPATION OR OTHER DISPOSITION OF ANY INTEREST IN THIS CERTIFICATE IF OLYMPIC RECEIVABLES FINANCE CORP. II, IN ITS SOLE AND ABSOLUTE DISCRETION, DETERMINES THAT SUCH TRANSFER, PARTICIPATION OR OTHER DISPOSITION, IF EFFECTED, WOULD CAUSE THE TRUST TO BE TREATED AS A PUBLICLY TRADED PARTNERSHIP UNDER SECTION 7704 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR THE TREASURY REGULATIONS ISSUED THEREUNDER. This Certificate evidences a fractional undivided interest in the Trust, as defined below, the property of which includes certain retail installment sale contracts and promissory notes secured by new and used automobiles and light trucks and sold to the Trust by Olympic Receivables Finance Corp. II (This Certificate does not represent an obligation of, or an interest in, Olympic Receivables Finance Corp. II, Olympic Financial Ltd. or any affiliate of either of them.) Certificate No. Certificate Balance: $ OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within-mentioned Trust Agreement. WILMINGTON TRUST COMPANY, WILMINGTON TRUST COMPANY, not in its individual capacity but not in its individual capacity but solely as Owner Trustee or solely as Owner Trustee By Wilmington Trust Company, Authenticating Agent by_________________________________ by________________________________ -2- THIS CERTIFIES THAT______________________________is the registered owner of a nonassessable, fully-paid, fractional undivided interest in the Olympic Automobile Receivables Warehouse Trust (the "Trust"). The Trust was created pursuant to a Trust Agreement, dated as of December 28, 1995 (the "Trust Agreement"), between Olympic Receivables Finance Corp. II and Wilmington Trust Company, not in its individual capacity but solely as owner trustee (the "Owner Trustee"). To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Trust Agreement or the Sale and Servicing Agreement, dated as of December 28, 1995 (the "Sale and Servicing Agreement"), among the Trust, Olympic Receivables Finance Corp. II (the "Seller"), Olympic Financial Ltd., in its individual capacity and as servicer ("OFL" or the "Servicer"), and Norwest Bank Minnesota, National Association, as backup servicer, as applicable. This Certificate is one of the duly authorized Certificates designated as "Variable Funding Certificates" (herein called the "Certificates"). The Trust has also issued under the Indenture, dated as of December 28, 1995, among the Trust and Norwest Bank Minnesota, National Association, as trustee and indenture collateral agent, Notes designated as Variable Funding Notes (the "Notes"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of this Certificate by virtue of the acceptance hereof assents and by which such holder is bound. [ADD GRID AND REFERENCE TO SAME.] The Seller has structured the Agreement, the Certificates and the Trust with the intention that the Certificates will qualify under applicable tax law as indebtedness of the Seller, and both the Seller and each holder of a Certificate or any interest therein by acceptance of its certificate or any interest therein, agrees to treat the Certificates as indebtedness for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income. The recitals contained herein shall be taken as the statements of the Depositor, the General Partner or the Servicer, as the case may be, and the Owner Trustee assumes no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Certificate or of any Receivable or related document. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Owner Trustee, by manual or facsimile signature, this Certificate shall not entitle the holder hereof to any benefit under the Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose. B-3 IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not in its individual capacity has caused this Certificate to be duly executed. Dated:______, 199_ OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By:_________________________________________ Name: Title: Attest: _______________ Name: Title: B-4 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (Please print or typewrite name and address, including postal zip code, of assignee) the within Certificate, and all rights thereunder, hereby irrevocably constituting and appointing Attorney to transfer said Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: * ______________________________________________ Signature Guaranteed: * ______________________________________________ *NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration, enlargement or any change whatsoever. Such signature must be guaranteed by a member firm of The New York Stock Exchange, Inc. or a commercial bank or trust company. B-5 EX-10.6 9 AMENDMENT DATED AS OF JUNE 12 EXECUTION COPY AMENDMENT Dated as of June 12, 1996 to TRUST AGREEMENT Dated as of December 28, 1995 between OLYMPIC RECEIVABLES FINANCE CORP. II and WILMINGTON TRUST COMPANY Owner Trustee OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS ARTICLE II AMENDMENT SECTION 2.1. Amendment to Section 1.1 of the Trust Agreement . . . . . 1 SECTION 2.2. Amendment to Section 3.2 of the Trust Agreement . . . . . 1 SECTION 2.3. Amendment to Section 6.1 of the Trust Agreement . . . . . 2 SECTION 2.4. Amendment to Section 11.8 of the Trust Agreement. . . . . 2 ARTICLE III MISCELLANEOUS SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . . 2 SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 3.4. Trust Agreement in Full Force and Effect as Amended . . . 2 -i- AMENDMENT dated as of June 12, 1996 (the "AMENDMENT") to TRUST AGREEMENT dated as of December 28, 1995 (the "TRUST AGREEMENT"), between Olympic Receivables Finance Corp. II, a Delaware corporation (the "SELLER"), and Wilmington Trust Company, a Delaware Corporation, as Owner Trustee (in such capacity, the "OWNER TRUSTEE"). WHEREAS, the Depositor, the General Partner and the Owner Trustee have entered into the Trust Agreement; WHEREAS, pursuant to Section 11.1(b) of the Trust Agreement, the Depositor, the General Partner and the Owner Trustee desire to amend the Trust Agreement in certain respects as provided below; WHEREAS, a Certificate Majority and a Note Majority each has consented to the terms of this Amendment as required by Section 11.1(b) of the Trust Agreement; WHEREAS, it is the intent of the parties that this Amendment be effective as of the date set forth above (the "EFFECTIVENESS DATE"); NOW, THEREFORE, the parties to this Amendment hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined herein or the context otherwise requires, defined terms used herein shall have the meanings ascribed thereto in the Trust Agreement. ARTICLE II AMENDMENT SECTION 2.1. AMENDMENT TO SECTION 1.1 OF THE TRUST AGREEMENT. The definition of "MAXIMUM CERTIFICATE BALANCE" in Section 1.1 of the Trust Agreement is hereby amended to read in its entirety as follows: MAXIMUM CERTIFICATE BALANCE: $29,700,000. SECTION 2.2. AMENDMENT TO SECTION 3.2 OF THE TRUST AGREEMENT. (a) Section 3.2 of the Trust Agreement is hereby amended by deleting the reference to the amount "$200,000" and substituting therefor "$300,000." (b) Section 3.2 of the Trust Agreement is hereby further amended by adding the following new subsection (c): (c) Following a Trust Property Liquidation Date and payment in full of the Notes and Investor Certificates and any other expenses of the Trust, the General Partner may instruct the Owner Trustee to pay to the General Partner all or any portion of the funds remaining in the Collection Account. The principal balance of the General Partner Certificates will be reduced by any amount so paid, and will thereafter be increased by any amount of funds deposited by the General Partner in the Collection Account. No Investor Certificates may thereafter be issued pursuant to Section 3.2(b) unless the General Partner Certificates represent in excess of 1% of the Maximum Certificate Balance. SECTION 2.3. AMENDMENT TO SECTION 6.1 OF THE TRUST AGREEMENT. Section 6.1 of the Trust Agreement is hereby amended by deleting the reference to the amount "$200,000,000" and substituting therefor "$300,000,000." SECTION 2.4. AMENDMENT TO SECTION 11.8 OF THE TRUST AGREEMENT. Section 11.8 of the Trust Agreement is hereby amended by deleting the words "902 Market Street, Wilmington, Delaware 19801" and substituting therefor "500 Stanton Christiana Road, Newark, Delaware 19713-2107." ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when the Owner Trustee shall have received (a) counterparts hereof executed on behalf of the Seller, the General Partner and the Owner Trustee, (b) the consents of JPMD, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, the sole Noteholder, to the terms of this Amendment and (c) evidence of written notice to each of S & P, Moody's and Norwest Bank Minnesota, National Association, as Indenture Trustee, of this Amendment. SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE -2- INTERNAL LAWS OF THE STATE OF DELAWARE. This Amendment and the Trust Agreement (and all exhibits, annexes and schedules thereto) constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 3.3. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof or thereof. SECTION 3.4. TRUST AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically stated herein, all of the terms and conditions of the Trust Agreement shall remain in full force and effect. All references to the Trust Agreement in any other document or instrument shall be deemed to mean the Trust Agreement, as amended by this Amendment. This Amendment shall not constitute a novation of the Trust Agreement, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Trust Agreement, as amended by this Amendment, as though the terms and conditions of the Trust Agreement were set forth herein. -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers, all as of the date and year first above written. DEPOSITOR AND GENERAL PARTNER: OLYMPIC RECEIVABLES FINANCE CORP. II By: __________________________________ Name: Title: OWNER TRUSTEE: WILMINGTON TRUST COMPANY not in its individual capacity but solely as Owner Trustee By: __________________________________ Name: Title: CONSENTS: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, as sole Noteholder By: Name: Title: -4- EX-10.7 10 INDENTURE DATED DEC 28, 1995 EXECUTION COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST Variable Funding Notes ----------------------------------- INDENTURE Dated as of December 28, 1995 ----------------------------------- NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Trustee - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.02. Rules of Construction. . . . . . . . . . . . . . . . . . 9 ARTICLE II THE NOTES SECTION 2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 2.02. Execution, Authentication and Delivery . . . . . . . . . 10 SECTION 2.03. Additional Issuances . . . . . . . . . . . . . . . . . . 11 SECTION 2.04. Registration; Registration of Transfer and Exchange. . . 11 SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . 13 SECTION 2.06. Person Deemed Owner. . . . . . . . . . . . . . . . . . . 14 SECTION 2.07. Payment of Principal and Interest; Defaulted Interest. . 14 SECTION 2.08. Cancellation . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE III COVENANTS SECTION 3.01. Payment of Principal, Interest and Premium . . . . . . . 15 SECTION 3.02. Maintenance of Office or Agency. . . . . . . . . . . . . 15 SECTION 3.03. Money for Payments To Be Held in Trust . . . . . . . . . 16 SECTION 3.04. Existence. . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 3.05. Protection of Trust Estate . . . . . . . . . . . . . . . 17 SECTION 3.06. Opinions as to Trust Estate. . . . . . . . . . . . . . . 18 SECTION 3.07. Performance of Obligations; Servicing of Receivables . . 18 SECTION 3.08. Negative Covenants . . . . . . . . . . . . . . . . . . . 19 SECTION 3.09. Annual Statement as to Compliance. . . . . . . . . . . . 20 SECTION 3.10. Issuer May Consolidate, etc. Only on Certain Terms . . . 20 SECTION 3.11. Successor or Transferee. . . . . . . . . . . . . . . . . 22 SECTION 3.12. No Other Business. . . . . . . . . . . . . . . . . . . . 22 SECTION 3.13. No Borrowing . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 3.14. Servicer's Obligations . . . . . . . . . . . . . . . . . 23 - i - Page ---- SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. . . . 23 SECTION 3.16. Capital Expenditures . . . . . . . . . . . . . . . . . . 23 SECTION 3.17. Restricted Payments. . . . . . . . . . . . . . . . . . . 23 SECTION 3.18. Notice of Events of Default. . . . . . . . . . . . . . . 23 SECTION 3.19. Further Instruments and Acts . . . . . . . . . . . . . . 24 SECTION 3.20. Compliance with Laws . . . . . . . . . . . . . . . . . . 24 SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 3.22. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 3.23. Income Tax Characterization. . . . . . . . . . . . . . . 24 ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.01. Satisfaction and Discharge of Indenture. . . . . . . . . 24 SECTION 4.02. Application of Trust Money . . . . . . . . . . . . . . . 25 SECTION 4.03. Repayment of Moneys Held by Paying Agent . . . . . . . . 25 SECTION 4.04. Release of Trust Estate. . . . . . . . . . . . . . . . . 25 ARTICLE V REMEDIES SECTION 5.01. Events of Default. . . . . . . . . . . . . . . . . . . . 26 SECTION 5.02. Rights upon Event of Default . . . . . . . . . . . . . . 27 SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee; Authority of Controlling Party. . . . . . . . . 27 SECTION 5.04. Remedies . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 5.05. Optional Preservation of the Receivables . . . . . . . . 30 SECTION 5.06. Priorities . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 5.07. Limitation of Suits. . . . . . . . . . . . . . . . . . . 31 SECTION 5.08. [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 5.09. Restoration of Rights and Remedies . . . . . . . . . . . 32 SECTION 5.10. Rights and Remedies Cumulative . . . . . . . . . . . . . 32 SECTION 5.11. Delay or Omission Not a Waiver . . . . . . . . . . . . . 33 SECTION 5.12. Control by Noteholders . . . . . . . . . . . . . . . . . 33 SECTION 5.13. Waiver of Past Defaults. . . . . . . . . . . . . . . . . 33 SECTION 5.14. Undertaking for Costs. . . . . . . . . . . . . . . . . . 34 SECTION 5.15. Waiver of Stay or Extension Laws . . . . . . . . . . . . 34 SECTION 5.16. Action on Notes. . . . . . . . . . . . . . . . . . . . . 34 - ii - Page ---- SECTION 5.17. Performance and Enforcement of Certain Obligations . . . 35 ARTICLE VI THE TRUSTEE SECTION 6.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . 36 SECTION 6.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . 38 SECTION 6.03. Individual Rights of Trustee . . . . . . . . . . . . . . 39 SECTION 6.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . 39 SECTION 6.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . 39 SECTION 6.06. Reports by Trustee to Holders. . . . . . . . . . . . . . 39 SECTION 6.07. Compensation and Indemnity . . . . . . . . . . . . . . . 39 SECTION 6.08. Replacement of Trustee . . . . . . . . . . . . . . . . . 40 SECTION 6.09. Successor Trustee by Merger. . . . . . . . . . . . . . . 42 SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. . . . . . 42 SECTION 6.11. Eligibility; Disqualification. . . . . . . . . . . . . . 43 ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.01. Issuer to Furnish to Trustee Names and Addresses of Noteholders. . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 7.02. Preservation of Information; Communications to Noteholders. . . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.01. Collection of Money. . . . . . . . . . . . . . . . . . . 44 SECTION 8.02. Trust Accounts . . . . . . . . . . . . . . . . . . . . . 45 SECTION 8.03. General Provisions Regarding Accounts. . . . . . . . . . 45 ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.01. Supplemental Indentures Without Consent of Noteholders . 46 SECTION 9.02. Supplemental Indentures With Consent of Noteholders. . . 47 SECTION 9.03. Execution of Supplemental Indentures . . . . . . . . . . 49 - iii - Page ---- SECTION 9.04. Effect of Supplemental Indenture . . . . . . . . . . . . 49 SECTION 9.05. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 9.06. Reference in Notes to Supplemental Indentures. . . . . . 49 ARTICLE X REDEMPTION OF NOTES SECTION 10.01. Redemption . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 10.02. Form of Redemption Notice. . . . . . . . . . . . . . . . 51 SECTION 10.03. Notes Payable on Redemption Date . . . . . . . . . . . . 52 ARTICLE XI MISCELLANEOUS SECTION 11.01. Compliance Certificates and Opinions, etc. . . . . . . . 52 SECTION 11.02. Form of Documents Delivered to Trustee . . . . . . . . . 54 SECTION 11.03. Acts of Noteholders. . . . . . . . . . . . . . . . . . . 54 SECTION 11.04. Notices, etc., to Trustee, Issuer, JPMD and the Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 11.05. Notices to Noteholders; Waiver . . . . . . . . . . . . . 56 SECTION 11.06. Alternate Payment and Notice Provisions. . . . . . . . . 56 SECTION 11.07. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 11.08. Effect of Headings and Table of Contents . . . . . . . . 57 SECTION 11.09. Successors and Assigns . . . . . . . . . . . . . . . . . 57 SECTION 11.10. Severability . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 11.11. Benefits of Indenture. . . . . . . . . . . . . . . . . . 57 SECTION 11.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . 57 SECTION 11.13. Governing Law. . . . . . . . . . . . . . . . . . . . . . 57 SECTION 11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 11.15. Recording of Indenture . . . . . . . . . . . . . . . . . 58 SECTION 11.16. Trust Obligation . . . . . . . . . . . . . . . . . . . . 58 SECTION 11.17. No Petition. . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 11.18. Inspection . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 11.19. Limitation of Liability. . . . . . . . . . . . . . . . . 59 Exhibit A Schedule of Receivables Exhibit B Form of Variable Funding Note Exhibit C Letter Agreement Between OFL and the Trustee and Other Fee Letters - iv - INDENTURE, dated as of December 28, 1995, between OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "Issuer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, in its capacities as trustee (the "Trustee") and not in its individual capacity. Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuer's Variable Funding Notes (the "Notes"): As security for the payment and performance by the Issuer of its obligations under this Indenture and the Notes, the Issuer has agreed to assign the Indenture Collateral (as defined below) as collateral to the Trustee for the benefit of the Noteholders. GRANTING CLAUSE The Issuer hereby Grants to Trustee at the Closing Date for the benefit of the Noteholders to secure the performance of the Secured Obligations, all of the Issuer's right, title and interest in and to (a) the Receivables and all moneys paid or payable thereon or in respect thereof after the applicable Cutoff Date (including amounts due on or before the applicable Cutoff Date but received by OFL, the Seller or the Issuer after such Cutoff Date); (b) an assignment of the security interests of OFL in the Financed Vehicles; (c) the Insurance Policies and any proceeds from any Insurance Policies relating to the Receivables, the Obligors or the Financed Vehicles, including rebates of premiums, all Collateral Insurance and any Force-Placed Insurance relating to the Receivables; (d) an assignment of the rights of OFL or the Seller against Dealers with respect to the Receivables under the Dealer Agreements and the Dealer Assignments, (e) all items contained in the Receivable Files and any and all other documents or election records that OFL keeps on file in accordance with its customary procedures relating to the Receivables, the Obligors or the Financed Vehicles, (f) an assignment of the rights of the Seller under the Purchase Agreement, (g) property (including the right to receive future Liquidation Proceeds) that secures a Receivable and that has been acquired by or on behalf of the Trust pursuant to liquidation of such Receivable, (h) the Trust Accounts and all funds on deposit therein from time to time (other than the Certificate Distribution Account), and in all investments and proceeds thereof (including all income thereon), (i) the Purchase Agreement and each Assignment Agreement, including the right assigned to the Issuer to cause OFL to repurchase Receivables from the Seller under certain circumstances, (j) the Sale and Servicing Agreement and each Transfer Agreement (including all rights of the Seller under the Purchase Agreement and each Assignment Agreement assigned to the Issuer pursuant to the Sale and Servicing Agreement), and (k) all present and future claims, demands, causes and choses in action in respect of the Receivables and any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of the Receivables and any or all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of the Receivables and any of the foregoing (collectively, the "Indenture Collateral"). The Trustee for the benefit of the Holders of the Notes acknowledges such Grant. The Trustee on behalf of the Holders of the Notes accepts the trusts under this Indenture in accordance with the provisions of this Indenture and agrees to perform its duties required in this Indenture to the best of its ability to the end that the interests of the Holders of the Notes may be adequately and effectively protected. ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. (a) Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth below for all purposes of this Indenture. "ACT" has the meaning specified in Section 11.03(a). "ADMINISTRATOR" has the meaning specified therefor in the Trust Agreement. "AFFILIATE" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to such specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AUTHORIZED OFFICER" means, with respect to the Issuer, any officer of the Owner Trustee who is authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list of Authorized Officers delivered by the Owner Trustee to the Trustee on the Closing Date (as such list may be modified or supplemented from time to time thereafter). "BUSINESS DAY" means any day other than a Saturday, Sunday, legal holiday or other day on which commercial banking institutions in Minneapolis, Minnesota, New York, New York, Wilmington, Delaware or any other location of any successor Servicer, successor - 2 - Owner Trustee or successor Trustee are authorized or obligated by law, executive order or governmental decree to remain closed. "CERTIFICATEHOLDER" has the meaning specified therefor in the Trust Agreement. "CLOSING DATE" means December 28, 1995. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "CONTROLLING PARTY" means the Note Majority and JPMD. "CORPORATE TRUST OFFICE" means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered which office at date of the execution of this Agreement is located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust Department; or at such other address as the Trustee may designate from time to time by notice to the Noteholders, JPMD and the Issuer, or the principal corporate trust office of any successor Trustee (the address of which the successor Trustee will notify the Noteholders and the Issuer). "DEFAULT" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. "EVENT OF DEFAULT" has the meaning specified in Section 5.01. "EXECUTIVE OFFICER" means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, Executive Vice President, any Vice President, any Responsible Officer, the Secretary or the Treasurer of such corporation; and with respect to any partnership, any general partner thereof. "FINAL MATURITY DATE" means the earlier of (i) the Payment Date that is 85 months from the Purchase Termination Date and (ii) the date on which the Notes are fully redeemed in accordance with this Indenture (or, if such day is not a Business Day, the next succeeding Business Day). "GENERAL PARTNER" means Seller in its capacity as general partner of the Trust, and any successors thereto as permitted by the Trust Agreement. "GRANT" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create, and grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to this Indenture. A Grant of the Indenture Collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the Granting party thereunder, including the - 3 - immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of the Indenture Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the Granting party or otherwise and generally to do and receive anything that the Granting party is or may be entitled to do or receive thereunder or with respect thereto. "HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is registered on the Note Register. "INDEBTEDNESS" means, with respect to any Person at any time, (a) indebtedness or liability of such Person for borrowed money whether or not evidenced by bonds, debentures, notes or other instruments, or for the deferred purchase price of property or services (including trade obligations); (b) obligations of such Person as lessee under leases which should have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases; (c) current liabilities of such Person in respect of unfunded vested benefits under plans covered by Title IV of the Employee Retirement Income Security Act of 1974, as amended; (d) obligations issued for or liabilities incurred on the account of such Person; (e) obligations or liabilities of such Person arising under acceptance facilities; (f) obligations of such Person under any guarantees, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; (g) obligations of such Person secured by any lien on property or assets of such Person, whether or not the obligations have been assumed by such Person; or (h) obligations of such Person under any interest rate or currency exchange agreement. "INDENTURE" means this Indenture as amended or supplemented from time to time. "INDENTURE COLLATERAL" has the meaning specified in the Granting Clause of this Indenture. "INDEPENDENT" means, when used with respect to any specified Person, that the Person (a) is in fact independent of the Issuer, any other obligor upon the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. "INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered to the Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, made by an Independent appraiser or other expert appointed - 4 - by an Issuer Order and approved by the Trustee in the exercise of reasonable care, and such opinion or certificate shall state that the signer has read the definition of "Independent" in this Indenture and that the signer is Independent within the meaning thereof. "INTEREST RATE" means the Note Interest Rate. "ISSUER" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor and each other obligor on the Notes. "ISSUER ORDER" and "ISSUER REQUEST" means a written order or request signed in the name of the Issuer by any one of its Authorized Officers and delivered to the Trustee. "LETTER AGREEMENT" has the meaning specified in Section 6.07. "NON-CALLABLE NOTE" means a Note issued in connection with a Recapitalization that is not subject to any right of OFL to purchase such Note from its Holder pursuant to the Note Purchase Agreement or otherwise. "NOTE" means the Variable Funding Notes substantially in the form of Exhibit B. "NOTE OWNER" means with respect to any Notes, the Holder. "NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings specified in Section 2.04. "OFFICER'S CERTIFICATE" means a certificate signed by any Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the applicable requirements of Section 11.01, and delivered to, the Trustee. Unless otherwise specified, any reference in this Indenture to an Officer's Certificate shall be to an Officer's Certificate of any Authorized Officer of the Issuer. "OPINION OF COUNSEL" means one or more written opinions of counsel who may, except as otherwise expressly provided in this Indenture, be employees of or counsel to the Issuer and who shall be satisfactory to the Trustee and which shall comply with any applicable requirements of Section 11.01, and shall be in form and substance satisfactory to the Trustee. "OUTSTANDING" means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture except: (i) Notes theretofore canceled by the Note Registrar or delivered to the Note Registrar for cancellation; - 5 - (ii) Notes or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Notes (provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor, satisfactory to the Trustee, has been made); and (iii) Notes in exchange for or in lieu of other Notes which have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Trustee is presented that any such Notes are held by a bona fide purchaser; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite percentage of the Outstanding Amount of the Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Related Document, Notes owned by the Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Trustee knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Seller or any Affiliate of any of the foregoing Persons. "OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes Outstanding at the date of determination. "OWNER TRUSTEE" means Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, or any successor trustee under the Trust Agreement. "PAYING AGENT" means the Trustee or any other Person that meets the eligibility standards for the Trustee specified in Section 6.11 and is authorized by the Issuer to make the distributions from the Note Distribution Account, including payment of principal of or interest on the Notes on behalf of the Issuer. "PAYMENT DATE" means a Distribution Date. "PERSON" means any legal person including any individual, corporation, estate, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity. "PROCEEDING" means any suit in equity, action at law or other judicial or administrative proceeding. - 6 - "RECORD DATE" means, with respect to a Payment Date or Redemption Date, the close of business on the last Business Day immediately preceding such Payment Date or Redemption Date. "REDEMPTION DATE" means (a) in the case of a redemption of the Notes pursuant to Section 10.01(a) or a payment to Noteholders pursuant to Section 10.01(c), the date specified in the notice of redemption sent by the Servicer or the Issuer pursuant to Section 10.01(a) or 10.01(c), as applicable, and Section 10.02 or (b) in the case of a redemption of Notes pursuant to Section 10.01(b) or 10.01(d), the date specified in the notice of redemption sent in accordance with Section 10.02. "REDEMPTION PRICE" means (a) in the case of a redemption of the Notes pursuant to Section 10.01 (a), (b) or (d), an amount equal to the principal amount of the Notes redeemed plus accrued and unpaid interest on the principal amount of Notes at the Interest Rate to but excluding the Redemption Date and plus, any breakage payments (including the amounts to be deposited in the Commercial Paper Funding Account pursuant to the Note Purchase Agreement) specified in the Note Purchase Agreement, or (b) in the case of a payment made to Noteholders pursuant to Section 10.01(c), the amount on deposit in the Note Distribution Account, but not in excess of the amount specified in clause (a) above. "RELATED DOCUMENTS" means the Trust Agreement, the Certificates, the Notes, the Purchase Agreement, the Sale and Servicing Agreement, each Assignment Agreement, the Lockbox Agreement, the Administration Agreement, the Note Purchase Agreement, and the Certificate Purchase Agreement. The Related Documents executed by any party are referred to herein as "such party's Related Documents," "its Related Documents" or by a similar expression. "RESPONSIBLE OFFICER" means, with respect to the Trustee, any officer of the Trustee assigned by the Trustee to administer its corporate trust affairs relating to the Trust Estate. "SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement, dated as of December 28, 1995, among the Issuer, the Seller, the Servicer and the Backup Servicer. "SECURED OBLIGATIONS" means all amounts and obligations which the Issuer may at any time owe to or on behalf of the Trustee for the benefit of the Noteholders under this Indenture or the Notes. "STATE" means any one of the 50 states of the United States of America or the District of Columbia. "TERMINATION DATE" means the date on which the Trustee shall have received payment and performance of all Secured Obligations. - 7 - "TRUST ESTATE" means all money, instruments, rights and other property that are subject or intended to be subject to the lien and security interest of this Indenture for the benefit of the Noteholders (including, without limitation, the Indenture Collateral Granted to the Trustee), including all proceeds thereof. "TRUSTEE" means Norwest Bank Minnesota, National Association, a national banking association, as Trustee under this Indenture, or any successor Trustee under this Indenture. "UCC" means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time. (b) Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth in the Sale and Servicing Agreement as in effect on the Closing Date for all purposes of this Indenture, and the definitions of such terms are equally applicable both to the singular and plural forms of such terms: Section of Sale and Term Servicing Agreement - ---- ------------------- Administration Agreement . . . . . . . . . . Section 1.1 Assignment Agreement . . . . . . . . . . . . Section 1.1 Backup Servicer. . . . . . . . . . . . . . . Section 1.1 Certificate Balance. . . . . . . . . . . . . Section 1.1 Certificate Distribution Account . . . . . . Section 1.1 Certificates . . . . . . . . . . . . . . . . Section 1.1 Collateral Insurance . . . . . . . . . . . . Section 1.1 Collection Account . . . . . . . . . . . . . Section 1.1 Custodian. . . . . . . . . . . . . . . . . . Section 1.1 Cutoff Date. . . . . . . . . . . . . . . . . Section 1.1 Dealer . . . . . . . . . . . . . . . . . . . Section 1.1 Dealer Agreement . . . . . . . . . . . . . . Section 1.1 Dealer Assignment. . . . . . . . . . . . . . Section 1.1 Distribution Date. . . . . . . . . . . . . . Section 1.1 Eligible Account . . . . . . . . . . . . . . Section 1.1 Eligible Investments . . . . . . . . . . . . Section 1.1 Facility Balance . . . . . . . . . . . . . . Section 1.1 Facility Limit . . . . . . . . . . . . . . . Section 1.1 Financed Vehicle . . . . . . . . . . . . . . Section 1.1 Forced-Placed Insurance. . . . . . . . . . . Section 1.1 Insurance Policies . . . . . . . . . . . . . Section 1.1 JPMD . . . . . . . . . . . . . . . . . . . . Section 1.1 Lien . . . . . . . . . . . . . . . . . . . . Section 1.1 - 8 - Liquidation Proceeds . . . . . . . . . . . . Section 1.1 Lockbox Agreement. . . . . . . . . . . . . . Section 1.1 Lockbox Bank . . . . . . . . . . . . . . . . Section 1.1 Monthly Period . . . . . . . . . . . . . . . Section 1.1 Moody's. . . . . . . . . . . . . . . . . . . Section 1.1 Note Distribution Account. . . . . . . . . . Section 1.1 Note Interest Rate . . . . . . . . . . . . . Section 1.1 Note Majority. . . . . . . . . . . . . . . . Section 1.1 Note Purchase Agreement. . . . . . . . . . . Section 1.1 Obligor. . . . . . . . . . . . . . . . . . . Section 1.1 OFL. . . . . . . . . . . . . . . . . . . . . Section 1.1 Principal Funding Excess Amount. . . . . . . Section 1.1 Purchase Agreement . . . . . . . . . . . . . Section 1.1 Purchase Termination Date. . . . . . . . . . Section 1.1 Rating Agency. . . . . . . . . . . . . . . . Section 1.1 Rating Agency Condition. . . . . . . . . . . Section 1.1 Recapitalization . . . . . . . . . . . . . . Section 1.1 Receivable . . . . . . . . . . . . . . . . . Section 1.1 Receivable File. . . . . . . . . . . . . . . Section 1.1 Schedule of Receivables. . . . . . . . . . . Section 1.1 Securitized Offering . . . . . . . . . . . . Section 1.1 Seller . . . . . . . . . . . . . . . . . . . Section 1.1 Servicer . . . . . . . . . . . . . . . . . . Section 1.1 Servicer Termination Event . . . . . . . . . Section 1.1 Standard & Poor's. . . . . . . . . . . . . . Section 1.1 Transfer Agreement . . . . . . . . . . . . . Section 1.1 Transfer Date. . . . . . . . . . . . . . . . Section 1.1 Trust Accounts . . . . . . . . . . . . . . . Section 1.1 Trust Agreement. . . . . . . . . . . . . . . Section 1.1 SECTION 1.02. RULES OF CONSTRUCTION. Unless otherwise specified: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time; (iii) "or" is not exclusive; (iv) "including" means including without limitation; - 9 - (v) words in the singular include the plural and words in the plural include the singular; and (vi) references to Sections, Subsections, Schedules and Exhibits shall refer to such portions of this Indenture. ARTICLE II THE NOTES SECTION 2.01. FORM. The Notes, together with the Trustee's certificate of authentication, shall be in substantially the form set forth in Exhibit B, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note. The Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing such Notes, as evidenced by their execution of such Notes. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit B are part of the terms of this Indenture. SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any such Authorized Officer on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signature of individuals who were at any time Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. The Trustee shall upon receipt of the Issuer Order authenticate and deliver Notes for original issue in an aggregate principal amount of up to $200,000,000. The aggregate principal amount of Notes outstanding at any time may not exceed that amount. Each Note shall be dated the date of its authentication. The Notes shall be issued in minimum initial denominations and in such integral multiples as are necessary to comply with the terms of this Agreement and the Related Documents. - 10 - No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. SECTION 2.03. ADDITIONAL ISSUANCES. (a) On each Business Day that is a Transfer Date under the Sale and Servicing Agreement and upon meeting all conditions precedent to the purchase of additional principal amounts of Notes under the Note Purchase Agreement, the Issuer may instruct the Trustee by rendering an Issuer Order to indicate or cause the Note Registrar to indicate in the Note Register that the outstanding principal amount of Notes held by each Noteholder is increased pro rata, in accordance with the outstanding principal balance held by such Noteholder, by an aggregate amount for all Notes equal to (x) the aggregate outstanding principal balance of Receivables transferred to the Trust on such Transfer Date, less (y) the amount of any increase in the outstanding Certificate Balance of Certificates related to such Receivables transferred on the Transfer Date. The Trustee shall, upon receipt of the Issuer Order and funds in the amount of the increase in principal balance of Notes from the Noteholders or their agent, instruct the Note Registrar to indicate in the Note Register such increase in the principal amount of Notes. The Outstanding Amount of Notes may never exceed the maximum aggregate principal amount of Notes as specified in the Note Purchase Agreement. No increase in the principal balance of Notes shall be effective until the Outstanding Amount of Certificates equals $19,800,000.00. (b) Upon any Recapitalization, upon satisfaction of the applicable requirements of Article X of this Indenture, (i) the Trustee shall upon receipt of the Issuer Order authenticate and deliver to the Holders (determined as of the related Record Date) Non-Callable Notes in an aggregate principal amount specified in the Issuer Order (which shall not exceed the then-outstanding principal amount of the Notes and shall be allocated pro rata among the Noteholders in accordance with outstanding principal amount of Notes held by each), and (ii) the Issuer shall instruct the Trustee by rendering an Issuer Order to indicate or cause the Note Registrar to indicate in the Note Register that the outstanding principal amount of Notes represented by the physical Notes issued prior to the Recapitalization and held by each Noteholder is decreased by the principal amount of the Non-Callable Notes issued to such Noteholder in that Recapitalization, and Trustee shall make, or cause to be made such indication. After any Recapitalization, any increase made pursuant to paragraph (a) above shall be made to Non-Callable Notes only to the extent specified in the Issuer Order relating to that Recapitalization and otherwise shall be applied ratably to the other outstanding Notes. SECTION 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Issuer shall cause to be kept a register (the "Note Register") in which, subject to such reasonable - 11 - regulations as it may prescribe, the Issuer shall provide for the registration of Notes and the registration of transfers of Notes. The Trustee shall be "Note Registrar" for the purpose of registering Notes and transfers of Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar. If a Person other than the Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 3.02, the Issuer shall execute, and the Trustee shall authenticate and the Noteholder shall obtain from the Trustee, in the name of the designated transferee or transferees, one or more new Notes in any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes in any authorized denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and the Noteholder shall obtain from the Trustee, the Notes which the Noteholder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in The City of New York or the city in which the Corporate Trust Office is located, or by a member firm of a national securities exchange, and such other documents as the Trustee may require. No service charge shall be made to a Holder for any registration of transfer or exchange of Notes, but the Issuer or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any - 12 - registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.03 or 9.06 not involving any transfer. The preceding provisions of this section notwithstanding, the Issuer shall not be required to make and the Note Registrar need not register transfers or exchanges of Notes selected for redemption or of any Note for a period of 15 days preceding the due date for any payment with respect to the Note. SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any mutilated Note is surrendered to the Trustee, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Trustee such security or indemnity as may be required by them to hold the Issuer and the Trustee harmless, then, in the absence of notice to the Issuer, the Note Registrar or the Trustee that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon its request the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement Note; PROVIDED, HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall have become or within seven days shall be due and payable, or shall have been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender thereof. If, after the delivery of such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of the original Note in lieu of which such replacement Note was issued presents for payment such original Note, the Issuer and the Trustee shall be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note from such Person to whom such replacement Note was delivered or any assignee of such Person, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Trustee in connection therewith. Upon the issuance of any replacement Note under this Section, the Issuer or the Trustee may require the payment by the Holder of such Note of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Trustee or the Note Registrar) connected therewith. Every replacement Note issued pursuant to this Section in replacement of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. - 13 - The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 2.06. PERSON DEEMED OWNER. Prior to due presentment for registration of transfer of any Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments of principal of and interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Issuer, the Trustee nor any agent of the Issuer or the Trustee shall be affected by notice to the contrary. SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST. (a) The Notes shall accrue interest as provided herein and in the form of Note set forth in Exhibit B, and such interest shall be payable on each Payment Date and Redemption Date as specified herein and therein. Any installment of interest or principal, if any, payable on any Note which is punctually paid or duly provided for by the Issuer on the applicable Payment Date and Redemption Date shall be paid to the Person in whose name such Note (or one or more predecessor Notes) is registered on the Record Date, by wire transfer in immediately available funds to the account designated by such Person and except for (i) the final installment of principal payable with respect to such Note on a Payment Date and (ii) the Redemption Price for any Note called for redemption pursuant to Section 10.01(a), which shall be payable as provided below. Any funds for which proper wire instructions have not been received shall be held in accordance with Section 3.03. (b) The principal of each Note shall be payable in installments on Payment Dates and Redemption Dates as provided herein and in the form of the Notes. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, so long as the Controlling Party has declared the Notes to be immediately due and payable in the manner provided in Section 5.02. All principal payments on the Notes shall be made pro rata to the Noteholders. If Non-Callable Notes are issued, principal payments shall also be made pro rata between the Non-Callable Notes and any other outstanding Notes, based upon their respective principal amounts on the Record Date preceding the applicable Payment Date or Redemption Date. The Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be mailed no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place where - 14 - such Note may be presented and surrendered for payment of such installment. Notices in connection with redemptions of Notes shall be mailed to Noteholders as provided in Section 10.02. SECTION 2.08. CANCELLATION. All Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by the Trustee. The Issuer may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by the Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Notes may be held or disposed of by the Trustee in accordance with its standard retention or disposal policy as in effect at the time unless the Issuer shall direct by an Issuer Order that they be destroyed or returned to it, provided that such Issuer Order is timely and the Notes have not been previously disposed of by the Trustee. ARTICLE III COVENANTS SECTION 3.01. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM. The Issuer will duly and punctually pay the principal, interest and premium, if any, on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, the Issuer will cause to be distributed all amounts on deposit in the Note Distribution Account on a Payment Date in accordance with Section 8.02(b). Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest and/or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in Minneapolis or St. Paul, Minnesota, an office or agency where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially appoints the Trustee to serve as its agent for the foregoing purposes. The Issuer will give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Trustee with the address thereof, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Trustee as its agent to receive all such surrenders, notices and demands. - 15 - SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in Section 8.02, all payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Note Distribution Account pursuant to Section 8.02(b) shall be made on behalf of the Issuer by the Trustee or by another Paying Agent, and no amounts so withdrawn from the Note Distribution Account for payments of Notes shall be paid over to the Issuer. On or before each Payment Date and Redemption Date, the Issuer shall deposit or cause to be deposited in the Note Distribution Account an aggregate sum sufficient to pay the amounts then becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Paying Agent is the Trustee) shall promptly notify the Trustee of its action or failure so to act. The Issuer will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee (and if the Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section, that such Paying Agent will: (i) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; (ii) give the Trustee notice of any default (of which it has actual knowledge) by the Issuer (or any other obligor upon the Notes) in the making of any payment required to be made with respect to the Notes; (iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; (iv) immediately resign as a Paying Agent and forthwith pay to the Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying - 16 - Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its existence, rights and franchises as a business trust under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other state or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes, the Indenture Collateral and each other instrument or agreement included in the Trust Estate. SECTION 3.05. PROTECTION OF TRUST ESTATE. The Issuer intends the security interest Granted pursuant to this Indenture in favor of the Trustee to be prior to all other liens in respect of the Trust Estate, and the Issuer shall take all actions necessary to obtain and maintain, in favor of the Trustee, a first lien on and a first priority, perfected security interest in the Trust Estate. The Issuer will from time to time execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, all as prepared by the Servicer and delivered to the Issuer, and will take such other action necessary or advisable to: (i) grant more effectively all or any portion of the Trust Estate; (ii) maintain or preserve the lien and security interest (and the priority thereof) in favor of the Trustee created by this Indenture or carry out more effectively the purposes hereof; (iii) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture; (iv) enforce any of the Indenture Collateral; (v) preserve and defend title to the Trust Estate and the rights of the Trustee in such Trust Estate against the claims of all persons and parties; or (vi) pay all taxes or assessments levied or assessed upon the Trust Estate when due. - 17 - The Issuer hereby designates the Trustee its agent and attorney-in-fact to execute any financing statement, continuation statement or other instrument required by the Trustee pursuant to this Section. SECTION 3.06. OPINIONS AS TO TRUST ESTATE. On the Closing Date, the Issuer shall furnish to the Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording and filing of this Indenture, any indentures supplemental hereto, and any other requisite documents, and with respect to the execution and filing of any financing statements and continuation statements, as are necessary to perfect and make effective the first priority lien and security interest in favor of the Trustee, created by this Indenture and reciting the details of such action, or stating that, in the opinion of such counsel, no such action is necessary to make such lien and security interest effective. SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES. (a) The Issuer will not take any action and will use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person's material covenants or obligations under any instrument or agreement included in the Trust Estate or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as expressly provided in this Indenture, the Sale and Servicing Agreement or such other instrument or agreement. (b) The Issuer may contract with other Persons acceptable to the Controlling Party to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Trustee in an Officer's Certificate of the Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer and the Administrator to assist the Issuer in performing its duties under this Indenture. The Owner Trustee shall not be responsible for the action or inaction of the Servicer or the Administrator. (c) The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the Related Documents and in the instruments and agreements included in the Trust Estate, including but not limited to filing or causing to be filed all UCC financing statements and continuation statements required to be filed by the terms of this Indenture and the Sale and Servicing Agreement in accordance with and within the time periods provided for herein and therein. (d) If the Issuer shall have knowledge of the occurrence of a Servicer Termination Event under the Sale and Servicing Agreement, the Issuer shall promptly notify the Trustee, JPMD and the Rating Agencies thereof, and shall specify in such - 18 - notice the action, if any, the Issuer is taking with respect of such default. If a Servicer Termination Event shall arise from the failure of the Servicer or the Seller to perform any of their respective duties or obligations under the Sale and Servicing Agreement with respect to the Receivables, the Issuer shall take all reasonable steps available to it to remedy such failure. (e) Upon any termination of the Servicer's rights and powers pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify the Trustee. As soon as a successor Servicer is appointed, the Issuer shall notify the Trustee and JPMD of such appointment, specifying in such notice the name and address of such successor Servicer. (f) The Issuer agrees that it will not waive timely performance or observance by the Servicer, the Backup Servicer, the Seller or OFL of their respective duties under the Related Documents without the prior consent of the Controlling Party. SECTION 3.08. NEGATIVE COVENANTS. Until the Termination Date, the Issuer shall not: (i) except as expressly permitted by this Indenture, the Purchase Agreement or the Sale and Servicing Agreement, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Trust Estate, unless directed to do so by the Controlling Party; (ii) claim any credit on, or make any deduction from the principal, interest or premium payable in respect of, the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Trust Estate; or (iii) (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the lien in favor of the Trustee created by this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien in favor of the Trustee created by this Indenture) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds thereof (other than tax liens, mechanics' liens and other liens that arise by operation of law, in each case on a Financed Vehicle and arising solely as a result of an - 19 - action or omission of the related Obligor), (C) permit the lien in favor of the Trustee created by this Indenture not to constitute a valid first priority (other than with respect to any such tax, mechanics' or other lien) security interest in the Trust Estate, or (D) amend, modify or fail to comply with the provisions of the Related Documents without the prior written consent of the Controlling Party. SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver to the Trustee and JPMD, within 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year ended December 31, 1996), an Officer's Certificate stating, as to the Authorized Officer signing such Officer's Certificate, that (i) a review of the activities of the Issuer during such year and of performance under this Indenture has been made under such Authorized Officer's supervision; and (ii) to the best of such Authorized Officer's knowledge, based on such review, the Issuer has complied with all conditions and covenants under this Indenture throughout such year, or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Authorized Officer and the nature and status thereof. SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS. (a) The Issuer shall not consolidate or merge with or into any other Person, unless (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States of America or any State and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form and substance satisfactory to the Trustee and JPMD, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture and each other Related Document on the part of the Issuer to be performed or observed, all as provided herein; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; - 20 - (iv) the Issuer shall have received an Opinion of Counsel which shall be delivered to and shall be satisfactory to the Trustee to the effect that such transaction will not have any material adverse tax consequence to the Trust, any Noteholder or any Certificateholder; (v) any action as is necessary to maintain the lien and security interest created in favor of the Trustee by this Indenture shall have been taken; (vi) the Issuer shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel (which shall describe the actions taken as required by clause (a)(v) of this Section 3.10 or that no such actions will be taken) each stating that such consolidation or merger and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been compiled with; and (vii) the Issuer or the Person (if other than the Issuer) formed by or surviving such consolidation or merger has a net worth, immediately after such consolidation or merger, that is (a) greater than zero and (b) not less than the net worth of the Issuer immediately prior to giving effect to such consolidation or merger. (b) The Issuer shall not convey or transfer all or substantially all of its properties or assets, including those included in the Trust Estate, to any Person (except as expressly permitted by the Indenture, the Purchase Agreement or the Sale and Servicing Agreement), unless (i) the Person that acquires by conveyance or transfer the properties and assets of the Issuer shall (A) be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form and substance satisfactory to the Trustee and the Note Majority, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture and each Related Document on the part of the Issuer to be performed or observed, all as provided herein, (C) expressly agree by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be subject and subordinate to the rights of Holders of the Notes and (D) unless otherwise provided in such supplemental indenture, expressly agree to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes; - 21 - (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel which shall be delivered to and shall be satisfactory to the Trustee and JPMD to the effect that such transaction will not have any material adverse tax consequence to the Trust, any Noteholder or any Certificateholder; (v) any action as is necessary to maintain the lien and security interest created in favor of the Trustee by this Indenture shall have been taken; (vi) the Issuer shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel (which shall describe the actions taken as required by clause (b)(v) of this Section 3.10 or that no such actions will be taken) each stating that such conveyance or transfer and such supplemental indenture comply with this Article III and that all conditions precedent herein provided for relating to such transaction have been complied with; and (vii) the Person acquiring by conveyance or transfer the properties or assets of the Issuer has a net worth, immediately after such conveyance or transfer, that is (a) greater than zero and (b) not less than the net worth of the Issuer immediately prior to giving effect to such conveyance or transfer. SECTION 3.11. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger of the Issuer in accordance with Section 3.10(a), the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein. (b) Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.10(b), Olympic Automobile Receivables Warehouse Trust will be released from every covenant and agreement of this Indenture to be observed or performed on the part of the Issuer with respect to the Notes immediately upon the delivery of written notice to the Trustee stating that Olympic Automobile Receivables Warehouse Trust is to be so released. SECTION 3.12. NO OTHER BUSINESS. The Issuer shall not engage in any business other than financing, purchasing, owning, selling and managing the Receivables in the - 22 - manner contemplated by this Indenture and the Related Documents and activities incidental thereto. SECTION 3.13. NO BORROWING. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any Indebtedness except for (i) the Notes, (ii) any other Indebtedness permitted by or arising under the Related Documents and (iii) a Securitized Offering. The proceeds of the Notes and the Certificates shall be used exclusively to fund the Issuer's purchase of the Receivables and the other assets specified in the Sale and Servicing Agreement and to pay the Issuer's organizational, transactional and start-up expenses. SECTION 3.14. SERVICER'S OBLIGATIONS. The Issuer shall cause the Servicer to comply with Sections 3.9, 3.10, 3.11 and 4.9(b) of the Sale and Servicing Agreement. SECTION 3.15. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as contemplated by the Sale and Servicing Agreement or this Indenture, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuming another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, any other interest in, or make any capital contribution to, any other Person. SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty). SECTION 3.17. RESTRICTED PAYMENTS. Except as expressly permitted by this Indenture or the Sale and Servicing Agreement, the Issuer shall not, directly or indirectly, (i) make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose. The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the Related Documents. SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the Trustee, the Controlling Party, JPMD and the Rating Agencies prompt written notice of each Event of Default hereunder, each default on the part of the Servicer or the Seller of its obligations under the Sale and Servicing Agreement and each default on the part of OFL of its obligations under the Purchase Agreement. - 23 - SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 3.20. COMPLIANCE WITH LAWS. The Issuer shall comply with the requirements of all applicable laws, the non-compliance with which would, individually or in the aggregate, materially and adversely affect the ability of the Issuer to perform its obligations under the Notes, this Indenture or any Related Document. SECTION 3.21. AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST AGREEMENT. The Issuer shall not agree to any amendment to Section 10.1 of the Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate the requirements thereunder that the Trustee or the Holders of the Notes consent to amendments thereto as provided therein. SECTION 3.22. [Reserved]. SECTION 3.23. INCOME TAX CHARACTERIZATION. For purposes of federal income, state and local income and franchise and any other income taxes, the Issuer and the Trustee hereby agree, and the Noteholders will agree by their acceptance of the Notes or any interest therein, to treat the Notes as indebtedness. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments of principal, interest and premium, if any, thereon and breakage payments in connection therewith, (iv) Sections 3.01, 3.03, 3.04, 3.05, 3.07, 3.08, 3.10, 3.12, 3.13, 3.20, 3.21 and 3.23, (v) the rights, obligations and immunities of the Trustee hereunder (including the rights of the Trustee under Section 6.07 and the obligations of the Trustee under Section 4.02) and (vi) the rights of Noteholders as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when (A) either (1) all Notes theretofore authenticated and delivered (other than (i) Notes that have been destroyed, lost or stolen and that have been replaced or - 24 - paid as provided in Section 2.05 and (ii) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 3.03) have been delivered to the Trustee for cancellation; or (2) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as part of the Trust Estate cash or direct obligations of or obligations guaranteed by the United States of America (which will mature prior to the date such amounts are payable), in trust in an Eligible Account in the name of the Trustee for such purpose, in an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation when due to the Final Maturity Date; (B) the Issuer has paid or caused to be paid all Secured Obligations; and (C) the Issuer has delivered to the Trustee an Officer's Certificate and an Independent Certificate from a firm of certified public accountants, each meeting the applicable requirements of Section 11.01(a) and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with and the Rating Agency Condition has been satisfied. SECTION 4.02. APPLICATION OF TRUST MONEY. All moneys deposited with the Trustee pursuant to Section 4.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Trustee may determine, to the Holders of the particular Notes for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Sale and Servicing Agreement or required by law. SECTION 4.03. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with the satisfaction and discharge of this Indenture with respect to the Notes, all moneys then held by any Paying Agent other than the Trustee under the provisions of this Indenture with respect to such Notes shall, upon demand of the Issuer, be paid to the Trustee to be held and applied according to Section 3.03 and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 4.04. RELEASE OF TRUST ESTATE. The Trustee shall, on or after the Termination Date, release any remaining portion of the Trust Estate from the lien created by this Indenture and deposit in the Collection Account any funds then on deposit in any other - 25 - Trust Account. The Trustee shall release property from the lien created by this Indenture pursuant to this Section 4.04 only upon receipt of an Issuer Request accompanied by an Officer's Certificate and, if requested by the Trustee, an Opinion of Counsel satisfying the criteria set forth in Section 11.01(a)(ii). ARTICLE V REMEDIES SECTION 5.01. EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default in the payment of any interest on any Note when the same becomes due and payable; or (ii) default in the payment of the principal of or any installment of the principal of any Note when the same becomes due and payable; or (iii) default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere in this Section specifically dealt with), or any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of 30 days after there shall have been given, by registered or certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the Controlling Party, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (v) the commencement of an involuntary case against the Issuer under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, and such case is not dismissed within 60 days; or - 26 - (vi) (A) the commencement by the Issuer of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, (B) the entry of an order for relief in an involuntary case against the Issuer under any such law, (C) the consent by the Issuer to the entry of any such order for relief, (D) the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, (E) the making by the Issuer of any general assignment for the benefit of creditors, (F) the failure by the Issuer generally to pay its debts as such debts become due, or (G) the taking of action by the Issuer in furtherance of any of the foregoing. The Issuer shall deliver to the Trustee, within five days after obtaining knowledge of the occurrence thereof, written notice in the form of an Officer's Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under clause (iii), its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 5.02. RIGHTS UPON EVENT OF DEFAULT. If an Event of Default shall have occurred and be continuing, the Notes shall become immediately due and payable, together with accrued interest thereon. If an Event of Default shall have occurred and be continuing, the Controlling Party may exercise any of the remedies specified in Section 5.04(a). SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE; AUTHORITY OF CONTROLLING PARTY. (a) The Issuer covenants that if any Notes are accelerated following the occurrence of an Event of Default, the Issuer will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal and interest, with interest upon the overdue principal, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the Interest Rate and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel, and any breakage payments in connection therewith. (b) The Trustee hereby irrevocably and unconditionally appoints the Controlling Party as the true and lawful attorney-in-fact of the Trustee for so long as the Trustee is not the Controlling Party, with full power of substitution, to execute, acknowledge and deliver any notice, document, certificate, paper, pleading or -27- instrument and to do in the name of the Controlling Party as well as in the name, place and stead of the Trustee such acts, things and deeds for or on behalf of and in the name of the Controlling Party under this Indenture (including specifically under Section 5.04) and under the Related Documents which the Trustee could or might do or which may be necessary, desirable or convenient in such Controlling Party's sole discretion to effect the purposes contemplated hereunder and under the Related Documents and, without limitation, following the occurrence of an Event of Default, exercise full right, power and authority to take, or defer from taking, any and all acts with respect to the administration, maintenance or disposition of the Trust Estate. (c) If an Event of Default occurs and is continuing, the Trustee may in its discretion but with the consent of the Controlling Party (except as provided in Section 5.03(d) below or as required to comply with Section 6.01(a)), proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate Proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. (d) Notwithstanding anything to the contrary contained in this Indenture (including without limitation Sections 5.04(a), 5.12, 5.13 and 5.17), if the Issuer fails to perform its obligations under Section 10.01(b) hereof when and as due, the Trustee may in its discretion (and without the consent of the Controlling Party) proceed to protect and enforce its rights and the rights of the Noteholders by such appropriate Proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for specific performance of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law; provided that the Trustee shall only be entitled to take any such actions without the consent of the Controlling Party to the extent such actions are taken only to enforce to Issuer's obligations to redeem the principal amount of Notes. (e) In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Trust Estate, Proceedings under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have -28- made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal, interest and premium, if any, owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, a standby trustee or Person performing similar functions in any such Proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith. (f) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. -29- (g) All rights of action and of asserting claims under this Indenture or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes. (h) In any Proceedings brought by the Trustee (including any Proceedings involving the interpretation of any provision of this Indenture), the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such Proceedings. SECTION 5.04. REMEDIES. (a) If an Event of Default shall have occurred and be continuing, the Controlling Party may: (i) institute Proceedings in its own name and as or on behalf of a trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Notes moneys adjudged due; (ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate; (iii) exercise any remedies of a secured party under the UCC and any other remedy available to the Trustee and take any other appropriate action to protect and enforce the rights and remedies of the Trustee for the benefit of the Noteholders under this Indenture or the Notes; and (iv) direct the Trustee to sell the Trust Estate or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law; SECTION 5.05. OPTIONAL PRESERVATION OF THE RECEIVABLES. If the Notes have been declared to be due and payable under Section 5.02 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Trustee may, but need not, unless otherwise directed by the Controlling Party, maintain possession of the Trust Estate. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes, and the Trustee shall take such desire into account when determining whether or not to maintain possession of the Trust Estate. In determining whether to maintain possession of the Trust Estate, the -30- Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose. SECTION 5.06. PRIORITIES. If the Trustee collects any money or property pursuant to this Article V or the Trustee receives proceeds of liquidation of the Trust Estate pursuant to Section 5.04(a)(iv), the Trustee shall pay as promptly as practicable out the money or property in the following order: FIRST: amounts due and owing and required to be distributed to the Servicer, the Owner Trustee, the Trustee, the Lockbox Bank, the Custodian and the Backup Servicer, respectively, pursuant to priorities (i), (ii) and (iii) of Section 4.6 of the Sale and Servicing Agreement and not previously distributed, in the order of such priorities and without preference or priority of any kind within such priorities; SECOND: to the Noteholders for amounts due and unpaid on the Notes for interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; THIRD: to the Noteholders for amounts due and unpaid on the Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal; FOURTH: amounts due and unpaid on the Certificates for interest and principal, to the Owner Trustee for distribution to Certificateholders in accordance with Section 5.2(d) of the Trust Agreement; FIFTH: any amounts due and owing to any Indemnified Party (as such term is used in the Note Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Note Purchase Agreement; and SIXTH: any amounts due and owing to any Indemnified Party (as such term is used in the Certificate Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Certificate Purchase Agreement. SECTION 5.07. LIMITATION OF SUITS. No Holder of any Notes shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given written notice to the Trustee of a continuing Event of Default; -31- (ii) the Holders of not less than 25% of the Outstanding Amount of such Notes have made written request to the Trustee to institute such Proceeding in respect of such Event of Default in its own name as Trustee hereunder; (iii) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in complying with such request; (iv) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and (v) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of such Notes; it being understood and intended that no one or more Holders of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided. In the event the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of such Notes, each representing less than a majority of the Outstanding Amount of such Notes, the Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture. SECTION 5.08. [Reserved]. SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Controlling Party or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Controlling Party or to such Noteholder, then and in every such case the Issuer, the Controlling Party and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Controlling Party and the Noteholders shall continue as though no such Proceeding had been instituted. SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Controlling Party or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given -32- hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.11. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the Controlling Party or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Noteholders, as the case may be. SECTION 5.12. CONTROL BY NOTEHOLDERS. The Controlling Party shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee with respect to the Notes or exercising any trust or power conferred on the Trustee; provided that (i) such direction shall not be in conflict with any rule of law or with this Indenture; (ii) subject to the express terms of Section 5.04, any direction to the Trustee to sell or liquidate all or any portion of the Trust Estate shall be by the Holders of Notes representing not less than 100% of the Outstanding Amount of the Notes; (iii) if the conditions set forth in Section 5.05 have been satisfied and the Trustee elects to retain the Trust Estate pursuant to such Section, then any direction to the Trustee by Holders of Notes representing less than 100% of the Outstanding Amount of the Notes to sell or liquidate all or any portion of the Trust Estate shall be of no force and effect; and (iv) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction; PROVIDED, HOWEVER, that, subject to Section 6.01, the Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Noteholders not consenting to such action. SECTION 5.13. WAIVER OF PAST DEFAULTS. The Controlling Party may waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or interest on any of the Notes or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Note. In the case of any such waiver, the Issuer, -33- the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 5.14. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (a) any suit instituted by the Trustee, (b) any suit instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date). SECTION 5.15. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantages of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.16. ACTION ON NOTES. The Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. -34- SECTION 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a) Promptly following a request from the Trustee to do so and at the Seller's expense, the Issuer agrees to take all such lawful action as the Trustee may request to compel or secure the performance and observance by the Seller, the Servicer and OFL, as applicable, of each of their obligations to the Issuer under or in connection with the Sale and Servicing Agreement or to the Seller under or in connection with the Purchase Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale and Servicing Agreement to the extent and in the manner directed by the Trustee, including the transmission of notices of default on the part of the Seller or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Seller or the Servicer of each of their obligations under the Sale and Servicing Agreement. (b) If an Event of Default has occurred and is continuing, the Trustee may, and at the direction (which direction shall be in writing, including facsimile) of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller or the Servicer under or in connection with the Sale and Servicing Agreement, including the right or power to take any action to compel or secure performance or observance by the Seller or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale and Servicing Agreement, and any right of the Issuer to take such action shall be suspended. (c) Promptly following a request from the Trustee to do so and at the Seller's expense, the Issuer agrees to take all such lawful action as the Trustee may request to compel or secure the performance and observance by OFL of each of its obligations to the Seller under or in connection with the Purchase Agreement in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Purchase Agreement to the extent and in the manner directed by the Trustee, including the transmission of notices of default on the part of the Seller thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by OFL of each of its obligations under the Purchase Agreement. (d) If an Event of Default has occurred and is continuing the Trustee may, and at the direction (which direction shall be in writing, including facsimile) of the Holders of 66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights, remedies, powers, privileges and claims of the Seller against OFL under or in connection with the Purchase Agreement, including the right or power to take any action to compel or secure performance or observance by OFL of each of its -35- obligations to the Seller hereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Purchase Agreement, and any right of the Seller to take such action shall be suspended. ARTICLE VI THE TRUSTEE SECTION 6.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and in the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs except to the extent that the Controlling Party has directed the Trustee to act or assumes the duties and/or responsibilities of the Trustee hereunder on behalf of the Noteholders. (b) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; however, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture and, if applicable, the Trustee's other Related Documents. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and -36- (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.12. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Sale and Servicing Agreement. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) In no event shall the Trustee be required to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer, or any other party, under the Sale and Servicing Agreement, except during such time, if any, as the Backup Servicer shall be the successor to, and be vested with the rights, powers, duties and privileges of the Servicer in accordance with the terms of, the Sale and Servicing Agreement. (i) The Trustee shall, and hereby agrees that it will, perform all of the obligations and duties required of it under the Sale and Servicing Agreement. (j) Without limiting the generality of this Section 6.01, the Trustee shall have no duty (i) to see to any recording, filing or depositing of this Indenture or any agreement referred to herein or any financing statement evidencing a security interest in the Financed Vehicles, or to see to the maintenance of any such recording or filing or depositing or to any recording, refiling or redepositing of any thereof, (ii) to see to any insurance of the Financed Vehicles or Obligors or to effect or maintain any such insurance, (iii) to see to the payment or discharge of any tax, assessment or other governmental charge or any Lien or encumbrance of any kind owing with respect to, assessed or levied against any part of the Trust, (iv) to confirm or verify the contents of any reports or certificates delivered to the Trustee pursuant to this Indenture or the Sale and Servicing Agreement believed by the Trustee to be genuine and to have been signed or presented by the proper party or parties, or (v) to inspect the Financed Vehicles at any time or ascertain or inquire as to the performance of observance of -37- any of the Issuer's, the Seller's or the Servicer's representations, warranties or covenants or the Servicer's duties and obligations as Servicer and as custodian of the Receivable Files under the Agreement. SECTION 6.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate (with respect to factual matters) or an Opinion of Counsel, as applicable. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officer's Certificate or Opinion of Counsel, as applicable, or as directed by the requisite amount of Note Owners as provided herein. (c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute willful misconduct, negligence or bad faith. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to institute, conduct or defend any litigation under this Indenture or in relation to this Indenture, at the request, order or direction of any of the Holders of Notes, pursuant to the provisions of this Indenture, unless such Holders of Notes shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby; PROVIDED, HOWEVER, that the Trustee shall, upon the occurrence of an Event of Default (that has not been cured), exercise the rights and powers vested in it by this Indenture with reasonable care and skill. -38- (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by the Holders of Notes evidencing not less than 25% of the Outstanding Amount thereof; PROVIDED, HOWEVER, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture or the Sale and Servicing Agreement, the Trustee may require reasonable indemnity against such cost, expense or liability as a condition to so proceeding; the reasonable expense of every such examination shall be paid by the Person making such request, or, if paid by the Trustee, shall be reimbursed by the Person making such request upon demand. SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee is required to comply with Sections 6.11 and 6.12. SECTION 6.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Trust Estate or the Notes, it shall not be accountable for the Issuer's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Issuer in the Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee's certificate of authentication. SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to JPMD and each Noteholder notice of the Default within 10 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Note (including payments pursuant to the mandatory redemption provisions of such Note), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Noteholders. SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS. The Trustee shall deliver to each Noteholder such information as may be required to enable such holder to prepare its federal and state income tax returns. SECTION 6.07. COMPENSATION AND INDEMNITY. (a) OFL in a separate letter agreement (the "Letter Agreement") has covenanted and agreed to pay to the Trustee, and the Trustee shall be entitled to, -39- certain annual fees, which shall not be limited by any law on compensation of a trustee of an express trust. In the Letter Agreement, OFL has also agreed to reimburse the Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. Pursuant to the Letter Agreement, OFL has agreed to indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. (b) If notwithstanding the provisions of the Letter Agreement, OFL fails to pay any fees or expenses due to the Trustee pursuant to the terms or the Letter Agreement, the Trustee shall be entitled to a distribution in respect of such amount pursuant of Section 4.6(ii) of the Sale and Servicing Agreement. The Issuer's payment obligations to the Trustee pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 5.01(v) or (vi) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or similar law. Notwithstanding anything else set forth in this Indenture or the Related Documents, the Trustee agrees that the obligations of the Issuer (but not OFL) to the Trustee hereunder and under the Related Documents shall be recourse to the Trust Estate only and specifically shall not be recourse to the assets of the General Partner of the Issuer or any Certificateholder. SECTION 6.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time by so notifying the Issuer and the Controlling Party. The Issuer may, with the consent of the Controlling Party, and, at the request of the Controlling Party shall, remove the Trustee if: (i) the Trustee fails to comply with Section 6.11; (ii) a court having jurisdiction in the premises in respect of the Trustee in an involuntary case or proceeding under federal or state banking or bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, shall have entered a decree or order granting relief or appointing a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator (or similar official) for the Trustee or for any substantial part of the Trustee's property, or ordering the winding-up or liquidation of the Trustee's affairs; (iii) an involuntary case under the federal bankruptcy laws, as now or hereafter in effect, or another present or future federal or state bankruptcy, -40- insolvency or similar law is commenced with respect to the Trustee and such case is not dismissed within 60 days; (iv) the Trustee commences a voluntary case under any federal or state banking or bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, conservator, sequestrator (or other similar official) for the Trustee or for any substantial part of the Trustee's property, or makes any assignment for the benefit of creditors or fails generally to pay its debts as such debts become due or takes any corporate action in furtherance of any of the foregoing; (v) the Trustee otherwise becomes incapable of acting; or (vi) the rating assigned to the long-term unsecured debt obligations of the Trustee (or the holding company thereof) by the Rating Agencies shall be lowered below the rating of "BBB", "Baa3" or equivalent rating or be withdrawn by either of the Rating Agencies. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee acceptable to the Controlling Party. If the Issuer fails to appoint such a successor Trustee, the Controlling Party may appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to the Noteholders and JPMD. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Controlling Party or the Issuer may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 6.11, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance -41- of appointment by the successor Trustee pursuant to this Section and payment of all fees and expenses owed to the outgoing Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the retiring Trustee shall be entitled to payment or reimbursement of such amounts as such Person is entitled pursuant to Section 6.07. SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. The Trustee shall provide the Rating Agencies prompt notice of any such transaction. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Trust may at the time be located, the Trustee, with the consent of the Controlling Party, shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Trust, or any part hereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section 6.11, and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required under Section 6.08 hereof. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it -42- being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee. (d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall provide copies of such reports to the Controlling Party upon request. -43- ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS SECTION 7.01. ISSUER TO FURNISH TO TRUSTEE NAMES AND ADDRESSES OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Trustee (a) not more than five days after the earlier of (i) each Record Date and (ii) three months after the last Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Notes as of such Record Date, (b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; PROVIDED, HOWEVER, that so long as the Trustee is the Note Registrar, no such list shall be required to be furnished. The Trustee or, if the Trustee is not the Note Registrar, the Issuer shall furnish to the Controlling Party in writing on an annual basis on each March 31 and at such other times as the Controlling Party may request a copy of the list. SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list furnished to the Trustee as provided in Section 7.01 and the names and addresses of Holders of Notes received by the Trustee in its capacity as Note Registrar. The Trustee may destroy any list furnished to it as provided in such Section 7.01 upon receipt of a new list so furnished. ARTICLE VIII ACCOUNTS, DISBURSEMENTS AND RELEASES SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Trustee pursuant to this Indenture. The Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of this Indenture or the Notes, the Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V. -44- SECTION 8.02. TRUST ACCOUNTS. (a) On or prior to the Closing Date, the Issuer shall cause the Servicer to establish and maintain, in the name of the Trustee, for the benefit of the Noteholders and the Certificateholders, the Trust Accounts as provided in Section 4.1 of the Sale and Servicing Agreement. The Trustee shall apply the moneys in such Trust Accounts in accordance with the provisions of this Indenture and the Sale and Servicing Agreement. (b) On each Payment Date and Redemption Date, the Trustee shall distribute all amounts on deposit in the Note Distribution Account to Noteholders in respect of the Notes to the extent of amounts due and unpaid on the Notes for principal, interest and premium, if any, first to pay all accrued and unpaid interest, and then to pay principal and premium, if any, on the Notes in the following amounts and in the following order of priority (except as otherwise provided in Section 5.06): (i) accrued and unpaid interest on the Notes, provided that if funds in the Note Distribution Account are not sufficient to pay the entire amount of accrued but unpaid interest on the Notes, the amount in the Note Distribution Account shall be applied to the payment of such interest pro rata on the basis of the principal amount of Notes held by each Noteholder; (ii) (w) to the Holders of Notes in reduction of the Outstanding Amount of the Notes, an amount equal to the Noteholders' Percentage of any Principal Funding Excess Amount, (x) on a Payment Date prior to the Purchase Termination Date on which the Facility Balance exceeds the Facility Limit, to the Holders of the Notes in reduction of the Outstanding Amount of the Notes, an amount equal to the excess of (1) the Facility Balance over (2) the Facility Limit and (y) on each Payment Date on or after the Purchase Termination Date, to the Holders of the Notes in reduction of the Outstanding Amount of the Notes, until the Outstanding Amount of the Notes is reduced to zero; and (iii) any amounts due and owing to any Indemnified Party (as such term is used in the Note Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Note Purchase Agreement. SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Trust Accounts shall be invested and reinvested in Eligible Investments in accordance with the provisions of Section 4.1(e) of the Sale and Servicing Agreement. -45- (b) Subject to Section 6.01(c), the Trustee shall not in any way be held liable by reason of any insufficiency in any of the Trust Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Trustee's failure to make payments on such Eligible Investments issued by the Trustee, in its commercial capacity as principal obligor and not as Trustee, in accordance with their terms. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a) Without the consent of the Holders of any Notes but with the consent of JPMD and with prior notice to the Rating Agencies, the Issuer and the Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (i) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien created by this Indenture, or to subject to the lien created by this Indenture additional property; (ii) to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Notes contained; (iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes, or to surrender any right or power herein conferred upon the Issuer; (iv) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee; (v) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture which may be inconsistent with any other provision herein or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under this Indenture or -46- in any supplemental indenture; PROVIDED that such action shall not adversely affect the interests of the Holders of the Notes; or (vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Article VI. The Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained. (b) The Issuer and the Trustee, when authorized by an Issuer Order, may, with the consent of the Controlling Party and with prior notice to the Rating Agencies, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder. SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies, with the consent of the Note Majority, by Act of such Holders delivered to the Issuer and the Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that, no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: (i) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate thereon or the Redemption Price with respect thereto, change the provision of this Indenture relating to the application of collections on, or the proceeds of the sale of, the Trust Estate to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of the provisions of this Indenture requiring the application of funds available therefor, as provided in Article V, to the payment of any such amount due on the Notes on or after the respective due dates thereof (or, in the case of redemption, on or after the Redemption Date); -47- (ii) reduce the percentage of the Outstanding Amount of the Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; (iii) modify or alter the provisions of the proviso to the definition of the term "Outstanding"; (iv) reduce the percentage of the Outstanding Amount of the Notes required to direct the Trustee to direct the Issuer to sell or liquidate the Trust Estate pursuant to Section 5.04; (v) modify any provision of this Section except to increase any percentage specified herein or to provide that certain additional provisions of this Indenture or the Related Documents cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby; (vi) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date (including the calculation of any of the individual components of such calculation) or to affect the rights of the Holders of Notes to the benefit of any provisions for the mandatory redemption of the Notes contained herein; or (vii) permit the creation of any lien ranking prior to or on a parity with the lien created by this Indenture with respect to any part of the Trust Estate or, except as otherwise permitted or contemplated herein, terminate the lien created by this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security provided by the lien created by this Indenture. The Trustee may in its discretion determine whether or not any Notes would be affected by any supplemental indenture, and any such determination shall be conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Trustee shall not be liable for any such determination made in good faith. It shall not be necessary for any Act of Noteholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to this Section, the Trustee shall mail to the Holders of the Notes to -48- which such amendment or supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02 shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Trustee's own rights, duties, liabilities or immunities under this Indenture or otherwise. SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Trustee, the Issuer and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 9.05. [Reserved]. SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Trustee shall, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuer or the Trustee shall so determine, new notes so modified as to conform, in the opinion of the Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes. -49- ARTICLE X REDEMPTION OF NOTES SECTION 10.01. REDEMPTION. (a) In the event that the Seller or the Servicer pursuant to Sections 9.1(a) or 9.1(b) of the Sale and Servicing Agreement purchases the corpus of the Trust, the Notes are subject to redemption in whole, but not in part, on any Business Day on which such repurchase occurs, for a purchase price equal to the Redemption Price; PROVIDED, HOWEVER, that the Issuer has available funds sufficient to pay the Redemption Price. The Seller, the Servicer or the Issuer shall furnish the Rating Agencies notice of such redemption. If the Notes are to be redeemed pursuant to this Section 10.01(a), the Servicer or the Issuer shall furnish notice of such election to the Trustee not later than 3 days prior to the Redemption Date, and the Issuer shall deposit with the Trustee in the Note Distribution Account the Redemption Price of the Notes to be redeemed, whereupon all such Notes shall be due and payable on the Redemption Date upon the furnishing of a notice complying with Section 10.02 to each Holder of the Notes. Notes redeemed pursuant to Section 9.1(b) may be reissued in accordance with the provisions of Article II hereof provided that neither the Seller nor the Servicer shall have given notice of final termination of the Trust. (b) The Issuer may, at any time upon giving proper notice as required by Section 10.02 hereof, redeem in whole, but not in part, the Notes on any Business Day in connection with a Securitized Offering for a price equal to the Redemption Price; PROVIDED, HOWEVER, that the Issuer has available funds sufficient to pay the Redemption Price; and PROVIDED FURTHER, HOWEVER, that, in the case of a Redemption of all outstanding Notes in connection with a Securitized Offering, the Seller has repurchased or is simultaneously with the redemption repurchasing any Receivables that are not eligible to be included in such Securitized Offering pursuant to Section 6.5 of the Sale and Servicing Agreement. If the Notes are to be redeemed pursuant to this Section 10.01(b), the Servicer or the Issuer shall furnish notice of such election to the Trustee not later than ten days prior to the Redemption Date, and the Issuer shall deposit with the Trustee in the Note Distribution Account the Redemption Price of the Notes to be redeemed, whereupon all such Notes shall be due and payable on the Redemption Date upon furnishing of a notice complying with Section 10.02 to each Holder of the Notes. (c) In the event that the assets of the Trust are sold pursuant to Section 9.2 of the Trust Agreement, the proceeds of such sale shall be distributed as provided in Section 5.06. If amounts are to be paid to Noteholders pursuant to this Section 10.01(c), the Servicer or the Issuer shall, to the extent practicable, furnish notice of -50- such event to the Trustee not later than ten days prior to the Redemption Date whereupon all such amounts shall be payable on the Redemption Date. (d) The Issuer may, at any time upon giving proper notice as required by Section 10.02 hereof, redeem in whole or in part, the Notes on any Business Day in connection with a Recapitalization for a price equal to the Redemption Price for the Notes that are redeemed. A portion of the Redemption Price equal to the outstanding principal amount of the Notes being redeemed shall be paid by issuance of new Non-Callable Notes in like principal amount to each Noteholder; PROVIDED, HOWEVER, that the Issuer has available funds sufficient to pay the remainder of the Redemption Price. If all or any part of the Notes are to be redeemed pursuant to this Section 10.01(d), the Servicer or the Issuer shall furnish notice of such election to the Trustee not later than 3 days prior to the Redemption Date, and the Issuer shall deliver to the Trustee for authentication and delivery the Non-Callable Notes being issued in the Recapitalization and deposit with the Trustee in the Note Distribution Account the balance of the Redemption Price of the Notes to be redeemed, whereupon such Notes to be redeemed shall be due and payable on the Redemption Date upon furnishing of a notice complying with Section 10.02 to each Holder of the Notes. Redemption of any Notes in a Recapitalization shall be evidenced by the decreases marked in the Note Register pursuant to Section 2.03(b). Notwithstanding anything in this Section 10.01, no redemption pursuant to Section 10.01 (a), (b) or (c) shall occur unless the Issuer shall have deposited the amount, if any, required to be deposited in the Commercial Paper Funding Account pursuant to Section 2.10 of the Note Purchase Agreement. SECTION 10.02. FORM OF REDEMPTION NOTICE. (a) Notice of redemption under Section 10.01(a) or 10.01(b) shall be given by the Trustee in writing (which may be by facsimile) not less than three days prior to the applicable Redemption Date to each Holder of Notes, as of the close of business on the Record Date with respect to the Payment Date immediately preceding the applicable Redemption Date, at such Holder's address appearing in the Note Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; and (iii) except in connection with a Recapitalization, the place where such Notes are to be surrendered for payment of the Redemption Price (which -51- shall be the office or agency of the Issuer to be maintained as provided in Section 3.02). Notice of redemption of the Notes shall be given by the Trustee in the name and at the expense of the Issuer. Failure to give notice of redemption, or any defect therein, to any Holder of any Note shall not impair or affect the validity of the redemption of any other Note. (b) Prior notice of redemption under Section 10.01(c) is not required to be given to Noteholders. SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes or portions thereof to be redeemed shall, following notice of redemption (if any) as required by Section 10.02, on the Redemption Date become due and payable at the Redemption Price and (unless the Issuer shall default in the payment of the Redemption Price) no interest shall accrue on the Redemption Price (other than any portion thereof represented by Non-Callable Notes in accordance with Section 10.01(d), which shall accrue interest in accordance with the terms of such Non- Callable Notes) for any period after the date to which accrued interest is calculated for purposes of calculating the Redemption Price. ARTICLE XI MISCELLANEOUS SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any application or request by the Issuer to the Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Trustee and to the Controlling Party (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with. (b) (i) Prior to the deposit of any Indenture Collateral or other property or securities with the Trustee that is to be made the basis for the release of any property subject to the lien created by this Indenture, the Issuer shall, in addition to any obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish to the Trustee and the Controlling Party an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Indenture Collateral or other property or securities to be so deposited. -52- (ii) Whenever the Issuer is required to furnish to the Trustee and the Controlling Party an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuer shall also deliver to the Trustee and the Controlling Party an Independent Certificate as to the same matters, if the fair value to the Issuer of the property to be so deposited and of all other such property made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the Outstanding Amount of the Notes, but such a certificate need not be furnished with respect to any property so deposited, if the fair value thereof to the Issuer as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the Outstanding Amount of the Notes. (iii) Other than with respect to any release described in clause (A) or (B) of Section 11.01(b)(v), whenever any property or securities are to be released from the lien created by this Indenture, the Issuer shall also furnish to the Trustee and the Controlling Party an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security created by this Indenture in contravention of the provisions hereof. (iv) Whenever the Issuer is required to furnish to the Trustee and the Controlling Party an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuer shall also furnish to the Trustee and the Controlling Party an Independent Certificate as to the same matters if the fair value of the property or securities and of all other property or securities (other than property described in clauses (A) or (B) of Section 11.01(b)(v)) released from the lien created by this Indenture since the commencement of the then current fiscal year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the Outstanding Amount of the Notes, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than $25,000 or less than one percent of the then Outstanding Amount of the Notes. (v) Notwithstanding any other provision of this Section, the Issuer may, without compliance with the other provisions of this Section (A), collect, liquidate, sell or otherwise dispose of Receivables as and to the extent permitted or required by the Related Documents (including as provided in Section 3.1 of the Sale and Servicing Agreement) and (B) make cash payments -53- out of the Trust Accounts as and to the extent permitted or required by the Related Documents. SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Seller or the Issuer, stating that the information with respect to such factual matters is in the possession of the Servicer, the Seller or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture, in connection with any application or certificate or report to the Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VI. SECTION 11.03. ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor -54- signed by such Noteholders in person or by agents duly appointed in writing; and except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any person of any such instrument or writing may be proved in any manner that the Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 11.04. NOTICES, ETC., TO TRUSTEE, ISSUER, JPMD AND THE RATING AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to or filed with: (a) the Trustee by any Noteholder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, (b) the Issuer by the Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage prepaid, to the Issuer addressed to: Olympic Automobile Receivables Warehouse Trust, in care of Wilmington Trust Company, as Owner Trustee, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration or at any other address previously furnished in writing to the Trustee by Issuer. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Trustee, or (c) JPMD by the Trustee, by the Issuer or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage prepaid, to JPMD addressed to: J.P. Morgan Delaware, 902 Market Street, Wilmington, Delaware 19801, Attention: Asset Finance Group, or at any other -55- address previously furnished in writing to the Trustee and the Issuer by JPMD. JPMD shall promptly transmit any notice received by it from the Noteholders to the Trustee and the Issuer. Notices required to be given to the Rating Agencies by the Issuer, the Trustee or the Owner Trustee shall be in writing, personally delivered or mailed by certified mail, return receipt requested to (i) in the case of Moody's, at the following address: Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007 and (ii) in the case of Standard & Poor's, at the following address: Standard & Poor's Ratings Group, 26 Broadway (20th Floor), New York, New York 10004, Attention of Asset Backed Surveillance Department; or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties. SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides for notice to Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Noteholder affected by such event, at his address as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Noteholder shall affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default. SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the -56- Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Trustee a copy of each such agreement and the Trustee will cause payments to be made and notices to be given in accordance with such agreements. SECTION 11.07. [Reserved]. SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 11.09. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture and the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.10. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 11.11. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Trust Estate, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 11.12. LEGAL HOLIDAYS. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date. SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.14. COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -57- SECTION 11.15. RECORDING OF INDENTURE. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Trustee or any other counsel reasonably acceptable to the Trustee, and the Controlling Party) to the effect that such recording is necessary either for the protection of the Noteholders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Trustee under this Indenture. SECTION 11.16. TRUST OBLIGATION. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Trustee or of any successor or assign of the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement. SECTION 11.17. NO PETITION. The Trustee, by entering into this Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree that they will not at any time institute against the Seller, the Issuer or the General Partner, or join in any institution against the Seller, the Issuer or the General Partner of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Related Documents. SECTION 11.18. INSPECTION. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Trustee or of the Controlling Party, during the Issuer's normal business hours, to examine all the books of account, records, reports, and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited by independent certified public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees, and independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Trustee shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for -58- confidential treatment are unavailing) and except to the extent that the Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. SECTION 11.19. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Issuer is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Issuer, (c) nothing herein contained shall be construed as creating any liability on Wilmington Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties to this Agreement and by any person claiming by, through or under them and (d) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer under this Agreement or any related documents. 59 IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture to be duly executed by their respective officers, thereunto duly authorized, all as of the day and year first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, By /s/ Emmett R. Harmon -------------------------------------------- Name: Emmett R. Harmon Title: Vice President NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but solely as Trustee, By /s/ Robert N. Guimont --------------------------------------------- Name: Robert N. Guimont Title: Assistant Vice President EXHIBIT A SCHEDULE OF RECEIVABLES EXHIBIT B [Form of Variable Funding Note] REGISTERED No. __ OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST VARIABLE FUNDING NOTE THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR REGULATORY AUTHORITY OF ANY STATE. THIS NOTE HAS BEEN OFFERED AND SOLD PRIVATELY. THE HOLDER HEREOF ACKNOWLEDGES THAT THESE SECURITIES ARE "RESTRICTED SECURITIES" THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND AGREES FOR THE BENEFIT OF THE ISSUER AND ITS AFFILIATES THAT THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SECTION 5 OF THE SECURITIES ACT PROVIDED THE ISSUER IS PROVIDED WITH AN OPINION OF COUNSEL THAT SUCH TRANSFER IS SO EXEMPT, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN CONDITIONS REFERRED TO IN THE NOTE PURCHASE AGREEMENT PURSUANT TO WHICH THIS NOTE WAS PURCHASED. NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE ACQUIRED BY (A) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE 1 OF ERISA, (B) A PLAN DESCRIBED IN SECTION 4975 (E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (C) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY (EACH A "BENEFIT PLAN"). BY ACCEPTING AND HOLDING THIS NOTE OR ANY INTEREST HEREIN, THE HOLDER HEREOF OR ANY OWNER OF AN INTEREST HEREIN SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT A BENEFIT PLAN. THIS NOTE IS PREPAYABLE IN WHOLE OR IN PART ON ANY BUSINESS DAY. THE PRINCIPAL ON THIS NOTE IS PAYABLE IN INSTALLMENTS ON PAYMENT DATES AND REDEMPTION DATES IN THE AMOUNTS DESCRIBED IN THE INDENTURE REFERRED TO HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF AND UNPAID INTEREST ON THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. B-1 OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST VARIABLE FUNDING NOTE Olympic Automobile Receivables Warehouse Trust, a business trust organized and existing under the laws of the State of Delaware (herein referred to as the "ISSUER"), for value received, hereby promises to pay to _____________________, the principal sum of [ ], payable in installments on Payment Dates and Redemption Dates in the amounts described in the Indenture referred to on the reverse hereof; PROVIDED, HOWEVER, that the entire unpaid principal amount of this Note shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, so long as the Controlling Party has declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture referred to on the reverse hereof. The Issuer will pay interest on this Note at the Note Interest Rate and the Note Interest Arrearage on each Payment Date and Redemption Date, until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date) or, with respect to the first Payment Date, on the Funding Date (as such term is defined in the Note Purchase Agreement). Interest on this Note will accrue for each Payment Date for the calendar month preceding the month in which such Payment Date occurs or, with respect to the first Payment Date, for the period commencing on the Funding Date and ending on the last day of the calendar month preceding the month in which the first Payment Date occurs. Such principal of and interest and premium, if any, on this Note shall be paid in the manner specified on the reverse hereof. The principal of and interest and premium, if any, on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. Unless the certificate of authentication hereon has been executed by the Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE HEREOF, WHICH SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FACE OF THIS NOTE. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. Dated: _______ OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust B-2 Agreement, By_________________________________ Name: Title: B-3 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes designated above and referred to in the within-mentioned Indenture. Dated: _______ NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but solely as Trustee, By ----------------------------------------- Authorized Signatory B-4 [REVERSE OF NOTE] This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Variable Funding Notes (herein called the "NOTES"), all issued under an Indenture, dated as of December 28, 1995 (such indenture, as supplemented or amended, herein called the "INDENTURE"), between the Issuer and Norwest Bank Minnesota, National Association, as trustee (the "TRUSTEE", which term includes any successor Trustee under the Indenture), to which the Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have the meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Notes are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. Principal of the Notes will be payable on certain Payment Dates and on each Redemption Date in an amount described in the Indenture. "PAYMENT DATE" means the fifteenth day of each month, or, if any such date is not a Business Day, the next succeeding Business Day, commencing February 15, 1996. The entire unpaid principal amount of this Note shall be due and payable on the earlier of the Final Scheduled Distribution Date and the Redemption Date, if any, pursuant to Section 10.01(a), 10.01(b) or 10.01(c) of the Indenture. All or a portion of the unpaid principal balance of this Note shall be due and payable on the Redemption Date, if any, pursuant to Section 10.01(d) of the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing, unless the Controlling Party has waived such Event of Default in the manner provided in Section 5.13 of the Indenture. All principal payments on the Notes shall be made pro rata to the Noteholders entitled thereto. Payments of interest on this Note due and payable on each Payment Date and Redemption Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be paid to the Person in whose name such Note is registered on the Record Date, by wire transfer in immediately available funds to the account designated by such Person. Any reduction in the principal amount of this Note affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date or Redemption Date, then the Trustee, in the name of and on behalf of the Issuer, will notify the Person in whose name a Note is registered at the close of business on the Record Date with respect to such Payment Date or the Payment Date immediately preceding such Redemption Date by notice mailed within five days of such Payment Date or Redemption Date, as applicable, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Trustee's principal Corporate Trust Office, at the office of the Trustee's agent appointed for such purposes located in The City of New York, or at the place specified in such notice. As provided in the Indenture, the Notes may be redeemed (a) pursuant to B-5 Section 10.01(a) of the Indenture, in whole, but not in part, at the option of the Seller or the Servicer, after the date on which the Seller or the Servicer, pursuant to Section 9.1(a) or 9.1(b) of the Sale and Servicing Agreement, purchases the corpus of the Trust, (b) pursuant to Section 10.01(b) of the Indenture, in whole, but not in part, on any Business Day, in connection with a Securitized Offering, (c) in connection with Section 10.01(c) of the Indenture, and (d) pursuant to Section 10.01(d) of the Indenture, in whole or in part, on any Business Day, in connection with a Recapitalization, PROVIDED, HOWEVER, that any redemption of Notes in part shall be made on a pro rata basis to the Holders of Notes. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in the city in which the Corporate Trust Office is located, or a member firm of a national securities exchange, and such other documents as the Trustee may require, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange. Each Noteholder, by acceptance of a Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee or the Trustee or of any successor or assign of the Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. Each Noteholder by acceptance of a Note covenants and agrees that by accepting the benefits of the Indenture and such Note that such Noteholder will not at any time institute against the Seller, the Issuer or the General Partner, or join in any institution against the Seller, the Issuer or the General Partner of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the Related Documents. It is the intent and agreement of the Issuer, the Trustee and the Noteholders that, for purposes of federal income, state and local income and franchise and any other income taxes, the Notes will be treated as debt. Each B-6 Noteholder by acceptance of this Note covenants and agrees to treat this Note as debt for such tax purposes and to take no action inconsistent with such treatment. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Note Majority. The Indenture also contains provisions permitting the Controlling Party, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Trustee and the Holder of Notes under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Related Documents, neither Wilmington Trust Company in its individual capacity, any owner of a beneficiary interest in the Issuer, nor any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture, it being expressly understood that said covenants, obligations and B-7 indemnifications have been made by the Owner Trustee for the sole purpose of binding the interests of the Owner Trustee in the assets of the Issuer. The Holder of this Note by the acceptance hereof agrees that except as expressly provided in the Related Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. B-8 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: - ----------------------------- FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto_________________________________________________________________________ ______________________________________ (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints ______________ attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: ----------------- Signature Guaranteed: ** ---------------------------- - -------------------------------- ** NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. B-9 EX-10.8 11 INDENTURE DATED JUNE 12, 1996 EXECUTION COPY - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SUPPLEMENTAL INDENTURE Dated as of June 12, 1996 to INDENTURE Dated as of December 28, 1995 between OLYMPIC AUTOMOBILES RECEIVABLES WAREHOUSE TRUST Issuer NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Trustee and MORGAN GUARANTY TRUST COMPANY OF NEW YORK Administrative Agent - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ TABLE OF CONTENTS PAGE ---- ARTICLE I DEFINITIONS ARTICLE II SUPPLEMENTAL INDENTURE SECTION 2.1. Amendment to Section 2.02 of the Indenture......... 1 SECTION 2.2. Amendment to Section 2.03 of the Indenture......... 2 SECTION 2.3. Amendment to Section 2.07 of the Indenture......... 2 SECTION 2.4. Amendment to Section 3.18 of the Indenture......... 2 SECTION 2.5. Amendment to Section 5.03 of the Indenture......... 2 SECTION 2.6. Amendment to Section 5.05 of the Indenture......... 2 SECTION 2.7. Amendment to Section 5.09 of the Indenture......... 2 SECTION 2.8. Amendment to Section 7.01 of the Indenture......... 3 SECTION 2.9. Amendment to Section 9.01 of the Indenture......... 3 SECTION 2.10. Amendment to Section 11.01 of the Indenture........ 3 SECTION 2.11. Amendment to Section 11.04 of the Indenture........ 3 SECTION 2.12. Amendment to Section 11.15 of the Indenture........ 3 SECTION 2.13. Amendment to Section 11.18 of the Indenture........ 3 ARTICLE III MISCELLANEOUS SECTION 3.1. Counterparts....................................... 3 SECTION 3.2. Governing Law; Entire Agreement.................... 3 SECTION 3.3. Headings........................................... 4 SECTION 3.4. Effectiveness of Supplemental Indenture............ 4 SECTION 3.5. Effect of Supplemental Indenture................... 4 SECTION 3.6. Indenture in Full Force and Effect as Supplemented................................. 4 -i- SUPPLEMENTAL INDENTURE dated as of June 12, 1996 (the "SUPPLEMENTAL INDENTURE") to INDENTURE dated as of December 28, 1995 (the "INDENTURE"), between Olympic Automobile Receivables Warehouse Trust, a Delaware business trust (the "ISSUER") and Norwest Bank Minnesota, National Association, a national banking association, in its capacities as trustee ("the "TRUSTEE") and not in its individual capacity. WHEREAS, the Issuer and the Trustee have entered into the Indenture; WHEREAS, pursuant to Section 9.01(b) of the Indenture, the Issuer and the Trustee desire to enter into this Supplemental Indenture; WHEREAS, the Issuer has executed and delivered to the Trustee pursuant to Section 9.01(b) of the Indenture an Issuer Order, authorizing this Supplemental Indenture; WHEREAS, each of JPMD and a Note Majority has consented to the execution of this Supplemental Indenture as required by Section 9.01(b) of the Indenture; WHEREAS, it is the intent of the parties that this Supplemental Indenture be effective as of the date set forth above (the "EFFECTIVENESS DATE"); NOW, THEREFORE, the parties to this Supplemental Indenture hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined herein or the context otherwise requires, defined terms used herein shall have the meanings ascribed thereto in the Indenture. ARTICLE II SUPPLEMENTAL INDENTURE SECTION 2.1. AMENDMENT TO SECTION 2.02 OF THE INDENTURE. The third paragraph of Section 2.02 of the Indenture is hereby amended by deleting the reference to the amount "$200,000,000" and substituting therefor "$300,000,000." SECTION 2.2. AMENDMENT TO SECTION 2.03 OF THE INDENTURE. Section 2.03(a) of the Indenture is hereby amended by deleting the reference to the amount "$19,800,000" and substituting therefor "$29,700,000." SECTION 2.3. AMENDMENT TO SECTION 2.07 OF THE INDENTURE. Section 2.07(b) of the Indenture is hereby amended by deleting the words "so long as the Controlling Party has declared the Notes to be immediately due and payable in the manner provided in Section 5.02." SECTION 2.4. AMENDMENT TO SECTION 3.18 OF THE INDENTURE. Section 3.18 of the Indenture is hereby amended by deleting the word "JPMD" and the comma which precedes it. SECTION 2.5. AMENDMENT TO SECTION 5.03 OF THE INDENTURE. Section 5.03(b) of the Indenture is hereby amended by deleting the words "for so long as the Trustee is not the Controlling Party." SECTION 2.6. AMENDMENT TO SECTION 5.05 OF THE INDENTURE. Section 5.05 of the Indenture is hereby amended to read in its entirety as follows: "SECTION 5.05. OPTIONAL PRESERVATION OF THE RECEIVABLES. If the Notes have become due and payable under Section 5.02 following an Event of Default, the Trustee may, but need not, unless otherwise directed by the Controlling Party, maintain possession of the Trust Estate. It is the desire of the parties hereto and the Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Notes, and the Trustee shall take such desire into account when determining whether or not to maintain possession of the Trust Estate. In determining whether to maintain possession of the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Trust Estate for such purpose". SECTION 2.7. AMENDMENT TO SECTION 5.09 OF THE INDENTURE. Section 5.09 of the Indenture is hereby amended to read in its entirety as follows: "SECTION 5.09 RESTORATION OF RIGHTS AND REMEDIES. If the Controlling Party or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Controlling Party or to such Noteholder, then and in every such case the Issuer, the Controlling Party and any such Noteholder shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Controlling Party and any such Noteholder shall continue as though no such Proceeding had been instituted". SECTION 2.8. AMENDMENT TO SECTION 7.01 OF THE INDENTURE. Section 7.01 of the Indenture is hereby amended by deleting each reference to the words "the Controlling Party" and substituting therefor "JPMD." -2- SECTION 2.9. AMENDMENT TO SECTION 9.01 OF THE INDENTURE. Section 9.01(b) of the Indenture is hereby amended by deleting the words "the Controlling Party" and substituting therefor "JPMD." SECTION 2.10. AMENDMENT TO SECTION 11.01 OF THE INDENTURE. Section 11.01 of the Indenture is hereby amended by deleting each reference to the words "the Controlling Party" and substituting therefor "JPMD." SECTION 2.11. AMENDMENT TO SECTION 11.04 OF THE INDENTURE. Section 11.04(c) of the Indenture is hereby amended by deleting the words "902 Market Street, Wilmington, Delaware 19801" and substituting therefor "500 Stanton Christiana Road, Newark, Delaware 19713-2107." SECTION 2.12. AMENDMENT TO SECTION 11.15 OF THE INDENTURE. Section 11.15 of the Indenture is hereby amended by deleting the words "the Controlling Party" and substituting therefor "JPMD." SECTION 2.13. AMENDMENT TO SECTION 11.18 OF THE INDENTURE. Section 11.18 of the Indenture is hereby amended by deleting the words "the Controlling Party" and substituting therefor "JPMD." ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. This Supplemental Indenture may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS SUPPLEMENTAL INDENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Supplemental Indenture and the Indenture (and all exhibits, annexes and schedules thereto) constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 3.3. HEADINGS. The various headings of this Supplemental Indenture are inserted for convenience only and shall not affect the meaning or interpretation of this Supplemental Indenture or any provisions hereof or thereof. SECTION 3.4. EFFECTIVENESS OF SUPPLEMENTAL INDENTURE. This Supplemental Indenture shall become effective when the Trustee shall have received (a) counterparts hereof executed on behalf of the Issuer and the Trustee, and evidencing the consent of JPMD, -3- (b) the consent of JPMD, on behalf of Delaware Funding Corporation, as sole Noteholder, to the terms of this Supplemental Indenture and (c) evidence of written notice to S&P and Moody's of this Supplemental Indenture. The Trustee shall be entitled to receive, as a condition to the effectiveness of this Supplemental Indenture, an Opinion of Counsel stating that this Supplemental Indenture does not adversely affect in any material respect the interests of any Noteholder. SECTION 3.5. EFFECT OF SUPPLEMENTAL INDENTURE. Pursuant to Section 9.04 of the Indenture, upon the execution of this Supplemental Indenture pursuant to the provisions of Article IX of the Indenture, the Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to the Notes affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under the Indenture of the Trustee, the Issuer and the Holders of the Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of this Supplemental Indenture shall be and be deemed to be part of the terms and conditions of the Indenture for any and all purposes. SECTION 3.6. INDENTURE IN FULL FORCE AND EFFECT AS SUPPLEMENTED. Except as specifically stated herein, all of the terms and conditions of the Indenture shall remain in full force and effect. All references to the Indenture in any other document or instrument shall be deemed to mean the Indenture, as supplemented by this Supplemental Indenture. This Supplemental Indenture shall not constitute a novation of the Indenture, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Indenture, as supplemented by this Supplemental Indenture, as though the terms and obligations of the Indenture were set forth herein. -4- IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and delivered by their authorized officers, all as of the date and year first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement By: __________________________________ Name: Title: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but solely as Trustee By: __________________________________ Name: Title: AGREED AND CONSENTED: MORGAN GUARANTY TRUST COMPANY OF NEW YORK in its capacity as Administrative Agent for DFC, as sole Noteholder, and the purchasers under the DFC Asset Purchase Agreement and as agent for the banks under the Program Facility and as agent for the Investor Group By: __________________________________ Name: Title: -5- EX-10.9 12 RECEIVABLES PURCHASE AGREEMENT EXECUTION COPY RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT between OLYMPIC RECEIVABLES FINANCE CORP. II Purchaser and OLYMPIC FINANCIAL LTD. Seller dated as of December 28, 1995 TABLE OF CONTENTS ARTICLE I DEFINITIONS SECTION 1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2 Specific Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.3 Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 1.4 Certain References . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 1.5 No Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 1.6 Action by or Consent of Noteholders or Certificateholders. . . . 4 ARTICLE II CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY SECTION 2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 2.2. Conveyance of Receivables . . . . . . . . . . . . . . . . . . . 5 SECTION 2.3. Delivery of Receivable Files. . . . . . . . . . . . . . . . . . 6 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1 Representations and Warranties of OFL. . . . . . . . . . . . . . 7 SECTION 3.2 Representations and Warranties of ORFC II. . . . . . . . . . . . 9 ARTICLE IV COVENANTS OF OFL SECTION 4.1 Protection of Title of ORFC II and the Trust . . . . . . . . . . 11 SECTION 4.2 Other Liens or Interests . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.3 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.5 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE V REPURCHASES SECTION 5.1 Repurchase of Receivables Upon Breach of Warranty or Covenant. . 16 SECTION 5.2 Reassignment of Purchased Receivables. . . . . . . . . . . . . . 16 SECTION 5.3 Repurchase of Ineligible Receivables Upon Securitized Offering . 17 SECTION 5.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE VI MISCELLANEOUS SECTION 6.1 Liability of OFL . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 6.2 [RESERVED]. . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 6.3 Merger or Consolidation of OFL or ORFC II. . . . . . . . . . . . 17 SECTION 6.4 Limitation on Liability of OFL and Others. . . . . . . . . . . . 18 SECTION 6.5 OFL May Own Notes or Certificates. . . . . . . . . . . . . . . . 18 SECTION 6.6 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 6.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 6.8 Merger and Integration . . . . . . . . . . . . . . . . . . . . . 20 SECTION 6.9 Severability of Provisions . . . . . . . . . . . . . . . . . . . 20 SECTION 6.10 Intention of the Parties. . . . . . . . . . . . . . . . . . . . 20 SECTION 6.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 6.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 6.13 Conveyance of the Receivables and the Other Conveyed Property to the Trust. . . . . . . . . . . . . . . . . . . . . . 21 SECTION 6.14 Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . . . 21 ii RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as of December 28, 1995, executed between Olympic Receivables Finance Corp. II, a Delaware corporation, as purchaser ("ORFC II"), and Olympic Financial Ltd., a Minnesota corporation, as seller ("OFL"). W I T N E S S E T H: WHEREAS, ORFC II has agreed from time to time to purchase from OFL and OFL, pursuant to this Agreement, has agreed from time to time to sell and assign to ORFC II the Receivables and Other Conveyed Property. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, and for other good and valuable consideration, the receipt of which is acknowledged, ORFC II and OFL, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 GENERAL. The specific terms defined in this Article include the plural as well as the singular. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision, and Article, Section, Schedule and Exhibit references, unless otherwise specified, refer to Articles and Sections of and Schedules and Exhibits to this Agreement. Capitalized terms used herein without definition shall have the respective meanings assigned to such terms in the Sale and Servicing Agreement, dated as of December 28, 1995, by and among Olympic Receivables Finance Corp. II (as Seller), Olympic Financial Ltd. (in its individual capacity and as Servicer), Olympic Automobile Receivables Warehouse Trust (as Issuer) (the "Trust") and Norwest Bank Minnesota, National Association, a national banking association (as Backup Servicer). SECTION 1.2 SPECIFIC TERMS. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: "Agreement" means this Receivables Purchase Agreement and Assignment and all amendments hereof and supplements hereto. "Assignment Agreement" means, with respect to any Receivables and related Other Conveyed Property, the assignment agreement between OFL and ORFC II pursuant to which OFL sells and assigns Receivables and related Other Conveyed Property to ORFC II, the form of which is attached hereto as Exhibit A. "Closing Date" means December 28, 1995. "Indenture Trustee" means Norwest Bank Minnesota, National Association, a national banking association, as trustee and indenture collateral agent under the Indenture, dated as of December 28, 1995, between the Trust and the Indenture Trustee. "ORFC II" means Olympic Receivables Finance Corp. II, a Delaware corporation. "Other Conveyed Property" means all monies at any time paid or payable on the Receivables or in respect thereof after the applicable Cutoff Date (including amounts due on or before the applicable Cutoff Date but receivable by OFL after such Cutoff Date), the security interests of OFL in the Financed Vehicles, the Insurance Policies and any proceeds from any Insurance Policies relating to the Receivables, the Obligors or the Financed Vehicles, including rebates of premiums, all Collateral Insurance and any Force-Placed Insurance relating to the Receivables, rights of OFL against Dealers with respect to the Receivables under the Dealer Agreements and the Dealer Assignments, all items contained in the Receivable Files, any and all other documents or electronic records that OFL keeps on file in accordance with its customary procedures relating to the Receivables, the Obligors or the Financed Vehicles, property (including the right to receive future Liquidation Proceeds) that secures a Receivable and that has been acquired by or on behalf of OFL pursuant to liquidation of such Receivable, all present and future claims, demands, causes and chooses in action in respect of the Receivables and any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of the Receivables and any and all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivables, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of the Receivables and any of the foregoing. "Owner Trustee" means Wilmington Trust Company, a Delaware corporation, not in its individual capacity but solely as trustee of the Trust and any successor trustee appointed and acting pursuant to the Trust Agreement. "Purchase Price" means, with respect to any Receivables and related Other Conveyed Property conveyed to ORFC II by OFL on any Transfer Date, an amount equal to the sum of the Principal Balances of all such Receivables as of the applicable Cutoff Date. 2 "Receivable" means a retail installment sale contract or promissory note (and related security agreement) for a new or used automobile or light truck (and all accessories thereto) that is included in the Schedule of Receivables, and all rights and obligations under such a contract. "Related Documents" means the Notes, the Custodian Agreement, the Sale and Servicing Agreement, the Lockbox Agreement and the Indenture. The Related Documents to be executed by any party are referred to herein as "such party's Related Documents," "its Related Documents" or by a similar expression. "Repurchase Event" means the occurrence of a breach of any of OFL's representations and warranties contained in Section 3.1(a) hereof or any other event which requires the repurchase of a Receivable by OFL under the Sale and Servicing Agreement or by ORFC II pursuant to Section 2.6 of the Sale and Servicing Agreement. "Sale and Servicing Agreement" means the Sale and Servicing Agreement, dated as of December 28, 1995, executed and delivered by Olympic Receivables Finance Corp. II, as Seller, Olympic Financial Ltd., in its individual capacity and as Servicer, Olympic Automobile Receivables Warehouse Trust, as Issuer, and Norwest Bank Minnesota, National Association, as Backup Servicer, together with any Transfer Agreements executed pursuant thereto and in accordance with the terms thereof. "Schedule of Receivables" means the schedule of all automobile retail installment loan contracts and promissory notes sold and transferred pursuant to each Assignment Agreement which is attached hereto as Schedule A, as such Schedule shall be supplemented from time to time (i) by each Schedule of Receivables with respect to each Assignment Agreement, which Schedules of Receivables shall be deemed incorporated and made a part of Schedule A hereto and (ii) to reflect the repurchase from ORFC II of (a) Warranty Receivables and (b) other Receivables purchased from ORFC II by OFL, such comprehensive schedule to be maintained by the Indenture Trustee. With respect to an Assignment Agreement, "Schedule of Receivables" shall mean the Schedule attached to such Assignment Agreement as Exhibit A thereto. "Schedule of Representations" means the Schedule of Representations and Warranties attached hereto as Schedule B. "Transfer Date" means any date on which Receivables and related Other Conveyed Property are sold and assigned to ORFC II pursuant to Section 2.2. "Trust" means the trust created by the Trust Agreement, the estate of which consists of the Trust Property. 3 "Trust Property" means the property and proceeds of every description conveyed pursuant to Section 2.5 of the Trust Agreement, Sections 2.1 and 2.4 of the Sale and Servicing Agreement and Section 2.2 hereof and pursuant to any Assignment Agreement, together with the Trust Accounts (including all Eligible Investments therein and all proceeds therefrom). SECTION 1.3 USAGE OF TERMS. With respect to all terms used in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other gender; references to "writing" include printing, typing, lithography, and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all subsequent amendments thereto or changes therein entered into in accordance with their respective terms and not prohibited by this Agreement or the Sale and Servicing Agreement; references to Persons include their permitted successors and assigns; and the terms "include" or "including" mean "include without limitation" or "including without limitation." SECTION 1.4 CERTAIN REFERENCES. All references to the Principal Balance of a Receivable as of an Accounting Date shall refer to the close of business on such day, or as of the first day of a Monthly Period shall refer to the opening of business on such day. All references to the last day of a Monthly Period shall refer to the close of business on such day. SECTION 1.5 NO RECOURSE. Without limiting the obligations of OFL hereunder, no recourse may be taken, directly or indirectly, under this Agreement or any certificate or other writing delivered in connection herewith or therewith, against any stockholder, officer or director, as such, of OFL, or of any predecessor or successor of OFL. SECTION 1.6 ACTION BY OR CONSENT OF NOTEHOLDERS OR CERTIFICATEHOLDERS. Whenever any provision of this Agreement refers to action to be taken, or consented to, by Noteholders or Certificateholders, such provision shall be deemed to refer to Noteholders or Certificateholders, as the case may be, of record as of the Record Date immediately preceding the date on which such action is to be taken, or consent given, by Noteholders or Certificateholders, as the case may be. Solely for the purposes of any action to be taken, or consented to, by Noteholders or Certificateholders, any Note or Certificate registered in the name of ORFC II, OFL or any Affiliate thereof shall be deemed not to be outstanding, and the related Outstanding Amount or Certificate Balance, as applicable, evidenced thereby shall not be taken into account in determining whether the requisite Outstanding Amount or Certificate Balance necessary to effect any such action or consent has been obtained; provided, however, that, solely for the purpose of determining whether the Indenture Trustee or Owner Trustee is entitled to rely upon any such action or consent, only Notes or Certificates which the Indenture Trustee or Owner Trustee knows to be so owned shall be so disregarded. 4 ARTICLE II CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY SECTION 2.1 PURCHASE PRICE. In consideration of the conveyance of the Receivables and the related Other Conveyed Property to ORFC II on each Transfer Date, ORFC II shall pay or cause to be paid to OFL an amount equal to the Purchase Price. Such amount shall be paid by wire transfer of immediately available funds on the date of such conveyance. SECTION 2.2. CONVEYANCE OF RECEIVABLES. (a) Subject to the conditions set forth in paragraph (b) below, OFL, pursuant to the mutually agreed upon terms contained herein and pursuant to one or more Assignment Agreements, shall sell, transfer, assign and otherwise convey to ORFC II without recourse (but without limitation of its obligations in this Agreement or the Sale and Servicing Agreement), all of the right, title and interest of OFL, whether then existing or thereafter acquired, in and to the Receivables listed on the related Schedule of Receivables and the related Other Conveyed Property. It is the intention of ORFC II and OFL that the transfers and assignments contemplated by this Agreement and each Assignment Agreement shall constitute a sale of the Receivables and the Other Conveyed Property from OFL to ORFC II, conveying good title thereto free and clear of any Liens, and the Receivables and Other Conveyed Property shall not be a part of OFL's estate in the event of the filing of a bankruptcy petition by or against OFL under any bankruptcy or similar law. (b) (1) OFL shall transfer to ORFC II the Receivables and the related Other Conveyed Property as described in paragraph (a) above only upon the satisfaction of each of the following conditions on or prior to the related Transfer Date: (i) OFL shall have delivered to ORFC II, the Owner Trustee and the Indenture Trustee a duly executed Assignment Agreement (including an acceptance by ORFC II), which shall include a Schedule of Receivables listing the Receivables being transferred on such Transfer Date; (ii) as of such Transfer Date, OFL shall not have been insolvent nor shall OFL have been rendered insolvent by such sale and assignment nor shall OFL be aware of any pending insolvency; (iii) OFL shall have taken any action necessary or advisable to maintain the first priority perfected ownership interest of ORFC II in the Receivables and Other Conveyed Property; 5 (iv) no selection procedures adverse to the interests of ORFC II, the Issuer or the Noteholders shall have been utilized by OFL or ORFC II in selecting the Receivables; (v) OFL shall have provided to ORFC II and JPMD any information reasonably requested by any of the foregoing with respect to the Receivables; (vi) the conditions to the transfer of Receivables to the Trust pursuant to Section 2.1(b) of the Sale and Servicing Agreement have been met; (vii) each of the representations and warranties made by OFL pursuant to Section 3.1 shall be true and correct as of the related Transfer Date, and OFL shall have performed all obligations to be performed by it hereunder on or prior to such Transfer Date; (viii) OFL shall, at its own expense, on or prior to the Transfer Date indicate in its computer files that the Receivables identified in the Assignment Agreement have been sold to ORFC II pursuant to this Agreement and the related Assignment Agreement; (ix) on any Transfer Date following a Trust Property Liquidation Date on which (i) not less than all of the Receivables in the Trust as of such date are purchased pursuant to Section 9.1(b) of the Sale and Servicing Agreement and (ii) ORFC II receives amounts on deposit in the Spread Account pursuant to Section 5.1(b) of the Sale and Servicing Agreement, until the Transfer Date that occurs on the later to occur of (x) 90 days since the most recent Trust Property Liquidation Date and (y) 90 days since the most recent Transfer Date on which the Excess Yield Condition was not satisfied, but for the required hedging arrangement, if the Excess Yield Condition is not satisfied with respect to the Receivables to be conveyed on such Transfer Date, OFL shall have established a hedging arrangement with respect to such Receivables that is acceptable to JPMD; and (x) OFL shall have delivered to the Indenture Trustee, the Owner Trustee and JPMD an Officer's Certificate confirming the satisfaction of each condition precedent specified in this paragraph (b)(1). SECTION 2.3. DELIVERY OF RECEIVABLE FILES. OFL shall use its best efforts to deliver to the Custodian within three Business Days after each Transfer Date, but in any event OFL shall deliver to the Custodian no later than ten Business Days after such Transfer Date, the following documents: 6 (i) The fully executed original of the Receivable (together with the original of any agreements modifying the Receivable, including without limitation any extension agreements); (ii) A certificate of insurance, application form signed by the Obligor or a signed representation letter from the Obligor named in the Receivable pursuant to which the Obligor has agreed to obtain an Insurance Policy, or a documented verbal confirmation by the insurance agent for the Obligor of a policy number for an Insurance Policy or any other documents evidencing or relating to any Insurance Policy; (iii) The original credit application, or a copy thereof, of each Obligor, on OFL's customary form, or on a form approved by OFL, for such application; and (iv) The original certificate of title (when received) and otherwise such documents, if any, that OFL keeps on file in accordance with its customary procedures indicating that the Financed Vehicle is owned by the Obligor and subject to the interest of OFL as first lienholder or secured party (including any Lien Certificate received by OFL), or if such original certificate of title has not yet been received, a copy of the application therefor, showing OFL as secured party, or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by OFL within 180 days. It is the intention of OFL and ORFC II that the transfer and assignment contemplated by this Agreement and the related Assignment Agreements shall constitute a sale of the Receivables and the Other Conveyed Property from OFL to ORFC II, conveying good title thereto free and clear of any Liens, and the Receivables and the Other Conveyed Property shall not be part of OFL's estate in the event of the filing of a bankruptcy petition by or against OFL under any bankruptcy or similar law. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF OFL. OFL makes the following representations and warranties, on which ORFC II relies in purchasing the Receivables and the Other Conveyed Property and in transferring the Receivables and the Other Conveyed Property to the Trust under the Sale and Servicing Agreement. Such representations are made as of the execution and delivery of this Agreement and as of each Transfer Date, and shall survive the sale, transfer and assignment of the Receivables and the Other Conveyed Property hereunder and under the Assignment Agreements and the sale, transfer and assignment thereof by ORFC II to the Trust under the Sale and Servicing Agreement. OFL and ORFC II agree that ORFC II will assign to the Trust all of ORFC II's 7 rights under this Agreement and that the Trust will thereafter be entitled to enforce this Agreement against OFL in the Trust's own name. (a) SCHEDULE OF REPRESENTATIONS. The representations and warranties set forth on the Schedule of Representations are true and correct. (b) ORGANIZATION AND GOOD STANDING. OFL has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Minnesota, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire, own and sell the Receivables and the Other Conveyed Property transferred to ORFC II. (c) DUE QUALIFICATION. OFL is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of its property or the conduct of its business requires such qualification. (d) POWER AND AUTHORITY. OFL has the power and authority to execute and deliver this Agreement, each Assignment Agreement and its Related Documents and to carry out its terms and their terms, respectively; OFL has full power and authority to sell and assign the Receivables and the Other Conveyed Property to be sold and assigned to and deposited with ORFC II under each Assignment Agreement and has duly authorized such sale and assignment to ORFC II by all necessary corporate action; and the execution, delivery and performance of this Agreement, each Assignment Agreement and OFL's Related Documents have been duly authorized by OFL by all necessary corporate action. (e) VALID SALE; BINDING OBLIGATIONS. This Agreement, each Assignment Agreement and OFL's Related Documents have been duly executed and delivered, shall effect a valid sale, transfer and assignment of the Receivables and the Other Conveyed Property, enforceable against OFL and creditors of and purchasers from OFL; and this Agreement, each Assignment Agreement and OFL's Related Documents constitute legal, valid and binding obligations of OFL enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law. (f) NO VIOLATION. The consummation of the transactions contemplated by this Agreement, each Assignment Agreement and the Related Documents and the fulfillment of the terms of this Agreement, each Assignment Agreement and the Related Documents shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice, lapse of time or both) a default under, the articles of 8 incorporation or bylaws of OFL, or any indenture, agreement, mortgage, deed of trust or other instrument to which OFL is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement, each Assignment Agreement and the Sale and Servicing Agreement, or violate any law, order, rule or regulation applicable to OFL of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over OFL or any of its properties. (g) NO PROCEEDINGS. There are no proceedings or investigations pending or, to OFL's knowledge, threatened against OFL, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over OFL or its properties (i) asserting the invalidity of this Agreement, any Assignment Agreement or any of the Related Documents, (ii) seeking to prevent the issuance of the Notes or the Certificates or the consummation of any of the transactions contemplated by this Agreement, any Assignment Agreement or any of the Related Documents, (iii) seeking any determination or ruling that might materially and adversely affect the performance by OFL of its obligations under, or the validity or enforceability of, this Agreement, any Assignment Agreement or any of the Related Documents or (iv) seeking to affect adversely the federal income tax or other federal, state or local tax attributes of, or seeking to impose any excise, franchise, transfer or similar tax upon, the transfer and acquisition of the Receivables and the Other Conveyed Property hereunder, under any Assignment Agreement or under the Sale and Servicing Agreement. (h) NO TERMINATION EVENTS. No Purchase Termination Event or Servicer Termination Event shall have occurred and be continuing. (i) CHIEF EXECUTIVE OFFICE. The chief executive office of OFL is located at 7825 Washington Avenue South, Suite 400, Minneapolis, MN 55439-2435. SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF ORFC II. ORFC II makes the following representations and warranties, on which OFL relies in selling, assigning, transferring and conveying the Receivables and the Other Conveyed Property to ORFC II hereunder and under each Assignment Agreement. Such representations are made as of the execution and delivery of this Agreement and as of each Transfer Date, and shall survive the sale, transfer and assignment of the Receivables and the Other Conveyed Property hereunder and under each Assignment Agreement and the sale, transfer and assignment thereof by ORFC II to the Trust under the Sale and Servicing Agreement. (a) ORGANIZATION AND GOOD STANDING. ORFC II has been duly organized and is validly existing and in good standing as a corporation under the laws of the State of Delaware, with the power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all 9 relevant times, and has, full power, authority and legal right to acquire and own the Receivables and the Other Conveyed Property and to transfer the Receivables and the Other Conveyed Property to the Trust pursuant to the Sale and Servicing Agreement. (b) DUE QUALIFICATION. ORFC II is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions where the failure to do so would materially and adversely affect (i) ORFC II's ability to acquire the Receivables or the Other Conveyed Property, (ii) the validity or enforceability of the Receivables and the Other Conveyed Property or (iii) ORFC II's ability to perform its obligations hereunder, under any Assignment Agreement and under the Related Documents. (c) POWER AND AUTHORITY. ORFC II has the power, authority and legal right to execute and deliver this Agreement, each Assignment Agreement and its Related Documents and to carry out the terms hereof and thereof and to acquire the Receivables and the Other Conveyed Property hereunder and under each Assignment Agreement; and the execution, delivery and performance of this Agreement, each Assignment Agreement and its Related Documents and all of the documents required pursuant hereto or thereto have been duly authorized by ORFC II by all necessary action. (d) NO CONSENT REQUIRED. ORFC II is not required to obtain the consent of any other Person, or any consent, license, approval or authorization or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery or performance of this Agreement, each Assignment Agreement and the Related Documents, except for such as have been obtained, effected or made. (e) BINDING OBLIGATION. This Agreement, each Assignment Agreement and each of its Related Documents constitutes a legal, valid and binding obligation of ORFC II, enforceable against ORFC II in accordance with its terms, subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, liquidation and other similar laws and to general equitable principles. (f) NO VIOLATION. The execution, delivery and performance by ORFC II of this Agreement and each Assignment Agreement, the consummation of the transactions contemplated by this Agreement, each Assignment Agreement and the Related Documents and the fulfillment of the terms of this Agreement, each Assignment Agreement and the Related Documents do not and will not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice or lapse of time) a default under the certificate of incorporation or bylaws of ORFC II, or conflict with or breach any of the terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any indenture, agreement, mortgage, deed of trust or other instrument to which ORFC is a party or by which ORFC II is bound or to which any of its properties are subject, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any 10 such indenture, agreement, mortgage, deed of trust or other instrument (other than the Sale and Servicing Agreement and the Indenture), or violate any law, order, rule or regulation, applicable to ORFC II or its properties, of any federal or state regulatory body or any court, administrative agency, or other governmental instrumentality having jurisdiction over ORFC II or any of its properties. (g) NO PROCEEDINGS. There are no proceedings or investigations pending, or, to the knowledge of ORFC II, threatened against ORFC II, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality having jurisdiction over ORFC II or its properties: (i) asserting the invalidity of this Agreement, any Assignment Agreement or any of the Related Documents, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, any Assignment Agreement or any of the Related Documents, (iii) seeking any determination or ruling that might materially and adversely affect the performance by ORFC II of its obligations under, or the validity or enforceability of, this Agreement, any Assignment Agreement or any of the Related Documents or (iv) that may adversely affect the federal or state income tax attributes of, or seeking to impose any excise, franchise, transfer or similar tax upon, the transfer and acquisition of the Receivables and the Other Conveyed Property hereunder or under any Assignment Agreement or the transfer of the Receivables and the Other Conveyed Property to the Trust pursuant to the Sale and Servicing Agreement. In the event of any breach of a representation and warranty made by ORFC II hereunder, OFL covenants and agrees that it will not take any action to pursue any remedy that it may have hereunder, in law, in equity or otherwise, until a year and a day have passed since the date on which all investor certificates, notes or other similar securities issued by the Trust, or a trust or similar vehicle formed by ORFC II, have been paid in full. OFL and ORFC II agree that damages will not be an adequate remedy for such breach and that this covenant may be specifically enforced by ORFC II or by the Owner Trustee on behalf of the Trust. ARTICLE IV COVENANTS OF OFL SECTION 4.1 PROTECTION OF TITLE OF ORFC II AND THE TRUST. (a) At or prior to the Closing Date, OFL shall have filed or caused to be filed a UCC-1 financing statement, executed by OFL as seller or debtor, naming ORFC II as purchaser or secured party and describing the Receivables and the Other Conveyed Property, with respect to this Agreement and each Assignment Agreement, being sold by it to ORFC II as collateral, with the office of the Secretary of State of the State of Minnesota and in such other locations as ORFC II shall have required. From time to time thereafter, OFL shall execute and file such financing statements and cause to be executed and filed such 11 continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of ORFC II under this Agreement and each Assignment Agreement and of the Trust under the Sale and Servicing Agreement in the Receivables and the Other Conveyed Property and in the proceeds thereof. OFL shall deliver (or cause to be delivered) to ORFC II, the Owner Trustee, the Indenture Trustee and DFC file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. In the event that OFL fails to perform its obligations under this subsection, ORFC II or the Owner Trustee may do so at the expense of OFL. (b) OFL shall not change its name, identity, or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed by OFL (or by ORFC II or the Owner Trustee on behalf of OFL) in accordance with paragraph (a) above seriously misleading within the meaning of Section 9-402(7) of the UCC, unless it shall have given ORFC II, the Owner Trustee and JPMD at least 60 days' prior written notice thereof, and shall promptly file appropriate amendments to all previously filed financing statements and continuation statements. (c) OFL shall give ORFC II, JPMD, the Indenture Trustee and the Owner Trustee at least 60 days' prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement. OFL shall at all times maintain each office from which it services Receivables and its principal executive office within the United States of America. (d) OFL shall maintain its computer systems so that, from and after the time of sale under this Agreement and under any Assignment Agreement of the Receivables to ORFC II, and the conveyance of the Receivables by ORFC II to the Trust, OFL's master computer records (including archives) that shall refer to a Receivable indicate clearly that such Receivable has been sold to ORFC II and has been conveyed by ORFC II to the Trust. Indication of the Trust's ownership of Receivable shall be deleted from or modified on OFL's computer systems when, and only when, the Receivable shall become a Purchased Receivable or shall have been paid in full. OFL shall indicate in its consolidated financial statements that Receivables have been sold to ORFC II and are not available to the creditors of OFL. (e) If at any time OFL shall propose to sell, grant a security interest in, or otherwise transfer any interest in motor vehicle receivables to any prospective purchaser, lender or other transferee, OFL shall give to such prospective purchaser, lender, or other transferee computer tapes, records, or print-outs (including any restored from archives) that, if they shall refer in any manner whatsoever to any Receivable, shall indicate clearly that such Receivable has been sold to ORFC II and is owned by the Trust. 12 SECTION 4.2 OTHER LIENS OR INTERESTS. Except for the conveyances under any Assignment Agreement, OFL will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on the Receivables or the Other Conveyed Property, or any interest therein, and OFL shall defend the right, title, and interest of ORFC II and the Trust in and to the Receivables and the Other Conveyed Property against all claims of third parties claiming through or under OFL. SECTION 4.3 COSTS AND EXPENSES. OFL shall pay all reasonable costs and disbursements in connection with the performance of its obligations hereunder and under each Assignment Agreement and its Related Documents. SECTION 4.4 INDEMNIFICATION. (a) OFL shall defend, indemnify and hold harmless ORFC II, the Trust, the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Noteholders and the Certificateholders from and against any and all costs, expenses, losses, damages, claims, and liabilities, arising out of or resulting from any breach of any of OFL's representations and warranties contained herein. (b) OFL shall defend, indemnify and hold harmless ORFC II, the Trust, the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Noteholders and the Certificateholders from and against any and all costs, expenses, losses, damages, claims, and liabilities, arising out of or resulting from the use, ownership or operation by OFL or any affiliate thereof of a Financed Vehicle. (c) OFL shall defend and indemnify ORFC II, the Trust, the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Noteholders and the Certificateholders against any and all costs, expenses, losses, damages, claims and liabilities arising out of or resulting from any action taken, or failed to be taken, by it in respect of any portion of the Trust Property other than in accordance with this Agreement or the Sale and Servicing Agreement. (d) OFL agrees to pay, and shall defend, indemnify and hold harmless ORFC II, the Trust, the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Noteholders and the Certificateholders from and against any taxes that may at any time be asserted against ORFC II, the Owner Trustee, the Indenture Trustee, DFC, the Backup Servicer, the Noteholders and the Certificateholders with respect to the transactions contemplated in this Agreement or in any Assignment Agreement, including, without limitation, any sales, gross receipts, general corporation, tangible or intangible personal property, privilege, or license taxes (but not including any taxes asserted with respect to, and as of the date of, any sale, transfer and assignment of the Receivables and the Other Conveyed Property to ORFC II and of the Trust Property to the Trust or the issuance and original sale of the Notes or the Certificates, or asserted with respect to ownership of the 13 Receivables and Other Conveyed Property or the Trust Property which shall be indemnified by OFL pursuant to clause (e) below, or federal, state or other income taxes, arising out of distributions on the Notes or the Certificates or transfer taxes arising in connection with the transfer of the Notes or the Certificates) and costs and expenses in defending against the same, arising by reason of the acts to be performed by OFL under this Agreement or under any Assignment Agreement or imposed against such Persons. (e) OFL agrees to pay, and to indemnify, defend and hold harmless ORFC II, the Trust, the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Noteholders and the Certificateholders from, any taxes which may at any time be asserted against such Persons with respect to, and as of the date of, the conveyance or ownership of any Receivables or the Other Conveyed Property hereunder or under each Assignment Agreement and the conveyance or ownership of the Trust Property under the Sale and Servicing Agreement or the issuance and original sale of the Notes and the Certificates, including, without limitation, any sales, gross receipts, personal property, tangible or intangible personal property, privilege or license taxes (but not including any federal or other income taxes, including franchise taxes, arising out of the transactions contemplated hereby or transfer taxes arising in connection with the transfer of Notes or Certificates) and costs and expenses in defending against the same, arising by reason of the acts to be performed by OFL under this Agreement or under any Assignment Agreement or imposed against such Persons. (f) OFL shall defend, indemnify, and hold harmless ORFC II, the Owner Trustee, the Indenture Trustee, DFC, the Backup Servicer, the Trust, JPMD, the Noteholders and the Certificateholders from and against any and all costs, expenses, losses, claims, damages, and liabilities to the extent that such cost, expense, loss, claim, damage, or liability arose out of, or was imposed upon ORFC II, the Trust, the Indenture Trustee, JPMD, the Noteholders and the Certificateholders through the negligence, willful misfeasance, or bad faith of OFL in the performance of its duties under this Agreement or under any Assignment Agreement or by reason of reckless disregard of OFL's obligations and duties under this Agreement or under any Assignment Agreement. (g) OFL shall indemnify, defend and hold harmless ORFC II, the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Trust, the Noteholders and the Certificateholders from and against any loss, liability or expense incurred by reason of the violation by OFL of federal or state securities laws in connection with the registration or the sale of the Notes and the Certificates. (h) OFL shall indemnify, defend and hold harmless ORFC II, the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Trust, the Noteholders and the Certificateholders from and against any loss, liability or expense imposed upon, or incurred by, ORFC II, the Owner Trustee, the Indenture Trustee, JPMD, the Trust, the 14 Noteholders or the Certificateholders as a result of the failure of any Receivable, or the sale of the related Financed Vehicle, to comply with all requirements of applicable law. (i) OFL shall defend, indemnify, and hold harmless ORFC II and its assignees from and against all costs, expenses, losses, claims, damages, and liabilities arising out of or incurred in connection with the acceptance or performance of OFL's trusts and duties as Servicer under the Sale and Servicing Agreement, except to the extent that such cost, expense, loss, claim, damage, or liability shall be due to the willful misfeasance, bad faith, or negligence (except for errors in judgment) of ORFC II. (j) OFL shall indemnify, defend and hold harmless ORFC II, the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Trust, the Noteholders and the Certificateholders from and against any loss, liability or expense imposed upon, or incurred by, ORFC II, the Owner Trustee and the Indenture Trustee, JPMD, the Trust, the Noteholders or the Certificateholders as a result of OFL's or ORFC II's use of the name "Olympic." Indemnification under this Section 4.4 shall include reasonable fees and expenses of counsel and expenses of litigation and shall survive termination of the Trust. The indemnity obligations hereunder shall be in addition to any obligation that OFL may otherwise have. SECTION 4.5 ADVANCES. (a) As of any Determination Date as of which no Trigger Event has occurred, and any previous Trigger Event has been Deemed Cured, OFL, as Seller hereunder, shall become obligated to pay to or upon the order of ORFC II on the related Deposit Date, an amount equal to the lesser of (i) the aggregate Collection Shortfall with respect to Receivables for which no Scheduled Payment was due during such Monthly Period and (ii) the Net Advance Shortfall; PROVIDED, HOWEVER, that OFL shall not be required to make such payments with respect to a Receivable extended pursuant to Section 3.2(b) of the Sale and Servicing Agreement for any Monthly Period during which no Scheduled Payment is due according to the terms of such extension. (b) As of any Determination Date as of which a Trigger Event has occurred, or as of which any previous Trigger Event has not been Deemed Cured, OFL, as Seller hereunder, shall become obligated to pay to or upon the order of ORFC II on the related Deposit Date, the following amounts: If there are Collection Shortfalls with respect to a Receivable, an amount equal to such Collection Shortfall; PROVIDED, HOWEVER, OFL shall only be required to make such payments with respect to Receivables for which no Scheduled Payment was due during such Monthly Period; PROVIDED, FURTHER, that OFL shall not be required to make such payments with respect to a Receivable extended pursuant to Section 15 3.2(b) of the Sale and Servicing Agreement for any Monthly Period during which no Scheduled Payment is due according to the terms of such extension. ARTICLE V REPURCHASES SECTION 5.1 REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY OR COVENANT. Upon the occurrence of a Repurchase Event OFL shall, unless such breach shall have been cured in all material respects, repurchase such Receivable from the Trust and, on or before the related Deposit Date, OFL shall pay the Purchase Amount to the Trust pursuant to Section 4.5 of the Sale and Servicing Agreement. It is understood and agreed that, except as set forth in Section 6.1, the obligation of OFL to repurchase any Receivable as to which a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against OFL for such breach available to ORFC II, Certificateholders, Noteholders, or the Owner Trustee or the Indenture Trustee on behalf of Certificateholders or Noteholders or DFC. The provisions of this Section 5.1 are intended to grant the Owner Trustee and the Indenture Trustee a direct right against OFL to demand performance hereunder, and in connection therewith, OFL waives any requirement of prior demand against ORFC II with respect to such repurchase obligation. Any such purchase shall take place in the manner specified in Section 2.6 or Section 3.7, as applicable, of the Sale and Servicing Agreement. Notwithstanding any other provision of this Agreement or the Sale and Servicing Agreement to the contrary, the obligation of OFL under this Section shall not terminate upon a termination of OFL as Servicer under the Sale and Servicing Agreement and shall be performed in accordance with the terms hereof notwithstanding the failure of the Servicer or ORFC II to perform any of their respective obligations with respect to such Receivable under the Sale and Servicing Agreement. In addition to the foregoing and notwithstanding whether the related Receivable shall have been purchased by OFL, OFL shall indemnify the Owner Trustee, the Indenture Trustee, JPMD, the Backup Servicer, the Trust, the Noteholders and the Certificateholders against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such Repurchase Events. SECTION 5.2 REASSIGNMENT OF PURCHASED RECEIVABLES. Upon deposit in the Collection Account of the Purchase Amount of any Receivable repurchased by OFL under Section 5.1, ORFC II and the Owner Trustee shall take such steps as may be reasonably requested by OFL in order to assign to OFL all of ORFC II's and the Trust's right, title and interest in and to such Receivable and all security and documents and all Other Conveyed Property conveyed to ORFC II and the Trust directly relating thereto, without recourse, 16 representation or warranty, except as to the absence of liens, charges or encumbrances created by or arising as a result of actions of ORFC II or the Owner Trustee. Such assignment shall be a sale and assignment outright, and not for security. If, following the reassignment of a Purchased Receivable, in any enforcement suit or legal proceeding, it is held that OFL may not enforce any such Receivable on the ground that it shall not be a real party in interest or a holder entitled to enforce the Receivable, ORFC II and the Owner Trustee shall, at the expense of OFL, take such steps as OFL deems reasonably necessary to enforce the Receivable, including bringing suit in ORFC II's or the Owner Trustee's name or the names of the Certificateholders. SECTION 5.3 REPURCHASE OF INELIGIBLE RECEIVABLES UPON SECURITIZED OFFERING. Upon the purchase of Ineligible Receivables by ORFC II pursuant to Section 6.5 of the Sale and Servicing Agreement, OFL shall be obligated to purchase from ORFC II all such Ineligible Receivables for a purchase price equal to the fair market value of such Ineligible Receivables. SECTION 5.4 WAIVERS. No failure or delay on the part of ORFC II, or the Owner Trustee as assignee of ORFC II, in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other or future exercise thereof or the exercise of any other power, right or remedy. ARTICLE VI MISCELLANEOUS SECTION 6.1 LIABILITY OF OFL. OFL shall be liable in accordance herewith only to the extent of the obligations in this Agreement or in any Assignment Agreement specifically undertaken by OFL and the representations and warranties of OFL. SECTION 6.2 [RESERVED]. SECTION 6.3 MERGER OR CONSOLIDATION OF OFL OR ORFC II. Any corporation or other entity (i) into which OFL or ORFC II may be merged or consolidated, (ii) resulting from any merger or consolidation to which OFL or ORFC II is a party or (iii) succeeding to the business of OFL or ORFC II, in the case of ORFC II, which corporation has a certificate of incorporation containing provisions relating to limitations on business and other matters substantively identical to those contained in ORFC II's certificate of incorporation, provided that in any of the foregoing cases such corporation shall execute an agreement of assumption to perform every obligation of OFL or ORFC II, as the case may be, under this Agreement and each Assignment Agreement and, whether or not such assumption agreement is executed, shall be the successor to OFL or ORFC II, as the case 17 may be, hereunder and under each such Assignment Agreement (without relieving OFL or ORFC II of its responsibilities hereunder, if it survives such merger or consolidation) without the execution or filing of any document or any further act by any of the parties to this Agreement or each Assignment Agreement. Notwithstanding the foregoing, ORFC II shall not merge or consolidate with any other Person or permit any other Person to become the successor to ORFC II's business without the prior written consent of JPMD and the Rating Agencies. OFL or ORFC II shall promptly inform the other party, the Owner Trustee, the Indenture Trustee, JPMD and the Rating Agencies of such merger, consolidation or purchase and assumption. Notwithstanding the foregoing, as a condition to the consummation of the transactions referred to in clauses (i), (ii) and (iii) above, (x) immediately after giving effect to such transaction, no representation or warranty made pursuant to Sections 3.1 and 3.2 and this Agreement, or similar representation or warranty made in any Assignment Agreement, shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction), (y) OFL or ORFC II, as applicable, shall have delivered prompt written notice of such consolidation, merger or purchase and assumption to the Owner Trustee, the Indenture Trustee, JPMD, and the Rating Agencies prior to the consummation of such transaction and shall have delivered to the Owner Trustee, the Indenture Trustee and DFC an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 6.3 and that all conditions precedent, if any, provided for in this Agreement, or in each Assignment Agreement, relating to such transaction have been complied with, and (z) OFL or ORFC II, as applicable, shall have delivered to the Owner Trustee, the Indenture Trustee and JPMD an Opinion of Counsel, stating that, in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of the Owner Trustee in the Trust Property and reciting the details of the filings or (B) no such action shall be necessary to preserve and protect such interest. SECTION 6.4 LIMITATION ON LIABILITY OF OFL AND OTHERS. OFL and any director, officer, employee or agent may rely in good faith on the advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. OFL shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations under this Agreement, any Assignment Agreement or its Related Documents and that in its opinion may involve it in any expense or liability. SECTION 6.5 OFL MAY OWN NOTES OR CERTIFICATES. Subject to the provisions of the Sale and Servicing Agreement, OFL and any Affiliate of OFL may in its individual or any other capacity become the owner or pledgee of Notes or Certificates with the same rights as it would have if it were not OFL or an Affiliate thereof. 18 SECTION 6.6 AMENDMENT. (a) This Agreement and any Assignment Agreement may be amended by OFL and ORFC II, without the consent of the Owner Trustee, the Indenture Trustee or JPMD (A) to cure any ambiguity or (B) to correct any provisions in this Agreement or any such Assignment Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee, the Indenture Trustee and JPMD adversely affect in any material respect the interests of any Certificateholder or Noteholder. (b) This Agreement and any Assignment Agreement may also be amended from time to time by OFL and ORFC II, with the prior written consent of the Owner Trustee, the Indenture Trustee, a Certificate Majority, a Note Majority and JPMD for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or any Assignment Agreement, or of modifying in any manner the rights of the Certificateholders or the Noteholders; PROVIDED, HOWEVER, that no such amendment shall (i) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables, distributions that shall be required to be made on any Certificate or Note or the Certificate Rate or the Note Interest Rate or (ii) reduce the aforesaid percentage required to consent to any such amendment or any waiver hereunder, without the consent of the Holders of all Certificates or Notes then outstanding or of the Holders of all Notes then outstanding. (c) Prior to the execution of any such amendment or consent, OFL shall have furnished written notification of the substance of such amendment or consent to each Rating Agency. (d) Promptly after the execution of any such amendment or consent, the Owner Trustee or the Indenture Trustee, as applicable, shall furnish written notification of the substance of such amendment or consent to JPMD and each Certificateholder and Noteholder. (e) It shall not be necessary for the consent of Certificateholders or Noteholders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders or Noteholders shall be subject to such reasonable requirements as the Owner Trustee or the Indenture Trustee, as applicable, may prescribe, including the establishment of record dates. The consent of any Holder of a Certificate or Note given pursuant to this Section or pursuant to any other provision of this Agreement shall be conclusive and binding on such Holder and on all future Holders of such Certificate or Note and of any Certificate or Note issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Certificate or Note. 19 SECTION 6.7 NOTICES. All demands, notices and communications to OFL or ORFC II hereunder shall be in writing, personally delivered, or sent by telecopier (subsequently confirmed in writing), reputable overnight courier or mailed by certified mail, return receipt requested, and shall be deemed to have been given upon receipt (a) in the case of OFL, to Olympic Financial Ltd., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention: John A. Witham, or such other address as shall be designated by OFL in a written notice delivered to the other party or to the Owner Trustee or the Indenture Trustee, as applicable, (b) in case of ORFC II, to Olympic Receivables Finance Corp. II, 7825 Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435, Attention: John A. Witham, or (c) in the case of JPMD, 902 Market Street, Wilmington, Delaware 19801-3015, Attention: Asset Finance Group. SECTION 6.8 MERGER AND INTEGRATION. Except as specifically stated otherwise herein, this Agreement, each Assignment Agreement and the Related Documents set forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement, each Assignment Agreement and the Related Documents. Neither this Agreement nor any Assignment Agreement may be modified, amended, waived or supplemented except as provided herein. SECTION 6.9 SEVERABILITY OF PROVISIONS. If any one or more of the covenants, provisions or terms of this Agreement or any Assignment Agreement shall be for any reason whatsoever held invalid, then such covenants, provisions or terms shall be deemed severable from the remaining covenants, provisions or terms of this Agreement or any Assignment Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or any Assignment Agreement. SECTION 6.10 INTENTION OF THE PARTIES. The execution and delivery of this Agreement shall constitute an acknowledgment by OFL and ORFC II that they intend that the assignments and transfers herein contemplated pursuant to each Assignment Agreement constitute a sale and assignment outright, and not for security, of the Receivables and the Other Conveyed Property, conveying good title thereto free and clear of any Liens, from OFL to ORFC II, and that the Receivables and the Other Conveyed Property shall not be a part of OFL's estate in the event of the bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, or the occurrence of another similar event, of, or with respect to, OFL. In the event that such conveyance is determined to be made as security for a loan made by ORFC II, the Trust, the Certificateholders or the Noteholders to OFL, the parties intend that OFL shall have granted to ORFC II a security interest in all of OFL's right, title and interest in and to the Receivables and the Other Conveyed Property conveyed pursuant to each Assignment Agreement and that this Agreement shall constitute a security agreement under applicable law. 20 SECTION 6.11 GOVERNING LAW. This Agreement shall be construed in accordance with, the laws of the State of New York without regard to the principles of conflicts of laws thereof and the obligations, rights and remedies of the parties under this Agreement shall be determined in accordance with such laws. SECTION 6.12 COUNTERPARTS. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. SECTION 6.13 CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY TO THE TRUST. OFL acknowledges that ORFC II intends, pursuant to the Sale and Servicing Agreement, to convey the Receivables and the Other Conveyed Property, together with its rights under this Agreement, to the Trust on the date hereof. OFL acknowledges and consents to such conveyance and waives any further notice thereof and covenants and agrees that the representations and warranties of OFL contained in this Agreement and the rights of ORFC II hereunder are intended to benefit the Owner Trustee, the Indenture Trustee, JPMD, the Trust, the Certificateholders and the Noteholders. In furtherance of the foregoing, OFL covenants and agrees to perform its duties and obligations hereunder, in accordance with the terms hereof for the benefit of the Owner Trustee, the Indenture Trustee, JPMD, the Trust, the Certificateholders and the Noteholders and that, notwithstanding anything to the contrary in this Agreement, OFL shall be directly liable to the Owner Trustee and the Trust (notwithstanding any failure by the Servicer, the Backup Servicer or ORFC II to perform its duties and obligations hereunder or under the Sale and Servicing Agreement) and that the Owner Trustee may enforce the duties and obligations of OFL under this Agreement against OFL for the benefit of the Trust, JPMD, the Certificateholders and the Noteholders. SECTION 6.14 NONPETITION COVENANT. Neither ORFC II nor OFL shall petition or otherwise invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Trust (or, in the case of OFL, against ORFC II) under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust (or ORFC II) or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Trust (or ORFC II). 21 IN WITNESS WHEREOF, the parties have caused this Receivables Purchase Agreement and Assignment to be duly executed by their respective officers as of the day and year first above written. OLYMPIC RECEIVABLES FINANCE CORP. II, as Purchaser By:_________________________________ Name: John A. Witham Title: Senior Vice President and Chief Financial Officer OLYMPIC FINANCIAL LTD., as Seller By:_________________________________ Name: John A. Witham Title: Senior Vice President and Chief Financial Officer SCHEDULE A SCHEDULE OF RECEIVABLES [Deemed Incorporated from each Assignment Agreement] SCHEDULE B REPRESENTATIONS AND WARRANTIES OF OFL 1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary course of such Dealer's business and such Dealer had all necessary licenses and permits to originate Receivables in the state where such Dealer was located, was fully and properly executed by the parties thereto, was purchased by OFL from such Dealer under an existing Dealer Agreement with OFL and was validly assigned by such Dealer to OFL, (B) contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for realization against the collateral security, and (C) is fully amortizing and provides for level monthly payments (provided that the payment in the first Monthly Period and the final Monthly Period of the life of the Receivable may be minimally different from the level payment) which, if made when due, shall fully amortize the Amount Financed over the original term. 2. NO FRAUD OR MISREPRESENTATION. Each Receivable was originated by a Dealer and was sold by the Dealer to OFL without any fraud or misrepresentation on the part of such Dealer in either case. 3. COMPLIANCE WITH LAW. All requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor Vehicle Retail Installment Sales Act, and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and other consumer credit laws and equal credit opportunity and disclosure laws) in respect of all of the Receivables and each and every sale of Financed Vehicles, have been complied with in all material respects, and each Receivable and the sale of the Financed Vehicle evidenced by each Receivable complied at the time it was originated or made and now complies in all material respects with all applicable legal requirements. 4. ORIGINATION. Each Receivable is a United States dollar obligation of an Obligor domiciled in the United States and such Receivable was originated in the United States. 5. BINDING OBLIGATION. Each Receivable represents the genuine, legal, valid and binding payment obligation of the Obligor thereon, enforceable by the holder thereof in accordance with its terms, except (A) as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law and (B) as such Receivable may B-1 be modified by the application after the related Cutoff Date of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties to each Receivable had full legal capacity to execute and deliver such Receivable and all other documents related thereto and to grant the security interest purported to be granted thereby. 6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of America or any State or any agency, department, subdivision or instrumentality thereof. 7. OBLIGOR BANKRUPTCY. At the applicable Cutoff Date, no Obligor had been identified on the records of OFL as being, and, to the best of ORFC II's knowledge, no Obligor is the subject of a current bankruptcy proceeding. 8. SCHEDULE OF RECEIVABLES. The information set forth in the Schedule of Receivables has been produced from the Electronic Ledger and was true and correct in all material respects as of the close of business on the applicable Cutoff Date. 9. MARKING RECORDS. By the Closing Date or by each Transfer Date, as applicable, OFL will have caused the portions of the Electronic Ledger relating to the Receivables to be clearly and unambiguously marked to show that the Receivables constitute part of the Trust Property and are owned by the Trust in accordance with the terms of the Sale and Servicing Agreement. 10. MONTHLY TAPE. The Monthly Tape made available by OFL to ORFC II, the Backup Servicer and the Indenture Trustee was complete and accurate in all respects as of the date delivered and includes a description of the same Receivables that are described in the Schedule of Receivables. 11. ADVERSE SELECTION. No selection procedures adverse to the Noteholders or the Certificateholders were utilized in selecting the Receivables from those receivables owned by OFL which met the selection criteria contained in the Sale and Servicing Agreement. 12. CHATTEL PAPER. The Receivables constitute chattel paper within the meaning of the UCC as in effect in the States of Minnesota and New York. 13. ONE ORIGINAL. There is only one original executed copy of each Receivable. 14. RECEIVABLE FILES COMPLETE. The complete Receivable File (other than item (iv) in Section 2.3 of this Agreement) is in the possession of OFL at its corporate office. The complete Receivable File for each Receivable will be in the possession of the Custodian within ten Business Days after the conveyance of the Receivable from OFL to ORFC II. By such date, there will exist a Receivable File pertaining to each Receivable and such Receivable File B-2 contains (a) a fully executed original of the Receivable, (b) a certificate of insurance, application form for insurance signed by the Obligor or a signed representation letter from the Obligor named in the Receivable pursuant to which the Obligor has agreed to obtain physical damage insurance for the Financed Vehicle, or copies thereof, or a documented verbal confirmation by an insurance agent for the Obligor of a policy number for an insurance policy for the Financed Vehicle, (c) the original Lien Certificate or application therefor or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by OFL within 180 days, and (d) a credit application signed by the Obligor, or a copy thereof. Each of such documents which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces. All blanks on any form have been properly filled in and each form has otherwise been correctly prepared. The complete file for each Receivable currently is in the possession of the Custodian. 15. RECEIVABLES IN FORCE. No Receivable has been satisfied, subordinated or rescinded, and the Financed Vehicle securing each such Receivable has not been released from the lien of the related Receivable in whole or in part. No provisions of any Receivable have been waived, altered or modified in any respect since its origination, except by instruments or documents identified in the Receivable File. No Receivable has been modified as a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. 16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale, transfer and assignment of such Receivable under this Agreement, under any Assignment Agreement or pursuant to transfers of the Notes or the Certificates. With respect to such sale, transfer and assignment of such Receivable under this Agreement or pursuant to transfers of the Notes or the Certificates, either (1) no consent is required or (2) all required consents have been obtained. 17. GOOD TITLE. No Receivable has been sold, transferred, assigned or pledged by OFL to any Person other than ORFC II; immediately prior to the conveyance of the Receivables to ORFC II pursuant to this Agreement or any Assignment Agreement, OFL had good and indefeasible title thereto, free and clear of any Lien, and immediately upon the transfer thereof, ORFC II shall have good and indefeasible title to and will be the sole owner of each Receivable, free of any Lien. No Dealer has a participation in, or other right to receive, proceeds of any Receivable. OFL has not taken any action to convey any right to any Person that would result in such Person having a right to payments received under the related Insurance Policies or the related Dealer Agreements or Dealer Assignments or to payments due under such Receivables. 18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable created or shall create a valid, binding and enforceable first priority security interest in favor of OFL in the Financed Vehicle. The Lien Certificate and original certificate of title for each Financed Vehicle B-3 show, or if a new or replacement Lien Certificate is being applied for with respect to such Financed Vehicle, the Lien Certificate will be received within 180 days of the Closing Date or any Transfer Date, as applicable, and will show, OFL named as the original secured party under each Receivable as the holder of a first priority security interest in such Financed Vehicle. With respect to each Receivable for which the Lien Certificate has not yet been returned from the Registrar of Titles, OFL has received written evidence from the related Dealer that such Lien Certificate showing OFL as first lienholder has been applied for, or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by OFL within 180 days. OFL's security interest has been validly assigned by OFL to ORFC II pursuant to this Agreement or any Assignment Agreement, as applicable. Immediately after the sale, transfer and assignment thereof by ORFC II to the Trust, each Receivable will be secured by an enforceable and perfected first priority security interest in the Financed Vehicle in favor of the Trust as secured party, which security interest is prior to all other Liens upon and security interests in such Financed Vehicle which now exist or may hereafter arise or be created (except, as to priority, for any lien for taxes, labor or materials affecting a Financed Vehicle). As of each Cutoff Date there were no Liens or claims for taxes, work, labor or materials affecting a Financed Vehicle which are or may be Liens prior or equal to the lien of the related Receivable. 19. ALL FILINGS MADE. All filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Trust a first priority perfected lien on, or ownership interest in, the Receivables and the Other Conveyed Property have been made, taken or performed. 20. NO IMPAIRMENT. OFL has not done anything to convey any right to any Person that would result in such Person having a right to payments due under a Receivable or otherwise to impair the rights of ORFC II, the Trust, the Indenture Trustee, JPMD, the Noteholders and the Certificateholders in any Receivable or the proceeds thereof. 21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations to OFL with respect to such Receivable. 22. NO DEFENSES. No Receivable is subject to any right of rescission, setoff, counterclaim or defense and no such right has been asserted or threatened with respect to any Receivable. 23. NO DEFAULT. There has been no default, breach, violation or event permitting acceleration under the terms of any Receivable (other than payment delinquencies of not more than 30 days), and no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable, and there has been no waiver of any of the B-4 foregoing. As of any Cutoff Date or any Transfer Date, as applicable, no Financed Vehicle had been repossessed. 24. INSURANCE. As of the date hereof or as of the date of any Assignment Agreement, as applicable, each Financed Vehicle is covered by a comprehensive and collision insurance policy (i) in an amount at least equal to the lesser of (a) its maximum insurable value or (b) the principal amount due from the Obligor under the relate Receivable, (ii) naming OFL as loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage. Each Receivable requires the Obligor to maintain physical loss and damage insurance, naming OFL and its successors and assigns as additional insured parties, and each Receivable permits the holder thereof to obtain physical loss and damage insurance at the expense of the Obligor if the Obligor fails to do so. No Financed Vehicle was or had previously been insured under a policy of Force-Placed Insurance on the related Cutoff Date. 25. PAST DUE. As of the related Cutoff Date, no Receivable was more than 30 days past due and no funds have been advanced by ORFC II, the Servicer, any Dealer, or anyone acting on behalf of any of them in order to cause any Receivable to qualify under this representation. 26. REMAINING PRINCIPAL BALANCE. As of the related Cutoff Date, each Receivable had a remaining principal balance equal to or greater than $500.00 and the Principal Balance of each Receivable set forth in the Schedule of Receivables is true and accurate in all material respects. 27. MATURITY. Each Receivable had an original maturity of at least three months. 28. CERTAIN CHARACTERISTICS. (A) No Receivable has an initial payment date more than three months subsequent to the related Cutoff Date; (B) No Receivable has a final scheduled payment date on or before the related Transfer Date; (C) The Principal Balance of each Receivable set forth in Schedule of Receivables is true and accurate in all material respects as of the related Cutoff Date; and (D) after giving effect to the conveyance of Receivables on each Transfer Date, (i) the aggregate of the Principal Balances of Receivables with original maturities ranging from 72 to 84 months shall not exceed 7.5% of the aggregate of the Principal Balances of all Receivables on such Transfer Date, and (ii) the aggregate of the Principal Balances of Receivables attributable to loans originated under OFL's "Classic" program shall not exceed 40% of the aggregate of the Principal Balances of all Receivables on such Transfer Date. 29. PAYMENTS TO LOCKBOX BANK. The Obligor with respect to each Receivable, as of the related Transfer Date, is required to make all Scheduled Payments to the Lockbox Bank. B-5 EX-10.10 13 AMENDMENT DATED JUNE 12, 1996 EXECUTION COPY AMENDMENT Dated as of June 12, 1996 to RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT Dated as of December 28, 1995 between OLYMPIC RECEIVABLES FINANCE CORP. II Purchaser and OLYMPIC FINANCIAL LTD. Seller TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS ARTICLE II AMENDMENT SECTION 2.1. AMENDMENT TO SECTION 6.7 OF THE RECEIVABLES PURCHASE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.2. AMENDMENT TO SCHEDULE B OF THE RECEIVABLES PURCHASE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT . . . . . . . . . . . . . 2 SECTION 3.3. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 3.4. RECEIVABLES PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 -i- AMENDMENT dated as of June 12, 1996 (the "AMENDMENT") to RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT dated as of December 28, 1995 (the "RECEIVABLES PURCHASE AGREEMENT"), between Olympic Receivables Finance Corp. II, a Delaware corporation, as Purchaser (the "PURCHASER") and Olympic Financial Ltd., a Minnesota corporation, as Seller (the "SELLER"). WHEREAS, the Purchaser and the Seller have entered into the Receivables Purchase Agreement; WHEREAS, pursuant to Section 6.6(b) of the Receivables Purchase Agreement, the Purchaser and the Seller desire to amend the Receivables Purchase Agreement in certain respects as provided below; WHEREAS, each of the Owner Trustee, the Indenture Trustee, a Certificate Majority, a Note Majority and JPMD has consented to this Amendment as required by Section 6.6(b) of the Receivables Purchase Agreement; WHEREAS, it is the intent of the parties that this Amendment be effective as of the date set forth above (the "EFFECTIVENESS DATE"); NOW, THEREFORE, the parties to this Amendment hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined herein or the context otherwise requires, defined terms used herein shall have the meanings ascribed thereto in the Receivables Purchase Agreement. ARTICLE II AMENDMENT SECTION 2.1. AMENDMENT TO SECTION 6.7 OF THE RECEIVABLES PURCHASE AGREEMENT. Section 6.7 of the Receivables Purchase Agreement is hereby amended by deleting the words "902 Market Street, Wilmington, Delaware 19801" and substituting therefor "500 Stanton Christiana Road, Newark, Delaware 19713- 2107." SECTION 2.2. AMENDMENT TO SCHEDULE B OF THE RECEIVABLES PURCHASE AGREEMENT. Clause (D)(i) of Paragraph 28 of Schedule B to the Receivables Purchase Agreement is hereby amended by deleting the number "72" and substituting therefor "73." ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when the Seller shall have received (a) counterparts hereof executed on behalf of the Purchaser and the Seller, (b) the consents of the Owner Trustee, the Indenture Trustee, JPMD, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, the sole Noteholder, and JPMD, in its individual capacity, to the terms of this Amendment and (c) evidence of written notice to S&P and Moody's of this Amendment. SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Amendment and the Receivables Purchase Agreement (and all exhibits, annexes and schedules thereto) constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 3.3. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof or thereof. SECTION 3.4. RECEIVABLES PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically stated herein, all of the terms and conditions of the Receivables Purchase Agreement shall remain in full force and effect. All references to the Receivables Purchase Agreement in any other document or instrument shall be deemed to mean the Receivables Purchase Agreement, as amended by this Amendment. This Amendment shall not constitute a novation of the Receivables Purchase Agreement, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Receivables Purchase Agreement, as amended by this Amendment, as though the terms and obligations of the Receivables Purchase Agreement were set forth herein. -2- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers, all as of the date and year first above written. PURCHASER: OLYMPIC RECEIVABLES FINANCE CORP. II By: __________________________________ Name: Title: SELLER: OLYMPIC FINANCIAL LTD., By: __________________________________ Name: Title: AGREED AND CONSENTED: OWNER TRUSTEE: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement By: __________________________________ Name: Title: -3- INDENTURE TRUSTEE: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee By: __________________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, as sole Noteholder By: __________________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, in its individual capacity By: __________________________________ Name: Title: -4- EX-10.11 14 AMENDMENT NO 2 DATED SEPT 30, 1996 EXECUTION COPY AMENDMENT NO. 2 Dated as of September 30, 1996 to RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT Dated as of December 28, 1995 between OLYMPIC RECEIVABLES FINANCE CORP. II Purchaser and OLYMPIC FINANCIAL LTD. Seller TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS ARTICLE II AMENDMENT SECTION 2.1. Amendment to Section 2.2 of the Receivables Purchase Agreement. . . . . . . . . . . . . . . . . . 1 ARTICLE III MISCELLANEOUS SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . . 2 SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 3.4. Receivables Purchase Agreement in Full Force and Effect as Amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 -i- AMENDMENT NO. 2 dated as of September 30, 1996 (the "AMENDMENT") to RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT dated as of December 28, 1995 and amended as of June 12, 1996 (as amended, the "RECEIVABLES PURCHASE AGREEMENT"), between Olympic Receivables Finance Corp. II, a Delaware corporation, as Purchaser (the "PURCHASER") and Olympic Financial Ltd., a Minnesota corporation, as Seller (the "SELLER"). WHEREAS, the Purchaser and the Seller have entered into the Receivables Purchase Agreement; WHEREAS, pursuant to Section 6.6(b) of the Receivables Purchase Agreement, the Purchaser and the Seller desire to amend the Receivables Purchase Agreement in certain respects as provided below; WHEREAS, each of the Owner Trustee, the Indenture Trustee, a Certificate Majority, a Note Majority and JPMD has consented to this Amendment as required by Section 6.6(b) of the Receivables Purchase Agreement; WHEREAS, it is the intent of the parties that this Amendment be effective as of the date set forth above (the "EFFECTIVENESS DATE"); NOW, THEREFORE, the parties to this Amendment hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined herein or the context otherwise requires, defined terms used herein shall have the meanings ascribed thereto in the Receivables Purchase Agreement. ARTICLE II AMENDMENT SECTION 2.1. AMENDMENT TO SECTION 2.2 OF THE RECEIVABLES PURCHASE AGREEMENT. (a) Section 2.2(b)(1)(ix) of the Receivables Purchase Agreement is hereby amended to read in its entirety as follows: (ix) on any Transfer Date, OFL shall have established, in the name of the Trustee for the benefit of the Noteholders and the Certificateholders, an Eligible Interest Rate Cap Agreement in a notional amount equal to or greater than the sum of the Note Balance PLUS the Certificate Balance on such date (after taking into account the transfer of Receivables to the Trust on such date); (b) Section 2.2(b)(1) of the Receivables Purchase Agreement is hereby amended by adding the following subsection (x) immediately following Section 2.2(b)(1)(ix): (x) OFL shall have paid to the Purchaser for deposit into the Spread Account an amount at least equal to 1.0% of the aggregate of the Principal Balances of the Receivables sold to the Purchaser on such Transfer Date; and (c) Section 2.2(b)(1) of the Receivables Purchase Agreement is hereby further amended by renumbering Section 2.2(b)(1)(x) as Section 2.2(b)(1)(xi). ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when the Seller shall have received (a) counterparts hereof executed on behalf of the Purchaser and the Seller, (b) the consents of the Owner Trustee, the Indenture Trustee, JPMD, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, the sole Noteholder, to the terms of this Amendment and (c) evidence of written notice to Standard & Poor's and Moody's of this Amendment. SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Amendment and the Receivables Purchase Agreement (and all exhibits, annexes and schedules thereto) constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 3.3. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof or thereof. SECTION 3.4. RECEIVABLES PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically stated herein, all of the terms and conditions of the Receivables Purchase Agreement shall remain in full force and effect. All references to the Receivables Purchase Agreement in any other document or instrument shall be deemed to -2- mean the Receivables Purchase Agreement, as amended by this Amendment. This Amendment shall not constitute a novation of the Receivables Purchase Agreement, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Receivables Purchase Agreement, as amended by this Amendment, as though the terms and obligations of the Receivables Purchase Agreement were set forth herein. -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers, all as of the date and year first above written. PURCHASER: OLYMPIC RECEIVABLES FINANCE CORP. II By: /s/ John Witham ---------------------------------- Name: John Witham Title: EVP/CFO SELLER: OLYMPIC FINANCIAL LTD., By: /s/ Mike Sherman ---------------------------------- Name: Mike Sherman Title: VP/Treasurer AGREED AND CONSENTED: OWNER TRUSTEE: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement By: /s/ Denise M. Geran ---------------------------------- Name: Denise M. Geran Title: Financial Services Officer -4- INDENTURE TRUSTEE: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee By: /s/ illegible ---------------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, as sole Noteholder By: /s/ illegible ---------------------------------- Name: Title: -5- EX-10.12 15 AMENDMENT NO 3 JANUARY 17, 1997 EXECUTION COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AMENDMENT NO. 3 Dated as of January 17, 1997 to RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT Dated as of December 28, 1995 between OLYMPIC RECEIVABLES FINANCE CORP. II Purchaser and 0LYMPIC FINANCIAL LTD. Seller - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS ARTICLE II AMENDMENT SECTION 2.1. Amendment to Section 2.2 of the Receivables Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.2. Amendment to Schedule B to Receivables Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE III MISCELLANEOUS SECTION 3.1. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 3.2. Governing Law; Entire Agreement. . . . . . . . . . . . . . 2 SECTION 3.3. Headings . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 3.4. Receivables Purchase Agreement in Full Force and Effect as Amended . . . . . . . . . . . . . . . . . . . . . . . . 3 -i- AMENDMENT NO. 3. dated as of January 17, 1997 (the "AMENDMENT") to RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT dated as of December 28, 1995 and amended as of June 12, 1996 and September 30, 1996 (as amended, the "RECEIVABLES PURCHASE AGREEMENT"), between Olympic Receivables Finance Corp. II, a Delaware corporation, as Purchaser (the "PURCHASER") and Olympic Financial LTD., a Minnesota corporation, as Seller (the "SELLER"). WHEREAS, the Purchaser and the Seller have entered into the Receivables Purchase Agreement; WHEREAS, pursuant to Section 6.6(b) of the Receivables Purchase Agreement, the Purchaser and the Seller desire to amend the Receivables Purchase Agreement in certain respects as provided below; WHEREAS, each of the Owner Trustee, the Indenture Trustee, a Certificate Majority, a Note Majority and JPMD has consented to this Amendment as required by Section 6.6(b) of the Receivables Purchase Agreement; WHEREAS, it is the intent of the parties that this Amendment be effective as of the date set forth above (the "EFFECTIVENESS DATE"); NOW, THEREFORE, the parties to this Amendment hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined herein or the context otherwise requires, defined terms used herein shall have the meanings ascribed thereto in the Receivables Purchase Agreement. ARTICLE II AMENDMENT SECTION 2.1. AMENDMENT TO SECTION 2.2 OF THE RECEIVABLES PURCHASE AGREEMENT (a) Section 2.2(b)(1)(x) of the Receivables Purchase Agreement is hereby amended by deleting the reference to "1.0%" and substituting therefor "4.0%". (b) Section 2.2(b)(1) of the Receivables Purchase Agreement is hereby amended by adding the following subsection (xi) immediately following Section 2.2(b)(1)(x): (xi) after giving effect to the conveyance of Receivables on such Transfer Date, the aggregate of the Principal Balances of Receivables attributable to loans classified as Financed Repossessions shall not exceed 3.0% of the aggregate of the Principal Balances of all Receivables on such Transfer Date; and (c) Section 2.2(b)(1) of the Receivables Purchase Agreement is hereby further amended by renumbering Section 2.2(b)(1)(xi) as Section 2.2(b)(1)(xii). SECTION 2.2. AMENDMENT TO SCHEDULE B TO RECEIVABLES PURCHASE AGREEMENT. (a) Clause 28(D)(i) of Schedule B is hereby amended by deleting the word "and" at the end of such clause. (b) Clause 28(D)(ii) of Schedule B is hereby amended by deleting the reference to "40%" and substituting therefor "55%". (c) Clause 28(D) is hereby amended by adding the following immediately following clause (ii) thereof: "; and (iii) the aggregate of the Principal Balances of Receivables attributable to loans classified as Financed Repossessions shall not exceed 3.0% of the aggregate of the Principal Balances of all Receivables on such Transfer Date" ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when the Seller shall have received (a) counterparts hereof executed on behalf of the Purchaser and the Seller, (b) the consents of the Owner Trustee, the Indenture Trustee, JPMD, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, the sole Noteholder, to the terms of this Amendment and (c) evidence of written notice to Standard & Poor's and Moody's of this Amendment. SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Amendment and the Receivables Purchase Agreement (and all exhibits, annexes and schedules thereto) constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. -2- SECTION 3.3. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof or thereof. SECTION 3.4. RECEIVABLES PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically stated herein, all of the terms and conditions of the Receivables Purchase Agreement shall remain in full force and effect. All references to the Receivables Purchase Agreement in any other document or instrument shall be deemed to mean the Receivables Purchase Agreement, as amended by this Amendment. This Amendment shall not constitute a novation of the Receivables Purchase Agreement, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Receivables Purchase Agreement, as amended by this Amendment, as though the terms and obligations of the Receivables Purchase Agreement were set forth herein. -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers, all as of the date and year first above written. PURCHASER: OLYMPIC RECEIVABLES FINANCE CORP. II By:__________________________________ Name: Title: SELLER: OLYMPIC FINANCIAL LTD., By:__________________________________ Name: Title: AGREED AND CONSENTED: OWNER TRUSTEE: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement By:__________________________________ Name: Title: -4- INDENTURE TRUSTEE: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee By:__________________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, as sole Noteholder By:__________________________________ Name: Title: -5- EX-10.13 16 SALE & SERVICING AGREEMENT EXECUTION COPY SALE AND SERVICING AGREEMENT Dated as of December 28, 1995 among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST Issuer OLYMPIC RECEIVABLES FINANCE CORP. II Seller OLYMPIC FINANCIAL LTD. In its individual capacity and as Servicer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Backup Servicer TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . 22 Section 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . . 22 Section 1.4. Section References . . . . . . . . . . . . . . . . . . . 22 Section 1.5. No Recourse. . . . . . . . . . . . . . . . . . . . . . . 23 Section 1.6. Condition to Effectiveness of Agreements . . . . . . . . 23 ARTICLE II CONVEYANCE OF RECEIVABLES Section 2.1. Conveyance of Receivables. . . . . . . . . . . . . . . . 23 Section 2.2. Custody of Receivable Files. . . . . . . . . . . . . . . 28 Section 2.3. Conditions to Acceptance by Owner Trustee. . . . . . . . 29 Section 2.4. Deemed Acceptance by Owner Trustee and Indenture Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 2.5. Representations and Warranties of Seller . . . . . . . . 30 Section 2.6. Repurchase of Receivables Upon Breach of Warranty. . . . 34 Section 2.7. Nonpetition Covenant . . . . . . . . . . . . . . . . . . 35 Section 2.8. Collecting Lien Certificates Not Delivered on the Closing Date or Transfer Date. . . . . . . . . . . . . . 35 Section 2.9. Trust's Assignment of Administrative Receivables and Warranty Receivables . . . . . . . . . . . . . . . . . . 35 ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES Section 3.1. Duties of the Servicer . . . . . . . . . . . . . . . . . 36 Section 3.2. Collection of Receivable Payments; Modifications of Receivables; Lockbox Agreements. . . . . . . . . . . . . 37 Section 3.3. Realization Upon Receivables . . . . . . . . . . . . . . 40 Section 3.4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . 41 Section 3.5. Maintenance of Security Interests in Vehicles. . . . . . 42 Section 3.6. Covenants, Representations, and Warranties of Servicer . 43 Section 3.7. Purchase of Receivables Upon Breach of Covenant. . . . . 45 Section 3.8. Total Servicing Fee; Payment of Certain Expenses by Servicer . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 3.9. Servicer's Certificate . . . . . . . . . . . . . . . . . 46 -i- Section 3.10. Annual Statement as to Compliance; Notice of Servicer Termination Event. . . . . . . . . . . . . . . . . . . . 47 Section 3.11. Annual Independent Accountants' Report . . . . . . . . . 48 Section 3.12. Access to Certain Documentation and Information Regarding Receivables. . . . . . . . . . . . . . . . . . 48 Section 3.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . . 49 Section 3.14. Retention of Servicer. . . . . . . . . . . . . . . . . . 50 Section 3.15. Fidelity Bond. . . . . . . . . . . . . . . . . . . . . . 50 Section 3.16. Duties of the Servicer under the Indenture . . . . . . . 50 Section 3.17. Daily Report . . . . . . . . . . . . . . . . . . . . . . 51 Section 3.18. Certain Duties of the Servicer under the Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . 51 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS Section 4.1. Trust Accounts . . . . . . . . . . . . . . . . . . . . . 52 Section 4.2. Collections. . . . . . . . . . . . . . . . . . . . . . . 53 Section 4.3. Application of Collections . . . . . . . . . . . . . . . 54 Section 4.4. Monthly Advances . . . . . . . . . . . . . . . . . . . . 55 Section 4.5. Additional Deposits. . . . . . . . . . . . . . . . . . . 56 Section 4.6. Distributions. . . . . . . . . . . . . . . . . . . . . . 56 Section 4.7. Distributions on Trust Property Liquidation. . . . . . . 58 Section 4.8. Net Deposits . . . . . . . . . . . . . . . . . . . . . . 60 Section 4.9. Statements to Certificateholders and Noteholders . . . . 60 Section 4.10. Indenture Trustee as Agent . . . . . . . . . . . . . . . 62 Section 4.11. Eligible Accounts. . . . . . . . . . . . . . . . . . . . 62 ARTICLE V THE SPREAD ACCOUNT Section 5.1. Withdrawals from Spread Account. . . . . . . . . . . . . 62 ARTICLE VI THE SELLER Section 6.1. Liability of Seller. . . . . . . . . . . . . . . . . . . 62 Section 6.2. Merger or Consolidation of, or Assumption of the Obligations of, Seller; Amendment of Certificate of Incorporation. . . . . . . . . . . . . . . . . . . . . . 63 Section 6.3. Limitation on Liability of Seller and Others . . . . . . 63 Section 6.4. Seller May Own Certificates or Notes . . . . . . . . . . 64 Section 6.5. Limited Recourse Upon Securitized Offering . . . . . . . 64 -ii- ARTICLE VII THE SERVICER Section 7.1. Liability of Servicer; Indemnities . . . . . . . . . . . 64 Section 7.2. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or Backup Servicer. . . . . 66 Section 7.3. Limitation on Liability of Servicer, Backup Servicer and Others . . . . . . . . . . . . . . . . . . . . . . . 67 Section 7.4. Delegation of Duties . . . . . . . . . . . . . . . . . . 67 Section 7.5. Servicer and Backup Servicer Not to Resign . . . . . . . 68 ARTICLE VIII SERVICER TERMINATION EVENTS Section 8.1. Servicer Termination Event . . . . . . . . . . . . . . . 68 Section 8.2. Consequences of a Servicer Termination Event . . . . . . 69 Section 8.3. Appointment of Successor . . . . . . . . . . . . . . . . 70 Section 8.4. Notification to Certificateholders and Noteholders . . . 71 Section 8.5. Waiver of Past Defaults. . . . . . . . . . . . . . . . . 71 ARTICLE IX TERMINATION Section 9.1. Optional Purchase of Receivables; Liquidation of Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . 72 ARTICLE X MISCELLANEOUS PROVISIONS Section 10.1. Amendment. . . . . . . . . . . . . . . . . . . . . . . . 74 Section 10.2. Protection of Title to Trust Property. . . . . . . . . . 76 Section 10.3. Governing Law. . . . . . . . . . . . . . . . . . . . . . 78 Section 10.4. Severability of Provisions . . . . . . . . . . . . . . . 78 Section 10.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . 78 Section 10.6. Third-Party Beneficiaries. . . . . . . . . . . . . . . . 78 Section 10.7. [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . 78 Section 10.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . 78 Section 10.9. Intention of Parties . . . . . . . . . . . . . . . . . . 78 Section 10.10. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 10.11. Limitation of Liability. . . . . . . . . . . . . . . . . 79 -iii- SCHEDULE A SCHEDULE OF RECEIVABLES SCHEDULE B REPRESENTATIONS AND WARRANTIES OF SELLER AND OFL SCHEDULE C SERVICING POLICIES AND PROCEDURES EXHIBIT B FORM OF CUSTODIAN AGREEMENT EXHIBIT D FORM OF RECEIVABLES PURCHASE AGREEMENT EXHIBIT E FORM OF SERVICER'S CERTIFICATE EXHIBIT F FORM OF TRANSFER AGREEMENT -iv- THIS SALE AND SERVICING AGREEMENT, dated as of December 28, 1995, is made among Olympic Automobile Receivables Warehouse Trust (the "Issuer"), Olympic Receivables Finance Corp. II, a Delaware corporation, as Seller (the "Seller"), Olympic Financial Ltd., a Minnesota corporation, in its individual capacity and as Servicer (in its individual capacity, "OFL"; in its capacity as Servicer, the "Servicer") and Norwest Bank Minnesota, National Association, a national banking association, as Backup Servicer (the "Backup Servicer"). In consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.1. DEFINITIONS. All terms defined in the Indenture or the Trust Agreement (each as defined below) shall have the same meaning in this Agreement. Whenever capitalized and used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: ACCOUNTANTS' REPORT: The report of a firm of nationally recognized independent accountants described in Section 3.11. ACCOUNTING DATE: With respect to a Distribution Date or a Determination Date, the last day of the Monthly Period immediately preceding such Distribution Date or Determination Date. ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a Receivable which the Servicer is required to purchase pursuant to Section 3.7 or which the Servicer has elected to purchase pursuant to Section 3.4(c). ADMINISTRATOR: The meaning assigned to such term in the Trust Agreement. AFFILIATE: With respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. AGGREGATE MONTHLY ADVANCE AMOUNT: As of any Determination Date, the excess, if any, of (x) the amount of interest accrued on the Receivables (for the number of calendar days in the related Monthly Period) (calculated according to the method specified in the related retail installment sale contract or promissory note at the APR on the Principal Balance of such Receivable as of the second Accounting Date preceding such Determination Date) over (y) the amounts deposited into the Collection Account during the related Monthly Period in respect of the Receivables and allocable to interest (determined in accordance with Section 4.3). AGGREGATE PRINCIPAL BALANCE: With respect to any Determination Date, the sum of the Principal Balances (computed as of the related Accounting Date) for all Receivables (other than (i) any Receivable that became a Liquidated Receivable during the related Monthly Period and (ii) any Receivable that became a Purchased Receivable as of the related Accounting Date). AGREEMENT OR "THIS AGREEMENT": This Sale and Servicing Agreement, all amendments and supplements thereto and all exhibits and schedules to any of the foregoing. AMOUNT FINANCED: With respect to a Receivable or an Auto Receivable, the aggregate amount advanced under such Receivable or Auto Receivable, as applicable, toward the purchase price of the Financed Vehicle and related costs, including amounts advanced in respect of accessories, insurance premiums, service and warranty contracts, other items customarily financed as part of retail automobile installment sale contracts or promissory notes, and related costs. The term "Amount Financed" shall not include any Insurance Add-On Amounts. ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the rate per annum of finance charges stated in such Receivable as the "annual percentage rate" (within the meaning of the Federal Truth-in-Lending Act). If after the Closing Date or the applicable Transfer Date, the rate per annum with respect to a Receivable as of the Closing Date or the applicable Transfer Date is reduced as a result of (i) an insolvency proceeding involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced rate. ASSIGNMENT AGREEMENT: The assignment agreement between OFL and the Seller pursuant to which OFL sells and assigns Receivables and related Other Conveyed Property to the Seller, the form of which is attached to the Purchase Agreement as Exhibit A. AUTO RECEIVABLES: Any consumer installment sale contracts or promissory notes (and related security agreements) secured by new and used automobiles and light trucks (and all accessories thereto) purchased or otherwise acquired by OFL or any Affiliate of OFL from Dealers. -2- AVAILABLE FUNDS: With respect to any Determination Date, the sum of (i) the Collected Funds for such Determination Date, (ii) all Purchase Amounts to be deposited in the Collection Account on the related Deposit Date, (iii) all Monthly Advances to be made by the Seller or the Servicer on the related Deposit Date, and (iv) all net income from investments of funds in the Trust Accounts and the Certificate Distribution Account during the related Monthly Period. AVERAGE NET EXCESS SPREAD PERCENTAGE: (i) As of (x) the first Determination Date or (y) the second Determination Date immediately following a Trust Property Liquidation Date, or if no Trust Property Liquidation Date has occurred, the Closing Date, in the case of the first such Determination Date, the Net Excess Spread Percentage as of the Accounting Date for the related Monthly Period and in the case of the second such Determination Date, the average of the Net Excess Spread Percentages for the two preceding Monthly Periods, calculated as of the Accounting Date of each such Monthly Period; and (ii) as of any subsequent Determination Date, the average of the Net Excess Spread Percentages for the three preceding Monthly Periods, calculated as of the Accounting Date of each such Monthly Period. AVERAGE SERVICING PORTFOLIO: As of any date, the average of the Servicing Portfolio for the seven preceding Monthly Periods, calculated in each case as of the Accounting Date with respect to each Monthly Period. BACKUP SERVICER: Norwest Bank Minnesota, National Association, or its successor in interest pursuant to Section 8.2, or such Person as shall have been appointed as Backup Servicer or successor Servicer pursuant to Section 8.3. BASIC SERVICING FEE: With respect to any Monthly Period, the fee payable to the Servicer for services rendered during such Monthly Period, which shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied by the Aggregate Principal Balance as of the Determination Date falling in such Monthly Period. BASIC SERVICING FEE RATE: 1.00% per annum, payable monthly at one-twelfth of the annual rate. BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday or other day on which commercial banking institutions in Minneapolis, Minnesota, New York, New York, Wilmington, Delaware or any other location of any successor Servicer, successor Owner Trustee or successor Indenture Trustee are authorized or obligated by law, executive order or governmental decree to be closed. CERTIFICATE BALANCE: The meaning assigned to such term in the Trust Agreement. -3- CERTIFICATE DISTRIBUTION ACCOUNT: The meaning assigned to such term in the Trust Agreement. CERTIFICATE MAJORITY: The meaning assigned to such term in the Trust Agreement. CERTIFICATE PURCHASE AGREEMENT: The meaning assigned to such term in the Trust Agreement CERTIFICATE PURCHASE TERMINATION EVENT: Any event or occurrence designated as such in the Certificate Purchase Agreement. CERTIFICATE RATE: The meaning assigned to such term in the Certificate Purchase Agreement. CERTIFICATEHOLDERS' DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the sum of the Certificateholders' Interest Distributable Amount and the Certificateholders' Principal Distributable Amount. CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL: With respect to any Distribution Date, the excess of the Certificateholders' Interest Distributable Amount for the preceding Distribution Date over the amount in respect of interest on the Certificates that was actually deposited in the Certificate Distribution Account on such preceding Distribution Date, plus interest on such excess, to the extent permitted by law, at the Certificate Rate from such preceding Distribution Date to but excluding the current Distribution Date. CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the sum of the Certificateholders' Monthly Interest Distributable Amount for such Distribution Date and the Certificateholders' Interest Carryover Shortfall for such Distribution Date. CERTIFICATEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, for the related Interest Accrual Period, the sum of (i) the sum of the interest accrued on each day during such Interest Accrual Period on the Certificates at the Certificate Rate on the Certificate Balance as of the close of business on the immediately preceding day and (ii) the Interest Arrearage. CERTIFICATEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the Certificateholders' Percentage of the Principal Distribution Amount plus, with respect to the Distribution Date on which the outstanding principal balance of the Notes is reduced to zero, the remainder of the Principal Distribution Amount on such Distribution Date. -4- CERTIFICATEHOLDERS' PERCENTAGE: With respect to any Determination Date relating to a Distribution Date, 100% minus the Noteholders' Percentage as of such Determination Date. CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL: As of the close of any Distribution Date, the excess of the sum of the Certificateholders' Principal Distributable Amount over the amount in respect of principal that was actually deposited in the Certificate Distribution Account on such Distribution Date. CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any Distribution Date (other than the Final Scheduled Distribution Date), the sum of the Certificateholders' Monthly Principal Distributable Amount for such Distribution Date and any Certificateholders' Principal Carryover Shortfall as of the close of the preceding Distribution Date; PROVIDED, HOWEVER, that the Certificateholders' Principal Distributable Amount shall not exceed the Certificate Balance. The "Certificateholders' Principal Distributable Amount" on the Final Scheduled Distribution Date will equal the Certificate Balance as of the Final Scheduled Distribution Date. CERTIFICATES: The meaning assigned to such term in the Trust Agreement. CLOSING DATE: December 28, 1995. COLLATERAL INSURANCE: The meaning set forth in Section 3.4(a). COLLECTED FUNDS: With respect to any Determination Date, the amount of funds in the Collection Account representing collections on the Receivables during the related Monthly Period, including all Liquidation Proceeds collected during the related Monthly Period (but excluding any Monthly Advances and any Purchase Amounts). COLLECTION ACCOUNT: The account designated as the Collection Account in, and which is established and maintained pursuant to, Section 4.1(a). COLLECTION RECORDS: All manually prepared or computer generated records relating to collection efforts or payment histories with respect to the Receivables. COLLECTION SHORTFALL: As of any Determination Date, with respect to a Receivable, if the amounts deposited into the Collection Account during a Monthly Period in respect of such Receivable and allocable to interest (determined in accordance with Section 4.3) is less than the interest accrued on such Receivable (for the number of calendar days in such Monthly Period) (calculated according to the method specified in the related retail installment sale contract or promissory note at the APR on the Principal Balance of such Receivable as of the Accounting Date for the immediately preceding Monthly Period), the amount of such shortfall. -5- COMMERCIAL PAPER NOTES: The commercial paper notes issued from time to time by DFC and related to the Notes. CORPORATE TRUST OFFICE: With respect to the Owner Trustee, the principal office of the Owner Trustee at which at any particular time its corporate trust business shall be administered, which office at the Closing Date is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration; the telecopy number for the Corporate Trust Office of the Owner Trustee on the date of the execution of this Agreement is (302) 651-8882; with respect to the Indenture Trustee, the principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office is located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust Department; the telecopy number for the Corporate Trust Office of the Indenture Trustee on the date of execution of this Agreement is (612) 667-9825. CRAM DOWN LOSS: With respect to a Receivable or an Auto Receivable, as applicable, if a court of appropriate jurisdiction in an insolvency proceeding shall have issued an order reducing the amount owed on a Receivable or an Auto Receivable or otherwise modifying or restructuring the Scheduled Payments to be made on a Receivable or an Auto Receivable, an amount equal to the excess of the principal balance of such Receivable or Auto Receivable, as applicable, immediately prior to such order over the principal balance of such Receivable or Auto Receivable, as applicable, as so reduced or the net present value (using as the discount rate the higher of the contract rate or the rate of interest, if any, specified by the court in such order) of the scheduled payments as so modified or restructured. A Cram Down Loss will be deemed to have occurred on the date of issuance of such order. CUSTODIAN: OFL and any other Person named from time to time as custodian in any Custodian Agreement acting as agent for the Trust, which Person must be acceptable to JPMD. CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time in effect between the Custodian named therein and the Trust, substantially in the form of Exhibit B hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, which Custodian Agreement and any amendments, supplements or modifications thereto shall be acceptable to JPMD. CUTOFF DATE: With respect to any Receivables, the date specified in the related Transfer Agreement, which may in no event be later than the related Transfer Date. DEALER: A seller of new or used automobiles or light trucks that originated one or more of the Receivables and sold the respective Receivable, directly or indirectly, to OFL under an agreement between such seller and OFL. -6- DEALER AGREEMENT: An agreement between OFL and a Dealer relating to the sale of Auto Receivables to OFL and all documents and instruments relating thereto. DEALER ASSIGNMENT: With respect to an Auto Receivable, the executed assignment executed by a Dealer conveying such Receivable to OFL. DEEMED CURED: (i) As of any Determination Date following the occurrence of a Trigger Event, no Trigger Event has occurred and is continuing as of such Determination Date or as of any of the 3 consecutively preceding Monthly Periods during which there were Receivables in the Trust; and (ii) the occurrence of a Trust Property Liquidation Date on which not less than all of the Receivables in the Trust as of such date are purchased pursuant to Section 9.1(b) hereof. DEFICIENCY CLAIM AMOUNT: The meaning set forth in Section 5.1. DELINQUENCY RATIO: As of any Determination Date, a fraction, expressed as a percentage, the numerator of which equals the aggregate of the Principal Balances of all Auto Receivables that are Delinquent Receivables and the denominator of which equals the Servicing Portfolio as of such Determination Date. DELINQUENT RECEIVABLE: With respect to any Determination Date, any Receivable or Auto Receivable, as applicable, as to which all or a portion of a Scheduled Payment is more than 31 days delinquent as of the related Accounting Date. DEPOSIT DATE: With respect to any Monthly Period, the Business Day immediately preceding the related Distribution Date. DETERMINATION DATE: With respect to any Monthly Period, the fifth Business Day immediately preceding the related Distribution Date. DFC: Delaware Funding Corporation, a Delaware corporation. DFC ASSET PURCHASE AGREEMENT: The meaning assigned to such term in the Note Purchase Agreement. DISTRIBUTION AMOUNT: With respect to a Distribution Date, the sum of (i) the Available Funds for such Distribution Date, and (ii) the Deficiency Claim Amount, if any, received by the Indenture Trustee with respect to such Distribution Date. DISTRIBUTION DATE: The 15th day of each calendar month, or if such 15th day is not a Business Day, the next succeeding Business Day, commencing February 15, 1996 to and including the Final Scheduled Distribution Date. -7- ELECTRONIC LEDGER: The electronic master record of the retail installment sales contracts or installment loans of OFL. ELIGIBLE ACCOUNT: A segregated direct deposit account maintained with a depository institution or trust company organized under the laws of the United States of America, or any of the States thereof, or the District of Columbia, having a certificate of deposit, short term deposit or commercial paper rating of at least "A-1+" by Standard & Poor's and "P-1" by Moody's. ELIGIBLE INVESTMENTS: Any one or more of the following types of investments: (a) (i) direct interest-bearing obligations of, and interest-bearing obligations guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality of the United States, the obligations of which are backed by the full faith and credit of the United States; and (ii) direct interest-bearing obligations of, and interest-bearing obligations guaranteed as to timely payment of principal and interest by, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, but only if, at the time of investment, such obligations are assigned the highest credit rating by each Rating Agency; (b) demand or time deposits in, certificates of deposit of, or bankers' acceptances issued by any depository institution or trust company organized under the laws of the United States or any State and subject to supervision and examination by federal and/or State banking authorities (including, if applicable, the Indenture Trustee, the Owner Trustee or any agent of either of them acting in their respective commercial capacities); provided that the short-term unsecured debt obligations of such depository institution or trust company at the time of such investment, or contractual commitment providing for such investment, are assigned the highest credit rating by each Rating Agency; (c) repurchase obligations pursuant to a written agreement (i) with respect to any obligation described in clause (a) above, where the Indenture Trustee has taken actual or constructive delivery of such obligation in accordance with Section 4.1, and (ii) entered into with the corporate trust department of a depository institution or trust company organized under the laws of the United States or any State thereof, the deposits of which are insured by the Federal Deposit Insurance Corporation and the short-term unsecured debt obligations of which are rated "A-1+" by Standard & Poor's and "P-1" by Moody's (including, if applicable, the Indenture Trustee, the Owner Trustee or any agent of either of them acting in their respective commercial capacities); -8- (d) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any State whose long-term unsecured debt obligations are assigned the highest credit rating by each Rating Agency at the time of such investment or contractual commitment providing for such investment; PROVIDED, HOWEVER, that securities issued by any particular corporation will not be Eligible Investments to the extent that an investment therein will cause the then outstanding principal amount of securities issued by such corporation and held in the Trust Accounts to exceed 10% of the Eligible Investments held in the Trust Accounts (with Eligible Investments held in the Trust Accounts valued at par); (e) commercial paper that (i) is payable in United States dollars and (ii) is rated in the highest credit rating category by each Rating Agency; (f) units of money market funds rated in the highest credit rating category by each Rating Agency; provided that all Eligible Investments shall be held in the name of the Indenture Trustee; or (g) any other demand or time deposit, obligation, security or investment as may be acceptable to JPMD and that satisfies the Rating Agency Condition; Eligible Investments may be purchased by or through the Indenture Trustee or any of its Affiliates. ELIGIBLE SERVICER: OFL, the Backup Servicer or another Person which at the time of its appointment as Servicer (i) is servicing a portfolio of motor vehicle retail installment sales contracts and/or motor vehicle installment loans, (ii) is legally qualified and has the capacity to service the Receivables, (iii) has demonstrated the ability professionally and competently to service a portfolio of motor vehicle retail installment sales contracts and/or motor vehicle installment loans similar to the Receivables with reasonable skill and care, and (iv) is qualified and entitled to use, pursuant to a license or other written agreement, and agrees to maintain the confidentiality of, the software which the Servicer uses in connection with performing its duties and responsibilities under this Agreement or otherwise has available software which is adequate to perform its duties and responsibilities under this Agreement. EXCESS YIELD CONDITION: As of any date, the Excess Yield Percentage is greater than 3.0%. EXCESS YIELD PERCENTAGE: As of any date, (i) the weighted average APR of the Receivables, minus (ii) the sum of (x) the H.15 (519) 30-day Commercial Paper Rate as of the immediately preceding Business Day plus (y) 1.50%. -9- FACILITY BALANCE: As of any date, the sum of (i) the aggregate Outstanding Amount of the Notes, plus (ii) the Certificate Balance (excluding the General Partner Certificates). FACILITY LIMIT: $219,800,000.00. FINAL SCHEDULED DISTRIBUTION DATE: With respect to the Notes and the Certificates, the earlier of (i) the Distribution Date that is 85 months from the Purchase Termination Date and (ii) the date on which the Notes or the Certificates are fully redeemed in accordance with the Indenture or the Trust Agreement, as the case may be (or, if such day is not a Business Day, the next succeeding Business Day). FINANCED VEHICLE: A new or used automobile or light truck, together with all accessories thereto, securing or purporting to secure an Obligor's indebtedness under a Receivable or an Auto Receivable, as applicable. FORCE-PLACED INSURANCE: The meaning set forth in Section 3.4(b). FUNDING PERIOD: The period from and including the Closing Date to but excluding the Purchase Termination Date. GENERAL PARTNER CERTIFICATES: The meaning assigned to such term in the Trust Agreement. GENERAL PARTNER: Seller in its capacity as general partner of the Trust, and any successors thereto as permitted by the Trust Agreement. INDENTURE: The Indenture, dated as of December 28, 1995, between the Trust and the Indenture Trustee, as the same may be amended and supplemented from time to time. INDENTURE COLLATERAL: The meaning assigned to such term in the Indenture. INDENTURE TRUSTEE: The Person acting as Trustee under the Indenture, its successors in interest and any successor Trustee under the Indenture. INDEPENDENT ACCOUNTANTS: The meaning set forth in Section 3.11(a). INDEPENDENT CERTIFICATE: The meaning assigned to such term in the Indenture. INELIGIBLE RECEIVABLES: With respect to a Securitized Offering, any Receivables that do not meet the eligibility criteria as of the cutoff date for such Securitized Offering. INSOLVENCY EVENT: With respect to a specified Person, (a) the commencement of an involuntary case against such Person under the federal bankruptcy laws, as now or -10- hereinafter in effect, or another present or future federal or state bankruptcy, insolvency or similar law, and such case is not dismissed within 60 days; or (b) the filing of a decree or entry of an order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person's affairs; or (c) the commencement by such Person of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing. INSOLVENCY PROCEEDS: The meaning set forth in Section 9.1(c). INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the event that the Servicer obtains Force-Placed Insurance pursuant to Section 3.4. INSURANCE POLICY: With respect to a Receivable, any insurance policy benefiting the holder of the Receivable providing loss or physical damage, credit life, credit disability, theft, mechanical breakdown or similar coverage with respect to the Financed Vehicle or the Obligor. INTEREST ACCRUAL PERIOD: The meaning set forth in the Note Purchase Agreement or the Certificate Purchase Agreement, as applicable INTEREST ARREARAGE: The meaning assigned to such term in the Certificate Purchase Agreement. INVESTOR GROUP: The group of investors committed to purchasing Investor Certificates under the Certificate Purchase Agreement. ISSUER: The meaning assigned to such term in the Indenture. ISSUER ORDER: The meaning assigned to such term in the Indenture. JPMD: J.P. Morgan Delaware, in its capacity as Administrative Agent for DFC and the purchasers under the DFC Asset Purchase Agreement and as agent for the banks under the Program Facility, or as agent for the Investor Group. -11- LIEN: Any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind, including tax liens, mechanics' liens and any liens that attach by operation of law. LIEN CERTIFICATE: With respect to a Financed Vehicle, an original certificate of title, certificate of lien or other notification issued by the Registrar of Titles of the applicable state to a secured party which indicates that the lien of the secured party on the Financed Vehicle is recorded on the original certificate of title. In any jurisdiction in which the original certificate of title is required to be given to the Obligor, the term "Lien Certificate" shall mean only a certificate or notification issued to a secured party. LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a Receivable as to which (i) 91 days have elapsed since the Servicer repossessed the related Financed Vehicle, (ii) the Servicer has determined in good faith that all amounts it expects to recover have been received, or (iii) all or any portion of a Scheduled Payment shall have become more than 180 days delinquent. LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all amounts realized with respect to such Receivable net of (i) reasonable expenses incurred by the Servicer in connection with the collection of such Receivable and the repossession and disposition of the Financed Vehicle and (ii) amounts that are required to be refunded to the Obligor on such Receivable; PROVIDED, HOWEVER, that the Liquidation Proceeds with respect to any Receivable shall in no event be less than zero. LOCKBOX ACCOUNT: The segregated account maintained on behalf of the Trust by the Lockbox Bank in accordance with Section 3.2(d). LOCKBOX AGREEMENT: The Agency Agreement, dated as of November 13, 1992 by and among Harris Trust and Savings Bank, OFL, Shawmut Bank, N.A., as Trustee, Saturn Financial Services, Inc. and the Program Parties (as defined therein), taken together with the Retail Lockbox Agreement, dated as of November 13, 1992, among such parties, and the Counterpart to Agency Agreement and Retail Lockbox Agreement, dated as of December 28, 1995, among Harris Trust and Savings Bank, OFL, the Trust and the Indenture Trustee, as such agreements may be amended from time to time, unless the Indenture Trustee hereunder shall cease to be a Program Party thereunder, or such agreement shall be terminated in accordance with its terms, in which event "Lockbox Agreement" shall mean such other agreement, in form and substance acceptable to JPMD, among the Servicer, the Trust, the Indenture Trustee and the Lockbox Bank. LOCKBOX BANK: Harris Trust and Savings Bank or a depository institution named by the Servicer and acceptable to JPMD. -12- MATERIAL ADVERSE EFFECT: With respect to any event or circumstance, means a material adverse effect on: (i) the ability of OFL, the Seller or the Servicer to perform in all material respects its obligations under this Agreement or any other Related Document; (ii) the validity or enforceability of this Agreement, any other Related Document or the Receivables or the collectibility of the Receivables; or (iii) the status, existence, perfection, priority or enforceability of the Trust's interest in the Receivables. MAXIMUM PRINCIPAL BALANCE: With respect to the Notes, $200,000,000 (excluding capitalized interest thereon). MONTHLY ADVANCE: The amount that the Servicer or the Seller, as the case may be, is required to advance on any Receivables pursuant to Section 4.4(a) or (b). MONTHLY INTEREST COLLECTION SHORTFALL: As of any Determination Date, the excess, if any, of (x) the amount necessary to make the payments required by Sections 4.6(i), (ii), (iii), (iv) and (vi) hereof over (y) the sum of (i) the Collected Funds for such Determination Date, to the extent allocable to interest on the related Receivables, (ii) all Purchase Amounts to be deposited in the Collection Account on the related Deposit Date, to the extent allocable to interest on the related Receivables, and (iii) all net income from investments of funds in the Trust Accounts and the Certificate Distribution Account during the related Monthly Period. MONTHLY PERIOD: With respect to a Distribution Date or a Determination Date, the calendar month preceding the month in which such Distribution Date or Determination Date occurs (or, in the case of the first Distribution Date or Determination Date, the portion of the calendar month preceding the month in which such Distribution Date or Determination Date occurs, from and including the initial Transfer Date to and including the last day of such calendar month) (such calendar month (or portion thereof) being referred to as the "related" Monthly Period with respect to such Distribution Date or Determination Date). With respect to an Accounting Date, the calendar month in which such Accounting Date occurs is referred to herein as the "related" Monthly Period to such Accounting Date. MONTHLY RECORDS: All records and data maintained by the Servicer with respect to the Receivables, including the following with respect to each Receivable: the account number; the identity of the originating Dealer; Obligor name; Obligor address; Obligor home phone number; Obligor business phone number; original Principal Balance; original -13- term; Annual Percentage Rate; current Principal Balance; current remaining term; origination date; first payment date; final scheduled payment date; next payment due date; date of most recent payment; new/used classification; collateral description; days currently delinquent; number of contract extensions (months) to date; amount, if any, of Force-Placed Insurance payable monthly; amount of the Scheduled Payment; current Insurance Policy expiration date; and past due late charges, if any. MOODY'S: Moody's Investors Service, Inc., or any successor thereto. NET ADVANCE AMOUNT: As of any Determination Date, an amount equal to the lesser of (i) the Aggregate Monthly Advance Amount and (ii) the Monthly Interest Collection Shortfall. NET ADVANCE SHORTFALL: The meaning set forth in Section 4.4(a)(ii). NET EXCESS SPREAD PERCENTAGE: As of any Determination Date, (i) the weighted average APR of the Receivables (taking into account any hedging arrangements maintained pursuant to Section 2.1(b)(xiv) as of the related Accounting Date, minus (ii) the weighted average of the Note Interest Rate and the Certificate Rate for the immediately preceding Interest Accrual Period, minus (iii) 1.00%, minus (iv) the Net Loss Rate for such Determination Date. NET LOSS RATE: As of any Determination Date, a fraction expressed as a percentage, the numerator of which is equal to (i) the sum of (a) the aggregate of the Principal Balances as of the related Accounting Date of all Receivables that became Liquidated Receivables during the related Monthly Period and (b) the amount of any Cram Down Losses less (ii) the Liquidation Proceeds received by the Trust during the related Monthly Period, and the denominator of which is equal to the average of the Aggregate Principal Balance as of the related Accounting Date and the Aggregate Principal Balance as of the next preceding Accounting Date. NET PORTFOLIO LOSSES: With respect to any Monthly Period, the aggregate amount of gross charge-offs of Auto Receivables serviced by OFL or any of its Affiliates during such Monthly Period net of all recoveries with respect to any such Auto Receivables (including post-disposition amounts received on previously charged-off Auto Receivables), calculated in a manner consistent with the calculation of net losses in OFL's Annual Report on Form 10-K for the year ended December 31, 1994. NON-CALLABLE NOTES: The meaning assigned to such term in the Indenture. NOTE DISTRIBUTION ACCOUNT: The account designated as such, established and maintained pursuant to Section 4.1(b). -14- NOTE INTEREST ARREARAGE: The meaning assigned to such term in the Note Purchase Agreement. NOTE INTEREST RATE: The meaning assigned to such term in the Note Purchase Agreement. NOTE MAJORITY: Holders of Notes representing a majority of the Outstanding principal balance of Notes or if no Notes are Outstanding but the Purchase Termination Date has not occurred, holders of commitments to purchase a majority of the Maximum Principal Balance of Notes; PROVIDED, HOWEVER, any Notes held by OFL or any affiliate thereof shall be excluded when calculating a Note Majority. NOTE PURCHASE AGREEMENT: The Note Purchase Agreement, dated as of December 28, 1995, among the Trust, OFL, the owners named therein and J.P. Morgan Delaware, as agent for those owners, as the same may be amended and supplemented from time to time. NOTE PURCHASE TERMINATION EVENT: Any event or occurrence designated as such in the Note Purchase Agreement. NOTEHOLDERS' DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the sum of the Noteholders' Interest Distributable Amount and the Noteholders' Principal Distributable Amount. NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL: With respect to any Distribution Date, the excess of the Noteholders' Interest Distributable Amount for the preceding Distribution Date over the amount in respect of interest on the Notes that was actually deposited in the Note Distribution Account on such preceding Distribution Date, plus interest on the amount of interest due but not paid to Noteholders on the preceding Distribution Date, to the extent permitted by law, at the Note Interest Rate from such preceding Distribution Date to but excluding the current Distribution Date. NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the sum of the Noteholders' Monthly Interest Distributable Amount for such Distribution Date and the Noteholders' Interest Carryover Shortfall for such Distribution Date. NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, for the related Interest Accrual Period, the sum of (i) the sum of the interest accrued on each day during such Interest Accrual Period on the Notes at the Note Interest Rate on the outstanding principal balance of the Notes as of the close of business on the immediately preceding day and (ii) the Note Interest Arrearage. -15- NOTEHOLDERS' PERCENTAGE: (i) with respect to any Determination Date relating to a Distribution Date prior to the Distribution Date on which the principal balance of the Notes is reduced to zero, 100%, (ii) with respect to the Determination Date relating to the Distribution Date on which the principal balance of the Notes is reduced to zero, 100% with respect to that portion of the Principal Distribution Amount equal to the unpaid principal balance of the Notes, and with respect to the remaining portion of the Principal Distribution Amount, zero, and (iii) with respect to any Determination Date relating to a Distribution Date thereafter (if any), zero. NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any Distribution Date (other than the Final Scheduled Distribution Date with respect to the Notes), the Noteholders' Percentage of the Principal Distribution Amount for such Distribution Date. The Noteholders' Principal Distributable Amount on the Final Scheduled Distribution Date will equal the sum of (i) the Noteholders' Percentage of the Principal Distribution Amount for such Distribution Date, and (ii) the excess of the outstanding principal balance of the Notes, if any, over the amounts in clause (i). In no event may the Noteholders' Principal Distributable Amount for any Distribution Date exceed the outstanding principal balance of the Notes immediately prior to such Distribution Date. NOTES: The meaning assigned to such term in the Indenture. OBLIGOR: The purchaser or the co-purchasers of the Financed Vehicle and any other Person or Persons who are primarily or secondarily obligated to make payments under a Receivable or an Auto Receivable, as applicable. OFFICER'S CERTIFICATE: The meaning assigned to such term in the Indenture. OFL: Olympic Financial Ltd., a Minnesota corporation. OPINION OF COUNSEL: A written opinion of counsel acceptable in form and substance and from counsel acceptable to the Owner Trustee and, if such opinion or a copy thereof is required to be delivered to the Indenture Trustee or JPMD, to the Indenture Trustee or JPMD, as applicable. OTHER CONVEYED PROPERTY: The meaning assigned to such term in the Purchase Agreement. OUTSTANDING: The meaning assigned to such term in the Indenture. OUTSTANDING AMOUNT: The meaning assigned to such term in the Indenture. OUTSTANDING MONTHLY ADVANCES: With respect to a Receivable and a Determination Date, the sum of all Monthly Advances made on any Determination Date pursuant to -16- Section 4.4(b) prior to such Determination Date relating to that Receivable which have not been reimbursed pursuant to Section 4.6(i) or Section 4.8. OWNER TRUSTEE: Wilmington Trust Company, acting not individually but solely as trustee, or its successor in interest, and any successor Owner Trustee appointed as provided in the Trust Agreement. PAYING AGENT: The meaning assigned to such term in the Indenture. PERSON: Any legal person, including any individual, corporation, partnership, joint venture, estate, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity. PORTFOLIO LOSS RATIO: As of any Determination Date, a fraction, expressed as a percentage, the numerator of which equals the product of 2.0 times the Net Portfolio Losses for the six preceding Monthly Periods and the denominator of which equals the Average Servicing Portfolio as of such Determination Date. PRINCIPAL BALANCE: With respect to any Receivable, as of any date, the Amount Financed minus (i) that portion of all amounts received on or prior to such date and allocable to principal in accordance with the terms of the Receivable, and (ii) any Cram Down Loss in respect of such Receivable. PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution Date, the amount equal to the sum of the following amounts with respect to the related Monthly Period, in each case computed with respect to each Receivable in accordance with the method specified in the related retail installment sale contract or promissory note: (i) that portion of all collections on Receivables (other than Liquidated Receivables and Purchased Receivables) allocable to principal, including all full and partial principal prepayments, (ii) the Principal Balance (as of the related Accounting Date) of all Receivables that became Liquidated Receivables during the related Monthly Period (other than Purchased Receivables), (iii) the Principal Balance of all Receivables that became Purchased Receivables as of the related Accounting Date, and (iv) the aggregate amount of Cram Down Losses that shall have occurred during the related Monthly Period. PRINCIPAL FUNDING ACCOUNT: The account designated as the Principal Funding Account in, and which is established and maintained pursuant to, Section 4.1(d). PRINCIPAL FUNDING EXCESS AMOUNT: The meaning specified in Section 4.2(b). PROGRAM FACILITY: The meaning assigned to such term in the Note Purchase Agreement. -17- PURCHASE AGREEMENT: (i) The Receivables Purchase Agreement and Assignment, dated as of December 28, 1995, between OFL and the Seller and (ii) one or more Assignment Agreements pursuant thereto, pursuant to which, together, OFL transfers the Receivables and Other Conveyed Property to the Seller. PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance and all accrued and unpaid interest on the Receivable (without regard to any Monthly Advances that may have been made with respect to the Receivable) as of the Accounting Date on which the obligation to purchase such Receivable arises. PURCHASE PRICE: With respect to any Receivables, Other Conveyed Property and other property conveyed to the Trust by the Seller on any Transfer Date, an amount equal to the sum of the Principal Balances of all such Receivables conveyed as of the applicable Cutoff Date. PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable (including any Liquidated Receivable) that became a Warranty Receivable or Administrative Receivable as of such Accounting Date (or which OFL or the Servicer has elected to purchase as of an earlier Accounting Date, as permitted by Section 2.6 or 3.7), and as to which the Purchase Amount has been deposited in the Collection Account by the Seller, OFL or the Servicer, as applicable, on or before the related Deposit Date. PURCHASE TERMINATION DATE: The meaning set forth in Section 2.1(c)(1). PURCHASE TERMINATION EVENT: The meaning set forth in Section 2.1(c)(2). RATING AGENCY: Each of Moody's and Standard & Poor's, so long as such Persons maintain a rating on the Commercial Paper Notes; and if either Moody's or Standard & Poor's no longer maintains a rating on the Commercial Paper Notes , such other nationally recognized statistical rating organization selected by JPMD. RATING AGENCY CONDITION: With respect to any action, that each Rating Agency shall have been given 10 days' prior notice thereof and that each of the Rating Agencies shall have notified JPMD in writing that such action will not result in a reduction or withdrawal of the then current rating of the Commercial Paper Notes. RECAPITALIZATION: A recapitalization of the Trust in which (a) the Trust issues Non-Callable Notes under the Indenture, the proceeds of which are used to redeem, in full or in part, the Notes Outstanding prior to that recapitalization and (b) the Seller waives its rights under Section 9.1(b)(ii) to purchase the Trust Property. RECEIVABLE: An Auto Receivable that is included in the Schedule of Receivables, and all rights and obligations under such a contract, but not including (i) any Liquidated -18- Receivable (other than for purposes of calculating Certificateholders' Distributable Amounts and Noteholders' Distributable Amounts hereunder and for the purpose of determining the obligations pursuant to Section 2.6 and 3.7 to purchase Receivables), or (ii) any Purchased Receivable on or after the Accounting Date immediately preceding the Deposit Date on which payment of the Purchase Amount is made in connection therewith pursuant to Section 4.5. RECEIVABLE FILE: The documents, electronic entries, instruments and writings listed in Section 2.2(a) pertaining to a particular Receivable. REGISTRAR OF TITLES: With respect to any state, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon. RELATED DOCUMENTS: The Trust Agreement, the Indenture, the Certificates, the Notes, the Purchase Agreement, each Transfer Agreement, the Custodian Agreement, the Lockbox Agreement, the Certificate Purchase Agreement and the Note Purchase Agreement. The Related Documents executed by any party are referred to herein as "such party's Related Documents," "its Related Documents" or by a similar expression. RESPONSIBLE OFFICER: When used with respect to the Owner Trustee, any officer of the Owner Trustee assigned by the Owner Trustee to administer its corporate trust affairs relating to the Trust. When used with respect to any other Person that is not an individual, the President, any Vice-President or Assistant Vice-President or the Controller of such Person, or any other officer or employee having similar functions. SCHEDULED PAYMENT: With respect to any Monthly Period for any Receivable or Auto Receivable, as applicable, the amount set forth in such Receivable or Auto Receivable, as applicable, as required to be paid by the Obligor in such Monthly Period. If after the Closing Date or the related Cutoff Date, the Obligor's obligation under a Receivable or Auto Receivable with respect to a Monthly Period has been modified so as to differ from the amount specified in such Receivable or Auto Receivable, as applicable, as a result of (i) the order of a court in an insolvency proceeding involving the Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii) modifications or extensions of the Receivable permitted by Section 3.2(b), the Scheduled Payment with respect to such Monthly Period shall refer to the Obligor's payment obligation with respect to such Monthly Period as so modified. SCHEDULE OF RECEIVABLES: The schedule of all automobile retail installment loan contracts and promissory notes sold and transferred pursuant to each Transfer Agreement which is attached hereto as Schedule A, as such Schedule shall be supplemented from time to time (i) by each Schedule of Receivables with respect to each Transfer Agreement, which Schedules of Receivables shall be deemed incorporated and made a part of Schedule A -19- hereto and (ii) by the Servicer from time to time to reflect removal from the Trust of (a) Purchased Receivables and (b) Receivables purchased from the Trust pursuant to Section 9.1, such comprehensive schedule to be maintained by the Indenture Trustee. With respect to a Transfer Agreement, "Schedule of Receivables" shall mean the Schedule attached to such Transfer Agreement as Exhibit A thereto. SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and Warranties attached hereto as Schedule B. SECURED OBLIGATIONS: The meaning assigned to such term in the Indenture. SECURITIZED OFFERING: An offering of certificates and notes of this Trust, the proceeds of which are used to redeem, in full, the Certificates issued under the Trust Agreement (excluding the General Partner Certificates) and the Notes issued under the Indenture. SELLER: Olympic Receivables Finance Corp. II, a Delaware corporation, or its successor in interest pursuant to Section 6.2. SERVICER: Olympic Financial Ltd., its successor in interest pursuant to Section 8.2 or, after any termination of the Servicer upon a Servicer Termination Event, the Backup Servicer or any other successor Servicer. SERVICER FEE THRESHOLD: The meaning specified in Section 4.6(ii). SERVICER TERMINATION EVENT: An event described in Section 8.1. SERVICER'S CERTIFICATE: With respect to each Determination Date, a certificate, completed by and executed on behalf of the Servicer, in accordance with Section 3.9, substantially in the form attached hereto as Exhibit E. SERVICING PORTFOLIO: As of any date, the aggregate principal balance of all Auto Receivables (whether or not thereafter sold or disposed of) which are serviced by OFL or any of its Affiliates at such time, calculated in a manner consistent with the calculation of the components of Average Servicing Portfolio in OFL's most recent Annual Report on Form 10-K to the extent such calculation is consistent with the calculation of the components of Average Servicing Portfolio in OFL's Annual Report on Form 10-K for the year ended December 31, 1994, as amended. SPREAD ACCOUNT: The account designated as the Spread Account in, and which is established and maintained pursuant to, Section 4.1(c). -20- STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of McGraw-Hill, Inc., or any successor thereto. SUBCOLLECTION ACCOUNT: The account designated as the Subcollection Account in, and which is established and maintained pursuant to Section 4.2(a). SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, all administrative fees, expenses and charges paid by or on behalf of Obligors, including late fees, collected on the Receivables during such Monthly Period. TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the Supplemental Servicing Fee. TRANSFER AGREEMENT: With respect to any Receivables, the transfer agreement between the Seller and the Trust pursuant to which the Seller sells and assigns Receivables, Other Conveyed Property and other property to the Trust, the form of which is attached hereto as Exhibit F. TRANSFER DATE: Any date during the Funding Period on which Receivables are transferred to the Trust pursuant to Section 2.1. TRIGGER EVENT: As of any Determination Date, if the Net Excess Spread Percentage shall be less than 3%. TRUST: Olympic Automobile Receivables Warehouse Trust. TRUST ACCOUNTS: The meaning specified in 4.1(e). TRUST AGREEMENT: The Trust Agreement, dated as of December 28, 1995, between the Seller and the Owner Trustee, as the same may be amended and supplemented from time to time. TRUST ESTATE: The meaning assigned to such term in the Indenture. TRUST PROPERTY: The meaning specified in the Trust Agreement. TRUST PROPERTY LIQUIDATION DATE: The date specified in the notice issued pursuant to Section 9.1(b) as the date on which proceeds from a sale of the Trust Property will be distributed to Noteholders and Certificateholders. UCC: The Uniform Commercial Code as in effect in the relevant jurisdiction. -21- WAREHOUSING LOSS RATIO: With respect to any Determination Date, a fraction, expressed as a percentage, calculated as of the related Accounting Date, the numerator of which is equal to the excess of (A) the sum of (i) the aggregate of the Principal Balances of Receivables conveyed to the Trust since the immediately preceding Trust Property Liquidation Date, or, if no Trust Property Liquidation Date has occurred, since the Closing Date (plus accrued and unpaid interest to the end of the relevant Monthly Period, at the applicable APR) of all Receivables that became Liquidated Receivables since the immediately preceding Trust Property Liquidation Date, or, if no Trust Property Liquidation Date has occurred, since the Closing Date, plus (ii) the aggregate of the Principal Balances of all Receivables that became Purchased Receivables since the immediately preceding Trust Property Liquidation Date, or, if no Trust Property Liquidation Date has occurred, since the Closing Date and that were delinquent with respect to all or a portion of a Scheduled Payment more than 31 days as of the related Accounting Date, plus (iii) the aggregate of all Cram Down Losses that occurred since the immediately preceding Trust Property Liquidation Date, or, if no Trust Property Liquidation Date has occurred, since the Closing Date, over (B) the Liquidation Proceeds received by the Trust since the immediately preceding Trust Property Liquidation Date, or, if no Trust Property Liquidation Date has occurred, since the Closing Date and the denominator of which is equal to the Aggregate Principal Balance as of the related Accounting Date. WARRANTY RECEIVABLE: With respect to any Monthly Period, a Receivable which OFL has become obligated to repurchase pursuant to Section 2.6. Section 1.2. USAGE OF TERMS. With respect to all terms used in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other gender; references to "writing" include printing, typing, lithography, and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all subsequent amendments thereto or changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the terms "include" or "including" mean "include without limitation" or "including without limitation." Section 1.3. CALCULATIONS. (a) All calculations of the amount of interest accrued on the Certificates and the Notes shall be made on the basis of the actual number of days elapsed in either a 360-day or a 365-day year, as specified in the Note Purchase Agreement or Certificate Purchase Agreement, as the case may be; and (b) all calculations of the amount of the Basic Servicing Fee shall be made on the basis of a 360-day year consisting of twelve 30-day months. All references to the Principal Balance of a Receivable as of an Accounting Date shall refer to the close of business on such day. -22- Section 1.4. SECTION REFERENCES. All references to Articles, Sections, paragraphs, subsections, exhibits and schedules shall be to such portions of this Agreement unless otherwise specified. Section 1.5. NO RECOURSE. Subject to the provisions of Section 6.5 with respect to the Seller, no recourse may be taken, directly or indirectly, under this Agreement or any certificate or other writing delivered in connection herewith or therewith, against any stockholder, officer, or director, as such, of the Seller, OFL, the Servicer, the Indenture Trustee, the Backup Servicer or the Owner Trustee or of any predecessor or successor of the Seller, OFL, the Servicer, the Indenture Trustee, the Backup Servicer or the Owner Trustee. Section 1.6. CONDITION TO EFFECTIVENESS OF AGREEMENTS. This Agreement and the Related Documents shall not be effective until such time as this Agreement, the Related Documents and any and all certificates, opinions and other documents required hereby and thereby have been executed and delivered to the satisfaction of JPMD, in its sole discretion. ARTICLE II CONVEYANCE OF RECEIVABLES Section 2.1. CONVEYANCE OF RECEIVABLES. (a) Subject to the terms and conditions of this Agreement, including the conditions set forth in paragraph (b) below, the Seller, pursuant to the mutually agreed upon terms contained herein and pursuant to one or more Transfer Agreements, shall sell, transfer, assign, and otherwise convey to the Trust, without recourse (but without limitation of its obligations in this Agreement), all of the right, title and interest of the Seller, whether then existing or thereafter acquired, in and to the Receivables and the Other Conveyed Property, an assignment of the rights of the Seller under the Purchase Agreement, all funds on deposit from time to time in the Trust Accounts and all investments therein and proceeds thereof, and all proceeds of the foregoing. It is the intention of the Seller that the transfer and assignment contemplated by this Agreement and each Transfer Agreement shall constitute a sale of the Receivables and other Trust Property from the Seller to the Trust and the beneficial interest in and title to the Receivables and the other Trust Property shall not be part of the Seller's estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. In the event that, notwithstanding the intent of the Seller, the transfer and assignment contemplated hereby and each Transfer Agreement is held not to be a sale, this Agreement and each Transfer Agreement shall constitute a grant of a security interest to the Trust in the property referred to in this Section 2.1 or transferred to the Trust pursuant to the related Transfer Agreement. (b) (1) The Seller shall transfer to the Trust the Receivables and the other property and rights related thereto described in paragraph (a) above only upon the satisfaction of each of the following conditions on or prior to the related Transfer Date: -23- (i) the Funding Period shall not have terminated; (ii) the Seller shall have provided the Owner Trustee, the Indenture Trustee and the Rating Agencies with any information reasonably requested by any of the foregoing with respect to the Receivables; (iii) the Seller shall have delivered to the Owner Trustee and the Indenture Trustee a duly executed Transfer Agreement, which shall include a Schedule of Receivables listing the Receivables being transferred on such Transfer Date; (iv) OFL shall have delivered to the Seller, the Owner Trustee and the Indenture Trustee a duly executed Assignment Agreement, which shall include a Schedule of Receivables listing the Receivables being transferred on such Transfer Date; (v) the Seller shall, to the extent required by Section 4.1, have deposited in the Collection Account collections in respect of the Receivables; (vi) the Seller shall have taken any action necessary or advisable to maintain the first perfected ownership interest of the Trust in the Trust Property and the first perfected security interest of the Indenture Trustee in the Indenture Collateral; (vii) the aggregate Principal Balances of Receivables in the Trust, including the Receivables to be conveyed to the Trust on each Transfer Date, that were owed by any single Obligor or its Affiliates shall not exceed $250,000; (viii) after giving effect to the conveyance of Receivables on such Transfer Date, the aggregate of the Principal Balances of Receivables with original maturities ranging from 72 to 84 months shall not exceed 7.5% of the aggregate of the Principal Balances of all Receivables on such Transfer Date; (ix) each of the representations and warranties made by the Seller pursuant to Section 2.5 shall be true and correct as of the related Transfer Date, and the Seller shall have performed all obligations to be performed by it hereunder on or prior to such Transfer Date; (x) the Seller shall, at its own expense, on or prior to the Transfer Date indicate in its computer files that the Receivables identified in the Transfer Agreement have been sold to the Trust pursuant to this Agreement and the related Transfer Agreement; -24- (xi) no event has occurred and is continuing, or would result from the conveyance on such Transfer Date, that constitutes a Purchase Termination Event or Servicer Termination Event; (xii) after giving effect to the conveyance of Receivables on such Transfer Date, the Facility Balance shall not exceed the Facility Limit; (xiii) the Seller shall have provided the Indenture Trustee, the Owner Trustee and JPMD a statement listing (A) the aggregate of the Principal Balances of such Receivables so transferred, (B) the related Purchase Price, (C) the Facility Balance after giving effect to the transfers on such date and (D) any other information reasonably requested by any of the foregoing with respect to such Receivables; (xiv) on any Transfer Date following a Trust Property Liquidation Date on which (i) not less than all of the Receivables in the Trust as of such date are purchased pursuant to Section 9.1(b) hereof and (ii) the Seller receives amounts on deposit in the Spread Account pursuant to Section 5.1(b) hereof, until the Transfer Date on the later of (x) the date that is 90 days from the most recent Trust Property Liquidation Date and (y) the date that is 90 days from the most recent Transfer Date on which the Excess Yield Condition was not satisfied, but for the required hedging arrangement, if the Excess Yield Condition is not satisfied with respect to the Receivables to be conveyed on such Transfer Date, OFL shall have established a hedging arrangement with respect to such Receivables that is acceptable to JPMD; (xv) after giving effect to the conveyance of Receivables on such Transfer Date, the aggregate of the Principal Balances of Receivables attributable to loans originated under OFL's "Classic" program shall not exceed 40% of the aggregate of the Principal Balances of all Receivables on such Transfer Date; (xvi) the condition to effectiveness set forth in Section 1.6 shall have been satisfied; and (xvii) the Seller shall have delivered to the Owner Trustee and the Indenture Trustee an Officer's Certificate confirming the satisfaction of each condition precedent specified in this paragraph (b)(1). (2) On each such Transfer Date, if all the conditions specified in paragraph (b)(1) above have been satisfied, the Trust shall accept the transfer of such Receivables and shall pay or cause to be paid to the Seller an amount equal to the Purchase Price. The Purchase Price shall be paid FIRST, from amounts, if any, on deposit in the Principal Funding Account, and SECOND, from amounts, if any, received by the Trust in connection -25- with the issuance and sale of Notes or Certificates (or additional principal amounts thereof), as applicable. (c) (1) PURCHASE TERMINATION DATE. The Trust's commitment to purchase Receivables and other property hereunder and under any Transfer Agreement shall terminate upon the earliest to occur of the following (the "Purchase Termination Date"): (i) The date that is 364 days from the Closing Date; PROVIDED, HOWEVER, the parties to this Agreement (with the consent of JPMD) may mutually agree in writing to the extension of such date to a date no later than 364 days following the date of such extension; (ii) A date upon which a Purchase Termination Event has occurred and is continuing and (A) JPMD declares a Purchase Termination Date in a notice in accordance with the terms of subsection 2 below, or (B) such date becomes a Purchase Termination Date automatically in accordance with the terms of subsection 2 below; (iii) The initial cutoff date with respect to a Securitized Offering, as specified in the preliminary offering document with respect to the securities to be issued in connection with such Securitized Offering; (iv) A date on which a Note Purchase Termination Event has occurred and is continuing; or (v) A date on which a Certificate Purchase Termination Event has occurred and is continuing. (2) PURCHASE TERMINATION EVENTS. If any of the following events (each, a "Purchase Termination Event") shall have occurred and be continuing, then (a) in the case of a Purchase Termination Event other than a Purchase Termination Event described in subsection (ii) below, JPMD shall, at the request of, or may with the consent of, a Note Majority, by notice (which notice shall be in writing) to the Seller, the Indenture Trustee and the Owner Trustee declare the Purchase Termination Date to have occurred, and (b) in the case of a Purchase Termination Event described in subsection (ii) below, the Purchase Termination Date shall occur automatically: (i) Any event or occurrence that constitutes a Servicer Termination Event pursuant to Section 8.1 (other than an event described in Section 8.1(d)); (ii) Any event or occurrence that constitutes a Servicer Termination Event pursuant to Section 8.1(d); -26- (iii) There shall exist any event or occurrence that has a Material Adverse Effect; (iv) The Seller, for any reason, shall fail to grant to the Trust and to maintain in favor of the Trust a valid and perfected ownership interest (or, if not an ownership interest, a valid and perfected first priority security interest) in any material portion of the Receivables and other Trust Property; (v) The Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Internal Revenue Code with regard to any of the assets of the Seller or OFL, or the Pension Benefit Guaranty Corporation shall file notice of a lien pursuant to Section 4068 of the Employee Retirement Income Security Act of 1974 with regard to any of the assets of the Seller or OFL, and in either such case such lien shall secure a liability in excess of $1,000,000 and shall not have been released within 40 days; (vi) A default shall have occurred and be continuing (x) under any instrument or agreement evidencing, securing or providing for the issuance of indebtedness for borrowed money in excess of $10,000,000 of, or guaranteed by, OFL, the Seller or the Servicer which default (A) is a default in payment of any principal or interest on such indebtedness when due or within any applicable grace period, or (B) such default shall have resulted in acceleration of the maturity of such indebtedness; or (y) under any agreement providing for the sales of Receivables by OFL, the Seller or the Servicer with an aggregate purchase price outstanding over $10,000,000, resulting in the early amortization of the purchasers' or investors' interest in such Receivables, or the replacement of the Servicer as servicer thereunder; unless, in the case of each of CLAUSES (X) and (Y) above, (1) OFL, the Seller or the Servicer, as the case may be, is contesting in good faith, by appropriate proceedings, that such indebtedness is due and payable or that such acceleration or early amortization is rightful, and (2) no final judgment adverse to OFL, the Seller or the Servicer, as the case may be, shall have been entered on such proceedings; (vii) (A) Any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings not disclosed in writing by OFL, the Seller or the Servicer, as the case may be, prior to the date of execution and delivery of this Agreement is pending against OFL, the Seller or the Servicer, as the case may be, or any Affiliate thereof, which, in the reasonable opinion of JPMD, if adversely determined, would have a Material Adverse Effect, or (B) any material development not so disclosed has occurred in any litigation (including, without limitation, derivative actions), arbitration proceedings or governmental proceedings so disclosed, which, in the reasonable opinion of JPMD, would have a reasonable probability of causing a Material Adverse Effect; or -27- (viii) OFL (if it is the Servicer) shall make any material adverse change in the Servicing Policy and Procedures without the prior written consent of JPMD (which consent shall not be unreasonably withheld); or (ix) On any Determination Date after the first Transfer Date but prior to the Purchase Termination Date, (A) the Delinquency Ratio shall exceed 2.5%; (B) the Portfolio Loss Ratio shall exceed 2.0%; (C) the Warehousing Loss Ratio shall exceed 1.0%; or (D) the Average Net Excess Spread Percentage shall be less than 1.5%. Section 2.2. CUSTODY OF RECEIVABLE FILES. (a) In connection with the sale, transfer and assignment of the Receivables and the other Trust Property to the Trust pursuant to this Agreement and each Transfer Agreement, and simultaneously with the execution and delivery of this Agreement, the Trust shall enter into the Custodian Agreement with the Custodian, dated as of the Closing Date, pursuant to which the Owner Trustee, on behalf of the Trust, shall revocably appoint the Custodian, and the Custodian shall accept such appointment, to act as the agent of the Trust as Custodian of the documents set forth below. Pursuant to the terms of the Purchase Agreement, OFL has agreed to use its best efforts to deliver to the Custodian as agent of the Trust within three Business Days after each Transfer Date, but in any event OFL shall deliver to the Custodian no later than ten Business Days after such Transfer Date, the following documents: (i) The fully executed original of the Receivable (together with any agreements modifying the Receivable, including without limitation any extension agreements); (ii) A certificate of insurance, application form signed by the Obligor or a signed representation letter from the Obligor named in the Receivable pursuant to which the Obligor has agreed to obtain an Insurance Policy, or a documented verbal confirmation by the insurance agent for the Obligor of a policy number for an Insurance Policy or any other documents evidencing or related to any Insurance Policy, or copies thereof; (iii) The original credit application, or a copy thereof, of each Obligor, fully executed by each such Obligor on OFL's customary form, or on a form approved by OFL, for such application; and (iv) The original certificate of title (when received) and otherwise such documents, if any, that OFL keeps on file in accordance with its customary procedures indicating that the Financed Vehicle is owned by the Obligor and subject to the interest of OFL as first lienholder or secured party (including any Lien Certificate received by OFL), or, if such original certificate of title has not yet been received, a copy of the application therefor, showing OFL as secured party or a -28- letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by OFL within 180 days. In connection with the grant of the security interest in the Trust Estate to the Indenture Trustee in respect of the Secured Obligations pursuant to the Indenture, the Trust agrees that from and after the Closing Date through the date of release of such security interest pursuant to the terms of the Indenture, the Custodian shall not be acting as agent of the Trust, but rather shall be acting as agent of the Indenture Trustee in respect of the Secured Obligations. The Indenture Trustee may act as the Custodian, in which case the Indenture Trustee shall be deemed to have assumed the obligations of the Custodian specified in the Custodian Agreement, and the terms of Exhibit B shall be deemed incorporated by reference herein. (b) Upon payment in full on any Receivable, the Servicer will notify the Custodian by certification of an officer of the Servicer (which certification shall include a statement to the effect that all amounts received in connection with such payments which are required to be deposited in the Collection Account pursuant to Section 3.1 have been so deposited) and shall request delivery of the Receivable and Receivable File to the Servicer. From time to time as appropriate for servicing and enforcing any Receivable, the Custodian shall, upon written request of an officer of the Servicer and delivery to the Custodian of a receipt signed by such officer, cause the original Receivable and the related Receivable File to be released to the Servicer. The Servicer's receipt of a Receivable and/or Receivable File shall obligate the Servicer to return the original Receivable and the related Receivable File to the Custodian when its need by the Servicer has ceased unless the Receivable shall be repurchased as described in Section 2.6 or 3.7. Section 2.3. CONDITIONS TO ACCEPTANCE BY OWNER TRUSTEE. As conditions to the Owner Trustee's execution and delivery of the Notes on behalf of the Trust and execution, authentication and delivery of the Certificates on behalf of the Trust on the Closing Date, the Owner Trustee shall have received the following on or before the Closing Date: (a) Copies of resolutions of the Board of Directors of the Seller approving the execution, delivery and performance of this Agreement, the Related Documents and the transactions contemplated hereby and thereby, certified by a Secretary or an Assistant Secretary of the Seller; (b) Copies of resolutions of the Board of Directors of OFL approving the execution, delivery and performance of this Agreement, the Related Documents and the transactions contemplated hereby and thereby, certified by a Secretary or an Assistant Secretary of OFL; and -29- (c) Evidence that all filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Owner Trustee a first priority perfected lien on, or ownership interest in, the Receivables and the other Trust Property have been made, taken or performed. Section 2.4. DEEMED ACCEPTANCE BY OWNER TRUSTEE AND INDENTURE TRUSTEE. By its execution or acceptance, as the case may be, of this Agreement, each of the Owner Trustee and the Indenture Trustee, on each Transfer Date, subject to the satisfaction of the conditions to conveyance set forth in Section 2.1(b), shall be deemed to have accepted the conveyance of the Receivables and other property conveyed to the Trust under the related Transfer Agreement and assigned to the Indenture Trustee pursuant to the Indenture without any further act on their behalf. Section 2.5. REPRESENTATIONS AND WARRANTIES OF SELLER. By its execution of this Agreement and each Transfer Agreement, the Seller makes the following representations and warranties on which the Trust relies in accepting the Receivables and the other Trust Property in trust and on which the Owner Trustee relies in issuing, on behalf of the Trust, the Certificates and Notes. Unless otherwise specified, such representations and warranties speak as of the Closing Date or Transfer Date, as appropriate, but shall survive the sale, transfer, and assignment of the Receivables to the Trust. (a) SCHEDULE OF REPRESENTATIONS. The representations and warranties set forth on the Schedule of Representations are true and correct. (b) ORGANIZATION AND GOOD STANDING. The Seller has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire, own and sell the Receivables and the other property transferred to the Trust. (c) DUE QUALIFICATION. The Seller is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of its property or the conduct of its business requires such qualification. (d) POWER AND AUTHORITY. The Seller has the power and authority to execute and deliver this Agreement and its Related Documents and to carry out its terms and their terms, respectively; the Seller has full power and authority to sell and assign the Trust Property to be sold and assigned to and deposited with the Trust by it and has duly authorized such sale and assignment to the Trust by all -30- necessary corporate action; and the execution, delivery and performance of this Agreement and the Seller's Related Documents have been duly authorized by the Seller by all necessary corporate action. (e) VALID SALE; BINDING OBLIGATIONS. This Agreement and each Transfer Agreement effects a valid sale, transfer and assignment of the Receivables and the other Trust Property, enforceable against the Seller and creditors of and purchasers from the Seller; and this Agreement and each Transfer Agreement and the Seller's Related Documents, when duly executed and delivered, shall constitute legal, valid and binding obligations of the Seller enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law. (f) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and each Transfer Agreement and the Related Documents and the fulfillment of the terms of this Agreement and each Transfer Agreement and the Related Documents shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice, lapse of time or both) a default under the certificate of incorporation or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement, or violate any law, order, rule or regulation applicable to the Seller of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or any of its properties. Notwithstanding the foregoing, it is understood that no representation or warranty is expressed herein with respect to the legality of the use of word "Olympic" by the Seller or its Affiliates. (g) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the Seller's knowledge, threatened against the Seller or OFL, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Seller or its properties (A) asserting the invalidity of this Agreement, any Transfer Agreement or any of the Related Documents, (B) seeking to prevent the issuance of the Certificates or the Notes or the consummation of any of the transactions contemplated by this Agreement, any Transfer Agreement or any of the Related Documents, (C) seeking any determination or ruling that might materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this -31- Agreement, any Transfer Agreement or any of the Related Documents, or (D) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Certificates or the Notes. (h) NO TERMINATION EVENTS. To the Seller's knowledge, no Purchase Termination Event or Servicer Termination Event shall have occurred and be continuing. (i) CHIEF EXECUTIVE OFFICE. The chief executive office of the Seller is at 7825 Washington Avenue South, Suite 900, Minneapolis, MN 55439-2435. (j) SEPARATE CORPORATE EXISTENCE. The Seller shall: (1) Maintain in full effect its existence, rights and franchises as a corporation under the laws of the state of its incorporation and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement and its Related Documents and each other instrument or agreement necessary or appropriate to proper administration hereof and permit and effectuate the transactions contemplated hereby. (2) Maintain its own deposit account or accounts, separate from those of any Affiliate of the Seller, with commercial banking institutions. The funds of the Seller will not be diverted to any other Person or for other than the corporate use of the Seller (including the payment of duly declared dividends to the Seller's stockholders), and, except as may be expressly permitted by this Agreement or the Related Documents, the funds of the Seller shall not be commingled with those of any Affiliate of the Seller. (3) Ensure that, to the extent that it shares the same officers or other employees as any of its stockholders or Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees. (4) Ensure that, to the extent that it jointly contracts with any of its stockholders or Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that the Seller contracts or does business with vendors or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing -32- shall be fairly allocated to or among such entities for whose benefit the goods and services are provided, and each such entity shall bear its fair share of such costs. All material transactions between the Seller and any of its Affiliates shall be only on an arm's-length basis and shall receive the approval of the Seller's Board of Directors including at least one Independent Director (as defined below). (5) Maintain a principal executive and administrative office through which its business is conducted separate from those of its stockholders and Affiliates. To the extent that the Seller and any of its stockholders or Affiliates have offices in contiguous space, there shall be fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses. (6) Conduct its affairs strictly in accordance with its Certificate of Incorporation and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special stockholders' and directors' meetings appropriate to authorize all corporate action, keeping separate and accurate minutes of such meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts. Regular stockholders' and directors' meetings shall be held at least annually. (7) Ensure that its Board of Directors shall be elected independently from the Boards of Directors of its Affiliates and shall at all times after January 15, 1995 include at least one Independent Director (for purposes hereof, "INDEPENDENT DIRECTOR" shall mean any member of the Board of Directors of the Seller that is not and has not at any time been (x) a director, officer, employee or shareholder of any Affiliate of the Seller or (y) a member of the immediate family of any of the foregoing). (8) Ensure that decisions with respect to its business and daily operations shall be independently made by the Seller (although the officer making any particular decision may also be an officer or director of an Affiliate of the Seller) and shall not be dictated by an Affiliate of the Seller. (9) Act solely in its own corporate name and through its own authorized officers and agents, and no Affiliate of the Seller shall be appointed to act as agent of the Seller, except as expressly contemplated by this Agreement or the Related Documents; -33- (10) Ensure that no Affiliate of the Seller shall advance funds to the Seller, other than capital contributions made to enable the Seller to pay the purchase price of Receivables or to otherwise conduct its business as contemplated by this Agreement and the Related Documents, and no Affiliate of the Seller will otherwise supply funds to, or guaranty debts of, the Seller. (11) Not enter into any guaranty, or otherwise become liable, with respect to any obligation of any Affiliate of the Seller other than as expressly contemplated by this Agreement or the Related Documents. (12) Ensure that any financial reports required of the Seller shall comply with generally accepted accounting principles and shall be issued separately from, but may be consolidated with, any reports prepared for any of its Affiliates. (13) Maintain capitalization adequate for the conduct of its business. Section 2.6. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY. Concurrently with the execution and delivery of this Agreement and each Transfer Agreement, respectively, OFL and the Seller have entered into the Purchase Agreement and an Assignment Agreement, the rights of the Seller under which have been assigned by the Seller to the Trust. Under the Purchase Agreement and each Assignment Agreement OFL has made the same representations and warranties to the Seller with respect to the Receivables as those made by Seller pursuant to the Schedule of Representations, upon which the Owner Trustee has relied in accepting the Trust Property in trust and executing the Certificates and Notes and upon which the Indenture Trustee has relied in authenticating the Notes. Upon discovery by any of OFL, the Seller, the Servicer, the Indenture Trustee or the Owner Trustee of a breach of any of the representations and warranties contained in Section 2.5 that materially and adversely affects the interests of the Noteholders, the Certificateholders or the Trust in any Receivable (including any Liquidated Receivable), the party discovering such breach shall give prompt written notice to the others; PROVIDED, HOWEVER, that the failure to give any such notice shall not affect any obligation of OFL or the Seller. As of the second Accounting Date (or, at OFL's election, the first Accounting Date) following its discovery or its receipt of notice of any breach of the representations and warranties set forth on the Schedule of Representations that materially and adversely affects the interests of the Noteholders, the Certificateholders or the Trust in any Receivable (including any Liquidated Receivable) OFL shall, unless such breach shall have been cured in all material respects, purchase such Receivable from the Trust and, on or before the related Deposit Date, OFL shall pay the Purchase Amount to the Owner Trustee pursuant to Section 4.5. The obligations of the Seller with respect to any such breach of representations and warranties shall be limited to taking any and all actions necessary to enable the Owner Trustee to enforce directly the obligations of OFL -34- under the Purchase Agreement and any Assignment Agreement, as applicable. It is understood and agreed that, except as set forth in this Section 2.6, the obligation of OFL to repurchase any Receivable as to which a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against OFL or the Seller for such breach available to the Indenture Trustee on behalf of the Noteholders or the Owner Trustee on behalf of Certificateholders. In addition to the foregoing and notwithstanding whether the related Receivable shall have been purchased by the Seller or OFL, OFL shall indemnify the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Trust, the Noteholders and the Certificateholders against all reasonable costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach. Section 2.7. NONPETITION COVENANT. Until the date that is one year and one day following the termination of the Trust pursuant to the terms of the Trust Agreement, none of the Seller, the Servicer, the Owner Trustee (in its individual capacity or on behalf of the Trust), the Backup Servicer nor OFL shall petition or otherwise invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Trust or the General Partner under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Trust. Section 2.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE CLOSING DATE OR TRANSFER DATE. In the case of any Receivable in respect of which written evidence from the Dealer selling the related Financed Vehicle that the Lien Certificate for such Financed Vehicle showing OFL as first lienholder has been applied for from the Registrar of Titles was delivered to the Custodian on the Closing Date or Transfer Date, as appropriate, in lieu of a Lien Certificate, the Servicer shall use its best efforts to collect such Lien Certificate from the Registrar of Titles as promptly as practicable. If such Lien Certificate showing OFL as first lienholder is not received by the Custodian within 180 days after the Closing Date or Transfer Date, as appropriate, then the representation and warranty in paragraph 5 of the Schedule of Representations in respect of such Receivable shall be deemed to have been incorrect in a manner that materially and adversely affects the Certificateholders, the Noteholders and the Trust. Section 2.9. TRUST'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND WARRANTY RECEIVABLES. With respect to all Administrative Receivables and all Warranty Receivables purchased by the Servicer, the Seller or OFL, the Owner Trustee and the Indenture Trustee shall take any and all actions reasonably requested by the Seller, OFL or Servicer, at the expense of the requesting party, to assign, without recourse, representation or warranty, to -35- the Seller, OFL or the Servicer, as applicable, all of the Indenture Trustee's and the Trust's right, title and interest in and to such purchased Receivable, all monies due thereon, the security interests in the related Financed Vehicles, proceeds from any Insurance Policies, proceeds from recourse against Dealers on such Receivables and the interests of the Trust in certain rebates of premiums and other amounts relating to the Insurance Policies and any documents relating thereto, such assignment being an assignment outright and not for security; and the Seller, OFL or the Servicer, as applicable, shall thereupon own such Receivable, and all such security and documents, free of any further obligation to the Owner Trustee, the Trust, the Indenture Trustee, the Certificateholders or the Noteholders with respect thereto. ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES Section 3.1. DUTIES OF THE SERVICER. The Servicer is hereby authorized to act as agent for the Trust and in such capacity shall manage, service, administer and make collections on the Receivables, and perform the other actions required by the Servicer under this Agreement. The Servicer agrees that its servicing of the Receivables shall be carried out in accordance with customary and usual procedures of institutions which service motor vehicle retail installment sales contracts and, to the extent more exacting, the degree of skill and attention that the Servicer exercises from time to time with respect to all comparable motor vehicle receivables that it services for itself or others. In performing such duties, so long as OFL is the Servicer, it shall comply with the policies and procedures attached hereto as Schedule C. The Servicer's duties shall include, without limitation, collection and posting of all payments, responding to inquiries of Obligors on the Receivables, investigating delinquencies, sending payment coupons to Obligors, reporting any required tax information to Obligors, policing the collateral, complying with the terms of the Lockbox Agreement, accounting for collections and furnishing monthly and annual statements to the Owner Trustee, the Indenture Trustee and JPMD with respect to distributions, monitoring the status of Insurance Policies with respect to the Financed Vehicles and performing the other duties specified herein. The Servicer shall also administer and enforce all rights and responsibilities of the holder of the Receivables provided for in the Dealer Agreements (and shall maintain possession of the Dealer Agreements, to the extent it is necessary to do so), the Dealer Assignments and the Insurance Policies, to the extent that such Dealer Agreements, Dealer Assignments and Insurance Policies relate to the Receivables, the Financed Vehicles or the Obligors. To the extent consistent with the standards, policies and procedures otherwise required hereby, the Servicer shall follow its customary standards, policies, and procedures and shall have full power and authority, acting alone, to do any and all things in connection with such managing, servicing, administration and collection that it may deem necessary or desirable. Without limiting the generality of the foregoing, the Servicer is hereby authorized and empowered by the Owner Trustee and the Indenture Trustee to execute and deliver, on -36- behalf of the Certificateholders and the Trust or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Receivables and with respect to the Financed Vehicles; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not, except pursuant to an order from a court of competent jurisdiction, release an Obligor from payment of any unpaid amount under any Receivable or waive the right to collect the unpaid balance of any Receivable from the Obligor, except that the Servicer may forego collection efforts if the amount subject to collection is DE MINIMIS and if it would forego collection in accordance with its customary procedures. The Servicer is hereby authorized to commence, in its own name or in the name of the Trust (provided the Servicer has obtained the Owner Trustee's consent, which consent shall not be unreasonably withheld), a legal proceeding to enforce a Receivable pursuant to Section 3.3 or to commence or participate in any other legal proceeding (including, without limitation, a bankruptcy proceeding) relating to or involving a Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or participates in such a legal proceeding in its own name, the Trust shall thereupon be deemed to have automatically assigned such Receivable to the Servicer solely for purposes of commencing or participating in any such proceeding as a party or claimant, and the Servicer is authorized and empowered by the Owner Trustee to execute and deliver in the Servicer's name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding. The Owner Trustee shall furnish the Servicer with any powers of attorney and other documents which the Servicer may reasonably request and which the Servicer deems necessary or appropriate and take any other steps which the Servicer may deem necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement. Section 3.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF RECEIVABLES; LOCKBOX AGREEMENTS. (a) Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due, and shall follow such collection procedures as it follows with respect to all comparable automobile receivables that it services for itself or others and otherwise act with respect to the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance Policies and the other Trust Property in such manner as will, in the reasonable judgment of the Servicer, maximize the amount to be received by the Trust with respect thereto. The Servicer is authorized in its discretion to waive any prepayment charge, late payment charge or any other similar fees that may be collected in the ordinary course of servicing any Receivable. (b) The Servicer may at any time agree to a modification or amendment of a Receivable in order to (i) change the Obligor's regular due date to a date within the Monthly Period in which such due date occurs or (ii) re-amortize the scheduled payments on the Receivable following a partial prepayment of principal. -37- (c) The Servicer may grant payment extensions on, or other modifications or amendments to, a Receivable (in addition to those modifications permitted by Section 3.2(b)) in accordance with its customary procedures if the Servicer believes in good faith that such extension, modification or amendment is necessary to avoid a default on such Receivable, will maximize the amount to be received by the Trust with respect to such Receivable, and is otherwise in the best interests of the Trust; PROVIDED, HOWEVER, that: (i) The aggregate period of all extensions on a Receivable shall not exceed three months; (ii) In no event may a Receivable be extended beyond the Monthly Period immediately preceding the Final Scheduled Distribution Date; (iii) The aggregate Principal Balances of the Receivables which have been extended during any calendar quarter (computed as of the Accounting Date immediately prior to the first day of such calendar quarter) shall not exceed 1.5% of the average of the Aggregate Principal Balances as of the Accounting Date immediately prior to the first day of such Calendar Quarter and the three immediately succeeding Accounting Dates; and (iv) No such extension, modification or amendment shall be granted more than 90 days after the Closing Date or the related Transfer Date if such action would have the effect of causing such Receivable to be deemed to have been exchanged for another Receivable within the meaning of Section 1001 of the Internal Revenue Code of 1986, as amended, or any proposed, temporary or final Treasury Regulations issued thereunder. (d) The Servicer shall use its best efforts to cause Obligors to make all payments on the Receivables, whether by check or by direct debit of the Obligor's bank account, to be made directly to one or more Lockbox Banks, acting as agent for the Trust pursuant to a Lockbox Agreement. Amounts received by a Lockbox Bank in respect of the Receivables may initially be deposited into a demand deposit account maintained by the Lockbox Bank as agent for the Trust and for other owners of automobile receivables serviced by the Servicer. The Servicer shall use its best efforts to cause any Lockbox Bank to deposit all payments on the Receivables in the Lockbox Account no later than the Business Day after receipt, and to cause all amounts credited to the Lockbox Account on account of such payments to be transferred to the Collection Account no later than the second Business Day after receipt of such payments. The Lockbox Account shall be a demand deposit account held by the Lockbox Bank, or an Eligible Account satisfying clause (i) of the definition thereof. Prior to the Closing Date and any Transfer Date the Servicer shall have notified each Obligor that makes its payments on the Receivables by check to make such payments -38- thereafter directly to the Lockbox Bank (except in the case of Obligors that have already been making such payments to the Lockbox Bank), and shall have provided each such Obligor with a supply of mailing address labels in order to enable such Obligors to make such payments directly to the Lockbox Bank for deposit into the Lockbox Account, and the Servicer will continue, not less often than every three months, to so notify those Obligors who have failed to make payments to the Lockbox Bank. If and to the extent requested by JPMD, the Servicer shall request each Obligor that makes payment on the Receivables by direct debit of such Obligor's bank account, to execute a new authorization for automatic payment which in the judgment of JPMD is sufficient to authorize direct debit by the Lockbox Bank on behalf of the Trust. If at any time the Lockbox Bank is unable to directly debit an Obligor's bank account that makes payment on the Receivables by direct debit and if such inability is not cured within 15 days or cannot be cured by execution by the Obligor of a new authorization for automatic payment, the Servicer shall notify such Obligor that it cannot make payment by direct debit and must thereafter make payment by check. Notwithstanding any Lockbox Agreement, or any of the provisions of this Agreement relating to the Lockbox Agreement, the Servicer shall remain obligated and liable to the Owner Trustee, Indenture Trustee, Certificateholders and Noteholders for servicing and administering the Receivables and the other Trust Property in accordance with the provisions of this Agreement without diminution of such obligation or liability by virtue thereof. In the event the Servicer shall for any reason no longer be acting as such, the successor Servicer shall thereupon assume all of the rights and obligations of the outgoing Servicer under the Lockbox Agreement. In such event, the successor Servicer shall be deemed to have assumed all of the outgoing Servicer's interest therein and to have replaced the outgoing Servicer as a party to each such Lockbox Agreement to the same extent as if such Lockbox Agreement had been assigned to the successor Servicer, except that the outgoing Servicer shall not thereby be relieved of any liability or obligations on the part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement. The outgoing Servicer shall, upon request of the Owner Trustee but at the expense of the outgoing Servicer, deliver to the successor Servicer all documents and records relating to each such Agreement and an accounting of amounts collected and held by the Lockbox Bank and otherwise use its best efforts to effect the orderly and efficient transfer of any Lockbox Agreement to the successor Servicer. In the event that JPMD elects to change the identity of the Lockbox Bank, the outgoing Servicer, at its expense, shall cause the Lockbox Bank to deliver, at the direction of JPMD to the Owner Trustee or a successor Lockbox Bank, all documents and records relating to the Receivables and all amounts held (or thereafter received) by the Lockbox Bank (together with an accounting of such amounts) and shall otherwise use its best efforts to effect the orderly and efficient transfer of the lockbox arrangements and the Servicer shall notify the Obligors to make payments to the Lockbox established by the successor. -39- (e) The Servicer shall remit all payments by or on behalf of the Obligors received directly by the Servicer to the Subcollection Account or to the Lockbox Bank for deposit into the Collection Account without deposit into any intervening account as soon as practicable, but in no event later than the Business Day after receipt thereof. Section 3.3. REALIZATION UPON RECEIVABLES. (a) Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall use its best efforts to repossess (or otherwise comparably convert the ownership of) and liquidate any Financed Vehicle securing a Receivable with respect to which the Servicer has determined that payments thereunder are not likely to be resumed, as soon as is practicable after default on such Receivable but in no event later than the date on which all or any portion of a Scheduled Payment has become 91 days delinquent. The Servicer is authorized to follow such customary practices and procedures as it shall deem necessary or advisable, consistent with the standard of care required by Section 3.1, which practices and procedures may include reasonable efforts to realize upon any recourse to Dealers, the sale of the related Financed Vehicle at public or private sale, the submission of claims under an Insurance Policy and other actions by the Servicer in order to realize upon such a Receivable. The foregoing is subject to the provision that, in any case in which the Financed Vehicle shall have suffered damage, the Servicer shall not expend funds in connection with any repair or towards the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair and/or repossession shall increase the proceeds of liquidation of the related Receivable by an amount greater than the amount of such expenses. All amounts received upon liquidation of a Financed Vehicle shall be remitted directly by the Servicer to the Subcollection Account without deposit into any intervening account as soon as practicable, but in no event later than the Business Day after receipt thereof. The Servicer shall be entitled to recover all reasonable expenses incurred by it in the course of repossessing and liquidating a Financed Vehicle into cash proceeds, but only out of the cash proceeds of such Financed Vehicle, any deficiency obtained from the Obligor or any amounts received from the related Dealer, which amounts may be retained by the Servicer (and shall not be required to be deposited as provided in Section 3.2(e)) to the extent of such expenses. The Servicer shall pay on behalf of the Trust any personal property taxes assessed on repossessed Financed Vehicles; the Servicer shall be entitled to reimbursement of any such tax from Liquidation Proceeds with respect to such Receivable. (b) If the Servicer elects to commence a legal proceeding to enforce a Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed to be an automatic assignment from the Trust and the Indenture Trustee to the Servicer of the rights under such Dealer Agreement and Dealer Assignment for purposes of collection only. If, however, in any enforcement suit or legal proceeding, it is held that the Servicer may not enforce a Dealer Agreement or Dealer Assignment on the grounds that it is not a real party in interest or a Person entitled to enforce the Dealer Agreement or Dealer Assignment, the Owner Trustee, at the Servicer's expense, or the Seller, at the Seller's expense, shall take such steps as the Servicer deems necessary to enforce the Dealer -40- Agreement or Dealer Assignment, including bringing suit in its name or the name of the Seller or of the Owner Trustee for the benefit of the Certificateholders and the Indenture Trustee in respect of the Secured Obligations. All amounts recovered shall be remitted directly by the Servicer as provided in Section 3.2(e). Section 3.4. INSURANCE. (a) The Servicer shall require that each Financed Vehicle be insured by the Insurance Policies referred to in Paragraph 24 of the Schedule of Representations (the "Collateral Insurance") and shall monitor the status of such physical loss and damage insurance coverage thereafter, in accordance with its customary servicing procedures. Each Receivable requires the Obligor to maintain such physical loss and damage insurance, naming OFL and its successors and assigns as additional insureds, and permits the holder of such Receivable to obtain physical loss and damage insurance at the expense of the Obligor if the Obligor fails to maintain such insurance. If the Servicer shall determine that an Obligor has failed to obtain or maintain a physical loss and damage Insurance Policy covering the related Financed Vehicle which satisfies the conditions set forth in clause (i)(a) of such Paragraph 24 (including, without limitation, during the repossession of such Financed Vehicle) the Servicer shall enforce the rights of the holder of the Receivable under the Receivable to require the Obligor to obtain such physical loss and damage insurance. (b) The Servicer may, if an Obligor fails to obtain or maintain a physical loss and damage Insurance Policy, obtain insurance with respect to the related Financed Vehicle and advance on behalf of such Obligor, as required under the terms of the insurance policy, the premiums for such insurance (such insurance being referred to herein as "Force-Placed Insurance"). All policies of Force-Placed Insurance shall be endorsed with clauses providing for loss payable to the Owner Trustee. Any cost incurred by the Servicer in maintaining such Force-Placed Insurance shall only be recoverable out of premiums paid by the Obligors or Liquidation Proceeds with respect to the Receivable, as provided in Section 3.4(c). (c) In connection with any Force-Placed Insurance obtained hereunder, the Servicer may, in the manner and to the extent permitted by applicable law, require the Obligors to repay the entire premium to the Servicer. In no event shall the Servicer include the amount of the premium in the Amount Financed under the Receivable. For all purposes of this Agreement, the Insurance Add-On Amount with respect to any Receivable having Force-Placed Insurance will be treated as a separate obligation of the Obligor and will not be added to the Principal Balance of such Receivable, and amounts allocable thereto will not be available for distribution on the Notes or the Certificates. The Servicer shall retain and separately administer the right to receive payments from Obligors with respect to Insurance Add-On Amounts or rebates of Forced-Placed Insurance premiums. If an Obligor makes a payment with respect to a Receivable having Force-Placed Insurance, but the Servicer is unable to determine whether the payment is allocable to the Receivable or to the Insurance Add-On Amount, the payment shall be applied first to any unpaid -41- Scheduled Payments and then to the Insurance Add-On Amount. Liquidation Proceeds on any Receivable will be used first to pay the Principal Balance and accrued interest on such Receivable and then to pay the related Insurance Add-On Amount. If an Obligor under a Receivable with respect to which the Servicer has placed Force-Placed Insurance fails to make scheduled payments of such Insurance Add-On Amount as due, and the Servicer has determined that eventual payment of the Insurance Add-On Amount is unlikely, the Servicer may, but shall not be required to, purchase such Receivable from the Trust for the Purchase Amount on any subsequent Deposit Date. Any such Receivable, and any Receivable with respect to which the Servicer has placed Force-Placed Insurance which has been paid in full (excluding any Insurance Add-On Amounts) will be assigned to the Servicer. (d) The Servicer may sue to enforce or collect upon the Insurance Policies, in its own name, if possible, or as agent of the Trust. If the Servicer elects to commence a legal proceeding to enforce an Insurance Policy, the act of commencement shall be deemed to be an automatic assignment of the rights of the Trust under such Insurance Policy to the Servicer for purposes of collection only. If, however, in any enforcement suit or legal proceeding it is held that the Servicer may not enforce an Insurance Policy on the grounds that it is not a real party in interest or a holder entitled to enforce the Insurance Policy, the Owner Trustee, on behalf of the Trust, at the Servicer's expense, or the Seller, at the Seller's expense, shall take such steps as the Servicer deems necessary to enforce such Insurance Policy, including bringing suit in its name or the name of the Owner Trustee for the benefit of the Certificateholders and the Indenture Trustee in respect of the Secured Obligations. (e) Subject to the fourth sentence of this subsection (e), the Servicer shall maintain a vendor's single interest or other collateral protection insurance policy with respect to all Financed Vehicles which policy shall by its terms insure against physical damage in the event any Obligor fails to maintain physical loss and damage insurance with respect to the related Financed Vehicle. Costs incurred by the Servicer in maintaining such insurance shall be paid by the Servicer. The Servicer will cause itself to be named as named insured and the Owner Trustee to be named a loss payee under all such policies. The Servicer may, with the consent of JPMD, elect not to maintain such insurance policy but in such event will be obligated to indemnify the Trust against any losses arising from an Obligor's failure to maintain physical loss and damage insurance with respect to the related Financed Vehicle. Section 3.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES. (a) Consistent with the policies and procedures required by this Agreement, the Servicer shall take such steps as are necessary to maintain perfection of the security interest created by each Receivable in the related Financed Vehicle on behalf of the Trust, including but not limited to obtaining the execution by the Obligors and the recording, registering, filing, re-recording, re-filing, and re-registering of all security agreements, financing statements and continuation statements as -42- are necessary to maintain the security interest granted by the Obligors under the respective Receivables. The Owner Trustee hereby authorizes the Servicer, and the Servicer agrees, to take any and all steps necessary to re-perfect such security interest on behalf of the Trust as necessary because of the relocation of a Financed Vehicle or for any other reason. In the event that the assignment of a Receivable to the Owner Trustee on behalf of the Trust is insufficient, without a notation on the related Financed Vehicle's certificate of title, or without fulfilling any additional administrative requirements under the laws of the state in which the Financed Vehicle is located, to perfect a security interest in the related Financed Vehicle in favor of the Trust, the Servicer hereby agrees that the Servicer's designation as the secured party on the certificate of title is in its capacity as agent of the Trust. (b) Upon the occurrence of a Servicer Termination Event, the Owner Trustee and the Servicer shall take or cause to be taken such action as may, in the opinion of counsel to the Owner Trustee, be necessary to perfect or re-perfect the security interests in the Financed Vehicles securing the Receivables in the name of the Trust by amending the title documents of such Financed Vehicles or by such other reasonable means as may, in the opinion of counsel to the Owner Trustee, be necessary or prudent. OFL hereby agrees to pay all expenses related to such perfection or re-perfection and to take all action necessary therefor. Section 3.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER. By its execution and delivery of this Agreement, the Servicer makes the following representations, warranties and covenants on which the Owner Trustee relies in accepting the Receivables in trust and issuing the Certificates and the Notes on behalf of the Trust and on which the Indenture Trustee relies in authenticating the Notes. (a) The Servicer covenants as follows: (i) LIENS IN FORCE. The Financed Vehicle securing each Receivable shall not be released in whole or in part from the security interest granted by the Receivable, except upon payment in full of the Receivable or as otherwise contemplated herein; (ii) NO IMPAIRMENT. The Servicer shall do nothing to impair the rights of the Trust, the Certificateholders or the Noteholders in the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance Policies or the other Trust Property; and (iii) NO AMENDMENTS. The Servicer shall not extend or otherwise amend the terms of any Receivable, except in accordance with Section 3.2. (b) The Servicer represents, warrants and covenants as of the Closing Date as to itself: -43- (i) ORGANIZATION AND GOOD STANDING. The Servicer has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with power, authority and legal right to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to enter into and perform its obligations under this Agreement; (ii) DUE QUALIFICATION. The Servicer is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Receivables as required by this Agreement) requires or shall require such qualification; (iii) POWER AND AUTHORITY. The Servicer has the power and authority to execute and deliver this Agreement and its Related Documents and to carry out its terms and their terms, respectively, and the execution, delivery and performance of this Agreement and the Servicer's Related Documents have been duly authorized by the Servicer by all necessary corporate action; (iv) BINDING OBLIGATION. This Agreement and the Servicer's Related Documents shall constitute legal, valid and binding obligations of the Servicer enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law; (v) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and the Servicer's Related Documents, and the fulfillment of the terms of this Agreement and the Servicer's Related Documents, shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Servicer, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement, or violate any law, order, rule or regulation applicable to the Servicer of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Servicer or any of its properties. Notwithstanding the foregoing, it is understood that no representation or warranty is expressed herein with respect to the legality of the use of the word "Olympic" by the Servicer; -44- (vi) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the Servicer's knowledge, threatened against the Servicer, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Servicer or its properties (A) asserting the invalidity of this Agreement or any of the Related Documents, (B) seeking to prevent the issuance of the Certificates or the Notes or the consummation of any of the transactions contemplated by this Agreement or any of the Related Documents, or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, this Agreement or any of the Related Documents or (D) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Certificates or the Notes; (vii) NO CONSENTS. The Servicer is not required to obtain the consent of any other party or any consent, license, approval or authorization, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement; (viii) COLLATERAL INSURANCE. The Collateral Insurance is in full force and effect. Section 3.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon discovery by any of the Servicer, the Owner Trustee or the Indenture Trustee of a breach of any of the covenants set forth in Sections 3.5(a) or 3.6(a), the party discovering such breach shall give prompt written notice to the others; PROVIDED, HOWEVER, that the failure to give any such notice shall not affect any obligation of the Servicer. As of the second Accounting Date following its discovery or receipt of notice of any breach of any covenant set forth in Sections 3.5(a) or 3.6(a) which materially and adversely affects the interests of the Certificateholders, the Noteholders or the Trust in any Receivable (including any Liquidated Receivable) (or, at the Servicer's election, the first Accounting Date so following), the Servicer shall, unless it shall have cured such breach in all material respects, purchase from the Trust the Receivable affected by such breach and, on the related Deposit Date, the Servicer shall pay the related Purchase Amount. It is understood and agreed that the obligation of the Servicer to purchase any Receivable (including any Liquidated Receivable) with respect to which such a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against the Servicer for such breach available to the Certificateholders, the Noteholders, the Owner Trustee on behalf of Certificateholders or the Indenture Trustee on behalf of Noteholders; PROVIDED, HOWEVER, that the Servicer shall indemnify the Owner Trustee, the Backup Servicer, the Trust, the Indenture Trustee, the Noteholders and the Certificateholders against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach. -45- Section 3.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY SERVICER. On each Distribution Date, the Servicer shall be entitled to receive out of the Collection Account the Basic Servicing Fee and any Supplemental Servicing Fee for the related Monthly Period pursuant to Section 4.6. The Servicer shall be required to pay all expenses incurred by it in connection with its activities under this Agreement (including taxes imposed on the Servicer), expenses incurred in connection with distributions and reports to Certificateholders and Noteholders and all other fees and expenses of the Trust, including taxes levied or assessed against the Trust, and claims against the Trust in respect of indemnification, unless such fees, expenses or claims in respect of indemnification are expressly stated to be for the account of OFL or not to be for the account of the Servicer. The Servicer shall be liable for the fees and expenses of the Owner Trustee, the Administrator, the Indenture Trustee, the Custodian, the Backup Servicer, the Lockbox Bank (and any fees under the Lockbox Agreement) and the Independent Accountants. Notwithstanding the foregoing, if the Servicer shall not be OFL, a successor to OFL as Servicer permitted by Section 7.2 or an Affiliate of any of the foregoing, such Servicer shall not be liable for taxes levied or assessed against the Trust or claims against the Trust in respect of indemnification. Section 3.9. SERVICER'S CERTIFICATE. (a) No later than 10:00 a.m. New York City time on each Determination Date, the Servicer shall deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and each Rating Agency a Servicer's Certificate executed by a Responsible Officer of the Servicer containing, among other things, (i) all information necessary to enable the Indenture Trustee to make the distributions required by Section 4.6 and to determine the amount to which the Servicer is entitled to be reimbursed or has been reimbursed during the related Monthly Period for Monthly Advances pursuant to Section 4.4(d), (ii) all information necessary to enable the Indenture Trustee to send the statements to Noteholders, Certificateholders and JPMD required by Section 4.9, (iii) a listing of all Warranty Receivables and Administrative Receivables purchased as of the related Deposit Date, identifying the Receivables so purchased and (iv) all information necessary to enable the Indenture Trustee to reconcile all deposits to, and withdrawals from, the Collection Account for the related Monthly Period and Distribution Date, including the accounting required by Section 4.8. Receivables purchased by the Servicer or by the Seller or OFL on the related Deposit Date and each Receivable which became a Liquidated Receivable or which was paid in full during the related Monthly Period shall be identified by account number (as set forth in the Schedule of Receivables). A copy of such certificate may be obtained by any Certificateholder or Noteholder (or by a Certificate Owner or Note Owner, upon certification that such Person is a Certificate Owner or Note Owner and payment of any expenses associated with the distribution thereof) by a request in writing to the Indenture Trustee addressed to the Corporate Trust Office. In addition to the information set forth in the preceding sentence, the Servicer's Certificate delivered to the Indenture Trustee and JPMD on the Determination Date shall also contain the following information: (a) the Delinquency Ratio, Portfolio Loss Ratio, Warehousing Loss Ratio and Average Net Excess Spread -46- Percentage for such Determination Date; (b) whether any Trigger Event has occurred as of such Determination Date; (c) whether any Trigger Event that may have occurred as of a prior Determination Date is Deemed Cured as of such Determination Date; (d) whether to the knowledge of the Servicer a Purchase Termination Event or Servicer Termination Event has occurred; and (e) such other information as JPMD requests from time to time. (b) No later than 10:00 a.m. New York City time on the date that is five Business Days prior to a Trust Property Liquidation Date, the Servicer shall deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and each Rating Agency, a Servicer's Certificate executed by a Responsible Officer of the Servicer containing, among other things, (i) all information necessary for the distributions in Section 4.7, (ii) a listing of all purchasers of Receivables identifying the Receivables being purchased by each purchaser, (iii) for Receivables being purchased by the Seller specifying the specific source of funds for payment of the Seller's portion of the purchase price, (iv) the aggregate purchase price, and (v) whether the purchase of Trust Property will be in connection with a final liquidation and termination of the Trust. Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER TERMINATION EVENT. (a) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and each Rating Agency, on or before March 31 (or 90 days after the end of the Servicer's fiscal year, if other than December 31) of each year, beginning on March 31, 1997, an officer's certificate signed by any Responsible Officer of the Servicer, dated as of December 31 (or other applicable date) of the immediately preceding year, stating that (i) a review of the activities of the Servicer during the preceding 12-month period (or such other period as shall have elapsed from the Closing Date to the date of the first such certificate) and of its performance under this Agreement has been made under such officer's supervision, and (ii) to such officer's knowledge, based on such review, the Servicer has fulfilled all its obligations under this Agreement throughout such period, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof. (b) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and each Rating Agency, promptly after having obtained knowledge thereof, but in no event later than 2 Business Days thereafter, written notice in an officer's certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under Section 8.1(a). The Seller or the Servicer shall deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, the Servicer or the Seller (as applicable) and each Rating Agency promptly after having obtained knowledge thereof, but in no event later than 2 Business Days thereafter, written notice in an officer's certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under any other clause of Section 8.1. -47- Section 3.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The Servicer shall cause a firm of nationally recognized independent certified public accountants (the "Independent Accountants"), who may also render other services to the Servicer or to the Seller, to deliver to the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and each Rating Agency, on or before March 31 (or 90 days after the end of the Servicer's fiscal year, if other than December 31) of each year, beginning on March 31, 1997, with respect to the twelve months ended the immediately preceding December 31 (or other applicable date) (or such other period as shall have elapsed from the Closing Date to the date of such certificate), a statement (the "Accountant's Report") addressed to the Board of Directors of the Servicer, to the Owner Trustee, the Indenture Trustee, the Backup Servicer and to JPMD to the effect that such firm has audited the financial statements of the Servicer and issued its report thereon and that such audit was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances including procedures as determined by the Independent Accountants related to (1) the documents and records concerning the servicing of automobile installment sales contracts under pooling and servicing agreements and sale and servicing agreements substantially similar one to another (such statement to have attached thereto a schedule setting forth the pooling and servicing agreements and sale and servicing agreements covered thereby, including this Agreement); and (2) the delinquency and loss statistics relating to the Servicer's portfolio of automobile installment sales contracts; and except as described in the statement, disclosed no exceptions or errors in the records relating to automobile and light truck loans serviced for others that, in the firm's opinion, generally accepted auditing standards requires such firm to report. The Accountants' Report shall further state that (1) a review in accordance with agreed upon procedures was made of three randomly selected Servicer's Certificates for each Trust and (2) except as disclosed in the Report, no exceptions or errors in the Servicer's Certificates so examined were found. (b) The Accountants' Report shall also indicate that the firm is independent of the Seller and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. (c) A copy of the Accountants' Report may be obtained by any Certificateholder or Noteholder by a request in writing to the Indenture Trustee addressed to the Corporate Trust Office. Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING RECEIVABLES. The Servicer shall provide to representatives of the Owner Trustee, Indenture Trustee, the Backup Servicer and JPMD reasonable access to the documentation regarding the Receivables. The Servicer shall provide such access to any Certificateholder or Noteholder only after the occurrence of a Certificate Purchase Termination Event or a Note Purchase Termination Event, as the case may be, or in such cases where the Servicer is required by applicable statutes or regulations (whether applicable to the Servicer or to -48- such Certificateholder or Noteholder) to permit such Certificateholder or Noteholder to review such documentation. In each case, such access shall be afforded without charge but only upon reasonable request and during normal business hours. Nothing in this Section shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors, and the failure of the Servicer to provide access as provided in this Section as a result of such obligation shall not constitute a breach of this Section. Any Certificateholder or Noteholder, by its acceptance of a Certificate or Note (or by acquisition of its beneficial interest therein), as applicable, shall be deemed to have agreed to keep confidential and not to use for its own benefit any information obtained by it pursuant to this Section, except as may be required by applicable law or requested or required in court proceedings or by regulatory authority. Section 3.13. MONTHLY TAPE. On or before the third Business Day, but in no event later than the fifth calendar day, of each month, the Servicer will deliver to the Indenture Trustee and the Backup Servicer a computer tape and a diskette (or any other electronic transmission acceptable to the Indenture Trustee and the Backup Servicer) in a format acceptable to the Indenture Trustee and the Backup Servicer containing the information with respect to the Receivables as of the preceding Accounting Date necessary for preparation of the Servicer's Certificate relating to the immediately succeeding Determination Date and necessary to determine the application of collections as provided in Section 4.3. The Backup Servicer shall use such tape or diskette (or other electronic transmission acceptable to the Indenture Trustee and the Backup Servicer) to verify the Servicer's Certificate delivered by the Servicer, and the Backup Servicer shall certify to JPMD that it has verified the Servicer's Certificate in accordance with this Section 3.13 and shall notify the Servicer and JPMD of any discrepancies, in each case, on or before the second Business Day following the Determination Date. In the event that the Backup Servicer reports any discrepancies, the Servicer and the Backup Servicer shall attempt to reconcile such discrepancies prior to the fourth Business Day prior to the related Distribution Date, but in the absence of a reconciliation, the Servicer's Certificate shall control for the purpose of calculations and distributions with respect to the related Distribution Date. In the event that the Backup Servicer and the Servicer are unable to reconcile discrepancies with respect to a Servicer's Certificate by the related Distribution Date, the Servicer shall cause the Independent Accountants, at the Servicer's expense, to audit the Servicer's Certificate and, prior to the third Business Day, but in no event later than the fifth calendar day, of the following month, reconcile the discrepancies. The effect, if any, of such reconciliation shall be reflected in the Servicer's Certificate for such next succeeding Determination Date. In addition, the Servicer shall, if so requested by the Backup Servicer deliver to the Backup Servicer its Collection Records and its Monthly Records within one Business Day of demand therefor and a computer tape containing as of the close of business on the date of demand all of the data maintained by the Servicer in computer format in connection with servicing the Receivables. Other than the duties specifically set forth in this Agreement, the Backup Servicer shall have no obligations hereunder, including, without limitation, to supervise, verify, monitor or administer the -49- performance of the Servicer. The Backup Servicer shall have no liability for any actions taken or omitted by the Servicer. The duties and obligations of the Backup Servicer shall be determined solely by the express provisions of this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Backup Servicer. Section 3.14. RETENTION OF SERVICER. The Servicer hereby covenants and agrees to act as such under this Agreement until the termination of the Trust, subject to and in accordance with the terms and conditions of this Agreement. Section 3.15. FIDELITY BOND. The Servicer shall maintain a fidelity bond in such form and amount as is customary for entities acting as custodian of funds and documents in respect of consumer contracts on behalf of institutional investors. Section 3.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The Servicer shall, and hereby agrees that it will, perform on behalf of the Trust and the Owner Trustee the following duties of the Trust or the Owner Trustee, as applicable, under the Indenture (references are to the applicable Sections in the Indenture): (a) the direction to the Paying Agents, if any, to deposit moneys with the Indenture Trustee (Section 3.03); (b) the obtaining and preservation of the Issuer's qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of the Indenture, the Notes, the Indenture Collateral and each other instrument and agreement included in the Trust Estate (Section 3.04); (c) the preparation of all supplements, amendments, financing statements, continuation statements, instruments of further assurance and other instruments, in accordance with Section 3.05 of the Indenture, necessary to protect the Trust Estate (Section 3.05); (d) the delivery of the Opinion of Counsel on the Closing Date and the annual delivery of Opinions of Counsel, in accordance with Section 3.06 of the Indenture, as to the Trust Estate, and the annual delivery of the Officer's Certificate and certain other statements, in accordance with Section 3.09 of the Indenture, as to compliance with the Indenture (Sections 3.06 and 3.09); (e) the preparation and obtaining of documents and instruments required for the release of the Issuer from its obligations under the Indenture (Section 3.10(b)); (f) the monitoring of the Issuer's obligations as to the satisfaction and discharge of the Indenture and the preparation of an Officer's Certificate and the -50- obtaining of the Opinion of Counsel and the Independent Certificate relating thereto (Section 4.01); (g) the preparation of any written instruments required to confirm more fully the authority of any co-trustee or separate trustee and any written instruments necessary in connection with the resignation or removal of any co-trustee or separate trustee (Sections 6.08 and 6.10); (h) the opening of one or more accounts in the Trust's name, the preparation of Issuer Orders, Officer's Certificates and Opinions of Counsel and all other actions necessary with respect to investment and reinvestment of funds in the Trust Accounts (Sections 8.02 and 8.03); (i) the preparation of Trust Orders and the obtaining of Opinions of Counsel with respect to the execution of supplemental indentures (Sections 9.01, 9.02 and 9.03); (j) the preparation of all Officer's Certificates, Opinions of Counsel and Independent Certificates with respect to any requests by the Issuer to the Indenture Trustee to take any action under the Indenture (Section 11.01(a)); (k) the preparation and delivery of Officer's Certificates and the obtaining of Independent Certificates, if necessary, for the release of property from the lien of the Indenture (Section 11.01(b)); and (l) the recording of the Indenture, if applicable (Section 11.15). In addition to the duties of the Servicer set forth above, the Servicer shall, and hereby agrees that it will, prepare, distribute and file any reports required by Section 313(b) of the Trust Indenture Act of 1939 as a result of any transfer of Receivables. Such distribution and filing is to be effected by the Servicer's distribution and filing of the Servicer's Certificate. Section 3.17. DAILY REPORT. The Servicer shall provide to the Indenture Trustee, the Owner Trustee and JPMD a daily report setting forth the principal collections with respect to the Receivables for the previous day. Section 3.18. CERTAIN DUTIES OF THE SERVICER UNDER THE TRUST AGREEMENT. The Servicer shall, and hereby agrees that it will, monitor the Trust's compliance with all applicable provisions of state and federal securities laws, notify the Trust and the Administrator of any actions to be taken by the Trust necessary for compliance with such laws and prepare on behalf of the Trust and the Administrator all notices, filings or other documents or instruments required to be filed under such laws. -51- ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS Section 4.1. TRUST ACCOUNTS. (a) The Servicer shall establish the Collection Account in the name of the Indenture Trustee for the benefit of the Certificateholders and in respect of the Secured Obligations. The Collection Account shall be an Eligible Account and initially shall be a segregated trust account established with the Indenture Trustee and maintained with the Indenture Trustee. (b) The Servicer shall establish the Note Distribution Account in the name of the Indenture Trustee in respect of the Secured Obligations. The Note Distribution Account shall be an Eligible Account and initially shall be a segregated trust account established with the Indenture Trustee and maintained with the Indenture Trustee. (c) The Servicer shall establish the Spread Account in the name of the Indenture Trustee for the benefit of the Certificateholders and in respect of the Secured Obligations. The Spread Account shall be an Eligible Account and initially shall be a segregated trust account established with the Indenture Trustee and maintained with the Indenture Trustee. (d) The Servicer shall establish the Principal Funding Account in the name of the Indenture Trustee for the benefit of the Certificateholders and in respect of the Secured Obligations. The Principal Funding Account shall be an Eligible Account and initially shall be a segregated trust account established with the Indenture Trustee and maintained with the Indenture Trustee. (e) All amounts held in the Collection Account, the Note Distribution Account, the Spread Account and the Principal Funding Account (collectively, the "Trust Accounts") shall, to the extent permitted by applicable laws, rules and regulations, be invested, as directed by the Servicer, in Eligible Investments that mature not later than one Business Day prior to the Distribution Date for the Monthly Period to which such amounts relate. Any such written direction shall certify that any such investment is authorized by this Section 4.1. Any investment of funds in the Trust Accounts shall be made in Eligible Investments held by a financial institution in accordance with the following requirements: (a) all Eligible Investments shall be held in an account with such financial institution in the name of the Indenture Trustee, (b) with respect to securities held in such account, such securities shall be (i) certificated securities (as such term is used in N.Y. UCC Section 8-313(d)(i)), securities deemed to be certificated securities under applicable regulations of the United States government, or uncertificated securities issued by an issuer organized under the laws of the State of New York or the State of Delaware, (ii) either (A) in the possession of such institution, (B) in the possession of a clearing corporation (as such term is used in Minn. Stat. Section 336.8-313(g)) in the State of New York, registered in the name of such clearing -52- corporation or its nominee, not endorsed for collection or surrender or any other purpose not involving transfer, not containing any evidence of a right or interest inconsistent with the Indenture Trustee's security interest therein, and held by such clearing corporation in an account of such institution, (C), held in an account of such institution with the Federal Reserve Bank of New York or the Federal Reserve Bank of Minneapolis, or (D) in the case of uncertificated securities, issued in the name of such institution, and (iii) identified, by book entry or otherwise, as held for the account of, or pledged to, the Indenture Trustee on the records of such institution, and such institution shall have sent the Indenture Trustee a confirmation thereof, (c) with respect to repurchase obligations held in such account, such repurchase obligations shall be identified by such institution, by book entry or otherwise, as held for the account of, or pledged to, the Indenture Trustee on the records of such institution, and the related securities shall be held in accordance with the requirements of clause (b) above, and (d) with respect to other Eligible Investments other than securities and repurchase agreements, such Eligible Investments shall be held in a manner acceptable to the Indenture Trustee. Subject to the other provisions hereof, the Indenture Trustee shall have sole control over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Indenture Trustee or its agent, together with each document of transfer, if any, necessary to transfer title to such investment to the Indenture Trustee in a manner which complies with this Section 4.1. All interest, dividends, gains upon sale and other income from, or earnings on, investments of funds in the Trust Accounts (other than the Spread Account) shall be deposited in the Collection Account and distributed on the next Distribution Date pursuant to Section 4.6. All interest, dividends, gains upon sale and other income from, or earnings on, investments of funds in the Spread Account shall remain in the Spread Account. The Servicer shall deposit in the applicable Trust Account an amount equal to any net loss on such investments immediately as realized. (f) On each Transfer Date, the Servicer shall deposit in the Collection Account (i) all Scheduled Payments and prepayments of Receivables received by the Servicer after the Cutoff Date and on or prior to the Business Day immediately preceding the applicable Transfer Date or received by the Lockbox Bank after the Cutoff Date and on or prior to the second Business Day immediately preceding the applicable Transfer Date and (ii) all Liquidation Proceeds and proceeds of Insurance Policies realized in respect of a Financed Vehicle and applied by the Servicer after the Cutoff Date. Section 4.2. COLLECTIONS. (a) The Servicer shall establish the Subcollection Account in the name of the Indenture Trustee for the benefit of the Certificateholders and the Noteholders. The Subcollection Account shall be an Eligible Account and shall initially be established with the Indenture Trustee. The Servicer shall remit directly to the Subcollection Account without deposit into any intervening account all payments by or on behalf of the Obligors on the Receivables and all Liquidation Proceeds received by the Servicer, in each case, as soon as practicable, but in no event later than the Business Day -53- after receipt thereof. Within two days of deposit of payments into the Subcollection Account, the Indenture Trustee shall transfer all amounts credited to the Subcollection Account on account of such payments to the Collection Account. Amounts in the Subcollection Account shall not be invested. (b) On each Deposit Date related to a Distribution Date (i) prior to the Purchase Termination Date and (ii) so long as the Facility Balance is less than or equal to the Facility Limit, all amounts on deposit in the Collection Account allocable the Noteholders' Principal Distributable Amount and the Certificateholders' Principal Distributable Amount shall be deposited into the Principal Funding Account. On each Deposit Date preceding a Distribution Date on or after the occurrence of the Purchase Termination Date, amounts on deposit in the Principal Funding Account shall be deposited into the Note Distribution Account or the Certificate Distribution Account, as Collections and applied in accordance with Section 4.6 hereof. On each Deposit Date preceding a Distribution Date on which the Facility Balance would exceed the Facility Limit (after giving effect to a reduction thereof requested by the Seller) (provided that a Purchase Termination Date shall not have been declared pursuant to Section 2.1(c)(2)), amounts on deposit in the Principal Funding Account equal to such excess shall be deposited into the Note Distribution Account as Collections and applied in accordance with Section 4.6 hereof. Notwithstanding the foregoing, if on any Determination Date the amount on deposit in the Principal Funding Account exceeds the aggregate Purchase Price with respect to Receivables to be purchased during the remainder of the Monthly Period during which such Determination Date occurs, as determined by the Servicer in its sole discretion (the amount of such excess, the "Principal Funding Excess Amount"), an amount equal to the Principal Funding Excess Amount shall be deposited into the Note Distribution Account and the Certificate Distribution Account, as applicable, and applied in accordance with Section 4.6 hereof. (c) Notwithstanding the provisions of subsection (a) hereof, the Servicer will be entitled to be reimbursed from amounts on deposit in the Collection Account with respect to a Monthly Period for amounts previously deposited in the Collection Account but later determined by the Servicer or the Lockbox Bank to have resulted from mistaken deposits or postings or checks returned for insufficient funds. The amount to be reimbursed hereunder shall be paid to the Servicer on the related Distribution Date pursuant to Section 4.6(iii) upon certification by the Servicer of such amounts and the provision of such information to the Indenture Trustee as may be necessary in the opinion of the Indenture Trustee to verify the accuracy of such certification. Section 4.3. APPLICATION OF COLLECTIONS. For the purposes of this Agreement, all collections for a Monthly Period shall be applied by the Servicer as follows: (a) With respect to each Receivable, payments by or on behalf of the Obligor thereof (other than of Supplemental Servicing Fees with respect to such Receivable, to the extent collected) shall be applied to interest and principal with respect to such Receivable -54- in accordance with the terms of such Receivable. With respect to each Liquidated Receivable, Liquidation Proceeds shall be applied to interest and principal with respect to such Receivable in accordance with the terms of such Receivable, and then to any Insurance Add-On Amount due and payable with respect to such Receivable. The Servicer shall not be entitled to any Supplemental Servicing Fees with respect to a Liquidated Receivable. (b) With respect to each Receivable that has become a Purchased Receivable on any Deposit Date, the Purchase Amount shall be applied, for purposes of this Agreement only, to interest and principal on the Receivable in accordance with the terms of the Receivable as if the Purchase Amount had been paid by the Obligor on the Accounting Date. The Servicer shall not be entitled to any Supplemental Servicing Fees with respect to such a Receivable. Nothing contained herein shall relieve any Obligor of any obligation relating to any Receivable. (c) All amounts collected that are payable to the Servicer as Supplemental Servicing Fees hereunder shall be deposited in the Collection Account and paid to the Servicer in accordance with Section 4.6(iii). (d) All payments by or on behalf of an Obligor received with respect to any Purchased Receivable after the Accounting Date immediately preceding the Deposit Date on which the Purchase Amount was paid by the Seller, OFL or the Servicer shall be paid to the Seller, OFL or the Servicer, respectively, and shall not be included in the Available Funds. Section 4.4. MONTHLY ADVANCES. (a) As of any Determination Date as of which no Trigger Event has occurred, and any previous Trigger Event has been Deemed Cured, (i) the Servicer shall be obligated to make a Monthly Advance on the related Deposit Date in an amount equal to the lesser of (x) the aggregate Collection Shortfall with respect to Receivables for which a Scheduled Payment was due during such Monthly Period and (y) the Net Advance Amount; and (ii) to the extent the amount the Servicer is obligated to advance pursuant to sub-clause (i) above is less than the Net Advance Amount (such amount, the "Net Advance Shortfall"), the Seller shall be obligated to make a Monthly Advance on the related Deposit Date in an amount equal to the lesser of (x) the aggregate Collection Shortfall with respect to Receivables for which no Scheduled Payment was due during such Monthly Period and (y) the Net Advance Shortfall; PROVIDED, HOWEVER, that neither the Servicer nor the Seller shall be required to make a Monthly Advance with respect to a Receivable extended pursuant to Section 3.2(b) for any Monthly Period during which no Scheduled Payment is due according to the terms of such extension. (b) As of any Determination Date as of which a Trigger Event has occurred, or as of which any previous Trigger Event has not been Deemed Cured, the Servicer and the Seller, as specified below, shall be required to make Monthly Advances as follows: if there -55- are Collection Shortfalls with respect to any Receivables, the Servicer, with respect to Receivables for which a Scheduled Payment was due during such Monthly Period, or the Seller, with respect to Receivables for which no Scheduled Payment was due during such Monthly Period, shall make a Monthly Advance equal to the amount of such Collection Shortfall; PROVIDED, HOWEVER, that neither the Servicer nor the Seller shall be required to make a Monthly Advance for a Collection Shortfall with respect to a Receivable extended pursuant to Section 3.2(b) for any Monthly Period during which no Scheduled Payment is due according to the terms of such extension. (c) On or before each Deposit Date, the Servicer and the Seller, as applicable, shall deposit in the Collection Account the aggregate amount of Monthly Advances required for the related Monthly Period in immediately available funds (subject to Section 4.8). (d) The Servicer shall be entitled to be reimbursed for Outstanding Monthly Advances made in accordance with Section 4.4(a)(i) or Section 4.4(b) pursuant to Section 4.6(i), Section 4.7(i) or Section 4.8 with respect to any Receivable with respect to which a Collection Shortfall existed from the following sources received on any day subsequent to the Distribution Date in respect of which such Monthly Advance was made: (i) subsequent payments by or on behalf of the Obligor with respect to such Receivable, (ii) collections of Liquidation Proceeds with respect to such Receivable if such Receivable becomes a Liquidated Receivable and (iii) payment of any Purchase Amount with respect to such Receivable if such Receivable becomes a Purchased Receivable. If any Receivable shall become a Liquidated Receivable and the Servicer shall not have been fully reimbursed for Outstanding Monthly Advances with respect to such Receivable from the sources of funds previously described in this paragraph, the Servicer shall be entitled to reimbursement from collections on Receivables other than the Receivable in respect of which such Outstanding Monthly Advance shall have been made. Section 4.5. ADDITIONAL DEPOSITS. On or before each Deposit Date, the Servicer or OFL shall deposit in the Collection Account the aggregate Purchase Amounts with respect to Administrative Receivables and Warranty Receivables, respectively. All such deposits of Purchase Amounts shall be made in immediately available funds. Section 4.6. DISTRIBUTIONS. On each Distribution Date (except as otherwise provided in priorities (v) and (vii) below), the Indenture Trustee shall (based on the information contained in the Servicer's Certificate delivered on the related Determination Date) distribute the following amounts and in the order of priority specified below. Within each order of priority (other than priority (viii) or (ix)), amounts shall be deemed withdrawn first from Available Funds and second from any Deficiency Claim Amount. (i) first, from the Distribution Amount, (A) to the Trust for payment of any taxes due and unpaid with respect to the Trust, to the extent such taxes have not been previously paid by OFL or by the Servicer pursuant to Section 3.8, and (B) -56- then to the Servicer, the amount of Outstanding Monthly Advances for which the Servicer is entitled to be reimbursed pursuant to Section 4.4(d) and for which the Servicer has not previously been reimbursed pursuant to Section 4.8; (ii) second, from the Distribution Amount, to the Owner Trustee, any accrued and unpaid fees of the Owner Trustee in accordance with the Trust Agreement and including amounts with respect to which the Administrator is entitled to be reimbursed pursuant to the Administration Agreement; to the Indenture Trustee, any accrued and unpaid fees of the Indenture Trustee in accordance with the Indenture; to any Lockbox Bank, Custodian, Backup Servicer or Administrator (including the Owner Trustee or Indenture Trustee if acting in any such additional capacity), any accrued and unpaid fees (in each case, to the extent such Person has not previously received such amount from the Servicer or OFL), to the Backup Servicer, any transition expenses (not to exceed $50,000) in accordance with Section 8.3; PROVIDED, HOWEVER, if the accrued and unpaid fees of the Owner Trustee, the Indenture Trustee, the Backup Servicer and the Administrator to be distributed pursuant to this clause (ii) are in excess of the amount (the "Servicer Fee Threshold") obtained by dividing (x) .20% of the Aggregate Principal Balance by (y) twelve, any accrued and unpaid fees in excess of the Servicer Fee Threshold remaining to be distributed pursuant to this clause (ii) shall not be distributed pursuant to this clause (ii) but shall be distributed after the distributions to be made pursuant to clause (v) below but before the distributions to be made pursuant to clause (vi) below; (iii) third, from the Distribution Amount, to the Servicer, the Basic Servicing Fee for the related Monthly Period, any Supplemental Servicing Fees for the related Monthly Period, and any amounts specified in Section 4.2(b), to the extent the Servicer has not reimbursed itself in respect of such amounts pursuant to Section 4.8; (iv) fourth, from the Distribution Amount, to the Note Distribution Account, an amount equal to the Noteholders' Interest Distributable Amount for such Distribution Date; (v) fifth, to the Note Distribution Account, (w) on each Distribution Date, an amount equal to the Noteholders' Percentage of any Principal Funding Excess Amount, (x) on each Distribution Date prior to the Purchase Termination Date on which the Facility Balance exceeds the Facility Limit, an amount equal to the excess of (1) the Facility Balance over (2) the Facility Limit and (y) on each Distribution Date on or after the Purchase Termination Date, from the Distribution Amount, an amount equal to the Noteholders' Principal Distributable Amount for such Distribution Date; -57- (vi) sixth, from the Distribution Amount, to the Certificate Distribution Account, an amount equal to the Certificateholders' Interest Distributable Amount for such Distribution Date; (vii) seventh, to the Certificate Distribution Account, (x) on each Distribution Date, an amount equal to the Certificateholders' Percentage of any Principal Funding Excess Amount and (y) on each Distribution Date on or after the Purchase Termination Date, from the Distribution Amount, an amount equal to the Certificateholders' Principal Distributable Amount for such Distribution Date; and (viii) eighth, (A) if (i) a Trigger Event shall have occurred or (ii) any previous Trigger Event has not been Deemed Cured and OFL is no longer required to maintain any hedging arrangement in accordance with Section 2.1(b)(1)(xiv) hereof, any remaining Available Funds shall be deposited into the Spread Account; or (B) if no Trigger Event shall have occurred and be continuing and any previous Trigger Event shall have been Deemed Cured, FIRST, from Available Funds, if any amounts are due and owing to any Indemnified Party (as such term is used in the Note Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Note Purchase Agreement, such amount shall be deposited into the Note Distribution Account for distribution to such Indemnified Parties, SECOND, from Available Funds, if any amounts are due and owing to any Indemnified Party (as such term is used in the Certificate Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Certificate Purchase Agreement, such amount shall be deposited into the Certificate Distribution Account for distribution to such Indemnified Parties, and THIRD, any remaining Available Funds shall be released to the Seller. Section 4.7. DISTRIBUTIONS ON TRUST PROPERTY LIQUIDATION. On any Trust Property Liquidation Date, the Indenture Trustee shall (based on the information contained in the Servicer's Certificate delivered pursuant to Section 3.9(b)) distribute the following amounts and in the order of priority specified below. Within each order of priority amounts shall be withdrawn first from Available Funds and second from any Deficiency Claim Amount. (i) first, from the Distribution Amount and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), (A) to the Trust for payment of any taxes due and unpaid with respect to the Trust, to the extent such taxes have not been previously paid by OFL or by the Servicer pursuant to Section 3.8, and (B) then to the Servicer, the amount of Outstanding Monthly Advances for which the Servicer is entitled to be reimbursed pursuant to Section 4.4(d) and for which the Servicer has not previously been reimbursed pursuant to Section 4.8; -58- (ii) second, from the Distribution Amount and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), to the Owner Trustee, any accrued and unpaid fees of the Owner Trustee in accordance with the Trust Agreement and including amounts with respect to which the Administrator is entitled to be reimbursed pursuant to the Administration Agreement; to the Indenture Trustee, any accrued and unpaid fees of the Indenture Trustee in accordance with the Indenture; to any Lockbox Bank, Custodian, Backup Servicer or Administrator (including the Owner Trustee or Indenture Trustee if acting in any such additional capacity), any accrued and unpaid fees (in each case, to the extent such Person has not previously received such amount from the Servicer or OFL), to the Backup Servicer, any transition expenses (not to exceed $50,000) in accordance with Section 8.3; PROVIDED, HOWEVER, if the accrued and unpaid fees of the Owner Trustee, the Indenture Trustee, the Backup Servicer and the Administrator to be distributed pursuant to this clause (ii) are in excess of the Servicer Fee Threshold, any accrued and unpaid fees in excess of the Servicer Fee Threshold remaining to be distributed pursuant to this clause (ii) shall not be distributed pursuant to this clause (ii) but shall be distributed after the distributions to be made pursuant to clause (v) below but before the distributions to be made pursuant to clause (vi) below; (iii) third, from the Distribution Amount and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), to the Servicer, the Basic Servicing Fee, any Supplemental Servicing Fees that have accrued and remain unpaid and any amounts specified in Section 4.2(b), to the extent the Servicer has not reimbursed itself in respect of such amounts pursuant to Section 4.8; (iv) fourth, from the Distribution Amount and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), to the Note Distribution Account, an amount equal to all accrued and unpaid interest on the Notes to and including the Trust Property Liquidation Date, plus all breakage payments on the Notes specified in the Note Purchase Agreement (together with any amounts required to fund the Commercial Paper Funding Account pursuant to the Note Purchase Agreement); (v) fifth, from the Distribution Amount and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), to the Note Distribution Account, an amount equal to the Outstanding principal amount of Notes; (vi) sixth, from the Distribution Amount and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), to the Certificate Distribution Account, an amount equal to all accrued and unpaid interest -59- on the Certificates to and including the Trust Property Liquidation Date plus all breakage payments on the Certificates as specified in the Certificate Purchase Agreement; (vii) seventh, from the Distribution Amount and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), to the Certificate Distribution Account, an amount equal to the Certificate Balance; and (viii) eighth, from Available Funds and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), FIRST, if any amounts are due and owing to any Indemnified Party (as such term is used in the Note Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Note Purchase Agreement, such amount shall be deposited into the Note Distribution Account for distribution to such Indemnified Parties and SECOND, from Available Funds and, without duplication, from amounts deposited into the Collection Account pursuant to Section 9.1(b), if any amounts are due and owing to any Indemnified Party (as such term is used in the Certificate Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Certificate Purchase Agreement, such amount shall be deposited into the Certificate Distribution Account for distribution to such Indemnified Parties. Section 4.8. NET DEPOSITS. Subject to payment by the Servicer of amounts otherwise payable pursuant to Section 4.6(ii) and provided that no Servicer Termination Event shall have occurred and be continuing with respect to such Servicer, the Servicer may make the remittances to be made by it pursuant to Sections 4.2, 4.4 and 4.5 net of amounts (which amounts may be netted prior to any such remittance for a Monthly Period) to be distributed to it pursuant to Sections 3.8, 4.2(b) and 4.6(i); PROVIDED, HOWEVER, that the Servicer shall account for all of such amounts in the related Servicer's Certificate as if such amounts were deposited and distributed separately; and, PROVIDED, FURTHER, that if an error is made by the Servicer in calculating the amount to be deposited or retained by it, with the result that an amount less than required is deposited in the Collection Account, the Servicer shall make a payment of the deficiency to the Collection Account, immediately upon becoming aware, or receiving notice from the Indenture Trustee, of such error. Section 4.9. STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS. (a) On each Distribution Date, the Owner Trustee shall deliver to each Certificateholder (other than the General Partner) and JPMD, a statement based on information in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 3.9, setting forth for the Monthly Period or Interest Accrual Period, as applicable, relating to such Distribution Date the following information: (i) the amount of such distribution allocable to principal; -60- (ii) the amount of such distribution allocable to interest; (iii) the amount of such distribution payable out of amounts withdrawn from the Spread Account; (iv) the Certificate Balance and the remaining balance of the Notes (after giving effect to distributions made on such Distribution Date); (v) the Noteholders' Interest Carryover Shortfall, the Certificateholders' Interest Carryover Shortfall and the Certificateholders' Principal Carryover Shortfall, if any, and the change in such amounts from the preceding statement; and (vi) the amount of fees paid by the Trust with respect to such Monthly Period. Each amount set forth pursuant to subclauses (i) through (iv) above may be expressed as a dollar amount per $1,000 of original principal balance of a Certificate. (b) On each Payment Date, the Indenture Trustee shall deliver to each Noteholder and JPMD, a statement based on information in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 3.9, setting forth for the Monthly Period or Interest Accrual Period, as applicable, relating to such Payment Date the following information with respect to the Notes: (i) the amount of such distribution allocable to principal; (ii) the amount of such distribution allocable to interest; (iii) the amount of such distribution payable out of amounts withdrawn from the Spread Account; (iv) the outstanding principal balance of the Notes and the remaining Certificate Balance (after giving effect to distributions made on such Payment Date); (v) the Noteholders' Interest Carryover Shortfall, the Certificateholders' Interest Carryover Shortfall and the Certificateholders' Principal Carryover Shortfall, if any, and the change in such amounts from the preceding statement; and (vi) the amount of fees paid by the Trust with respect to such Monthly Period. Each amount set forth pursuant to subclauses (i) through (iv) above may be expressed as a dollar amount per $1,000 of original principal balance of a Note. -61- Section 4.10. INDENTURE TRUSTEE AS AGENT. The Indenture Trustee, in holding all funds in the Trust Accounts and in making distributions as provided in this Agreement, shall act solely on behalf of and as agent for the Certificateholders and the Noteholders. Section 4.11. ELIGIBLE ACCOUNTS. Any account which is required to be established as an Eligible Account pursuant to this Agreement and which ceases to be an Eligible Account shall within 5 Business Days (or such longer period, not to exceed 30 days, as to which each Rating Agency may consent) be established as a new account which shall be an Eligible Account and any cash and/or any investments shall be transferred to such new account. ARTICLE V THE SPREAD ACCOUNT Section 5.1. WITHDRAWALS FROM SPREAD ACCOUNT. (a) In the event that the Servicer's Certificate with respect to any Determination Date shall state that the Deficiency Claim Amount (as defined below) with respect to the related Distribution Date is greater than zero, then the Indenture Trustee shall, on the Deposit Date, withdraw from the Spread Account an amount equal to the lesser of (x) the Deficiency Claim Amount and (y) the amount on deposit in the Spread Account, and deposit such amount into the Collection Account. The "Deficiency Claim Amount" with respect to any Distribution Date shall equal the excess, if any, of (i) the amount required to be distributed pursuant to clauses (i) - (vii) of Section 4.6, or clauses (i) - (vii) of Section 4.7, as applicable, over (ii) the Available Funds with respect to such Distribution Date. (b) All amounts, if any, remaining on deposit in the Spread Account immediately following the distribution of the amounts required by clauses (i) - (vii) of Section 4.7 in connection with a sale of not less than all of the Receivables in the Trust pursuant to Section 9.1(b) hereof shall be distributed to the Seller. ARTICLE VI THE SELLER Section 6.1. LIABILITY OF SELLER. The Seller shall be liable hereunder only to the extent of the obligations in this Agreement specifically undertaken by the Seller and the representations made by the Seller. -62- Section 6.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION. (a) The Seller shall not merge or consolidate with any other Person or permit any other Person to become the successor to the Seller's business without the prior written consent of JPMD. The certificate of incorporation of any corporation (i) into which the Seller may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Seller shall be a party, or (iii) succeeding to the business of Seller, shall contain provisions relating to limitations on business and other matters substantively identical to those contained in the Seller's certificate of incorporation. Any such successor corporation shall execute an agreement of assumption of every obligation of the Seller under this Agreement and each Related Document and, whether or not such assumption agreement is executed, shall be the successor to the Seller under this Agreement without the execution or filing of any document or any further act on the part of any of the parties to this Agreement. The Seller shall provide prompt, written notice of any merger, consolidation or succession pursuant to this Section 6.2 to the Owner Trustee, the Indenture Trustee, JPMD and the Rating Agencies. Notwithstanding the foregoing, the Seller shall not merge or consolidate with any other Person or permit any other Person to become a successor to the Seller's business, unless (x) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 2.5 shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction) and no event that, after notice or lapse of time, or both, would become a Servicer Termination Event shall have occurred and be continuing, (y) the Seller shall have delivered to the Owner Trustee, the Indenture Trustee and JPMD an officer's certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 6.2 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and (z) the Seller shall have delivered to the Owner Trustee, the Indenture Trustee and JPMD an Opinion of Counsel, stating, in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of the Trust in the Trust Property and reciting the details of the filings or (B) no such action shall be necessary to preserve and protect such interest. (b) The Seller hereby agrees that it shall not (i) take any action prohibited by Article XVI of its certificate of incorporation or (ii) without the prior written consent of the Owner Trustee, the Indenture Trustee and JPMD, amend Article III, Article IX, Article XIV or Article XVI of its certificate of incorporation. Section 6.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller and any director or officer or employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. The Seller shall not be under any obligation to appear in, prosecute or defend any legal action that is not -63- incidental to its obligations as Seller of the Receivables under this Agreement and that in its opinion may involve it in any expense or liability. Section 6.4. SELLER MAY OWN CERTIFICATES OR NOTES. Each of the Seller and any Affiliate of the Seller may in its individual or any other capacity become the owner or pledgee of Certificates or Notes with the same rights as it would have if it were not the Seller or an Affiliate thereof except as otherwise specifically provided herein or in the Related Documents. Certificates or Notes so owned by or pledged to the Seller or such Affiliate shall have an equal and proportionate benefit under the provisions of this Agreement or any Related Document, without preference, priority, or distinction as among all of the Certificates or Notes, provided that any Certificates or Notes owned by the Seller or any Affiliate thereof, during the time such Certificates or Notes are owned by them, shall be without voting rights for any purpose set forth in this Agreement or any Related Document. The Seller shall notify the Owner Trustee, the Indenture Trustee and JPMD promptly after it or any of its Affiliates become the owner or pledgee of a Certificate or Note. Section 6.5. LIMITED RECOURSE UPON SECURITIZED OFFERING. As a condition precedent to the optional redemption of the Notes under Section 10.01(b) of the Indenture in connection with a Securitized Offering, the Seller shall be obligated to purchase from the Trust, on or prior to the date on which such redemption of Notes occurs, all Ineligible Receivables for a purchase price equal to the Purchase Amount for such Ineligible Receivables. ARTICLE VII THE SERVICER Section 7.1. LIABILITY OF SERVICER; INDEMNITIES. (a) The Servicer (in its capacity as such and, in the case of OFL, without limitation of its obligations under the Purchase Agreement) shall be liable hereunder only to the extent of the obligations in this Agreement specifically undertaken by the Servicer and the representations made by the Servicer. (b) The Servicer shall defend, indemnify and hold harmless the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, their respective officers, directors, agents and employees, the Certificateholders and the Noteholders from and against any and all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel and expenses of litigation arising out of or resulting from the use, ownership or operation by the Servicer or any Affiliate thereof of any Financed Vehicle. -64- (c) The Servicer shall indemnify, defend and hold harmless the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, their respective officers, directors, agents and employees, the Certificateholders and the Noteholders from and against any taxes that may at any time be asserted against the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, the Certificateholders or the Noteholders with respect to the transactions contemplated in this Agreement, including, without limitation, any sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but not including any taxes asserted with respect to, and as of the date of, the sale of the Receivables and the other Trust Property to the Trust or the issuance and original sale of the Certificates and the Notes, or federal or other income taxes arising out of distributions on the Certificates) and costs and expenses in defending against the same. (d) The Servicer shall indemnify, defend and hold harmless the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, their respective officers, directors, agents and employees, the Certificateholders and the Noteholders from and against any and all costs, expenses, losses, claims, damages, and liabilities to the extent that such cost, expense, loss, claim, damage, or liability arose out of, or was imposed upon the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD, the Certificateholders or the Noteholders through the breach of this Agreement, the negligence, willful misfeasance, or bad faith of the Servicer in the performance of its duties under this Agreement or by reason of reckless disregard of its obligations and duties under this Agreement. (e) The Servicer shall indemnify, defend, and hold harmless the Owner Trustee, in its individual capacity, its officers, directors, agents and employees, from and against all costs, taxes (other than income taxes on fees and expenses payable to the Owner Trustee), expenses, losses, claims, damages and liabilities arising out of or incurred in connection with the acceptance or performance of the trusts and duties contained in the Trust Agreement and the Related Documents, except to the extent that such cost, taxes (other than income taxes), expense, loss, claim, damage or liability (A) is due to the willful misfeasance or gross negligence of the Owner Trustee, or (B) arises from the Owner Trustee's breach of any of its representations or warranties set forth in Section 7.3 of the Trust Agreement; PROVIDED, HOWEVER, that amounts payable under this paragraph shall be increased by the amount of income taxes actually paid by the Owner Trustee in respect of any indemnity payment unless the Owner Trustee received or can reasonably be expected to receive a tax deduction for the related loss or cost. (f) Indemnification under this Article shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If the Servicer has made any indemnity payments pursuant to this Article and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to the Servicer, without interest. -65- (g) OFL, in its individual capacity, hereby acknowledges that the indemnification provisions in the Purchase Agreement benefiting the Trust, the Owner Trustee, the Indenture Trustee, the Backup Servicer and JPMD are enforceable by each hereunder. Section 7.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER. (a) The Servicer shall not merge or consolidate with any other person, convey, transfer or lease substantially all its assets as an entirety to another Person, or permit any other Person to become the successor to the Servicer's business unless, after the merger, consolidation, conveyance, transfer, lease or succession, the successor or surviving entity shall be an Eligible Servicer and shall be capable of fulfilling the duties of the Servicer contained in this Agreement. Any corporation (i) into which the Servicer may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Servicer shall be a party, (iii) which acquires by conveyance, transfer, or lease substantially all of the assets of the Servicer, or (iv) succeeding to the business of the Servicer, in any of the foregoing cases shall execute an agreement of assumption to perform every obligation of the Servicer under this Agreement and, whether or not such assumption agreement is executed, shall be the successor to the Servicer under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be deemed to release the Servicer from any obligation. The Servicer shall provide notice of any merger, consolidation or succession pursuant to this Section 7.2(a) to the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and each Rating Agency. Notwithstanding the foregoing, the Servicer shall not merge or consolidate with any other Person or permit any other Person to become a successor to the Servicer's business, unless (x) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 3.6 shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction) and no event that, after notice or lapse of time, or both, would become a Servicer Termination Event shall have occurred and be continuing, (y) the Servicer shall have delivered to the Owner Trustee, the Indenture Trustee and JPMD an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 7.2(a) and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and (z) the Servicer shall have delivered to the Owner Trustee, the Indenture Trustee and JPMD an Opinion of Counsel, stating that, in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of the Owner Trustee and the Indenture Trustee in the Trust Property and reciting the details of the filings or (B) no such action shall be necessary to preserve and protect such interest. (b) Any corporation (i) into which the Backup Servicer may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Backup Servicer -66- shall be a party, (iii) which acquires by conveyance, transfer or lease substantially all of the assets of the Backup Servicer, or (iv) succeeding to the business of the Backup Servicer, in any of the foregoing cases shall execute an agreement of assumption to perform every obligation of the Backup Servicer under this Agreement and, whether or not such assumption agreement is executed, shall be the successor to the Backup Servicer under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be deemed to release the Backup Servicer from any obligation. Section 7.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND OTHERS. (a) Neither the Servicer, the Backup Servicer nor any of the directors or officers or employees or agents of the Servicer or Backup Servicer shall be under any liability to the Trust, the Certificateholders or the Noteholders, except as provided in this Agreement, for any action taken or for refraining from the taking of any action pursuant to this Agreement; PROVIDED, HOWEVER, that this provision shall not protect the Servicer, the Backup Servicer or any such person against any liability that would otherwise be imposed by reason of a breach of this Agreement or willful misfeasance, bad faith or negligence (excluding errors in judgment) in the performance of duties, by reason of reckless disregard of obligations and duties under this Agreement or any violation of law by the Servicer, Backup Servicer or such person, as the case may be; PROVIDED FURTHER, that this provision shall not affect any liability to indemnify the Owner Trustee and the Indenture Trustee for costs, taxes, expenses, claims, liabilities, losses or damages paid by the Owner Trustee or the Indenture Trustee, each in its individual capacity. The Servicer, the Backup Servicer and any director, officer, employee or agent of the Servicer or Backup Servicer may rely in good faith on the advice of counsel or on any document of any kind PRIMA FACIE properly executed and submitted by any Person respecting any matters arising under this Agreement. (b) The Backup Servicer shall not be liable for any obligation of the Servicer contained in this Agreement, and the Owner Trustee, the Indenture Trustee, the Seller, JPMD, the Noteholders and the Certificateholders shall look only to the Servicer to perform such obligations. Section 7.4. DELEGATION OF DUTIES. The Servicer may delegate duties under this Agreement to an Affiliate of OFL with the prior written consent of JPMD, the Indenture Trustee, the Owner Trustee and the Backup Servicer (which consent shall not be unreasonably withheld). Neither OFL nor any party acting as Servicer hereunder shall appoint any subservicer hereunder without the prior written consent of JPMD, the Indenture Trustee, the Owner Trustee and the Backup Servicer (which consent shall not be unreasonably withheld). Notwithstanding the foregoing, the Servicer also may at any time and in its sole discretion perform the specific duty of repossession of Financed Vehicles through sub-contractors who are in the business of servicing automotive receivables, -67- PROVIDED, HOWEVER, that no such delegation or sub-contracting of duties by the Servicer shall relieve the Servicer of its responsibility with respect to such duties. Section 7.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to the provisions of Section 7.2, neither the Servicer nor the Backup Servicer shall resign from the obligations and duties imposed on it by this Agreement as Servicer or Backup Servicer except upon a determination that by reason of a change in legal requirements the performance of its duties under this Agreement would cause it to be in violation of such legal requirements in a manner which would have a material adverse effect on the Servicer or the Backup Servicer, as the case may be, and JPMD does not elect to waive the obligations of the Servicer or the Backup Servicer, as the case may be, to perform the duties which render it legally unable to act or to delegate those duties to another Person. Any such determination permitting the resignation of the Servicer or Backup Servicer shall be evidenced by an Opinion of Counsel to such effect delivered and acceptable to JPMD, the Owner Trustee and the Indenture Trustee. No resignation of the Servicer shall become effective until the Backup Servicer or a successor Servicer that is an Eligible Servicer shall have assumed the responsibilities and obligations of the Servicer. No resignation of the Backup Servicer shall become effective until a Person that is an Eligible Servicer shall have assumed the responsibilities and obligations of the Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup Servicer is not appointed within 60 days after the Backup Servicer has given notice of its resignation and has provided the Opinion of Counsel required by this Section 7.5, the Backup Servicer may petition a court for its removal. ARTICLE VIII SERVICER TERMINATION EVENTS Section 8.1. SERVICER TERMINATION EVENT. For purposes of this Agreement, each of the following shall constitute a "Servicer Termination Event": (a) Any failure by the Servicer to deliver to the Indenture Trustee for distribution to Certificateholders or Noteholders any proceeds or payment required to be so delivered under the terms of this Agreement (or, if OFL is the Servicer, the Purchase Agreement); (b) Failure by the Servicer to deliver to the Indenture Trustee, the Owner Trustee and JPMD the Servicer's Certificate by the third Business Day prior to the Distribution Date, or failure on the part of the Servicer to observe its covenants and agreements set forth in Section 7.2(a); (c) Failure on the part of the Servicer or the Seller duly to observe or perform in any material respect any other covenants or agreements of the Servicer or the Seller set forth in this Agreement (or, if OFL is the Servicer, the Purchase -68- Agreement), which failure (i) materially and adversely affects the rights of Certificateholders or Noteholders and (ii) continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer or the Seller by the Owner Trustee, the Indenture Trustee or any Certificateholder or Noteholder; (d) The occurrence of an Insolvency Event with respect to the Seller or the Servicer; (e) Any representation, warranty or statement of the Servicer or the Seller made in this Agreement or any certificate, report or other writing delivered pursuant hereto shall prove to be incorrect in any material respect as of the time when the same shall have been made (excluding, however, any representation or warranty set forth in Section 2.5(a)), and the incorrectness of such representation, warranty or statement has a material adverse effect on the Trust and, within 30 days after written notice thereof shall have been given to the Servicer or the Seller by the Owner Trustee, the Indenture Trustee or a Certificateholder or Noteholder, the circumstances or condition in respect of which such representation, warranty or statement was incorrect shall not have been eliminated or otherwise cured; or (f) An Event of Default under the Indenture shall have occurred. Section 8.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a Servicer Termination Event shall occur and be continuing, either the Indenture Trustee, the Owner Trustee, JPMD, by notice given in writing to the Servicer (and to the Indenture Trustee and the Owner Trustee if given by JPMD) may terminate all of the rights and obligations of the Servicer under this Agreement. On or after the receipt by the Servicer of such written notice, all authority, power, obligations and responsibilities of the Servicer under this Agreement, whether with respect to the Certificates, the Notes or the Trust Property or otherwise, shall be terminated and automatically shall pass to, be vested in and become obligations and responsibilities of the Backup Servicer (or such other successor Servicer appointed pursuant to Section 8.3(b)); PROVIDED, HOWEVER, that the successor Servicer shall have no liability with respect to any obligation which was required to be performed by the terminated Servicer prior to the date that the successor Servicer becomes the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer. The successor Servicer is authorized and empowered by this Agreement to execute and deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivables and the other Trust Property and related documents to show the Owner Trustee as lienholder or secured party on the related Lien Certificates, or otherwise. The terminated Servicer agrees to cooperate with the successor Servicer in effecting the termination of the responsibilities and rights of -69- the terminated Servicer under this Agreement, including, without limitation, the transfer to the successor Servicer for administration by it of all cash amounts that shall at the time be held by the terminated Servicer for deposit, or have been deposited by the terminated Servicer, in the Collection Account or thereafter received with respect to the Receivables and the delivery to the successor Servicer of all Receivable Files, Monthly Records and Collection Records and a computer tape in readable form as of the most recent Business Day containing all information necessary to enable the successor Servicer or a successor Servicer to service the Receivables and the other Trust Property. If requested by JPMD, the successor Servicer shall terminate the Lockbox Agreement and direct the Obligors to make all payments under the Receivables directly to the successor Servicer (in which event the successor Servicer shall process such payments in accordance with Section 3.2(e)), or to a lockbox established by the successor Servicer at the direction of JPMD, at the successor Servicer's expense. In addition to any other amounts that are then payable to the terminated Servicer under this Agreement, the terminated Servicer shall then be entitled to receive out of Available Funds reimbursements for any Outstanding Monthly Advances (in accordance with Section 4.4(d)) made during the period prior to the notice pursuant to this Section 8.2 which terminates the obligation and rights of the terminated Servicer under this Agreement. The Owner Trustee, the Indenture Trustee and the successor Servicer may set off and deduct any amounts owed by the terminated Servicer from any amounts payable to the terminated Servicer pursuant to the preceding sentence. The terminated Servicer shall grant the Owner Trustee, the Indenture Trustee, JPMD and the successor Servicer reasonable access to the terminated Servicer's premises at the terminated Servicer's expense. Section 8.3. APPOINTMENT OF SUCCESSOR. (a) On and after (i) the time the Servicer receives a notice of termination pursuant to Section 8.2 or (ii) the resignation of the Servicer pursuant to Section 7.5, the Backup Servicer (unless pursuant to Section 8.3(b) an alternate successor Servicer has been appointed) shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for in this Agreement, and shall be subject to all the responsibilities, restrictions, duties, liabilities and termination provisions relating thereto placed on the Servicer by the terms and provisions of this Agreement. The Owner Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. If a successor Servicer is acting as Servicer hereunder, it shall be subject to termination under Section 8.2 upon the occurrence of any Servicer Termination Event applicable to it as Servicer and shall serve from term to term as provided in Section 3.14. (b) If the Backup Servicer shall be legally unable or unwilling to act as Servicer, the Backup Servicer, the Indenture Trustee, JPMD or the Owner Trustee may petition a court of competent jurisdiction to appoint any Eligible Servicer as the successor to the Servicer. Pending appointment pursuant to the preceding sentence, the Backup Servicer shall act as successor Servicer unless it is legally unable to do so, in which event the outgoing Servicer shall continue to act as Servicer until a successor has been appointed and accepted such appointment. Subject to Section 7.5, no provision of this Agreement shall be construed as -70- relieving the Backup Servicer of its obligation to succeed as successor Servicer upon the termination of the Servicer pursuant to Section 8.2 or the resignation of the Servicer pursuant to Section 7.5. (c) Any successor Servicer shall be entitled to such compensation (whether payable out of the Collection Account or otherwise) as the Servicer would have been entitled to under the Agreement if the Servicer had not resigned or been terminated hereunder. If any successor Servicer is appointed as a result of the Backup Servicer's refusal (in contravention of the terms of this Agreement) to act as Servicer although it is legally able to do so, JPMD and such successor Servicer may agree on reasonable additional compensation to be paid to such successor Servicer by the Backup Servicer, which additional compensation shall be paid by the Backup Servicer in its individual capacity and solely out of its own funds. If any successor Servicer is appointed for any reason other than the Backup Servicer's refusal to act as Servicer although legally able to do so, JPMD and such successor Servicer may agree on additional compensation to be paid to such successor Servicer, which additional compensation shall be payable from Available Funds. If the Backup Servicer is the successor Servicer, the Backup Servicer shall be entitled to reimbursement, pursuant to Section 4.6(ii), of reasonable transition expenses, not in excess of $50,000, incurred in acting as successor Servicer. In addition, any successor Servicer shall be entitled to reimbursement from Available Funds of reasonable transition expenses incurred in acting as successor Servicer. Section 8.4. NOTIFICATION TO CERTIFICATEHOLDERS AND NOTEHOLDERS. Upon any termination of, or appointment of a successor to, the Servicer pursuant to this Article VIII, the Owner Trustee shall give prompt written notice thereof to Certificateholders at their respective addresses appearing in the Certificate Register and to each Rating Agency, and the Indenture Trustee shall give prompt written notice thereof to Noteholders at their respective addresses appearing in the Note Register. Section 8.5. WAIVER OF PAST DEFAULTS. A Note Majority or Certificate Majority may, on behalf of all Holders of Notes and Certificates, waive any default by the Servicer in the performance of its obligations hereunder and its consequences. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Termination Event arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon. -71- ARTICLE IX TERMINATION Section 9.1. OPTIONAL PURCHASE OF RECEIVABLES; LIQUIDATION OF TRUST ESTATE. (a) On each Determination Date with respect to a Distribution Date following the Distribution Date as of which the Aggregate Principal Balance is less than 10% of the Facility Limit, the Servicer and the Seller each shall have the option to purchase the corpus of the Trust; PROVIDED, HOWEVER, that the amount to be paid for such purchase (as set forth in the following sentence) shall be sufficient to pay the full amount of principal, premium, if any, and interest then due and payable on the Notes and the Certificates, together with any breakage payments (including amounts needed to fund the Commercial Paper Funding Account pursuant to the Note Purchase Agreement). To exercise such option, the Servicer or the Seller, as the case may be, shall pay the aggregate Purchase Amounts for the Receivables, plus the appraised value of any other property (including the right to receive any future recoveries) held as part of the Trust, such appraisal to be conducted by an appraiser acceptable to the Servicer and the Seller, and shall succeed to all interests in and to the Trust Property. The fees and expenses related to such appraisal shall be paid by the party exercising the option to purchase. The party exercising such option to repurchase shall deposit the aggregate Purchase Amounts for the Receivables and the amount of the appraised value of any other property held as part of the Trust into the Collection Account, and the Indenture Trustee shall distribute the amounts so deposited in accordance with Section 4.6. (b) Prior to a Recapitalization, the Seller may purchase the Trust Property and apply the proceeds of such purchase or purchases to redeem or pay in full Outstanding Notes and Certificates; PROVIDED, THAT, (1) the Seller shall have provided a written notice to the Servicer, the Indenture Trustee, the Owner Trustee, the Backup Servicer, JPMD and the Rating Agencies setting forth the Trust Property Liquidation Date at least 3 days prior to such proposed Trust Property Liquidation Date and stating whether such liquidation will be a final termination of the Trust; (2) the Seller shall pay at least one Business Day prior to the Trust Property Liquidation Date the aggregate Purchase Amounts for the Receivables, plus the appraised value of any other property (including the right to receive any future recoveries) held as part of the Trust, plus all breakage payments (including amounts needed to fund the Commercial Paper Funding Account pursuant to the Note Purchase Agreement) provided in the Note Purchase Agreement and the Certificate Purchase Agreement, and the Seller shall succeed to all interests in and to the Trust Property. Any such appraisal shall be conducted by an appraiser acceptable to the Seller and JPMD and the fees and expenses related thereto shall be paid by the Seller; -72- (3) the source of funds for the purchase of Trust Property specified in clause (2) above shall be fully disclosed to JPMD and shall be acceptable to JPMD; (4) each of the Seller and OFL shall provide an Officer's Certificate executed by its Chief Financial Officer or Treasurer stating that the Seller or OFL, as applicable, is not insolvent (within the meaning of the Bankruptcy Code) prior to and will not be insolvent (within the meaning of the Bankruptcy Code) subsequent to the purchase of Trust Property; (5) each of the Seller and OFL shall provide to JPMD such Opinions of Counsel as JPMD shall deem necessary and advisable in connection with the purchase of Trust Property; and (6) the proceeds from the purchase are sufficient to pay all the obligations required to be paid in clauses (i) through (vii) of Section 4.7. All proceeds from a sale of the Trust Property pursuant to this Section 9.1(b) shall be deposited in the Collection Account for distribution by the Indenture Trustee pursuant to Section 4.7 hereof. (c) Upon any sale of the assets of the Trust pursuant to Section 9.2 of the Trust Agreement, the Owner Trustee shall instruct the Indenture Trustee to deposit the proceeds from such sale after all payments and reserves therefrom have been made (the "Insolvency Proceeds") in the Collection Account. On the Distribution Date on which the Insolvency Proceeds are deposited in the Collection Account (or, if such proceeds are not so deposited on a Distribution Date, on the Distribution Date immediately following such deposit), the Owner Trustee shall instruct the Indenture Trustee to make the following deposits (after the application on such Distribution Date of the Available Funds) from the Insolvency Proceeds: (i) (A) to the Trust for payment of any taxes due and unpaid with respect to the Trust, to the extent such taxes have not been previously paid by OFL or by the Servicer pursuant to Section 3.8; (B) to the Servicer, the amount of Outstanding Monthly Advances for which the Servicer is entitled to be reimbursed pursuant to Section 4.4(d) and for which the Servicer has not previously been reimbursed pursuant to Section 4.8; (C) to the Owner Trustee, any accrued and unpaid fees of the Owner Trustee in accordance with the Trust Agreement and including amounts with respect to which the Administrator is entitled to be reimbursed pursuant to the Administration Agreement; (D) to the Indenture Trustee, any accrued and unpaid fees of the Indenture Trustee in accordance with the Indenture; (E) to any Lockbox Bank, Custodian, Backup Servicer or Administrator (including the Owner Trustee or Indenture Trustee if acting in any such additional capacity), any accrued and -73- unpaid fees (in each case, to the extent such Person has not previously received such amount from the Servicer or OFL); and (F) to the Servicer, the Basic Servicing Fee for the related Monthly Period, any Supplemental Servicing Fees for the related Monthly Period, and any amounts specified in Section 4.2(b), to the extent the Servicer has not reimbursed itself in respect of such amounts pursuant to Section 4.8; (ii) to the Note Distribution Account, any portion of the Noteholders' Interest Distributable Amount not otherwise deposited into the Note Distribution Account on such Distribution Date plus any breakage payments specified in the Note Purchase Agreement; (iii) to the Note Distribution Account, the outstanding principal balance of the Notes (after giving effect to the reduction in the outstanding principal balance of the Notes to result from the deposits otherwise made in the Note Distribution Account on such Distribution Date); (iv) to the Certificate Distribution Account, any portion of the Certificateholders' Interest Distributable Amount not otherwise deposited into the Certificate Distribution Account on such Distribution Date plus any breakage payments specified in the Certificate Purchase Agreement; and (v) to the Certificate Distribution Account, the Certificate Balance (after giving effect to the reduction in the Certificate Balance to result from the deposits otherwise made in the Certificate Distribution Account on such Distribution Date). Any Insolvency Proceeds remaining after the deposits described above shall be deposited into the Certificate Distribution Account. (d) Notice of any termination of the Trust shall be given by the Servicer to the Owner Trustee and the Indenture Trustee as soon as practicable after the Servicer has received notice thereof. ARTICLE X MISCELLANEOUS PROVISIONS Section 10.1. AMENDMENT. (a) This Agreement may be amended by the Seller, the Servicer and the Trust, with the prior written consent of the Indenture Trustee and JPMD (which consent shall not be unreasonably withheld) but without the consent of any of the Noteholders or Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any provisions in this Agreement or (iii) for the purpose of adding any provision to or changing in any manner or eliminating any provision of this Agreement or of modifying in -74- any manner the rights of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of the Noteholders or Certificateholders. (b) This Agreement may also be amended from time to time by the Seller, the Servicer and the Trust with the prior written consent of the Indenture Trustee and the Backup Servicer (which consent shall not be unreasonably withheld) and with the consent of a Certificate Majority and a Note Majority (which consent of any Holder of a Certificate or Note given pursuant to this Section or pursuant to any other provision of this Agreement shall be conclusive and binding on such Holder and on all future Holders of such Certificate or Note and of any Certificate or Note issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Certificate or Note) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the rights of the Holders of Certificates or Notes; PROVIDED, HOWEVER, that, subject to the provisions of Section 5.04 of the Indenture, no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions required to be made on any Certificate or Note or the Certificate Rate or Note Interest Rate, (b) amend any provisions of Section 4.6 in such a manner as to affect the priority of payment of interest, principal or premium to Noteholders or Certificateholders, or (c) reduce the aforesaid percentage required to consent to any such amendment or any waiver hereunder, without the consent of the Holders of all Certificates or Notes then outstanding. (c) Prior to the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Rating Agency. (d) Promptly after the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder and the Indenture Trustee. STP It shall not be necessary for the consent of Certificateholders or Noteholders pursuant to Section 10.1(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Certificateholders and Noteholders provided for in this Agreement) and of evidencing the authorization of the execution thereof by Certificateholders or Noteholders shall be subject to such reasonable requirements as the Owner Trustee or Indenture Trustee, as applicable, may prescribe, including the establishment of record dates. (f) Prior to the execution of any amendment to this Agreement, the Owner Trustee and the Backup Servicer shall be entitled to receive and rely upon an Opinion of Counsel -75- stating that the execution of such amendment is authorized or permitted by this Agreement, in addition to the Opinion of Counsel referred to in Section 10.2(i). The Owner Trustee and the Backup Servicer may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee's and the Backup Servicer's own rights, duties or immunities under this Agreement or otherwise. Section 10.2. PROTECTION OF TITLE TO TRUST PROPERTY. (a) The Servicer shall execute and file such financing statements and cause to be executed and filed such continuation and other statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Trust, the Owner Trustee and the Indenture Trustee in the Trust Property and in the proceeds thereof. The Servicer shall deliver (or cause to be delivered) to the Owner Trustee, the Indenture Trustee and JPMD file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. (b) Neither the Seller, the Servicer nor the Trust shall change its name, identity or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed by the Seller in accordance with paragraph (a) above seriously misleading within the meaning of Section 9-402(7) of the UCC, unless it shall have given the Owner Trustee, the Indenture Trustee and JPMD at least 60 days' prior written notice thereof, and shall promptly file appropriate amendments to all previously filed financing statements and continuation statements. (c) Each of the Seller, the Servicer and the Trust shall give the Owner Trustee, the Indenture Trustee and JPMD at least 60 days' prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement. The Servicer shall at all times maintain each office from which it services Receivables and its principal executive office within the United States of America. (d) The Servicer shall maintain accounts and records as to each Receivable accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status of such Receivable, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on (or with respect to) each Receivable and the amounts from time to time deposited in the Collection Account in respect of such Receivable. (e) The Servicer shall maintain its computer systems so that, from and after the time of sale under this Agreement of the Receivables to the Trust, the Servicer's master computer records (including any backup archives) that refer to any Receivable indicate clearly (with reference to the particular trust) that the Receivable is owned by the Trust. Indication of the Trust's ownership of a Receivable shall be deleted from or modified on 76 the Servicer's computer systems when, and only when, the Receivable has been paid in full or repurchased by the Seller or Servicer. (f) If at any time the Seller or the Servicer proposes to sell, grant a security interest in, or otherwise transfer any interest in automotive receivables to any prospective purchaser, lender or other transferee, the Servicer shall give to such prospective purchaser, lender or other transferee computer tapes, records or print-outs (including any restored from backup archives) that, if they refer in any manner whatsoever to any Receivable, indicate clearly that such Receivable has been sold and is owned by the Trust unless such Receivable has been paid in full or repurchased by the Seller or Servicer. (g) The Servicer shall permit the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and their respective agents, at any time to inspect, audit and make copies of and abstracts from the Servicer's records regarding any Receivables or any other portion of the Trust Property. (h) The Servicer shall furnish to the Owner Trustee, the Indenture Trustee, the Backup Servicer and JPMD at any time upon request a list of all Receivables then held as part of the Trust, together with a reconciliation of such list to the Schedule of Receivables and to each of the Servicer's Certificates furnished before such request indicating removal of Receivables from the Trust. Upon request, the Servicer shall furnish a copy of any list to the Seller. The Owner Trustee shall hold any such list and Schedule of Receivables for examination by interested parties during normal business hours at the Corporate Trust Office upon reasonable notice by such Persons of their desire to conduct an examination. (i) The Seller and the Servicer shall deliver to the Owner Trustee, the Indenture Trustee and JPMD simultaneously with the execution and delivery of this Agreement and of each amendment thereto and upon the occurrence of the events giving rise to an obligation to give notice pursuant to Section 10.2(b) or (c), an Opinion of Counsel either (a) stating that, in the opinion of such Counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Owner Trustee and the Indenture Trustee in the Receivables and the other Trust Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (b) stating that, in the opinion of such counsel, no such action is necessary to preserve and protect such interest. (j) The Servicer shall deliver to the Owner Trustee, the Indenture Trustee and JPMD, within 90 days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the Closing Date, an Opinion of Counsel, either (a) stating that, in the opinion of such counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Trust and the Indenture Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such 77 details are given, or (b) stating that, in the opinion of such counsel, no action shall be necessary to preserve and protect such interest. Section 10.3. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles of conflicts of laws thereof and the obligations, rights and remedies of the parties under this Agreement shall be determined in accordance with such laws. Section 10.4. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the Notes or the respective rights of the Holders thereof. Section 10.5. ASSIGNMENT. Notwithstanding anything to the contrary contained in this Agreement, except as provided in Section 7.2 or Section 8.2 (and as provided in the provisions of the Agreement concerning the resignation of the Servicer and the Backup Servicer), this Agreement may not be assigned by the Seller or the Servicer without the prior written consent of the Owner Trustee, the Indenture Trustee, the Backup Servicer, JPMD and a Certificate Majority (which consent, in the case of the Owner Trustee or the Indenture Trustee, shall not be unreasonably withheld). Section 10.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. JPMD and its successors and assigns shall be a third-party beneficiary to the provisions of this Agreement, and shall be entitled to rely upon and directly to enforce such provisions of this Agreement. Nothing in this Agreement, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 10.7. [RESERVED]. Section 10.8. COUNTERPARTS. For the purpose of facilitating its execution and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 10.9. INTENTION OF PARTIES. (a) The execution and delivery of this Agreement and each Transfer Agreement shall constitute an acknowledgement by the Seller, that it is intended that the assignment and transfer contemplated herein and therein constitute a sale and assignment outright, and not for security, of the Receivables and the other Trust Property, conveying good title thereto free and clear of any Liens, from the 78 Seller to the Trust, and that the Receivables and the other Trust Property shall not be a part of the Seller's estate in the event of the insolvency, receivership, conservatorship or the occurrence of another similar event, of, or with respect to, the Seller. In the event that any such conveyance is determined to be made as security for a loan made by the Trust or the Certificateholders to the Seller, the Seller intends that it shall have granted to the Owner Trustee a first priority security interest in all of the Seller's right, title and interest in and to the Trust Property conveyed to the Trust pursuant to Section 2.1 of this Agreement, and that this Agreement shall constitute a security agreement under applicable law. (b) The execution and delivery of this Agreement shall constitute an acknowledgement by the Seller and the Owner Trustee on behalf of the Certificateholders that they intend that the Certificates will qualify as indebtedness, and that the Trust will be treated as a security device, for federal income tax purposes. The Seller and the Owner Trustee on behalf of the Certificateholders further acknowledge that they intend, in the event that the Certificates are deemed for federal income tax purposes to represent equity interests in the Trust, that the Trust will be treated for federal income tax purposes as a partnership, rather than an association taxable as a corporation. The powers granted and obligations undertaken in this Agreement shall be construed so as to further such intent. Section 10.10. NOTICES. All demands, notices and communications under this Agreement shall be in writing, personally delivered or mailed by certified mail-return receipt requested, and shall be deemed to have been duly given upon receipt (a) in the case of OFL, the Seller or the Servicer, at the following address: Olympic Receivables Finance Corp. II, 7825 Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435, with copies to: Olympic Financial Ltd., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention: John A. Witham, (b) in the case of the Owner Trustee, at the Corporate Trust Office, (c) in the case of the Indenture Trustee and, for so long as the Indenture Trustee is the Backup Servicer, at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust Department, (d) in the case of each Rating Agency, 99 Church Street, New York, New York 10007 (for Moody's) and 26 Broadway, New York, New York 10004 (for Standard & Poor's), Attention: Asset-Backed Surveillance, (e) in the case of JPMD, J.P. Morgan Delaware, 902 Market Street, Wilmington, Delaware 19801, Attention: Asset Finance Group, and (f) any notice required or permitted to be mailed to a Certificateholder or a Noteholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Certificate Register or the Note Register (as the case may be), and any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder or the Noteholder receives such notice. Section 10.11. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee of the Trust under the Trust Agreement, in the exercise of the powers and authority conferred and vested in 79 it, (b) each of the representations, undertakings and agreements herein made on the part of the Trust is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Trust, (c) nothing herein contained shall be construed as creating any liability on Wilmington Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties to this Agreement and by any person claiming by, through or under them and (d) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Agreement or any related documents. 80 IN WITNESS WHEREOF, the Issuer, the Seller, OFL, the Servicer and the Backup Servicer have caused this Sale and Servicing Agreement to be duly executed by their respective officers as of the day and year first above written. ISSUER: OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By /s/ Emmett R. Harmon ---------------------------------------- Name: Emmett R. Harmon Title: Vice President SELLER: OLYMPIC RECEIVABLES FINANCE CORP. II By /s/ John A. Witham ---------------------------------------- Name: John A. Witham Title: Senior Vice President and Chief Financial Officer OLYMPIC FINANCIAL LTD., in its individual capacity and as Servicer By /s/ John A. Witham ---------------------------------------- Name: John A. Witham Title: Senior Vice President and Chief Financial Officer BACKUP SERVICER: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION By /s/ Robert N. Guimont ---------------------------- Name: Robert N. Guimont Title: Assistant Vice President Acknowledged and Accepted: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee By /s/ Robert N. Guimont ------------------------------ Name: Robert N. Guimont Title: Assistant Vice President SCHEDULE A SCHEDULE OF RECEIVABLES [Deemed Incorporated From Each Transfer Agreement] SCHEDULE B REPRESENTATIONS AND WARRANTIES OF SELLER AND OFL .1 CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary course of such Dealer's business and such Dealer had all necessary licenses and permits to originate Receivables in the state where such Dealer was located, was fully and properly executed by the parties thereto, was purchased by OFL from such Dealer under an existing Dealer Agreement with OFL and was validly assigned by such Dealer to OFL, (B) contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for realization against the collateral security, and (C) is fully amortizing and provides for level monthly payments (provided that the payment in the first Monthly Period and the final Monthly Period of the life of the Receivable may be minimally different from the level payment) which, if made when due, shall fully amortize the Amount Financed over the original term. .2 NO FRAUD OR MISREPRESENTATION. Each Receivable was originated by a Dealer and was sold by the Dealer to OFL without any fraud or misrepresentation on the part of such Dealer in either case. .3 COMPLIANCE WITH LAW. All requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor Vehicle Retail Installment Sales Act, and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and other consumer credit laws and equal credit opportunity and disclosure laws) in respect of all of the Receivables and each and every sale of Financed Vehicles, have been complied with in all material respects, and each Receivable and the sale of the Financed Vehicle evidenced by each Receivable complied at the time it was originated or made and now complies in all material respects with all applicable legal requirements. .4 ORIGINATION. Each Receivable is a United States dollar obligation of an Obligor domiciled in the United States and such Receivable was originated in the United States. .5 BINDING OBLIGATION. Each Receivable represents the genuine, legal, valid and binding payment obligation of the Obligor thereon, enforceable by the holder thereof in accordance with its terms, except (A) as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law and (B) as such Receivable may 1 be modified by the application after the related Cutoff Date of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties to each Receivable had full legal capacity to execute and deliver such Receivable and all other documents related thereto and to grant the security interest purported to be granted thereby. .6 NO GOVERNMENT OBLIGOR. No Obligor is the United States of America or any State or any agency, department, subdivision or instrumentality thereof. .7 OBLIGOR BANKRUPTCY. At the applicable Cutoff Date, no Obligor had been identified on the records of OFL as being, and, to the best of the Seller's knowledge, no Obligor is the subject of a current bankruptcy proceeding. .8 SCHEDULE OF RECEIVABLES. The information set forth in the Schedule of Receivables has been produced from the Electronic Ledger and was true and correct in all material respects as of the close of business on the applicable Cutoff Date. .9 MARKING RECORDS. By the Closing Date or by each Transfer Date, as applicable, the Seller will have caused the portions of the Electronic Ledger relating to the Receivables to be clearly and unambiguously marked to show that the Receivables constitute part of the Trust Property and are owned by the Trust in accordance with the terms of this Agreement. .10 MONTHLY TAPE. The Monthly Tape made available by the Seller to the Backup Servicer and the Indenture Trustee was complete and accurate in all respects as of the date delivered, and includes a description of the same Receivables that are described in the Schedule of Receivables. .11 ADVERSE SELECTION. No selection procedures adverse to the Noteholders or the Certificateholders were utilized in selecting the Receivables from those receivables owned by OFL which met the selection criteria contained in this Agreement. .12 CHATTEL PAPER. The Receivables constitute chattel paper within the meaning of the UCC as in effect in the States of Minnesota and New York. .13 ONE ORIGINAL. There is only one original executed copy of each Receivable. .14 RECEIVABLE FILES COMPLETE. The complete Receivable File (other than item (iv) in Section 2.2 of this Agreement) is in the possession of OFL at its corporate office. The complete Receivable File for each Receivable will be in the possession of the Custodian within ten Business Days after the conveyance of the Receivable from OFL to the Seller and from the Seller to the Trust. By such date, there will exist a Receivable File pertaining to each Receivable and such Receivable File contains (a) a fully executed original of the Receivable, (b) a certificate of insurance, application form for insurance signed by the Obligor, or a signed representation letter 2 from the Obligor named in the Receivable pursuant to which the Obligor has agreed to obtain physical damage insurance for the related Financed Vehicle, or copies thereof, or a documented verbal confirmation by an insurance agent for the Obligor of a policy number for an insurance policy for the Financed Vehicle, (c) the original Lien Certificate or application therefor or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by OFL within 180 days, and (d) a credit application signed by the Obligor, or a copy thereof. Each of such documents which is required to be signed by the Obligor has been signed by the Obligor in the appropriate spaces. All blanks on any form have been properly filled in and each form has otherwise been correctly prepared. The complete Receivable File for each Receivable currently is in the possession of the Custodian. .15 RECEIVABLES IN FORCE. No Receivable has been satisfied, subordinated or rescinded, and the Financed Vehicle securing each such Receivable has not been released from the lien of the related Receivable in whole or in part. No provisions of any Receivable have been waived, altered or modified in any respect since its origination, except by instruments or documents identified in the Receivable File. No Receivable has been modified as a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. .16 LAWFUL ASSIGNMENT. No Receivable was originated in, or is subject to the laws of, any jurisdiction the laws of which would make unlawful, void or voidable the sale, transfer and assignment of such Receivable under this Agreement or pursuant to transfers of the Notes or the Certificates. With respect to such sale, transfer and assignment of such Receivable under this Agreement or pursuant to transfers of the Notes or the Certificates, either (1) no consent is required or (2) all required consents have been obtained. .17 GOOD TITLE. No Receivable has been sold, transferred, assigned or pledged by OFL to any Person other than the Seller or by the Seller to any Person other than the Trust; immediately prior to the conveyance of the Receivables pursuant to the Purchase Agreement or any Assignment Agreement, OFL was the sole owner of and had good and indefeasible title thereto, free and clear of any Lien; immediately prior to the conveyance of the Receivables to the Trust pursuant to this Agreement or any Transfer Agreement, as applicable, the Seller was the sole owner thereof and had good and indefeasible title thereto, free of any Lien and, upon execution and delivery of this Agreement or any Transfer Agreement, as applicable, by the Seller, the Trust shall have good and indefeasible title to and will be the sole owner of such Receivables, free of any Lien. No Dealer has a participation in, or other right to receive, proceeds of any Receivable. Neither OFL nor the Seller has taken any action to convey any right to any Person that would result in such Person having a right to payments received under the related Insurance Policies or the related Dealer Agreements or Dealer Assignments or to payments due under such Receivables. .18 SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable created or shall create a valid, binding and enforceable first priority security interest in favor of OFL in the Financed 3 Vehicle. The Lien Certificate and original certificate of title for each Financed Vehicle show, or if a new or replacement Lien Certificate is being applied for with respect to such Financed Vehicle the Lien Certificate will be received within 180 days of the Closing Date or any Transfer Date, as applicable, and will show OFL named as the original secured party under each Receivable as the holder of a first priority security interest in such Financed Vehicle. With respect to each Receivable for which the Lien Certificate has not yet been returned from the Registrar of Titles, OFL has received written evidence from the related Dealer that such Lien Certificate showing OFL as first lienholder has been applied for or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by OFL within 180 days. OFL's security interest has been validly assigned by OFL to the Seller, by the Seller to the Owner Trustee pursuant to this Agreement or any Transfer Agreement, as applicable, and by the Trust to the Indenture Trustee pursuant to the Indenture. Immediately after the sale, transfer and assignment thereof to the Trust, each Receivable will be secured by an enforceable and perfected first priority security interest in the Financed Vehicle in favor of the Trust as secured party, which security interest is prior to all other liens upon and security interests in such Financed Vehicle which now exist or may hereafter arise or be created (except, as to priority, for any lien for taxes, labor or materials affecting a Financed Vehicle). As of each Cutoff Date, there were no Liens or claims for taxes, work, labor or materials affecting a Financed Vehicle which are or may be Liens prior or equal to the lien of the related Receivable. .19 ALL FILINGS MADE. All filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Trust a first priority perfected lien on, or ownership interest in, the Receivables and the proceeds thereof and the other Trust Property have been made, taken or performed. .20 NO IMPAIRMENT. Neither OFL nor the Seller has done anything to convey any right to any Person that would result in such Person having a right to payments due under the Receivable or otherwise to impair the rights of the Trust, the Indenture Trustee, JPMD, the Noteholders and the Certificateholders in any Receivable or the proceeds thereof. .21 RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations to the Seller with respect to such Receivable. .22 NO DEFENSES. No Receivable is subject to any right of rescission, setoff, counterclaim or defense and no such right has been asserted or threatened with respect to any Receivable. .23 NO DEFAULT. There has been no default, breach, violation or event permitting acceleration under the terms of any Receivable (other than payment delinquencies of not more than 30 days), and no condition exists or event has occurred and is continuing that with notice, 4 the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable, and there has been no waiver of any of the foregoing. As of any Cutoff Date or any Transfer Date, as applicable, no Financed Vehicle had been repossessed. .24 INSURANCE. As of the Closing Date or as of any Transfer Date, as applicable, each Financed Vehicle is covered by a comprehensive and collision insurance policy (i) in an amount at least equal to the lesser of (a) its maximum insurable value or (b) the principal amount due from the Obligor under the related Receivable, (ii) naming OFL as loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage. Each Receivable requires the Obligor to maintain physical loss and damage insurance, naming OFL and its successors and assigns as additional insured parties, and each Receivable permits the holder thereof to obtain physical loss and damage insurance at the expense of the Obligor if the Obligor fails to do so. No Financed Vehicle was or had previously been insured under a policy of Force-Placed Insurance on the related Cutoff Date. .25 PAST DUE. As of the related Cutoff Date, no Receivable was more than 30 days past due and no funds have been advanced by the Seller, the Servicer, any Dealer, or anyone acting on behalf of any of them in order to cause any Receivable to qualify under this representation. .26 REMAINING PRINCIPAL BALANCE. As of the related Cutoff Date, each Receivable had a remaining principal balance equal to or greater than $500.00, and the Principal Balance of each Receivable set forth in the Schedule of Receivables is true and accurate in all material respects. .27 MATURITY. Each Receivable has an original maturity of at least three months. .28 CERTAIN CHARACTERISTICS. (A) No Receivable has an initial payment date more than three months subsequent to the related Cutoff Date; (B) No Receivable has a final scheduled payment date on or before the related Transfer Date; (C) The Principal Balance of each Receivable set forth in Schedule of Receivables is true and accurate in all material respects as of the related Cutoff Date; and (D) after giving effect to the conveyance of Receivables on each Transfer Date, (i) the aggregate of the Principal Balances of Receivables with original maturities ranging from 72 to 84 months shall not exceed 7.5% of the aggregate of the Principal Balances of all Receivables on such Transfer Date, and (ii) the aggregate of the Principal Balances of Receivables attributable to loans originated under OFL's "Classic" program shall not exceed 40% of the aggregate of the Principal Balances of all Receivables on such Transfer Date. .29 PAYMENTS TO LOCKBOX BANK. The Obligor with respect to each Receivable, as of the related Transfer Date, is required to make all Scheduled Payments to the Lockbox Bank. 5 SCHEDULE C SERVICING POLICIES AND PROCEDURES EXHIBIT B FORM OF CUSTODIAN AGREEMENT EXHIBIT D FORM OF PURCHASE AGREEMENT EXHIBIT E FORM OF SERVICER'S CERTIFICATE EXHIBIT F FORM OF TRANSFER AGREEMENT TRANSFER AGREEMENT, dated as of _________________ 199__, among Olympic Automobile Receivables Warehouse Trust, a Delaware business trust (the "Trust"), Olympic Receivables Finance Corp. II, a Delaware corporation (the "Seller"), and Olympic Financial Ltd., a Minnesota corporation (the "Servicer"), pursuant to the Sale and Servicing Agreement referred to below. W I T N E S S E T H: WHEREAS, the Trust, the Seller and the Servicer are parties to the Sale and Servicing Agreement, dated as of December 28, 1995 (hereinafter as such agreement may have been, or may from time to time be, amended, supplemented or otherwise modified, the "Sale and Servicing Agreement"); WHEREAS, pursuant to the Sale and Servicing Agreement, the Seller wishes to convey Receivables and certain related property to the Trust; and WHEREAS, the Trust is willing to accept such conveyance subject to the terms and conditions hereof and of the Sale and Servicing Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Trust, the Seller and the Servicer hereby agree as follows: II DEFINED TERMS. Capitalized terms used herein shall have the meanings ascribed to them in the Sale and Servicing Agreement unless otherwise defined herein. "CUTOFF DATE" shall mean, with respect to the Receivables conveyed hereby, __________, 199__. "TRANSFER DATE" shall mean, with respect to the Receivables conveyed hereby, __________, 199__. III SCHEDULE OF RECEIVABLES. The Schedule of Receivables attached hereto as Exhibit A is a supplement to the Schedule of Receivables attached as Schedule A to the Sale and Servicing Agreement. The Receivables listed in the Schedule of Receivables constitute the Receivables to be conveyed pursuant to this Agreement on the Transfer Date. IV CONVEYANCE OF RECEIVABLES. Subject to the conditions specified in Section 2.1(b) of the Sale and Servicing Agreement and in consideration of the Trust's delivery to or upon the order of the Seller of the Purchase Price, the Seller does hereby sell, transfer, assign, and otherwise convey to the Trust, without recourse (but without limitation of its obligations in the Sale and Servicing Agreement, the Purchase Agreement and this Agreement), all of the right, title and interest of the Seller, whether now existing or hereafter acquired, in and to the Receivables listed on Schedule A hereto and the related Other Conveyed Property, an assignment of the rights of the Seller under the Purchase Agreement, all funds on deposit from time to time in the Trust Accounts and all investments therein and proceeds thereof, and all proceeds of the foregoing. OFL and the Seller acknowledge that such Receivables have previously been sold, transferred, assigned and conveyed to the Seller pursuant to one or more Assignment Agreements pursuant to the Purchase Agreement, and OFL hereby confirms such prior sale, transfer, assignment and conveyance. V REQUIRED INFORMATION. .1 Aggregate Principal Balance of Receivables to be transferred: $________________. .2 Purchase Price for Receivables: $_________________. .3 Facility Balance after giving effect to the conveyance contemplated hereby: $_________________. VI INCORPORATION OF SALE AND SERVICING AGREEMENT. This Transfer Agreement is made pursuant to and upon the representations, warranties and agreements on the part of OFL and the Seller contained in the Sale and Servicing Agreement and shall be governed in all respects by the Sale and Servicing Agreement. VII RATIFICATION OF SALE AND SERVICING AGREEMENT. As supplemented by this Agreement, the Sale and Servicing Agreement is in all respects ratified and confirmed and the Sale and Servicing Agreement as so supplemented by this Agreement shall be read, taken and construed as one and the same instrument. VII COUNTERPARTS. This Agreement may be executed in two or more counterparts (and by different parties in separate counterparts), each of which shall be an original but all of which together shall constitute one and the same instrument. F-2 IX GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. IN WITNESS WHEREOF, the Trust, the Seller and the Servicer have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the day and the year first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By ------------------------------------------ Name: Title: OLYMPIC RECEIVABLES FINANCE CORP. II By ------------------------------------------ Name: Title: OLYMPIC FINANCIAL LTD. By ------------------------------------------ Name: Title: F-3 EX-10.14 17 AMENDMENT DATED JUNE 12, 1996 TO S&S AGREEMENT EXECUTION COPY AMENDMENT Dated as of June 12, 1996 to SALE AND SERVICING AGREEMENT Dated as of December 28, 1995 among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST Issuer OLYMPIC RECEIVABLES FINANCE CORP. II Seller OLYMPIC FINANCIAL LTD. In its individual capacity and as Servicer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Backup Servicer TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS ARTICLE II AMENDMENT SECTION 2.1. Amendment to Section 1.1 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.2. Amendment to Section 2.1 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.3. Amendment to Section 4.1 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.4. Amendment to Section 4.6 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.5. Amendment to Section 5.1 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.6. Amendment to Section 10.10 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.7. Amendment to Schedule B of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE III MISCELLANEOUS SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . . 4 SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 3.4. Sale and Servicing Agreement in Full Force and Effect as Amended . . . . . . . . . . . . . . . . . . . . 4 -i- AMENDMENT dated as of June 12, 1996 (the "AMENDMENT") to SALE AND SERVICING AGREEMENT dated as of December 28, 1995 (the "SALE AND SERVICING AGREEMENT"), among Olympic Automobile Receivables Warehouse Trust (the "ISSUER"), Olympic Receivables Finance Corp. II, a Delaware corporation, as Seller (the "SELLER"), Olympic Financial Ltd., a Minnesota corporation, in its individual capacity and as Servicer, (the "SERVICER") and Norwest Bank Minnesota, National Association, a national banking association, as Backup Servicer (the "BACKUP SERVICER"). WHEREAS, the Issuer, the Seller, the Servicer and the Backup Servicer have entered into the Sale and Servicing Agreement; WHEREAS, pursuant to Section 10.1(b) of the Sale and Servicing Agreement, the Issuer, the Seller and the Servicer desire to amend the Sale and Servicing Agreement in certain respects as provided below; WHEREAS, each of the Indenture Trustee, the Backup Servicer, a Certificate Majority and a Note Majority has consented to this Amendment as required by Section 10.1(b) of the Sale and Servicing Agreement; WHEREAS, it is the intent of the parties that this Amendment be effective as of the date set forth above (the "EFFECTIVENESS DATE"); NOW, THEREFORE, the parties to this Amendment hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined herein or the context otherwise requires, defined terms used herein shall have the meanings ascribed thereto in the Sale and Servicing Agreement. ARTICLE II AMENDMENT SECTION 2.1. AMENDMENT TO SECTION 1.1 OF THE SALE AND SERVICING AGREEMENT. (a) Clause (i) of the definition of "DEEMED CURED" in Section 1.1 of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: (i) As of any Determination Date and with respect to a Trigger Event, no Trigger Event has occurred and is continuing as of such Determination Date or as of any of the two consecutively preceding Determination Dates for related Monthly Periods during which there were Receivables in the Trust; (b) Clause (g) of the definition of "ELIGIBLE INVESTMENTS" in Section 1.1 of the Sale and Servicing Agreement is hereby amended by adding the following immediately after the word "investment": "(including, without limitation, a hedging arrangement)" (c) The definition of "FACILITY LIMIT" in Section 1.1 of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: FACILITY LIMIT: $329,700,000. (d) The definition of "JPMD" in Section 1.1 of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: JPMD: Morgan Guaranty Trust Company of New York, in its capacity as Administrative Agent for DFC and the purchasers under the DFC Asset Purchase Agreement and as agent for the banks under the Program Facility, or as agent for the Investor Group. (e) The definition of "MAXIMUM PRINCIPAL BALANCE" in Section 1.1 of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: MAXIMUM PRINCIPAL BALANCE: With respect to the Notes, $300,000,000 (excluding capitalized interest thereon). (f) The definition of "TRIGGER EVENT" in Section 1.1 of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: TRIGGER EVENT: As of any Determination Date, (i) if the Net Excess Spread Percentage shall be less than 5.0% but equal to or greater than 4.0%; (ii) if the Net Excess Spread Percentage shall be less than 4.0% but equal to or greater than 3.0%; and (iii) if the Net Excess Spread Percentage shall be less than 3.0%. (g) Section 1.1. of the Sale and Servicing Agreement is hereby further amended by adding the following defined terms and definitions: MAXIMUM PROGRAM SIZE: The sum of (i) the Maximum Principal Balance PLUS (ii) the Maximum Certificate Balance. REQUISITE AMOUNT: As of any Determination Date, (i) if no Trigger Event shall have occurred, and all previous Trigger Events shall have been Deemed Cured, zero; and (ii) if a Trigger Event shall have occurred (and until such Trigger Event shall have been Deemed -2- Cured), (x) if such Trigger Event is of the type described in clause (i) of the definition thereof, 1.0% of the Maximum Program Size, (y) if such Trigger Event is of the type described in clause (ii) of the definition thereof, 2.0% of the Maximum Program Size, and (z) if such Trigger Event is of the type described in clause (iii) of the definition thereof, an unlimited amount. SPREAD ACCOUNT AVAILABLE AMOUNT: An amount equal to 75% of all amounts deposited into the Spread Account after the occurrence of a Trigger Event of the type described in clause (iii) of the definition thereof and until such Trigger Event of the type described in clause (iii) of the definition thereof is Deemed Cured. SECTION 2.2. AMENDMENT TO SECTION 2.1 OF THE SALE AND SERVICING AGREEMENT. (a) Section 2.1(b)(1)(viii) of the Sale and Servicing Agreement is hereby amended by deleting the number "72" and substituting therefor "73." SECTION 2.3. AMENDMENT TO SECTION 4.1 OF THE SALE AND SERVICING AGREEMENT. Section 4.1(e) of the Sale and Servicing Agreement is hereby amended by adding the words ";PROVIDED HOWEVER, that amounts on deposit in the Spread Account up to an amount equal to the Spread Account Available Amount may be used to establish a hedging arrangement with a longer term in accordance with clause (g) of the definition of Eligible Investments" following the end of the first sentence of such Section. SECTION 2.4. AMENDMENT TO SECTION 4.6 OF THE SALE AND SERVICING AGREEMENT. Section 4.6(viii)(A) of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: (A) if (i) a Trigger Event shall have occurred or (ii) any previous Trigger Event has not been Deemed Cured and in either case OFL is no longer required to maintain any hedging arrangement in accordance with Section 2.1(b)(1)(xiv) hereof, an amount equal to the lesser of (x) all remaining Available Funds and (y) the excess, if any, of the Requisite Amount as of the immediately preceding Determination Date over the amount on deposit in the Spread Account as of such date, shall be deposited into the Spread Account; SECTION 2.5. AMENDMENT TO SECTION 5.1 OF THE SALE AND SERVICING AGREEMENT. Section 5.1 of the Sale and Servicing Agreement is hereby amended by adding the following subsection (c) immediately following Section 5.1(b): (c) If a Trigger Event of the type described in clause (i) or clause (ii) of the definition thereof shall have occurred and subsequently be Deemed Cured (so long as no Trigger Event of the type described in clause (iii) of the definition thereof shall have occurred upon or after the occurrence of such Trigger Event and on or prior to the Distribution Date described below), then, on the Distribution Date immediately following the Determination Date on which such Trigger Event shall be Deemed -3- Cured, all amounts on deposit in the Spread Account in respect of amounts deposited therein pursuant to SECTION 4.6(VIII) as a result of the occurrence of such Trigger Event (after making all distributions required pursuant to SECTIONS 4.6(I) - (VII) on such Distribution Date) shall be distributed to the Seller. SECTION 2.6. AMENDMENT TO SECTION 10.10 OF THE SALE AND SERVICING AGREEMENT. Section 10.10 of the Sale and Servicing Agreement is hereby amended by deleting the words "902 Market Street, Wilmington, Delaware 19801" and substituting therefor "500 Stanton Christiana Road, Newark, Delaware 19713- 2107." SECTION 2.7. AMENDMENT TO SCHEDULE B OF THE SALE AND SERVICING AGREEMENT. Clause (D)(i) of Paragraph 28 of Schedule B to the Sale and Servicing Agreement is hereby amended by deleting the number "72" and substituting therefor "73." ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when the Servicer shall have received (a) counterparts hereof executed on behalf of the Issuer, the Seller and the Servicer, (b) the consents of the Backup Servicer, the Indenture Trustee and JPMD, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, the sole Noteholder, to the terms of this Amendment and (c) evidence of written notice to S&P and Moody's of this Amendment. SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Amendment and the Sale and Servicing Agreement (and all exhibits, annexes and schedules thereto) constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 3.3. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof or thereof. SECTION 3.4. SALE AND SERVICING AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically stated herein, all of the terms and conditions of the Sale and Servicing Agreement shall remain in full force and effect. All references to the Sale and Servicing Agreement in any other document or instrument shall be deemed to mean the Sale and Servicing Agreement, as amended by this Amendment. This Amendment shall not constitute -4- a novation of the Sale and Servicing Agreement, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Sale and Servicing Agreement, as amended by this Amendment, as though the terms and obligations of the Sale and Servicing Agreement were set forth herein. -5- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers, all as of the date and year first above written. ISSUER: OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: __________________________________ Name: Title: SELLER: OLYMPIC RECEIVABLES FINANCE CORP. II By: __________________________________ Name: Title: SERVICER: OLYMPIC FINANCIAL LTD., in its individual capacity and as Servicer By: __________________________________ Name: Title: -6- AGREED AND CONSENTED: BACKUP SERVICER: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Backup Servicer By: __________________________________ Name: Title: INDENTURE TRUSTEE: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee By: __________________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, as sole Noteholder By: __________________________________ Name: Title: -7- EX-10.15 18 AMENDMENT NO 2 TO S&S AGREEMENT EXECUTION COPY - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- AMENDMENT NO. 2 Dated as of September 30, 1996 to SALE AND SERVICING AGREEMENT Dated as of December 28, 1995 among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST Issuer OLYMPIC RECEIVABLES FINANCE CORP. II Seller OLYMPIC FINANCIAL LTD. In its individual capacity and as Servicer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Backup Servicer - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS ARTICLE II AMENDMENT SECTION 2.1. Amendment to Section 1.1 of the Sale and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.2. Amendment to Section 2.1 of the Sale and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.3. Amendment to Section 4.1 of the Sale and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.4. Amendment to Section 4.6 of the Sale and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.5. Amendment to Section 5.1 of the Sale and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.6. Amendment to Section 9.1 of the Sale and Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE III MISCELLANEOUS SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . . 5 SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.4. Sale and Servicing Agreement in Full Force and Effect as Amended. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 i AMENDMENT NO. 2 dated as of September 30, 1996 (the "AMENDMENT") to SALE AND SERVICING AGREEMENT dated as of December 28, 1995 and amended as of June 12, 1996 (as amended, the "SALE AND SERVICING AGREEMENT"), among Olympic Automobile Receivables Warehouse Trust (the "ISSUER"), Olympic Receivables Finance Corp. II, a Delaware corporation, as Seller (the "SELLER"), Olympic Financial Ltd., a Minnesota corporation, in its individual capacity and as Servicer, (the "SERVICER") and Norwest Bank Minnesota, National Association, a national banking association, as Backup Servicer (the "BACKUP SERVICER"). WHEREAS, the Issuer, the Seller, the Servicer and the Backup Servicer have entered into the Sale and Servicing Agreement; WHEREAS, pursuant to Section 10.1(b) of the Sale and Servicing Agreement, the Issuer, the Seller and the Servicer desire to amend the Sale and Servicing Agreement in certain respects as provided below; WHEREAS, each of the Indenture Trustee, the Backup Servicer, a Certificate Majority and a Note Majority has consented to this Amendment as required by Section 10.1(b) of the Sale and Servicing Agreement; WHEREAS, it is the intent of the parties that this Amendment be effective as of the date set forth above (the "EFFECTIVENESS DATE"); NOW, THEREFORE, the parties to this Amendment hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined herein or the context otherwise requires, defined terms used herein shall have the meanings ascribed thereto in the Sale and Servicing Agreement. ARTICLE II AMENDMENT SECTION 2.1. AMENDMENT TO SECTION 1.1 OF THE SALE AND SERVICING AGREEMENT. (a) The definition of "COLLECTED FUNDS" in Section 1.1 of the Sale and Servicing Agreement is hereby amended by adding the following at the end of such definition: "and any payments under, or proceeds from, any Eligible Interest Rate Cap Agreement maintained pursuant to SECTION 2.1(B)(1)(XIV)." (b) The definition of "NET EXCESS SPREAD PERCENTAGE" in Section 1.1 of the Sale and Servicing Agreement is hereby amended (i) by deleting the words "hedging arrangements" in the parenthetical phrase immediately following the word "Receivables" and inserting in their place the words "Eligible Interest Rate Cap Agreement" and (ii) by inserting the symbol ")" immediately after the words "Section 2.1(b)(xiv)." (c) The definition of "NET LOSS RATE" in Section 1.1 of the Sale and Servicing Agreement is hereby amended (i) by inserting the words "the annualized total of the difference between" immediately following the words "the numerator of which is equal to" and (ii) by deleting the word "less" and inserting in its place the word "MINUS." (d) The definition of "REQUISITE AMOUNT" in Section 1.1 of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: REQUISITE AMOUNT: As of any Determination Date, (i) if no Trigger Event shall have occurred, and all previous Trigger Events shall have been Deemed Cured, 1.0% of the sum of the Note Balance on such Determination Date PLUS the Certificate Balance on such Determination Date; and (ii) if a Trigger Event shall have occurred (and until such Trigger Event shall have been Deemed Cured), (x) if such Trigger Event is of the type described in clause (i) of the definition thereof, 1.0% of the Maximum Program Size PLUS 1.0% of the sum of the Note Balance on such Determination Date PLUS the Certificate Balance on such Determination Date, (y) if such Trigger Event is of the type described in clause (ii) of the definition thereof, 2.0% of the Maximum Program Size PLUS 1.0% of the sum of the Note Balance on such Determination Date PLUS the Certificate Balance on such Determination Date, and (z) if such Trigger Event is of the type described in clause (iii) of the definition thereof, an unlimited amount. (e) Section 1.1 of the Sale and Servicing Agreement is hereby further amended by deleting the following defined terms and the corresponding definitions: EXCESS YIELD CONDITION, EXCESS YIELD PERCENTAGE and SPREAD ACCOUNT AVAILABLE AMOUNT. (f) Section 1.1. of the Sale and Servicing Agreement is hereby further amended by adding the following defined terms and definitions: ELIGIBLE INTEREST RATE CAP AGREEMENT: An interest rate cap agreement that: (i) is on a standard ISDA form; (ii) is an amortizing interest rate cap with a maturity date that is no earlier than the final scheduled payment date with respect to the last maturing Receivable in the Trust; (iii) is issued by a bank or other financial institution whose short term unsecured -2- debt obligations are rated A-1+/P-1 by Standard & Poor's and Moody's, respectively or that it is otherwise acceptable to JPMD; (iv) has a capped interest rate equal to a 30-day LIBOR rate of 9.50% per annum; (v) provides that any payments made by the counterparty shall be made directly to the Collection Account; (vi) provides that it may not be materially amended, terminated, waived or assigned by the counterparty without the prior written consent of the Note Majority and the Certificate Majority; (vii) provides that it may be sold by the Trust on any Trust Property Liquidation Date on which not less than all of the Receivables in the Trust are disposed pursuant to Section 9.1; and (viii) is otherwise in form and substance reasonably satisfactory to JPMD. SECTION 2.2. AMENDMENT TO SECTION 2.1 OF THE SALE AND SERVICING AGREEMENT. (a) Section 2.1(b)(1)(xiv) of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: (xiv) (A) on any Transfer Date, OFL shall have established, in accordance with Section 2.2(b)(1)(ix) of the Receivables Purchase Agreement, in the name of the Trustee for the benefit of the Noteholders and the Certificateholders, an Eligible Interest Rate Cap Agreement in a notional amount equal to or greater than the sum of the Note Balance PLUS the Certificate Balance on such Transfer Date (after taking into account the transfer of Receivables to the Trust on such date); (b) Section 2.1(b)(1)(xv) of the Sale and Servicing Agreement is hereby amended by deleting the number "40%" and substituting therefor "55%." (c) Section 2.1(b)(1) of the Sale and Servicing Agreement is hereby amended by adding the following subsection (xvi) immediately following Section 2.1(b)(1)(xv): (xvi) the Seller shall have deposited into the Spread Account an amount at least equal to 1.0% of the aggregate of the Principal Balances of the Receivables sold to the Trust on such Transfer Date; (d) Section 2.1(b)(1) of the Sale and Servicing Agreement is hereby further amended by renumbering Section 2.1(b)(1)(xvi) as Section 2.1(b)(1)(xvii) and by renumbering Section 2.1(b)(1)(xvii) as Section 2.1(b)(1)(xviii). (e) Section 2.1(c)(2)(viii) of the Sale and Servicing Agreement is hereby amended by deleting the word "or" at the end thereof. (f) Section 2.1(c)(2)(ix) of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: -3- (ix) on any Determination Date after the first Transfer Date but prior to the Purchase Termination Date, (A) the Delinquency Ratio shall exceed 3.50%; (B) the Portfolio Loss Ratio shall exceed 2.50%; (C) the Warehousing Loss Ratio shall exceed 1.0%; or (D) the Average Net Excess Spread Percentage shall be less than 1.5%; or (g) Section 2.1(c)(2) of the Sale and Servicing Agreement is hereby amended by adding the following subsection (x) immediately following Section 2.1(c)(2)(ix): (x) The notional amount of the Eligible Interest Rate Cap Agreement required pursuant to Section 2.1(b)(1)(xiv) shall on any date be less than the sum of the Note Balance PLUS the Certificate Balance on such date (after taking into account the transfer of Receivables to the Trust, if any, on such date). SECTION 2.3. AMENDMENT TO SECTION 4.1 OF THE SALE AND SERVICING AGREEMENT. Section 4.1(e) of the Sale and Servicing Agreement is hereby amended by deleting the words "; PROVIDED HOWEVER, that amounts on deposit in the Spread Account up to an amount equal to the Spread Account Available Amount may be used to establish a hedging arrangement with a longer term in accordance with clause (g) of the definition of "Eligible Investments" following the end of the first sentence of such Section. SECTION 2.4. AMENDMENT TO SECTION 4.6 OF THE SALE AND SERVICING AGREEMENT. Section 4.6(viii) of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: (viii) eighth, FIRST, an amount equal to the lesser of (x) all remaining Available Funds and (y) the excess, if any, of the Requisite Amount as of the immediately preceding Determination Date over the amount on deposit in the Spread Account as of such date (after taking into account all withdrawals from the Spread Account on such Distribution Date), shall be deposited into the Spread Account; SECOND, from Available Funds, if any amounts are due and owing to any Indemnified Party (as such term is used in the Note Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Note Purchase Agreement, such amount shall be deposited into the Note Distribution Account for distribution to such Indemnified Parties, THIRD, from Available Funds, if any amounts are due and owing to any Indemnified Party (as such term is used in the Certificate Purchase Agreement) under Section 11.01, Section 11.04 or Section 11.05 of the Certificate Purchase Agreement, such amount shall be deposited into the Certificate Distribution Account for distribution to such Indemnified Parties, and FOURTH, any remaining Available Funds shall be released to the Seller. SECTION 2.5. AMENDMENT TO SECTION 5.1 OF THE SALE AND SERVICING AGREEMENT. Section 5.1(c) of the Sale and Servicing Agreement is hereby amended by deleting the words "respect of amounts deposited therein pursuant to Section 4.6(viii) as a result of the -4- occurrence of such Trigger Event" and substituting therefor the words "excess of the Requisite Amount as of such date." SECTION 2.6. AMENDMENT TO SECTION 9.1 OF THE SALE AND SERVICING AGREEMENT. Section 9.1(b)(2) of the Sale and Servicing Agreement is hereby amended by deleting the words "at least one Business Day prior to" and substituting therefor the words "no later than 11:00 A.M. (New York time) on." ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when: (1) the Servicer shall have received (a) counterparts hereof executed on behalf of the Issuer, the Seller and the Servicer, (b) the consents of the Backup Servicer, the Indenture Trustee and JPMD, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, the sole Noteholder, to the terms of this Amendment and (c) evidence of written notice to Standard & Poor's and Moody's of this Amendment and (2) OFL shall have caused the delivery of an Opinion of Counsel to JPMD with respect to true-sale and non-substantive consolidation matters (or a bring-down of the Opinion of Counsel with respect to these matters delivered on the Closing Date) satisfactory to JPMD. SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Amendment and the Sale and Servicing Agreement (and all exhibits, annexes and schedules thereto) constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 3.3. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof or thereof. SECTION 3.4. SALE AND SERVICING AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically stated herein, all of the terms and conditions of the Sale and Servicing Agreement shall remain in full force and effect. All references to the Sale and Servicing Agreement in any other document or instrument shall be deemed to mean the Sale and Servicing Agreement, as amended by this Amendment. This Amendment shall not constitute a novation of the Sale and Servicing Agreement, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Sale and Servicing -5- Agreement, as amended by this Amendment, as though the terms and obligations of the Sale and Servicing Agreement were set forth herein. -6- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers, all as of the date and year first above written. ISSUER: OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: /s/ Denise M. Geran ------------------------------------------- Name: Denise M. Geran Title: Financial Services Officer SELLER: OLYMPIC RECEIVABLES FINANCE CORP. II By: __________________________________ Name: Title: SERVICER: OLYMPIC FINANCIAL LTD., in its individual capacity and as Servicer By: __________________________________ Name: Title: -7- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers, all as of the date and year first above written. ISSUER: OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: ___________________________________________ Name: Title: SELLER: OLYMPIC RECEIVABLES FINANCE CORP. II By: /s/ John Witham ------------------------------------------ Name: John Witham Title: EVP/CFO SERVICER: OLYMPIC FINANCIAL LTD., in its individual capacity and as Servicer By: /s/ Mike Sherman ------------------------------------------ Name: Mike Sherman Title: VP/Treasurer -8- AGREED AND CONSENTED: BACKUP SERVICER: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Backup Servicer By: /s/ Illegible ------------------------------------------ Name: Title: INDENTURE TRUSTEE: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee By: /s/ Illegible ------------------------------------------ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, as sole Noteholder By: __________________________________ Name: Title: -9- AGREED AND CONSENTED: BACKUP SERVICER: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Backup Servicer By: __________________________________ Name: Title: INDENTURE TRUSTEE: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee By: __________________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, as sole Noteholder By: /s/ Illegible ------------------------------------------ Name: Title: -10- EX-10.16 19 AMENDMENT NO 3 TO S&S AGREEMENT EXECUTION COPY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AMENDMENT NO. 3 Dated as of January 17, 1997 to SALE AND SERVICING AGREEMENT Dated as of December 28, 1995 among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST Issuer OLYMPIC RECEIVABLES FINANCE CORP. II Seller OLYMPIC FINANCIAL LTD. In its individual capacity and as Servicer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Backup Servicer - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS ARTICLE II AMENDMENT SECTION 2.1. Amendment to Section 1.1 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 2.2. Amendment to Section 2.1 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2.3. Amendment to Section 3.6 of the Sale and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE III MISCELLANEOUS SECTION 3.1. Counterparts. . . . . . . . . . . . . . . . . . . . . . 4 SECTION 3.2. Governing Law; Entire Agreement . . . . . . . . . . . . 5 SECTION 3.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.4. Sale and Servicing Agreement in Full Force and Effect as Amended . . . . . . . . . . . . . . . . . . . 5 -i- AMENDMENT NO. 3 dated as of January 17, 1997 (the "AMENDMENT") to SALE AND SERVICING AGREEMENT dated as of December 28, 1995 and amended as of June 12, 1996 and September 30, 1996 (as amended, the "SALE AND SERVICING AGREEMENT"), among Olympic Automobile Receivables Warehouse Trust (the "ISSUER"), Olympic Receivables Finance Corp. II, a Delaware corporation, as Seller (the "SELLER"), Olympic Financial Ltd., a Minnesota corporation, in its individual capacity and as Servicer, (the "SERVICER") and Norwest Bank Minnesota, National Association, a national banking association, as Backup Servicer (the "BACKUP SERVICER"). WHEREAS, the Issuer, the Seller, the Servicer and the Backup Servicer have entered into the Sale and Servicing Agreement; WHEREAS, pursuant to Section 10.1(b) of the Sale and Servicing Agreement, the Issuer, the Seller and the Servicer desire to amend the Sale and Servicing Agreement in certain respects as provided below; WHEREAS, each of the Indenture Trustee, the Backup Servicer, a Certificate Majority and a Note Majority has consented to this Amendment as required by Section 10.1(b) of the Sale and Servicing Agreement; WHEREAS, it is the intent of the parties that this Amendment be effective as of the date set forth above (the "EFFECTIVENESS DATE"); NOW, THEREFORE, the parties to this Amendment hereby agree as follows: ARTICLE I DEFINITIONS Unless otherwise defined herein or the context otherwise requires, defined terms used herein shall have the meanings ascribed thereto in the Sale and Servicing Agreement. ARTICLE II AMENDMENT SECTION 2.1. AMENDMENT TO SECTION 1.1 OF THE SALE AND SERVICING AGREEMENT. (a) The definition of "AVERAGE NET EXCESS SPREAD PERCENTAGE" is hereby amended to read in its entirety as follows: "(i) As of (x) the first Determination Date on which there are Receivables in the Trust or (y) the second Determination Date on which there are Receivables in the Trust immediately following a Trust Property Liquidation Date, or if no Trust Property Liquidation Date has occurred, the Closing Date, in case of the first such Determination Date, the Net Excess Spread Percentage as of the Accounting Date for the related Monthly Period and in the case of the second such Determination Date, the average of the Net Excess Spread Percentages for the two preceding Monthly Periods, calculated as of the Accounting Date of each such Monthly Period; and (ii) as of any subsequent Determination Date on which there are Receivables in the Trust, the average of the Net Excess Spread Percentages for the three preceding Monthly Periods during which there were Receivables in the Trust, calculated as of the Accounting Date of each such Monthly Period." (b) The definition of "ELIGIBLE INTEREST RATE CAP AGREEMENT" in Section 1.1 of the Sale and Servicing Agreement is hereby amended by adding the following immediately after clause (ii) thereof: (iii) is purchased in a minimum notional amount of at least $100,000,000; (c) The definition of "ELIGIBLE INTEREST RATE CAP AGREEMENT" in Section 1.1 of the Sale and Servicing Agreement is hereby further amended by renumbering clause (iii) as clause (iv), clause (iv) as clause (v), clause (v) as clause (vi), clause (vi) as clause (vii), clause (vii) as clause (viii) and clause (viii) as clause (ix). (d) The definition of "REQUISITE AMOUNT" in Section 1.1 of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: "As of any Determination Date, (i) if no Trigger Event shall have occurred, and all previous Trigger Events shall have been Deemed Cured, 4.0% of the sum of the Note Balance on such Determination Date PLUS the Certificate Balance on such Determination Date; and (ii) if a Trigger Event shall have occurred (and until such Trigger Event shall have been Deemed Cured), (x) if such Trigger Event is of the type described in clause (i) of the definition thereof, 1.0% of the Maximum Program Size PLUS 4.0% of the sum of the Note Balance on such Determination Date PLUS the Certificate Balance on such Determination Date, (y) if such Trigger Event is of the type described in clause (ii) of the definition thereof, 2.0% of the Maximum Program Size PLUS 4.0% of the sum of the Note Balance on such Determination Date PLUS the Certificate Balance on such Determination Date, and (z) if such Trigger Event is of the type described in clauses (iii) or (iv) of the definition thereof, an unlimited amount." (e) The definition of "TRIGGER EVENT" in Section 1.1 of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: -2- TRIGGER EVENT: As of any Determination Date, (i) if the Net Excess Spread Percentage shall be less than 5.0% but equal to or greater than 4.0%; (ii) if the Net Excess Spread Percentage shall be less than 4.0% but equal to or greater than 3.0%; (iii) if the Net Excess Spread Percentage shall be less than 3.0% and (iv) if the Warehousing Loss Ratio shall exceed 0.75%. (f) Section 1.1. of the Sale and Servicing Agreement is hereby further amended by adding the following defined terms and definitions: FINANCED REPOSSESSIONS: Receivables with respect to loans financing the purchase of Vehicles that were previously repossessed by or for the benefit of the Servicer. WAREHOUSING PERIOD: (i) The period beginning upon the first sale of Receivables to the Trust and ending on the day immediately preceding a Trust Property Liquidation Date on which all of the Receivables in the Trust are purchased and (ii) thereafter, any period beginning upon the first sale of Receivables to the Trust immediately following a Trust Property Liquidation Date on which all of the Receivables in the Trust are purchased and ending on the day immediately preceding a Trust Property Liquidation Date on which all of the Receivables in the Trust are purchased. SECTION 2.2. AMENDMENT TO SECTION 2.1 OF THE SALE AND SERVICING AGREEMENT. (a) Section 2.1(b)(1) of the Sale and Servicing Agreement is hereby amended by adding the following subsection immediately following Section 2.1(b)(1)(xv): (xvi) after giving effect to the conveyance of Receivables on such Transfer Date, the aggregate of the Principal Balances of Receivables attributable to loans classified as Financed Repossessions shall not exceed 3.0% of the aggregate of the Principal Balances of all Receivables on such Transfer Date; (b) Section 2.1(b)(1) of the Sale and Servicing Agreement is hereby further amended by renumbering Section 2.1(b)(1)(xvi) as Section 2.1(b)(1)(xvii), by renumbering Section 2.1 (b)(1)(xvii) as Section 2.1(b)(1)(xviii) and by renumbering Section 2.l(b)(1)(xviii) as Section 2.1(b)(1)(xix). (c) Section 2.1(b)(1)(xvi) of the Sale and Servicing Agreement is hereby amended by deleting the reference to "1.0%" and substituting therefor "4.0%". (d) Clause (D) of Section 2.1(c)(2)(ix) of the Sale and Servicing Agreement is hereby amended to read in its entirety as follows: (D) the Average Net Excess Spread Percentage shall be less than 4.0%; -3- (e) Section 2.1(c)(2) of the Sale and Servicing Agreement is hereby amended by adding the following subsection immediately following Section 2.1(c)(2)(x): (xi) Any Warehousing Period exceeds 120 days. SECTION 2.3. AMENDMENT TO ARTICLE III OF THE SALE AND SERVICING AGREEMENT. Article III of the Sale and Servicing Agreement is hereby amended by adding the following section immediately following Section 3.18: Section 3.19. MONTHLY REPORTS. The Servicer (if OFL is the Servicer) shall deliver to JPMD on or prior to the 20th of each month (or if the twentieth is not a Business Day, the next succeeding Business Day), the "Internal Static Pool Analysis" with respect to the Receivables and OFL's "Credit Administration" report (together, the "MONTHLY REPORTS"), in each case with respect to the immediately preceding Monthly Period. If JPMD does not receive the Monthly Reports in accordance with the preceding sentence, JPMD shall provide written notice of non-delivery thereof to the Servicer. SECTION 2.4. AMENDMENT TO SECTION 8.1 OF THE SALE AND SERVICING AGREEMENT. Section 8.1(b) of the Sale and Servicing Agreement is hereby amended by inserting the following immediately following the words "Servicer's Certificate" in such section: "or failure by the Servicer (if OFL is the Servicer) to deliver to JPMD the Monthly Reports required by SECTION 3.19 within 10 days of receipt of the notice of non-delivery required under SECTION 3.19" SECTION 2.5. AMENDMENT TO SCHEDULE B TO SALE AND SERVICING AGREEMENT. (a) Clause 28(D)(i) of Schedule B is hereby amended (i) by deleting the reference to "72" and substituting therefor "73" and (ii) by deleting the word "and" at the end of such clause. (b) Clause 28(D)(ii) of Schedule B is hereby amended by deleting the reference to "40%" and substituting therefor "55%". (c) Clause 28(D) is hereby amended by adding the following immediately following clause (ii) thereof: "; and (iii) the aggregate of the Principal Balances of Receivables attributable to loans classified as Financed Repossessions shall not exceed 3.0% of the aggregate of the Principal Balances of all Receivables on such Transfer Date" -4- ARTICLE III MISCELLANEOUS SECTION 3.1. COUNTERPARTS. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Amendment shall become effective when: (1) the Servicer shall have received (a) counterparts hereof executed on behalf of the Issuer, the Seller and the Servicer, (b) the consents of the Backup Servicer, the Indenture Trustee and JPMD, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, the sole Noteholder, to the terms of this Amendment and (c) evidence of written notice to Standard & Poor's and Moody's of this Amendment and (2) OFL shall have caused the delivery to JPMD of an Opinion of Counsel with respect to truesale and non-substantive consolidation matters (or a bring-down of the Opinion of Counsel with respect to these matters delivered on the Closing Date) satisfactory to JPMD. SECTION 3.2. GOVERNING LAW; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Amendment and the Sale and Servicing Agreement (and all exhibits, annexes and schedules thereto) constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 3.3. HEADINGS. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof or thereof. SECTION 3.4. SALE AND SERVICING AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically stated herein, all of the terms and conditions of the Sale and Servicing Agreement shall remain in full force and effect. All references to the Sale and Servicing Agreement in any other document or instrument shall be deemed to mean the Sale and Servicing Agreement, as amended by this Amendment. This Amendment shall not constitute a novation of the Sale and Servicing Agreement, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Sale and Servicing Agreement, as amended by this Amendment, as though the terms and obligations of the Sale and Servicing Agreement were set forth herein. -5- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers, all as of the date and year first above written. ISSUER: OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: ------------------------------------ Name: Title: SELLER: OLYMPIC RECEIVABLES FINANCE CORP. II By: ------------------------------------ Name: Title: SERVICER: OLYMPIC FINANCIAL LTD., in its individual capacity and as Servicer By: ------------------------------------ Name: Title: -6- AGREED AND CONSENTED: BACKUP SERVICER: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Backup Servicer By: ------------------------------------ Name: Title: INDENTURE TRUSTEE: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee By: ------------------------------------ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as sole Certificateholder, and as Administrative Agent for Delaware Funding Corporation, as sole Noteholder By: ------------------------------------ Name: Title: -7- EX-10.18 20 AMENDMENT TO INCREASE PURCHASE COMMITMENT EXECUTION COPY AGREEMENT TO INCREASE PURCHASE COMMITMENT AND CONSENT dated as of June 12, 1996 Relating to NOTE PURCHASE AGREEMENT among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller, OLYMPIC FINANCIAL LTD. as Servicer and in its individual capacity, DELAWARE FUNDING CORPORATION as Purchaser, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent for the benefit of the DFC Owners, THIS AGREEMENT dated as of June 12, 1996 (this "Agreement") is by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "SELLER"), OLYMPIC FINANCIAL, LTD., a Minnesota corporation, as Servicer and in its individual capacity ("OFL"), DELAWARE FUNDING CORPORATION (with its respective successors and assigns, the "PURCHASER"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. Morgan Delaware), as Administrative Agent, for the benefit of the DFC Owners (the "ADMINISTRATIVE AGENT"), and relates to the Note Purchase Agreement dated as of December 28, 1995 (as amended from time to time, the "NOTE PURCHASE AGREEMENT"), by and among the parties listed above. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings assigned to such terms in the Note Purchase Agreement. RECITALS WHEREAS, pursuant to Section 2.05(b) of the Note Purchase Agreement, the Seller may request in writing an increase in the Purchase Commitment and such increase will become effective if the Purchaser and the Administrative Agent agree thereto; and WHEREAS, pursuant to Section 8.06 of the Note Purchase Agreement, the Seller agreed not to make any material amendment to the Trust Agreement, the Sale and Servicing Agreement or the Indenture without prior written consent of the Purchaser; and WHEREAS, pursuant to Section 9.06 of the Note Purchase Agreement, OFL agreed not to make any material amendment to the Sale and Servicing Agreement without the prior written consent of the Purchasers; and WHEREAS, the Purchaser and the Administrative Agent desire to agree to the Seller's request for an increase in the Purchase Commitment, and to amend the Trust Agreement, the Sale and Servicing Agreement and the Indenture. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties to this Agreement agree as follows: SECTION 1. INCREASE IN PURCHASE COMMITMENT. The Purchaser and the Administrative Agent agree to the increase of the Purchase Commitment from $200,000,000 to $300,000,000. SECTION 2. CONSENT TO AMENDMENT TO TRUST DOCUMENTS. The Purchaser hereby consents, pursuant to Sections 8.06 and 9.06 of the Note Purchase Agreement, to the Amendment to Trust Agreement, Amendment to Sale and Servicing Agreement and Supplemental Indenture of even date herewith, substantially in the forms attached to this Amendment as Exhibit A. 2 SECTION 3. NOTE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS SUPPLEMENTED. Except as specifically stated herein, all of the terms and conditions of the Note Purchase Agreement shall remain in full force and effect. All references to the Note Purchase Agreement in any other document or instrument shall be deemed to mean the Note Purchase Agreement, as supplemented by this Agreement. This Agreement shall not constitute a novation of the Note Purchase Agreement, but shall constitute a supplement thereto. The parties hereto agree to be bound by the terms and obligations of the Note Purchase Agreement, as supplemented by this Agreement, as though the terms and obligations of the Note Purchase Agreement were set forth herein. SECTION 4. EFFECTIVENESS. This Agreement shall become effective as of June 12, 1996, upon receipt by the Administrative Agent of (a) executed counterparts of this Agreement; (b) an executed copy of the First Amendment to DFC Asset Purchase Agreement, dated as of the date hereof, evidencing the increase in the commitment amounts of the DFC Purchasers; (c) an executed copy of the Agreement to Increase Aggregate Purchase Commitments and Consent, dated the date hereof, relating to the Certificate Purchase Agreement among the Seller, OFL, the financial institution party thereto and Morgan Guaranty Trust Company of New York; and (d) confirmation by each of S&P and Moody's of the then-current ratings of the Commercial Paper Notes. SECTION 4. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, as Seller By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By:___________________________ Name: Title: OLYMPIC FINANCIAL LTD. By:___________________________ Name: Title: Treasurer DELAWARE FUNDING CORPORATION, as Purchaser By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By:___________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By:___________________________ Name: Title: 4 EX-10.19 21 AGREEMENT TO EXTEND PURCHASE COMMITMENT EXECUTION COPY - -------------------------------------------------------------------------------- AGREEMENT TO EXTEND PURCHASE COMMITMENT EXPIRATION DATE dated as of December 20, 1996 Relating to NOTE PURCHASE AGREEMENT among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller, OLYMPIC FINANCIAL LTD. as Servicer and in its individual capacity, DELAWARE FUNDING CORPORATION as Purchaser, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent for the benefit of the DFC Owners, - -------------------------------------------------------------------------------- THIS AGREEMENT TO EXTEND PURCHASE COMMITMENT EXPIRATION DATE dated as of December 20, 1996 (this "AGREEMENT") Relating to the Note Purchase Agreement dated as of December 28, 1995 (as amended from time to time, the "NOTE PURCHASE AGREEMENT") by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "SELLER"), OLYMPIC FINANCIAL, LTD., a Minnesota corporation, as Servicer and in its individual capacity ("OFL"), DELAWARE FUNDING CORPORATION (with its respective successors and assigns, the "PURCHASER"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. Morgan Delaware), as Administrative Agent, for the benefit of the DFC Owners (the "ADMINISTRATIVE AGENT"), is by and among the parties listed above. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings assigned to such terms in the Note Purchase Agreement. RECITALS WHEREAS, pursuant to Section 2.04 of the Note Purchase Agreement, the parties to the Note Purchase Agreement are permitted to extend the Purchase Commitment Expiration Date by mutual agreement in writing; and WHEREAS, the parties to the Note Purchase Agreement desire to extend the Purchase Commitment Expiration Date. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties to this Agreement agree as follows: SECTION 1. EXTENSION OF PURCHASE COMMITMENT EXPIRATION DATE. The parties hereto agree to extend the Purchase Commitment Expiration Date such that clause (i) of the definition of "Purchase Commitment Expiration Date" now reads "January 17, 1997. SECTION 2. NOTE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS SUPPLEMENTED. Except as specifically stated herein, all of the terms and conditions of the Note Purchase Agreement shall remain in full force and effect. All references to the Note Purchase Agreement in any other document or instrument shall be deemed to mean the Note Purchase Agreement, as supplemented by this Agreement. This Agreement shall not constitute a novation of the Note Purchase Agreement, but shall constitute a supplement thereto. The parties hereto agree to be bound by the terms and obligations of the Note Purchase Agreement, as supplemented by this Amendment, as though the terms and obligations of the Note Purchase Agreement were set forth herein. SECTION 3. EFFECTIVENESS. This Agreement shall become effective as of December 20, 1996, upon receipt by the Administrative Agent of the following: (a) executed counterparts of this Agreement; (b) an executed copy of the Second Amendment and Consent Relating to DFC Asset Purchase Agreement, dated as of the date hereof, evidencing the extension of the commitment terms and the change of the commitment amounts of certain DFC Purchasers; (c) an executed copy of the First Amendment and Consent Relating to Certificate Purchase Agreement among the Seller, OFL, the "Purchasers" named therein and Morgan Guaranty Trust Company of New York; (d) an Officer's Certificate from each of the Seller, OFL and ORFC II, each in form and substance reasonably acceptable to the Purchaser and its counsel, dated as of the date of this Agreement, to the effect that (i) the representations and warranties of the Seller, OFL and ORFC II in the Sale and Servicing Agreement, the Note Purchase Agreement, the Certificate Purchase Agreement, the Purchase Agreement and the Trust Agreement, as applicable, are true and correct as of the date hereof; (ii) OFL, the Seller and ORFC II are in compliance with their respective covenants in the Sale and Servicing Agreement, the Note Purchase Agreement, the Certificate Purchase Agreement, the Purchase Agreement and the Trust Agreement, as applicable, as of the date hereof; and (iii) no Note Purchase Termination Event or event which with the passage of time could become a Note Purchase Termination Event shall have occurred and be continuing as of the date hereof; and (e) confirmation by each of S&P and Moody's of the then-current ratings of the Commercial Paper Notes. SECTION 4. PRIOR UNDERSTANDINGS. This Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral. SECTION 5. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 2 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, as Seller By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ Denise M. Geran ________________________________ Name: DENISE M. GERAN Title: Financial Services Officer OLYMPIC FINANCIAL LTD. By: /s/ illegible __________________________________ Name: Title: Treasurer DELAWARE FUNDING CORPORATION, as Purchaser By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By: /s/ Richard A. Burke __________________________________ Name: RICHARD A. BURKE Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: /s/ Richard A. Burke __________________________________ Name: RICHARD A. BURKE Title: Vice President 3 EX-10.20 22 FIRST AMENDMENT & CONSENT DATED JAN 17, 1997 EXECUTION COPY - ------------------------------------------------------------------------------ FIRST AMENDMENT AND CONSENT dated as of January 17, 1997 Relating to NOTE PURCHASE AGREEMENT among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller, OLYMPIC FINANCIAL LTD. as Servicer and in its individual capacity, DELAWARE FUNDING CORPORATION as Purchaser, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent for the benefit of the DFC Owners, - ------------------------------------------------------------------------------ THIS FIRST AMENDMENT AND CONSENT dated as of January 17, 1997 (this "AMENDMENT") Relating to the Note Purchase Agreement dated as of December 28, 1995 (as amended from time to time, the "NOTE PURCHASE AGREEMENT") by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "SELLER"), OLYMPIC FINANCIAL, LTD., a Minnesota corporation, as Servicer and in its individual capacity ("OFL"), DELAWARE FUNDING CORPORATION (with its respective successors and assigns, the "PURCHASER"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. Morgan Delaware), as Administrative Agent, for the benefit of the DFC Owners (the "ADMINISTRATIVE AGENT"), is by and among the parties listed above. Capitalized terms used in this Amendment and not otherwise defined shall have the meanings assigned to such terms in the Note Purchase Agreement. RECITALS WHEREAS, pursuant to Section 13.01 of the Note Purchase Agreement, the parties to the Note Purchase Agreement may agree in writing to amend such Agreement; and WHEREAS, pursuant to Section 2.04 of the Note Purchase Agreement, the parties to the Note Purchase Agreement are permitted to extend the Purchase Commitment Expiration Date by mutual agreement in writing; and WHEREAS, pursuant to Section 2.05(a) of the Note Purchase Agreement, the Seller may reduce the unused Purchase Commitment and such reduction will become effective upon the Seller's providing the Administrative Agent with written notice of such reduction thereto; and WHEREAS, pursuant to Section 8.06 of the Note Purchase Agreement, the Seller agreed not to make any material amendment to the Sale and Servicing Agreement without prior written consent of the Purchaser; and WHEREAS, pursuant to Section 9.06 of the Note Purchase Agreement, OFL agreed not to make any material amendment to the Sale and Servicing Agreement or the Purchase Agreement without the prior written consent of the Purchaser; and WHEREAS, the parties to the Note Purchase Agreement desire to amend the Note Purchase Agreement in certain respects as provided herein, including by amending certain definitions, adding certain covenants and adding certain Note Purchase Termination Events; and WHEREAS, the parties to the Note Purchase Agreement desire to extend the Purchase Commitment Expiration Date by amending the related definition in the Note Purchase Agreement; and WHEREAS, the Purchaser and the Administrative Agent desire to accept this Amendment as notice of the reduction of the amount of the Purchase Commitment; and WHEREAS, the Purchasers desire to consent to the amendments to the Sale and Servicing Agreement and the Purchase Agreement. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties to this Amendment agree as follows: SECTION 1. NEW DEFINITIONS. The following new definitions are hereby added to Section 1.01 of the Note Purchase Agreement: "CAPITAL BASE" shall mean, at any date, OFL's Tangible Net Worth at such date. "CAPITAL BASE PROCEEDS," for any period, shall mean the proceeds received by OFL from any sale of equity securities during such period (net of direct, out-of-pocket expenses incurred in connection with such sale). "CHANGE OF CONTROL" shall mean the occurrence of any of the following with respect to OFL: (a) (i) a majority of the directors of OFL shall be Persons other than Persons (x) for whose election proxies shall have been solicited by the board of directors of OFL or (y) who are then serving as directors appointed by the board of directors to fill vacancies on the board of directors caused by death or resignation (but not by removal) or to fill newly-created directorships or (ii) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 50% or more in voting power of the outstanding voting stock of OFL; or (b) OFL shall fail to own, directly or indirectly, 100% of the outstanding capital stock of ORFC II. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of any determination. 2 "NET INCOME" shall mean, for any period, OFL's after-tax net income for such period determined in accordance with GAAP but after deduction of dividend payments on OFL's Cumulative Convertible Exchangeable Preferred Stock (as described in OFL's Amendment No. 3 to Form S-1 Registration Statement dated November 22, 1993). "NET WORTH" shall mean the total of all assets appearing on OFL's balance sheet after deducting all proper reserves (including reserves for depreciation, obsolescence and amortization) minus all liabilities of OFL, in each case determined in accordance with GAAP. "PERMITTED ACQUISITION" shall mean the acquisition by OFL or any of its subsidiaries of any Person that is a going concern that satisfies the conditions specified in that certain Credit Agreement dated as of July 11, 1996, among OFL, the several institutions party thereto, Bank of America National Trust and Savings Association, as agent and First Bank National Association, as co-manager. "TANGIBLE NET WORTH" shall mean, at any time, OFL's Net Worth at such time, excluding the value of goodwill (other than goodwill arising from a Permitted Acquisition), trademarks, trade names, copyrights, patents, licenses and similar intangibles but specifically including, all of OFL's Finance Income Receivables (calculated in a manner consistent with OFL's audited consolidated balance sheet as of December 31, 1995) as at such time. SECTION 2. EXTENSION AND AMENDMENT OF PURCHASE COMMITMENT EXPIRATION DATE. The parties hereto agree to extend the Purchase Commitment Expiration Date and to amend such definition. The definition of "Purchase Commitment Expiration Date" is hereby amended to read as follows: "PURCHASE COMMITMENT EXPIRATION DATE" means the earliest of (i) December 19, 1997, (ii) June 30, 1997, but only if either (A) a "Purchase Commitment Expiration Date" occurs by reason of clause (ii) of such definition in the Certificate Purchase Agreement or (B) the Purchaser, in its sole and absolute discretion, determines to terminate its Purchase Commitment hereunder and so notifies the Seller and OFL in writing on or before May 30, 1997, (iii) the date on which an event which causes or might cause a Note Purchase Termination Event occurs, and (iv) the date on which a Securitized Offering occurs; provided that the Purchase Commitment Expiration Date may be extended from time to time in accordance with Section 2.04 hereof. SECTION 3. ADDITIONAL REQUIREMENTS FOR INCREMENTAL PURCHASES. (a) Section 2.03(a)(ii) of the Note Purchase Agreement is hereby amended to read as follows: 3 (ii) The Administrative Agent shall have received a completed Notice of Incremental Purchase by 2:00 p.m., New York City time, on the Business Day immediately preceding such Incremental Purchase Date (or if any such Notice is received after 2:00 p.m., the related Incremental Purchase shall occur on the second Business Day following such receipt); (b) Clause (vi) of Section 2.03(a) is hereby amended to include a reference to the Note Purchase Agreement and now reads as follows: (vi) The Seller, the Owner Trustee, the General Partner, OFL and ORFC II shall be in compliance with all of their respective covenants contained in the Trust Agreement, the Sale and Servicing Agreement, the Purchase Agreement, each Assignment Agreement, each Transfer Agreement, the Indenture and this Note Purchase Agreement; SECTION 4. DECREASE IN PURCHASE COMMITMENT. In accordance with the provisions of Section 2.05(a) of the Note Purchase Agreement, the Purchaser and the Administrative Agent acknowledge that this Amendment constitutes notice of the reduction of the Purchase Commitment from $300,000,000 to $225,000,000. SECTION 5. ADDITION OF NOTE PURCHASE TERMINATION EVENT. The following event is added as a new clause (j) to Section 2.08 of the Note Purchase Agreement as an additional "Note Purchase Termination Event": (j) a Change of Control shall have occurred without the consent of the Administrative Agent. SECTION 6. ADDITIONAL OFL COVENANT. The following new OFL covenant is added as new Section 9.07 to the Note Purchase Agreement and reads as follows: SECTION 9.07. MINIMUM CAPITAL BASE. (a) OFL will not permit its consolidated Capital Base, on the last day of its fiscal year, to be less than the sum of (i) its consolidated Capital Base on the last day of the immediately preceding fiscal year, PLUS (ii) to the extent Net Income for such fiscal year is greater than zero, Net Income for such fiscal year PLUS (iii) Capital Base Proceeds for such fiscal year. (b) OFL will not permit its consolidated Capital Base, on the last day of any fiscal quarter other than the last day of its fiscal year, to be less than the sum (i) 95% of its consolidated Capital Base on the last day of the immediately preceding fiscal year PLUS (ii) Capital Base Proceeds since the last day of the immediately preceding fiscal year. 4 SECTION 7. AMENDMENT TO NOTICE OF INCREMENTAL PURCHASE. The Notice of Incremental Purchase, included as Exhibit D to the Note Purchase Agreement, is hereby amended and now reads as set forth in the Exhibit D attached to this Amendment. SECTION 8. CONSENT TO AMENDMENT TO SALE AND SERVICING AGREEMENT AND PURCHASE AGREEMENT. The Purchaser hereby consents, pursuant to Sections 8.06 and 9.06 of the Note Purchase Agreement, to Amendment No. 3 to Sale and Servicing Agreement and Amendment No. 3 to Receivables Purchase Agreement, each of even date herewith, substantially in the forms attached to this Amendment as Appendices A and B. SECTION 9. NOTE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically stated herein, all of the terms and conditions of the Note Purchase Agreement shall remain in full force and effect. All references to the Note Purchase Agreement in any other document or instrument shall be deemed to mean the Note Purchase Agreement, as amended by this Amendment. This Amendment shall not constitute a novation of the Note Purchase Agreement, but shall constitute an amendment thereto. The parties hereto agree to be bound by the terms and obligations of the Note Purchase Agreement, as amended by this Amendment, as though the terms and obligations of the Note Purchase Agreement were set forth herein. SECTION 10. EFFECTIVENESS. This Amendment shall become effective as of January 17, 1997, upon receipt by the Administrative Agent of the following: (a) executed counterparts of this Amendment; (b) an executed copy of the Third Amendment and Consent Relating to DFC Asset Purchase Agreement, dated as of the date hereof, evidencing the extension of the commitment terms and the reduction of the commitment amounts of the DFC Purchasers; (c) an executed copy of the Second Amendment and Consent Relating to Certificate Purchase Agreement among the Seller, OFL, the "Purchasers" named therein and Morgan Guaranty Trust Company of New York; (d) executed counterparts of each of Amendment No. 3 to the Sale and Servicing Agreement and Amendment No. 3 to Receivables Purchase Agreement, each dated as of the date hereof; (e) an Officer's Certificate from each of the Seller, OFL and ORFC II, each in form and substance reasonably acceptable to the Purchaser and its counsel, dated as of the date of this Amendment, to the effect that (i) the representations and warranties of the Seller, OFL and ORFC II in the Sale and Servicing Agreement, the Note Purchase Agreement, the Certificate Purchase Agreement, the Purchase Agreement and the Trust Agreement, as applicable, are true and correct as of the date hereof; (ii) OFL, the Seller and ORFC II are in compliance with their respective covenants in the Sale and Servicing Agreement, the Note Purchase Agreement, the Certificate Purchase Agreement, the Purchase Agreement and the Trust Agreement, as applicable, as of the date hereof; and (iii) no Note Purchase Termination Event or event which with the passage of time could become a Note Purchase Termination Event shall have occurred and be continuing 5 as of the date hereof; (f) opinions of counsel to each of OFL, the Seller and ORFC II, dated as of the date hereof, to the effect that (i) as to OFL and ORFC II, this Amendment and the Amendments referenced in clauses (b) through (d) of this Section 13 have been duly authorized, executed and delivered and (ii) as to OFL, the Seller and ORFC II, such Amendments and the Agreements amended thereby are enforceable obligations of the Seller, OFL and ORFC II, as applicable; (g) an executed copy of the Amendment of DFC Fee Letter dated the date hereof; and (h) confirmation by each of S&P and Moody's of the then-current ratings of the Commercial Paper Notes. SECTION 11. PRIOR UNDERSTANDINGS. This Amendment sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral. SECTION 12. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 13. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 6 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, as Seller By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ [illegible] ____________________________________ Name: Title: OLYMPIC FINANCIAL LTD. By:_____________________________________ Name: Title: Treasurer DELAWARE FUNDING CORPORATION, as Purchaser By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By:______________________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By:______________________________________ Name: Title: 7 EXHIBIT D to Note Purchase Agreement Form of Notice of Incremental Purchase or Repayment/Redemption Olympic Automobile Receivables Trust, 1996-A Variable Funding Notes A. Proposed Incremental Purchase or Repayment/Redemption Date: __________ B. Certificate Balance of Investor Certificates $__________ C. Outstanding Amount of Notes (prior to giving effect to Incremental Purchase or Repayment/Redemption, as applicable, on date hereof) $__________ D. Amount of requested Incremental Purchase (lesser of minimum amount of $__________ or remaining DFC Purchase Commitment) $__________ E. Repayment/Redemption Amount $__________ F. Outstanding Amount of Notes (after giving effect to Incremental Purchase or Repayment/Redemption, as applicable, on date hereof) $__________ G. Facility Limit $__________ H. Remaining Facility Limit $__________ I. Calculations (after giving effect to the conveyance of Receivables on the related Transfer Date) 1. The aggregate Principal Balance of Receivables with original maturities from 73 to 84 months divided by the aggregate of the Principal Balances of all Receivables (maximum of 7.5%) ____________% 2. The aggregate Principal Balance of Receivables attributable to loans originated under OFL's "Classic" program divided by the aggregate of the Principal Balances of all Receivables (maximum of 55%) ____________% 3. The aggregate Principal Balance of Receivables attributable to loans defined by OFL as "Financed Repossessions" divided by the aggregate of the Principal Balances of all Receivables (maximum of 3.0%) ____________% 4. Weighted Average Coupon of Receivables ____________% 5. Weighted Average Maturity of Receivables ____________% J. Certifications (applicable only with respect to an Incremental Purchase) 1. The information relating to the Receivables to be purchased by Olympic Automobile Receivables Warehouse Trust, (the "Trust") and pledged to Norwest Bank Minnesota, National Association, as trustee (the "Indenture Trustee") under the Indenture dated as of December 28, 1995, as amended (the "Indenture"), is true and correct. 2. The representations and warranties of Olympic Financial Ltd., ("OFL"), in the Sale and Servicing Agreement dated as of December 28, 1995, as amended (the "Sale and Servicing Agreement"), among the Trust, Olympic Receivables Financial Corp. II ("ORFC II"), OFL, in its individual capacity and as servicer of the Receivables, and Norwest Bank Minnesota, National Association, the Receivables Purchase Agreement dated December 28, 1995, as amended, by and between OFL and ORFC II and the Note Purchase Agreement dated as of December 28, 1995, as amended (the "Note Purchase Agreement"), by and among the Trust, OFL, in its individual capacity and as servicer of the Receivables, Delaware Funding Corporation and Morgan Guaranty Trust Company of New York are true and correct in all material respects as of the date hereof. 3. The representations of the Trust in the Note Purchase Agreement are true and correct in all material respects as of the date hereof. 4. The representations of ORFC II in the Sale and Servicing Agreement are true and correct in all material respects as of the date hereof. 5. The Incremental Purchase Conditions specified in Section 2.03(a) of the Note Purchase Agreement have been satisfied and/or will be satisfied as of the applicable Incremental Purchase Date. D-2 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, as Seller By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ [illegible] ____________________________ Name: Title: OLYMPIC FINANCIAL LTD. By: ____________________________ Name: Title: Treasurer DELAWARE FUNDING CORPORATION, as Purchaser By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By: ------------------------------- Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: ------------------------------- Name: Title: 7 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, as Seller By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By:_________________________________ Name: Title: OLYMPIC FINANCIAL LTD. By:/s/ Michael J. Sherman _________________________________ Name: Michael J. Sherman Title: Treasurer DELAWARE FUNDING CORPORATION, as Purchaser By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By:_________________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By:_________________________________ Name: Title: 7 (i) The Collateral Agent, by the execution hereof, acknowledges receipt of the Pledged Shares on behalf of Financial Security. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Pledge Agreement on the date first above written. OLYMPIC FINANCIAL LTD. By:_________________________________ Name: Title: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Collateral Agent By:_________________________________ Name: Title: FINANCIAL SECURITY ASSURANCE INC. By: /s/ [illegible] _________________________________ Name: Title: EX-10.22 23 AGREEMENT TO INCREASE AGGREGATE PURCHASE AGREEMENT EXECUTION COPY - ------------------------------------------------------------------------------- AGREEMENT TO INCREASE AGGREGATE PURCHASE COMMITMENTS AND CONSENT dated as of June 12, 1996 Relating to CERTIFICATE PURCHASE AGREEMENT among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller, OLYMPIC FINANCIAL LTD. as Servicer and in its individual capacity, THE FINANCIAL INSTITUTIONS SIGNATORY HERETO as Purchasers, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent for the Purchasers - ------------------------------------------------------------------------------- THIS AGREEMENT dated as of June 12, 1996 (this "AGREEMENT") is by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "SELLER"), OLYMPIC FINANCIAL LTD., a Minnesota corporation, as Servicer (as defined below) and in its individual capacity ("OFL"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. Morgan Delaware), as a purchaser (a "PURCHASER" or "MORGAN"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. Morgan Delaware), as agent for the benefit of the Purchasers from time to time (the "PURCHASERS' AGENT"), and relates to the Certificate Purchase Agreement dated as of December 28, 1995 (as amended from time to time, the "CERTIFICATE PURCHASE AGREEMENT"), by and among the Seller, OFL, Morgan, as the sole Purchaser and the Purchasers' Agent. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings assigned to such terms in the Certificate Purchase Agreement. RECITALS WHEREAS, pursuant to Section 2.05(b) of the Certificate Purchase Agreement, the Seller may request in writing an increase in the aggregate of the Purchase Commitments and such increase will become effective if the Purchasers and the Purchasers' Agent agree thereto or if an additional Purchaser agrees to accept all or a portion of the increase in the aggregate Purchase Commitments; and WHEREAS, pursuant to Section 8.05 of the Certificate Purchase Agreement, the Seller agreed not to make any material amendment to the Trust Agreement, the Sale and Servicing Agreement or the Indenture without the prior written consent of the Purchasers; and WHEREAS, pursuant to Section 9.05 of the Certificate Purchase Agreement, OFL agreed not to make any material amendment to the Sale and Servicing Agreement without the prior written consent of the Purchasers; and WHEREAS, Morgan is currently the sole Purchaser under the Certificate Purchase Agreement; and WHEREAS, Morgan and the Purchasers' Agent desire to agree to the Seller's request for an increase in the aggregate Purchase Commitments and to consent to the amendment of the Trust Agreement, the Sale and Servicing Agreement and the Indenture. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties to this Agreement agree as follows: SECTION 1. INCREASE IN PURCHASE COMMITMENTS. Morgan and the Purchasers' Agent agree to the increase of the aggregate of the Purchase Commitments from $19,800,000 to $29,700,000. Following such increase, Morgan's Purchase Percentage will remain at 100% and its Purchase Commitment will be increased. Morgan will evidence its increased Purchase Commitment by executing a signature page to this Agreement. Such signature page shall supersede the signature pages to the Certificate Purchase Agreement, and from and after the date of this Agreement, all references to the signature pages of the Certificate Purchase Agreement shall refer to the signature pages to this Agreement. SECTION 2. CONSENT TO AMENDMENT TO TRUST DOCUMENTS. The Purchaser hereby consents, pursuant to Section 8.05 and 8.06 of the Certificate Purchase Agreement, to the Amendment to Trust Agreement, Amendment to Sale and Servicing Agreement and Supplemental Indenture of even date herewith, substantially in the forms attached hereto as Exhibit A. SECTION 3. CERTIFICATE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS SUPPLEMENTED. Except as specifically stated herein, all of the terms and conditions of the Certificate Purchase Agreement shall remain in full force and effect. All references to the Certificate Purchase Agreement in any other document or instrument shall be deemed to mean the Certificate Purchase Agreement, as supplemented by this Agreement. This Agreement shall not constitute a novation of the Certificate Purchase Agreement, but shall constitute a supplement thereto. The parties hereto agree to be bound by the terms and obligations of the Certificate Purchase Agreement, as supplemented by this Agreement, as though the terms and obligations of the Certificate Purchase Agreement were set forth herein. SECTION 4. EFFECTIVENESS. This Agreement shall become effective as of June 12, 1996. SECTION 5. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 2 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By:___________________________ Name: Title: OLYMPIC FINANCIAL LTD., as Servicer and in its individual capacity By:___________________________ Name: Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Purchaser Purchase By:___________________________ Commitment: $29,700,000 Name: Purchase Percentage: 100% Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Purchasers' Agent By:___________________________ Name: Title: 3 EX-10.23 24 FIRST AMENDMENT & CONSENT DATED AS OF DEC 20, 1996 EXECUTION COPY FIRST AMENDMENT AND CONSENT dated as of December 20, 1996 Relating to CERTIFICATE PURCHASE AGREEMENT among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller, OLYMPIC FINANCIAL LTD. as Servicer and in its individual capacity, THE PARTIES SIGNATORY HERETO as Purchasers, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent for the Purchasers THIS FIRST AMENDMENT AND CONSENT dated as of December 20, 1996 (this "AMENDMENT") Relating to the Certificate Purchase Agreement dated as of December 28, 1995 (as amended and supplemented from time to time, the "CERTIFICATE PURCHASE AGREEMENT"), by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "SELLER"), OLYMPIC FINANCIAL LTD., a Minnesota corporation, as Servicer (as defined below) and in its individual capacity ("OFL"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. MORGAN DELAWARE) ("MGT"), and Olympic Receivables Finance Corp. II ("ORFC II") (each of MGT and ORFC II, a "PURCHASER" and together, the "PURCHASERS"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as agent for the benefit of the Purchasers (the "PURCHASERS' AGENT"), is by and among the parties listed above. Capitalized terms used in this Amendment and not otherwise defined shall have the meanings assigned to such terms in the Certificate Purchase Agreement. RECITALS WHEREAS, pursuant to Section 13.01 of the Certificate Purchase Agreement, the parties to such Agreement are authorized to amend the Certificate Purchase Agreement in a written amendment signed by all parties thereto; and WHEREAS, pursuant to Section 2.04 of the Certificate Purchase Agreement, the parties may agree in writing to the extension of the Purchase Commitment Expiration Date; and WHEREAS, pursuant to the Certificate Purchase Agreement, only "financial institutions" are permitted to become "Purchasers" thereunder; and WHEREAS, MGT is currently the sole Purchaser under the Certificate Purchase Agreement; and WHEREAS, ORFC II has agreed to become a Purchaser under the Certificate Purchase Agreement; and WHEREAS, the parties to the Certificate Purchase Agreement desire to amend the definition of "Purchaser" therein in order to permit ORFC II to become a Purchaser; and WHEREAS, the parties to the Certificate Purchase Agreement desire to extend the Purchase Commitment Expiration Date by amending the related definition in the Certificate Purchase Agreement; and WHEREAS, due to the addition of ORFC II as a Purchaser under the Certificate Purchase Agreement, the Purchase Commitments and Purchaser Percentages will be affected as evidenced herein. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties to this Amendment agree as follows: SECTION 1. AMENDMENT OF DEFINITION OF PURCHASER. (a) The first paragraph of the Certificate Purchase Agreement is amended by deleting the words "each FINANCIAL INSTITUTION which has executed a signature page thereto or an Assignment of Purchase Commitment in the form of Exhibit A hereto (each a "PURCHASER" and together, the "PURCHASERS")" and inserting in its place the phrase "each PURCHASER (as defined below)." (b) A new definition of "Purchaser" is added to Section 1.01 of the Certificate Purchase Agreement and reads as follows: "PURCHASER" means ORFC II or any financial institution which has executed a signature page to this Agreement or an Assignment of Purchase Commitment in the form of Exhibit A hereto, or the successors or assigns of any of the above. SECTION 2. ADDITIONAL PURCHASER; EVIDENCE OF PURCHASE COMMITMENTS AND PURCHASE PERCENTAGES. ORFC II hereby agrees to become a Purchaser under the Certificate Purchase Agreement. Following the addition of ORFC II as a Purchaser, MGT's Purchase Percentage and Purchase Commitment will be revised. The Purchasers will evidence their respective Purchase Commitments and Purchase Percentages by executing signature pages to this Amendment. Such signature pages shall supersede the signature pages to the Certificate Purchase Agreement, and from and after the date of this Amendment, all references to the signature pages of the Certificate Purchase Agreement shall refer to the signature pages to this Amendment. SECTION 3. EXTENSION AND AMENDMENT OF PURCHASE COMMITMENT EXPIRATION DATE. The parties hereto agree to extend the Purchase Commitment Expiration Date and to amend such definition. The definition of "Purchase Commitment Expiration Date" in Section 1.01 of the Certificate Purchase Agreement is hereby amended to read as follows: "PURCHASE COMMITMENT EXPIRATION DATE" means the earliest of (i) January 17, 1997, (ii) the date on which an event which causes or might cause a Certificate Purchase Termination Event occurs, and (iii) the date on which a Securitized Offering occurs; provided that the Purchase Commitment Expiration Date may be extended from time to time in accordance with Section 2.04 hereof. SECTION 4. CERTIFICATE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED AND SUPPLEMENTED. Except as specifically stated herein, all of the terms and conditions of the Certificate Purchase Agreement shall remain in full force and effect. All references to the Certificate Purchase Agreement in any other document or instrument shall be deemed to mean the Certificate Purchase Agreement, as amended and supplemented by -2- this Amendment. This Amendment shall not constitute a novation of the Certificate Purchase Agreement, but shall constitute an amendment and supplement thereto. The parties hereto agree to be bound by the terms and obligations of the Certificate Purchase Agreement, as supplemented by this Amendment, as though the terms and obligations of the Certificate Purchase Agreement were set forth herein. SECTION 5. EFFECTIVENESS. This Amendment shall become effective as of December 20, 1996 upon receipt by the Purchasers' Agent of (i) counterparts of this Amendment, duly executed by each of the parties hereto, (ii) notice that the conditions to effectiveness of the Agreement to Extend Purchase Commitment Expiration Date Relating to Note Purchase Agreement dated the date hereof have been satisfied and (iii) confirmation by each of S&P and Moody's of the then- current ratings of the Commercial Paper Notes. SECTION 6. PRIOR UNDERSTANDINGS. This Amendment sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral. SECTION 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. -3- IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller By:/s/ Mike Sherman ----------------------------------- Name: Mike Sherman Title: Treasurer OLYMPIC FINANCIAL LTD., as Servicer and in its individual capacity By:/s/ Mike Sherman ----------------------------------- Name: Mike Sherman Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Purchaser By:/s/ Richard A. Burke Purchase ----------------------------------- Commitment: $14,850,000 Name: Richard A. Burke Purchase Percentage: 50% Title: Vice President OLYMPIC RECEIVABLES FINANCE CORP. II, as a Purchaser By:/s/ illegible Purchase ----------------------------------- Commitment: $14,850,000 Name: Purchase Percentage: 50% Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Purchasers' Agent By:/s/ Richard A. Burke ----------------------------------- Name: Richard A. Burke Title: Vice President -4- EX-10.24 25 SECOND AMENDMENT & CONSENT DATES AS OF 1/17/1997 EXECUTION COPY - ------------------------------------------------------------------------------- SECOND AMENDMENT AND CONSENT dated as of January 17, 1997 Relating to CERTIFICATE PURCHASE AGREEMENT among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller, OLYMPIC FINANCIAL LTD. as Servicer and in its individual capacity, THE PARTIES SIGNATORY HERETO as Purchasers, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent for the Purchasers - ------------------------------------------------------------------------------- THIS SECOND AMENDMENT AND CONSENT dated as of January 17, 1997 (this "AMENDMENT") Relating to the Certificate Purchase Agreement dated as of December 28, 1995 and amended as of December 20, 1996 (as amended and supplemented from time to time, the "CERTIFICATE PURCHASE AGREEMENT"), by and among OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, a Delaware business trust (the "SELLER"), OLYMPIC FINANCIAL LTD., a Minnesota corporation, as Servicer (as defined below) and in its individual capacity ("OFL"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK (successor to J.P. MORGAN DELAWARE) ("MGT"), and Olympic Receivables Finance Corp. II ("ORFC II") (each of MGT and ORFC II, a "PURCHASER" and together, the "PURCHASERS"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as agent for the benefit of the Purchasers (the "PURCHASERS' AGENT"), is by and among the parties listed above. Capitalized terms used in this Amendment and not otherwise defined shall have the meanings assigned to such terms in the Certificate Purchase Agreement. RECITALS WHEREAS, pursuant to Section 13.01 of the Certificate Purchase Agreement, the parties to such Agreement are authorized to amend the Certificate Purchase Agreement in a written amendment signed by all parties thereto; and WHEREAS, pursuant to Section 2.04 of the Certificate Purchase Agreement, the parties may agree in writing to the extension of the Purchase Commitment Expiration Date; and WHEREAS, pursuant to Section 2.05(a) of the Certificate Purchase Agreement, the Seller may notify the Purchasers' Agent in writing of the Seller's determination to reduce the aggregate of the Purchase Commitments, such reduction to become effective in the manner provided in the Certificate Purchase Agreement; and WHEREAS, pursuant to Section 8.05 of the Certificate Purchase Agreement, the Seller agreed not to make any material amendment to the Sale and Servicing Agreement without the prior written consent of the Purchasers; and WHEREAS, pursuant to Section 9.05 of the Certificate Purchase Agreement, OFL agreed not to make any material amendment to the Sale and Servicing Agreement or the Purchase Agreement without the prior written consent of the Purchasers; and WHEREAS, the parties to the Certificate Purchase Agreement desire to further amend the Certificate Purchase Agreement to, among other things, change certain of the Incremental Purchase Conditions, add certain covenants and change certain rates and fees; and WHEREAS, the parties to the Certificate Purchase Agreement desire to extend the Purchase Commitment Expiration Date by amending the related definition in the Certificate Purchase Agreement; and WHEREAS, MGT and the Purchasers' Agent desire to accept this Amendment as the Seller's notice of reduction of the aggregate Purchase Commitments; and WHEREAS, due to the reduction of the Purchase Commitments, the Purchase Commitments will be affected as evidenced herein; and WHEREAS, the Purchasers and the Purchasers' Agent desire to consent to amendment of the Sale and Servicing Agreement and the Purchase Agreement. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties to this Amendment agree as follows: SECTION 1. NEW DEFINITIONS. The following new definitions are hereby added to Section 1.01 of the Certificate Purchase Agreement: "CAPITAL BASE" shall mean, at any date, OFL's Tangible Net Worth at such date. "CAPITAL BASE PROCEEDS," for any period, shall mean the proceeds received by OFL from any sale of equity securities during such period (net of direct, out-of-pocket expenses incurred in connection with such sale). "CHANGE OF CONTROL" shall mean the occurrence of any of the following with respect to OFL: (a) (i) a majority of the directors of OFL shall be Persons other than Persons (x) for whose election proxies shall have been solicited by the board of directors of OFL or (y) who are then serving as directors appointed by the board of directors to fill vacancies on the board of directors caused by death or resignation (but not by removal) or to fill newly-created directorships or (ii) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 50% or more in voting power of the outstanding voting stock of OFL; or (b) OFL shall fail to own, directly or indirectly, 100% of the outstanding capital stock of ORFC II. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting 2 profession), which are applicable to the circumstances as of the date of any determination. "NET INCOME" shall mean, for any period, OFL's after-tax net income for such period determined in accordance with GAAP but after deduction of dividend payments on OFL's Cumulative Convertible Exchangeable Preferred Stock (as described in OFL's Amendment No. 3 to Form S-1 Registration Statement dated November 22, 1993). "NET WORTH" shall mean the total of all assets appearing on OFL's balance sheet after deducting all proper reserves (including reserves for depreciation, obsolescence and amortization) minus all liabilities of OFL, in each case determined in accordance with GAAP. "PERMITTED ACQUISITION" shall mean the acquisition by OFL or any of its subsidiaries of any Person that is a going concern that satisfies the conditions specified in that certain Credit Agreement dated as of July 11, 1996, among OFL, the several institutions party thereto, Bank of America National Trust and Savings Association, as agent and First Bank National Association, as co-manager. "TANGIBLE NET WORTH" shall mean, at any time, OFL's Net Worth at such time, excluding the value of goodwill (other than goodwill arising from a Permitted Acquisition), trademarks, trade names, copyrights, patents, licenses and similar intangibles but specifically including, all of OFL's Finance Income Receivables (calculated in a manner consistent with OFL's audited consolidated balance sheet as of December 31, 1995) as at such time. SECTION 2. INCREASE IN EURODOLLAR RATE UNDER CERTAIN CIRCUMSTANCES. The parties hereto agree to increase the Eurodollar Rate if and for so long as any Warehousing Period (as defined in the Sale and Servicing Agreement) exceeds 90 days and accordingly the definition of "Eurodollar Rate" in Section 1.01 of the Certificate Purchase Agreement is hereby amended to read as follows: "EURODOLLAR RATE" shall mean, with respect to any Certificate Funding Period, a rate per annum equal to Adjusted LIBOR for such Certificate Funding Period plus either (i) 0.55% of one percent per annum or (ii) if and for so long as any Warehousing Period exceeds 90 days, 0.80% of one percent per annum. Each determination of the Eurodollar Rate shall be calculated on the basis of actual days elapsed and a year of 360 days. SECTION 3. EXTENSION AND AMENDMENT OF PURCHASE COMMITMENT EXPIRATION DATE. The parties hereto agree to extend the Purchase Commitment Expiration Date and to amend such definition. The definition of "Purchase Commitment Expiration 3 Date" in Section 1.01 of the Certificate Purchase Agreement is hereby amended to read as follows: "PURCHASE COMMITMENT EXPIRATION DATE" means the earliest of (i) December 19, 1997, (ii) June 30, 1997, but only if any Purchaser, in its sole and absolute discretion, determines to terminate its Purchase Commitment hereunder and so notifies the Seller, OFL and the Purchasers' Agent in writing on or before May 30, 1997 and such terminating Purchaser's Purchase Commitment is not accepted by another existing or new Purchaser or Purchasers, (iii) the date on which an event which causes or might cause a Certificate Purchase Termination Event occurs, and (iv) the date on which a Securitized Offering occurs; provided that the Purchase Commitment Expiration Date may be extended from time to time in accordance with Section 2.04 hereof. SECTION 4. ADDITIONAL INCREMENTAL PURCHASE CONDITIONS. (a) Clause (ii) of Section 2.03(a) of the Certificate Purchase Agreement is hereby amended to read as follows: (ii) The Purchasers' Agent shall have received a completed Notice of Incremental Purchase by 2:00 p.m., New York City time, on the third LIBOR Business Day before such Incremental Purchase Date (if any such Notice is received after 2:00 p.m., the related Incremental Purchase shall occur on the fourth LIBOR Business Day following such receipt); (b) Clause (vi) of Section 2.03(a) is hereby amended to include a reference to the Certificate Purchase Agreement and now reads as follows: (vi) The Seller, the Owner Trustee, the General Partner, OFL and ORFC II shall be in compliance with all of their respective covenants contained in the Trust Agreement, the Sale and Servicing Agreement, the Purchase Agreement, each Assignment Agreement, each Transfer Agreement, the Indenture and this Certificate Purchase Agreement; SECTION 5. CHANGE IN AMOUNT OF INCREMENTAL PURCHASE. Section 2.03(b) of the Certificate Purchase Agreement is hereby amended to require that each Incremental Purchase be made in the amount of the aggregate unused Purchase Commitments under the Certificate Purchase Agreement and now reads as follows: (b) Each Incremental Purchase shall be requested in the amount equal to the aggregate of the unused Purchase Commitments hereunder and the initial Funding Rate on the Investor Certificates purchased on each such Incremental Purchase Date shall be based on the Euro-Dollar Rate. SECTION 6. DECREASE IN PURCHASE COMMITMENTS. In accordance with the provisions of Section 2.05(a) of the Certificate Purchase Agreement, the Purchasers and the 4 Purchasers' Agent acknowledge notice of the reduction in the aggregate of the Purchase Commitments from $29,700,000 to $22,275,000. Following such reduction, the Purchasers' Purchase Percentage will remain unchanged, and the Purchase Commitments will be revised proportionately. The Purchasers will evidence their respective Purchase Commitments and Purchase Percentages by executing signature pages to this Amendment. Such signature pages shall supersede the signature pages to the Certificate Purchase Agreement, and from and after the date of this Amendment, all references to the signature pages of the Certificate Purchase Agreement shall refer to the signature pages to this Amendment. SECTION 7. ADDITION OF CERTIFICATE PURCHASE TERMINATION EVENT. The following event is added as a new clause (g) to Section 2.07 of the Certificate Purchase Agreement as an additional "Certificate Purchase Termination Event": (g) a Change of Control shall have occurred without the consent of the Purchasers' Agent. SECTION 8. ADDITIONAL OFL COVENANTS. The following new OFL covenant is added as new Section 9.06 to the Certificate Purchase Agreement and reads as follows: SECTION 9.06. MINIMUM CAPITAL BASE. (a) OFL will not permit its consolidated Capital Base, on the last day of its fiscal year, to be less than the sum of (i) its consolidated Capital Base on the last day of the immediately preceding fiscal year, PLUS (ii) to the extent Net Income for such fiscal year is greater than zero, Net Income for such fiscal year PLUS (iii) Capital Base Proceeds for such fiscal year. (b) OFL will not permit its consolidated Capital Base, on the last day of any fiscal quarter other than the last day of its fiscal year, to be less than the sum (i) 95% of its consolidated Capital Base on the last day of the immediately preceding fiscal year PLUS (ii) Capital Base Proceeds since the last day of the immediately preceding fiscal year. SECTION 9. INCREASE IN PURCHASE AVAILABILITY FEE UNDER CERTAIN CIRCUMSTANCES. The parties hereto agree to increase the Purchase Availability Fee if and for so long as any Warehousing Period (as defined in the Sale and Servicing Agreement) exceeds 90 days and accordingly, Section 10.02(b) of the Certificate Purchase Agreement is amended to read as follows: (b) OFL shall pay to each Purchaser a Purchase Availability Fee, payable quarterly in arrears, on the last day of each calendar quarter during the period such Purchaser has a Purchase Commitment under this Certificate Purchase Agreement and on the Purchase Commitment Expiration 5 Date, as the same may be extended from time to time. The Purchase Availability Fee for each Purchaser shall be a per annum fee equal to such Purchaser's average daily unused Purchase Commitment multiplied by either (i) .35% per annum or (ii) if and for so long as any Warehousing Period exceeds 90 days, .45% per annum. SECTION 10. AMENDMENT TO NOTICE OF INCREMENTAL PURCHASE. The Notice of Incremental Purchase, included as Exhibit C to the Certificate Purchase Agreement, is hereby amended and now reads as set forth in the Exhibit C attached to this Amendment. SECTION 11. CONSENT TO AMENDMENT TO SALE AND SERVICING AGREEMENT AND PURCHASE AGREEMENT. The Purchasers hereby consent, pursuant to Section 8.05 and 9.05 of the Certificate Purchase Agreement, to the Amendment No. 3 to Sale and Servicing Agreement and Amendment No. 3 to Receivables Purchase Agreement, each of even date herewith, substantially in the forms attached hereto as Appendices A and B. SECTION 12. CERTIFICATE PURCHASE AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED AND SUPPLEMENTED. Except as specifically stated herein, all of the terms and conditions of the Certificate Purchase Agreement shall remain in full force and effect. All references to the Certificate Purchase Agreement in any other document or instrument shall be deemed to mean the Certificate Purchase Agreement, as amended and supplemented by this Amendment. This Amendment shall not constitute a novation of the Certificate Purchase Agreement, but shall constitute an amendment and supplement thereto. The parties hereto agree to be bound by the terms and obligations of the Certificate Purchase Agreement, as supplemented by this Amendment, as though the terms and obligations of the Certificate Purchase Agreement were set forth herein. SECTION 13. EFFECTIVENESS. This Amendment shall become effective as of January 17, 1997 upon receipt by the Purchasers' Agent of (i) counterparts of this Amendment, duly executed by each of the parties hereto, (ii) notice that the conditions to effectiveness of the First Amendment and Consent Relating to Note Purchase Agreement dated the date hereof have been satisfied and (iii) confirmation by each of S&P and Moody's of the then-current ratings of the Commercial Paper Notes. SECTION 14. PRIOR UNDERSTANDINGS. This Amendment sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral. SECTION 15. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. 6 SECTION 16. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 7 IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST as Seller By: Wilmington Trust Company, as Owner Trustee By:/s/ illegible ---------------------------- Name: Authorized Officer OLYMPIC FINANCIAL LTD., as Servicer and in its individual capacity By:/s/ Michael J. Sherman ---------------------------- Name: Michael J. Sherman Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Purchaser Purchase By:/s/ Richard A. Burke Commitment: $11,137,500 ---------------------------- Purchase Percentage: 50% Name: Richard A. Burke Title: Vice President OLYMPIC RECEIVABLES FINANCE CORP. II, as a Purchaser Purchase By:/s/ John A. Witham Commitment: $11,137,500 ---------------------------- Purchase Percentage: 50% Name: John A. Witham Title: Senior Vice President & Chief Financial Officer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Purchasers' Agent By:/s/ Richard A. Burke ---------------------------- Name: Richard A. Burke Title: Vice President 8 EXHIBIT C to Certificate Purchase Agreement Form of Notice of Incremental Purchase or Repayment/Redemption Olympic Automobile Receivables Warehouse Trust Variable Funding Certificates A. Proposed Incremental Purchase or Repayment/Redemption Date: __________ B. Certificate Balance of Investor Certificates (prior to giving effect to Incremental Purchase or Repayment/Redemption, as applicable, on date hereof) $__________ C. Amount of requested Incremental Purchase (amount of remaining aggregate Purchase Commitments) $__________ D. Repayment/Redemption Amount $__________ E. Certificate Balance of Investor Certificates (after giving effect to Incremental Purchase or Repayment/Redemption, as applicable, on date hereof) $__________ F. Facility Limit $__________ G. Remaining Facility Limit $__________ H. Calculations (after giving effect to the conveyance of Receivables on the related Transfer Date) 1. The aggregate Principal Balance of Receivables with original maturities from 73 to 84 months divided by the aggregate of the Principal Balances of all Receivables (maximum of 7.5%) __________% 2. The aggregate Principal Balance of Receivables attributable to loans originated under OFL's "Classic" program divided by the aggregate of the Principal Balances of all Receivables (maximum of 55%) __________% 3. The aggregate Principal Balance of Receivables attributable to loans defined by OFL as "Financed Repossessions" divided by the aggregate of the Principal Balances of all Receivables (maximum of 3.0%) __________% 4. Weighted Average Coupon of Receivables __________% 5. Weighted Average Maturity of Receivables __________% I. Certifications (applicable only with respect to an Incremental Purchase) 1. The information relating to the Receivables to be purchased by Olympic Automobile Receivables Warehouse Trust (the "Trust") and pledged to Norwest Bank Minnesota, National Association, as trustee (the "Indenture Trustee") under the Indenture dated as of December 28, 1995, as amended (the "Indenture"), is true and correct. 2. The representations and warranties of Olympic Financial Ltd. ("OFL") in the Sale and Servicing Agreement dated as of December 28, 1995, as amended (the "Sale and Servicing Agreement"), among the Trust, Olympic Receivables Financial Corp. ("ORFC II"), OFL, in its individual capacity and as servicer of the Receivables, and Norwest Bank Minnesota, National Association, the Receivables Purchase Agreement dated December 28, 1995, as amended, by and between OFL and ORFC II and the Certificate Purchase Agreement dated as of December 28, 1995, as amended (the "Certificate Purchase Agreement"), by and among the Trust, OFL, in its individual capacity and as servicer of the Receivables, the financial institutions which executed signature pages thereto and Morgan Guaranty Trust Company of New York are true and correct in all material respects as of the date hereof. 3. The representations of the Trust in the Certificate Purchase Agreement are true and correct in all material respects as of the date hereof. 4. The representations of ORFC II in the Sale and Servicing Agreement are true and correct in all material respects as of the date hereof. C-2 5. The Incremental Purchase Conditions specified in Section 2.03(a) of the Certificate Purchase Agreement have been satisfied and/or will be satisfied as of the applicable Incremental Purchase Date. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST By: Wilmington Trust Company, as Owner Trustee By: ________________________ Authorized Officer OLYMPIC FINANCIAL LTD. By: ________________________ Authorized Officer Date: ____________________ C-3 EX-10.25 26 ASSET PURCHASE AGREEMENT DATED DEC 28, 1995 ASSET PURCHASE AGREEMENT Dated as of December 28, 1995 J.P. MORGAN DELAWARE, as purchaser agent (in such capacity, the "AGENT"), and as agent for the purchasers of the Purchased Note (hereinafter defined) (in such capacity, for the benefit of Delaware Funding Corporation and the purchasers hereunder, as their interests may appear, the "ADMINISTRATIVE AGENT"), and each of the parties (each an "APA PURCHASER") who has executed a signature page to this Asset Purchase Agreement (this "ASSET PURCHASE AGREEMENT") or an Assignment of Purchase Commitment in the form of Exhibit A hereto agree as follows: RECITALS WHEREAS Olympic Financial Ltd. ("OFL"), as seller, and Olympic Receivables Financial Corp. II ("ORFC II"), as buyer, have entered into a Receivables Purchase Agreement and Assignment dated as of December 28, 1995 (the "PURCHASE AGREEMENT") and will from time to time enter into assignment agreements providing for the sale and assignment by OFL to ORFC II of a pool of specified Receivables; WHEREAS ORFC II, as seller, and Olympic Automobile Receivables Warehouse Trust (the "TRUST"), as buyer, have entered into a Sale and Servicing Agreement dated as of December 28, 1995 (the "SALE AND SERVICING AGREEMENT") with OFL, in its individual capacity and as Servicer, and Norwest Bank Minnesota, National Association, as Backup Servicer, and will from time to time enter into transfer agreements providing for the sale and assignment by ORFC II to the Trust of a pool of Specified Receivables; WHEREAS the Trust has entered into an Indenture dated as of December 28, 1995 (the "INDENTURE") with Norwest Bank Minnesota, National Association, as trustee (the "INDENTURE TRUSTEE"), providing for the issuance of the Variable Funding Notes (the "NOTES"); WHEREAS the Administrative Agent, Delaware Funding Corporation ("DFC"), OFL, in its individual capacity and as Servicer, and the Trust have entered into a Note Purchase Agreement dated as of December 28, 1995 (the "NOTE PURCHASE AGREEMENT"), pursuant to which DFC through the Administrative Agent, as agent for DFC, has purchased the Notes and has agreed to fund, from time to time, increases in the principal balance (the "OUTSTANDING AMOUNT") of the Notes (each, an "INCREMENTAL PURCHASE") (the "PURCHASED NOTE" or "PURCHASED INTEREST"); WHEREAS DFC may from time to time sell undivided percentage interests in the Purchased Note ("PERCENTAGE INTERESTS") to the APA Purchasers; WHEREAS each APA Purchaser has agreed to purchase Percentage Interests that from time to time may be offered for sale by the Administrative Agent on behalf of DFC during the term of its Purchase Commitment (as defined below) under this Asset Purchase Agreement; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows: 1. DEFINITIONS. Unless otherwise defined herein, the terms defined in the Indenture, the Trust Agreement or Note Purchase Agreement, as applicable, are used herein as therein defined. 2. PURCHASE OF PERCENTAGE INTERESTS. (a) An APA Purchaser shall become a party hereto (i) by executing and delivering to the Agent a counterpart of the signature page to this Asset Purchase Agreement or (ii) in accordance with the procedures set forth in Section 9 hereof. Thereupon, upon approval of such proposed APA Purchaser by the Transferor in accordance with the provisions of Section 9(b)(2) and acceptance and recording by the Agent in the Register (defined below), such APA Purchaser shall become a party to this Asset Purchase Agreement from and after the effective date set forth on such signature page. APA Purchasers may become parties hereto at different times and from time to time in accordance with the foregoing procedure. The signature page shall set forth the initial undivided percentage (such initial percentage, as it may be changed from time to time, the "PERCENTAGE") interest in the Purchased Note that an APA Purchaser has agreed to purchase hereunder, the maximum Outstanding Amount of the Percentage Interest in the Purchased Note that an APA Purchaser is obligated to purchase hereunder plus accrued and unpaid interest on the Purchased Note (the "MAXIMUM PURCHASE"), the effective date of the purchase commitment and the expiration date of the purchase commitment (the "PURCHASE TERMINATION DATE"). No Downgraded Purchaser (as defined below) shall be permitted to extend its Purchase Termination Date. In the event that any APA Purchaser desires to extend its Purchase Termination Date for a Maximum Purchase amount that is less than the amount of its Maximum Purchase prior to DFC's request for an extension of the Purchase Termination Date, DFC, in its sole and absolute discretion, may accept such extension; PROVIDED, HOWEVER, that such APA Purchaser shall be deemed to be a Reducing Purchaser (as defined below) for purposes of Section 13(g) to the extent of such APA Purchaser's Reduced Amount (as defined below). For the purposes of this Asset Purchase Agreement, "DOWNGRADED PURCHASER" means any APA Purchaser that has its commercial paper or short-term deposit rating lowered below (a) P-1 by Moody's or (b) A-1+ by S&P and "NON- EXTENDING PURCHASER" shall mean an APA Purchaser that has not consented to the extension of its Purchase Termination Date. 2 (b) From time to time upon notice from the Agent to each APA Purchaser, each of the APA Purchasers severally and not jointly shall purchase, on the terms and conditions herein set forth, in accordance with their respective Percentages, Percentage Interests that the Administrative Agent, as agent for DFC, offers for sale, up to such Purchaser's Maximum Purchase. In addition, the Administrative Agent, as agent for DFC, shall offer for sale to each APA Purchaser, and each APA Purchaser shall purchase, on the terms and conditions herein set forth, in accordance with their respective Percentages, a 100% Percentage Interest in the Outstanding Amount of the Purchased Note, up to each such APA Purchaser's Maximum Purchase, if any of the following events occurs (each, a "Put Event"): (i) an Event of Default specified in Section 5.01(v) or (vi) of the Indenture, (ii) a Note Purchase Termination Event specified in Section 2.08(d) or (h) of the Note Purchase Agreement, or (iii) a Purchase Termination Event specified in Section 2.1(c)(2)(ix) of the Sale and Servicing Agreement. Upon the occurrence of a Put Event, the Administrative Agent shall notify the Collateral Agent to instruct Morgan Guaranty Trust Company of New York, as depositary and issuing and paying agent for DFC's Commercial Paper Notes, to stop the issuance and delivery of Commercial Paper Notes relating to the Seller. (c) Each such notice of purchase referred to in Section 2(b) shall be given no later than 11:00 a.m. (New York City time) on the Business Day of such purchase (each, a "PURCHASE DATE"), shall be irrevocable, shall be sent by telecopier, telex or cable to all APA Purchasers concurrently, and shall specify the date of such purchase and the Outstanding Amount of Notes to be purchased and the accrued and unpaid interest thereon. The Agent, after consultation with OFL, shall request a rate (the "PURCHASER FUNDING RATE") for each period designated by the Agent (each, a "TRANCHE PERIOD") during which a Percentage Interest in a Purchased Note will be held by an APA Purchaser, which Purchaser Funding Rate shall be calculated based on the Eurodollar Rate set pursuant to the procedures set forth in the definition of "LIBOR" or Base Rate (each as defined below and collectively, the "RATE"). Each Tranche Period based on a Eurodollar Rate shall be a period of 1, 2 or 3 months; provided, however, that if on the last day of any Tranche Period, the Seller has notified the Administrative Agent that a Securitized Offering or a redemption of the Notes with the proceeds of the sale of Trust Property is expected to occur within 30 days of such last day, the Tranche Period beginning on such last day may be based on a 1-week, 2-week or 3-week LIBOR, with a 1-week Tranche Period selected no more than twice in connection with such Securitized Offering or redemption of the Notes. If the Agent has requested a Purchaser Funding Rate for any Tranche Period to be calculated based on the Eurodollar Rate, the Purchaser Funding Rate for such Tranche Period shall commence three LIBOR Business Days after notice of such requested Purchaser Funding Rate (and prior to such commencement, shall be set at the applicable Purchaser Funding Rate for the prior Tranche Period, if applicable, or otherwise shall be calculated 3 based on Base Rate). Each APA Purchaser will calculate the Purchaser Funding Rate based on the Rate requested by the Agent and for the Tranche Period designated by the Agent; PROVIDED, HOWEVER, that if the Agent has requested a Purchaser Funding Rate based on the Eurodollar Rate, and either: (a) deposits in United States dollars (in the applicable amounts) are not available to the APA Purchasers generally in the London interbank market for such Tranche Period, or (b) the Majority Purchasers advise the Agent that the Adjusted LIBOR Rate (as defined below) will not adequately and fairly reflect the cost to such APA Purchasers of maintaining or funding the Outstanding Amount of the Notes based on the Eurodollar Rate, the Agent shall so notify the Administrative Agent, whereupon until the Agent notifies the Administrative Agent that such circumstances no longer exist, the obligation of the APA Purchasers to accept a Purchaser Funding Rate based on the Eurodollar Rate shall be suspended; and PROVIDED FURTHER, that for any Tranche Period commencing on or after the occurrence of (1) any Default Rate Event or within five Business Days of the Expiry Date (as defined in Section 13(i) hereof), the Purchaser Funding Rate shall equal the Base Rate plus one (1) percent per annum or (2) any Note Purchase Termination Event (other than a Default Rate Event), the Purchaser Funding Rate shall equal the Adjusted LIBOR for such Tranche Period plus one (1) percent per annum. Each APA Purchaser will notify the Agent by 12:00 noon (New York City time) on the date two LIBOR Business Days prior to the first day of the requested Tranche Period if, in its judgment, the requested Purchaser Funding Rate based on the Eurodollar Rate is not going to adequately reflect its cost. Each APA Purchaser will establish the Purchaser Funding Rate based on the Eurodollar Rate at the Eurodollar Rate and will establish the Rate based on the Base Rate at the Base Rate. Prior to 2:00 p.m. (New York City time) on each Purchase Date, each APA Purchaser shall pay the Agent for the account of DFC in immediately available funds in United States dollars, by depositing to an account designated by the Agent in New York City, an amount (such APA Purchaser's "PURCHASE PRICE") equal to such APA Purchaser's Percentage of the lesser of (x) the Outstanding Amount of Notes being purchased on such Purchase Date plus accrued and unpaid interest thereon, if any (less any funds on deposit with Morgan Guaranty Trust Company of New York, as Collateral Agent, for DFC and the other specified parties, held in respect of such interest), and (y) (I) the sum of (A) the aggregate Principal Balance of Receivables that are not Liquidated Receivables as of the earlier of the Purchase Date or the date on which the Put Event, if any, occurred, and (B) all Collected Funds received by the Servicer that have not been deposited into the Collection Account and applied in accordance with the provisions of the Sale and Servicing Agreement divided by (II) a subordination reserve adjustment, computed by adding to the number 1 an amount (expressed as a fraction) equal to 50% of 9%. 4 For the purpose of determining the Purchaser Funding Rate hereunder, the following terms shall have the following meanings: "BASE RATE" shall mean, with respect to each purchase of the Purchased Note (or portion thereof), and with respect to each day during a Tranche Period, commencing on the first Business Day of such Tranche Period, a rate per annum equal to the higher of (i) the prime rate announced from time to time by the Agent and in effect on the morning of each day and (ii) the rate equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for each day (or, if such day is not a Business Day, the next succeeding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any such day, the average of the quotations for such day for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it plus one-half of one percent (1/2 of 1%). Each determination of the Base Rate shall be calculated on the basis of actual days elapsed and a year of 365 or 366 days, as the case may be. "EURODOLLAR RATE" shall mean, with respect to each purchase of the Purchased Note (or portion thereof), and with respect to any Tranche Period, a rate per annum equal to Adjusted LIBOR for such Tranche Period plus .375% of one percent per annum. Each determination of the Eurodollar Rate shall be calculated on the basis of actual days elapsed and a year of 360 days. "ADJUSTED LIBOR" shall mean, with respect to each purchase of the Purchased Note (or portion thereof), and with respect to any Tranche Period, a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100 of 1%) by dividing (i) LIBOR for such Tranche Period by (ii) a percentage equal to 100% minus the maximum rate of all reserve requirements as specified in Regulation D of the Board of Governors of the Federal Reserve System (or any successor to all or any portion thereof establishing reserve requirements) including any marginal, emergency, supplemental, special or other reserves, that are applicable to an APA Purchaser during such Tranche Period in respect of eurocurrency or eurodollar funding, lending or liabilities. "LIBOR" shall mean, with respect to each purchase of the Purchased Note (or portion thereof), and with respect to any Tranche Period, a rate per annum determined by the Agent to be the rate at which deposits in Dollars are offered to the Agent by prime banks in the London Interbank market at approximately 11:00 a.m. (London time) two LIBOR Business Days before the first day of such Tranche Period, for a period of time comparable to such Tranche Period. 5 "LIBOR BUSINESS DAY" shall mean any Business Day on which commercial banks are open for dealings in Dollar deposits in London. (d) Notwithstanding Section 2(c), an APA Purchaser shall not be obligated to make purchases under such Section at any time in an amount that would exceed such APA Purchaser's Maximum Purchase. Each APA Purchaser's obligation shall be several, such that the failure of any APA Purchaser to make payment to the Agent in connection with any purchase hereunder shall not relieve any other APA Purchaser of its obligation hereunder to make payment for the purchase by such other APA Purchaser up to such other APA Purchaser's Maximum Purchase. If the Agent shall have been notified by any APA Purchaser that such APA Purchaser will not (or if any APA Purchaser does not) make available the amount that would represent such APA Purchaser's Percentage of any purchase (other than a Non-Pro Rata Purchase (as defined below)) requested by the Agent or DFC, each other APA Purchaser agrees, subject to the first sentence of this Section 2(d), to make available to the Agent a ratable share of such amount (calculated on the basis of the Percentages of the APA Purchasers that the Agent has determined will make such purchase). The defaulting APA Purchaser agrees to purchase from each APA Purchaser that shall have purchased a portion of such defaulting APA Purchaser's Percentage (each such portion, a "DEFAULTED PORTION"), forthwith upon demand, the Defaulted Portion so purchased, together with interest at the applicable Purchaser Funding Rate on that portion of Outstanding Amount of the Purchased Note funded by such APA Purchaser, for each day that an APA Purchaser is required to fund a portion of the defaulting APA Purchaser's Percentage; PROVIDED, if such defaulting APA Purchaser has not purchased such Defaulted Portion within three Business Days following such demand, such defaulting APA Purchaser shall thereafter be required to pay interest with respect to such Defaulted Portion at the Base Rate plus 2% per annum. (e) Each APA Purchaser shall be obligated to purchase Percentage Interests under this Asset Purchase Agreement (its "PURCHASE COMMITMENT") until the earliest of (i) the Purchase Termination Date of such APA Purchaser's Purchase Commitment, (ii) the date on which the Agent notifies the APA Purchaser that the Indenture has been discharged and satisfied and the Outstanding Amount of the Notes and all accrued and unpaid interest thereon have been paid in full and (iii) (A) the date DFC voluntarily commences any proceeding or files any petition under any bankruptcy, insolvency or similar law seeking the dissolution, liquidation or reorganization of DFC, or (B) if involuntary proceedings or any involuntary petition shall have been commenced or filed against DFC by any Person under any bankruptcy, insolvency or similar law seeking the dissolution, liquidation or reorganization of DFC, the earlier of (y) the date 60 days following the commencement or filing of such proceeding or petition, if such proceeding or petition has not been 6 dismissed on or before such date or (z) the date on which an order of relief has been entered against DFC. (f) The Agent will hold, for the account of each APA Purchaser, the Purchased Notes in which the Purchased Interests were purchased pursuant to Section 2(b), and the Administrative Agent will be the registered holder of the Purchased Notes for all purposes under the Note Purchase Agreement and the Indenture. Within 10 Business Days of each purchase pursuant to Section 2(b) hereof, the Agent will deliver to each APA Purchaser a certificate in the form of Exhibit B attached hereto reflecting each APA Purchaser's ownership of the Percentage Interest so purchased. (g) Notwithstanding that APA Purchasers may have purchased Percentage Interests hereunder and may have received payments from Collected Funds with respect to Receivables sufficient to repay such Percentage Interests in whole or in part, each APA Purchaser may be called upon to purchase additional Percentage Interests (not to exceed the Maximum Purchase for each such APA Purchaser) until the expiration of such APA Purchaser's Purchase Commitment pursuant to Section 2(e) hereof. (h) In the event that DFC assigns any portion of the Purchased Note to another Person (which is managed by the Agent and which in the ordinary course of its business issues commercial paper or other securities to fund its acquisition and maintenance of asset-backed certificates, receivables or interests therein), sales of the Purchased Note by such other Person may be made under this Asset Purchase Agreement on the same terms and conditions as sales or assignments by DFC. 3. REGISTER. The Agent shall maintain at its address, 902 Market Street, Wilmington, Delaware 19801, Attention: Asset Finance Group, a copy of this Asset Purchase Agreement and each signature page hereto and each Assignment of Purchase Commitment approved by the Trust in accordance with the provisions of Section 9(b) and delivered to and accepted by the Agent and a register for the recordation of the names and addresses of the APA Purchasers, their Percentage Interests, effective dates and Purchase Termination Dates, the Outstanding Amount of the Purchased Note owned by each APA Purchaser from time to time and the Purchase Price relating thereto (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Trust, OFL, the Servicer, the Agent and the APA Purchasers may treat each Person whose name is recorded in the Register as an APA Purchaser hereunder for all purposes of this Asset Purchase Agreement. The Register shall be available for inspection by the Trustee, the Trust, OFL, the Servicer, or any APA Purchaser at any reasonable time and from time to time during normal business hours upon reasonable prior notice. 7 4. DISTRIBUTION OF PAYMENTS. (a) Whenever any amount of principal or interest is paid in respect of such APA Purchaser's Percentage Interest in the Purchased Note and such APA Purchaser's Percentage Interest has not been repurchased by DFC pursuant to Section 10 hereof, the Administrative Agent will promptly pay, or cause to be paid, out of funds received by it as a Noteholder under the Indenture, to such APA Purchaser, in United States dollars, its Percentage of such amount (adjusted for differences in the Purchaser Funding Rates to which such APA Purchaser and DFC are entitled and further adjusted to reflect the fact that, except as set forth below, such APA Purchaser is only entitled to the applicable Purchaser Funding Rate on its Purchase Price) accrued from and after the last date on which interest was paid in respect of such Percentage Interest prior to the acquisition of such Percentage Interest by the APA Purchaser. (b) If, after the Agent has paid an APA Purchaser its Percentage of any amount received by an APA Purchaser pursuant to paragraph (a) above, such amount must be returned for any reason (including bankruptcy), such APA Purchaser will repay to the Agent promptly the amount the Agent paid to such APA Purchaser, whereupon such APA Purchaser's Purchased Interest, together with accrued interest thereon, shall be deemed increased or reinstated, as applicable, as if such amount had not been received by such APA Purchaser. After an APA Purchaser has been paid (excluding any repayment referred to in the immediately preceding sentence) its Percentage of the Outstanding Amount of the Purchased Note plus accrued interest thereon (based on the Purchaser Funding Rate to which such APA Purchaser is entitled and further adjusted to reflect the fact that, except as set forth below, the APA Purchaser is only entitled to the applicable Purchaser Funding Rate on its Purchase Price), such APA Purchaser acknowledges that any remaining amounts of principal or interest paid in connection with the Purchased Note to which such APA Purchaser would otherwise be entitled by reason of its Purchased Interest shall be paid to DFC for its own account. (c) Each APA Purchaser's rights as a purchaser of Purchased Interests shall be as set forth herein, but shall not include any right to receive any fees set forth in the DFC Fee Letter, except as set forth in Section 16. 5. REPRESENTATIONS AND WARRANTIES. (a) Neither the Agent nor DFC makes any representation or warranty or assumes any responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Purchase Agreement, any Assignment Agreement, the Trust Agreement, the Indenture, the Sale and Servicing Agreement, any Transfer Agreement, the Note Purchase Agreement, the Custodian Agreement or other agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of the Purchase Agreement, any Assignment Agreement, the Trust 8 Agreement, the Indenture, the Note Purchase Agreement, the Sale and Servicing Agreement, any Transfer Agreement, the Trust Agreement, the Indenture, the Custodian Agreement or other agreement or any instrument or document furnished pursuant thereto or in connection therewith, (ii) the value or collectibility of any Receivable, (iii) the value of the Purchased Note or (iv) the financial condition of the Trust, OFL, ORFC II, the Servicer or any Affiliate thereof or the performance or observance by the Trust, OFL, ORFC II, the Servicer or any Affiliate thereof of any of their respective obligations under the Sale and Servicing Agreement, any Transfer Agreement, the Purchase Agreement, any Assignment Agreement, the Note Purchase Agreement, the Trust Agreement, the Indenture or other agreement or any instrument or document furnished pursuant thereto or in connection therewith. Each of the Agent, the Administrative Agent and DFC does represent to each APA Purchaser, however, that the Percentage Interest which is sold to each APA Purchaser hereunder pursuant to Section 2(b) is, at the time of sale, free and clear of any adverse claims created by or arising as a result of claims against the Agent, the Administrative Agent or DFC. (b) Each APA Purchaser represents that this Asset Purchase Agreement has been duly authorized, executed and delivered by such APA Purchaser pursuant to its corporate powers and constitutes the legal, valid and binding obligation of such APA Purchaser. (c) Each APA Purchaser confirms that such APA Purchaser has received such documents and information as such APA Purchaser has deemed appropriate to make its own credit analysis and decision, independently and without reliance on the Agent or DFC, to enter into this Asset Purchase Agreement and will, independently and without reliance on the Agent or DFC and based on such documents and information as such APA Purchaser shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action hereunder. The Administrative Agent will furnish to each APA Purchaser copies of any financial or other documents that the Administrative Agent receives from time to time under the Note Purchase Agreement, but the Administrative Agent assumes no responsibility for the authenticity, validity, accuracy or completeness thereof. (d) Each APA Purchaser shall be deemed to have represented and warranted at the time of any purchase of a Percentage Interest hereunder that it is an "accredited investor" as defined in Rule 501, promulgated by the Securities and Exchange Commission (the "COMMISSION") under the Securities Act of 1933, as amended; such APA Purchaser understands that the offering and sale of its Percentage Interest in the Purchased Note and the Notes have not been and will not be registered under the Securities Act of 1933, as amended, and have not and will not be registered or qualified under any applicable "blue sky" law, and that the offering and sale of the Percentage Interests and the Notes have not been reviewed by, passed on or submitted to any Federal or state agency or commission, securities exchange or 9 other regulatory body; and such APA Purchaser, through the Administrative Agent, as agent for DFC, is acquiring its Percentage Interest without a view to any distribution, resale or other transfer thereof; such APA Purchaser will not resell or otherwise transfer its Percentage Interest or any portion thereof, except (i) pursuant to an effective registration statement under the Securities Act of 1933, as amended; (ii) in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and applicable state securities or "blue sky" laws; (iii) to a person who the APA Purchaser reasonably believes is a qualified institutional buyer (within the meaning thereof in Rule 144A under the Securities Act of 1933, as amended) that is aware that the resale or other transfer is being made in reliance upon Rule 144A; or (iv) pursuant to Regulation S under the Securities Act of 1933, as amended. In connection therewith, such APA Purchaser hereby agrees that it will not resell or otherwise transfer its Percentage Interest or any portion thereof except as provided unless the purchaser thereof provides to the Administrative Agent an opinion of counsel to the effect that such purchase is in compliance with the registration provisions of the federal securities laws and any applicable provisions under state securities law or pursuant to an available exemption from such provisions. 6. LIABILITY OF THE AGENT, ETC. None of the Agent, the Administrative Agent, DFC or the Referral Agent shall be liable to any APA Purchaser in connection with (i) the administration of the Agreement or (ii) this Asset Purchase Agreement or any purchases hereunder (except pursuant to the Agent's representation in Section 5(a) hereof), in either case except for its own gross negligence or willful misconduct. Without limiting the foregoing, the Agent, DFC and the Referral Agent (i) may consult with legal counsel (including counsel for the Trust, OFL or the Servicer), independent public accountants or other experts and shall not be liable for any action taken or omitted to be taken in good faith in accordance with the advice of such counsel, accountants or other experts, (ii) shall not be responsible for the performance or observance by the Trust, OFL, the Servicer or any Affiliate or agent thereof of any of the terms, covenants or conditions of the Sale and Servicing Agreement, the Purchase Agreement, the Note Purchase Agreement, the Trust Agreement, the Indenture or other agreement or any instrument or document furnished pursuant thereto or in connection therewith, (iii) shall incur no liability by acting upon any notice, consent, certificate or other instrument or writing believed to be genuine and signed or sent by the proper party and (iv) shall not be deemed to be acting as any APA Purchaser's trustee or otherwise in a fiduciary capacity hereunder or under or in connection with the Indenture or the Purchased Note. 10 7. RIGHTS OF THE AGENT. The Agent reserves the right, in its sole discretion (subject to the next sentence), to, and at the request of the Majority Purchasers will, exercise any rights and remedies available to it, as the Administrative Agent, under the Sale and Servicing Agreement, the Purchase Agreement, the Note Purchase Agreement, the Trust Agreement, the Indenture or other agreement or pursuant to applicable law, and also to agree to any amendment, modification or waiver of the Sale and Servicing Agreement, the Purchase Agreement, the Note Purchase Agreement, the Trust Agreement, the Indenture or other agreement or any instrument or document delivered pursuant thereto or in connection therewith, in each case only to the extent its consent is required as "Administrative Agent," "JPMD" or "Noteholder" pursuant to the relevant document. Notwithstanding the foregoing, the Agent, when acting either in its capacity as Agent or as Administrative Agent on behalf of DFC, agrees that it shall not, (a) without the prior written consent of each APA Purchaser, (i) consent to any amendment, modification or waiver of any provision of the Indenture in any way that would reduce the amount or priority of principal or interest that is payable on account of the Notes or delay any scheduled date for payment thereof; (ii) agree to a different Purchaser Funding Rate from the Rate set forth herein; (iii) amend or waive the Note Purchase Termination Event relating to the bankruptcy of the Trust, OFL or ORFC II; or (iv) amend any provision of the Note Purchase Agreement which amendment would have the effect of increasing or changing the nature of any liabilities assumed by the APA Purchasers as contemplated in Section 8 below; or (b) without the prior written consent of the "Majority Purchasers" (defined below), (i) consent to any amendment of the definitions of "Delinquent Receivable,""Liquidated Receivable," Purchased Receivable," "Noteholders' Percentage," "Outstanding Amount," "Excess Spread," "Excess Yield Condition," "Net Portfolio Losses," "Portfolio Loss Ratio," "Delinquency Ratio," "Warehousing Loss Ratio," "Excess Yield Percentage," "Average Excess Yield Percentage," "Average Net Excess Spread Percentage," "Net Excess Spread Percentage," "Net Loss Percentage," or "Trigger Event" contained in the Sale and Servicing Agreement; 11 (ii) amend or not declare to be a "Purchase Termination Event" the Purchase Termination Event specified in Section 2.1(c)(2)(ix) of the Sale and Servicing Agreement; or (iii) amend or waive a Note Purchase Termination Event specified in Section 2.08(e), (f) or (g) of the Note Purchase Agreement; "MAJORITY PURCHASERS" shall mean Persons owning undivided Percentage Interests in the Purchased Note that aggregate more than 50% of the total outstanding principal amount of the Purchased Note; PROVIDED, that solely for purposes of each such computation, (1) APA Purchasers shall be deemed (whether or not they shall have made purchases hereunder) to own undivided interests equal to their respective Percentages of the Outstanding Amount of the Purchased Note, (2) the portion of the Outstanding Amount of the Purchased Note owned by DFC shall be deemed to be reduced by the amounts set forth in clause (1) and also by the amount of any undivided interests in the Purchased Note owned by Persons other than APA Purchasers and (3) defaulting APA Purchasers shall be deemed not to own undivided interests in the Purchased Note; or (c) Subject to Sections 7(a) and (b) above, amend, modify or waive any provision of the Sale and Servicing Agreement or the Indenture that requires the approval or consent of a specified percentage of Noteholders without the consent of APA Purchasers owning undivided Percentage Interests in the Purchased Note (determined as set forth in the definition of "Majority Purchasers" above) equal to such specified percentage. Notwithstanding anything to the contrary contained in this Section 7, nothing herein shall affect any obligation under the Sale and Servicing Agreement, the Purchase Agreement, the Trust Agreement or the Indenture, if any, to give notice to, or seek the consent of, Moody's and S&P to any amendment or waiver of any provision of the Sale and Servicing Agreement, the Purchase Agreement, the Trust Agreement or the Indenture. 8. OBLIGATIONS OF THE APA PURCHASERS, INCLUDING CONFIDENTIALITY. Each APA Purchaser agrees to abide by, and be liable for, any obligations set forth in the Note Purchase Agreement on the part of the DFC Owners (as defined therein) (other than the provisions therein relating to DFC's Commercial Paper Notes). Furthermore, each APA Purchaser understands that the Sale and Servicing Agreement, the Purchase Agreement, the Note Purchase Agreement, the Trust Agreement and the Indenture are confidential documents and no APA Purchaser will disclose them to any other Person except with the Agent's prior written consent or to APA Purchaser's legal counsel if such counsel agrees to hold them confidential, or upon request, to any regulatory authority having jurisdiction over such APA Purchaser, or as required by law, or as required or requested by any 12 Governmental Authority. Notwithstanding the foregoing, any APA Purchaser may, in connection with any assignment or participation or proposed assignment or participation pursuant to Section 9 or 10 hereof, disclose to the assignee or participant or proposed assignee or participant any information relating to the Trust, OFL, ORFC II or the Servicer furnished to such APA Purchaser by or on behalf of the Trust, OFL, ORFC II or the Servicer or by the Agent; PROVIDED, that prior to any such disclosure, the assignee or participant or proposed assignee or participant agrees to preserve the confidentiality of any confidential information relating to the Trust, OFL, ORFC II or the Servicer received by it from any of the foregoing entities. 9. ASSIGNABILITY. (a) Each APA Purchaser may assign to any Eligible Assignee (defined below) or to any other existing APA Purchaser all or a portion of its rights and obligations under this Asset Purchase Agreement (including, without limitation, all or a portion of its Purchase Commitment and any Percentage Interests owned by it); PROVIDED, HOWEVER, that (i) each such assignment shall be of a constant, and not a varying, percentage of all of such APA Purchaser's rights and obligations under this Asset Purchase Agreement, (ii) the amount of unused Maximum Purchase and/or Purchased Interest being assigned pursuant to each assignment shall in no event be less than the lesser of $10,000,000 and the assigning APA Purchaser's Maximum Purchase, and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment of Purchase Commitment in the form of Exhibit A attached hereto, together with a processing and recordation fee of $2,500. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in the Assignment of Purchase Commitment, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to this Asset Purchase Agreement, have the rights and obligations of an APA Purchaser hereunder and (y) the assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to this Asset Purchase Agreement, relinquish its rights and be released from its obligations under this Asset Purchase Agreement (and, in the case of an assignment covering all or the remaining portion of an assigning APA Purchaser's rights and obligations under this Asset Purchase Agreement, such APA Purchaser shall cease to be a party hereto). Notwithstanding the foregoing, no assignment hereunder shall be effective unless (i) the documents evidencing such assignment are satisfactory to Moody's and S&P and (ii) the assignee has 13 delivered to Moody's and S&P an opinion of counsel to the assignee satisfactory to each of Moody's and S&P stating that the obligations of the assignee under this Asset Purchase Agreement are the legal, valid and binding obligations of the assignee, enforceable against the assignee in accordance with their terms. (b) For purposes of this Asset Purchase Agreement, (i) the term "APA PURCHASER" shall mean a party executing a counterpart of a signature page hereto and each Eligible Assignee that shall become a party to this Asset Purchase Agreement pursuant to this Section 9, and (ii) the term "ELIGIBLE ASSIGNEE" shall mean any Person which (A) is reasonably acceptable to the Agent, (B) is approved by OFL which approval shall not be unreasonably withheld, (C) either (x) has short-term debt rated at least "P-1" by Moody's and "A-1+" by S&P or (y) is acceptable to Moody's and S&P and (D) executes an Assignment of Purchase Commitment. (c) Upon its receipt of an Assignment of Purchase Commitment executed by an assigning APA Purchaser and by an assignee who is an Eligible Assignee or who is an existing APA Purchaser, the Agent shall (i) accept such Assignment of Purchase Commitment, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to OFL. 10. REPURCHASE BY DFC. (a) Provided no Note Purchase Termination Event has occurred and is continuing, DFC may, upon one Business Day's prior written notice to S&P and Moody's and the Agent (which shall notify the APA Purchasers on the day that it receives such notice), repurchase Percentage Interests (the "REPURCHASED INTERESTS") from an APA Purchaser at a repurchase price equal to such APA Purchaser's Percentage Interest in the Outstanding Amount of the Purchased Note related to such Repurchased Interest plus accrued and unpaid interest, if any, at the applicable Purchaser Funding Rate for such Repurchased Interest (the "REPURCHASE AMOUNT"); PROVIDED, that the repurchase of any Repurchased Interest shall only occur (a) during a Tranche Period during which the Purchaser Funding Rate is based on the Base Rate and (b) on the last day of a Tranche Period during which the Purchaser Funding Rate is based on the Eurodollar Rate, unless the Seller requests, and the Agent in its sole discretion agrees to, an earlier repurchase date. Prior to 2:00 p.m. (New York City time) on the date of such repurchase, DFC shall pay the Agent for the account of each applicable APA Purchaser in immediately available funds in Dollars, by depositing to an account designated by the Agent in New York City, the Repurchase Amount, plus any applicable Breakage Payments, for each Repurchased Interest. The Agent shall promptly pay each APA Purchaser in immediately available funds in United States dollars its respective share of the Repurchase Amount. (b) Within 10 Business Days of each repurchase pursuant to Section 10(a) hereof, each APA Purchaser will deliver 14 to DFC the certificate delivered to such APA Purchaser pursuant to Section 2(f) reflecting DFC's ownership of the Repurchased Interest repurchased. 11. PARTICIPATIONS. Each APA Purchaser may sell participations to one or more banks or other entities (each, a "PARTICIPANT") (which Participant, unless it is an investment bank or a full service commercial bank, is not a competitor of OFL or any of its Affiliates) in or to all or a portion of its rights and obligations under this Asset Purchase Agreement (including, without limitation, all or a portion of its Purchase Commitment and the Percentage Interests owned by it); PROVIDED, HOWEVER, that (i) such APA Purchaser's obligations under this Asset Purchase Agreement (including, without limitation, its Purchase Commitment hereunder) shall remain unchanged and (ii) such APA Purchaser shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Agent shall continue to deal solely and directly with such APA Purchaser in connection with such APA Purchaser's rights and obligations under this Asset Purchase Agreement and (iv) no Participant shall have any greater right to any compensation or indemnification from the Agent, the Administrative Agent, the Trust or OFL under this Asset Purchase Agreement, the Note Purchase Agreement, the Sale and Servicing Agreement or the Indenture than the APA Purchaser would be entitled to receive hereunder or thereunder. The Trust, the Agent, the Administrative Agent, OFL and the other APA Purchasers shall continue to deal solely and directly with such APA Purchaser in connection with such APA Purchaser's rights and obligations under this Asset Purchase Agreement. 12. CHANGE IN FACILITY LIMIT AND DFC'S PURCHASE COMMITMENT. (a) If, pursuant to Section 2.05 of the Note Purchase Agreement, the Trust shall request an increase in the Facility Limit (as defined in the Sale and Servicing Agreement) and/or DFC's Purchase Commitment (as defined in the Note Purchase Agreement), then (i) the Agent shall promptly notify each APA Purchaser of the increase in DFC's Purchase Commitment and (ii) if an additional APA Purchaser has agreed to sign this Asset Purchase Agreement with a Maximum Purchase equal to 102% of the increase in DFC's Purchase Commitment, then on the effective date of such increase, each other APA Purchaser's Percentage under its Purchase Commitment shall be proportionately reduced and each APA Purchaser's Maximum Purchase amount shall remain the same; PROVIDED, HOWEVER, that if the Agent has not notified the APA Purchasers in the notification provided pursuant to clause (i) above that an additional APA Purchaser has agreed to sign this Asset Purchase Agreement with a Maximum Purchase equal to 102% of the increase in DFC's Purchase Commitment, each APA Purchaser may elect to maintain its Percentage under its Purchase Commitment by executing and delivering, within ten days after receipt of notice of such increase, a new signature page to this Asset Purchase 15 Agreement reaffirming its Percentage and indicating its new Maximum Purchase amount. (b) If, pursuant to Section 2.05 of the Note Purchase Agreement, the Facility Limit and/or DFC's Purchase Commitment shall be decreased, then (i) the Agent shall promptly notify each APA Purchaser of the decrease in DFC's Purchase Commitment and (ii) on the effective date of such decrease, each APA Purchaser's Percentage under its Purchase Commitment shall remain the same and each APA Purchaser's Maximum Purchase amount shall be proportionately decreased; PROVIDED, HOWEVER, that if the Agent shall notify the APA Purchasers in the notification provided pursuant to clause (i) above that DFC's Purchase Commitment will be reduced by an amount equal to a Downgraded Purchaser's Maximum Purchase, then each non-Downgraded Purchaser may elect to increase its APA Purchaser's Percentage and maintain its Maximum Purchase at the same amount as was in effect immediately prior to the reduction in DFC's Purchase Commitment by executing and delivering, within ten days after receipt of notice of such decrease, a new signature page to this Asset Purchase Agreement reaffirming its Maximum Purchase amount and indicating its new Percentage. 13. MISCELLANEOUS. (a) Each APA Purchaser will on demand reimburse the Agent its Percentage share of any and all reasonable costs and expenses (including, without limitation, reasonable fees and disbursements of counsel), which may be incurred in connection with collecting any principal or interest with respect to the Purchased Note in which an APA Purchaser purchases Percentage Interests hereunder, for which the Agent is not promptly reimbursed by the Trust. (b) The Agent and its Affiliates may accept deposits from, lend money or otherwise extend credit to, act as trustee under indentures of, and generally engage in any kind of business with, the Trust, OFL, ORFC II, the Servicer and any of their Affiliates and any Person who may do business with or own securities of the Trust, OFL, ORFC II, the Servicer or any Affiliate, all as though this Asset Purchase Agreement had not been entered into and without any duty to account therefor to any APA Purchaser. (c) Subject to Section 11.04 of the Note Purchase Agreement, any taxes due and payable on any payments to be made to any APA Purchaser hereunder shall be such APA Purchaser's sole responsibility. Each APA Purchaser warrants that it is not subject to any taxes, charges, levies or withholdings with respect to payments under the Asset Purchase Agreement that are imposed by means of withholding by any applicable taxing authority ("WITHHOLDING TAX"). Each APA Purchaser agrees to provide the Agent, from time to time upon the Agent's request, completed and signed copies of any documents that may be required by an applicable taxing authority to certify such APA Purchaser's 16 exemption from Withholding Tax with respect to payments to be made to such APA Purchaser under this Asset Purchase Agreement; and each APA Purchaser agrees to hold the Agent harmless from any Withholding Tax imposed due to such APA Purchaser's failure to establish that it is not subject to Withholding Tax. (d) The Agent shall furnish to each APA Purchaser upon request, until the later of (i) such APA Purchaser's Purchase Termination Date and (ii) the date on which such APA Purchaser's Percentage Interest in the Purchased Note and all other amounts payable to such APA Purchaser hereunder have been paid in full, a copy of the annual audited financial statements of DFC, promptly upon the same becoming available, and, as requested by such APA Purchaser, copies of such other financial information that the Agent may have received from the Servicer or OFL. (e) Each APA Purchaser shall promptly notify the Agent of any downgrading in the ratings of the short-term unsecured debt securities or deposits of such APA Purchaser below (i) P-1 by Moody's or (ii) A-1+ by S&P (such APA Purchaser, a "DOWNGRADED PURCHASER"). The Agent shall have the right, in its sole discretion, to terminate the right and obligation of any Downgraded Purchaser to purchase a Percentage Interest in the Purchased Note; PROVIDED, that the Agent shall not terminate the right and obligation of any Downgraded Purchaser hereunder unless either (i) one or more Eligible Assignees or other APA Purchasers have agreed to accept, in the aggregate, effective as of the date of termination, such terminated APA Purchaser's Maximum Purchase, (ii) DFC's Purchase Commitment has been reduced by an amount equal to the product of (A) the terminated Downgraded Purchaser's Maximum Purchase and (B) one (1) divided by 102%, and each non-terminated APA Purchaser has agreed to increase its APA Purchaser's Percentage and maintain its Maximum Purchase at the same amount as was in effect immediately prior to the reduction in DFC's Purchase Commitment or (iii) DFC obtains liquidity support satisfactory to Moody's and S&P and, solely with respect to how such liquidity support affects this Asset Purchase Agreement only, OFL, in an amount not less than such terminated Downgraded Purchaser's Maximum Purchase. Such termination shall be effective upon written notice to such effect delivered by the Agent to such Downgraded Purchaser, whereupon all of the rights and obligations hereunder of such Downgraded Purchaser shall terminate; PROVIDED, that upon such termination, the Downgraded Purchaser shall continue to have the rights and obligations of an APA Purchaser with respect to the outstanding Percentage Interest in the Purchased Note purchased by it pursuant to the terms of this Asset Purchase Agreement prior to such termination. (f) Each APA Purchaser shall promptly notify the Agent of any event of which it has knowledge which will entitle such APA Purchaser to compensation pursuant to Section 11.05 of the Note Purchase Agreement (an "AFFECTED PURCHASER"). The Agent shall have the right to terminate the rights and obligations of any Affected Purchaser and to purchase a portion of the Purchased Interest hereunder and, in the event OFL requests that the Agent 17 terminate such rights and obligations of the Affected Purchaser, the Agent shall use its best efforts to find a replacement APA Purchaser (or Eligible Assignee) or to cause the other APA Purchasers to accept the Affected Purchaser's rights and obligations hereunder; PROVIDED that the Agent shall not terminate such rights and obligations of any Affected Purchaser unless either: (i) (A) one or more Eligible Assignees or other APA Purchasers have agreed to accept, in the aggregate, effective as of the date of termination, such Affected Purchaser's Maximum Purchase, and (B) such Eligible Assignee(s) or APA Purchaser(s) shall have repurchased the Repurchased Interest, if any, of the terminated Affected Purchaser by paying the Repurchase Amount or (ii) DFC's Purchase Commitment has been reduced by an amount at least equal to the product of (A) the Affected Purchaser's Maximum Purchase and (B) one (1) divided by 102%, and each remaining APA Purchaser has agreed, notwithstanding Section 12(b) hereof, to increase its APA Purchaser's Percentage and maintain its Maximum Purchase at the same amount as was in effect immediately prior to the reduction in DFC's Purchase Commitment. Such termination shall be effective upon written notice to such effect delivered by the Agent to such Affected Purchaser, whereupon the Purchase Termination Date of such Affected Purchaser shall be deemed to have occurred. Upon such termination, the Affected Purchaser shall cease to have any rights or obligations with respect to future purchases of interests in the Purchased Note under this Asset Purchase Agreement but shall continue to have the rights and obligations of an APA Purchaser with respect to the portion of the Purchased Interest purchased by it, together with all other rights due and owing to it, pursuant to the terms of this Asset Purchase Agreement immediately prior to such termination. The Agent shall use its best efforts to find Eligible Assignee(s) or APA Purchaser(s) to replace an Affected Purchaser. (g) On the fifth Business Day prior to any Non-Extending Purchaser's Expiry Date (defined below), such Non-Extending Purchaser shall, upon the request of the Agent, and subject to the limitations imposed by Section 2(c) hereof, make a Non-Pro Rata Purchase (defined below) in an amount up to such APA Purchaser's Maximum Purchase or, if such Non-Extending Purchaser has extended its Purchase Termination Date for a Purchase Commitment that is less than the amount of its Maximum Purchase (a "REDUCING PURCHASER") prior to such extension, such Non-Pro Rata Purchase shall be in an amount equal to the difference between such APA Purchaser's Maximum Purchase prior to such extension and such APA Purchaser's Purchase Commitment amount as extended (such amount is hereinafter referred to as the "REDUCED AMOUNT"). The amount of such Non-Pro Rata Purchase to be made by a Non-Extending Purchaser or Reducing Purchaser shall be an amount equal to the product of (i) the difference between (A) DFC's Purchase Commitment MINUS the aggregate outstanding APA Purchasers' Purchased Interests (excluding such Non-Pro Rata Purchase) and (B) an amount equal to the difference between (x) the aggregate of the Maximum Purchase of the APA Purchasers whose obligations to purchase Purchased Interests hereunder do 18 not expire on such Expiry Date (including the reduced Maximum Purchase of the Reducing Purchaser) and (y) the aggregate outstanding Purchased Interests of all APA Purchasers whose obligations to purchase Purchased Interests hereunder do not expire on such Expiry Date (including the Purchased Interests of a Reducing Purchaser that do not constitute the Reduced Amount for such APA Purchaser) and (ii) a fraction the numerator of which is such Non-Extending Purchaser's Maximum Purchase, or Reduced Amount, as the case may be, and the denominator of which is the aggregate of the Maximum Purchases or Reduced Amounts of all of the Non-Extending Purchasers whose obligations to purchase Purchased Interests hereunder expire on such Expiry Date; PROVIDED, HOWEVER, that upon receipt of notice that an APA Purchaser will become a Non-Extending Purchaser or a Reducing Purchaser, DFC shall promptly request a determination from each of Moody's and S&P of whether failure to request such a purchase will result in the reduction or withdrawal of its then current rating, if any, of the Commercial Paper, and if DFC shall have received written confirmation from each of S&P and Moody's prior to the fifth Business Day immediately preceding such Expiry Date that such failure will not result in a rating reduction or withdrawal of DFC's Commercial Paper Notes, DFC shall not request and such Non-Extending Purchaser or Reducing Purchaser shall not be required to make, such purchase. The Non-Pro Rata Purchase amount shall be held in the Non-Pro Rata Funding Account as provided in Section 13(i) hereof and shall be returned to the Non-Extending Purchaser or Reducing Purchaser, as the case may be, on such APA Purchaser's Expiry Date if and to the extent that the aggregate of the Maximum Purchase of all APA Purchasers whose obligations to purchase Purchased Interests do not expire on such Expiry Date is at least equal to the greater of (A) the aggregate Outstanding Amount of all Notes on such Expiry Date and (B) DFC's Purchase Commitment (after giving effect to any reduction thereof pursuant to Section 2.05 of the Note Purchase Agreement) on such Expiry Date. Notwithstanding any provision in the Agreement or the Note Purchase Agreement to the contrary, following the Expiry Date of any Non-Extending Purchaser and the related Non-Pro Rata Purchase, if any, such Non-Extending Purchaser shall have no further obligation to Purchase Interests under this Asset Purchase Agreement or to make any Incremental Purchase under the Note Purchase Agreement or the Indenture. A Non-Extending Purchaser's Non-Pro Rata Purchase shall be deemed to constitute such Purchaser's Purchased Interest hereunder on and after such APA Purchaser's Expiry Date. (h) On the 30th day (or if such day is not a Business Day, the next succeeding Business Day) after any APA Purchaser becomes a Downgraded Purchaser, unless DFC shall have replaced such Downgraded Purchaser pursuant to Section 13(e) hereof, the Agent, as agent for DFC, shall request such Downgraded Purchaser to make, and if such request is made such Downgraded Purchaser shall make in accordance with the provisions hereof, subject to the limitations imposed by Section 2(c) hereof, a purchase in an amount equal to the Maximum Purchase MINUS the outstanding Percentage Interests of such APA Purchaser; PROVIDED, HOWEVER, 19 that if DFC shall have requested at least 15 Business Days prior to such 30th day from each of Moody's and S&P written confirmation that the failure to request such a purchase or assignment will not result in the reduction or withdrawal of its then current rating, if any, of the Commercial Paper, and if such written confirmation is received by DFC prior to such 30th day, the Agent shall not request, and such Downgraded Purchaser shall not make, such purchase or accept such assignment. A Downgraded Purchaser's Non-Pro Rata Purchase shall be the functional equivalent of such APA Purchaser's Maximum Purchase and if and to the extent the Agent notifies such Downgraded Purchaser of its obligation to purchase a Percentage Interest, moneys in the Non-Pro Rata Funding Account shall be used to fund such Downgraded Purchaser's Percentage of the Percentage Interest and shall thereafter constitute such APA Purchaser's Purchased Interest. (i) The Agent will promptly give each Non-Extending Purchaser or Downgraded Purchaser, as applicable, telephonic notice (confirmed in writing promptly thereafter) of the aggregate amount of the Non-Pro Rata Purchases required pursuant to Section 13(g) or Section 13(h) hereof. If such telephonic notice is received by an APA Purchaser prior to 12:00 noon (New York City time) on any such Business Day, the requested Non-Pro Rata Purchase shall be made by the Non-Extending Purchaser or Downgraded Purchaser, as applicable, by 2:00 p.m. (New York City time) on such Business Day. If such telephonic notice is not received prior to 12:00 noon (New York City time) on such Business Day, the requested Non-Pro Rata Purchase shall be made by the Non-Extending Purchaser or Downgraded Purchaser, as applicable, by 2:00 p.m. (New York City time) on the Business Day next succeeding the Business Day on which such telephonic notice is given. A Non-Pro Rata Purchase shall be made by the Non-Extending Purchaser or Downgraded Purchaser, as applicable, by a payment to the Agent of the amount of such Non-Pro Rata Purchase. Such amount shall be deposited by the Agent into a Non-Pro Rata Funding Account established by the Agent in connection with each Non-Pro Rata Purchase (each, a "NON-PRO RATA FUNDING ACCOUNT"). Moneys in a Non-Pro Rata Funding Account shall be invested by the Agent in obligations that are rated A-1+ by S&P and P-1 by Moody's. Earnings on such investments (after deducting any losses), if any, shall be paid by the Agent to the Downgraded Purchaser or Non-Extending Purchaser, as the case may be, whose deposit funded such Non-Pro Rata Funding Account on such Downgraded or Non-Extending Purchaser's Expiry Date (or such earlier date on which such Downgraded or Non-Extending Purchaser is replaced). For purposes of this Asset Purchase Agreement, "EXPIRY DATE" shall mean the later of (i) December 26, 1996, or, if said day is not a Business Day, the Business Day next preceding said day, and (ii) such later date agreed to by the Agent and an APA Purchaser, and "NON-PRO RATA PURCHASE" shall mean a purchase of Percentage Interests pursuant to Section 13(g) or 13(h). 20 (j) THIS ASSET PURCHASE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. (k) This Asset Purchase Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Asset Purchase Agreement by telecopier shall be as effective as delivery of a manually executed counterpart of this Asset Purchase Agreement. (l) The APA Purchasers and DFC may, from time to time, enter into agreements amending, modifying or supplementing this Asset Purchase Agreement with the prior written consent of OFL. Any such agreement must be in writing and shall be effective only to the extent specifically set forth in such writing; provided that DFC shall not amend any provision of this Asset Purchase Agreement without having given prior notice thereof to Moody's and S&P and without the prior written confirmation from each of Moody's and S&P that such amendment would not result in the reduction or withdrawal of the then current rating, if any, of the Commercial Paper. (m) This Asset Purchase Agreement constitutes the entire agreement between the parties hereto with respect to the matters covered hereby and supersedes all prior agreements and understandings between the parties. This Asset Purchase Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, and no other person will have any right or obligation hereunder. 14. BANKRUPTCY PETITION AGAINST DFC. Each APA Purchaser and the Agent hereby covenants and agrees that, prior to the date which is one year and one day after the later of (i) the payment in full of all outstanding Commercial Paper and (ii) the payment in full of all outstanding Commercial Paper of any subsidiary of DFC, it will not institute against, or join any other Person in instituting against DFC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other similar proceeding under the laws of the United States or any state of the United States. 15. LIMITED RECOURSE TO DFC. Notwithstanding anything to the contrary contained herein, all obligations of DFC shall be payable by DFC only to the extent of assets available therefor and, to the extent assets are not available or are insufficient for the payment thereof, shall not constitute a claim against DFC. 16. FEES. DFC shall pay to each APA Purchaser a liquidity fee (the "LIQUIDITY FEE"), payable quarterly in arrears, on the last day of each calendar quarter during the period such APA Purchaser has a Purchase Commitment under this 21 Asset Purchase Agreement and on the earlier of the Expiration Date or such Purchaser's Purchase Termination Date, as the same may be extended from time to time. The Liquidity Fee for each APA Purchaser shall be a per annum fee equal to such APA Purchaser's average daily unused Maximum Purchase multiplied by .15% per annum. 22 Signature Page with respect to the Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated as of December 28, 1995 J.P. Morgan Delaware, as Agent and as Administrative Agent By: /s/ Richard A. (illegible) --------------------------- Authorized Signature Title: Signature Page with respect to the Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated December 28, 1995 SECTION 1. Initial Percentage: 43.65% SECTION 2. Maximum Purchase: $89,000,000 SECTION 3. Effective Date of Purchase Commitment: December 28, 1995 SECTION 4. Purchase Termination Date: December 26, 1996 J.P. MORGAN DELAWARE 902 Market Street Wilmington, Delaware 19801 By: /s/ Richard A. (illegible) ------------------------- Authorized Signature ------------------------- Title Signature Page with respect to the Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated December 28, 1995 SECTION 1. Initial Percentage: 24.5% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: December 28, 1995 SECTION 4. Purchase Termination Date: December 26, 1996 BANK OF AMERICA ILLINOIS 231 South LaSalle Street Chicago, Illinois 60690 By: /s/ Erik Ford -------------------------------- Erik Ford Vice President -------------------------------- Title as Attorney-in-fact Signature Page with respect to the Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated December 28, 1995 SECTION 1. Initial Percentage: 7.35% SECTION 2. Maximum Purchase: $15,000,000 SECTION 3. Effective Date of Purchase Commitment: December 28, 1995 SECTION 4. Purchase Termination Date: December 26, 1996 THE BANK OF NOVA SCOTIA, ATLANTA AGENCY Suite 2700 600 Peachtree Street, N.E. Atlanta, Georgia 30308 By: /s/ F.C.H. Ashby -------------------------------- Authorized Signature Senior Manager Loan Operations -------------------------------- Title Signature Page with respect to the Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated December 28, 1995 SECTION 1. Initial Percentage: 24.5% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: December 28, 1995 SECTION 4. Purchase Termination Date: December 26, 1996 DRESDNER BANK AG CHICAGO AND GRAND CAYMAN BRANCH Suite 2700 190 South LaSalle Street Chicago, IL 60603 By: (illegible) -------------------------------- Authorized Signature SVP -------------------------------- Title By: (illegible) -------------------------------- Authorized Signature (illegible) -------------------------------- Title The undersigned hereby consents to the sale from time to time by J.P. Morgan Delaware, as Agent for the undersigned, of undivided interests in the Purchased Note owned by the undersigned, pursuant to the Asset Purchase Agreement to which this is attached. DELAWARE FUNDING CORPORATION By: J.P. Morgan Delaware, as attorney-in-fact for Delaware Funding Corporation By: Richard A. (illegible) -------------------------------- Authorized Signature -------------------------------- Title Exhibit A Signature Page with respect to the Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated December ____, 1995 SECTION 1. Purchase Commitment Percentage Assigned: ________% Assignor's remaining Purchase Commitment Percentage: ________% Outstanding Amount of the Percentage Interests Assigned: $__________ Outstanding Amount of Assignor's remaining Percentage Interests: $__________ SECTION 2. Assignee's Maximum Purchase: $__________ Assignor's remaining Maximum Purchase: $__________ SECTION 3. Effective Date of this Assignment: __________, 19__ [NAME OF ASSIGNOR] By: ________________________ Title: [NAME OF ASSIGNEE] [Address] By: ________________________ Title: Accepted this ____ day of __________, 199__ J.P. MORGAN DELAWARE, as Agent By: ________________________ Authorized Signature ________________________ Title Exhibit B PURCHASE CERTIFICATE ________________, 19___ [Date of Purchase] [Name and Address of APA Purchaser] [Delaware Funding Corporation] Re: Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Gentlemen: This certificate confirms that on the date set forth above (the "Purchase Date") you have [purchased]1/ [repurchased]2/ for your account and risk, upon the terms and conditions of the Asset Purchase Agreement dated as of December ____, 1995, among you, the undersigned and certain other parties, an undivided interest (your "Percentage Interest") to the extent of ____% in and to the Purchased Note held by the Agent and owned by [DFC] [name of APA Purchaser from whom interest is being repurchased]2/, pursuant to the Note Purchase Agreement dated as of December __, 1995 among Delaware Funding Corporation, J.P. Morgan Delaware, Olympic Automobiles Receivables Warehouse Trust and Olympic Financial Ltd. We acknowledge receipt from you of the sum of $__________ in payment of the Purchase Price for your Percentage Interest in the Purchased Note. Very truly yours, J.P. MORGAN DELAWARE, as Agent By: -------------------------------- Authorized Signature -------------------------------- Title __________________ 1/ To be inserted if certificate is being delivered in connection with a purchase by a Purchaser. 2/ To be inserted if certificate is being delivered in connection with the repurchase by DFC. EX-10.26 27 FIRST AMENDMENT TO ASSET PURCHASE DATED 6/12/1996 EXECUTION COPY FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT Olympic Automobile Receivables Warehouse Trust Variable Funding Notes THIS FIRST AMENDMENT dated as of June 12, 1996 (the "AMENDMENT") to the ASSET PURCHASE AGREEMENT, dated as of December 28, 1995 (the "AGREEMENT") among Morgan Guaranty Trust Company of New York (successor to J.P. Morgan Delaware), as administrative agent (the "AGENT") and each of the parties (collectively, the "APA PURCHASERS") who has (i) executed a signature page to the Agreement or (ii) executed an Assignment of Purchase Commitment, is by and among the parties listed above. Capitalized terms used in this Amendment and not otherwise defined shall have the meanings assigned to such terms in the Agreement. RECITALS WHEREAS, the Agent and the APA Purchasers wish to amend the Agreement to add APA Purchasers and reallocate Maximum Purchases and Percentages among existing and new APA Purchasers due to the increase in DFC's Purchase Commitment and in the Facility Limit as provided herein, and Delaware Funding Corporation and Olympic Financial Ltd. ("OFL") are willing to consent to such amendments upon the terms provided for herein. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties hereto agree as follows: SECTION 1. NEW PURCHASERS. This Amendment provides for the addition of new Purchasers to the Asset Purchase Agreement, such addition to be evidenced by the execution by such new Purchasers of the signature pages attached hereto as Exhibit A. SECTION 2. CONSENT TO INCREASE IN FACILITY LIMIT AND DFC'S PURCHASE LIMIT. In accordance with the provisions of Section 12(a) of the Agreement, all of the Purchasers who execute the attached signature pages hereby consent to the increase in the Facility Limit and DFC's Purchase Limit from $200,000,000 to $300,000,000. SECTION 3. CONSENT TO AMENDMENT TO TRUST DOCUMENTS. In accordance with the provisions of Section 7(b) of the Agreement, all of the Purchasers who execute the attached signature pages hereby consent to the Amendment to Trust Agreement, Amendment to Sale and Servicing Agreement and Supplemental Indenture of even date herewith, substantially in the forms attached to this Amendment as Exhibit B. SECTION 4. AMENDMENTS OF SIGNATURE PAGES. As a result of the addition of new Purchasers and the increase in DFC's Purchase Commitment, pursuant to Sections 2(a), 12(a) and 13(l) of the Agreement, the Percentages and Maximum Purchases of existing APA Purchasers are being revised. The Percentages and Maximum Purchases of the new and existing (as revised) APA Purchasers are specified in the executed signature pages attached to this Amendment as Exhibit A. The attached signature pages shall supersede the signature pages to the Agreement dated December 28, 1995, and from and after the date of this Amendment all references to the signature pages of the Agreement shall refer to the signature pages attached as Exhibit A to this Amendment. SECTION 5. EFFECTIVENESS. The amendments provided for by this Amendment shall become effective as of June 12, 1996, upon receipt by the Agent of (i) counterparts of this Amendment, duly executed by each of the parties hereto and (ii) written confirmation from each of S&P and Moody's that such amendments will not result in a downgrade in the ratings of the Commercial Paper Notes. SECTION 6. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically amended or waived hereby, all of the terms and conditions of the Agreement shall remain in full force and effect. All references to the Agreement in any other document or instrument shall be deemed to mean such Agreement as amended by this Amendment. This Amendment shall not constitute a novation of the Agreement, but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and obligations of the Agreement, as amended by this Amendment, as though the terms and obligations of the Agreement were set forth herein. SECTION 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 9. DEFINED TERMS. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Agreement. 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ------------------------ Title: Acknowledged and consented to: June 12, 1996 DELAWARE FUNDING CORPORATION By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By: ------------------------ Authorized Signatory ------------------------ Title OLYMPIC FINANCIAL LIMITED By: ------------------------ Authorized Signatory ------------------------ Title 3 EXHIBIT A Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated as of December 28, 1995 Amended as of June 12, 1996 Morgan Guaranty Trust Company of New York, as Agent and as Administrative Agent By: ---------------------- Authorized Signature ------------------------ Title Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 28.33% SECTION 2. Maximum Purchase: $85,000,000 SECTION 3. Effective Date of Purchase Commitment: June 12, 1996 SECTION 4. Purchase Termination Date: December 26, 1996 MORGAN GUARANTY TRUST COMPANY OF NEW YORK 500 Stanton Christiana Road Newark, Delaware 19713-2107 By: ------------------------ Authorized Signature ------------------------ Title Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 16.67% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: June 12, 1996 SECTION 4. Purchase Termination Date: December 26, 1996 BANK OF AMERICA ILLINOIS 231 South LaSalle Street Chicago, Illinois 60690 By: ------------------------ Title: By: ------------------------ Title: A-3 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 5.00% SECTION 2. Maximum Purchase: $15,000,000 SECTION 3. Effective Date of Purchase Commitment: June 12, 1996 SECTION 4. Purchase Termination Date: December 26, 1996 THE BANK OF NOVA SCOTIA, ATLANTA AGENCY Suite 2700 600 Peachtree Street, N.E. Atlanta, Georgia 30308 By: ------------------------ Title: By: ------------------------ Title: A-4 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 16.67% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: June 12, 1996 SECTION 4. Purchase Termination Date: December 26, 1996 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES Suite 2700 1900 South LaSalle Street Chicago, Illinois 60603 By: ________________________ Title: By: ________________________ Title: A-5 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 8.33% SECTION 2. Maximum Purchase: $25,000,000 SECTION 3. Effective Date of Purchase Commitment: June 12, 1996 SECTION 4. Purchase Termination Date: December 26, 1996 COMMERZBANK AKTIENGESELLSCHAFT, CHICAGO BRANCH 311 S. Wacker Drive Chicago, Illinois 60606 By: ------------------------ Title: By: ------------------------ Title: A-6 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 8.33% SECTION 2. Maximum Purchase: $25,000,000 SECTION 3. Effective Date of Purchase Commitment: June 12, 1996 SECTION 4. Purchase Termination Date: December 26, 1996 HARRIS TRUST AND SAVINGS BANK 111 West Monroe Street P.O. Box 755 Chicago, Illinois 60690 By: ------------------------ Title: By: ------------------------ Title: A-7 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 16.67% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: June 12, 1996 SECTION 4. Purchase Termination Date: December 26, 1996 BANCO SANTANDER, NEW YORK BRANCH 453 East 53rd Street New York, New York 10022 By: ------------------------ Title: By: ------------------------ Title: A-8 EX-10.27 28 SECOND AMENDMENT TO ASSET PURCHASE DATE 12/20/96 EXECUTION COPY SECOND AMENDMENT AND CONSENT RELATING TO ASSET PURCHASE AGREEMENT Olympic Automobile Receivables Warehouse Trust Variable Funding Notes THIS SECOND AMENDMENT AND CONSENT dated as of December 20, 1996 (the "SECOND AMENDMENT") Relating to the ASSET PURCHASE AGREEMENT, dated as of December 28, 1995 and amended as of June 12, 1996 (the "AGREEMENT") among Morgan Guaranty Trust Company of New York (successor to J.P. Morgan Delaware), as administrative agent (the "AGENT") and each of the parties (collectively, the "APA PURCHASERS") who has (i) executed a signature page to the Agreement or (ii) executed an Assignment of Purchase Commitment, is by and among the parties listed above. Capitalized terms used in this Second Amendment and not otherwise defined shall have the meanings assigned to such terms in the Agreement. RECITALS WHEREAS, December 26, 1996 is the Purchase Termination Date for each of the current APA Purchasers and is also the Expiry Date specified in the Agreement; and WHEREAS, in accordance with the provisions of Section 2(a) of the Agreement, Bank of America Illinois (the "Non-Extending Purchaser") has notified the Agent that it will not consent to the extension of its Purchase Termination Date; and WHEREAS, the Agent and the APA Purchasers (other than the Non-Extending Purchaser) wish to amend the Agreement to extend each APA Purchaser's (other than the Non-Extending Purchaser) Purchase Termination Date and the Expiry Date; and WHEREAS, two APA Purchasers, Harris Trust and Savings Bank and Morgan Guaranty Trust Company of New York, desire to increase their Maximum Purchases; and WHEREAS, due to the withdrawal of the Non-Extending Purchaser and the increase of the Maximum Purchases of two current APA Purchasers, the Percentages of the remaining APA Purchasers will be affected as evidenced herein; and WHEREAS, in accordance with the provisions of Section 13(l) of the Agreement, Delaware Funding Corporation and Olympic Financial Ltd. ("OFL") are willing to consent to this Second Amendment upon the terms provided for herein. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties hereto agree as follows: SECTION 1. EXTENSION OF PURCHASE TERMINATION DATE. Each APA Purchaser who executes an attached signature page hereby consents to the extension of such APA Purchaser's Purchase Termination Date to the date specified on such signature page. SECTION 2. INCREASE IN MAXIMUM PURCHASES. Each of Harris Trust and Savings Bank and Morgan Guaranty Trust Company of New York, by execution of its attached signature page, hereby agrees to the increase in its Maximum Purchase to the amount stated therein. SECTION 3. EXTENSION AND AMENDMENT OF THE "EXPIRY DATE." The definition of "Expiry Date" in the last paragraph of Section 13(i) of the Agreement is hereby amended to read as follows: For purposes of this Asset Purchase Agreement, "EXPIRY DATE" shall mean, for each APA Purchaser, the later of (i) January 17, 1997 and (ii) such later date agreed to by the Agent and such APA Purchaser, SECTION 4. AMENDMENTS OF SIGNATURE PAGES. As a result of the withdrawal of the Non-Extending Purchaser as an APA Purchaser and the increase in the Maximum Purchases of certain APA Purchasers as provided in Section 2 of this Second Amendment, the Percentages of remaining APA Purchasers are being revised. The Percentages and extended Purchase Termination Dates of the remaining APA Purchasers are specified in the executed signature pages attached to this Amendment as Exhibit A. The attached signature pages shall supersede the signature pages to the Agreement dated June 12, 1996, and from and after the date of this Second Amendment all references to the signature pages of the Agreement shall refer to the signature pages attached as Exhibit A to this Second Amendment. SECTION 5. EFFECTIVENESS. The amendments provided for by this Second Amendment shall become effective as of December 20, 1996, upon receipt by the Agent of (i) counterparts of this Amendment, duly executed by each of the parties hereto, (ii) notice that the conditions to effectiveness of the Agreement to Extend Purchase Commitment Expiration Date Relating to Note Purchase Agreement dated the date hereof have been satisfied and (iii) confirmation by each of S&P and Moody's of the then-current ratings of the Commercial Paper Notes. SECTION 6. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically amended or waived hereby, all of the terms and conditions of the Agreement shall remain in full force and effect. All references to the Agreement in any other document or instrument shall be deemed to mean such Agreement as amended by this Second Amendment. This Second Amendment shall not constitute a novation of the Agreement, but shall constitute 2 an amendment thereof. The parties hereto agree to be bound by the terms and obligations of the Agreement, as amended by this Second Amendment, as though the terms and obligations of the Agreement were set forth herein. SECTION 7. PRIOR UNDERSTANDINGS. This Second Amendment sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral. SECTION 8. COUNTERPARTS. This Second Amendment may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 9. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 10. DEFINED TERMS. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Agreement. 3 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to the Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ ILLEGIBLE ---------------------------------- Title: VICE PRESIDENT Acknowledged and consented to: December 20, 1996 DELAWARE FUNDING CORPORATION By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By: /s/ ILLEGIBLE ---------------------------------- Authorized Signatory VICE PRESIDENT ---------------------------------- Title OLYMPIC FINANCIAL LIMITED By: ---------------------------------- Authorized Signatory ---------------------------------- Title 4 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to the Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ---------------------------------- Title: Acknowledged and consented to: December 20, 1996 DELAWARE FUNDING CORPORATION By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By: ---------------------------------- Authorized Signatory ---------------------------------- Title OLYMPIC FINANCIAL LIMITED By: /s/ ILLEGIBLE ---------------------------------- Authorized Signatory ---------------------------------- Title 5 EXHIBIT A Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated as of December 28, 1995 Amended as of June 12, 1996 Amended as of December 20, 1996 Morgan Guaranty Trust Company of New York, as Agent and as Administrative Agent By: /s/ ILLEGIBLE ----------------------------------- Authorized Signature VICE PRESIDENT ----------------------------------- Title Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 36.67% SECTION 2. Maximum Purchase: $110,000,000 SECTION 3. Effective Date of Purchase Commitment: December 20, 1996 SECTION 4. Purchase Termination Date: January 17, 1997 MORGAN GUARANTY TRUST COMPANY OF NEW YORK 500 Stanton Christiana Road Newark, Delaware 19713-2107 By: /s/ ILLEGIBLE ----------------------------------- Authorized Signature VICE PRESIDENT ----------------------------------- Title A-2 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 5.00% SECTION 2. Maximum Purchase: $15,000,000 SECTION 3. Effective Date of Purchase Commitment: December 20, 1996 SECTION 4. Purchase Termination Date: January 17, 1997 THE BANK OF NOVA SCOTIA, ATLANTA AGENCY Suite 2700 600 Peachtree Street, N.E. Atlanta, Georgia 30308 By: /s/ A.S. Norsworthy ----------------------------------- Title: A.S. NORSWORTHY SR. TEAM LEADER-LOAN OPERATIONS By: ----------------------------------- Title: A-3 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 8.33% SECTION 2. Maximum Purchase: $25,000,000 SECTION 3. Effective Date of Purchase Commitment: December 20, 1996 SECTION 4. Purchase Termination Date: January 17, 1997 COMMERZBANK AKTIENGESELLSCHAFT, CHICAGO BRANCH 311 S. Wacker Drive Chicago, Illinois 60606 By: /s/ W.B. Peterson ----------------------------------- Title: WILLIAM BRENT PETERSON Assistant Vice President By: /s/ J. Timothy Shortly ----------------------------------- Title: J. TIMOTHY SHORTLY Senior Vice President A-4 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 16.67% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: December 20, 1996 SECTION 4. Purchase Termination Date: January 17, 1997 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES Suite 2700 1900 South LaSalle Street Chicago, Illinois 60603 By: /s/ ILLEGIBLE ----------------------------------- Title: VICE PRESIDENT By: /s/ ILLEGIBLE ----------------------------------- Title: Vice President A-5 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 16.67% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: December 20, 1996 SECTION 4. Purchase Termination Date: January 17, 1997 HARRIS TRUST AND SAVINGS BANK 111 West Monroe Street P.O. Box 755 Chicago, Illinois 60690 By: /s/ ILLEGIBLE ----------------------------------- Title: V.P. By: ----------------------------------- Title: A-6 Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 16.67% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: December 20, 1996 SECTION 4. Purchase Termination Date: January 17, 1997 BANCO SANTANDER, NEW YORK BRANCH 453 East 53rd Street New York, New York 10022 By: /s/ ILLEGIBLE ----------------------------------- Title: VP By: /s/ ILLEGIBLE ----------------------------------- Title: A-7 EX-10.28 29 THIRD AMENDMENT TO ASSET PURCHASE 1/17/97 EXECUTION COPY THIRD AMENDMENT AND CONSENT RELATING TO ASSET PURCHASE AGREEMENT Olympic Automobile Receivables Warehouse Trust Variable Funding Notes THIS THIRD AMENDMENT AND CONSENT dated as of January 17, 1997 (the "THIRD AMENDMENT") Relating to the ASSET PURCHASE AGREEMENT, dated as of December 28, 1995 and amended as of June 12, 1996 and December 20, 1996 (the "AGREEMENT") among Morgan Guaranty Trust Company of New York (successor to J.P. Morgan Delaware), as administrative agent (the "AGENT") and each of the parties (collectively, the "APA PURCHASERS") who has (i) executed a signature page to the Agreement or (ii) executed an Assignment of Purchase Commitment, is by and among the parties listed above. Capitalized terms used in this Third Amendment and not otherwise defined shall have the meanings assigned to such terms in the Agreement. RECITALS WHEREAS, January 17, 1997 is the Purchase Termination Date for each of the current APA Purchasers and is also the Expiry Date specified in the Agreement; and WHEREAS, in accordance with the provisions of Section 2(a) of the Agreement, Dresdner Bank AG Chicago and Grand Cayman Branch (the "Non-Extending Purchaser") has notified the Agent that it will not consent to the extension of its Purchase Termination Date; and WHEREAS, the Agent and the APA Purchasers (other than the Non-Extending Purchaser) wish to amend the Agreement to extend each APA Purchaser's (other than the Non-Extending Purchaser) Purchase Termination Date and the Expiry Date; and WHEREAS, in accordance with the provisions of Section 2(a) of the Agreement, Morgan Guaranty Trust Company of New York, as an APA Purchaser (in such capacity, the "Reducing Purchaser") has notified the Agent that it wants to reduce its Maximum Purchase following the January 17, 1997 Purchase Termination Date; and WHEREAS, the Seller has determined to reduce the Facility Limit and DFC's Purchase Commitment, such reduction to be effective as of January 17, 1997; and WHEREAS, due to the withdrawal of the Non-Extending Purchaser, the decrease in the Maximum Purchase of the Reducing Purchaser and the reduction in DFC's Purchase Commitment and in the Facility Limit, the Percentages of the remaining APA Purchasers will be affected as evidenced herein; and WHEREAS, in a First Amendment and Consent relating to the Note Purchase Agreement dated the date hereof, the Agent has been given the right to consent to a Change of Control (as defined in such First Amendment) of OFL and desires to be governed by the Majority Purchasers in determining whether to grant such consent; and WHEREAS, the Agent has agreed to increase the Liquidity Fee payable to the APA Purchasers under certain circumstances; and WHEREAS, in accordance with the provisions of Section 13(l) of the Agreement, Delaware Funding Corporation and Olympic Financial Ltd. ("OFL") are willing to consent to this Third Amendment upon the terms provided for herein; and WHEREAS, pursuant to Section 7(b) of the Agreement, the Agent is required to obtain the consent of the Majority Purchasers before consenting to amendments to the Sale and Servicing Agreement. NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties hereto agree as follows: SECTION 1. EXTENSION OF PURCHASE TERMINATION DATE. Each APA Purchaser who executes an attached signature page hereby consents to the extension of such APA Purchaser's Purchase Termination Date to the date specified on such signature page. SECTION 2. DECREASE IN MAXIMUM PURCHASE. The Reducing Purchaser, by execution of its attached signature page, hereby agrees to the decrease in its Maximum Purchase to the amount stated therein. SECTION 3. ACKNOWLEDGEMENT OF DECREASE IN FACILITY LIMIT AND DFC'S PURCHASE LIMIT. In accordance with the provisions of Section 12(b) of the Agreement, all of the APA Purchasers who execute the attached signature pages hereby acknowledge the reduction in the Facility Limit and DFC's Purchase Limit from $300,000,000 to $225,000,000. SECTION 4. EXTENSION AND AMENDMENT OF THE "EXPIRY DATE." The definition of "Expiry Date" in the last paragraph of Section 13(i) of the Agreement is hereby amended to read as follows: For purposes of this Asset Purchase Agreement, "EXPIRY DATE" shall mean, for each APA Purchaser, the earlier of (i) December 19, 1997 or (ii) June 30, 1997, but only if 2 either (a) such APA Purchaser determines, in its sole and absolute discretion, to terminate its Purchase Commitment hereunder and so notifies the Agent and OFL in writing on or before May 27, 1997 or (b) DFC terminates its Purchase Commitment under the Note Purchase Agreement, SECTION 5. RIGHT OF MAJORITY PURCHASERS TO CONSENT TO CHANGE OF CONTROL. A new clause (iv) is added to Section 7(b) of the Agreement and reads as follows: (iv) consent to a Change of Control with respect to OFL; SECTION 6. INCREASE OF LIQUIDITY FEE UNDER CERTAIN CIRCUMSTANCES. The last sentence of Section 16 of the Agreement is hereby amended to read as follows: The Liquidity Fee for each APA Purchaser shall be a per annum fee equal to, for each day, such APA Purchaser's unused Maximum Purchase multiplied by either (i) .15% per annum or (ii) if and for so long as any Warehousing Period (as defined in the Sale and Servicing Agreement) exceeds 90 days, .25% per annum. SECTION 7. CONSENT TO AMENDMENT TO SALE AND SERVICING AGREEMENT. In accordance with the provisions of Section 7(b) of the Agreement, all of the Purchasers who execute the attached signature pages hereby consent to Amendment No. 3 to Sale and Servicing Agreement of even date herewith, substantially in the form attached to this Third Amendment as Exhibit B. SECTION 8. AMENDMENTS OF SIGNATURE PAGES. As a result of the withdrawal of the Non-Extending Purchaser as an APA Purchaser and the decrease in the Maximum Purchase of the Reducing Purchaser as provided in Section 2 of this Third Amendment, pursuant to Sections 2(a), 12(b) and 13(l) of the Agreement, the Percentages of remaining APA Purchasers are being revised. The Percentages and extended Purchase Termination Dates of the remaining APA Purchasers are specified in the executed signature pages attached to this Third Amendment as Exhibit A. The attached signature pages shall supersede the signature pages to the Agreement dated December 20, 1996, and from and after the date of this Third Amendment all references to the signature pages of the Agreement shall refer to the signature pages attached as Exhibit A to this Third Amendment. SECTION 9. EFFECTIVENESS. The amendments provided for by this Third Amendment shall become effective as of January 17, 1997, upon receipt by the Agent of (i) counterparts of this Third Amendment, duly executed by each of the parties hereto, (ii) notice that the conditions to effectiveness of the First Amendment and Consent Relating to Note Purchase Agreement dated the date hereof have been satisfied and (iii) confirmation by each of S&P and Moody's of the then-current ratings of the Commercial Paper Notes. 3 SECTION 10. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. Except as specifically amended or waived hereby, all of the terms and conditions of the Agreement shall remain in full force and effect. All references to the Agreement in any other document or instrument shall be deemed to mean such Agreement as amended by this Third Amendment. This Third Amendment shall not constitute a novation of the Agreement, but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and obligations of the Agreement, as amended by this Third Amendment, as though the terms and obligations of the Agreement were set forth herein. SECTION 11. PRIOR UNDERSTANDINGS. This Third Amendment sets forth the entire understanding of the parties relating to the subject matter hereof, and supersedes all prior understandings and agreements, whether written or oral. SECTION 12. COUNTERPARTS. This Third Amendment may be executed in any number of counterparts and by separate parties hereto on separate counterparts, each of which when executed shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument. SECTION 13. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 14. DEFINED TERMS. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Agreement. 4 IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to the Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Richard A. Burke ------------------------ Title: Richard A. Burke Vice President Acknowledged and consented to: January 17, 1997 DELAWARE FUNDING CORPORATION By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By: /s/ Richard A. Burke ------------------------ Authorized Signatory Richard A. Burke Vice President ------------------------ Title OLYMPIC FINANCIAL LIMITED By: -------------------------- Authorized Signatory -------------------------- Title 5 IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to the Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: ------------------------ Title: Acknowledged and consented to: January 17, 1997 DELAWARE FUNDING CORPORATION By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By: -------------------------- Authorized Signatory -------------------------- Title OLYMPIC FINANCIAL LTD. By: /s/ Michael J. Sherman ------------------------- Authorized Signatory Michael J. Sherman Treasurer ------------------------- Title 5 EXHIBIT A Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement Dated as of December 28, 1995 Amended as of June 12, 1996 Amended as of December 20, 1996 Amended as of January 17, 1997 Morgan Guaranty Trust Company of New York, as Agent and as Administrative Agent By: /s/ Richard A. Burke ------------------------ Authorized Signature Richard A. Burke Vice President ------------------------ Title Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 37.78% SECTION 2. Maximum Purchase: $85,000,000 SECTION 3. Effective Date of Purchase Commitment: January 17, 1997 SECTION 4. Purchase Termination Date: December 19, 1997* MORGAN GUARANTY TRUST COMPANY OF NEW YORK 500 Stanton Christiana Road Newark, Delaware 19713-2107 By: /s/ Richard A. Burke ------------------------ Authorized Signature Richard A. Burke Vice President ------------------------ Title - ------------- * At the option of the APA Purchaser named above, June 30, 1997. Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 6.67% SECTION 2. Maximum Purchase: $15,000,000 SECTION 3. Effective Date of Purchase Commitment: January 17, 1997 SECTION 4. Purchase Termination Date: December 19, 1997* THE BANK OF NOVA SCOTIA, ATLANTA AGENCY Suite 2700 600 Peachtree Street, N.E. Atlanta, Georgia 30308 By: /s/ F.C.H. Ashby ------------------------ Title: F.C.H. Ashby Senior Manager Loan Operations - ------------- * At the option of the APA Purchaser named above, June 30, 1997. Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 11.11% SECTION 2. Maximum Purchase: $25,000,000 SECTION 3. Effective Date of Purchase Commitment: January 17, 1997 SECTION 4. Purchase Termination Date: December 19, 1997* COMMERZBANK AKTIENGESELLSCHAFT, CHICAGO BRANCH 311 S. Wacker Drive Chicago, Illinois 60606 By: /s/ Paul Karlin ------------------------ Title: Paul Karlin Assistant Treasurer By: /s/ J. Timothy Shortly ------------------------ Title: J. Timothy Shortly Senior Vice President - ------------- * At the option of the APA Purchaser named above, June 30, 1997. Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 22.22% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: January 17, 1997 SECTION 4. Purchase Termination Date: December 19, 1997* HARRIS TRUST AND SAVINGS BANK 111 West Monroe Street P.O. Box 755 Chicago, Illinois 60690 By: /s/ ILLEGIBLE ------------------------ Title: Illegible By: V.P. ------------------------ Title: - ------------- * At the option of the APA Purchaser named above, June 30, 1997. Signature Page with respect to Olympic Automobile Receivables Warehouse Trust Variable Funding Notes Asset Purchase Agreement SECTION 1. Percentage: 22.22% SECTION 2. Maximum Purchase: $50,000,000 SECTION 3. Effective Date of Purchase Commitment: January 17, 1997 SECTION 4. Purchase Termination Date: December 19, 1997* BANCO SANTANDER, NEW YORK BRANCH 453 East 53rd Street New York, New York 10022 By: /s/ Dom J. Rodriguez ------------------------ Title: Dom J. Rodriguez Vice President BANCO SANTANDER By: /s/ Robert E. Schlegel ------------------------ Title: Robert E. Schlegel Vice President Manager-Corporate Banking BANCO SANTANDER - ------------- * At the option of the APA Purchaser named above, June 30, 1997. EX-10.29 30 MASTER PURCH AGREE ASSIG OLYMPIC RECEIVE FIN CORP EXECUTION COPY _______________________________________________________________________________ RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT between OLYMPIC RECEIVABLES FINANCE CORP. Purchaser and OLYMPIC FINANCIAL LTD. Seller dated as of December 3, 1996 _______________________________________________________________________________ TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2. Specific Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.3. Usage of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 1.4. Certain References. . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 1.6. Action by or Consent of Holders . . . . . . . . . . . . . . . . . . 7 SECTION 1.7. Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE II CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY SECTION 2.1. Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.2. Conveyance of Receivables . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.3. Delivery of Receivable Files. . . . . . . . . . . . . . . . . . . . 9 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. Representations and Warranties of OFL . . . . . . . . . . . . . . . 10 SECTION 3.2. Representations and Warranties of ORFC. . . . . . . . . . . . . . . 12 ARTICLE IV COVENANTS OF OFL SECTION 4.1. Protection of Title of ORFC.. . . . . . . . . . . . . . . . . . . . 14 SECTION 4.2. Other Liens or Interests. . . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.3. Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE V REPURCHASES SECTION 5.1. Repurchase of Receivables Upon Breach of Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 5.2. Reassignment of Purchased Receivables . . . . . . . . . . . . . . . 19 SECTION 5.3. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Page ---- ARTICLE VI MISCELLANEOUS SECTION 6.1. Liability of OFL. . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 6.2. Merger or Consolidation of OFL or ORFC. . . . . . . . . . . . . . . 20 SECTION 6.3. Limitation on Liability of OFL and Others . . . . . . . . . . . . . 21 SECTION 6.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 6.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 6.6. Merger and Integration. . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 6.7. Severability of Provisions. . . . . . . . . . . . . . . . . . . . . 22 SECTION 6.8. Intention of the Parties. . . . . . . . . . . . . . . . . . . . . . 22 SECTION 6.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 6.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 6.11. Conveyance of the Receivables and the Other Conveyed Property to an Assignee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 6.12. Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . . . . . 23 SCHEDULE - --------- SCHEDULE A SCHEDULE OF RECEIVABLES SCHEDULE B REPRESENTATIONS AND WARRANTIES OF SELLER EXHIBIT - ------- EXHIBIT A FORM OF ASSIGNMENT AGREEMENT
RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT THIS RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT, dated as of December 3, 1996, executed between Olympic Receivables Finance Corp., a Delaware corporation, as purchaser ("ORFC"), and Olympic Financial Ltd., a Minnesota corporation, as seller ("OFL"). W I T N E S S E T H : WHEREAS, ORFC has agreed from time to time to purchase from OFL and OFL, pursuant to this Agreement, has agreed from time to time to sell and assign to ORFC the Receivables and Other Conveyed Property. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, ORFC and OFL, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. GENERAL. The specific terms defined in this Article include the plural as well as the singular. The words, "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision, and Article, Section, Schedule and Exhibit references, unless otherwise specified, refer to Articles and Sections of and Schedules and Exhibits to this Agreement. SECTION 1.2. SPECIFIC TERMS. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: "ACCOUNTING DATE" means with respect to any Receivables the date specified, if applicable, in the related Servicing Agreement. z "AFFILIATE" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "AGREEMENT" shall mean this Receivables Purchase Agreement and Assignment and all amendments hereof and supplements hereto. "AMOUNT FINANCED" has the meaning specified, with respect to any Receivable, in the related Servicing Agreement. "ASSIGNEE" means, collectively, each Person specified in the relevant Securitization Document or Warehousing Document to whom ORFC assigns or otherwise transfers specified Receivables and the related Other Conveyed Property. "ASSIGNMENT AGREEMENT" means, with respect to any Receivables, the assignment agreement between OFL and ORFC pursuant to which OFL sells and assigns Receivables to ORFC, the form of which is attached hereto as Exhibit A. "ASSIGNMENT DATE" means any date on which Receivables are sold and assigned to ORFC pursuant to Section 2.2. "BACKUP SERVICER" means, if applicable, any backup servicer or its successor in interest, or such Person as shall have been appointed as Backup Servicer or successor Servicer pursuant to any Servicing Agreement. "BUSINESS DAY" means any day other than a Saturday, Sunday, legal holiday or other day on which commercial banking institutions in Minneapolis, Minnesota, New York, New York or any other location of any successor Servicer, any Trustee or Collateral Agent are obligated by law, executive order or governmental decree to be closed. "CLOSING DATE" means December 3, 1996. "COLLECTION ACCOUNT" has the meaning specified, with respect to any Receivable, in the related Servicing Agreement. "COLLATERAL AGENT" has the meaning specified, if applicable, in any Servicing Agreement. "COMPUTER TAPE" means the computer tape generated on behalf of ORFC that provides information relating to Receivables and that was used by OFL and ORFC in selecting the Receivables conveyed hereunder and under any Related Document. "CRAM DOWN LOSS" means, with respect to a Receivable, if a court of appropriate jurisdiction in an insolvency proceeding shall have issued an order reducing the Principal Balance of such Receivable, the amount of such reduction. A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of such order. "CUSTODIAN" means, collectively, each Custodian specified in a Servicing Agreement or other Related Document. 2 "CUT-OFF DATE" means, with respect to any Receivables, the date specified in the related Warehousing Documents or Securitization Documents. "DEALER" means a seller of new or used automobiles or light trucks that originated one or more of the Receivables and sold the respective Receivable, directly or indirectly, to OFL under an existing agreement between such seller and OFL. "DEALER AGREEMENT" means an agreement between OFL and a Dealer relating to the sale of retail installment sales contracts and installment notes to OFL and all documents and instruments relating thereto. "DEALER ASSIGNMENT" means, with respect to a Receivable, the executed assignment executed by a Dealer conveying such Receivable to OFL. "DEPOSIT DATE" means that date specified, with respect to a Receivable, in the related Servicing Agreement. "FINANCED VEHICLE" means a new or used automobile or light truck, together with all accessories thereto, securing or purporting to secure an Obligor's indebtedness under a Receivable. "FORCE-PLACED INSURANCE" means insurance that the Servicer may, if an Obligor fails to obtain or maintain a comprehensive and collision insurance policy, obtain with respect to the related Financed Vehicle. "HOLDERS" means any "Holder" of a Security as defined in any applicable Related Document. "INSURANCE AGREEMENT" means collectively, each insurance agreement dated as of a date on or after the date hereof, executed and delivered by among others, a Security Insurer, an Assignee, ORFC and OFL. "INSURANCE POLICY" means, with respect to a Receivable, any insurance policy benefiting the holder of the Receivable providing loss or physical damage, credit life, credit disability, theft, mechanical breakdown or similar coverage with respect to the Financed Vehicle or the Obligor. "INSURER DEFAULT" with respect to any Security Insurer has the meaning specified in any Servicing Agreement(s) covering Receivables backing a Security insured by such Security Insurer. "LIEN" means any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind, including tax liens, mechanics' liens and any liens that attach by operation of law. 3 "LIEN CERTIFICATE" means, with respect to a Financed Vehicle, an original certificate of title, certificate of lien or other notification issued by the Registrar of Titles of the applicable state to a secured party which indicates that the lien of the secured party on the Financed Vehicle is recorded on the original certificate of title. In any jurisdiction in which the original certificate of title is required to be given to the Obligor, the term "Lien Certificate" shall mean only a certificate or notification issued to a secured party. "LIQUIDATED RECEIVABLE" has the meaning specified, with respect to a Receivable, in the related Servicing Agreement. "LIQUIDATION PROCEEDS" means, with respect to a Liquidated Receivable, all amounts realized with respect to such Receivable (other than amounts withdrawn from a spread account or other like account and drawings under a Security Policy) net of (i) reasonable expenses incurred by the Servicer in connection with the collection of such Receivable and the repossession and disposition of the Financed Vehicle and (ii) amounts that are required to be refunded to the Obligor on such Receivable; PROVIDED, HOWEVER, that the Liquidation Proceeds with respect to any Receivable shall in no event be less than zero. "OBLIGOR" means the purchaser or the co-purchasers of the Financed Vehicle and any other Person or Persons who are primarily or secondarily obligated to make payments under a Receivable. "OTHER CONVEYED PROPERTY" means all monies at any time paid or payable on the Receivables or in respect thereof after the applicable Cut-Off Date (including amounts due on or before the applicable Cut-Off Date but received by OFL after such Cut-Off Date), the security interests of OFL in the Financed Vehicles, the Insurance Policies and any proceeds from any Insurance Policies relating to the Receivables, the Obligors or the Financed Vehicles, including rebates of premiums, and any Force-Placed Insurance relating to the Receivables, rights of OFL against Dealers with respect to the Receivables under the Dealer Agreements and the Dealer Assignments, all items contained in the Receivable Files, any and all other documents or electronic records that OFL keeps on file in accordance with its customary procedures relating to the Receivables, the Obligors or the Financed Vehicles, property (including the right to receive future Liquidation Proceeds) that secures a Receivable and that has been acquired by or on behalf of OFL pursuant to liquidation of such Receivable, all present and future claims, demands, causes and choses in action in respect of the Receivables and any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of the Receivables and any and all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivables, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights 4 to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of the Receivables and any of the foregoing. "PERSON" means any legal person, including any individual, corporation, partnership, joint venture, estate, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity. "PRINCIPAL BALANCE" means, with respect to any Receivable, as of any date, the Amount Financed minus (i) that portion of all amounts received on or prior to such date and allocable to principal in accordance with the terms of the Receivable, and (ii) any Cram Down Loss in respect of such Receivable. "PURCHASE AMOUNT" with respect to a Receivable has the meaning specified, if applicable, in the Servicing Agreement related to such Receivable. "PURCHASED RECEIVABLE" has the meaning specified, if applicable, in the related Servicing Agreement. "RATING AGENCY" means any nationally recognized statistical rating organization selected by OFL or ORFC to rate any of the Securities or that determines a capital charge with respect to the issuance of a Security Policy by a Security Insurer or any other party specified as such in the Servicing Agreement or other Related Document. "RECEIVABLE" means a retail installment sales contract or promissory note (and related security agreement) for a new or used automobile or light truck (and all accessories thereto) that is included in the Schedule of Receivables, and all rights and obligations under such a contract. "RECEIVABLE FILES" means the documents, electronic entries, instruments and writings with respect to a Receivable required to be transferred to, and held by, the Custodian pursuant to a Warehousing Document or Securitization Document relating to such Receivable. "REGISTRAR OF TITLES" means, with respect to any state, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon. "RELATED DOCUMENTS" has the meaning specified in each Servicing Agreement. The Related Documents to be executed by any party are referred to herein as "such party's Related Documents," "its Related Documents" or by a similar expression. 5 "REPURCHASE DATE" means the date specified, if applicable, in the relevant Warehousing Document. "REPURCHASE EVENT" means the occurrence of a breach of any of OFL's representations and warranties contained in Section 3.1(a) hereof that materially and adversely affects the interests of ORFC or any assignee in the related Receivables or any other event which requires the repurchase of a Receivable by OFL under a Servicing Agreement or this Agreement. "REPURCHASED RECEIVABLES" has the meaning specified, if applicable, in the relevant Warehousing Document. "SCHEDULE OF RECEIVABLES" means the schedule of all automobile retail installment loan contracts and promissory notes sold and transferred pursuant to this Agreement which is attached hereto as Schedule A, as such Schedule shall be supplemented from time to time (a) by each Schedule of Receivables with respect to each Assignment Agreement, which Schedules of Receivables shall be deemed incorporated and made a part of Schedule A hereto and (b) to reflect the repurchase from ORFC of Receivables repurchased by OFL hereunder or purchased by a Servicer under any Servicing Agreement. OFL shall maintain a Master Schedule A reflecting all such sales, transfers , repurchases and purchases. With respect to an Assignment Agreement, "Schedule of Receivables" shall mean the Schedule attached to such Assignment Agreement as Exhibit A thereto. "SCHEDULE OF REPRESENTATIONS" means the Schedule of Representations and Warranties attached hereto as Schedule B. "SECURITIZATION DOCUMENT" means each Servicing Agreement and Related Document related to a transfer of Receivables in connection with the public sale or private placement of term securities backed by such Receivables. "SECURITY" means any note, certificate or other security backed by Receivables that is issued pursuant to a Warehousing Document or a Securitization Document. "SECURITY INSURER" means each financial guaranty insurance company issuing a Security Policy, as specified in any Servicing Agreement. "SECURITY POLICY" means any "Note Policy," "Certificate Policy" or other policy of financial guaranty insurance with respect to a Security defined as such in the relevant Servicing Agreement. "SERVICER" means OFL and any successor in interest, as applicable, pursuant to the related Servicing Agreement. "SERVICING AGREEMENT" means, collectively, each servicing agreement or sale and servicing agreement dated as of a 6 date on or after the date hereof relating to the Receivables assigned hereunder. "TRUSTEE" means any indenture trustee, owner trustee or other trustee specified as such in a Securitization Document or Warehousing Document. "UCC" means The Uniform Commercial Code as in effect in the relevant jurisdiction. "WAREHOUSING DOCUMENT" means each Servicing Agreement and Related Document related to a transfer of Receivables in connection with a warehousing facility for the financing of such Receivables in anticipation of the later repurchase, sale or term resecuritization of such Receivables. SECTION 1.3. USAGE OF TERMS. With respect to all terms used in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other gender; references to "writing" include printing, typing, lithography, and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all subsequent amendments thereto or changes therein entered into in accordance with their respective terms and not prohibited by this Agreement, a Warehousing Document or a Securitization Document or a Servicing Agreement; references to Persons include their permitted successors and assigns; and the terms "include" or "including" mean "include without limitation" or "including without limitation." SECTION 1.4. CERTAIN REFERENCES. All references to the Principal Balance of a Receivable as of an Accounting Date shall refer to the close of business on such day, or as of the first day of a calendar month shall refer to the opening of business on such day. All references to the last day of a calendar month shall refer to the close of business on such day. SECTION 1.5. NO RECOURSE. Without limiting the obligations of OFL hereunder, no recourse may be taken, directly or indirectly, under this Agreement or any certificate or other writing delivered in connection herewith or therewith, against any stockholder, officer or director, as such, of OFL, or any stockholder, officer or director, as such, of any predecessor or successor of OFL. SECTION 1.6. ACTION BY OR CONSENT OF HOLDERS. Whenever any provision of this Agreement refers to action to be taken, or consented to, by Holders, such provision shall be deemed to refer to Holders of record as of the applicable record date immediately preceding the date on which such action is to be taken, or consent given, by Holders. Solely for the purposes of any action to be taken, or consented to, by Holders, any Security registered in the name of ORFC, OFL or any Affiliate thereof shall be deemed not to be outstanding and the principal amount evidenced thereby shall not be taken into account in determining 7 whether the requisite principal amount necessary to effect any such action or consent has been obtained; PROVIDED, HOWEVER, that solely for the purpose of determining whether a Trustee is entitled to rely upon any such action or consent, only Securities which the related Trustee knows to be so owned shall be so disregarded. SECTION 1.7. MATERIAL ADVERSE EFFECT. Whenever a determination is to be made under this Agreement as to whether a given event, action, course of conduct or set of facts or circumstances could or would have a material adverse effect on any Securities and the interests of the Holders therein (or any similar or analogous determination), such determination shall be made without taking into account the funds available from claims under any Security Policy or withdrawals from any reserve accounts. ARTICLE II CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY SECTION 2.1. PURCHASE PRICE. In consideration of the conveyance of the Receivables and the related Other Conveyed Property to ORFC on each Assignment Date, ORFC shall pay or cause to be paid to OFL an amount equal to the product of (x) the outstanding Principal Balance of each Receivable and (y) 100%. Such amount shall be paid to OFL, by wire transfer of immediately available funds on the date of such conveyance, to the extent of the net proceeds received by ORFC upon its contemporaneous conveyance of such Receivables to an Assignee pursuant to a Warehousing Document or Securitization Document. The balance shall be payable (a) with respect to any Receivable transferred pursuant to a Warehousing Document, upon the subsequent transfer of such Receivable pursuant to a Securitization Document, to the extent the net proceeds received by ORFC upon such subsequent transfer exceeds the amount paid by ORFC to effect the retransfer of such Receivable to ORFC pursuant to such Warehousing Document, and (b) with respect to any Receivable transferred pursuant to a Securitization Document, within ninety days after such transfer. SECTION 2.2. CONVEYANCE OF RECEIVABLES. (a) Subject to the conditions set forth in paragraph (b) below, OFL, pursuant to the mutually agreed upon terms contained herein and pursuant to one or more Assignment Agreements, shall sell, transfer, assign and otherwise convey to ORFC without recourse (but without limitation of its obligations in this Agreement or its obligations as Servicer under any Servicing Agreement, all of the right, title and interest of OFL, whether then existing or thereafter acquired, in and to all accounts, contract rights, general intangibles, chattel paper, instruments, documents, money, deposit accounts, certificates of deposit, goods, letters of credit, advices of credit and 8 uncertificated securities consisting of, arising from or relating to the Receivables listed on the Schedule of Receivables and the related Other Conveyed Property. It is the intention of ORFC and OFL that the transfers and assignments contemplated by this Agreement and each Assignment Agreement shall constitute a sale of the Receivables and the Other Conveyed Property from OFL to ORFC, conveying good title thereto free and clear of any Liens, and the Receivables and Other Conveyed Property shall not be a part of OFL's estate in the event of the filing of a bankruptcy petition by or against OFL under any bankruptcy or similar law. (b) OFL shall transfer to ORFC the Receivables and the related Other Conveyed Property as described in paragraph (a) above only upon the satisfaction of each of the following conditions on or prior to the related Assignment Date: (i) OFL shall have delivered to ORFC and the related Assignee a duly executed Assignment Agreement (including an acceptance by ORFC), which shall include a Schedule of Receivables listing the Receivables being transferred on such Assignment Date; (ii) as of such Assignment Date, OFL shall not have been insolvent nor shall OFL have been rendered insolvent by such sale and assignment nor shall OFL be aware of any pending insolvency; (iii) OFL shall have taken any action necessary or, if requested by any Security Insurer, advisable, to obtain or maintain the first priority perfected ownership interest of ORFC in the Receivables and Other Conveyed Property; and (iv) no selection procedures believed by OFL to be adverse to the interests of ORFC, any Assignee or any Holders shall have been utilized by OFL or ORFC in selecting the Receivables. SECTION 2.3. DELIVERY OF RECEIVABLE FILES. OFL shall deliver to the Custodian on each Assignment Date the following documents: (i) The fully executed original of the Receivable (together with the original of any agreements modifying the Receivable, including without limitation any extension agreements); (ii) A certificate of insurance, application form for insurance signed by the Obligor or a signed representation letter from the Obligor named in the Receivable pursuant to which the Obligor has agreed to obtain physical damage insurance for the related Financed Vehicle, or a documented verbal confirmation by the insurance agent for the Obligor of a policy number for an insurance policy for the Financed Vehicle; 9 (iii) The original credit application, or a copy thereof, of each Obligor, on OFL's customary form, or on a form approved by OFL, for such application; and (iv) The original certificate of title (when received) and otherwise such documents, if any, that OFL keeps on file in accordance with its customary procedures indicating that the Financed Vehicle is owned by the Obligor and subject to the interest of OFL as first lienholder or secured party (including any Lien Certificate received by OFL), or if such original certificate of title has not yet been received, a copy of the application therefor, showing OFL as secured party, or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by OFL within 180 days. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF OFL. OFL makes the following representations and warranties, on which ORFC relies in purchasing the Receivables and the Other Conveyed Property. Such representations are made as of the execution and delivery of this Agreement and on each Assignment Date, and shall survive the sale, transfer and assignment of the Receivables and the Other Conveyed Property under such Assignment Agreements, and the sale, transfer and assignment thereof by ORFC under any Securitization Document or Warehousing Document. OFL and ORFC agree that pursuant to the relevant Securitization Document or Warehousing Document ORFC will assign to the relevant Assignee all of ORFC's rights under this Agreement with respect to Receivables sold, transferred or assigned pursuant to any Securitization Document or Warehousing Document and not repurchased by ORFC, and the related Other Conveyed Party, and that such Assignee will thereafter be entitled to enforce this Agreement against OFL in such Assignee's own name. (a) SCHEDULE OF REPRESENTATIONS. The representations and warranties set forth on the Schedule of Representations are true and correct with respect to each Receivable on the date it is sold by OFL to ORFC hereunder. (b) ORGANIZATION AND GOOD STANDING. OFL has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Minnesota, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire, own and sell the Receivables and the Other Conveyed Property transferred to ORFC. 10 (c) DUE QUALIFICATION. OFL is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of its property or the conduct of its business requires such qualification. (d) POWER AND AUTHORITY. OFL has the power and authority to execute and deliver this Agreement, each Assignment Agreement and its Related Documents and to carry out its terms and their terms, respectively; OFL has full power and authority to sell and assign the Receivables and the Other Conveyed Property to be sold and assigned to and deposited with ORFC under each Assignment Agreement and has duly authorized such sale and assignment to ORFC by all necessary corporate action; and the execution, delivery and performance of this Agreement, each Assignment Agreement and OFL's Related Documents have been duly authorized by OFL by all necessary corporate action. (e) VALID SALE; BINDING OBLIGATIONS. This Agreement and each Assignment Agreement have been duly executed and delivered and shall effect a valid sale, transfer and assignment of the Receivables and the Other Conveyed Property, enforceable against OFL and creditors of and purchasers from OFL; and this Agreement, each Assignment Agreement and OFL's Related Documents constitute legal, valid and binding obligations of OFL enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (f) NO VIOLATION. The consummation of the transactions contemplated by this Agreement, each Assignment Agreement and the Related Documents and the fulfillment of the terms of this Agreement, each Assignment Agreement and the Related Documents do not and shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice, lapse of time or both) a default under, the articles of incorporation or bylaws of OFL, or any indenture, agreement, mortgage, deed of trust or other instrument to which OFL is a party or by which it or any of its property is bound, or result in the creation or imposition of any Lien upon any of OFL's properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement and each Assignment Agreement, or violate any law, order, rule or regulation applicable to OFL of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over OFL or any of its properties. 11 (g) NO PROCEEDINGS. There are no proceedings or investigations pending or, to OFL's knowledge, threatened against OFL, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over OFL or its properties (i) asserting the invalidity of this Agreement, any Assignment Agreement or any of the Related Documents, (ii) seeking to prevent the issuance of any Securities or the consummation of any of the transactions contemplated by this Agreement, any Assignment Agreement or any of the Related Documents, (iii) seeking any determination or ruling that might materially and adversely affect the performance by OFL of its obligations under, or the validity or enforceability of, this Agreement, any Assignment Agreement or any of the Related Documents or (iv) seeking to affect adversely the federal income tax or other federal, state or local tax attributes of, or seeking to impose any excise, franchise, transfer or similar tax upon, the transfer and acquisition of the Receivables and the Other Conveyed Property hereunder, under any Assignment Agreement or under any of the Related Documents. (h) CHIEF EXECUTIVE OFFICE. The chief executive office of OFL is located at 7825 Washington Avenue South, Suite 400, Minneapolis, MN 55439-2435. SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF ORFC. ORFC makes the following representations and warranties, on which OFL relies in selling, assigning, transferring and conveying the Receivables and the Other Conveyed Property to ORFC hereunder and under each Assignment Agreement. Such representations are made as of the execution and delivery of this Agreement and each Assignment Agreement, but shall survive the sale, transfer and assignment of the Receivables and the Other Conveyed Property hereunder and under each Assignment Agreement and the sale, transfer and assignment thereof by ORFC to an Assignee pursuant to any Related Document. (a) ORGANIZATION AND GOOD STANDING. ORFC has been duly organized and is validly existing and in good standing as a corporation under the laws of the State of Delaware, with the power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and has, full power, authority and legal right to acquire and own the Receivables and the Other Conveyed Property, and to transfer the Receivables and the Other Conveyed Property to an Assignee pursuant to any Related Document. (b) DUE QUALIFICATION. ORFC is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions where the failure to do so would materially and adversely affect ORFC's ability to acquire the 12 Receivables or the Other Conveyed Property or the validity or enforceability of the Receivables and the Other Conveyed Property or to perform ORFC's obligations hereunder, under any Assignment Agreement and under the Related Documents. (c) POWER AND AUTHORITY. ORFC has the power, authority and legal right to execute and deliver this Agreement and each Assignment Agreement and to carry out the terms hereof and thereof and to acquire the Receivables and the Other Conveyed Property hereunder; and the execution, delivery and performance of this Agreement and each Assignment Agreement and all of the documents required pursuant hereto and thereto have been duly authorized by ORFC by all necessary action. (d) NO CONSENT REQUIRED. ORFC is not required to obtain the consent of any other Person, or any consent, license, approval or authorization or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery or performance of this Agreement, each Assignment Agreement and the Related Documents, except for such as have been obtained, effected or made. (e) BINDING OBLIGATION. This Agreement and each Assignment Agreement constitute legal, valid and binding obligations of ORFC, enforceable against ORFC in accordance with their terms, subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, liquidation and other similar laws and to general equitable principles. (f) NO VIOLATION. The execution, delivery and performance by ORFC of this Agreement and each Assignment Agreement, the consummation of the transactions contemplated by this Agreement, each Assignment Agreement and the Related Documents and the fulfillment of the terms of this Agreement, each Assignment Agreement and the Related Documents do not and will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the certificate of incorporation or bylaws of ORFC, or conflict with or breach any of the terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any indenture, agreement, mortgage, deed of trust or other instrument to which ORFC is a party or by which ORFC is bound or to which any of its properties are subject, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument (other than with respect to Receivables and the related Other Conveyed Property being transferred under a Related Document, under such Related Document), or violate any law, order, rule or regulation, applicable to ORFC or its properties, of any federal or state regulatory body, any 13 court, administrative agency, or other governmental instrumentality having jurisdiction over ORFC or any of its properties. (g) NO PROCEEDINGS. There are no proceedings or investigations pending, or, to the knowledge of ORFC, threatened against ORFC, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality having jurisdiction over ORFC or its properties: (i) asserting the invalidity of this Agreement, any Assignment Agreement or any of the Related Documents, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, any Assignment Agreement or any of the Related Documents, (iii) seeking any determination or ruling that might materially and adversely affect the performance by ORFC of its obligations under, or the validity or enforceability of, this Agreement, any Assignment Agreement or any of the Related Documents or (iv) that may adversely affect the federal or state income tax attributes of, or seek to impose any excise, franchise, transfer or similar tax upon, the transfer and acquisition of the Receivables and the Other Conveyed Property hereunder or under any Assignment Agreement or the transfer of the Receivables and the Other Conveyed Property to an Assignee pursuant to any Related Document. In the event of any breach of a representation and warranty made by ORFC hereunder, OFL covenants and agrees that it will not take any action to pursue any remedy that it may have hereunder, in law, in equity or otherwise, until a year and a day have passed since the date on which all the Securities have been paid in full. OFL and ORFC agree that damages will not be an adequate remedy for such breach and that this covenant may be specifically enforced by ORFC or by an Assignee under any Related Document. ARTICLE IV COVENANTS OF OFL SECTION 4.1. PROTECTION OF TITLE OF ORFC. (a) At or prior to the Closing Date, OFL shall have filed or caused to be filed a UCC-1 financing statement, executed by OFL as seller or debtor, naming ORFC as purchaser or secured party and describing the Receivables and the Other Conveyed Property to be sold by OFL to ORFC as collateral, with the office of the Secretary of State of the State of Minnesota and in such other locations as ORFC shall have required. From time to time thereafter OFL shall execute and file such financing statements and cause to be executed and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of ORFC under this Agreement and of each Assignee under any Securitization 14 Document or Warehousing Document in the Receivables and the Other Conveyed Property and in the proceeds thereof. OFL shall deliver (or cause to be delivered) to ORFC and any party entitled thereto under any Securitization Document or Warehousing Document file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. In the event that OFL fails to perform its obligations under this subsection, ORFC and any party entitled thereto under any Securitization Document or Warehousing Document may do so, at the expense of OFL. (b) Except for changing its name to Arcadia Financial Ltd., OFL shall not change its name, identity, or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed by OFL (or by ORFC or any party entitled to file a financing statement under any Securitization Document or Warehousing Document on behalf of OFL) in accordance with paragraph (a) above seriously misleading within the meaning of Section 9-402(7) of the UCC, unless it shall have given ORFC and any party entitled thereto under any Securitization Document or Warehousing Document and each Security Insurer at least 60 days' prior written notice thereof, and (including in connection with changing its name to Arcadia Financial Ltd.) shall promptly file appropriate amendments to all previously filed financing statements and continuation statements. (c) OFL shall give ORFC, each Security Insurer (so long as an Insurer Default with respect to such Security Insurer shall not have occurred and be continuing) and any party entitled thereto under any Securitization Document or Warehousing Document at least 60 days' prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement. OFL shall at all times maintain each office from which it services the Receivables and its principal executive office within the United States of America. (d) OFL shall maintain its computer systems so that, from and after the time of any sale hereunder and under any Assignment Agreement of the Receivables to ORFC and the conveyance under any Securitization Document or Warehousing Document of the related Receivables by ORFC to an Assignee, OFL's master computer records (including archives) that refer to any such Receivable indicate clearly that such Receivable has been sold to ORFC and has been conveyed by ORFC to such Assignee. Indication of such Assignee's ownership of a Receivable shall be deleted from or modified on OFL's computer systems when, and only when the Receivable shall have been paid in full or shall have been repurchased by ORFC or OFL. 15 (e) If at any time OFL shall propose to sell, grant a security interest in, or otherwise transfer any interest in motor vehicle receivables to any prospective purchaser, lender or other transferee, OFL shall give to such prospective purchaser, lender, or other transferee computer tapes, records, or print-outs (including any restored from archives) that, if they shall refer in any manner whatsoever to any Receivable, shall indicate clearly that such Receivable has been sold to ORFC and is owned by the relevant Assignee pursuant to the applicable Securitization Document or Warehousing Document. SECTION 4.2. OTHER LIENS OR INTERESTS. Except for the conveyances under any Assignment Agreement, OFL will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien on the Receivables or the Other Conveyed Property or any interest therein, and OFL shall defend the right, title, and interest of ORFC and each Assignee under any Securitization Document or Warehousing Document in and to the Receivables and the Other Conveyed Property against all claims of third parties claiming through or under OFL. SECTION 4.3. COSTS AND EXPENSES. OFL shall pay all reasonable costs and disbursements in connection with the performance of its obligations hereunder, under any Assignment Agreement and under its Related Documents. SECTION 4.4. INDEMNIFICATION. (a) OFL shall defend, indemnify and hold harmless ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each Security Insurer and the Holders from and against any and all costs, expenses, losses, damages, claims, and liabilities arising out of or resulting from any breach of any of OFL's representations and warranties contained herein. (b) OFL shall defend, indemnify and hold harmless ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each Security Insurer and the Holders from and against any and all costs, expenses, losses, damages, claims, and liabilities, arising out of or resulting from the use, ownership or operation by OFL or any Affiliate thereof, other than ORFC and the Issuer, of a Financed Vehicle. (c) OFL will defend and indemnify ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each Security Insurer and the Holders against any and all costs, expenses, losses, damages, claims and liabilities arising out of or resulting from any action taken, or failed to be taken, by OFL in respect of any of the Receivables other than in accordance with this Agreement or any Warehousing Document or Securitization Document. 16 (d) OFL agrees to pay, and shall defend, indemnify and hold harmless ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each Security Insurer and the Holders from and against any taxes that may at any time be asserted against ORFC, any Assignee, any Backup Servicer or any Holders with respect to the transactions contemplated in this Agreement, including, without limitation, any sales, gross receipts, general corporation, tangible or intangible personal property, privilege, or license taxes (but not including any taxes asserted with respect to, and as of any date of, the sale, transfer and assignment of any Receivables and Other Conveyed Property to ORFC and of the sale, transfer and assignment of such Receivables and Other Conveyed Property to an Assignee or the issuance and sale of any Securities, or asserted with respect to ownership of the Receivables and Other Conveyed Property which shall be indemnified by OFL pursuant to clause (e) below, or federal, state or other income taxes, arising out of distributions on the Securities or transfer taxes arising in connection with the transfer of Securities) and costs and expenses in defending against the same, arising by reason of the acts to be performed by OFL under this Agreement or any Assignment Agreement or imposed against such Persons. (e) OFL agrees to pay, and to indemnify, defend and hold harmless ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each Security Insurer and the Holders from, any taxes which may at any time be asserted against such Persons with respect to, and as of the date of, any conveyance or ownership of the Receivables or Other Conveyed Property hereunder and under any Assignment Agreement or the issuance and sale of any Securities, including, without limitation, any sales, gross receipts, personal property, tangible or intangible personal property, privilege or license taxes (but not including any federal or other income taxes, including franchise taxes, arising out of the transactions contemplated hereby or transfer taxes arising in connection with the transfer of the Securities) and costs and expenses in defending against the same, arising by reason of the acts to be performed by OFL under this Agreement or imposed against such Persons. (f) OFL shall defend, indemnify, and hold harmless ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each Security Insurer and the Holders from and against any and all costs, expenses, losses, claims, damages, and liabilities to the extent that such cost, expense, loss, claim, damage, or liability arose out of, or was imposed upon ORFC, any Assignee, any Backup Servicer and any Holders through the negligence, willful misfeasance, or bad faith of OFL in the performance of its duties under this Agreement or by reason of reckless disregard of OFL's obligations and duties under this Agreement. 17 (g) OFL shall indemnify, defend and hold harmless ORFC, each Assignee, each Backup Servicer, each Collateral Agent, each Trustee, each Security Insurer and the Holders from and against any loss, liability or expense imposed upon, or incurred by, ORFC, any Assignee, any Backup Servicer or any Holders as a result of the failure of any Receivable, or the sale of the related Financed Vehicle, to comply with all requirements of applicable law. (h) OFL shall defend, indemnify, and hold harmless ORFC from and against all costs, expenses, losses, claims, damages, and liabilities arising out of or incurred in connection with the acceptance or performance of OFL's duties as Servicer under any Servicing Agreement, except to the extent that such cost, expense, loss, claim, damage, or liability shall be due to the willful misfeasance, bad faith, or negligence (except for errors in judgment) of ORFC. (i) OFL shall indemnify, defend and hold harmless ORFC, each Assignee, each Security Insurer, each Backup Servicer and the Holders from and against any loss, liability or expense imposed upon, or incurred by, ORFC, any Assignee, any Backup Servicer, any Trustee or any Holders as a result of OFL's or ORFC's use of the name "Olympic." Indemnification under this Section 4.4 shall include reasonable fees and expenses of counsel and expenses of litigation and shall survive maturity of the related Securities. The indemnity obligations hereunder shall be in addition to any obligation that OFL may otherwise have. ARTICLE V REPURCHASES SECTION 5.1. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY. Upon the occurrence of a Repurchase Event with respect to a Receivable, OFL shall, unless such breach shall have been cured in all material respects, repurchase such Receivable from ORFC or the applicable Assignee, as applicable, and on or before the related Deposit Date (with respect to a Purchased Receivable) or the related Repurchase Date (with respect to Repurchased Receivables), OFL shall deposit the Purchase Amount into the Collection Account as payment to ORFC or such Assignee pursuant to the relevant Servicing Agreement or other Related Document. It is understood and agreed that, except as set forth in Section 6.1, the obligation of OFL to repurchase any Receivable as to which a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against OFL for such breach available to ORFC, any Security Insurer, any Collateral Agent, any such Assignee or any Trustee on behalf of its Holders. The provisions of this Section 5.1 are intended to grant to any such Assignee a direct right 18 against OFL to demand performance hereunder, and in connection therewith OFL waives any requirement of prior demand against ORFC with respect to such repurchase obligation. Any such purchase shall take place in the manner specified in the related Servicing Agreement or other Related Document. Notwithstanding any other provision of this Agreement or any Related Document to the contrary, the obligation of OFL under this Section shall not terminate upon a termination of OFL as Servicer under the related Servicing Agreement and shall be performed in accordance with the terms hereof notwithstanding the failure of the Servicer or ORFC to perform any of their respective obligations with respect to such Receivable under such Servicing Agreement. In addition to the foregoing and whether or not the related Receivable shall have been purchased by OFL, OFL shall indemnify each such Assignee, each Backup Servicer, each Collateral Agent, each Security Insurer, each Trustee and the Holders against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such Repurchase Events. SECTION 5.2. REASSIGNMENT OF PURCHASED RECEIVABLES. Upon deposit in the Collection Account of the Purchase Amount of any Receivable repurchased by OFL under Section 5.1, ORFC shall take such steps as may be reasonably requested by OFL in order to assign to OFL all of ORFC's and the relevant Assignee's right, title and interest in and to such Receivable and all security and documents and all Other Conveyed Property conveyed to ORFC and such Assignee directly relating thereto, without recourse, representation or warranty, except as to the absence of liens, charges or encumbrances created by or arising as a result of actions of ORFC or such Assignee. Such assignment shall be a sale and assignment outright, and not for security. If, following the reassignment of a Purchased Receivable, in any enforcement suit or legal proceeding, it is held that OFL may not enforce any such Receivable on the ground that it shall not be a real party in interest or a holder entitled to enforce the Receivable, ORFC shall, at the expense of OFL, take such steps as OFL deems reasonably necessary to enforce the Receivable, including bringing suit in ORFC's or any such Assignee's name or any Collateral Agent's name or the name of a Trustee on behalf of its Holders. SECTION 5.3. WAIVERS. No failure or delay on the part of ORFC, or any Assignee, in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other or future exercise thereof or the exercise of any other power, right or remedy. 19 ARTICLE VI MISCELLANEOUS SECTION 6.1. LIABILITY OF OFL. OFL shall be liable in accordance herewith only to the extent of the obligations in this Agreement specifically undertaken by OFL and the representations and warranties of OFL. SECTION 6.2. MERGER OR CONSOLIDATION OF OFL OR ORFC. Any corporation or other entity (i) into which OFL or ORFC may be merged or consolidated, (ii) resulting from any merger or consolidation to which OFL or ORFC is a party or (iii) succeeding to the business of OFL or ORFC, in the case of ORFC, which corporation has a certificate of incorporation containing provisions relating to limitations on business and other matters substantively identical to those contained in ORFC's certificate of incorporation or otherwise acceptable to the Security Insurers and the Rating Agencies, provided that in any of the foregoing cases such corporation shall execute an agreement of assumption to perform every obligation of OFL or ORFC, as the case may be, under this Agreement and such party's Related Documents and, whether or not such assumption agreement or agreements are executed, shall be the successor to OFL or ORFC, as the case may be, hereunder (without relieving OFL or ORFC of its responsibilities hereunder, if it survives such merger or consolidation) without the execution or filing of any document or any further act by any of the parties to this Agreement. Notwithstanding the foregoing, ORFC shall not merge or consolidate with any other Person or permit any other Person to become the successor to ORFC's business without the prior written consent of each Security Insurer (so long as no Insurer Default shall have occurred and be continuing with respect to such Security Insurer). OFL or ORFC shall promptly inform the other party, and, so long as an Insurer Default shall not have occurred and be continuing with respect to such Security Insurer, each Security Insurer of such merger, consolidation or purchase and assumption. Notwithstanding the foregoing, as a condition to the consummation of the transactions referred to in clauses (i), (ii) and (iii) above, (x) immediately after giving effect to such transaction, no representation or warranty made pursuant to Sections 3.1 and 3.2 shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction) and no event that, after notice or lapse of time, or both, would become an event of default under any Insurance Agreement, shall have occurred and be continuing, (y) OFL or ORFC, as applicable, shall have delivered to each Trustee an officer's certificate and an opinion of counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 6.2 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and (z) OFL or ORFC, as applicable, shall have delivered to each Trustee an opinion of counsel, stating, in the opinion of such counsel, either (A) all financing statements and 20 continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of each Assignee under any Related Document in the Receivables and reciting the details of the filings or (B) no such actions shall be necessary to preserve and protect such interest. SECTION 6.3. LIMITATION ON LIABILITY OF OFL AND OTHERS. OFL and any director, officer, employee or agent may rely in good faith on the advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement. OFL shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations under this Agreement or its Related Documents and that in its opinion may involve it in any expense or liability. SECTION 6.4. AMENDMENT. (a) This Agreement may be amended by OFL and ORFC, without the consent of any Assignee or any Holders, (i) to cure any ambiguity or (ii) to correct any ambiguity with respect to any provision in this Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an opinion of counsel delivered to each Trustee and each Rating Agency, adversely affect in any material respect the interests of any Assignee or any Holder. (b) This Agreement may also be amended from time to time by OFL and ORFC, with the prior written consent of each Security Insurer (so long as an Insurer Default shall not have occurred and be continuing with respect to such Security Insurer) or, if an Insurer Default shall have occurred and be continuing, with the consent of each Assignee and each Trustee (or other representative of the Holders of all securities backed by the affected Receivables), for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the rights of ORFC; PROVIDED, that if such amendment will have a material adverse effect on any Holders of any Securities, the consent of the Trustee or other representative for such Holders shall be required for such amendment; PROVIDED FURTHER, HOWEVER, that no such amendment shall increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made on any Security. (c) Prior to the execution of any amendment or consent referred to in subsection (b), OFL shall have furnished written notification of the substance of such amendment or consent to each Rating Agency. 21 (d) It shall not be necessary for the consent of Holders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Holders shall be subject to such reasonable requirements as the related Trustee may prescribe, including the establishment of record dates. The consent of any Holder given pursuant to this Section or pursuant to any other provision of this Agreement shall be conclusive and binding on such Holder and on all future Holders of such Security and of any Security issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Security. SECTION 6.5. NOTICES. All demands, notices and communications to OFL or ORFC hereunder shall be in writing, personally delivered, or sent by telecopier (subsequently confirmed in writing), delivered by reputable overnight courier or mailed by certified mail, return receipt requested, and shall be deemed to have been given upon receipt (a) in the case of OFL, to Olympic Financial Ltd., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention: Treasurer, or such other address as shall be designated by OFL in a written notice delivered to the other party or to the Issuer, as applicable or (b) in case of ORFC, to Olympic Receivables Finance Corp., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention: Treasurer. SECTION 6.6. MERGER AND INTEGRATION. Except as specifically stated otherwise herein, this Agreement, each Assignment Agreement and the Related Documents sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the Related Documents. This Agreement may not be modified, amended, waived or supplemented except as provided herein. SECTION 6.7. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, provisions or terms shall be deemed severable from the remaining covenants, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement. SECTION 6.8. INTENTION OF THE PARTIES. The execution and delivery of this Agreement shall constitute an acknowledgement by OFL and ORFC that they intend that the assignments and transfers herein contemplated pursuant to each Assignment Agreement constitute a sale and assignment outright, and not for security, of the Receivables and the Other Conveyed Property, conveying good title thereto free and clear of any Liens, from OFL to ORFC, and that the Receivables and the Other 22 Conveyed Property shall not be a part of OFL's estate in the event of the bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, or the occurrence of another similar event, of, or with respect to, OFL. In the event that such conveyance is determined to be made as security for a loan made by ORFC, any Assignee or any Holders to OFL, the parties intend that OFL shall have granted to ORFC a security interest in all of OFL's right, title and interest in and to the Receivables and the Other Conveyed Property conveyed pursuant to each Assignment Agreement, and that this Agreement shall constitute a security agreement under applicable law. SECTION 6.9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 6.10. COUNTERPARTS. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. SECTION 6.11. CONVEYANCE OF THE RECEIVABLES AND THE OTHER CONVEYED PROPERTY TO AN ASSIGNEE. OFL acknowledges that ORFC intends, pursuant to a Servicing Agreement and other Related Document, to convey the Receivables and the Other Conveyed Property, together with its rights under this Agreement, to Assignees under Warehousing Documents and Securitization Documents. OFL acknowledges and consents to such conveyance and waives any further notice thereof and covenants and agrees that the representations and warranties of OFL contained in this Agreement and the rights of ORFC hereunder are intended to benefit each Security Insurer, each Assignee, each Collateral Agent and each Trustee on behalf of its Holders. In furtherance of the foregoing, OFL covenants and agrees to perform its duties and obligations hereunder, in accordance with the terms hereof for the benefit of each Security Insurer, each Assignee, each Collateral Agent and each Trustee on behalf of its Holders and that, notwithstanding anything to the contrary in this Agreement, OFL shall be directly liable to each such Assignee (notwithstanding any failure by the Servicer, any Backup Servicer or ORFC to perform its duties and obligations hereunder or under any Servicing Agreement) and that each such Assignee or the related Security Insurer may enforce the duties and obligations of OFL under this Agreement against OFL for the benefit of the related Assignee. SECTION 6.12. NONPETITION COVENANT. OFL shall not petition or otherwise invoke the process of any court or government authority for the purpose of commencing or sustaining a case against ORFC under any federal or state bankruptcy, 23 insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of ORFC or any substantial part of its property, or ordering the winding up or liquidation of the affairs of ORFC. 24 IN WITNESS WHEREOF, the parties have caused this Receivables Purchase Agreement and Assignment to be duly executed by their respective officers as of the day and year first above written. OLYMPIC RECEIVABLES FINANCE CORP., as Purchaser By: /s/ illegible -------------------------- Name: Title: OLYMPIC FINANCIAL LTD., as Seller By: /s/ illegible -------------------------- Name: Title: [Signature Page to Receivables Purchase Agreement] SCHEDULE A SCHEDULE OF RECEIVABLES [Deemed Incorporated from each Assignment Agreement] SCHEDULE B REPRESENTATIONS AND WARRANTIES OF OFL 1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary course of such Dealer's business and such Dealer had all necessary licenses and permits to originate Receivables in the state where such Dealer was located, was fully and properly executed by the parties thereto, was purchased by OFL from such Dealer under an existing Dealer Agreement with OFL and was validly assigned by such Dealer to OFL, (B) contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for realization against the collateral security, and (C) is a fully amortizing Receivable which provides for level monthly payments (provided that the payment in the first calendar month and the final calendar month of the life of the Receivable may be minimally different from the level payment) which, if made when due, shall fully amortize the Amount Financed over the original term. 2. NO FRAUD OR MISREPRESENTATION. Each Receivable was originated by a Dealer and was sold by the Dealer to OFL without any fraud or misrepresentation on the part of such Dealer in either case. 3. COMPLIANCE WITH LAW. All requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and "Z," the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor Vehicle Retail Installment Sales Act, and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and other consumer credit laws and equal credit opportunity and disclosure laws) in respect of all of the Receivables and each and every sale of Financed Vehicles, have been complied with in all material respects, and each Receivable and the sale of the Financed Vehicle evidenced by each Receivable complied at the time it was originated or made and now complies in all material respects with all applicable legal requirements. 4. ORIGINATION. Each Receivable was originated in the United States. 5. BINDING OBLIGATION. Each Receivable represents the genuine, legal, valid and binding payment obligation of the Obligor thereon, enforceable by the holder thereof in accordance with its terms, except (A) as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law and (B) as such Receivable may be modified by the application after its Cut-Off Date of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties to each Receivable had full legal capacity to execute and deliver such Receivable and all other documents related thereto and to grant the security interest purported to be granted thereby. 6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of America or any State or any agency, department, subdivision or instrumentality thereof. 7. OBLIGOR BANKRUPTCY. At the applicable Cut-Off Date, no Obligor had been identified on the records of OFL as being the subject of a current bankruptcy proceeding. 8. SCHEDULE OF RECEIVABLES. The information set forth in the most recent Schedule of Receivables delivered to an Assignee was true and correct in all material respects as of the close of business on the applicable Cut-Off Date. 9. MARKING RECORDS. On each Assignment Date, the portions of the Electronic Ledger relating to the Receivables assigned to ORFC on such date will be clearly and unambiguously marked to show that the Receivables were sold to ORFC pursuant to this Agreement and each Assignment Agreement. On each date on which Receivables are transferred by ORFC to an Assignee, OFL will cause the portion of the Electronic Ledger relating to the Receivables to be clearly and unambiguously marked to show that the Receivables were sold by ORFC to an Assignee under the terms of the relevant Related Document. 10. COMPUTER TAPE. The Computer Tape, computer diskette or other electronic transmission made available by OFL to ORFC and its assignee on each Assignment Date was complete and accurate as of the applicable Cut-Off Date, and includes a description of the same Receivables that are described in the Schedule of Receivables. 11. ADVERSE SELECTION. No selection procedures adverse to an Assignee or any Holders were utilized in selecting the Receivables from those receivables owned by OFL which met the selection criteria contained in such Related Document. 12. CHATTEL PAPER. The Receivables constitute chattel paper within the meaning of the UCC as in effect in the States of Minnesota and New York. 13. ONE ORIGINAL. There is only one original executed copy of each Receivable. 14. RECEIVABLE FILES COMPLETE. On the applicable Assignment Date there exists a complete Receivable File for each B-2 Receivable transferred on such date, and such Receivable File is in the possession of the relevant Custodian on such Assignment Date. A Receivable File pertaining to each Receivable will contain on the related Assignment Date (a) a fully executed original of the Receivable, (b) a certificate of insurance, application form for insurance signed by the Obligor or a signed representation letter from the Obligor named in the Receivable pursuant to which the Obligor has agreed to obtain physical damage insurance for the Financed Vehicle, or a documented verbal confirmation by an insurance agent for the Obligor of a policy number for an insurance policy for the Financed Vehicle, (c) the original Lien Certificate or application therefor or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by OFL within 180 days, and (d) a credit application of the Obligor or a copy thereof. Each of such documents which is required to be signed by the Obligor will have been signed by the Obligor in the appropriate spaces. All blanks on any form will have been properly filled in and each form will otherwise have been correctly prepared. 15. RECEIVABLES IN FORCE. No Receivable has been satisfied, subordinated or rescinded, and the Financed Vehicle securing each such Receivable has not been released from the lien of the related Receivable in whole or in part. No provisions of any Receivable have been waived, altered or modified in any respect since its origination, except by instruments or documents identified in the Receivable File. No Receivable has been modified as a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. 16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is subject to the laws of, any jurisdiction, the laws of which would make unlawful, void or voidable the sale, transfer and assignment of such Receivable under any Assignment Agreement, Servicing Agreement or other Related Document or pursuant to transfers of any Securities. 17. GOOD TITLE. No Receivable has been sold, transferred, assigned or pledged by OFL to any Person other than ORFC unless the same was released prior to the transfer of such Receivable to ORFC; immediately prior to the conveyance of the Receivables to ORFC pursuant to any Assignment Agreement, OFL had good and indefeasible title thereto, free and clear of any Lien; and immediately upon the transfer thereof, ORFC shall have good and indefeasible title to and will be the sole owner of each Receivable, free of any Lien, other than Liens created by ORFC pursuant to a Related Document. No Dealer has a participation in, or other right to receive, proceeds of any Receivable. OFL has not taken any action to convey any right to any Person that would result in such Person having a right to payments received under the related Insurance Policies or the related Dealer Agreements or Dealer Assignments or to payments due under such Receivables. B-3 18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable creates a valid, binding and enforceable first priority security interest in favor of OFL in the Financed Vehicle. The Lien Certificate and original certificate of title for each Financed Vehicle show, or if a new or replacement Lien Certificate is being applied for with respect to such Financed Vehicle the Lien Certificate will be received within 180 days of the related Assignment Date and will show, OFL named as the original secured party under each Receivable as the holder of a first priority security interest in such Financed Vehicle. With respect to each Receivable for which the Lien Certificate has not yet been returned from the Registrar of Titles, OFL has received written evidence from the related Dealer that such Lien Certificate showing OFL as first lienholder has been applied for, or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received within 180 days. OFL's security interest has been validly assigned by OFL to ORFC pursuant to the applicable Assignment Agreement. Immediately after the sale, transfer and assignment thereof by ORFC to an Assignee, each Receivable will be secured by an enforceable and perfected first priority security interest in the Financed Vehicle in favor of such Assignee as secured party, which security interest is prior to all other Liens upon and security interests in such Financed Vehicle which now exist or may hereafter arise or be created (except, as to priority, for any lien for taxes, labor or materials affecting a Financed Vehicle). As of the applicable Cut-Off Date there were no Liens or claims for taxes, work, labor or materials affecting a Financed Vehicle which are or may be Liens prior or equal to the lien of the related Receivable. 19. ALL FILINGS MADE. All filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give ORFC a first priority perfected lien on, or ownership interest in, the Receivables and the Other Conveyed Property have been made, taken or performed. 20. NO IMPAIRMENT. OFL has not done anything to convey any right to any Person that would result in such Person having a right to payments due under a Receivable or otherwise to impair the rights of ORFC, any Assignee and the related Trustee on behalf of its Holders in any Receivable or the proceeds thereof. 21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations to OFL with respect to such Receivable. 22. NO DEFENSES. No Receivable is subject to any right of rescission, setoff, counterclaim or defense and no such right has been asserted or threatened with respect to any Receivable. B-4 23. NO DEFAULT. There has been no default, breach, violation or event permitting acceleration under the terms of any Receivable (other than payment delinquencies of not more than 30 days), and no condition exists or event has occurred and is continuing that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable, and there has been no waiver of any of the foregoing. As of the applicable Cut-Off Date, no Financed Vehicle has been repossessed. 24. INSURANCE. As of the Assignment Date for the related Receivable, each Financed Vehicle is covered by a comprehensive and collision insurance policy (i) in an amount at least equal to the lesser of (a) its maximum insurable value or (b) the principal amount due from the Obligor under the related Receivable, (ii) naming OFL as loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage. Each Receivable requires the Obligor to maintain physical loss and damage insurance, naming OFL and its successors and assigns as additional insured parties, and each Receivable permits the holder thereof to obtain physical loss and damage insurance at the expense of the Obligor if the Obligor fails to do so. No Financed Vehicle was or had previously been insured under a policy of Force-Placed Insurance on the related Cut-Off Date. 25. PAST DUE. As of the applicable Cut-Off Date, no Receivable was more than 30 days past due and no funds have been advanced by OFL, ORFC, the Servicer, any Dealer or anyone acting on behalf of any of them in order to cause any Receivable to satisfy such requirement. 26. REMAINING PRINCIPAL BALANCE. As of the applicable Cut-Off Date, each Receivable had a remaining principal balance equal to or greater than $500.00 and the Principal Balance of each Receivable set forth in the related Schedule of Receivables is true and accurate in all material respects. 27. ORIGINAL MATURITY. Each Receivable, and the Receivables as a whole, had original maturities with the parameters represented and warranted to by ORFC in the related Warehousing Document or Securitization Document. If represented and warranted to by ORFC in the related Securitization Document or Warehousing Document, each Receivable with an original maturity of greater than 72 months is secured by a Financed Vehicle that is a new automobile or an automobile that is less than one year old. If applicable, no more than the percentage specified in the applicable Warehousing Document or Securitization Document of the Receivables are Classic Receivables or are secured by Financed Vehicles that are financed repossessions, or satisfy any other applicable categorization with respect to Receivable type. B-5 28. COMPLIANCE WITH UNDERWRITING GUIDELINES. Each Receivable was originated pursuant to OFL's underwriting standards which have not, without the prior written consent of any Person specified in a Related Document, been materially changed since the Closing Date. B-6 EXHIBIT A FORM OF ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT dated as of __________ __, ____, executed between Olympic Receivables Finance Corp., a Delaware corporation, as purchaser ("ORFC"), and Olympic Financial Ltd., a Minnesota corporation, as seller ("OFL"). W I T N E S S E T H WHEREAS, ORFC and OFL are parties to the Receivables Purchase Agreement and Assignment dated as of December 3, 1996 (hereinafter as such agreement may have been, or may from time to time be, amended, supplemented or otherwise modified, the "Purchase Agreement"); and WHEREAS, pursuant to the Purchase Agreement, OFL wishes to convey Receivables and Other Conveyed Property (as each such term is defined in the Purchase Agreement) to ORFC hereunder; NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, ORFC and OFL, intending to be legally bound, hereby agree as follows: 1. DEFINITIONS. All terms defined in the Purchase Agreement (whether directly or by reference to other documents) and used herein shall have such defined meanings when used herein, unless otherwise defined herein. "Assignment Date" shall mean, with respect to the Receivables and the related Other Conveyed Property being conveyed hereby, __________ __, ____. "Cut-Off Date" shall mean, with respect to the Receivables and the related Other Conveyed Property being conveyed hereby, the date specified in the Related Document(s) conveying such Receivables to an Assignee. 2. CONVEYANCE OF RECEIVABLES. Subject to the conditions specified in Section 2.2(b) of the Purchase Agreement and subject to the mutually agreed upon terms contained in the Purchase Agreement, OFL hereby sells, transfers, assigns and otherwise conveys to ORFC without recourse (but without limitation of its obligations in the Purchase Agreement, or any other Related Document), all of the right, title and interest of OFL, whether now existing or hereafter acquired, in and to all accounts, contract rights, general intangibles, chattel paper, instruments, documents, money, deposit accounts, certificates of deposit, goods, letters of credit, advices of credit and uncertificated securities consisting of, arising from or relating to the Receivables listed on Schedule A hereto and the related Other Conveyed Property. 3. COUNTERPARTS. This Assignment Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 4. GOVERNING LAW. This Assignment Agreement shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the undersigned have caused this Assignment Agreement to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. OLYMPIC RECEIVABLES FINANCE CORP., as Purchaser By: _____________________________ Name: Title: OLYMPIC FINANCIAL LTD., as Seller By: _____________________________ Name: Title: A-2 EX-10.30 31 REPURCH AGREE 12/3/96 ARCADIA RECEIVABLES EXECUTION COPY ______________________________________________________________________________ REPURCHASE AGREEMENT Dated as of December 3, 1996 among ARCADIA RECEIVABLES CONDUIT CORP. Buyer and OLYMPIC RECEIVABLES FINANCE CORP. Seller ______________________________________________________________________________ Page ---- TABLE OF CONTENTS 1. APPLICABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3. COMMITMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5. SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . 8 6. PAYMENT, TRANSFER AND CUSTODY . . . . . . . . . . . . . . . . . . . 8 7. REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 10 8. EVENT OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . 13 9. TERM OF COMMITMENT. . . . . . . . . . . . . . . . . . . . . . . . . 16 10. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY . . . . . . . . . 16 11. NOTICES AND OTHER COMMUNICATIONS. . . . . . . . . . . . . . . . . . 17 12. ENTIRE AGREEMENT; SEVERABILITY. . . . . . . . . . . . . . . . . . . 18 13. NON-ASSIGNABILITY; THIRD PARTY BENEFICIARIES. . . . . . . . . . . . 18 14. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 15. NO WAIVERS, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . 18 16. OPINIONS OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . 19 17. ADDITIONAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 19 18. FURTHER ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 21 19. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 20. BINDING TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 21. COVENANT OF THE SELLER. . . . . . . . . . . . . . . . . . . . . . . 21 22. LIMITED RECOURSE. . . . . . . . . . . . . . . . . . . . . . . . . . 21 23. NONPETITION COVENANT. . . . . . . . . . . . . . . . . . . . . . . . 21 i EXHIBITS - -------- EXHIBIT A - OPINIONS OF COUNSEL TO SELLER AND OLYMPIC EXHIBIT B - ADDRESSES FOR NOTICES AND OTHER COMMUNICATIONS EXHIBIT C - FORM OF CONFIRMATION LETTER EXHIBIT D - FORM OF NOTICE OF REPURCHASE DATE EXHIBIT E - FORM OF RECONVEYANCE OF PURCHASED RECEIVABLES EXHIBIT F - FORM OF NOTICE OF REQUEST FOR AN ADVANCE SCHEDULES - --------- SCHEDULE A - REPRESENTATIONS AND WARRANTIES OF SELLER THIS REPURCHASE AGREEMENT, dated as of December 3, 1996, is made among ARCADIA RECEIVABLES CONDUIT CORP. (the "BUYER") and OLYMPIC RECEIVABLES FINANCE CORP. (the "SELLER"). In consideration of the mutual agreements herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. APPLICABILITY. From time to time prior to the Insurer Notice Date, the parties hereto may enter into transactions in which the Buyer makes Advances for the account of the Seller for deposit in the Collection Account and the Seller transfers Receivables and the related other Seller Conveyed Property to the Buyer from time to time against the release of funds from the Collection Account, with a simultaneous agreement by Buyer to transfer to Seller such Receivables and such other Seller Conveyed Property at a future date or, under certain circumstances, on demand, against the deposit of funds by Seller into the Collection Account. Each such transaction shall be referred to herein as a "TRANSACTION" and shall be governed by this Repurchase Agreement (this "AGREEMENT"). Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings set forth in the Servicing Agreement (including by way of reference to other documents). 2. DEFINITIONS. (a) "ACT OF INSOLVENCY," with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or such party seeking the appointment of a receiver, trustee, custodian or similar official for such party or any substantial part of its property, or (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 60 days, (iii) the making by a party of a general assignment for the benefit of creditors, or (iv) the admission in writing by a party of such party's inability to pay such party's debts as they become due. (b) "ADVANCE" means, individually and collectively, the advances provided for in SECTION 3(a) hereof. (c) "AUTO LOAN SECURITIZATION" means a public or private transfer of Auto Receivables in the ordinary course of business and by which Olympic directly or indirectly securitizes a pool of specified Auto Receivables. (d) "AUTO RECEIVABLE" means an installment sales contract or promissory notes purchased by Olympic or a Subsidiary of Olympic from motor vehicle dealers and secured by new and used automobiles and light trucks. (e) "BUYER" means Arcadia Receivables Conduit Corp., a Delaware corporation. (f) "CAPITALIZED LEASE" means any lease which is or should be capitalized on the books of the lessee in accordance with GAAP. (g) "COMMITMENT AMOUNT" means $300,000,000. (h) "CONFIRMATION" has the meaning set forth in SECTION 3(b) hereof. (i) "CONTROLLING PARTY" has the meaning set forth in the Security Agreement. (j) "CUT-OFF DATE" means the date specified in the related Confirmation with respect to each Transaction. (k) "EVENT OF DEFAULT" has the meaning set forth in SECTION 8 hereof. (l) "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of any determination. (m) "INDEBTEDNESS" means, with respect to any Person, without duplication, all obligations, contingent or otherwise, which in accordance with GAAP should be classified upon such Person's balance sheet as liabilities, but in any event including the following (whether or not they should be classified as liabilities upon such balance sheet): (a) all indebtedness for borrowed money of such Person and all obligations of such Person secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the obligation secured thereby shall have been assumed and whether or not the obligation secured is the obligation of such Person or another party; (b) any obligation of such Person on account of deposits or advances; (c) any obligation of such Person for the deferred purchase price of any property or services, except Trade Accounts Payable; (d) any obligation of such Person as lessee under any Capitalized Lease; (e) all guaranties, endorsements and other contingent obligations of such Person in respect to Indebtedness of others (other than endorsements of instruments for collection in the ordinary course 2 of such Person's business); and (f) undertakings or agreements to reimburse or indemnify issuers of letters of credit issued for the account of such Person. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. (n) "INSURER NOTICE DATE" means the earlier of (i) the date specified in the written notice delivered by the Security Insurer to the Seller, the Buyer, the Indenture Trustee and the Collateral Agent, which date is the date on and after which the Note Policy will not cover payments on Notes issued after such date and (ii) the occurrence of an Amortization Event. (o) "OLYMPIC" means Olympic Financial Ltd., a Minnesota corporation. (p) "OTHER CONVEYED PROPERTY" has the meaning set forth in the Purchase Agreement. (q) "PURCHASE DATE" means a date prior to the Insurer Notice Date on which Purchased Receivables are transferred by Seller to Buyer. (r) "PURCHASE PERIOD" has the meaning set forth in the Note Purchase Agreement. (s) "PURCHASE PRICE" means with respect to each Purchase Date, the price at which Purchased Receivables are transferred by Seller to Buyer, which shall equal (x) the product of 0.98 and the outstanding Principal Balance of the Premier Receivables and the Classic Receivables that are not Financed Repossessions being transferred on such Purchase Date and (y) the product of 0.85 and the outstanding Principal Balance of Classic Receivables that are Financed Repossessions being transferred on such Purchase Date. (t) "PURCHASED RECEIVABLES" means the Receivables transferred by Seller to Buyer in a Transaction hereunder, the related Other Conveyed Property transferred hereunder and the Seller's rights as purchaser under the Purchase Agreement and any Assignment Agreement related thereto. (u) "RECEIVABLES SCHEDULE" has the meaning set forth in SECTION 3(b) hereof. (v) "REPURCHASE DATE" means, with respect to any Purchased Receivable, the date on which Seller is required to repurchase such Purchased Receivable from Buyer, which date shall be the earliest to occur of (i) the date that is twelve months after the Purchase Date of such Purchased Receivable, (ii) a date specified by the Seller upon at least three Business Days prior notice to the Buyer, the Indenture Trustee and the Security Insurer in the form set forth in EXHIBIT D, (iii) any date determined with respect to such Purchased Receivable by the 3 application of the provisions of SECTION 8 OR 11 hereof, and (iv) the last day of the Purchase Period. (w) "REPURCHASE PRICE" means, with respect to a Purchased Receivable, the price at which such Purchased Receivable is to be transferred from Buyer to Seller, which will equal the (x) the product of 0.98 and the aggregate outstanding Principal Balance of such Purchased Receivable as of the date of such transfer, if such Purchased Receivable is a Premier Receivable or a Classic Receivable that is not a Financed Repossession or (y) the product of 0.85 and the aggregate outstanding Principal Balance of such Purchased Receivable as of the date of such transfer, if such Purchased Receivable is a Classic Receivable that is a Financed Repossession, plus, in each case, interest on 98% of the Principal Balance of such Purchased Receivable (if such Receivable is a Premier Receivable or a Classic Receivable that is not a Financed Repossession) or on 85% of the Principal Balance of such Purchased Receivable (if such Receivable is a Classic Receivable that is a Financed Repossession) at the sum of the Advance Interest Rate plus the Total Expense Percent, PLUS any Breakage Fee payable upon the simultaneous repayment of the related Advance (if such Advance is being repaid), in each case as of the date of such transfer. (x) "SCHEDULE OF REPRESENTATIONS" means the Schedule of Representations and Warranties attached hereto as SCHEDULE A. (y) "SECURED PARTIES" has the meaning set forth in the Security Agreement. (z) "SELLER" means Olympic Receivables Finance Corp., a Delaware corporation. (aa) "SELLER CONVEYED PROPERTY" has the meaning set forth in SECTION 6(b) hereof. (bb) "SERVICING AGREEMENT" means the Servicing Agreement dated as of December 3, 1996 among the Seller, the Buyer, Olympic Financial Ltd., in its individual capacity and as Servicer, Bank of America National Trust and Savings Association, as Agent, and Norwest Bank Minnesota, National Association, as Backup Servicer, Collateral Agent and Indenture Trustee, providing for the servicing of the Receivables. (cc) "SUBSIDIARY" of a Person means any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by such Person, or one or more of the Subsidiaries of such Person, or a combination thereof. Without limiting the generality of the foregoing, the term "Subsidiary" specifically includes any special purpose vehicle or conduit formed by a Person that is otherwise within the ambit of the immediately preceding sentence. Unless the context otherwise 4 clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of Olympic. (dd) "TRADE ACCOUNTS PAYABLE" means, as to any Person, the trade accounts payable to such Person with a maturity of not greater than 90 days incurred in the ordinary course of such Person's business. 3. COMMITMENT. (a) The Buyer agrees, on the terms of this Agreement, to make Advances for the account of the Seller by depositing the balance of the proceeds of such Advance in the Collection Account during the period from and including the Closing Date to but not including the earliest to occur of (x) the Insurer Notice Date, (y) the termination of the commitment pursuant to SECTION 9 hereof and (z) the first day of the Amortization Period, in an amount at any one time outstanding not to exceed the Commitment Amount. Subject to the terms of this Agreement, during such period the Seller may request Advances and prepay Advances without limitation, except that (i) each Advance and prepayment shall be in amounts of $5,000,000 or any amount in excess thereof, (ii) each request for an Advance shall comply with CLAUSE (c) below and each prepayment of an Advance shall comply with CLAUSE (e) below, and (iii) the Seller shall not be permitted to request an Advance if the difference between the aggregate outstanding principal balance of the Advances and the aggregate outstanding Principal Balance of the Receivables is greater than $5,000,000 (excluding any WAC Deficiency Deposits) (or such other amount as shall be agreed to in writing from time to time by the Seller, the Buyer, the Agent and the Security Insurer). The Buyer agrees, subject to the terms and conditions of this Agreement, to the extent and only to the extent of funds available for release to the Seller for such purpose on deposit in the Collection Account, to purchase Receivables from the Seller from time to time during the period from and including the Closing Date to but excluding the earliest to occur of (q) the Insurer Notice Date, (r) the termination of the commitment pursuant to SECTION 9 hereof, and (s) the first day of the Amortization Period. (b) On each Purchase Date, the Purchased Receivables shall be transferred to the Buyer or its agent against the release of the Purchase Price from the Collection Account for deposit to the Spread Account and payment to the Seller in accordance with and subject to the provisions of Section 3.10 of the Servicing Agreement and the Security Agreement. On the Purchase Date for a Transaction hereunder, Seller shall promptly deliver to the Agent and to the Indenture Trustee a written confirmation, in the form set forth in EXHIBIT C, of such Transaction (a "CONFIRMATION"). The Confirmation shall describe the Purchased Receivables, identify Buyer and Seller, have the updated Receivables Schedule attached thereto and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Cut-Off Date, and (iv) any additional terms or conditions of the 5 Transaction not inconsistent with this Agreement. The Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and Seller with respect to the transfer to which the Confirmation relates, unless with respect to the Confirmation specific objection is made promptly after receipt thereof. In the event of any conflict between the terms of such Confirmation and this Agreement, this Agreement shall prevail. The Purchased Receivables shall be identified on a detailed list provided by Seller to Buyer on each Purchase Date and Repurchase Date (the "RECEIVABLES SCHEDULE") and may be identified in the related Confirmation by reference to such list. Any release of funds from the Collection Account in connection with a purchase of Receivables shall not affect the outstanding principal balance of Advances. (c) The Seller shall give the Buyer, the Agent and the Indenture Trustee notice of each request for an Advance by 12:00 noon, New York City time, at least one Business Day prior to the date requested for such Advance (or if such request is for an Advance of $15,000,000 or less, by 11:00 a.m., New York City time, on the date requested for such Advance), which notice shall be substantially in the form of EXHIBIT F attached hereto and which shall include the Seller's requested Tranche Periods in connection with such Advance. Each such notice shall be in the form of EXHIBIT F and shall be irrevocable unless a written revocation signed by a Responsible Officer of the Seller is received by the Buyer by the end of the day immediately preceding the day such Advance will be made and shall be effective only if received by the Buyer not later than 12:00 noon New York time on the date specified in the preceding sentence (or if such notice is for a same-day Advance, 11:00 a.m. New York City time on the date of the requested Advance). Not later than 1:00 p.m., New York City time, on the date specified for each Advance hereunder, the Buyer shall deposit the amount of such Advance in the Collection Account. (d) On the Repurchase Date for any Purchased Receivables, such repurchase shall be effected by transfer to Seller or its agent of such Purchased Receivables against the transfer of the Repurchase Price therefor on behalf of the Buyer to the Collection Account. On such Repurchase Date , the Buyer shall execute a written reconveyance substantially in the form of EXHIBIT E pursuant to which it shall reconvey to the Seller (without recourse, representation or warranty other than as to Liens created by the Buyer) all right, title and interest of the Buyer in such Purchased Receivables. On any Business Day during the Revolving Period on which there has been since the preceding Business Day an amount greater than $5,000,000 on deposit in the Collection Account in excess of the WAC Deficiency Deposit, Seller shall effect a prepayment of Advances pursuant to Section 3(e) hereof in an amount equal to the lesser of (x) the amount specified by Seller equal to or greater than $5,000,000 and (y) the amount permitted to be prepaid pursuant to Section 3(e) hereof. On a Repurchase Date specified in CLAUSE (iv) of the 6 definition of Repurchase Date herein, the Seller shall effect a repayment of Advances pursuant to SECTION 3(e) hereof, up to the outstanding principal balance of the Notes. (e) Subject to the terms of this Agreement and the Servicing Agreement, the Seller shall have the right to prepay Advances on any Business Day during the Revolving Period in an amount equal to $5,000,000 or any amount in excess thereof. Any such prepayment shall include accrued and unpaid interest on the Advance at the Advance Interest Rate being prepaid through but excluding the date such Advance is prepaid. By 12:00 noon, New York City time, on the Business Day preceding the date on which the Seller proposes to prepay Advances, the Seller shall notify the Buyer, the Agent, the Servicer, the Backup Servicer, the Collateral Agent, the Indenture Trustee and the Security Insurer of the amount of such prepayment, which amount shall be set forth in a certificate executed by a Responsible Officer of the Seller on such date of notice. The Seller shall pay the Breakage Fee, if any, on such date of prepayment by paying to the Trustee for deposit into the Note Distribution Account an amount equal to such Breakage Fee (which amount may come from amounts otherwise distributable to the Seller on such date). Any such prepayment (including interest in connection therewith but excluding the aforementioned Breakage Fee) shall be payable solely out of funds on deposit in the Collection Account and the Spread Account and shall not exceed an amount equal to the lesser of (i) on any date occurring during the period from but excluding a Determination Date through and including the related Distribution Date, an amount equal to the excess of the total amount on deposit in the Collection Account and the Spread Account on such date over the sum of (A) the amounts to be distributed on such Distribution Date pursuant to CLAUSES (i) THROUGH (ix) of SECTION 3.6(a) of the Servicing Agreement as set forth in a Servicer's Certificate delivered on such Determination Date, and (B) any increase in the WAC Deficiency Amount on such date, if any, above the WAC Deficiency Amount on such Determination Date, and (ii) an amount equal to the excess of the total amount on deposit in the Collection Account on such date over the WAC Deficiency Amounts, if any, on deposit in the Collection Account on such date. Notwithstanding anything contained in this SECTION 3(e) to the contrary, if the Breakage Fee is not paid in full on or before the date of any proposed prepayment, no such prepayment may occur. (f) All outstanding Advances shall be due and payable by the Seller on the first day of the Amortization Period. Unless otherwise paid by the Seller, such Advances shall be repaid by the Seller to the Buyer on each Distribution Date in the amounts specified for such repayment in SECTION 3.6 of the Servicing Agreement. 4. PAYMENTS. All payments of principal and interest and principal prepayments payable to the holder of the Purchased Receivables, including Liquidation Proceeds collected in respect of such Purchased Receivables, shall be collected and applied as 7 set forth in the Servicing Agreement. All such payments in excess of the amounts required to be distributed pursuant to clauses (i) through (ix) of Section 3.6(a) AND CLAUSES (i) THROUGH (ix) OF SECTION 3.6(b) of the Servicing Agreement shall be the property of the Seller. 5. SECURITY INTEREST. (a) In the event, for any reason, any Transaction is construed by any court as a secured loan rather than a purchase and sale, the parties intend that Seller shall have granted to Buyer a perfected first priority security interest in all of the Purchased Receivables. (b) Seller shall pay all fees and expenses associated with perfecting such security interest including, without limitation, the cost of filing financing statements under the Uniform Commercial Code as and when required by Buyer (including, without limitation, as required under the Servicing Agreement). 6. PAYMENT, TRANSFER AND CUSTODY. (a) Unless otherwise mutually agreed in writing, all transfers of funds hereunder shall be in immediately available funds. (b) On the Purchase Date for a Transaction, ownership of the Receivables and the related other Seller Conveyed Property shall be transferred to the Buyer against the simultaneous withdrawal of the Purchase Price from the Collection Account for payment to the Seller in accordance with and subject to the provisions of the Servicing Agreement. On each Purchase Date, the Seller hereby sells, transfers, assigns, and otherwise conveys to the Buyer, all of the right, title and interest, whether now or hereafter acquired, of the Seller in and to all accounts, contract rights, general intangibles, chattel paper, instruments, documents, money, deposit accounts, certificates of deposit, goods, letters of credit, advices of credit and uncertificated securities consisting of, arising from or relating to any of the following property: (i) the Receivables listed on the Receivables Schedule from time to time, (ii) the Other Conveyed Property related thereto, (iii) the rights of the Seller under the Purchase Agreement and each Assignment Agreement related thereto, (iv) all amounts required to be deposited, or deposited, or delivered to the Collateral Agent for deposit, to the Collection Account by the Seller in respect of the WAC Deficiency Amount or the Collateral Test, (v) all of Seller's right, title and interest in and to funds on deposit from time to time in the Secured Accounts and all investments therein and proceeds thereof, and (vi) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any and all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash 8 proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing (all of the foregoing referred to collectively as the "SELLER CONVEYED PROPERTY"). It is the intention of the Seller that the transfer and assignment contemplated by this Agreement shall constitute a sale of the Receivables and other Seller Conveyed Property from the Seller to the Buyer. (c) Simultaneously with the execution and delivery of this Agreement, the Seller, the Buyer and the other Secured Parties shall enter into the Custodian Agreement with the Custodian, dated as of the Closing Date, pursuant to which the Buyer and the other Secured Parties shall revocably appoint the Custodian, and the Custodian shall accept such appointment, to act as the agent of the Buyer and the other Secured Parties as Custodian of the following documents or instruments in its possession which the Seller shall deliver to the Custodian as agent of the Buyer and the other Secured Parties on or prior to the related Purchase Date: (i) The fully executed original of the Receivable (together with the original of any agreements modifying the Receivable, including without limitation any extension agreements); (ii) A certificate of insurance, application form for insurance signed by the Obligor or a signed representation letter from the Obligor named in the Receivable pursuant to which the Obligor has agreed to obtain physical damage insurance for the related Financed Vehicle, or a documented verbal confirmation by the insurance agent for the Obligor of a policy number for an insurance policy for the Financed Vehicle; (iii) The original credit application, or a copy thereof, of each Obligor, on Olympic's customary form, or on a form approved by Olympic, for such application; and (iv) The original certificate of title (when received) and otherwise such documents, if any, that Olympic keeps on file in accordance with its customary procedures indicating that the Financed Vehicle is owned by the Obligor and subject to the interest of Olympic as first lienholder or secured party (including any Lien Certificate received by Olympic), or if such original certificate of title has not yet been received, a copy of the application therefor, showing Olympic as secured party, or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the certificate of title is not received by Olympic within 180 days. 9 7. REPRESENTATIONS. (a) Each party represents and warrants, and shall on and as of the Purchase Date of any Transaction be deemed to represent and warrant, as follows: (i) The execution, delivery and performance of this Agreement and the performance of each Transaction do not and will not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant hereto and pursuant to the other Related Documents) upon or with respect to any of its properties; (ii) This Agreement is, and each Transaction when entered into under this Agreement will be, a legal, valid and binding obligation of it enforceable against it in accordance with the terms of this Agreement. (b) Seller represents and warrants to Buyer and to the Security Insurer, and on and as of the Purchase Date of any Transaction shall be deemed to represent and warrant to each of such Persons, as follows: (i) The representations and warranties set forth on the Schedule of Representations are true and correct with respect to the Receivable(s) transferred in such Transaction. (ii) The Seller has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire, own and sell the Receivables and the other Seller Conveyed Property transferred to the Buyer. (iii) The Seller is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of its property or the conduct of its business requires such qualification. (iv) The Seller has the power and authority to execute and deliver this Agreement, the Servicing Agreement and its Related Documents and to carry out its terms and their terms, respectively; the Seller has full power and authority to sell and assign the Receivables and other Seller Conveyed Property to be sold and assigned to the Buyer and has duly authorized such sale and assignment to the Buyer by all necessary corporate action; and the execution, delivery and performance of this Agreement and the Servicing Agreement and the Seller's Related Documents have been duly authorized by the Seller by all necessary corporate action. 10 (v) This Agreement and the related Confirmation effects a valid sale, transfer and assignment of the Receivables and the other Seller Conveyed Property, enforceable against the Seller and creditors of and purchasers from the Seller; and this Agreement and the related Confirmation and the Servicing Agreement and the Seller's Related Documents, when duly executed and delivered, shall constitute legal, valid and binding obligations of the Seller enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (vi) The consummation of the transactions contemplated by this Agreement and the related Confirmations and the Servicing Agreement and the Related Documents and the fulfillment of the terms of this Agreement and the related Confirmations and the Servicing Agreement and the Related Documents shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice, lapse of time or both) a default under the certificate of incorporation or by-laws of the Seller, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement and the Related Documents, or violate in any material respect any law, order, rule or regulation applicable to the Seller of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or any of its properties. Notwithstanding the foregoing, it is understood that no representation or warranty is expressed herein with respect to the legality of the use of the word "Olympic" by the Seller or its Affiliates. (vii) There are no proceedings or investigations pending or, to the Seller's knowledge, threatened against the Seller or Olympic, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Seller or its properties (A) asserting the invalidity of this Agreement, the Servicing Agreement or any of the Related Documents, (B) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Agreement, the Servicing Agreement or any of the Related Documents, or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Seller of its obligations under, or the validity or 11 enforceability of, this Agreement, the Servicing Agreement or any of the Related Documents. (viii) The chief executive office of the Seller is located at 7825 Washington Avenue South, Suite 410, Minneapolis, MN 55439-2435. (ix) All the issued common stock of Seller is owned by Olympic and such common stock is the only capital stock issued by Seller. Pursuant to its certificate of incorporation, Seller's business is limited to certain financing activities set forth in such certificate. (x) Seller does not commingle its assets or business functions with the assets or business functions of Olympic or any other Person. The bank accounts and funds of Seller are maintained separately from those of Olympic and all other Affiliates of Olympic. The board of directors of Seller duly authorizes all the corporate actions of Seller, to the extent required by the laws of its state of incorporation. Seller maintains its own separate minutes of such actions. Seller maintains separate and full corporate records and financial records for itself only and has at least one director who is not an Affiliate or director of or employed by Olympic or any other Affiliate of Olympic. As of the date hereof, Seller does not have employees and, in the event that it hires employees in the future, Seller will not employ any person employed by Olympic or by any Olympic Affiliate. (xi) The financial records and accounts of Seller are prepared and maintained in accordance with generally accepted accounting principles and are susceptible to audit. (xii) Seller conducts its business solely in its own name. In that regard, all written and oral communications, including, without limitation, letters, invoices, purchase orders and contracts, are made solely in the name of Seller. Seller has its own telephone number, stationery and business forms, separate from those of Olympic and any other Olympic Affiliate. (xiii) Seller pays its own expenses and liabilities from its own funds, except that certain of the organization expenses of Seller have been paid by Olympic. That payment serves a valid business purpose and will not affect the commitment of Olympic and Seller to maintain separate books of account and other indicia of separate corporate existence. The capitalization of Seller is adequate in light of its proposed business and purpose. (xiv) Seller is not liable for the payment of any liability of Olympic. The assets and the creditworthiness of Seller are never held out as being available for the payment of any liability of Olympic. Seller always 12 describes Olympic as a separate legal entity. Each of Olympic and Seller maintains an arm's length relationship with the other. No transaction between Seller and any Olympic Affiliate is on terms more favorable than in similar transactions involving an unrelated third party. Assets are not transferred from Olympic or Seller to the other without reasonably equivalent value or with the intent to hinder, delay or defraud the creditors of Olympic or Seller. Seller's existence is not dependent on its being a subsidiary of Olympic or any other Olympic Affiliate. (xv) Seller has not transferred any Receivables with the intent to hinder, delay or defraud any Person. Olympic receives reasonably equivalent value in exchange for its transfer of Receivables to Seller. Neither Olympic nor Seller is insolvent nor does Olympic or Seller expect to become insolvent as a result of any transfer of Receivables. Neither Olympic nor Seller engages in nor does it expect to engage in a business for which its remaining property represents an unreasonably small capitalization. Neither Olympic nor Seller intends to incur nor does it believe that it will incur indebtedness that it will not be able to repay at its maturity. (xvi) Seller does not intend to file a voluntary petition for relief under the Bankruptcy Code or any similar law. (xvii) Seller is not obligated in any way on the Receivables. (xviii) Seller has not taken any action that might cause any Transaction to violate any regulation of the Federal Reserve Board. 8. EVENT OF DEFAULT. In the event that: (i) Seller fails to repurchase or Buyer fails to transfer Purchased Receivables upon the applicable Repurchase Date or Buyer fails to make an Advance in accordance with the provisions hereof, and in each case such failure continues for two Business Days; (ii) an Act of Insolvency occurs with respect to Seller, Olympic or Buyer; (iii) any representation or warranty made by Seller or Olympic in this Agreement, the Purchase Agreement (excluding, however, any representation or warranty set forth in SECTION 7(b)(i) hereof or SECTION 3.1(a) of the Purchase Agreement), the Custodian Agreement, the Insurance Agreement, the Spread Account Agreement, the Note Purchase Agreement, the Security Agreement or the Servicing Agreement shall have been incorrect or untrue in any material respect when made or repeated or when deemed to have been made or 13 repeated; or either the Seller or Olympic shall fail to comply in any material respect with any of their other agreements contained in this Agreement, the Purchase Agreement, the Insurance Agreement, the Spread Account Agreement, the Note Purchase Agreement, the Security Agreement or the Servicing Agreement not defined elsewhere in this SECTION 8 as an "Event of Default" and such failure to comply shall continue unremedied for a period of 10 days after written notice thereof to the Seller by the Buyer or the Agent; (iv) Seller or Buyer shall admit to the other its inability to, or its intention not to, perform any of its obligations hereunder; (v) any governmental or self-regulatory authority shall take possession of Buyer, Seller or Olympic or their property or appoint any receiver, conservator or other official or, with respect to Seller or Olympic, shall take any action to remove, limit, restrict, suspend or terminate their rights or privileges, including suspension as an issuer, lender or seller/servicer of automobile loans, which suspension has a material adverse effect on the ordinary business operations of Seller or Olympic, and which continues for more than 24 hours; or any such party shall take any action to authorize any of the actions set forth in this CLAUSE (v); (vi) this Agreement shall for any reason cease to create a valid, first priority security interest in any of the Purchased Receivables purported to be covered thereby; (vii) a final judgment by any competent court in the United States of America for the payment of money in an amount of at least $50,000 is rendered against Seller or such a judgment in an amount of at least $5,000,000 is rendered against Olympic, and the same remains undischarged for a period of 60 days unless execution of such judgment is effectively stayed; (viii) Seller or Olympic dissolves, merges or consolidates with another entity unless it is the surviving party, or sells, transfers, or otherwise disposes of a material portion of its business or assets (excluding the sale, transfer or other disposition of Receivables in the ordinary course of business) and the surviving party or the party that succeeds to a material portion of the Seller's or Olympic's business or assets shall cause BofA or any Affiliate of BofA or any Permitted Assignee (as defined in the Indenture) to exceed its legal lending limit with respect to such party or any of its Affiliates; (ix) any of the documents or opinions required to be delivered by the Seller to the Buyer pursuant to SECTION 17 hereof shall not have been delivered within ten Business 14 Days after notice shall have been given to the Seller by the Buyer that such documents or opinions were not delivered when so required; (x) the maturity of any Indebtedness in an amount in excess of $5,000,000 of Olympic or a Subsidiary shall be accelerated, or Olympic or a Subsidiary shall fail to pay any such Indebtedness when due, or, in the case of such Indebtedness payable on demand, when demanded, or there shall occur any default or event or condition permitting the replacement of Olympic or any Subsidiary as Servicer under any Auto Loan Securitization of Olympic or any Subsidiary; (xi) it shall be determined on any Determination Date that the Collateral Test shall fail to have been satisfied as of the immediately preceding Accounting Date, after taking into account any deposit made by the Seller to the Collection Account on such Determination Date, and such failure shall continue for one Business Day; (xii) an Insurance Agreement Event of Default shall occur; (xiii) a Servicer Termination Event shall occur; or (xiv) the Seller shall fail to make a deposit with respect to any WAC Deficiency Amount in accordance with the provisions of SECTION 3.1(f) of the Servicing Agreement, and such failure shall continue for one Business Day. (each an "EVENT OF DEFAULT"): (a) At the option of the nondefaulting party (it being understood that with respect to the Seller, the Seller shall be deemed to be the nondefaulting party only upon the occurrence of an Event of Default specified in SECTION 8(i), (ii), (iv) or (v) with respect to the Buyer), or if the Seller is the defaulting party, the Agent, exercised by written notice to the defaulting party (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency or the occurrence of an Insurance Agreement Event of Default which the Security Insurer specifies in writing shall have such effect), the Repurchase Date for each Transaction hereunder shall be deemed immediately to occur and, if the Seller is the defaulting party, all outstanding Advances shall be and become immediately due and payable hereunder without notice or any further action. (b) If the defaulting party is the Seller and if the Buyer or the Agent exercises or is deemed to have exercised the option referred to in SUBPARAGRAPH (a) of this Section, (i) the Seller's obligations hereunder to repurchase all Purchased Receivables shall thereupon become immediately due and payable, and (ii) the Seller shall immediately deliver to the Buyer any 15 Purchased Receivables subject to such Transactions then in the Seller's custody or possession. (c) If the defaulting party is the Buyer, the Seller may, against transfer to the Seller of the Purchased Receivables, tender payment of the aggregate Repurchase Price for all of the Purchased Receivables, whereupon the Buyer's right, title and interest in all of the Purchased Receivables shall be deemed transferred to the Seller. (d) If the defaulting party is the Seller, after one Business Day's notice to the Seller (which notice need not be given if an Act of Insolvency shall have occurred and which may be the notice given under SUBPARAGRAPH (a) of this Section), the Controlling Party, as agent of the Buyer, may exercise any or all of the remedies provided for in SECTIONS 5.2 and 6.1 of the Security Agreement. (e) For purposes of this SECTION 8 the Repurchase Price for each transaction hereunder in respect of which the defaulting party is the Buyer shall not increase above the amount of such Repurchase Price for such Transaction determined as of the date of the exercise or deemed exercise by the Seller of its option under SUBPARAGRAPH (a) of this Section. (f) The defaulting party shall be liable to the nondefaulting party for the amount of all reasonable legal or other expenses incurred by the nondefaulting party in connection with or as a consequence of an Event of Default, together with interest thereon at a rate equal to the Reference Rate. (g) Each of the Buyer and the Seller agree to provide the Rating Agencies with written notice of any Event of Default of which they have actual acknowledge. 9. TERM OF COMMITMENT. Unless terminated earlier by mutual agreement of the Buyer and the Seller with prior written notice to each Rating Agency and subject to earlier termination as otherwise set forth herein, the commitment of the Buyer hereunder to make Advances and purchase Receivables shall remain in effect for a period of three years and such commitment shall terminate automatically without any requirement for notice on the date occurring three years from the date hereof; provided, however, that such commitment may be extended by mutual agreement of Buyer and Seller; and provided further, however, that no such party shall be obligated to agree to such an extension. 10. REPURCHASE OF RECEIVABLES UPON BREACH OF WARRANTY. Concurrently with the execution and delivery of this Agreement and each Confirmation, as appropriate, Olympic and the Seller have entered into the Purchase Agreement and an Assignment Agreement, as applicable, the rights of the Seller under which have been assigned by the Seller to the Buyer. Under the Purchase Agreement and each Assignment Agreement, Olympic has 16 made the same representations and warranties to the Seller with respect to the Receivables as those made by the Seller pursuant to the Schedule of Representations, upon which the Buyer has relied in accepting the Receivables and the other Seller Conveyed Property and issuing the Notes and upon which the Security Insurer has relied in issuing the Note Policy and upon which the Indenture Trustee has relied in authenticating the Notes. Upon discovery by any of Olympic, the Seller, the Servicer, the Security Insurer, the Indenture Trustee or the Buyer of a breach of any of the representations and warranties contained in SECTION 7(b)(i) that materially and adversely affects the interests of the Buyer, the Security Insurer or the Noteholders in any Receivable (including any Liquidated Receivable), the party discovering such breach shall give prompt written notice to the others; PROVIDED, HOWEVER, that the failure to give any such notice shall not affect any obligation of Olympic or the Seller. On the 15th day following the Seller's discovery or the Seller's receipt of notice of any breach of the representations and warranties set forth on the Schedule of Representations that materially and adversely affects the interests of the Buyer, the Security Insurer or the Noteholders in any Receivable (including any Liquidated Receivable), the Repurchase Date with respect to such Receivable shall be deemed to occur immediately; PROVIDED, that any breach of a representation and warranty contained in PARAGRAPH 14, 17 OR 27 of the Schedule of Representations with respect to any Receivable shall be deemed to materially and adversely affect the interest of the Buyer in such Receivable and the Repurchase Date with respect to such Receivable shall be deemed to occur on, with respect to a breach of a representation or warranty contained in PARAGRAPH 14, the Business Day immediately succeeding the day and, with respect to a breach of a representation or warranty contained in PARAGRAPH 17 OR 27, on the fifth Business Day immediately succeeding the day upon which, in either case, discovery or receipt of notice of any breach of such representation and warranty shall occur. The obligations of the Seller with respect to any such breach of representations and warranties shall include taking any and all actions necessary to enable the Buyer to enforce directly the obligations of Olympic under the Purchase Agreement or any Assignment Agreement, as applicable. In addition to the foregoing and notwithstanding whether the related Purchased Receivables shall have been repurchased by the Seller, the Seller shall indemnify the Buyer, the Security Insurer, the Noteholders and the Indenture Trustee against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach. 11. NOTICES AND OTHER COMMUNICATIONS. Unless another address is specified in writing by the party to whom any notice or other communication is to be given hereunder, all such notices or communications shall be in writing 17 or confirmed in writing and delivered at the respective addresses set forth in EXHIBIT B attached hereto. 12. ENTIRE AGREEMENT; SEVERABILITY. This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 13. NON-ASSIGNABILITY; THIRD PARTY BENEFICIARIES. Except for the assignment of the Buyer's rights hereunder pursuant to any of its Related Documents, the rights and obligations of the parties under this Agreement and under any Transaction shall not be assigned by either party without the prior written consent of the other party and, so long as no Insurer Default shall have occurred and be continuing, the Security Insurer. Subject to the foregoing, this Agreement and each Transaction shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns. The Security Insurer, the Agent and the Noteholders and their successors and assigns shall be third-party beneficiaries to the provisions of this Agreement, and shall be entitled to rely upon and to enforce directly such provisions as long as, with respect to the Security Insurer, no Insurer Default shall have occurred and be continuing. Except as set forth in this SECTION 13, nothing in this Agreement, express or implied, shall give to any Person, other than the parties hereto and their successors and permitted assigns hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement. 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. 15. NO WAIVERS, ETC. No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. Except as set forth in the next sentence, no modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto, and if such modification or waiver would have a material adverse effect on the Noteholders, the Agent, and, so long as no Insurer Default shall have occurred and be continuing, the Security Insurer. The parties hereto 18 acknowledge the provisions of that certain Fee and Commitment Letter dated as of the date hereof between the Buyer and the Seller and agree that the provisions of such Letter shall be binding between them as if set forth herein in full. 16. OPINIONS OF COUNSEL. Seller shall, on the date hereof and, upon the request of Buyer or the Agent, no more than once each calendar year, cause to be delivered to Buyer, the Agent and the Security Insurer, with reliance thereon permitted as to any person or entity that is granted a pledge of the Receivables and the other Seller Conveyed Property, a favorable opinion or opinions of counsel with respect to the matters set forth in EXHIBIT A hereto, in form and substance acceptable to Buyer. 17. ADDITIONAL CONDITIONS. (a) Prior to entering into the initial Transaction under this Agreement, each of the Servicing Agreement, the Purchase Agreement, the Security Agreement, the Spread Account Agreement, the Insurance Agreement, the Indenture and the Custodian Agreement, in a form satisfactory to Buyer shall have been executed and delivered by the parties thereto. (b) On or before the date of delivery of this Agreement, Seller shall, at Seller's own cost and expense, deliver to Buyer: (i) a favorable opinion or opinions of counsel with respect to the matters set forth in EXHIBIT A hereto, in form and substance acceptable to Buyer and its counsel; (ii) a certificate of the Secretary of State of the State of Minnesota, dated reasonably near the date hereof, listing all charter documents with respect to Olympic on file in his office and stating that Olympic is duly organized and existing, has filed all annual reports and has paid all franchise taxes and is in good standing in the State of Minnesota; (iii) a certificate, dated the date of delivery thereof, of Olympic's Secretary as to (a) the charter documents of Olympic (with a copy of Olympic's By-laws attached); (b) the attached resolutions of the Board of Directors of Olympic authorizing Olympic to enter into the transactions contemplated hereby; and (c) the good standing of Olympic; (iv) evidence of filing with the appropriate filing offices in the State of Minnesota a UCC-1 Financing Statement against Olympic in favor of Seller; (v) a certificate of the Secretary of the State of Delaware, dated reasonably near the date hereof, listing all 19 charter documents with respect to Seller on file in his office and stating that Seller is duly organized and existing, has filed all annual reports and has paid all franchise taxes and is in good standing in the State of Delaware; (vi) a certificate, dated the date of delivery thereof, of Seller's Secretary as to (a) the charter documents of Seller (with a copy of Seller's By-laws attached); (b) the attached resolutions of the Board of Directors of Seller authorizing Seller to enter into the transactions contemplated hereby; and (c) the good standing of Seller and that the Seller is qualified to do business in Minnesota; (vii) evidence of filing with the appropriate filing offices in the State of Minnesota a UCC-1 Financing Statement against Seller; and (viii) such other information and certificates as Buyer shall reasonably request. (c) Seller shall enter into any Transaction under this Agreement only upon the satisfaction of each of the following conditions on or prior to the related Purchase Date: (i) Buyer shall have received a Confirmation with the updated Receivables Schedule attached thereto with respect to the Purchased Receivables being transferred on the related Purchase Date; (ii) As of such Purchase Date, Seller shall not have been insolvent nor shall Seller have been rendered insolvent by such Transaction nor shall Seller be aware of any pending insolvency; (iii) Seller shall have taken any action requested by Buyer to maintain the first perfected security interest of Buyer in the Purchased Receivables and the other Seller Conveyed Property; (iv) No selection procedures believed by Seller to be adverse to the interests of Buyer or the Noteholders shall have been utilized by Olympic or Seller in selecting such Purchased Receivables; (v) No material change shall have occurred in the underwriting standards of Olympic in effect on the Closing Date (INTER ALIA, not enter the subprime market) without the prior written consent of the Agent; 20 (vi) The Insurer Notice Date shall not have occurred; (vii) The provisions of SECTION 3.10(A) of the Servicing Agreement shall be complied with in connection with such Transaction. 18. FURTHER ASSURANCE. Seller shall promptly provide such further assurance or agreements as Buyer may request in order to effect the purposes of this Agreement. 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute but one and the same instrument. 20. BINDING TERMS. All of the covenants, stipulations, promises and agreements in the Agreement shall bind the successors and permitted assigns of the parties hereto, whether expressed or not. 21. COVENANT OF THE SELLER. Seller hereby agrees that it shall not (i) take any action prohibited or not authorized by its certificate of incorporation or (ii) without the prior written consent of the Agent and (so long as no Insurer Default shall have occurred and be continuing) the Security Insurer and without giving prior written notice to the Rating Agencies, amend its certificate of incorporation. 22. LIMITED RECOURSE. Notwithstanding anything to the contrary contained herein, the obligations of the Buyer and the Seller hereunder shall not be recourse to the Buyer or the Seller, respectively (or any person or organization acting on behalf of the Buyer or the Seller or any affiliate, employee, incorporator, stockholder, officer or director of the Buyer or the Seller), other than to the Receivables and the other Seller Conveyed Property and the proceeds thereof as provided in this Agreement, the Security Agreement and the Servicing Agreement. Each of the Buyer and the Seller hereby agree that to the extent such funds are insufficient or assets are unavailable to pay any amounts owing to it from the other party pursuant to this Agreement, it shall not constitute a claim against the other party. 23. NONPETITION COVENANT. Notwithstanding any prior termination of this Agreement, each of the Seller and the Buyer agrees that it shall not, prior to one year and one day after the Final Distribution Date, acquiesce, petition or otherwise invoke the process of the United States of America, any State or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case by or against the other under a Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the other or all or any part of its property or assets or ordering the winding up or liquidation of 21 the affairs of the other. The Buyer and the Seller agree that damages will be an inadequate remedy for breach of this covenant and that this covenant may be specifically enforced. 22 IN WITNESS WHEREOF, the parties hereto have caused this Repurchase Agreement to be executed by their duly authorized officers as of the date first set forth above. ARCADIA RECEIVABLES CONDUIT CORP. By: /s/ illegible -------------------------------- Authorized Signature OLYMPIC RECEIVABLES FINANCE CORP. By: /s/ illegible --------------------------------- Authorized Signature [Signature Page to Repurchase Agreement] EXHIBIT A OPINIONS OF COUNSEL TO SELLER AND OLYMPIC [Opinions of Counsel to Seller] (i) Olympic Receivables Finance Corp. (the "Seller") has been duly incorporated and is validly existing under the laws of the State of Delaware, with corporate power and authority to own its properties and to transact the business in which it is now engaged, and the Seller is duly qualified to do business and is in good standing as a foreign corporation in the State of Minnesota. (ii) The Seller has full corporate power and authority to execute and deliver the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement and the Spread Account Agreement and to perform its obligations thereunder and has all necessary licenses and approvals under federal and state law to transact the business in which it is now engaged. (iii) Each of the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement and the Spread Account Agreement has been duly authorized, executed and delivered by the Seller and, as to the Seller, is a legal, valid and binding obligation, enforceable against the Seller in accordance with its terms (except as may be limited by bankruptcy and insolvency laws and general principles of equity). (iv) The compliance by the Seller with all of the provisions of the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement and the Spread Account Agreement will not (1) conflict with or result in any breach which would constitute a default under, or except as contemplated by the Repurchase Agreement, result in the creation or imposition of any Lien, charge or encumbrance upon any of the property or assets of the Seller pursuant to any material terms of, any indenture, loan agreement or other agreement or instrument for borrowed money to which the Seller is a party or by which the Seller may be bound or to which any of the property or assets of the Seller is subject, (2) violate any provisions of the Certificate of Incorporation or the By-Laws of the Seller, or (3) violate or conflict with any order, judgment, decree, writ, injunction, rule or regulation applicable to the Seller of any court or any federal, state or other regulatory authority or other governmental body having jurisdiction over the Seller. (v) No consent, approval, authorization or other order of, or filing with, any court or any federal, state or other regulatory authority or other governmental body having jurisdiction over the Seller, which has not already been made or obtained, is required for the execution, delivery, or performance of the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement and the Spread Account Agreement except for the filing of any financing statements required to perfect the Buyer's and the Seller's respective interests in the Receivables. (vi) The Seller is not an "investment company" nor is it controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (vii) There is no action, suit, investigation, litigation or proceeding pending or, to the best of our knowledge, threatened before any court, governmental agency or arbitrator (1) against the Seller or any of its properties, (2) asserting the invalidity of the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement or the Spread Account Agreement, (3) seeking to prevent the consummation of any of the transactions contemplated by the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement or the Spread Account Agreement or (4) challenging the enforceability of the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement and the Spread Account Agreement. (viii) If the transfer of the Receivables from the Seller to the Buyer does not constitute an absolute sale, the Repurchase Agreement grants to the Buyer a security interest in the Seller's rights in the Receivables and the proceeds thereof, which security interest is a first priority perfected security interest. ADDRESSEES: Moody's Investors Service, Inc. Standard & Poor's Ratings Group Arcadia Receivables Conduit Corp. Bank of America National Trust and Savings Association Financial Security Assurance Inc. Norwest Bank Minnesota, National Association A-2 [Opinions of Counsel to Olympic] (i) Olympic Financial Ltd. ("Olympic") has been duly incorporated and is validly existing as a corporation under the laws of the State of Minnesota, with corporate power and authority to own its properties and to transact the business in which it is now engaged, and Olympic is duly qualified to do business and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. (ii) Olympic has full corporate power and authority to execute and deliver the Purchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement, the Spread Account Agreement and the Custodian Agreement and to perform its obligations thereunder. (iii) Each of the Purchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement, the Spread Account Agreement and the Custodian Agreement has been duly authorized, executed and delivered by Olympic and, as to Olympic, is a legal, valid and binding obligation enforceable in accordance with its terms (except as may be limited by bankruptcy and insolvency laws and general principles of equity). (iv) The execution and delivery by Olympic of, and the performance by Olympic of the provisions of each of the Purchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement, the Spread Account Agreement and the Custodian Agreement will not (1) conflict with or result in any breach which would constitute a default under, or result in the creation or imposition of any Lien, charge or encumbrance upon any of the property or assets of Olympic pursuant to any material terms of, any indenture, loan agreement or other agreement or instrument for borrowed money to which Olympic is a party or by which Olympic may be bound or to which any of the property or assets of Olympic is subject, (2) violate any provisions of the Articles of Incorporation or the By-Laws of Olympic or (3) violate or conflict with any order, judgment, decree, writ, injunction of any court or any federal, state or other regulatory authority or other governmental body having jurisdiction over Olympic or any rule or regulation applicable to Olympic. (v) No consent, approval, authorization or other order of, or filing with, any court or any federal, state or other regulatory authority or other governmental body having jurisdiction over Olympic, which has not already been made or obtained, is required in connection with the execution, delivery or performance of the transactions contemplated by the Purchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement, the Spread Account Agreement and the Custodian Agreement. A-3 (vi) There is no action, suit, investigation, litigation or proceeding pending or, to the best of our knowledge, threatened before any court, governmental agency or arbitrator (1) against Olympic or any of its properties, (2) asserting the invalidity of the Purchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement, the Spread Account Agreement and the Custodian Agreement, (3) seeking to prevent the consummation of any of the transactions contemplated by the Purchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement, the Spread Account Agreement and the Custodian Agreement, or (4) challenging the enforceability of the Purchase Agreement, the Servicing Agreement, the Security Agreement, the Insurance Agreement, the Spread Account Agreement and the Custodian Agreement. (vii) The Receivables constitute "chattel paper" as such term is defined in Article 9 of the Uniform Commercial Code in effect in Minnesota. (viii) Should Olympic become the debtor in a case under the Bankruptcy Code, if the matter were properly briefed and presented to a court, the court would hold that (1) the transfer of the Receivables (and the collections thereon) by Olympic to the Seller in the manner set forth in the Purchase Agreement would constitute an absolute sale of the Receivables (and the collections thereon), rather than a borrowing by Olympic secured by the Receivables (and the collections thereon), so that the Receivables would not be the property of the estate of Olympic under Section 541(a) of the Bankruptcy Code, and thus (2) the Seller's rights to the Receivables (and the collections thereon) would not be impaired by the operation of Section 362(a) of the Bankruptcy Code. (ix) Under present reported decisional authority and statutes applicable to bankruptcy cases, should Olympic become the debtor in a case under the Bankruptcy Code, and the Seller would not otherwise properly be a debtor in a case under the Bankruptcy Code, and if the matter were properly briefed and presented to a court exercising bankruptcy jurisdiction, the court, exercising reasonable judgment after full consideration of all relevant factors, should not order, over the objection of the Buyer, the Indenture Trustee on behalf of the Noteholders or the Security Insurer, the substantive consolidation of the assets and liabilities of the Seller with those of Olympic. ADDRESSEES: Moody's Investors Service, Inc. Standard & Poor's Ratings Group Arcadia Receivables Conduit Corp. Bank of America National Trust and Savings Association Financial Security Assurance Inc. Norwest Minnesota, National Association A-4 EXHIBIT B ADDRESSES FOR NOTICES AND OTHER COMMUNICATIONS Olympic Receivables Finance Corp. 7825 Washington Avenue South Suite 410 Minneapolis, Minnesota 55439-2435 Attention: Treasurer Telecopier No.: (612) 942-0015 Arcadia Receivables Conduit Corp. 7825 Washington Avenue South Suite 900 Minneapolis, Minnesota 55439-2435 Attention: Treasurer Telecopier No.: (612) 942-0015 EXHIBIT C FORM OF CONFIRMATION LETTER [date] Arcadia Receivables Conduit Corp. 7825 Washington Avenue South Suite 900 Minneapolis, Minnesota 55439-2435 Attention: Treasurer Confirmation No.: Ladies and Gentlemen: This letter confirms our agreement to sell to you the Purchased Receivables listed in SCHEDULE A hereto, pursuant to the Repurchase Agreement between us, dated as of December 3, 1996 (as amended from time to time, the "Agreement"), as follows: Purchase Date: Cut-Off Date: Purchased Receivables: See SCHEDULE A hereto 1) Product of 0.98 and the Aggregate Outstanding Principal Balance of Purchased Receivables that are Premier Receivables or Classic Receivables that are not Financed Repossessions being transferred: $_______ 2) Product of 0.85 and the Aggregate Outstanding Principal Balance of Purchased Receivables that are Classic Receivables that are Financed Repossessions: $_______ 3) Purchase Price (sum of 1) and 2)) $_______ Calculation of Amount to be released from the Collection Account: The least of 1) Purchase Price: $_______ 2) On each such date occurring during the period from but excluding a Determination Date through and including the related Distribution Date: a) Amount on deposit in Collection $ - Account b) minus amount of distributions or $ - retentions to be made pursuant to SECTIONS 3.6(a)(i) THROUGH (ix) of the Servicing Agreement c) minus any increase in the WAC $ - Deficiency Amount above the WAC Deficiency Amount on such Determination Date 3) a) Amount on deposit in Collection $ - Account b) minus WAC Deficiency Amount on $ - deposit in Collection Account -------- $ - -------- -------- The least of 1), 2), and 3): $ - OLYMPIC RECEIVABLES FINANCE CORP. By:_____________________________ Responsible Officer OLYMPIC FINANCIAL LTD., as Servicer By:_____________________________ Responsible Officer C-2 EXHIBIT D FORM OF NOTICE OF REPURCHASE DATE _________ __, 19__ Arcadia Receivables Conduit Corp. 7825 Washington Avenue South Suite 900 Minneapolis, Minnesota 55439-2435 Attention: Treasurer Norwest Bank Minnesota, National Association Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479-0070 Attention: Corporate Trust Department Financial Security Assurance Inc. 350 Park Avenue New York, New York 10022 Attention: Surveillance Department Ladies and Gentlemen: Reference is made to the Repurchase Agreement between Arcadia Receivables Conduit Corp., as Buyer, and Olympic Receivables Finance Corp., as Seller, dated as of December 3, 1996 (the "Repurchase Agreement"). Capitalized terms used herein shall have the meanings given to them in the Repurchase Agreement. Notice is hereby given that on __________ __, 19__ (the "Repurchase Date") [Note: Date specified must be at least one Business Days after the letter is delivered] we will repurchase the Receivables listed on SCHEDULE 1 hereto with an aggregate outstanding Principal Balance of $__________ and an aggregate Repurchase Price of $_________. The Seller hereby represents and warrants that the Receivables selected by the Seller to be repurchased on the Repurchase Date, if less than all of the Receivables transferred to the Buyer under the Repurchase Agreement that have not been repurchased as of the date hereof, were selected for repurchase randomly and that no selection procedures adverse to the Buyers or the Noteholders were utilized in selecting the Receivables for repurchase. OLYMPIC RECEIVABLES FINANCE CORP. By:______________________ Responsible Officer EXHIBIT E FORM OF RECONVEYANCE OF RECEIVABLES RECONVEYANCE OF RECEIVABLES dated as of _________ __, 19__ by and between Arcadia Receivables Conduit Corp., a Delaware Corporation (the "Buyer"), and OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"). WHEREAS, the Buyer and the Seller are parties to a Repurchase Agreement dated as of December 3, 1996 (hereinafter as such agreement may have been, or may from time to time be, amended, supplemented or otherwise modified, the "Repurchase Agreement"); WHEREAS, pursuant to the Repurchase Agreement the Buyer is required to reconvey and the Seller is required to repurchase the Purchased Receivables (as such term is defined in the Repurchase Agreement) listed on SCHEDULE 1 hereto; NOW THEREFORE, the Buyer and the Seller hereby agree as follows: 1. DEFINED TERMS. All terms defined in the Repurchase Agreement and used herein shall have such defined meanings when used herein, unless otherwise defined herein. "REPURCHASE DATE" shall mean ________ __, 19__. 2. RECONVEYANCE OF RECEIVABLES. (a) Upon deposit of the Repurchase Price in respect thereof by the Seller, the Buyer does hereby reconvey to the Seller, without recourse, on the Repurchase Date, all right, title and interest of the Buyer in and to each Purchased Receivable listed on SCHEDULE 1 hereto. (b) In connection with such reconveyance, the Buyer agrees to execute and deliver, at the Seller's expense, to the Seller on or prior to the Repurchase Date, such UCC termination statements prepared by the Seller as the Seller may reasonably request, evidencing the release by the Buyer of its lien on the Receivables. 3. COUNTERPARTS. The Reconveyance may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. 4. GOVERNING LAW. This Reconveyance shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions. IN WITNESS WHEREOF, the undersigned have caused this Reconveyance of Receivables to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. ARCADIA RECEIVABLES CONDUIT CORP., Buyer By:___________________________ Responsible Officer OLYMPIC RECEIVABLES FINANCE CORP., Seller By:__________________________ Responsible Officer E-2 EXHIBIT F FORM OF NOTICE OF REQUEST FOR AN ADVANCE _________ __, 19__ Arcadia Receivables Conduit Corp. 7825 Washington Avenue South Suite 900 Minneapolis, Minnesota 55439-2435 Attention: Treasurer Norwest Bank Minnesota, National Association Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479-0070 Attention: Corporate Trust Department Ladies and Gentlemen: Reference is made to the Repurchase Agreement between Arcadia Receivables Conduit Corp., as Buyer, and Olympic Receivables Finance Corp., as Seller, dated as of December 3, 1996 (the "Repurchase Agreement"). Capitalized terms used herein shall have the meanings given to them in the Repurchase Agreement. Notice is hereby given of our request for an Advance in the amount of $_________ (Note: such amount shall be at least $5 million) to be made on _________ __, 19__ [Note: Date specified must be at least one Business Day after letter is delivered unless request is for $15,000,000 or less] to be deposited into the Collection Account. The difference between the aggregate outstanding principal amount of Advances, including the Advance being requested hereby ($___________) and the aggregate outstanding Principal Balance of Receivables ($__________) is less than $5,000,000. Requested Tranche Periods: OLYMPIC RECEIVABLES FINANCE CORP. By:___________________________ Responsible Officer SCHEDULE A REPRESENTATIONS AND WARRANTIES OF SELLER 1. CHARACTERISTICS OF RECEIVABLES. Each Receivable (A) was originated by a Dealer for the retail sale of a Financed Vehicle in the ordinary course of such Dealer's business and such Dealer had all necessary licenses and permits to originate Receivables in the state where such Dealer was located, was fully and properly executed by the parties thereto, was purchased by Olympic from such Dealer under an existing Dealer Agreement with Olympic and was validly assigned by such Dealer to Olympic, (B) contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for realization against the collateral security, and (C) is a fully amortizing Receivable which provides for level monthly payments (provided that the payment in the first Monthly Period and the final Monthly Period of the life of the Receivable may be minimally different from the level payment) which, if made when due, shall fully amortize the Amount Financed over the original term. 2. NO FRAUD OR MISREPRESENTATION. Each Receivable was originated by a Dealer and was sold by the Dealer to Olympic without any fraud or misrepresentation on the part of such Dealer in either case. 3. COMPLIANCE WITH LAW. All requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and "Z," the Soldiers' and Sailors' Civil Relief Act of 1940, the Minnesota Motor Vehicle Retail Installment Sales Act, and state adaptations of the National Consumer Act and of the Uniform Consumer Credit Code and other consumer credit laws and equal credit opportunity and disclosure laws) in respect of all of the Receivables and each and every sale of Financed Vehicles, have been complied with in all material respects, and each Receivable and the sale of the Financed Vehicle evidenced by each Receivable complied at the time it was originated or made and now complies in all material respects with all applicable legal requirements. 4. ORIGINATION. Each Receivable was originated in the United States. 5. BINDING OBLIGATION. Each Receivable represents the genuine, legal, valid and binding payment obligation of the Obligor thereon, enforceable by the holder thereof in accordance with its terms, except (A) as enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law and (B) as such Receivable may be modified by the application after its Cut-Off Date of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended; and all parties to each Receivable had full legal capacity to execute and deliver such Receivable and all other documents related thereto and to grant the security interest purported to be granted thereby. 6. NO GOVERNMENT OBLIGOR. No Obligor is the United States of America or any State or any agency, department, subdivision or instrumentality thereof. 7. OBLIGOR BANKRUPTCY. At the applicable Cut-Off Date, no Obligor had been identified on the records of Olympic as being the subject of a current bankruptcy proceeding. 8. RECEIVABLES SCHEDULE. The information set forth in the most recent Receivables Schedule delivered to the Buyer or the Agent was true and correct in all material respects as of the close of business on the applicable Cut-Off Date. 9. MARKING RECORDS. On each Purchase Date, the portions of the Electronic Ledger relating to the Receivables will be clearly and unambiguously marked to show that the Receivables constitute part of the Seller Conveyed Property and are owned by the Buyer in accordance with the terms of the Agreement. 10. COMPUTER TAPE. The Computer Tape, computer diskette or other electronic transmission made available by the Seller to the Buyer on each Purchase Date was complete and accurate as of the applicable Cut-Off Date, and includes a description of the same Receivables that are described in the Receivables Schedule. 11. ADVERSE SELECTION. No selection procedures adverse to the Buyer or the Noteholders were utilized in selecting the Receivables from those receivables owned by Olympic which met the selection criteria contained in the Agreement. 12. CHATTEL PAPER. The Receivables constitute chattel paper within the meaning of the UCC as in effect in the States of Minnesota and New York. 13. ONE ORIGINAL. There is only one original executed copy of each Receivable. 14. RECEIVABLE FILES COMPLETE. On the applicable Purchase Date there exists a complete Receivable File for each Receivable transferred on such date, and such receivable File is in the possession of the Custodian on such Purchase Date. A Receivable File pertaining to each Receivable will contain on the related Purchase Date (a) a fully executed original of the Receivable, (b) a certificate of insurance, application form for insurance signed by the Obligor, or a signed representation letter from the Obligor named in the Receivable pursuant to which the Obligor has agreed to obtain physical damage insurance for A-2 the related Financed Vehicle, or a documented verbal confirmation by an insurance agent for the Obligor of a policy number for an insurance policy for the Financed Vehicle, (c) the original Lien Certificate or application therefor or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the Lien Certificate is not received by Olympic within 180 days, and (d) a credit application signed by the Obligor or a copy thereof. Each of such documents which is required to be signed by the Obligor will have been signed by the Obligor in the appropriate spaces. All blanks on any form will have been properly filled in and each form will otherwise have been correctly prepared. 15. RECEIVABLES IN FORCE. No Receivable has been satisfied, subordinated or rescinded, and the Financed Vehicle securing each such Receivable has not been released from the lien of the related Receivable in whole or in part. No provisions of any Receivable have been waived, altered or modified in any respect since its origination, except by instruments or documents identified in the Receivable File. No Receivable has been modified as a result of application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. 16. LAWFUL ASSIGNMENT. No Receivable was originated in, or is subject to the laws of, any jurisdiction, the laws of which would make unlawful, void or voidable the sale, transfer and assignment of such Receivable under this Agreement or any Assignment Agreement or pursuant to transfers of the Notes. 17. GOOD TITLE. No Receivable has been sold, transferred, assigned or pledged by Olympic to any Person other than the Seller unless the same was released prior to the transfer of such Receivable to the Seller or by the Seller to any Person other than the Buyer; immediately prior to the conveyance of the Receivables pursuant to the Purchase Agreement, Olympic was the sole owner of and had good and indefeasible title thereto, free and clear of any Lien other than Liens created pursuant to its Related Documents. Immediately prior to the conveyance of the Receivables to the Buyer pursuant to this Agreement and any Transaction, the Seller was the sole owner thereof and had good and indefeasible title thereto, free of any Lien; and, upon execution and delivery of this Agreement and any Confirmation by the Seller, the Buyer shall have good and indefeasible title to and will be the sole owner of such Receivables, free of any Lien. No Dealer has a participation in, or other right to receive, proceeds of any Receivable. Neither Olympic nor the Seller has taken any action to convey any right to any Person that would result in such Person having a right to payments received under the related Insurance Policies or the related Dealer Agreements or Dealer Assignments or to payments due under such Receivables. 18. SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable creates a valid, binding and enforceable first priority security interest in favor of Olympic in the Financed A-3 Vehicle. The Lien Certificate and original certificate of title for each Financed Vehicle show, or if a new or replacement Lien Certificate is being applied for with respect to such Financed Vehicle the Lien Certificate will be received within 180 days of the related Purchase Date and will show, Olympic named as the original secured party under each Receivable as the holder of a first priority security interest in such Financed Vehicle. With respect to each Receivable for which the Lien Certificate has not yet been returned from the Registrar of Titles, Olympic has received written evidence from the related Dealer that such Lien Certificate showing Olympic as first lienholder has been applied for, or a letter from the applicable Dealer agreeing unconditionally to repurchase the related Receivable if the Certificate of title is not received within 180 days. Olympic's security interest has been validly assigned by Olympic to the Seller pursuant to the Purchase Agreement and by the Seller to the Buyer pursuant to this Agreement. Immediately after the sale, transfer and assignment thereof to the Buyer, each Receivable will be secured by an enforceable and perfected first priority security interest in the Financed Vehicle in favor of the Buyer as secured party, which security interest is prior to all other liens upon and security interests in such Financed Vehicle which now exist or may hereafter arise or be created (except, as to priority, for any lien for taxes, labor or materials affecting a Financed Vehicle). As of the applicable Cut-Off Date, there were no Liens or claims for taxes, work, labor or materials affecting a Financed Vehicle which are or may be Liens prior or equal to the lien of the related Receivable. 19. ALL FILINGS MADE. All filings (including, without limitation, UCC filings) required to be made by any Person and actions required to be taken or performed by any Person in any jurisdiction to give the Buyer a first priority perfected lien on, or ownership interest in, the Receivables and the proceeds thereof and the other Seller Conveyed Property have been made, taken or performed. 20. NO IMPAIRMENT. Neither Olympic nor the Seller has done anything to convey any right to any Person that would result in such Person having a right to payments due under a Receivable or otherwise to impair the rights of the Buyer and the Indenture Trustee on behalf of the Noteholders in any Receivable or the proceeds thereof. 21. RECEIVABLE NOT ASSUMABLE. No Receivable is assumable by another Person in a manner which would release the Obligor thereof from such Obligor's obligations to the Seller with respect to such Receivable. 22. NO DEFENSES. No Receivable is subject to any right of rescission, setoff, counterclaim or defense and no such right has been asserted or threatened with respect to any Receivable. 23. NO DEFAULT. There has been no default, breach, violation or event permitting acceleration under the terms of any A-4 Receivable (other than payment delinquencies of not more than 30 days), and no condition exists or event has occurred and is continuing, that with notice, the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable, and there has been no waiver of any of the foregoing. As of the applicable Cut-Off Date, no Financed Vehicle had been repossessed. 24. INSURANCE. As of the Purchase Date for the related Receivable, each Financed Vehicle is covered by a comprehensive and collision insurance policy (i) in an amount at least equal to the lesser of (a) its maximum insurable value or (b) the principal amount due from the Obligor under the related Receivable, (ii) naming Olympic as loss payee and (iii) insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage. Each Receivable requires the Obligor to maintain physical loss and damage insurance, naming Olympic and its successors and assigns as additional insured parties, and each Receivable permits the holder thereof to obtain physical loss and damage insurance at the expense of the Obligor if the Obligor fails to do so. No Financed Vehicle was or had previously been insured under a policy of Force-Placed Insurance on the related Cut-Off Date. 25. PAST DUE. As of the applicable Cut-Off Date, no Receivable being transferred on the related Purchase Date was more than 30 days past due and no funds have been advanced by the Seller, the Servicer, and Dealer, or anyone acting on behalf of any of them in order to cause any Receivable to satisfy such requirement. 26. REMAINING PRINCIPAL BALANCE. As of the applicable Cut-Off Date, each Receivable had a remaining principal balance equal to or greater than $500.00 and the Principal Balance of each Receivable set forth in the most recent Receivables Schedule delivered to the Buyer or the Agent is true and accurate in all material respects. 27. ORIGINAL MATURITY. Each Receivable had an original maturity of at least 12 months but not more than 84 months and no more than 10% of the Receivables had an original maturity of greater than 72 months. Each Receivable with an original maturity of greater than 72 months is secured by a Financed Vehicle that is a new automobile or an automobile that is less than one year old. No more than 5% of the aggregate outstanding Principal Balance of the Receivables are Classic Receivables secured by Financed Vehicles that are financed repossessions. No more than 65% of the aggregate outstanding Principal Balance of the Receivables are Classic Receivables. 28. COMPLIANCE WITH UNDERWRITING GUIDELINES. Each Receivable was originated pursuant to Olympic's underwriting standards in effect on the Closing Date which have not, without the prior written consent of the Agent, been materially changed A-5 since the Closing Date. A-6 EX-10.31 32 SERVICING AGREE 12/3/96 ARCC, ORFC EXECUTION COPY - ------------------------------------------------------------------------------ SERVICING AGREEMENT Dated as of December 3, 1996 among ARCADIA RECEIVABLES CONDUIT CORP. Issuer OLYMPIC RECEIVABLES FINANCE CORP. Seller OLYMPIC FINANCIAL LTD. In its individual capacity and as Servicer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Agent and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Backup Servicer, Collateral Agent and Indenture Trustee - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page ---- INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I DEFINITIONS Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2. Usage of Terms . . . . . . . . . . . . . . . . . . . . . . . 23 Section 1.3. Calculations . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 1.4. Section References . . . . . . . . . . . . . . . . . . . . . 23 Section 1.5. No Recourse . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 1.6. Material Adverse Effect . . . . . . . . . . . . . . . . . . 24 ARTICLE II ADMINISTRATION AND SERVICING OF RECEIVABLES Section 2.1. Duties of the Servicer . . . . . . . . . . . . . . . . . . . 24 Section 2.2. Collection of Receivable Payments; Modifications of Receivables; Lockbox Agreements. . . . . . . . . . . . . . . 25 Section 2.3. Realization Upon Receivables . . . . . . . . . . . . . . . . 28 Section 2.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 2.5. Maintenance of Security Interests in Vehicles . . . . . . . 31 Section 2.6. Covenants, Representations, and Warranties of Servicer . . . 32 Section 2.7. Purchase of Receivables Upon Breach of Covenant . . . . . . 34 Section 2.8. Total Servicing Fee; Payment of Certain Expenses by Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 2.9. Servicer's Certificate . . . . . . . . . . . . . . . . . . . 35 Section 2.10. Annual Statement as to Compliance; Notice of Servicer Termination Event. . . . . . . . . . . . . . . . . . . . . . 35 Section 2.11. Annual Independent Accountants' Report . . . . . . . . . . . 36 Section 2.12. Access to Certain Documentation and Information Regarding Receivables . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 2.13. Monthly Tape . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 2.14. Retention and Termination of Servicer . . . . . . . . . . . 38 Section 2.15. Fidelity Bond . . . . . . . . . . . . . . . . . . . . . . . 39 Section 2.16. Duties of the Servicer under the Indenture . . . . . . . . . 39 Section 2.17. Collecting Lien Certificates Not Delivered on the Purchase Date . . . . . . . . . . . . . . . . . . . . . . . 39 Section 2.18. Accountants' Review of Receivable Files . . . . . . . . . . 39 ARTICLE III DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS Section 3.1. Secured Accounts . . . . . . . . . . . . . . . . . . . . . . 40 Section 3.2. Collections . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 3.3. Application of Collections . . . . . . . . . . . . . . . . . 42 Section 3.4. Monthly Advances . . . . . . . . . . . . . . . . . . . . . . 43 Section 3.5. Additional Deposits . . . . . . . . . . . . . . . . . . . . 44 Section 3.6. Distributions . . . . . . . . . . . . . . . . . . . . . . . 45 Section 3.7. Statements to Noteholders . . . . . . . . . . . . . . . . . 48 Section 3.8. Indenture Trustee as Agent; Calculation of Weighted Average APR, WAC Deficiency Amounts, Basis Fee Percent and Advance Interest Rate . . . . . . . . . . . . . . . . . . . . . . . 48 Section 3.9. Eligible Accounts . . . . . . . . . . . . . . . . . . . . . 49 Section 3.10. Additional Withdrawals from the Collection Account . . . . . 49 Section 3.11. Cross-Collateralization with the Spread Account Agreement. . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE IV THE SERVICER Section 4.1. Liability of Servicer; Indemnities . . . . . . . . . . . . . 50 Section 4.2. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or Backup Servicer. . . . . . . . . . . . . 52 Section 4.3. Limitation on Liability of Servicer, Backup Servicer and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 4.4. Delegation of Duties . . . . . . . . . . . . . . . . . . . . 54 Section 4.5. Servicer and Backup Servicer Not to Resign . . . . . . . . . 54 ARTICLE V SERVICER TERMINATION EVENTS Section 5.1. Servicer Termination Event . . . . . . . . . . . . . . . . . 55 Section 5.2. Consequences of a Servicer Termination Event . . . . . . . 57 Section 5.3. Appointment of Successor . . . . . . . . . . . . . . . . . . 58 Section 5.4. Notification to Noteholders . . . . . . . . . . . . . . . . 60 Section 5.5. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . 60 ARTICLE VI MISCELLANEOUS PROVISIONS Section 6.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 60 Section 6.2. Protection of Title to Seller Conveyed Property . . . . . . 61 Section 6.3. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 64 ii Section 6.4. Severability of Provisions . . . . . . . . . . . . . . . . . 64 Section 6.5. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 6.6. Third-Party Beneficiaries . . . . . . . . . . . . . . . . . 64 Section 6.7. Disclaimer by Security Insurer . . . . . . . . . . . . . . . 64 Section 6.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 6.9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 6.10. Interest Rate Protection . . . . . . . . . . . . . . . . . . 65 EXHIBITS Exhibit A - Servicing Policies and Procedures Exhibit B - Form of Servicer's Certificate Exhibit C - Form of Note for Intercompany Indebtedness iii THIS SERVICING AGREEMENT, dated as of December 3, 1996, is made among ARCADIA RECEIVABLES CONDUIT CORP., a Delaware corporation (the "Issuer"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation, as Seller (the "Seller"), OLYMPIC FINANCIAL LTD., a Minnesota corporation, in its individual capacity and as Servicer (in its individual capacity, "OFL"; in its capacity as Servicer, the "Servicer"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, in its capacity as Agent (in such capacity as administrator for Receivables Capital Corporation and as agent for certain liquidity purchasers, the "Agent"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as Backup Servicer (in such capacity the "Backup Servicer"), as Collateral Agent (in such capacity the "Collateral Agent") and as Indenture Trustee (in such capacity the "Indenture Trustee"). In consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: ARTICLE I DEFINITIONS Section 1.1. DEFINITIONS. All terms defined in the Spread Account Agreement, the Security Agreement, the Repurchase Agreement, the Purchase Agreement, the Note Purchase Agreement or the Indenture (as defined below) shall have the same meaning in this Agreement. Whenever capitalized and used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: ACCOUNTANTS' REPORT: The report of a firm of nationally recognized independent accountants described in Section 2.11. ACCOUNTING DATE: With respect to a Distribution Date, the last day of the Monthly Period immediately preceding such Distribution Date. ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a Receivable which the Servicer is required to purchase pursuant to Section 2.7 or which OFL has elected to purchase pursuant to Section 2.4(c). ADVANCE INTEREST CARRYOVER SHORTFALL: With respect to any Distribution Date, the excess of the Advance Monthly Interest Distributable Amount for the preceding Distribution Date and any outstanding Advance Interest Carryover Shortfall on such preceding Distribution Date, over the amount in respect of interest that is actually deposited in the Note Distribution Account on such preceding Distribution Date, plus interest on the amount of interest due but not paid with respect to the Advances on the preceding Distribution Date, to the extent permitted by law, at the Advance Interest Rate from such preceding Distribution Date through the current Distribution Date. ADVANCE INTEREST DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the sum of the Advance Monthly Interest Distributable Amount for such Distribution Date and the Advance Interest Carryover Shortfall for such Distribution Date. ADVANCE INTEREST RATE: With respect to each Interest Period or any shorter period for which interest accrues, a per annum rate determined in arrears of the daily weighted average cost of funding of the Noteholders' purchase or carrying of the Notes during such Interest Period or any shorter period for which interest accrues, which shall be: (A) prior to the occurrence of an Amortization Event, (i) the CP Rate plus 0.20%, to the extent the purchase or carrying of Notes issued pursuant to the Indenture is funded by the Noteholders by issuing Commercial Paper Notes, or (ii) the Offshore Rate plus the Applicable Margin, to the extent the purchase or carrying of Notes issued pursuant to the Indenture is not so funded by the Noteholders and (B) after the occurrence of an Amortization Event, the Reference Rate; PROVIDED, that, from and after the occurrence of an Amortization Event, the Advance Interest Rate shall not exceed the Maximum Interest Rate, and the Agent may, on any Business Day, by prior written notice to the Issuer, the Indenture Trustee, the Seller, the Servicer and the Security Insurer, convert the Advance Interest Rate to a fixed interest rate not to exceed the Maximum Interest Rate as of the close of business on the date such Amortization Event occurs, such fixed interest rate not to exceed the Two Year Treasury Yield (as of the close of business on the date such Amortization Event occurs) plus 0.60% PLUS the Basis Fee Percent. ADVANCE MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the sum of the interest accrued on each day during the immediately preceding Interest Period at the Advance Interest Rate(s) in effect from time to time with respect to such Interest Period on the outstanding principal balance of the Advances on each day; PROVIDED that the amount of the Advance Monthly Interest Distributable Amount distributed pursuant to Sections 3.6(a)(i) or (b)(ii) shall not be duplicative of the amount of any interest that accrued during such immediately preceding Interest Period on any Advance that was prepaid during such Interest Period pursuant to Section 3(e) of the Repurchase Agreement and which was deposited into the Note Distribution Account pursuant to Section 3.10(b). ADVANCE PRINCIPAL CARRYOVER SHORTFALL: As of the close of business on any Distribution Date after the occurrence of an Amortization Event, the excess of the sum of the Principal Distribution Amount and any outstanding Advance Principal Carryover Shortfall from the preceding Distribution Date over the amount in respect of Advances that is actually deposited in the Note Distribution Account on such Distribution Date. 2 ADVANCE PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any Distribution Date (other than the Final Distribution Date) during the Amortization Period, the sum of the Principal Distribution Amount for such Distribution Date and any outstanding Advance Principal Carryover Shortfall as of the close of the preceding Distribution Date; PROVIDED, HOWEVER, the Advance Principal Distributable Amount shall not exceed the outstanding principal balance of the Advances. The "Advance Principal Distributable Amount" on the Final Distribution Date will equal the outstanding principal balance of the Advances on the Final Distribution Date. AFFILIATE: With respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. AGENT: Bank of America National Trust and Savings Association, as administrator of RCC and as agent for certain liquidity purchasers under the Liquidity Asset Purchase Agreement, and its successors in such capacity. AGGREGATE PRINCIPAL BALANCE: With respect to any Determination Date, the sum of the Principal Balances (computed as of the related Accounting Date) for all Receivables (other than (i) any Receivable that became a Liquidated Receivable during the related Monthly Period, (ii) any Purchased Receivable with respect to the related Monthly Period and (iii) any Receivable that became a Repurchased Receivable during the related Monthly Period). AGREEMENT OR THIS AGREEMENT: This Servicing Agreement, all amendments and supplements thereto and all exhibits and schedules to any of the foregoing. AMORTIZATION EVENT: Any of (i) an Event of Default shall have occurred and either the Repurchase Date shall be deemed to occur automatically or the Issuer or the Agent shall exercise its option to have the Repurchase Date with respect to all Transactions occur automatically, (ii) an Insurance Agreement Event of Default shall have occurred and the Security Insurer shall have delivered notice to the Issuer and the Seller that such Insurance Agreement Event of Default shall constitute an Amortization Event,(iii) an Insurer Default shall have occurred and be continuing or (iv) the succession of the Backup Servicer as Servicer hereunder. AMORTIZATION PERIOD: The period commencing on the earliest to occur of (i) December 2, 1999, and (ii) the date on 3 which an Insurer Notice Date has occurred and ending on the Final Distribution Date. AMOUNT FINANCED: With respect to a Receivable, the aggregate amount advanced under such Receivable toward the purchase price of the Financed Vehicle and related costs, including amounts advanced in respect of accessories, insurance premiums, service and warranty contracts, other items customarily financed as part of retail automobile installment sale contracts or promissory notes, and related costs. The term "Amount Financed" shall not include any Insurance Add-On Amounts. ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the rate per annum of finance charges stated in such Receivable as the "annual percentage rate" (within the meaning of the Federal Truth-in-Lending Act). If after the applicable Cut-Off Date with respect to a Receivable, the rate per annum with respect to such Receivable as of such Cut-Off Date is reduced as a result of (i) an insolvency proceeding involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940, Annual Percentage Rate or APR from and after such date shall refer to such reduced rate. APPLICABLE MARGIN: 0.375%. AVAILABLE FUNDS: With respect to any Determination Date, the amount on deposit in the Collection Account as of the immediately preceding Accounting Date plus any amounts deposited in the Collection Account on such Determination Date pursuant to Section 3.1(e) to satisfy the Collateral Test. BACKUP SERVICER: Norwest Bank Minnesota, National Association, or its successor in interest pursuant to Section 5.2, or such Person as shall have been appointed as Backup Servicer or successor Servicer pursuant to Section 5.3. BASIC SERVICING FEE: With respect to any Monthly Period, the fee payable to the Servicer for services rendered during such Monthly Period, which shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied by the daily average aggregate Principal Balance of the Receivables during such Monthly Period; PROVIDED, HOWEVER, with respect to the first Monthly Period, the Basic Servicing Fee shall accrue from the Closing Date until December 31, 1996 on the basis of a 360-day year consisting of twelve 30-day months. BASIC SERVICING FEE RATE: 1.00% per annum, payable monthly at one-twelfth of the annual rate. BASIS FEE PERCENT: As of any date of determination, the positive difference, if any, as determined by the Agent, as calculation agent, between (A) the comparable spread over the Two Year Treasury Yield of the yield on OFL's most recent two year weighted average life AAA/Aaa rated, publicly issued automobile 4 asset-backed securities; or, if such a spread is not available, the average price offered for such AAA/Aaa rated automobile asset-backed securities by the asset-backed trading desk from time to time of two nationally recognized underwriters or dealers that last underwrote OFL's most recent AAA/Aaa rated, publicly issued automobile asset-backed securities, and (B) 0.45%. BofA: Bank of America National Trust and Savings Association, a national banking association, and its successors in interest. BREAKAGE FEE: An amount payable by the Seller pursuant to Section 3(e) of the Repurchase Agreement in connection with a prepayment of an Advance (and the concurrent prepayment of Notes pursuant to the Indenture) if the Seller shall have requested a prepayment of an Advance on a date other than the last day of a Tranche Period or in an amount in excess of the Tranches maturing on such date, which shall be equal to the amount as may be necessary to compensate the Noteholders for any resulting losses or costs, including those resulting from any liquidation or reemployment of deposits or other funds or other funding arrangements (such losses to be calculated on a net basis assuming reinvestment (for the period with respect to which breakage is being paid) equal to the rate quoted by the Agent for a time deposit equal to the principal so prepaid for a period equal to the breakage period). BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday or other day on which commercial banking institutions in Minneapolis, Minnesota, Chicago, Illinois, New York, New York, or any other location of any successor Servicer, successor Indenture Trustee or successor Collateral Agent are authorized or obligated by law, executive order or governmental decree to be closed and, if the applicable Business Day relates to any calculation of the Offshore Rate, such a day on which dealings are carried on in the applicable offshore dollar interbank market. CLASSIC RECEIVABLES: Receivables originated under OFL's "Classic" program. CLOSING DATE: December 3, 1996. COLLATERAL AGENT: The Collateral Agent named in the Security Agreement, and any successor thereto pursuant to the terms of the Security Agreement. COLLATERAL TEST: On any Determination Date, a test that will be satisfied if, as of the immediately preceding Accounting Date, the aggregate outstanding amount of all Advances under the Repurchase Agreement is less than or equal to the sum of the following amounts, each determined as of such Accounting Date: (i) the amount on deposit in the Collection Account less the WAC Deficiency Deposit, if any, (ii) the product of (I) 0.98 and (II) the sum of the aggregate outstanding Principal Balance 5 of Premier Receivables that are Qualifying Receivables and the aggregate outstanding Principal Balance of Classic Receivables that are not Financed Repossessions and that are Qualifying Receivables and (iii) the product of the aggregate outstanding Principal Balance of Classic Receivables that are Financed Repossessions and that are Qualifying Receivables and 0.85; PROVIDED, that any deposit into the Collection Account that the Seller may make on such Determination Date pursuant to Section 3.1(e) shall be included as amounts on deposit in the Collection Account as of the immediately preceding Accounting Date in clause (i) above. COLLECTED FUNDS: With respect to any Determination Date, the amount of funds in the Collection Account representing collections on the Receivables during the related Monthly Period, including all Liquidation Proceeds collected during the related Monthly Period (but excluding any Monthly Advances and any Purchase Amounts and the Repurchase Price of any Repurchased Receivables). COLLECTION ACCOUNT: The account designated as the Collection Account in, and which is established and maintained pursuant to, Section 3.1(a). COLLECTION RECORDS: All manually prepared or computer generated records relating to collection efforts or payment histories with respect to the Receivables. COMMERCIAL PAPER NOTES: The short-term promissory notes issued or to be issued in the United States commercial paper market to fund the purchase of the Notes, which, unless otherwise agreed to in writing by the Seller, the Agent and the Security Insurer, shall mature within 120 days from the date of issuance of such notes. CORPORATE TRUST OFFICE: The principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office is located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust Services - Asset- Backed Administration; the telecopy number for the Corporate Trust Office of the Indenture Trustee on the date of execution of this Agreement is (612) 667-3539. CP COMPOSITE RATE: For any date of determination, the Money Market Yield of the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System ("H.15(519)") for the 30 day maturity under the caption "Commercial Paper." If such rate cannot be determined, the Offshore Rate. CP RATE: For any Interest Period or any shorter period for which interest accrues, and with respect to any portion of the principal amount of the Notes as to which the Noteholders' 6 funding of their purchase or carrying thereof is provided by Commercial Paper Notes, the rate of interest per annum determined in arrears in good faith by the Agent equal to the Noteholders' cost of funding the purchase or carrying of such portion of the Notes, which shall be equal to the weighted daily average interest rate payable in respect of such Commercial Paper Notes during such period (determined in the case of discount Commercial Paper Notes by converting the discount to an interest bearing equivalent rate per annum), plus applicable placement fees and commissions, but excluding any other fees related to such funding. CP TRANCHE PERIOD: If the funding of the purchase or carrying of the Notes is funded in whole or in part by Commercial Paper Notes, a period of up to 120 days from and including the date any amount of such Commercial Paper Notes are issued to and including the date such Commercial Paper Notes mature. CRAM DOWN LOSS: With respect to a Receivable, if a court of appropriate jurisdiction in an insolvency proceeding shall have issued an order reducing the Principal Balance of such Receivable, the amount of such reduction. A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of such order. CUSTODIAN: Olympic Financial Ltd., a Minnesota corporation, and any successor thereto pursuant to the terms of the Custodian Agreement. CUSTODIAN AGREEMENT: Any Custodian Agreement from time to time in effect among the Custodian named therein, the Issuer, the Seller and the Agent relating to custody of the Receivable Files, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, which Custodian Agreement and any amendments, supplements or modifications thereto shall (so long as an Insurer Default shall not have occurred and be continuing) be acceptable to the Security Insurer (the Custodian Agreement which is effective on the Closing Date is acceptable to the Security Insurer). CUT-OFF DATE: With respect to any Receivables, the date specified in the related Confirmation. DEALER: A seller of new or used automobiles or light trucks that originated one or more of the Receivables and sold the respective Receivable, directly or indirectly, to OFL under an existing agreement between such seller and OFL. DEALER AGREEMENT: An agreement between OFL and a Dealer relating to the sale of retail installment sale contracts and installment notes to OFL and all documents and instruments relating thereto. 7 DEALER ASSIGNMENT: With respect to a Receivable, the executed assignment executed by a Dealer conveying such Receivable to OFL. DEFAULT AMOUNT: With respect to any Distribution Date, an amount, if positive, equal to the sum of default interest for each day during the immediately preceding Interest Period or portion thereof after the occurrence of an Amortization Event that accrues at the applicable Default Rate on the aggregate outstanding principal balance of the Notes on each such day, calculated on the basis of the actual number of days elapsed and a 365-day year. DEFAULT AMOUNT CARRYOVER SHORTFALL: With respect to any Distribution Date, the excess of the Default Amount for the preceding Distribution Date and any outstanding Default Amount Carryover Shortfall on such preceding Distribution Date, over the amount in respect of such Default Amount and Default Amount Carryover Shortfall that is actually deposited in the Note Distribution Account on such preceding Distribution Date, PLUS interest on the Default Amount Carryover Shortfall, to the extent permitted by law, at an annualized rate equal to the Reference Rate from such preceding Distribution Date through the current Distribution Date. DEFAULT AMOUNT DISTRIBUTABLE AMOUNT: With respect to any Distribution Date, the sum of the Default Amount for such Distribution Date and the Default Amount Carryover Shortfall for such Distribution Date. DEFAULT RATE: For each day during an Interest Period or any portion thereof after the occurrence of an Amortization Event, a per annum rate equal to the positive difference, if any, between (i) the Reference Rate for such Interest Period, and (y) the Advance Interest Rate for such Interest Period; PROVIDED, that if the Advance Interest Rate has been converted to a fixed interest rate, the Default Rate shall be that rate set forth in the side letter between the Issuer and the Agent and acknowledged by the Trustee. DEFICIENCY CLAIM AMOUNT: As defined in Section 3.11(a). DEFICIENCY CLAIM DATE: With respect to any Distribution Date, the fourth Business Day immediately preceding such Distribution Date. DEFICIENCY NOTICE: As defined in Section 3.11(a). DEPOSIT DATE: With respect to any Monthly Period, the Business Day immediately preceding the related Distribution Date. DETERMINATION DATE: With respect to any Monthly Period, the sixth Business Day prior to the related Distribution Date (or, if such day is not a Business Day, the next succeeding 8 Business Day); provided, however, that if the determination dates in all of the other automobile loan securitizations of the Seller insured by the Security Insurer are on the same date, the Determination Date shall be such date provided the Seller provides the Indenture Trustee, the Security Insurer, and the Agent 30 days prior written notice of such change. DISTRIBUTION AMOUNT: With respect to a Distribution Date, the amount of funds on deposit in the Collection Account on such Distribution Date. DISTRIBUTION DATE: The 15th day of each calendar month, or if such 15th day is not a Business Day, the next succeeding Business Day, commencing January 15, 1997 and including the Final Distribution Date. ELECTRONIC LEDGER: The electronic master record of the retail installment sales contracts or installment loans of OFL. ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained with the corporate trust department of a depository institution acceptable to the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing), or (ii) a segregated direct deposit account maintained with a depository institution or trust company organized under the laws of the United States of America, or any of the States thereof, or the District of Columbia, having a certificate of deposit, short term deposit or commercial paper rating of at least "A-1+" by Standard & Poor's and "P-1" by Moody's and (so long as an Insurer Default shall not have occurred and be continuing) acceptable to the Security Insurer. ELIGIBLE INVESTMENTS: Any one or more of the following types of investments: (a) (i) direct interest-bearing obligations of, and interest-bearing obligations guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality of the United States the obligations of which are backed by the full faith and credit of the United States; and (ii) direct interest-bearing obligations of, and interest-bearing obligations guaranteed as to timely payment of principal and interest by, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, but only if, at the time of investment, such obligations are assigned the highest credit rating by each Rating Agency; (b) demand or time deposits in, certificates of deposit of, or bankers' acceptances issued by any depository institution or trust company organized under the laws of the United States or any State and subject to supervision and examination by federal or state banking authorities (including, if applicable, the Indenture Trustee or any agent of the Indenture Trustee acting in its commercial 9 capacity); provided that the short-term unsecured debt obligations of such depository institution or trust company at the time of such investment, or contractual commitment providing for such investment, are assigned the highest credit rating by each Rating Agency; (c) repurchase obligations pursuant to a written agreement (i) with respect to any obligation described in clause (a) above, where the Indenture Trustee has taken actual or constructive delivery of such obligation in accordance with Section 3.1, and (ii) entered into with the corporate trust department of a depository institution or trust company organized under the laws of the United States or any state thereof, the deposits of which are insured by the Federal Deposit Insurance Corporation and the short-term unsecured debt obligations of which are rated "A-1+" by Standard & Poor's and "P-1" by Moody's (including, if applicable, the Indenture Trustee or any agent of the Indenture Trustee acting in its commercial capacity); (d) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any state whose long-term unsecured debt obligations are assigned the highest credit rating by each Rating Agency at the time of such investment or contractual commitment providing for such investment; provided however that securities issued by any particular corporation will not be Eligible Investments to the extent that an investment therein will cause the then outstanding principal amount of securities issued by such corporation and held in the Secured Accounts to exceed 10% of the Eligible Investments held in the Secured Accounts (with Eligible Investments held in the Secured Accounts valued at par); (e) commercial paper that (i) is payable in United States dollars and (ii) is rated in the highest credit rating category by each Rating Agency; (f) with the prior written consent of the Security Insurer, money market mutual funds registered under the Investment Company Act of 1940, as amended, having a rating at the time of such investment from each of the Rating Agencies in the highest credit rating category; or (g) any other demand or time deposit, obligation, security or investment as may be acceptable to the Security Insurer, as evidenced by the prior written consent of the Security Insurer, as may from time to time be confirmed in writing to the Indenture Trustee by the Security Insurer, and with prior written notice to the Rating Agencies and the Agent. Eligible Investments may be purchased by or through the Indenture Trustee or any of its Affiliates. 10 ELIGIBLE SERVICER: OFL, the Backup Servicer or another Person which at the time of its appointment as Servicer (i) is servicing a portfolio of motor vehicle retail installment sales contracts or motor vehicle installment loans, (ii) is legally qualified and has the capacity to service the Receivables, (iii) has demonstrated the ability professionally and competently to service a portfolio of motor vehicle retail installment sales contracts or motor vehicle installment loans similar to the Receivables with reasonable skill and care, and (iv) is qualified and entitled to use, pursuant to a license or other written agreement, and agrees to maintain the confidentiality of, the software which the Servicer uses in connection with performing its duties and responsibilities under this Agreement or otherwise has available software which is adequate to perform its duties and responsibilities under this Agreement. EVENT OF DEFAULT: An "Event of Default" (as defined in the Repurchase Agreement) with respect to the Seller. FINAL DISTRIBUTION DATE: The earlier to occur of (i) the Final Scheduled Distribution Date, and (ii) if an Amortization Event shall have occurred, the Distribution Date next succeeding the date on which the Controlling Party shall have sold, securitized or otherwise liquidated the last Receivable. FINAL SCHEDULED DISTRIBUTION DATE: After the commencement of the Amortization Period, the fourth Distribution Date after the Monthly Period in which occurs the latest final scheduled payment on a Receivable (without giving effect to any extensions granted by the Servicer pursuant to Section 2.2). FINANCED REPOSSESSION: Classic Receivables that are secured by Financed Vehicles that are financed repossessions. FINANCED VEHICLE: A new or used automobile or light truck, together with all accessories thereto, securing or purporting to secure an Obligor's indebtedness under a Receivable. FORCE-PLACED INSURANCE: The meaning set forth in Section 2.4(b). FRB: The Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. INDENTURE: The Indenture, dated as of December 3, 1996, between the Issuer and the Indenture Trustee, as the same may be amended and supplemented from time to time. INDENTURE TRUSTEE: The Person acting as Trustee under the Indenture, its successors in interest and any successor Trustee under the Indenture. 11 INDEPENDENT ACCOUNTANTS: As defined in Section 2.11(a). INSURANCE ADD-ON AMOUNT: The premium charged to the Obligor in the event that the Servicer obtains Force-Placed Insurance pursuant to Section 2.4. INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated as of December 3, 1996, among the Security Insurer, the Issuer, the Seller and OFL. INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as defined in the Insurance Agreement. INSURANCE POLICY: With respect to a Receivable, any insurance policy benefiting the holder of the Receivable providing loss or physical damage, credit life, credit disability, theft, mechanical breakdown or similar coverage with respect to the Financed Vehicle or the Obligor. INSURANCE PREMIUM: The amount of the premium payable to the Security Insurer, as set forth in the Premium Letter, dated December 3, 1996, from the Security Insurer to OFL, the Seller, the Issuer and the Indenture Trustee. INSURER DEFAULT: The occurrence and continuance of any of the following: (a) the Security Insurer shall have failed to make a payment required under the Note Policy; (b) The Security Insurer shall have (i) filed a petition or commenced any case or proceeding under any provision or chapter of the United States Bankruptcy Code, the New York State Insurance Law, or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made a general assignment for the benefit of its creditors, or (iii) had an order for relief entered against it under the United States Bankruptcy Code, the New York State Insurance Law, or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is final and nonappealable; or (c) a court of competent jurisdiction, the New York Department of Insurance or other competent regulatory authority shall have entered a final and nonappealable order, judgment or decree (i) appointing a custodian, trustee, agent or receiver for the Security Insurer or for all or any material portion of its property or (ii) authorizing the taking of possession by a custodian, trustee, agent or receiver of the Security Insurer (or the taking of possession of all or any material portion of the property of the Security Insurer). 12 INTEREST PERIOD: With respect to any Distribution Date, the Monthly Period immediately preceding such Distribution Date (or, in the case of the first Distribution Date, the period from and including the Closing Date to and excluding the first day of the succeeding calendar month); PROVIDED, that the final Interest Period shall commence on the first day of the calendar month immediately preceding the month in which the Final Distribution Date occurs and shall end on, but shall exclude, the Final Distribution Date. ISSUER: Arcadia Receivables Conduit Corp., a Delaware corporation. LIEN: Any security interest, lien, charge, pledge, preference, equity or encumbrance of any kind, including tax liens, mechanics' liens and any liens that attach by operation of law. LIEN CERTIFICATE: With respect to a Financed Vehicle, an original certificate of title, certificate of lien or other notification issued by the Registrar of Titles of the applicable state to a secured party which indicates that the lien of the secured party on the Financed Vehicle is recorded on the original certificate of title. In any jurisdiction in which the original certificate of title is required to be given to the Obligor, the term "Lien Certificate" shall mean only a certificate or notification issued to a secured party. LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a Receivable as to which (i) 91 days have elapsed since the Servicer repossessed the Financed Vehicle, (ii) the Servicer has determined in good faith that all amounts it expects to recover have been received, or (iii) all or any portion of a Scheduled Payment shall have become more than 180 days delinquent. LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all amounts realized with respect to such Receivable (other than amounts withdrawn from the Spread Account and drawings under the Note Policy) net of (i) reasonable expenses incurred by the Servicer in connection with the collection of such Receivable and the repossession and disposition of the Financed Vehicle and (ii) amounts that are required to be refunded to the Obligor on such Receivable; PROVIDED, HOWEVER, that the Liquidation Proceeds with respect to any Receivable shall in no event be less than zero. LOCKBOX ACCOUNT: The segregated account maintained on behalf of the Issuer by the Lockbox Bank in accordance with Section 2.2(d). LOCKBOX AGREEMENT: The Agency Agreement, dated as of November 13, 1992 by and among Harris Trust and Savings Bank, OFL, Shawmut Bank, N.A., as trustee, Saturn Financial Services, Inc. and the Program Parties (as defined therein), taken 13 together with the Retail Lockbox Agreement, dated as of November 13, 1992, among such parties, and the Counterpart to Agency Agreement and Retail Lockbox Agreement, dated as of December 3, 1996, among Harris Trust and Savings Bank, OFL, the Issuer, the Indenture Trustee and the Security Insurer, as such agreements may be amended from time to time, unless the Indenture Trustee and the Issuer shall cease to be a Program Party thereunder, or such agreement shall be terminated in accordance with its terms, in which event "Lockbox Agreement" shall mean such other agreement, in form and substance acceptable to the Security Insurer, or if an Insurer Default shall have occurred and be continuing, to the Agent, among the Servicer, the Issuer, the Indenture Trustee and the Lockbox Bank. LOCKBOX BANK: A depository institution named by the Servicer and, so long as an Insurer Default shall not have occurred and be continuing, acceptable to the Security Insurer, or, if an Insurer Default shall have occurred and be continuing, to the Agent. MAXIMUM INTEREST RATE: As of the date on which an Amortization Event occurs, the greater of (I) the sum of (i) the Two Year Treasury Yield determined as of such day by the Indenture Trustee pursuant to Section 403(b) of the Indenture plus (ii) 0.60% plus (iii) the Basis Fee Percent and (II) the weighted average APR (weighted based on the aggregate outstanding Principal Balance of the relevant Receivables as of the immediately preceding Accounting Date PLUS the aggregate outstanding Principal Balance of any Receivables transferred by the Seller to the Issuer since such Accounting Date and LESS the aggregate outstanding Principal Balance of any Receivables that became Purchased Receivables or Repurchased Receivables since such Accounting Date) of Qualifying Receivables, MINUS 6.50%, MINUS the Total Expense Percent. MONTHLY ADVANCE: The amount that the Servicer is required to advance on any Receivable pursuant to Section 3.4(a) or that the Servicer (or OFL if OFL is not the Servicer) is required to advance on any Determination Date pursuant to Section 3.4(b). MONTHLY PERIOD: With respect to a Distribution Date, the calendar month preceding the month in which such Distribution Date occurs (such calendar month being referred to as the "related" Monthly Period with respect to such Distribution Date). With respect to an Accounting Date, the calendar month in which such Accounting Date occurs is referred to herein as the "related" Monthly Period to such Accounting Date. MONTHLY RECORDS: All records and data maintained by the Servicer with respect to the Receivables, including the following with respect to each Receivable: the account number; the identity of the originating Dealer; Obligor name; Obligor address; Obligor home phone number; Obligor business phone number; original Principal Balance; original term; Annual 14 Percentage Rate; current Principal Balance; current remaining term; origination date; first payment date; final scheduled payment date; next payment due date; date of most recent payment; new/used classification; collateral description; days currently delinquent; number of contract extensions (months) to date; amount, if any, of Force-Placed Insurance payable monthly; amount of the Scheduled Payment; and past due late charges, if any. MOODY'S: Moody's Investors Service, Inc., or any successor thereto. NOTES: The Floating Rate Automobile Receivables-Backed Notes issued by the Issuer pursuant to the Indenture. NOTE DISTRIBUTION ACCOUNT: The account designated as such, established and maintained pursuant to Section 3.1(b). NOTE MAJORITY: Holders of Notes representing a majority of the outstanding principal balance of the Notes. NOTE POLICY: The financial guaranty insurance policy issued by the Security Insurer to the Indenture Trustee on behalf of the Noteholders. NOTE PURCHASE AGREEMENT: The Note Purchase Agreement, dated as of December 3, 1996, among OFL, the Issuer, the Agent and Receivables Capital Corporation. OBLIGOR: The purchaser or the co-purchasers of the Financed Vehicle and any other Person or Persons who are primarily or secondarily obligated to make payments under a Receivable. OFL: Olympic Financial Ltd., a Minnesota corporation. OFFSHORE RATE: (i) For any Interest Period or any shorter period for which interest accrues and (ii) for the purpose of determining the WAC Deficiency Percentage, the rate of interest per annum (rounded upward, if necessary, to the next 1/16th of 1%) determined by the Agent as follows: Offshore Rate = IBOR ------------------------------------- 1.00 - Eurodollar Reserve Percentage. Where, EURODOLLAR RESERVE PERCENTAGE means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward, if necessary, to the next 1/100th of 1%) in effect on such day and applicable to any Noteholder under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"); and 15 IBOR means the rate of interest per annum determined by the Agent as the rate at which dollar deposits in the approximate amount of the Noteholders' funding for the purchase or carrying of Notes that is not being provided by Commercial Paper Notes are offered for such Interest Period or any shorter period for which interest accrues based on information presented on the Telerate Screen page 3750 at approximately 11:00 a.m. (Chicago time) two Business Days prior to such date of determination; PROVIDED, that if at least two such offered rates appear on the Telerate Screen in respect of such Interest Period or any shorter period for which interest accrues, the arithmetic mean of all such rates (as determined by the Agent) will be the rate used; PROVIDED, FURTHER, that if Telerate ceases to provide LIBOR quotations, such rate shall be the rate of interest determined by the Agent at which dollar deposits in the approximate amount of the Noteholders' funding for the purchase or carrying of Notes that is not being provided by Commercial Paper Notes for such Interest Period or shorter period for which interest accrues would be offered by BofA's Grand Cayman Branch, Grand Cayman, B.W.I. (or such other office as may be designated for such purpose of BofA), to major banks in the offshore dollar market at their request at approximately 11:00 a.m. (New York City time) two Business Days prior to such date of determination. The Offshore Rate shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. OFFSHORE TRANCHE PERIOD: The period commencing on the date any portion of the Notes is no longer funded by Commercial Paper Notes or the last day of any previous Offshore Tranche Period and ending on the date seven, fourteen or twenty-one days or one, two or three months thereafter as selected by the Issuer; PROVIDED that: (i) if any Offshore Tranche Period would otherwise end on a day that is not a Business Day, such Offshore Tranche Period shall be extended to the following Business Day unless, in the case of an Offshore Tranche Period of one, two or three months, the result of such extension would be to carry such Offshore Tranche Period into another calendar month, in which event such Offshore Tranche Period shall end on the preceding Business Day; (ii) any Offshore Tranche Period of one, two or three months that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Offshore Tranche Period) shall end on the last Business Day of the calendar month at the end of such Offshore Tranche Period; and 16 (iii) no Offshore Tranche Period for any Notes shall extend beyond the end of the Purchase Period. OPINION OF COUNSEL: A written opinion of counsel acceptable in form and substance and from counsel acceptable to the Agent and, if such opinion or a copy thereof is required to be delivered to the Indenture Trustee or the Security Insurer, to the Indenture Trustee or the Security Insurer, as applicable. OTHER FEE PERCENT: 0.025% per annum. OUTSTANDING MONTHLY ADVANCES: With respect to any Determination Date, (A) the sum of all Monthly Advances made pursuant to Section 3.4(a) with respect to a Receivable on any Determination Date prior to such Determination Date relating to that Receivable which have not been reimbursed pursuant to Section 3.6(b)(i) or (B) the sum of all Monthly Advances made pursuant to Section 3.4(b) on any Determination Date prior to such Determination Date which have not been reimbursed pursuant to Section 3.6(a)(ii). PERSON: Any legal person, including any individual, corporation, partnership, joint venture, estate, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof, or any other entity. PREMIER RECEIVABLES: Receivables originated under OFL's "Premier" program. PRINCIPAL BALANCE: With respect to any Receivable, as of any date, the Amount Financed minus (i) that portion of all amounts received on or prior to such date and allocable to principal in accordance with the terms of the Receivable, and (ii) any Cram Down Loss in respect of such Receivable. PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution Date during the Amortization Period, the amount equal to the sum of the following amounts with respect to the immediately preceding Monthly Period, in each case computed without duplication (including without duplication of amounts distributed with respect to prior Distribution Dates): (i) that portion of all collections on Receivables allocable to principal, including all full and partial principal prepayments, (ii) the Principal Balance (as of the related Accounting Date) of all Receivables that are Liquidated Receivables as of the prior Accounting Date (other than Receivables that became Purchased Receivables or Repurchased Receivables as of the immediately preceding Accounting Date), (iii) the portion of the Purchase Amount allocable to principal of all Receivables that became Purchased Receivables as of the immediately preceding Accounting Date, (iv) the portion of the Repurchase Price allocable to principal of all Receivables that became Repurchased Receivables during the preceding Monthly Period, (v) the portion of the proceeds allocable to principal from the sale or securitization 17 of the Receivables pursuant to the Security Agreement, and (vi) the aggregate amount of Cram Down Losses that shall have occurred during or prior to the related Monthly Period. PURCHASE AGREEMENT: The Receivables Purchase Agreement and Assignment, dated as of December 3, 1996 between OFL and the Seller. PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance and all accrued and unpaid interest on the Receivable (without regard to any Monthly Advances that may have been made with respect to the Receivable) as of the Accounting Date on which the obligation to purchase such Receivable arises. PURCHASED RECEIVABLE: As of any Accounting Date, any Receivable (including any Liquidated Receivable) that became an Administrative Receivable as of such Accounting Date, and as to which the Purchase Amount has been deposited in the Collection Account by the Seller, OFL or the Servicer, as applicable, on or before the related Deposit Date. QUALIFYING RECEIVABLE: With respect to any Monthly Period, a Receivable as to which (i) no portion of a Scheduled Payment shall have become more than 30 days delinquent, (ii) the Servicer in good faith has not determined that the Obligor thereon is unlikely to continue making Scheduled Payments, and (iii) all of the representations and warranties under the Purchase Agreement and Repurchase Agreement are true and correct; PROVIDED, that the sum (without duplication) of the aggregate Principal Balance of Classic Receivables that are Financed Repossessions in excess of 5% of the aggregate outstanding Principal Balance of Qualifying Receivables and the aggregate Principal Balance of Classic Receivables in excess of 65% of the aggregate outstanding Principal Balance of Qualifying Receivables shall be excluded from the Principal Balance of Qualifying Receivables for all purposes hereunder, including the denominator of the aforesaid calculations and the calculation of the Collateral Test. RATING AGENCY: Each of Moody's and Standard & Poor's, so long as such Persons determined a capital charge with respect to the issuance of the Note Policy by the Security Insurer; and if either Moody's or Standard & Poor's no longer determines such capital charge, such other nationally recognized statistical rating organization selected by the Agent and (so long as an Insurer Default shall not have occurred and be continuing) acceptable to the Security Insurer. RECEIVABLE: A retail installment sale contract or promissory note (and related security agreement) for a new or used automobile or light truck (and all accessories thereto) that is included in the Receivables Schedule, and all rights and obligations under such a contract, but not including (i) any Liquidated Receivable (other than for purposes of calculating the Advance Interest Distributable Amounts, Advance Principal 18 Distributable Amounts and the WAC Deficiency Amount hereunder and for the purpose of determining the obligations pursuant to Section 2.7 to purchase Receivables), (ii) any Purchased Receivable on or after the Accounting Date immediately preceding the Deposit Date on which payment of the Purchase Amount is made in connection therewith pursuant to Section 3.5 or (iii) any Repurchased Receivable on or after the date on which payment of the Repurchase Price is deposited in the Collection Account pursuant to Section 3(d) of the Repurchase Agreement. RECEIVABLE FILES: The documents, electronic entries, instruments and writings listed in Section 6(c) of the Repurchase Agreement. REFERENCE RATE: For any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the rate of interest in effect for such day, as publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." It is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate. REGISTRAR OF TITLES: With respect to any state, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon. RELATED DOCUMENTS: The Repurchase Agreement, the Indenture, the Notes, the Purchase Agreement, the Custodian Agreement, the Note Policy, the Security Agreement, the Note Purchase Agreement, the Fee Letter, the Insurance Agreement, the Spread Account Agreement and the Lockbox Agreement. The Related Documents executed by any party are referred to herein as "such party's Related Documents," "its Related Documents" or by a similar expression. REPURCHASE AGREEMENT: The Repurchase Agreement dated as of December 3, 1996, between the Issuer, as Buyer, and Olympic Receivables Finance Corp., as Seller. REPURCHASED RECEIVABLES: Any Receivables that are required to be repurchased by the Seller pursuant to Section 3(d) of the Repurchase Agreement. RESPONSIBLE OFFICER: The President, any Vice President or Assistant Vice President or the Controller of such Person, or any other officer or employee having similar functions and, with respect to the Seller or the Servicer, those employees of the Seller or the Servicer, as the case may be, whose names appear on a list of people authorized to sign on behalf of the Seller or Servicer, as applicable, furnished to the Indenture Trustee, the 19 Security Insurer and the Agent, as such list may from time to time be amended. REVOLVING PERIOD: The period from and including the Closing Date to but excluding the date on which the Amortization Period commences. SCHEDULE OF REPRESENTATIONS: The Schedule of Representations and Warranties attached as Schedule A to the Repurchase Agreement. SCHEDULED PAYMENT: With respect to any Monthly Period for any Receivable, the amount set forth in such Receivable as required to be paid by the Obligor in such Monthly Period. If after the applicable Cut-Off Date with respect to a Receivable, the Obligor's obligation under such Receivable with respect to a Monthly Period has been modified so as to differ from the amount specified in such Receivable as a result of (i) the order of a court in an insolvency proceeding involving the Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii) modifications or extensions of the Receivable permitted by Section 2.2(b), the Scheduled Payment with respect to such Monthly Period shall refer to the Obligor's payment obligation with respect to such Monthly Period as so modified. SECURED ACCOUNTS: The meaning specified in Section 3.1(c). SECURITY AGREEMENT: The Security Agreement dated as of December 3, 1996, among OFL, the Seller, the Security Insurer, the Agent, the Issuer, the Indenture Trustee and the Collateral Agent. SECURITY INSURER: Financial Security Assurance Inc., a financial guaranty insurance corporation incorporated under the laws of the State of New York, or any successor thereto, as issuer of the Note Policy. SECURITY INSURER OPTIONAL DEPOSIT: With respect to a Determination Date, the amount, if any, delivered by the Security Insurer to the Indenture Trustee pursuant to Section 3.5(b) with respect to such Determination Date. SELLER: Olympic Receivables Finance Corp., a Delaware corporation. SERVICER: Olympic Financial Ltd., its successor in interest pursuant to Section 5.2 or, after any termination of the Servicer upon a Servicer Termination Event, the Backup Servicer or any other successor Servicer. SERVICER EXTENSION NOTICE: The notice delivered pursuant to Section 2.14. 20 SERVICER TERMINATION EVENT: An event described in Section 5.1. SERVICER'S CERTIFICATE: With respect to each Determination Date, a certificate, completed by and executed on behalf of the Servicer, in accordance with Section 2.9, substantially in the form attached hereto as Exhibit B. SPREAD ACCOUNT: The Spread Account maintained pursuant to the Spread Account Agreement. SPREAD ACCOUNT AGREEMENT: The Spread Account Agreement dated as of March 25, 1993, as amended and restated as of December 3, 1996, among the Seller, OFL, the Spread Account Collateral Agent, the Security Insurer and the trustees specified therein, together with the Warehousing Series Supplement thereto dated as of December 3, 1996, as the same may be amended, supplemented or otherwise modified in accordance with the terms thereof. SPREAD ACCOUNT AVAILABLE FUNDS: With respect to any Deficiency Claim Date, the amount on deposit in the Collection Account as of such date, without taking into account any amounts deposited into the Collection Account with respect to amounts withdrawn from the Spread Account pursuant to Section 3.11. SPREAD ACCOUNT COLLATERAL AGENT: The Collateral Agent named in the Spread Account Agreement, and any successor thereto pursuant to the terms of the Spread Account Agreement. STANDARD & POOR'S: Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor thereto. SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, all administrative fees, expenses and charges paid by or on behalf of Obligors, including late fees, collected on the Receivables during such Monthly Period. TOTAL EXPENSE PERCENT: The sum of (i) the Basic Servicing Fee Rate, (ii) the Insurance Premium and (iii) the Other Fee Percent. TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the Supplemental Servicing Fee. TRANCHE: A portion of the Advances funded by Notes funded by the Noteholders' sale of Commercial Paper Notes maturing at the end of a CP Tranche Period, or funded at the Offshore Rate for an Offshore Tranche Period as selected by the Issuer as provided in the definition thereof. TRANCHE PERIOD: A CP Tranche Period or an Offshore Tranche Period. 21 TWO YEAR TREASURY YIELD: As of any date of determination, the per annum rate equal to the yield for two year United States Treasury notes that appears on the Telerate Page 5 (or such replacement system or page as is then customarily used to quote yields on United States Treasury notes) as of 10:00 a.m., New York City time, on such date of determination; PROVIDED, HOWEVER, following the occurrence of an Amortization Event, the Two Year Treasury Yield shall be the yield for two year United States Treasury notes appearing on the Telerate Page 5 (or such replacement system or pages as is then customarily used to quote yields on United States Treasury notes) at the close of business, New York City time, on the date of the occurrence of such Amortization Event. UCC: The Uniform Commercial Code as in effect in the relevant jurisdiction. WAC DEFICIENCY AMOUNT: As of any date of determination on which the WAC Deficiency Percentage is greater than zero, an amount equal to the product of (x) 1.7 times (y) the WAC Deficiency Percentage times (z) the result of (i) the aggregate outstanding Principal Balance of the Receivables as of the immediately preceding Accounting Date PLUS (ii) the aggregate outstanding Principal Balance of any Receivables transferred by the Seller to the Issuer since such Accounting Date and LESS (iii) the aggregate outstanding Principal Balance of any Receivables that become Purchased Receivables or Repurchased Receivables since such Accounting Date. WAC DEFICIENCY DEPOSIT: As of any date of determination, the amount on deposit in the Collection Account in respect of the WAC Deficiency Amount, which shall equal the amount withheld in the Collection Account in respect of the WAC Deficiency Amount on the Distribution Date coinciding with or next preceding such date of determination pursuant to Section 3.6(a)(vii) plus amounts, if any, deposited into the Collection Account in respect of the WAC Deficiency Amount from such Distribution Date to and including the date of determination. WAC DEFICIENCY PERCENTAGE: As of any date of determination, an amount expressed as a percentage equal to the excess, if any, of (A) 6.50% PLUS the greatest of (I) the sum of (i) the Two Year Treasury Yield, determined as of such date, (ii) 0.60%, (iii) the Basis Fee Percent and (iv) the Total Expense Percent; (II) the sum of (i) the product of (1) the CP Composite Rate, if the purchase or carrying of any of the Notes by the Noteholder is funded by Commercial Paper Notes, and (2) 1.2 PLUS (ii) 0.25% and (iii) the Total Expense Percent; and (III) the sum of (i) the product of (1) the Offshore Rate, if the purchase or carrying of any of the Notes by the Noteholders is not funded by Commercial Paper Notes, and (2) 1.2, (ii) 0.375% and (iii) the Total Expense Percent over (B) the weighted average APR (weighted based on the aggregate outstanding Principal Balance of the relevant Receivables as of the immediately preceding Accounting Date PLUS the aggregate outstanding Principal Balance of any 22 Receivables transferred by the Seller to the Issuer since such Accounting Date and LESS the aggregate outstanding Principal Balance of any Receivables that became Purchased Receivables or Repurchased Receivables since such Accounting Date) of Qualifying Receivables. WAREHOUSING SHORTFALL AVAILABLE FUNDS: With respect to any Deficiency Claim Date, means the amount on deposit in the Collection Account as of such date, taking into account amounts deposited into the Collection Account in respect of a Collection Account Shortfall but without taking into account amounts deposited into the Collection Account in respect of a Warehousing Shortfall. WARRANTY RECEIVABLE: With respect to any Monthly Period, a Receivable that the Seller or OFL has become obligated to repurchase pursuant to Section 10 of the Repurchase Agreement. Section 1.2. USAGE OF TERMS. With respect to all terms used in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other gender; references to "writing" include printing, typing, lithography, and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all subsequent amendments thereto or changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the terms "include" or "including" mean "include without limitation" or "including without limitation." Section 1.3. CALCULATIONS. All calculations of the amount of interest accrued on the Notes shall be made on the basis of a 360-day year and actual days elapsed and all calculations of the amount of the Basic Servicing Fee shall be made on the basis of a 360-day year consisting of twelve 30-day months. All references to the Principal Balance of a Receivable as of an Accounting Date shall refer to the close of business on such day. Section 1.4. SECTION REFERENCES. All references to Articles, Sections, paragraphs, subsections, exhibits and schedules shall be to such portions of this Agreement unless otherwise specified. Section 1.5. NO RECOURSE. No recourse may be taken, directly or indirectly, under this Agreement or any certificate or other writing delivered in connection herewith or therewith, against any stockholder, employee, incorporator, officer, or director, as such, of the Seller, the Agent, OFL, the Servicer, the Indenture Trustee, the Collateral Agent, the Backup Servicer or the Issuer or of any predecessor or successor of the Seller, the Agent, OFL, the Servicer, the Indenture Trustee, the Collateral Agent, the Backup Servicer or the Issuer. 23 Section 1.6. MATERIAL ADVERSE EFFECT. Whenever a determination is to be made under this Agreement as to whether a given event, action, course of conduct or set of facts or circumstances could or would have a material adverse effect on the Issuer or the Noteholders (or any similar or analogous determination), such determination shall be made without taking into account the insurance provided by the Note Policy. ARTICLE II ADMINISTRATION AND SERVICING OF RECEIVABLES Section 2.1. DUTIES OF THE SERVICER. The Servicer is hereby authorized to act as agent for the Issuer and the Seller and in such capacity shall manage, service, administer and make collections on the Receivables, and perform the other actions required by the Servicer under this Agreement. The Servicer agrees that its servicing of the Receivables shall be carried out in accordance with customary and usual procedures of institutions which service motor vehicle retail installment sales contracts and, to the extent more exacting, the degree of skill and attention that the Servicer exercises from time to time with respect to all comparable motor vehicle receivables that it services for itself or others. In performing such duties, so long as OFL is the Servicer, it shall comply with the policies and procedures attached hereto as Exhibit A. The Servicer's duties shall include, without limitation, collection and posting of all payments, responding to inquiries of Obligors on the Receivables, investigating delinquencies, sending payment coupons to Obligors, reporting any required tax information to Obligors, policing the collateral, complying with the terms of the Lockbox Agreement, accounting for collections and furnishing monthly and annual statements to the Issuer, the Agent, the Indenture Trustee and the Security Insurer with respect to distributions, monitoring the status of Insurance Policies with respect to the Financed Vehicles and performing the other duties specified herein. The Servicer shall also administer and enforce all rights and responsibilities of the holder of the Receivables provided for in the Dealer Agreements (and shall maintain possession of the Dealer Agreements, to the extent it is necessary to do so), the Dealer Assignments and the Insurance Policies, to the extent that such Dealer Agreements, Dealer Assignments and Insurance Policies relate to the Receivables, the Financed Vehicles or the Obligors. To the extent consistent with the standards, policies and procedures otherwise required hereby, the Servicer shall follow its customary standards, policies, and procedures and shall have full power and authority, acting alone, to do any and all things in connection with such managing, servicing, administration and collection that it may deem necessary or desirable. Without limiting the generality of the foregoing, the Servicer is hereby authorized and empowered by the Issuer to execute and deliver, on behalf of the Issuer, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, 24 with respect to the Receivables and with respect to the Financed Vehicles; PROVIDED, HOWEVER, that notwithstanding the foregoing, the Servicer shall not, except pursuant to an order from a court of competent jurisdiction, release an Obligor from payment of any unpaid amount under any Receivable or waive the right to collect the unpaid balance of any Receivable from the Obligor, except that the Servicer may forego collection efforts if the amount subject to collection is DE MINIMIS and if it would forego collection in accordance with its customary procedures. The Servicer is hereby authorized to commence, in its own name or in the name of the Issuer (provided the Servicer has obtained the Issuer's consent, which consent shall not be unreasonably withheld), a legal proceeding to enforce a Receivable pursuant to Section 2.3 or to commence or participate in any other legal proceeding (including, without limitation, a bankruptcy proceeding) relating to or involving a Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or participates in such a legal proceeding in its own name, the Issuer shall thereupon be deemed to have automatically assigned such Receivable to the Servicer solely for purposes of commencing or participating in any such proceeding as a party or claimant, and the Servicer is authorized and empowered by the Issuer to execute and deliver in the Servicer's name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding. The Issuer shall furnish the Servicer with any powers of attorney and other documents which the Servicer may reasonably request and which the Servicer deems necessary or appropriate and take any other steps which the Servicer may deem necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement. Section 2.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF RECEIVABLES; LOCKBOX AGREEMENTS. (a) Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due, and shall follow such collection procedures as it follows with respect to all comparable automobile receivables that it services for itself or others and otherwise act with respect to the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance Policies and the other Seller Conveyed Property in such manner as will, in the reasonable judgment of the Servicer, maximize the amount to be received by the Issuer with respect thereto. The Servicer is authorized in its discretion to waive any prepayment charge, late payment charge or any other similar fees that may be collected in the ordinary course of servicing any Receivable. (b) The Servicer may at any time agree to a modification or amendment of a Receivable in order to (i) change the Obligor's regular due date to another date within the Monthly Period in which such due date occurs, (ii) re-amortize the 25 scheduled payments on the Receivable following a partial prepayment of principal or (iii) grant extensions on a Receivable, provided that the aggregate period of all extensions on a Receivable shall not exceed three months. The aggregate Principal Balance of Receivables which have been extended during any calendar quarter shall not exceed the greater of (A) $500,000 and (B) 1.5% of the Aggregate Principal Balance as of the Accounting Date immediately prior to the first day of such calendar quarter. (c) The Servicer may grant payment extensions on, or other modifications or amendments to, a Receivable (in addition to those modifications permitted by Section 2.2(b)) in accordance with its customary procedures if the Servicer believes in good faith that such extension, modification or amendment is necessary to avoid a default on such Receivable, will maximize the amount to be received by the Issuer with respect to such Receivable, and is otherwise in the best interests of the Issuer; PROVIDED, HOWEVER, that: (i) In no event may a Receivable be extended beyond the Monthly Period immediately preceding the Final Scheduled Distribution Date; (ii) So long as an Insurer Default shall not have occurred and be continuing, the Servicer shall not amend or modify a Receivable (except as provided in Section 2.2(b)) without the consent of the Security Insurer; and (iii) If an Insurer Default shall have occurred and be continuing, the Servicer may not extend or modify any Receivable (other than as permitted by Section 2.2(b)). (d) The Servicer shall use its best efforts to cause Obligors to make all payments on the Receivables, whether by check or by direct debit of the Obligor's bank account, to be made directly to one or more Lockbox Banks, acting as agent for the Collateral Agent pursuant to a Lockbox Agreement. Amounts received by a Lockbox Bank in respect of the Receivables may initially be deposited into a demand deposit account maintained by the Lockbox Bank as agent for the Collateral Agent and for other owners of automobile receivables serviced by the Servicer. The Servicer shall use its best efforts to cause any Lockbox Bank to deposit all payments on the Receivables in the Lockbox Account no later than the Business Day after receipt, and to cause all amounts credited to the Lockbox Account on account of such payments to be transferred to the Collection Account no later than the second Business Day after receipt of such payments. The Lockbox Account shall be a demand deposit account held by the Lockbox Bank, or at the request of the Agent or the Security Insurer (unless an Insurer Default shall have occurred and be continuing) an Eligible Account satisfying clause (i) of the definition thereof. The Collateral Agent shall not be liable for any actions or omissions of the Lockbox Bank. 26 Prior to each Purchase Date, the Servicer shall have notified each Obligor that makes its payments on the Receivables being transferred to the Issuer on such date by check to make such payments thereafter directly to the Lockbox Bank (except in the case of Obligors that have already been making such payments to the Lockbox Bank), and shall have provided each such Obligor with respect to the Premier Receivables with a supply of mailing address labels and shall provide each such Obligor with respect to the Classic Receivables with monthly invoices, in each case in order to enable such Obligors to make such payments directly to the Lockbox Bank for deposit into the Lockbox Account, and the Servicer will continue, not less often than every three months, to so notify those Obligors who have failed to make payments to the Lockbox Bank. If and to the extent requested by the Agent or the Security Insurer (unless an Insurer Default shall have occurred and be continuing), the Servicer shall request each Obligor that makes payment on the Receivables by direct debit of such Obligor's bank account to execute an authorization for automatic payment which in the judgment of the Security Insurer is sufficient to authorize direct debit by the Lockbox Bank on behalf of the Issuer. If at any time the Lockbox Bank is unable to directly debit an Obligor's bank account that makes payment on the Receivables by direct debit and if such inability is not cured within 15 days or cannot be cured by execution by the Obligor of a new authorization for automatic payment, the Servicer shall notify such Obligor that it cannot make payment by direct debit and must thereafter make payment by check. Notwithstanding any Lockbox Agreement, or any of the provisions of this Agreement relating to the Lockbox Agreement, the Servicer shall remain obligated and liable to the Issuer, Indenture Trustee and Noteholders for servicing and administering the Receivables and the other Seller Conveyed Property in accordance with the provisions of this Agreement without diminution of such obligation or liability by virtue thereof. In the event the Servicer shall for any reason no longer be acting as such, the successor Servicer shall thereupon assume all of the rights and obligations of the outgoing Servicer under the Lockbox Agreement. In such event, the successor Servicer shall be deemed to have assumed all of the outgoing Servicer's interest therein and to have replaced the outgoing Servicer as a party to each such Lockbox Agreement to the same extent as if such Lockbox Agreement had been assigned to the successor Servicer, except that the outgoing Servicer shall not thereby be relieved of any liability or obligations on the part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement. The outgoing Servicer shall, upon request of the Agent, but at the expense of the outgoing Servicer, deliver to the successor Servicer all documents and records relating to each such Lockbox Agreement and an accounting of amounts collected and held by the Lockbox Bank and otherwise use its best efforts to effect the orderly and efficient transfer of any Lockbox Agreement to the successor Servicer. In the event that the Security Insurer (so long as an Insurer Default shall not have 27 occurred and be continuing) or the Agent (if an Insurer Default shall have occurred and be continuing) elects to change the identity of the Lockbox Bank, the outgoing Servicer, at its expense, shall cause the Lockbox Bank to deliver, at the direction of the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) or the Agent (if an Insurer Default shall have occurred and be continuing) to the Agent or a successor Lockbox Bank, all documents and records relating to the Receivables and all amounts held (or thereafter received) by the Lockbox Bank (together with an accounting of such amounts) and shall otherwise use its best efforts to effect the orderly and efficient transfer of the lockbox arrangements and the Servicer shall notify the Obligors to make payments to the Lockbox Account established by the successor. (e) The Servicer shall remit all payments by or on behalf of the Obligors received directly by the Servicer to the Collection Account or the Lockbox Account for deposit into the Collection Account as soon as practicable, but in no event later than the Business Day after receipt thereof. Section 2.3. REALIZATION UPON RECEIVABLES. (a) Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall use its best efforts to repossess (or otherwise comparably convert the ownership of) and liquidate any Financed Vehicle securing a Receivable with respect to which the Servicer has determined that payments thereunder are not likely to be resumed, as soon as is practicable after default on such Receivable but in no event later than the date on which all or any portion of a Scheduled Payment has become 91 days delinquent. The Servicer is authorized to follow such customary practices and procedures as it shall deem necessary or advisable, consistent with the standard of care required by Section 2.1, which practices and procedures may include reasonable efforts to realize upon any recourse to Dealers, the sale of the related Financed Vehicle at public or private sale, the submission of claims under an Insurance Policy and other actions by the Servicer in order to realize upon such a Receivable. The foregoing is subject to the provision that, in any case in which the Financed Vehicle shall have suffered damage, the Servicer shall not expend funds in connection with any repair or towards the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair or repossession shall increase the proceeds of liquidation of the related Receivable by an amount greater than the amount of such expenses. All amounts received upon liquidation of a Financed Vehicle shall be remitted directly by the Servicer to the Collection Account or the Lockbox Account for deposit into the Collection Account without deposit into any intervening account as soon as practicable, but in no event later than the Business Day after receipt thereof. The Servicer shall be entitled to recover all reasonable expenses incurred by it in the course of repossessing and liquidating a Financed Vehicle into cash proceeds, but only out of the cash proceeds of such 28 Financed Vehicle, any deficiency obtained from the Obligor or any amounts received from the related Dealer, which amounts may be retained by the Servicer (and shall not be required to be deposited as provided in Section 2.2(e)) to the extent of such expenses. The Servicer shall pay on behalf of the Issuer any personal property taxes assessed on repossessed Financed Vehicles; the Servicer shall be entitled to reimbursement of any such tax from Liquidation Proceeds with respect to such Receivable. (b) If the Servicer elects to commence a legal proceeding to enforce a Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed to be an automatic assignment from the Issuer to the Servicer of the rights under such Dealer Agreement and Dealer Assignment for purposes of collection only. If, however, in any enforcement suit or legal proceeding, it is held that the Servicer may not enforce a Dealer Agreement or Dealer Assignment on the grounds that it is not a real party in interest or a Person entitled to enforce the Dealer Agreement or Dealer Assignment, the Issuer, at the Servicer's expense, or the Seller, at the Seller's expense, shall take such steps as the Servicer deems necessary to enforce the Dealer Agreement or Dealer Assignment, including bringing suit in its name or the name of the Seller or of the Issuer and the Collateral Agent for the benefit of the Secured Parties. All amounts recovered shall be remitted directly by the Servicer as provided in Section 2.2(e). Section 2.4. INSURANCE. (a) The Servicer shall require that each Financed Vehicle be insured by the Insurance Policies referred to in Paragraph 24 of the Schedule of Representations and shall monitor the status of such comprehensive and collision insurance coverage thereafter, in accordance with its customary servicing procedures. Each Receivable requires the Obligor to maintain such comprehensive and collision insurance, naming OFL and its successors and assigns as additional insureds, and permits the holder of such Receivable to obtain comprehensive and collision insurance at the expense of the Obligor if the Obligor fails to maintain such insurance. If the Servicer shall determine that an Obligor has failed to obtain or maintain a comprehensive and collision Insurance Policy covering the related Financed Vehicle which satisfies the conditions set forth in such Paragraph 24 (including, without limitation, during the repossession of such Financed Vehicle) the Servicer shall enforce the rights of the holder of the Receivable under the Receivable to require the Obligor to obtain such comprehensive and collision insurance. (b) The Servicer may, if an Obligor fails to obtain or maintain a comprehensive and collision Insurance Policy, obtain insurance with respect to the related Financed Vehicle and advance on behalf of such Obligor, as required under the terms of the insurance policy, the premiums for such insurance (such insurance being referred to herein as "Force-Placed Insurance"). 29 All policies of Force-Placed Insurance shall be endorsed with clauses providing for loss payable to the Issuer. Any cost incurred by the Servicer in maintaining such Force-Placed Insurance shall only be recoverable out of premiums paid by the Obligors or Liquidation Proceeds with respect to the Receivable, as provided in Section 2.4(c). (c) In connection with any Force-Placed Insurance obtained hereunder, OFL may, in the manner and to the extent permitted by applicable law, require the Obligors to repay the entire premium to OFL. In no event shall OFL include the amount of the premium in the Amount Financed under the Receivable. For all purposes of this Agreement, the Insurance Add-on Amount with respect to any Receivable having Force-Placed Insurance will be treated as a separate obligation of the Obligor and will not be added to the Principal Balance of such Receivable, and amounts allocable thereto will not be available for distribution on the Notes. OFL shall retain and separately administer the right to receive payments from Obligors with respect to Insurance Add-on Amounts or rebates of Forced-Placed Insurance premiums. If an Obligor makes a payment with respect to a Receivable having Force-Placed Insurance, but OFL is unable to determine whether the payment is allocable to the Receivable or to the Insurance Add-on Amount, the payment shall be applied first to any unpaid Scheduled Payments and then to the Insurance Add-on Amount. Liquidation Proceeds on any Receivable will be used first to pay the Principal Balance and accrued interest on such Receivable and then to pay the related Insurance Add-on Amount. If an Obligor under a Receivable with respect to which OFL has placed Force-Placed Insurance fails to make scheduled payments of such Insurance Add-on Amount as due, and OFL has determined that eventual payment of the Insurance Add-on Amount is unlikely, OFL may, but shall not be required to, purchase such Receivable from the Issuer for the Purchase Amount on any subsequent Deposit Date. Any such Receivable, and any Receivable with respect to which OFL has placed Force-Placed Insurance which has been paid in full (excluding any Insurance Add-on Amounts) will be assigned to OFL. (d) The Servicer may sue to enforce or collect upon the Insurance Policies, in its own name, if possible, or as agent of the Issuer. If the Servicer elects to commence a legal proceeding to enforce an Insurance Policy, the act of commencement shall be deemed to be an automatic assignment of the rights of the Issuer under such Insurance Policy to the Servicer for purposes of collection only. If, however, in any enforcement suit or legal proceeding it is held that the Servicer may not enforce an Insurance Policy on the grounds that it is not a real party in interest or a holder entitled to enforce the Insurance Policy, the Issuer, on behalf of the Collateral Agent and the Secured Parties, at the Servicer's expense, or the Seller, at the Seller's expense, shall take such steps as the Servicer deems necessary to enforce such Insurance Policy, including bringing suit in its name or the name of the Issuer and the Collateral Agent for the benefit of the Secured Parties. 30 Section 2.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES. (a) Consistent with the policies and procedures required by this Agreement, the Servicer shall take such steps as are necessary to maintain perfection of the security interest created by each Receivable in the related Financed Vehicle on behalf of the Issuer, including but not limited to obtaining the execution by the Obligors and the recording, registering, filing, re-recording, re-filing, and re-registering of all security agreements, financing statements and continuation statements as are necessary to maintain the security interest granted by the Obligors under the respective Receivables. The Issuer hereby authorizes the Servicer, and the Servicer agrees, to take any and all steps necessary to re-perfect such security interest on behalf of the Issuer as necessary because of the relocation of a Financed Vehicle or for any other reason. In the event that the assignment of a Receivable to the Issuer is insufficient, without a notation on the related Financed Vehicle's certificate of title, or without fulfilling any additional administrative requirements under the laws of the state in which the Financed Vehicle is located, to perfect a security interest in the related Financed Vehicle in favor of the Issuer, the Servicer hereby agrees that the Servicer's designation as the secured party on the certificate of title is in its capacity as agent of the Issuer. (b) Upon the occurrence of an Insurance Agreement Event of Default, the Security Insurer may (so long as an Insurer Default shall not have occurred and be continuing) instruct the Issuer and the Servicer to take or cause to be taken, or, if an Insurer Default shall have occurred, upon the occurrence of a Servicer Termination Event, the Issuer and the Servicer shall take or cause to be taken such action as may, in the opinion of counsel to the Security Insurer (or, if an Insurer Default shall have occurred and be continuing, counsel to the Agent), be necessary to perfect or reperfect the security interests in the Financed Vehicles securing the Receivables in the name of the Issuer by amending the title documents of such Financed Vehicles or by such other reasonable means as may, in the opinion of counsel to the Security Insurer or the Agent (as applicable), be necessary or prudent. OFL hereby agrees to pay all expenses related to such perfection or reperfection and to take all action necessary therefor. In addition, prior to the occurrence of an Insurance Agreement Event of Default, the Security Insurer may (unless an Insurer Default shall have occurred and be continuing) instruct the Issuer and the Servicer to take or cause to be taken such action as may, in the opinion of counsel to the Security Insurer, be necessary to perfect or re-perfect the security interest in the Financed Vehicles underlying the Receivables in the name of the Issuer, including by amending the title documents of such Financed Vehicles or by such other reasonable means as may, in the opinion of counsel to the Security Insurer, be necessary or prudent; PROVIDED, HOWEVER, that (unless an Insurer Default shall have occurred and be continuing) if the Security 31 Insurer requests that the title documents be amended prior to the occurrence of an Insurance Agreement Event of Default, the out-of-pocket expenses of the Servicer or the Issuer in connection with such action shall be reimbursed to the Servicer or the Issuer, as applicable, by the Security Insurer. Section 2.6. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF SERVICER. By its execution and delivery of this Agreement, the Servicer makes the following representations, warranties and covenants on which the Issuer relies in purchasing the Receivables and issuing the Notes, on which the Indenture Trustee relies in authenticating the Notes and on which the Security Insurer relies in issuing the Note Policy. (a) The Servicer covenants as follows: (i) LIENS IN FORCE. The Financed Vehicle securing each Receivable shall not be released in whole or in part from the security interest granted by the related Obligor, except upon payment in full of the Receivable or as otherwise contemplated herein; (ii) NO IMPAIRMENT. The Servicer shall do nothing to impair the rights of the Issuer or the Noteholders in the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance Policies or the other Seller Conveyed Property; and (iii) NO AMENDMENTS. The Servicer shall not extend or otherwise amend the terms of any Receivable, except in accordance with Section 2.2. (b) The Servicer represents, warrants and covenants as of the Closing Date as to itself: (i) ORGANIZATION AND GOOD STANDING. The Servicer has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with power, authority and legal right to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to enter into and perform its obligations under this Agreement; (ii) DUE QUALIFICATION. The Servicer is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Receivables as required by this Agreement) requires or shall require such qualification, if the failure to be so qualified would have a material adverse effect on the ability of the Servicer to perform its obligations hereunder or on the enforceability of any Receivable. 32 (iii) POWER AND AUTHORITY. The Servicer has the power and authority to execute and deliver this Agreement and its Related Documents and to carry out its terms and their terms, respectively, and the execution, delivery and performance of this Agreement and the Servicer's Related Documents have been duly authorized by the Servicer by all necessary corporate action; (iv) BINDING OBLIGATION. This Agreement and the Servicer's Related Documents shall constitute legal, valid and binding obligations of the Servicer enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law; (v) NO VIOLATION. The consummation of the transactions contemplated by this Agreement and the Servicer's Related Documents, and the fulfillment of the terms of this Agreement and the Servicer's Related Documents, shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Servicer, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than this Agreement, or violate any law, order, rule or regulation applicable to the Servicer of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Servicer or any of its properties; (vi) NO PROCEEDINGS. There are no proceedings or investigations pending or, to the Servicer's knowledge, threatened against the Servicer, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Servicer or its properties (A) asserting the invalidity of this Agreement or any of the Related Documents, (B) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Agreement or any of the Related Documents, or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, this Agreement or any of the Related Documents or (D) seeking to adversely affect the federal income tax or other federal, state or local tax attributes of the Notes; and 33 (vii) NO CONSENTS. The Servicer is not required to obtain the consent of any other party or any consent, license, approval or authorization, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement. Section 2.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT. Upon discovery by any of the Servicer, the Security Insurer, the Issuer or the Indenture Trustee of a breach of any of the covenants set forth in Sections 2.5(a) or 2.6(a), the party discovering such breach shall give prompt written notice to the others; PROVIDED, HOWEVER, that the failure to give any such notice shall not affect any obligation of the Servicer. As of the second Accounting Date following its discovery or receipt of notice of any breach of any covenant set forth in Sections 2.5(a) or 2.6(a) which materially and adversely affects the interests of the Noteholders, the Issuer or the Security Insurer in any Receivable (including any Liquidated Receivable) (or, at the Servicer's election, the first Accounting Date so following), the Servicer shall, unless it shall have cured such breach in all material respects, purchase from the Issuer the Receivable affected by such breach and, on the related Deposit Date, the Servicer shall pay the related Purchase Amount. It is understood and agreed that the obligation of the Servicer to purchase any Receivable (including any Liquidated Receivable) with respect to which such a breach has occurred and is continuing shall, if such obligation is fulfilled, constitute the sole remedy against the Servicer for such breach available to the Security Insurer, the Noteholders, the Issuer or the Indenture Trustee on behalf of Noteholders; PROVIDED, HOWEVER, that the Servicer shall indemnify the Issuer, the Backup Servicer, the Collateral Agent, the Security Insurer, the Indenture Trustee, the Agent and the Noteholders against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach. Section 2.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY SERVICER. On each Distribution Date, the Servicer shall be entitled to receive out of the Collection Account the Basic Servicing Fee and any Supplemental Servicing Fee for the related Monthly Period pursuant to Section 3.6. The Servicer shall be required to pay all expenses incurred by it in connection with its activities under this Agreement (including taxes imposed on the Servicer, expenses incurred in connection with distributions and reports to Noteholders and the Security Insurer and all other fees and expenses of the Issuer, including claims against the Issuer in respect of indemnification, unless such fees, expenses or claims in respect of indemnification are expressly stated to be for the account of OFL or not to be for the account of the Servicer). The Servicer shall be liable for the fees and expenses of the Indenture Trustee, the Custodian, the Backup Servicer, the Collateral Agent, the Lockbox Bank (and 34 any fees under the Lockbox Agreement) and the Independent Accountants. Notwithstanding the foregoing, if the Servicer shall not be OFL, a successor to OFL as Servicer permitted by Section 4.2 or an Affiliate of any of the foregoing, such Servicer shall not be liable for claims against the Issuer in respect of indemnification. Section 2.9. SERVICER'S CERTIFICATE. No later than 5:00 p.m. New York City time on each Determination Date, the Servicer shall deliver to the Issuer, the Agent, the Indenture Trustee, the Backup Servicer, the Security Insurer and the Collateral Agent, a Servicer's Certificate executed by a Responsible Officer of the Servicer containing, among other things, (i) all information available as of such date necessary to enable the Indenture Trustee to make the distributions required by Section 3.6 and to determine the amount to which the Servicer is entitled to be reimbursed or has been reimbursed during the related Monthly Period for Monthly Advances, (ii) all information available as of such date necessary to enable the Indenture Trustee to send the statements to Noteholders and the Security Insurer required by Section 3.7, (iii) a listing of all Warranty Receivables and Administrative Receivables purchased or repurchased as of the related Deposit Date, identifying the Receivables so purchased or repurchased and (iv) all information available as of such date necessary to enable the Indenture Trustee to reconcile all deposits to, and withdrawals from, the Collection Account for the related Monthly Period and Distribution Date, including the accounting required by compliance with the Collateral Test. Receivables purchased by the Servicer or by the Seller or OFL on the related Deposit Date and each Receivable which became a Liquidated Receivable or which was paid in full during the related Monthly Period shall be identified by account number (as set forth in the Receivables Schedule). Section 2.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER TERMINATION EVENT. (a) The Servicer shall deliver to the Issuer, the Agent, the Indenture Trustee, the Backup Servicer, the Security Insurer, the Collateral Agent and each Rating Agency, on or before March 31, (or 90 days after the end of the Servicer's fiscal year, if other than December 31) of each year, beginning on March 31, 1997, an officer's certificate signed by any Responsible Officer of the Servicer, dated as of December 31, (or other applicable date) of such year, stating that (i) a review of the activities of the Servicer during the preceding 12-month period (or such other period as shall have elapsed from the Closing Date to the date of the first such certificate) and of its performance under this Agreement has been made under such officer's supervision, and (ii) to such officer's knowledge, based on such review, the Servicer has fulfilled all its obligations under this Agreement throughout such period, or, if there has been a default in the fulfillment of any such 35 obligation, specifying each such default known to such officer and the nature and status thereof. (b) The Servicer shall deliver to the Issuer, the Agent, the Indenture Trustee, the Backup Servicer, the Security Insurer and the Collateral Agent, promptly after having obtained knowledge thereof, but in no event later than two Business Days thereafter, written notice in an officer's certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under Section 5.1(a). The Seller or the Servicer shall deliver to the Issuer, the Agent, the Indenture Trustee, the Backup Servicer, the Security Insurer, the Collateral Agent and the Servicer or the Seller (as applicable) promptly after having obtained knowledge thereof, but in no event later than two Business Days thereafter, written notice in an officer's certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under any other clause of Section 5.1. Section 2.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The Servicer shall cause a firm of nationally recognized independent certified public accountants (the "Independent Accountants"), who may also render other services to the Servicer or to the Seller, to deliver to the Issuer, the Indenture Trustee, the Agent, the Backup Servicer, the Security Insurer, the Collateral Agent and each Rating Agency, on or before March 31 (or 90 days after the end of the Servicer's fiscal year, if other than December 31) of each year, beginning on March 31, 1997, with respect to the twelve months ended the immediately preceding December 31 (or other applicable date) (or such other period as shall have elapsed from the Closing Date to the date of such certificate), a statement (the "Accountant's Report") addressed to the Board of Directors of the Servicer, to the Agent, the Indenture Trustee, the Backup Servicer, the Collateral Agent and the Security Insurer, to the effect that such firm has audited the financial statements of the Servicer and issued its report thereon and that such audit (1) was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances; (2) included an examination of documents and records relating to the servicing of automobile installment sales contracts under pooling and servicing agreements, sale and servicing agreements and warehousing agreements substantially similar one to another (such statement to have attached thereto a schedule setting forth the pooling and servicing agreements and sale and servicing agreements covered thereby, including this Agreement); (3) included an examination of the delinquency and loss statistics relating to the Servicer's portfolio of automobile installment sales contracts; and (4) except as described in the statement, disclosed no exceptions or errors in the records relating to automobile and light truck loans serviced for others that, in the firm's opinion, generally accepted auditing standards requires such firm to report. The 36 Accountants' Report shall further state that (1) a review in accordance with agreed upon procedures was made of three randomly selected Servicer's Certificates for each such pooling and servicing agreement, sale and servicing agreement or warehousing agreements and (2) except as disclosed in the Accountant's Report, no exceptions or errors in the Servicer's Certificates so examined were found. (b) The Accountants' Report shall also indicate that the firm is independent of the Seller and the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. (c) A copy of the Accountants' Report may be obtained by any Noteholder by a request in writing to the Indenture Trustee addressed to the Corporate Trust Office. Section 2.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING RECEIVABLES. The Servicer shall provide to representatives of the Issuer, Indenture Trustee, the Agent, the Backup Servicer and the Security Insurer reasonable access to the documentation and its operations regarding the Receivables. In each case, such access shall be afforded without charge but only upon reasonable request and during normal business hours and on a date not more than two Business Days after the date of such request. Nothing in this Section shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors, and the failure of the Servicer to provide access as provided in this Section as a result of such obligation shall not constitute a breach of this Section. Section 2.13. MONTHLY TAPE. (a) On or before the third Business Day, but in no event later than the fifth calendar day, of each month, the Servicer will deliver to the Indenture Trustee and the Backup Servicer a computer tape or a diskette (or any other electronic transmission acceptable to the Indenture Trustee and the Backup Servicer) in a format acceptable to the Indenture Trustee and the Backup Servicer containing the information with respect to the Receivables as of the preceding Accounting Date necessary for preparation of the Servicer's Certificate relating to the immediately succeeding Determination Date and necessary to determine the application of collections as provided in Section 3.3. The Backup Servicer shall use such tape or diskette (or other electronic transmission acceptable to the Indenture Trustee and the Backup Servicer) to verify the Servicer's Certificate delivered by the Servicer, and the Backup Servicer shall certify to the Security Insurer and the Agent that it has verified the Servicer's Certificate in accordance with this Section 2.13 and shall notify the Servicer, the Security Insurer and the Agent of any discrepancies, in each case, on or before the second Business Day following the Determination Date. In the event that the Backup Servicer reports any discrepancies, the Servicer and the 37 Backup Servicer shall attempt to reconcile such discrepancies prior to the related Deficiency Claim Date, but in the absence of a reconciliation, the Servicer's Certificate shall control for the purpose of calculations and distributions with respect to the related Distribution Date. In the event that the Backup Servicer and the Servicer are unable to reconcile discrepancies with respect to a Servicer's Certificate by the related Distribution Date, the Servicer shall cause the Independent Accountants, at the Servicer's expense, to audit the Servicer's Certificate and, prior to the third Business Day, but in no event later than the fifth calendar day, of the following month, reconcile the discrepancies. The effect, if any, of such reconciliation shall be reflected in the Servicer's Certificate for such next succeeding Determination Date. In addition, the Servicer shall, if so requested by the Agent or the Security Insurer (unless an Insurer Default shall have occurred and be continuing) deliver to the Backup Servicer its Collection Records and its Monthly Records within one Business Day of demand therefor and a computer tape containing as of the close of business on the date of demand all of the data maintained by the Servicer in computer format in connection with servicing the Receivables. Other than the duties specifically set forth in this Agreement, the Backup Servicer shall have no obligations hereunder, including, without limitation, to supervise, verify, monitor or administer the performance of the Servicer. The Backup Servicer shall have no liability for any actions taken or omitted by the Servicer. The duties and obligations of the Backup Servicer shall be determined solely by the express provisions of this Agreement and no implied covenants or obligations shall be read into this Agreement against the Backup Servicer. Section 2.14. RETENTION AND TERMINATION OF SERVICER. The Servicer hereby covenants and agrees to act as such under this Agreement for an initial term, commencing on the Closing Date and ending on March 31, 1997 which term may be extended by the Security Insurer for successive quarterly terms ending on each successive June 30, September 30, December 31, and March 31, (or, pursuant to revocable written standing instructions from time to time to the Servicer, the Indenture Trustee and the Agent, for any specified number of terms greater than one), until the termination of this Agreement. Each such notice (including each notice pursuant to standing instructions, which shall be deemed delivered at the end of successive quarterly terms for so long as such instructions are in effect) (a "Servicer Extension Notice") shall be delivered by the Security Insurer to the Agent, the Indenture Trustee and the Servicer. The Servicer hereby agrees that, as of the date hereof and upon its receipt of any such Servicer Extension Notice, the Servicer shall become bound, for the initial term beginning on the Closing Date and for the duration of the term covered by such Servicer Extension Notice, to continue as the Servicer subject to and in accordance with the other provisions of this Agreement. Until such time as an Insurer Default shall have occurred and be continuing, the Indenture Trustee agrees that if as of the fifteenth day prior to the last day of any term of the Servicer the Indenture Trustee 38 shall not have received any Servicer Extension Notice from the Security Insurer, the Indenture Trustee will, within five days thereafter, give written notice of such non-receipt to the Agent, the Security Insurer and the Servicer. Section 2.15. FIDELITY BOND. The Servicer shall maintain a fidelity bond in such form and amount as is customary for entities acting as custodian of funds and documents in respect of consumer contracts on behalf of institutional investors. Section 2.16. DUTIES OF THE SERVICER UNDER THE INDENTURE. The Servicer shall, and hereby agrees that it will, perform on behalf of the Issuer the following duties of the Issuer under the Indenture (references are to the applicable Sections in the Indenture): (a) the direction to the Paying Agent, if any, to deposit moneys with the Indenture Trustee (Section 1011); (b) the preparation of all supplements, amendments, financing statements, continuation statements, instruments of further assurance and other instruments, in accordance with Section 1016 of the Indenture, necessary to protect the Trust Estate (Section 1016); and (c) the preparation of any written instruments required to confirm more fully the authority of any co-trustee or separate trustee and any written instruments necessary in connection with the resignation or removal of any co-trustee or separate trustee (Sections 710 and 716). Section 2.17. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE PURCHASE DATE. In the case of any Receivable in respect of which written evidence from the Dealer selling the related Financed Vehicle that the Lien Certificate for such Financed Vehicle showing OFL as first lienholder has been applied for from the Registrar of Titles was delivered to the Custodian on the applicable Purchase Date in lieu of a Lien Certificate, the Servicer shall use its best efforts to collect such Lien Certificate from the Registrar of Titles as promptly as practicable. If such Lien Certificate showing OFL as first lienholder is not received by the Custodian within 180 days after the applicable Purchase Date, then the representation and warranty in paragraph 5 of the Schedule of Representations shall be deemed to have been incorrect in a manner that materially and adversely affects the Security Insurer and the Issuer. Section 2.18. ACCOUNTANTS' REVIEW OF RECEIVABLE FILES. The Servicer (or OFL, if OFL is not the Servicer) shall at its own expense cause Independent Accountants acceptable to the Security Insurer to conduct a review of Receivable Files upon the terms and subject to the conditions of a letter agreement dated December 3, 1996 between OFL and the Security Insurer. 39 ARTICLE III DISTRIBUTIONS; STATEMENTS TO NOTEHOLDERS Section 3.1. SECURED ACCOUNTS. (a) The Servicer shall establish the Collection Account in the name of the Collateral Agent for the benefit of the Secured Parties (as defined in the Security Agreement). The Collection Account shall be an Eligible Account and shall be a segregated trust account established with the Collateral Agent and maintained with the Collateral Agent. The Issuer and the Collateral Agent agree that the Indenture Trustee shall have full power and authority to withdraw, or cause to be withdrawn, funds held in the Collection Account in accordance with the provisions of this Agreement and the Indenture. (b) The Issuer shall establish the Note Distribution Account in the name of the Collateral Agent for the benefit of the Secured Parties. The Note Distribution Account shall be an Eligible Account and shall be a segregated trust account established with the Collateral Agent and maintained with the Collateral Agent. The Issuer and the Collateral Agent agree that the Indenture Trustee shall have full power and authority to withdraw, or cause to be withdrawn, funds held in the Note Distribution Account in accordance with the provisions of this Agreement and the Indenture. (c) All amounts held in the Collection Account and the Note Distribution Account (collectively, the "Secured Accounts") shall, to the extent permitted by applicable laws, rules and regulations, be invested over night, as directed by the Servicer, in Eligible Investments. Any such written direction shall certify that any such investment is authorized by this Section 3.1. Investments in Eligible Investments shall be made in the name of the Collateral Agent on behalf of the Secured Parties, and such investments shall not be sold or disposed of prior to their maturity. Any investment of funds in the Secured Accounts shall be made in Eligible Investments held by a financial institution in accordance with the following requirements: (a) all Eligible Investments shall be held in an account with such financial institution in the name of the Collateral Agent, (b) with respect to securities held in such account, such securities shall be (i) certificated securities (as such term is used in N.Y. UCC Section 8-313(d)(i)), securities deemed to be certificated securities under applicable regulations of the United States government, or uncertificated securities issued by an issuer organized under the laws of the State of New York or the State of Delaware, (ii) either (A) in the possession of such institution, (B) in the possession of a clearing corporation (as such term is used in Minn. Stat. Section 336.8-313(g)) in the State of New York, registered in the name of such clearing corporation or its nominee, not endorsed for collection or surrender or any other purpose not involving transfer, not containing any evidence of a right or interest inconsistent with the Collateral Agent's 40 security interest therein, and held by such clearing corporation in an account of such institution, (C) held in an account of such institution with the Federal Reserve Bank of New York or the Federal Reserve Bank of Minneapolis, or (D) in the case of uncertificated securities, issued in the name of such institution, and (iii) identified, by book entry or otherwise, as held for the account of, or pledged to, the Collateral Agent on the records of such institution, and such institution shall have sent the Collateral Agent a confirmation thereof, (c) with respect to repurchase obligations held in such account, such repurchase obligations shall be identified by such institution, by book entry or otherwise, as held for the account of, or pledged to, the Collateral Agent on the records of such institution, and the related securities shall be held in accordance with the requirements of clause (b) above, and (d) with respect to other Eligible Investments shall be held in a manner acceptable to the Controlling Party. Subject to the other provisions hereof, the Collateral Agent shall have sole control over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Collateral Agent or its agent, together with each document of transfer, if any, necessary to transfer title to such investment to the Collateral Agent in a manner which complies with this Section 3.1. All interest, dividends, gains upon sale and other income from, or earnings on, investments of funds in the Secured Accounts shall be deposited in the Collection Account and distributed on the next Distribution Date pursuant to Section 3.6. The Servicer shall deposit in the applicable Secured Account an amount equal to any net loss on such investments immediately as realized. (d) On each Purchase Date, the Servicer shall deposit in the Collection Account (x) all Scheduled Payments and prepayments of the Receivables transferred to the Issuer on such date that are received by the Servicer after the related Cut-Off Date and on or prior to the Business Day immediately preceding such Purchase Date or received by the Lockbox Bank after the related Cut-Off Date and on or prior to the second Business Day immediately preceding such Purchase Date and (y) all Liquidation Proceeds and proceeds of Insurance Policies in respect of a Financed Vehicle and applied by the Servicer after the related Cut-Off Date. (e) The Seller shall have the right (but not the obligation) to make deposits into the Collection Account in order to satisfy the Collateral Test. OFL represents and warrants and agrees that it will not make a capital contribution to the Seller to enable the Seller to make such a deposit and that it will have the option (but not the obligation) to make loans to the Seller to enable the Seller to make such a deposit, but only if (i) such loans are made on an arms-length basis, (ii) OFL reasonably believes that at the time it shall make such loan it will be repaid by the Seller and (iii) if OFL shall make any such loan to the Seller, OFL shall enter into a Note for Intercompany Discretionary Advance and Subordination Agreement and a 41 Subordinated Revolving Credit Promissory Note in substantially the form of Exhibit C hereto. The Seller shall provide the Rating Agencies prior written notice of any loans it shall receive from OFL in order to satisfy the Collateral Test. (f) On any Business Day on which there is a WAC Deficiency Amount, the Seller shall deposit into the Collection Account the positive difference, if any, between the WAC Deficiency Amount on such Business Day and the WAC Deficiency Deposit. The Seller shall provide the Rating Agencies prior written notice of any loans it shall receive from OFL in order to make a deposit in respect of the WAC Deficiency Amount. (g) The Issuer shall deposit into the Collection Account the amount of all Advances made by the Issuer to the Seller pursuant to Section 3 of the Repurchase Agreement. Section 3.2. COLLECTIONS. The Servicer will be entitled to be reimbursed from amounts on deposit in the Collection Account with respect to a Monthly Period for amounts previously deposited in the Collection Account but later determined by the Servicer or the Lockbox Bank to have resulted from mistaken deposits or postings or checks returned for insufficient funds. The amount to be reimbursed hereunder shall be paid to the Servicer on the related Distribution Date pursuant to Sections 3.6(a)(iv) and 3.6(b)(iv) upon certification by the Servicer of such amounts and the provision of such information to the Indenture Trustee, the Agent and the Security Insurer as may be necessary in the opinion of the Agent or the Security Insurer to verify the accuracy of such certification. In the event that the Security Insurer or the Agent has not received evidence satisfactory to it of the Servicer's entitlement to reimbursement pursuant to this Section 3.2, the Agent or the Security Insurer, as the case may be, shall (unless an Insurer Default shall have occurred and be continuing) give the Indenture Trustee notice to such effect, following receipt of which the Indenture Trustee shall not make a distribution to the Servicer in respect of such amount pursuant to Section 3.6, or if the Servicer prior thereto has been reimbursed pursuant to Section 3.6, the Indenture Trustee shall withhold such amounts from amounts otherwise distributable to the Servicer on the next succeeding Distribution Date. Section 3.3. APPLICATION OF COLLECTIONS. For the purposes of this Agreement, all collections for a Monthly Period shall be applied by the Servicer as follows: (a) With respect to each Receivable, payments by or on behalf of the Obligor thereof (other than of Supplemental Servicing Fees with respect to such Receivable, to the extent collected) shall be applied to interest and principal with respect to such Receivable in accordance with the terms of such Receivable. With respect to each Liquidated Receivable, Liquidation Proceeds shall be applied to interest and principal with respect to such Receivable in accordance with the terms of 42 such Receivable, and then to any Insurance Add-On Amount due and payable with respect to such Receivable. The Servicer shall not be entitled to any Supplemental Servicing Fees with respect to a Liquidated Receivable. (b) With respect to each Receivable that has become a Purchased Receivable on any Deposit Date, the Purchase Amount shall be applied, for purposes of this Agreement only, to interest and principal on the Receivable in accordance with the terms of the Receivable as if the Purchase Amount had been paid by the Obligor on the Accounting Date next preceding such Deposit Date. The Servicer shall not be entitled to any Supplemental Servicing Fees with respect to such a Receivable. Nothing contained herein shall relieve any Obligor of any obligation relating to any Receivable. (c) With respect to each Receivable that has become a Repurchased Receivable on any date, the Repurchase Price shall be applied, for purposes of this Agreement only, to interest and principal on the Receivable in accordance with the terms of the Receivable as if the Repurchase Price had been paid by the Obligor on such date. The Servicer shall not be entitled to any Supplemental Servicing Fees with respect to such a Receivable. Nothing contained herein shall relieve any Obligor of any obligation relating to any Receivable. (d) All amounts collected that are payable to the Servicer as Supplemental Servicing Fees hereunder shall be deposited in the Collection Account and paid to the Servicer in accordance with Sections 3.6(a)(iv) and 3.6(b)(iv). (e) All payments by or on behalf of an Obligor received with respect to any Purchased Receivable after the Accounting Date immediately preceding the Deposit Date on which the Purchase Amount was paid by the Seller, OFL or the Servicer shall be paid to the Seller, OFL or the Servicer, respectively, and shall not be included in the Available Funds, the Distribution Amount or the Spread Account Available Funds. Section 3.4. MONTHLY ADVANCES. (a) After the occurrence of an Amortization Event, if with respect to a Receivable the amount deposited into the Collection Account during a Monthly Period in respect of such Receivable and allocable to interest (determined in accordance with Section 3.3) is less than the amount of interest accrued on such Receivable (for the number of calendar days in such Monthly Period), the Servicer shall make a Monthly Advance equal to the amount of such shortfall; PROVIDED, HOWEVER, that the Servicer shall not be required to make a Monthly Advance with respect to a Receivable extended pursuant to Section 2.2(b) for any Monthly Period during which no Scheduled Payment is due according to the terms of such extension. 43 (b) If with respect to any Determination Date so long as an Amortization Event has not occurred, the amount of Available Funds is less than the sum of the amounts payable on the related Distribution Date pursuant to clause (i) of Section 3.6(a), then on such Determination Date the Servicer, or OFL if OFL is no longer the Servicer, shall make a Monthly Advance equal to the amount of such shortfall. (c) On or before each Determination Date and prior to the delivery of the Servicer's Certificate for such Determination Date pursuant to Section 2.9, the Servicer (or OFL if OFL is not the Servicer and OFL is required to make a Monthly Advance pursuant to Section 3.4(b)) shall deposit in the Collection Account the aggregate amount of Monthly Advances required for the related Monthly Period in immediately available funds. (d) The Servicer shall be entitled to be reimbursed for Outstanding Monthly Advances pursuant to Section 3.6(b)(i) from the following sources on any day subsequent to the Distribution Date in respect of which such Monthly Advance was made: (i) subsequent payments by or on behalf of any Obligor with respect to such Receivable, (ii) collections of Liquidation Proceeds with respect to any Receivable if such Receivable becomes a Liquidated Receivable, (iii) payment of any Purchase Amount with respect to any Receivable if such Receivable becomes a Purchased Receivable and (iv) payment of any Repurchase Price with respect to any Receivable if such Receivable becomes a Repurchased Receivable. If any Receivable shall become a Liquidated Receivable and the Servicer shall not have been fully reimbursed for Outstanding Monthly Advances with respect to such Receivable from the sources of funds previously described in this paragraph, the Servicer shall be entitled to reimbursement from collections on Receivables other than the Receivable in respect of which such Outstanding Monthly Advance shall have been made. Section 3.5. ADDITIONAL DEPOSITS. (a) On or before each Deposit Date, the Servicer or OFL shall deposit in the Collection Account the aggregate Purchase Amounts with respect to Administrative Receivables. The Seller shall deposit in the Collection Account the Repurchase Price with respect to Repurchased Receivables. All such deposits of Purchase Amounts and Repurchase Prices shall be made in immediately available funds. On each Deficiency Claim Date, the Indenture Trustee shall deposit in the Collection Account any amounts delivered to the Indenture Trustee by the Spread Account Collateral Agent. (b) The Security Insurer shall at any time, and from time to time, have the option but not the obligation to deliver amounts to the Indenture Trustee for deposit into the Collection Account, for distribution as a component of the Distribution Amount with respect to the Deficiency Claim Date coinciding with or next succeeding the date of such deposit to the extent that without such distribution a draw would be required to be made on 44 the Note Policy, in order to provide for the compensation of a Successor Servicer as provided in Section 5.3(c), or otherwise to provide for expenses of the Issuer, including amounts due to providers of services to the Issuer. Section 3.6. DISTRIBUTIONS. (a) On each Distribution Date prior to the occurrence of an Amortization Event, the Indenture Trustee shall (based on the information contained in the Servicer's Certificate delivered on the related Determination Date) distribute the following amounts in the following order of priority: (i) first, from the Distribution Amount, to the Note Distribution Account, an amount equal to the Advance Interest Distributable Amount for such Distribution Date; (ii) second, from the Distribution Amount, to the Servicer (or to OFL if OFL is not the Servicer and OFL has made a Monthly Advance pursuant to Section 3.4(b)), the amount of Outstanding Monthly Advances for which the Servicer (or OFL) is entitled to be reimbursed and for which the Servicer (or OFL) has not previously been reimbursed; (iii) third, from the Distribution Amount, PRO RATA, to the Indenture Trustee, any accrued and unpaid fees of the Indenture Trustee in accordance with the Indenture; to any Lockbox Bank, Custodian, Backup Servicer or Collateral Agent (including the Indenture Trustee if acting in any such additional capacity), any accrued and unpaid fees (in each case, to the extent such Person has not previously received such amount from the Servicer or OFL); to any successor Servicer, to the extent not previously paid by the predecessor Servicer pursuant to Section 5.2, reasonable transition expenses incurred in acting as successor Servicer in an amount not to exceed $50,000 in total; (iv) fourth, from the Distribution Amount, to the Servicer, the Basic Servicing Fee for the related Monthly Period, any Supplemental Servicing Fees for the related Monthly Period, and any amounts permitted to be paid to the Servicer pursuant to Section 3.2; (v) fifth, from the Distribution Amount, on Distribution Dates with respect to the Amortization Period so long as no Amortization Event shall have occurred, to the Note Distribution Account, an amount equal to the Advance Principal Distributable Amount for such Distribution Date; (vi) sixth, from the Distribution Amount, to the Security Insurer, to the extent of any amounts owing to the Security Insurer under the Insurance Agreement and not paid, whether or not OFL or any other Person is also obligated to pay such amounts; 45 (vii) seventh, from the Distribution Amount, on Distribution Dates with respect to the Revolving Period, an amount determined and certified by the Servicer and included in the Servicer's Certificate delivered on the related Determination Date to be at least equal to the sum of (1) the WAC Deficiency Amount, if any, on such Determination Date, and (2) the amount necessary to be held in the Collection Account such that after giving effect to all deposits and distributions to be made on such Distribution Date, the Collateral Test will be satisfied (not taking into account any WAC Deficiency Amounts provided for in clause (1) above) as of the immediately preceding Accounting Date, shall remain on deposit in the Collection Account; (viii) eighth, from the Distribution Amount, on Distribution Dates with respect to the Amortization Period so long as no Amortization Event shall have occurred, to the Note Distribution Account, an amount equal to the remaining amount on deposit in the Collection Account until an amount payable in respect of the principal of the Advances equal to the unpaid principal amount of the Advances has been deposited in the Note Distribution Account; (ix) ninth, from the Distribution Amount, to the Agent for distribution to the applicable parties, any amounts owing to the Agent, the Noteholders or any Permitted Assignee by the Issuer or the Seller under the Note Purchase Agreement, the Fee Letter or any other Related Document, to the extent not otherwise paid; and (x) tenth, from the Distribution Amount (excluding amounts required to be retained in the Collection Account pursuant to clause (vii) above), the remaining portion of the Distribution Amount to the Spread Account Collateral Agent for deposit in the Spread Account. (b) On each Distribution Date after the occurrence of an Amortization Event, the Indenture Trustee shall (based on the information contained in the Servicer's Certificate delivered on the related Determination Date) distribute the following amounts and in the following order of priority: (i) first, from the Distribution Amount, to the Servicer (or to OFL if OFL is not the Servicer and OFL has made a Monthly Advance pursuant to Section 3.4(b)), an amount equal to the amount of Outstanding Monthly Advances for which the Servicer (or OFL) is entitled to be reimbursed and for which the Servicer (or OFL) has not previously been reimbursed; (ii) second, from the Distribution Amount, to the Note Distribution Account, an amount equal to the Advance Interest Distributable Amount for such Distribution Date; 46 (iii) third, from the Distribution Amount, PRO RATA, to the Indenture Trustee, an amount equal to any accrued and unpaid fees of the Indenture Trustee in accordance with the Indenture; to any Lockbox Bank, Custodian, Backup Servicer, Collateral Agent (including the Indenture Trustee if acting in any such additional capacity), an amount equal to any accrued and unpaid fees owing to such Persons (in each case, to the extent such Person has not previously received such amount from the Servicer or OFL); to any successor Servicer, to the extent not previously paid by the predecessor Servicer pursuant to Section 5.2, reasonable transition expenses incurred in acting as successor Servicer in an amount not to exceed $50,000 in total; (iv) fourth, from the Distribution Amount, to the Servicer, the sum of the Basic Servicing Fee for the related Monthly Period, any Supplemental Servicing Fees for the related Monthly Period, and any amounts specified in Section 3.2; (v) fifth, from the Distribution Amount, to the Note Distribution Account, an amount equal to the Advance Principal Distributable Amount for such Distribution Date; (vi) sixth, from the Distribution Amount, to the Security Insurer, to the extent of any amounts owing to the Security Insurer under the Insurance Agreement and not paid, whether or not OFL or any other Person is also obligated to pay such amounts; and (vii) seventh, if an Insurer Default has occurred, from the Distribution Amount, to the Note Distribution Account, an amount equal to the Default Amount Distributable Amount for such Distribution Date; (viii) eighth, from the Distribution Amount, to the Note Distribution Account, an amount equal to the remaining Distribution Amount until an amount payable in respect of principal of the Notes equal to the unpaid principal amount of the Notes has been deposited in the Note Distribution Account; (ix) ninth, from the Distribution Amount, PRO RATA, (I) to the Agent, for distribution to the applicable parties, an amount equal to the sum, without duplication, of (A) any expenses incurred by the Agent or the Noteholders as a result of any failure of the Seller to perform under the Repurchase Agreement PLUS (B) any amounts owing to the Agent, the Noteholders or any Permitted Assignee under the Note Purchase Agreement, the Fee Letter or any other Related Document, to the extent not otherwise paid; and (II) if an Insurer Default has not occurred, to the Note 47 Distribution Account, an amount equal to the Default Amount Distributable Amount for such Distribution Date; and (x) tenth, any remaining Distribution Amount to the Spread Account Collateral Agent for deposit in the Spread Account. Section 3.7. STATEMENTS TO NOTEHOLDERS. On each Distribution Date, the Indenture Trustee shall include with each distribution to each Noteholder, a Servicer's Certificate. Section 3.8. INDENTURE TRUSTEE AS AGENT; CALCULATION OF WEIGHTED AVERAGE APR, WAC DEFICIENCY AMOUNTS, BASIS FEE PERCENT AND ADVANCE INTEREST RATE. (a) The Indenture Trustee, in making distributions as provided in this Agreement, shall act solely on behalf of and as agent for the Noteholders. (b) Prior to the occurrence of an Amortization Event, on each Business Day the Seller shall calculate the Maximum Interest Rate, the weighted average APR of the Receivables, the WAC Deficiency Percentage and the WAC Deficiency Amount, if any, and shall, upon request, provide such calculation in writing to the Indenture Trustee, the Issuer, the Agent, the Servicer or the Security Insurer. Prior to the occurrence of an Amortization Event, if on any Business Day the WAC Deficiency Amount is greater than zero, the Seller shall provide written notice of such WAC Deficiency Amount and the corresponding WAC Deficiency Percentage and the WAC Deficiency Deposit, if any, with respect to such Business Day to the Issuer, the Agent, the Indenture Trustee, the Servicer, and the Security Insurer by 12:00 noon, New York City time, on such day. (c) On the Closing Date, the Basis Fee Percent shall be 0%. On any Business Day on which the Agent determines, in its sole discretion, that there has been a change in the Basis Fee Percent, the Agent shall calculate the Basis Fee Percent and shall provide the Seller with telephonic notice of such calculation by 10:00 a.m. New York City time on each such day. In the absence of notice of a change in the Basis Fee Percent, the Basis Fee Percent shall remain the same as it was as of the Closing Date or, if notice of a change in the Basis Fee Percent has been given to the Seller by the Agent, as it was as of the date of the last such notice of change in the Basis Fee Percent. (d) The Agent shall provide the Indenture Trustee, the Security Insurer, the Issuer, the Seller and the Servicer by facsimile transmission no later than 10:00 a.m. on the Business Day prior to each Determination Date, a certificate of a responsible officer, which shall set forth the Advance Interest Rate for the immediately preceding Interest Period and shall set forth in reasonable detail the manner in which such calculation of the Advance Interest Rate was determined and, absent manifest 48 error, the amount set forth in such certificate with respect to the Advance Interest Rate shall be conclusive. The Agent shall provide to the Security Insurer, the Issuer, the Seller, OFL and the Indenture Trustee, on the Business Day preceding the date of prepayment, if the Agent shall have received notice of such prepayment on or prior to such Business Day, or on the prepayment date, if the Agent shall receive notice of such prepayment on such date of prepayment, a certificate of a responsible officer, which shall set forth the interest due on the Notes being prepaid together with the Breakage Fee, if any, due on such prepayment date, and which also shall set forth, in reasonable detail, the manner in which the calculation of the interest due on the Notes and the Breakage Fee was determined. Absent manifest error, the amount set forth in such certificate with respect to the Breakage Fee and interest shall be conclusive. Section 3.9. ELIGIBLE ACCOUNTS. Any account which is required to be established as an Eligible Account pursuant to this Agreement and which ceases to be an Eligible Account shall within five Business Days (or such longer period, not to exceed 30 days, as to which each Rating Agency, the Agent and the Security Insurer may consent) be established as a new account which shall be an Eligible Account and any cash or any investments shall be transferred to such new account. Section 3.10. ADDITIONAL WITHDRAWALS FROM THE COLLECTION ACCOUNT. (a) On each Purchase Date under the Repurchase Agreement, the Servicer shall instruct the Indenture Trustee in writing by 10:00 a.m., Minneapolis, Minnesota time, to withdraw from the Collection Account and deposit to the Spread Account and pay to the account of the Seller specified by the Servicer in such writing, and upon such instruction, the Indenture Trustee shall withdraw from the Collection Account and initiate a wire transfer to the Spread Account and to such account of the Seller no earlier than 2:00 p.m., New York City time, and no later than 3:00 p.m., New York City time, the amounts set forth in such instructions. The aggregate amount set forth in the instruction referred to in the preceding sentence shall be equal to the least of (i) the Purchase Price for the Receivables being purchased by the Issuer on such date, (ii) for any Purchase Date occurring during the period from but excluding a Determination Date through and including the related Distribution Date, an amount equal to the total amount on deposit in the Collection Account on such date over the sum of (A) the amounts to be distributed from or retained in the Collection Account on such Distribution Date pursuant to clauses (i) through (ix) of Section 3.6(a) as set forth in the Servicer's Certificate delivered on such Determination Date, and (B) any increase in the WAC Deficiency Amount on such date, if any, above the WAC Deficiency Amount on such Determination Date, and (iii) an amount equal to the excess of the total amount on deposit in the Collection Account on such date over the WAC Deficiency Amounts, if any, required to be on deposit in the Collection Account on such date. The Servicer 49 shall instruct the Trustee to wire an amount equal to 1% of the aggregate Principal Balance of Receivables being purchased by the Issuer on such date to the Spread Account and the Servicer shall instruct the Trustee to wire the remainder of the amount specified in the preceding sentence to the account of the Seller. (b) On the Business Day specified by the Seller in the notice of a prepayment of an Advance delivered to the Indenture Trustee pursuant to Section 3(e) of the Repurchase Agreement, the Indenture Trustee shall withdraw from the Collection Account and, if applicable, the Spread Account the amount of such prepayment determined in accordance with the provisions of Section 3(e) of the Repurchase Agreement (as set forth in a certificate of a Responsible Officer of the Seller) and shall deposit such amount into the Note Distribution Account for application in accordance with the provisions of the Indenture. Section 3.11. CROSS-COLLATERALIZATION WITH THE SPREAD ACCOUNT AGREEMENT. (a) In the event that the Indenture Trustee shall determine on any Deficiency Claim Date, based on information in the Servicer's Certificate, that there exists a Collection Account Shortfall or a Warehousing Shortfall (each as defined in the Spread Account Agreement) (any such shortfall being a "Deficiency Claim Amount"), then on such Deficiency Claim Date, the Indenture Trustee shall deliver to the Collateral Agent, the Spread Account Collateral Agent, the Security Insurer, the Issuer and the Servicer, by hand delivery, telex or facsimile transmission, a written notice (a "Deficiency Notice") specifying the Deficiency Claim Amount for such Distribution Date. Such Deficiency Notice shall direct the Spread Account Collateral Agent to remit such Deficiency Claim Amount (to the extent of the funds available to be distributed pursuant to the Spread Account Agreement) to the Indenture Trustee for deposit in the Collection Account. (b) Any Deficiency Notice shall be delivered by 10:00 a.m., New York City time, on the related Deficiency Claim Date. The amounts distributed by the Spread Account Collateral Agent to the Indenture Trustee pursuant to a Deficiency Notice shall be deposited by the Indenture Trustee into the Collection Account pursuant to Section 3.5. ARTICLE IV THE SERVICER Section 4.1. LIABILITY OF SERVICER; INDEMNITIES. (a) The Servicer (in its capacity as such and, in the case of OFL, without limitation of its obligations under the Purchase Agreement) shall be liable hereunder only to the extent 50 of the obligations in this Agreement specifically undertaken by the Servicer and the representations made by the Servicer. (b) The Servicer shall defend, indemnify and hold harmless the Issuer, the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Agent, the Security Insurer, their respective officers, directors, agents and employees and the Noteholders from and against any and all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel and expenses of litigation arising out of or resulting from the use, ownership or operation by the Servicer or any Affiliate thereof other than the Seller or the Issuer of any Financed Vehicle. (c) The Servicer shall indemnify, defend and hold harmless the Issuer, the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Agent, the Security Insurer, their respective officers, directors, agents and employees and the Noteholders from and against any taxes that may at any time be asserted against the Issuer, the Indenture Trustee, the Backup Servicer, the Agent, the Collateral Agent, or the Noteholders with respect to the execution, delivery and performance of this Agreement, including, without limitation, any sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but not including any taxes asserted with respect to, and as of the date of, the sale of the Receivables and the other Seller Conveyed Property to the Issuer or the issuance and original sale of the Notes, or federal or other income taxes arising out of distributions on the Notes) and costs and expenses in defending against the same. (d) The Servicer shall indemnify, defend and hold harmless the Issuer, the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Agent, the Security Insurer, their respective officers, directors, agents and employees and the Noteholders from and against any and all costs, expenses, losses, claims, damages, and liabilities to the extent that such cost, expense, loss, claim, damage, or liability arose out of, or was imposed upon the Issuer, the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Agent, the Security Insurer or the Noteholders through the breach of this Agreement, the negligence, willful misfeasance, or bad faith of the Servicer in the performance of its duties under this Agreement or by reason of reckless disregard of its obligations and duties under this Agreement. (e) Indemnification under this Article shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If the Servicer has made any indemnity payments pursuant to this Article and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to the Servicer, without interest. 51 (f) OFL, in its individual capacity, hereby acknowledges that the indemnification provisions in the Purchase Agreement benefiting the Issuer, the Agent, the Indenture Trustee, the Collateral Agent and the Backup Servicer are enforceable by each hereunder. (g) OFL, in its individual capacity, shall indemnify, defend and hold harmless the Issuer, the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Agent, the Security Insurer, their respective officers, directors, agents and employees and the Noteholders from and against any taxes that may at any time be asserted against the Issuer, the Indenture Trustee, the Backup Servicer, the Agent, the Collateral Agent, the Security Insurer or the Noteholders with respect to the transactions contemplated in this Agreement, including, without limitation, any sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but not including any taxes asserted with respect to, and as of the date of, the sale of the Receivables and the other Seller Conveyed Property to the Issuer or the issuance and original sale of the Notes, or federal or other income taxes arising out of distributions on the Notes) and costs and expenses in defending against the same, but only to the extent such amounts are not otherwise covered by the indemnities set forth in Sections 4.1(b) through (f) above. Section 4.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER. (a) The Servicer shall not merge or consolidate with any other person, convey, transfer or lease substantially all its assets as an entirety to another Person, or permit any other Person to become the successor to the Servicer's business unless, after the merger, consolidation, conveyance, transfer, lease or succession, the successor or surviving entity shall be an Eligible Servicer and shall be capable of fulfilling the duties of the Servicer contained in this Agreement. Any corporation (i) into which the Servicer may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Servicer shall be a party, (iii) which acquires by conveyance, transfer, or lease substantially all of the assets of the Servicer, or (iv) succeeding to the business of the Servicer, in any of the foregoing cases shall execute an agreement of assumption to perform every obligation of the Servicer under this Agreement and, whether or not such assumption agreement is executed, shall be the successor to the Servicer under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be deemed to release the Servicer from any obligation. The Servicer shall provide notice of any merger, consolidation or succession pursuant to this Section 4.2(a) to the Issuer, the Indenture Trustee, the Agent, the Security Insurer and each Rating Agency. Notwithstanding the foregoing, the Servicer shall not merge or consolidate with any 52 other Person or permit any other Person to become a successor to the Servicer's business, unless (x) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 2.6 shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction) and no event that, after notice or lapse of time, or both, would become an Insurance Agreement Event of Default shall have occurred and be continuing, (y) the Servicer shall have delivered to the Issuer, the Agent, the Indenture Trustee and the Security Insurer an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 4.2(a) and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and (z) the Servicer shall have delivered to the Issuer, the Agent, the Indenture Trustee and the Security Insurer an Opinion of Counsel, stating, in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been executed and filed that are necessary to preserve and protect the interest of the Issuer in the Seller Conveyed Property and reciting the details of the filings or (B) no such action shall be necessary to preserve and protect such interest. (b) Any corporation (i) into which the Backup Servicer may be merged or consolidated, (ii) resulting from any merger or consolidation to which the Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer or lease substantially all of the assets of the Backup Servicer, or (iv) succeeding to the business of the Backup Servicer, in any of the foregoing cases shall execute an agreement of assumption to perform every obligation of the Backup Servicer under this Agreement and, whether or not such assumption agreement is executed, shall be the successor to the Backup Servicer under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be deemed to release the Backup Servicer from any obligation. Section 4.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND OTHERS. (a) Neither the Servicer, the Backup Servicer nor any of the directors or officers or employees or agents of the Servicer or Backup Servicer shall be under any liability to the Noteholders, except as provided in this Agreement, for any action taken or for refraining from the taking of any action pursuant to this Agreement; PROVIDED, HOWEVER, that this provision shall not protect the Servicer, the Backup Servicer or any such Person against any liability that would otherwise be imposed by reason of a breach of this Agreement or willful misfeasance, bad faith or negligence in the performance of duties, by reason of reckless disregard of obligations and duties under this Agreement or any 53 violation of law by the Servicer, Backup Servicer or such Person, as the case may be; PROVIDED FURTHER, that this provision shall not affect any liability to indemnify the Issuer and the Indenture Trustee for costs, taxes, expenses, claims, liabilities, losses or damages paid by the Issuer or the Indenture Trustee, each in its individual capacity. The Servicer, the Backup Servicer and any director, officer, employee or agent of the Servicer or Backup Servicer may rely in good faith on the advice of counsel or on any document of any kind PRIMA FACIE properly executed and submitted by any Person respecting any matters arising under this Agreement. (b) The Backup Servicer shall not be liable for any obligation of the Servicer contained in this Agreement, and the Issuer, the Indenture Trustee, the Agent, the Seller, the Security Insurer and the Noteholders shall look only to the Servicer to perform such obligations. Section 4.4. DELEGATION OF DUTIES. The Servicer may delegate duties under this Agreement to an Affiliate of OFL with the prior written consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing) and the Agent. Any successor Servicer may delegate duties under this Agreement with the prior written consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing) and the Agent. The Servicer also may at any time perform the specific duty of repossession of Financed Vehicles through sub-contractors who are in the business of servicing automotive receivables and may perform other specific duties through such sub-contractors with the prior written consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing); PROVIDED, HOWEVER, that no such delegation or sub-contracting duties by the Servicer shall relieve the Servicer of its responsibility with respect to such duties. Neither OFL nor any party acting as Servicer hereunder shall appoint any subservicer hereunder without the prior written consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing) and the Agent. Section 4.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to the provisions of Section 4.2, neither the Servicer nor the Backup Servicer shall resign from the obligations and duties imposed on it by this Agreement as Servicer or Backup Servicer except upon a determination that by reason of a change in legal requirements the performance of its duties under this Agreement would cause it to be in violation of such legal requirements in a manner which would have a material adverse effect on the Servicer or the Backup Servicer, as the case may be, and the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) or the Agent (if an Insurer Default shall have occurred and be continuing) does not elect to waive the obligations of the Servicer or the Backup Servicer, as the case may be, to perform the duties which render it legally unable to act or to delegate those duties to another Person. Any such determination permitting the 54 resignation of the Servicer or Backup Servicer shall be evidenced by an Opinion of Counsel to such effect delivered and acceptable to the Issuer, the Indenture Trustee, the Agent and the Security Insurer (unless an Insurer Default shall have occurred and be continuing). No resignation of the Servicer shall become effective until, so long as no Insurer Default shall have occurred and be continuing, the Backup Servicer or an entity acceptable to the Security Insurer shall have assumed the responsibilities and obligations of the Servicer or, if an Insurer Default shall have occurred and be continuing, the Backup Servicer or a successor Servicer that is an Eligible Servicer shall have assumed the responsibilities and obligations of the Servicer. No resignation of the Backup Servicer shall become effective until, so long as no Insurer Default shall have occurred and be continuing, an entity acceptable to the Security Insurer shall have assumed the responsibilities and obligations of the Backup Servicer or, if an Insurer Default shall have occurred and be continuing, a Person that is an Eligible Servicer shall have assumed the responsibilities and obligations of the Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup Servicer is not appointed within 60 days after the Backup Servicer has given notice of its resignation and has provided the Opinion of Counsel required by this Section 4.5, the Backup Servicer may petition a court for its removal. ARTICLE V SERVICER TERMINATION EVENTS Section 5.1. SERVICER TERMINATION EVENT. For purposes of this Agreement, each of the following shall constitute a "Servicer Termination Event": (a) Any failure by the Servicer to deliver to the Indenture Trustee for distribution to Noteholders any proceeds or payment required to be so delivered under the terms of this Agreement (or, if OFL is the Servicer, the Purchase Agreement) that continues unremedied for a period of two Business Days (one Business Day with respect to payment of Purchase Amounts) after written notice is received by the Servicer from the Indenture Trustee or (unless an Insurer Default shall have occurred and be continuing) the Security Insurer or after discovery of such failure by a Responsible Officer of the Servicer; (b) Failure by the Servicer to deliver the Servicer's Certificate to the Indenture Trustee, the Issuer, the Agent and (so long as an Insurer Default shall not have occurred and be continuing) the Security Insurer by 5:00 p.m., New York City time on the fifth Business Day prior to the Distribution Date, or failure on the part of the Servicer to observe its covenants and agreements set forth in Section 4.2(a); (c) Failure on the part of the Servicer duly to observe or perform in any material respect any other covenants or 55 agreements of the Servicer set forth in this Agreement (or, if OFL is the Servicer, the Purchase Agreement), which failure (i) materially and adversely affects the rights of the Issuer (determined without regard to the availability of funds under the Note Policy), or of the Security Insurer (unless an Insurer Default shall have occurred and be continuing), and (ii) continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Issuer, the Agent, the Indenture Trustee or the Security Insurer; (d) The entry of a decree or order for relief by a court or regulatory authority having jurisdiction in respect of the Servicer or the Seller in an involuntary case under the federal bankruptcy laws, as now or hereafter in effect, or another present or future, federal or state, bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Servicer or the Seller or of any substantial part of their respective properties or ordering the winding up or liquidation of the affairs of the Servicer or the Seller and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days or the commencement of an involuntary case under the federal bankruptcy laws, as now or hereafter in effect, or another present or future federal or state bankruptcy, insolvency or similar law and such case is not dismissed within 60 days; (e) The commencement by the Servicer or the Seller of a voluntary case under the federal bankruptcy laws, as now or hereafter in effect, or any other present or future, federal or state, bankruptcy, insolvency or similar law, or the consent by the Servicer or the Seller to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Servicer or the Seller or of any substantial part of its property or the making by the Servicer or the Seller of an assignment for the benefit of creditors or the failure by the Servicer or the Seller generally to pay its debts as such debts become due or the taking of corporate action by the Servicer or the Seller in furtherance of any of the foregoing; (f) Any representation, warranty or statement of the Servicer or the Seller made in this Agreement or any certificate, report or other writing delivered pursuant hereto shall prove to be incorrect in any material respect as of the time when the same shall have been made, and the incorrectness of such representation, warranty or statement has a material adverse effect on the Issuer or the Security Insurer and, within 30 days after written notice thereof shall have been given to the Servicer or the Seller by the Issuer, the Agent, the Indenture Trustee or the Security Insurer (or, if an Insurer Default shall have occurred and be continuing, a Noteholder), the circumstances or condition in respect of which such representation, warranty or 56 statement was incorrect shall not have been eliminated or otherwise cured; (g) So long as an Insurer Default shall not have occurred and be continuing, the Security Insurer shall not have delivered a Servicer Extension Notice pursuant to Section 2.14; (h) So long as an Insurer Default shall not have occurred and be continuing, an Insurance Agreement Event of Default shall have occurred; (i) A claim is made under the Note Policy; or (j) A servicer termination event or like event shall occur in any other securitization with respect to which OFL or any of its Affiliates is acting as servicer. Section 5.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a Servicer Termination Event shall occur and be continuing, the Security Insurer (or, if an Insurer Default shall have occurred and be continuing, either the Indenture Trustee or the Agent), by notice given in writing to the Servicer (and to the Indenture Trustee and the Agent if given by the Security Insurer) may terminate all of the rights and obligations of the Servicer under this Agreement; PROVIDED, that if the Security Insurer shall not deliver a Servicer Extension Notice, the rights and obligations of the Servicer hereunder shall terminate automatically upon the expiration of the term of the Servicer without the requirement of notice. On or after the receipt by the Servicer of such written notice or upon such automatic termination, all authority, power, obligations and responsibilities of the Servicer under this Agreement automatically shall pass to, be vested in and become obligations and responsibilities of the Backup Servicer (or such other successor Servicer appointed by the Security Insurer); PROVIDED, HOWEVER, that the successor Servicer shall have no liability with respect to any obligation which was required to be performed by the terminated Servicer prior to the date that the successor Servicer becomes the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer. The successor Servicer is authorized and empowered by this Agreement to execute and deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivables and the other Seller Conveyed Property and related documents to show the Issuer as lienholder or secured party on the related Lien Certificates, or otherwise. The terminated Servicer agrees to cooperate with the successor Servicer in effecting the termination of the responsibilities and rights of the terminated Servicer under this Agreement, including, without limitation, the transfer to the successor Servicer for administration by it of all cash amounts that shall at the time be held by the terminated Servicer for deposit, or 57 have been deposited by the terminated Servicer, in the Collection Account or thereafter received with respect to the Receivables and the delivery to the successor Servicer of all Receivable Files, Monthly Records and Collection Records and a computer tape or diskette in readable form as of the most recent Business Day containing all information necessary to enable the successor Servicer to service the Receivables and the other Seller Conveyed Property. If requested by the Agent or the Security Insurer (unless an Insurer Default shall have occurred and be continuing), the successor Servicer shall terminate the Lockbox Agreement and direct the Obligors to make all payments under the Receivables directly to the successor Servicer (in which event the successor Servicer shall process such payments in accordance with Section 2.2(e)), or to a lockbox established by the successor Servicer at the direction of the Agent or the Security Insurer (unless an Insurer Default shall have occurred and be continuing), at the successor Servicer's expense. In addition to any other amounts that are then payable to the terminated Servicer under this Agreement, the terminated Servicer shall then be entitled to receive out of Available Funds reimbursements for any Outstanding Monthly Advances made during the period prior to the notice pursuant to this Section 5.2 which terminates the obligation and rights of the terminated Servicer under this Agreement. The Issuer, the Agent, the Indenture Trustee and the successor Servicer may set off and deduct any amounts owed by the terminated Servicer from any amounts payable to the terminated Servicer pursuant to the preceding sentence. The terminated Servicer shall grant the Issuer, the Agent, the Indenture Trustee, the successor Servicer and the Security Insurer reasonable access to the terminated Servicer's premises at the terminated Servicer's expense. Section 5.3. APPOINTMENT OF SUCCESSOR. (a) On and after the time the Servicer receives a notice of termination pursuant to Section 5.2 or upon the resignation of the Servicer pursuant to Section 4.5, or in the event the term of the Servicer expires as a consequence of the Security Insurer electing not to deliver a Servicer Extension Notice, the Backup Servicer (unless the Security Insurer shall have exercised its option pursuant to Section 5.3(b) to appoint an alternate successor Servicer) shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for in this Agreement, and shall be subject to all the responsibilities, restrictions, duties, liabilities and termination provisions relating thereto placed on the Servicer by the terms and provisions of this Agreement; PROVIDED, HOWEVER, that the successor Servicer shall have no liability with respect to any obligation which was required to be performed by the terminated Servicer prior to the date that the successor Servicer becomes the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer. The Issuer and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such 58 succession. If a successor Servicer is acting as Servicer hereunder, it shall be subject to termination under Section 5.2 upon the occurrence of any Servicer Termination Event applicable to it as Servicer. (b) The Security Insurer may (so long as an Insurer Default shall not have occurred and be continuing) exercise at any time its right to appoint as Backup Servicer or as successor to the Servicer a Person other than the Person serving as Backup Servicer at the time, and (without limiting its obligations under the Note Policy) shall have no liability to the Issuer, the Indenture Trustee, OFL, the Seller, the Person then serving as Backup Servicer, any Noteholders or any other Person if it does so. Notwithstanding the above, if the Backup Servicer shall be legally unable or unwilling to act as Servicer and an Insurer Default shall have occurred and be continuing, the Backup Servicer, the Indenture Trustee or the Agent may petition a court of competent jurisdiction to appoint any Eligible Servicer as the successor to the Servicer. Pending appointment pursuant to the preceding sentence, the Backup Servicer shall act as successor Servicer unless it is legally unable to do so, in which event the outgoing Servicer shall continue to act as Servicer until a successor has been appointed and accepted such appointment. Subject to Section 4.5, no provision of this Agreement shall be construed as relieving the Backup Servicer of its obligation to succeed as successor Servicer upon the termination of the Servicer pursuant to Section 5.2, the resignation of the Servicer pursuant to Section 4.5 or the expiration of the term of the Servicer. If upon the termination of the Servicer pursuant to Section 5.2, the resignation of the Servicer pursuant to Section 4.5 or the expiration of the term of the Servicer, the Security Insurer appoints a successor Servicer other than the Backup Servicer, the Backup Servicer shall not be relieved of its duties as Backup Servicer hereunder. (c) Any successor Servicer shall be entitled to such compensation (whether payable out of the Collection Account or otherwise) as the Servicer would have been entitled to under the Agreement if the Servicer had not resigned or been terminated hereunder. If any successor Servicer is appointed as a result of the Backup Servicer's refusal (in contravention of the terms of this Agreement) to act as Servicer although it is legally able to do so, the Security Insurer and such successor Servicer may agree on reasonable additional compensation to be paid to such successor Servicer by the Backup Servicer, which additional compensation shall be paid by the Backup Servicer in its individual capacity and solely out of its own funds. If any successor Servicer is appointed for any reason other than the Backup Servicer's refusal to act as Servicer although legally able to do so, the Security Insurer and such successor Servicer may agree on additional compensation to be paid to such successor Servicer, which additional compensation may be payable by the Security Insurer as a Security Insurer Optional Deposit. In addition, any successor Servicer shall be entitled to reasonable 59 transition expenses incurred in acting as successor Servicer to the extent provided in Section 3.6(a)(iii) or 3.6(b)(iii). Section 5.4. NOTIFICATION TO NOTEHOLDERS. Upon any termination of or appointment of a successor to the Servicer pursuant to this Article V, the Indenture Trustee shall give prompt written notice thereof to Noteholders at their respective addresses appearing in the Note Register. Section 5.5. WAIVER OF PAST DEFAULTS. The Security Insurer (or, if an Insurer Default shall have occurred and be continuing, the Agent) may, waive any default by the Servicer in the performance of its obligations hereunder and its consequences. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Termination Event arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon. ARTICLE VI MISCELLANEOUS PROVISIONS Section 6.1. AMENDMENT. (a) This Agreement may be amended by the Seller, the Servicer, the Agent and the Issuer, with the prior written consent of the Indenture Trustee, the Backup Servicer and the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) but without the consent of any of the Noteholders, (i) to cure any ambiguity, (ii) to correct or supplement any provisions in this Agreement or (iii) for the purpose of adding any provision to or changing in any manner or eliminating any provision of this Agreement or of modifying in any manner the rights of the Noteholders; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of the Noteholders. (b) This Agreement may also be amended from time to time by the Seller, the Servicer, the Agent and the Issuer with the prior written consent of the Indenture Trustee, the Collateral Agent, the Backup Servicer and the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) and with the consent of a Note Majority (which consent of any Holder of a Note given pursuant to this Section or pursuant to any other provision of this Agreement shall be conclusive and binding on such Holder and on all future Holders of such Note and of any Note issued upon the transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent is made upon the Note) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the 60 rights of the Holders of Notes; PROVIDED, HOWEVER, that subject to the express rights of the Security Insurer under the Related Documents, including its rights to agree to certain modifications of the Receivables pursuant to Section 2.2 and its rights to cause the Collateral Agent to liquidate the Collateral under the circumstances and subject to the provisions of Section 6.1 of the Security Agreement, no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions required to be made with respect to any Advance or the Advance Interest Rate, (b) amend any provisions of Section 3.6 in such a manner as to affect the priority of payment of interest, principal or premium to Noteholders, or (c) reduce the aforesaid percentage required to consent to any such amendment or any waiver hereunder, without the consent of the Holders of all Notes then outstanding. (c) Prior to the execution of any such amendment or consent, the Issuer shall furnish written notification of the substance of such amendment or consent to each Rating Agency. (d) Promptly after the execution of any such amendment or consent, the Issuer shall furnish written notification of the substance of such amendment or consent to the Indenture Trustee. (e) It shall not be necessary for the consent of Noteholders pursuant to Section 6.1(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Noteholders provided for in this Agreement) and of evidencing the authorization of the execution thereof by Noteholders shall be subject to such reasonable requirements as the Issuer or Indenture Trustee, as applicable, may prescribe, including the establishment of record dates. (f) Prior to the execution of any amendment to this Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement, in addition to the Opinion of Counsel referred to in Section 6.2(i). The Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects the Indenture Trustee's own rights, duties or immunities under this Agreement or otherwise. Section 6.2. PROTECTION OF TITLE TO SELLER CONVEYED PROPERTY. (a) The Servicer and the Seller shall execute and file such financing statements and cause to be executed and filed such continuation and other statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer and the Collateral Agent in the Seller Conveyed Property and in the proceeds thereof. The 61 Servicer shall deliver (or cause to be delivered) to the Issuer, the Agent, the Collateral Agent and the Security Insurer file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. (b) Neither the Seller nor the Servicer shall change its name, identity or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed by the Seller in accordance with paragraph (a) above seriously misleading within the meaning of Section 9-402(7) of the UCC, unless it shall have given the Issuer, the Agent, the Indenture Trustee and the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) at least 60 days prior written notice thereof, and shall promptly file appropriate amendments to all previously filed financing statements and continuation statements; provided that no prior notice need be given for a change in the name of the Seller from Olympic Receivables Finance Corp. to Arcadia Receivables Finance Corp. or the Servicer from Olympic Financial Ltd. to Arcadia Financial Ltd. (c) Each of the Seller and the Servicer shall give the Issuer, the Agent, the Indenture Trustee and the Security Insurer at least 60 days' prior written notice of any relocation of its principal executive office if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement. The Servicer shall at all times maintain each office from which it services Receivables and its principal executive office within the United States of America. (d) The Servicer shall maintain accounts and records as to each Receivable accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status of such Receivable, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on (or with respect to) each Receivable and the amounts from time to time deposited in the Collection Account in respect of such Receivable. (e) The Servicer shall maintain its computer systems so that, from and after the time of sale under the Repurchase Agreement of the Receivables to the Issuer, the Servicer's master computer records (including any backup archives) that refer to any Receivable indicate clearly that the Receivable is owned by the Issuer. Indication of the Issuer's ownership of a Receivable shall be deleted from or modified on the Servicer's computer systems when, and only when, the Receivable has been paid in full or repurchased by the Seller or Servicer. (f) If at any time the Seller or the Servicer proposes to sell, grant a security interest in, or otherwise transfer any interest in automotive receivables to any prospective purchaser, 62 lender or other transferee, the Servicer shall give to such prospective purchaser, lender or other transferee computer tapes, records or printouts (including any restored from backup archives) that, if they refer in any manner whatsoever to any Receivable, indicate clearly that such Receivable has been sold and is owned by the Issuer unless such Receivable has been paid in full or repurchased by the Seller or Servicer. (g) The Servicer shall permit the Issuer, the Agent, the Indenture Trustee, the Collateral Agent, the Backup Servicer, the Security Insurer and their respective agents, at any time to inspect, audit and make copies of and abstracts from the Servicer's records regarding any Receivables or any other portion of the Seller Conveyed Property. (h) The Servicer shall furnish to the Issuer, the Agent, the Indenture Trustee, the Collateral Agent, the Backup Servicer and the Security Insurer at any time upon request a list of all Receivables then held by the Issuer, together with a reconciliation of such list to the Receivables Schedule and to each of the Servicer's Certificates furnished before such request indicating repurchase of Receivables from the Issuer. Upon request, the Servicer shall furnish a copy of any list to the Seller. The Indenture Trustee shall hold any such list and Receivables Schedule for examination by interested parties during normal business hours at the Corporate Trust Office upon reasonable notice by such Persons of their desire to conduct an examination. (i) The Seller and the Servicer shall deliver to the Issuer, the Agent, the Indenture Trustee, the Collateral Agent and the Security Insurer simultaneously with the execution and delivery of this Agreement and of each amendment thereto and upon the occurrence of the events giving rise to an obligation to give notice pursuant to Section 6.2(b) or (c), an Opinion of Counsel either (a) stating that, in the opinion of such counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Issuer and the Collateral Agent in the Receivables and the other Seller Conveyed Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (b) stating that, in the opinion of such counsel, no such action is necessary to preserve and protect such interest. (j) The Servicer shall deliver to the Issuer, the Agent, the Indenture Trustee, the Collateral Agent and the Security Insurer, within 90 days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the Closing Date, an Opinion of Counsel, either (a) stating that, in the opinion of such counsel, all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Issuer and the Collateral Agent in the Receivables, and reciting the details of such filings or 63 referring to prior Opinions of Counsel in which such details are given, or (b) stating that, in the opinion of such counsel, no action shall be necessary to preserve and protect such interest. Section 6.3. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 6.4. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Notes or the respective rights of the Holders thereof. Section 6.5. ASSIGNMENT. Notwithstanding anything to the contrary contained in this Agreement, except as provided in Section 4.2 or Section 5.2 (and as provided in the provisions of the Agreement concerning the resignation of the Servicer and the Backup Servicer), this Agreement may not be assigned by the Seller or the Servicer without the prior written consent of the Issuer, the Agent, the Indenture Trustee, the Collateral Agent and the Security Insurer (or, if an Insurer Default shall have occurred and be continuing, the Agent, the Issuer and the Indenture Trustee) Section 6.6. THIRD-PARTY BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. The Security Insurer and the Noteholders and their successors and assigns shall be third-party beneficiaries to the provisions of this Agreement, and shall be entitled to rely upon and directly to enforce such provisions of this Agreement so long as, with respect to the Security Insurer, no Insurer Default shall have occurred and be continuing. Except as set forth in this Section 6.6, nothing in this Agreement, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement. Except as expressly stated otherwise herein or in the Related Documents, any right of the Security Insurer to direct, appoint, consent to, approve of, or take any action under this Agreement, shall be a right exercised by the Security Insurer in its sole and absolute discretion. Section 6.7. DISCLAIMER BY SECURITY INSURER. The Security Insurer may disclaim any of its rights and powers under this Agreement (but not its duties and obligations under the Note Policy) upon delivery of a written notice to the Issuer, the Agent and the Indenture Trustee. 64 Section 6.8. COUNTERPARTS. For the purpose of facilitating its execution and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterpart shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 6.9. NOTICES. All demands, notices and communications under this Agreement shall be in writing, personally delivered, sent by facsimile transmission or mailed by certified mail-return receipt requested, and shall be deemed to have been duly given upon receipt (a) in the case of OFL, the Seller or the Servicer, at the following address: Olympic Receivables Finance Corp., 7825 Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435, Attention: Treasurer, with copies to: Olympic Financial Ltd., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435, Attention: Treasurer, (b) in the case of the Issuer, Arcadia Receivables Conduit Corp., 7825 Washington Avenue South, Suite 900, Minneapolis, Minnesota 55439-2435, Attention: Treasurer, (c) in the case of the Indenture Trustee and, for so long as the Indenture Trustee is the Backup Servicer or the Collateral Agent, at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust Services - Asset-Backed Administration, (d) in the case of each Rating Agency, 99 Church Street, New York, New York 10007 (for Moody's) and 26 Broadway, New York, New York 10004 (for Standard & Poor's), Attention: Asset-Backed Surveillance), (e) in the case of the Security Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention: Surveillance Department, Telex No.: (2) 688-3103, Confirmation: (2) 826-0100, Telecopy Nos.: (2) 339-3518, (2) 339-3529, (in each case in which notice or other communication to Financial Security refers to an Event of Default, a claim on the Note Policy or with respect to which failure on the part of Financial Security to respond shall be deemed to constitute consent or acceptance, then a copy of such notice or other communication should also be sent to the attention of the General Counsel and the Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"), and (f) in the case of the Agent, Bank of America National Trust and Savings Association, Asset Securitization Group, 231 South LaSalle Street, Chicago, Illinois, 60697, Attention: Mr. Albert Yoshimura or at such other address as shall be designated by any such party in a written notice to the other parties. Any notice required or permitted to be mailed to a Noteholder shall be given by first class mail, postage prepaid, at the address of such Holder as shown in the Note Register, and any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Noteholder receives such notice. Section 6.10. INTEREST RATE PROTECTION. The parties hereto agree, upon the request of the Seller, to amend this Agreement to allow for the substitution of interest rate caps or other interest rate hedges acceptable to the Security Insurer and 65 the Agent for the obligation of the Seller to make deposits to the Collection Account or retain amounts on deposit in the Collection Account in respect of the WAC Deficiency Amount, but only to the extent that such interest rate caps or other interest rate hedges would have the same economic effect as the WAC Deficiency Amount, as determined by the Security Insurer and the Agent in their reasonable discretion. 66 IN WITNESS WHEREOF, the Issuer, the Agent, the Seller, OFL, the Servicer and the Backup Servicer have caused this Servicing Agreement to be duly executed by their respective officers as of the day and year first above written. ISSUER: ARCADIA RECEIVABLES CONDUIT CORP. By /s/ [illegible] ____________________________ Name: Title: SELLER: OLYMPIC RECEIVABLES FINANCE CORP. By /s/ [illegible] ____________________________ Name: Title: OLYMPIC FINANCIAL LTD., in its individual capacity and as Servicer By /s/ [illegible] ____________________________ Name: Title: BACKUP SERVICER: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Backup Servicer By /s/ Thomas A. Wraabsted ____________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By By /s/ Erik G. Ford ____________________________ Name: ERIK G. FORD Title: as Attorney-in-Fact Acknowledged and Accepted: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity but as Indenture Trustee and Collateral Agent, By /s/ Thomas A. Wraabsted ____________________________ Name: Title: [Signature Page to Servicing Agreement] SERVICING POLICIES AND PROCEDURES NOTE: APPLICABLE TIME PERIODS WILL VARY BY STATE. I. PAST DUE PAYMENT COLLECTIONS A. Past due payment notices are generated and sent on the 9th and 15th day of delinquency. B. The collection officer will make at least one phone call by day 10. C. The collection officer will write a personalized collection letter by day 15 and will have made at least two collection phone calls. D. The collection officer will make at least two (2) more phone calls and write at least one (1) more letter between days 15 and 30. E. The collection officer will send a final demand letter on or about 31 days past due. The letter will allow 10 days to bring the account current. F. The collection officer will recommend either repossession, or some form of reasonable forbearance (e.g., one extension in exchange for a partial payment for cooperative debtors). All phone calls and correspondence will require a brief handwritten comment in the credit file. The date of each comment and the officer's initials will be documented. II. PAYMENT EXTENSIONS Extensions of monthly payments must be granted only after careful consideration and analysis. The extension is not to be used to mask delinquencies, but rather assist in the collection and correction of verifiable and legitimate customer problems. All extensions or modifications require the prior approval of the Branch Manager. In the absence of the Branch Manager, the Executive Vice President's or the President's approval is required. Possible qualifications for extensions to cooperative and trustworthy customers include: (a) Medical problems - verifiable; (b) Temporary work loss - verifiable; (c) Pending insurance claim - verifiable; or (d) Bankruptcy trustee cram down. III. REPOSSESSIONS Repossessions of the collateral is only to be pursued after exhausting all other collection efforts. Once the decision is made to attempt repossession, the following process is to be utilized: (a) Decision on repossession. (b) If the customer is cooperative, attempt repossession by Servicer personnel. If uncooperative or unable to locate, utilize a third party collection agency. (c) Once secured, complete an inventory of personal belongings and brief condition report on the vehicle. Return the property to the customer and obtain a signed statement of inventory receipt. (d) If the repossession is involuntary, notify the police department in the city where the repossession occurred. (e) Notify the originating dealership of repossession as soon as possible and request a refund of all rebateable dealer adds. (f) Send written notification to the customer regarding a 10-day notice to redeem the loan. (g) Decide on proper method of liquidation and plan for sale after the 10-day redemption period has expired. (h) If consignment, set 21-day maximum term with the dealership, after which time, if unsold, the vehicle is returned to the Servicer. If wholesale, contact the appropriate auction company to make arrangements for immediate sale. If private sale, place advertisements in the proper media and attempt to liquidate within one week. (i) After the collateral is liquidated, send the debtor a letter stating the amount of deficiency. Continued collection efforts will take the form of voluntary payments or involuntary payments via judgment, garnishment, and levy. IV. CHARGE OFFS It is the responsibility of the collection officer to diligently pursue any and all deficiencies which result from problem accounts. All avenues of potential collection will be pursued, ranging from cash settlements to amortized deficiency notes to judgment and garnishment. A complete list of all charge offs will be maintained. The list will be categorized into "active" and "dead" accounts. A brief action plan will be shown for each active account. Accounts will only be designated as "dead" with the recommendation of the collection officer and approval of the Executive Vice President. The "dead" designation will only be granted for those accounts which hold no potential for recovery (e.g., discharged Chapter 7). Active charge off action plans will be presented at least monthly to the Executive Vice President. Decisions regarding pursuit of legal action and incurring potential legal fees will need prior approval by the Executive Vice President. V. DEFICIENCY COLLECTIONS (a) Establish the exact amount of the deficiency, using the repossession worksheet. This includes all fees and per diem interest. (b) Attempt verbal and/or written negotiations with the debtor to settle the deficiency. (c) Send a certified letter to the debtor and cosigner(s) stating that we need $X by _____________, 19__ (7-10 days), or we will begin legal action. If no reasonable response is received move to (d). (d) Complete a General Claim Form. Send the form to [applicable local court]. (e) We should receive notification of the court's decision within one week. If we receive notice of judgment, it is possible that the debtor will pay the court and the court will then pay the Servicer. As this usually does not happen, proceed to exercise on the judgment as follows: (1) File both the Transcript of Judgment and the Affidavit of Identification of Judgment Debtor with [appropriate office]. (2) Order a Writ of Execution from [appropriate office]. (3) "Service" of the Writ of Execution is handled by the Sheriff or an Attorney. SERVICER'S CERTIFICATE Delivered by Olympic Financial Ltd. ("the Servicer"). In accordance with the terms of the Servicing Agreement, dated December 3, 1996, among Arcadia Receivables Conduit Corporation ("the Issuer"), Olympic Receivables Finance Corporation ("Seller"), Olympic Financial Ltd. in its individual capacity and as Servicer, Bank of America National Trust & Savings Association as Agent, and Norwest Bank Minnesota, National Association as Backup Servicer, Collateral Agent and Indenture Trustee, the Servicer hereby certifies that the following information is true and correct as of the close of business on INPUT SHEET (INPUTS ARE BLUE) Dates 1 Accounting Date: 2 Determination Date: 3 Distribution Date: 4 Number of Days in Accounting Date Month 30 5 Has an Amortization Period commenced (Y/N) N Rates 5 2-year Treasury 0.00% 6 30-day CP composite ratio 0.00% 7 Offshore Rate 0.00% 8 Weighted Average APR of Qualifying Receivables 0.00% 9 Basis Fee Percent 0.00% 10 Total Expense Percent 0.000% Auto Loan Information 11 Total Premier Receivables $0 12 Total Classic Receivables $0 13 Total Financed Repossessions $0 -- Aggregate Principal Balance $0 Less: Classic Receivables in excess of 65% of Total $0 Less: Financed Repossession in excess of 5% of Total $0 -- Total aggregate Principal Balance of Qual. Receivables $0 14 Amount on deposit in Collection Account $0 15 WAC Deficiency Deposit $0 Aging of Pool 16 Current $0 17 1-30 days past due $0 18 31-60 days past due $0 19 61-90 days past due $0 20 90+ days past due $0 -- Total (should equal aggregate Principal Balance) $0 21 Advance Principal Distribution Amount $0 Funding Data 22 Is the purchase of Notes funded with CP (Y/N) Y 23 Outstanding Principal Amount as of Accounting Date $0 24 Advance Interest Carryover Shortfall $0 25 Interest Related to Prepayments (Sec. 3 (e) of Repo Agmt) $0 26 Total Interest due on Distribution Date $0 Portfolio Performance Liquidated Receivables Calculation Those Receivables where: 27 (i) 91 days have elapsed since the Servicer repossessed the Financed Vehicle; $0 28 (ii) the Servicer has determined in good faith that all amounts it expects to recover have been received; $0 29 (iii) all or any portion of a Scheduled Payment shall have become more than 180 days delinquent $0 -- Total Liquidated Receivables $0 30 Total Collections for the Accounting Period $0 Required Distributions from the Distribution Amount, Pursuant to Section 3.6(a) of the Servicing Agreement: (i) Advance Interest Distributable Amount $0 (ii) Amount of Outstanding Monthly Advances for which the Servicer (or OFL) is entitled to be reimbursed and for which the Servicer (or OFL) has not been previously reimbursed $0 (iii) Accrued and unpaid fees and expenses, pro rata, to the extent Exhibit B Page 1 that such Person has not previously received such amounts from Servicer or OFL: Accrued and unpaid fees of the Indenture Trustee $0 Accrued and unpaid expenses of the Indenture Trustee $0 Accrued and unpaid fees of the Lockbox Bank $0 Accrued and unpaid fees of the Custodian $0 Accrued and unpaid fees of the Backup Servicer $0 Accrued and unpaid fees of the Collateral Agent $0 Transition expense of successor Servicer (not to exceed $50,000) $0 (iv) Basic Servicing Fee for the related Monthly Period $0 Supplemental Servicing Fees for the Related Monthly period $0 Amounts permitted to be paid to the Servicer pursuant to Section 3.2: $0 (v) With respect to an Amortization Period, so long as no Amortization Event has occurred, the Advance Principal Distributable Amount $0 (vi) Any amount owed and unpaid to the Security Insurer under the Insurer Agreement, whether or not OFL or any other Person is also obligated to pay such amounts $0 (vii) With respect to the Revolving Period, an amount required to be at least equal to the sum of: (1) the WAC Deficiency Amount, if any, and $0 (2) the amount necessary to be held in the Collection Account such that Collateral Test will be satisfied $0 (viii) With respect to an Amortization Period, so long as no Amortization Event has occurred, the amount equal to the remaining amount on deposit in the Collection Account necessary to pay down the unpaid principal amount of the Advances $0 (ix) To the Agent for distribution, any amounts owing to the Agent, the Noteholders or any Permitted Assignee under the Note Purchase Agreement, the Fee Letter or any other Related Document, to the extent not otherwise paid $0 Total Required Distribution (Note: item (vii) not distributed but retained in Collection Account) $0 (x) Any remaining portion of Distribution Amount to the Spread Account (Collection Account balance less Total Required Distribution note: Item (vii) not distributed but retained in the Collection Account) $0 CALCULATION OF WAC DEFICIENCY PERCENTAGE AND AMOUNT The excese, if any, of (A) 6.5% 6.500% plus the greatest of: (i) the sum of 2 year Treasury Yield + 0.60% + Basis Fee % + Total Expense % 0.600% (ii) (30 day CP composite x 1.2) +0.25% + Total Exp. % 0.250% (iii) (Offshore Rate x 1.2) + 0.375% + Total Exp. % NA -- Maximum: 0.600% over (B) the Weighted Average APR of Qualifying Receivables 0.000% ------ WAC Deficiency Percentage 7.100% multiplied by 1.7 12.070% multiplied by the Principal Balance of Qualifying Receivables $0 -- equals WAC Deficiency Amount $0 Calculation of Collateral Value of Premier Receivables 1) Total current principal outstanding on Qualifying Premier Receivables $0 2) multiplied by Premier Collateral Ratio 98.00% ------ Premier Collateral Value $0 Exhibit B Page 2 Calculation of Collateral Value of Classic Receivables 1) Total aggregate outstanding Principal Balance of Qualifying Receivables (net of 65% cap) $0 2) multiplied by Classic Collateral Ratio 98.00% ------ Classic Collateral Value $0 Calculation of Collateral Value of Financed Repossessed Receivables 1) Outstanding Principal Balance of Classic Receivables that are Financed Repossessions and are Qualifying Receivables $0 2) multiplied by Financed Repossessed Collateral Ratio 85.00% ------ Financed Repossessions Collateral Value $0 Total Collateral Value of all Qualifying Receivables $0 Collateral Test 1) Amount on deposit in Collection Account $0 Less WAC Deficiency Deposit $0 Plus the Total Collateral Value of all Qualifying Receivables $0 -- 2) Aggregate outstanding amount of all Advances (LESS THAN or EQUAL to above) $0 Is the Collateral Test satisfied? YES If Collateral Test not satisfied, amount required to be held in Collection Account $0 Determination of Advance Interest Distributable Amount 1) Outstanding Advance Balance $0 2) Total interest accrued during the immediately preceding Interest Period $0 3) Less the amount of any Interest that accrued during the preceding Interest Period on any Advance that was prepaid during such Interest Period pursuant to section 3(e) of the Repurchase Agreement and deposited into the Note Distribution account pursuant to Section 3.10(b) of the Servicing Agreement $0 -- Advance Monthly Interest Distributable Amount $0 4) Determination of the Advance Interest Distributable Amount a) Advance Monthly Interest Distributable Amount $0 b) Advance Interest Carryover Shortfall $0 -- Advance Interest Distributable Amount $0 Determination of the Basic Servicing Fee 1) Average Aggregate Principal Balance $0 multiplied by the Basic Servicing Fee Rate 1.00% multiplied by 30/360 8.33% ----- 0.00 IN WITNESS WHEREOF, I ________________________ executed this Certificate as of the date set forth above By: _____________________ Title: _____________________ Exhibit B EXHIBIT C INTERCOMPANY DISCRETIONARY ADVANCE AND SUBORDINATION AGREEMENT This Agreement is made as of this __ day of ______________, 199_ by and between Olympic Financial Ltd. ("OFL") and Olympic Receivables Finance Corp. ("ORFC"). RECITALS OFL and ORFC are parties to a Servicing Agreement dated as of December 3, 1996 (the "Servicing Agreement"), a Spread Account Agreement dated as of March 25, 1994, as amended and restated as of December 3, 1996 (the "Spread Account Agreement"), and an Insurance and Indemnity Agreement dated as of August 1, 1994 (the "Insurance Agreement"). ORFC is party to a Repurchase Agreement dated as of December 3, 1996 between ORFC and Arcadia Receivables Conduit Corp. (the "Repurchase Agreement"). Pursuant to the terms of the Servicing Agreement, ORFC has the right, but not the obligation, to make deposits into the Collection Account in order to satisfy the Collateral Test. Failure to satisfy the Collateral Test is an Event of Default under the Repurchase Agreement. In the event ORFC wishes to mace deposits to satisfy the Collateral Test and does not have sufficient funds to do so, ORFC may seek to borrow funds for that purpose from OFL. OFL is not obligated, and has not committed, to lend funds to ORFC. OFL and ORFC wish to enter into this Agreement to define the terms under which ORFC will repay any loans OFL elects to make to ORFC for the purpose of making deposits into the Collection Account to satisfy the Collateral Test. NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, OFL and ORFC agree as follows: 1. DEFINITIONS. All undefined capitalized terms used in this Agreement shall have the Leanings pen them in the Servicing Agreement, Spread Account Agreement and Insurance Agreement. 2. ADVANCES. ORFC may request from time to time that OFL lend ORFC such funds as may be required to satisfy the Collateral Test. OFL may, in its sole and absolute discretion, make a loan to ORFC (each such loan, an "Advance"). In no event will OFL make an Advance unless its officers believe at the time that there is a reasonable expectation of repayment. 3. REPAYMENT OF ADVANCES. 3.1 NOTE. The obligation of ORFC to repay the aggregate balance of the Advances shall be evidenced by a nonrecourse promissory note of ORFC dated the date hereof and substantially in the form of Exhibit A attached hereto (the "Note"). OFL shall, and is hereby authorized by ORFC to, endorse on the Note or on a schedule attached thereto an appropriate notation evidencing the date and amount of each Advance made by OFL and each principal payment and interest payment made by ORFC. Such notations will be presumed correct unless and until the contrary is established; PROVIDED, HOWEVER, that failure to make or any error in making any such notation will not limit or expand or otherwise affect the obligations of ORFC under this Agreement or the Note. 3.2 UNSECURED OBLIGATION. The obligation of ORFC to repay the Advances shall be unsecured. 3.3 SUBORDINATION; LIMITED RECOURSE. The obligation of ORFC to repay the Advances shall be subordinated in accordance with Section 4 and shall be recourse only to the extent of amounts released to ORFC pursuant to priority EIGHTH of Section 3.03(b) of the Spread Account Agreement after payment by ORFC of any amounts owing under, or in connection with, any of the Transaction Documents (as defined in the Spread Account Agreement) to any party, including any amounts payable to OFL other than in respect of the Advances (such amounts, net of all such payments, the "Available Funds"). 3.4 INTEREST. Subject to the provisions of Section 4 of this Agreement, ORFC agrees to pay interest on the principal balance of the Advances at a per annum rate equal to [IBOR (as defined in the Servicing Agreement) plus one percent] calculated on the basis of actual days elapsed and a year of 360 days. 3.5 PAYMENTS. Funds shall be allocated for application to the Note each month on the Distribution Date in an amount equal to the lesser of (a) Available Funds, if any, and (b) the principal balance outstanding on the Note plus accrued interest. Each payment shall be applied first to accrued interest and the balance to principal. 4. SUBORDINATION. The parties hereto hereby agree that, except as and to the extent hereinafter provided in this paragraph 4, the indebtedness of ORFC -2- evidenced by the Note, whether now outstanding or hereafter owing (the "Subordinated Debt"), is and shall be subordinate and subject in right of payment to the prior payment in full of all of OFRC's obligations under the Repurchase Agreement and the other Transaction Documents (the "Senior Debt"); provided, however, that so long as no Act of Insolvency or Event of Default (as defined in the Repurchase Agreement) shall have occurred and is continuing, ORFC can borrow, repay and reborrow the Subordinated Indebtedness, subject to the terms and conditions contained in this Agreement. In the event of any distribution of all or part of the assets of ORFC or the proceeds thereof to the creditors of ORFC, by reason of the liquidation, dissolution or winding up of ORFC, or any sale, receivership, insolvency or bankruptcy proceeding, then all payments or distributions of cash, securities or property which but for this paragraph would be payable upon the Subordinated Debt, shall instead be paid to the Collateral Agent for application on the Senior Debt, whether or not due, until the Senior Debt is paid in full. 5. NONPETITION COVENANT. OFL agrees that it will not commences or join with any other creditor of ORFC in commencing, against ORFC, any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or similar proceeding under any bankruptcy or similar law or assignment for the benefit of creditors or any marshalling of assets and liabilities. 6. MISCELLANEOUS. 6.1. AMENDMENTS. The provisions of this Agreement may be modified, amended, waived or terminated, only by a written document signed by both parties or, in the case of a waiver, signed by the party against which such waiver is being enforced, and, in each case, only with the prior written consent of the Rating Agencies. 6.2. NOTICES. Except as otherwise expressly provided herein, all notices and other communications hereunder will be in writing and will be delivered in person or by courier or mailed, registered or certified mail, postage prepaid and return address requested, to the parties at the following addresses: To ORFC: 7825 Washington Avenue Suite 410 Minneapolis, MN 554389-2044 Attn: Treasurer To OFL: 7825 Washington Avenue Suite 400 Minneapolis, MS 554389-2044 Attn: John A. Witham -3- or to such other address or to the attention of such other person as the recipient has previously designated to the sender in writing. All such notices and communications will be effective when delivered (if delivered personals or by courier) or received (in the case of telecommunications) or three days after they have been deposited in the mail (if sent by U.S. mail). 6.3. GOVERNING LAW. This Agreement and the Note, and all questions relating to their validity, interpretations, performance and enforcement, shall be governed and construed in accordance with the substantive laws of the State of Minnesota without regard to the principles of conflicts of law thereof. 6.4. ASSIGNMENT. This Agreement and the Note shall not be assigned or transferred by OFL to arm person other than a direct or indirect subsidiary of OFL. 6.5. RATING AGENCY COPIES. Upon the execution and delivery of this Agreement, OFL will deliver an executed copy of this Agreement and the executed Note to each Rating Agency. IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above. OLYMPIC FINANCIAL LTD. By: ----------------------------------- Its: ------------------------------- OLYMPIC RECEIVABLES FINANCE CORP. By: ----------------------------------- Its: ------------------------------- -4- EXHIBIT A SUBORDINATED REVOLVING CREDIT PROMISSORY NOTE Minneapolis, Minnesota ____________, 199_ FOR VALUE RECEIVED, Olympic Receivables Finance Corp. ("ORFC") promises to pay to the order of Olympic Financial Ltd. ("OFL") the principal amount of Advances, if any, made by OFL to ORFC in accordance with the terms of the Intercompany Discretionary Advance and Subordination Agreement of even date herewith (the "Agreement"), together with interest at the rate provided in the Agreement. This Note shall be payable at the times and in the amounts specified in the Agreement. Payment of the obligations of ORFC evidenced by this Note is subordinated on the terms of the Agreement and shall be recourse only to the extent provided in the Agreement. The terms of the Agreement are incorporated by reference herein with the same force and effect as if fully set forth herein. This Note shall be governed by and construed in accordance with the internal laws of the state of Minnesota. OLYMPIC RECEIVABLES FINANCE CORP. By ------------------------------------ Its --------------------------------- [COPY TO BE DELIVERED TO MOODY'S AND S&P IF AND WHEN EXECUTED] -5- EX-10.32 33 THIRD AMENDED & RESTAT STOCK PLEDGE AGREE 12/3/96 THIRD AMENDED AND RESTATED STOCK PLEDGE AGREEMENT THIS THIRD AMENDED AND RESTATED STOCK PLEDGE AGREEMENT dated as of December 3, 1996 (the "Pledge Agreement") among Olympic Financial Ltd., a Minnesota corporation (the "Pledgor"), as owner of all of the outstanding capital stock in (a) Olympic Receivables Finance Corp., a Delaware corporation ("ORFC"), (b) Olympic First GP Inc., a Delaware corporation ("First GP"), (c) Olympic Second GP Inc., a Delaware corporation ("Second GP", together with First GP, the "General Partners") and (d) Arcadia Receivables Conduit Corp., a Delaware corporation ("ARCC"), Financial Security Assurance Inc., a New York stock insurance company ("Financial Security") and Norwest Bank Minnesota, National Association, as collateral agent (the "Collateral Agent") on behalf of Financial Security. INTRODUCTORY STATEMENTS The Pledgor is the sole shareholder of each of ORFC, First GP, Second GP and ARCC (together, the "Pledged Entities"). The Pledgor and ORFC have previously entered into three Pooling and Servicing Agreements pursuant to which Olympic Automobiles Receivables Trust, 1993-A (the "Series 1993-A Trust"), Olympic Automobile Receivables Trust, 1993-B (the "Series 1993-B Trust") and Olympic Automobiles Receivables Trust, 1995-A (the "Series 1995-A Trust") were formed. Financial Security has issued a Series 1993-A Policy with respect to the Series 1993-A Trust, a Series 1993-B Policy with respect to the Series 1993-B Trust and a Series 1995-A Policy with respect to the Series 1995-A Trust. The Pledgor, ORFC, First GP, Second GP, Financial Security and Wilmington Trust Company, as Owner Trustee, have previously entered into thirteen Trust Agreements pursuant to which Olympic Automobile Receivables Trust, 1993-C (the "Series 1993-C Trust"), Olympic Automobile Receivables Trust, 1993-D (the "Series 1993-D Trust"), Olympic Automobile Receivables Trust, 1994-A (the "Series 1994-A Trust"), Olympic Automobile Receivables Trust, 1994-B (the "Series 1994-B Trust"), Olympic Automobile Receivables Trust, 1994-D (the "Series 1994-C Trust"), Olympic Automobile Receivables Trust, 1994-D (the "Series 1994-D Trust"), Olympic Automobile Receivables Trust, 1995-B (the "Series 1995-B Trust"), Olympic Automobile Receivables Trust, 1995-C (the "Series 1995-C Trust"), Olympic Automobile Receivables Trust, 1995-D (the "Series 1995-D Trust"), Olympic Automobile Receivables Trust, 1995-E (the "Series 1995-E Trust"), Olympic Automobile Receivables Trust, 1996-A (the "Series 1996-A Trust"), Olympic Automobile Receivables Trust, 1996-B (the "Series 1996-B Trust"), and Olympic Automobile Receivables Trust, 1996-C (the "Series 1996-C Trust") were formed. Financial Security has issued a Series 1993-C Certificate Policy and a Series 1993-C Note Policy with respect to the Series 1993-C Trust, a Series 1993-D Certificate Policy and a Series 1993-D Note Policy with respect to the Series 1993-D Trust, a Series 1994-A Certificate Policy and a Series 1994-A Note Policy with respect to the Series 1994-A Trust, a Series 1994-B Certificate Policy and a Series 1994-B Note Policy with respect to the Series 1994-B Trust, a Series 1994-C Certificate Policy and a Series 1994-C Note Policy with respect to the Series 1994-C Trust, a Series 1994-D Certificate Policy and a Series 1994-D Note Policy with respect to the Series 1994-D Trust, a Series 1995-B Certificate Policy and a Series 1995-B Note Policy with respect to the Series 1995-B Trust, a Series 1995-C Certificate Policy and a Series 1995-C Note Policy with respect to the Series 1995-C Trust, a Series 1995-D Certificate Policy and a Series 1995-D Note Policy with respect to the Series 1995-D Trust, a Series 1995-E Certificate Policy and a Series 1995-E Note Policy with respect to the Series 1995-E Trust, a Series 1996-A Certificate Policy and a Series 1996-A Note Policy with respect to the Series 1996-A Trust, a Series 1996-B Certificate Policy and a Series 1996-B Note Policy with respect to the Series 1996-B Trust, and a Series 1996-C Certificate Policy and a Series 1996-C Note Policy with respect to the Series 1996-C Trust. Contemporaneously herewith, ORFC has agreed to sell to ARCC from time to time all of its right, title and interest in and to certain motor vehicle retail installment sale contracts and other property, and ARCC is entering into an Indenture, dated as of November , 1996, between itself and [ ] (the "Indenture"), pursuant to which the Issuer is issuing certain notes (the "Warehousing Series"). Financial Security is contemporaneously herewith issuing a Warehousing Series Policy in respect of the Warehousing Notes. In addition to the foregoing, the Pledgor and ORFC may enter into one or more Pooling and Servicing Agreements or Trust Agreements and Sale and Servicing Agreements and Financial Security may issue additional policies (such policies together with the Series 1993-A Policy, Series 1993-B Policy, the Series 1993-C Certificate Policy, the Series 1993-C Note Policy, the Series 1993-D Certificate Policy, the Series 1993-D Note Policy, the Series 1994-A Certificate Policy, the Series 1994-A Note Policy, the Series 1994-B Certificate Policy, the Series 1994-B Note Policy, the Series 1994-C Certificate Policy, the Series 1994-C Note Policy, the Series 1994-D Certificate Policy, the Series 1994-D Note Policy, the Series 1995-A Policy, the Series 1995-B Certificate Policy, the Series 1995-B Note Policy, the Series 1995-C Certificate Policy, the Series 1995-C Note Policy, the Series 1995-D Certificate Policy, the Series 1995-D Note Policy, the 1995-E Certificate Policy, the 1995-E Note Policy, the 1996-A Certificate Policy, the 1996-A Note Policy, the Series 1996-B Certificate Policy, the 1996-B Note Policy, the Series 1996-C 2 Certificate Policy, the Series 1996-C Note Policy and the Warehousing Series Policy, the "Policies") with respect to certain guaranteed distributions and guaranteed payments on the corresponding additional series of certificates and notes (such series together with Series 1993-A, Series 1993-B, Series 1993-C, Series 1993-D, Series 1994-A, Series 1994-B, Series 1994-C, Series 1994-D, Series 1995-A, Series 1995-B, Series 1995-C, Series 1995-D, Series 1995-E, Series 1996-A, Series 1996-B, Series 1996-C and the Warehousing Series, the "Series"). To secure the Insurer Secured Obligations (as defined in the Spread Account Agreement referred to below) with respect to each Series the Pledgor has agreed to pledge its interest as sole shareholder of each of ORFC, First GP, Second GP and ARCC to the Collateral Agent on behalf of Financial Security, all such interests represented by the stock certificates listed on attached Schedule A (the "Pledged Shares"). In consideration of the premises and of the agreements herein contained, the Pledgor, Financial Security and the Collateral Agent agree as follows: Section 1. DEFINITIONS. Capitalized terms used but not otherwise defined in this Pledge Agreement shall have the meanings specified therefor in the Insurance and Indemnity Agreement dated as of August 17, 1993 among Financial Security, the Trust, the Pledgor, ORFC, First GP, Second GP and the Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of December 3, 1996, among the Pledgor, ORFC, Financial Security and Norwest Bank Minnesota, National Association, as Collateral Agent. Section 2. SECURITY INTEREST. As security for the full and complete performance of all the Insurer Secured Obligations with respect to each Series (the "Obligations"), the Pledgor hereby delivers, pledges and assigns to the Collateral Agent on behalf of Financial Security, and creates in the Collateral Agent on behalf of Financial Security, a first priority security interest in all of the Pledgor's right, title and interest in and to the Pledged Shares together with all of the Pledgor's rights and privileges with respect thereto, all proceeds, income and profits thereof and all property received in exchange thereof or in substitution therefor (the "Collateral"). Section 3. STOCK DIVIDENDS, OPTIONS, OR OTHER ADJUSTMENTS. Until the occurrence of the last Insurer Termination Date with respect to any Series, the Pledgor shall deliver, as Collateral, to the Collateral Agent, any and all additional shares of stock or any other property of any kind distributable on or by reason of the Collateral, whether in the form of or by way of stock dividends, warrants, total or partial liquidation, conversion, prepayments, redemptions or otherwise, with the sole exception of cash dividends or cash interest payments, as the case may be. If any additional shares of capital stock, instruments, or other property a security interest in which can only be perfected by possession by the Collateral Agent, which are distributable on or 3 by reason of the Collateral pledged hereunder, shall come into the possession or control of the Pledgor, the Pledgor shall forthwith transfer and deliver such property to the Collateral Agent, as Collateral hereunder. Section 4. DELIVERY OF SHARE CERTIFICATES; STOCK POWERS. Simultaneously with the delivery of this Pledge Agreement, the Pledgor is delivering to the Collateral Agent all instruments and stock certificates representing the Collateral, together with stock powers duly executed in blank by the Pledgor. The Pledgor shall promptly deliver to the Collateral Agent, or cause the relevant Pledged Entity or any other entity issuing the Collateral to deliver directly to the Collateral Agent, share certificates or other instruments representing any Collateral acquired or received after the date of this Pledge Agreement with a stock or bond power duly executed by the Pledgor. If at any time either the Collateral Agent or Financial Security notifies the Pledgor that it requires additional stock powers endorsed in blank, the Pledgor shall promptly execute in blank and deliver the requested power to the requesting party. Section 5. POWER OF ATTORNEY. The Pledgor hereby constitutes and irrevocably appoints the Collateral Agent and Financial Security, or either one acting alone, with full power of substitution and revocation, as the Pledgor's true and lawful attorney-in-fact, with the power, after the occurrence of a Stock Pledge Event (as defined in Section 11 hereof), to the full extent permitted by law, to affix to any certificates and documents representing the Collateral the stock or bond powers delivered with respect thereto, and to transfer or cause the transfer of the Collateral, or any part thereof, on the books of each Pledged Entity or other entity issuing such Collateral, to the name of the Collateral Agent or Financial Security or any nominee, and thereafter to exercise with respect to such Collateral, all the rights, powers and remedies of an owner. The power of attorney granted pursuant to this Pledge Agreement and all authority hereby conferred are granted and conferred solely to protect Financial Security's interest in the Collateral and shall not impose any duty upon the Collateral Agent or Financial Security to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest until the occurrence of the last Insurer Termination Date with respect to any Series. Section 6. INDUCING REPRESENTATIONS OF THE PLEDGOR. The Pledgor represents and warrants to Financial Security that: (a) The Pledged Shares are validly issued, fully paid for and non-assessable. (b) The Pledged Shares represent all of the issued and outstanding capital stock of each of ORFC, First GP, Second GP and ARCC. 4 (c) The Pledgor is the sole legal and beneficial owner of, and has good and marketable title to, the Pledged Shares, free and clear of all pledges, liens, security interests and other encumbrances other than the security interest created by this Pledge Agreement, and the Pledgor has the unqualified right and authority to execute and perform this Pledge Agreement. (d) No options, warrants or other agreements with respect to the Collateral are outstanding. (e) Any consent, approval or authorization of or designation or filing with any authority on the part of the Pledgor which is required in connection with the pledge and security interest granted under this Pledge Agreement has been obtained or effected. (f) Neither the execution and delivery of this Pledge Agreement by the Pledgor, the consummation of the transaction contemplated hereby nor the satisfaction of the terms and conditions of this Pledge Agreement: (i) conflicts with or results in any breach or violation of any provision of the articles of incorporation or bylaws of the Pledgor or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to the Pledgor or any of its properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over the Pledgor; (ii) conflicts with, constitutes a default (or an event which with the giving of notice or the passage of time, or both, would constitute a default) by the Pledgor under, or a breach of or contravenes any provision of, the Transaction Documents related to any Series, any loan agreement, mortgage, indenture or other agreement or instrument to which the Pledgor or any of its Subsidiaries is a party or by which it or any of their properties is or may be bound or affected; or (iii) results in or requires the creation of any Lien upon or in respect of any of the Pledgor's assets except the Lien created by this Pledge Agreement. (g) Upon the Pledgor's delivery of the Pledged Shares to the Collateral Agent, the Collateral Agent, on behalf of Financial Security, will have a valid, perfected first priority Lien on the Collateral, enforceable as such against all creditors of the Pledgor and against all Persons purporting to purchase any of the Collateral from the Pledgor. 5 Section 7. OBLIGATIONS OF THE PLEDGOR. The Pledgor further represents, warrants and covenants to Financial Security that: (a) The Pledgor will not sell, transfer or convey any interest in, or suffer or permit any Lien or encumbrance to be created upon or with respect to, any of the Collateral (other than as created under this Pledge Agreement) during the term of this Pledge Agreement. (b) The Pledgor will, at its own expense, at any time and from time to time at the request of the Collateral Agent or Financial Security, do, make, procure, execute and deliver all acts, things, writings, assurances and other documents as may be proposed by the Collateral Agent or Financial Security to preserve, establish, demonstrate or enforce the Collateral Agent's rights, interests and remedies as created by, provided in, or emanating from this Pledge Agreement. (c) The Pledgor will not take any action which would cause any of the Subsidiaries to issue any other capital stock, without the prior written consent of Financial Security so long as no Insurer Default has occurred and is continuing. Any such issuance shall be subject to this Pledge Agreement. (d) The Pledgor will not consent to any amendment of any Pledged Entity's Certificate of Incorporation without the prior written consent of Financial Security prior to an Insurer Default. Section 8. DIVIDENDS. (a) Pledgor agrees that it shall not cause ORFC to declare or make payment of (i) any dividend or other distribution on any shares of its capital stock, (ii) any payment on account of the purchase, redemption, retirement or acquisition of (x) any option, warrant or other right to acquire shares of its capital stock, unless (in each case) at the time of such declaration or payment (and after giving effect thereto) no amount payable by ORFC under any Transaction Document with respect to any Series is then due and owing but unpaid. (b) Pledgor agrees that it shall not cause First GP to declare or make payment of (i) any dividend or other distribution on any shares of its capital stock, (ii) any payment on account of the purchase, redemption, retirement or acquisition of (x) any option, warrant or other right to acquire shares of its capital stock, unless (in each case) at the time of such declaration or payment (and after giving effect thereto) the aggregate net worth of the two General Partners would be greater than the Minimum Net Worth (as defined in the Trust Agreement). (c) Pledgor agrees that it shall not cause Second GP to declare or make payment of (i) any dividend or other distribution on any shares of its capital stock, (ii) any payment on account of the purchase, redemption, retirement or acquisition 6 of (x) any option, warrant or other right to acquire shares of its capital stock, unless (in each case) at the time of such declaration or payment (and after giving effect thereto) the aggregate net worth of the two General Partners would be greater than the Minimum Net Worth (as defined in the Trust Agreement). (d) Pledgor agrees that it shall not cause ARCC to declare or make payment of (i) any dividend or other distribution on any shares of its capital stock, (ii) any payment on account of the purchase, redemption, retirement or acquisition of (x) any option, warrant or other right to acquire shares of its capital stock, unless (in each case) at the time of such declaration or payment (and after giving effect thereto) no amount payable by ARCC under any Transaction Document with respect to the Warehousing Series is then due and owing but unpaid. Section 9. VOTING PROXY. The Pledgor hereby grants to the Collateral Agent on behalf of Financial Security an irrevocable proxy to vote the Pledged Shares with respect to the matters contained in Articles III, IX, XIV, XVI and XVII of each Pledged Entity's certificate of incorporation, which proxy shall continue, so long as no Insurer Default has occurred and is continuing, until the occurrence of the last Insurer Termination Date with respect to any Series. The Pledgor represents and warrants that it has directed each Pledged Entity, in accordance with Section 217 of the Delaware Corporation Law, to reflect the Collateral Agent's right to vote the Collateral, on behalf of Financial Security, on such Pledged Entity's books. Upon the request of the Collateral Agent or Financial Security, the Pledgor shall deliver to the Collateral Agent such further evidence of such irrevocable proxy or such further irrevocable proxy to vote the Collateral as the Collateral Agent or Financial Security may request. The Collateral Agent shall exercise all such rights to vote the Collateral granted hereunder in accordance with the written directions given by Financial Security. Section 10. RIGHTS OF THE COLLATERAL AGENT AND FINANCIAL SECURITY. At any time and without notice, Financial Security, so long as no Insurer Default with respect to any Series has occurred and is continuing, may, upon providing the Collateral Agent with the full amount necessary to carry out such direction, direct the Collateral Agent to discharge any taxes, liens, security interests or other encumbrances levied or placed on the Collateral, pay for the maintenance and preservation of the Collateral, or pay for insurance on the Collateral; the amount of such payments, plus any and all fees, costs and expenses of the Collateral Agent and Financial Security, (including attorneys' fees and disbursements) in connection therewith, shall, at the option of the Collateral Agent or Financial Security, as appropriate, be reimbursed by the Pledgor on demand, with interest thereon from the date paid at the Late Payment Rate. The Collateral Agent shall have no duty or obligation to follow any direction provided in this Section 10, 7 unless Financial Security has provided the Collateral Agent with the full amount necessary to carry out such direction. Section 11. REMEDIES UPON EVENT OF DEFAULT. (a) Upon the occurrence of an "Event of Default" under and as defined in any Insurance Agreement relating to any Series currently outstanding or issued hereafter, which "Event of Default" is not defined as a "Portfolio Performance Event of Default" in such Insurance Agreement (a "Stock Pledge Event") Financial Security, so long as no Insurer Default with respect to any Series has occurred and is continuing, may, directly or through the Collateral Agent, without notice to the Pledgor: (i) cause the Collateral to be transferred to the Collateral Agent's name or Financial Security's name or in the name of nominees of either and thereafter exercise as to such Collateral all of the rights, powers and remedies of an owner; (ii) collect by legal proceedings or otherwise all dividends, interest, principal payments, capital distributions and other sums now or hereafter payable on account of the Collateral, and hold all such sums as part of the Collateral, or apply such sums to the payment of the Obligations in such manner and order as Financial Security may decide, in its sole discretion; (iii) enter into any extension, subordination, reorganization, deposit, merger, or consolidation agreement, or any other agreement relating to or affecting the Collateral, and in connection therewith deposit or surrender control of the Collateral thereunder, and accept other property in exchange therefor and hold and apply such property or money so received in accordance with the provisions hereof; and (b) In addition to all the rights and remedies of a secured party under the Uniform Commercial Code, Financial Security, shall have the right, and without demand of performance or other demand, advertisement or notice of any kind, except as specified below, to or upon the Pledgor or any other person (all and each of which demands, advertisements and/or notices are hereby expressly waived to the extent permitted by law), to proceed forthwith, or direct the Collateral Agent to proceed forthwith, to collect, receive, appropriate and realize upon the Collateral, or any part thereof and to proceed forthwith to sell, assign, give an option or options to purchase, contract to sell, or otherwise dispose of and deliver the Collateral or any part thereof in one or more parcels in accordance with applicable securities laws and in a manner designed to ensure that such sale will not result in a distribution of the Pledged Shares in violation of Section 5 of the Securities Act of 1933, as amended and on such terms (including, without limitation, a requirement that any purchaser of all or any part of the Collateral shall be required to purchase any securities constituting the Collateral solely for investment and without any intention to make a distribution thereof) as Financial Security, in 8 its sole and absolute discretion deems appropriate without any liability for any loss due to decrease in the market value of the Collateral during the period held. If any notification of intended disposition of the Collateral is required by law, such notification shall be deemed reasonable and properly given if mailed to the Pledgor, postage prepaid, at least five (5) days before any such disposition at the address indicated by their respective signatures. Any disposition of the Collateral or any part thereof may be for cash or on credit or for future delivery without assumption of any credit risk, with the right of Financial Security to purchase all or any part of the Collateral so sold at any such sale or sales, public or private, free of any equity or right of redemption in the Pledgor, which right of equity is, to the extent permitted by applicable law, hereby expressly waived or released by the Pledgor. (c) Financial Security, in its sole discretion, may elect to obtain or cause the Collateral Agent to obtain the advice of any independent nationally known investment banking firm, which is a member firm of the New York Stock Exchange, with respect to the method and manner of sale or other disposition of any of the Collateral, the best price reasonably obtainable therefor, the consideration of cash and/or credit terms, or any other details concerning such sale or disposition; costs and expenses of obtaining such advice shall be for the account of Financial Security. Financial Security, in its sole discretion, may elect to sell or cause the Collateral Agent to sell, the Collateral on any credit terms which it deems reasonable; the out-of-pocket costs and expenses of such sale shall be for the account of Financial Security. The sale of any of the Collateral on credit terms shall not relieve the Pledgor of its liability with respect to the Obligations. All payments received by the Collateral Agent, if any, and Financial Security in respect of any sale of the Collateral shall be applied to the Obligations as and when such payments are received. (d) The Pledgor recognizes that it may not be feasible to effect a public sale of all or a part of the Collateral by reason of certain prohibitions contained in the Securities Act, and that it may be necessary to sell privately to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account, for investment and not with a view for the distribution or resale thereof. The Pledgor agrees that private sales may be at prices and other terms less favorable to the seller than if the Collateral were sold at public sale, and that neither the Collateral Agent nor Financial Security has any obligation to delay the sale of any Collateral for the period of time necessary to permit the registration of the Collateral for public sale under the Securities Act. The Pledgor agrees that a private sale or sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner. 9 (e) If any consent, approval or authorization of any state, municipal or other governmental department, agency or authority shall be necessary to effectuate any sale or other disposition of the Collateral, or any partial disposition of the Collateral, the Pledgor will execute all such applications and other instruments as may be required in connection with securing any such consent, approval or authorization, and will otherwise use its best efforts to secure the same. (f) Upon any sale or other disposition, the Collateral Agent acting at the direction of Financial Security or Financial Security shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold or disposed of. Each purchaser at any such sale or other disposition (including Financial Security) shall hold the Collateral free from any claim or right of whatever kind, including any equity or right of redemption of the Pledgor. The Pledgor specifically waives, to the extent permitted by applicable law, all rights of redemption, stay or appraisal which it may have under any rule of law or statute now existing or hereafter adopted. (g) Neither the Collateral Agent nor Financial Security shall be obligated to make any sale or other disposition of the Collateral, unless the terms thereof shall be satisfactory to Financial Security. The Collateral Agent or Financial Security may, without notice or publication, adjourn any private or public sale, and, upon five (5) days' prior notice to the Pledgor, hold such sale at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral, on credit or future delivery, the Collateral so sold may be retained by the Collateral Agent or Financial Security until the selling price is paid by the purchaser thereof, but neither the Collateral Agent nor Financial Security shall incur any liability in case of the failure of such purchaser to take up and pay for the property so sold and, in case of any such failure, such property may again be sold as herein provided. (h) All of the rights and remedies granted to the Collateral Agent and Financial Security, including but not limited to the foregoing, shall be cumulative and not exclusive and shall be enforceable alternatively, successively or concurrently as Financial Security may deem expedient. Section 12. LIMITATION ON LIABILITY. (a) Neither the Collateral Agent nor Financial Security, nor any of their respective directors, officers or employees, shall be liable to the Pledgor or to any Pledged Entity for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, except that the Collateral Agent and Financial Security shall each be liable for its own gross negligence, bad faith or willful misconduct. 10 (b) The Collateral Agent shall incur no liability to Financial Security except for the Collateral Agent's negligence or willful misconduct in carrying out its duties hereunder. (c) The Collateral Agent shall be protected and shall incur no liability to any party in relying upon the accuracy, acting in reliance upon the contents, and assuming the genuineness of any notice, demand, certificate, signature, instrument or other document the Collateral Agent reasonably believes to be genuine and to have been duly executed by the appropriate signatory, and (absent actual knowledge to the contrary) the Collateral Agent shall not be required to make any independent investigation with respect thereto. The Collateral Agent shall at all times be free independently to establish to its reasonable satisfaction, but shall have no duty to independently verify, the existence or nonexistence of facts that are a condition to the exercise or enforcement of any right or remedy hereunder. (d) The Collateral Agent may consult with qualified counsel, financial advisors or accountants and shall not be liable for any action taken or omitted to be taken by it hereunder in good faith and in accordance with the written advice of such counsel, financial advisors or accountants. (e) The Collateral Agent shall not be under any obligation to exercise any of the remedial rights or powers vested in it by this Pledge Agreement unless it shall have received reasonable security or indemnity satisfactory to the Collateral Agent against the costs, expenses and liabilities which it might incur. Section 13. PERFORMANCE OF DUTIES. The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Pledge Agreement and the Spread Account Agreement, subject to the provisions of this Pledge Agreement and the Spread Account Agreement, or as directed by Financial Security in accordance with this Pledge Agreement or the Spread Account Agreement. Section 14. APPOINTMENT AND POWERS. Subject to the terms and conditions hereof, Financial Security appoints Norwest Bank Minnesota, National Association as its Collateral Agent and Norwest Bank Minnesota, National Association accepts such appointment and agrees to act as Collateral Agent on behalf of Financial Security to maintain custody and possession of the Collateral and to perform the other duties of the Collateral Agent in accordance with the provisions of this Pledge Agreement. The Collateral Agent shall, subject to the other terms and provisions of this Pledge Agreement, act upon and in compliance with Financial Security's written instructions delivered pursuant to this Pledge Agreement as promptly as possible following receipt of such written instructions. Receipt of written instructions shall not be a condition to the exercise by the Collateral Agent of its express duties hereunder, unless this Pledge Agreement provides that the 11 Collateral Agent is permitted to act only following receipt of such instructions. Section 15. SUCCESSOR COLLATERAL AGENT. (a) MERGER. Any Person into which the Collateral Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business and assets as a whole or substantially as a whole, or any Person resulting from any such conversion, merger, consolidation, sale or transfer to which the Collateral Agent is a party, shall (provided it is otherwise qualified to serve as the Collateral Agent hereunder) be and become a successor Collateral Agent hereunder and be vested with all of the title to and interest in the Collateral and all of the trusts, powers, immunities, privileges and other matters as was its predecessor without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. (b) RESIGNATION. The Collateral Agent and any successor Collateral Agent may resign only (i) with the prior written consent of Financial Security or (ii) if the Collateral Agent is unable to perform its duties hereunder as a matter of law as evidenced by an opinion of counsel acceptable to Financial Security. Upon the occurrence of (i) or (ii) above, the Collateral Agent shall give notice of its resignation by registered or certified mail to the Pledgor (with a copy to Financial Security). Any resignation by the Collateral Agent shall take effect only upon the date which is the later of (x) the effective date of the appointment by Financial Security of a successor Collateral Agent and the acceptance in writing by such successor Collateral Agent of such appointment and (y) the date on which the Collateral is delivered to the successor Collateral Agent. Notwithstanding the preceding sentence, if by the contemplated date of resignation specified in the written notice of resignation delivered (as described above) no successor Collateral Agent has been appointed Collateral Agent or becomes the Collateral Agent pursuant to subsection (d) below, the resigning Collateral Agent may petition a court of competent jurisdiction for the appointment of a successor. (c) REMOVAL. The Collateral Agent may be removed by Financial Security at any time, with or without cause, by an instrument or concurrent instruments in writing delivered to the Collateral Agent. Any removal pursuant to the provisions of this subsection (c) shall take effect only upon the later to occur of (i) the effective date of the appointment of a successor Collateral Agent and the acceptance in writing by such successor Collateral Agent of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof and (ii) the date on which the Collateral is delivered to the successor Collateral Agent. In the event of any removal by Financial Security pursuant to this Section 15(c), the Pledgor shall pay the 12 Collateral Agent its fees and expenses then due and owing in accordance with Section 19 hereof. (d) APPOINTMENT OF AND ACCEPTANCE BY SUCCESSOR. (i) Financial Security shall have the sole right to appoint each successor Collateral Agent. Every successor Collateral Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to Financial Security and the Pledgor an instrument in writing accepting such appointment hereunder and the relevant predecessor shall execute, acknowledge and deliver such other documents and instruments as will effectuate the delivery of all Collateral to the successor Collateral Agent, whereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, duties and obligations of its predecessor. Such predecessor shall, nevertheless, on the written request of Financial Security, execute and deliver an instrument transferring to such successor all the estates, properties, rights and powers of such predecessor hereunder. (ii) Every predecessor Collateral Agent shall assign, transfer and deliver all Collateral held by it as Collateral Agent hereunder to its successor as Collateral Agent. (iii) Should any instrument in writing from the Pledgor or any Pledged Entity be reasonably required by a successor Collateral Agent for more fully and certainly vesting in such successor the estates, properties, rights, powers, duties and obligations vested or intended to be vested hereunder in the Collateral Agent, any and all such written instruments shall, at the request of the successor Collateral Agent, be forthwith executed, acknowledged and delivered by the Pledgor or such Subsidiary, as the case may be. (iv) The designation of any successor Collateral Agent and the instrument or instruments removing any Collateral Agent and appointing a successor hereunder, together with all other instruments provided for herein, shall be maintained with the records relating to the Collateral and, to the extent required by applicable law, filed or recorded by the successor Collateral Agent in each place where such filing or recording is necessary to effect the transfer of the Collateral to the successor Collateral Agent or to protect and preserve the security interests granted hereunder. Section 16. INDEMNIFICATION. The Pledgor shall indemnify the Collateral Agent, its directors, officers, employees and its agents for, and hold the Collateral Agent, its directors, officers, employees and its agents harmless against, any loss, liability or expense (including the costs and expenses of defending against any claim of liability) arising out of or in connection with the Collateral Agent's acting as Collateral Agent hereunder, except such loss, liability or expense as shall result from the 13 negligence, bad faith or willful misconduct of the Collateral Agent or its directors, officers, employees or agents. The obligation of the Pledgor under this Section shall survive the termination of this Agreement and the resignation or removal of the Collateral Agent. Section 17. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT. The Collateral Agent represents and warrants to Pledgor and to Financial Security as follows: (a) DUE ORGANIZATION. The Collateral Agent is a national banking association, duly organized, validly existing and in good standing under the laws of the United States and is duly authorized and licensed under applicable law to conduct its business as presently conducted. (b) CORPORATE POWER. The Collateral Agent has all requisite right, power and authority to execute and deliver this Pledge Agreement and the other Documents to which it is a party and to perform all of its duties as Collateral Agent hereunder and thereunder. (c) DUE AUTHORIZATION. The execution and delivery by the Collateral Agent of this Pledge Agreement and the other Transaction Documents to which it is a party, and the performance by the Collateral Agent of its duties hereunder and thereunder, have been duly authorized by all necessary corporate proceedings and no further approvals or filings, including any governmental approvals, are required for the valid execution and delivery by the Collateral Agent, or the performance by the Collateral Agent, of this Pledge Agreement and such other Transaction Documents. (d) VALID AND BINDING AGREEMENTS. The Collateral Agent has duly executed and delivered this Pledge Agreement and each other Transaction Document to which it is a party, and each of this Pledge Agreement and each such other Transaction Document constitutes the legal, valid and binding obligation of the Collateral Agent, enforceable against the Collateral Agent in accordance with its terms, except as (i) such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. Section 18. TERMINATION. This Pledge Agreement shall continue in full force and effect until the date which is the last Insurer Termination Date with respect to any Series. Subject to any sale or other disposition by the Collateral Agent or Financial Security of the Collateral or any part thereof pursuant to and in accordance with this Pledge Agreement, the Collateral shall be returned to the Pledgor on the date which is the last Insurer Termination Date with respect to any Series. 14 Section 19. COMPENSATION AND REIMBURSEMENT. The Pledgor agrees for the benefit of Financial Security and as part of the Insurer Secured Obligations (a) to pay to the Collateral Agent, from time to time, reasonable compensation for all services rendered by it hereunder; and (b) to reimburse the Collateral Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Collateral Agent in accordance with any provision of, or carrying out its duties and obligations under, this Agreement (including the reasonable compensation and fees and the expenses and disbursements of its agents, any independent certified public accountants and independent counsel), except any expense, disbursement or advances as may be attributable to negligence, bad faith or willful misconduct on the part of the Collateral Agent. Section 20. FORECLOSURE EXPENSES OF THE COLLATERAL AGENT AND FINANCIAL SECURITY. All expenses (including reasonable fees and disbursements of counsel) incurred by the Collateral Agent or Financial Security in connection with any actual or attempted sale, exchange of, or any enforcement, collection, compromise or settlement respecting, this Agreement or the Collateral, or any other action taken by Financial Security hereunder whether directly or as attorney-in-fact pursuant to a power of attorney or other authorization herein conferred, for the purpose of satisfaction of the Obligations shall be deemed an Obligation for all purposes of this Pledge Agreement, and an Insurer Secured Obligation for all purposes of the Spread Account Agreement, and the Collateral Agent (with the consent of Financial Security) and Financial Security may apply the Collateral to payment of or reimbursement of itself for such liability. Section 21. NOTICES. Any notice or other communication given hereunder shall be in writing and shall be sent by registered mail, postage prepaid, or personally delivered or telecopied to the recipient as follows: (a) To the Collateral Agent: Norwest Bank Minnesota, National Association Norwest Center Sixth Street & Marquette Avenue Minneapolis, MN 55479-0069 Attention: Corporate Trust Department Telecopy No.: (612) 667-9825 (b) To Financial Security: Financial Security Assurance Inc. 350 Park Avenue New York, New York 10022 Attention: Surveillance Department Confirmation: (212) 826-0100 Telecopy Nos.: (212) 339-3518 (212) 339-3529 15 (c) To the Pledgor: Olympic Financial Ltd. Olympic Place 7825 Washington Avenue South Minneapolis, MN 55439-2444 Attention: Treasurer Confirmation: (612) 944-4880 Telecopy No: (612) 942-6730 Section 22. GENERAL PROVISIONS. (a) The Collateral Agent on behalf of Financial Security and its successors and assigns shall have no obligation in respect of the Collateral, except to use reasonable care in holding the Collateral and to hold and dispose of the same in accordance with the terms of this Pledge Agreement. (b) The failure of the Collateral Agent or Financial Security to exercise, or delay in exercising, any right, power or remedy hereunder, shall not operate as a waiver thereof, nor shall any single or partial exercise by the Collateral Agent or Financial Security of any right, power or remedy hereunder preclude any other or future exercise thereof, or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided by law or any other agreement. (c) The representations, covenants and agreements of the Pledgor herein contained shall survive the date hereof. (d) Neither this Pledge Agreement nor the provisions hereof can be changed, waived or terminated orally. This Pledge Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, legal representatives and assigns. If any provision of this Pledge Agreement shall be invalid or unenforceable in any respect or in any jurisdiction, the remaining provisions shall remain in full force and effect and shall be enforceable to the maximum extent permitted by law. (e) This Pledge Agreement may be executed in counterparts. (f) EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR THEREUNDER. EACH OF THE PARTIES HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS 16 AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY, BY AMONG OTHER THINGS, THIS WAIVER. (g) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (h) The Pledgor irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York, any court in the State of New York located in the city and county of New York, and any appellate court from any thereof, in any action, suit or proceeding brought against it and related to or in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereunder or thereunder or for recognition or enforcement of any judgment and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such suit or action or proceeding may be heard or determined in such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. To the extent permitted by applicable law, each of the parties hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that is not personally subject to the jurisdiction of such courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or any of the other Transaction Documents or the subject matter hereof or thereof may not be litigated in or by such courts. The Pledgor irrevocably appoints and designates CT Corporation System, whose address is 1633 Broadway, New York, New York 10019, as its true and lawful attorney and duly authorized agent for acceptance of service of legal process. The Pledgor agrees that service of such process upon such Person shall constitute personal service of such process upon it. Nothing contained in this Agreement shall limit or affect the rights of any party hereto to serve process in any other manner permitted by law or to start legal proceedings related to any of the Transaction Documents against the Pledgor or its respective property in the courts of any jurisdiction. 17 SCHEDULE A PLEDGED SHARES Certificate No. 1, 100 Shares of the Common Stock of Olympic Receivables Finance Corp. Certificate No. 1, 100 Shares of the Common Stock of Olympic First GP Inc. Certificate No. 1, 100 Shares of the Common Stock of Olympic Second GP Inc. Certificate No. 1, 100 Shares of the Common Stock of ARCC (i) the Collateral Agent, by the execution hereof, acknowledges receipt of the Pledged Shares on behalf of Financial Security. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Pledge Agreement on the date first above written. OLYMPIC FINANCIAL LTD. By: [Illegible] ---------------------------------- Name: Title: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Collateral Agent By: ---------------------------------- Name: Title: FINANCIAL SECURITY ASSURANCE INC. By: --------------------------------- Name: Title: (i) The Collateral Agent, by the execution hereof, acknowledges receipt of the Pledged Shares on behalf of Financial Security. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Pledge Agreement on the date first above written. OLYMPIC FINANCIAL LTD. By:________________________________ Name: Title: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Collateral Agent By: [Illegible] ________________________________ Name: Title: FINANCIAL SECURITY ASSURANCE, INC. By:________________________________ Name: Title: IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. OLYMPIC AUTOMOBILE RECEIVABLES WAREHOUSE TRUST, as Seller By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By:_________________________________ Name: Title: OLYMPIC FINANCIAL LTD. By:__________________________________ Name: Title: Treasurer DELAWARE FUNDING CORPORATION, as Purchaser By: Morgan Guaranty Trust Company of New York, as attorney-in-fact for Delaware Funding Corporation By: RICHARD A. BURKE Name: Richard A. Burke Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK as Administrative Agent By: RICHARD A. BURKE Name: Richard A. Burke Title: Vice President PLEASE SEE RESTRICTIVE LEGEND ON REVERSE SIDE HEREOF INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE NUMBER SHARES 1 100 ARCADIA RECEIVABLES CONDUIT CORP. This Certifies that OLYMPIC FINANCIAL LTD. is the owner and registered holder of ONE HUNDRED (100) Shares of fully paid and nonassessable Common Stock, $.01 par value, of ARCADIA RECEIVABLES CONDUIT CORP. transferable only on the books of the corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. IN WITNESS WHEREOF, the said corporation has caused this certificate to be signed by its duly authorized officers and to be sealed with the seal of the corporation. this 2ND day of December, 1996 [Illegible] [Illegible] _____________________________ __________________________________ Secretary President SEAL The shares represented by this certificate have not been registered or qualified under the Securities Act of 1933, as amended, or any state securities laws. Such shares of stock may not be sold, transferred or otherwise disposed of without either (i) an opinion of counsel satisfactory to the corporation that such transfer may lawfully be made without registration or qualification under the federal Securities Act of 1933, as amended, and all applicable state securities laws; or (ii) such registration or qualification. For Value Received _________ hereby sell, assign and transfer unto __________________________________________________________________ ___________________________________________________________ Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint _________________________________________________________ Attorney to transfer the said shares on the Books of the within named Corporation with full power of substitution in the premises. Dated ___________________, 19 ____________________________________ IN PRESENCE OF ____________________________________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. 4B-Stock Power For Value Received, Olympic Financial Ltd. does hereby transfer unto ____________________________________, One hunded (100) shares of the common stock, $.01 par value, of Arcadia Receivables Conduit Corp., a Delaware corporation, standing in the name on the books of the corporation and represented by Stock Certificate Number _________________ and does hereby irrevocably constitute and appoint its attorney-in-fact to transfer the said stock on the books of the corporation with full power of substitution in the premises. OLYMPIC FINANCIAL LTD. Dated:_____________________ By: [Illegible] ______________________________ Its:______________________________ EX-10.33 34 SECURITY AGREE 12/3/96 REGISTRANT, ORFC, ARCC EXECUTION COPY - -------------------------------------------------------------------------------- SECURITY AGREEMENT among OLYMPIC FINANCIAL LTD., OLYMPIC RECEIVABLES FINANCE CORP., ARCADIA RECEIVABLES CONDUIT CORP., FINANCIAL SECURITY ASSURANCE INC., BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Indenture Trustee and as Collateral Agent Dated as of December 3, 1996 - -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS Section 1.1. Defined Terms................................................. 2 Section 1.2. Rules of Interpretation....................................... 4 ARTICLE II THE COLLATERAL Section 2.1. Grant of Security Interest by the Issuer...................... 4 Section 2.2. No Transfer of Duties......................................... 5 Section 2.3. Termination and Release of Rights............................. 5 ARTICLE III THE COLLATERAL AGENT Section 3.1. Appointment and Powers........................................ 7 Section 3.2. Performance of Duties......................................... 7 Section 3.3. Limitation on Liability....................................... 7 Section 3.4. Reliance upon Documents....................................... 8 Section 3.5. Successor Collateral Agent.................................... 8 Section 3.6. Indemnification............................................... 10 Section 3.7. Compensation and Reimbursement................................ 10 Section 3.8. Representations and Warranties of the Collateral Agent.............................................. 11 Section 3.9. Waiver of Setoffs............................................. 11 Section 3.10. Control by the Controlling Party.............................. 12 ARTICLE IV COVENANTS OF THE ISSUER Section 4.1. Preservation of Collateral.................................... 12 Section 4.2. Notices....................................................... 12 Section 4.3. Waiver of Stay or Extension Laws; Marshalling of Assets......................................... 12 Section 4.4. Noninterference, Etc.......................................... 13 Section 4.5. Issuer Changes................................................ 13 i ARTICLE V CONTROLLING PARTY; INTERCREDITOR PROVISIONS Section 5.1. Appointment of Controlling Party.............................. 14 Section 5.2. Controlling Party's Authority................................. 14 Section 5.3. Rights of Secured Parties..................................... 15 Section 5.4. Degree of Care................................................ 15 ARTICLE VI REMEDIES UPON DEFAULT Section 6.1. Remedies upon a Default....................................... 16 Section 6.2. Restoration of Rights and Remedies............................ 18 Section 6.3. No Remedy Exclusive........................................... 18 ARTICLE VII MISCELLANEOUS Section 7.1. Further Assurances............................................ 19 Section 7.2. Waiver........................................................ 19 Section 7.3. Amendments; Waivers........................................... 19 Section 7.4. Severability.................................................. 19 Section 7.5. Nonpetition Covenant.......................................... 20 Section 7.6. Notices....................................................... 20 Section 7.7. Term of this Security Agreement............................... 22 Section 7.8. Assignments; Third-Party Rights; Reinsurance.................. 23 Section 7.9. Consent of Controlling Party.................................. 23 Section 7.10. Trial by Jury Waived.......................................... 23 Section 7.11. Governing Law................................................. 24 Section 7.12. Consents to Jurisdiction...................................... 24 Section 7.13. Limitation of Liability....................................... 25 Section 7.14. Determination of Adverse Effect............................... 25 Section 7.15. Counterparts.................................................. 25 Section 7.16. Headings...................................................... 25 Section 7.17. Limited Recourse.............................................. 25 Section 7.18. Respective Rights of the Issuer and the Secured Parties in the Collateral............................. 25 ii SECURITY AGREEMENT SECURITY AGREEMENT, dated as of December 3, 1996, by and among OLYMPIC FINANCIAL LTD., a Minnesota corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), ARCADIA RECEIVABLES CONDUIT CORP., a Delaware corporation (the "Issuer"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company (the "Security Insurer"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Agent") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as collateral agent (in such capacity, the "Collateral Agent") and as indenture trustee (in such capacity, the "Indenture Trustee"). W I T N E S E T H - - - - - - - - - WHEREAS, pursuant to the Receivables Purchase Agreement and Assignment dated as of December 3, 1996 (the "Purchase Agreement") between OFL and the Seller, OFL is selling to the Seller from time to time all of its right, title and interest in and to certain Receivables and the other property specified therein; and WHEREAS, pursuant to the Repurchase Agreement dated as of December 3, 1996 (the "Repurchase Agreement"), between the Seller and the Issuer, the Seller is selling to the Issuer from time to time all of its right, title and interest in and to certain Receivables and the other property specified therein; and WHEREAS, pursuant to the Indenture dated as of December 3, 1996 (the "Indenture"), between the Issuer and the Indenture Trustee, the Issuer is issuing from time to time its Floating Rate Automobile Receivables-Backed Notes (the "Notes"); and WHEREAS, the Seller has requested that the Security Insurer issue the Note Policy to the Indenture Trustee to guarantee payment of the Scheduled Payments (as defined in such Note Policy) on each Distribution Date in respect of the Notes; NOW THEREFORE, in order to secure the performance of the Secured Obligations and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1. DEFINED TERMS. Terms defined in the Servicing Agreement (including by way of reference to other documents), unless otherwise defined herein, shall have such defined meanings when used herein, and the following terms shall have such following meanings: "AUTHORIZED OFFICER" shall mean, (i) with respect to Financial Security, the Chairman of the Board, the President, the Chief Executive Officer, Chief Operating Officer, or any Managing Director of Financial Security, (ii) with respect to the Indenture Trustee or the Collateral Agent, any Vice President or Trust Officer thereof, (iii) with respect to any of OFL, the Seller or the Issuer, the President, any Vice President or the Treasurer thereof. "COLLATERAL" shall have the meaning assigned to such term in Section 2.1(a) hereof. "COLLATERAL AGENT" shall mean, initially, Norwest Bank Minnesota, National Association, in its capacity as Collateral Agent on behalf of the Secured Parties, including its successors in interest, until a successor Person shall have become the Collateral Agent pursuant to Section 3.1, and thereafter "Collateral Agent" shall mean such successor Person. "CONTROLLING PARTY" shall mean at any time the Person designated as the Controlling Party at such time pursuant to Section 5.1. "FINAL TERMINATION DATE" shall mean the date that is the later of (i) the Insurer Termination Date and (ii) the Trustee Termination Date. "INSURER SECURED OBLIGATIONS" shall mean all amounts and obligations that may at any time be owed or required to be performed to or on behalf of the Security Insurer (or any agents, accountants or attorneys for the Security Insurer), including the Security Insurer as third party beneficiary, under the Insurance Agreement or under any other Transaction Document, regardless of whether such amounts are owed or performance is due now or in the future, whether liquidated or unliquidated, contingent or non-contingent. "INSURER TERMINATION DATE" shall mean the date that is the latest of (i) the date of the expiration of the Note Policy, (ii) the date on which the Security Insurer shall have received payment and performance in full of all Insurer Secured Obligations and (iii) the latest date on which any payment referred to in clause (ii) above could be avoided as a preference under the United States Bankruptcy Code or any other similar 2 federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, as specified in an Opinion of Counsel delivered to the Collateral Agent. "NON-CONTROLLING PARTY" shall mean at any time a Secured Party that is not the Controlling Party at such time. "OPINION OF COUNSEL" shall mean a written opinion of counsel acceptable, as to form, substance and issuing counsel, to the Controlling Party. "PROCEEDING" means any suit in equity, action at law or other judicial or administrative proceeding. "PURCHASE DATE" shall have the meaning assigned to such term in the Repurchase Agreement. "RECEIVABLES SCHEDULE" shall have the meaning assigned to such term in the Repurchase Agreement. "SECURED OBLIGATIONS" shall mean the Insurer Secured Obligations and the Trustee Secured Obligations. "SECURED PARTIES" shall mean each of the Indenture Trustee, in respect of the Trustee Secured Obligations, and the Security Insurer, in respect of the Insurer Secured Obligations. "SECURITY AGREEMENT" shall mean this Security Agreement, as the same may from time to time be amended, supplemented, waived or modified. "SERVICING AGREEMENT" shall mean the Servicing Agreement dated as of December 3, 1996 among the Issuer, the Seller, Olympic Financial Ltd., in its individual capacity and as Servicer, Bank of America National Trust and Savings Association, as Agent, and Norwest Bank Minnesota, National Association, as Backup Servicer, Collateral Agent and Indenture Trustee. "TRANSACTION DOCUMENTS" shall mean the Indenture, this Security Agreement, the Repurchase Agreement, the Servicing Agreement, the Note Purchase Agreement, the Purchase Agreement and any Assignment Agreements (but only with respect to the Collateral), the Spread Account Agreement, the Insurance Agreement, the Custodian Agreement and the Lockbox Agreement. "TRUSTEE SECURED OBLIGATIONS" shall mean all amounts and obligations that the Issuer may at any time owe or be required to perform to or for the benefit of the Indenture Trustee or the Noteholders under the Indenture. "TRUSTEE TERMINATION DATE" shall mean the date on which the Indenture Trustee shall have received on behalf of the Noteholders payment and performance in full of all Trustee Secured Obligations. 3 "UNIFORM COMMERCIAL CODE" or "UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial Code, or any successor statute, or any comparable law, as the same may from time to time be amended, supplemented or otherwise modified and in effect. Section 1.2. RULES OF INTERPRETATION. The terms "hereof," "herein" or "hereunder," unless otherwise modified by more specific reference, shall refer to this Security Agreement in its entirety. Unless otherwise indicated in context, the terms "Article" or "Section" shall refer to an Article or Section of this Security Agreement. The definition of a term shall include the singular, the plural, the past, the present, the future, the active and the passive forms of such terms. ARTICLE II THE COLLATERAL Section 2.1. GRANT OF SECURITY INTEREST BY THE ISSUER. (a) The Issuer hereby grants to the Collateral Agent at the Closing Date and on each Purchase Date, on behalf of and for the benefit of the Secured Parties to secure the performance of the respective Secured Obligations, a security interest in all of the Issuer's right, title and interest, whether now owned or hereafter acquired, in and to all accounts, contract rights, general intangibles, chattel paper, instruments, documents, money, deposit accounts, certificates of deposit, goods, letters of credit, advices of credit and authenticated securities consisting of, arising from or relating to any of the following property: (i) the Receivables; (ii) the Other Conveyed Property related thereto; (iii) the rights of the Seller under the Purchase Agreement and each Assignment Agreement assigned to the Issuer pursuant to the Repurchase Agreement, including the right to cause OFL to repurchase Receivables from Seller under certain circumstances; (iv) all amounts required to be deposited, or deposited, or delivered to the Collateral Agent for deposit, to the Collection Account by the Seller in respect of the WAC Deficiency Amount or the Collateral Test; (v) all funds on deposit from time to time in the Secured Accounts, and in all investments and proceeds thereof (including all income thereon); (vi) the Servicing Agreement and the Repurchase Agreement; and (vii) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any and all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivables, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in 4 the proceeds of any of the foregoing (collectively, the "Collateral"). The Collateral Agent, for the benefit of the Indenture Trustee on behalf of the Holders of the Notes and for the benefit of the Security Insurer acknowledges such grant of a security interest. (b) In order to effectuate the provisions and purposes of this Security Agreement, including for the purpose of perfecting the security interests granted hereunder, the Issuer represents and warrants that it has, prior to the execution of this Security Agreement, executed and filed an appropriate UCC-1 financing statement in Minnesota sufficient to ensure that the Collateral Agent, as agent for the Secured Parties, has a first priority perfected security interest in all of the Collateral that can be perfected by the filing of a financing statement. Section 2.2. NO TRANSFER OF DUTIES. The security interests granted hereby are granted as security only and shall not (i) transfer or in any way affect or modify, or relieve the Issuer from, any obligation to perform or satisfy any term, covenant, condition or agreement to be performed or satisfied by the Issuer under or in connection with this Security Agreement or any other Transaction Document to which it is a party or (ii) impose any obligation on any of the Secured Parties or the Collateral Agent to perform or observe any such term, covenant, condition or agreement or impose any liability on any of the Secured Parties or the Collateral Agent for any act or omission on its part relative thereto or for any breach of any representation or warranty on its part contained therein or made in connection therewith except, in each case, to the extent specifically provided herein and in the other Transaction Documents. Section 2.3. TERMINATION AND RELEASE OF RIGHTS. (a) On the Insurer Termination Date, the rights, remedies, powers, duties, authority and obligations conferred upon the Security Insurer pursuant to this Security Agreement in respect of the Collateral shall terminate and be of no further force and effect and all rights, remedies, powers, duties, authority and obligations of the Security Insurer with respect to the Collateral shall be automatically released; PROVIDED, that any indemnity provided to or by the Security Insurer herein shall survive such Insurer Termination Date. If the Security Insurer is acting as Controlling Party on the Insurer Termination Date, the Security Insurer agrees, at the expense of OFL, to execute and deliver such instruments as the successor Controlling Party may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on the Security Insurer and any Person claiming by, through or under the Security Insurer. 5 (b) On the Trustee Termination Date, the rights, remedies, powers, duties, authority and obligations, if any, conferred upon the Indenture Trustee pursuant to this Security Agreement in respect of the Collateral shall terminate and be of no further force and effect and all such rights, remedies, powers, duties, authority and obligations of the Indenture Trustee with respect to such Collateral shall be automatically released; PROVIDED, that any indemnity provided to the Indenture Trustee herein shall survive such Trustee Termination Date. If the Indenture Trustee is acting as Controlling Party on the related Trustee Termination Date, the Indenture Trustee agrees, at the expense of OFL, to execute and deliver such instruments as OFL may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on the Indenture Trustee. (c) On the Final Termination Date, the rights, remedies, powers, duties, authority and obligations conferred upon the Collateral Agent and each Secured Party pursuant to this Security Agreement shall terminate and be of no further force and effect and all rights, remedies, powers, duties, authority and obligations of the Collateral Agent and each Secured Party with respect to the Collateral shall be automatically released. On the Final Termination Date, the Collateral Agent and each Secured Party agrees, at the expense of OFL, to execute such instruments of release, in recordable form if necessary, in favor of the Seller or OFL as the Seller or OFL may reasonably request, to deliver any Collateral in its possession to the Issuer, and to otherwise release the lien of this Security Agreement and release and deliver to the Issuer the Collateral. (d) To the extent required of the Issuer and its assignees by the terms of any Transaction Document and permitted by the terms hereof, each of the Collateral Agent and the Controlling Party shall, and otherwise upon the prior written instructions of an Authorized Officer of the Controlling Party, the Collateral Agent shall, at the expense of OFL take (in each case) such steps as may be necessary, or as the Issuer, in a manner consistent with the Transaction Documents, may reasonably request, to release the interests of the Secured Parties in the Collateral, including but not limited to redelivering and reassigning to the Issuer any releases necessary to permit the Issuer to release its interest in the Collateral in accordance with the terms thereof and of the Repurchase Agreement. ARTICLE III THE COLLATERAL AGENT Section 3.1. APPOINTMENT AND POWERS. Subject to the terms and conditions hereof, each of the Secured Parties hereby appoints Norwest Bank Minnesota, National Association as the Collateral Agent, and Norwest Bank Minnesota, National Association hereby accepts such appointment and agrees to act as 6 Collateral Agent with respect to the Collateral for the Secured Parties, to maintain custody and possession of the Collateral (except as otherwise provided hereunder and under the Custodian Agreement) and to perform the other duties of the Collateral Agent in accordance with the provisions of this Security Agreement. Each Secured Party hereby authorizes the Collateral Agent to take such action on its behalf, and to exercise such rights, remedies, powers and privileges hereunder and under the other Transaction Documents, as the Controlling Party may direct and as are specifically authorized to be exercised by the Collateral Agent by the terms hereof or by the terms of any Transaction Document, together with such actions, rights, remedies, powers and privileges as are reasonably incidental thereto. The Collateral Agent shall act upon and in compliance with the written instructions of the Controlling Party delivered pursuant to this Security Agreement promptly following receipt of such written instructions; PROVIDED, that the Collateral Agent shall not act in accordance with any instructions (i) which are not authorized by, or are in violation of the provisions of, this Security Agreement or any Transaction Document, (ii) which are in violation of any applicable law, rule or regulation or (iii) for which the Collateral Agent has not received reasonable indemnity. Receipt of such instructions shall not be a condition to the exercise by the Collateral Agent of its express duties hereunder or under any Transaction Document, except where this Security Agreement provides that the Collateral Agent is permitted to act only following and in accordance with such instructions. Section 3.2. PERFORMANCE OF DUTIES. The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Security Agreement and the other Transaction Documents to which the Collateral Agent is a party or as directed by the Controlling Party in accordance with this Security Agreement. The Collateral Agent shall not be required to take any discretionary actions hereunder except at the written direction and with the indemnification of the Controlling Party. Section 3.3. LIMITATION ON LIABILITY. Neither the Collateral Agent nor any of its directors, officers or employees, shall be liable for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, except that the Collateral Agent shall be liable for its negligence, bad faith or willful misconduct; nor shall the Collateral Agent be responsible for the validity, effectiveness, value, sufficiency or enforceability against the Issuer, the Seller or OFL of this Security Agreement or any of the Collateral (or any part thereof). Notwithstanding any term or provision of this Security Agreement, the Collateral Agent shall incur no liability to the Seller, OFL, the Issuer or the Secured Parties for any action taken or omitted by the Collateral Agent in connection with the Collateral, except for the negligence or willful misconduct on the part of the Collateral Agent, and shall incur no liability to the Seller, OFL, the Issuer or the Secured Parties except for negligence or willful misconduct in carrying out its duties. Subject to Section 3.4, the Collateral Agent shall be protected 7 and shall incur no liability to any such party in relying upon the genuineness of any notice, demand, certificate, signature, instrument or other document reasonably believed by the Collateral Agent to be genuine and to have been duly executed by the appropriate signatory, and (absent actual knowledge to the contrary) the Collateral Agent shall not be required to make any independent investigation with respect thereto. The Collateral Agent shall at all times be free independently to establish to its reasonable satisfaction, but shall have no duty to independently verify, the existence or nonexistence of facts that are a condition to the exercise or enforcement of any right or remedy hereunder or under any of the Transaction Documents. The Collateral Agent may consult with counsel, and shall not be liable for any action taken or omitted to be taken by it hereunder in good faith and in accordance with the written advice of such counsel. The Collateral Agent shall not be under any obligation to exercise any of the remedial rights or powers vested in it by this Security Agreement or to follow any direction from the Controlling Party unless it shall have received reasonable security or indemnity satisfactory to the Collateral Agent against the costs, expenses and liabilities which might be incurred by it. Section 3.4. RELIANCE UPON DOCUMENTS. In the absence of bad faith or negligence on its part, the Collateral Agent shall be entitled to rely on any communication, instrument, paper or other document reasonably believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons and shall have no liability in acting, or omitting to act, where such action or omission to act is in reasonable reliance upon any statement or opinion contained in any such document or instrument. Section 3.5. SUCCESSOR COLLATERAL AGENT. (a) MERGER. Any Person into which the Collateral Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business and assets as a whole or substantially as a whole, or any Person resulting from any such conversion, merger, consolidation, sale or transfer to which the Collateral Agent is a party, shall (provided it is otherwise qualified to serve as the Collateral Agent hereunder) be and become a successor Collateral Agent hereunder and be vested with all of the title to and interest in the Collateral and all of the trusts, powers, discretions, immunities, privileges and other matters as was its predecessor without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding, except to the extent, if any, that any such action is necessary to perfect, or continue the perfection of, the security interest of the Secured Parties in the Collateral. 8 (b) RESIGNATION. The Collateral Agent and any successor Collateral Agent may resign upon not less than 60 days' prior written notice of such resignation by registered or certified mail to the other Secured Parties and the Seller; PROVIDED, that such resignation shall take effect only upon the date that is the latest of (i) the effective date of the appointment of a successor Collateral Agent and the acceptance in writing by such successor Collateral Agent of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof and (ii) delivery of the Collateral to such successor to be held in accordance with the procedures specified in this Agreement and the Custodian Agreement. Notwithstanding the preceding sentence, if by the contemplated date of resignation specified in the written notice of resignation delivered as described above no successor Collateral Agent or temporary successor Collateral Agent has been appointed Collateral Agent or become the Collateral Agent pursuant to subsection (d) hereof, the resigning Collateral Agent may petition a court of competent jurisdiction in New York, New York for the appointment of a successor. (c) REMOVAL. The Collateral Agent may be removed by the Controlling Party at any time, with or without cause, by an instrument or concurrent instruments in writing delivered to the Collateral Agent, the other Secured Parties and the Seller. A temporary successor may be removed at any time to allow a successor Collateral Agent to be appointed pursuant to subsection (d) below. Any removal pursuant to the provisions of this subsection (c) shall take effect only upon the date that is the latest of (i) the effective date of the appointment of a successor Collateral Agent and the acceptance in writing by such successor Collateral Agent of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof, (ii) delivery of the Collateral to such successor to be held in accordance with the procedures specified in the Servicing Agreement and (iii) receipt by the Controlling Party of an Opinion of Counsel to the effect described in Section 4.5. (d) ACCEPTANCE BY SUCCESSOR. The Controlling Party shall have the sole right to appoint each successor Collateral Agent. Every temporary or permanent successor Collateral Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to each Secured Party and the Seller an instrument in writing accepting such appointment hereunder, and the relevant predecessor shall execute, acknowledge and deliver such other documents and instruments as will effectuate the delivery of all Collateral to the successor Collateral Agent to be held in accordance with the procedures specified in the Servicing Agreement, whereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, duties and obligations of its predecessor. Such predecessor shall, nevertheless, on the written request of any Secured Party or the Seller, execute and deliver an instrument transferring to such 9 successor all the estates, properties, rights and powers of such predecessor hereunder. In the event that any instrument in writing from the Seller or a Secured Party is reasonably required by a successor Collateral Agent to more fully and certainly vest in such successor the estates, properties, rights, powers, duties and obligations vested or intended to be vested hereunder in the Collateral Agent, any and all such written instruments shall, at the request of the temporary or permanent successor Collateral Agent, be forthwith executed, acknowledged and delivered by the Seller or such Secured Party. The designation of any successor Collateral Agent and the instrument or instruments removing any Collateral Agent and appointing a successor hereunder, together with all other instruments provided for herein, shall be maintained with the records relating to the Collateral and, to the extent required by applicable law, filed or recorded by the successor Collateral Agent in each place where such filing or recording is necessary to effect the transfer of the Collateral to the successor Collateral Agent or to protect or continue the perfection of the security interests granted hereunder. Section 3.6. INDEMNIFICATION. OFL shall indemnify the Collateral Agent, its directors, officers, employees and agents for, and hold the Collateral Agent, its directors, officers, employees and agents harmless against, any loss, liability or expense (including the costs and expenses of defending against any claim of liability) arising out of or in connection with the Collateral Agent's acting as Collateral Agent hereunder, except such loss, liability or expense as shall result from the negligence, bad faith or willful misconduct of the Collateral Agent or its officers or agents. The obligation of OFL under this Section shall survive the termination of this Agreement and the resignation or removal of the Collateral Agent. The Collateral Agent covenants not to assert any Lien or to take any other action in respect of the Collateral to enforce its rights to indemnification hereunder until the Final Termination Date. Section 3.7. COMPENSATION AND REIMBURSEMENT. The Seller agrees for the benefit of the Secured Parties and as part of the Secured Obligations (a) to pay to the Collateral Agent, from time to time, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a collateral trustee); and (b) to reimburse the Collateral Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Collateral Agent in accordance with any provision of, or carrying out its duties and obligations under, this Security Agreement (including the reasonable compensation and fees and the expenses and disbursements of its agents, any independent certified public accountants and independent counsel), except any expense, disbursement or advances as may be attributable to negligence, bad faith or willful misconduct on the part of the Collateral Agent. 10 Section 3.8. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT. The Collateral Agent represents and warrants to the Seller and to each Secured Party as follows: (a) DUE ORGANIZATION. The Collateral Agent is a national banking association, duly organized, validly existing and in good standing under the laws of the United States and is duly authorized and licensed under applicable law to conduct its business as presently conducted. (b) CORPORATE POWER. The Collateral Agent has all requisite right, power and authority to execute and deliver this Security Agreement and to perform all of its duties as Collateral Agent hereunder. (c) DUE AUTHORIZATION. The execution and delivery by the Collateral Agent of this Security Agreement and the other Transaction Documents to which it is a party, and the performance by the Collateral Agent of its duties hereunder and thereunder, have been duly authorized by all necessary corporate proceedings and no further approvals or filings, including any governmental approvals, are required for the valid execution and delivery by the Collateral Agent, or the performance by the Collateral Agent, of this Security Agreement and such other Transaction Documents. (d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly executed and delivered this Security Agreement and each other Transaction Document to which it is a party, and each of this Security Agreement and each such other Transaction Document constitutes the legal, valid and binding obligation of the Collateral Agent, enforceable against the Collateral Agent in accordance with its terms, except as (i) such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) the availability of equitable remedies may be limited by equitable principles of general applicability. Section 3.9. WAIVER OF SETOFFS. The Collateral Agent hereby expressly waives any and all rights of setoff that the Collateral Agent may otherwise at any time have under applicable law with respect to any Secured Account and agrees that amounts in the Secured Accounts shall at all times be held and applied solely in accordance with the provisions hereof and of the Transaction Documents. Section 3.10. CONTROL BY THE CONTROLLING PARTY. The Collateral Agent shall comply with notices and instructions given by the Issuer only if accompanied by the written consent of the Controlling Party, except that if any Amortization Event shall have occurred and be continuing, the Collateral Agent shall act upon and comply with notices and instructions given by the Controlling Party alone in the place and stead of the Issuer. 11 ARTICLE IV COVENANTS OF THE ISSUER Section 4.1. PRESERVATION OF COLLATERAL. Subject to the rights, powers and authorities granted to the Collateral Agent and the Controlling Party in this Security Agreement, the Issuer shall take such action as is necessary and proper with respect to the Collateral in order to preserve and maintain such Collateral and to cause (subject to the rights of the Secured Parties) the Collateral Agent to perform its obligations with respect to such Collateral as provided herein. The Issuer will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such instruments of transfer or take such other steps or actions as may be necessary, or required by the Controlling Party, to perfect the security interests granted hereunder in the Collateral, to ensure that such security interests rank prior to all other Liens and to preserve the priority of such security interests and the validity and enforceability thereof. Upon any delivery or substitution of Collateral, the Issuer shall be obligated to execute such documents and perform such actions as are necessary to create in the Collateral Agent for the benefit of the Secured Parties a valid first Lien on, and valid and perfected first priority security interest in, the Collateral so delivered and to deliver such Collateral to the Collateral Agent, free and clear of any other Lien, together with satisfactory assurances thereof, and to pay any reasonable costs incurred by any of the Secured Parties or the Collateral Agent (including its agents) or otherwise in connection with such delivery. Section 4.2. NOTICES. In the event that the Issuer acquires knowledge of the occurrence and continuance of any Amortization Event or of any event of default or like event, howsoever described or called, under any of the Transaction Documents, the Issuer shall immediately give notice thereof to the Collateral Agent and each Secured Party. Section 4.3. WAIVER OF STAY OR EXTENSION LAWS; MARSHALLING OF ASSETS. The Issuer covenants, to the fullest extent permitted by applicable law, that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or redemption law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Security Agreement or any absolute sale of the Collateral or any part thereof, or the possession thereof by any purchaser at any sale under Article VI of this Security Agreement; and the Issuer, to the fullest extent permitted by applicable law, for itself and all who may claim under it, hereby waives the benefit of all such laws, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Collateral Agent, but will suffer and permit the execution of every such power as though no such law had been enacted. The Seller, for itself and all who may claim under it, waives, to the 12 fullest extent permitted by applicable law, all right to have the Collateral marshalled upon any foreclosure or other disposition thereof. Section 4.4. NONINTERFERENCE, ETC. The Issuer shall not (i) waive or alter any of its rights under the Collateral (or any agreement or instrument relating thereto) without the prior written consent of the Controlling Party; or (ii) fail to pay any tax, assessment, charge or fee levied or assessed against the Collateral, or to defend any action, if such failure to pay or defend may adversely affect the priority or enforceability of the Seller's right, title or interest in and to the Collateral or the Collateral Agent's lien on, and security interest in, the Collateral for the benefit of the Secured Parties; or (iii) take any action, or fail to take any action, if such action or failure to take action will interfere with the enforcement of any rights under the Transaction Documents. Section 4.5. ISSUER CHANGES. (a) CHANGE IN NAME, STRUCTURE, ETC. The Issuer shall not change its name, identity or corporate structure unless it shall have given each Secured Party and the Collateral Agent at least 30 days' prior written notice thereof, shall have effected any necessary or appropriate assignments or amendments thereto and filings of financing statements or amendments thereto, and shall have delivered to the Collateral Agent and each Secured Party an Opinion of Counsel either (a) stating that, in the opinion of such counsel, such action has been taken with respect to the execution and filing of any amendments to previously recorded financing statements and continuation statements and other actions as are necessary to perfect, maintain and protect the lien and security interest of the Collateral Agent (and the priority thereof), on behalf of the Secured Parties, with respect to such Collateral against all creditors and purchasers from the Issuer and reciting the details of such action, or (b) stating that, in the opinion of such counsel, no such action is necessary to maintain such perfected lien and security interest. (b) RELOCATION OF THE ISSUER. The Issuer shall not change its principal executive office unless it gives each Secured Party and the Collateral Agent at least 30 days' prior written notice of any relocation of its principal executive office. If the Issuer relocates its principal executive office or principal place of business from 7825 Washington Avenue South, Suite 900, Minneapolis, Minnesota 55439-2435, the Issuer shall give prior notice thereof to the Controlling Party and the Collateral Agent and shall effect whatever appropriate recordations and filings are necessary and shall provide an Opinion of Counsel to the Controlling Party and the Collateral Agent, to the effect that, upon the recording of any necessary assignments or amendments to previously-recorded assignments and filing of any necessary amendments to the previously filed financing or continuation statements or upon the filing of one or more specified new financing statements, and the taking of such 13 other actions as may be specified in such opinion, the security interests in the Collateral shall remain, after such relocation, valid and perfected. ARTICLE V CONTROLLING PARTY; INTERCREDITOR PROVISIONS Section 5.1. APPOINTMENT OF CONTROLLING PARTY. From and after the Closing Date until the Insurer Termination Date, the Security Insurer shall be the Controlling Party and shall be entitled to exercise all the rights given the Controlling Party hereunder. From and after the Insurer Termination Date until the Trustee Termination Date, the Indenture Trustee hereby agrees that the Agent shall be the Controlling Party. Notwithstanding the foregoing, in the event that an Insurer Default shall have occurred and be continuing, the Agent shall be the Controlling Party until the Trustee Termination Date. If prior to an Insurer Termination Date the Agent shall have become the Controlling Party as a result of the occurrence of an Insurer Default and either such Insurer Default is cured or for any other reason ceases to exist or the Trustee Termination Date occurs, then upon such cure or other cessation or on such Trustee Termination Date, as the case may be, the Security Insurer shall, upon notice thereof being duly given to the Collateral Agent, again be the Controlling Party. Section 5.2. CONTROLLING PARTY'S AUTHORITY. (a) Each of the Issuer, OFL, the Seller and the Secured Parties hereby irrevocably appoints the Controlling Party, and any successor to the Controlling Party appointed pursuant to Section 5.1, its true and lawful attorney, with full power of substitution, in the name of the Issuer, OFL, the Seller, the Secured Parties or otherwise, but at the expense of the Seller, to the extent permitted by law to exercise in its sole and absolute discretion, at any time and from time to time while any Amortization Event has occurred and is continuing, any or all of the following powers with respect to all or any of the Collateral: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, (iii) to sell, securitize, transfer, assign or otherwise deal with the same or the proceeds thereof as fully and effectively as if the Collateral Agent were the absolute owner thereof, and (iv) to extend the time of payment of any or all thereof and to make any allowance or other adjustments with respect thereto; PROVIDED, that the foregoing powers and rights shall be exercised in accordance with the provisions of Article VI. (b) Each Secured Party hereby irrevocably and unconditionally constitutes and appoints the Controlling Party, 14 and any successor to the Controlling Party appointed pursuant to Section 5.1 from time to time, as the true and lawful attorney-in-fact of such Secured Party for so long as such Secured Party is a Non-Controlling Party, with full power of substitution, to execute, acknowledge and deliver any notice, document, certificate, paper, pleading or instrument and to do in the name of the Controlling Party as well as in the name, place and stead of such Secured Party such acts, things and deeds for and on behalf of and in the name of such Secured Party under this Security Agreement that such Secured Party could or might do or which may be necessary, desirable or convenient in the Controlling Party's sole discretion to effect the purposes contemplated hereunder and, without limitation, exercise full right, power and authority to take, or defer from taking, any and all acts with respect to the administration of the Collateral, and the enforcement of the rights of the Secured Parties hereunder, on behalf of and for the benefit of the Controlling Party and such Non-Controlling Party, as their interests may appear. Section 5.3. RIGHTS OF SECURED PARTIES. The Non-Controlling Parties at any time expressly agree that they shall not assert any right that they may otherwise have, as a Secured Party with respect to the Collateral, to direct the maintenance, sale or other disposition of the Collateral or any portion thereof, notwithstanding the occurrence and continuation of any Amortization Event or any non-performance by OFL, the Seller or the Issuer of any obligation owed to such Secured Party hereunder or under any other Transaction Document, and each party hereto agrees that the Controlling Party shall be the only Person entitled to assert and exercise such rights. Section 5.4. DEGREE OF CARE. (a) CONTROLLING PARTY. Notwithstanding any term or provision of this Security Agreement, the Controlling Party shall incur no liability to OFL, the Seller or the Issuer for any action taken or omitted by the Controlling Party in connection with the Collateral, except for any gross negligence, bad faith or willful misconduct on the part of the Controlling Party and, further, shall incur no liability to the Non-Controlling Parties except for a breach of the terms of this Security Agreement or for gross negligence, bad faith or willful misconduct in carrying out its duties to the Non-Controlling Parties. The Controlling Party shall be protected and shall incur no liability to any such party in relying upon the accuracy, acting in reliance upon the contents and assuming the genuineness of any notice, demand, certificate, signature, instrument or other document believed by the Controlling Party to be genuine and to have been duly executed by the appropriate signatory, and (absent manifest error or actual knowledge to the contrary) the Controlling Party shall not be required to make any independent investigation with respect thereto. The Controlling Party shall, at all times, be free independently to establish to its reasonable satisfaction the existence or nonexistence, as the case may be, of any fact 15 the existence or nonexistence of which shall be a condition to the exercise or enforcement of any right or remedy under this Security Agreement or any of the Transaction Documents. (b) THE NON-CONTROLLING PARTIES. The Non-Controlling Parties shall not be liable to the Seller, OFL or the Issuer for any action or failure to act by the Controlling Party or the Collateral Agent in exercising, or failing to exercise, any rights or remedies hereunder. ARTICLE VI REMEDIES UPON DEFAULT Section 6.1. REMEDIES UPON A DEFAULT. (a) If an Amortization Event has occurred and is continuing, the Collateral Agent shall, at the direction of the Controlling Party, take whatever action at law or in equity as may appear necessary or desirable in the judgment of the Controlling Party to collect and satisfy all Secured Obligations (including, but not limited to, foreclosure upon the Collateral and sale or securitization of the Collateral and all other rights available to secured parties under applicable law) or to enforce performance and observance of any obligation, agreement or covenant under any of the Transaction Documents. In addition to all other rights and remedies granted to the Collateral Agent for the benefit of the Secured Parties by this Security Agreement, the other Transaction Documents, the UCC and other applicable law, rules, or regulations, the Collateral Agent may with the consent of the Controlling Party, and shall upon the request of the Controlling Party, upon the occurrence and during the continuance of any such Amortization Event, exercise any one or more of the following rights and remedies: (i) foreclose upon or otherwise enforce the security interests in any or all Collateral in any manner permitted by applicable law, rules, or regulations or in this Security Agreement; (ii) notify any or all Obligors to make payments with respect to Receivables directly to the Collateral Agent; (iii) sell or otherwise dispose of any or all Collateral at one or more public or private sales, for cash or credit or future delivery, on such terms and in such manner as the Controlling Party may determine; (iv) require OFL, the Seller or the Issuer to assemble the Collateral and make it available to the Collateral Agent at a place to be designated by the Collateral Agent; (v) enter onto any property where any Collateral is located and take possession thereof with or without judicial process; and (vi) enforce any rights of the Issuer under any Receivable or other agreement to the extent the Controlling Party deems appropriate. In furtherance of the Collateral Agent's rights hereunder, each of OFL, the Seller and the Issuer hereby grants to the Collateral Agent an irrevocable, non-exclusive license (exercisable without royalty or other payment by the Collateral Agent) to use, license or sublicense any patent, trademark, tradename, copyright or other intellectual 16 property in which the Issuer now or hereafter has any right, title or interest, together with the right of access to all media in which any of the foregoing may be recorded or stored. Each of OFL, the Seller and the Issuer hereby agrees that ten (10) days notice of any intended sale or disposition of any Collateral is reasonable. Notwithstanding the foregoing, the Collateral Agent shall not be entitled to take any action and the Controlling Party shall not be entitled to give any direction with respect to the Collateral, except to the extent provided herein and in the Servicing Agreement or other Transaction Documents. (b) In the event of any sale, collection, conversion or other disposition into cash of the Collateral, or any part thereof, after deducting any actual costs and expenses incurred in connection with any such disposition, the Collateral Agent shall deposit the proceeds thereof into the Collection Account for distribution on the next succeeding Distribution Date in accordance with the priorities set forth in Section 3.6 of the Servicing Agreement. (c) The Controlling Party and the Collateral Agent shall be entitled to obtain from OFL, the Seller and the Issuer all records and documentation in the possession of OFL, the Seller or the Issuer, as the case may be, pertaining to any Collateral. Upon consummation of any sale pursuant to this Section 6.1, the Controlling Party, or the Collateral Agent acting on behalf of and at the direction of the Controlling Party, shall have the right to assign, transfer, endorse and deliver to the purchaser or purchasers thereof (which may include the Security Insurer), free and clear of any Lien, the Collateral, or any portion thereof or any interest therein, so sold. Each purchaser at any such sale shall hold the property purchased by it absolutely free and clear from any claim or right on the part of the Secured Parties, OFL, the Seller or the Issuer and OFL, the Seller and the Issuer hereby irrevocably waive all rights of redemption, stay, marshalling of assets or appraisal that either of them now has or may at any time in the future have under applicable law or statute now existing or hereafter enacted. (d) In addition to the remedies granted in this Agreement and the other Transaction Documents, if an Amortization Event has occurred and is continuing, the Collateral Agent shall, at the direction of the Controlling Party, take whatever action at law or in equity as may appear necessary or desirable in the judgment of the Controlling Party to collect the amounts then due and thereafter to become due under this Agreement and any of the other Transaction Documents (including but not limited to, all rights available to secured parties under applicable law) or to enforce performance and observance of any obligation, agreement or covenant under any of the Transaction Documents, including the exercise of the following powers with respect to the Collateral: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, (ii) to settle, compromise, compound, prosecute or 17 defend any action or proceeding with respect thereto, (iii) to sell, securitize, transfer, assign or otherwise deal with the same or the proceeds thereof as fully and effectively as if the Collateral Agent were the absolute owner thereof, and (iv) to extend the time of payment of any or all thereof and to make any allowance or other adjustment with respect thereto. All proceeds of any portion of the Collateral liquidated pursuant to this Section 6.1 shall be applied as set forth in Subsection (b) above. (e) The Collateral Agent and the Controlling Party, as the case may be, may exercise the powers and rights granted by this Section 6.1, without notice or demand to the Indenture Trustee, OFL, the Seller or the Issuer except as provided in (a) above. Section 6.2. RESTORATION OF RIGHTS AND REMEDIES. If the Collateral Agent has instituted any proceeding to enforce any right or remedy under this Agreement, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to such Collateral Agent, then and in every such case the Seller, the Collateral Agent and each of the Secured Parties shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such proceeding had been instituted. Section 6.3. NO REMEDY EXCLUSIVE. No right or remedy herein conferred upon or reserved to the Collateral Agent, the Controlling Party or any of the Secured Parties is intended to be exclusive of any other right or remedy, and every right or remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law, in equity or otherwise and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised by the Controlling Party, and the exercise of or the beginning of the exercise of any right or power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. ARTICLE VII MISCELLANEOUS Section 7.1. FURTHER ASSURANCES. Each party hereto shall take such action and deliver such instruments to any other party hereto, in addition to the actions and instruments specifically provided for herein, as may be reasonably requested or required to effectuate the purpose or provisions of this Security Agreement or to confirm or perfect any transaction described or contemplated herein. 18 Section 7.2. WAIVER. Any waiver by any party of any provision of this Security Agreement or any right, remedy or option hereunder shall only prevent and estop such party from thereafter enforcing such provision, right, remedy or option if such waiver is given in writing and only as to the specific instance and for the specific purpose for which such waiver was given. The failure or refusal of any party hereto to insist in any one or more instances, or in a course of dealing, upon the strict performance of any of the terms or provisions of this Security Agreement by any party hereto or the partial exercise of any right, remedy or option hereunder shall not be construed as a waiver or relinquishment of any such term or provision, but the same shall continue in full force and effect. Section 7.3. AMENDMENTS; WAIVERS. No amendment, modification, waiver or supplement to this Security Agreement or any provision of this Security Agreement shall in any event be effective unless the same shall have been made or consented to in writing by each of the parties hereto and each Rating Agency shall have confirmed in writing that such amendment will not cause a reduction or withdrawal of a rating on the Notes; PROVIDED, HOWEVER, that, for so long as the Security Insurer shall be the Controlling Party, amendments, modifications, waivers or supplements hereto or any requirement hereunder to deposit or retain any amounts in the Secured Accounts shall be effective if made or consented to in writing by the Security Insurer, the Seller, OFL, the Issuer, the Agent, the Indenture Trustee and the Collateral Agent (the consent of which shall not be withheld or delayed with respect to any amendment that has been consented to by the Security Insurer and that does not adversely affect the Collateral Agent) but shall in no circumstances require the consent of the Noteholders. Section 7.4. SEVERABILITY. In the event that any provision of this Security Agreement or the application thereof to any party hereto or to any circumstance or in any jurisdiction governing this Security Agreement shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent that it is invalid or unenforceable and the remainder of this Security Agreement, and the application of any such invalid or unenforceable provision to the parties, jurisdictions or circumstances other than to whom or to which it is held invalid or unenforceable, shall not be affected thereby nor shall the same affect the validity or enforceability of any other provision of this Security Agreement. The parties hereto further agree that the holding by any court of competent jurisdiction that any remedy pursued by the Collateral Agent or any of the Secured Parties hereunder is unavailable or unenforceable shall not affect in any way the ability of the Collateral Agent or any of the Secured Parties to pursue any other remedy available to it or them (subject, however, to the provisions of this Security Agreement limiting such remedies). 19 Section 7.5. NONPETITION COVENANT. Notwithstanding any prior termination of this Security Agreement, each of the parties hereto agrees that it shall not, prior to one year and one day after the Final Termination Date, acquiesce, petition or otherwise invoke or cause the Seller or the Issuer to invoke the process of the United States of America, any State or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case by or against the Seller or the Issuer under a Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Seller or the Issuer or all or any part of its property or assets or ordering the winding up or liquidation of the affairs of the Seller or the Issuer. The parties agree that damages will be an inadequate remedy for breach of this covenant and that this covenant may be specifically enforced. Section 7.6. NOTICES. All notices, demands, certificates, requests and communications hereunder ("notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to OFL: Olympic Financial Ltd. 7825 Washington Avenue South, Suite 400 Minneapolis, Minnesota 55439-2435 Attention: Treasurer Telecopier No.: (612) 942-6730 (ii) If to the Seller: Olympic Receivables Finance Corp. 7825 Washington Avenue South Suite 410 Minneapolis, Minnesota 55439-2435 Attention: Treasurer Telecopier No.: (612) 942-0015 20 (iii) If to the Security Insurer: Financial Security Assurance Inc. 350 Park Avenue - 13th Floor New York, New York 10022 Attention: Surveillance Department Telecopier No.: (212) 755-5165 (212) 688-3101 (in each case in which notice or other communication to the Security Insurer refers to an Amortization Event or a claim on the Policy or in which failure on the part of the Security Insurer to respond shall be deemed to constitute consent or acceptance, then with a copy to the attention of the Senior Vice President Surveillance) (iv) If to the Indenture Trustee: Norwest Bank Minnesota, National Association Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479-0070 Attention: Corporate Trust Services - Asset-Backed Administration Telecopier No.: (612) 667-3539 (v) If to the Collateral Agent: Norwest Bank Minnesota, National Association Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479-0070 Attention: Corporate Trust Services - Asset-Backed Administration Telecopier No.: (612) 667-3539 (vi) If to Moody's: Moody's Investor's Service, Inc. 99 Church Street New York, New York 10007 Telecopier No.: (212) 553-0344 (vii) If to Standard & Poor's: Standard & Poor's Ratings Group 26 Broadway New York, New York 10004 Telecopier No.: (212) 208-1582 21 (viii) If to the Issuer: Arcadia Receivables Conduit Corp. 7825 Washington Avenue South Suite 900 Minneapolis, Minnesota 55439-2435 Telecopier No.: (612) 942-6730 (ix) If to the Agent: Bank of America National Trust and Savings Association Asset Securitization Group 231 South LaSalle Street Chicago, Illinois 60697 Attention: Albert Yoshimura Telecopier No.: (312) 923-0273 A copy of each notice given hereunder to any party hereto shall also be given to (without duplication) the Security Insurer, the Seller, the Issuer, the Agent, the Indenture Trustee and the Collateral Agent. Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. Section 7.7. TERM OF THIS SECURITY AGREEMENT. This Security Agreement shall continue in effect until the Final Termination Date. On such Final Termination Date, this Security Agreement shall terminate, all obligations of the parties hereunder shall cease and terminate and the Collateral, if any, held hereunder and not to be used or applied in discharge of any obligations of the Issuer, the Seller or OFL in respect of the Secured Obligations or otherwise under this Agreement or any of the Transaction Documents, shall be released to and in favor of the Issuer; PROVIDED, that the provisions of Sections 3.6, 3.7 and 7.5 shall survive any termination of this Security Agreement and the release of any Collateral upon such termination. Section 7.8. ASSIGNMENTS; THIRD-PARTY RIGHTS; REINSURANCE. (a) This Security Agreement shall be a continuing obligation of the parties hereto and shall (i) be binding upon the parties and their respective successors and assigns, and (ii) inure to the benefit of and be enforceable by each Secured Party and the Collateral Agent, and by their respective successors, transferees and assigns. None of the Issuer, the Seller nor OFL may assign this Security Agreement, or delegate any of its duties hereunder, without the prior written consent of the Controlling Party. 22 (b) The Security Insurer shall have the right (unless an Insurer Default shall have occurred and be continuing) to give participations in its rights under this Security Agreement and to enter into contracts of reinsurance with respect to the Note Policy and each such participant or reinsurer shall be entitled to the benefit of any representation, warranty, covenant and obligation of each party (other than the Security Insurer) hereunder as if such participant or reinsurer was a party hereto and, subject only to such agreement regarding such reinsurance or participation, shall have the right to enforce the obligations of each such other party directly hereunder; PROVIDED, HOWEVER, that no such reinsurance or participation agreement or arrangement shall relieve the Security Insurer of its obligations hereunder, under the Transaction Documents to which it is a party or under the Note Policy. In addition, nothing contained herein shall restrict the Security Insurer from assigning to any Person pursuant to any liquidity facility or credit facility any rights of the Security Insurer under this Security Agreement or with respect to any real or personal property or other interests pledged to the Security Insurer, or in which the Security Insurer has a security interest, in connection with the transactions contemplated hereby. The terms of any such assignment or participation shall contain an express acknowledgment by such Person of the condition of this Section and the limitations of the rights of the Security Insurer hereunder. Section 7.9. CONSENT OF CONTROLLING PARTY. In the event that the Controlling Party's consent is required under the terms hereof or under the terms of any Transaction Document, it is understood and agreed that, except as otherwise provided expressly herein, the determination whether to grant or withhold such consent shall be made solely by the Controlling Party in its sole and absolute discretion. SECTION 7.10. TRIAL BY JURY WAIVED. EACH OF THE PARTIES HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT, ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER OR THEREUNDER. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAVIER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY, BY AMONG OTHER THINGS, THIS WAIVER. SECTION 7.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 23 Section 7.12. CONSENTS TO JURISDICTION. Each of the parties hereto irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York, any court in the sate of New York located in the city and county of New York, and any appellate court from any thereof, in any action, suit or proceeding brought against it and related to or in connection with this Security Agreement, the other Transaction Documents or the transactions contemplated hereunder or thereunder or for recognition or enforcement of any judgment and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such suit or action or proceeding may be heard or determined in such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. To the extent permitted by applicable law, each of the parties hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Security Agreement or any of the other Transaction Documents or the subject matter hereof or thereof may not be litigated in or by such courts. Each of OFL, the Seller and the Issuer hereby irrevocably appoints and designates CT Corporation System, 1633 Broadway, New York, New York 10019 as its true and lawful attorney and duly authorized agent for acceptance of service of legal process. Each of OFL, the Seller and the Issuer agrees that service of such process upon such Person shall constitute personal service of such process upon it. Nothing contained in this Security Agreement shall limit or affect the rights of any party hereto to serve process in any other manner permitted by law or to start legal proceedings relating to any of the Transaction Documents against OFL, the Seller, the Issuer or their respective property in the courts of any jurisdiction. Section 7.13. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that Norwest Bank Minnesota, National Association is executing this Security Agreement not in its individual capacity but solely in its capacity as indenture trustee pursuant to the Indenture and as Collateral Agent hereunder. Section 7.14. DETERMINATION OF ADVERSE EFFECT. Any determination of an adverse effect on the interest of the Secured Parties or the Noteholders shall be made without consideration of the availability of funds under the Note Policy. Section 7.15. COUNTERPARTS. This Security Agreement may be executed in two or more counterparts by the parties hereto, and each such counterpart shall be considered an original and all such counterparts shall constitute one and the same instrument. 24 Section 7.16. HEADINGS. The headings of sections and paragraphs and the Table of Contents contained in this Agreement are provided for convenience only. They form no part of this Security Agreement and shall not affect its construction or interpretation. Section 7.17. LIMITED RECOURSE. Notwithstanding anything to the contrary contained herein, the obligations of the Issuer hereunder shall not be recourse to the Issuer (or any person or organization acting on behalf of the Issuer or any affiliate, employee, incorporator, stockholder, officer or director of the Issuer), other than to the Receivables and the other Collateral and the proceeds thereof as provided in this Security Agreement, the Repurchase Agreement and the Servicing Agreement. Each of the parties hereto hereby agree that to the extent such funds are insufficient or assets are unavailable to pay any amounts owing to it from the other party pursuant to this Security Agreement, it shall not constitute a claim against the other party. Section 7.18. RESPECTIVE RIGHTS OF THE ISSUER AND THE SECURED PARTIES IN THE COLLATERAL. The Issuer hereby acknowledges and agrees that its interest in the Collateral under the Repurchase Agreement is subject and subordinate in all respects to its pledge of the Collateral to the Secured Parties under this Security Agreement and that the Collateral Agent holds the Collateral first for the Secured Parties hereunder and second on behalf of the Issuer in respect of its interest in the Collateral under the Repurchase Agreement. 25 IN WITNESS WHEREOF, the parties hereto have executed this Security Agreement as of the date set forth on the first page hereof. OLYMPIC FINANCIAL LTD. By: /s/ ILLEGIBLE ------------------------------------ Name: Title: OLYMPIC RECEIVABLES FINANCE CORP. By: /s/ ILLEGIBLE ------------------------------------ Name: Title: ARCADIA RECEIVABLES CONDUIT CORP. By: /s/ ILLEGIBLE ------------------------------------ Name: Title: FINANCIAL SECURITY ASSURANCE INC. By: /s/ ILLEGIBLE ------------------------------------ Name: Title: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Indenture Trustee By: /s/ Thomas A. Wraablert ------------------------------------ Name: Title: [Signature Page to Security Agreement] NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral Agent By: /s/ Thomas A. Wraablert -------------------------- Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Erik G. Ford -------------------------- Name: Erik G. Ford Title: Attorney-in-Fact EX-10.34 35 INDENTURE DATED 12/3/96 ARCC & NORWEST BANK MN EXECUTION COPY ============================================================================== ARCADIA RECEIVABLES CONDUIT CORP. ____________________ INDENTURE Dated as of December 3, 1996 _____________________________ NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Trustee and Collateral Agent ============================================================================== TABLE OF CONTENTS Page ----- PARTIES RECITALS OF THE ISSUER ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions......................................... 1 Act........................................................... 2 Advance....................................................... 2 Agent......................................................... 2 Assignment Agreement.......................................... 2 Authenticating Agent.......................................... 2 Authorized Officer............................................ 2 Board of Directors............................................ 2 Board Resolution.............................................. 2 BofA.......................................................... 3 Closing Date.................................................. 3 Code.......................................................... 3 Collateral.................................................... 3 Collateral Agent.............................................. 3 Commercial Paper Notes........................................ 3 Commission.................................................... 3 Controlling Party............................................. 3 Corporate Trust Office........................................ 3 corporation................................................... 3 covenant defeasance........................................... 4 CP Composite Rate............................................. 4 CP Rate....................................................... 4 Default....................................................... 4 defeasance.................................................... 4 Draw Date..................................................... 4 Event of Default.............................................. 4 Exchange Act.................................................. 4 Executive Officer............................................. 4 Holder........................................................ 4 Noteholder.................................................... 4 Indebtedness.................................................. 4 Indenture..................................................... 5 Indenture Supplement.......................................... 5 Insurer Notice Date........................................... 5 Insurer Secured Obligations................................... 5 Interest Period............................................... 5 Issuer........................................................ 5 Issuer Request" or "Issuer Order.............................. 5 Letter Agreement.............................................. 6 Lien.......................................................... 6 TABLE OF CONTENTS (CONTINUED) Page ----- Liquidity Asset Purchase Agreement............................ 6 Maturity Date................................................. 6 Maximum Authorized Amount..................................... 6 Maximum Interest Rate......................................... 6 Note Interest Rate............................................ 6 Note Policy................................................... 7 Note Register................................................. 7 Note Registrar................................................ 7 Noteholders' Interest Carryover Shortfall..................... 7 Noteholders' Interest Distributable Amount.................... 7 Noteholders' Principal Distributable Amount................... 7 Notes......................................................... 7 Officers' Certificate......................................... 7 Opinion of Counsel............................................ 7 Original Issue Date........................................... 8 Outstanding................................................... 8 Outstanding Amount............................................ 9 Paying Agent.................................................. 9 Payment Date.................................................. 9 Permitted Assignee............................................ 9 Person........................................................ 9 Policy Claim Amount........................................... 9 Predecessor Note.............................................. 9 Preference Claim.............................................. 9 Prepayment Price.............................................. 9 Proceeding.................................................... 9 Program Support Provider...................................... 9 Property...................................................... 10 Rating Agency Condition....................................... 10 RCC........................................................... 10 Record Date................................................... 10 Registered Holder............................................. 10 Related Documents............................................. 10 Responsible Officer........................................... 10 Scheduled Payments............................................ 10 Secured Obligations........................................... 10 Secured Parties............................................... 10 Securities Act................................................ 10 Servicing Agreement........................................... 11 State......................................................... 11 Termination Date.............................................. 11 Tranche....................................................... 11 Trustee....................................................... 11 Trustee Secured Obligations................................... 11 Trust Estate.................................................. 11 Trust Indenture Act........................................... 11 UCC........................................................... 11 U.S. Government Obligations................................... 11 Vice President................................................ 11 -ii- TABLE OF CONTENTS (CONTINUED) Page ----- Section 102. Compliance Certificates and Opinions................ 13 Section 103. Form of Documents Delivered to Trustee.............. 14 Section 104. Acts of Holders..................................... 15 Section 105. Notices Etc., to Trustee, Issuer and Rating Agencies............................................ 15 Section 106. Notice to Holders; Waiver........................... 16 Section 107. Alternate Payment and Notice Provisions............. 17 Section 108. Conflict with Trust Indenture Act................... 17 Section 109. Effect of Headings and Table of Contents............ 17 Section 110. Successors and Assigns.............................. 18 Section 111. Separability Clause................................. 18 Section 112. Benefits of Indenture............................... 18 Section 113. Governing Law....................................... 18 Section 114. Legal Holidays...................................... 18 Section 115. No Bankruptcy Petition Against the Issuer or the Seller.......................................... 18 ARTICLE TWO Security Section 201. Collateral.......................................... 19 Section 202. Limited Recourse to Issuer.......................... 19 Section 203. Authorization of Actions to be Taken by the Trustee............................................. 20 Section 204. Termination of Security Interests................... 20 ARTICLE THREE Note Forms Section 301. Forms Generally..................................... 20 Section 302. Form of Trustee's Certificate of Authentication...................................... 21 Section 303. Securities Legend................................... 21 ARTICLE FOUR The Notes Section 401. Amount Limited; Issuable in Tranches................ 22 Section 402. Maturity, Principal Payments and Denominations....................................... 22 Section 403. Interest Payments................................... 23 Section 404. Execution, Authentication, Delivery and Dating.............................................. 24 -iii- TABLE OF CONTENTS (CONTINUED) Page ----- Section 405. Temporary Notes..................................... 25 Section 406. Registration, Registration of Transfer and Exchange, Transfer Restrictions............................... 25 Section 407. Mutilated, Destroyed, Lost and Stolen Notes......... 27 Section 408. Payment of Interest; Interest Rights Preserved........................................... 28 Section 409. Persons Deemed Owners............................... 28 Section 410. Cancellation........................................ 28 ARTICLE FIVE Accounts, Disbursements and Releases Section 501. Collection of Money................................. 29 Section 502. General Provisions Regarding Accounts............... 29 ARTICLE SIX Remedies Section 601. Events of Default................................... 30 Section 602. Rights upon Event of Default........................ 31 Section 603. Collection of Indebtedness and Suits for Enforcement by Trustee; Authority of Controlling Party.......... 32 Section 604. Limitation on Suits................................. 34 Section 605. Unconditional Right of Holders to Receive Principal and Interest.............................. 35 Section 606. Restoration of Rights and Remedies.................. 36 Section 607. Rights and Remedies Cumulative...................... 36 Section 608. Delay or Omission Not Waiver........................ 36 Section 609. Control by Holders.................................. 36 Section 610. Waiver of Past Defaults............................. 37 Section 611. Undertaking for Costs............................... 37 Section 612. Waiver of Stay or Extension Laws.................... 38 Section 613. Action on Notes..................................... 38 Section 614. Performance and Enforcement of Certain Obligations......................................... 38 Section 615. Claims Under Note Policy............................ 39 Section 616. Preference Claims................................... 40 ARTICLE SEVEN The Trustee Section 701. Certain Duties and Responsibilities................. 41 Section 702. Notice of Defaults.................................. 44 -iv- TABLE OF CONTENTS (CONTINUED) Page ----- Section 703. Certain Rights of Trustee........................... 44 Section 704. Not Responsible for Recitals or Issuance of Notes............................................... 45 Section 705. May Hold Notes...................................... 45 Section 706. Money Held in Trust................................. 45 Section 707. Compensation and Indemnity.......................... 46 Section 708. Disqualification; Conflicting Interests............. 46 Section 709. Corporate Trustee Required; Eligibility............. 47 Section 710. Resignation and Removal; Appointment of Successor........................................... 47 Section 711. Acceptance of Appointment by Successor.............. 48 Section 712. Merger, Conversion, Consolidation or Succession to Business.............................. 49 Section 713. Preferential Collection of Claims Against Issuer.............................................. 49 Section 714. Appointment of Authenticating Agent................. 49 Section 715. Paying Agent........................................ 51 Section 716. Appointment of Co-Trustee or Separate Trustee............................................. 52 ARTICLE EIGHT Holders' Lists and Reports by Trustee and Issuer Section 801. Issuer to Furnish Trustee Names and Addresses of Holders.......................................... 53 Section 802. Preservation of Information; Communications to Holders.......................................... 53 Section 803. Reports by Trustee.................................. 54 Section 804. Reports by Issuer................................... 54 ARTICLE NINE Indenture Supplements Section 901. Indenture Supplements Without Consent of Holders............................................. 55 Section 902. Indenture Supplements with Consent of Holders............................................. 57 Section 903. Execution of Indenture Supplements.................. 58 Section 904. Effect of Indenture Supplements..................... 59 Section 905. Reference in Notes to Indenture Supplements......... 59 Section 906. Rating Agency Confirmation.......................... 59 ARTICLE TEN -v- TABLE OF CONTENTS (CONTINUED) Page ----- Covenants Section 1001. Payment of Principal and Interest................... 59 Section 1002. Maintenance of Office or Agency..................... 59 Section 1003. Consolidation, Merger, Sale of Assets............... 60 Section 1004. Negative Covenants.................................. 62 Section 1005. Performance of Obligations; Servicing of Receivables......................................... 63 Section 1006. Other Indebtedness.................................. 64 Section 1007. Guarantees, Loans, Advances and Other Liabilities......................................... 64 Section 1008. Dividends; Distributions............................ 65 Section 1009. Money for Note Payments to Be Held in Trust......... 65 Section 1010. Corporate Existence................................. 66 Section 1011. Payment of Taxes and Other Claims................... 67 Section 1012. Notice of Events of Default......................... 67 Section 1013. Amendment of Certificate of Incorporation and Bylaws.......................................... 67 Section 1014. Statement as to Compliance.......................... 67 Section 1015. Rule 144A Information............................... 68 Section 1016. Further Instruments and Acts........................ 68 Section 1017. Compliance with Laws................................ 68 Section 1018. Income Tax Characterization......................... 68 ARTICLE ELEVEN Prepayment of Notes Section 1101. Prepayment.......................................... 69 Section 1102. Notice of Prepayment in Whole of a Tranche.......... 69 Section 1103. Deposit of Prepayment Price......................... 69 Section 1104. Notes Prepayable in Whole on any Date............... 70 ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE Section 1201. Issuer's Option to Effect Defeasance or Covenant Defeasance................................. 70 Section 1202. Defeasance and Discharge............................ 70 Section 1203. Covenant Defeasance................................. 71 Section 1204. Conditions to Defeasance or Covenant Defeasance.......................................... 71 Section 1205. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions.......................................... 73 -vi- TABLE OF CONTENTS (CONTINUED) Page ----- TESTIMONIUM SIGNATURES ACKNOWLEDGMENTS EXHIBIT A Form of Note EXHIBIT B Form of Note Policy -vii- INDENTURE, dated as of December 3, 1996, between ARCADIA RECEIVABLES CONDUIT CORP., a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Issuer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America, in its capacities as Trustee (the "Trustee") and as Collateral Agent (as defined below) and not in its individual capacity. RECITALS OF THE ISSUER Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Issuer's Floating Rate Automobile Receivables-Backed Notes (the "Notes"): The Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its Notes to be issued in one or more tranches as in this Indenture provided. Financial Security Assurance Inc. (the "Security Insurer") has issued and delivered a financial guaranty insurance policy, dated the Closing Date (with endorsements, the "Note Policy"), pursuant to which the Security Insurer guarantees certain Scheduled Payments, as defined in the Note Policy. As an inducement to the Security Insurer to issue and deliver the Note Policy, the Issuer and the Security Insurer have executed and delivered the Insurance and Indemnity Agreement, dated as of December 3, 1996 (as amended from time to time, the "Insurance Agreement"), among the Security Insurer, the Issuer, Olympic Receivables Finance Corp. and Olympic Financial Ltd. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows: ARTICLE ONE Definitions and Other Provisions of General Application SECTION 101. DEFINITIONS. (a) For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: -1- (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act (as hereinafter defined), either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and (4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision, or is not exclusive and including means including without limitation. Certain terms, used principally in Article Six, are defined in that Article. "Act," when used with respect to any Holder, has the meaning specified in Section 104. "Advance" has the meaning specified therefor in the Repurchase Agreement. "Agent" means BofA as administrator of RCC and as agent for certain liquidity purchasers under the Liquidity Asset Purchase Agreement, and its successors and assigns in such capacity under the Note Purchase Agreement. "Assignment Agreement" has the meaning specified therefor in the Purchase Agreement. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Notes. "Authorized Officer" means, with respect to the Issuer, any President or Vice President of the Issuer. "Board of Directors" means either the board of directors of the Issuer or any committee of that board duly authorized to act hereunder. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Issuer to have been duly adopted by the Board of Directors and to -2- be in full force and effect on the date of such certification, and delivered to the Trustee. "BofA" means Bank of America National Trust and Savings Association and its successors. "Closing Date" means December 3, 1996. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "Collateral" has the meaning specified therefor in the Security Agreement. "Collateral Agent" has the meaning specified therefor in the Security Agreement. "Commercial Paper Notes" means the short-term promissory notes issued or to be issued in the United States commercial paper market to fund the purchase of the Notes, which unless otherwise agreed to in writing by the Seller, the Agent and the Security Insurer, shall mature within 120 days from the date of issuance of such notes. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Controlling Party" has the meaning specified therefor in the Security Agreement. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be administered, such office at the date of the execution of this Indenture is located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust Services - Asset-Backed Administration; or at such other address as the Trustee may designate from time to time by notice to the Agent, the Noteholders, the Security Insurer and the Issuer, or the principal corporate trust office of any successor Trustee (the address of which the successor Trustee will notify the Agent, the Noteholders, the Security Insurer and the Issuer). "corporation" includes corporations, associations, companies and business trusts. "covenant defeasance" has the meaning specified in Section 1203. -3- "CP Composite Rate" means for any date of determination, the Money Market Yield of the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System ("H.15(519)") for the 30 day maturity under the caption "Commercial Paper." If such rate cannot be determined, the Offshore Rate. "CP Rate" means, for any Interest Period or any shorter period for which interest accrues, and with respect to any portion of the principal amount of the Notes as to which the Noteholders' funding of their purchase or carrying thereof is provided by Commercial Paper Notes, the rate of interest per annum determined in arrears in good faith by the Agent equal to the Noteholders' cost of funding the purchase or carrying of such portion of the Notes, which shall be equal to the weighted daily average interest rate payable in respect of such Commercial Paper Notes during such period (determined in the case of discount Commercial Paper Notes by converting the discount to an interest bearing equivalent rate per annum), plus applicable placement fees and commissions, but excluding any other fees related to such funding. "Default" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. "defeasance" has the meaning specified in Section 1202. "Draw Date" means, with respect to any Deficiency Claim Date, the third Business Day preceding the related Distribution Date. "Event of Default" has the meaning specified in Section 601. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Executive Officer" means, with respect to any corporation, the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, Executive Vice President, Managing Director, any Vice President, any Responsible Officer, the Secretary or the Treasurer of such corporation. "Holder" or "Noteholder" means RCC and any Permitted Assignee, and, in any case, in whose name a Note is registered in the Note Register. "Indebtedness" means, with respect to any Person at any time, (a) indebtedness or liability of such Person for borrowed money whether or not evidenced by bonds, debentures, notes or other instruments, or for the deferred purchase price of property or services (including trade obligations); (b) obligations of such Person as lessee under leases which should have been or should be, in accordance with generally accepted accounting -4- principles, recorded as capital leases; (c) current liabilities of such Person in respect of unfunded vested benefits under plans covered by Title IV of ERISA; (d) obligations issued for or liabilities incurred on the account of such Person; (e) obligations or liabilities of such Person arising under acceptance facilities; (f) obligations of such Person under any guarantees, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; (g) obligations of such Person secured by any lien on property or assets of such Person, whether or not the obligations have been assumed by such Person; or (h) obligations of such Person under any interest rate or currency exchange agreement. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular Tranche of Notes established as contemplated by Section 401. "Indenture Supplement" means the supplement to this Indenture relating to a Tranche of Notes, and any other supplemental indentures executed pursuant to Article Nine. "Insurer Notice Date" has the meaning specified therefor in the Repurchase Agreement. "Insurer Secured Obligations" has the meaning specified therefor in the Security Agreement. "Interest Period" means, with respect to any Distribution Date, the Monthly Period immediately preceding such Distribution Date (or, in the case of the first Distribution Date, the period from and including the Closing Date to and excluding the first day of the succeeding calendar month; PROVIDED, that the final Interest Period shall commence on the first day of the calendar month immediately preceding the month in which the Final Distribution Date occurs and shall end on, but shall exclude, the Final Distribution Date. "Issuer" means the Person named as the "Issuer" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Issuer" shall mean such successor Person. "Issuer Request" or "Issuer Order" means a written request or order signed in the name of the Issuer by its Chairman of the Board, its Vice Chairman, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, or signed on behalf of the Issuer by a duly appointed agent of the Issuer and delivered to the Trustee. -5- "Letter Agreement" has the meaning specified in Section 707(a). "Lien", in respect of the Property of any Person, means any ownership interest of any other Person, any mortgage, deed of trust, hypothecation, pledge, lien, security interest, grant of a power to confess judgment, filing of any financing statement, charge or other encumbrance or security arrangement of any nature whatsoever, including, without limitation, any conditional sale or title retention arrangement, and any assignment, deposit arrangement, consignment or lease intended as, or having the effect of, security. "Liquidity Asset Purchase Agreement" means that certain Liquidity Asset Purchase Agreement dated as of December 3, 1996 among the purchasers from time to time party thereto, BofA as administrator and liquidity agent, and RCC, as amended, supplemented or otherwise modified from time to time. "Maturity Date", when used with respect to any Note, means the date on which the principal of such Note or an installment of principal becomes due and payable as therein or herein provided, whether on the Final Distribution Date or by declaration of acceleration, prepayment or otherwise. "Maximum Authorized Amount" has the meaning specified therefor in the Note Purchase Agreement. "Maximum Interest Rate" means as of the date on which an Amortization Event occurs, the greater of (I) the sum of (i) the Two Year Treasury Yield determined as of such day by the Trustee pursuant to Section 403(b) plus (ii) 0.60% plus (iii) the Basis Fee Percent and (II) the weighted average APR (weighted based on the aggregate outstanding Principal Balance of the relevant Receivables as of the immediately preceding Accounting Date PLUS the outstanding Principal Balance of any Receivables transferred by the Seller to the Issuer since such Accounting Date and LESS the outstanding Principal Balance of any Receivables that become Purchased Receivables or Repurchased Receivables since such Accounting Date) of Qualifying Receivables, MINUS 6.50%, MINUS the Total Expense Percent. "Note Interest Rate" means with respect to each Interest Period or any shorter period for which interest accrues, a per annum rate determined in arrears of the daily weighted average cost of funding of the Noteholders' purchase or carrying of the Notes during such Interest Period or any shorter period for which interest accrues, which shall be: (A) prior to the occurrence of an Amortization Event, (i) the CP Rate plus 0.20%, to the extent the purchase or carrying of the Notes issued pursuant to this Indenture is funded by the Noteholders by issuing Commercial Paper Notes, or (ii) the Offshore Rate plus the Applicable Margin, to the extent the purchase or carrying of the Notes issued pursuant to this Indenture is not so funded by the Noteholders and (B) after the occurrence of an Amortization -6- Event, the Reference Rate; PROVIDED, that, from and after the occurrence of an Amortization Event, the Note Interest Rate shall not exceed the Maximum Interest Rate, and the Agent may, on any Business Day, by prior written notice to the Issuer, the Trustee, the Seller, the Servicer and the Security Insurer, convert the Note Interest Rate to a fixed interest rate not to exceed the Maximum Interest Rate as of the close of business on the date such Amortization Event occurs, such fixed interest rate not to exceed the Two Year Treasury Yield (as of the close of business on the date on the date such Amortization Event occurs) plus 0.60% PLUS the Basis Fee Percent. "Note Policy" means the Financial Guaranty Insurance Policy No. 50528-N issued by the Security Insurer with respect to the Notes, including any endorsements thereto, in the form of Exhibit B. "Note Register" and "Note Registrar" have the respective meanings specified in Section 406. "Noteholders' Interest Carryover Shortfall" means, with respect to a Payment Date, the Advance Interest Carryover Shortfall with respect to such date. "Noteholders' Interest Distributable Amount" means, with respect to a Payment Date, the Advance Interest Distributable Amount with respect to such date. "Noteholders' Principal Distributable Amount" means, with respect to a Payment Date, the Advance Principal Distributable Amount with respect to such date. "Notes" has the meaning stated in the first recital of this Indenture and more particularly means any Notes authenticated and delivered under this Indenture. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the Deputy Chairman, the Comptroller, a Vice Chairman, the President or a Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Issuer, or signed on behalf of the Issuer by a duly appointed agent of the Issuer and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel who may, except as otherwise expressly stated in this Indenture, be employees of or counsel for the Issuer and who shall be acceptable to the Trustee and, if addressed to the Security Insurer, satisfactory to the Security Insurer, and which shall comply with any applicable requirements of Section 102, and shall be in form and substance satisfactory to the Trustee, and if addressed to the Security Insurer, satisfactory to the Security Insurer. "Original Issue Date" means, for any Tranche of Notes, the date of original issue of such Tranche of Notes. -7- "Outstanding", when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture EXCEPT, (i) Notes theretofore cancelled by the Note Registrar or delivered to the Note Registrar for cancellation; and (ii) Notes for whose payment or prepayment money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent for the Holders of such Notes; and (iii) Notes which have been defeased pursuant to Section 1202 hereof; and (iv) Notes which have been paid pursuant to Section 407 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Issuer; PROVIDED, HOWEVER, that Notes which have been paid with proceeds of the Note Policy shall continue to remain Outstanding for purposes of this Indenture until the Security Insurer has been paid as subrogee hereunder or reimbursed pursuant to the Insurance Agreement as evidenced by a written notice from the Security Insurer delivered to the Trustee, and the Security Insurer shall be deemed to be the Holder thereof to the extent of any payments thereon made by the Security Insurer; PROVIDED FURTHER, HOWEVER, that in determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any related document, Notes owned by the Issuer or any other obligor upon the Notes, the Seller or any Affiliate of any of the foregoing shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Trustee knows to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes, the Seller or any Affiliate of the Issuer or of any of the foregoing Persons. "Outstanding Amount" means the aggregate principal amount of all Notes Outstanding at the date of determination after giving effect to all distributions of principal on such date of determination. "Paying Agent" means the Trustee or any other Person that meets the eligibility standards for the trustee specified in -8- Section 709 and, so long as no Insurer Default shall have occurred and be continuing, is consented to by the Security Insurer and is authorized by the Issuer to make the distributions from the Note Distribution Account, including payment of principal of or interest on the Notes on behalf of the Issuer. "Payment Date" means a Distribution Date. "Permitted Assignee" means, collectively, one or more banks or other institutions party to the Liquidity Asset Purchase Agreement from time to time and any other Program Support Provider. "Person" means any individual, corporation, estate partnership, joint venture, association, limited liability company, joint-stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof. "Policy Claim Amount" has the meaning specified in Section 615. "Predecessor Note" of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 406 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Note. "Preference Claim" has the meaning specified in Section 616. "Prepayment Price" means an amount equal to (i) the outstanding principal amount of the Notes being prepaid in whole PLUS (ii) accrued and unpaid interest thereon at the Note Interest Rate to, but excluding, the date on which such Notes are to be prepaid in whole PLUS (iii) any Breakage Fees. "Proceeding" means any suit in equity, action at law or other judicial or administrative proceeding. "Program Support Provider" means and includes any Person (other than any customer of RCC) now or hereafter extending credit or having a commitment to extend credit to or for the account of, or to make purchase from, RCC or issuing a letter of credit, surety bond or other instrument to support any obligations arising under or in connection with RCC's securitization program. "Property" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. - 9 - "Rating Agency Condition" means, with respect to any action, that each Rating Agency shall have been given 10 business days prior written notice thereof and that each of the Rating Agencies shall have notified the Seller, the Servicer, the Security Insurer, the Trustee and the Issuer in writing that such action will not, in and of itself result in an increased capital charge to the Security Insurer. "RCC" means Receivables Capital Corporation, a Delaware corporation. "Record Date" means, with respect to a Payment Date, the close of business on the last Business Day immediately preceding such Payment Date. "Registered Holder" means the Person in whose name a Note is registered on the Note Register on the applicable Record Date. "Related Documents" means the Notes, the Purchase Agreement, the Repurchase Agreement, the Servicing Agreement, each Assignment Agreement, the Custodian Agreement, the Note Policy, the Security Agreement, the Note Purchase Agreement, the Spread Account Agreement, the Insurance Agreement, and the Lockbox Agreement. The Related Documents executed by any party are referred to herein as "such party's Related Documents," "its Related Documents" or by a similar expression. "Responsible Officer" means, with respect to the Trustee, any officer of the Trustee assigned by the Trustee to administer its corporate trust affairs relating to the Trust Estate. "Scheduled Payments" has the meaning specified therefor in the Note Policy. "Secured Obligations" has the meaning specified therefor in the Security Agreement. "Secured Parties" has the meaning specified therefor in the Security Agreement. "Securities Act" means the United States Securities Act of 1933, as amended. "Servicing Agreement" means the Servicing Agreement, dated as of December 3, 1996, among the Issuer, the Seller, Olympic Financial Ltd., in its individual capacity and as Servicer, the Agent and Norwest Bank Minnesota, National Association, as Backup Servicer, Collateral Agent and Trustee. "State" means any one of the 50 States of the United States of America or the District of Columbia. - 10 - "Termination Date" means the latest of (i) the expiration of the Note Policy and the return of the Note Policy to the Security Insurer for cancellation, (ii) the date on which the Security Insurer shall have received payment and performance of all Insurer Secured Obligations and (iii) the date on which the Trustee shall have received payment and performance of all Trustee Secured Obligations. "Tranche" with respect to any Notes means those Notes having the same Original Issue Date. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include the Person who is then the Trustee hereunder. "Trustee Secured Obligations" has the meaning specified therefor in the Security Agreement. "Trust Estate" means the assets and property rights that constitute the Collateral. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time. "UCC" means the Uniform Commercial Code as adopted in the State of New York. "U.S. Government Obligations" has the meaning specified in Section 1204(1). "Vice President", when used with respect to the Issuer or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "Vice President." (b) Except as otherwise specified herein or as the context may otherwise require, the following terms have the respective meanings set forth in the Servicing Agreement as in effect on the Closing Date for all purposes of this Indenture, and the definitions of such terms are equally applicable both to the singular and plural forms of such terms: Section of Term Servicing Agreement - ---- ------------------- Accounting Date........................................ Section 1.1 Advance Interest Distributable Amount.................. Section 1.1 Advance Principal Distributable Amount................. Section 1.1 Affiliate.............................................. Section 1.1 Amortization Event..................................... Section 1.1 Amortization Period.................................... Section 1.1 - 11 - Applicable Margin...................................... Section 1.1 APR.................................................... Section 1.1 Available Funds........................................ Section 1.1 Backup Servicer........................................ Section 1.1 Basis Fee Percent...................................... Section 1.1 Breakage Fee........................................... Section 1.1 Business Day........................................... Section 1.1 Collateral Agent....................................... Section 1.1 Collection Account..................................... Section 1.1 Custodian Agreement.................................... Section 1.1 Default Amount Distributable Amount.................... Section 1.1 Deficiency Claim....................................... Section 1.1 Deficiency Claim Date.................................. Section 1.1 Deficiency Notice...................................... Section 1.1 Determination Date..................................... Section 1.1 Distribution Date...................................... Section 1.1 Eligible Investments................................... Section 1.1 Final Distribution Date................................ Section 1.1 Financed Vehicle....................................... Section 1.1 Insurance Agreement.................................... Section 1.1 Insurance Agreement Event of Default................... Section 1.1 Insurer Default........................................ Section 1.1 Lockbox Agreement...................................... Section 1.1 Monthly Period......................................... Section 1.1 Moody's................................................ Section 1.1 Note Distribution Account.............................. Section 1.1 Note Majority.......................................... Section 1.1 Note Purchase Agreement................................ Section 1.1 Obligor................................................ Section 1.1 OFL.................................................... Section 1.1 Offshore Rate.......................................... Section 1.1 Principal Balance...................................... Section 1.1 Purchase Agreement..................................... Section 1.1 Purchased Receivable................................... Section 1.1 Qualifying Receivable.................................. Section 1.1 Rating Agency.......................................... Section 1.1 Receivable............................................. Section 1.1 Reference Rate......................................... Section 1.1 Repurchase Agreement................................... Section 1.1 Repurchased Receivable................................. Section 1.1 Revolving Period....................................... Section 1.1 Secured Accounts....................................... Section 1.1 Security Agreement..................................... Section 1.1 Security Insurer....................................... Section 1.1 Seller................................................. Section 1.1 Servicer............................................... Section 1.1 Servicer Termination Event............................. Section 1.1 Spread Account Agreement............................... Section 1.1 Spread Account Available Funds......................... Section 1.1 Spread Account Collateral Agent........................ Section 1.1 - 12 - Standard & Poor's...................................... Section 1.1 Total Expense Percent.................................. Section 1.1 Two Year Treasury Yield................................ Section 1.1 SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Issuer to the Trustee or the Collateral Agent to take any action under any provision of this Indenture, other than any request that the Trustee authenticate the Notes specified in such request or the Trustee pay monies due and payable to the Issuer hereunder to the Issuer's assignee specified in such request, the Trustee may require the Issuer to furnish to the Trustee or the Collateral Agent, as the case may be, and to the Security Insurer, (i) an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, such individual has made such examination or investigation as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or - 13 - covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officers' certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or any Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer, the Seller or the Issuer stating that the information with respect to such factual matters is in the possession of such Person, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Whenever in this Indenture, in connection with any application or certificate or report to the Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Article VII. SECTION 104. ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced - 14 - thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 701) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner that the Trustee deems sufficient. (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. SECTION 105. NOTICES ETC., TO TRUSTEE, ISSUER AND RATING AGENCIES. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, (2) the Issuer by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Issuer addressed to: Arcadia Receivables Conduit Corp. 7825 Washington Avenue South Suite 900 Minneapolis, Minnesota 55439-2435 Attention: Treasurer or at any other address furnished in writing to the Trustee by the Issuer. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Trustee, or (3) the Security Insurer by the Issuer or the Trustee shall be sufficient for any purpose hereunder if in writing - 15 - and mailed by registered mail or personally delivered or telexed or telecopied to the recipient as follows: Financial Security Assurance Inc. 350 Park Avenue New York, NY 10022 Attention: Surveillance Department Telex No.: (212) 688-3101 Confirmation: (212) 826-0100 Telecopy Nos.: (212) 339-3518 (212) 339-3529 (In each case in which notice or other communication to the Security Insurer refers to an Event of Default, a claim on the Note Policy or with respect to which failure on the part of the Security Insurer to respond shall be deemed to constitute consent or acceptance, then a copy of such notice or other communication should also be sent to the attention of the General Counsel and the Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED.") Notices required to be given to the Rating Agencies by the Issuer or the Trustee shall be in writing, personally delivered or mailed by certified mail, return receipt requested to (i) in the case of Moody's, at the following address: Moody's Investors Service Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007 and (ii) in the case of Standard & Poor's, at the following address: Standard & Poor's Ratings Group, 26 Broadway (20th Floor), New York, New York 10004, Attention of Asset Backed Surveillance Department; or as to each of the foregoing, at such other address as shall be designated by written notice to the other parties. SECTION 106. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at such Holder's address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the - 16 - Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default. SECTION 107. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any provision of this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement with any Holder of a Note providing for a method of payment, or notice by the Trustee or any Paying Agent to such Holder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer will furnish to the Trustee a copy of each such agreement and the Trustee will cause payments to be made and notices to be given in accordance with such agreements. SECTION 108. CONFLICT WITH TRUST INDENTURE ACT. If this Indenture is qualified under the Trust Indenture Act and any provision hereof limits, qualifies or conflicts with another provision hereof that is deemed to be included in and to govern this Indenture by any of the provisions of the Trust Indenture Act, such provision deemed to be included herein shall control. SECTION 109. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 110. SUCCESSORS AND ASSIGNS. All covenants and agreements in this Indenture by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements by the Trustee in this Indenture shall bind its successors. SECTION 111. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, - 17 - legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 112. BENEFITS OF INDENTURE. The Security Insurer and its successors and assigns shall be a third-party beneficiary of the provisions of this Indenture, and shall be entitled to rely upon and directly to enforce such provisions of this Indenture so long as no Insurer Default shall have occurred and be continuing. Except as aforesaid, nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Agent and the Holders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Trust Estate, any benefit or any legal or equitable right, remedy or claim under this Indenture. The Security Insurer may disclaim any of its rights and powers under this Indenture (in which case the Trustee may exercise such right or power hereunder), but not its duties and obligations under the Note Policy, upon delivery of a written notice to the Trustee. SECTION 113. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 114. LEGAL HOLIDAYS. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue on the amount to be so paid for the period from and after any such nominal date. SECTION 115. NO BANKRUPTCY PETITION AGAINST THE ISSUER OR THE SELLER. The Trustee, by entering into this Indenture, and, notwithstanding the provisions of Section 607, each Holder by its acceptance of a Note hereunder, severally and not jointly, hereby covenants and agrees that, prior to the date that is one year and four days after the payment in full of all outstanding Notes, it will not institute against, join any other Person in instituting against, the Seller or the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other similar proceeding under the laws of the United States or any state of the United States. - 18 - ARTICLE TWO Security SECTION 201. COLLATERAL. In order to secure the due and punctual payment of the principal of and interest on the Notes and all other Trustee Secured Obligations when and as the same shall become due and payable, whether on a Payment Date, the Final Distribution Date or by declaration of acceleration, prepayment or otherwise, according to the terms of this Indenture and the Notes, the Issuer, pursuant to the Security Agreement, has granted (or in the case of after-acquired property, has agreed to grant) first priority perfected Liens on the Collateral to the Collateral Agent, all for the benefit of the Holders, the Trustee and the other Secured Parties. SECTION 202. LIMITED RECOURSE TO ISSUER. (a) The Trustee and each Holder by its acceptance of a Note hereunder agree that the obligations of the Issuer hereunder, including, without limitation, the obligation of the Issuer in respect of the Notes shall be payable solely from the Trust Estate, and that neither the Trustee nor any Holder shall look to any other Property or assets of the Issuer or to any Affiliate, stockholder, employee, officer, director or incorporator of the Issuer in respect of such obligations. (b) The Issuer's obligation to pay certain fees or expenses under, or claims arising out of, this Indenture shall be limited to moneys available to the Issuer from the Collateral in accordance with the payment priority set forth in the Servicing Agreement, and to the extent such funds are insufficient to pay such fees or expenses, it shall not constitute a claim against the Issuer. SECTION 203. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE. (a) Subject to the rights of the Secured Parties under the Security Agreement, the Trustee may take all actions it deems necessary or appropriate in order to enforce or exercise its rights under the Security Agreement in accordance with and subject to the provisions thereof. Such actions shall include, but not be limited to, advising, instructing or otherwise directing the Collateral Agent in connection with enforcing or effecting any term or provision of the Security Agreement. Subject to the provisions thereof, the Trustee shall have power to institute and to maintain suits and proceedings to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of the Security Agreement or this Indenture, and suits and proceedings to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the - 19 - enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security hereunder or be prejudicial to the interests of the Holders or of the Trustee). (b) The Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Servicing Agreement or the Security Agreement and to make further distributions of such funds to the Holders according to the provisions of this Indenture. SECTION 204. TERMINATION OF SECURITY INTERESTS. Upon the payment in full of all Trustee Secured Obligations, the Trustee shall, with the consent of the Issuer and at the request of the Seller, deliver a certificate to the Collateral Agent stating that all Trustee Secured Obligations have been paid in full, in which case the Liens created by the Security Agreement shall be released with respect to the Trustee Secured Obligations. ARTICLE THREE Note Forms SECTION 301. FORMS GENERALLY. The Notes of each Tranche shall be in substantially the form set forth in Exhibit A, or in such other form as shall be established by or pursuant to a Board Resolution and in one or more Indenture Supplements, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Notes, as evidenced by their execution of the Notes. If the form of Notes of any Tranche is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Issuer and delivered to the Trustee at or prior to the delivery of the Issuer Order contemplated by Section 404 for the authentication and delivery of such Notes. The Trustee's certificates of authentication shall be in substantially the form set forth in this Article. The Notes shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner (provided that if any Notes are to be listed on any securities exchange, then in any such manner as may be permitted by the - 20 - rules of any such securities exchange, all as determined by the officers executing such Notes, as evidenced by their execution of such Notes). SECTION 302. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is one of the Notes designated herein referred to in the within-mentioned Indenture. Norwest Bank Minnesota, National Association, as Trustee By__________________________ Authorized Signatory SECTION 303. SECURITIES LEGEND. Each Note issued hereunder will contain the following legend limiting sales to "Qualified Institutional Buyers" within the meaning of Rule 144A of the Securities Act: THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR REGULATORY AUTHORITY OF ANY STATE. THIS NOTE HAS BEEN OFFERED AND SOLD PRIVATELY. THE HOLDER HEREOF ACKNOWLEDGES THAT THESE SECURITIES ARE "RESTRICTED SECURITIES" THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND AGREES FOR THE BENEFIT OF THE ISSUER AND ITS AFFILIATES THAT THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERMITTED ASSIGNEE WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (B) TO A PERMITTED ASSIGNEE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (C) TO A PERMITTED ASSIGNEE PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SECTION 5 OF THE SECURITIES ACT, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. ARTICLE FOUR The Notes SECTION 401. AMOUNT LIMITED; ISSUABLE IN TRANCHES. The aggregate principal amount of Notes which may be authenticated and delivered and Outstanding at any time under - 21 - this Indenture is limited to the Maximum Authorized Amount. The Notes may be issued in one or more Tranches. No Tranche of Notes shall be issued under this Indenture unless (i) no Default or Event of Default shall have occurred and be continuing, (ii) the Amortization Period shall not have begun, (iii) the Insurer Notice Date shall not have occurred and (iv) after giving effect to such issuance, the Outstanding Amount of the Notes will not be greater than the aggregate principal amount of the Advances that are outstanding. All Notes shall be substantially identical except as to Original Issue Date and denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to in Section 301 and set forth in any Indenture Supplement hereto. All Notes issued under this Indenture shall be in all respects equally and ratably entitled to the benefits hereof and secured by the Collateral without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Indenture. Payments of interest on the Notes and Default Interest Distributable Amount shall be made pro rata among all Outstanding Notes, without preference or priority of any kind. Except as provided in Section 1101 concerning principal prepayments on the Notes, payments of principal on the Notes shall be made pro rata among all Outstanding Notes, without preference or priority of any kind. SECTION 402. MATURITY, PRINCIPAL PAYMENTS AND DENOMINATIONS. (a) The principal of each Note shall be payable in installments equal to the sum of the Advance Principal Distributable Amount deposited in the Note Distribution Account pursuant to Sections 3.6(a)(v) and 3.6(b)(v) of the Servicing Agreement on each Payment Date with respect to the Amortization Period and the amounts deposited in the Note Distribution Account pursuant to Sections 3.6(a)(viii) and 3.6(b)(viii) of the Servicing Agreement on each such Payment Date. Subject to Section 602 and notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing so long as an Insurer Default shall not have occurred and be continuing or, if an Insurer Default shall have occurred and be continuing, on the date on which an Event of Default shall have occurred and be continuing and the Trustee or a Note Majority have declared the Notes to be immediately due and payable in the manner provided in Section 602(a). All such principal payments on the Notes shall be made pro rata to the Noteholders entitled thereto. The Trustee shall notify the Person in whose name a Note is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and interest on such Note will be paid. Such notice shall be mailed no later than five days prior to such final Payment Date - 22 - and shall specify that such final installment will be payable only upon presentation and surrender of such Note and shall specify the place were such Note may be presented and surrendered for payment of such installment. Notices in connection with prepayments in whole of Notes shall be mailed, couriered or sent by facsimile transmission to Noteholders as provided in Section 1102. (b) Promptly following the date on which all principal of and interest on the Notes has been paid in full and the Notes have been surrendered to the Trustee, the Trustee shall, if the Security Insurer has paid any amount in respect of the Notes under the Note Policy that has not been reimbursed to it, deliver such surrendered Notes to the Security Insurer. (c) The Notes shall be issuable only in registered form and only in denominations of $100,000 and any amount in excess thereof; PROVIDED, that the foregoing shall not restrict or prevent the transfer in accordance with Section 406 of any Note having a remaining outstanding principal amount of less than $100,000. SECTION 403. INTEREST PAYMENTS. (a) Interest on the unpaid principal amount of each Outstanding Note shall be payable on each Payment Date at the Note Interest Rate for the period from its Original Issue Date, or such later date to which interest has been paid or duly provided for, to such Payment Date. Interest on the Notes shall be computed on the basis of a 360-day year and actual days elapsed. Except in connection with the prepayment of a Note, the first payment of interest on a Note issued between the first day of a calendar month and the Payment Date occurring in such calendar month will be made on the Payment Date occurring in the next succeeding calendar month. In addition, on each Payment Date with respect to any Interest Period or portion thereof after the occurrence of an Amortization Event, the Default Amount Distributable Amount shall be payable with respect to the Notes to the extent funds are available therefor pursuant to Section 3.6(b)(vii) or (ix) of the Servicing Agreement. (b) On each Business Day, the Trustee shall determine the Two Year Treasury Yield and, in addition, upon the occurrence of an Amortization Event, the Trustee shall determine the Maximum Interest Rate. On each Business Day, prior to 12:00 noon, the Trustee shall send to the Servicer, by facsimile transmission, notification of the Two Year Treasury Yield, the CP Composite Rate and the Offshore Rate, and, on the date on which an Amortization Event occurs, the Maximum Interest Rate. The Two Year Treasury Yield, the CP Composite Rate and the Offshore Rate and, if applicable, the Maximum Interest Rate, may be obtained by any Noteholder, the Agent or the Security Insurer by telephoning the Trustee at its Corporate Trust Office at (612) 667-3538. SECTION 404. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. - 23 - The Notes shall be executed on behalf of the Issuer by any of its Authorized Officers. The signature of any of these officers on the Notes may be manual or facsimile. Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. At any time and from time to time after the execution and delivery of this Indenture and receipt of the Note Policy, and upon satisfaction of all the conditions set forth in Section 401, the Issuer may deliver Notes of any Tranche executed by the Issuer to the Trustee or Authenticating Agent for authentication, together with an Issuer Order for the authentication and delivery of such Notes and an Officer's Certificate that all conditions precedent for such issuance have been satisfied, and the Trustee in accordance with the Issuer Order shall authenticate and make available for delivery such Notes. Each Note shall be dated the date of its authentication. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee or the Authenticating Agent by manual signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Note shall have been authenticated and delivered hereunder but never issued and sold by the Issuer, and the Issuer shall deliver such Note to the Trustee or the Authenticating Agent for cancellation as provided in Section 410 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Note has never been issued and sold by the Issuer, for all purposes of this Indenture such Note shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 405. TEMPORARY NOTES. Pending the preparation of definitive Notes of any Tranche, the Issuer may execute, and upon Issuer Order the Trustee or the Authenticating Agent shall authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, reproduced or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the - 24 - officers executing such Notes may determine, as evidenced by their execution of such Notes. If temporary Notes of any Tranche are issued, the Issuer will cause definitive Notes of that Tranche to be prepared without unreasonable delay. After the preparation of definitive Notes of such Tranche, the temporary Notes of such Tranche shall be exchangeable for definitive Notes of such Tranche upon surrender of the temporary Notes of such Tranche at the office or agency of the Issuer to be maintained as provided in Section 1002. Upon surrender for cancellation of any one or more temporary Notes of any Tranche the Issuer shall execute, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery, in exchange therefor a like principal amount of definitive Notes of the same Tranche and tenor of authorized denominations. Until so exchanged, the temporary Notes of any Tranche shall in all respects be entitled to the same benefits under this Indenture as definitive Notes of such Tranche. SECTION 406. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE, TRANSFER RESTRICTIONS. The Issuer shall cause to be kept a register (the "Note Register") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Notes and of transfers of the Notes. Norwest Bank Minnesota, National Association, is hereby initially appointed "Note Registrar" for the purpose of registering Notes and transfers of the Notes as herein provided. Upon any resignation of any Note Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of the Note Registrar. If a Person other than the Trustee is appointed by the Issuer as Note Registrar, the Issuer will give the Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Registrar, and the Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Executive Officer thereof as the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer to be maintained as provided in Section 1002, the Issuer shall execute, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like tenor and aggregate principal amount. - 25 - At the option of the Holder, Notes may be exchanged for other Notes in any authorized denominations, of a like tenor and aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery, the Notes which the Holder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Issuer or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in the City of New York or the city in which the Corporate Trust Office is located, or by a member firm of a national securities exchange, and such other documents as the Trustee may require. No service charge shall be made for any registration of transfer or exchange of Notes, but the Issuer or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 404 or 905 not involving any transfer. No Holder of a Note shall transfer its Note unless such transfer is made (i) in accordance (A) with Rule 144A of the Securities Act, (B) an exemption from registration provided by Rule 144 under the Securities Act (if available) or any other exemption from the registration requirements under Section 5 of the Securities Act provided the Issuer is provided an Opinion of Counsel that such transfer is so exempt, and (C) the registration and qualification requirements (or any applicable exemptions therefrom) under applicable state securities laws and (ii) to a Permitted Assignee. SECTION 407. MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If any mutilated Note is surrendered to the Trustee, the Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Issuer and the Trustee and the Security Insurer (unless an Insurer Default shall have occurred and be continuing) (i) evidence to their - 26 - satisfaction of the destruction, loss or theft of any Note and (ii) such security or indemnity as may be required by them to save each of them and any agent of any of them harmless, then, in the absence of notice to the Issuer, the Trustee or the Security Insurer that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon its request the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuer in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any new Note under this Section, the Issuer or the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Note of any Tranche issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. SECTION 408. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest on any Note that is payable, and is punctually paid or duly provided for, on any Payment Date shall be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the Record Date, by wire transfer in immediately available funds to the account and number specified in the Note Register on such Record Date for such Person or, if no such account or number is so specified, then by check mailed to such Person's address as it appears in the Note Register on such Record Date. Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. - 27 - SECTION 409. PERSONS DEEMED OWNERS. Prior to due presentment of a Note for registration of transfer, the Issuer, the Security Insurer, the Trustee and any agent of the Issuer, the Security Insurer or the Trustee may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of and (subject to Section 408) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and the Issuer, the Security Insurer, the Trustee nor any agent of the Issuer, the Security Insurer or the Trustee shall be affected by notice to the contrary. SECTION 410. CANCELLATION. Subject to Section 402(b), all Notes surrendered for payment, prepayment in whole, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by the Trustee. Subject to Section 402(b), the Issuer may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Notes previously authenticated hereunder which the Issuer has not issued and sold, and all Notes so delivered shall be promptly cancelled by the Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be held or destroyed by the Trustee in accordance with its standard retention or disposal policy as in effect at the time. ARTICLE FIVE Accounts, Disbursements and Releases SECTION 501. COLLECTION OF MONEY. Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Trustee pursuant to this Indenture. The Trustee shall apply all such money received by it as provided in this Indenture. Subject to the provisions of the Security Agreement and except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of this Indenture or the Notes, the Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate Proceedings. Any such action shall be without - 28 - prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article VI. SECTION 502. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) On each Payment Date, the Trustee shall distribute all amounts on deposit in the Note Distribution Account to Noteholders in respect of the Notes based on the instructions set forth in the Servicer's Certificate to the extent of amounts due and unpaid on the Notes for principal, interest and Default Amount Distributable Amounts (if any), first to pay all accrued and unpaid interest, then to pay principal on the Notes and then to pay any Default Amount Distributable Amount. (b) Subject to Section 701(c), the Trustee shall not in any way be held liable by reason of any insufficiency in any of the Secured Accounts resulting from any loss or any Eligible Investment included therein except for losses attributable to the Trustee's failure to make payments on such Eligible Investments issued by the Trustee, in its commercial capacity as principal obligor and not as Trustee, in accordance with their terms. ARTICLE SIX Remedies SECTION 601. EVENTS OF DEFAULT. "Event of Default," wherever used herein with respect to the Notes, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (i) default in the payment of any interest on any Note when the same becomes due and payable, and such default shall continue for a period of two Business Days (solely for purposes of this clause, a payment on the Notes funded by the Security Insurer or the Collateral Agent shall be deemed to be a payment made by the Issuer); or (ii) default in the payment of or any installment of the principal on any Note when the same becomes due and payable and such default shall continue for a period of two Business Days (solely for purposes of this clause, a payment on the Notes funded by the Security Insurer or the Collateral Agent shall be deemed to be a payment made by the Issuer); or (iii) so long as an Insurer Default shall not have occurred and be continuing, an Insurance Agreement Event of - 29 - Default shall have occurred; provided, however, that the occurrence of an Insurance Agreement Event of Default may not form the basis of an Event of Default unless the Security Insurer shall have delivered to the Issuer and the Trustee and not rescinded a written notice specifying that such Insurance Agreement Event of Default constitutes an Event of Default under the Indenture; or (iv) so long as an Insurer Default shall have occurred and be continuing, default in the observance or performance or any covenant or agreement of the Issuer made in this Indenture (other than a covenant or agreement, a default in the observance or performance of which is elsewhere in this Section specifically dealt with), or any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstances or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, for a period of 30 days after there shall have been given, by registered or certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% of the Outstanding Amount of the Notes, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (v) so long as an Insurer Default shall have occurred and be continuing, the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Trust Estate in an involuntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust Estate, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (vi) so long as an Insurer Default shall have occurred and be continuing, the commencement by the Issuer of a voluntary case under any applicable Federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer for any substantial part of the Trust Estate, or the making by the Issuer of any general assignment for the benefit of - 30 - creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing. The Issuer shall deliver to the Trustee and the Security Insurer, within five days after obtaining knowledge of the occurrence thereof, written notice in the form of an Officers' Certificate of any event which with the giving of notice and the lapse of time would become an Event of Default under clause (iii), its status and what action the Issuer is taking or proposes to take with respect thereto. SECTION 602. RIGHTS UPON EVENT OF DEFAULT. (a) If an Insurer Default shall not have occurred and be continuing and an Event of Default shall have occurred and be continuing, the Notes shall become immediately due and payable at par, together with accrued interest thereon. In the event of any acceleration of the Notes by operation of this Section 602, the Trustee shall continue to be entitled to make claims under the Note Policy pursuant to Section 615 hereof for Scheduled Payments on the Notes. Payments under the Note Policy following acceleration of the Notes shall be applied by the Trustee: FIRST: to Noteholders for amounts due and unpaid on the Notes for interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; and SECOND: to Noteholders for amounts due and unpaid on the Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal; (b) In the event the Notes are accelerated due to an Event of Default, the Security Insurer shall have the right (in addition to its obligation to pay Scheduled Payments on the Notes in accordance with the Note Policy), but not the obligation, to make payments under the Note Policy or otherwise of interest and principal due on the Notes, in whole or in part, on any date or dates following such acceleration as the Security Insurer, in its sole discretion, shall elect. (c) If an Insurer Default shall have occurred and be continuing and an Event of Default shall have occurred and be continuing, the Trustee if so requested in writing by the Agent shall, upon prior written notice to the Rating Agencies, declare by written notice to the Issuer that the Notes become, whereupon they shall become, immediately due and payable at par, together with accrued interest thereon. Notwithstanding anything to the contrary in this paragraph (c), if an Event of Default specified in Section 601(v) or (vi) shall occur and be continuing when an Insurer Default has occurred and is continuing, the Notes shall become immediately due and payable at par, together with accrued interest thereon. - 31 - SECTION 603. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE; AUTHORITY OF CONTROLLING PARTY. (a) Subject to the provisions of the Security Agreement, the Issuer covenants that if the Notes are accelerated following the occurrence of an Event of Default, the Issuer will, upon demand of the Trustee, pay to it, for the benefit of the Holders of the Notes, the whole amount then due and payable on such Notes for principal and interest, with interest upon the overdue principal, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the Note Interest Rate and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee and its agents and counsel. (b) If an Event of Default occurs and is continuing, the Trustee may in its discretion but with the consent of the Controlling Party (except as provided in Section 603(c) below), proceed to protect and enforce its rights and the rights of the Noteholders, by such appropriate Proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Trustee by this Indenture or by law. (c) In case there shall be pending, relative to the Issuer or any other obligor upon the Notes or any Person having or claiming an ownership interest in the Trust Estate, Proceedings under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in case of any other comparable judicial Proceedings relative to the Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of any Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such Proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their - 32 - respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence or bad faith) and of the Noteholders allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of Notes in any election of a trustee, as standby trustee or person performing similar functions in any such Proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on such claims and to distribute all amounts received with respect to the claims of the Noteholders and of the Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee or the Holders of Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Noteholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to such Noteholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith. (e) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person. (f) All rights of action and of asserting claims under this Indenture, the Security Agreement, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes or the production thereof in any trial or other Proceedings relative thereto, and any such action or Proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Notes, - 33 - (g) In any Proceedings brought by the Trustee (including any Proceedings involving the interpretation of any provision of this Indenture or the Security Agreement), the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Noteholder a party to any such Proceedings. SECTION 604. LIMITATION ON SUITS. No Holder of any Note shall have any right to institute any Proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Notes; (2) the Holders of not less than 25% of the Outstanding Amount of the Notes shall have made written request to the Trustee to institute such Proceeding in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such Proceeding; (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of the Notes; and (6) an Insurer Default shall have occurred and be continuing. It is understood and intended that no one or more of the Holders shall have any right in any manner whatever hereunder or under the Notes to (i) affect, disturb or prejudice or the rights of the Holders of any other Notes, (ii) obtain or seek to obtain priority or preference over any other such Holder or (iii) enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all such Holders. - 34 - SECTION 605. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of and interest (including, without limitation, any Breakage Fee) on such Note on or after the respective due dates thereof expressed in such Note or in this Indenture and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder; PROVIDED, HOWEVER, that so long as an Insurer Default shall not have occurred and be continuing, no such suit shall be instituted; PROVIDED FURTHER, HOWEVER, that notwithstanding the foregoing proviso, a Holder shall be entitled to institute suit against the Seller for the enforcement of payment of any Breakage Fee to which it may be entitled to receive hereunder. SECTION 606. RESTORATION OF RIGHTS AND REMEDIES. If any of the Trustee, the Controlling Party or any Holder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, the Controlling Party or to such Holder, then and in every such case, subject to any determination in such Proceeding, the Issuer, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such Proceeding had been instituted. SECTION 607. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen securities in the last paragraph of Section 407, no right or remedy herein conferred upon or reserved to any of the Trustee, the Controlling Party or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 608. DELAY OR OMISSION NOT WAIVER. No delay or omission of any of the Trustee, the Controlling Party or any Holder of any Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the - 35 - Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 609. CONTROL BY HOLDERS. If the Issuer is the Controlling Party, the Holders of a majority of the Outstanding Amount of the Notes shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Notes; PROVIDED that (1) such direction shall not be in conflict with any rule of law, with this Indenture or with the Security Agreement, and (2) the Issuer may take any other action deemed proper by the Issuer which is not inconsistent with such direction. SECTION 610. WAIVER OF PAST DEFAULTS. If an Insurer Default shall have occurred and be continuing, the Holders of not less than a majority of the Outstanding Amount of the Notes may on behalf of the Holders of all the Notes waive any past Default or Event of Default hereunder and its consequences, except a Default: (1) in the payment of the principal of or interest, if any, on any Note, or (2) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to waive any past Default or Event of Default hereunder. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any Default or Event of Default hereunder, whether or not such Holders remain Holders after such record date; and unless such majority in principal amount shall have been obtained prior to the date which is 90 days after such record date, any such waiver previously given shall automatically and without further action by any Holder be cancelled and of no further effect. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. - 36 - SECTION 611. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Issuer, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% of the Outstanding Amount of the Notes, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture. SECTION 612. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantages of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 613. ACTION ON NOTES. The Trustee's right to seek and recover judgment on the Notes or under this Indenture shall not be affected by the seeking, obtaining or application or any other relief under or with respect to this Indenture. Neither the lien of the Security Agreement nor any rights or remedies of the Trustee or the Noteholders shall be impaired by the recovery of any judgment by the Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Trust Estate or upon any of the assets of the Issuer. SECTION 614. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. Subject to the provisions of the Security Agreement and the other Related Documents, promptly following a request from the Trustee to do so and at the Issuer's expense, the Issuer agrees to take all such lawful action as the Trustee may request - 37 - to compel or secure the performance and observance by the Seller, the Servicer and OFL, as applicable, of each of their obligations to the Issuer under or in connection with the Servicing Agreement or to OFL and the Seller under or in connection with the Purchase Agreement or to the Seller under or in connection with the Repurchase Agreement in accordance with the terms of each thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Servicing Agreement, the Repurchase Agreement and the Purchase Agreement to the extent and in the manner directed by the Trustee, including the transmission of notices of default on the part of the Seller or the Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by any of OFL, the Seller or the Servicer of each of their obligations under such agreements. SECTION 615. CLAIMS UNDER NOTE POLICY. (a) In the event that the Trustee has delivered a Deficiency Notice with respect to any Deficiency Claim Date and the Trustee has not cancelled and returned the Note Policy to the Security Insurer, the Trustee shall determine on the related Draw Date whether the sum of (i) the amount of Spread Account Available Funds with respect to such Deficiency Claim Date (excluding, following the occurrence of an Amortization Event, amounts distributable to the Servicer pursuant to Section 3.6(b)(i)) and (ii) the amount of the Deficiency Claim Amount, if any, to be delivered by the Spread Account Collateral Agent to the Trustee pursuant to a Deficiency Notice with respect to such Deficiency Claim Date (as stated in the certificate delivered on such Deficiency Claim Date by the Spread Account Collateral Agent pursuant to Section 3.03(a) of the Spread Account Agreement) would be insufficient to pay the Noteholders' Interest Distributable Amount and, with respect to a Payment Date with respect to the Amortization Period, the amounts referred to in clauses (i) and (ii) would be insufficient, after giving effect to the distributions required by clauses (i) through (iv) of Section 3.6(a) of the Servicing Agreement or, if an Amortization Event shall have occurred, after giving effect to the distributions required by clauses (i) through (iv) of Section 3.6(b) of the Servicing Agreement, to pay the Noteholders' Principal Distributable Amount for the related Payment Date, then in any such event the Trustee shall furnish to the Security Insurer no later than 12:00 noon New York City time on the related Draw Date a completed Notice of Claim in the amount of the shortfall in amounts so available to pay the Noteholders' Interest Distributable Amount and, on Payment Dates with respect to the Amortization Period, the Noteholders' Principal Distributable Amount with respect to such Payment Date (the amount of any such shortfall being hereinafter referred to as the "Policy Claim Amount"). Amounts paid by the Security Insurer pursuant to a claim submitted under this Section 615 shall be deposited by the Trustee into the Note Distribution Account for payment to Noteholders on the related Payment Date. - 38 - (b) Any notice delivered by the Trustee to the Security Insurer pursuant to Section 615(a) shall specify the Policy Claim Amount claimed under the Note Policy and shall constitute a "Notice of Claim" under the Note Policy. In accordance with the provisions of the Note Policy, the Security Insurer is required to pay to the Trustee the Policy Claim Amount properly claimed thereunder by 12:00 noon, New York City time, on the later of (i) the third Business Day following receipt on a Business Day of the Notice of Claim, and (ii) the applicable Payment Date. Any payment made by the Security Insurer under the Note Policy shall be applied solely to the payment of the Notes, and for no other purpose. (c) The Trustee shall (i) receive as attorney-in-fact of each Noteholder any Policy Claim Amount from the Security Insurer and (ii) deposit the same in the Note Distribution Account for disbursement to the Noteholders as provided in Section 402, 403 or 602. Any and all Policy Claim Amounts disbursed by the Trustee from claims made under the Note Policy shall not be considered payment by the Issuer, and shall not discharge the obligations of the Issuer with respect thereto. The Security Insurer shall, to the extent it makes any payment with respect to the Notes, become subrogated to the rights of the recipients of such payments to the extent of such payments. Subject to and conditioned upon any payment with respect to the Notes by or on behalf of the Security Insurer, the Trustee shall assign to the Security Insurer all rights to the payment of interest or principal with respect to the Notes which are then due for payment to the extent of all payments made by the Security Insurer and the Security Insurer may exercise any option, vote, right, power or the like with respect to the Notes to the extent that it has made payment pursuant to the Note Policy. To evidence such subrogation, the Note Registrar shall note the Security Insurer's rights as subrogee upon the register of Noteholders upon receipt from the Security Insurer of proof of payment by the Security Insurer of any Noteholders' Interest Distributable Amount or Noteholders' Principal Distributable Amount. The foregoing subrogation shall in all cases be subject to the rights of the Noteholders to receive all scheduled payments in respect of the Notes. (d) The Trustee shall keep a complete and accurate record of all funds delivered by the Security Insurer to the Trustee and the allocation of such funds to the payment of interest on and principal paid with respect to any Note. The Security Insurer shall have the right to inspect such records at reasonable times upon one Business Day's prior notice to the Trustee. (e) The Trustee shall be entitled to enforce on behalf of the Noteholders the obligations of the Security Insurer under the Note Policy. Notwithstanding any other provision of this Indenture or any Related Document, the Noteholders are not entitled to institute proceedings directly against the Security Insurer. - 39 - SECTION 616. PREFERENCE CLAIMS. (a) In the event that the Trustee has received a certified copy of an order of the appropriate court that any Noteholders' Interest Distributable Amount or Noteholders' Principal Distributable Amount paid on a Note (including in the computation of such Noteholders' Principal Distributable Amount for the purpose of this Section 616, if the Security Insurer shall have received the items described in clauses (A), (B) and (C) of Section 3 of the Note Policy, any distribution in respect of principal on the Notes prior to the Final Maturity Date that was subsequently avoided as a preference payment under applicable bankruptcy, insolvency, receivership or similar law to the extent any such amount remains unpaid on such date) has been avoided in whole or in part as a preference payment under applicable bankruptcy law, the Trustee shall so notify the Security Insurer, shall comply with the provisions of the Note Policy to obtain payment by the Security Insurer of such avoided payment, and shall, at the time it provides notice to the Security Insurer, notify Holders of the Notes by mail that, in the event that any Noteholder's payment is so recoverable, such Noteholder will be entitled to payment pursuant to the terms of the Note Policy. Pursuant to the terms of the Note Policy, the Security Insurer will make such payment on behalf of the Noteholder to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the order (as defined in the Note Policy) and not to the Trustee or any Noteholder directly (unless a Noteholder has previously paid such payment to the receiver, conservator, debtor-in-possession or trustee in bankruptcy, in which case the Security Insurer will make such payment to the Trustee for distribution to such Noteholder upon proof of such payment reasonably satisfactory to the Security Insurer). (b) The Trustee shall promptly notify the Security Insurer of any proceeding or the institution of any action (of which the Trustee has actual knowledge) seeking the avoidance as a preferential transfer under applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (a "Preference Claim") of any distribution made with respect to the Notes. Each Holder, by its purchase of Notes, and the Trustee hereby agree that so long as an Insurer Default shall not have occurred and be continuing, the Security Insurer may at any time during the continuation of any proceeding relating to a Preference Claim direct all matters relating to such Preference Claim including, without limitation, (i) the direction of any appeal of any order relating to any Preference Claim and (ii) the posting of any surety, supersedeas or performance bond pending any such appeal at the expense of the Security Insurer, but subject to reimbursement as provided in the Insurance Agreement. In addition, and without limitation of the foregoing, as set forth in Section 615(c), the Security Insurer shall be subrogated to, and each Noteholder and the Trustee hereby delegate and assign, to the fullest extent permitted by law, the rights of the Trustee and each Noteholder in the conduct of any proceeding with respect to a Preference Claim, including, without limitation, all rights - 40 - of any party to an adversary proceeding action with respect to any court order issued in connection with any such Preference Claim. ARTICLE SEVEN The Trustee SECTION 701. CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, the Servicing Agreement or any other Related Document to which it is a party, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, the Servicing Agreement or any other Related Document to which it is a party; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture, the Servicing Agreement or any other Related Document to which it is a party, shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own wilful misconduct; PROVIDED, that (1) this subsection shall not be construed to limit the effect of subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; - 41 - (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Security Insurer or the Holders of a majority of the Outstanding Amount of the Notes, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Notes; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Servicing Agreement. (g) The Trustee shall, upon one Business Day's prior notice to the Trustee, permit any representative of the Security Insurer or the Agent, during the Trustee's normal business hours, to examine all books of account, records, reports and other papers of the Trustee relating to the Notes, to make copies and extracts therefrom and to discuss the Trustee's affairs and actions, as such affairs and actions relate to the Trustee's duties with respect to the Notes, with the Trustee's officers and employees responsible for carrying out the Trustee's duties with respect to the Notes. (h) In no event shall the Trustee be required to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer, or any other party, under the Servicing Agreement except during such time, if any, as the Trustee, in its capacity as Backup Servicer shall be the successor to, and be vested with the rights, powers, duties and privileges of the Servicer in accordance with the terms of the Servicing Agreement. (i) The Trustee shall, and hereby agrees that it will, perform all of the obligations and duties required of it under the Servicing Agreement and all other Related Documents to which it is a party. - 42 - (j) The Trustee shall, and hereby agrees that it will, hold the Note Policy in trust, and will hold any proceeds of any claim on the Note Policy in trust solely for the use and benefit of the Noteholders. (k) Without limiting the generality of this Section 701, the Trustee shall have no duty (i) to see to any recording, filing or depositing of this Indenture or any agreement referred to herein or any financing statement evidencing a security interest in the Financed Vehicles, or to see the maintenance of any such recording or filing or depositing or to any recording, refiling or redepositing of any thereof, (ii) to see to any insurance of the Financed Vehicles or Obligors or to the effect or maintain any such insurance, (iii) to see to the payment or discharge of any tax, assessment or other governmental charge or any Lien or encumbrance of any kind owing with respect to, assessed or levied against any part of the Trust Estate, (iv) to confirm or verify the contents of any reports or certificates delivered to the Trustee pursuant to this Indenture or the Servicing Agreement believed by the Trustee to be genuine and to have been signed or presented by the proper party or parties, or (v) to inspect the Financed Vehicles at any time or ascertain or inquire as to the performance or observance of any of the Issuer's, the Seller's or the Servicer's representation, warranties or covenants or the Servicer's duties and obligations as Servicer under the Agreement. SECTION 702. NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall notify the Agent and each Rating Agency of any such Default promptly after it occurs. SECTION 703. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of Section 701: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or Issuer Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be - 43 - herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Security Insurer or the Holders pursuant to this Indenture, unless the Security Insurer or such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 704. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES. The recitals contained herein, in any Indenture Supplement and in the Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes, the Collateral or the Trust Estate. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Issuer of Notes or the proceeds thereof. SECTION 705. MAY HOLD NOTES. The Trustee, any Authenticating Agent, any Paying Agent, any Note Registrar or any other agent of the Issuer, in - 44 - its individual or any other capacity, may become the owner or pledgee of Notes and, subject to Sections 708 and 713, may otherwise deal with the Issuer with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Note Registrar or such other agent. SECTION 706. MONEY HELD IN TRUST. Money held by the Trustee in trust hereunder must be segregated from other funds. The Trustee shall be under no liability for interest on any money received by it and held by it hereunder in trust except as otherwise agreed with the Issuer. SECTION 707. COMPENSATION AND INDEMNITY. (a) OFL in a separate letter agreement (the "Letter Agreement") has covenanted and agreed to pay to the Trustee, and the Trustee shall be entitled to, certain annual fees, which shall not be limited by any law on compensation of a Trustee of an express trust. In the Letter Agreement, OFL has also agreed to reimburse the Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. Pursuant to the Letter Agreement, OFL has agreed to indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. (b) If notwithstanding the provisions of the Letter Agreement, OFL fails to pay any fee or expense due to the Trustee pursuant to the terms of the Letter Agreement, the Trustee shall be entitled to a distribution in respect of such amount pursuant to Section 3.6(a)(iii) or Section 3.6(b)(iii) of the Servicing Agreement. OFL's payment obligations to the Trustee pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 601(v) or (vi) with respect to the Issuer, the expenses are intended to constitute expenses of administration under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or similar law. Notwithstanding anything else set forth in this Indenture or the Related Documents, the Trustee agrees that the obligations of the Issuer (but not OFL) to the Trustee hereunder and under the Related Documents shall be recourse to the Trust Estate only. In addition, the Trustee agrees that its recourse to the Issuer, the Trust Estate and the Seller shall be limited to the right to receive the distributions referred to in the first sentence of this Section 707(b). - 45 - SECTION 708. DISQUALIFICATION; CONFLICTING INTERESTS. If this Indenture is qualified under the Trust Indenture Act and if the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 709. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder, which (a) shall be a commercial bank or trust company organized and doing business under the laws of the United States of America or any State thereof,(b) shall have a combined capital and surplus of at least $50,000,000 and a long-term deposit rating of at least Baa3 from Moody's or otherwise be acceptable to Moody's and (c) shall be authorized to exercise corporate trust powers and be subject to supervision or examination by Federal or State authority. If such commercial bank or trust company publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such commercial bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 710. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (1) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 711. (2) The Trustee may resign at any time with respect to the Notes by giving written notice thereof to the Issuer. If the instrument of acceptance by a successor Trustee required by Section 711 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Notes. (3) The Trustee may be removed at any time with respect to the Notes by Act of the Holders of a majority of the Outstanding Amount of the Notes, delivered to the Trustee and to the Issuer. (4) If at any time: - 46 - (1) The Trustee shall fail to comply with Section 708 after written request therefor by the Issuer or by any Holder who has been a bona fide Holder of a Note for at least six months, or (2) the Trustee shall cease to be eligible under Section 709 and shall fail to resign after written request therefor by the Issuer or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Issuer may, with the consent of the Security Insurer (and at the request of the Security Insurer shall, unless an Insurer Default shall have occurred and be continuing) remove the Trustee. (5) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Notes, the Issuer shall promptly appoint a successor Trustee acceptable to the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing) and shall comply with the applicable requirements of Section 711. If the Issuer fails to appoint such a successor Trustee, the Security Insurer may appoint a successor Trustee. (6) The Issuer shall give notice of each resignation and each removal of the Trustee with respect to the Notes and each appointment of a successor Trustee with respect to the Notes by mailing written notice of such event by first-class mail, postage prepaid, to all holders of Notes as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee with respect to the Notes and the address of its Corporate Trust Office. SECTION 711. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of the appointment hereunder of a successor Trustee with respect to the Notes, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Issuer and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to - 47 - such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) of this Section. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 712. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The Trustee shall provide the Rating Agencies prompt notice of any such transaction. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes. SECTION 713. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. If this Indenture is ever qualified under the Trust Indenture Act, then the provisions of Section 311 of the Trust Indenture Act shall govern. SECTION 714. APPOINTMENT OF AUTHENTICATING AGENT. As of the date of the Indenture and at any time when any of the Notes remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more Tranche of Notes which shall be authorized to act on behalf of the Trustee to authenticate Notes of such Tranche issued upon exchange, registration of transfer or partial prepayment thereof, or pursuant to Section 406, and Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Notes by the Trustee upon - 48 - exchange, registration of transfer or partial prepayment thereof or the Trustee's certificate of authentication in connection therewith, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Issuer and shall at all times be a corporation organized and doing business under the laws of the United States of America or any State thereof, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Issuer. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Notes, as their names and addresses appear in the Note Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. No resignation or termination of an Authenticating Agent shall become effective until a successor Authenticating Agent shall be appointed and - 49 - qualified hereunder or the Trustee assumes the duties of Authenticating Agent hereunder. The Issuer agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. In the event an Authenticating Agent is appointed under this Indenture, the Trustee shall incur no liability for such appointment or for any misconduct or negligence of such Authenticating Agent, including without limitation, its authentication of the Notes upon original issuance or pursuant to Section 406. In the event the Trustee does incur liability for any such misconduct or negligence of the Authenticating Agent, the Issuer agrees to indemnify the Trustee for, and hold it harmless against, any such liability, including the costs and expenses of defending itself against any liability in connection with such misconduct or negligence of the Authenticating Agent. If an appointment with respect to one or more Tranches is made pursuant to this Section, the Notes of such Tranche may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Notes referred to in the within-mentioned Indenture. Norwest Bank Minnesota, National Association As Trustee By: ___________________________ As Authenticating Agent By: _______________________ Authorized Officer SECTION 715. PAYING AGENT. (a) The payment responsibilities for the Notes shall be performed by a Paying Agent, appointed by the Issuer and, so long as no Insurer Default shall have occurred and be continuing, consented to by the Security Insurer, which (a) shall be a commercial bank or trust company organized and doing business under the laws of the United States or of any State thereof, (b) shall have a combined capital and surplus of at least $50,000,000 and a long-term deposits rating of at least Baa3 from Moody's or otherwise be acceptable to Moody's, and (c) shall be authorized to exercise corporate trust powers and be subject to supervision or examination by Federal or State authority. - 50 - Norwest Bank Minnesota, National Association, is hereby initially appointed Paying Agent for the purpose of making payments on the Notes as herein provided. (b) Upon the resignation or removal of the Paying Agent, the Trustee shall, with the consent of the Issuer and, so long as no Insurer Default shall have occurred and be continuing, promptly appoint a successor Paying Agent meeting the requirements of Section 715(a) to perform the duties and exercise the rights of the Paying Agent pursuant to this Indenture. Such resignation or removal shall not be effective until a successor Paying Agent is appointed hereunder. Upon the appointment of a successor Paying Agent, the Paying Agent shall transfer all funds held by it hereunder to such successor. SECTION 716. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirement or any jurisdiction in which any part of the Trust may at the time be located, the Trustee, with the consent of the Security Insurer (so long as an Insurer Default shall not have occurred and be continuing), shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Noteholders, such title to the Trust, or any part hereof, and subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section 709. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; - 51 - (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder, and (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Each instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee. (d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new successor trustee. ARTICLE EIGHT Holders' Lists and Reports by Trustee and Issuer SECTION 801. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS. The Issuer will furnish or cause to be furnished to the Trustee (a) not more than five days after the earlier of (i) each Record Date and (ii) three months after the last Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Notes as of such Record Date, (b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than 10 days prior to the time such list is furnished; PROVIDED, HOWEVER, that so long as the Trustee is the Note Registrar, no such list shall be required to be furnished. The Trustee or, if the Trustee is not the Note Registrar, the Issuer shall furnish to the Security Insurer in writing on an annual basis on each November 30 and at such other times as the Security Insurer may request a copy of the list. - 52 - SECTION 802. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 801 and the names and addresses of Holders received by the Trustee in its capacity as Note Registrar. The Trustee may destroy any list furnished to it as provided in Section 801 upon receipt of a new list so furnished. (b) Every Holder of Notes, by receiving and holding the same, agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 802(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 802(b). SECTION 803. REPORTS BY TRUSTEE. If this Indenture is ever qualified under the Trust Indenture Act, then the Trustee shall comply with the provisions of Section 313 of the Trust Indenture Act. SECTION 804. REPORTS BY ISSUER. If this Indenture is qualified under the Trust Indenture Act, the Issuer shall: (1) file with the Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Issuer is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the - 53 - Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (3) transmit by mail to all Holders, as their names and addresses appear in the Note Register, and each Rating Agency within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Issuer pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; and (4) furnish any other periodic reports as required by the Trust Indenture Act. ARTICLE NINE Indenture Supplements SECTION 901. INDENTURE SUPPLEMENTS WITHOUT CONSENT OF HOLDERS. (a) Without the consent of any Holders but with the consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing), the Agent and the Trustee (the consent of which shall not be withheld or delayed with respect to any Indenture Supplement that has been consented to by the Security Insurer that does not materially and adversely affect the Trustee), and with prior written notice to the Rating Agencies and the Issuer, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more Indenture Supplements, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession, in compliance with the applicable provisions hereof, of another corporation to the Issuer and the assumption by any such successor of the covenants of the Issuer herein and in the Notes; or (2) to add to the covenants of the Issuer for the benefit of the Holders of the Notes or to surrender any right or power herein conferred upon the Issuer; or (3) to add any additional Events of Default; or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Notes in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Notes in uncertificated form, or to facilitate the issuance of Notes in global form through the facilities of a Depository; or - 54 - (5) to modify the restrictions on and procedures for resale and other transfers of the Notes to reflect any change in applicable law or regulation (or the interpretation thereof) or in practices relating to the resale or transfer of restricted securities generally; or (6) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 711(b); or (7) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to qualify, requalify or continue the qualification of this Indenture (including any supplemental indenture) under the Trust Indenture Act, or under any similar Federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar Federal statute hereinafter enacted; or (8) to convey, transfer and assign to the Trustee Property to secure the Notes, and to correct or amplify the description of any Property at any time subject to this Indenture or to assure, convey, and confirm unto the Trustee or the Collateral Agent any Property subject or required to be subject to this Indenture; or (9) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, as long as such action shall not adversely affect the interests of the Holders of Notes in any material respect. (b) The Issuer and the Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Notes but with the consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing) and with prior written notice to the Agent and the Rating Agencies, enter into an Indenture Supplement or Supplements for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Noteholder or Permitted Assignee. - 55 - SECTION 902. INDENTURE SUPPLEMENTS WITH CONSENT OF HOLDERS. The Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies, with the consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing), and with the consent of the Agent, by notice delivered to the Issuer and the Trustee, enter into an Indenture Supplement or Supplements hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Notes under this Indenture; PROVIDED, that, subject to the express rights of the Security Insurer under the Related Documents, no such Indenture Supplement shall, without the consent of the Holder of each Outstanding Note affected thereby, (1) change the date of payment any installment of principal of or interest on any Note, or reduce the principal amount thereof or the rate of, or method of computation of the rate of, interest thereon or the Prepayment Price with respect thereto, change the provision of this Indenture relating to the application or collections on, or the proceeds of the sale of, the Trust Estate to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the respective due dates thereof, or (2) reduce the percentage of the Outstanding Amount of the Notes, the consent of whose Holders is required for any such Indenture Supplement, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) permit the creation of any lien prior to the lien created by the Security Agreement with respect to any part of the Trust Estate, or terminate the lien created by the Security Agreement on any Property subject hereto or deprive any Holder of the security afforded by the lien of the Security Agreement, except to the extent expressly permitted by this Indenture or the Security Agreement, or (4) modify any of the provisions of this Section or Section 610, except to increase any such percentage or to provide that certain other provisions of this Indenture or the Related Document cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby, or (5) modify or alter the provisions of the second proviso to the definition of the term "Outstanding." - 56 - PROVIDED, FURTHER, that no such Indenture Supplement, without the consent of the Agent shall have a material adverse effect on the rights of the Agent. The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any Indenture Supplement hereto. If a record date is fixed, the Holders on such record date or their duly designated proxies, and only such Persons, shall be entitled to consent to such Indenture Supplement, whether or not such Holders remain Holders after such record date; PROVIDED, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed Indenture Supplement, but it shall be sufficient if such Act shall approve the substance thereof. The Trustee may in its discretion determine whether or not any Notes would be affected by any Indenture Supplement and any such determination shall be conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Trustee shall not be liable for any such determination made in good faith. Promptly after the execution by the Issuer and the Trustee of any Supplemental Indenture pursuant to this Section, the Trustee shall mail to the Holders of the Notes to which such amendment or Supplemental Indenture relates a notice setting forth in general terms the substance of such Supplemental Indenture. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. SECTION 903. EXECUTION OF INDENTURE SUPPLEMENTS. In executing, or accepting the additional trusts created by, any Indenture Supplement permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee may receive, and (subject to Section 701) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such Indenture Supplement is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. EFFECT OF INDENTURE SUPPLEMENTS. Upon the execution of any Indenture Supplement under this Article, this Indenture shall be modified in accordance -57- therewith, and such Indenture Supplement shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. REFERENCE IN NOTES TO INDENTURE SUPPLEMENTS. Notes authenticated and delivered after the execution of any Indenture Supplement pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such Indenture Supplement. If the Issuer or the Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Issuer, to any such Indenture Supplement may be prepared and executed by the Issuer and authenticated and delivered by the Trustee in exchange for Outstanding Notes. SECTION 906. RATING AGENCY CONFIRMATION. No Indenture Supplement authorized and executed pursuant to this Article Nine shall be effective until the Trustee shall have received confirmation from the Rating Agencies that such Indenture Supplement shall not result in a capital charge to the Security Insurer. ARTICLE TEN Covenants The Issuer hereby covenants and agrees that so long as this Indenture is in effect and any Notes remain Outstanding: SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly and punctually pay the principal of and interest on the Notes in accordance with the terms of the Notes and this Indenture. Without limiting the foregoing, the Issuer will cause to be distributed all amounts on deposit in the Note Distribution Account on a Payment Date. Amounts properly withheld under the Code by any Person from a payment to any Noteholder of interest or principal shall be considered as having been paid by the Issuer to such Noteholder for all purposes of this Indenture. SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in The City of New York, the City of Chicago, Illinois or the City of Minneapolis, Minnesota an office or agency where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer -58- shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Issuer hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. SECTION 1003. CONSOLIDATION, MERGER, SALE OF ASSETS. (a) the Issuer shall not consolidate or merge with or into any other Person, unless (i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall be a Person organized and existing under the laws of the United States of America or any State and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee and the Agent, in form and substance satisfactory to the Trustee, the Agent and the Security Insurer (so long as no Insurer Default shall have occurred and be continuing), the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture and each other Related Document on the part of the Issuer to be performed or observed, all as provided herein; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) any action as is necessary to maintain the lien and security interest created in favor of the Collateral Agent by the Security Agreement shall have been taken; (v) the Issuer shall have delivered to the Trustee and the Agent an Officers' Certificate and an Opinion of Counsel (which shall describe the actions taken as required by clause (a)(iv) of this Section 1003 or that no such actions will be taken) each stating that such consolidation or merger and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act); and (vi) so long as no Insurer Default shall have occurred and be continuing, the Issuer shall have given the Security Insurer written notice of such consolidation or merger at least 20 Business Days prior to the consummation of such action and shall have received the prior written approval of the Security Insurer of such consolidation or merger and the Issuer or the Person (if other than the Issuer) formed by or surviving such consolidation or merger has a net worth, -59- immediately after such consolidation or merger, that is (a) greater than zero and (b) not less than the net worth of the Issuer immediately prior to giving effect to such consolidation or merger. (b) The Issuer shall not convey or transfer all or substantially all of its properties or assets, including those included in the Trust Estate, to any Person (except as expressly permitted by the Indenture, the Security Agreement, the Repurchase Agreement or the Servicing Agreement), unless (i) the Person that acquires by conveyance or transfer the properties and assets of the Issuer shall (A) be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee and the Agent in form and substance satisfactory to the Trustee, the Agent and the Security Insurer (so long as no Insurer Default shall have occurred and be continuing), the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture and each Related Document on the part of the Issuer to be performed or observed, all as provided herein, (C) expressly agree by means of such supplemental indenture that all right, title and interest so conveyed or transferred shall be subject and subordinate to the rights of Holders of the Notes, (D) unless otherwise provided in such Supplemental Indenture, expressly agree to indemnify, defend and hold harmless the Issuer against and from any loss, liability or expense arising under or related to this Indenture and the Notes and (E) expressly agree by means of such supplemental indenture that such Person (or if a group of Persons, then one specified Person) shall make all filings with the Commission (and any other appropriate Person) required by the Exchange Act in connection with the Notes; (ii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction; (iv) the Issuer shall have received an Opinion of Counsel which shall be delivered to and shall be satisfactory to the Trustee, the Agent and the Security Insurer (so long as no Insurer Default shall have occurred and be continuing) to the effect that such transaction will not have any material adverse tax consequence to the Issuer, the Security Insurer or any Noteholder; -60- (v) any action as is necessary to maintain the lien and security interest created in favor of the Collateral Agent by the Security Agreement shall have been taken; (vi) the Issuer shall have delivered to the Trustee and the Agent an Officers' Certificate and an Opinion of Counsel (which shall describe the actions taken as required by clause (b)(v) of this Section 1003 or that no such actions will be taken) each stating that such conveyance or transfer and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with (including any filing required by the Exchange Act); and (vii) so long as no Insurer Default shall have occurred and be continuing, the Issuer shall have given the Security Insurer written notice of such conveyance or transfer of properties or assets at least 20 Business Days prior to the consummation of such action and shall have received the prior written approval of the Security Insurer of such conveyance or transfer and the Person acquiring by conveyance or transfer the properties or assets of the Issuer has a net worth, immediately after such conveyance or transfer, that is (a) greater than zero and (b) not less than the net worth of the Issuer immediately prior to giving effect to such conveyance or transfer. SECTION 1004. NEGATIVE COVENANTS. Until the Termination Date, the Issuer shall not: (i) except as expressly permitted by this Indenture, the Security Agreement, the Repurchase Agreement or the Servicing Agreement, sell, transfer, exchange or otherwise dispose of any of the properties or assets constituting the Trust Estate, unless directed to do so by the Controlling Party; (ii) claim any credit on, or make any deduction from the principal or interest in respect of, the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon any part of the Trust Estate; or (iii) (A) permit the validity or effectiveness of this Indenture to be impaired, or permit the first priority perfected lien in favor of the Collateral Agent created by the Security Agreement to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except as may be expressly permitted hereby, (B) permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance (other than the lien in favor of the Collateral -61- Agent created by the Security Agreement) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds thereof (other than tax liens, mechanics' liens and other liens that arise by operation of law, in each case on a Financed Vehicle and arising solely as a result of an action or omission of the related Obligor), (C) permit the lien in favor of the Collateral Agent created by the Security Agreement not to constitute a valid first priority (other than with respect to any such tax, mechanics' or other lien) security interest in the Trust Estate, or (D) amend, modify or fail to comply with the provisions of the Related Documents without the prior written consent of the Controlling Party. SECTION 1005. PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES. (a) The Issuer will not take any action and will use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person's material covenants or obligations under any instrument or agreement included in the Trust Estate or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as expressly provided in this Indenture, the Security Agreement, the Servicing Agreement or such other instrument or agreement. (b) The Issuer may contract with other Persons acceptable to the Security Insurer (so long as no Insurer Default shall have occurred and be continuing) to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Trustee, the Agent and the Security Insurer in an Officers' Certificate of the Issuer shall be deemed to be action taken by the Issuer. (c) The Issuer will punctually perform and observe all of its obligations and agreements contained in this Indenture, the Related Documents and in the instruments and agreements included in the Trust Estate, including but not limited to filing or causing to be filed all UCC financing statements and continuation statements required to be filed by the terms of this Indenture, the Security Agreement, the Repurchase Agreement and the Servicing Agreement in accordance with and within the time periods provided for herein and therein. (d) If the Issuer shall have knowledge of the occurrence of a Servicer Termination Event under the Servicing Agreement, the Issuer shall promptly notify the Trustee, the Security Insurer and the Rating Agencies thereof, and shall specify in such notice the action, if any, the Issuer is taking with respect of such default. If a Servicer Termination Event shall arise from the failure of the Servicer to perform any of its duties or obligations under the Servicing Agreement with -62- respect to the Receivables, the Issuer shall take all reasonable steps available to it to remedy such failure. (e) If an Insurer Default shall have occurred and be continuing and if the Issuer has given notice of termination to the Servicer of the Servicer's rights and powers pursuant to Section 5.2 of the Servicing Agreement, as promptly as possible thereafter, the Issuer shall appoint a successor servicer in accordance with Section 5.3 of the Servicing Agreement. (f) Upon any termination of the Servicer's rights and powers pursuant to the Servicing Agreement, the Issuer shall promptly notify the Trustee. As soon as a successor Servicer is appointed, the Issuer shall notify the Trustee of such appointment, specifying in such notice the name and address of such successor Servicer. (g) The Issuer agrees that it will not waive timely performance or observance by the Servicer, the Backup Servicer, the Seller or OFL of their respective duties under the Related Documents; (x) without the prior consent of the Security Insurer (unless an Insurer Default shall have occurred and be continuing) or (y) if the effect thereof would adversely affect the Holders of the Notes. SECTION 1006. OTHER INDEBTEDNESS. The Issuer will not create, incur, assume or suffer to exist any Indebtedness for borrowed money, whether current or funded, other than (i) the Notes, (ii) any other Indebtedness permitted by or arising under the Related Documents, and (iii) any indebtedness to which the Rating Agencies confirm beforehand in writing will not result in a capital charge to the Security Insurer. SECTION 1007. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. The Issuer will not make any loan or advance credit to, or guaranty (directly or indirectly by an instrument having the effect of assuring another's payment or performance on any obligation) or otherwise become contingently liable for any Indebtedness or other obligations of any other Person (other than (i) by endorsement of instruments in the ordinary course of collection, (ii) by operation of law and (iii) as otherwise permitted by the Related Documents) unless the Rating Agencies have confirmed beforehand in writing that such action will not result in capital charge to the Security Insurer. SECTION 1008. DIVIDENDS; DISTRIBUTIONS. The Issuer will not declare or pay any dividends in respect of, or make any distributions upon any of the capital stock of the Issuer, if the effect of such declaration, payment or distribution would be to reduce the sum of the paid-in -63- capital, paid-in surplus, retained earnings and deferred income (net of anticipated taxes) of the Issuer to less than $10,000. SECTION 1009. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST. All payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Note Distribution Account shall be made on behalf of the Issuer by the Trustee or by another Paying Agent, and no amounts so withdrawn from the Note Distribution Account for payments of Notes shall be paid over to the Issuer. On or before each Payment Date, the Issuer shall, subject to the provisions hereof, deposit or cause to be deposited in the Note Distribution Account from amounts specified therefor in the Servicing Agreement and the other Related Documents an aggregate sum sufficient to pay the amounts then becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless the Paying Agent is the Trustee) shall promptly notify the Trustee of its action or failure so to act. The Issuer will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of or interest on the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Issuer (or any other obligor upon the Notes) in the making of any payment of principal or interest on the Notes; (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; (4) immediately resign as a Paying Agent and forthwith pay to the Trustee all sums held by it in trust for the payment of Notes if at any time it ceases to meet the standards required to be met by a Paying Agent at the time of its appointment; and (5) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. -64- The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, in trust for the payment of the principal of or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Issuer on Issuer Request; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. SECTION 1010. CORPORATE EXISTENCE. Except as provided in Section 1003, the Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and material rights (charter and statutory) and material franchises of the Issuer; PROVIDED, HOWEVER, that the Issuer shall not be required to preserve any such right or franchise if the Issuer shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer, and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1011. PAYMENT OF TAXES AND OTHER CLAIMS. The Issuer will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Issuer or upon the income, profits or property of the Issuer, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the Property of the Issuer; PROVIDED, HOWEVER, that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose -65- amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1012. NOTICE OF EVENTS OF DEFAULT. The Issuer agrees to give the Trustee, the Security Insurer, the Agent and the Rating Agencies prompt written notice of each Event of Default hereunder, each default on the part of the Servicer or the Seller of its obligations under the Servicing Agreement or the Repurchase Agreement and each default on the part of OFL of its obligations under the Purchase Agreement. SECTION 1013. AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. The Issuer will not amend its Certificate of Incorporation or Bylaws in any manner that materially and adversely affects the Holders and without prior written confirmation of the Rating Agencies that such amendment will not result in any downgrade or withdrawal of their ratings on the Notes. SECTION 1014. STATEMENT AS TO COMPLIANCE. The Issuer will deliver to the Trustee, with copies to the Rating Agencies, within 120 days after the end of each fiscal year, a written statement, which need not comply with Section 102, signed on behalf of the Issuer stating, as to each signatory thereof, that (1) a review of the activities of the Issuer during such year and of performance under this Indenture has been made under such person's supervision, and (2) to the best of such person's knowledge, based on such review, (a) the Issuer has fulfilled all its obligations under this Indenture throughout such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such person and the nature and status thereof, and (b) no event has occurred and is continuing which is, or after notice or lapse of time or both would become, an Event of Default or Default, or, if such an event has occurred and is continuing, specifying each such event known to such person and the nature and status thereof. SECTION 1015. RULE 144A INFORMATION. At any time when the Issuer is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, upon the request of a Holder, the Issuer shall promptly furnish to such Holder or to a prospective purchaser of a Note designated by such Holder, as the case may be, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act ("Rule 144A Information") in order to permit compliance by such -66- Holder with Rule 144A in connection with the resale of such Note by such Holder; PROVIDED, HOWEVER, that the Issuer shall not be required to furnish Rule 144A Information in connection with any request made on or after the date which is three years from the later of (i) the date such Note (or any predecessor Note) was acquired from the Issuer or (ii) the date such Note (or any predecessor Note) was last acquired from an "affiliate" of the Issuer within the meaning of Rule 144 under the Securities Act; and PROVIDED FURTHER, that the Issuer shall not be required to furnish such information at any time to a prospective purchaser located outside the United States who is not a "United States Person" within the meaning of Regulation S under the Securities Act if such Note may then be sold to such prospective purchaser in accordance with Rule 904 under the Securities Act (or any successor provision thereto). SECTION 1016. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee or the Security Insurer, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 1017. COMPLIANCE WITH LAWS. The Issuer shall comply with the requirements of all applicable laws, the non-compliance with which would, individually or in the aggregate, materially and adversely affect the ability of the Issuer to perform its obligations under the Notes, this Indenture or any Related Document. SECTION 1018. INCOME TAX CHARACTERIZATION. For purposes of Federal income, State and local income and franchise and any other income taxes, the Issuer will treat the Notes as debt of the Issuer. ARTICLE ELEVEN Prepayment of Notes SECTION 1101. PREPAYMENT. The Notes shall be prepayable in whole or in part at the Prepayment Price on any Business Day in accordance (and simultaneously) with the prepayment of any Advance pursuant to Section 3(e) of the Repurchase Agreement and Section 3.10(b) of the Servicing Agreement in an amount equal to the amount deposited with respect to principal in the Note Distribution Account pursuant to Section 3.10(b) of the Servicing Agreement. Principal prepayments on Notes of a Tranche shall be applied pro rata among all Notes of such Tranche, without priority or preference of any kind. -67- SECTION 1102. NOTICE OF PREPAYMENT IN WHOLE OF A TRANCHE. To the extent practicable, notice of the prepayment in whole of any Tranche of Notes shall be given by the Issuer by facsimile transmission, courier or first-class mail, postage prepaid, mailed, faxed or couriered not less than 1 nor more than 5 days prior to the date on which such prepayment in whole shall occur, to each Holder of Notes of such Tranche to be so prepaid in whole, at such Holder's address appearing in the Note Register. All notices of prepayment in whole shall state: (1) the date on which such prepayment in whole shall occur, (2) the Prepayment Price, (3) the place or places where such Notes are to be surrendered for payment of the Prepayment Price (which shall be the office or agency of the Issuer to be maintained as provided in Section 1002). Failure to give notice of prepayment in whole, or any defect therein, to any Holder of any Note shall not impair or affect the validity of such prepayment. SECTION 1103. DEPOSIT OF PREPAYMENT PRICE. On any date on which such prepayment in whole shall occur, the Issuer shall deposit with the Trustee or with a Paying Agent an amount of money sufficient to pay the Prepayment Price of all Notes which are to be prepaid in whole on that date. SECTION 1104. NOTES PREPAYABLE IN WHOLE ON ANY DATE. Notice of prepayment in whole having been given as aforesaid, the Notes so to be prepaid in whole shall, on the date on which such prepayment in whole shall occur, become due and payable at the Prepayment Price therein specified, and from and after such date (unless the Issuer shall default in the payment of the Prepayment Price and accrued interest) such Notes shall cease to bear interest. Upon surrender of any such Note for prepayment in whole in accordance with said notice, such Note shall be prepaid by the Issuer at the Prepayment Price, together with accrued interest to the date on which such prepayment in whole shall occur; PROVIDED, HOWEVER, that installments of interest due and payable on or prior to the date on which such prepayment in whole shall occur shall be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 408. If any Note called for prepayment in whole shall not be so paid upon surrender thereof for prepayment in whole, the -68- principal shall, until paid, bear interest from the date on which such prepayment in whole shall occur at the Note Interest Rate. ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE SECTION 1201. ISSUER'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE. The Issuer may at its option by Board Resolution and with the consent of the Agent and the Security Insurer (as long as no Insurer Default has occurred and is continuing), at any time, elect to have either Section 1202 (if applicable) or Section 1203 (if applicable) be applied to the Outstanding Notes upon compliance with the conditions set forth below in this Article Twelve. SECTION 1202. DEFEASANCE AND DISCHARGE. Upon the Issuer's exercise of the above option applicable to this Section, the Issuer shall be deemed to have been discharged from its obligations with respect to the Outstanding Notes on and after the date the conditions precedent set forth below are satisfied but subject to satisfaction of the conditions subsequent set forth below (hereinafter, "defeasance"). For this purpose, such defeasance means that the Issuer shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Notes and to have satisfied all its other obligations under the Notes and this Indenture (and the Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Notes to receive, solely from the trust fund described in Section 1204 and as more fully set forth in such Section, payments of the principal of and interest on the Notes when such payments are due, (B) the Issuer's obligations under Sections 404, 405, 406, 1002, 1010 and 1016 and such obligations as shall be ancillary thereto, (C) the rights, powers, trusts, duties, immunities and other provisions in respect of the Trustee hereunder and (D) this Article Twelve. Subject to compliance with this Article Twelve, the Issuer may exercise its option under this Section 1202 notwithstanding the prior exercise of its option under Section 1203. Following a defeasance, payment of the Notes may not be accelerated because of an Event of Default. SECTION 1203. COVENANT DEFEASANCE. Upon the Issuer's exercise of the above option applicable to this Section, the Issuer shall be released from its obligations under Sections 1003 through 1008, 1011, 1012 and 1013 and the occurrence of an Event of Default specified in Section 601(iv) (insofar as it is with respect to Sections 1002 through -69- 1008, 1011, 1012 and 1013) shall be deemed not to be an Event of Default with respect to the Outstanding Notes on and after the date the conditions precedent set forth below are satisfied but subject to satisfaction of the conditions subsequent set forth below (hereinafter, "covenant defeasance"). For this purpose, such covenant defeasance means that, with respect to the Outstanding Notes, the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and the Notes shall be unaffected thereby. SECTION 1204. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions precedent or, as specifically noted below, the conditions subsequent to application of either Section 1202 or Section 1203 to the Outstanding Notes: (1) the Issuer shall irrevocably have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Notes, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, without reinvestment, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, the principal of and interest on the Outstanding Notes to maturity or redemption, as the case may be. Before such a deposit the Issuer may make arrangements satisfactory to the Trustee for the redemption of Notes at a future date or dates in accordance with Article Eleven, which shall be given effect in applying the foregoing. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. -70- Government Obligation held by such custodian for the account of the holder of such depository receipt (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (2) No Event of Default or event which with notice or lapse of time or both would become an Event of Default with respect to the Notes shall have occurred and be continuing (A) on the date of such deposit or (B) insofar as subsections 601(v) and (vi) are concerned, at any time during the period ending on the 123rd day after the date of such deposit or, if longer, ending on the day following the expiration of the longest preference period applicable to the Issuer in respect of such deposit (it being understood that the condition in this clause (B) is a condition subsequent and shall not be deemed satisfied until the expiration of such period). (3) Such defeasance or covenant defeasance shall not (A) cause the Trustee to have a conflicting interest as defined in Section 708 or for purposes of the Trust Indenture Act with respect to any securities of the Issuer or (B) result in the trust arising from such deposit to constitute, unless it is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended. (4) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound. (5) Such defeasance or covenant defeasance shall not cause any Notes then listed on any registered national securities exchange under the Securities Exchange Act of 1934, as amended, to be delisted. (6) In the case of an election under Section 1202, the Issuer shall have delivered to the Trustee and the Agent an Opinion of Counsel stating that (x) the Issuer has received from, or there has been published by, the Internal Revenue service a ruling, or (y) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. -71- (7) In the case of an election under Section 1203, the Issuer shall have delivered to the Trustee and the Agent an Opinion of Counsel to the effect that the Holders of the Outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (8) The Issuer shall have delivered to the Trustee and the Agent an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 1202 or the covenant defeasance under Section 1203 (as the case may be) have been complied with. (9) The Issuer shall have delivered or caused to be delivered to the Trustee and the Agent written confirmation of the Rating Agencies that such defeasance under Section 1202 or covenant defeasance under Section 1203 will not result in a capital charge to the Security Insurer. SECTION 1205. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last paragraph of Section 1009, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 1204 in respect of the Outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Holders of the Notes, of all sums due and to become due thereon in respect of principal and interest, but such money need not be segregated from other funds except to the extent required by law. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the money or U.S. Government Obligations deposited pursuant to Section 1204 or the principal and interest received in respect thereof. Anything herein to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request any money or U.S. Government Obligations held by it as provided in Section 1204 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. -72- Anything herein to the contrary notwithstanding, if and to the extent the deposited money or U.S. Government Obligations (or the proceeds thereof) either (i) cannot be applied by the Trustee in accordance with this Section because of a court order or (ii) are for any reason insufficient in amount, then the Issuer's obligations to pay principal of and interest on the Notes shall be reinstated to the extent necessary to cover the deficiency on any due date for payment. In any case specified in clause (i), the Issuer's interest in the deposited money and U.S. Government Obligations (and proceeds thereof) shall be reinstated to the extent the Issuer's payment obligations are reinstated. _________________________ This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -73- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. ARCADIA RECEIVABLES CONDUIT CORP. By /s/ [Illegible] -------------------------------- NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee By /s/ [Illegible] -------------------------------- [Signature page to Indenture] EXHIBIT A [Form of Note] REGISTERED No. ARCADIA RECEIVABLES CONDUIT CORP. FLOATING RATE AUTOMOBILE RECEIVABLES-BACKED NOTES THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR REGULATORY AUTHORITY OF ANY STATE. THIS NOTE HAS BEEN OFFERED AND SOLD PRIVATELY. THE HOLDER HEREOF ACKNOWLEDGES THAT THESE SECURITIES ARE "RESTRICTED SECURITIES" THAT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND AGREES FOR THE BENEFIT OF THE ISSUER AND ITS AFFILIATES THAT THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERMITTED ASSIGNEE WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (B) TO A PERMITTED ASSIGNEE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (C) TO A PERMITTED ASSIGNEE PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SECTION 5 OF THE SECURITIES ACT, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THIS NOTE WILL BE PREPAYABLE IN WHOLE OR IN PART ON ANY BUSINESS DAY. THEREFORE IT IS POSSIBLE THAT SOME TRANCHES OF NOTES MAY BE RETIRED BEFORE ANY PAYMENTS OF PRINCIPAL ARE MADE ON THIS NOTE. THE PRINCIPAL ON THIS NOTE IS PAYABLE IN INSTALLMENTS ON THE PAYMENT DATES AND IN THE AMOUNTS DESCRIBED IN THE INDENTURE REFERRED TO HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF AND UNPAID INTEREST ON THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. Original Issue Date: Principal Amount: $ Arcadia Receivables Conduit Corp. (the "Issuer"), a corporation duly organized and existing under the laws of the State of Delaware, for value received hereby promises to pay to ___________ the principal sum of ___________ Dollars payable in installments on the Payment Dates and in the amounts described in the Indenture referred to herein and to pay interest thereon on each Payment Date at the Note Interest Rate until the principal hereof is paid or made available for payment. The Note Interest Rate will be a per annum rate equal to (A) prior to the occurrence of an Amortization Event, (i) the CP Rate plus 0.20%, to the extent the purchase or carrying of the Notes issued pursuant to this Indenture is funded by the Noteholders by issuing Commercial Paper Notes, or (ii) the Offshore Rate plus the Applicable Margin, to the extent the purchase or carrying of the Notes issued pursuant to this Indenture is not so funded by the Noteholders and (B) after the occurrence of an Amortization Event, the Reference Rate; PROVIDED, that from and after the occurrence of an Amortization Event, the Note Interest Rate shall not exceed the Maximum Interest Rate, and the Agent may, on any Business Day, by prior written notice to the Issuer, the Trustee, the Seller, the Servicer and the Security Insurer, convert the Note Interest Rate to a fixed interest rate not to exceed the Maximum Interest Rate as of the close of business on the date such Amortization Event occurs, such fixed interest rate not to exceed the Two Year Treasury Yield (as of the close of business on the date such Amortization Event occurs) plus 0.60% PLUS the Basis Fee Percent. This Note will bear interest, payable in arrears, from the Original Issue Date at the Note Interest Rate. Interest will accrue on each Note from the most recent Payment Date to which interest has been paid in full or duly provided for (or, if no interest has been paid, from the Original Issue Date), to but excluding the next succeeding Payment Date. The first payment of interest on any Note issued between the first day of a calendar month and a Payment Date will be made on the Payment Date following the next succeeding calendar month. In addition, on each Payment Date with respect to any Interest Period or portion thereof after the occurrence of an Amortization Event, the Default Amount Distributable Amount, if any, shall be payable with respect to the Notes to the extent funds are available therefor pursuant to Section 3.6(b)(vii) or (ix) of the Servicing Agreement. Payments on this Note will be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Record Date, by wire transfer in immediately available funds to the account and number specified in the Note Register on such Record Date for such Person or, if no such account or number is so specified, then by check mailed to the address of such Person as such address shall appear in the Note Register. The Record Date for each Payment Date for this Note will be the close of business on the last Business Day immediately preceding such Payment Date. This Note is entitled to the benefits of an Indenture dated as of December 3, 1996, as amended and supplemented, (as amended and supplemented from time to time, the "Indenture") between the Issuer and Norwest Bank Minnesota, National Association, as Trustee (in such capacity, the "Trustee") and as Collateral Agent (in such capacity, the "Collateral Agent"). The Notes are entitled to the benefits of a financial guaranty insurance policy (the "Note Policy") issued by Financial Security Assurance Inc. (the "Security Insurer"), pursuant to which the Security Insurer has unconditionally guaranteed payments of the Noteholders' Interest Distributable Amount on each Payment Date and the Noteholders' Principal Distributable Amount on each Payment Date. NO HOLDER OF A NOTE SHALL TRANSFER ITS NOTE UNLESS SUCH TRANSFER IS MADE IN ACCORDANCE WITH RULE 144A OF THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT (IF AVAILABLE), OR PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SECTION 5 OF THE SECURITIES ACT PROVIDED THE ISSUER IS PROVIDED WITH AN OPINION OF COUNSEL THAT SUCH TRANSFER IS SO EXEMPT, AND IN EACH CASE IN ACCORDANCE WITH THE REGISTRATION AND QUALIFICATION REQUIREMENTS (OR ANY APPLICABLE EXEMPTION THEREFROM) UNDER APPLICABLE STATE SECURITIES LAWS. This Note shall not be valid or entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless the certificate of authentication appearing hereon has been executed by the Trustee or the Authenticating Agent by manual signature. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE. IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer. ARCADIA RECEIVABLES CONDUIT CORP. By ------------------------- Authorized Officer Dated: TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By ------------------------- Authorized Signatory [FORM OF REVERSE SIDE OF NOTE] ARCADIA RECEIVABLES CONDUIT CORP. (Continued) This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Floating Rate Automobile Receivables Backed Notes (herein called the "Notes") authorized to be issued under and pursuant to an Indenture by and between the Issuer and Norwest Bank Minnesota, National Association, as Trustee and as Collateral Agent, dated as of December 3, 1996, as amended and supplemented (as amended and supplemented from time to time, the "Indenture") to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Trustee and the Holders of the Notes. The Notes are subject to all terms of the Indenture. All terms used in this Note that are defined in the Indenture, as supplemented or amended, shall have meanings assigned to them in or pursuant to the Indenture, as so supplemented or amended. The Notes are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. Principal of the Notes will be payable in installments on the Payment Dates and in the amounts described in the Indenture. "Payment Date" means the fifteenth day of each month, or if any such date is not a Business Day, the next succeeding Business Day, commencing January 15, 1997. As described above, the entire unpaid principal amount of this Note shall be due and payable on the Final Distribution Date. In addition, the Notes are prepayable in whole or in part on any Business Day as set forth in the Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing so long as an Insurer Default shall not have occurred and be continuing or, if an Insurer Default shall have occurred and be continuing, on the date on which an Event of Default shall have occurred and be continuing and the Trustee or the Agent have declared the Notes to be immediately due and payable in the manner provided in Section 602 of the Indenture. All principal payments on the Notes shall be made pro rata to the Noteholders entitled thereto. Payments of interest on this Note due and payable on each Payment Date, together with an installment of principal, if any, to the extent not in full payment of this Note, shall be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Record Date, by wire transfer in immediately available funds to the account and number specified in the Note Register on such Record Date for such Person or, if no such account or number is so specified, then by check mailed to such Person's address as it appears in the Note Register on each such Record Date. Such payments shall be sent without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) affected by any payments made on any Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the final installment of the then remaining unpaid principal amount of this Note on a Payment Date, then the Trustee will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice mailed within five days of such Payment Date and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the place specified by the Trustee in such notice. Notices in connection with prepayments in whole shall be couriered, mailed or sent by facsimile transmission as provided in Section 1102 of the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Notes under the Indenture at any time by the Issuer with the consent of the Security Insurer and of the Agent or the Holders of Notes representing a majority of the Outstanding Amount of all Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Amount of the Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequence. Any such consent or waiver by the Holder of this Note (or any one of more Predecessor Notes) shall be conclusive and binding upon such Holders and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Notes issued thereunder. Upon surrender for registration of transfer of this Note at the office or agency of the Issuer to be maintained in The City of New York, the City of Chicago, Illinois or the City of Minneapolis, Minnesota, the Issuer shall execute, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like tenor and aggregate principal amount. At the option of the Holder, Notes may be exchanged for other Notes of any authorized denominations and of a like tenor and aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery, the Notes which the Holder making the exchange is entitled to receive. Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Issuer or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in the City of New York or the city in which the Corporate Trust Office is located, or by a member firm of a national securities exchange, and such other documents as the Trustee may require. No service charge shall be made for any registration of transfer or exchange of Notes, but the Issuer or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 404 or 905 not involving any transfer. The term "Issuer" as used in this Note includes any successor to the Issuer under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. THIS NOTE AND THE INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Anything herein to the contrary notwithstanding, except as expressly provided in the Related Documents, neither the Issuer nor any of its agents, officers, directors, employees, stockholders, incorporators or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture. The Holder of this Note by the acceptance hereof agrees that except as expressly provided in the Related Documents, in the case of an Event of Default under the Indenture, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom. [FORM OF ASSIGNMENT] For value received ____________________ hereby sells, assigns and transfers unto (Please insert Social Security or Other Identifying Number of Assignee.) (Please print or typewrite name and address, including zip code, of Assignee.) the within Note and all rights hereunder and does hereby irrevocably constitute and appoint ____________________ attorney to transfer the said Note on the books of the said Note Registrar with full power of substitution in the premises. Dated: * - ------------------------- Signature Signature Guaranteed: --------------------------- ____________________ *NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever. EXHIBIT B - -------------------------------------------------------------------------------- [LOGO] FINANCIAL GUARANTY INSURANCE POLICY OBLIGOR: Arcadia Receivables Conduit Corp. Policy No.: 50528-N OBLIGATIONS: Up to $300,000,000 Original Principal Date of Issuance: 12/3/96 Amount Floating Rate Automobile Receivables-Backed Notes FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to each Holder, subject only to the terms of this Policy (which includes each endorsement hereto), the full and complete payment by the Obligor of Scheduled Payments of principal of, and interest on, the Obligations. For the further protection of each Holder, Financial Security irrevocably and unconditionally guarantees: (a) payment of the amount of any distribution of principal of, or interest on, the Obligations made during the Term of this Policy to such Holder that is subsequently avoided in whole or in part as a preference payment under applicable law (such payment to be made by Financial Security in accordance with Endorsement No. 1 hereto). (b) payment of any amount required to be paid under this Policy by Financial Security following Financial Security's receipt of notice as described in Endorsement No. 1 hereto. Financial Security shall be subrogated to the rights of each Holder to receive payments under the Obligations to the extent of any payment by Financial Security hereunder. Except to the extent expressly modified by an endorsement hereto, the following terms have the meanings specified for all purposes of this Policy. "Holder" means the registered owner of any Obligation as indicated on the registration books maintained by or on behalf of the Obligor for such purpose or, if the Obligation is in bearer form, the holder of the Obligation. "Scheduled Payments" means payments which are scheduled to be made during the Term of this Policy in accordance with the original terms of the Obligations when issued and without regard to any amendment or modification of such Obligations thereafter; payments which become due on an accelerated basis as a result of (a) a default by the Obligor, (b) an election by the Obligor to pay principal on an accelerated basis or (c) any other cause, shall not constitute "Scheduled Payments" unless financial Security shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration. "Term of this Policy" shall have the meaning set forth in Endorsement No. 1 hereto. This Policy sets forth in full the undertaking of Financial Security, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto, or by the merger, consolidation or dissolution of the Obligor. Except to the extent expressly modified by an endorsement hereto, the premiums paid in respect of this Policy are nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Obligations prior to maturity. This Policy may not be cancelled or revoked during the Term of this Policy. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this Policy to be executed on its behalf by its Authorized Officer. FINANCIAL SECURITY ASSURANCE INC. By /s/ [Illegible] ------------------------------ Authorized Officer A subsidiary of Financial Security Assurance Holdings Ltd. 350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100 - -------------------------------------------------------------------------------- EX-10.35 36 INSURANCE & INDEMNITY AGREEMENT 12/3/96 FSA - -------------------------------------------------------------------------- INSURANCE AND INDEMNITY AGREEMENT among FINANCIAL SECURITY ASSURANCE INC., OLYMPIC FINANCIAL LTD., OLYMPIC RECEIVABLES FINANCE CORP., and ARCADIA RECEIVABLES CONDUIT CORP. Dated as of December 3, 1996, Floating Rate Automobile Receivables-Backed Notes - -------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; LIMITED RECOURSE Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . 1 Section 1.02. Certain Obligations Not Recourse to OFL and ORFC. . 2 Section 1.03. Limited Recourse to Issuer. . . . . . . . . . . . . 2 ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.01. Representations and Warranties of OFL and ORFC. . . 2 Section 2.02. Affirmative Covenants of OFL and ORFC . . . . . . . 7 Section 2.03. Negative Covenants of OFL and ORFC. . . . . . . . . 13 Section 2.04. Representations and Warranties of OFL and the Issuer. . . . . . . . . . . . . . . . . . . . . . . 16 Section 2.05. Affirmative Covenants of OFL and the Issuer . . . . 20 Section 2.06. Negative Covenants of OFL and the Issuer. . . . . . 25 ARTICLE III THE POLICY; REIMBURSEMENT; INDEMNIFICATION Section 3.01. Issuance of the Policy. . . . . . . . . . . . . . . 27 Section 3.02. Payment of Fees and Premium . . . . . . . . . . . . 27 Section 3.03. Reimbursement and Additional Payment Obligation . . 28 Section 3.04. Indemnification . . . . . . . . . . . . . . . . . . 29 Section 3.05. Subrogation . . . . . . . . . . . . . . . . . . . . 30 ARTICLE IV FURTHER AGREEMENTS Section 4.01. Effective Date; Term of Agreement . . . . . . . . . 31 Section 4.02. Obligations Absolute. . . . . . . . . . . . . . . . 31 Section 4.03. Assignments; Reinsurance; Third-Party Rights. . . . 32 Section 4.04. Liability of Financial Security . . . . . . . . . . 33 ARTICLE V EVENTS OF DEFAULT; REMEDIES Section 5.01. Events of Default . . . . . . . . . . . . . . . . . 33 Section 5.02. Remedies; Waivers . . . . . . . . . . . . . . . . . 34 ARTICLE VI MISCELLANEOUS Section 6.01. Amendments, Etc . . . . . . . . . . . . . . . . . . 36 Section 6.02. Notices . . . . . . . . . . . . . . . . . . . . . . 36 Section 6.03. Payment Procedure . . . . . . . . . . . . . . . . . 37 Section 6.04. Severability. . . . . . . . . . . . . . . . . . . . 37 Section 6.05. Governing Law . . . . . . . . . . . . . . . . . . . 37 Section 6.06. Consent to Jurisdiction . . . . . . . . . . . . . . 37 Section 6.07. Consent of Financial Security . . . . . . . . . . . 38 Section 6.08. Counterparts. . . . . . . . . . . . . . . . . . . . 38 Section 6.09. Trial by Jury Waived. . . . . . . . . . . . . . . . 38 Section 6.10. Limited Liability . . . . . . . . . . . . . . . . . 39 Section 6.11. Entire Agreement. . . . . . . . . . . . . . . . . . 39 Appendix I--Definitions Appendix A--Conditions Precedent to Issuance of the Policy Annex I--Form of Policy ii INSURANCE AND INDEMNITY AGREEMENT INSURANCE AND INDEMNITY AGREEMENT dated as of December 3, 1996, among FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY"), OLYMPIC FINANCIAL LTD. ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP. ("ORFC") and ARCADIA RECEIVABLES CONDUIT CORP. (the "ISSUER"). INTRODUCTORY STATEMENTS 1. ORFC has agreed from time to time to purchase from OFL, and OFL has agreed from time to time to sell and assign to ORFC, Receivables pursuant to the Receivables Purchase Agreement and Assignment. 2. ORFC proposes to transfer Receivables to the Issuer against the transfer of funds by the Issuer, with a simultaneous agreement by the Issuer to transfer to ORFC such Receivables at a future date, in accordance with the terms of the Repurchase Agreement. 3. The Issuer will issue Securities pursuant to the Indenture. Each Security will be secured by the Receivables and other collateral. 4. The Issuer has requested that Financial Security issue a financial guaranty insurance policy guarantying scheduled payments of interest and ultimate payment of principal on the Securities (including any such payments subsequently avoided as a preference under applicable bankruptcy law) upon the terms and subject to the conditions provided herein. 5. The parties hereto desire to specify the conditions precedent to the issuance of the Policy by Financial Security, the payment of premium in respect of the Policy, the indemnity and reimbursement to be provided to Financial Security in respect of certain amounts paid by Financial Security under the Policy or otherwise and certain other matters. In consideration of the premises and of the agreements herein contained, Financial Security, OFL, ORFC and the Issuer hereby agree as follows: ARTICLE I DEFINITIONS; LIMITED RECOURSE Section 1.01. DEFINITIONS. Capitalized terms used herein shall have the meanings provided in Appendix I hereto, or the meanings given such terms in the Servicing Agreement, unless the context otherwise requires. 1 Section 1.02. CERTAIN OBLIGATIONS NOT RECOURSE TO OFL AND ORFC. Notwithstanding any provision of this Agreement to the contrary, the payment obligations provided in Section 3.03(a) and (d), in each case, to the extent that such payment obligations do not arise from any failure or default in the performance by OFL or ORFC of any of its obligations under the Transaction Documents, and any interest on the foregoing in accordance with Section 3.03(c), shall be non-recourse obligations with respect to OFL and ORFC, respectively, and shall be payable only from monies available for such payment in accordance with the provisions of the Servicing Agreement. Section 1.03. LIMITED RECOURSE TO ISSUER. Financial Security agrees that the obligations of the Issuer under this Agreement are solely the corporate obligations of the Issuer. No recourse shall be had for the payment of any amount owing in respect of the Issuer's obligations hereunder or for any payment obligation or claim arising out of or based upon this Agreement against any stockholder, employee, officer, director or incorporator of the Issuer or against any agent, stockholder, employee, officer, director, incorporator or affiliate thereof, and Financial Security shall not look to any property or assets of the Issuer, other than amounts paid to the Issuer under the Transaction Documents and to amounts payable to Financial Security pursuant to the Transaction Documents in respect of the Issuer's obligations hereunder. To the extent that such funds are insufficient, any payment obligation or claim arising hereunder shall not constitute a claim against the Issuer. ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.01. REPRESENTATIONS AND WARRANTIES OF OFL AND ORFC. OFL and ORFC jointly and severally represent, warrant and covenant, as of the date hereof and as of the Date of Issuance, as follows: (a) DUE ORGANIZATION AND QUALIFICATION. Each of OFL and ORFC is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota or the laws of the State of Delaware, respectively, with power and authority to own its properties and conduct its business. Each of OFL and ORFC is duly qualified to do business, is in good standing and has obtained all necessary licenses, permits, charters, registrations and approvals (together, "APPROVALS") necessary for the conduct of its business as currently conducted and the performance of its obligations under the Transaction Documents, in each jurisdiction in which the failure to be so qualified or to obtain such approvals would render any Receivable unenforceable in such jurisdiction or any Transaction Document unenforceable in any respect or would otherwise have a material adverse effect upon the Transaction. (b) POWER AND AUTHORITY. Each of OFL and ORFC has all necessary corporate power and authority to conduct its business as currently conducted, to execute, deliver and perform its obligations under this Agreement and each other Transaction Document to which it is a party and to carry out the terms of each such Transaction Document and has 2 full power and authority to sell and assign the Receivables as contemplated by the Transaction Documents and to consummate the Transaction. (c) DUE AUTHORIZATION. The execution, delivery and performance by each of OFL and ORFC of this Agreement and each other Transaction Document to which it is a party have been duly authorized by all necessary corporate action and do not require any additional approvals or consents or other action by or any notice to or filing with any Person, including, without limitation, any governmental entity, the stockholders of OFL or the stockholder of ORFC. (d) NONCONTRAVENTION. Neither the execution nor delivery of this agreement and each other Transaction Document to which OFL or ORFC is a party, nor the consummation of the Transaction nor the satisfaction of the terms and conditions of this agreement and each other Transaction Documents to which OFL or ORFC is a party, (i) conflicts with or results, or will conflict with or result, in any breach or violation of any provision of the Certificate of Incorporation or Bylaws of OFL or ORFC or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to OFL or ORFC, or any of their respective properties, (ii) constitutes or will constitute a default by OFL or ORFC under or a breach of any provision of any loan agreement, mortgage, indenture or other agreement or instrument to which OFL or ORFC or any of their respective Subsidiaries is a party or by which it or any of its or their properties is or may be bound or affected, or (iii) results in or requires, or will result in or require, the creation of any Lien upon or in respect of any of the assets of OFL or ORFC or any of their respective Subsidiaries except as otherwise expressly contemplated by the Transaction Documents. (e) LEGAL PROCEEDINGS. There is no action, proceeding or investigation pending, or to the best knowledge of OFL and ORFC after reasonable inquiry, threatened by or before any court, regulatory body, governmental or administrative agency or arbitrator against or affecting OFL or ORFC, or any properties or rights of OFL or ORFC, including without limitation, the Receivables: (A) asserting the invalidity of this Agreement or any other Transaction Document to which the OFL or ORFC is a party, (B) seeking to prevent the issuance of the Securities or the consummation of the Transaction, (C) seeking any determination or ruling that might materially and adversely affect the validity or enforceability of this Agreement or any other Transaction Document to which OFL or ORFC is a party or (D) which might result in a Material Adverse Change with respect to OFL or ORFC. (f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents to which either OFL or ORFC is a party, when executed and delivered by it, and assuming 3 due authorization, execution and delivery by the other parties thereto, will constitute the legal, valid and binding obligations of such Person, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. The Securities when executed, authenticated and delivered in accordance with the Indenture, will be entitled to the benefits of the Indenture and will constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. (g) NO CONSENTS. No consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency, or other governmental instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other non-governmental person, is required in connection with the execution, delivery and performance by OFL or ORFC of this Agreement or of any other Transaction Document to which it is a party, except (in each case) such as have been obtained and are in full force and effect. (h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy employed or proposed to be employed by OFL or ORFC in the conduct of their respective businesses violates any law, regulation, judgment, agreement, order or decree applicable to it which, if enforced, would result in a Material Adverse Change with respect to such Person. (i) GOOD TITLE; VALID TRANSFER; ABSENCE OF LIENS; SECURITY INTEREST. (i) Immediately prior to the transfer of any Receivables and related Other Conveyed Property to ORFC pursuant to the Receivables Purchase Agreement and Assignment, OFL was or will have been the owner of, and had or will have had good and marketable title to, such Receivables free and clear of all Liens and Restrictions on Transferability, and had or will have had full right, corporate power and lawful authority to assign, transfer and pledge such Receivables and related Other Conveyed Property and immediately following such transfer ORFC will be the owner of, and have good and marketable title to, such Receivables and related Other Conveyed Property free and clear of all Liens and Restrictions on Transferability. Each such transfer pursuant to the Receivables Purchase Agreement and Assignment constitutes or will constitute a valid sale, transfer and assignment of such Receivables and related Other Conveyed Property to ORFC enforceable against creditors of and purchasers from OFL. In the event that, in contravention of the intention of the parties, a transfer of Receivables and related Other Conveyed Property by OFL to ORFC is characterized as other than a sale, such transfer shall be characterized as a secured financing, and ORFC shall have a valid and perfected first priority security interest in such Receivables and related Other Conveyed Property free and clear of all Liens and Restrictions on Transferability, subject to the provisions of the Repurchase Agreement. 4 (ii) Immediately prior to the transfer of any Receivables and related Other Conveyed Property to the Issuer pursuant to the Repurchase Agreement, ORFC was or will have been the owner of, and had good and marketable title to, such property free and clear of all Liens and Restrictions on Transferability, and had or will have had full right, corporate power and lawful authority to assign, transfer and pledge such Receivables. In the event that a transfer of the Receivables and related Other Conveyed Property by ORFC to the Issuer is characterized as other than a sale, such transfer shall be characterized as a secured financing, and the Issuer shall have a valid and perfected first priority security interest in such Receivables and related Other Conveyed Property free and clear of all Liens and Restrictions on Transferability, other than the Lien of the Security Agreement in favor of the Collateral Agent. (j) ACCURACY OF INFORMATION. None of the Transaction Documents nor any of the other Provided Documents provided by OFL or ORFC contain any statement of a material fact with respect to OFL or ORFC or the Transaction that was untrue or misleading in any material respect when made (except insofar as any such Document was connected or superseded by a subsequent Provided Document and Financial Security has not detrimentally relied on the original Provided Document). There is no fact known to OFL or ORFC which has a material possibility of causing a Material Adverse Change with respect to either of them or which has a material possibility of impairing the value or marketability of the Receivables, taken as a whole, or decreasing the possibility that amounts due in respect of the Receivables will be collected as due. Since the furnishing of the Provided Documents, there has been no change, or any development or event involving a prospective change known to OFL or ORFC that would render any representation or warranty or other statement made by either of them in any of the Provided Documents untrue or misleading in any material respect. (k) FINANCIAL STATEMENTS. The Financial Statements of each of OFL and ORFC, copies of which have been furnished to Financial Security, (i) are, as of the dates and for the periods referred to therein, complete and correct in all material respects, (ii) present fairly the financial condition and results of operations of such Person as of the dates and for the periods indicated and (iii) have been prepared in accordance with generally accepted accounting principles consistently applied, except as noted therein (subject as to interim statements to normal year-end adjustments). Since the date of the most recent Financial Statements with respect to such Person, there has been no material adverse change in such financial condition or results of operations of such Person. Except as disclosed in the Financial Statements, neither OFL nor ORFC is subject to any contingent liabilities or commitments that, individually or in the aggregate, have a material possibility of causing a Material Adverse Change in respect of OFL or ORFC. (l) ERISA. OFL is in compliance with ERISA in all material respects and has not incurred and does not reasonably expect to incur any material liabilities to the PBGC under ERISA in connection with any Plan or Multiemployer Plan or to contribute now or in the future in respect of any Plan or Multiemployer Plan. 5 (m) COMPLIANCE WITH SECURITIES LAWS. ORFC is not required to be registered as an "investment company" under the Investment Company Act and is not subject to the information reporting requirements of the Exchange Act. (n) TRANSACTION DOCUMENTS. Each of the representations and warranties of OFL and ORFC contained in the Transaction Documents is true and correct in all material respects and each of OFL and ORFC hereby makes each such representation and warranty made by it to, and for the benefit of, Financial Security as if the same were set forth in full herein. (o) SPECIAL PURPOSE ENTITY. (i) The capital of ORFC is adequate for the business and undertakings of ORFC. (ii) Other than with respect to the ownership by OFL of the stock of ORFC and as provided in this Agreement and the Receivables Purchase Agreement and Assignment, the Servicing Agreement, the Security Agreement and the Spread Account Agreement, and in connection with the Term Transactions, ORFC is not engaged in any business transactions with OFL or any affiliate of OFL. (iii) At least one director of ORFC shall be a person who is not, and will not be, a director, officer, employee or holder of any equity securities of OFL or any of its affiliates or Subsidiaries. (iv) The funds and assets of ORFC are not, and will not be, commingled with the funds of any other person. (v) The bylaws of ORFC require it to maintain (A) correct and complete minute books and records of account, and (B) minutes of the meetings and other proceedings of its shareholders and board of directors. (p) SOLVENCY; FRAUDULENT CONVEYANCE. Each of OFL and ORFC is solvent and will not be rendered insolvent by the Transaction and, after giving effect to the Transaction, neither OFL nor ORFC will be left with an unreasonably small amount of capital with which to engage in its business. Neither OFL nor ORFC intends to incur, or believes that it has incurred, debts beyond its ability to pay such debts as they mature. Neither OFL nor ORFC contemplates the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of OFL or ORFC or any of its assets. The amount of consideration being received by ORFC upon the transfer of Receivables and related Other Conveyed Property to the Issuer constitutes reasonably equivalent value and fair consideration for the Receivables and such Other Conveyed Property. The amount of consideration being received by OFL upon the sale of the Receivables and related Other Conveyed Property to ORFC constitutes reasonably equivalent value and fair consideration for the Receivables and such Other Conveyed Property. Neither OFL nor 6 ORFC is entering into the Transaction Documents or consummating the transactions contemplated thereby with any intent to hinder, delay or defraud any of the Issuer's creditors. (q) TAXES. Each of OFL and ORFC has, and each member of the respective affiliated groups of corporations of which such Person is a member has, filed all federal and state tax returns which are required to be filed and paid all taxes, including any assessments received by such Person, to the extent that such taxes have become due other than taxes that such Person shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto. Any taxes, fees and other governmental charges payable by OFL or ORFC in connection with the Transaction, the execution and delivery of the Transaction Documents and the issuance of the Securities have been paid or shall have been paid at or prior to the Date of Issuance. (r) PLEDGE OF SHARES. The shares of stock of the ORFC which have been pledged pursuant to the Stock Pledge Agreement constitute all of the issued and outstanding shares of ORFC. (s) PERFECTION OF LIENS AND SECURITY INTEREST. The Lien and security interest in favor of the Collateral Agent with respect to the Receivables and Other Conveyed Property will be perfected by the filing of financing statements on Form UCC-1 on or prior to the Date of Issuance in each jurisdiction where such recording or filing is necessary for the perfection thereof, the delivery of the Receivable Files for the Receivables to the Custodian, and the establishment of the Collection Account, the Note Distribution Account and the Spread Account in accordance with the provisions of the Transaction Documents, and no other filings in any jurisdiction or any other actions (except as expressly provided herein) are necessary to perfect the Collateral Agent's Lien on and security interest in the Receivables and Other Conveyed Property as against any third parties. (t) SECURITY INTEREST IN ACCOUNTS. Assuming the retention of funds in the Collection Account, the Note Distribution Account and the Spread Account and the acquisition of Eligible Investments, in each case, in accordance with the Transaction Documents, such funds and Eligible Investments will be subject to a valid and perfected, first priority security interest in favor of the Collateral Agent on behalf of Financial Security and the Trustee for the benefit of the Noteholders. Section 2.02. AFFIRMATIVE COVENANTS OF OFL AND ORFC. OFL and ORFC jointly and severally hereby agree, during the Term of this Agreement, unless Financial Security shall otherwise expressly consent in writing, as follows: (a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Each of OFL and ORFC shall perform each of its respective obligations under the Transaction Documents and shall comply with all material requirements of any law, rule or regulation applicable to it or thereto, or that are required in connection with its performance under any of the 7 Transaction Documents. Neither OFL nor ORFC will cause or permit to become effective any amendment to or modification of any of the Transaction Documents to which it is a party unless (i) so long as no Insurer Default shall have occurred and be continuing Financial Security shall have previously approved in writing the form of such amendment or modification or (ii) if an Insurer Default shall have occurred and be continuing such amendment would not adversely affect the interests of Financial Security. Neither OFL nor ORFC shall take any action or fail to take any action that would interfere with the enforcement of any rights under the Transaction Documents. (b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. Each of OFL and ORFC shall keep or cause to be kept in reasonable detail books and records of account of its assets and business. Each of OFL and ORFC shall furnish or cause to be furnished to Financial Security: (i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within 90 days after the close of each fiscal year of OFL or ORFC, the audited balance sheets of OFL or ORFC, as the case may be, as of the end of such fiscal year and the audited statements of income, changes in shareholders' equity and cash flows of OFL or ORFC, as the case may be, for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by the certificate of independent accountants (which shall be a nationally recognized firm or otherwise acceptable to Financial Security) for OFL or ORFC, as the case may be, and by the certificate specified in Section 2.02(c) hereof. (ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within 45 days after the close of each of the first three quarters of each fiscal year of OFL or ORFC, as the case may be, the unaudited balance sheets of OFL or ORFC, as the case may be, as of the end of such quarter and the unaudited statements of income, changes in shareholders' equity and cash flows of OFL or ORFC, as the case may be, for the portion of the fiscal year then ended, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied (subject to normal year-end adjustments), and accompanied by the certificate specified in Section 2.02(c) hereof if such certificate is required to be provided pursuant to such Section. (iii) ACCOUNTANTS' REPORTS. If a Special Event specified in clauses (a) or (d) of the definition thereof or clause (b) or (c) of the definition thereof with respect to OFL or ORFC has occurred, copies of any reports submitted to OFL or ORFC by their respective independent accountants in connection with any examination of the financial statements of OFL or ORFC promptly upon receipt thereof. 8 (iv) OTHER INFORMATION. Promptly upon receipt thereof, copies of all reports, statements, certifications, schedules, or other similar items delivered to or by OFL or ORFC pursuant to the terms of the Transaction Documents and, promptly upon request, such other data as Financial Security may reasonably request; PROVIDED, HOWEVER, that neither OFL nor ORFC shall be required to deliver any such items if provision by some other party to Financial Security is required under the Transaction Documents unless such other party wrongfully fails to deliver such item. OFL and ORFC shall, upon the request of Financial Security, permit Financial Security and its authorized agents (A) to inspect its books, records and operations as they may relate to the Securities, the Receivables, the obligations of OFL or ORFC under the Transaction Documents, the Transaction and OFL's business; (B) to discuss the affairs, finances and accounts of OFL and ORFC with its Chief Operating Officer and Chief Financial Officer upon Financial Security's reasonable request; and (C) to discuss the affairs, finances and accounts of OFL and ORFC with their respective independent accountants, PROVIDED that an officer of such Person shall have the right to be present during such discussions. Such inspections and discussions shall be conducted during normal business hours and shall not unreasonably disrupt the business of such Person. The fees and expenses of any such authorized agents of Financial Security shall be for the account of OFL. In addition, OFL and ORFC shall promptly (but in no case more than 30 days following issuance or receipt by a Commonly Controlled Entity) provide to Financial Security a copy of all correspondence between a Commonly Controlled Entity and the PBGC, IRS, Department of Labor or the administrators of a Multiemployer Plan relating to any Reportable Event or the underfunded status, termination or possible termination of a Plan or a Multiemployer Plan. The books and records of OFL and ORFC with respect to the Receivables will be maintained at the National Servicing Center, 10033 West 70th Street, Eden Prairie, Minnesota, unless OFL or ORFC shall otherwise advise the parties hereto in writing. (v) OFL shall provide or cause to be provided to Financial Security an executed original copy of each document executed in connection with the Transaction within 30 days after the date of closing. (c) COMPLIANCE CERTIFICATE. Each of OFL and ORFC shall deliver to Financial Security concurrently with the delivery of the financial statements required pursuant to Section 2.02(b)(i) hereof (and concurrently with the delivery of the financial statements required pursuant to Section 2.02(b)(ii) hereof, if a Special Event specified in clauses (a) or (d) of the definition thereof or clause (b) or (c) of the definition thereof with respect to OFL or ORFC has occurred), a certificate signed by its Chief Financial Officer stating that: (i) a review of such Person's performance under the Transaction Documents during such period has been made under such officer's supervision; 9 (ii) to the best of such officer's knowledge following reasonable inquiry, no Special Event, Default or Event of Default has occurred with respect to such Person, or if a Special Event, Default or Event of Default has occurred with respect to such Person, specifying the nature thereof and, if such Person has a right to cure any such Default or Event of Default pursuant to Section 5.01, stating in reasonable detail the steps, if any, being taken by such Person to cure such Default or Event of Default or to otherwise comply with the terms of the agreement to which such Default or Event of Default relates; and (iii) the attached financial reports submitted in accordance with Section 2.02(b)(i) or (ii) hereof, as applicable, are complete and correct in all material respects and present fairly the financial condition and results of operations of OFL or ORFC, as the case may be, as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied (subject as to interim statements to normal year-end adjustments). (d) NOTICE OF MATERIAL EVENTS. OFL and ORFC shall promptly inform Financial Security in writing of the occurrence of any of the following: (i) the submission of any claim or the initiation of any legal process, litigation or administrative or judicial investigation against OFL or ORFC involving potential damages or penalties in an uninsured amount in excess of $5,000 in any one instance or $25,000 in the aggregate with respect to ORFC and in excess of $10,000 in any one instance or $25,000 in the aggregate with respect to OFL; (ii) any change in the location of such Person's principal office or any change in the location of the books and records of OFL or ORFC; (iii) the occurrence of any Default or Special Event (which notice shall also be delivered to the Rating Agencies); (iv) the commencement of any proceedings by or against OFL under any applicable bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for OFL or ORFC or any of their assets; (v) the receipt of notice that (A) OFL or ORFC is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of OFL's or ORFC's business is to be, or may be, suspended or revoked, or (C) OFL or ORFC is to cease and desist any practice, procedure or policy employed by OFL or ORFC in the conduct of its business, and such cessation may result in a Material Adverse Change with respect to OFL or ORFC; or 10 (vi) any other event, circumstance or condition that has resulted, or which such Person reasonably believes might result, in a Material Adverse Change in respect of OFL or ORFC. (e) FURTHER ASSURANCES. Each of OFL and ORFC will file all necessary financing statements, assignments or other instruments, and any amendments or continuation statements relating thereto, necessary to be kept and filed in such manner and in such places as may be required by law to preserve and protect fully the Lien on and security interest in, and all rights of the Collateral Agent, for the benefit of the Trustee for the Noteholders and Financial Security, with respect to, the Receivables, the Collection Account, the Note Distribution Account and the Spread Account. In addition, each of OFL and ORFC shall, upon the request of Financial Security, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, within thirty (30) days of such request, such amendments hereto and such further instruments and take such further action as may be reasonably necessary to effectuate the intention, performance and provisions of the Transaction Documents or to protect the interest of the Collateral Agent, for the benefit of the Trustee for Noteholders and Financial Security, in the Receivables, the Collection Account, the Note Distribution Account and the Spread Account, free and clear of all Liens and Restrictions on Transferability except the Restrictions on Transferability imposed by the Transaction Documents. In addition, each of OFL and ORFC agrees to cooperate with S&P and Moody's in connection with any review of the Transaction which may be undertaken by S&P and Moody's after the date hereof. (f) THIRD-PARTY BENEFICIARY. Each of OFL and ORFC agrees that Financial Security shall have all rights of a third-party beneficiary in respect of the Servicing Agreement and hereby incorporates and restates its representations, warranties and covenants as set forth therein for the benefit of Financial Security. (g) CORPORATE EXISTENCE. Each of OFL and ORFC shall maintain its corporate existence and shall at all times continue to be duly organized under the laws of the State of Minnesota or laws of the State of Delaware, respectively, and duly qualified and duly authorized (as described in Sections 2.01(a), (b) and (c) hereof) and shall conduct its business in accordance with the terms of its Certificate of Incorporation and Bylaws. (h) SPECIAL PURPOSE ENTITY. (i) ORFC shall conduct its business solely in its own name through its duly authorized officers or agents so as not to mislead others as to the identity of the entity with which those others are concerned. It particularly will use its best efforts to avoid the appearance of conducting business on behalf of OFL or any affiliate of OFL and to avoid the appearance that the assets of ORFC are available to pay the creditors of OFL or any affiliate thereof. Without limiting the generality of the foregoing, all oral and written communications, including, without limitation, letters, invoices, purchase orders, contracts, statements and loan applications, will be made solely in the name of ORFC. 11 (ii) ORFC shall maintain corporate records and books of account separate from those of OFL and the affiliates thereof. ORFC's books and records shall clearly reflect the transfer of the Receivables to the Issuer. (iii) ORFC shall obtain proper authorization from its Board of Directors of all corporate action requiring such authorization, meetings of the board of directors of ORFC shall be held not less frequently than three times per annum and copies of the minutes of each such board meeting shall be delivered to Financial Security within two weeks of such meeting. (iv) ORFC shall obtain proper authorization from its shareholders of all corporate action requiring shareholder approval, meetings of the shareholders of ORFC shall be held not less frequently than one time per annum and copies of each such authorization and the minutes of each such shareholder meeting shall be delivered to Financial Security within two weeks of such authorization or meeting, as the case may be. (v) Although the organizational expenses of ORFC have been paid by OFL, operating expenses and liabilities of ORFC shall be paid from its own funds. If OFL transfers funds to ORFC which funds ORFC applies to the satisfaction of an obligation under the Transaction Documents, such transfer shall be characterized by ORFC and OFL as a loan recourse only to amounts available for payment to OFL pursuant to Section 2.08 of the Spread Account Agreement, shall be pursuant to documentation substantially in the form set forth as Exhibit C to the Servicing Agreement, and ORFC's obligation to OFL with respect to such loan shall be limited to the amounts so available; ORFC and OFL covenant and agree that any such available amounts shall be applied to the satisfaction of any amounts outstanding under any such loan, prior to distribution by ORFC on or in respect of the capital stock of ORFC. (vi) The annual financial statements of ORFC shall disclose the effects of its transactions in accordance with generally accepted accounting principles and shall disclose that the assets of ORFC are not available to pay creditors of OFL or any affiliate of OFL. (vii) The resolutions, agreements and other instruments of ORFC underlying the transactions described in this Agreement and in the other Transaction Documents shall be continuously maintained by ORFC as official records of ORFC separately identified and held apart from the records of OFL and each affiliate of OFL. (viii) ORFC shall maintain an arm's-length relationship with OFL and the affiliates thereof and will not hold itself out as being liable for the debts of OFL or any of OFL's affiliates. 12 (ix) ORFC shall keep its assets and liabilities wholly separate from those of all other entities, including, but not limited to, OFL and its affiliates. (x) The books and records of ORFC will be maintained at the National Servicing Center, 10033 West 70th Street, Eden Prairie, Minnesota, unless it shall otherwise advise the parties hereto in writing. ORFC shall, upon the request of Financial Security, permit Financial Security or its authorized agents to inspect its books and records. (i) MAINTENANCE OF LICENSES. Each of OFL and ORFC shall maintain all licenses, permits, charters and registrations which are material to the performance by it of its obligations under this Insurance Agreement and each other Transaction Document to which is a party or by which it is bound. (j) MAINTENANCE OF WAREHOUSING FACILITIES. OFL and its Subsidiaries shall at all times have warehousing facilities (other than that contemplated by the Transaction) under which the amount of credit available (including amounts outstanding) to finance the purchase of automobile receivables originated by OFL, together with the sum of the amount of unrestricted cash on OFL's balance sheet and the aggregate principal balance of automobile receivables eligible to be pledged by OFL (but not pledged) under the Transaction or such warehouse facilities as of the end of the immediately preceding calendar quarter, at least equal to $250,000,000. (k) PROVISION OF INFORMATION ORFC shall provide the Independent Accountants with such information as is necessary to conduct the review required by Section 2.18 of the Servicing Agreement. (l) CLOSING DOCUMENTS. OFL shall provide or cause to be provided to Financial Security an executed original copy of each document executed in connection with the Transaction within 30 days after the Closing Date, except that OFL shall cause a copy of the Repurchase Agreement, the Servicing Agreement, the Purchase Agreement, the Indenture, and each Transaction Document to which Financial Security is a party to be provided to Financial Security on the Closing Date. (m) INCORPORATION OF COVENANTS. Each of OFL and ORFC agrees to comply with their respective covenants set forth in the Transaction Documents and hereby incorporates such covenants by reference as if each were set forth herein. Section 2.03. NEGATIVE COVENANTS OF OFL AND ORFC. OFL and ORFC hereby jointly and severally agree, during the Term of the Agreement, unless Financial Security shall otherwise expressly consent in writing, as follows: (a) RESTRICTIONS ON LIENS. Neither OFL nor ORFC shall (i) create, incur or suffer to exist, or agree to create, incur or suffer to exist, or consent to cause or permit in the future (upon the happening of a contingency or otherwise) the creation, incurrence 13 or existence of any Lien or Restriction on Transferability of the Receivables and related Other Conveyed Property except for (w) the Liens imposed by the Transaction Documents, and (x) Liens for taxes if such taxes shall not at the time be due and payable or if the Issuer shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto, and (y) the Restrictions on Transferability imposed by the Transaction Documents, or (ii) sign or file under the Uniform Commercial Code of any jurisdiction any financing statement which names either OFL, ORFC or the Issuer as a debtor, or sign any security agreement authorizing any secured party thereunder to file such financing statement, with respect to the Receivables, except in each case any such instrument solely securing the rights and preserving the Lien of the Issuer or of the Collateral Agent for the benefit of the Trustee for the Noteholders and Financial Security. (b) IMPAIRMENT OF RIGHTS. Neither OFL nor ORFC shall take any action, or fail to take any action, if such action or failure to take action may (i) interfere with the enforcement of any rights under the Transaction Documents that are material to the rights, benefits or obligations of the Trustee, the Noteholders or Financial Security, (ii) result in a Material Adverse Change in respect of the Receivables or (iii) impair the ability of OFL or ORFC to perform their respective obligations under the Transaction Documents. (c) LIMITATION ON MERGERS. OFL shall not consolidate with or merge with or into any Person or transfer all or any material part of its assets to any Person (except as contemplated by the Transaction Documents) or liquidate or dissolve, provided that OFL may consolidate with, merge with or into, or transfer all or a material part of its assets to, another corporation if (i) the acquiror of its assets, or the corporation surviving such merger or consolidation, shall be organized and existing under the laws of any state and shall be qualified to transact business in each jurisdiction in which failure to qualify would render any Transaction Document unenforceable or would result in a Material Adverse Change in respect of OFL or the Other Conveyed Property; (ii) after giving effect to such consolidation, merger or transfer of assets, no Default or Event of Default shall have occurred or be continuing; (iii) such acquiring or surviving entity can lawfully perform the obligations of OFL under the Transaction Documents and shall expressly assume in writing all of the obligations of OFL, including, without limitation, its obligations under the Transaction Documents; and (iv) such acquiring or surviving entity and the consolidated group of which it is a part shall each have a net worth immediately subsequent to such consolidation, merger or transfer of assets at least equal to the net worth of OFL immediately prior to such consolidation, merger or transfer of assets; and OFL shall give Financial Security written notice of any such consolidation, merger or transfer of assets on the earlier of: (A) the date upon which any publicly available filing or release is made with respect to such action or (B) 10 Business Days prior to the date of consummation of such action. OFL shall furnish to Financial Security all information requested by it that is reasonably necessary to determine compliance with this paragraph. (d) WAIVER, AMENDMENTS, ETC. Neither OFL nor ORFC shall waive, modify, amend, supplement or consent to any waiver, modification or amendment of, any of the provisions of any of the Transaction Documents or the certificate of incorporation or by- 14 laws of ORFC (i) unless, if no Insurer Default shall have occurred and be continuing, Financial Security shall have consented thereto in writing or (ii) if an Insurer Default shall have occurred and be continuing, which would adversely affect the interests of Financial Security. (e) SUCCESSORS. Neither OFL nor ORFC shall terminate or designate, or consent to the termination or designation of, the servicer, back-up servicer or collateral agent or any successor thereto without the prior approval of Financial Security. (f) CREATION OF INDEBTEDNESS; GUARANTEES. ORFC shall not create, incur, assume or suffer to exist any Indebtedness, other than in connection with Term Transactions, the Repurchase Agreement, Indebtedness permitted by Section 2.02(j) hereof and any other Indebtedness guaranteed or approved in writing by Financial Security. Without the prior written consent in writing by Financial Security, ORFC shall not assume, guarantee, endorse or otherwise be or become directly or contingently liable for the obligations of any Person by, among other things, agreeing to purchase any obligation of another Person, agreeing to advance funds to such Person or causing or assisting such Person to maintain any amount of capital. (g) SUBSIDIARIES. ORFC shall not form, or cause to be formed, any Subsidiaries. (h) ISSUANCE OF STOCK. ORFC shall not issue any shares of capital stock or rights, warrants or options in respect of capital stock or securities convertible into or exchangeable for capital stock. (i) NO MERGERS. ORFC shall not consolidate with or merge into any Person or (except as contemplated in the Transaction Documents) transfer all or any material amount of its assets to any Person or liquidate or dissolve. (j) ERISA. (A) OFL shall not contribute or incur any obligation to contribute to, or incur any liability in respect of, any Plan or Multiemployer Plan, except that OFL may make such a contribution or incur such a liability provided that neither OFL nor any Commonly Controlled Entity will: (i) terminate any Plan so as to incur any material liability to the PBGC; (ii) knowingly participate in any "prohibited transaction" (as defined in ERISA) involving any Plan or Multiemployer Plan or any trust created thereunder which would subject any of them to a material tax or penalty on prohibited transactions imposed under Section 4975 of the Code or ERISA; (iii) fail to pay to any Plan or Multiemployer Plan any contribution which it is obligated to pay under the terms of such Plan or Multiemployer Plan, if such failure would cause such Plan to have any material Accumulated Funding Deficiency, whether or not waived; or 15 (iv) allow or suffer to exist any occurrence of a Reportable Event, or any other event or condition, which presents a material risk of termination by the PBGC of any Plan or Multiemployer Plan, to the extent that the occurrence or nonoccurrence of such Reportable Event or other event or condition is within the control of it or any Commonly Controlled Entity. (B) ORFC shall not contribute or incur any obligation to contribute to any Multiemployer Plan. (k) OTHER ACTIVITIES. ORFC shall not: (i) sell, transfer, exchange or otherwise dispose of any of its assets except as permitted under the Transaction Documents and the Term Transactions; or (ii) engage in any business or activity other than in connection with the Servicing Agreement, the Repurchase Agreement, the Security Agreement, the Spread Account Agreement, the Receivables Purchase Agreement and Assignment and the Term Transactions, and as permitted by its certificate of incorporation. (l) INSOLVENCY. Neither OFL nor ORFC shall commence with respect to ORFC or the Issuer, as the case may be, any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to the bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, corporation or other relief with respect to it or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or make a general assignment for the benefit of its creditors. Neither OFL nor ORFC shall take any action in furtherance of, or indicating the consent to, approval of, or acquiescence in any of the acts set forth above. ORFC shall not admit in writing its inability to pay its debts. (m) DIVIDENDS. ORFC shall not declare or make payment of (i) any dividend or other distribution on any shares of its capital stock, or (ii) any payment on account of the purchase, redemption, retirement or acquisition of any option, warrant or other right to acquire shares of its capital stock, unless (in each case) at the time of such declaration or payment (and after giving effect thereto) no amount payable by ORFC under any Transaction Document is then due and owing but unpaid. Section 2.04. REPRESENTATIONS AND WARRANTIES OF OFL AND THE ISSUER. Each of OFL and the Issuer represent and warrant as of the date hereof and as of the Date of Issuance, as follows: (a) DUE ORGANIZATION AND QUALIFICATION. The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with power and authority to own its properties and conduct its business. The Issuer is duly qualified to do business, is in good standing and has obtained all necessary licenses, 16 permits, charters, registrations and approvals (together, "APPROVALS") necessary for the conduct of its business as currently conducted and the performance of its obligations under the Transaction Documents, in each jurisdiction in which the failure to be so qualified or to obtain such approvals would render any Receivable unenforceable in such jurisdiction or any Transaction Document unenforceable in any respect or would otherwise have a material adverse effect upon the Transaction. (b) POWER AND AUTHORITY. The Issuer has all necessary corporate power and authority to conduct its business as currently conducted, to execute, deliver and perform its obligations under this Agreement and each other Transaction Document to which it is a party and to carry out the terms of each such Document and has full power and authority to sell and assign the Receivables as contemplated by the Transaction Documents and to consummate the Transaction. (c) DUE AUTHORIZATION. The execution, delivery and performance by the Issuer of this Agreement and each other Transaction Document to which it is a party have been duly authorized by all necessary corporate action and do not require any additional approvals or consents or other action by or any notice to or filing with any Person, including, without limitation, any governmental entity or the stockholders of the Issuer. (d) NONCONTRAVENTION. Neither the execution nor delivery of this agreement and each other Transaction Document to which the Issuer is a party, nor the consummation of the Transaction nor the satisfaction of the terms and conditions of this agreement and each other Transaction Documents to which the Issuer is a party, (i) conflicts with or results, or will conflict with or result, in any breach or violation of any provision of the Certificate of Incorporation or Bylaws of the Issuer or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to the Issuer, or any of its properties, agency or other governmental authority having supervisory powers over the Issuer, (ii) constitutes or will constitute a default by the Issuer under or a breach of any provision of any loan agreement, mortgage, indenture or other agreement or instrument to which the Issuer is a party or by which it or any of its properties is or may be bound or affected, or (iii) results in or requires, or will result in or require, the creation of any Lien upon or in respect of any of the assets of the Issuer except as otherwise expressly contemplated by the Transaction Documents. (e) LEGAL PROCEEDINGS. There is no action, proceeding or investigation pending, or to the best knowledge of the Issuer after reasonable inquiry, threatened by or before any court, regulatory body, governmental or administrative agency or arbitrator against or affecting the Issuer, or any properties or rights of the Issuer, including without limitation, the Receivables: (A) asserting the invalidity of this Agreement or any other 17 Transaction Document to which the Issuer is a party, (B) seeking to prevent the issuance of the Securities or the consummation of the Transaction, (C) seeking any determination or ruling that might materially and adversely affect to the validity or enforceability of this Agreement or any other Transaction Document to which the Issuer is a party or (D) which might result in a Material Adverse Change with respect to the Issuer. (f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents to which the Issuer is a party, when executed and delivered by it, and assuming due authorization, execution and delivery by the other parties thereto, will constitute the legal, valid and binding obligations of such Person, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. The Securities, when executed, authenticated and delivered in accordance with the Indenture, will be validly issued and outstanding and entitled to the benefits of the Indenture, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. (g) NO CONSENTS. No consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency, or other governmental instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other non-governmental person, is required in connection with the execution, delivery and performance by the Issuer of this Agreement or of any other Transaction Document to which it is a party, except (in each case) such as have been obtained and are in full force and effect. (h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy employed or proposed to be employed by the Issuer in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to it which, if enforced, would result in a Material Adverse Change with respect to the Issuer. (i) ACCURACY OF INFORMATION. None of the Provided Documents contain any statement of a material fact with respect to the Issuer or the Transaction that was untrue or misleading in any material respect when made (except insofar as any such Document was connected or superseded by a subsequent Provided Document). There is no fact known to OFL or the Issuer which has a material possibility of causing a Material Adverse Change with respect to either of them or which has a material possibility of impairing the value or marketability of the Receivables and related Other Conveyed Property, taken as a whole, or decreasing the profitability that amounts due in respect of the Receivables and related Other Conveyed Property will be collected as due. Since the furnishing of the Provided Documents, there has been no change, or any development or event involving a prospective change known to OFL or the Issuer that would render any representation or warranty or other statement made by either of them in any of the Provided Documents untrue or misleading in any material respect. 18 (j) ERISA. The Issuer is in compliance with ERISA and has not incurred and does not reasonably expect to incur any liabilities to the PBGC under ERISA in connection with any Plan or Multiemployer Plan or to contribute now or in the future in respect of any Plan or Multiemployer Plan. (k) COMPLIANCE WITH SECURITIES LAWS. The Issuer is not required to be registered as an "investment company" under the Investment Company Act and is not subject to the information reporting requirements of the Exchange Act. (l) TRANSACTION DOCUMENTS. Each of the representations and warranties of the Issuer contained in the Transaction Documents is true and correct in all material respects and the Issuer hereby makes each such representation and warranty made by it to, and for the benefit of, Financial Security as if the same were set forth in full herein. (m) SPECIAL PURPOSE ENTITY. (i) The capital of the Issuer is adequate for the business and undertakings of the Issuer. (ii) Other than as provided in this Agreement, the Indenture, the Repurchase Agreement, the Servicing Agreement, the Security Agreement and the Guaranty, the Issuer is not engaged in any business transactions with OFL or any affiliate of OFL. (iii) At least one director of the Issuer shall be a person who is not, and will not be, a director, officer, employee or holder of any equity securities of OFL or any of its affiliates or Subsidiaries. (iv) The Issuer's funds and assets are not, and will not be, commingled with the funds of any other Person, except as provided in the Transaction Documents. (v) The bylaws of the Issuer require it to maintain (A) correct and complete minute books and records of account, and (B) minutes of the meetings and other proceedings of its shareholders and board of directors. (n) SOLVENCY; FRAUDULENT CONVEYANCE. The Issuer is solvent and will not be rendered insolvent by the Transaction and, after giving effect to the Transaction, the Issuer will not be left with an unreasonably small amount of capital with which to engage in its business. The Issuer does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. The Issuer does not contemplate the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of the Issuer or any of its assets. The Issuer is not entering into the Transaction Documents or consummating the transactions contemplated thereby with any intent to hinder, delay or defraud any of the Issuer's creditors. 19 (o) TAXES. The Issuer has, and each member of the affiliated groups of corporations of which such Person is a member has, filed all federal and state tax returns which are required to be filed and paid all taxes, including any assessments received by such Person, to the extent that such taxes have become due other than taxes that such Person shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto. Any taxes, fees and other governmental charges payable by the Issuer in connection with the Transaction, the execution and delivery of the Transaction Documents and the issuance of the Securities have been paid or shall have been paid at or prior to the Date of Issuance. (p) NO PRIOR ACTIVITIES. The Issuer has not engaged in any activities or entered into any agreements prior to this Transaction. (q) PLEDGE OF SHARES. The shares of stock of the Issuer which have been pledged pursuant to the Stock Pledge Agreement constitute all of the issued and outstanding shares of the Issuer. Section 2.05. AFFIRMATIVE COVENANTS OF OFL AND THE ISSUER. Each of OFL and the Issuer hereby agree that during the Term of this Agreement, unless Financial Security shall otherwise expressly consent in writing, as follows: (a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Issuer shall perform each of its respective obligations under the Transaction Documents and shall comply with all material requirements of, and the Securities shall be offered and sold in accordance with, any law, rule or regulation applicable to it or thereto, or that are required in connection with its performance under any of the Transaction Documents. The Issuer will not cause or permit to become effective any amendment to or modification of any of the Transaction Documents to which it is a party unless (i) so long as no Insurer Default shall have occurred and be continuing Financial Security shall have previously approved in writing the form of such amendment or modification or (ii) if an Insurer Default shall have occurred and be continuing such amendment would not adversely affect the interests of Financial Security. The Issuer shall not take any action or fail to take any action that would interfere with the enforcement of any rights under the Transaction Documents. (b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. The Issuer shall keep or cause to be kept in reasonable detail books and records of account of its assets and business. The Issuer shall furnish or cause to be furnished to Financial Security: (i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within 90 days after the close of each fiscal year of the Issuer, the audited balance sheets of the Issuer as of the end of such fiscal year and the audited statements of income, changes in shareholders' equity and cash flows of the Issuer for such fiscal year, all in reasonable detail and stating in comparative form the 20 respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by the certificate of independent accountants (which shall be a nationally recognized firm or otherwise acceptable to Financial Security) for the Issuer and by the certificate specified in Section 2.05(c) hereof. (ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within 45 days after the close of each of the first three quarters of each fiscal year of the Issuer the unaudited balance sheets of the Issuer as of the end of such quarter and the unaudited statements of income, changes in shareholders' equity and cash flows of the Issuer for the portion of the fiscal year then ended, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied (subject to normal year-end adjustments), and accompanied by the certificate specified in Section 2.05(c) hereof if such certificate is required to be provided pursuant to such Section. (iii) ACCOUNTANTS' REPORTS. If a Special Event has occurred, copies of any reports submitted to the Issuer by its independent accountants in connection with any examination of the financial statements of the Issuer promptly upon receipt thereof. (iv) OTHER INFORMATION. Promptly upon receipt thereof, copies of all reports, statements, certifications, schedules, or other similar items delivered to or by the Issuer pursuant to the terms of the Transaction Documents and, promptly upon request, such other data as Financial Security may reasonably request; PROVIDED, HOWEVER, that the Issuer shall not be required to deliver any such items if provision by some other party to Financial Security is required under the Transaction Documents unless such other party wrongfully fails to deliver such item. The Issuer shall, upon the request of Financial Security, permit Financial Security or its authorized agents (A) to inspect its books and records as they may relate to the Securities, the Receivables, the obligations of the Issuer under the Transaction Documents, the Transaction; (B) to discuss the affairs, finances and accounts of the Issuer with its officers upon Financial Security's reasonable request; and (C) upon the occurrence of a Special Event, to discuss the affairs, finances and accounts of the Issuer with its independent accountants, PROVIDED that an officer of the Issuer shall have the right to be present during such discussions. Such inspections and discussions shall be conducted during normal business hours and shall not unreasonably disrupt the business of such Person. The books and records of the Issuer will be maintained at the National Servicing Center, 10033 West 70th Street, Eden Prairie, Minnesota, unless such Person shall otherwise advise the parties hereto in writing. 21 (v) The Issuer shall provide or cause to be provided to Financial Security an executed original copy of each document executed in connection with the Transaction within 30 days after the date of closing. (c) COMPLIANCE CERTIFICATE. The Issuer shall deliver to Financial Security concurrently with the delivery of the financial statements required pursuant to Section 2.05(b)(i) hereof (and concurrently with the delivery of the financial statements required pursuant to Section 2.05(b)(ii) hereof, if a Special Event has occurred), a certificate signed by a President, Vice President or duly authorized agent stating that: (i) a review of the Issuer's performance under the Transaction Documents during such period has been made under such officer's supervision; (ii) to the best of such officer's knowledge following reasonable inquiry, no Special Event, Default or Event of Default has occurred with respect to such Person, or if a Special Event, Default or Event of Default has occurred with respect to such Person, specifying the nature thereof and, if such Person has a right to cure any such Default or Event of Default pursuant to Section 5.01, stating in reasonable detail the steps, if any, being taken by such Person to cure such Default or Event of Default or to otherwise comply with the terms of the agreement to which such Default or Event of Default relates; and (iii) the attached financial reports submitted in accordance with Section 2.05(b)(i) or (ii) hereof, as applicable, are complete and correct in all material respects and present fairly the financial condition and results of operations of the Issuer as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied (subject as to interim statements to normal year-end adjustments). (d) NOTICE OF MATERIAL EVENTS. The Issuer shall promptly inform Financial Security in writing of the occurrence of any of the following: (i) the submission of any claim or the initiation of any legal process, litigation or administrative or judicial investigation (A) against the Issuer pertaining to the Receivables in general, (B) with respect to a material portion of the Receivables or (C) in which a request has been made for certification as a class action (or equivalent relief) that would involve a material portion of the Receivables; (ii) any change in the location of such Person's principal office or any change in the location of the books and records of the Issuer; (iii) the occurrence of any Default or Special Event (which notice shall also be delivered to the Rating Agencies); 22 (iv) the commencement of any proceedings by or against the Issuer under any applicable bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for the Issuer or any of its assets; (v) the receipt of notice that (A) the Issuer is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of the Issuer's business is to be, or may be, suspended or revoked, or (C) the Issuer is to cease and desist any practice, procedure or policy employed by the Issuer in the conduct of its business, and such cessation may result in a Material Adverse Change with respect to the Issuer; or (vi) any other event, circumstance or condition that has resulted, or which such Person reasonably believes might result, in a Material Adverse Change in respect of the Issuer. (e) FURTHER ASSURANCES. The Issuer will file all necessary financing statements, assignments or other instruments, and any amendments or continuation statements relating thereto, necessary to be kept and filed in such manner and in such places as may be required by law to preserve and protect fully the Lien on and security interest in, and all rights of the Collateral Agent, for the benefit of the Trustee for the Noteholders and Financial Security, with respect to, the Receivables, the Collection Account and the Note Distribution Account. In addition, the Issuer shall, upon the request of Financial Security, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, within thirty (30) days of such request, such amendments hereto and such further instruments and take such further action as may be reasonably necessary to effectuate the intention, performance and provisions of the Transaction Documents or to protect the interest of the Collateral Agent, for the benefit of the Trustee for the Noteholders and Financial Security, in the Receivables, free and clear of all Liens and Restrictions on Transferability, except the Restrictions on Transferability imposed by the Transaction Documents. In addition, the Issuer agrees to cooperate with the Rating Agencies in connection with any review of the Transaction which may be undertaken by the Rating Agencies after the date hereof. (f) REDEMPTION OF SECURITIES. The Issuer shall, upon the repayment of outstanding Advances and termination of the Issuer's obligation to make further Advances pursuant to the Repurchase Agreement or otherwise, furnish to Financial Security a notice of such repayment and termination, and, upon payment of all of the Securities and the expiration of the term of the Policy, surrender the Policy to Financial Security for cancellation. (g) THIRD-PARTY BENEFICIARY. The Issuer agrees that Financial Security shall have all rights of a third-party beneficiary in respect of the Servicing Agreement and hereby incorporates and restates its representations, warranties and covenants as set forth therein for the benefit of Financial Security. 23 (h) CORPORATE EXISTENCE. The Issuer shall maintain its corporate existence and shall at all times continue to be duly organized under the laws of the State of Delaware and duly qualified and duly authorized (as described in Sections 2.04(a), (b) and (c) hereof) and shall conduct its business in accordance with the terms of its Certificate of Incorporation and Bylaws. (i) DISCLOSURE DOCUMENT. Any Offering Document delivered with respect to the Securities shall clearly disclose that the Policy is not covered by the property/casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. In addition, any Offering Document delivered with respect to the Securities which includes financial statements of Financial Security prepared in accordance with generally accepted accounting principles shall include the following statement immediately preceding such financial statements: The New York State Insurance Department recognizes only statutory account practices for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the New York Insurance Law, and for determining where its financial condition warrants the payment of a dividend to its stockholders. No consideration is given by the New York State Insurance Department to financial statements prepared in accordance with generally accepted accounting principles in making such determinations. (j) SPECIAL PURPOSE ENTITY. (i) The Issuer shall conduct its business solely in its own name through its duly authorized officers or agents so as not to mislead others as to the identity of the entity with which those others are concerned. It particularly will use its best efforts to avoid the appearance of conducting business on behalf of OFL or any affiliate thereof or and to avoid the appearance that the assets of the Issuer are available to pay the creditors of OFL or any affiliate thereof. Without limiting the generality of the foregoing, all oral and written communications, including, without limitation, letters, invoices, purchase orders, contracts, statements and loan applications, will be made solely in the name of the Issuer. (ii) The Issuer shall maintain corporate records and books of account separate from those of OFL and any affiliate thereof. The Issuer's books and records shall clearly reflect the transfer of the Receivables and related Other Conveyed Property to the Issuer. (iii) The Issuer shall obtain proper authorization from its Board of Directors of all corporate action requiring such authorization, meetings of the board of directors of the Issuer shall be held not less frequently than one time per 24 annum and copies of the minutes of each such board meeting shall be delivered to Financial Security within two weeks of such meeting. (iv) The Issuer shall obtain proper authorization from its shareholders of all corporate action requiring shareholder approval, meetings of the shareholders of the Issuer shall be held not less frequently than one time per annum and copies of each such authorization and the minutes of each such shareholder meeting shall be delivered to Financial Security within two weeks of such authorization or meeting, as the case may be. (v) Although the organizational expenses of the Issuer have been paid by OFL, operating expenses and liabilities of the Issuer shall be paid from its own funds. (vi) The annual financial statements of the Issuer shall disclose the effects of its transactions in accordance with generally accepted accounting principles and shall disclose that the assets of the Issuer are not available to pay creditors of OFL or any affiliate thereof. (vii) The resolutions, agreements and other instruments of the Issuer underlying the transactions described in this Agreement and in the other Transaction Documents shall be continuously maintained by the Issuer as official records of the Issuer separately identified and held apart from the records of OFL and each affiliate thereof. (viii) The Issuer shall maintain an arm's-length relationship with OFL and the affiliates thereof and will not hold itself out as being liable for the debts of OFL or any affiliate thereof. (ix) The Issuer shall keep its assets and liabilities wholly separate from those of all other entities, including, but not limited to, OFL and the affiliates thereof. (x) The books and records of the Issuer will be maintained at the National Servicing Center, 10033 West 70th Street, Eden Prairie, Minnesota, unless it shall otherwise advise the parties hereto in writing. The Issuer shall, upon the request of Financial Security, permit Financial Security or its authorized agents to inspect its books and records. (k) MAINTENANCE OF LICENSES. The Issuer shall maintain all licenses, permits, charters and registrations which are material to the performance by of its obligations under this Insurance Agreement and each other Transaction Document to which is a party or by which it is bound. 25 (l) INCORPORATION OF COVENANTS. The Issuer agrees to comply with each of the Issuer's covenants set forth in the Transaction Documents and hereby incorporates such covenants by reference as if each were set forth herein. Section 2.06. NEGATIVE COVENANTS OF OFL AND THE ISSUER. Each of OFL and the Issuer hereby agree that during the Term of this Agreement, unless Financial Security shall otherwise expressly consent in writing, as follows: (a) RESTRICTIONS ON LIENS. The Issuer shall not (i) create, incur or suffer to exist, or agree to create, incur or suffer to exist, or consent to cause or permit in the future (upon the happening of a contingency or otherwise) the creation, incurrence or existence of any Lien or Restriction on Transferability of the Receivables except for (w) the Lien in favor of the Collateral Agent, for the benefit of the Trustee for the Noteholders and Financial Security, (x) Liens for taxes if such taxes shall not at the time be due and payable or if the Issuer shall currently be contesting the validity thereof in good faith by appropriate proceedings and shall have set aside on its books adequate reserves with respect thereto, and (y) the Restrictions on Transferability imposed by the Transaction Documents or (ii) sign or file under the Uniform Commercial Code of any jurisdiction any financing statement which names the Issuer as a debtor, or sign any security agreement authorizing any secured party thereunder to file such financing statement, with respect to the Receivables, except in each case any such instrument solely securing the rights and preserving the Lien of the Collateral Agent, for the benefit of the Trustee for the Noteholders and Financial Security. (b) IMPAIRMENT OF RIGHTS. The Issuer shall not take any action, or fail to take any action, if such action or failure to take action may (i) interfere with the enforcement of any rights under the Transaction Documents that are material to the rights, benefits or obligations of the Trustee, the Noteholders or Financial Security, (ii) result in a Material Adverse Change in respect of the Receivables or (iii) impair the ability of the Issuer to perform its obligations under the Transaction Documents, including any consolidation, merger with any Person or any transfer of all or any material amount of the assets of the Issuer to any other Person if such consolidation, merger or transfer would materially impair the net worth of the Issuer or any successor Person obligated, after such event, to perform such Person's obligations under the Transaction Documents. (c) WAIVER, AMENDMENTS, ETC. The Issuer shall not waive, modify or amend, or consent to any waiver, modification or amendment of, any of the provisions of any of the Transaction Documents or the Certificate of incorporation or by-laws of the Issuer unless (i) if no Insurer Default shall have occurred and be continuing Financial Security shall have occurred and be continuing Financial Security shall have consented thereto in writing or (ii) if an Issuer Default shall have occurred and be continuing which would adversely affect the interests of Financial Security. (d) SUCCESSORS. The Issuer shall not terminate or designate, or consent to the termination or designation of, the servicer, back-up servicer or collateral agent or any successor thereto without the prior approval of Financial Security. 26 (e) OTHER ACTIVITIES. The Issuer shall not issue securities other than the Securities or create, incur, assume or suffer to exist any Indebtedness or sell, transfer, exchange or otherwise dispose of any of its assets, or engage in any business or activity, except for the Transaction and otherwise only if the following conditions are met: (i) no other securities of the Issuer will be downgraded or listed for credit review for possible downgrade by reason of such transaction, (ii) the shadow rating of the Securities is not reduced by reason of such transaction, (iii) all parties to such transaction enter into agreements with the Issuer (and satisfactory to Financial Security), with Financial Security as a named third-party beneficiary, not to commence a bankruptcy, reorganization or similar proceeding against the Issuer. (f) SUBSIDIARIES. The Issuer shall not form, or cause to be formed, any Subsidiaries. (g) ISSUANCE OF STOCK. The Issuer shall not issue any shares of capital stock or rights, warrants or options in respect of capital stock or securities convertible into or exchangeable for capital stock, other than the shares of common stock which have been pledged to Financial Security under the Stock Pledge Agreement. (h) NO MERGERS. The Issuer shall not consolidate with or merger into any Person or transfer all or any material amount of its assets to any Person or liquidate or dissolve. (i) INSOLVENCY. The Issuer shall not commence with respect to ORFC any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to the bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, corporation or other relief with respect to it or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or make a general assignment for the benefit of its creditors. Neither OFL nor the Issuer shall take any action in furtherance of, or indicating the consent to, approval of, or acquiescence in any of the acts set forth above. The Issuer shall not admit in writing its inability to pay its debts. ARTICLE III THE POLICY; REIMBURSEMENT; INDEMNIFICATION Section 3.01. ISSUANCE OF THE POLICY. Financial Security agrees to issue the Policy subject to satisfaction of each and all of the conditions precedent set forth in Appendix A hereto. 27 Section 3.02. PAYMENT OF FEES AND PREMIUM. (a) INDUCEMENT LETTER FEES AND EXPENSES. On the Date of Issuance, OFL shall pay or cause to be paid the amounts specified with respect to fees, expenses and disbursements in the Inducement Letter, unless otherwise agreed between OFL and Financial Security. (b) LEGAL FEES. On the Date of Issuance, OFL shall pay or cause to be paid legal fees and disbursements incurred by Financial Security in connection with the issuance of the Policy, unless otherwise agreed between OFL and Financial Security. (c) RATING AGENCY FEES. The initial fees of S&P and Moody's with respect to the Securities and the Transaction shall be paid by OFL in full on the Date of Issuance, or otherwise provided for to the satisfaction of Financial Security. All periodic and subsequent fees of S&P or Moody's with respect to, and directly allocable to, the Securities and the Transaction shall be for the account of, and shall be billed to, OFL. The fees for any other rating agency shall be paid by the party requesting such other agency's rating, unless such other agency is a substitute for S&P or Moody's in the event that S&P or Moody's is no longer determining a capital charge with respect to the Policy by Financial Security, in which case the cost for such agency shall be paid by OFL. (d) AUDITORS' FEES. OFL shall pay on demand any fees of Financial Security's auditors payable in respect of any Offering Document that are incurred after the Date of Issuance. It is understood that Financial Security's auditors shall not incur any additional fees in respect of future Offering Documents except at the request of or with the consent of OFL. (e) PREMIUM. In consideration of the issuance by Financial Security of the Policy, Financial Security shall be entitled to receive the Premium as and when due in accordance with the terms of the Premium Letter. The Premium paid hereunder or under the Servicing Agreement shall be nonrefundable without regard to whether Financial Security makes any payment under the Policy or any other circumstances relating to the Securities or provision being made for payment of the Securities prior to maturity. Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION. OFL agrees to pay to Financial Security the following amounts as and when incurred: (a) a sum equal to the total of all amounts paid by Financial Security under the Policy; (b) any and all out-of-pocket charges, fees, costs and expenses which Financial Security may reasonably pay or incur, including, but not limited to, attorneys' and accountants' fees and expenses, in connection with (i) in the event of payments under the Policy, any accounts established to facilitate payments under the Policy, to the extent Financial Security has not been immediately reimbursed on the date that any amount is paid by Financial Security under the Policy, or other administrative expenses relating to 28 such payments under the Policy, (ii) the enforcement, defense or preservation of any rights in respect of any of the Transaction Documents, including defending, monitoring or participating in any litigation or proceeding (including any insolvency or bankruptcy proceeding in respect of any Transaction participant or any affiliate thereof) relating to any of the Transaction Documents, any party to any of the Transaction Documents or the Transaction, (iii) any amendment, waiver or other action with respect to, or related to, any Transaction Document whether or not executed or completed, or (iv) any review or investigation made by Financial Security in those circumstances where its approval or consent is sought under any of the Transaction Documents; (c) interest on any and all amounts described in Section 3.03(a) or (b) or Section 3.02(e) from the date due to Financial Security pursuant to the provisions hereof until payment thereof in full, payable to Financial Security at the Late Payment Rate per annum; and (d) any payments made by Financial Security on behalf of, or advanced to, OFL, in its capacity as Servicer, or the Trustee, including, without limitation, any amounts payable by OFL, in its capacity as Servicer, or the Trustee pursuant to the Securities or any other Transaction Documents; and any payments made by Financial Security as, or in lieu of, any servicing, management, trustee, custodial or administrative fees payable, in the sole discretion of Financial Security to third parties in connection with the Transaction. Section 3.04. INDEMNIFICATION. (a) INDEMNIFICATION BY OFL. In addition to any and all rights of reimbursement, indemnification, subrogation and any other rights pursuant hereto or under law or in equity, OFL hereby agrees to pay, and to protect, indemnify and save harmless, Financial Security and its officers, directors, shareholders, employees, agents and each Person, if any, who controls Financial Security within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages, costs or expenses (including, without limitation, fees and expenses of attorneys, consultants and auditors and reasonable costs of investigations) of any nature arising out of or relating to the transactions contemplated by the Transaction Documents by reason of: (i) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft committed by any director, officer, employee or agent of OFL, ORFC or the Issuer; (ii) the breach by OFL, ORFC or the Issuer of any representation, warranty or covenant under any of the Transaction Documents or the occurrence, in respect of OFL, ORFC or the Issuer under any of the Transaction Documents of any "event of default" or any event which, with the giving of notice or the lapse of time or both, would constitute any "event of default"; or 29 (iii) any untrue statement or alleged untrue statement of a material fact contained in any Offering Document or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such claims arise out of or are based upon any untrue statement or omission in information included in an Offering Document and furnished by Financial Security in writing expressly for use therein (all such information so furnished by Financial Security being referred to herein as "FINANCIAL SECURITY INFORMATION"). (b) CONDUCT OF ACTIONS OR PROCEEDINGS. If any action or proceeding (including any governmental investigation) shall be brought or asserted against Financial Security, any officer, director, shareholder, employee or agent of Financial Security or any Person controlling Financial Security (individually, an "INDEMNIFIED PARTY" and, collectively, the "INDEMNIFIED PARTIES") in respect of which indemnity may be sought from OFL (the "INDEMNIFYING PARTY") hereunder, Financial Security shall promptly notify the Indemnifying Party in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel satisfactory to Financial Security and the payment of all expenses. An Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof at the expense of the Indemnified Party; PROVIDED, HOWEVER, that the fees and expenses of such separate counsel shall only be at the expense of the Indemnifying Party if (i) the Indemnifying Party has agreed to pay such fees and expenses, (ii) the Indemnifying Party shall have failed to assume the defense of such action or proceeding and employ counsel satisfactory to Financial Security in any such action or proceeding or (iii) the named parties to any such action or proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party shall have been advised by counsel that (A) there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party and (B) the representation of the Indemnifying Party and the Indemnified Party by the same counsel would be inappropriate or contrary to prudent practice (in which case, if the Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for the Indemnified Parties, which firm shall be designated in writing by Financial Security). The Indemnifying Party shall not be liable for any settlement of any such action or proceeding effected without its written consent but, if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding with respect to which the Indemnifying Party shall have received notice in accordance with this subsection (b), the Indemnifying Party agrees to indemnify and hold the Indemnified Parties harmless from and against any loss or liability by reason of such settlement or judgment. 30 (c) CONTRIBUTION. To provide for just and equitable contribution if the indemnification provided by the Indemnifying Party is determined to be unavailable for any Indemnified Party (other than due to application of this Section), the Indemnifying Party shall contribute to the losses incurred by the Indemnified Party on the basis of the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand. Section 3.05. SUBROGATION. Subject only to the priority of payment provisions of the Indenture and the Security Agreement, each of the parties hereto acknowledges that, to the extent of any payment made by Financial Security pursuant to the Policy, Financial Security is to be fully subrogated to the extent of such payment and any additional interest due on any late payment, to the rights of the Noteholders to any moneys paid or payable in respect of the Securities under the Transaction Documents or otherwise. Each of the parties hereto agrees to such subrogation and, further, agrees to execute such instruments and to take such actions as, in the sole judgment of Financial Security, are necessary to evidence such subrogation and to perfect the rights of Financial Security to receive any moneys paid or payable in respect of the Securities under the Transaction Documents or otherwise. ARTICLE IV FURTHER AGREEMENTS Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall take effect on the Date of Issuance and shall remain in effect until the later of (a) such time as Financial Security is no longer subject to a claim under the Policy and the Policy shall have been surrendered to Financial Security for cancellation and (b) all amounts payable to Financial Security and the Noteholders under the Transaction Documents and under the Securities have been paid in full; PROVIDED, HOWEVER, that the provisions of Sections 3.02, 3.03 and 3.04 hereof shall survive any termination of this Agreement. Section 4.02. OBLIGATIONS ABSOLUTE. (a) The payment obligations of OFL, ORFC and the Issuer hereunder shall be absolute and unconditional, and shall be paid strictly in accordance with this Agreement under all circumstances irrespective of (i) any lack of validity or enforceability of, or any amendment or other modifications of, or waiver with respect to, any of the Transaction Documents, the Securities or the Policy; (ii) any exchange or release of any other obligations hereunder; (iii) the existence of any claim, setoff, defense, reduction, abatement or other right which OFL, ORFC or the Issuer may have at any time against Financial Security or any other Person; (iv) any document presented in connection with the Policy proving to be forged, fraudulent, invalid or insufficient in any respect, including any failure to strictly comply with the terms of the Policy, or any statement therein being untrue or inaccurate in any respect; (v) any failure of the Issuer to receive the proceeds from the sale of the Securities; (vi) any breach by OFL, ORFC or the Issuer of any representation, warranty or covenant contained in any of the Transaction Documents; or (vii) any other circumstances, other than payment in full, which might otherwise constitute a defense available to, or discharge of, OFL, ORFC or the Issuer in respect of any Transaction Document. 31 (b) OFL, ORFC and the Issuer and any and all others who are now or may become liable for all or part of the obligations of such Persons under this Agreement agree to be bound by this Agreement and (i) to the extent permitted by law, waive and renounce any and all redemption and exemption rights and the benefit of all valuation and appraisement privileges against the indebtedness, if any, and obligations evidenced by any Transaction Document or by any extension or renewal thereof; (ii) waive presentment and demand for payment, notices of nonpayment and of dishonor, protest of dishonor and notice of protest; (iii) waive all notices in connection with the delivery and acceptance hereof and all other notices in connection with the performance, default or enforcement of any payment hereunder except as required by the Transaction Documents; (iv) waive all rights of abatement, diminution, postponement or deduction, or to any defense other than payment, or to any right of setoff or recoupment arising out of any breach under any of the Transaction Documents, by any party thereto or any beneficiary thereof, or out of any obligation at any time owing to OFL, ORFC or the Issuer; (v) agree that any consent, waiver or forbearance hereunder with respect to an event shall operate only for such event and not for any subsequent event; (vi) consent to any and all extensions of time that may be granted by Financial Security with respect to any payment hereunder or other provisions hereof and to the release of any security at any time given for any payment hereunder, or any part thereof, with or without substitution, and to the release of any Person or entity liable for any such payment; and (vii) consent to the addition of any and all other makers, endorsers, guarantors and other obligors for any payment hereunder, and to the acceptance of any and all other security for any payment hereunder, and agree that the addition of any such obligors or security shall not affect the liability of the parties hereto for any payment hereunder. (c) Nothing herein shall be construed as prohibiting OFL, ORFC or the Issuer from pursuing any rights or remedies it may have against any Person other than Financial Security in a separate legal proceeding. Section 4.03. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS. (a) This Agreement shall be a continuing obligation of the parties hereto and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. None of OFL, ORFC nor the Issuer may assign its rights under this Agreement, or delegate any of its duties hereunder, without the prior written consent of Financial Security. Any assignment made in violation of this Agreement shall be null and void. (b) Financial Security shall have the right to give participations in its rights under this Agreement and to enter into contracts of reinsurance with respect to the Policy upon such terms and conditions as Financial Security may in its discretion determine; PROVIDED, HOWEVER, that no such participation or reinsurance agreement or arrangement shall relieve Financial Security of any of its obligations hereunder or under the Policy. (c) In addition, Financial Security shall be entitled to assign or pledge to any bank or other lender providing liquidity or credit with respect to the Transaction or the obligations of Financial Security in connection therewith any rights of Financial Security under the Transaction Documents or with respect to any real or personal property or other interests pledged to Financial Security, or in which Financial Security has a security interest, in connection with the Transaction. 32 (d) Except as provided herein with respect to participants and reinsurers, nothing in this Agreement shall confer any right, remedy or claim, express or implied, upon any Person, including, particularly, any Noteholder, other than Financial Security, against OFL, ORFC or the Issuer, and all the terms, covenants, conditions, promises and agreements contained herein shall be for the sole and exclusive benefit of the parties hereto and their successors and permitted assigns. Neither the Trustee nor any Noteholder shall have any right to payment from any premiums paid or payable hereunder or from any other amounts paid by OFL or the Issuer pursuant to Section 3.02, 3.03 or 3.04 hereof. Section 4.04. LIABILITY OF FINANCIAL SECURITY. Neither Financial Security nor any of its officers, directors or employees shall be liable or responsible for: (a) the use which may be made of the Policy by the Trustee or for any acts or omissions of the Trustee in connection therewith or (b) the validity, sufficiency, accuracy or genuineness of documents delivered to Financial Security (or its Fiscal Agent) in connection with any claim under the Policy, or of any signatures thereon, even if such documents or signatures should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged (unless Financial Security had actual knowledge thereof). In furtherance and not in limitation of the foregoing, Financial Security (or its Fiscal Agent) may accept documents that appear on their face to be in order, without responsibility for further investigation. ARTICLE V EVENTS OF DEFAULT; REMEDIES Section 5.01. EVENTS OF DEFAULT. The occurrence of any of the following events shall constitute an Event of Default hereunder: (a) any demand for payment shall be made under the Policy; (b) any representation or warranty made by OFL, ORFC or the Issuer under any of the Transaction Documents, or in any certificate or report furnished under any of the Transaction Documents, shall prove to be untrue or incorrect in any material respect; PROVIDED, HOWEVER, that if OFL, ORFC or the Issuer effectively cures any such defect in any representation or warranty under any Transaction Document, or certificate or report furnished under any Transaction Document, within the time period specified in the relevant Transaction Document as the cure period therefor, such defect shall not in and of itself constitute an Event of Default hereunder; (c) (i) OFL, ORFC or the Issuer shall fail to pay when due any amount payable by it, shall fail to effect any purchase or repurchase required to be made by it, in each case, hereunder or under any of the Transaction Documents unless such amounts are paid in full within any applicable cure period explicitly provided for under the relevant Transaction Document; (ii) OFL, ORFC or the Issuer shall have asserted that any material provision of the Transaction Documents to which it is a party is not valid and binding on the parties thereto; or (iii) any court, governmental authority or agency having 33 jurisdiction over any of the parties to any of the Transaction Documents or any property thereof shall find or rule that any material provision of any of the Transaction Documents is not valid and binding on the parties thereto; (d) OFL, ORFC or the Issuer shall fail to perform or observe any other covenant or agreement contained in any of the Transaction Documents (except for the obligations described under clause (c) above) and such failure shall continue beyond any applicable cure period explicitly provided for under the relevant Transaction Document; (e) any of OFL, ORFC or the Issuer shall fail to pay its debts generally as they come due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors, or shall institute any proceeding seeking to adjudicate it insolvent or seeking a liquidation, or shall take advantage of any insolvency act, or shall commence a case or other proceeding naming it as debtor under the United States Bankruptcy Code or similar law, domestic or foreign, or a case or other proceeding shall be commenced against any of OFL, ORFC or the Issuer under the United States Bankruptcy Code or similar law, domestic or foreign, or any proceeding shall be instituted against any of OFL, ORFC or the Issuer seeking liquidation of its assets and such Person shall fail to take appropriate action resulting in the withdrawal or dismissal of such proceeding within 30 days or there shall be appointed or any of OFL, ORFC or the Issuer shall consent to, or acquiesce in, the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such Person or the whole or any substantial part of its properties or assets or such Person shall take any corporate action in furtherance of any of the foregoing; (f) the occurrence of an Insurance Agreement Event of Default with respect to any Term Transaction, which Insurance Agreement Event of Default is not defined as a "Portfolio Performance Event of Default" in the related Insurance Agreement; (g) ORFC shall fail to make a deposit with respect to any WAC Deficiency Amount in accordance with the provisions of Section 3.1(f) of the Servicing Agreement, and such failure shall continue for one Business Day; (h) it shall be determined on any Determination Date that the Collateral Test shall fail to have been satisfied as of the immediately preceding Accounting Date, after taking into account any deposit made by ORFC to the Collection Account on such Determination Date and such failure shall continue for one Business Day; (i) a Servicer Termination Event shall occur; or (j) the occurrence of an "Event of Default" under the Repurchase Agreement and either (x) the Repurchase Date (as defined in the Repurchase Agreement) shall have been deemed to automatically occur or (y) the Issuer shall have exercised its option to have the Repurchase Date immediately occur pursuant to Section 8(a) of the Repurchase Agreement. 34 Section 5.02. REMEDIES; WAIVERS. (a) Upon the occurrence of an Event of Default, Financial Security may exercise any one or more of the rights and remedies set forth below: (i) declare the Premium Supplement to be immediately due and payable, and the same shall thereupon be immediately due and payable, whether or not Financial Security shall have declared an "Event of Default" or shall have exercised, or be entitled to exercise, any other rights or remedies hereunder; (ii) exercise any rights and remedies available under the Transaction Documents in its own capacity or in its capacity as the Person entitled to exercise the rights of the Noteholders in respect of the Securities; or (iii) take whatever action at law or in equity may appear necessary or desirable in its judgment to enforce performance of any obligation of OFL, ORFC or the Issuer under the Transaction Documents. (b) Unless otherwise expressly provided, no remedy herein conferred upon or reserved is intended to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under the Transaction Documents or existing at law or in equity. No delay or failure to exercise any right or power accruing under any Transaction Document upon the occurrence of any Event of Default or otherwise shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle Financial Security to exercise any remedy reserved to Financial Security in this Article, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Article. (c) If any proceeding has been commenced to enforce any right or remedy under this Agreement and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to Financial Security, then and in every such case the parties hereto shall, subject to any determination in such proceeding, be restored to their respective former positions hereunder, and, thereafter, all rights and remedies of Financial Security shall continue as though no such proceeding had been instituted. (d) Financial Security shall have the right, to be exercised in its complete discretion, to waive any covenant, Default or Event of Default by a writing setting forth the terms, conditions and extent of such waiver signed by Financial Security and delivered to OFL, ORFC and the Issuer. Any such waiver may only be effected in writing duly executed by Financial Security, and no other course of conduct shall constitute a waiver of any provision hereof. Unless such writing expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence so waived and not to any other similar event or occurrence. (e) Upon the declaration of an Event of Default by Financial Security, Financial Security shall provide written notice of such Event of Default to the Rating Agencies. 35 ARTICLE VI MISCELLANEOUS Section 6.01. AMENDMENTS, ETC. This Agreement may be amended, modified or terminated only by written instrument or written instruments signed by the parties hereto. No act or course of dealing shall be deemed to constitute an amendment, modification or termination hereof. Section 6.02. NOTICES. All demands, notices and other communications to be given hereunder shall be in writing (except as otherwise specifically provided herein) and shall be mailed by registered mail or personally delivered or telecopied to the recipient as follows: (a) To Financial Security: Financial Security Assurance Inc. 350 Park Avenue New York, NY 10022 Attention: Surveillance Department Re: Arcadia Receivables Conduit Corp., Floating Rate Automobile Receivables- Backed Notes/Olympic Structured Warehouse Facility Confirmation: (212) 826-0100 Telecopy Nos.: (212) 339-3518, (212) 339-3529 (in each case in which notice or other communication to Financial Security refers to an Event of Default, a claim on the Policy or with respect to which failure on the part of Financial Security to respond shall be deemed to constitute consent or acceptance, then a copy of such notice or other communication should also be sent to the attention of each of the General Counsel and the Head-- Financial Guaranty Group and shall be marked to indicate "URGENT MATERIAL ENCLOSED.") (b) To OFL: Olympic Financial Ltd. Olympic Place 7825 Washington Avenue South Minneapolis, MN 55439-2444 Attention: Treasurer (c) To ORFC: Olympic Receivables Finance Corp. Olympic Place 7825 Washington Avenue South Minneapolis, MN 55439-2444 Attention: Treasurer 36 (d) To the Issuer: Arcadia Receivables Conduit Corp. Olympic Place 7825 Washington Avenue South Minneapolis, MN 55439-2444 Attention: Treasurer A party may specify an additional or different address or addresses by writing mailed or delivered to the other party as aforesaid. All such notices and other communications shall be effective upon receipt. Section 6.03. PAYMENT PROCEDURE. In the event of any payment by Financial Security for which it is entitled to be reimbursed or indemnified as provided herein, each party obligated hereunder to make such reimbursement or provide such indemnification agrees to accept the voucher or other evidence of payment as prima facie evidence of the propriety thereof and the liability therefor to Financial Security. All payments to be made to Financial Security under this Agreement shall be made to Financial Security in lawful currency of the United States of America in immediately available funds to the account number provided in the Premium Letter before 1:00 p.m. (New York, New York time) on the date when due or as Financial Security shall otherwise direct by written notice to OFL. In the event that the date of any payment to Financial Security or the expiration of any time period hereunder occurs on a day which is not a Business Day, then such payment or expiration of time period shall be made or occur on the next succeeding Business Day with the same force and effect as if such payment was made or time period expired on the scheduled date of payment or expiration date. Payments to be made to Financial Security under this Agreement shall bear interest at the Late Payment Rate from the date due to the date paid. Section 6.04. SEVERABILITY. In the event that any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, the parties hereto agree that such holding shall not invalidate or render unenforceable any other provision hereof. The parties hereto further agree that the holding by any court of competent jurisdiction that any remedy pursued by any party hereto is unavailable or unenforceable shall not affect in any way the ability of such party to pursue any other remedy available to it. Section 6.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 6.06. CONSENT TO JURISDICTION. (a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE 37 THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE TRANSACTION DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. (b) To the extent permitted by applicable law, the parties hereto shall not seek and hereby waive the right to any review of the judgment of any such court by any court of any other nation or jurisdiction which may be called upon to grant an enforcement of such judgment. (c) Each of OFL, ORFC and the Issuer hereby irrevocably appoints and designates CT Corporation System, whose address is 1633 Broadway, New York, New York 10019, as its true and lawful attorney and duly authorized agent for acceptance of service of legal process. Each of OFL, ORFC and the Issuer agrees that service of such process upon such Person shall constitute personal service of such process upon it. (d) Nothing contained in the Agreement shall limit or affect Financial Security's right to serve process in any other manner permitted by law or to start legal proceedings relating to any of the Transaction Documents against OFL, ORFC or the Issuer or its property in the courts of any jurisdiction. Section 6.07. CONSENT OF FINANCIAL SECURITY. In the event that Financial Security's consent is required under any of the Transaction Documents, the determination whether to grant or withhold such consent shall be made by Financial Security in its sole discretion without any implied duty towards any other Person, except as otherwise expressly provided therein. Section 6.08. COUNTERPARTS. This Agreement may be executed in counterparts by the parties hereto, and all such counterparts shall constitute one and the same instrument. Section 6.09. TRIAL BY JURY WAIVED. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND 38 (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER. Section 6.10. LIMITED LIABILITY. No recourse under any Transaction Document shall be had against, and no personal liability shall attach to, any officer, employee, director, affiliate or shareholder of any party hereto, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise in respect of any of the Transaction Documents, the Securities or the Policy, it being expressly agreed and understood that each Transaction Document is solely a corporate obligation of each party hereto, and that any and all personal liability, either at common law or in equity, or by statute or constitution, of every such officer, employee, director, affiliate or shareholder for breaches by any party hereto of any obligations under any Transaction Document is hereby expressly waived as a condition of and in consideration for the execution and delivery of this Agreement. Section 6.11. ENTIRE AGREEMENT. This Agreement, the Premium Letter and the Policy set forth the entire agreement between the parties with respect to the subject matter thereof, and this Agreement supersedes and replaces any agreement or understanding that may have existed between the parties prior to the date hereof in respect of such subject matter. 39 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement, all as of the day and year first above written. FINANCIAL SECURITY ASSURANCE INC. By: ________________________________ Authorized Officer OLYMPIC FINANCIAL LTD. By: ________________________________ Title: ________________________________ OLYMPIC RECEIVABLES FINANCE CORP. By: ________________________________ Title: ________________________________ ARCADIA RECEIVABLES CONDUIT CORP. By: ________________________________ Title: ________________________________ 40 APPENDIX I DEFINITIONS "ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in Section 412 of the Code and Section 302 of ERISA, whether or not waived. "ASSIGNMENT AGREEMENT" means, with respect to any Receivables, the assignment agreement between OFL and ORFC pursuant to which OFL sells and assigns Receivables to ORFC, in such form as is attached to the Receivables Purchase Agreement and Assignment as Exhibit A. "BUSINESS DAY" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the City of New York, New York or the City of Minneapolis, Minnesota are authorized or obligated by law or executive order to be closed. "CODE" means the Internal Revenue Code of 1986, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "COMMISSION" means the Securities and Exchange Commission. "COMMONLY CONTROLLED ENTITY" means ORFC or the Issuer and each entity, whether or not incorporated, which is affiliated with such Person pursuant to Section 414(b), (c), (m) or (o) of the Code. "CUSTODIAN AGREEMENT" means any Custodian Agreement as defined in the Servicing Agreement. "DATE OF ISSUANCE" means the date on which the Policy is issued as specified therein. "DEFAULT" means any event which results, or which with the giving of notice or the lapse of time or both would result, in an Event of Default. "ERISA" means the Employee Retirement Income Security Act of 1974, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "EVENT OF DEFAULT" means any event of default specified in Section 5.01 of the Insurance Agreement. "EXPIRATION DATE" means the final date of the Term of the Policy, as specified in the Policy. "FINANCIAL SECURITY" means Financial Security Assurance Inc., a New York stock insurance company, its successors and assigns. 41 "FINANCIAL STATEMENTS" means with respect to each of OFL and ORFC the balance sheets as of December 31, 1995 and the statements of income, retained earnings and cash flows for the 12-month period then ended and the notes thereto and the balance sheets as of September 30, 1996 and the statements of income, retained earnings and cash flows for the fiscal quarter then ended. "FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant to the terms of the Policy. "INDEBTEDNESS" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under any capital leases, (v) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person, (vi) all Indebtedness of others guaranteed by such Person or with respect to which such Person shall agree to become directly or contingently liable by, and (vii) all obligations of such Person in connection with the repurchase of motor vehicle retail installment sales contracts. "INDENTURE" means the Indenture dated as of the date hereof between the Issuer and the Trustee, pursuant to which the Issuer issues the Securities, as the same may be amended from time to time. "INSURANCE AGREEMENT" means this Insurance and Indemnity Agreement, as the same may be amended from time to time, and, with respect to a Term Transaction, any Insurance and Indemnity Agreement entered into in connection with such Term Transaction. "INSURANCE AGREEMENT EVENT OF DEFAULT" means an "Event of Default" under any Insurance and Indemnity Agreement among Financial Security, OFL and Olympic Receivables Finance Corp. entered into with respect to a Term Transaction. "INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "IRS" means the Internal Revenue Service. "LATE PAYMENT RATE" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by Chemical Bank at its principal office in the City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by Chemical Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Securities and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over the actual number of days in the current calendar year. 42 "LIEN" means, as applied to the property or assets (or the income or profits therefrom) of any Person, in each case whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease, conditional sale or other title retention agreement, or other security interest or encumbrance of any kind or (b) any arrangement, express or implied, under which such property or assets are transferred, sequestered or otherwise identified for the purpose of subjecting or making available the same for the payment of debt or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person. "LOCKBOX AGREEMENT" means the Lockbox Agreement, as defined in the Servicing Agreement. "MATERIAL ADVERSE CHANGE" means, (a) in respect of any Person, a material adverse change in (i) the business, financial condition, results of operations or properties of such Person or any of its Subsidiaries or (ii) the ability of such Person to perform its obligations under any of the Transaction Documents to which it is a party and (b) in respect of the Receivables, a material adverse change in (i) the value or marketability of the Receivables, taken as a whole, or (ii) the probability that amounts now or hereafter due in respect of a material portion of the Receivables will be collected on a timely basis. "MOODY'S" means Moody's Investors Service, Inc., a Delaware corporation, and any successor thereto, and, if such corporation shall for any reason no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized rating agency designated by Financial Security. "MULTIEMPLOYER PLAN" means a multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity makes contributions or has liability. "NOTEHOLDERS" means registered holders of the Securities. "NOTICE OF CLAIM" means a Notice of Claim and Certificate in the form attached as Exhibit A to Endorsement No. 1 to the Policy. "OFFERING DOCUMENT" means any offering document in respect of the Securities that makes reference to the Policy. "OTHER CONVEYED PROPERTY" has the meaning provided in the Receivables Purchase Agreement and Assignment. "PBGC" means the Pension Benefit Guaranty Corporation or any successor agency, corporation or instrumentality of the United States to which the duties and powers of the Pension Benefit Guaranty Corporation are transferred. 43 "PERSON" means an individual, joint stock company, trust, unincorporated association, joint venture, corporation, business or owner trust, partnership or other organization or entity (whether governmental or private). "PLAN" means any pension plan (other than a Multiemployer Plan) covered by Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in respect of which a Commonly Controlled Entity has liability. "POLICY" means the financial guaranty insurance policy, including any endorsements thereto, issued by Financial Security with respect to the Securities, substantially in the form attached as Annex I to this Agreement. "PREMIUM" means the premium payable in accordance with Section 3.02 of the Insurance Agreement and the Premium Supplement, if any. "PREMIUM LETTER" means the side letter between Financial Security, OFL, ORFC, the Issuer and the Trustee dated December 3, 1996, in respect of the premium payable by OFL in consideration of the issuance of the Policy. "PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to the premium payable in accordance with Section 3.02 of the Insurance Agreement, payable to Financial Security in monthly installments commencing on the Premium Supplement Commencement Date and on each monthly anniversary thereof in accordance with the terms set forth in the Premium Letter. "PROVIDED DOCUMENTS" means the Transaction Documents and any documents, agreements, instruments, schedules, certificates, statements, cash flow schedules, number runs or other writings or data furnished to Financial Security by or on behalf of OFL, ORFC or the Issuer with respect to themselves, their Subsidiaries or the Transaction. "RECEIVABLE" has the meaning provided in the Servicing Agreement. "RECEIVABLES PURCHASE AGREEMENT AND ASSIGNMENT" means the Receivables Purchase Agreement and Assignment dated as of the date hereof between ORFC and OFL, as the same may be amended from time to time. "REPORTABLE EVENT" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. "REPURCHASE AGREEMENT" means the Repurchase Agreement dated as of the date hereof among the Issuer, as Buyer, and ORFC, as Seller, as the same may be amended from time to time. "RESTRICTIONS ON TRANSFERABILITY" means, as applied to the property or assets (or the income or profits therefrom) of any Person, in each case whether the same is consensual or non-consensual or arises by contract, operation of law, legal process or otherwise, any material 44 condition to, or restriction on, the ability of such Person or any transferee therefrom to sell, assign, transfer or otherwise liquidate such property or assets in a commercially reasonable time and manner or which would otherwise materially deprive such Person or any transferee therefrom of the benefits of ownership of such property or assets. "SECURITIES" means the Issuer's Floating Rate Automobile Receivables-Backed Notes, issued in one or more series pursuant to the Indenture, in an aggregate principal amount at any one time outstanding not exceeding $300 million. "SECURITIES ACT" means the Securities Act of 1933, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "SECURITY AGREEMENT" means the Security Agreement dated as of the date hereof among OFL, ORFC, the Issuer, Financial Security, Bank of America National Trust and Savings Association, as agent, and the Trustee, as Trustee and as Collateral Agent, as the same may be amended from time to time. "SERVICING AGREEMENT" means the Servicing Agreement dated as of the date hereof among the Issuer, ORFC, OFL and the Trustee, as Backup Servicer, Collateral Agent and Indenture Trustee, as the same may be amended from time to time. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., and any successor thereto, and, if such entity shall for any reason no longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized rating agency designated by Financial Security. "SPECIAL EVENT" means the occurrence of any one of the following: (a) an Event of Default under the Insurance Agreement has occurred and is continuing, (b) any legal proceeding or binding arbitration is instituted with respect to the Transaction or with respect to OFL, ORFC or the Issuer that would result in a Material Adverse Change in respect of OFL, ORFC, the Issuer or the Receivables, (c) any governmental or administrative investigation, action or proceeding is instituted that would, if adversely decided, result in a Material Adverse Change in respect of ORFC, the Issuer or the Receivables, or (d) Financial Security pays a claim under the Policy. "SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement, dated as of March 26, 1993, as amended and restated as of December 3, 1996 among ORFC, OFL, the Collateral Agent named therein and the trustees specified therein, as the same may be further amended, supplemented or otherwise modified in accordance with the terms thereof. "STOCK PLEDGE AGREEMENT" means the Stock Pledge Agreement, as amended and restated, dated as of December 3, 1996, among Financial Security, OFL and the Collateral Agent named therein, as the same may be amended from time to time. 45 "SUBSIDIARY" means, with respect to any Person, any corporation of which a majority of the outstanding shares of capital stock having ordinary voting power for the election of directors is at the time owned by such Person directly or through one or more Subsidiaries. "TERM OF THE AGREEMENT" shall be determined as provided in Section 4.01 of the Insurance Agreement. "TERM OF THE POLICY" has the meaning provided in the Policy. "TERM TRANSACTION" means any transaction other than the Transaction in connection with which Financial Security has issued a financial guaranty insurance policy to guarantee principal and/or interest on certificates or notes representing an interest in receivables originated by OFL. "TRANSACTION" means the transactions contemplated by the Transaction Documents. "TRANSACTION DOCUMENTS" means the Insurance Agreement, the Indenture, the Servicing Agreement, the Repurchase Agreement, the Receivables Purchase Agreement and Assignment (with respect to the Receivables), any Assignment Agreement (with respect to the Receivables), any Custodian Agreement, the Security Agreement, the Premium Letter, the Stock Pledge Agreement, the Lockbox Agreement and the Spread Account Agreement. "TRUSTEE" means Norwest Bank Minnesota, National Association, a national banking association, as trustee under the Indenture, and any successor thereto as trustee under the Indenture. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "UNDERFUNDED PLAN" means any Plan that has an Underfunding. "UNDERFUNDING" means, with respect to any Plan, the excess, if any, of (a) the present value of all benefits under the Plan (based on the assumptions used to fund the Plan pursuant to Section 412 of the Code) as of the most recent valuation date over (b) the fair market value of the assets of such Plan as of such valuation date. 46 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement, all as of the day and year first above written. FINANCIAL SECURITY ASSURANCE INC. By: /s/ Roger K. Taylor ________________________________ Authorized Officer OLYMPIC FINANCIAL LTD. By: /s/ illegible ________________________________ Title: ________________________________ OLYMPIC RECEIVABLES FINANCE CORP. By: /s/ illegible ________________________________ Title: ________________________________ ARCADIA RECEIVABLES CONDUIT CORP. By: /s/ illegible ________________________________ Title: ________________________________ APPENDIX A TO INSURANCE AND INDEMNITY AGREEMENT CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY (a) PAYMENT OF INITIAL PREMIUM AND EXPENSES; PREMIUM LETTER. Financial Security shall have been paid, by or on behalf of OFL and ORFC, a nonrefundable Premium and shall have been reimbursed, by or on behalf of OFL and ORFC, for other fees and expenses identified in Section 3.02 of the Insurance Agreement as payable at closing and Financial Security shall have received a fully executed copy of the Premium Letter. (b) TRANSACTION DOCUMENTS. Financial Security shall have received a copy of each of the Transaction Documents (other than the Policy), in form and substance satisfactory to Financial Security, duly authorized, executed and delivered by each party thereto. Without limiting the foregoing, the provisions of the Servicing Agreement and the Indenture relating to the payment to Financial Security of Premium due on the Policy and the reimbursement to Financial Security of amounts paid under the Policy shall be in form and substance acceptable to Financial Security in its sole discretion. (c) CERTIFIED DOCUMENTS AND RESOLUTIONS. Financial Security shall have received a copy of (i) the certificate of incorporation and bylaws of each of OFL, ORFC and the Issuer and (ii) the resolutions of the Board of Directors of each of OFL, ORFC and the Issuer authorizing the execution, delivery and performance by OFL, ORFC and the Issuer of the Transaction Documents to which it is a party and the transactions contemplated thereby, including, as to the Issuer, the authorization of the issuance of the Securities, certified by the Secretary or an Assistant Secretary of OFL, ORFC or the Issuer, as the case may be (which certificate shall state that such certificate of incorporation, bylaws and resolutions are in full force and effect without modification on December 3, 1996. (d) INCUMBENCY CERTIFICATE. Financial Security shall have received a certificate of the Secretary or an Assistant Secretary of each of OFL, ORFC and the Issuer certifying the name and signatures of the officers of OFL, ORFC or the Issuer, as the case may be, authorized to execute and deliver the Transaction Documents and, if applicable, that shareholder consent to the execution and delivery of such documents is not necessary or has been obtained. (e) REPRESENTATIONS AND WARRANTIES; CERTIFICATE. The representations and warranties of OFL, ORFC or the Issuer, as the case may be, in the Insurance Agreement shall be true and correct as of the Date of Issuance with respect to such Person as if made on the Date of Issuance and Financial Security shall have received a certificate of appropriate officers of OFL, ORFC or the Issuer, as the case may be, to that effect. (f) OPINIONS OF COUNSEL. Financial Security shall have received opinions of counsel addressed to Financial Security, Moody's and S&P in respect of OFL, ORFC, the Issuer, the other parties to the Transaction Documents and the Transaction in form and substance satisfactory to Financial Security, addressing such matters as Financial Security may reasonably request, and A-1 the counsel providing each such opinion shall have been instructed by its client to deliver such opinion to the addressees thereof. (g) APPROVALS, ETC. Financial Security shall have received true and correct copies of all approvals, licenses and consents, if any, including, without limitation, the approval of the shareholders of OFL, ORFC and the Issuer, required in connection with the Transaction. (h) NO LITIGATION, ETC. No suit, action or other proceeding, investigation, or injunction or final judgment relating thereto, shall be pending or threatened before any court or governmental agency in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with any of the Transaction Documents or the consummation of the Transaction. (i) LEGALITY. No statute, rule, regulation or order shall have been enacted, entered or deemed applicable by any government or governmental or administrative agency or court which would make the transactions contemplated by any of the Transaction Documents illegal or otherwise prevent the consummation thereof. (j) ISSUANCE OF RATINGS. Financial Security shall have received confirmation that the risk secured by the Policy constitutes an investment grade risk by S&P and an insurable risk by Moody's. (k) NO DEFAULT. No Default or Event of Default shall have occurred. (l) ADDITIONAL ITEMS. Financial Security shall have received such other documents, instruments, approvals or opinions requested by Financial Security as may be reasonably necessary to effect the Transaction, including but not limited to evidence satisfactory to Financial Security that all conditions precedent, if any, in the Transaction Documents have been satisfied. A-2 ANNEX I TO INSURANCE AND INDEMNITY AGREEMENT FORM OF FINANCIAL GUARANTY INSURANCE POLICY [LOGO] FINANCIAL FINANCIAL GUARANTY SECURITY INSURANCE POLICY ASSURANCE OBLIGOR: Arcadia Receivables Conduit Corp. Policy No.: 50528-N OBLIGATIONS: Up to $300,000,000 Original Principal Date of Issuance: 12/3/96 Amount Floating Rate Automobile Receivables-Backed Notes FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to each Holder, subject only to the terms of this Policy (which includes each endorsement hereto), the full and complete payment by the Obligor of Scheduled Payments of principal of, and interest on, the Obligations. For the further protection of each Holder, Financial Security irrevocably and unconditionally guarantees: (a) payment of the amount of any distribution of principal of, or interest on, the Obligations made during the Term of this Policy to such Holder that is subsequently avoided in whole or in part as a preference payment under applicable law (such payment to be made by Financial Security in accordance with Endorsement No. 1 hereto). (b) payment of any amount required to be paid under this Policy by Financial Security following Financial Security's receipt of notice as described in Endorsement No. 1 hereto. Financial Security shall be subrogated to the rights of each Holder to receive payments under the Obligations to the extent of any payment by Financial Security hereunder. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Holder" means the registered owner of any Obligation as indicated on the registration books maintained by or on behalf of the Obligor for such purpose or, if the Obligation is in bearer form, the holder of the Obligation. "Scheduled Payments" means payments which are scheduled to be made during the Term of this Policy in accordance with the original terms of the Obligations when issued and without regard to any amendment or modification of such Obligations thereafter; payments which become due on an accelerated basis as a result of (a) a default by the Obligor, (b) an election by the Obligor to pay principal on an accelerated basis or (c) any other cause, shall not constitute "Scheduled Payments" unless Financial Security shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration. "Term of this Policy" shall have the meaning set forth in Endorsement No. 1 hereto. This Policy sets forth in full the undertaking of Financial Security, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto, or by the merger, consolidation or dissolution of the Obligor. Except to the extent expressly modified by an endorsement hereto, the premiums paid in respect of this Policy are nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Obligations prior to maturity. This Policy may not be cancelled or revoked during the Term of this Policy. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this Policy to be executed on its behalf by its Authorized Officer. FINANCIAL SECURITY ASSURANCE INC. By /s/ Roger K. Taylor --------------------------------- Authorized Officer A subsidiary of Financial Security Assurance Holdings Ltd. 350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100 EX-10.36 37 US $300,000,000 FLOAT RATE FSA INSURE AUTO RECEIVE EXECUTION COPY ARCADIA RECEIVABLES CONDUIT CORP. U.S. $300,000,000 FLOATING RATE FSA INSURED AUTOMOBILE RECEIVABLES-BACKED NOTES NOTE PURCHASE AGREEMENT DATED AS OF DECEMBER 3, 1996 TABLE OF CONTENTS Page ---- Section 1. The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. Sale and Purchase of the Notes. . . . . . . . . . . . . . . . . 3 Section 3. Delivery and Payment. . . . . . . . . . . . . . . . . . . . . . 3 Section 4. Issuer's Representations, Warranties and Covenants. . . . . . . 4 Section 5. Purchaser Representations . . . . . . . . . . . . . . . . . . . 6 Section 6. Conditions of Purchaser's Obligations.. . . . . . . . . . . . . 8 Section 7. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 8. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .10 Section 9. Successors and Assigns. . . . . . . . . . . . . . . . . . . . .11 Section 10. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .11 Section 11. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . .12 Section 12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 14. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .14 Section 15. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .14 Section 16. Severability of Provisions. . . . . . . . . . . . . . . . . . .14 Section 17. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Section 18. Limited Recourse. . . . . . . . . . . . . . . . . . . . . . . .15 Section 19. No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .15 Section 20. Trial By Jury Waived. . . . . . . . . . . . . . . . . . . . . .15 OLYMPIC FINANCIAL, LTD. 7825 Washington Avenue South Minneapolis, Minnesota 55439 ARCADIA RECEIVABLES CONDUIT CORP. 7825 Washington Avenue South Minneapolis, Minnesota 55439 -------------------------------------------------- NOTE PURCHASE AGREEMENT -------------------------------------------------- Dated as of December 3, 1996 Receivables Capital Corporation c/o Bank of America National Trust and Savings Association as Administrator Asset Securitization Group 231 South LaSalle Street Chicago, Illinois 60697 Bank of America National Trust and Savings Association as Administrator of Receivables Capital Corporation and as Agent to the Liquidity Purchasers Asset Securitization Group 231 South LaSalle Street Chicago, Illinois 60697 Ladies and Gentlemen: The undersigned, Arcadia Receivables Finance Corp., a Delaware corporation (the "ISSUER"), and Olympic Financial Ltd., a Minnesota corporation ("OLYMPIC"), hereby agree with you as follows: SECTION 1. THE NOTES. The Issuer proposes to sell to Receivables Capital Corporation (the "PURCHASER"), from time to time during the Purchase Period, Floating Rate Automobile Receivables-Backed Notes (the "NOTES"), in a maximum authorized amount to be outstanding at any time (the "MAXIMUM AUTHORIZED AMOUNT") of U.S. $300,000,000, issued by the Issuer pursuant to the Indenture, dated as of December 3, 1996 (as from time to time amended, supplemented or modified, the "INDENTURE"), between the Issuer and Norwest Bank Minnesota, National Association, as trustee (in such capacity, the "TRUSTEE") and as Collateral Agent (as defined in the Indenture). Each Note: (i) bears interest (subject to conversion to a fixed rate at the option of the Agent upon the occurrence of an Amortization Event) at a fluctuating rate per annum equal to the "APPLICABLE RATE" plus the "APPLICABLE MARGIN"; (ii) is issuable in denominations of $5,000,000 and any higher amount, in the form of fully registered securities in certificated form (as contemplated by Article VIII of the New York Uniform Commercial Code) and (iii) is subject to prepayment at the option of the Issuer as provided in the Indenture. The Notes are secured by a revolving pool of automobile receivables originated by Olympic and sold by Olympic to its wholly-owned subsidiary, Olympic Receivables Finance Corp. ("ORFC"), and by ORFC to the Issuer, and by collections received in respect thereof. Payment of principal and interest on the entire Maximum Authorized Amount of Notes is insured by Financial Security Assurance Inc. ("FSA") under a financial guaranty insurance policy (the "POLICY") dated December 3, 1996. The Issuer, the Agent, Olympic, ORFC and the Trustee have entered into a Servicing Agreement, dated as of December 3, 1996 (as from time to time amended, supplemented or modified, the "SERVICING AGREEMENT"), to provide for the servicing of the receivables and certain other matters. SECTION 2. SALE AND PURCHASE OF THE NOTES. During the Purchase Period and subject to the terms and conditions of, and in reliance upon the representations, warranties and covenants set forth in, this Agreement, the Issuer agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Issuer, from time to time on the date of issuance thereof (each, a "PURCHASE DATE") the Notes issued on such date up to an aggregate principal amount at any time outstanding for all Notes purchased hereunder not to exceed the Maximum Authorized Amount, at a purchase price equal to 100% of such principal amount (the "PURCHASE PRICE"). SECTION 3. DELIVERY AND PAYMENT. The Issuer will provide the Agent with written notice of each Purchase Date and of the aggregate principal amount of Notes to be purchased on such Purchase Date no later than 12:00 noon (New York City time) one Business Day prior to the proposed Purchase Date; PROVIDED, that if the Purchase Price for the Notes on a Purchase Date is less than or equal to $15,000,000, then such notice may be made no later than 11:00 a.m., New York City time on such Purchase Date; PROVIDED FURTHER, that if such notice is given on a Purchase Date, the Purchaser will not be obligated to purchase the Notes on such Purchase Date unless the Purchaser is able to issue and sell its Commercial Paper Notes in an amount sufficient to fund such purchase, and Olympic and the Issuer agree to hold harmless the Purchaser for failing to effect a purchase on such Purchase Date. Delivery of the Notes shall be made on each Purchase Date at the offices of the Agent at 10:00 a.m. New York City time (or at such other place and time as the parties hereto shall mutually agree). On each Purchase Date, the Issuer will deliver to the Agent one or more duly executed and authenticated Notes dated such Purchase Date, registered in the Purchaser's name (or in such name as the Agent shall have notified Issuer prior to such 2 Purchase Date). The delivery of the Notes to the Agent shall be made against payment by wire transfer of immediately available funds to the account of Norwest Bank Minnesota, National Association as Trustee for Arcadia Receivables Conduit Warehouse, Account # 3651742, Harris Trust and Savings Bank, ABA # 071000288, in the amount of the Purchase Price. SECTION 4. ISSUER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The Issuer represents and warrants to, and agrees with, the Purchaser and the Agent, as of the date hereof and as of each Purchase Date, as follows: (a) The Issuer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation. (b) The Issuer has all requisite power (corporate and other) and authority necessary to enter into this Agreement and the Basic Agreements, to offer, sell and deliver the Notes and to perform its obligations hereunder and thereunder; the Issuer has taken all corporate action required to authorize the execution and delivery of this Agreement, the Basic Agreements and the Notes, the offer, sale and delivery of the Notes and the performance of all obligations to be performed by it hereunder and under the Basic Agreements and the Notes; this Agreement and the Basic Agreements to which the Issuer is a party have been duly authorized, executed and delivered by the Issuer and constitute, and each Note when purchased by the Purchaser will have been duly authorized, executed and delivered and will constitute, the legal, valid and binding obligation of the Issuer, enforceable against the Issuer in accordance with its terms, subject to (i) limitations on enforceability imposed by bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws relating to or affecting the enforcement of creditors' rights generally, and (ii) general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (c) Neither the authorization, execution, sale, delivery or performance of the Notes or the authorization, execution, delivery or performance of this Agreement or the Basic Agreements to which the Issuer is a party, nor the consummation of any of the transactions contemplated herein or therein, nor the execution, delivery or performance of the terms of this Agreement, the Notes or any Basic Agreement, will result in the breach of any term or provision of the certificate of incorporation or by-laws of the Issuer, or conflict with, result in a breach or violation of, or the acceleration of, indebtedness under, or constitute a default under, the terms of any indenture or other agreement, instrument or arrangement to which the Issuer is a party or by which it is bound, or any statute or regulation applicable to the Issuer or any order applicable to it of any court, regulatory body, administrative agency or governmental body having jurisdiction over it. (d) With the exception of applicable blue-sky or state securities regulations (as to which no representation is made), no consent, approval, authorization of, registration or filing with, or notice to, any governmental or regulatory authority, agency, department, commission, board, bureau, body or instrumentality was or is required for the execution, delivery or performance of or compliance by the Issuer with this Agreement, the Notes or 3 any Basic Agreement or the offer, sale, delivery or performance of the Notes, or the consummation by the Issuer of any other transaction contemplated by this Agreement, the Notes or any Basic Agreement, or such consent, approval or authorization has been obtained, or such registration, filing or notice has been made (and, in either such case, copies thereof delivered to you and your counsel). No tax, assessment or other governmental charge is or will become payable as a result of (i) the execution, delivery or performance of this Agreement or any Basic Agreement, or (ii) the execution, sale, delivery or performance of any Note, or (iii) except for taxes imposed on the net income of Purchaser with respect to interest on the Notes, the receipt or non-receipt of any payment of principal or interest on any Note (or in respect thereof under the Policy). (e) There is no action, suit or proceeding pending, or investigation of, the Issuer, pending or, to the best of the Issuer's knowledge after due inquiry, threatened, against the Issuer before any court, administrative agency or other tribunal which, (i) either individually or in the aggregate, could, if adversely determined, result in any material adverse change in the business, operations, financial condition, prospects, properties, or assets of the Issuer or in any impairment of the right or ability of the Issuer to carry on its business substantially as now conducted, (ii) asserts the invalidity of this Agreement, any Note or any of the Basic Agreements, (iii) seeks to prevent the issuance, sale or purchase of the Notes or the consummation of any of the transactions contemplated by this Agreement or any of the Basic Agreements or (iv) could materially and adversely affect the performance by the Issuer of its obligations under, or the validity or enforceability of, this Agreement, any of the Notes or any of the Basic Agreements. (f) The Issuer is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in, and is not otherwise in default under, (i) any law or statute applicable to it, or (ii) any judgment, decree, writ, injunction, order, award or other action of any court or governmental authority or arbitrator or any order, rule or regulation, of any federal, state, county, municipal or other governmental or public authority or agency having or asserting jurisdiction over it or any of its properties, or (iii) (x) any indebtedness or any instrument or agreement under or pursuant to which any such indebtedness has been, or could be, issued or incurred, or (y) any other instrument or agreement to which it is a party or by which it is bound or any of its properties is affected including, without limitation, the Basic Agreements which, (A) either individually or in the aggregate, could result in any material adverse change in the business, operations, financial condition, prospects, properties, or assets of the Issuer or in any impairment of the right or ability of the Issuer to carry on its business substantially as now conducted or (B) could materially and adversely affect the performance by the Issuer of its obligations under, or the validity or enforceability of, this Agreement, any of the Notes or any of the Basic Agreements. (g) Neither the Issuer nor, to the best of the Issuer's knowledge, anyone acting on behalf of the Issuer, has offered, transferred, pledged, sold or otherwise disposed of any Note or any interest in any Note to, or solicited any offer to buy or accept a transfer, pledge or other disposition of any Note or any interest in any Note from, or otherwise approached or negotiated with respect to any Note or any interest in any Note with, any person in any 4 manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, which would constitute a public distribution of the Notes under the Securities Act of 1933, as amended (the "1933 ACT"), or which would render the disposition of any Note a violation of Section 5 of the 1933 Act or any state securities laws, or require registration or qualification pursuant thereto or require registration of the Issuer under the Investment Company Act of 1940, as amended, nor will the Issuer act, nor has the Issuer authorized or will it authorize any person to act, in such manner with respect to any Note. (h) (i) The offer and sale of the Notes from the Issuer to the Purchaser in the manner contemplated herein are transactions exempt from the registration requirements of the 1933 Act and (ii) the Indenture is not required to be qualified under the Trust Indenture Act of 1939, as amended. The representation by the Issuer with respect to the sale from the Issuer to the Purchaser in clause (i) of the preceding sentence is made upon and subject to the accuracy of the representations made by you in Section 5(a) hereof. (i) The Issuer is not required, and will not be required as a result of the offer and sale of the Notes under the circumstances contemplated by this Agreement or the other transactions contemplated by this Agreement and the Basic Agreements, to register as an "investment company" under the Investment Company Act of 1940, as amended (the "1940 ACT"), and the Issuer is not "controlled" by an "investment company" as defined in the 1940 Act. (j) Each Note purchased hereunder by the Purchaser will have been duly authorized, executed and delivered by the Issuer, will be entitled to the benefit of the security provided for in the Indenture, will bear interest and mature and be subject to prepayment all as specified in Section 1 hereof and will, as to both principal and interest, be fully and unconditionally insured under the Policy. (k) The Issuer further agrees that it will not permit any amendment, modification or waiver, which could in any way be materially adverse to the Noteholders, to any of the provisions of any of the Basic Agreements without the prior written consent of the Agent, it being agreed that a waiver of any Event of Default under the Repurchase Agreement or of any Amortization Event materially adversely affects the Noteholders. SECTION 5. PURCHASER REPRESENTATIONS. (a) This Agreement is made with you in reliance upon your representation to the Issuer, which by your acceptance hereof you confirm, that you understand that the Notes have not been and will not be registered under the 1933 Act in reliance upon the exemption provided in Section 4(2) of the 1933 Act or registered or qualified under the securities or "Blue Sky" laws of any jurisdiction and may not be resold or otherwise pledged or transferred except in a transaction which is exempt from the registration requirements of the 1933 Act (and, in that regard the Purchaser hereby represents that any Notes purchased by it hereunder will be purchased for its own account and not with a view to distribution thereof); PROVIDED, that, (i) the disposition of your property shall at all times be within your control; 5 and (ii) it is recognized and agreed that you may transfer your rights and interests under the Notes and herein to one or more liquidity purchasers ("LIQUIDITY PURCHASERS") under a Liquidity Asset Purchase Agreement dated as of December 3, 1996 (the "LIQUIDITY ASSET PURCHASE AGREEMENT") among the Liquidity Purchasers from time to time party thereto, Receivables Capital Corporation and Bank of America National Trust and Savings Association, as Administrator and Liquidity Agent. The Purchaser represents that the Liquidity Purchasers will make the foregoing representations and warranties with respect to any purchase of the Notes pursuant to the Liquidity Asset Purchase Agreement. (b) The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation. (c) The Purchaser has all requisite power (corporate and other) and authority necessary to enter into this Agreement and to perform its obligations hereunder; the Purchaser has taken all corporate action required to authorize the execution and delivery of this Agreement and the performance of all obligations to be performed by it hereunder; this Agreement has been duly authorized, executed and delivered by the Purchaser, and constitutes the legal, valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to (i) limitations imposed by bankruptcy, insolvency, reorganization, arrangement, moratorium or other laws relating to or affecting the enforcement of creditors' rights generally, and (ii) general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (d) Neither the purchase of the Notes nor the consummation of any of the transactions contemplated herein by the Purchaser, nor the execution, delivery or performance of the terms of this Agreement by the Purchaser, will result in the breach of any term or provision of the certificate of incorporation or by-laws of the Purchaser, or conflict with, result in a breach or violation of or the acceleration of indebtedness under or constitute a default under, the terms of any indenture or other agreement or instrument to which the Purchaser is a party or by which it is bound, or any statute or regulation applicable to the Purchaser or any order applicable to it of any court, regulatory body, administrative agency or governmental body having jurisdiction over it which materially and adversely affects, or may in the future materially and adversely affect, (i) the ability of the Purchaser to perform its obligations hereunder or (ii) the business, operations, financial condition, prospects, properties or assets of the Purchaser. (e) No consent, approval, authorization of, registration or filing with, or notice to, any governmental or regulatory authority, agency, department, commission, board, bureau, body or instrumentality was or is required for the execution, delivery or performance of or compliance by the Purchaser with this Agreement or the purchase of the Notes by the Purchaser, or the consummation by the Purchaser of any other transaction contemplated under this Agreement or such consent, approval or authorization has been obtained or such registration, filing or notice has been made. (f) There is no action, suit or proceeding against, or investigation of, the Purchaser, pending or, to the best of the Purchaser's knowledge, threatened, before any 6 court, administrative agency or other tribunal which, either individually or in the aggregate, (i) may result in any material adverse change in the business, operations, financial condition, prospects, properties, or assets of Purchaser or in any impairment of the right or ability of the Purchaser to carry on its business substantially as now conducted, or (ii) asserts the invalidity of this Agreement or (iii) seeks to prevent the purchase of the Notes or the consummation of any of the transactions contemplated by this Agreement or (iv) could materially and adversely affect the performance by the Purchaser of its obligations under, or the validity or enforceability of, this Agreement. (g) The Purchaser is not required, and will not be required as a result of the purchase of the Notes under the circumstances contemplated by this Agreement, to register as an "investment company" under the 1940 Act. (h) On the Closing Date, the Purchaser's commercial paper notes are rated A-1+ by Standard & Poor's and P-1 by Moody's. SECTION 6. CONDITIONS OF PURCHASER'S OBLIGATIONS. (a) EACH PURCHASE. Your obligation to purchase and pay for any Notes on any Purchase Date shall be subject to the fact that the conditions to the initial purchase of Notes hereunder shall have been satisfied and to the conditions that: (v) no Amortization Event shall have occurred; (w) the Notes to be purchased shall be in conformity with the description thereof contained in Section 1 hereof; (x) the Purchase Period shall not have expired; (y) the representations and warranties that are made on the part of the Issuer and contained in this Agreement shall be true and correct, on and as of such Purchase Date, as if made on and as of such Purchase Date; and (z) the Issuer shall be in continuing compliance, in all material respects, with all of its obligations hereunder and under the Basic Agreements and that ORFC and OFL are in continuing compliance in all material respects with their obligations under the Fee Letter. Your obligation to purchase or pay for any Notes shall also be subject to the accuracy in all material respects, on and as of the date of such purchase, of the representations and warranties contained herein and of the statements made by the Issuer in any certificates furnished pursuant to the provisions hereof. Each purchase of Notes hereunder shall constitute a representation and warranty by the Issuer that all of the above conditions are satisfied on and as of the respective Purchase Date. (b) CLOSING DATE. Your obligation to purchase and pay for Notes commencing on the Closing Date shall be subject to the following additional conditions: (i) The Agent shall have received and had an opportunity to review the Basic Agreements (and the respective appendices and exhibits thereto) and the form of Notes, and each of such documents shall be in form and substance satisfactory to you. (ii) Timely payment, as and when due, of all principal of and interest on the Notes shall be fully and unconditionally insured under the Policy. 7 (iii) The Issuer shall have complied in all material respects with all the agreements and satisfied all the conditions on its part to be performed or satisfied by it on or prior to the Closing Date under this Agreement. (iv) Each of the Basic Agreements shall have been duly authorized, executed and delivered by each of the parties thereto, shall be in full force and effect and shall constitute a legal, valid and binding agreement of each of the parties thereto, enforceable against each of them in accordance with its terms, subject, with respect to enforceability, to bankruptcy, insolvency, reorganization or other similar laws affecting the enforceability of creditors' rights generally and to general principles of equity regardless of whether enforcement is sought in a proceeding in equity or at law, and no event shall have occurred which constitutes or, with the passage of time or with notice or both, would constitute a default thereunder, and the Agent shall have received one fully executed copy of each of the Basic Agreements. (v) The Agent shall have received opinions of counsel (or reliance letters with respect to certain opinions previously rendered) to the Issuer, Olympic, ORFC, FSA and the Trustee, each dated the Closing Date, and such opinions shall be in form, scope and substance satisfactory to the Agent. (vi) All proceedings in connection with the transactions contemplated by this Agreement and the Basic Agreements and all documents incident hereto and thereto shall be satisfactory in form and substance to the Agent, and the Agent shall have received such information, certificates and documents as the Agent may request. (vii) The Agent shall have received a certificate from the Issuer confirming that its representations and warranties contained in the Basic Agreements are true and correct in all material respects on and as of the Closing Date. (viii) The Agent shall have received from each of the Issuer, Olympic, ORFC, FSA and the Trustee copies of the charter, by-laws, board resolutions, signature and incumbency and other related corporate matters of those respective Persons, in form and substance acceptable to the Agent, together with copies of the Officers' Certificates with respect thereto delivered on the Closing Date. (ix) The Indenture shall be in form and substance satisfactory to you, and you shall have received a true and complete copy thereof. SECTION 7. EXPENSES. The Issuer and Olympic shall, jointly and severally, be obligated to pay on demand to (i) the Purchaser and the Agent all reasonable costs and expenses in connection with the preparation, execution, and delivery of the Basic Agreements and any other documents to be delivered in connection therewith, including, without limitation, the reasonable fees and expenses of counsel for the Purchaser and the Agent, and (ii) the Purchaser and the Agent all reasonable costs and expenses, including, without limitation, the reasonable fees and expenses of counsel for the Purchaser and the Agent, in 8 connection with the enforcement of any Basic Agreement or any document delivered in connection therewith. SECTION 8. DEFINITIONS. For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the term "AGENT" means Bank of America National Trust and Savings Association and its successors as Administrator of Receivables Capital Corporation and as Agent to the Liquidity Purchasers; (b) the term "APPLICABLE RATE" means the CP Rate or, to the extent the principal amount of any Notes have been purchased by the Liquidity Purchasers under the Liquidity Agreement, the Offshore Rate; (c) the term "BASIC AGREEMENTS" shall mean this Agreement, the Indenture, the Servicing Agreement, the Repurchase Agreement, the Purchase Agreement, the Security Agreement, the Lockbox Agreement, the Custodian Agreement, the Policy, the Spread Account Agreement, the Fee Letter and the Insurance Agreement; (d) the term "CP RATE" means for any period and with respect to any portion of the principal amount of the Notes as to which your funding of the purchase or carrying thereof is being provided by commercial paper notes, the rate of interest per annum determined in arrears in good faith by the Agent to reflect the Purchaser's cost of funding the purchase or carrying of such portion of the Notes, which shall be equal to the weighted daily average interest rate payable in respect of such Commercial Paper Notes during such period (determined in the case of discount commercial paper notes by converting the discount to an interest bearing equivalent rate per annum), plus applicable placement fees and commissions, but excluding any other fees related to such funding; (e) the term "FEE LETTER" shall mean the Fee Letter dated as of December 3, 1996 among Olympic, Receivables Capital Corporation and the Agent; (f) the term "LIQUIDITY PURCHASERS" shall mean each of the purchasers party to the Liquidity Asset Purchase Agreement; (g) the term "PROGRAM SUPPORT DOCUMENT" shall mean the Liquidity Asset Purchase Agreement and any other agreement entered into by any other Program Support Provider providing for the issuance of one or more letters of credit for the account of the Purchaser, the issuance of one or more surety bonds for which the Purchaser is obligated to reimburse the applicable Program Support Provider of the Notes (or any interest therein) or the making of loans or other extensions of credit to the Purchaser in connection with the Purchaser's securitization program, together with any letter of credit, surety bond or other instrument issued thereunder (but excluding any discretionary advance facility provided by the Agent as administrator of the Purchaser); 9 (h) the term "PURCHASE PERIOD" shall mean the period from the date of execution hereof to the earliest to occur of (i) December 2, 1999, (ii) the commencement of the Amortization Period, (iii) the commitment of the Liquidity Purchasers to purchase Notes from the Purchaser under the Liquidity Asset Purchase Agreement shall expire and (iv) the date specified by the Issuer with five Business Day's prior notice to the Agent, the Security Insurer, the Indenture Trustee and the Rating Agencies; (i) all capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Servicing Agreement (including by way of reference to other documents); (j) terms defined in this Agreement include the plural as well as the singular, and the use of any gender herein shall be deemed to include each other gender; (k) the words "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular provisions; and (l) the term "include" or "including" shall mean without limitation by reason of enumeration. SECTION 9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns; PROVIDED, that the Issuer may not assign any of its rights or obligations hereunder without the prior written consent of the Purchaser. No provision of this Agreement shall in any way limit Purchaser's ability to assign all or any portion of its rights and obligations hereunder to any Liquidity Purchaser. SECTION 10. INDEMNIFICATION. (a) Without limiting any other rights that the Agent or any of its Affiliates, employees, agents, successors, transfers or assigns (each, an "INDEMNIFIED PARTY") may have hereunder or under applicable law, the Issuer hereby agrees to indemnify each Indemnified Party from and against any and all claims, damages, expenses, losses and liabilities (including fees and expenses of counsel) (all of the foregoing being collectively referred to as "INDEMNIFIED AMOUNTS") arising out of or resulting from this Agreement and the Basic Documents (whether directly or indirectly) or the ownership of the Notes, or any interest therein, or in respect of any Receivable, excluding, however, (i) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party, (ii) any losses arising out of or relating to any non-payment of any Receivable, or (iii) any overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified Party is organized or any political subdivision thereof. (b) Without limiting any other rights that the Indemnified Parties may have hereunder or under applicable law, Olympic hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts for or on account of or arising from or in connection with any breach of any representation, warranty or covenant of Olympic in this Note Purchase Agreement or any Basic Document or in any certificate or other written 10 material delivered pursuant hereto or thereto, excluding, however, (i) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party and (ii) any overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified Party is organized or any political subdivision thereof. (c) In order for an Indemnified Party to be entitled to any indemnification provided for under this Agreement in respect of, arising out of, or involving a claim made by any Person against the Indemnified Party (a "THIRD PARTY CLAIM"), such Indemnified Party must notify the Issuer or Olympic, as applicable, in writing of the Third Party Claim within five Business Days of receipt of a summons, complaint or other notice of the commencement of litigation and within ten Business Days after receipt by such Indemnified Party of any other written notice of the Third Party Claim. Thereafter, the Indemnified Party shall deliver to the Issuer or Olympic, as applicable, within a reasonable time after the Indemnified Party's receipt thereof, copies of all notices and documents (including court papers) received by the Indemnified Party relating to the Third Party Claim. (d) If a Third Party Claim is made against an Indemnified Party, (x) the Issuer or Olympic, as applicable, will be entitled to participate in the defense thereof and, (y) if either so chooses, to assume the defense thereof with counsel selected by the Issuer or Olympic, as applicable, provided that in connection with such assumption (i) such counsel is not reasonably objected to by the Indemnified Party and (ii) the Issuer or Olympic, as applicable, first admits in writing its liability to indemnify the Indemnified Party with respect to all elements of such claim in full. Should the Issuer or Olympic, as applicable, so elect to assume the defense of a Third Party Claim, the Issuer or Olympic, as applicable, will not be liable to the Indemnified Party for any legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. If the Issuer or Olympic, as applicable, elects to assume the defense of a Third Party Claim, the Indemnified Party will (i) cooperate in all reasonable respects with the Issuer or Olympic in connection with such defense and (ii) not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Issuer's or Olympic's prior written consent, as the case may be. If the Issuer or Olympic, as applicable, shall assume the defense of any Third Party Claim, the Indemnified Party shall be entitled to participate in (but not control) such defense with its own counsel at its own expense. If the Issuer or Olympic, as applicable, does not assume the defense of any such Third Party Claim, the Indemnified Party may defend the same in such manner as it may deem appropriate, including settling such claim or litigation after giving notice to the Issuer or Olympic, as applicable, of such terms and the Issuer or Olympic, as applicable, will promptly reimburse the Indemnified Party upon written request. Anything contained in this Note Purchase Agreement to the contrary notwithstanding, the Issuer or Olympic, as applicable, shall not be entitled to assume the defense of any part of a Third Party Claim that seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnified Party. SECTION 11. INCREASED COSTS. (a) If the Purchaser, any other Program Support Provider or any of their respective Affiliates (each an "AFFECTED PERSON") determines that the existence of or compliance with (i) any law or regulation or any change therein or in 11 the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof or (ii) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement affects or would affect the amount of capital required or expected to be maintained by such Affected Person and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of or otherwise to maintain the investment in the Notes or the Liquidity Asset Purchase Agreement or any other Program Support Document, then, upon demand by such Affected Person (with a copy to the Agent), the Issuer agrees to immediately pay to the Agent, for the account of such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Issuer and the Agent by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Affected Person of agreeing to purchase or purchasing, or maintaining the ownership of the Notes in respect of which interest is computed by reference to the Offshore Rate, then, upon demand by such Affected Person, the Issuer agrees to immediately pay to such Affected Person, from time to time as specified, additional amounts sufficient to compensate such Affected Person for such increased costs. A certificate as to such amounts submitted to the Issuer by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (c) Before giving any notice to the Issuer under this Section 11, the Affected Person shall use commercially reasonable efforts to designate a different office with respect to its purchase of Notes or its provision of liquidity or credit support under the relevant Program Support Document if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Affected Person, be illegal or otherwise disadvantageous to such Affected Person. (d) Upon the receipt by the Issuer of a claim for reimbursement or compensation under this Section 11 related to the ownership of a Note or any interest therein by an Affected Person, and payment thereof hereunder shall not be waived by such Affected Person, the Issuer may (i) request the Affected Person to use its reasonable efforts to obtain a replacement bank, financial institution or asset-backed commercial paper conduit, as applicable, satisfactory to the Issuer to acquire and assume all or a ratable part of all of such Affected Person's Notes or interests therein (a "REPLACEMENT PURCHASER"), (ii) request one or more of the other Noteholders or Liquidity Purchasers to acquire and assume all or a part of such Affected Person's Notes or interests therein; or (iii) designate a Replacement Purchaser. Any such designation of a Replacement Purchaser under CLAUSE (i) or (iii) shall be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld). Upon notice from the Issuer, such Affected Person shall assign its Notes or interests therein 12 and its other rights and obligations (if any) hereunder or a ratable share thereof to the Replacement Purchaser or Replacement Purchasers designated by the Issuer for a purchase price equal to the sum of the principal amount of the Notes or interests therein so assigned and all accrued and unpaid interest thereon and any other amounts (including fees) to which it is entitled hereunder or under any Basic Document or other Program Support Document (including any fee letters entered into in connection therewith); PROVIDED, that the Issuer shall provide such Affected Person with an officer's certificate stating that such Replacement Purchaser has advised the Issuer that it is not subject to, or has agreed not to seek, such increased amount. SECTION 12. NOTICES. (a) All communications provided for or permitted hereunder and under any other Basic Agreement shall be in writing and shall be delivered, sent by overnight courier or mailed or transmitted by telecopier and confirmed by a similar mailed writing, if to the Purchaser, or the Agent, addressed to the Purchaser or the Agent, as applicable, at the address shown on page 1 of this Agreement, telecopy no. (312) 923-0273, or to such other address as the Purchaser or the Agent may have designated in writing to the Issuer, and if to the Issuer, Olympic or the Rating Agencies, to their respective addresses set forth in the Servicing Agreement, or to such other address as the Issuer or Olympic may have designated in writing to the Purchaser. (b) All such written communications shall, when so sent by overnight courier, telecopied or mailed, be deemed given when delivered to the overnight courier, when telephone confirmation of telecopy is received, or, in the case of communications by mail, on the fourth Business Day following deposit in the mails. All other written communications shall be deemed to have been given upon receipt thereof. SECTION 13. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall constitute an original, but all of which together shall constitute one instrument notwithstanding that all parties are not signatories to the same counterparts. SECTION 14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to the matters and transactions contemplated by this Agreement and supersedes any prior agreement and understandings with respect to those matters and transactions. SECTION 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF. THE PARTIES HERETO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, OR RELATING TO, THIS AGREEMENT, ANY NOTE OR ANY BASIC AGREEMENT AND HEREBY WAIVE ANY OBJECTION TO THE VENUE OF ANY SUCH COURT AS WELL AS ANY CLAIM OF INCONVENIENT FORUM. SECTION 16. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason 13 whatsoever held invalid, the invalidity of any such covenant, agreement, provision or term of this Agreement shall in no way affect the validity or enforceability of the other provisions of this Agreement, PROVIDED, HOWEVER, that if the invalidity of any covenant, agreement or provision shall deprive any party of the economic benefit intended to be conferred by this Agreement, the parties shall negotiate in good faith to develop a structure the economic effect of which is as nearly as possible the same as the economic effect of this Agreement. SECTION 17. SURVIVAL. All representations, warranties and covenants made by the Issuer herein shall be considered to have been relied upon by you and shall survive the delivery to you of the Notes regardless of any investigation made by you or on your behalf. SECTION 18. LIMITED RECOURSE. This Agreement is solely a corporate obligation of the Issuer, Olympic, the Agent and the Purchaser. No recourse may be taken, directly or indirectly, under this Purchase Agreement or any certificate or other writing delivered in connection herewith against any stockholder, incorporator, employee, officer, director or agent of the Issuer, Olympic, the Agent or the Purchaser. SECTION 19. NO PROCEEDINGS. Each of the Issuer and Olympic hereby agrees that it will not institute or join with others in instituting against the Purchaser, and the Purchaser hereby agrees that it will not institute or join with others in instituting against the Issuer, a bankruptcy, reorganization or analogous proceeding until at least 368 days after the later of (i) the last maturing commercial paper note issued or to be issued by the Purchaser matures and (ii) the last maturing Note issued or to be issued by the Purchaser. SECTION 20. TRIAL BY JURY WAIVED. Each of the parties hereto waives, to the fullest extent permitted by law, any right it may have to a trial by jury in respect of any litigation arising directly or indirectly out of, under or in connection with this Agreement or any of the transactions contemplated hereunder. 14 IN WITNESS WHEREOF, the Purchaser, the Agent, Olympic and the Issuer have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written. ARCADIA RECEIVABLES CONDUIT CORP. By: [illegible] ---------------------------------------- Name: Title: OLYMPIC FINANCIAL LTD. By: [illegible] ---------------------------------------- Name: Title: The foregoing Agreement is hereby accepted as of the 3rd day of December, 1996: RECEIVABLES CAPITAL CORPORATION By: /s/ Stewart L. Cotter ------------------------------- Name: Stewart L. Cotter Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ Erik G. Ford -------------------------------- Name: Erik G. Ford Title: as Attorney-in-Fact [Signature Page to Note Purchase Agreement] EX-10.37 38 SPREAD ACCOUNT AGREE 3/25/93 AS AMEND & RESTATE SPREAD ACCOUNT AGREEMENT, dated as of March 25, 1993, as amended and restated as of September 12, 1996 among OLYMPIC FINANCIAL LTD., OLYMPIC RECEIVABLES FINANCE CORP., FINANCIAL SECURITY ASSURANCE INC. and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee and as Collateral Agent TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.02. Rules of Interpretation . . . . . . . . . . . . . . . . . . 12 ARTICLE II CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL Section 2.01. Series 1993-A Credit Enhancement Fee. . . . . . . . . . . . 12 Section 2.02. Series Supplements. . . . . . . . . . . . . . . . . . . . . 13 Section 2.03. Grant of Security Interest by OFL and the Seller . . . . . 13 Section 2.04. Priority. . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2.05. Seller and OFL Remain Liable. . . . . . . . . . . . . . . . 14 Section 2.06. Maintenance of Collateral . . . . . . . . . . . . . . . . . 15 Section 2.07. Termination and Release of Rights . . . . . . . . . . . . . 15 Section 2.08. Non-Recourse Obligations of Seller. . . . . . . . . . . . . 16 ARTICLE III SPREAD ACCOUNTS Section 3.01. Establishment of Spread Accounts; Initial Deposits into Spread Accounts . . . . . . . . . . . . . . . . . . . . . . 16 Section 3.02. Investments . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 3.03. Distributions: Priority of Payments . . . . . . . . . . . . 19 Section 3.04. General Provisions Regarding Spread Accounts . . . . . . . 22 Section 3.05. Reports by the Collateral Agent . . . . . . . . . . . . . . 23 ARTICLE IV THE COLLATERAL AGENT Section 4.01. Appointment and Powers. . . . . . . . . . . . . . . . . . . 23 Section 4.02. Performance of Duties . . . . . . . . . . . . . . . . . . . 24 Section 4.03. Limitation on Liability . . . . . . . . . . . . . . . . . . 24 Section 4.04. Reliance upon Documents . . . . . . . . . . . . . . . . . . 24 Section 4.05. Successor Collateral Agent. . . . . . . . . . . . . . . . . 25 Section 4.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . 26 i Page ---- Section 4.07. Compensation and Reimbursement. . . . . . . . . . . . . . . 27 Section 4.08. Representations and Warranties of the Collateral Agent. . . 27 Section 4.09. Waiver of Setoffs . . . . . . . . . . . . . . . . . . . . . 27 Section 4.10. Control by the Controlling Party. . . . . . . . . . . . . . 28 ARTICLE V COVENANTS OF THE SELLER Section 5.01. Preservation of Collateral. . . . . . . . . . . . . . . . . 28 Section 5.02. Opinions as to Collateral . . . . . . . . . . . . . . . . . 28 Section 5.03. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 5.04. Waiver of Stay or Extension Laws; Marshalling of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 5.05. Noninterference, etc. . . . . . . . . . . . . . . . . . . . 29 Section 5.06. Seller Changes. . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE VI CONTROLLING PARTY; INTERCREDITOR PROVISIONS Section 6.01. Appointment of Controlling Party. . . . . . . . . . . . . . 30 Section 6.02. Controlling Party's Authority . . . . . . . . . . . . . . . 30 Section 6.03. Rights of Secured Parties . . . . . . . . . . . . . . . . . 32 Section 6.04. Degree of Care. . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE VII REMEDIES UPON DEFAULT Section 7.01. Remedies upon a Default . . . . . . . . . . . . . . . . . . 33 Section 7.02. Waiver of Default . . . . . . . . . . . . . . . . . . . . . 33 Section 7.03. Restoration of Rights and Remedies. . . . . . . . . . . . . 33 Section 7.04. No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . 34 ARTICLE VIII MISCELLANEOUS Section 8.01. Further Assurances. . . . . . . . . . . . . . . . . . . . . 34 Section 8.02. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 8.03. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . 34 Section 8.04. Severability. . . . . . . . . . . . . . . . . . . . . . . . 35 Section 8.05. Nonpetition Covenant. . . . . . . . . . . . . . . . . . . . 35 ii Page ---- Section 8.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 8.07. Term of this Agreement. . . . . . . . . . . . . . . . . . . 37 Section 8.08. Assignments: Third-Party Rights; Reinsurance . . . . . . . 37 Section 8.09. Consent of Controlling Party. . . . . . . . . . . . . . . . 38 Section 8.10. Trial by Jury Waived. . . . . . . . . . . . . . . . . . . . 38 Section 8.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 38 Section 8.12. Consents to Jurisdiction. . . . . . . . . . . . . . . . . . 38 Section 8.13. Limitation of Liability . . . . . . . . . . . . . . . . . . 39 Section 8.14. Determination of Adverse Effect . . . . . . . . . . . . . . 39 Section 8.15. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 39 Section 8.16. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 39 EXHIBIT A Form of Pooling and Servicing Agreement iii SPREAD ACCOUNT AGREEMENT, dated as of March 25, 1993, as amended and restated as of September 12, 1996 (the "Agreement"), by and among OLYMPIC FINANCIAL LTD., a Minnesota corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company ("Financial Security") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association in its capacities as Trustee under each Pooling and Servicing Agreement referred to below and as Trustee under each Indenture referred to below, in such capacity as agent for the Noteholders and Certificateholders with respect to the related Series (in each such capacities the "Trustee") and as Collateral Agent (as defined below). RECITALS 1. Olympic Automobile Receivables Trust, 1993-A (the "Series 1993-A Trust") was formed pursuant to a Pooling and Servicing Agreement, dated as of March 1, 1993 (the "Series 1993-A Pooling and Servicing Agreement"), among OFL, as Servicer, the Seller, the Trustee and the Backup Servicer. 2. Pursuant to the Series 1993-A Pooling and Servicing Agreement, the Seller sold to the Series 1993-A Trust all of its right, title and interest in and to the Receivables and certain other Trust Property in exchange for the Series 1993-A Certificates. 3. The Seller has requested that Financial Security issue the Series 1993-A Policy to the Trustee to guarantee payment of the Guaranteed Distributions (as defined in such Policy) on each Distribution Date in respect of the Series 1993-A Certificates. 4. In partial consideration of the issuance of the Series 1993-A Policy, the Seller has agreed that Financial Security shall have certain rights as Controlling Party, to the extent set forth herein with respect to the Series 1993-A Trust. 5. The Seller is a wholly owned special purpose subsidiary of OFL. The Series 1993-A Trust has agreed to pay a certain Credit Enhancement Fee to the Seller in consideration of the obligations of the Seller and OFL pursuant hereto in respect of the Series 1993-A Certificates and in consideration of the obligations of OFL pursuant to the Series 1993-A Insurance Agreement (such obligations forming part of the Series 1993-A Insurer Secured Obligations referred to herein). The Series 1993-A Insurer Secured Obligations form part of the consideration to Financial Security for its issuance of the Series 1993-A Policy. 6. In order to secure the performance of the Series 1993-A Secured Obligations, to further effect and enforce the subordination provisions to which the Credit Enhancement Fee is subject, and in consideration of the receipt of the Credit Enhancement Fee, OFL and the Seller agreed to pledge the Series 1993-A Collateral as Collateral to the Collateral Agent for the benefit of Financial Security and for the benefit of the Trustee on behalf of the Trust, upon the terms and conditions set forth herein. 7. It is contemplated (A) that the Seller and OFL may enter into one or more additional Pooling and Servicing Agreements with the Trustee and the Backup Servicer pursuant to which the Seller will sell all of its right, title and interest in pools of Receivables, and that Financial Security in its discretion may issue one or more Policies with respect to certain guaranteed distributions on the corresponding Series of Certificates and (B) that the Seller and OFL may enter into one or more Sale and Servicing Agreements with the related Trust and the Backup Servicer pursuant to which the Seller will sell all of its right, title and interest in pools of Receivables (each, a "Sale and Servicing Agreement"), that the Trust will issue one or more classes of Certificates pursuant to a Trust Agreement among the Seller, Financial Security, an Owner Trustee and certain other parties specified therein (each, a "Trust Agreement"), and will issue one or more classes of Notes pursuant to an Indenture among the related Trust, the Indenture Trustee and the Collateral Agent, and that Financial Security in its discretion may issue one or more Policies with respect to certain guaranteed distributions on the corresponding Series of Certificates and may issue one or more Policies with respect to certain scheduled payments on the corresponding Series of Notes. In connection with any such issuance of additional Policies, it is contemplated that Financial Security will obtain certain Controlling Party rights with respect to the related Series, and that, in connection with each such additional Series, the parties hereto will enter into a Series Supplement hereto pursuant to which the Seller will pledge additional Collateral pursuant to the terms hereof. 8. The Seller has entered into a Repurchase Agreement dated as of August 1, 1994 with Telluride Funding Corp. (the "Issuer") (the "Repurchase Agreement") pursuant to which the Seller has sold or will sell all of its right, title and interest in Receivables, and that the Issuer will issue one or more classes or tranches of Notes pursuant to an Indenture among the Issuer, the Indenture Trustee and the Collateral Agent, and that Financial Security in its discretion may issue one or more Policies with respect to certain scheduled payments on the corresponding Notes. 9. The parties have previously executed, amended and restated this Agreement, and now wish to further amend and restate this Agreement to supplement certain provisions therein in order to reflect the intent of the parties. AGREEMENTS In consideration of the premises, and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. DEFINITIONS. All terms defined in the document entitled "OFL Grantor Trusts Standard Terms and Conditions of Agreement Effective March 1, 1993" (the "Standard Terms and Conditions") shall have the same meaning with respect to each Series in this Agreement. If the related Series was issued pursuant to a Pooling and Servicing Agreement, all terms defined in Section 1.01 of such Pooling and Servicing Agreement shall have the same meaning with respect to the related Series in this Agreement. If the related Series was issued pursuant to a Trust Agreement, Sale and Servicing Agreement and Indenture, all terms defined in the related Sale and Servicing Agreement shall have the same meaning with respect to the related Series in this Agreement. If the related Series was issued pursuant to an Indenture and the related Receivables were sold to the Issuer pursuant to a Repurchase Agreement, all terms defined in the related Servicing Agreement and Repurchase Agreement shall have the same meaning with respect to the related Series in this Agreement. If a term is defined herein with respect to Series 1993-A, if applicable, such term shall be defined with respect to any other Series in the Series Supplement related thereto. The following terms shall have the following respective meanings: 2 "AUTHORIZED OFFICER" means, (i) with respect to Financial Security, the Chairman of the Board, the President, the Executive Vice President or any Managing Director of Financial Security, (ii) with respect to the Trustee or the Collateral Agent, any Vice President or Trust Officer thereof, (iii) with respect to OFL, the President or any Vice President thereof, and (iv) with respect to the Seller, the President or any Vice President thereof. "AVERAGE DELINQUENCY RATIO" means, with respect to any Series and any Determination Date, the arithmetic average of the Delinquency Ratios for such Determination Date and the two immediately preceding Determination Dates. "CAPTURE EVENT" means the occurrence of an "Event of Default," as defined in the Indenture, dated as of April 28, 1995, between OFL and Norwest Bank Minnesota, National Association, as amended or supplemented, relating to OFL's $145,000,000 13% Senior Notes due 2000, with respect to which a permanent waiver has not been effected in accordance with the terms of such agreement. "COLLATERAL" means the Series 1993-A Collateral and, with respect to any other Series, all collateral delivered hereunder with respect to each of the Series, as specified in the related Series Supplement. "COLLATERAL AGENT" means, initially, Norwest Bank Minnesota, National Association, in its capacity as collateral agent on behalf of the Secured Parties, including its successors in interest, until a successor Person shall have become the Collateral Agent pursuant to Section 4.05 hereof, and thereafter "Collateral Agent" shall mean such successor Person. "COLLECTION ACCOUNT SHORTFALL" means (A), with respect to any Series created pursuant to a Pooling and Servicing Agreement, any Distribution Date, and a time of determination, the excess, if any, of the amount required to be distributed on such Distribution Date pursuant to subsections (i) through (vi) of Section 4.6(a) of the Standard Terms and Conditions over the amount on deposit in and available for distribution (or, for the purposes of Section 3.03(a), calculated on a pro forma basis to be on deposit in and available for distribution) on such Distribution Date from the Collection Account related to such Series, and (B) with respect to any Series created pursuant to a Trust Agreement, Sale and Servicing Agreement and Indenture, or with respect to any Series issued by the Issuer, the meaning assigned in the related Series Supplement. "CONTROLLING PARTY" means with respect to a Series, at any time, the Person designated as the Controlling Party at such time pursuant to Section 6.01 hereof. "CRAM DOWN LOSS" means, if a court of appropriate jurisdiction in an insolvency proceeding shall have issued an order reducing the Principal Balance of a Receivable, the amount of such reduction. A "Cram Down Loss" shall be deemed to have occurred on the date of issuance of such order. 3 "CUMULATIVE DEFAULT RATE" means, with respect to any Determination Date and any Series, the fraction, expressed as a percentage, the numerator of which is equal to the sum of (a) the Principal Balance of all Receivables which became Spread Account Liquidated Receivables since the Cutoff Date as of the related Accounting Date plus (b) the Principal Balance of all Receivables with respect to which all or any portion of a Scheduled Payment has become 91 or more days delinquent as of the related Accounting Date (not including those Receivables included in clause (a) above) and the denominator of which is equal to the sum of (i) the original Aggregate Principal Balance as of the Initial Cutoff Date plus (ii) the Prefunded Amount as of the Series Closing Date. "CUMULATIVE NET LOSS RATE" means, with respect to any Determination Date and any Series, the fraction, expressed as a percentage, the numerator of which is equal to the sum of (a) Net Losses for such Determination Date plus (b) 40% of the Principal Balance of all Receivables with respect to which all or any portion of a Scheduled Payment has become 91 or more days delinquent (not including Receivables included under the definition of Net Losses in clause (a) above) as of the related Accounting Date and the denominator of which is equal to the sum of (i) the original Aggregate Principal Balance as of the Initial Cutoff Date plus (ii) the Prefunded Amount as of the Series Closing Date. "DEEMED CURED" means, (a) with respect to a Trigger Event that has occurred pursuant to clause (i) or (ii) of the definition thereof, as of a Determination Date with respect to Series 1994-B, Series 1994-A, Series 1993-D, Series 1993-C, Series 1993-B or Series 1993-A, that no such clause (i) or clause (ii) Trigger Event with respect to such Series shall have occurred as of such Determination Date or as of any of the five consecutively preceding Determination Dates, and (b) with respect to a Trigger Event that has occurred pursuant to clause (iii) or clause (iv) of the definition thereof, as of the next Determination Date which occurs in a calendar month which is a multiple of three months succeeding the Closing Date with respect to Series 1994-B, Series 1994-A, Series 1993-D, Series 1993-C, Series 1993-B or Series 1993-A, that no such clause (iii) or clause (iv) Trigger Event with respect to such Series shall have occurred as of such Determination Date. "DEFAULT" means, with respect to any Series, at any time, (i) if Financial Security is then the Controlling Party with respect to such Series, any Insurance Agreement Event of Default with respect to such Series, and (ii) if the Trustee is then the Controlling Party with respect to such Series, any Servicer Termination Event with respect to such Series. "DELINQUENCY RATIO" means, with respect to any Determination Date and any Series, the fraction, expressed as a percentage, the numerator of which is equal to the sum of the Principal Balances (as of the related Accounting Date) of all Receivables that were delinquent with respect to all or any portion of a Scheduled Payment more than 30 days as of the related Accounting Date or that became a Purchased Receivable as of the related Accounting Date and that were delinquent with respect to all or any portion of a Scheduled Payment more than 30 days as of such Accounting Date and the denominator of which is equal to the Aggregate Principal Balance as of the related Accounting Date. 4 "ELIGIBLE ACCOUNT" means a segregated trust account that (i) is either (x) maintained with a depository institution or trust company the long-term unsecured debt obligations of which are rated "AA" or higher by Standard & Poor's and "Aa2" or higher by Moody's, or (y) maintained with a depository institution or trust company the commercial paper or other short-term unsecured debt obligations of which are rated "A-l+" by Standard & Poor's and "P-l" by Moody's and (ii) in either case, such depository institution or trust company shall have been specifically approved by the Controlling Party, acting in its discretion, by written notice to the Collateral Agent. "FINAL TERMINATION DATE" means, with respect to a Series, the date that is the later of (i) the Insurer Termination Date with respect to such Series and (ii) the Trustee Termination Date with respect to such Series. "FINANCIAL SECURITY DEFAULT" means, with respect to any Series, any one of the following events shall have occurred and be continuing: (a) Financial Security shall have failed to make a payment required under a related Policy; (b) Financial Security shall have (i) filed a petition or commenced any case or proceeding under any provision or chapter of the United States Bankruptcy Code, the New York State Insurance Law or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made a general assignment for the benefit of its creditors, or (iii) had an order for relief entered against it under the United States Bankruptcy Code, the New York State Insurance Law, or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is final and nonappealable; or (c) a court of competent jurisdiction, the New York Department of Insurance or other competent regulatory authority shall have entered a final and nonappealable order, judgment or decree (i) appointing a custodian, trustee, agent or receiver for Financial Security or for all or any material portion of its property or (ii) authorizing the taking of possession by a custodian, trustee, agent or receiver of Financial Security (or the taking of possession of all or any material portion of the property of Financial Security). "INITIAL PRINCIPAL AMOUNT" means $59,222,640.38 with respect to Series 1993-A. "INITIAL SPREAD ACCOUNT DEPOSIT" means $2,368,906 for Series 1993-A. "INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1993-A and any Distribution Date, an amount equal to the greater of (i) 7% of the Certificate Balance as of such Distribution Date (after giving effect to the distribution in respect of principal made on such Distribution Date) and (ii) the Spread Account Minimum Amount as of such Distribution Date. 5 "INSURANCE AGREEMENT" means, with respect to any Series, the Insurance and Indemnity Agreement among Financial Security, the Seller, OFL and such other parties as may be named therein, pursuant to which Financial Security issued (A) a Policy to the Trustee or (B) one or more Note Policies to the Trustee and/or one or more Certificate Policies to the Owner Trustee. "INSURER SECURED OBLIGATIONS" means, with respect to a Series, all amounts and obligations which OFL, the Seller and such other parties as may be named therein may at any time owe or be required to perform to or on behalf of Financial Security (or any agents, accountants or attorneys for Financial Security) under the Insurance Agreement related to such Series or under any Transaction Document in respect of such Series, regardless of whether such amounts are owed or performance is due now or in the future, whether liquidated or unliquidated, contingent or non-contingent. "INSURER TERMINATION DATE" means, with respect to any Series, the date which is the latest of (i) the date of the expiration of all Policies issued in respect of such Series, (ii) the date on which Financial Security shall have received payment and performance in full of all Insurer Secured Obligations with respect to such Series and (iii) the latest date on which any payment referred to above could be avoided as a preference or otherwise under the United States Bankruptcy Code or any other similar federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, as specified in an Opinion of Counsel delivered to the Collateral Agent and the Trustee. "ISSUER" means Telluride Funding Corp. "LIEN" means, as applied to the property or assets (or the income, proceeds, products, rents or profits therefrom) of any Person, in each case whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease, conditional sale or other title retention agreement, or other security interest or encumbrance of any kind; or (b) any arrangement, express or implied, under which such property or assets (and/or such income, proceeds, products, rents or profits) are transferred, sequestered or otherwise identified for the purpose of subjecting or making available the same for payment of debt or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person. "NET LOSSES" means, with respect to any Determination Date and any Series, the positive difference of (A) the sum of (i) the aggregate of the Principal Balances as of the related Accounting Date (plus accrued and unpaid interest to the end of the related Monthly Period, at the applicable APR) of all Receivables that became Spread Account Liquidated Receivables since the Cutoff Date, plus (ii) the Purchase Amount of all Receivables that became Purchased Receivables as of the related Accounting Date and that were delinquent with respect to all or any portion of a Scheduled Payment more than 30 days as of such Accounting Date, plus (iii) the aggregate of all Cram Down Losses as of the related Accounting Date that occurred since the Cutoff Date, over (B) the Liquidation Proceeds received by the Trust as of the related Accounting Date since the Cutoff Date. 6 "NON-CONTROLLING PARTY" means, with respect to a Series, at any time, the Secured Party that is not the Controlling Party at such time. "OBLIGOR" means, with respect to any Receivable, the purchaser or the co-purchasers of the Financed Vehicle and any other Person or Persons who are primarily or secondarily obligated to make payments under a Receivable. "OFL" means Olympic Financial Ltd., a Minnesota corporation. "OPINION OF COUNSEL" means a written opinion of counsel acceptable, as to form, substance and issuing counsel, to the Controlling Party. "PAYMENT PRIORITIES" means the priority of PRO RATA distributions described in clause (iii) of priority THIRD of Section 3.03(a). "POLICY" means the Series 1993-A Policy and any insurance policy subsequently issued by Financial Security with respect to a Series. "POOLING AND SERVICING AGREEMENT" means, with respect to Series 1993- A, the Series 1993-A Pooling and Servicing Agreement and, for each other Series created pursuant to a Pooling and Servicing Agreement, the Pooling and Servicing Agreement related to such Series. "SECURED OBLIGATIONS" means, with respect to each Series, the Insurer Secured Obligations with respect to such Series and the Trustee Secured Obligations with respect to such Series. "SECURED PARTIES" means, with respect to a Series and the related Collateral, each of the Trustee, in respect of the Trustee Secured Obligations with respect to such Series, and Financial Security, in respect of the Insurer Secured Obligations with respect to such Series. "SECURITY INTERESTS" means, with respect to Series 1993-A Certificates, the security interests and Liens in the Series 1993-A Collateral granted pursuant to Section 2.03 hereof, and, with respect to any other Series, the security interests and Liens in the related Collateral granted pursuant to the related Series Supplement. "SERIES 1993-A CERTIFICATES" means the Series of Certificates issued on the date hereof pursuant to the Series 1993-A Pooling and Servicing Agreement. "SERIES 1993-A COLLATERAL" has the meaning specified in Section 2.03(a) hereof. "SERIES 1993-A CREDIT ENHANCEMENT FEE" means the amount distributable on each Distribution Date pursuant to Section 4.6(a)(vi) and (vii) of the Standard Terms and Conditions as incorporated by reference in the Series 1993-A Pooling and Servicing Agreement. 7 "SERIES 1993-A POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing Agreement, dated as of the date hereof, among OFL, in its individual capacity and as Servicer, the Seller, the Trustee and the Backup Servicer, as such agreement may be supplemented, amended or modified from time to time. "SERIES 1993-A RECEIVABLE" means each Receivable referenced on the Schedule of Receivables attached to the Series 1993-A Pooling and Servicing Agreement. "SERIES OF SECURITIES" or "SERIES" means the Series 1993-A Certificates or, as the context may require, any other series of Certificates and/or Notes issued as described in Section 2.02 hereof, or collectively, all such series; PROVIDED, HOWEVER, Series, as used collectively shall not include any Series of Warehousing Notes when such term is used in, or with respect to, the definitions "Average Default Rate," "Average Delinquency Ratio," "Average Net Loss Rate," "Deemed Cured," "Delinquency Ratio," "Net Loss Rate," "Spread Account Shortfall" and "Spread Account Default Level." "SERIES SUPPLEMENT" means a supplement hereto executed by the parties hereto in accordance with Section 2.02 hereof. "SPREAD ACCOUNT" has the meaning specified in Section 3.01(a) hereof. "SPREAD ACCOUNT ADDITIONAL DEPOSIT" with respect to any Series created pursuant to a Trust Agreement, Sale and Servicing Agreement and Indenture, has the meaning assigned in the related Series Supplement. "SPREAD ACCOUNT LIQUIDATED RECEIVABLE" means, with respect to any Monthly Period, a Receivable as to which (i) 91 days have elapsed since the Servicer repossessed the related Financed Vehicle, (ii) the Servicer has determined in good faith that all amounts it expects to recover have been received, or (iii) all or any portion of a Scheduled Payment shall have become more than 180 days past due. "SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1993-A and any Distribution Date: (i) if no Insurance Agreement Event of Default with respect to such Series has occurred and is continuing as of the related Determination Date, no Capture Event has occurred and is continuing as of the related Determination Date, no Trigger Event has occurred as of the related Determination Date, and any Trigger Event with respect to such Series is Deemed Cured as of the related Determination Date, then the Initial Spread Account Maximum Amount with respect to such Series and such Distribution Date; (ii) if (A) a Trigger Event with respect to Series 1993-A has occurred as of the Determination Date or (B) a Trigger Event with respect to Series 1993-A has occurred as of a prior Distribution Date and is not Deemed Cured as of the related 8 Determination Date, and no Insurance Agreement Event of Default with respect to Series 1993-A has occurred and is continuing and no Capture Event has occurred and is continuing, the Spread Account Maximum Amount shall be equal to the greater of (i) 10% of the Series 1993-A Balance as of the close of business on such Distribution Date and (ii) the Spread Account Minimum Amount as of the close of business on such Distribution Date; or (iii) if (A) an Insurance Agreement Event of Default with respect to such Series has occurred and is continuing or (B) a Capture Event has occurred and is continuing as of the related Determination Date, the Spread Account Maximum Amount shall be equal to the greater of (i) 25% of the Series 1993-A Balance as of the close of business on such Distribution Date and (ii) the Spread Account Minimum Amount as of the close of business on such Distribution Date. "SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to Series 1993-A and any Distribution Date, an amount equal to the greater of: (i) $100,000, and (ii) the lesser of: (A) 1% of the Initial Principal Amount of such Series, but in no event less than $500,000, and (B) the Certificate Balance as of such Distribution Date (after giving effect to the distribution in respect of principal made on such Distribution Date). "SPREAD ACCOUNT SHORTFALL" means, with respect to any Distribution Date and any Series with respect to which an Insurance Agreement Event of Default has occurred and is continuing, or a Capture Event has occurred and is continuing, the excess, if any, of the Spread Account Maximum Amount for such Series and such Distribution Date and the amount on deposit in such Spread Account as of such Distribution Date after giving effect to distributions made on such Distribution Date pursuant to priority SECOND of Section 3.03(b). "STOCK PLEDGE AGREEMENT" means the Second Amended and Restated Stock Pledge Agreement, dated as of August 26, 1994, between OFL, Financial Security and the Collateral Agent. "TRANSACTION DOCUMENTS" means, with respect to a Series, this Agreement, each of the Pooling and Servicing Agreement or Trust Agreement, Sale and Servicing Agreement and Indenture, or Servicing Agreement, Repurchase Agreement, Indenture and Security Agreement, as applicable, the Insurance Agreement, the Custodian Agreement, the Purchase Agreement, any 9 Subsequent Purchase Agreements and Subsequent Transfer Agreements, any Underwriting Agreement, the Lockbox Agreement, and the Stock Pledge Agreement related to such Series. "TRIGGER EVENT" means, with respect to Series 1993-A and as of a Determination Date the occurrence of any of the following event: (i) [reserved]; (ii) the Average Delinquency Ratio for such Determination Date shall be equal to or greater than 4.50%; (iii) the Cumulative Default Rate shall be equal to or greater than (A) 3.15%, with respect to any Determination Date occurring prior to or during the sixth calendar month succeeding the Series 1993-A Closing Date, (B) 5.50%, with respect to any Determination Date occurring after the sixth, and prior to or during the 12th, calendar month succeeding the Series 1993-A Closing Date, (C) 7.0%, with respect to any Determination Date occurring after the 12th, and prior to or during the 18th, calendar month succeeding the Series 1993-A Closing Date, (D) 7.5%, with respect to any Determination Date occurring after the 18th, and prior to or during the 24th, calendar month succeeding the Series 1993-A Closing Date, (E) 8.15%, with respect to any Determination Date occurring after the 24th, and prior to or during the 30th, calendar month succeeding the Series 1993-A Closing Date, (F) 8.75%, with respect to any Determination Date occurring after the 30th, and prior to or during the 36th, calendar month succeeding the Series 1993-A Closing Date, (G) 9.0%, with respect to any Determination Date occurring after the 36th, and prior to or during the 42nd, calendar month succeeding the Series 1993-A Closing Date, (H) 9.25%, with respect to any Determination Date occurring after the 42nd, and prior to or during the 48th, calendar month succeeding the Series 1993-A Closing Date, (I) 9.50%, with respect to any Determination Date occurring after the 48th, and prior to or during the 54th, calendar month succeeding the Series 1993-A Closing Date, (J) 9.75%, with respect to any Determination Date occurring after the 54th, and prior to or during the 60th calendar month succeeding the Series 1993-A Closing Date, (K) 9.9%, with respect to any Determination Date occurring after the 60th, and prior to or during the 66th, calendar month succeeding the Series 1993-A Closing Date, or (L) 10.0%, with respect to any Determination Date occurring after the 66th, and prior to or during the 72nd, calendar month succeeding the Series 1993-A Closing Date; or (iv) the Cumulative Net Loss Rate shall be equal to or greater than (A) 1.25%, with respect to any Determination Date occurring prior to or during the sixth calendar month succeeding the Series 1993-A Closing 10 Date, (B) 2.0%, with respect to any Determination Date occurring after the sixth, and prior to or during the 12th, calendar month succeeding the Series 1993-A Closing Date, (C) 2.75%, with respect to any Determination Date occurring after the 12th, and prior to or during the 18th, calendar month succeeding the Series 1993-A Closing Date, (D) 3.0%, with respect to any Determination Date occurring after the 18th, and prior to or during the 24th, calendar month succeeding the Series 1993-A Closing Date, (E) 3.25%, with respect to any Determination Date occurring after the 24th, and prior to or during the 30th, calendar month succeeding the Series 1993-A Closing Date, (F) 3.5%, with respect to any Determination Date occurring after the 30th, and prior to or during the 36th, calendar month succeeding the Series 1993-A Closing Date, (G) 3.6%, with respect to any Determination Date occurring after the 36th, and prior to or during the 42nd, calendar month succeeding the Series 1993-A Closing Date, (H) 3.7%, with respect to any Determination Date occurring after the 42nd, and prior to or during the 48th, calendar month succeeding the Series 1993-A Closing Date, (I) 3.8%, with respect to any Determination Date occurring after the 48th, and prior to or during the 54th, calendar month succeeding the Series 1993-A Closing Date, (J) 3.9%, with respect to any Determination Date occurring after the 54th, and prior to or during the 60th, calendar month succeeding the Series 1993-A Closing Date, (K) 3.95%, with respect to any Determination Date occurring after the 60th, and prior to or during the 66th, calendar month succeeding the Series 1993-A Closing Date, or (L) 4.0%, with respect to any Determination Date occurring after the 66th, and prior to or during the 72nd, calendar month succeeding the Series 1993-A Closing Date. "TRUST" means a trust formed pursuant to a Pooling and Servicing Agreement or a Trust Agreement, as the case may be. "TRUST PROPERTY," with respect to any Series, has the meaning specified in the related Pooling and Servicing Agreement or Trust Agreement, as the case may be. "TRUSTEE" means (A) with respect to any Series created pursuant to a Pooling and Servicing Agreement, the Trustee named in such Pooling and Servicing Agreement, or (B) with respect to any Series issued pursuant to an Indenture, the Trustee named in such Indenture in its capacity as agent for the Noteholders and, if applicable, the Certificateholders. "TRUSTEE SECURED OBLIGATIONS" means, with respect to a Series, all amounts and obligations which OFL or the Seller may at any time owe or be required to perform to or on behalf of (i) the Trustee, the Trust or the Certificateholders under the Pooling and Servicing Agreement with respect to such Series, or (ii) the Trustee, the Owner Trustee, the Trust, the Certificateholders 11 or the Noteholders under the Trust Agreement, the Sale and Servicing Agreement or the Indenture with respect to such Series. "TRUSTEE TERMINATION DATE" means, with respect to any Series, the date which is the latest of (i) the date on which the Trustee shall have received, as Trustee for the holders of the Certificates of such Series, or as Indenture Trustee on behalf of (and as agent for) the Noteholders and/or Certificateholders of such Series, payment and performance in full of all Trustee Secured Obligations arising out of or relating to such Series and (ii) the date on which all payments in respect of the Certificates shall have been made and the related Trust shall have been terminated pursuant to the terms of the related Pooling and Servicing Agreement or Trust Agreement. "UNDERWRITING AGREEMENT" means, with respect to any Series, the Underwriting Agreement among OFL, the Seller and the Underwriters named therein. "UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code in effect in the relevant jurisdiction, as the same may be amended from time to time. "WAREHOUSING SERIES" means all notes issued by the Issuer. Section 1.02. RULES OF INTERPRETATION. The terms "hereof," "herein" or "hereunder," unless otherwise modified by more specific reference, shall refer to this Agreement in its entirety. Unless otherwise indicated in context, the terms "Article," "Section," "Appendix," "Exhibit" or "Annex" shall refer to an Article or Section of, or Appendix, Exhibit or Annex to, this Agreement. The definition of a term shall include the singular, the plural, the past, the present, the future, the active and the passive forms of such term. A term defined herein and used herein preceded by a Series designation, shall mean such term as it relates to the Series designated. ARTICLE II CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL Section 2.01. SERIES 1993-A CREDIT ENHANCEMENT FEE. The Series 1993-A Pooling and Servicing Agreement provides for the payment to the Seller of a Series 1993-A Credit Enhancement Fee, to be paid to the Seller by distribution of such amounts to the Collateral Agent for deposit and distribution pursuant to this Agreement. The Seller and OFL hereby agree that payment of the Series 1993- A Credit Enhancement Fee in the manner and subject to the conditions set forth herein and in the Series 1993-A Pooling and Servicing Agreement is adequate consideration and the exclusive consideration to be received by the Seller or OFL for the obligations of the Seller pursuant hereto and the obligations of OFL pursuant hereto (including, without limitation, the transfer by the Seller to the Collateral Agent of the Initial Spread Account Deposit) and pursuant to the Series 1993-A Insurance Agreement. The Seller and OFL hereby 12 agree with the Trustee and with Financial Security that payment of the Series 1993-A Credit Enhancement Fee to the Seller is expressly conditioned on subordination of the Series 1993-A Credit Enhancement Fee to payments on the Certificates of any Series, payments on the Notes of any Series, payments of amounts due to Financial Security and the other obligations of the Trusts, in each case to the extent provided in Section 4.6 of the Standard Terms and Conditions and Section 3.03 hereof; and the Security Interest of the Secured Parties in the Series 1993-A Collateral is intended to effect and enforce such subordination and to provide security for the Series 1993-A Secured Obligations and the Secured Obligations with respect to each other Series. Section 2.02. SERIES SUPPLEMENTS. The parties hereto intend to enter into a Series Supplement hereto with respect to any Series other than the Series 1993-A Certificates. The parties will enter into a Series Supplement only if the following conditions shall have been satisfied: (i) The Seller shall have sold Receivables to a Trust or to a corporation pursuant to (A) a Pooling and Servicing Agreement under which the Trustee shall act as trustee, (B) a Sale and Servicing Agreement in form and substance satisfactory to Financial Security, with respect to which the Trustee shall act as Indenture Trustee, and which Sale and Servicing Agreement may provide for the sale of Subsequent Receivables to the related Trust or (C) a Repurchase Agreement in form and substance satisfactory to Financial Security, with respect to which the Trustee shall act as Indenture Trustee with respect to the related Notes; (ii) Financial Security shall have issued (A) one or more Policies in respect of the Guaranteed Distributions on Certificates issued pursuant to the related Pooling and Servicing Agreement or Trust Agreement, and/or (B) one or more Note Policies in respect of the Scheduled Payments on the Notes issued pursuant to the related Indenture; and (iii) Pursuant to the related Series Supplement any and all right, title and interest of the Seller, OFL or any affiliate of either of them in the Collateral specified herein shall be pledged to the Secured Parties substantially on the terms set forth in Section 2.03 hereof. Section 2.03. GRANT OF SECURITY INTEREST BY OFL AND THE SELLER. (a) In order to secure the performance of the Secured Obligations with respect to each Series, the Seller (and OFL, to the extent it may have any rights therein) hereby pledges, assigns, grants, transfers and conveys to the Collateral Agent, on behalf of and for the benefit of the Secured Parties to secure the Secured Obligations with respect to each Series, a lien on and security interest in (which lien and security interest is intended to be prior to all other liens, security interest or other encumbrances), all of its right, title and interest in and to the following (all being collectively referred to herein as the "Series 1993-A Collateral"): 13 (i) the Series 1993-A Credit Enhancement Fee and all rights and remedies that the Seller may have to enforce payment of the Series 1993-A Credit Enhancement Fee whether under the Series 1993-A Pooling and Servicing Agreement or otherwise; (ii) the Series 1993-A Spread Account established pursuant to Section 3.01 hereof, and each other account owned by the Seller and maintained by the Collateral Agent (including, without limitation, all monies, checks, securities, investments and other documents from time to time held in or evidencing any such accounts); (iii) all of the Seller's right, title and interest in and to investments made with proceeds of the property described in clauses (i) and (ii) above, or made with amounts on deposit in the Series 1993-A Spread Account; and (iv) all distributions, revenues, products, substitutions, benefits, profits and proceeds, in whatever form, of any of the foregoing. (b) In order to effectuate the provisions and purposes of this Agreement, including for the purpose of perfecting the security interests granted hereunder, the Seller represents and warrants that it has, prior to the execution of this Agreement, executed and filed an appropriate Uniform Commercial Code financing statement in Minnesota sufficient to assure that the Collateral Agent, as agent for the Secured Parties, has a first priority perfected security interest in all Series 1993-A Collateral which can be perfected by the filing of a financing statement. Section 2.04. PRIORITY. The Seller (and OFL, to the extent it may have any rights in the Collateral) intends the security interests in favor of the Secured Parties to be prior to all other Liens in respect of the Collateral, and OFL and the Seller shall take all actions necessary to obtain and maintain, in favor of the Collateral Agent, for the benefit of the Secured Parties, a first lien on and a first priority, perfected security interest in the Collateral. Subject to the provisions hereof specifying the rights and powers of the Controlling Party from time to time to control certain specified matters relating to the Collateral, each Secured Party shall have all of the rights, remedies and recourse with respect to the Collateral afforded a secured party under the Uniform Commercial Code of the State of New York and all other applicable law in addition to, and not in limitation of, the other rights, remedies and recourse granted to such Secured Parties by this Agreement or any other law relating to the creation and perfection of liens on, and security interests in, the Collateral. Section 2.05. SELLER AND OFL REMAIN LIABLE. The Security Interests are granted as security only and shall not (i) transfer or in any way affect or modify, or relieve either the Seller or OFL from, any obligation to perform or satisfy, any term, covenant, condition or agreement to be performed or satisfied by the Seller or OFL under or in connection with this Agreement, the Insurance Agreement or any other Transaction Document to which it is a party or (ii) impose any obligation on any of the Secured Parties or the Collateral Agent to perform or observe any such term, covenant, condition or agreement or impose any liability on any of the Secured Parties or the Collateral Agent for any act or omission on its part relative thereto or for 14 any breach of any representation or warranty on its part contained therein or made in connection therewith, except, in each case, to the extent provided herein and in the other Transaction Documents. Section 2.06. MAINTENANCE OF COLLATERAL. (a) SAFEKEEPING. The Collateral Agent agrees to maintain the Collateral received by it (or evidence thereof, in the case of book-entry securities in the name of the Collateral Agent) and all records and documents relating thereto at the office of the Collateral Agent specified in Section 8.06 hereof or such other address within the State of Minnesota (unless all filings have been made to continue the perfection of the security interest in the Collateral to the extent such security interest can be perfected by filing a financing statement, as evidenced by an Opinion of Counsel delivered to the Controlling Party), as may be approved by the Controlling Party. The Collateral Agent shall keep all Collateral and related documentation in its possession separate and apart from all other property that it is holding in its possession and from its own general assets and shall maintain accurate records pertaining to the Eligible Investments and Spread Accounts included in the Collateral in such a manner as shall enable the Collateral Agent and the Secured Parties to verify the accuracy of such record-keeping. The Collateral Agent's books and records shall at all times show that the Collateral is held by the Collateral Agent as agent of the Secured Parties and is not the property of the Collateral Agent. The Collateral Agent will promptly report to each Secured Party and the Seller any failure on its part to hold the Collateral as provided in this Section 2.06(a) and will promptly take appropriate action to remedy any such failure. (b) ACCESS. The Collateral Agent shall permit each of the Secured Parties, or their respective duly authorized representatives, attorneys, auditors or designees, to inspect the Collateral in the possession of or otherwise under the control of the Collateral Agent pursuant hereto at such reasonable times during normal business hours as any such Secured Party may reasonably request upon not less than one Business Day's prior written notice. Section 2.07. TERMINATION AND RELEASE OF RIGHTS. (a) On the Insurer Termination Date relating to a Series, the rights, remedies, powers, duties, authority and obligations conferred upon Financial Security pursuant to this Agreement in respect of the Collateral related to such Series shall terminate and be of no further force and effect and all rights, remedies, powers, duties, authority and obligations of Financial Security with respect to such Collateral shall be automatically released; PROVIDED that any indemnity provided to or by Financial Security herein shall survive such Insurer Termination Date. If Financial Security is acting as Controlling Party with respect to a Series on the related Insurer Termination Date, Financial Security agrees, at the expense of the Seller, to execute and deliver such instruments as the successor Controlling Party may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on Financial Security and any Person claiming by, through or under Financial Security. 15 (b) On the Trustee Termination Date related to a Series, the rights, remedies, powers, duties, authority and obligations, if any, conferred upon the Trustee pursuant to this Agreement in respect of the Collateral related to such Series shall terminate and be of no further force and effect and all such rights, remedies, powers, duties, authority and obligations of the Trustee with respect to such Collateral shall be automatically released; PROVIDED that any indemnity provided to the Trustee herein shall survive such Trustee Termination Date. If the Trustee is acting as Controlling Party with respect to a Series on the related Trustee Termination Date, the Trustee agrees, at the expense of the Seller, to execute and deliver such instruments as the Seller may reasonably request to effectuate such release, and any such instruments so executed and delivered shall be fully binding on the Trustee. (c) On the Final Termination Date with respect to a Series, the rights, remedies, powers, duties, authority and obligations conferred upon the Collateral Agent and each Secured Party pursuant to this Agreement with respect to such Series shall terminate and be of no further force and effect and all rights, remedies, powers, duties, authority and obligations of the Collateral Agent and each Secured Party with respect to the Collateral related to such Series shall be automatically released. On the Final Termination Date with respect to a Series, the Collateral Agent agrees, and each Secured Party agrees, at the expense of the Seller, to execute such instruments of release, in recordable form if necessary, in favor of the Seller as the Seller may reasonably request, to deliver any Collateral in its possession to the Seller, and to otherwise release the lien of this Agreement and release and deliver to the Seller the Collateral related to such Series. Section 2.08. NON-RECOURSE OBLIGATIONS OF SELLER. Notwithstanding anything herein or in the other Transaction Documents to the contrary, the parties hereto agree that the obligations of the Seller hereunder (without limiting the obligation to apply distributions of the respective Credit Enhancement Fees in accordance with Section 3.03(b)) shall be recourse only to the extent of amounts released to the Seller pursuant to priority EIGHTH of Section 3.03(b) and retained by the Seller in accordance with the next sentence. The Seller agrees that it shall not declare or make payment of (i) any dividend or other distribution on or in respect of any shares of its capital stock or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (x) any shares of its capital stock or (y) any option, warrant or other right to acquire shares of its capital stock, or (iii) any payment of any loan made by OFL to the Seller, unless (in each case) at the time of such declaration or payment (and after giving effect thereto) no amount payable by Seller under any Transaction Document is then due and owing but unpaid. Nothing contained herein shall be deemed to limit the rights of the Certificateholders (or Certificate Owners) or Noteholders (or Note Owners) under any other Transaction Document. 16 ARTICLE III SPREAD ACCOUNTS Section 3.01. ESTABLISHMENT OF SPREAD ACCOUNTS; INITIAL DEPOSITS INTO SPREAD ACCOUNTS. (a) On or prior to the Closing Date relating to a Series, the Collateral Agent shall establish with respect to such Series, at its office or at another depository institution or trust company an Eligible Account, designated, "Spread Account -- Series [insert Series designation] -- Norwest Bank Minnesota, National Association, as Collateral Agent for Financial Security Assurance Inc. and another Secured Party" (the "Spread Account"). All Spread Accounts established under this Agreement from time to time shall be maintained at the same depository institution (which depository institution may be changed from time to time in accordance with this Agreement). If any Spread Account established with respect to a Series ceases to be an Eligible Account, the Collateral Agent shall, within five Business Days, establish a new Eligible Account for such Series. (b) No withdrawals may be made of funds in any Spread Account except as provided in Section 3.03 of this Agreement. Except as specifically provided in this Agreement, funds in a Spread Account established with respect to a Series shall not be commingled with funds in a Spread Account established with respect to another Series or with any other moneys. All moneys deposited from time to time in such Spread Account and all investments made with such moneys shall be held by the Collateral Agent as part of the Collateral with respect to such Series. (c) On the Closing Date with respect to a Series, the Collateral Agent shall deposit the Initial Spread Account Deposit with respect to such Series, if any, received from the Seller into the related Spread Account. On each Subsequent Transfer Date (if any) with respect to a Series, the Collateral Agent shall deposit the Spread Account Additional Deposit delivered by the related Trust on behalf of the Seller into the related Spread Account. (d) Each Spread Account shall be separate from each respective Trust or Issuer and amounts on deposit therein will not constitute a part of the Trust Property of any Trust or the assets of any Issuer. Except as specifically provided herein, each Spread Account shall be maintained by the Collateral Agent at all times separate and apart from any other account of the Seller, OFL, the Servicer or the Trust or the Issuer, as the case may be. All income or loss on investments of funds in any Spread Account shall be reported by the Seller as taxable income or loss of the Seller. Section 3.02. INVESTMENTS. (a) Funds which may at any time be held in the Spread Account established with respect to a Series shall be invested and reinvested by the Collateral Agent, at the written 17 direction (which may include, subject to the provisions hereof, general standing instructions) of the Seller (unless a Default shall have occurred and be continuing, in which case at the written direction of the Controlling Party) or its designee received by the Collateral Agent by 1:00 P.M. New York City time on the Business Day prior to the date on which such investment shall be made, in one or more Eligible Investments in the manner specified in Section 3.02(c). If no written direction with respect to any portion of such Spread Account is received by the Collateral Agent, the Collateral Agent shall invest such funds overnight in such Eligible Investments as the Collateral Agent may select, provided that the Collateral Agent shall not be liable for any loss or absence of income resulting from such investments. (b) Each investment made pursuant to this Section 3.02 on any date shall mature not later than the Business Day immediately preceding the Distribution Date next succeeding the day such investment is made, except that any investment made on the day preceding a Distribution Date shall mature on such Distribution Date; PROVIDED that any investment of funds in any Account maintained with the Collateral Agent in any investment as to which the Collateral Agent is the obligor, if otherwise qualified as an Eligible Investment (including any repurchase agreement on which the Collateral Agent in its commercial capacity is liable as principal), may mature on the Distribution Date next succeeding the date of such investment. (c) Any investment of funds in the Spread Account shall be made in Eligible Investments held by a financial institution in accordance with the following requirements: (a) all Eligible Investments shall be held in an account with such financial institution in the name of the Collateral Agent, (b) with respect to securities held in such account, such securities shall be (i) certificated securities (as such term is used in N.Y. U.C.C. Section 8-313(d)(i), securities deemed to be certificated securities under applicable regulations of the United States government, or uncertificated securities issued by an issuer organized under the laws of the State of New York or the State of Delaware, (ii) either (A) in the possession of such institution, (b) in the possession of a clearing corporation (as such term is used in Minn. Stat. Section 336.8-313(g)) in the State of New York, registered in the name of such clearing corporation or its nominee, not endorsed for collection or surrender or any other purpose not involving transfer, not containing any evidence of a right or interest inconsistent with the Collateral Agent's security interest therein, and held by such clearing corporation in an account of such institution, (C) held in an account of such institution with the Federal Reserve Bank of New York or the Federal Reserve Bank of Minneapolis, or (D) in the case of uncertificated securities, issued in the name of such institution, and (iii) identified, by book entry or otherwise, as held for the account of, or pledged to, the Collateral Agent on the records of such institution, and such institution shall have sent the Collateral Agent a confirmation thereof, (c) with respect to repurchase obligations held in such account, such repurchase obligations shall be identified by such institution, by book entry or otherwise, as held for the account of, or pledged to, the Collateral Agent on the records of such institution, and the related securities shall be held in accordance with the requirements of clause (b) above, and (d) with respect to other Eligible Investments other than securities and repurchase agreements, such Eligible Investments shall be held in a manner acceptable to the Collateral Agent. Subject to the other provisions hereof, the Collateral Agent shall have sole control over each such investment and the income thereon, and any certificate or other instrument evidencing any such investment, if any, shall be delivered directly to the Collateral Agent or its agent, 18 together with each document of transfer, if any, necessary to transfer title to such investment to the Collateral Agent in a manner which complies with Section 2.06 and this subsection. (d) If amounts on deposit in any Spread Account are at any time invested in an Eligible Investment payable on demand, the Collateral Agent shall (i) consistent with any notice required to be given thereunder, demand that payment thereon be made on the last day such Eligible Investment is permitted to mature under the provisions hereof and (ii) demand payment of all amounts due thereunder promptly upon receipt of written notice from the Controlling Party to the effect that such investment does not constitute an Eligible Investment. (e) All moneys on deposit in a Spread Account, together with any deposits or securities in which such moneys may be invested or reinvested, and any gains from such investments, shall constitute Collateral hereunder with respect to the related Series subject to the Security Interests of the Secured Parties. (f) Subject to Section 4.03 hereof, the Collateral Agent shall not be liable by reason of any insufficiency in any Spread Account resulting from any loss on any Eligible Investment included therein except for losses attributable to the Collateral Agent's failure to make payments on Eligible Investments as to which the Collateral Agent, in its commercial capacity, is obligated. Section 3.03. DISTRIBUTIONS: PRIORITY OF PAYMENTS. (a) On or before each Deficiency Claim Date, the Collateral Agent will make the following calculations on the basis of information (including, without limitation, the amount of any Collection Account Shortfall with respect to any Series) received pursuant to (x) Section 3.9 of the Standard Terms and Conditions, Section 5.03 of the Pooling and Servicing Agreements, or (y) Section 3.9 of the Sale and Servicing Agreements, or (z) Section 4.1 of the Servicing Agreement, as applicable, with respect to each Series; PROVIDED, HOWEVER, that if the Collateral Agent receives notice from Financial Security of the occurrence of an Insurance Agreement Event of Default with respect to any Series, or of the occurrence of a Capture Event, such notice shall be determinative for the purposes of determining the Spread Account Default Level and Spread Account Maximum Amount for such Series: FIRST, determine the amounts to be on deposit in the respective Spread Accounts (taking into account amounts in respect of the respective Credit Enhancement Fees to be deposited into the related Spread Accounts) on the next succeeding Distribution Date which will be available to satisfy any Collection Account Shortfall and any Warehousing Shortfall; SECOND, determine (i) the amounts, if any, to be distributed from each Spread Account related to each Series with respect to which there exists a Collection Account Shortfall and (ii) whether, following distribution from the related Spread Accounts to the respective Trustees for deposit into the respective Collection Accounts with respect to 19 which there exist Collection Account Shortfalls, a Collection Account Shortfall will continue to exist with respect to one or more Series; THIRD, (i) if a Collection Account Shortfall will continue to exist with respect to one or more Series (excluding the Warehousing Series) following the distributions from the related Spread Accounts contemplated by paragraph SECOND above, determine the amount, if any, to be distributed to the Trustee with respect to each Series from unrelated Spread Accounts (including the Warehousing Series Spread Account) in respect of such Collection Account Shortfall(s) and (ii) if a Warehousing Shortfall will exist with respect to the Warehousing Series, determine the amount, if any, to be distributed to the Trustee with respect to such Series from unrelated Spread Accounts in respect of such Warehousing Shortfall. This determination shall be made as follows: (i) of the aggregate of the amounts to be on deposit in the respective Spread Accounts for such Distribution Date (as determined pursuant to paragraph FIRST above, after making the withdrawals pursuant to paragraph SECOND above), up to the aggregate of the Collection Account Shortfalls (excluding any Collection Account Shortfall with respect to the Warehousing Series) and any Warehousing Shortfall for such Distribution Date, (ii) drawn from each Spread Account PRO RATA in accordance with amounts on deposit therein, and (iii) distributed to the respective Trustees in the following order of priority and PRO RATA within each priority (1) in the same priority as amounts are to be distributed pursuant to Section 4.6 of the Standard Terms and Conditions included in the respective Pooling and Servicing Agreements and pursuant to Section 4.6 of the respective Sale and Servicing Agreements, and pursuant to Section 3.6(a) or 3.6(b)(II) of the Servicing Agreement, as applicable, so that any shortfalls with respect to priority (i) of each such Section are to be covered first, any shortfalls with respect to priority (ii) of each such Section are to be covered second, and so forth, until priority (v) of such Section, so that priority (v) of Section 4.6 of the Standard Terms and Conditions and of the Sale and Servicing Agreement and priority (v)(B) of Section 3.6(a) or priority (v) of Section 3.6(b)(II) of the Servicing Agreement are to be covered fifth, (2) if Section 4.6 of one or more Sale and Servicing Agreements provides for distribution in respect of interest or principal on Notes or Certificates with priorities numerically greater than (v), in the same priority as amounts are to be distributed pursuant to each such Section 4.6, so that any shortfalls with respect to priority (vi) of each such Section 4.6 are covered first, and so forth through all priorities relating to interest or principal on Notes or Certificates and (3) amounts to be distributed to the Security Insurer; On such Deficiency Claim Date, the Collateral Agent shall deliver a certificate to each Trustee in respect of which the Collateral Agent has received notice pursuant to (i) Section 3.9 of the Standard Terms and Conditions of a Collection Account Shortfall or (ii) Section 3.9 of the Sale and Servicing Agreement of a Collection Account Shortfall or (iii) Section 4.1 of the Servicing Agreement of a Collection Account Shortfall or Warehousing Shortfall stating the amount (which, in the case of (i) and (ii) above, shall be the sum of the amount, if any, to be withdrawn from the related Spread Account, as calculated pursuant to paragraph SECOND of this Section 3.03(a), plus, the amount, if any, to be withdrawn from unrelated Spread Accounts, as calculated pursuant to paragraph THIRD of this Section 3.03(a), and which, in the case of a Warehousing Shortfall or Collection Account Shortfall referred to in clause (iii) shall be the respective amounts, if any, withdrawn from unrelated Spread Accounts, as calculated pursuant to paragraph THIRD of this Section 3.03(a) or calculated to be available pursuant to priority SEVENTH of Section 3.03(b)), if any, to be distributed to such Trustee on the next Distribution Date in respect of such Collection Account Shortfall or Warehousing Shortfall, as the case may be. 20 (b) On each Distribution Date, following delivery by the Trustee of the respective Credit Enhancement Fees for deposit into the respective Spread Accounts pursuant to Section 4.6 of the Standard Terms and Conditions included in the respective Pooling and Servicing Agreements or Section 4.6 of the respective Sale and Servicing Agreements, or Section 3.6 of the respective Servicing Agreement, as applicable, and upon receipt of a Deficiency Notice with respect to one or more such Series, or with respect to priorities FIFTH and SIXTH to the extent the amounts referred to therein are due and owing the Collateral Agent shall make the following distributions in the following order of priority: FIRST, if with respect to any Series there exists a Collection Account Shortfall from the Spread Account related to such Series, to the Trustee for deposit in the related Collection Account the amount of such Collection Account Shortfall; SECOND, if with respect to any Series (excluding the Warehousing Series) there exists a Collection Account Shortfall after deposit into the Collection Account of amounts distributed pursuant to priority FIRST, or if with respect to the Warehousing Series there exists a Warehousing Shortfall from each Spread Account (including the Warehousing Series Spread Account), pro rata in accordance with amounts on deposit therein (but in no event shall a withdrawal from a Spread Account pursuant to this priority SECOND cause the amount on deposit in such Spread Account to be below the Spread Account Withdrawal Floor for such Spread Account if a Spread Account Withdrawal Floor is specified in the Series Supplement establishing such Spread Account), an amount up to the aggregate of the Collection Account Shortfalls for all Series (excluding the Warehousing Series) and any Warehousing Shortfall, to the respective Trustees in accordance with the Payment Priorities for deposit in the respective Collection Accounts with respect to which there exist Collection Account Shortfalls or a Warehousing Shortfall; THIRD, if with respect to one or more Series (excluding the Warehousing Series) there exists a Spread Account Shortfall, from amounts, if any, on deposit in each Spread Account in excess of the related Spread Account Maximum Amount (after making any withdrawals therefrom required by priority FIRST or SECOND of this Section 3.03(b)), an amount in the aggregate up to the aggregate of the Spread Account Shortfalls for all Series for deposit into each Spread Account PRO RATA in accordance with their respective Spread Account Shortfalls; FOURTH, if with respect to one or more Series (excluding the Warehousing Series), amounts have been withdrawn from the related Spread Account pursuant to priority FIRST or SECOND of this Section 3.03(b) on such Distribution Date and/or on prior Distribution Dates and such amounts have not been redeposited in full into such Spread Account pursuant to this priority FOURTH (such amounts in the aggregate for a Series "Unreimbursed Amounts"), from amounts, if any, on deposit in each Spread Account in excess of the related Spread Account Maximum Amount (after making any withdrawals therefrom required by priority FIRST, SECOND or THIRD of this Section 3.03(b)), an amount up to the aggregate of the Unreimbursed Amounts for all such Series for deposit into each Spread Account with respect to which there exist Unreimbursed Amounts PRO RATA in accordance with the excess of the Spread Account Maximum Amount of each such Spread Account over the amount on deposit in such Spread Account; 21 FIFTH, if any amounts are owed to a successor Servicer pursuant to Section 9.3(c) of the Standard Terms and Conditions included in a Pooling and Servicing Agreement or Section 8.3(c) of a Sale and Servicing Agreement or Section 6.2 of a Servicing Agreement and such amounts are not payable pursuant to Section 4.6(a)(i) of the Standard Terms and Conditions included in such Pooling and Servicing Agreement or Section 4.6(i) of such Sale and Servicing Agreement or Section 3.6 of a Servicing Agreement, as applicable, from amounts on deposit in the related Spread Account, an amount up to the amount so owed, to such Servicer; SIXTH, if any amounts are owed by OFL or the Seller to a Trustee, Indenture Trustee, Owner Trustee, Lockbox Bank, Custodian, Backup Servicer, Administrator, Collateral Agent, the Indenture Collateral Agent or other service provider to either the Trust or the Issuer for expenses that have not been reimbursed by OFL or the Seller, from amounts on deposit in the related Spread Account, an amount up to the amount so owed, to such Person; SEVENTH, if with respect to the Warehousing Series there exists a Collection Account Shortfall, from the aggregate of all amounts on deposit in each Spread Account in excess of the related Spread Account Maximum Amount, an amount up to the amount of such Collection Account Shortfall (to the extent not distributed on such Distribution Date pursuant to a prior priority of this Section 3.03(b)), to the Trustee for the Warehousing Series for deposit in the Warehousing Series Collection Account; and EIGHTH, any funds in a Spread Account in excess of the applicable Spread Account Maximum Amount, and any funds in a Spread Account with respect to a Series for which the Final Termination Date shall have occurred, to the Seller. Section 3.04. GENERAL PROVISIONS REGARDING SPREAD ACCOUNTS. (a) Promptly upon the establishment (initially or upon any relocation) of a Spread Account hereunder, the Collateral Agent shall advise the Seller and each Secured Party in writing of the name and address of the depository institution or trust company where such Spread Account has been established (if not Norwest Bank Minnesota, National Association or any successor Collateral Agent in its commercial banking capacity), the name of the officer of the depository institution who is responsible for overseeing such Spread Account, the account number and the individuals whose names appear on the signature cards for such Spread Account. The Seller shall cause each such depository institution or trust company to execute a written agreement, in form and substance satisfactory to the Controlling Party, waiving, and the Collateral Agent by its execution of this Agreement hereby waives (except to the extent expressly provided herein), in each case to the extent permitted under applicable law, (i) any banker's or other statutory or similar Lien, and (ii) any right of set-off or other similar right under applicable law with respect to such Spread Account and any other Spread Account and agreeing, and the Collateral Agent by its execution of this Agreement hereby agrees, to notify the Seller, the Collateral Agent, and each Secured Party of any charge or claim against or with respect to such Spread Account. The Collateral Agent shall give the Seller and each Secured Party at least ten Business Days' prior written notice of any change in the location of such Spread Account or in any related account 22 information. If the Collateral Agent changes the location of any Spread Account, it shall change the location of the other Spread Accounts, so that all Spread Accounts shall at all times be located at the same depository institution. Anything herein to the contrary notwithstanding, unless otherwise consented to by the Controlling Party in writing, the Collateral Agent shall have no right to change the location of any Spread Account. (b) Upon the written request of the Controlling Party or the Seller and at the expense of the Seller, the Collateral Agent shall cause, at the expense of the Seller, the depository institution at which any Spread Account is located to forward to the requesting party copies of all monthly account statements for such Spread Account. (c) If at any time any Spread Account ceases to be an Eligible Account, the Collateral Agent shall notify the Controlling Party of such fact and shall establish within 5 Business Days of such determination, in accordance with paragraph (a) of this Section, a successor Spread Account thereto, which shall be an Eligible Account, at another depository institution acceptable to the Controlling Party and shall establish successor Spread Accounts with respect to all other Spread Accounts, each of which shall be an Eligible Account at the same depository institution. (d) No passbook, certificate of deposit or other similar instrument evidencing a Spread Account shall be issued, and all contracts, receipts and other papers, if any, governing or evidencing a Spread Account shall be held by the Collateral Agent. Section 3.05. REPORTS BY THE COLLATERAL AGENT. The Collateral Agent shall report to the Seller, Financial Security, the Trustee and the Servicer on a monthly basis no later than each Distribution Date with respect to the amount on deposit in each Spread Account and the identity of the investments included therein as of the last day of the related Monthly Period, and shall provide accountings of deposits into and withdrawals from the Spread Accounts, and of the investments made therein, to the independent accountants upon their request for purposes of their reports pursuant to Section 3.11 of the Pooling and Servicing Agreements and Section 3.11 of the Sale and Servicing Agreements. ARTICLE IV THE COLLATERAL AGENT Section 4.01. APPOINTMENT AND POWERS. Subject to the terms and conditions hereof, each of the Secured Parties hereby appoints Norwest Bank Minnesota, National Association as the Collateral Agent with respect to the Series 1993-A Collateral and the related Collateral subsequently specified in a Series Supplement, and Norwest Bank Minnesota, National Association hereby accepts such appointment and agrees to act as Collateral Agent with respect to the Series 1993-A Collateral, and upon execution of any Series Supplement, shall be deemed to accept such appointment, and agree to act as Collateral Agent with respect to such Collateral, in each case, for the Secured Parties, to maintain custody and possession of such Collateral (except 23 as otherwise provided hereunder) and to perform the other duties of the Collateral Agent in accordance with the provisions of this Agreement. Each Secured Party hereby authorizes the Collateral Agent to take such action on its behalf, and to exercise such rights, remedies, powers and privileges hereunder, as the Controlling Party may direct and as are specifically authorized to be exercised by the Collateral Agent by the terms hereof, together with such actions, rights, remedies, powers and privileges as are reasonably incidental thereto. The Collateral Agent shall act upon and in compliance with the written instructions of the Controlling Party delivered pursuant to this Agreement promptly following receipt of such written instructions; provided that the Collateral Agent shall not act in accordance with any instructions (i) which are not authorized by, or in violation of the provisions of, this Agreement, (ii) which are in violation of any applicable law, rule or regulation or (iii) for which the Collateral Agent has not received reasonable indemnity. Receipt of such instructions shall not be a condition to the exercise by the Collateral Agent of its express duties hereunder, except where this Agreement provides that the Collateral Agent is permitted to act only following and in accordance with such instructions. Section 4.02. PERFORMANCE OF DUTIES. The Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Transaction Documents to which the Collateral Agent is a party or as directed by the Controlling Party in accordance with this Agreement. The Collateral Agent shall not be required to take any discretionary actions hereunder except at the written direction and with the indemnification of the Controlling Party. Section 4.03. LIMITATION ON LIABILITY. Neither the Collateral Agent nor any of its directors, officers or employees, shall be liable for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, except that the Collateral Agent shall be liable for its negligence, bad faith or willful misconduct; nor shall the Collateral Agent be responsible for the validity, effectiveness, value, sufficiency or enforceability against the Seller or OFL of this Agreement or any of the Collateral (or any part thereof). Notwithstanding any term or provision of this Agreement, the Collateral Agent shall incur no liability to the Seller, OFL or the Secured Parties for any action taken or omitted by the Collateral Agent in connection with the Collateral, except for the negligence or willful misconduct on the part of the Collateral Agent, and, further, shall incur no liability to the Secured Parties except for negligence or willful misconduct in carrying out its duties to the Secured Parties. Subject to Section 4.04, the Collateral Agent shall be protected and shall incur no liability to any such party in relying upon the accuracy, acting in reliance upon the contents, and assuming the genuineness of any notice, demand, certificate, signature, instrument or other document reasonably believed by the Collateral Agent to be genuine and to have been duly executed by the appropriate signatory, and (absent actual knowledge to the contrary) the Collateral Agent shall not be required to make any independent investigation with respect thereto. The Collateral Agent shall at all times be free independently to establish to its reasonable satisfaction, but shall have no duty to independently verify, the existence or nonexistence of facts that are a condition to the exercise or enforcement of any right or remedy hereunder or under any of the Transaction Documents. The Collateral Agent may consult with counsel, and shall not be liable for any action taken or omitted to be taken by it hereunder in good faith and in accordance with the written advice of such counsel. The Collateral Agent shall not be under any obligation to exercise any of the remedial rights or powers vested in it by this 24 Agreement or to follow any direction from the Controlling Party unless it shall have received reasonable security or indemnity satisfactory to the Collateral Agent against the costs, expenses and liabilities which might be incurred by it. Section 4.04. RELIANCE UPON DOCUMENTS. In the absence of bad faith or negligence on its part, the Collateral Agent shall be entitled to rely on any communication, instrument, paper or other document reasonably believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons and shall have no liability in acting, or omitting to act, where such action or omission to act is in reasonable reliance upon any statement or opinion contained in any such document or instrument. Section 4.05. SUCCESSOR COLLATERAL AGENT. (a) MERGER. Any Person into which the Collateral Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its trust business and assets as a whole or substantially as a whole, or any Person resulting from any such conversion, merger, consolidation, sale or transfer to which the Collateral Agent is a party, shall (provided it is otherwise qualified to serve as the Collateral Agent hereunder) be and become a successor Collateral Agent hereunder and be vested with all of the title to and interest in the Collateral and all of the trusts, powers, discretions, immunities, privileges and other matters as was its predecessor without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding, except to the extent, if any, that any such action is necessary to perfect, or continue the perfection of, the security interest of the Secured Parties in the Collateral. (b) RESIGNATION. The Collateral Agent and any successor Collateral Agent may resign only (i) upon a determination that by reason of a change in legal requirements the performance of its duties under this Agreement would cause it to be in violation of such legal requirements in a manner which would result in a material adverse effect on the Collateral Agent, and the Controlling Party does not elect to waive the Collateral Agent's obligation to perform those duties which render it legally unable to act or elect to delegate those duties to another Person, or (ii) with the prior written consent of the Controlling Party. The Collateral Agent shall give not less than 60 days' prior written notice of any such permitted resignation by registered or certified mail to the other Secured Party and the Seller; PROVIDED, that such resignation shall take effect only upon the date which is the latest of (i) the effective date of the appointment of a successor Collateral Agent and the acceptance in writing by such successor Collateral Agent of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof, (ii) delivery of the Collateral to such successor to be held in accordance with the procedures specified in Article II hereof, and (iii) receipt by the Controlling Party of an Opinion of Counsel to the effect described in Section 5.02. Notwithstanding the preceding sentence, if by the contemplated date of resignation specified in the written notice of resignation delivered as described above no successor Collateral Agent or temporary successor Collateral Agent has been appointed Collateral Agent or becomes the Collateral Agent pursuant to subsection (d) hereof, the resigning Collateral Agent may petition a court of competent jurisdiction in New York, New York for the appointment of a successor. 25 (c) REMOVAL. The Collateral Agent may be removed by the Controlling Party at any time, with or without cause, by an instrument or concurrent instruments in writing delivered to the Collateral Agent, the other Secured Party and the Seller. A temporary successor may be removed at any time to allow a successor Collateral Agent to be appointed pursuant to subsection (d) below. Any removal pursuant to the provisions of this subsection (c) shall take effect only upon the date which is the latest of (i) the effective date of the appointment of a successor Collateral Agent and the acceptance in writing by such successor Collateral Agent of such appointment and of its obligation to perform its duties hereunder in accordance with the provisions hereof, (ii) delivery of the Collateral to such successor to be held in accordance with the procedures specified in Article II hereof and (iii) receipt by the Controlling Party of an Opinion of Counsel to the effect described in Section 5.02. (d) ACCEPTANCE BY SUCCESSOR. The Controlling Party shall have the sole right to appoint each successor Collateral Agent. Every temporary or permanent successor Collateral Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to each Secured Party and the Seller an instrument in writing accepting such appointment hereunder and the relevant predecessor shall execute, acknowledge and deliver such other documents and instruments as will effectuate the delivery of all Collateral to the successor Collateral Agent to be held in accordance with the procedures specified in Article II hereof, whereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, duties and obligations of its predecessor. Such predecessor shall, nevertheless, on the written request of either Secured Party or the Seller, execute and deliver an instrument transferring to such successor all the estates, properties, rights and powers of such predecessor hereunder. In the event that any instrument in writing from the Seller or a Secured Party is reasonably required by a successor Collateral Agent to more fully and certainly vest in such successor the estates, properties, rights, powers, duties and obligations vested or intended to be vested hereunder in the Collateral Agent, any and all such written instruments shall, at the request of the temporary or permanent successor Collateral Agent, be forthwith executed, acknowledged and delivered by the Seller. The designation of any successor Collateral Agent and the instrument or instruments removing any Collateral Agent and appointing a successor hereunder, together with all other instruments provided for herein, shall be maintained with the records relating to the Collateral and, to the extent required by applicable law, filed or recorded by the successor Collateral Agent in each place where such filing or recording is necessary to effect the transfer of the Collateral to the successor Collateral Agent or to protect or continue the perfection of the security interests granted hereunder. (e) Any resignation or removal of a Collateral Agent and appointment of a successor Collateral Agent shall be effected with respect to this Agreement and all Series Supplements simultaneously, so that at no time is there more than one Collateral Agent acting hereunder and under all Series Supplements. Section 4.06. INDEMNIFICATION. The Seller and OFL shall indemnify the Collateral Agent, its directors, officers, employees and agents for, and hold the Collateral Agent, its directors, officers, employees and agents harmless against, any loss, liability or expense (including the costs and expenses of defending against any claim of liability) arising out of or in 26 connection with the Collateral Agent's acting as Collateral Agent hereunder, except such loss, liability or expense as shall result from the negligence, bad faith or willful misconduct of the Collateral Agent or its officers or agents. The obligation of the Seller and OFL under this Section shall survive the termination of this Agreement and the resignation or removal of the Collateral Agent. The Collateral Agent covenants and agrees that the obligations of the Seller hereunder and under Section 4.07 shall be limited to the extent provided in Section 2.08, and further covenants not to take any action to enforce its rights to indemnification hereunder with respect to the Seller and to payment under Section 4.07 except in accordance with the provisions of Section 8.05, or otherwise to assert any Lien or take any other action in respect of the Collateral or the Trust Property of a Series until the applicable Final Termination Date. Section 4.07. COMPENSATION AND REIMBURSEMENT. The Seller agrees for the benefit of the Secured Parties and as part of the Secured Obligations (a) to pay to the Collateral Agent, from time to time, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a collateral trustee); and (b) to reimburse the Collateral Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Collateral Agent in accordance with any provision of, or carrying out its duties and obligations under, this Agreement (including the reasonable compensation and fees and the expenses and disbursements of its agents, any independent certified public accountants and independent counsel), except any expense, disbursement or advances as may be attributable to negligence, bad faith or willful misconduct on the part of the Collateral Agent. Section 4.08. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT. The Collateral Agent represents and warrants to the Seller and to each Secured Party as follows: (a) DUE ORGANIZATION. The Collateral Agent is a national banking association, duly organized, validly existing and in good standing under the laws of the United States and is duly authorized and licensed under applicable law to conduct its business as presently conducted. (b) CORPORATE POWER. The Collateral Agent has all requisite right, power and authority to execute and deliver this Agreement and to perform all of its duties as Collateral Agent hereunder. (c) DUE AUTHORIZATION. The execution and delivery by the Collateral Agent of this Agreement and the other Transaction Documents to which it is a party, and the performance by the Collateral Agent of its duties hereunder and thereunder, have been duly authorized by all necessary corporate proceedings and no further approvals or filings, including any governmental approvals, are required for the valid execution and delivery by the Collateral Agent, or the performance by the Collateral Agent, of this Agreement and such other Transaction Documents. (d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly executed and delivered this Agreement and each other Transaction Document to which it is a party, and each of this Agreement and each such other Transaction Document constitutes the legal, valid and 27 binding obligation of the Collateral Agent, enforceable against the Collateral Agent in accordance with its terms, except as (i) such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) the availability of equitable remedies may be limited by equitable principles of general applicability. Section 4.09. WAIVER OF SETOFFS. The Collateral Agent hereby expressly waives any and all rights of setoff that the Collateral Agent may otherwise at any time have under applicable law with respect to any Spread Account and agrees that amounts in the Spread Accounts shall at all times be held and applied solely in accordance with the provisions hereof. Section 4.10. CONTROL BY THE CONTROLLING PARTY. The Collateral Agent shall comply with notices and instructions given by the Seller only if accompanied by the written consent of the Controlling Party, except that if any Default shall have occurred and be continuing, the Collateral Agent shall act upon and comply with notices and instructions given by the Controlling Party alone in the place and stead of the Seller. ARTICLE V COVENANTS OF THE SELLER Section 5.01. PRESERVATION OF COLLATERAL. Subject to the rights, powers and authorities granted to the Collateral Agent and the Controlling Party in this Agreement, the Seller shall take such action as is necessary and proper with respect to the Collateral in order to preserve and maintain such Collateral and to cause (subject to the rights of the Secured Parties) the Collateral Agent to perform its obligations with respect to such Collateral as provided herein. The Seller will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such instruments of transfer or take such other steps or actions as may be necessary, or required by the Controlling Party, to perfect the Security Interests granted hereunder in the Collateral, to ensure that such Security Interests rank prior to all other Liens and to preserve the priority of such Security Interests and the validity and enforceability thereof. Upon any delivery or substitution of Collateral, the Seller shall be obligated to execute such documents and perform such actions as are necessary to create in the Collateral Agent for the benefit of the Secured Parties a valid first Lien on, and valid and perfected, first priority security interest in, the Collateral so delivered and to deliver such Collateral to the Collateral Agent, free and clear of any other Lien, together with satisfactory assurances thereof, and to pay any reasonable costs incurred by any of the Secured Parties or the Collateral Agent (including its agents) or otherwise in connection with such delivery. Section 5.02. OPINIONS AS TO COLLATERAL. Not more than 90 days nor less than 30 days prior to (i) each anniversary of the date hereof during the term of this Agreement and (ii) each date on which the Seller proposes to take any action contemplated by Section 5.06, the Seller shall, at its own cost and expense, furnish to each Secured Party and the Collateral Agent 28 an Opinion of Counsel with respect to each Series either (a) stating that, in the opinion of such counsel, such action has been taken with respect to the execution and filing of any financing statements and continuation statements and other actions as are necessary to perfect, maintain and protect the lien and security interest of the Collateral Agent (and the priority thereof), on behalf of the Secured Parties, with respect to such Collateral against all creditors of and purchasers from the Seller or OFL and reciting the details of such action, or (b) stating that, in the opinion of such counsel, no such action is necessary to maintain such perfected lien and security interest. Such Opinion of Counsel shall further describe each execution and filing of any financing statements and continuation statements and such other actions as will, in the opinion of such counsel, be required to perfect, maintain and protect the lien and security interest of the Collateral Agent, on behalf of the Secured Parties, with respect to such Collateral against all creditors of and purchasers from the Seller or OFL for a period, specified in such Opinion, continuing until a date not earlier than eighteen months from the date of such Opinion. Section 5.03. NOTICES. In the event that OFL or the Seller acquires knowledge of the occurrence and continuance of any Insurance Agreement Event of Default or Servicer Termination Event or of any event of default or like event, howsoever described or called, under any of the Transaction Documents, the Seller shall immediately give notice thereof to the Collateral Agent and each Secured Party. Section 5.04. WAIVER OF STAY OR EXTENSION LAWS; MARSHALLING OF ASSETS. The Seller covenants, to the fullest extent permitted by applicable law, that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or redemption law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Agreement or any absolute sale of the Collateral or any part thereof, or the possession thereof by any purchaser at any sale under Article VII of this Agreement; and the Seller, to the fullest extent permitted by applicable law, for itself and all who may claim under it, hereby waives the benefit of all such laws, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Collateral Agent, but will suffer and permit the execution of every such power as though no such law had been enacted. The Seller, for itself and all who may claim under it, waives, to the fullest extent permitted by applicable law, all right to have the Collateral marshalled upon any foreclosure or other disposition thereof. Section 5.05. NONINTERFERENCE, ETC. The Seller shall not (i) waive or alter any of its rights under the Collateral (or any agreement or instrument relating thereto) without the prior written consent of the Controlling Party; or (ii) fail to pay any tax, assessment, charge or fee levied or assessed against the Collateral, or to defend any action, if such failure to pay or defend may adversely affect the priority or enforceability of the Seller's right, title or interest in and to the Collateral or the Collateral Agent's lien on, and security interest in, the Collateral for the benefit of the Secured Parties; or (iii) take any action, or fail to take any action, if such action or failure to take action will interfere with the enforcement of any rights under the Transaction Documents. 29 Section 5.06. SELLER CHANGES. (a) CHANGE IN NAME, STRUCTURE, ETC. The Seller shall not change its name, identity or corporate structure unless it shall have given each Secured Party and the Collateral Agent at least 60 days' prior written notice thereof, shall have effected any necessary or appropriate assignments or amendments thereto and filings of financing statements or amendments thereto, and shall have delivered to the Collateral Agent and each Secured Party an Opinion of Counsel of the type described in Section 5.02. (b) RELOCATION OF THE SELLER. Neither OFL nor the Seller shall change its principal executive office unless it gives each Secured Party and the Collateral Agent at least 90 days' prior written notice of any relocation of its principal executive office. If the Seller relocates its principal executive office or principal place of business from Minnesota, the Seller shall give prior notice thereof to the Controlling Party and the Collateral Agent and shall effect whatever appropriate recordations and filings are necessary and shall provide an Opinion of Counsel to the Controlling Party and the Collateral Agent, to the effect that, upon the recording of any necessary assignments or amendments to previously-recorded assignments and filing of any necessary amendments to the previously filed financing or continuation statements or upon the filing of one or more specified new financing statements, and the taking of such other actions as may be specified in such opinion, the security interests in the Collateral shall remain, after such relocation, valid and perfected. ARTICLE VI CONTROLLING PARTY; INTERCREDITOR PROVISIONS Section 6.01. APPOINTMENT OF CONTROLLING PARTY. From and after the Closing Date of a Series until the Insurer Termination Date related to such Series, Financial Security shall be the Controlling Party with respect to such Series and shall be entitled to exercise all the rights given the Controlling Party hereunder with respect to such Series. From and after the Insurer Termination Date related to such Series until the Trustee Termination Date related to such Series, the Trustee shall be the Controlling Party with respect to such Series. Notwithstanding the foregoing, in the event that a Financial Security Default shall have occurred and be continuing, the Trustee shall be the Controlling Party with respect to such Series until the applicable Trustee Termination Date. If prior to an Insurer Termination Date the Trustee shall have become the Controlling Party with respect to a Series as a result of the occurrence of a Financial Security Default and either such Financial Security Default is cured or for any other reason ceases to exist or the Trustee Termination Date with respect to a Series occurs, then upon such cure or other cessation or on such Trustee Termination Date, as the case may be, Financial Security shall, upon notice thereof being duly given to the Collateral Agent, again be the Controlling Party with respect to such Series. 30 Section 6.02. CONTROLLING PARTY'S AUTHORITY. (a) Each of OFL and the Seller hereby irrevocably appoint the Controlling Party, and any successor to the Controlling Party appointed pursuant to Section 6.01, its true and lawful attorney, with full power of substitution, in the name of OFL, the Seller, the Secured Parties or otherwise, but (subject to Section 2.08) at the expense of the Seller, to the extent permitted by law to exercise, at any time and from time to time while any Insurance Agreement Event of Default has occurred and is continuing, any or all of the following powers with respect to all or any of the Collateral related to the relevant Series: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, (iii) to sell, transfer, assign or otherwise deal with the same or the proceeds thereof as fully and effectively as if the Collateral Agent were the absolute owner thereof, and (iv) to extend the time of payment of any or all thereof and to make any allowance or other adjustments with respect thereto; PROVIDED that the foregoing powers and rights shall be exercised in accordance with the provisions of Article VII hereof. (b) With respect to each Series of Certificates and the related Collateral, each Secured Party hereby irrevocably and unconditionally constitutes and appoints the Controlling Party with respect to such Series, and any successor to such Controlling Party appointed pursuant to Section 6.01 from time to time, as the true and lawful attorney-in-fact of such Secured Party for so long as such Secured Party is the Non-Controlling Party, with full power of substitution, to execute, acknowledge and deliver any notice, document, certificate, paper, pleading or instrument and to do in the name of the Controlling Party as well as in the name, place and stead of such Secured Party such acts, things and deeds for and on behalf of and in the name of such Secured Party under this Agreement with respect to such Series which such Secured Party could or might do or which may be necessary, desirable or convenient in such Controlling Party's sole discretion to effect the purposes contemplated hereunder and, without limitation, exercise full right, power and authority to take, or defer from taking, any and all acts with respect to the administration of the Collateral related to such Series, and the enforcement of the rights of the Secured Parties hereunder with respect to such Series, on behalf of and for the benefit of such Controlling Party and such Non-Controlling Party, as their interests may appear. (c) So long as Financial Security shall be the Controlling Party with respect to a Series, the Trustee hereby agrees, that if there exists an Insurance Agreement Event of Default with respect to such Series: (i) Financial Security shall have the exclusive right to direct the Trustee as to any and all actions to be taken under the related Transaction Documents, including without limitation all actions with respect to the giving of directions to the Servicer and any subservicer with respect to the servicing of the Receivables of such Series; enforcement of any rights of the Trustee under such Transaction Documents; and the giving or withholding of any other consents, requests, notices, directions, approvals, extensions or waivers under or in respect of any such Transaction Documents; and 31 (ii) Financial Security shall have the right to control the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the related Pooling and Servicing Agreement or under any other Transaction Document, including the remedies provided in Article VII. PROVIDED, HOWEVER, that the Trustee may decline to follow any of the above directions from Financial Security, if the Trustee, in accordance with an opinion of counsel to the Trustee, that is independent of the Trustee, determines that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith determines that the action or proceeding so directed would involve it in personal liability for which adequate indemnity is not reasonably assured to it or, in the case of actions or directions not specifically permitted to be taken by Financial Security so long as no Financial Security Default has occurred and is continuing, would adversely affect the interests of the Certificateholders in any material respect. (d) So long as Financial Security shall be the Controlling Party with respect to a Series, the Trustee shall not, without the prior written consent of Financial Security: (i) appoint new independent accountants with respect to the Series; (ii) consent to the amendment of or supplement to any of the Transaction Documents related to the Series; or (iii) waive a Servicer Termination Event under the related Pooling and Servicing Agreement or Sale and Servicing Agreement, as applicable. (e) So long as Financial Security shall be the Controlling Party with respect to a Series: (i) Financial Security shall have the rights provided in Section 5.3 of each Pooling and Servicing Agreement, Section 5.4 of each Sale and Servicing Agreement and Section 5.19 of each Indenture in respect of the direction of insolvency proceedings. (ii) Financial Security shall have the right to direct the Trustee as to any and all actions to be taken in the event of the occurrence of a Servicer Termination Event under the related Pooling and Servicing Agreement and shall have such other rights in respect of the appointment of a successor servicer as are provided in such Pooling and Servicing Agreement. Section 6.03. RIGHTS OF SECURED PARTIES. With respect to each Series of Certificates and the related Collateral, the Non-Controlling Party at any time expressly agrees that it shall not assert any rights that it may otherwise have, as a Secured Party with respect to the Collateral, to direct the maintenance, sale or other disposition of the Collateral or any portion 32 thereof, notwithstanding the occurrence and continuance of any Default with respect to such Series or any non-performance by OFL or the Seller of any obligation owed to such Secured Party hereunder or under any other Transaction Document, and each party hereto agrees that the Controlling Party shall be the only Person entitled to assert and exercise such rights. Section 6.04. DEGREE OF CARE. (a) CONTROLLING PARTY. Notwithstanding any term or provision of this Agreement, the Controlling Party shall incur no liability to OFL or the Seller for any action taken or omitted by the Controlling Party in connection with the Collateral, except for any gross negligence, bad faith or willful misconduct on the part of the Controlling Party and, further, shall incur no liability to the Non-Controlling Party except for a breach of the terms of this Agreement or for gross negligence, bad faith or willful misconduct in carrying out its duties, if any, to the Non-Controlling Party. The Controlling Party shall be protected and shall incur no liability to any such party in relying upon the accuracy, acting in reliance upon the contents and assuming the genuineness of any notice, demand, certificate, signature, instrument or other document believed by the Controlling Party to be genuine and to have been duly executed by the appropriate signatory, and (absent manifest error or actual knowledge to the contrary) the Controlling Party shall not be required to make any independent investigation with respect thereto. The Controlling Party shall, at all times, be free independently to establish to its reasonable satisfaction the existence or nonexistence, as the case may be, of any fact the existence or nonexistence of which shall be a condition to the exercise or enforcement of any right or remedy under this Agreement or any of the Transaction Documents. (b) THE NON-CONTROLLING PARTY. The Non-Controlling Party shall not be liable to the Seller for any action or failure to act by the Controlling Party or the Collateral Agent in exercising, or failing to exercise, any rights or remedies hereunder. ARTICLE VII REMEDIES UPON DEFAULT Section 7.01. REMEDIES UPON A DEFAULT. If a Default with respect to a Series has occurred and is continuing, the Collateral Agent shall, at the direction of the Controlling Party, take whatever action at law or in equity as may appear necessary or desirable in the judgment of the Controlling Party to collect and satisfy all Insurer Secured Obligations (including, but not limited to, foreclosure upon the Collateral and all other rights available to secured parties under applicable law) or to enforce performance and observance of any obligation, agreement or covenant under any of the Transaction Documents related to such Series. Notwithstanding the foregoing, the Collateral Agent shall not be entitled to take any action and the Controlling Party shall not be entitled to give any direction with respect to the Trust Property, except to the extent provided in the Pooling and Servicing Agreement or other Transaction Documents and Sections 6.02(a), (c), (d) and (e) hereof. 33 Section 7.02. WAIVER OF DEFAULT. The Controlling Party shall have the sole right, to be exercised in its complete discretion, to waive any Default by a writing setting forth the terms, conditions and extent of such waiver signed by the Controlling Party and delivered to the Collateral Agent, the other Secured Party and the Seller. Any such waiver shall be binding upon the Non- Controlling Party and the Collateral Agent. Unless such writing expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence which gave rise to the Default so waived and not to any other similar event or occurrence which occurs subsequent to the date of such waiver. Section 7.03. RESTORATION OF RIGHTS AND REMEDIES. If the Collateral Agent has instituted any proceeding to enforce any right or remedy under this Agreement, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to such Collateral Agent, then and in every such case the Seller, the Collateral Agent and each of the Secured Parties shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Secured Parties shall continue as though no such proceeding had been instituted. Section 7.04. NO REMEDY EXCLUSIVE. No right or remedy herein conferred upon or reserved to the Collateral Agent, the Controlling Party or either of the Secured Parties is intended to be exclusive of any other right or remedy, and every right or remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law, in equity or otherwise (but, in each case, shall be subject to the provisions of this Agreement limiting such remedies), and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Controlling Party, and the exercise of or the beginning of the exercise of any right or power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. ARTICLE VIII MISCELLANEOUS Section 8.01. FURTHER ASSURANCES. Each party hereto shall take such action and deliver such instruments to any other party hereto, in addition to the actions and instruments specifically provided for herein, as may be reasonably requested or required to effectuate the purpose or provisions of this Agreement or to confirm or perfect any transaction described or contemplated herein. Section 8.02. WAIVER. Any waiver by any party of any provision of this Agreement or any right, remedy or option hereunder shall only prevent and estop such party from thereafter enforcing such provision, right, remedy or option if such waiver is given in writing and only as to the specific instance and for the specific purpose for which such waiver was given. The failure or refusal of any party hereto to insist in any one or more instances, or in a course of 34 dealing, upon the strict performance of any of the terms or provisions of this Agreement by any party hereto or the partial exercise of any right, remedy or option hereunder shall not be construed as a waiver or relinquishment of any such term or provision, but the same shall continue in full force and effect. Section 8.03. AMENDMENTS; WAIVERS. No amendment, modification, waiver or supplement to this Agreement or any provision of this Agreement shall in any event be effective unless the same shall have been made or consented to in writing by each of the parties hereto and each Rating Agency shall have confirmed in writing that such amendment will not cause a reduction or withdrawal of a rating on any Series; PROVIDED, HOWEVER, that, for so long as Financial Security shall be the Controlling Party with respect to a Series, amendments, modifications, waivers or supplements hereto relating to such Series, the related Collateral or Spread Account or any requirement hereunder to deposit or retain any amounts in such Spread Account or to distribute any amounts therein as provided in Section 3.03 shall be effective if made or consented to in writing by Financial Security, the Seller, OFL and the Collateral Agent (the consent of which shall not be withheld or delayed with respect to any amendment that does not adversely affect the Collateral Agent) but shall in no circumstances require the consent of the Trustee or the Certificateholders related to such Series or any other Series. Section 8.04. SEVERABILITY. In the event that any provision of this Agreement or the application thereof to any party hereto or to any circumstance or in any jurisdiction governing this Agreement shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such provision shall be deemed inoperative to the extent that it is invalid or unenforceable and the remainder of this Agreement, and the application of any such invalid or unenforceable provision to the parties, jurisdictions or circumstances other than to whom or to which it is held invalid or unenforceable, shall not be affected thereby nor shall the same affect the validity or enforceability of any other provision of this Agreement. The parties hereto further agree that the holding by any court of competent jurisdiction that any remedy pursued by the Collateral Agent, or any of the Secured Parties, hereunder is unavailable or unenforceable shall not affect in any way the ability of the Collateral Agent or any of the Secured Parties to pursue any other remedy available to it or them (subject, however, to the provisions of this Agreement limiting such remedies). Section 8.05. NONPETITION COVENANT. Notwithstanding any prior termination of this Agreement, each of the parties hereto agrees that it shall not, prior to one year and one day after the Final Scheduled Distribution Date with respect to each Series, acquiesce, petition or otherwise invoke or cause the Seller or OFL to invoke the process of the United States of America, any State or other political subdivision thereof or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government for the purpose of commencing or sustaining a case by or against the Seller, OFL or the Trust under a Federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Seller, OFL or the Trust or all or any part of its property or assets or ordering the winding up or liquidation of the affairs of the Seller, OFL or the Trust. The parties agree that damages will be an inadequate remedy for breach of this covenant and that this covenant may be specifically enforced. 35 Section 8.06. NOTICES. All notices, demands, certificates, requests and communications hereunder ("notices") shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Authorized Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with a confirmation of receipt, in all cases addressed to the recipient as follows: (i) If to OFL: Olympic Financial Ltd. 7825 Washington Avenue South, Suite 410 Minneapolis, Minnesota 55439-2435 Attention: Chief Financial Officer Telecopier No.: (612) 942-6730 (ii) If to the Seller: Olympic Receivables Finance Corp. 7825 Washington Avenue South, Suite 410 Minneapolis, Minnesota 55439-2435 Attention: President Telecopier No.: (612) 942-6730 (iii) If to Financial Security: Financial Security Assurance Inc. 350 Park Avenue - 13th Floor New York, New York 10022 Attention: Surveillance Department Telecopier No.: (212) 339-3518 (212) 339-3529 (in each case in which notice or other communication to Financial Security refers to a Default or a claim on the Policy or in which failure on the part of Financial Security to respond shall be deemed to constitute consent or acceptance, then with a copy to the attention of the Senior Vice President Surveillance) 36 (iv) If to the Trustee: Norwest Bank Minnesota, National Association 6th Street and Marquette Avenue Minneapolis, Minnesota 55479-0070 Attention: Corporate Trust Services - Asset Backed Administration Telecopier No.: (612) 667-3539 (v) If to the Collateral Agent: Norwest Bank Minnesota, National Association 6th Street and Marquette Avenue Minneapolis, Minnesota 55479-0070 Attention: Corporate Trust Services - Asset Backed Administration Telecopier No.: (612) 667-3539 (vi) If to Moody's: Moody's Investor's Service, Inc. 99 Church Street New York, New York 10007 Telecopier No.: (212) 553-0344 (vii) If to Standard & Poor's: Standard & Poor's Ratings Group 26 Broadway New York, New York 10004 Telecopier No.: (212) 208-1582 A copy of each notice given hereunder to any party hereto shall also be given to (without duplication) Financial Security, the Seller, the Trustee and the Collateral Agent. Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent. Section 8.07. TERM OF THIS AGREEMENT. This Agreement shall take effect on the Closing Date of the Series 1993-A Certificates and shall continue in effect until the last Final Termination Date to occur with respect to each Series. On such Final Termination Date, this Agreement shall terminate, all obligations of the parties hereunder shall cease and terminate and the Collateral, if any, held hereunder and not to be used or applied in discharge of any obligations of the Seller or OFL in respect of the Secured Obligations or otherwise under this Agreement, 37 shall be released to and in favor of the Seller, PROVIDED that the provisions of Sections 4.06, 4.07 and 8.05 shall survive any termination of this Agreement and the release of any Collateral upon such termination. Section 8.08. ASSIGNMENTS: THIRD-PARTY RIGHTS; REINSURANCE. (a) This Agreement shall be a continuing obligation of the parties hereto and shall (i) be binding upon the parties and their respective successors and assigns, and (ii) inure to the benefit of and be enforceable by each Secured Party and the Collateral Agent, and by their respective successors, transferees and assigns. Neither the Seller nor OFL may assign this Agreement, or delegate any of its duties hereunder, without the prior written consent of the Controlling Party. (b) Financial Security shall have the right (unless a Financial Security Default shall have occurred and be continuing) to give participations in its rights under this Agreement and to enter into contracts of reinsurance with respect to any Policy issued in connection with a Series of Certificates and each such participant or reinsurer shall be entitled to the benefit of any representation, warranty, covenant and obligation of each party (other than Financial Security) hereunder as if such participant or reinsurer was a party hereto and, subject only to such agreement regarding such reinsurance or participation, shall have the right to enforce the obligations of each such other party directly hereunder; PROVIDED, HOWEVER, that no such reinsurance or participation agreement or arrangement shall relieve Financial Security of its obligations hereunder, under the Transaction Documents to which it is a party or under any such Policy. In addition, nothing contained herein shall restrict Financial Security from assigning to any Person pursuant to any liquidity facility or credit facility any rights of Financial Security under this Agreement or with respect to any real or personal property or other interests pledged to Financial Security, or in which Federal Security has a security interest, in connection with the transactions contemplated hereby. The terms of any such assignment or participation shall contain an express acknowledgment by such Person of the condition of this Section and the limitations of the rights of Financial Security hereunder. Section 8.09. CONSENT OF CONTROLLING PARTY. In the event that the Controlling Party's consent is required under the terms hereof or under the terms of any Transaction Document, it is understood and agreed that, except as otherwise provided expressly herein, the determination whether to grant or withhold such consent shall be made solely by the Controlling Party in its sole discretion. Section 8.10. TRIAL BY JURY WAIVED. Each of the parties hereto waives, to the fullest extent permitted by law, any right it may have to a trial by jury in respect of any litigation arising directly or indirectly out of, under or in connection with this Agreement, any of the other Transaction Documents or any of the transactions contemplated hereunder or thereunder. Each of the parties hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing 38 waiver and (b) acknowledges that it has been induced to enter into this Agreement and the other Transaction Documents to which it is a party, by among other things, this waiver. Section 8.11. GOVERNING LAW. This Agreement shall be governed by and construed, and the obligations, rights and remedies of the parties hereunder shall be determined, in accordance with the laws of the State of New York. Section 8.12. CONSENTS TO JURISDICTION. Each of the parties hereto irrevocably submits to the jurisdiction of the United States District Court for the Southern District of New York, any court in the state of New York located in the city and county of New York, and any appellate court from any thereof, in any action, suit or proceeding brought against it and related to or in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereunder or thereunder or for recognition or enforcement of any judgment and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such suit or action or proceeding may be heard or determined in such New York State court or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. To the extent permitted by applicable law, each of the parties hereby waives and agrees not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or any of the other Transaction Documents or the subject matter hereof or thereof may not be litigated in or by such courts. Each of OFL and the Seller hereby irrevocably appoints and designates Norwest Bank Minnesota, National Association, as its true and lawful attorney and duly authorized agent for acceptance of service of legal process. Each of OFL and the Seller agrees that service of such process upon such Person shall constitute personal service of such process upon it. Nothing contained in this Agreement shall limit or affect the rights of any party hereto to serve process in any other manner permitted by law or to start legal proceedings relating to any of the Transaction Documents against OFL or the Seller or their respective property in the courts of any jurisdiction. Section 8.13. LIMITATION OF LIABILITY. It is expressly understood and agreed by the parties hereto that (a) Norwest Bank Minnesota, National Association is executing this Agreement not in its individual capacity but solely in its capacity as trustee of the Trusts pursuant to the Pooling and Servicing Agreements and (b) in no case whatsoever shall Norwest Bank Minnesota, National Association be personally liable on, or for any loss in respect of, any of the statements, representations, warranties, covenants, agreements or obligations of the Trust hereunder, all such liability, if any, being expressly waived by the parties hereto. Section 8.14. DETERMINATION OF ADVERSE EFFECT. Any determination of an adverse effect on the interest of the Secured Parties or the Certificateholders shall be made without consideration of the availability of funds under the Policies. 39 Section 8.15. COUNTERPARTS. This Agreement may be executed in two or more counterparts by the parties hereto, and each such counterpart shall be considered an original and all such counterparts shall constitute one and the same instrument. Section 8.16. HEADINGS. The headings of sections and paragraphs and the Table of Contents contained in this Agreement are provided for convenience only. They form no part of this Agreement and shall not affect its construction or interpretation. 40 IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as amended and restated, as of the date set forth on the first page hereof. OLYMPIC FINANCIAL LTD. By ------------------------------------------ John A. Witham Executive Vice President and Chief Financial Officer OLYMPIC RECEIVABLES FINANCE CORP. By ------------------------------------------ John A. Witham Senior Vice President and Chief Financial Officer FINANCIAL SECURITY ASSURANCE INC. By ------------------------------------------ Authorized Officer NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By ------------------------------------------ Thomas D. Wraalstad Corporate Trust Officer NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral Agent By ------------------------------------------ Thomas D. Wraalstad Corporate Trust Officer 42 EX-10.38 39 WAREHOUSE SERIES SUPPLEMENT 12/3/96 SPREAD ACCT WAREHOUSING SERIES SUPPLEMENT dated as of December 3, 1996 to SPREAD ACCOUNT AGREEMENT, dated as of March 25, 1993, as amended and restated as of December 3, 1996 among OLYMPIC FINANCIAL LTD., OLYMPIC RECEIVABLES FINANCE CORP. FINANCIAL SECURITY ASSURANCE INC. and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee and as Collateral Agent TABLE OF CONTENTS PAGE ---- ARTICLE I DEFINITIONS Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . 2 Section 1.2. Rules of Interpretation . . . . . . . . . . . . . . 3 ARTICLE II SERIES SUPPLEMENTS; THE COLLATERAL Section 2.1. Series Supplement . . . . . . . . . . . . . . . . . 3 Section 2.2. Grant of Security Interest by OFL and the Seller . 4 ARTICLE III SPREAD ACCOUNT Section 3.1. Establishment of Warehousing Series Spread Account. 5 Section 3.2. Release of Funds Upon Repurchase . . . . . . . . . 5 ARTICLE IV MISCELLANEOUS Section 4.1. Further Assurances . . . . . . . . . . . . . . . . . 5 Section 4.2. Governing Law . . . . . . . . . . . . . . . . . . . 5 Section 4.3. Counterparts . . . . . . . . . . . . . . . . . . . . 5 Section 4.4. Headings . . . . . . . . . . . . . . . . . . . . . . 5 WAREHOUSING SUPPLEMENT WAREHOUSING SUPPLEMENT, dated as of December 3, 1996 (the "Warehousing Supplement"), by and among OLYMPIC FINANCIAL LTD., a Minnesota corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company ("Financial Security") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, in its capacity as Indenture Trustee under the Indenture referred to below, for the Noteholders with respect to the related Series (in each of such capacities, the "Trustee") and as Collateral Agent hereunder. R E C I T A L S 1. The parties hereto have previously entered into a Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of December 3, 1996 (the "Spread Account Agreement"), and, as contemplated by Section 2.02 of the Spread Account Agreement, this Warehousing Series Supplement constitutes a Series Supplement to the Spread Account Agreement so that hereafter this Warehousing Series Supplement shall form a part of the Spread Account Agreement for all purposes thereof, and all references herein and hereafter to the Spread Account Agreement shall mean the Spread Account Agreement, as supplemented hereby. 2. Pursuant to the Repurchase Agreement dated as of December 3, 1996 between Arcadia Receivables Conduit Corp., a Delaware corporation (the "Issuer"), as Buyer, and the Seller (the "Repurchase Agreement"), the Seller intends to sell from time to time to the Issuer all of its right, title and interest in and to Receivables and certain other Seller Conveyed Property (as defined in the Repurchase Agreement). 3. Pursuant to the Indenture between the Issuer and the Trustee (the "Warehousing Series Indenture"), the Issuer is issuing the Warehousing Notes. 4. The Seller has requested that Financial Security issue the Note Policy to the Trustee to guarantee payment of the Scheduled Payments (as defined in such Policy) on each Payment Date in respect of the Warehousing Notes. 5. In partial consideration of the issuance of the Note Policy, the Seller has agreed that Financial Security shall have certain rights as Controlling Party, to the extent set forth herein and in the Transaction Documents. 6. The Seller is a wholly owned special purpose subsidiary of OFL. The Issuer has agreed to pay the amount earned on the Receivables, net of certain amounts as set forth in the Servicing Agreement, to the Seller pursuant to the Repurchase Agreement. The Warehousing Series Insurer Secured Obligations form part of the consideration to Financial Security for its issuance of the Note Policy. 1 7. In order to secure the performance of the Warehousing Series Secured Obligations, the Seller have agreed to pledge the Warehousing Series Collateral as Collateral to the Collateral Agent for the benefit of Financial Security and for the benefit of the Trustee on behalf of the Noteholders, upon the terms and conditions set forth herein. A G R E E M E N T S In consideration of the premises, and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1. DEFINITIONS. All terms defined in Section 1.1 of the Repurchase Agreement shall have the same meaning with respect to this Warehousing Series Supplement. The following terms shall have the following respective meanings: "COLLECTION ACCOUNT SHORTFALL" means, with respect to the Warehousing Series, (I) with respect to any Distribution Date prior to the occurrence of an Amortization Event, the excess, if any, of (A) the amount required to be distributed on such Distribution Date pursuant to priorities (i) through (vi) of Section 3.6(a) of the Servicing Agreement over (B) Spread Account Available Funds with respect to the immediately preceding Deficiency Claim Date and (II) with respect to any Distribution Date following the occurrence of an Amortization Event, the excess, if any, of (A) the amount required to be distributed on such Distribution Date pursuant to priorities (i) through (vi) of Section 3.6(b) of the Servicing Agreement over (B) the Spread Account Available Funds with respect to such Distribution Date. "SPREAD ACCOUNT MAXIMUM AMOUNT," with respect to the Warehousing Series and any Distribution Date: (i) if no Insurance Agreement Event of Default with respect to the Warehousing Series has occurred and is continuing and no Capture Event has occurred and is continuing as of the related Determination Date, is equal to one percent of the principal balance of the Purchased Receivables (as defined in the Repurchase Agreement); or (ii) if (A) an Insurance Agreement Event of Default with respect to the Warehousing Series has occurred and is continuing, or (B) a Capture Event has occurred and is continuing as of the related Determination Date, the Spread Account Maximum Amount shall not be limited. "WAREHOUSING SERIES COLLATERAL" has the meaning specified in Section 2.3(a) hereof. 2 "WAREHOUSING SERIES INDENTURE" means the Indenture, dated as of December 3, 1996 between the Issuer and the Trustee. "WAREHOUSING SERIES NOTE POLICY" means the financial guaranty insurance policy issued by Financial Security with respect to the Warehousing Series Notes. "WAREHOUSING SERIES NOTES" means the Notes issued pursuant to the Warehousing Series Indenture. "WAREHOUSING SERIES REPURCHASE AGREEMENT" means the Repurchase Agreement, dated December 3, 1996, between the Issuer and the Seller. "WAREHOUSING SERIES SERVICING AGREEMENT" means the Servicing Agreement, dated as of December 3, 1996, among OFL, in its individual capacity and as Servicer, the Issuer, the Seller and the Backup Servicer, the Trustee, the Collateral Agent and Bank of America National Trust and Savings Association as Agent, as such agreement may be supplemented, amended or modified from time to time. "WAREHOUSING SHORTFALL" means, with respect to the Warehousing Series and any Distribution Date following the occurrence of an Amortization Event, the sum of (1) the excess, if any, of (A) the amount required to be distributed on such Distribution Date pursuant to priorities (i) through (viii) of Section 3.6(b) of the Servicing Agreement over (B) the Warehousing Shortfall Available Funds with respect to such Distribution Date. "WAREHOUSING SUPPLEMENT" means this Warehousing Supplement which constitutes a Series Supplement to the Spread Account Agreement. Section 1.2. RULES OF INTERPRETATION. The terms "hereof," "herein," "hereto" or "hereunder," unless otherwise modified by more specific reference, shall refer to this Warehousing Series Supplement. Unless otherwise indicated in context, the terms "Article," "Section," or "Exhibit" shall refer to an Article or Section of, or Exhibit to, this Warehousing Series Supplement. The definition of a term shall include the singular, the plural, the past, the present, the future, the active and the passive forms of such term. A term defined herein and used herein preceded by a Series designation or defined in the Servicing Agreement, shall mean such term as it relates to the Warehousing Series. ARTICLE II SERIES SUPPLEMENTS; THE COLLATERAL Section 2.1. SERIES SUPPLEMENT. As provided in and subject to the conditions specified in Section 2.02 of the Spread Account Agreement, the parties hereto are entering into this Warehousing Series Supplement with respect to the Warehousing Series. 3 Section 2.2. GRANT OF SECURITY INTEREST BY OFL AND THE SELLER. (a) In order to secure the performance of the Secured Obligations with respect to each Series, the Seller (and OFL, to the extent it may have any rights therein) hereby pledges, assigns, grants, transfers and conveys to the Collateral Agent, on behalf of and for the benefit of the Secured Parties to secure the Secured Obligations (as defined in the Spread Account Agreement), a lien on and security interest in (which lien and security interest is intended to be prior to all other liens, security interest or other encumbrances), all of its right, title and interest in and to the following (all being collectively referred to herein as the "Warehousing Series Collateral"): (i) all amounts distributable pursuant to Sections 3.6(a)(x) and 3.6(b)(x) of the Warehousing Series Servicing Agreement (the "Receivables Income") and all rights and remedies that the Seller may have to enforce payment of the Receivables Income whether under the Warehousing Series Servicing Agreement or otherwise; (ii) the Warehousing Series Spread Account established pursuant to Section 3.1 of this Series Supplement and Section 3.01 of the Spread Account Agreement, and each other account owned by the Seller and maintained by the Collateral Agent (including, without limitation, all monies, checks, securities, investments and other documents from time to time held in or evidencing any such accounts); (iii) all of the Seller's right, title and interest in and to investments made with proceeds of the property described in clauses (i) and (ii) above, or made with amounts on deposit in the Warehousing Series Spread Account; and (iv) all distributions, revenues, products, substitutions, benefits, profits and proceeds, in whatever form, of any of the foregoing. (b) In order to effectuate the provisions and purposes of this Series Supplement, including for the purpose of perfecting the security interests granted hereunder, the Seller represents and warrants that it has, prior to the execution of this Series Supplement, executed and filed an appropriate Uniform Commercial Code financing statement in Minnesota sufficient to ensure that the Collateral Agent, as agent for the Secured Parties, has a first priority perfected security interest in all Warehousing Series Collateral which can be perfected by the filing of a financing statement. 4 ARTICLE III SPREAD ACCOUNT Section 3.1. ESTABLISHMENT OF WAREHOUSING SERIES SPREAD ACCOUNT. On or prior to the Closing Date relating to the Warehousing Series, the Collateral Agent shall establish with respect to the Warehousing Series, at its office or at another depository institution or trust company, an Eligible Account, designated "Spread Account -- Warehousing Series -- Norwest Bank Minnesota, National Association, as Collateral Agent for Financial Security Assurance Inc. and another Secured Party" (the "Warehousing Series Spread Account"). Section 3.2. RELEASE OF FUNDS UPON REPURCHASE. On the Repurchase Date for any Purchased Receivables in respect of which the Collateral Agent has received a Notice of Repurchase in the form of Exhibit D to the Repurchase Agreement for Purchased Recevables with an aggregate principal balance equal to or greater than $20,000,000 and a corresponding executed reconveyance in the form of Exhibit E to the Repurchase Agreement pursuant to Section 3(d) thereof, the Collateral Agent, upon reconveyance of such Purchased Receivables, shall recalculate the Spread Account Maximum Amount for the Warehousing Series Spread Account and release funds from the Warehousing Series Spread Account in excess of the recalculated Spread Account Maximum Amount to the Seller. ARTICLE IV MISCELLANEOUS Section 4.1. FURTHER ASSURANCES. Each party hereto shall take such action and deliver such instruments to any other party hereto, in addition to the actions and instruments specifically provided for herein, as may be reasonably requested or required to effectuate the purpose or provisions of this Warehousing Series Supplement or to confirm or perfect any transaction described or contemplated herein. SECTION 4.2. GOVERNING LAW. THIS WAREHOUSING SERIES SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 4.3. COUNTERPARTS. This Warehousing Series Supplement may be executed in two or more counterparts by the parties hereto, and each such counterpart shall be considered an original and all such counterparts shall constitute one and the same instrument. Section 4.4. HEADINGS. The headings of sections and paragraphs and the Table of Contents contained in this Warehousing Series Supplement are provided for convenience only. They form no part of this Warehousing Series Supplement and shall not affect its construction or interpretation. 5 IN WITNESS WHEREOF, the parties hereto have executed this Warehousing Series Supplement as of the date set forth on the first page hereof. OLYMPIC FINANCIAL LTD. By illegible ---------------------------------- Name: Title: OLYMPIC RECEIVABLES FINANCE CORP. By illegible ---------------------------------- Name: Title: FINANCIAL SECURITY ASSURANCE INC. By Claire M. Robinson ---------------------------------- Authorized Officer NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By Thomas D. Wraathbert ---------------------------------- Name: Title: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral Agent By Thomas D. Wraathbert ---------------------------------- Name: Title: EX-10.41 40 SERIES 1996-C SUPPLEMENT 12/12/96 SPREAD ACCOUNT SERIES 1996-D SUPPLEMENT dated as of December 12, 1996 to SPREAD ACCOUNT AGREEMENT dated as of March 25, 1993, as amended and restated as of December 3, 1996 among OLYMPIC FINANCIAL LTD. OLYMPIC RECEIVABLES FINANCE CORP. FINANCIAL SECURITY ASSURANCE INC. and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee and as Collateral Agent TABLE OF CONTENTS Page ARTICLE I DEFINITIONS Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 2 Section 1.2 Rules of Interpretation . . . . . . . . . . . . . . . 8 ARTICLE II CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL Section 2.1 Series 1996-D Credit Enhancement Fee . . . . . . . . 8 Section 2.2 Series Supplements . . . . . . . . . . . . . . . . . 9 Section 2.3 Grant of Security Interest by OFL and the Seller . . 9 ARTICLE III SPREAD ACCOUNT Section 3.1 Establishment of Series 1996-D Spread Account; Initial Deposit into Series 1996-D Spread Account . . . . . . 10 Section 3.2 Spread Account Additional Deposits . . . . . . . . . 10 ARTICLE IV MISCELLANEOUS Section 4.1 Further Assurances . . . . . . . . . . . . . . . . . 10 Section 4.2 Governing Law . . . . . . . . . . . . . . . . . . . . 10 Section 4.3 Counterparts . . . . . . . . . . . . . . . . . . . . 11 Section 4.4 Headings . . . . . . . . . . . . . . . . . . . . . . 11 Page 1 SERIES 1996-D SUPPLEMENT SERIES 1996-D SUPPLEMENT, dated as of December 12, 1996 (the "Series 1996-D Supplement"), by and among OLYMPIC FINANCIAL LTD., a Minnesota corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company ("Financial Security"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, in its capacities as Trustee under each Pooling and Servicing Agreement and as Indenture Trustee under each Indenture referred to in the Spread Account Agreement (as defined below), in such capacity as agent for the Noteholders and Certificateholders with respect to the related Series (in each of such capacities, the "Trustee") and as Collateral Agent hereunder. RECITALS 1. The parties hereto have previously entered into a Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of December 3, 1996 (the "Spread Account Agreement"), and, as contemplated by Section 2.02 of the Spread Account Agreement, this Series 1996-D Supplement constitutes a Series Supplement to the Spread Account Agreement so that hereafter this Series 1996-D Supplement shall form a part of the Spread Account Agreement for all purposes thereof, and all references herein and hereafter to the Spread Account Agreement shall mean the Spread Account Agreement, as supplemented hereby. 2. Olympic Automobile Receivables Trust, 1996-D (the "Series 1996-D Trust") is being formed contemporaneously herewith pursuant to the Series 1996-D Trust Agreement (as defined herein). 3. Pursuant to the Series 1996-D Sale and Servicing Agreement, the Seller is selling to the Series 1996-D Trust all of its right, title and interest in and to the Initial Receivables (as defined in the Series 1996-D Sale and Servicing Agreement) and certain other Trust Property (as defined in the Series 1996-D Trust Agreement). 4. Pursuant to the Series 1996-D Trust Agreement, the Series 1996-D Trust is issuing the Series 1996-D Certificates (as defined herein). Pursuant to the Series 1996-D Indenture, the Series 1996-D Trust is issuing the Series 1996-D Notes (as defined herein). 5. The Seller has requested that Financial Security issue the Series 1996-D Note Policy to the Trustee to guarantee payment of the Scheduled Payments (as defined in such Policy) on each Payment Date in respect of the Series 1996-D Notes, and has requested that Financial Security issue the Series 1996-D Certificate Policy to Mellon Bank (DE), National Association, as Owner Trustee under the Series Page 2 1996-D Trust Agreement, to guarantee payment of the Guaranteed Distributions (as defined in such Policy) on each Distribution Date in respect of the Series 1996-D Certificates. 6. In partial consideration of the issuance of the Series 1996-D Note Policy and the Series 1996-D Certificate Policy, the Seller has agreed that Financial Security shall have certain rights as Controlling Party, to the extent set forth in the Spread Account Agreement and the Series 1996-D Indenture. 7. The Seller is a wholly owned special purpose subsidiary of OFL. The Series 1996-D Trust has agreed to pay the Series 1996-D Credit Enhancement Fee to the Seller in consideration of the obligations of the Seller and OFL pursuant hereto and in consideration of the obligations of OFL pursuant to the Series 1996-D Insurance Agreement (such obligations forming part of the Series 1996-D Insurer Secured Obligations as referred to herein). The Series 1996-D Insurer Secured Obligations form part of the consideration to Financial Security for its issuance of the Series 1996-D Policies. 8. In order to secure the performance of the Series 1996-D Secured Obligations, to further effect and enforce the subordination provisions to which the Series 1996-D Credit Enhancement Fee is subject, and in consideration of the receipt of the Series 1996-D Credit Enhancement Fee, OFL and the Seller have agreed to pledge the Series 1996-D Collateral as Collateral to the Collateral Agent for the benefit of Financial Security and for the benefit of the Trustee on behalf of the Trust, upon the terms and conditions set forth herein. AGREEMENTS In consideration of the premises, and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: DEFINITIONS Section 1.1 DEFINITIONS. All terms defined in Section 1.1 of the Series 1996-D Sale and Servicing Agreement shall have the same meaning with respect to this Series 1996-D Supplement. The following terms shall have the following meanings: "COLLECTION ACCOUNT SHORTFALL" means, with respect to Series 1996-D and any Distribution Date, the Deficiency Claim Amount, as defined in the Series 1996-D Sale and Servicing Agreement, with respect to such Distribution Date. Page 3 "DEEMED CURED" means, (a) with respect to a Trigger Event that has occurred pursuant to clause (i) of the definition thereof, as of a Determination Date with respect to Series 1996-D, that no Trigger Event as specified in clause (i) of the definition thereof with respect to such Series shall have occurred as of such Determination Date or as of any of the five consecutively preceding Determination Dates, and (b) with respect to a Trigger Event that has occurred pursuant to clause (ii) or clause (iii) of the definition thereof, as of the next Determination Date which occurs in a calendar month which is a multiple of three months succeeding the Series 1996-D Closing Date, that no such clause (ii) or clause (iii) Trigger Event with respect to such Series shall have occurred as of such Determination Date. "INITIAL PRINCIPAL AMOUNT" means $730,000,000 with respect to Series 1996-D. "INITIAL SPREAD ACCOUNT DEPOSIT" means $7,300,000 for Series 1996-D. "INITIAL SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1996-D and any Distribution Date, an amount equal to the greater of (i) 7% of the Series 1996-D Balance as of the close of business on such Distribution Date and (ii) the Spread Account Minimum Amount as of the close of business on such Distribution Date. "SERIES 1996-D BALANCE" means, with respect to Series 1996-D and any Distribution Date, the sum of the aggregate principal amount of the Series 1996-D Notes and the Certificate Balance with respect to Series 1996-D Certificates as of such Distribution Date (after giving effect to the distributions in respect of principal on the Notes and on the Certificates made on such Distribution Date). "SERIES 1996-D CERTIFICATE POLICY" means the financial guaranty insurance policy issued by Financial Security with respect to the Series 1996-D Certificates. "SERIES 1996-D CERTIFICATES" means the Certificates issued on the date hereof pursuant to the Series 1996-D Trust Agreement. "SERIES 1996-D COLLATERAL" has the meaning specified in Section 2.3(a) hereof. "SERIES 1996-D CREDIT ENHANCEMENT FEE" means the amount distributable on each Distribution Date pursuant to Section 4.6(viii) and (ix) of the Series 1996-D Sale and Servicing Agreement. "SERIES 1996-D INDENTURE" means the Indenture, dated as of December 1, 1996, among the Series 1996-D Trust, the Trustee and the Indenture Collateral Agent. "SERIES 1996-D NOTE POLICY" means the financial guaranty insurance policy issued by Financial Security with respect to the Series 1996-D Notes. "SERIES 1996-D NOTES" means the Class A-1, Class A-2, Class A-3, Class A-4 and Page 4 Class A-5 Notes issued pursuant to the Series 1996-D Indenture. "SERIES 1996-D OWNER TRUSTEE" means Mellon Bank (DE), National Association, not in its individual capacity but solely as Owner Trustee, or its successor in interest, and any successor Owner Trustee appointed as provided in the Series 1996-D Trust Agreement. "SERIES 1996-D RECEIVABLE" means each Receivable referenced on the Schedule of Receivables attached to the Series 1996-D Sale and Servicing Agreement, as supplemented from time to time during the Funding Period by one or more Subsequent Transfer Agreements. "SERIES 1996-D RESERVE ACCOUNT" means the Reserve Account established pursuant to Section 4.1(d) of the Series 1996-D Sale and Servicing Agreement. "SERIES 1996-D SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement, dated as of December 1, 1996, and attached hereto as Exhibit A, among the Series 1996-D Trust, OFL, in its individual capacity and as Servicer, the Seller and the Backup Servicer, as such agreement may be supplemented, amended or modified from time to time. "SERIES 1996-D SECURED OBLIGATIONS" means the Insurer Secured Obligations and the Trustee Secured Obligations with respect to Series 1996-D. "SERIES 1996-D SECURITIES" means the Series 1996-D Notes and the Series 1996-D Certificates, collectively. "SERIES 1996-D SPREAD ACCOUNT" means the Spread Account established pursuant to Section 3.1(a) hereof. "SERIES 1996-D SUPPLEMENT" means this Series 1996-D Supplement which constitutes a Series Supplement to the Spread Account Agreement. "SERIES 1996-D TRUST AGREEMENT" means the Trust Agreement, dated as of December 1, 1996, among the Seller, Olympic First GP Inc., Olympic Second GP Inc., Financial Security and the Series 1996-D Owner Trustee. "SPREAD ACCOUNT ADDITIONAL DEPOSIT" means, with respect to Series 1996-D and any Subsequent Transfer Date, an amount equal to 0.00% of the aggregate Principal Balance (as of the related Subsequent Cutoff Date) of the Subsequent Receivables being transferred to the Series 1996-D Trust on such Subsequent Transfer Date or such greater amount as required by the Rating Agencies to confirm that the rating assigned to the Series 1996-D Notes and the Series 1996-D Certificates will be in the highest category by such Rating Agencies. "SPREAD ACCOUNT MAXIMUM AMOUNT" means, with respect to Series 1996-D Page 5 and any Distribution Date: (i) if no Insurance Agreement Event of Default with respect to Series 1996-D has occurred and is continuing, no Capture Event has occurred and is continuing, no Trigger Event has occurred on the related Determination Date, and if any Trigger Event with respect to Series 1996-D has occurred as of a prior Determination Date, such Trigger Event is Deemed Cured as of the related Determination Date, the Initial Spread Account Maximum Amount with respect to Series 1996-D and such Distribution Date; (ii) if (A) a Trigger Event with respect to Series 1996-D has occurred as of the Determination Date or (B) a Trigger Event with respect to Series 1996-D has occurred as of a prior Distribution Date and is not Deemed Cured as of the related Determination Date, and no Insurance Agreement Event of Default with respect to Series 1996-D has occurred and is continuing and no Capture Event has occurred and is continuing, the Spread Account Maximum Amount shall be equal to the greater of (i) 10% of the Series 1996-D Balance as of the close of business on such Distribution Date and (ii) the Spread Account Minimum Amount as of the close of business on such Distribution Date; or (iii) if (A) an Insurance Agreement Event of Default with respect to Series 1996-D has occurred and is continuing or (B) a Capture Event has occurred and is continuing as of the related Determination Date, the Spread Account Maximum Amount shall be equal to the greater of (i) 25% of the Series 1996-D Balance as of the close of business on such Distribution Date and (ii) the Spread Account Minimum Amount as of the close of business on such Distribution Date. "SPREAD ACCOUNT MINIMUM AMOUNT" means, with respect to Series 1996-D and any Distribution Date, an amount equal to the greater of: (i) $100,000, and (ii) the lesser of: (A) 1% of the Initial Principal Amount of Series 1996-D, and (B) the Series 1996-D Balance. "SPREAD ACCOUNT WITHDRAWAL FLOOR" means, with respect to Series 1996-D and any Determination Date, an amount equal to the Spread Account Minimum Amount. "TRIGGER EVENT" means, with respect to Series 1996-D and as of a Determination Date, the occurrence of any of the following events: Page 6 (i) the Average Delinquency Ratio for such Determination Date shall be 5.9% or greater; (ii) the Cumulative Default Rate shall be equal to or greater than (A) 2.60%, with respect to any Determination Date occurring prior to or during the third calendar month succeeding the Series 1996-D Closing Date, (B) 4.76%, with respect to any Determination Date occurring after the third, and prior to or during the 6th, calendar month succeeding the Series 1996-D Closing Date, (C) 6.66%, with respect to any Determination Date occurring after the 6th, and prior to or during the 9th, calendar month succeeding the Series 1996-D Closing Date, (D) 8.22%, with respect to any Determination Date occurring after the 9th, and prior to or during the 12th, calendar month succeeding the Series 1996-D Closing Date, (E) 8.97%, with respect to any Determination Date occurring after the 12th, and prior to or during the 15th, calendar month succeeding the Series 1996-D Closing Date, (F) 9.97%, with respect to any Determination Date occurring after the 15th, and prior to or during the 18th, calendar month succeeding the Series 1996-D Closing Date, (G) 10.87%, with respect to any Determination Date occurring after the 18th, and prior to or during the 21st, calendar month succeeding the Series 1996-D Closing Date, (H) 11.56%, with respect to any Determination Date occurring after the 21st, and prior to or during the 24th, calendar month succeeding the Series 1996-D Closing Date, (I) 12.17%, with respect to any Determination Date occurring after the 24th, and prior to or during the 27th, calendar month succeeding the Series 1996-D Closing Date, (J) 12.70%, with respect to any Determination Date occurring after the 27th, and prior to or during the 30th, calendar month succeeding the Series 1996-D Closing Date, (K) 13.09%, with respect to any Determination Date occurring after the 30th, and prior to or during the 33rd, calendar month succeeding the Series 1996-D Closing Date, (L) 13.39%, with respect to any Determination Date occurring after the 33rd, and prior to or during the 36th, calendar month succeeding the Series 1996-D Closing Date, (M) 13.65%, with respect to any Determination Date occurring after the 36th, and prior to or during the 39th, calendar month succeeding the Series 1996-D Closing Date, (N) 13.81%, with respect to any Determination Date occurring after the 39th, and prior to or during the 42nd, calendar month succeeding the Series 1996-D Closing Date, (O) 13.96%, with respect to any Determination Date occurring after the 42nd, and prior to or during the 45th calendar month succeeding the Series 1996-D Closing Date, (P) 14.08%, with Page 7 respect to any Determination Date occurring after the 45th, and prior to or during the 48th, calendar month succeeding the Series 1996-D Closing Date, (Q) 14.15%, with respect to any Determination Date occurring after the 48th, and prior to or during the 51st, calendar month succeeding the Series 1996-D Closing Date, (R) 14.21%, with respect to any Determination Date occurring after the 51st, and prior to or during the 54th, calendar month succeeding the Series 1996-D Closing Date, (S) 14.25%, with respect to any Determination Date occurring after the 54th, and prior to or during the 57th, calendar month succeeding the Series 1996-D Closing Date, (T) 14.28%, with respect to any Determination Date occurring after the 57th, and prior to or during the 60th, calendar month succeeding the Series 1996-D Closing Date, (U) 14.30%, with respect to any Determination Date occurring after the 60th, and prior to or during the 63rd, calendar month succeeding the Series 1996-D Closing Date, (V) 14.32%, with respect to any Determination Date occurring after the 63rd, and prior to or during the 66th, calendar month succeeding the Series 1996-D Closing Date, (W) 14.33%, with respect to any Determination Date occurring after the 66th, and prior to or during the 69th, calendar month succeeding the Series 1996-D Closing Date, or (X) 14.35%, with respect to any Determination Date occurring after the 69th calendar month succeeding the Series 1996-D Closing Date; or (iii) the Cumulative Net Loss Rate shall be equal to or greater than (A) 1.34%, with respect to any Determination Date occurring prior to or during the third calendar month succeeding the Series 1996-D Closing Date, (B) 2.33%, with respect to any Determination Date occurring after the third, and prior to or during the 6th, calendar month succeeding the Series 1996-D Closing Date, (C) 3.14%, with respect to any Determination Date occurring after the 6th, and prior to or during the 9th, calendar month succeeding the Series 1996-D Closing Date, (D) 3.74%, with respect to any Determination Date occurring after the 9th, and prior to or during the 12th, calendar month succeeding the Series 1996-D Closing Date, (E) 4.08%, with respect to any Determination Date occurring after the 12th, and prior to or during the 15th, calendar month succeeding the Series 1996-D Closing Date, (F) 4.40%, with respect to any Determination Date occurring after the 15th, and prior to or during the 18th, calendar month succeeding the Series 1996-D Closing Date, (G) 4.65%, with respect to any Determination Date occurring after the 18th, and prior to or during the 21st, calendar month succeeding the Series 1996-D Closing Date, (H) 4.85%, Page 8 with respect to any Determination Date occurring after the 21st, and prior to or during the 24th, calendar month succeeding the Series 1996-D Closing Date, (I) 5.01%, with respect to any Determination Date occurring after the 24th, and prior to or during the 27th, calendar month succeeding the Series 1996-D Closing Date, (J) 5.16%, with respect to any Determination Date occurring after the 27th, and prior to or during the 30th, calendar month succeeding the Series 1996-D Closing Date, (K) 5.26%, with respect to any Determination Date occurring after the 30th, and prior to or during the 33rd, calendar month succeeding the Series 1996-D Closing Date, (L) 5.36%, with respect to any Determination Date occurring after the 33rd, and prior to or during the 36th, calendar month succeeding the Series 1996-D Closing Date, (M) 5.43%, with respect to any Determination Date occurring after the 36th, and prior to or during the 39th, calendar month succeeding the Series 1996-D Closing Date, (N) 5.51%, with respect to any Determination Date occurring after the 39th, and prior to or during the 42nd, calendar month succeeding the Series 1996-D Closing Date, (O) 5.58%, with respect to any Determination Date occurring after the 42nd, and prior to or during the 45th calendar month succeeding the Series 1996-D Closing Date, (P) 5.62%, with respect to any Determination Date occurring after the 45th, and prior to or during the 48th, calendar month succeeding the Series 1996-D Closing Date, (Q) 5.65%, with respect to any Determination Date occurring after the 48th, and prior to or during the 51st, calendar month succeeding the Series 1996-D Closing Date, (R) 5.68%, with respect to any Determination Date occurring after the 51st, and prior to or during the 54th, calendar month succeeding the Series 1996-D Closing Date, (S) 5.72%, with respect to any Determination Date occurring after the 54th, and prior to or during the 57th, calendar month succeeding the Series 1996-D Closing Date, (T) 5.74%, with respect to any Determination Date occurring after the 57th, and prior to or during the 60th, calendar month succeeding the Series 1996-D Closing Date, (U) 5.75%, with respect to any Determination Date occurring after the 60th, and prior to or during the 63rd, calendar month succeeding the Series 1996-D Closing Date, (V) 5.77%, with respect to any Determination Date occurring after the 63rd, and prior to or during the 66th, calendar month succeeding the Series 1996-D Closing Date, (W) 5.78%, with respect to any Determination Date occurring after Page 9 the 66th, and prior to or during the 69th, calendar month succeeding the Series 1996-D Closing Date, or (X) 5.80%, with respect to any Determination Date occurring after the 69th calendar month succeeding the Series 1996-D Closing Date. Section 1.2 RULES OF INTERPRETATION. The terms "hereof," "herein," "hereto" or "hereunder," unless otherwise modified by more specific reference, shall refer to this Series 1996-D Supplement. Unless otherwise indicated in context, the terms "Article," "Section" or "Exhibit" shall refer to an Article or Section of, or Exhibit to, this Series 1996-D Supplement. The definition of a term shall include the singular, the plural, the past, the present, the future, the active and the passive forms of such term. A term defined herein and used herein preceded by a Series designation, shall mean such term as it relates to the Series designated. ARTICLE CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL Section 2.1 SERIES 1996-D CREDIT ENHANCEMENT FEE. The Series 1996-D Sale and Servicing Agreement provides for the payment to the Seller of the Series 1996-D Credit Enhancement Fee, to be paid to the Seller by distribution of such amounts to the Collateral Agent for deposit and distribution pursuant to this Agreement. The Seller and OFL hereby agree that payment of the Series 1996-D Credit Enhancement Fee in the manner and subject to the conditions set forth herein and in the Series 1996-D Sale and Servicing Agreement is adequate consideration and the exclusive consideration to be received by the Seller or OFL for the obligations of the Seller pursuant hereto and the obligations of OFL pursuant hereto (including, without limitation, the transfer by the Seller to the Collateral Agent of the Initial Spread Account Deposit with respect to Series 1996-D) and pursuant to the Series 1996-D Insurance Agreement. The Seller and OFL hereby agree with the Trustee and with Financial Security that payment of the Series 1996-D Credit Enhancement Fee to the Seller is expressly conditioned on subordination of the Series 1996-D Credit Enhancement Fee to payments on the Notes (if any) and Certificates of any Series, payments of amounts due to Financial Security and the other obligations of the Trusts, in each case to the extent provided in Section 4.6 of the Standard Terms and Conditions or Section 4.6 of the related Sale and Servicing Agreement, as applicable, and Section 3.03 of the Spread Account Agreement, and the Security Interest of the Secured Parties in the Series 1996-D Collateral is intended to effect and enforce such subordination and to provide security for the Series 1996-D Secured Obligations and subject to the terms hereof the Secured Obligations with respect to other Series. Section 2.2 SERIES SUPPLEMENTS. As provided in and subject to the conditions specified in Section 2.02 of the Spread Account Agreement, the parties hereto are entering into this Series 1996-D Supplement with respect to the Series 1996-D Securities. Section 2.3 GRANT OF SECURITY INTEREST BY OFL AND THE SELLER. (a) In order to secure the performance of the Secured Obligations with respect to each Series, the Seller (and OFL, to the extent it may have any rights therein) hereby pledges, assigns, grants, transfers and conveys to the Collateral Agent, on behalf of and for the benefit of the Secured Parties to secure the Secured Obligations, a lien on and security interest in (which lien and security interest is intended to be prior to all other liens, security interests or other encumbrances), all of its right, title and interest in and to the following (all being collectively referred to herein as the "Series 1996-D Collateral"): (i) the Series 1996-D Credit Enhancement Fee and all rights and remedies that the Seller may have to enforce payment of the Series 1996-D Credit Enhancement Fee whether under the Series 1996-D Sale and Servicing Agreement or otherwise; (ii) the Series 1996-D Spread Account established pursuant to Section 3.1 of this Series 1996-D Supplement and Section 3.01 of the Spread Page 10 Account Agreement, and each other account owned by the Seller and maintained by the Collateral Agent (including, without limitation, all monies, checks, securities, investments and other documents from time to time held in or evidencing any such accounts); (iii) all of the Seller's right, title and interest in and to investments made with proceeds of the property described in clauses (i) and (ii) above, or made with amounts on deposit in the Series 1996-D Spread Account; and (iv) all distributions, revenues, products, substitutions, benefits, profits and proceeds, in whatever form, of any of the foregoing. (b) In order to effectuate the provisions and purposes of this Series 1996-D Supplement, including for the purpose of perfecting the security interests granted hereunder, the Seller represents and warrants that it has, prior to the execution of this Series 1996-D Supplement, executed and filed an appropriate Uniform Commercial Code financing statement in Minnesota sufficient to ensure that the Collateral Agent, as agent for the Secured Parties, has a first priority perfected security interest in all Series 1996-D Collateral which can be perfected by the filing of a financing statement. ARTICLE SPREAD ACCOUNT Section 3.1 ESTABLISHMENT OF SERIES 1996-D SPREAD ACCOUNT; INITIAL DEPOSIT INTO SERIES 1996-D SPREAD ACCOUNT. (a) On or prior to the Closing Date relating to the Series 1996-D Certificates, the Collateral Agent shall establish with respect to Series 1996-D, at its office or at another depository institution or trust company, an Eligible Account, designated "Spread Account--Series 1996-D--Norwest Bank Minnesota, National Association, as Collateral Agent for Financial Security Assurance Inc. and another Secured Party" (the "Series 1996-D Spread Account"). (b) On the Closing Date relating to the Series 1996-D, the Collateral Agent shall deposit the Initial Spread Account Deposit with respect to Series 1996-D received from the Seller into the Series 1996-D Spread Account. Section 3.2 SPREAD ACCOUNT ADDITIONAL DEPOSITS. On each Subsequent Transfer Date, the Series 1996-D Trust will, pursuant to Section 2.4 of the Series 1996-D Sale and Servicing Agreement, deliver on behalf of the Seller the Spread Account Additional Deposit for such Subsequent Transfer Date to the Collateral Agent. The Collateral Agent shall deposit each such Spread Account Additional Deposit Page 11 received from the Series 1996-D Trust into the Series 1996-D Spread Account. ARTICLE MISCELLANEOUS Section 4.1 FURTHER ASSURANCES. Each party hereto shall take such action and deliver such instruments to any other party hereto, in addition to the actions and instruments specifically provided for herein, as may be reasonably requested or required to effectuate the purpose or provisions of this Series 1996-D Supplement or to confirm or perfect any transaction described or contemplated herein. Section 4.2 GOVERNING LAW. This Series 1996-D Supplement shall be governed by and construed, and the obligations, rights and remedies of the parties hereunder shall be determined, in accordance with the laws of the State of New York. Section 4.3 COUNTERPARTS. This Series 1996-D Supplement may be executed in two or more counterparts by the parties hereto, and each such counterpart shall be considered an original and all such counterparts shall constitute one and the same instrument. Section 4.4 HEADINGS. The headings of sections and paragraphs and the Table of Contents contained in this Series 1996-D Supplement are provided for convenience only. They form no part of this Series 1996-D Supplement and shall not affect its construction or interpretation. Page 12 IN WITNESS WHEREOF, the parties hereto have executed this Series 1996-D Supplement as of the date set forth on the first page hereof. OLYMPIC FINANCIAL LTD. By ---------------------------------- John A. Witham Executive Vice President and Chief Financial Officer OLYMPIC RECEIVABLES FINANCE CORP. By ---------------------------------- John A. Witham Senior Vice President and Chief Financial Officer FINANCIAL SECURITY ASSURANCE INC. By ---------------------------------- Authorized Officer NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By ---------------------------------- Thomas D. Wraalstad Corporate Trust Officer NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral Agent By ---------------------------------- Thomas D. Wraalstad Corporate Trust Officer EX-10.42 41 AMEND DATED 1/14/97 AMONG REG, ORFC, FSA & NORWEST AMENDMENT dated as of January 14, 1997 among OLYMPIC FINANCIAL LTD. OLYMPIC RECEIVABLES FINANCE CORP. FINANCIAL SECURITY ASSURANCE INC. and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral Agent to Series 1994-B Supplement dated as of September 23, 1994 Series 1994-A Supplement dated as of April 5, 1994 Series 1993-D Supplement dated as of December 2, 1993 Series 1993-C Supplement dated as of August 17, 1993 Series 1993-B Supplement dated as of June 11, 1993 to Spread Account Agreement dated as of March 25, 1993 as amended and restated as of December 3, 1996 Amendment dated as of January 14, 1997 among OLYMPIC FINANCIAL LTD., a Minnesota corporation ("OFL"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company ("Financial Security") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral Agent to the: (i) the Series 1994-B Supplement dated as of September 23, 1994, as amended by that certain Amendment dated as of June 15, 1995 (the "June 1995 Amendment") to certain Series Supplements (as hereinafter defined), as further amended by that certain Amendment dated as of September 21, 1995 (the "September 1995 Amendment") to certain Series Supplements, that certain Amendment dated as of December 6, 1995 (the "December 1995 Amendment") to certain Series Supplements and that certain Amendment dated as of September 12, 1996 (the "September 1996 Amendment") to certain Series Supplements (as amended, the "Series 1994-B Supplement"); (ii) the Series 1994-A Supplement dated as of April 5, 1994 as amended by the June 1995 Amendment, as further amended by the September 1995 Amendment, the December 1995 Amendment and the September 1996 Amendment (as amended, the "Series 1994-A Supplement"); (iii) the Series 1993-D Supplement dated as of December 2, 1993, as amended by the June 1995 Amendment, as further amended by the September 1995 Amendment, the December 1995 Amendment and the September 1996 Amendment (as amended, the "Series 1993-D Supplement"); (iv) the Series 1993-C Supplement dated as of August 17, 1993, as amended by the June 1995 Amendment, as further amended by the September 1995 Amendment, the December 1995 Amendment and the September 1996 Amendment (as amended, the "Series 1993-C Supplement") (v) the Series 1993-B Supplement dated as of June 11, 1993, as amended by the June 1995 Amendment, as further amended by the September 1995 Amendment, the December 1995 Amendment and the September 1996 Amendment (as amended, the "Series 1993-B Supplement") (each of the supplements referred to in (i) through (v) herein, a "Series Supplement," and collectively, the "Series Supplements") to the Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of December 3, 1996 among OFL, the Seller, Financial Security and Norwest Bank Minnesota National Association as Trustee and as Collateral Agent (the "Spread Account Agreement"). WHEREAS, Section 8.03 of the Spread Account Agreement permits amendment of the Spread Account Agreement upon the terms and conditions specified therein. WHEREAS, the parties to the Spread Account Agreement (the "Parties") have heretofore executed the Series Supplements; 2 WHEREAS, the Parties wish to amend the Series Supplements. NOW, THEREFORE, the Parties agree that the Series Supplements are hereby amended effective as of the date hereof as follows: Section 1. DEFINITIONS. Each term used but not defined herein shall have the meaning assigned to such term in the Spread Account Agreement or in the relevant Series Supplement thereto, and when used herein with respect to a particular Series shall have the meaning assigned to such term of such Series. Section 2. AMENDMENT OF CERTAIN TERMS OF THE SERIES SUPPLEMENTS. Section 1.1 of each of the Series Supplements is amended as follows: Paragraph (ii) of the definition of "Trigger Event" is amended by deleting the percentage specified therein and replacing such percentage in each instance with the percentage corresponding to the applicable Series Supplement specified under Column I of Exhibit A hereto. Section 3. COUNTERPARTS. This Amendment to the Series Supplements may be executed in several counterparts, each of which shall be deemed an original hereof and all of which, when taken together, shall constitute one and the same Amendment to the Series Supplements. Section 4. RATIFICATION OF SPREAD ACCOUNT AGREEMENT. Except as provided herein, all provisions, terms and conditions of the Spread Account Agreement, including each Series Supplement, shall remain in full force and effect. As amended hereby, the Spread Account Agreement, including each Series Supplement, is ratified and confirmed in all respects. 3 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date set forth on the first page hereof. OLYMPIC FINANCIAL LTD. By: /s/ John A. Witham ------------------------------ John A. Witham Executive Vice President and Chief Financial Officer OLYMPIC RECEIVABLES FINANCE CORP. By: /s/ John A. Witham ------------------------------ John A. Witham Vice President and Chief Financial Officer FINANCIAL SECURITY ASSURANCE INC. By /s/ Richard J. Bannerfeld M.D. ------------------------------ Authorized Officer Richard J. Bannerfeld M.D. NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Collateral Agent By /s/ Thomas D. Wraalstad ------------------------------ Thomas D. Wraalstad Corporate Trust Officer EXHIBIT A Series Designation Column I ------------------ --------- 1993-B 5% 1993-C 5% 1993-D 5% 1994-A 5% 1994-B 5% EX-10.57 42 AMEND DATED 9/12/96 TO SRS 1996-B INS & INDEM AGMT AMENDMENT dated as of September 12, 1996 to Insurance and Indemnity Agreement dated as of June 14, 1996 Insurance and Indemnity Agreement dated as of March 14, 1996 Insurance and Indemnity Agreement dated as of December 6, 1995 Insurance and Indemnity Agreement dated as of September 21, 1995 Insurance and Indemnity Agreement dated as of June 15, 1995 Insurance and Indemnity Agreement dated as of March 15, 1995 Insurance and Indemnity Agreement dated as of February 9, 1995 Insurance and Indemnity Agreement dated as of September 23, 1994 Insurance and Indemnity Agreement dated as of April 5, 1994 Insurance and Indemnity Agreement dated as of December 2, 1993 Insurance and Indemnity Agreement dated as of August 17, 1993 Insurance and Indemnity Agreement dated as of June 11, 1993 Insurance and Indemnity Agreement dated as of March 25, 1993 Amendment to Insurance and Indemnity Agreements Amendment dated as of September 12, 1996 ("Amendment to Insurance and Indemnity Agreements") to: (i) Insurance and Indemnity Agreement dated as of June 14, 1996 (the "Series 1996-B Insurance and Indemnity Agreement"); (ii) Insurance and Indemnity Agreement dated as of March 14, 1996, as amended by that certain Amendment dated as of May 31, 1996 (the "May Amendment") to certain of the Insurance and Indemnity Agreements (as hereinafter defined) (as amended, the "Series 1996-A Insurance and Indemnity Agreement"); (iii) Insurance and Indemnity Agreement dated as of December 6, 1995, as amended by the May 1996 Amendment (as amended, the "Series 1995-E Insurance and Indemnity Agreement"); (iv) Insurance and Indemnity Agreement dated as of September 21, 1995, as amended by that certain Amendment dated as of December 6, 1995 (the "December 1995 Amendment") to certain of the Insurance and Indemnity Agreements, as further amended by the May 1996 Amendment (as amended, the "Series 1995-D Insurance and Indemnity Agreement"); (v) Insurance and Indemnity Agreement dated as of June 15, 1995, as amended by the December 1995 Amendment, as further amended by the May 1996 Amendment (as amended, the "Series 1995-C Insurance and Indemnity Agreement"); (vi) Insurance and Indemnity Agreement dated as of March 15, 1995, as amended by that certain Amendment dated as of June 15, 1995 (the "June 1995 Amendment") to certain of the Insurance and Indemnity Agreements, as further amended by the December 1995 Amendment and the May 1996 Amendment (as amended, the "Series 1995-B Insurance and Indemnity Agreement"); (vii) Insurance and Indemnity Agreement dated as of February 9, 1995, as amended by the June 1995 Amendment, as further amended by the December 1995 Amendment and May 1996 Amendment (as amended, the "Series 1995-A Insurance and Indemnity Agreement"); (viii) Insurance and Indemnity Agreement dated as of September 23, 1994, as amended by the June 1995 Amendment, as further amended by the December 1995 Amendment (as amended, the "Series 1994-B Insurance and Indemnity Agreement"); (ix) Insurance and Indemnity Agreement dated as of April 5, 1994, as amended by the June 1995 Amendment, as further amended by the December 1995 Amendment (as amended, the "Series 1994-A Insurance and Indemnity Agreement"); (x) Insurance and Indemnity Agreement dated as of December 2, 1993, as amended by the June 1995 Amendment, as further amended by the December 1995 Amendment (as amended, the "Series 1993-D Insurance and Indemnity Agreement"); (xi) Insurance and Indemnity Agreement dated as of August 17, 1993, as amended by the June 1995 Amendment, as further amended by the December 1995 Amendment (as amended, the "Series 1993-C Insurance and Indemnity Agreement"); (xii) Insurance and Indemnity Agreement dated as of June 11, 1993, as amended by the December 1995 Amendment (as amended, the "Series 1993-B Insurance and Indemnity Agreement"); (xiii) Insurance and Indemnity Agreement dated as of March 25, 1993, as amended by the December 1995 Amendment (as amended, the "Series 1993-A Insurance and Indemnity Agreement") (each of the agreements referred to in (i) through (xiii) herein, an "Insurance and Indemnity Agreement," and collectively, the "Insurance and Indemnity Agreements") among Financial Security Assurance Inc., Olympic Automobile Receivables Trust, 1996-B, Olympic Automobile Receivables Trust, 1996-A, Olympic Automobile Receivables Trust, 1995-E, Olympic Automobile Receivables Trust, 1995-D, Olympic Automobile Receivables Trust, 1995-C, Olympic Automobile Receivables Trust, 1995-B, Olympic Automobile Receivables Trust, 1994-B, Olympic Automobile Receivables Trust, 1994-A, Olympic Automobile Receivables Trust, 1993-D, Olympic Automobile Receivables Trust, 1993-C, Olympic First GP Inc., Olympic Second GP Inc., Olympic Receivables Finance Corp., and Olympic Financial Ltd, in each case with respect to each Insurance and Indemnity Agreement with respect to which such person is a party. WHEREAS, the respective parties to each Insurance and Indemnity Agreement (the "Respective Parties") have heretofore executed such Insurance and Indemnity Agreement; WHEREAS, the Respective Parties to each Insurance and Indemnity Agreement wish to amend such Agreement. NOW, THEREFORE, the Respective Parties to each Insurance and Indemnity Agreement agree that such Agreement is hereby amended as follows: Section 1. AMENDMENT TO THE SERIES 1993-A INSURANCE AND INDEMNITY AGREEMENT AND SERIES 1993-B INSURANCE AND INDEMNITY AGREEMENT. 2 (a) The text contained in paragraph (f) of Section 5.01 in each of the Series 1993-A Insurance and Indemnity Agreement and the Series 1993-B Insurance and Indemnity Agreement is deleted in its entirety. Such paragraph (f) shall be reserved in each instance and the paragraphs of Section 5.01 shall not be redesignated as a result of the deletion effected by this Section 1. (b) Paragraph (g) of Section 5.01 in each of the Series 1993-A Insurance and Indemnity Agreement and the Series 1993-B Insurance and Indemnity Agreement is amended by deleting the percentage specified therein and replacing such percentage in each instance with the percentage corresponding to the applicable Series specified under Column I of Exhibit A hereto. Section 2. AMENDMENT TO THE SERIES 1993-C INSURANCE AND INDEMNITY AGREEMENT. (a) The text contained in paragraph (j) of Section 5.01 in the Series 1993-C Insurance and Indemnity Agreement is deleted in its entirety. Such paragraph (j) shall be reserved and the paragraphs of Section 5.01 shall not be redesignated as a result of the deletion effected by this Section 2. (b) Paragraph (k) of Section 5.01 in the Series 1993-C Insurance and Indemnity Agreement is amended by deleting the percentage specified therein and replacing such percentage with the percentage corresponding to such Series specified under Column I of Exhibit A hereto. Section 3. AMENDMENT TO THE SERIES 1993-D INSURANCE AND INDEMNITY AGREEMENT, SERIES 1994-A INSURANCE AND INDEMNITY AGREEMENT AND SERIES 1994-B INSURANCE AND INDEMNITY AGREEMENT. (a) The text contained in paragraph (k) of Section 5.01 in each of the Series 1993-D Insurance and Indemnity Agreement, Series 1994-A Insurance and Indemnity Agreement and Series 1994-B Insurance and Indemnity Agreement is deleted in its entirety. Such paragraph (j) shall be reserved in each instance and the paragraphs of Section 5.01 shall not be redesignated as a result of the deletion effected by this Section 3. (b) Paragraph (l) of Section 5.01 in each of the Series 1993-D Insurance and Indemnity Agreement, Series 1994-A Insurance and Indemnity Agreement and Series 1994-B Insurance and Indemnity Agreement is amended by deleting the percentage specified therein and replacing such percentage in each instance with the percentage corresponding to such Series specified under Column I of Exhibit A hereto. Section 4. AMENDMENT TO THE SERIES 1995-B INSURANCE AND INDEMNITY AGREEMENT. (a) The text contained in paragraph (l) of Section 5.01 in the Series 1995-B Insurance and Indemnity Agreement is deleted in its entirety. Such paragraph (j) shall be reserved 3 and the paragraphs of Section 5.01 shall not be redesignated as a result of the deletion effected by this Section 4. (b) Paragraph (m) of Section 5.01 in the Series 1995-B Insurance and Indemnity Agreement is amended by deleting the percentage specified therein and replacing such percentage with the percentage corresponding to such Series specified under Column I of Exhibit A hereto. Section 5. AMENDMENT TO THE SERIES 1995-A INSURANCE AND INDEMNITY AGREEMENT, SERIES 1995-C INSURANCE AND INDEMNITY AGREEMENT, SERIES 1995-D INSURANCE AND INDEMNITY AGREEMENT, SERIES 1995-E INSURANCE AND INDEMNITY AGREEMENT, SERIES 1996-A INSURANCE AND INDEMNITY AGREEMENT AND SERIES 1996-B INSURANCE AND INDEMNITY AGREEMENT. (a) The text contained in paragraph (j) of Section 5.01 in each of the Series 1995-A Insurance and Indemnity Agreement, Series 1995-C Insurance and Indemnity Agreement, Series 1995-D Insurance and Indemnity Agreement, Series 1995-E Insurance and Indemnity Agreement, Series 1996-A Insurance and Indemnity Agreement and Series 1996-B Insurance and Indemnity Agreement is deleted in its entirety. Such paragraph (j) shall be reserved in each instance and the paragraphs of Section 5.01 shall not be redesignated as a result of the deletion effected by this Section 5. (b) Paragraph (k) of Section 5.01 in each of the Series 1995-A Insurance and Indemnity Agreement, Series 1995-C Insurance and Indemnity Agreement, Series 1995-D Insurance and Indemnity Agreement, Series 1995-E Insurance and Indemnity Agreement, Series 1996-A Insurance and Indemnity Agreement and Series 1996-B Insurance and Indemnity Agreement is amended by deleting the percentage specified therein and replacing such percentage in each instance with the percentage corresponding to the applicable Series specified under Column I of Exhibit A hereto. Section 6. COUNTERPARTS. This Amendment to the Insurance and Indemnity Agreements may be executed in several counterparts, each of which shall be deemed an original hereof and all of which, when taken together, shall constitute one and the same Amendment to the Insurance and Indemnity Agreements. Section 7. INSURANCE AND INDEMNITY AGREEMENTS. Except as provided herein, all provisions, terms and conditions of the Insurance and Indemnity Agreements shall remain in full force and effect. As amended hereby, the Insurance and Indemnity Agreements are ratified and confirmed in all respects. Section 8. AUTHORIZATION. By its execution hereof, Financial Security Assurance Inc. hereby instructs the Owner Trustee of each of Olympic Automobile Receivables Trust 1996-B, Olympic Automobile Receivables Trust 1996-A, Olympic Automobile Receivables Trust 1995-E, Olympic Automobile Receivables Trust 1995-D, Olympic Automobile Receivables 4 Trust 1995-C, Olympic Automobile Receivables Trust 1995-B, Olympic Automobile Receivables Trust 1994-B, Olympic Automobile Receivables Trust 1994-A, Olympic Automobile Receivables Trust 1993-D and Olympic Automobile Receivables Trust 1993-C, each in accordance with Section 6.3 of the respective Trust Agreements, to execute this Amendment. 5 IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the respective Insurance and Indemnity Agreements specified below as of the date set forth on the first page hereof. With respect to each Insurance and Indemnity Agreement: FINANCIAL SECURITY ASSURANCE INC. By: /s/ -------------------------------- Authorized Officer OLYMPIC RECEIVABLES FINANCE CORP. By: /s/ John A. Witham -------------------------------- John A. Witham Senior Vice President and Chief Financial Officer OLYMPIC FINANCIAL LTD. By: /s/ John A. Witham -------------------------------- John A. Witham Executive Vice President and Chief Financial Officer With respect to Series 1996-B Insurance and Indemnity Agreement, Series 1996-A Insurance and Indemnity Agreement, Series 1995-E Insurance and Indemnity Agreement, Series 1995-D Insurance and Indemnity Agreement, Series 1995-C Insurance and Indemnity Agreement, Series 1995-B Insurance and Indemnity Agreement Series 1994-B Insurance and Indemnity Agreement, Series 1994-A Insurance and Indemnity Agreement, Series 1993-D Indemnity Agreement, Series 1993-C Insurance and Indemnity Agreement: OLYMPIC FIRST GP INC. By: /s/ John A. Witham -------------------------------- John A. Witham Vice President and Chief Financial Officer OLYMPIC SECOND GP INC. By: /s/ John A. Witham -------------------------------- John A. Witham Vice President and Chief Financial Officer With respect to Series 1996-B Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-B By: Mellon Bank (DE), National Association, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ E.D. Renn -------------------------------- E.D. Renn Vice President With respect to Series 1996-A Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-A By: Mellon Bank (DE), National Association, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ E.D. Renn -------------------------------- E.D. Renn Vice President With respect to Series 1995-E Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1995-E By: Wilmington Trust Company, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ -------------------------------- Name: Title: With respect to Series 1995-D Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1995-D By: Wilmington Trust Company, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ -------------------------------- Name: Title: With respect to Series 1995-C Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1995-C By: Wilmington Trust Company, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ -------------------------------- Name: Title: With respect to Series 1995-B Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1995-B By: Wilmington Trust Company, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ -------------------------------- Name: Title: With respect to Series 1994-B Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1994-B By: Wilmington Trust Company, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ -------------------------------- Name: Title: With respect to Series 1994-A Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1994-A By: Wilmington Trust Company, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ -------------------------------- Name: Title: With respect to Series 1993-D Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1993-D By: Wilmington Trust Company, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ -------------------------------- Name: Title: With respect to Series 1993-C Insurance and Indemnity Agreement only: OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1993-C By: Wilmington Trust Company, not in its individual capacity, but solely in its capacity as Owner Trustee By: /s/ -------------------------------- Name: Title: EXHIBIT A SERIES DESIGNATION COLUMN I Series 1993-A 5.50% Series 1993-B 5.50% Series 1993-C 5.50% Series 1993-D 5.50% Series 1994-A 5.50% Series 1994-B 5.50% Series 1995-A 6.52% Series 1995-B 6.67% Series 1995-C 6.61% Series 1995-D 6.65% Series 1995-E 6.77% Series 1996-A 6.95% Series 1996-B 7.05% EX-10.58 43 INSUR & INDEM AGMT DATED 12/12/96 - ------------------------------------------------------------------------------- INSURANCE AND INDEMNITY AGREEMENT among FINANCIAL SECURITY ASSURANCE INC., OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-D, OLYMPIC FIRST GP INC., OLYMPIC SECOND GP INC., OLYMPIC RECEIVABLES FINANCE CORP. and OLYMPIC FINANCIAL LTD. Dated as of December 12, 1996 - ------------------------------------------------------------------------------- Olympic Automobile Receivables Trust, 1996-D 5.43% Class A-1 Money Market Automobile Receivables-Backed Notes 5.75% Class A-2 Automobile Receivables-Backed Notes 5.95% Class A-3 Automobile Receivables-Backed Notes 6.05% Class A-4 Automobile Receivables-Backed Notes 6.25% Class A-5 Automobile Receivables-Backed Notes 6.125% Automobile Receivables-Backed Certificates - ------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.01. Representations and Warranties of the Trust . . . . . . . . . . . . 8 Section 2.02. Affirmative Covenants of the Trust. . . . . . . . . . . . . . . . . 11 Section 2.03. Negative Covenants of the Trust . . . . . . . . . . . . . . . . . . 17 Section 2.04. Representations and Warranties of OFL and of the Class GP Certificateholders . . . . . . . . . . . . . . . . . . . . 18 Section 2.05. Affirmative Covenants of OFL and each Class GP Certificateholder. . 21 Section 2.06. Negative Covenants of OFL and each Class GP Certificateholder . . . 25 Section 2.07. Representations and Warranties of OFL and the Seller. . . . . . . . 27 Section 2.08. Affirmative Covenants of OFL and the Seller . . . . . . . . . . . . 32 Section 2.09. Negative Covenants of OFL and the Seller. . . . . . . . . . . . . . 36 Section 2.10. Representations and Warranties of OFL . . . . . . . . . . . . . . . 38 Section 2.11. Affirmative Covenants of OFL. . . . . . . . . . . . . . . . . . . . 40 Section 2.12. Negative Covenants of OFL . . . . . . . . . . . . . . . . . . . . . 44 ARTICLE III THE POLICIES; REIMBURSEMENT; INDEMNIFICATION Section 3.01. Conditions Precedent to Issuance of the Policies. . . . . . . . . . 45 Section 3.02. Payment of Fees and Premium . . . . . . . . . . . . . . . . . . . . 51 Section 3.03. Reimbursement and Additional Payment Obligation . . . . . . . . . . 51 Section 3.04. Certain Obligations Not Recourse to OFL; Recourse to Trust Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 3.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 3.06. Payment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 3.07. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
PAGE ARTICLE IV FURTHER AGREEMENTS; MISCELLANEOUS Section 4.01. Effective Date; Term of Agreement . . . . . . . . . . . . . . . . . 55 Section 4.02. Further Assurances and Corrective Instruments . . . . . . . . . . . 56 Section 4.03. Obligations Absolute. . . . . . . . . . . . . . . . . . . . . . . . 56 Section 4.04. Assignments; Reinsurance; Third-Party Rights. . . . . . . . . . . . 57 Section 4.05. Liability of Financial Security . . . . . . . . . . . . . . . . . . 58 ARTICLE V EVENTS OF DEFAULT; REMEDIES Section 5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 5.02. Remedies; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 62 ARTICLE VI MISCELLANEOUS Section 6.01. Amendments, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 6.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 6.03. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 6.04. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 6.05. Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 65 Section 6.06. Consent of Financial Security . . . . . . . . . . . . . . . . . . . 66 Section 6.07. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Section 6.08. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Section 6.09. Trial by Jury Waived. . . . . . . . . . . . . . . . . . . . . . . . 67 Section 6.10. Limited Liability . . . . . . . . . . . . . . . . . . . . . . . . . 67 Section 6.11. Limited Liability of Mellon Bank (DE), National Association . . . . 67 Section 6.12. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 67
ii INSURANCE AND INDEMNITY AGREEMENT INSURANCE AND INDEMNITY AGREEMENT dated as of December 12, 1996, among FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance company ("Financial Security"), OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-D, a Delaware business trust (the "Trust"), OLYMPIC FIRST GP INC., a Delaware corporation ("First Class GP Certificateholder"), OLYMPIC SECOND GP INC., a Delaware corporation ("Second Class GP Certificateholder" and collectively with First Class GP Certificateholder, the "Class GP Certificateholders"), OLYMPIC RECEIVABLES FINANCE CORP., a Delaware corporation (the "Seller"), and OLYMPIC FINANCIAL LTD., a Minnesota corporation (when referred to individually hereunder, "OFL", when referred to as servicer under the Sale and Servicing Agreement referred to below, the "Servicer"). INTRODUCTORY STATEMENTS 1. The Seller is the owner of the Receivables. The Seller proposes to sell to the Trust all of its right, title and interest in and to the Receivables and certain other property pursuant to the Sale and Servicing Agreement. The Trust will issue Certificates pursuant to the Trust Agreement and Notes pursuant to the Indenture. 2. Each Certificate will represent a fractional undivided interest in the Trust. Each Note will be secured by the Indenture Property. The Trust has requested that Financial Security issue two financial guaranty insurance policies guarantying respectively certain distributions of interest and principal on the Certificates and the Notes on each Distribution Date (including any such distributions subsequently avoided as a preference under applicable bankruptcy law) upon the terms, and subject to the conditions, provided herein. 3. OFL and the Seller have previously entered into and may in the future enter into one or more pooling and servicing agreements or sale and servicing agreements with a trust and Seller has previously entered into a Repurchase Agreement dated as of December 3, 1996 among the Seller and Arcadia Receivables Conduit Corp., in each case, pursuant to which the Seller sold or will sell all of its right, title and interest in and to receivables and the other trust property and in connection therewith Financial Security has and may in the future issue additional policies with respect to certain guaranteed distributions on the corresponding certificates, the corresponding notes or both. 4. The parties hereto desire to specify the conditions precedent to the issuance of the Policies by Financial Security, the payment of premium in respect of the Policies, the indemnity and reimbursement to be provided to Financial Security in respect of amounts paid by Financial Security under the Policies or otherwise and certain other matters. In consideration of the premises and of the agreements herein contained, Financial Security, the Trust, the Class GP Certificateholders, OFL, individually and as Servicer, and the Seller hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. DEFINITIONS. All words and phrases defined in the Trust Agreement, the Sale and Servicing Agreement or in the Spread Account Agreement shall have the same meanings in this Agreement. Unless otherwise specified, if a word or phrase defined in the Trust Agreement, the Sale and Servicing Agreement or in the Spread Account Agreement can be applied with respect to one or more Series, such a word or phrase shall be used herein as applied to Series 1996-D. In addition, the following words and phrases shall have the following respective meanings: "ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in Section 412 of the Code and Section 302 of ERISA, whether or not waived. "AGREEMENT" means this Insurance and Indemnity Agreement, as the same may be amended, modified or supplemented from time to time. "AUTHORIZED OFFICER" means, with respect to a corporation, the president, the chief financial officer or any vice president. "CERTIFICATES" means the Certificates issued under the Trust Agreement. "CERTIFICATE POLICY" means the financial guaranty insurance policy, including any endorsements thereto, issued by Financial Security with respect to the Certificates, substantially in the form attached as Exhibit B hereto. "CODE" means the Internal Revenue Code of 1986, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "COMMISSION" means the Securities and Exchange Commission. "COMMONLY CONTROLLED ENTITY" means with respect to the Trust, the Seller or OFL, as the case may be, each entity, whether or not incorporated, which is affiliated with the Trust, the Seller or OFL, as the case may be, pursuant to Section 414(b), (c), (m) or (o) of the Code. 2 "DEFAULT" means any event which results, or which with the giving of notice or the lapse of time or both would result, in an Event of Default. "DEMAND NOTES" means the Series 1993-C Demand Notes, the Series 1993-D Demand Notes, the Series 1994-A Demand Notes, the Series 1994-B Demand Notes, the Series 1995-B Demand Notes, Series 1995-C Demand Notes, the Series 1995-D Demand Notes, the Series 1995-E Demand Notes, the Series 1996-A Demand Notes, the Series 1996-B Demand Notes, the Series 1996-C Demand Notes and the Series 1996-D Demand Notes. "ERISA" means the Employee Retirement Income Security Act of 1974, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "EVENT OF DEFAULT" means any event of default specified in Section 5.01 of this Agreement. "EXPIRATION DATE" means, with respect to each Policy, the final date of the Term of such Policy, as specified therein. "FINANCIAL SECURITY" means Financial Security Assurance Inc., a New York stock insurance company, its successors and assigns. "FINANCIAL STATEMENTS" means with respect to OFL the audited consolidated balance sheets as of December 31, 1995, December 31, 1994 and December 31, 1993 and the related audited consolidated statements of income, retained earnings and cash flows for the 12-month periods then ended and the notes thereto and the unaudited balance sheets as of September 30, 1996 and September 30, 1995 and the statements of income, retained earnings and cash flows for the fiscal quarter then ended. "FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant to the terms of the Policies. "INDENTURE COLLATERAL AGENT" means initially, Norwest Bank Minnesota, National Association, in its capacity as collateral agent on behalf of Financial Security and the Indenture Trustee on behalf of the Noteholders pursuant to the Indenture, its successor in interest and any successor Indenture Collateral Agent under the Indenture. "INDENTURE PROPERTY" means the property pledged to the Indenture Collateral Agent on behalf of Financial Security and the Indenture Trustee on behalf of the Noteholders pursuant to the Indenture. "INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" means an Event of Default specified in clause (a), (f), (g), (h) or (i) of Section 5.01. 3 "INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "IRS" means the Internal Revenue Service. "LATE PAYMENT RATE" means the greater of (i) a per annum rate equal to 3 percent in excess of Financial Security's cost of funds, determined on a monthly basis, or (ii) a per annum rate equal to 3 percent in excess of the arithmetic average of the prime or base lending rates publicly announced by The Chase Manhattan Bank, N.A. (New York, New York) and Citibank, N.A. (New York, New York), as in effect on the last day of the month for which interest is being computed, but, in either case, in no event greater than the maximum rate permitted by law. "LIEN" means, as applied to the property or assets (or the income or profits therefrom) of any Person, in each case whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease, conditional sale or other title retention agreement, or other security interest or encumbrance of any kind; or (b) any arrangement, express or implied, under which such property or assets are transferred, sequestered or otherwise identified for the purpose of subjecting or making available the same for the payment of debt or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person. "MATERIAL ADVERSE CHANGE" means, in respect of any Person, a material adverse change in (i) the business, financial condition, results of operations, or properties of such Person and its Subsidiaries taken as a whole, (ii) the ability of such Person to perform its obligations under any of the Transaction Documents to which it is a party or (iii) the ability of Financial Security or the Trust to realize the benefits or security afforded under the Transaction Documents. "MULTIEMPLOYER PLAN" means a multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity makes contributions or has liability. "NOTE POLICY" means the financial guaranty insurance policy, including any endorsements thereto, issued by Financial Security with respect to the Notes, substantially in the form attached as Exhibit A hereto. "NOTICE OF CLAIM" means the Notice of Claim and Certificate in the form attached as Exhibit A to Endorsement No. 1 to each Policy. "OTHER TRUST PROPERTY" means the property conveyed by the Seller to the Trust pursuant to the Sale and Servicing Agreement and any Subsequent Transfer Agreement. "PBGC" means the Pension Benefit Guaranty Corporation or any successor agency, corporation or instrumentality of the United States to which the duties and powers of the Pension Benefit Guaranty Corporation are transferred. 4 "PLAN" means any pension plan (other than a Multiemployer Plan) covered by Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in respect of which a Commonly Controlled Entity has liability. "POLICIES" means the Note Policy and the Certificate Policy. "PORTFOLIO PERFORMANCE EVENT OF DEFAULT" means an Event of Default specified in clause (j), (k), or (l) of Section 5.01. "PREMIUM" means the premium payable in accordance with Section 3.02 of this Agreement. "PREMIUM LETTER" means the side letter between Financial Security and OFL dated the date hereof in respect of the premium payable by OFL in consideration of the issuance of the Policies. "PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to the premium payable in accordance with Section 3.02 of this Agreement, payable by OFL to Financial Security in monthly installments commencing on the first Distribution Date following the Premium Supplement Commencement Date and on each Distribution Date thereafter, payable in accordance with the terms of the Premium Letter. "PREMIUM SUPPLEMENT COMMENCEMENT DATE" means the date of occurrence of an Event of Default in respect of which the Premium Supplement shall have been declared due and payable in accordance with Section 5.02 of this Agreement. "PREVIOUS SERIES TRANSACTION DOCUMENTS" means the transaction documents as defined in each of the insurance and indemnity agreements related to Olympic Automobile Receivables Trust, 1993-A, Olympic Automobile Receivables Trust, 1993-B, Olympic Automobile Receivables Trust, 1993-C, and Olympic Automobile Receivables Trust, 1993-D, Olympic Automobile Receivables Trust, 1994-A, Olympic Automobile Receivables Trust, 1994-B, Olympic Automobile Receivables Trust, 1995-A, Olympic Automobile Receivables Trust, 1995-B, Olympic Automobile Receivables Trust, 1995-C, Olympic Automobile Receivables Trust, 1995-D, Olympic Automobile Receivables Trust, 1995-E, Olympic Automobile Receivables Trust, 1996-A, Olympic Automobile Receivables Trust, 1996-B, Olympic Automobile Receivables Trust, 1996-C and the Warehousing Notes. "PROSPECTUS" has the meaning set forth in Section 2.07(o) of this Agreement. "RELATED DOCUMENTS" means the Transaction Documents except for the Sale and Servicing Agreement. "REGISTRATION STATEMENT" has the meaning set forth in Section 2.07(o) of this Agreement. 5 "REPORTABLE EVENT" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder. "RESTRICTIONS ON TRANSFERABILITY" means, as applied to the property or assets (or the income or profits therefrom) of any Person, in each case whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise, any material condition to, or restriction on, the ability of such Person or any transferee therefrom to sell, assign, transfer or otherwise liquidate such property or assets in a commercially reasonable time and manner or which would otherwise materially deprive such Person or any transferee therefrom of the benefits of ownership of such property or assets. "SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement dated as of December 1, 1996 among the Seller, OFL, in its individual capacity and as Servicer, the Back-up Servicer and the Trust pursuant to which the Initial Receivables are to be sold, serviced and administered, as the same may be amended from time to time. "SECURITIES ACT" means the Securities Act of 1933, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "SENIOR NOTE INDENTURE" means the Indenture dated as of April 28, 1995 between OFL and Norwest Bank Minnesota, National Association, as amended or supplemented, relating to OFL's $145,000,000 13% Senior Notes due 2000. "SERIES 1993-C DEMAND NOTES" means each of the Demand Notes, dated August 17, 1993, issued by OFL to First Class GP Certificateholder and the Demand Note, dated August 17, 1993, issued by OFL to Second Class GP Certificateholder. "SERIES 1993-D DEMAND NOTES" means each of the Demand Notes, dated December 2, 1993, issued by OFL to First Class GP Certificateholder and the Demand Note, dated December 2, 1993, issued by OFL to Second Class GP Certificateholder. "SERIES 1994-A DEMAND NOTES" means each of the Demand Notes, dated April 5, 1994, issued by OFL to First Class GP Certificateholder and the Demand Note, dated April 5, 1994, issued by OFL to Second Class GP Certificateholder. "SERIES 1994-B DEMAND NOTES" means each of the Demand Notes, dated September 23, 1994, issued by OFL to Class B-GP Certificateholder and the Demand Note, dated September 23, 1994, issued by OFL to Class I-GP Certificateholder. "SERIES 1995-B DEMAND NOTES" means each of the Demand Notes, dated March 15, 1995, issued by OFL to the Class GP Certificateholders. 6 "SERIES 1995-C DEMAND NOTES" means each of the Demand Notes, dated June 15, 1995, issued by OFL to the Class GP Certificateholders. "SERIES 1995-D DEMAND NOTES" means each of the Demand Notes, dated September 21, 1995, issued by OFL to the Class GP Certificateholders. "SERIES 1995-E DEMAND NOTES" means each of the Demand Notes, dated December 6, 1995, issued by OFL to the Class GP Certificateholders. "SERIES 1996-A DEMAND NOTES" means each of the Demand Notes, dated March 14, 1996, issued by OFL to the Class GP Certificateholders. "SERIES 1996-B DEMAND NOTES" means each of the Demand Notes, dated June 14, 1996, issued by OFL to the Class GP Certificateholders. "SERIES 1996-C DEMAND NOTES" means each of the Demand Notes, dated September 12, 1996, issued by OFL to the Class GP Certificateholders. "SERIES 1996-D" means the Series of Certificates and Notes issued on the date hereof pursuant to the Trust Agreement and the Indenture, respectively. "SERIES 1996-D DEMAND NOTES" means each of the Demand Notes, dated December 12, 1996, issued by OFL to the Class GP Certificateholders. "SERIES OF CERTIFICATES", "SERIES OF NOTES" or "SERIES" means Series 1996-D or any, or as the context may require, all, additional series of certificates or notes or both issued as described in paragraph 3 of the Introductory Statements hereto. "SERVICER TERMINATION SIDE LETTER" means the letter from Financial Security to the Servicer dated as of December 12, 1996, with regard to the renewal of the term of the Servicer. "SPREAD ACCOUNT AGREEMENT" means the Spread Account Agreement, dated as of March 25, 1993, as amended and restated as of December 3, 1996 as supplemented in accordance with the terms thereof, among OFL, the Seller, Financial Security, the Indenture Trustee and the Collateral Agent. "STOCK PLEDGE AGREEMENT" means the Third Amended and Restated Stock Pledge Agreement, as amended and restated, dated as of December 3, 1996, among Financial Security, OFL, and the Collateral Agent, as the same may be amended from time to time. "SUBSIDIARY" means, with respect to any Person, any corporation of which a majority of the outstanding shares of capital stock having ordinary voting power for the election of directors is at the time owned by such Person directly or through one or more Subsidiaries. 7 "TERM OF THE POLICY" means, with respect to each Policy, the meaning provided therein. "TERM OF THIS AGREEMENT" shall be determined as provided in Section 4.01 of this Agreement. "TRANSACTION" means the transactions contemplated by the Transaction Documents, including the transactions described in the Registration Statement. "TRANSACTION DOCUMENTS" means this Agreement, the Sale and Servicing Agreement, the Trust Agreement, the Certificate of Trust, the Indenture, the Underwriting Agreement, the Purchase Agreement, the Premium Letter, the Stock Pledge Agreement, the Lockbox Agreement, the Depository Agreements, the Custodian Agreement, the Servicer Termination Side Letter, the Spread Account Agreement and the Administration Agreement. "TRUST AGREEMENT" means the Trust Agreement, dated as of December 1, 1996, among the Seller, the Class GP Certificateholders, Financial Security and Mellon Bank (DE), National Association, as Owner Trustee. "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "UNDERFUNDED PLAN" means any Plan that has an Underfunding. "UNDERFUNDING" means, with respect to any Plan, the excess, if any, of (a) the present value of all benefits under the Plan (based on the assumptions used to fund the Plan pursuant to Section 412 of the Code) as of the most recent valuation date over (b) the fair market value of the assets of such Plan as of such valuation date. "UNDERWRITERS" means Donaldson, Lufkin & Jenrette Securities Corporation, Bear Stearns & Co., Inc. and J.P. Morgan Securities Inc. "UNDERWRITING AGREEMENT" means the Pricing Agreement, dated December 5, 1996, among OFL and the Seller and the Underwriters. "WAREHOUSING NOTES" means the Notes issued pursuant to the Warehousing Series Indenture dated as of December 3, 1996 between Arcadia Receivables Conduit Corp., as the issuer, and Norwest Bank Minnesota, National Association, as trustee. 8 ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.01. REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust represents, warrants and covenants, as of the date hereof and as of the Closing Date, as follows: (a) DUE ORGANIZATION AND QUALIFICATION. The Trust is duly formed and validly existing as a Delaware statutory business trust and is in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business. The Trust is duly qualified to do business, is in good standing and has obtained all necessary licenses, permits, charters, registrations and approvals (together, "approvals") necessary for the conduct of its business as described in the Prospectus and the performance of its obligations under the Transaction Documents, in each jurisdiction in which the failure to be so qualified or to obtain such approvals would render the Receivables in such jurisdiction or any Transaction Document unenforceable in any respect or would otherwise have a material adverse effect upon the Transaction. (b) POWER AND AUTHORITY. The Trust has all necessary trust power and authority to conduct its business as described in the Prospectus, to execute, deliver and perform its obligations under this Agreement and each other Transaction Document to which the Trust is a party and to carry out the terms of each such agreement, and has full power and authority to issue the Notes and the Certificates and pledge and assign its assets pursuant to the Indenture and has duly authorized the issuance of the Notes and Certificates and the assignment of its assets by all necessary trust proceedings. (c) DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and each other Transaction Document to which the Trust is a party has been duly authorized by all necessary action on the part of the Trust and does not require any additional approvals or consents or other action by or any notice to or filing with any Person by or on behalf of the Trust, including, without limitation, any governmental entity. (d) NONCONTRAVENTION. Neither the execution and delivery of this Agreement and each other Transaction Document to which the Trust is a party, the consummation of the Transaction nor the satisfaction of the terms and conditions of this Agreement and each other Transaction Document to which the Trust is a party, (i) conflicts with or results in any breach or violation of any provision of the Certificate of Trust or the Trust Agreement or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to the Trust or any of its properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over the Trust, 9 (ii) constitutes a default by the Trust under or a breach of any provision of any loan agreement, mortgage, indenture or other agreement or instrument to which the Trust is a party or by which it or any of its properties is or may be bound or affected, or (iii) results in or requires the creation of any Lien upon or in respect of any of the Trust's assets except as otherwise expressly contemplated by the Transaction Documents. (e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action, proceeding or investigation pending, or, to the Trust's best knowledge, threatened, before any court, regulatory body, administrative agency, arbitrator or governmental agency or instrumentality having jurisdiction over the Trust or its properties: (A) asserting the invalidity of this Agreement or any other Transaction Document to which the Trust is a party, (B) seeking to prevent the issuance of the Certificates, the Notes or the consummation of the Transaction, (C) seeking any determination or ruling that might materially and adversely affect the validity or enforceability of this Agreement or any other Transaction Document to which the Trust is a party, (D) which might result in a Material Adverse Change with respect to the Trust or (E) which might adversely affect the federal or state tax attributes of the Certificates, the Notes or the Trust. (f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents to which the Trust is a party, when executed and delivered by the Trust, and assuming due authorization, execution and delivery by the other parties thereto, will constitute the legal, valid and binding obligation of the Trust enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. The Certificates, when executed, authenticated and delivered in accordance with the Trust Agreement, will be validly issued and outstanding and entitled to the benefits of the Trust Agreement and will evidence the entire beneficial ownership interest in the Trust. The Notes, when executed, authenticated and delivered in accordance with the Indenture, will be entitled to the benefits of the Indenture and will constitute legal, valid and binding obligations of the Trust, enforceable in accordance with their terms. (g) NO CONSENTS. No consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency, or other governmental instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other non-governmental person, is required in connection with the execution, delivery and performance by the Trust of this Agreement or of any other Transaction Document to which the Trust is a party, except (in each case) such as have been obtained and are in full force and effect. (h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy employed or proposed to be employed by the Trust in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to the Trust which, if enforced, would result in a Material Adverse Change with respect to the Trust. 10 (i) ERISA. The Trust does not maintain or contribute to, or have any obligation to maintain or contribute to, any Plan. The Trust is not subject to any of the provisions of ERISA. (j) COLLATERAL. On the Closing Date, and on each Subsequent Transfer Date, the Trust will have good and marketable title to each item of Other Trust Property conveyed on such date and will own each such item free and clear of any Lien (other than Liens contemplated under the Indenture) or any equity or participation interest of any other Person. (k) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing Date, the Lien and security interest in favor of the Indenture Collateral Agent with respect to Indenture Property will be perfected by the filing of financing statements on Form UCC-1 in each jurisdiction where such recording or filing is necessary for the perfection thereof, the delivery of the Receivable Files for the Receivables to the Custodian, and the establishment of the Collection Account, the Subcollection Account, the Lockbox Account, the Pre-Funding Account, the Reserve Account and the Note Distribution Account in accordance with the provisions of the Transaction Documents, and no other filings in any jurisdiction or any other actions (except as expressly provided herein) are necessary to perfect the Collateral Agent's Lien on and security interest in the Collateral as against any third parties. (l) SECURITY INTEREST IN FUNDS AND INVESTMENTS. Assuming the retention of funds in the Accounts (other than the Certificate Distribution Account) and the acquisition of Eligible Investments in accordance with the Transaction Documents, such funds and Eligible Investments will be subject to a valid and perfected, first priority security interest in favor of the Collateral Agent on behalf of the Indenture Trustee (on behalf of the Noteholders) and Financial Security. (m) COMPLIANCE WITH INVESTMENT COMPANY ACT. The Trust is not required to be registered as an "investment company" under the Investment Company Act. (n) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Trust set forth in each Transaction Document are (in each case) true and correct as if set forth herein. (o) SPECIAL PURPOSE ENTITY. (i) The capital of the Trust is adequate for the business and undertakings of the Trust. (ii) Except as contemplated by the Transaction Documents, the Trust is not engaged in any business transactions with OFL, the Seller or any Affiliate of either of them. (iii) The Trust's funds and assets are not, and will not be, commingled with the funds of any other Person, except as provided in the Transaction Documents. 11 (p) SOLVENCY; FRAUDULENT CONVEYANCE. The Trust is solvent and will not be rendered insolvent by the Transaction or by the performance of its obligations under the Transaction Documents and, after giving effect to such Transaction, the Trust will not be left with an unreasonably small amount of capital with which to engage in its business. The Trust does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. The Trust does not contemplate the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of the Trust or any of its assets. Section 2.02. AFFIRMATIVE COVENANTS OF THE TRUST. The Trust hereby agrees that during the Term of the Agreement, unless Financial Security shall otherwise expressly consent in writing: (a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Trust will comply with all terms and conditions of this Agreement and each other Transaction Document to which it is a party and with all material requirements of any law, rule or regulation applicable to it. The Trust will not cause or permit to become effective any amendment to or modification of any of the Transaction Documents to which it is a party unless (i) (so long as no Insurer Default shall have occurred and be continuing) Financial Security shall have previously approved in writing the form of such amendment or modification or (ii) if an Insurer Default shall have occurred and be continuing, such amendment would not adversely affect the interests of Financial Security. The Trust shall not take any action or fail to take any action that would interfere with the enforcement of any rights under this Agreement or the other Transaction Documents. (b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. The Trust shall keep or cause to be kept in reasonable detail books and records of account of the Trust's assets and business, which shall be furnished to Financial Security upon request. The Trust shall furnish to Financial Security, simultaneously with the delivery of such documents to the Indenture Trustee, the Noteholders or the Certificateholders, as the case may be, copies of all reports, certificates, statements, financial statements or notices furnished to the Indenture Trustee, the Noteholders or the Certificateholders, as the case may be, pursuant to the Transaction Documents. (i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within 90 days after the close of each fiscal year of the Trust, the audited balance sheets of the Trust as of the end of such fiscal year and the audited statements of income, changes in equityowners' equity and cash flows of the Trust for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by the certificate of the Trust's independent accountants (who shall be acceptable to Financial Security) and by the certificate specified in Section 2.02(c) hereof. (ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within 45 days after the close of each of the first three quarters of each fiscal year 12 of the Trust, the unaudited balance sheets of the Trust as of the end of such quarter and the unaudited statements of income, changes in equityowners' equity and cash flows of the Trust for the portion of the fiscal year then ended, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles consistently applied (subject to normal year-end adjustments), and accompanied by the certificate specified in Section 2.02(c) hereof. (iii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of any reports or comment letters submitted to the Trust by its independent accountants in connection with any examination of the financial statements of the Trust. (iv) CERTAIN INFORMATION. Not less than ten days prior to the date of filing with the IRS of any tax return or amendment thereto, copies of the proposed form of such return or amendment and, promptly after the filing or sending thereof, (i) copies of each tax return and amendment thereto that the Trust files with the IRS and (ii) copies of all financial statements, reports, and registration statements which the Trust files with, or delivers to, any federal government agency, authority or body which supervises the issuance of securities by the Trust. (v) OTHER INFORMATION. Promptly upon the request of Financial Security, copies of all schedules, financial statements or other similar reports delivered to or by the Trust pursuant to the terms of this Agreement and the other Transaction Documents and such other data as Financial Security may reasonably request. (c) COMPLIANCE CERTIFICATE. The Trust shall deliver to Financial Security and, upon request, any Noteholder or Certificateholder, concurrently with the delivery of the financial statements required pursuant to Section 2.02 (b)(i) and (ii) hereof, a certificate signed by an Authorized Officer of the Administrator stating that: (i) a review of the Trust's performance under the Transaction Documents during such period has been made under such officer's supervision; (ii) to the best of such individual's knowledge following reasonable inquiry, no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, specifying the nature thereof and, if the Trust has a right to cure pursuant to Section 5.01, stating in reasonable detail the steps, if any, being taken by the Trust to cure such Default or Event of Default or to otherwise comply with the terms of the agreement or agreements to which such Default or Event of Default relates; and (iii) the financial reports submitted in accordance with Section 2.02(b)(i) or (ii) hereof, as applicable, are complete and correct in all material respects and present fairly the financial condition and results of operations of the Trust as of the dates and for 13 the periods indicated, in accordance with generally accepted accounting principles consistently applied (subject as to interim statements to normal year-end adjustments). (d) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. The Trust shall, upon the request of Financial Security, permit Financial Security or its authorized agents (i) to inspect the books and records of the Trust as they may relate to the Notes, the Certificates, the Receivables and the Other Trust Property, the obligations of the Trust under the Transaction Documents, the Trust's business and the Transaction and (ii) to discuss the affairs, finances and accounts of the Trust with any of its personnel and representatives, including its Independent Accountants. Such inspections and discussions shall be conducted during normal business hours and shall not unreasonably disrupt the business of the Trust. The books and records of the Trust will be maintained at the address of the Trust designated herein for receipt of notices, unless the Trust shall otherwise advise the parties hereto in writing. (e) NOTICE OF MATERIAL EVENTS. The Trust shall promptly inform Financial Security in writing of the occurrence of any of the following: (i) the submission of any claim or the initiation of any legal process, litigation or administrative or judicial investigation against the Trust involving potential damages or penalties in an uninsured amount in excess of $100,000 in any one instance or $500,000 in the aggregate; (ii) any change in the location of Trust's principal office or any change in the location of the Trust's books and records; (iii) the occurrence of any Default or Event of Default; (iv) the commencement or threat of any rule making or disciplinary proceedings or any proceedings instituted by or against the Trust in any federal, state or local court or before any governmental body or agency, or before any arbitration board, or the promulgation of any proceeding or any proposed or final rule which, if adversely determined, would result in a Material Adverse Change with respect to the Trust; (v) the commencement of any proceedings by or against the Trust under any applicable bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for the Trust or any of its assets; (vi) the receipt of notice that (A) the Trust is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of the Trust's business is to be, or may be, suspended or revoked, or (C) the Trust is to cease and desist any practice, procedure or policy employed by the Trust in the conduct of its business, and such cessation may result in a Material Adverse Change with respect to the Trust; or 14 (vii) any other event, circumstance or condition that has resulted, or has a material possibility of resulting, in a Material Adverse Change in respect of the Trust. (f) FURTHER ASSURANCES. The Trust will file all necessary financing statements, assignments or other instruments, and any amendments or continuation statements relating thereto, necessary to be kept and filed in such manner and in such places as may be required by law to preserve and protect fully the Lien and security interest in, and all rights of the Indenture Collateral Agent with respect to the Indenture Property, under the Indenture. In addition, the Trust shall, upon the request of Financial Security (so long as no Insurer Default has occurred and is continuing), from time to time, execute, acknowledge and deliver and, if necessary, file such further instruments and take such further action as may be reasonably necessary to effectuate the intention, performance and provisions of the Transaction Documents to which the Trust is a party or to protect the interest of the Indenture Collateral Agent in the Indenture Property under the Indenture. The Trust agrees to cooperate with the Rating Agencies in connection with any review of the Transaction which may be undertaken by the Rating Agencies after the date hereof. (g) MAINTENANCE OF LICENSES. The Trust shall maintain all licenses, permits, charters and registrations which are material to the performance by the Trust of its obligations under this Agreement and each other Transaction Document to which the Trust is a party or by which the Trust is bound. (h) RETIREMENT OF NOTES AND CERTIFICATES. The Trust shall, upon retirement of the Certificates and upon retirement of the Notes furnish to Financial Security a notice of such retirement, and, upon such retirement and the expiration of the term of the applicable Policy, surrender the applicable Policy to Financial Security for cancellation. (i) DISCLOSURE DOCUMENT. Each Prospectus delivered with respect to the Notes and the Certificates shall clearly disclose that the Policies are not covered by the property/casualty insurance security fund specified in Article 76 of the New York Insurance Law. In addition, each Prospectus delivered with respect to the Notes and the Certificates which include financial statements of Financial Security prepared in accordance with generally accepted accounting principles (other than a Prospectus that only incorporates such financial statements by reference) shall include the following statement immediately preceding such financial statements: The New York State Insurance Department recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the New York Insurance Law, and for determining whether its financial condition warrants the payment of a dividend to its stockholders. No consideration is given by the New York State Insurance Department to financial statements prepared in accordance with generally accepted accounting principles in making such determinations. 15 (j) SPECIAL PURPOSE ENTITY. (i) The Trust shall conduct its business solely in its own name through its duly authorized officers or agents so as not to mislead others as to the identity of the entity with which those others are concerned, and particularly will use its best efforts to avoid the appearance of conducting business on behalf of OFL, the Seller, or any other Affiliates thereof or that the assets of the Trust are available to pay the creditors of OFL, the Seller, or any other Affiliates thereof. Without limiting the generality of the foregoing, all oral and written communications, including, without limitation, letters, invoices, purchase orders, contracts, statements and loan applications, will be made solely in the name of the Trust. (ii) The Trust shall maintain trust records and books of account separate from those of OFL, the Seller, each Class GP Certificateholder and Affiliates of any of them. (iii) The Trust shall obtain proper authorization from its equity owners of all trust action requiring such authorization, and copies of each such authorization and the minutes or other written summary of each such meeting shall be delivered to Financial Security within two weeks of such authorization or meeting as the case may be. (iv) Although the organizational expenses of the Trust have been paid by OFL, operating expenses and liabilities of the Trust shall be paid from its own funds. (v) The annual financial statements of the Trust shall disclose the effects of the Trust's transactions in accordance with generally accepted accounting principles and shall disclose that the assets of the Trust are not available to pay creditors of OFL, the Seller, either Class GP Certificateholder or any Affiliate of any of them. (vi) The resolutions, agreements and other instruments of the Trust underlying the transactions described in this Agreement and in the other Transaction Documents shall be continuously maintained by the Trust as official records of the Trust separately identified and held apart from the records of OFL, the Seller, each Class GP Certificateholder and each Affiliate of any of them. (vii) The Trust shall maintain an arm's-length relationship with OFL, the Seller, each Class GP Certificateholder and each Affiliate of any of them and will not hold itself out as being liable for the debts of any such Person. (viii) The Trust shall keep its assets and its liabilities wholly separate from those of all other entities, including, but not limited to, OFL, the Seller, each Class 16 GP Certificateholder and each Affiliate of any of them except, in each case, as contemplated by the Transaction Documents. (k) CLOSING DOCUMENTS. The Trust shall provide or cause to be provided to Financial Security an executed original copy of each document executed in connection with the Transaction within 10 days after the Closing Date, except that the Seller shall cause a copy of the Trust Agreement, the Sale and Servicing Agreement, the Series 1996-D Supplement, the Indenture, the Administration Agreement and each Transaction Document to which Financial Security is a party to be provided to Financial Security on the Closing Date. (l) TAX MATTERS. The Trust will take all actions necessary to ensure that the Trust is taxable as a partnership for federal and state income tax purposes and not as an association (or publicly traded partnership), taxable as a corporation. (m) SECURITIES LAWS. The Trust shall comply in all material respects with all applicable provisions of state and federal securities laws, including blue sky laws and the Securities Act, the Exchange Act and the Investment Company Act and all rules and regulations promulgated thereunder for which non-compliance would result in a Material Adverse Change with respect to the Trust. (n) INCORPORATION OF COVENANTS. The Trust agrees to comply with each of the covenants of the Trust set forth in the Transaction Documents and hereby incorporates such covenants by reference as if each were set forth herein. Section 2.03. NEGATIVE COVENANTS OF THE TRUST. The Trust hereby agrees that during the Term of this Agreement, unless Financial Security shall otherwise give its prior express written consent: (a) WAIVER, AMENDMENTS, ETC. The Trust shall not waive, modify, amend, supplement or consent to any waiver, modification, amendment of or supplement to, any of the provisions of the Certificate of Trust, the Trust Agreement or any of the other Transaction Documents unless, if no Insurer Default shall have occurred and be continuing, Financial Security shall have consented thereto in writing. (b) CREATION OF INDEBTEDNESS; GUARANTEES. The Trust shall not create, incur, assume or suffer to exist any indebtedness or assume, guarantee, endorse or otherwise be or become directly or contingently liable for the obligations of any Person by, among other things, agreeing to purchase any obligation of another Person, agreeing to advance funds to such Person or causing or assisting such Person to maintain any amount of capital, except as contemplated by the Transaction Documents. (c) SUBSIDIARIES. The Trust shall not form, or cause to be formed, any Subsidiaries. 17 (d) NO LIENS. The Trust shall not, except as contemplated by the Transaction Documents create, incur, assume or suffer to exist any Lien of any nature upon or with respect to any of its properties or assets, now owned or hereafter acquired, or sign or file under the Uniform Commercial Code of any jurisdiction any financing statement that names the Trust as debtor, or sign any security agreement authorizing any secured party thereunder to file such a financing statement. (e) IMPAIRMENT OF RIGHTS. The Trust shall not take any action, or fail to take any action, if such action or failure to take action may interfere with the enforcement of any rights under the Transaction Documents that are material to the rights, benefits or obligations of the Indenture Trustee, the Noteholders, the Certificateholders or Financial Security. (f) NO MERGERS. The Trust shall not consolidate with or merge into any Person or transfer all or any material amount of its assets to any Person (except as contemplated by the Transaction Documents) or liquidate or dissolve. (g) ERISA. The Trust shall not contribute or incur any obligation to contribute to, or incur any liability in respect of, any Plan or Multiemployer Plan. (h) OTHER ACTIVITIES. The Trust shall not: (i) sell, pledge, transfer, exchange or otherwise dispose of any of its assets except as permitted under the Transaction Documents; or (ii) engage in any business or activity except as contemplated by the Transaction Documents and as permitted by its Certificate of Trust. (i) INSOLVENCY. The Trust shall not commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, consolidation or other relief with respect to it or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets or make a general assignment for the benefit of its creditors. The Trust shall not take any action in furtherance of, or indicating the consent to, approval of, or acquiescence in any of the acts set forth above. The Trust shall not admit in writing its inability to pay its debts. (j) SUCCESSOR PARTIES. The Trust will not remove or replace, or cause to be removed or replaced, the Servicer, the Indenture Trustee, the Owner Trustee or the Administrator. Section 2.04. REPRESENTATIONS AND WARRANTIES OF OFL AND OF THE CLASS GP CERTIFICATEHOLDERS. Each of OFL and each Class GP Certificateholder (with respect to) represents and warrants as of the date hereof and as of the Closing Date, as follows: 18 (a) DUE ORGANIZATION AND QUALIFICATION. Each Class GP Certificateholder is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business. Each Class GP Certificateholder is duly qualified to do business, is in good standing and has obtained all necessary licenses, permits, charters, registrations and approvals (together, "approvals") necessary for the conduct of its business as described in the Transaction Documents and the performance of its obligations under the Transaction Documents. (b) POWER AND AUTHORITY. Each Class GP Certificateholder has all necessary corporate power and authority to conduct its business as described in the Transaction Documents, to execute, deliver and perform its obligations under this Agreement and each other Transaction Document to which it is a party and to carry out the terms of each such agreement. (c) DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and each other Transaction Document to which each Class GP Certificateholder is a party has been duly authorized by all necessary corporate action on the part of such Class GP Certificateholder and does not require any additional approvals or consents or other action by or any notice to or filing with any Person by or on behalf of such Class GP Certificateholder, including, without limitation, any governmental entity or such Class GP Certificateholder's stockholder. (d) NONCONTRAVENTION. Neither the execution and delivery of this Agreement and each other Transaction Document to which each Class GP Certificateholder is a party, the consummation of the Transaction nor the satisfaction of the terms and conditions of this Agreement and each other Transaction Document to which it is a party, (i) conflicts with or results in any breach or violation of any provision of the charter or bylaws of such Class GP Certificateholder or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to such Class GP Certificateholder or any of its properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over it, (ii) constitutes a default by such Class GP Certificateholder under or a breach of any provision of any loan agreement, mortgage, indenture or other agreement or instrument to which such Class GP Certificateholder is a party or by which it or any of its or their properties is or may be bound or affected, or (iii) results in or requires the creation of any Lien upon or in respect of any of such Class GP Certificateholder's assets except as otherwise expressly contemplated by the Transaction Documents. (e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action, proceeding or investigation pending, or, to OFL's or either Class GP Certificateholder's best knowledge, threatened, before any court, regulatory body, administrative agency, arbitrator or governmental 19 agency or instrumentality having jurisdiction over either Class GP Certificateholder or its properties: (A) asserting the invalidity of this Agreement or any other Transaction Document to which either Class GP Certificateholder is a party, (B) seeking to prevent the issuance of the Certificates or the Notes, or the consummation of the Transaction, (C) seeking any determination or ruling that might materially and adversely affect the validity or enforceability of this Agreement or any other Transaction Document to which either Class GP Certificateholder is a party, (D) which might result in a Material Adverse Change with respect to such Class GP Certificateholder or (E) which might adversely affect the federal or state tax attributes of the Notes, the Certificates or of the Trust. (f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents to which each Class GP Certificateholder is a party, when executed and delivered by such Class GP Certificateholder, and assuming due authorization, execution and delivery by the other parties thereto, will constitute the legal, valid and binding obligation of such Class GP Certificateholder enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. (g) NO CONSENTS. No consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency, or other governmental instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other non-governmental person, is required in connection with the execution, delivery and performance by each Class GP Certificateholder of this Agreement or of any other Transaction Document to which either Class GP Certificateholder is a party, except (in each case) such as have been obtained and are in full force and effect. (h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy employed or proposed to be employed by either Class GP Certificateholder in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to such Class GP Certificateholder which, if enforced, would result in a Material Adverse Change with respect to such Class GP Certificateholder. (i) SPECIAL PURPOSE ENTITY. (i) The capital of each Class GP Certificateholder is adequate for the business and undertakings of such Class GP Certificateholder. (ii) Other than with respect to the ownership by OFL of the stock of each Class GP Certificateholder, the issuance of the Demand Notes by OFL to each Class GP Certificateholder, and except for its ownership of the Series 1993-C Class B Certificates, the Series 1993-D Class B Certificates, the Series 1994-A Class B Certificates, the Series 1994-B Class B-GP and Class I-GP Certificates, the Series 1995-B Class GP Certificates, the Series 1995-C Class GP Certificates, the Series 1995-D Class B-GP and Class I-GP Certificates, the Series 1995-E Class GP Certificates, the Series 1996-A Class GP Certificates, the Series 1996-B Class GP 20 Certificates, the Series 1996-C Class GP Certificates and the Series 1996-D Class GP Certificates, it is not engaged in any business transactions with OFL or any Affiliate of OFL. (iii) At least one executive officer and one director of each Class GP Certificateholder shall be a person who is not, and will not be, a director, officer, employee or holder of any equity securities of OFL, the Seller, or any Affiliate of either of them. (iv) Each Class GP Certificateholder's funds and assets are not, and will not be, commingled with the funds of any other Person. (v) The by-laws of each Class GP Certificateholder require it to maintain (A) correct and complete minute books and records of account, and (B) minutes of the meetings and other proceedings of its shareholders and board of directors. (j) SOLVENCY; FRAUDULENT CONVEYANCE. Each Class GP Certificateholder is solvent and will not be rendered insolvent by the Transaction and, after giving effect to such Transaction, such Class GP Certificateholder will not be left with an unreasonably small amount of capital with which to engage in its business. Neither Class GP Certificateholder intends to incur, or believes that it has incurred, debts beyond its ability to pay such debts as they mature. Neither Class GP Certificateholder contemplates the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such Class GP Certificateholder or any of its assets. (k) CAPITAL STRUCTURE. The shares of stock of each Class GP Certificateholder which have been pledged pursuant to the Stock Pledge Agreement constitute all of the issued and outstanding shares of such Class GP Certificateholder. All of the outstanding equity securities of the Trust in which each Class GP Certificateholder owns an interest are owned by such Class GP Certificateholder free and clear of any Lien. (l) ERISA. Each Class GP Certificateholder is in compliance with ERISA and has not incurred and does not reasonable expect to incur any liability to any Plan or to PBGC in connection with any Plan or to contribute now or in the future in respect of any Plan. (m) SECURITIES LAWS COMPLIANCE. Neither Class GP Certificateholder is required to be registered as an "investment company" under the Investment Company Act of 1940. Neither Class GP Certificateholder is subject to the information reporting requirements of the Exchange Act. (n) TRANSACTION DOCUMENTS. All of the representations and warranties made by each Class GP Certificateholder in the Transaction Documents are incorporated by reference herein as if set forth herein and each such representation and warranty is true and correct as of the Closing Date. 21 Section 2.05. AFFIRMATIVE COVENANTS OF OFL AND EACH CLASS GP CERTIFICATEHOLDER. OFL and each Class GP Certificateholder (with respect to itself) hereby agrees that during the Term of the Agreement, unless Financial Security shall otherwise expressly consent in writing: (a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Such Class GP Certificateholder will comply with all terms and conditions of this Agreement and each other Transaction Document to which it is a party and with all material requirements of any law, rule or regulation applicable to it. Each Class GP Certificateholder will not cause or permit to become effective any amendment to or modification of any of the Transaction Documents to which it is a party unless (i) (so long as no Insurer Default shall have occurred and be continuing) Financial Security shall have previously approved in writing the form of such amendment or modification or (ii) if an Insurer Default shall have occurred and be continuing, such amendment would not adversely affect the interests of Financial Security. Each Class GP Certificateholder shall not take any action or fail to take any action that would interfere with the enforcement of any rights under this Agreement or the other Transaction Documents. (b) CORPORATE EXISTENCE. Each Class GP Certificateholder shall maintain its corporate existence and shall at all times continue to be duly organized under the laws of Delaware and duly qualified and duly authorized (as described in Sections 2.04(a), (b) and (c) hereof) and shall conduct its business in accordance with the terms of its corporate charter and bylaws. (c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. Each Class GP Certificateholder shall keep or cause to be kept in reasonable detail books and records of account of such Class GP Certificateholder's assets and business. Each Class GP Certificateholder shall furnish to Financial Security as soon as available, and in any event within 90 days after the close of each fiscal year of such Class GP Certificateholder, the unaudited balance sheet of such Class GP Certificateholder as of the end of such fiscal year and the unaudited statements of income, changes in shareholders' equity and cash flows of such Class GP Certificateholder for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied. (d) COMPLIANCE CERTIFICATE. Each Class GP Certificateholder shall deliver to Financial Security, within 90 days after the close of each fiscal year of such Class GP Certificateholder, a certificate signed by an Authorized Officer of such Class GP Certificateholder stating that (i) a review of such Class GP Certificateholder's performance under the Transaction Documents during such period has been made under such officer's supervision; (ii) to the best of such individual's knowledge following reasonable inquiry, no Default or Event of Default has occurred, or if a Default or Event of Default has occurred, specifying the nature thereof and, if such Class GP Certificateholder has or had a right to cure pursuant to Section 5.01, stating in reasonable detail the steps, if any, taken or being taken by such Class GP Certificateholder to cure such Default or Event of Default or to otherwise comply with the terms of the Transaction Document to which such Default or Event of Default relates; and (iii) the financial statements submitted in accordance with Section 2.05(c) hereof, as applicable, are complete and correct in all material respects and present fairly the financial condition and results of operations of such 22 Class GP Certificateholder as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied. (e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. Each Class GP Certificateholder shall, upon the request of Financial Security, permit Financial Security or its authorized agents (i) to inspect the books and records of such Class GP Certificateholder as they may relate to the obligations of such Class GP Certificateholder under the Transaction Documents, such Class GP Certificateholder's business and the Transaction and (ii) to discuss the affairs, finances and accounts of such Class GP Certificateholder with any of its officers, directors and representatives, including its Independent Accountants. Each inspections and discussions shall be conducted during normal business hours and shall not unreasonably disrupt the business of such Class GP Certificateholder. The books and records of each Class GP Certificateholder will be maintained at the address designated herein for receipt of notices, unless such Class GP Certificateholder shall otherwise advise the parties hereto in writing. (f) NOTICE OF MATERIAL EVENTS. OFL and each Class GP Certificateholder shall promptly inform Financial Security in writing of the occurrence of any of the following: (i) the submission of any claim or the initiation of any legal process, litigation or administrative or judicial investigation against such Class GP Certificateholder involving potential damages or penalties in an uninsured amount in excess of $5,000 in any one instance or $25,000 in the aggregate; (ii) any change in the location of such Class GP Certificateholder's principal office or any change in the location of such Class GP Certificateholder's books and records; (iii) the occurrence of any Default or Event of Default; (iv) the commencement or threat of any rule making or disciplinary proceedings or any proceedings instituted by or against such Class GP Certificateholder in any federal, state or local court or before any governmental body or agency, or before any arbitration board, or the promulgation of any proceeding or any proposed or final rule which, if adversely determined, would result in a Material Adverse Change with respect to such Class GP Certificateholder or the Trust; (v) the commencement of any proceedings by or against such Class GP Certificateholder under any applicable bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for such Class GP Certificateholder or any of its assets; 23 (vi) the receipt of notice that (A) such Class GP Certificateholder is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of such Class GP Certificateholder's business is to be, or may be, suspended or revoked, or (C) such Class GP Certificateholder is to cease and desist any practice, procedure or policy employed by such Class GP Certificateholder in the conduct of its business, and such cessation may result in a Material Adverse Change with respect to such Class GP Certificateholder or the Trust; or (vii) any other event, circumstance or condition that has resulted, or has a material possibility of resulting, in a Material Adverse Change in respect of such Class GP Certificateholder or the Trust. (g) MAINTENANCE OF LICENSES. Such Class GP Certificateholder shall maintain all licenses, permits, charters and registrations which are material to the performance by such Class GP Certificateholder of its obligations under this Agreement and each other Transaction Document to which the Seller is a party or by which such Class GP Certificateholder is bound. (h) SPECIAL PURPOSE ENTITY. (i) Such Class GP Certificateholder shall conduct its business solely in its own name through its duly authorized officers or agents so as not to mislead others as to the identity of the entity with which those others are concerned, and particularly will use its best efforts to avoid the appearance of conducting business on behalf of the Trust, OFL, the Seller or any other Affiliate of any of them or that, except as expressly provided in the Transaction Documents, the assets of such Class GP Certificateholder are available to pay the creditors of OFL, the Seller or any Affiliate of any of them. Without limiting the generality of the foregoing, all oral and written communications, including, without limitation, letters, invoices, purchase orders, contracts, statements and loan applications, will be made solely in the name of such Class GP Certificateholder. (ii) Such Class GP Certificateholder shall maintain corporate records and books of account separate from those of OFL, the Trust, the Seller and any Affiliate of any of them. (iii) Such Class GP Certificateholder shall obtain proper authorization from its board of directors of all corporate action requiring such authorization, meetings of the board of directors of such Class GP Certificateholder shall be held not less frequently than three times per annum and copies of the minutes of each such board meeting shall be delivered to Financial Security within two weeks of such meeting. (iv) Such Class GP Certificateholder shall obtain proper authorization from its shareholders of all corporate action requiring shareholder approval, meetings of the shareholders of such Class GP Certificateholder shall be held not less 24 frequently than one time per annum and copies of each such authorization and the minutes of each such shareholder meeting shall be delivered to Financial Security within two weeks of such authorization or meeting, as the case may be. (v) Although the organizational expenses of such Class GP Certificateholder have been paid by OFL, operating expenses and liabilities of such Class GP Certificateholder shall be paid from its own funds. (vi) The annual financial statements of such Class GP Certificateholder shall disclose the effects of such Class GP Certificateholder's transactions in accordance with generally accepted accounting principles and shall disclose that the assets of such Class GP Certificateholder are not available except as expressly provided in the Transaction Agreements to pay creditors of OFL, the Seller or any Affiliate of either of them. (vii) The resolutions, agreements and other instruments of such Class GP Certificateholder underlying the transactions described in this Agreement and in the other Transaction Documents shall be continuously maintained by such Class GP Certificateholder as official records of such Class GP Certificateholder separately identified and held apart from the records of OFL, the Seller, the Trust and any Affiliate of any of them. (viii) Except as expressly provided in the Transaction Documents such Class GP Certificateholder shall maintain an arm's-length relationship with OFL, the Seller and any Affiliate of either of them and will not hold itself out as being liable for the debts of OFL, the Seller or any Affiliate of either of them. (ix) Such Class GP Certificateholder shall keep its assets and its liabilities wholly separate from those of all other entities, including, but not limited to, OFL, the Seller and any Affiliate of either of them except, in each case, as contemplated by the Transaction Documents. (i) RETIREMENT OF NOTES AND CERTIFICATES. Such Class GP Certificateholder shall cause the Trust, upon retirement of the Notes or Certificates, to furnish to Financial Security a notice of such retirement, and, upon such retirement and the expiration of the term of the Note Policy or Certificate Policy, to surrender such Note Policy or Certificate Policy, as applicable, to Financial Security for cancellation. (j) INCORPORATION OF COVENANTS. Each Class GP Certificateholder agrees to comply with each of the covenants of such Class GP Certificateholder set forth in the Transaction Documents and hereby incorporates such covenants by reference as if each were set forth herein. (k) TAX MATTERS. As of the Closing Date, the Trust is, and shall remain during the Term of this Agreement, taxable as a partnership for federal and state income tax purposes and not as an association (or publicly traded partnership) taxable as a corporation. 25 Section 2.06. NEGATIVE COVENANTS OF OFL AND EACH CLASS GP CERTIFICATEHOLDER. Each of OFL and each Class GP Certificateholder (with respect to itself) hereby agrees that during the Term of this Agreement, unless Financial Security shall otherwise give its prior express written consent: (a) WAIVER, AMENDMENTS, ETC. Each Class GP Certificateholder shall not waive, modify, amend, supplement or consent to any waiver, modification, amendment of or supplement to, any of the provisions of any of the Transaction Documents or of its certificate of incorporation or by-laws (i) unless, if no Insurer Default shall have occurred and be continuing, Financial Security shall have consented thereto in writing or (ii) if an Insurer Default shall have occurred and be continuing, which would adversely affect the interests of Financial Security. (b) CREATION OF INDEBTEDNESS; GUARANTEES. Neither Class GP Certificateholder shall create, incur, assume or suffer to exist any indebtedness or assume, guarantee, endorse or otherwise be or become directly or contingently liable for the obligations of any Person by, among other things, agreeing to purchase any obligation of another Person, agreeing to advance funds to such Person or causing or assisting such Person to maintain any amount of capital, except as contemplated by the Transaction Documents or, with the prior written consent of Financial Security, as permitted by its certificate of incorporation. (c) SUBSIDIARIES. Neither Class GP Certificateholder shall form, or cause to be formed, any Subsidiaries. (d) NO LIENS. Neither Class GP Certificateholder shall, except as contemplated by the Transaction Documents, create, incur, assume or suffer to exist any Lien of any nature upon or with respect to any of its properties or assets, now owned or hereafter acquired, or sign or file under the Uniform Commercial Code of any jurisdiction any financing statement that names such Class GP Certificateholder as debtor, or sign any security agreement authorizing any secured party thereunder to file such a financing statement. (e) ISSUANCE OF STOCK. Neither Class GP Certificateholder shall issue any shares of capital stock or rights, warrants or options in respect of its capital stock or securities convertible into or exchangeable for its capital stock, other than the shares of common stock which have been pledged to Financial Security under the Stock Pledge Agreement. (f) IMPAIRMENT OF RIGHTS. Neither Class GP Certificateholder shall take any action, or fail to take any action, if such action or failure to take action may interfere with the enforcement of any rights under the Transaction Documents that are material to the rights, benefits or obligations of the Trust, the Indenture Trustee, the Certificateholders, the Noteholders or Financial Security. (g) NO MERGERS. Neither Class GP Certificateholder shall consolidate with or merge into any Person or transfer all or any material amount of its assets to any Person (except as contemplated by the Transaction Documents) or liquidate or dissolve. 26 (h) ERISA. Neither Class GP Certificateholder shall contribute or incur any obligation to contribute to, or incur any liability in respect of, any Plan or Multiemployer Plan. (i) OTHER ACTIVITIES. Neither Class GP Certificateholder shall: (i) sell, pledge, transfer, exchange or otherwise dispose of any of its assets except as permitted under the Transaction Documents; (ii) engage in any business or activity except as contemplated by the Transaction Documents and as permitted by its certificate of incorporation; or (iii) declare or make payment of (a) any divided or other distribution on any shares of its capital stock or (b) any payment on account of the purchase, redemption, retirement or acquisition of (1) any shares of its capital stock or (2) any option, warrant or other right to acquire shares of its capital stock unless (in each case) at the time of such declaration or payment (and after giving effect thereto) the aggregate net worth of the two Class GP Certificateholders would be greater than the Minimum Net Worth. (j) INSOLVENCY. Neither Class GP Certificateholder shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, consolidation or other relief with respect to it or the Trust or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for the Trust or for all or any substantial part of its assets or make a general assignment for the benefit of its creditors. Neither Class GP Certificateholder shall take any action in furtherance of, or indicating the consent to, approval of, or acquiescence in any of the acts set forth above. Neither Class GP Certificateholder shall admit in writing its inability to pay its debts. Section 2.07. REPRESENTATIONS AND WARRANTIES OF OFL AND THE SELLER. Each of OFL and the Seller represent and warrant as of the date hereof and as of the Closing Date, as follows: (a) DUE ORGANIZATION AND QUALIFICATION. The Seller is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business. The Seller is duly qualified to do business, is in good standing and has obtained all necessary licenses, permits, charters, registrations and approvals (together, "approvals") necessary for the conduct of its business as currently conducted and as described in the Prospectus and the performance of its obligations under the Transaction Documents, in each jurisdiction in which the failure to be so qualified or to obtain such approvals would render the Receivables in such jurisdiction or any Transaction Document unenforceable in any respect or would otherwise have a material adverse effect upon the Transaction. 27 (b) POWER AND AUTHORITY. The Seller has all necessary corporate power and authority to conduct its business as currently conducted and as described in the Prospectus, to execute, deliver and perform its obligations under this Agreement and each other Transaction Document to which the Seller is a party and to carry out the terms of each such agreement, and has full power and authority to sell and assign the Receivables and the Other Trust Property to the Trust and has duly authorized such sale and assignment to the Trust by all necessary corporate action. (c) DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and each other Transaction Document to which the Seller is a party has been duly authorized by all necessary corporate action on the part of the Seller and does not require any additional approvals or consents or other action by or any notice to or filing with any Person by or on behalf of the Seller, including, without limitation, any governmental entity or the Seller's stockholder. (d) NONCONTRAVENTION. Neither the execution and delivery of this Agreement and each other Transaction Document to which the Seller is a party, the consummation of the Transaction nor the satisfaction of the terms and conditions of this Agreement and each other Transaction Document to which the Seller is a party, (i) conflicts with or results in any breach or violation of any provision of the charter or bylaws of the Seller or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to the Seller or any of its properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over the Seller, (ii) constitutes a default by the Seller under or a breach of any provision of any loan agreement, mortgage, indenture or other agreement or instrument to which the Seller is a party or by which it or any of its properties is or may be bound or affected, or (iii) results in or requires the creation of any Lien upon or in respect of any of the Seller's assets except as otherwise expressly contemplated by the Transaction Documents. (e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action, proceeding or investigation pending, or, to the Seller's or OFL's best knowledge, threatened, before any court, regulatory body, administrative agency, arbitrator or governmental agency or instrumentality having jurisdiction over the Seller or its properties: (A) asserting the invalidity of this Agreement or any other Transaction Document to which the Seller is a party, (B) seeking to prevent the issuance of the Notes or the Certificates or the consummation of the Transaction, (C) seeking any determination or ruling that might materially and adversely affect the validity or enforceability of this Agreement or any other Transaction Document to which the Seller is a party, (D) which might result in a Material Adverse Change with respect to the Seller or (E) which might adversely affect the federal or state tax attributes of the Notes, the Certificates or the Trust. 28 (f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents to which the Seller is a party, when executed and delivered by the Seller, and assuming due authorization, execution and delivery by the other parties thereto, will constitute the legal, valid and binding obligation of the Seller enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. The Certificates, when executed, authenticated and delivered in accordance with the Trust Agreement, will be validly issued and outstanding and entitled to the benefits of the Trust Agreement and will evidence the entire beneficial ownership interest in the Trust. The Notes, when executed, authenticated and delivered in accordance with the Indenture, will be entitled to the benefits of the Indenture and will constitute legal, valid and binding obligations of the Trust, enforceable in accordance with their terms. (g) NO CONSENTS. No consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency, or other governmental instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other non-governmental person, is required in connection with the execution, delivery and performance by the Seller of this Agreement or of any other Transaction Document to which the Seller is a party, except (in each case) such as have been obtained and are in full force and effect. (h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy employed or proposed to be employed by the Seller in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to the Seller which, if enforced, would result in a Material Adverse Change with respect to the Seller. (i) GOOD TITLE; VALID TRANSFER; ABSENCE OF LIENS; SECURITY INTEREST. Immediately prior to the sale of the Initial Receivables and related Other Trust Property to the Trust pursuant to the Sale and Servicing Agreement, the Seller was the owner of, and had good and marketable title to, such property free and clear of all Liens and Restrictions on Transferability, and had full right, corporate power and lawful authority to assign, transfer and pledge the Initial Receivables and the related Other Trust Property. The Sale and Servicing Agreement constitutes a valid sale, transfer and assignment of the Other Trust Property to the Trust enforceable against creditors of and purchasers of the Seller. In the event that, in contravention of the intention of the parties, the transfer of the Other Trust Property by the Seller to the Trust is characterized as other than a sale, such transfer shall be characterized as a secured financing, and the Trust shall have a valid and perfected first priority security interest in the Other Trust Property free and clear of all Liens and Restrictions on Transferability. (j) ACCURACY OF INFORMATION. Neither the Transaction Documents nor any documents, agreements, instruments, schedules, certificates, statements, cash flow schedules, number runs or other writings or data (collectively, the "Documents") furnished to Financial Security by the Seller or OFL with respect to either of them, their Subsidiaries, the Receivables or the Transaction contain any statement of a material fact which was untrue or misleading in any material respect when made (except insofar as any Document was corrected or superseded by a 29 subsequent Document and Financial Security has not detrimentally relied on the original Document). There is no fact known to the Seller or OFL which has a material possibility of causing a Material Adverse Change with respect to the Seller or OFL, or which has a material possibility of impairing the value or marketability of the Receivables, taken as a whole, or decreasing the probability that amounts due in respect of the Receivables will be collected as due. Since the furnishing of the Transaction Documents, there has been no change or any development or event involving a prospective change known to the Seller or OFL which would render any representation or warranty or other statement made by either of them in any of the Transaction Documents untrue or misleading in a material respect. (k) COMPLIANCE WITH INVESTMENT COMPANY ACT. The Seller is not required to be registered as an "investment company" under the Investment Company Act. (l) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Seller set forth in the Transaction Documents are (in each case) true and correct as if set forth herein. (m) SPECIAL PURPOSE ENTITY. (i) The capital of the Seller is adequate for the business and undertakings of the Seller. (ii) Other than with respect to the ownership by OFL of the stock of the Seller and as provided in the Previous Series Transaction Documents, the Purchase Agreement, the Sale and Servicing Agreement, and the Spread Account Agreement, the Seller is not engaged in any business transactions with OFL or any Affiliate of OFL. (iii) At least one director of the Seller shall be a person who is not, and will not be, a director, officer, employee or holder of any equity securities of OFL or any of its Affiliates or Subsidiaries. (iv) The Seller's funds and assets are not, and will not be, commingled with the funds of any other Person, except as provided in the Transaction Documents. (v) The by-laws of the Seller require it to maintain (A) correct and complete minute books and records of account, and (B) minutes of the meetings and other proceedings of its shareholders and board of directors. (n) SOLVENCY; FRAUDULENT CONVEYANCE. The Seller is solvent and will not be rendered insolvent by the Transaction and, after giving effect to such Transaction, the Seller will not be left with an unreasonably small amount of capital with which to engage in its business. The Seller does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. The Seller does not contemplate the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of the Seller or any of its assets. The amount of 30 consideration being received by the Seller upon the sale of the Initial Receivables and related Other Trust Property and contemplated to be received upon the Sale of the Subsequent Receivables and related Other Trust Property constitutes reasonably equivalent value and fair consideration for interest in such Receivables and such Other Trust Property. The Seller is not transferring the Other Trust Property to the Trust, or selling the Certificates, as provided in the Transaction Documents, with any intent to hinder, delay or defraud any of the Seller's creditors. (o) REGISTRATION STATEMENTS; PROSPECTUS. The Seller has filed with the Securities and Exchange Commission (the "Commission") registration statements on Form S-3 (Nos. 33-97608 and 333-14983), including a preliminary prospectus and prospectus supplement for the registration of the Certificates and the Notes under the Securities Act, has filed such amendments thereto, and such amended preliminary prospectuses and prospectus supplements as may have been required to the date hereof, and will file such additional amendments thereto and such amended prospectuses and prospectus supplements as may hereafter be required. Such registration statements (as amended, if applicable) and the prospectus, together with the prospectus supplement relating to the Certificates and the Notes, constituting a part thereof (including in each case all documents, if any, incorporated by reference therein and the information, if any, deemed to be part thereof pursuant to the rules and regulations of the Commission under the Securities Act (the "Rules and Regulations"), as from time to time amended or supplemented pursuant to the Securities Act or otherwise, are hereinafter referred to as the "Registration Statements" and the "Prospectus," respectively, except that if any revised prospectus or prospectus supplement shall be provided by the Seller for use in connection with the offering of the Certificates and the Notes which differs from the Prospectus filed with the Commission pursuant to Rule 424 of the Rules and Regulations (whether or not such revised prospectus is required to be filed by the Seller pursuant to Rule 424 of the Rules and Regulations), the term "Prospectus" shall refer to such revised prospectus and prospectus supplement from and after the time it is first provided to the Underwriter for such use. The Registration Statements at the time they became effective complied, and at each time that the Prospectus is provided to the Underwriters for use in connection with the offering or sale of any Certificate or Note will comply, in all material respects with the requirements of the Securities Act and the Rules and Regulations. The Registration Statements and the Prospectus at the time the Registration Statements became effective did not and on the date hereof does not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and the Prospectus at the time it was first provided to the Underwriters for use in connection with the offering of the Certificates and the Notes did not, and on the date hereof does not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except that the representations and warranties in this subparagraph shall not apply to statements in or omissions from the Registration Statements or the Prospectus or any preliminary prospectus made in reliance upon information furnished to the Seller in writing by Financial Security expressly for use therein or the financial statements (including the related notes thereto) of Financial Security. (p) ERISA. The Seller is in compliance with ERISA and has not incurred and does not reasonably expect to incur any liabilities to the PBGC under ERISA in connection with 31 any Plan or Multiemployer Plan or to contribute now or in the future in respect of any Plan or Multiemployer Plan. (q) PLEDGE OF SHARES. The shares of stock of the Seller which have been pledged pursuant to the Stock Pledge Agreement constitute all of the issued and outstanding shares of the Seller. (r) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing Date, the Lien and security interest in favor of the Indenture Collateral Agent with respect to Indenture Property will be perfected by the filing of financing statements on Form UCC-1 in each jurisdiction where such recording or filing is necessary for the perfection thereof, the delivery of the Receivable Files for the Receivables to the Custodian, and the establishment of the Collection Account, the Subcollection Account, the Lockbox Account, the Pre-Funding Account, the Reserve Account and the Note Distribution Account in accordance with the provisions of the Transaction Documents, and no other filings in any jurisdiction or any other actions (except as expressly provided herein) are necessary to perfect the Collateral Agent's Lien on and security interest in the Collateral as against any third parties. (s) SECURITY INTEREST IN FUNDS AND INVESTMENTS. Assuming the retention of funds in the Accounts (other than the Certificate Account) and the acquisition of Eligible Investments in accordance with the Transaction Documents, such funds and Eligible Investments will be subject to a valid and perfected, first priority security interest in favor of the Collateral Agent on behalf of the Indenture Trustee (on behalf of the Noteholders) and Financial Security. Section 2.08. AFFIRMATIVE COVENANTS OF OFL AND THE SELLER. Each of OFL and the Seller hereby agree that during the Term of the Agreement, unless Financial Security shall otherwise expressly consent in writing: (a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Seller will comply with all terms and conditions of this Agreement and each other Transaction Document to which it is a party and with all material requirements of any law, rule or regulation applicable to it. The Seller will not cause or permit to become effective any amendment to or modification of any of the Transaction Documents to which it is a party unless (i) (so long as no Insurer Default shall have occurred and be continuing) Financial Security shall have previously approved in writing the form of such amendment or modification or (ii) if an Insurer Default shall have occurred and be continuing, such amendment would not adversely affect the interests of Financial Security. The Seller shall not take any action or fail to take any action that would interfere with the enforcement of any rights under this Agreement or the other Transaction Documents. (b) CORPORATE EXISTENCE. The Seller shall maintain its corporate existence and shall at all times continue to be duly organized under the laws of Delaware and duly qualified and duly authorized (as described in Sections 2.07(a), (b) and (c) hereof) and shall conduct its business in accordance with the terms of its corporate charter and bylaws. 32 (c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. The Seller shall keep or cause to be kept in reasonable detail books and records of account of the Seller's assets and business, and shall clearly reflect therein the transfer of the Receivables and the Other Trust Property to the Trust and the sale of the Receivables as a sale to the Trust of the Seller's interest in the Receivables and the Other Trust Property. The Seller shall furnish to Financial Security, simultaneously with the delivery of such documents to the Trustee, the Noteholders or the Certificateholders, as the case may be, copies of all reports, certificates, statements, financial statements or notices furnished to the Trustee, the Noteholders or the Certificateholders, as the case may be, pursuant to the Transaction Documents. The Seller shall furnish to Financial Security as soon as available, and in any event within 90 days after the close of each fiscal year of the Seller, the unaudited balance sheet of the Seller as of the end of such fiscal year and the unaudited statements of income, changes in shareholders' equity and cash flows of the Seller for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied. (d) COMPLIANCE CERTIFICATE. The Seller shall deliver to Financial Security, within 90 days after the close of each fiscal year of the Seller, a certificate signed by an Authorized Officer of the Seller stating that: (i) a review of the Seller's performance under the Transaction Documents during such period has been made under such officer's supervision; and (ii) to the best of such individual's knowledge following reasonable inquiry, no Default or Event of Default has occurred, or if a Default or Event of Default has occurred, specifying the nature thereof and, if the Seller has or had a right to cure pursuant to Section 5.01, stating in reasonable detail the steps, if any, taken or being taken by the Seller to cure such Default or Event of Default or to otherwise comply with the terms of the Transaction Document to which such Default or Event of Default relates. (iii) the financial reports submitted in accordance with Section 2.08(c) hereof, are complete and correct in all material respects and present fairly the financial condition and results of operations of the Seller as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied. (e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. The Seller shall, upon the request of Financial Security, permit Financial Security or its authorized agents (i) to inspect the books and records of the Seller as they may relate to the Notes, the Certificates, the Receivables and the Other Trust Property, the obligations of the Seller under the Transaction Documents, the Seller's business and the Transaction and (ii) to discuss the affairs, finances and accounts of the Seller with any of its officers, directors and representatives, including its Independent Accountants. Such inspections and discussions shall be conducted during normal business hours and shall not unreasonably disrupt the business of the Seller. The books and records of the Seller will be maintained at the address of the Seller designated herein for receipt of notices, unless the Seller shall otherwise advise the parties hereto in writing. 33 (f) NOTICE OF MATERIAL EVENTS. The Seller shall promptly inform Financial Security in writing of the occurrence of any of the following: (i) the submission of any claim or the initiation of any legal process, litigation or administrative or judicial investigation against the Seller involving potential damages or penalties in an uninsured amount in excess of $5,000 in any one instance or $25,000 in the aggregate; (ii) any change in the location of Seller's principal office or any change in the location of the Seller's books and records; (iii) the occurrence of any Default or Event of Default; (iv) the commencement or threat of any rule making or disciplinary proceedings or any proceedings instituted by or against the Seller in any federal, state or local court or before any governmental body or agency, or before any arbitration board, or the promulgation of any proceeding or any proposed or final rule which, if adversely determined, would result in a Material Adverse Change with respect to the Seller or the Trust; (v) the commencement of any proceedings by or against the Seller under any applicable bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for the Seller or any of its assets; (vi) the receipt of notice that (A) the Seller is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of the Seller's business is to be, or may be, suspended or revoked, or (C) the Seller is to cease and desist any practice, procedure or policy employed by the Seller in the conduct of its business, and such cessation may result in a Material Adverse Change with respect to the Seller or the Trust; or (vii) any other event, circumstance or condition that has resulted, or has a material possibility of resulting, in a Material Adverse Change in respect of the Seller or the Trust. (g) FURTHER ASSURANCES. The Seller will file all necessary financing statements, assignments or other instruments, and any amendments or continuation statements relating thereto, necessary to be kept and filed in such manner and in such places as may be required by law to preserve and protect fully the Lien and security interest in, and all rights of the Trust with respect to Other Trust Property, under the Sale and Servicing Agreement. In addition, the Seller shall, upon the request of Financial Security (so long as no Insurer Default has occurred and is continuing), from time to time, execute, acknowledge and deliver and, if necessary, file such further instruments and take such further action as may be reasonably necessary to effectuate the 34 intention, performance and provisions of the Transaction Documents to which the Seller is a party or to protect the interest of the Trust in the Receivables under the Sale and Servicing Agreement. The Seller agrees to cooperate with the Rating Agencies in connection with any review of the Transaction which may be undertaken by the Rating Agencies after the date hereof. (h) MAINTENANCE OF LICENSES. The Seller shall maintain all licenses, permits, charters and registrations which are material to the performance by the Seller of its obligations under this Agreement and each other Transaction Document to which the Seller is a party or by which the Seller is bound. (i) DISCLOSURE DOCUMENT. Each Prospectus delivered with respect to the Notes and Certificates shall clearly disclose that the Policies are not covered by the property/casualty insurance security fund specified in Article 76 of the New York Insurance Law. In addition, each Prospectus delivered with respect to the Notes and Certificates which includes financial statements of Financial Security prepared in accordance with generally accepted accounting principles (other than a Prospectus that only incorporates such financial statements by reference) shall include the following statement immediately preceding such financial statements: The New York State Insurance Department recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the New York Insurance Law, and for determining whether its financial condition warrants the payment of a dividend to its stockholders. No consideration is given by the New York State Insurance Department to financial statements prepared in accordance with generally accepted accounting principles in making such determinations. (j) SPECIAL PURPOSE ENTITY. (i) The Seller shall conduct its business solely in its own name through its duly authorized officers or agents so as not to mislead others as to the identity of the entity with which those others are concerned, and particularly will use its best efforts to avoid the appearance of conducting business on behalf of OFL or any other Affiliate thereof or that the assets of the Seller are available to pay the creditors of OFL or any Affiliate thereof. Without limiting the generality of the foregoing, all oral and written communications, including, without limitation, letters, invoices, purchase orders, contracts, statements and loan applications, will be made solely in the name of the Seller. (ii) The Seller shall maintain corporate records and books of account separate from those of OFL and the other Affiliates thereof. (iii) The Seller shall obtain proper authorization from its board of directors of all corporate action requiring such authorization, meetings of the board of directors of the Seller shall be held not less frequently than three times per annum and 35 copies of the minutes of each such board meeting shall be delivered to Financial Security within two weeks of such meeting. (iv) The Seller shall obtain proper authorization from its shareholders of all corporate action requiring shareholder approval, meetings of the shareholders of the Seller shall be held not less frequently than one time per annum and copies of each such authorization and the minutes of each such shareholder meeting shall be delivered to Financial Security within two weeks of such authorization or meeting, as the case may be. (v) Although the organizational expenses of the Seller have been paid by OFL, operating expenses and liabilities of the Seller shall be paid from its own funds. (vi) The annual financial statements of the Seller shall disclose the effects of the Seller's transactions in accordance with generally accepted accounting principles and shall disclose that the assets of the Seller are not available to pay creditors of OFL or any other Affiliate thereof. (vii) The resolutions, agreements and other instruments of the Seller underlying the transactions described in this Agreement and in the other Transaction Documents shall be continuously maintained by the Seller as official records of the Seller separately identified and held apart from the records of OFL and each other Affiliate thereof. (viii) The Seller shall maintain an arm's-length relationship with OFL and the other Affiliates thereof and will not hold itself out as being liable for the debts of OFL or any Affiliate thereof. (ix) The Seller shall keep its assets and its liabilities wholly separate from those of all other entities, including, but not limited to OFL and the other Affiliates thereof except, in each case, as contemplated by the Transaction Documents. (k) CLOSING DOCUMENTS. The Seller shall provide or cause to be provided to Financial Security an executed original copy of each document executed in connection with the Transaction within 10 days after the Closing Date, except that the Seller shall cause a copy of the Trust Agreement, the Sale and Servicing Agreement, the Series 1996-D Supplement, the Indenture, the Administration Agreement and each Transaction Document to which Financial Security is a party to be provided to Financial Security on the Closing Date. (l) SUBSEQUENT RECEIVABLES: GOOD TITLE; VALID TRANSFER; ABSENCE OF LIENS; SECURITY INTEREST. Immediately prior to the sale to the Trust pursuant to a Subsequent Transfer Agreement, the Seller will be the owner of, and shall have good and marketable title to, the Subsequent Receivables transferred thereby and the related Other Trust Property free and clear of all Liens and Restrictions on Transferability, and shall have full right, corporate power and lawful authority to assign, transfer and pledge such property. 36 (m) INCORPORATION OF COVENANTS. The Seller agrees to comply with each of the Seller's covenants set forth in the Transaction Documents and hereby incorporates such covenants by reference as if each were set forth herein. Section 2.09. NEGATIVE COVENANTS OF OFL AND THE SELLER. Each of OFL and the Seller hereby agrees that during the Term of this Agreement, unless Financial Security shall otherwise give its prior express written consent: (a) WAIVER, AMENDMENTS, ETC. The Seller shall not waive, modify, amend, supplement or consent to any waiver, modification, amendment of or supplement to, any of the provisions of any of the Transaction Documents or Previous Series Transaction Documents or of its certificate of incorporation or by-laws (i) unless, if no Insurer Default shall have occurred and be continuing, Financial Security shall have consented thereto in writing or (ii) if an Insurer Default shall have occurred and be continuing, which would adversely affect the interests of Financial Security. (b) CREATION OF INDEBTEDNESS; GUARANTEES. The Seller shall not create, incur, assume or suffer to exist any indebtedness or assume, guarantee, endorse or otherwise be or become directly or contingently liable for the obligations of any Person by, among other things, agreeing to purchase any obligation of another Person, agreeing to advance funds to such Person or causing or assisting such Person to maintain any amount of capital, except as contemplated by the Transaction Documents or as contemplated by the documents relating to a Series of Certificates or Notes. (c) SUBSIDIARIES. The Seller shall not form, or cause to be formed, any Subsidiaries. (d) NO LIENS. The Seller shall not, except as contemplated by the Transaction Documents or as contemplated by the documents relating to a Series of Certificates or Notes, create, incur, assume or suffer to exist any Lien of any nature upon or with respect to any of its properties or assets, now owned or hereafter acquired, or sign or file under the Uniform Commercial Code of any jurisdiction any financing statement that names the Seller as debtor, or sign any security agreement authorizing any secured party thereunder to file such a financing statement. (e) ISSUANCE OF STOCK. The Seller shall not issue any shares of capital stock or rights, warrants or options in respect of its capital stock or securities convertible into or exchangeable for its capital stock, other than the shares of common stock which have been pledged to Financial Security under the Seller Stock Pledge Agreement. (f) IMPAIRMENT OF RIGHTS. The Seller shall not take any action, or fail to take any action, if such action or failure to take action may interfere with the enforcement of any rights under the Transaction Documents that are material to the rights, benefits or obligations of the Trust, the Indenture Trustee, the Certificateholders, the Noteholders or Financial Security. 37 (g) NO MERGERS. The Seller shall not consolidate with or merge into any Person or transfer all or any material amount of its assets to any Person (except as contemplated by the Transaction Documents or the documents relating to a Series of Certificates or Notes). (h) ERISA. The Seller shall not contribute or incur any obligation to contribute to, or incur any liability in respect of, any Plan or Multiemployer Plan. (i) OTHER ACTIVITIES. The Seller shall not: (i) sell, pledge, transfer, exchange or otherwise dispose of any of its assets except as permitted under the Transaction Documents or the documents relating to a Series of Certificates or Notes; or (ii) engage in any business or activity except as contemplated by the Transaction Documents or as contemplated by the documents relating to a Series of Certificates or Notes and as permitted by its certificate of incorporation. (j) INSOLVENCY. The Seller shall not commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, consolidation or other relief with respect to it or the Trust or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for the Trust or for all or any substantial part of its assets or the Collateral related to any or all Series, or make a general assignment for the benefit of its creditors. The Seller shall not take any action in furtherance of, or indicating the consent to, approval of, or acquiescence in any of the acts set forth above. The Seller shall not admit in writing its inability to pay its debts. (k) DIVIDENDS. The Seller shall not declare or make payment of (i) any dividend or other distribution on any shares of its capital stock, or (ii) any payment on account of the purchase, redemption, retirement or acquisition of any option, warrant or other right to acquire shares of its capital stock, unless (in each case) at the time of such declaration or payment (and after giving effect thereto) no amount payable by the Seller under any Transaction Document with respect to any Series is then due and owing but unpaid. Section 2.10. REPRESENTATIONS AND WARRANTIES OF OFL. OFL represents and warrants, as of the date hereof and as of the Closing Date, as follows: (a) DUE ORGANIZATION AND QUALIFICATION. OFL and each of its Subsidiaries is a corporation, duly organized, validly existing and in good standing under the laws of the State of its respective incorporation with power and authority to own its properties and conduct its business. OFL and each of its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified would render any of the Receivables unenforceable in any respect or would otherwise have a material adverse effect upon the Transaction. OFL and each of its Subsidiaries has obtained all licenses, permits, charters, 38 registrations and approvals necessary for the conduct of its business as currently conducted and as described in the Prospectus and for the performance of its obligations under the Transaction Documents. (b) POWER AND AUTHORITY. OFL has all necessary corporate power and authority to conduct its business as currently conducted and as described in the Prospectus, to execute, deliver and perform its obligations under this Agreement and each other Transaction Document to which it is a party and to carry out the terms of each such agreement. (c) DUE AUTHORIZATION. The execution, delivery and performance of this Agreement and each other Transaction Document to which OFL is a party has been duly authorized by all necessary corporate action and does not require any additional approvals or consents or other action by or any notice to or filing with any Person, including, without limitation, any governmental entity or OFL's stockholders. (d) NONCONTRAVENTION. Neither the execution and delivery of this Agreement and each other Transaction Document to which OFL is a party, the consummation of the Transaction, nor the satisfaction of the terms and conditions of this Agreement and each other Transaction Document to which OFL is a party, (i) conflicts with or results in any breach or violation of any provision of the corporate charter or bylaws of OFL or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to OFL or any of its properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over OFL, (ii) constitutes a default by OFL under or a breach of any provision of any loan agreement, mortgage, indenture or other agreement or instrument to which OFL or any of its Subsidiaries is a party or by which it or any of its or their properties is or may be bound or affected, or (iii) results in or requires the creation of any Lien upon or in respect of any of OFL's assets, except as otherwise expressly contemplated by the Transaction Documents. (e) PENDING LITIGATION OR OTHER PROCEEDING. There is no action, proceeding or investigation pending, or, to OFL's best knowledge, threatened, before any court, regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over OFL or its properties: (A) asserting the invalidity of this Agreement or any other Transaction Document to which OFL is a party, (B) seeking to prevent the issuance of the Notes, the Certificates or the consummation of the Transaction, (C) seeking any determination or ruling that might materially and adversely affect the validity or enforceability of, this Agreement or any other Transaction Document to which OFL is a party, (D) which might result in a Material Adverse 39 Change with respect to OFL or (E) which might adversely affect the federal or state tax attributes of the Notes, the Certificates or the Trust. (f) VALID AND BINDING OBLIGATIONS. The Purchase Agreement constitutes a valid sale, transfer, and assignment of the Receivables and Other Trust Property to the Seller, enforceable against creditors of and purchasers from OFL. Each of the other Transaction Documents to which OFL is a party when executed and delivered by OFL, and assuming the due authorization, execution and delivery by the other parties thereto, will constitute the legal, valid and binding obligation of OFL enforceable in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. (g) NO CONSENTS. No consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency, or other governmental instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other non-governmental person, is required in connection with the execution, delivery and performance by OFL of this Agreement or of any other Transaction Document to which OFL is a party, except (in each case) such as have been obtained and are in full force and effect. (h) FINANCIAL STATEMENTS. The Financial Statements of OFL, copies of which have been furnished to Financial Security, (i) are, as of the dates and for the periods referred to therein, complete and correct in all material respects, (ii) present fairly the financial condition and results of operations of OFL as of the dates and for the periods indicated and (iii) have been prepared in accordance with generally accepted accounting principles consistently applied, except as noted therein (subject as to interim statements to normal year-end adjustments and the absence of notes). Since the date of the most recent Financial Statements, there has been no material adverse change in such financial condition or results of operations. Except as disclosed in the Financial Statements, OFL is not subject to any contingent liabilities or commitments that, individually or in the aggregate, have a reasonable likelihood of causing a Material Adverse Change in respect of OFL. (i) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy employed or proposed to be employed by OFL in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to OFL which, if enforced, would result in a Material Adverse Change with respect to OFL. (j) TAXES. OFL has, and each of its Subsidiaries have, filed all federal and state tax returns and paid all taxes to the extent that such taxes have become due. Any taxes, fees and other governmental charges payable by OFL in connection with the Transaction, the execution and delivery of the Transaction Documents and the issuance of the Notes and Certificates have been paid or shall have been paid at or prior to the Closing Date. (k) ERISA. OFL is in compliance with ERISA and has not incurred and does not reasonably expect to incur any liabilities to the PBGC under ERISA in connection with any 40 Plan or Multiemployer Plan or to contribute now or in the future in respect of any Plan or Multiemployer Plan except in accordance with the provisions of Section 2.12(e) hereof. (l) INCORPORATION OF CERTAIN REPRESENTATIONS AND WARRANTIES. OFL represents and warrants to Financial Security that the representations and warranties of OFL set forth in the Transaction Documents are (in each case) true and correct as if set forth herein. Section 2.11. AFFIRMATIVE COVENANTS OF OFL. OFL hereby agrees that during the Term of the Agreement, unless Financial Security shall otherwise expressly consent in writing: (a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. OFL will comply with all terms and conditions of this Agreement and each other Transaction Document to which it is a party and all material requirements of any law, rule or regulation applicable to it. OFL will not cause or permit to become effective any amendment to or modification of any Transaction Document to which it is a party (i) unless, so long as no Insurer Default shall have occurred and be continuing, Financial Security shall have previously approved in writing the form of such amendment or modification or (ii) if an Insurer Default shall have occurred and be continuing, such amendment would not adversely affect the interests of Financial Security. OFL shall not take any action or fail to take any action that would interfere with the enforcement of any rights under this Agreement or the other Transaction Documents. (b) CORPORATE EXISTENCE. OFL shall maintain its corporate existence and shall at all times continue to be duly organized under the laws of Minnesota and duly qualified and duly authorized (as described in Sections 2.10(a), (b) and (c) hereof) and shall conduct its business in accordance with the terms of its corporate charter and bylaws. (c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION. OFL shall keep or cause to be kept in reasonable detail books and records of account of OFL's assets and business. OFL, so long as it shall be the Servicer, shall furnish to Financial Security, simultaneously with the delivery of such documents to the Owner Trustee, Indenture Trustee, the Noteholders or the Certificateholders, as the case may be, copies of all reports, certificates, statements or notices furnished to the Owner Trustee, Indenture Trustee, the Noteholders or the Certificateholders, as the case may be, pursuant to the Transaction Documents. OFL shall also furnish or cause to be furnished to Financial Security: (i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within 90 days after the close of each fiscal year of OFL, the audited balance sheets of OFL and its subsidiaries as of the end of such fiscal year and the audited consolidated statements of income, changes in shareholders' equity and cash flows of OFL for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by the certificate of OFL's independent accountants (which, so long as no Insurer Default shall have occurred and be continuing, shall be acceptable to Financial Security) and by the certificate specified in Section 2.11(d) hereof. 41 (ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within 45 days after the close of each of the first three quarters of each fiscal year of OFL, the unaudited consolidated balance sheets of OFL as of the end of such quarter and the unaudited consolidated statements of income, changes in shareholders' equity and cash flows of OFL for the portion of the fiscal year then ended, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles consistently applied (subject to normal year-end adjustments), and accompanied by the certificate specified in Section 2.11(d) hereof. (iii) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, copies of any reports submitted to OFL by its independent accountants in connection with any examination of the financial statements of OFL. (iv) CERTAIN INFORMATION. Promptly after the filing or sending thereof, copies of all proxy statements, financial statements, reports and registration statements which OFL files, or delivers to, the IRS, the Commission, or any other federal government agency, authority or body which supervises the issuance of securities by OFL or any national securities exchange. (d) COMPLIANCE CERTIFICATE. OFL shall deliver to Financial Security within 90 days after the close of each fiscal year of OFL, a certificate signed by an Authorized Officer of OFL stating that: (i) a review of OFL's performance under the Transaction Documents during such period has been made under such officer's supervision; (ii) to the best of such individual's knowledge following reasonable inquiry, no Default or Event of Default has occurred, or if a Default or Event of Default has occurred, specifying the nature thereof and, if OFL has or had a right to cure pursuant to Section 5.01, stating in reasonable detail the steps, if any, taken or being taken by OFL to cure such Default or Event of Default or to otherwise comply with the terms of the Transaction Document to which such Default or Event of Default relates; and (iii) the financial statements submitted in accordance with Section 2.11(c) hereof, as applicable, are complete and correct in all material respects and present fairly the financial condition and results of operations of OFL as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied (subject as to interim statements to normal year-end adjustments and the absence of notes). (e) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. OFL shall, upon the request of Financial Security, permit Financial Security or its authorized agents (i) to inspect the books and records of OFL as they may relate to the Notes, the Certificates, the Receivables, the obligations of OFL as Servicer under the Transaction Documents, its business and the Transaction and (ii) to discuss the affairs, finances and accounts of OFL with any of its 42 officers, directors and representatives, including its Independent Accountants. Such inspections and discussions shall be conducted during normal business hours and shall not unreasonably disrupt the business of OFL. The books and records of OFL will be maintained at the address of OFL designated herein for receipt of notices, unless OFL shall otherwise advise the parties hereto in writing. (f) NOTICE OF MATERIAL EVENTS. OFL shall promptly inform Financial Security in writing of the occurrence of any of the following: (i) the submission of any claim or the initiation of any legal process, litigation or administrative or judicial investigation against OFL involving potential damages or penalties in an uninsured amount in excess of $10,000 in any one instance or $25,000 in the aggregate; (ii) any change in the location of OFL's principal office or any change in the location of the OFL's books and records; (iii) the occurrence of any Default or Event of Default; (iv) the commencement or threat of any rule making or disciplinary proceedings or any proceedings instituted by or against OFL in any federal, state or local court or before any governmental body or agency, or before any arbitration board, or the promulgation of any proceeding or any proposed or final rule which, if adversely determined, would result in a Material Adverse Change with respect to OFL; (v) the commencement of any proceedings by or against OFL under any applicable bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for OFL or any of its assets; (vi) the receipt of notice that (A) OFL is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of OFL's business is to be, or may be, suspended or revoked, or (C) OFL is to cease and desist any practice, procedure or policy employed by OFL in the conduct of its business, and such cessation may result in a Material Adverse Change with respect to OFL; or (vii) any other event, circumstance or condition that has resulted, or has a material possibility of resulting, in a Material Adverse Change in respect of OFL. (g) MAINTENANCE OF LICENSES. OFL shall maintain all licenses, permits, charters and registrations which are material to the performance by OFL of its obligations under this Agreement and each other Transaction Document to which OFL is a party or by which OFL is bound. 43 (h) ERISA. OFL shall give Financial Security prompt notice of each of the following events (but in no event more than 30 days after the occurrence of the event): (i) an Accumulated Funding Deficiency, (ii) the failure to make a required contribution to a Plan or Multiemployer Plan, (iii) a Reportable Event, (iv) any action by a Commonly Controlled Entity to terminate any Plan or withdraw from any Multiemployer Plan, (v) any action by the PBGC to terminate or appoint a trustee to administer a Plan, (vi) the reorganization or insolvency of any Multiemployer Plan and (vii) an aggregate Underfunding for all Underfunded Plans in excess of $100,000. In addition, OFL shall promptly (but in no case more than 30 days following issuance or receipt by the Commonly Controlled Entity) provide to Financial Security a copy of all correspondence between a Commonly Controlled Entity and the PBGC, IRS, Department of Labor or the administrators of a Multiemployer Plan relating to any of the events described in the preceding sentence or the underfunded status, termination or possible termination of a Plan or a Multiemployer Plan. (i) THIRD-PARTY BENEFICIARY. OFL agrees that Financial Security shall have all rights of a third-party beneficiary in respect of the Sale and Servicing Agreement, it being understood that the remedies of Financial Security with respect to the representations and warranties set forth in Section 2.4(b) and the covenants set forth in Section 3.6(a) shall be limited to the remedies set forth in the Sale and Servicing Agreement. (j) INCORPORATION OF COVENANTS. OFL agrees to comply with each of OFL's covenants set forth in the Transaction Documents and hereby incorporates such covenants by reference as if each were set forth herein. Section 2.12. NEGATIVE COVENANTS OF OFL. OFL hereby agrees that during the Term of this Agreement, unless Financial Security shall otherwise give its express written consent: (a) RESTRICTIONS ON LIENS. OFL shall not create, incur or suffer to exist, or agree to create, incur or suffer to exist, or consent to cause or permit in the future (upon the happening of a contingency or otherwise) the creation, incurrence or existence of any Lien or Restriction on Transferability on the Receivables and the Other Trust Property except for the Liens in favor of the Seller, the Trust and the Indenture Collateral Agent for the benefit of the Indenture Trustee and Financial Security contemplated by the Transaction Documents and the Restrictions on Transferability imposed by the Purchase Agreement and the Sale and Servicing Agreement. (b) IMPAIRMENT OF RIGHTS. OFL shall not take any action, or fail to take any action, if such action or failure to take action may interfere with the enforcement of any rights under the Transaction Documents that are material to the rights, benefits or obligations of the Seller, the Trust, the Indenture Trustee, the Noteholders, the Certificateholders or Financial Security. (c) LIMITATION ON MERGERS. OFL shall not consolidate with or merge with or into any Person or transfer all or any material part of its assets to any Person (except as contemplated by the Transaction Documents) or liquidate or dissolve, provided that OFL may consolidate with, merge with or into, or transfer all or a material part of its assets to, another 44 corporation if (i) the acquiror of its assets, or the corporation surviving such merger or consolidation, shall be organized and existing under the laws of any state and shall be qualified to transact business in each jurisdiction in which failure to qualify would render any Transaction Document unenforceable or would result in a Material Adverse Change in respect of OFL or the Trust Property; (ii) after giving effect to such consolidation, merger or transfer of assets, no Default or Event of Default shall have occurred or be continuing; (iii) such acquiring or surviving entity can lawfully perform the obligations of OFL under the Transaction Documents and shall expressly assume in writing all of the obligations of OFL, including, without limitation, its obligations under the Transaction Documents; and (iv) such acquiring or surviving entity and the consolidated group of which it is a part shall each have a net worth immediately subsequent to such consolidation, merger or transfer of assets at least equal to the net worth of OFL immediately prior to such consolidation, merger or transfer of assets; and OFL shall give Financial Security written notice of any such consolidation, merger or transfer of assets on the earlier of: (A) the date upon which any publicly available filing or release is made with respect to such action or (B) 10 Business Days prior to the date of consummation of such action. OFL shall furnish to Financial Security all information requested by it that is reasonably necessary to determine compliance with this paragraph. (d) WAIVER, AMENDMENTS, ETC. OFL shall not waive, modify, amend, supplement or consent to any waiver, modification, amendment of or supplement to, any of the provisions of any of the Transaction Documents without the prior written consent of Financial Security (i) unless, so long as no Insurer Default shall have occurred and be continuing, Financial Security shall have consented thereto in writing or (ii) if an Insurer Default shall have occurred and be continuing, which would adversely affect the interests of Financial Security. (e) ERISA. OFL shall not contribute or incur any obligation to contribute to, or incur any liability in respect of, any Plan or Multiemployer Plan, except that OFL may make such a contribution or incur such a liability provided that neither OFL nor any Commonly Controlled Entity will: (i) terminate any Plan so as to incur any material liability to the PBGC; (ii) knowingly participate in any "prohibited transaction" (as defined in ERISA) involving any Plan or Multiemployer Plan or any trust created thereunder which would subject any of them to a material tax or penalty on prohibited transactions imposed under Section 4975 of the Code or ERISA; (iii) fail to pay to any Plan or Multiemployer Plan any contribution which it is obligated to pay under the terms of such Plan or Multiemployer Plan, if such failure would cause such Plan to have any material Accumulated Funding Deficiency, whether or not waived; or (iv) allow or suffer to exist any occurrence of a Reportable Event, or any other event or condition, which presents a material risk of termination by the PBGC of any Plan or Multiemployer Plan, to the extent that the occurrence or nonoccurrence of such 45 Reportable Event or other event or condition is within the control of it or any Commonly Controlled Entity. (f) INSOLVENCY. OFL shall not commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, consolidation or other relief with respect to the Seller or either Class GP Certificateholder or (B) seeking appointment of a receiver, trustee, custodian or other similar official for the Seller or for either Class GP Certificateholder. OFL shall not take any action in furtherance of, or indicating the consent to, approval of, or acquiescence in any of the acts set forth above. ARTICLE III THE POLICIES; REIMBURSEMENT; INDEMNIFICATION Section 3.01. CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICIES. Financial Security agrees to issue the Policies subject to satisfaction of the conditions set forth below. (a) The obligation of Financial Security to issue the Policies is subject to the following having occurred or being true (as the case may be): (i) Financial Security shall have received evidence satisfactory to it that the Seller shall have assigned, conveyed and transferred, or caused to be assigned, conveyed and transferred, the Initial Receivables to the Trust, (ii) the Seller shall have created a valid security interest in, and Lien on, the Receivables in favor of the Trust, (iii) the Trust shall have created a valid security interest in, and Lien on, the Indenture Property in favor of the Indenture Collateral Agent on behalf of the Indenture Trustee (on behalf of the Noteholders) and Financial Security (iv) the initial Premium shall have been paid in accordance with Section 3.02 hereof, (v) the representations and warranties of the Trust, the Class GP Certificateholders, the Seller and of OFL and the Servicer set forth or incorporated by reference in this Agreement shall be true and correct on and as of the Closing Date, and (vi) each Transaction Document shall be in full force and effect and no Default thereunder shall have occurred and be continuing. (b) The obligation of Financial Security to issue the Policies is further subject to the condition precedent that Financial Security shall have received on the Closing Date, or, in its sole and absolute discretion, received the opportunity to review prior to and on the Closing Date, the following, each dated the Closing Date and in full force and effect on such date, except as otherwise provided herein, in form and substance satisfactory to Financial Security and its counsel: (i) a certificate of an Authorized Officer of each of the Seller and OFL stating that nothing has come to the attention of such entity to indicate that the Registration Statement or the Prospectus, on the date the Registration Statement became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the 46 Prospectus on any date on which it was forwarded to the Underwriter for use in connection with the offering of the Notes and the Certificates contained, or on the Closing Date contains, any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; (ii) copies, certified to be true copies by an Authorized Officer of the Owner Trustee, of (i) the resolutions of the board of directors of the Owner Trustee authorizing the execution, delivery and performance by the Owner Trustee of this Agreement and each other Transaction Document to which the Owner Trustee is a party and all transactions and documents contemplated hereby and thereby, and of all other documents evidencing any other necessary action of the Owner Trustee (which certification shall state that such resolutions have not been modified, are in full force and effect and constitute the only resolutions adopted by the Owner Trustee's board of directors or any committee thereof with respect thereto and (ii) the Certificate of Trust, certified by the Secretary of State or other appropriate official of the State of Delaware; (iii) with respect to each Class GP Certificateholder, copies, certified to be true copies by an Authorized Officer of such Class GP Certificateholder, of (i) the resolutions of the board of directors of such Class GP Certificateholder authorizing the execution, delivery and performance of this Agreement and each other Transaction Document to which such Class GP Certificateholder is a party and all other transactions and documents evidencing any other necessary action of such Class GP Certificateholder (which certification shall state that such resolutions have not been modified, are in full force and effect and constitute the only resolutions adopted by such Class GP Certificateholder's board of directors or any committee thereof with respect thereto), (ii) the corporate charter, as amended, of such Class GP Certificateholder and (iii) the by-laws, as amended, of such Class GP Certificateholder. (iv) copies, certified to be true copies by an Authorized Officer of the Seller, of (i) the resolutions of the board of directors of the Seller authorizing the execution, delivery and performance of this Agreement and each other Transaction Document to which the Seller is a party and all transactions and documents contemplated hereby and thereby, and of all other documents evidencing any other necessary action of the Seller (which certification shall state that such resolutions have not been modified, are in full force and effect and constitute the only resolutions adopted by the Seller's board of directors or any committee thereof with respect thereto), (ii) the corporate charter of the Seller and (iii) the by-laws, as amended, of the Seller; (v) copies, certified to be true copies by an Authorized Officer of OFL, of (i) the resolutions of the board of directors of OFL authorizing the execution, delivery and performance of this Agreement and each other Transaction Document to which OFL is a party and all other transactions and documents contemplated hereby and thereby, and of all documents evidencing any other necessary action of OFL (which certification shall state that such resolutions have not been modified, are in full force and effect and 47 constitute the only resolutions adopted by OFL's board of directors or any committee thereof with respect thereto), (ii) the corporate charter of OFL and (iii) the by-laws, as amended, of OFL; (vi) a certificate of an Authorized Officer of the Owner Trustee stating that (i) all consents, licenses and approvals necessary for the Owner Trustee to execute, deliver and perform this Agreement, the other Transaction Documents to which the Owner Trustee is a party and all other documents and instruments on the part of the Owner Trustee to be delivered pursuant hereto or thereto have been obtained, and (ii) all such consents, licenses and approvals are in full force and effect, the Owner Trustee has not received any notice of any proceeding for the revocation of any such license, charter, permit or approval, and, to the Owner Trustee's knowledge, there is no threatened action or proceeding or any basis therefor; (vii) with respect to each Class GP Certificateholder, a certificate of an Authorized Officer of such Class GP Certificateholder stating that (i) all consents, licenses and approvals necessary for such Class GP Certificateholder to execute, deliver and perform this Agreement, the other Transaction Documents to which such Class GP Certificateholder is a party and all other documents and instruments on the part of such Class GP Certificateholder to be delivered pursuant hereto or thereto have been obtained, and (ii) all such consents, licenses and approvals are in full force and effect, such Class GP Certificateholder has not received any notice of any proceeding for the revocation of any such license, charter, permit or approval, and, to such Class GP Certificateholder's knowledge, there is no threatened action or proceeding or any basis therefor; (viii) a certificate of an Authorized Officer of the Seller stating that (i) all consents, licenses and approvals necessary for the Seller to execute, deliver and perform this Agreement, the other Transaction Documents to which the Seller is a party and all other documents and instruments on the part of the Seller to be delivered pursuant hereto or thereto have been obtained, and (ii) all such consents, licenses and approvals are in full force and effect, the Seller has not received any notice of any proceeding for the revocation of any such license, charter, permit or approval, and, to the Seller's knowledge, there is no threatened action or proceeding or any basis therefor; (ix) a certificate of an Authorized Officer of OFL stating that (i) all consents, licenses and approvals necessary for OFL to execute, deliver and perform this Agreement, the other Transaction Documents to which OFL is a party and all other documents and instruments on the part of OFL to be delivered pursuant hereto or thereto have been obtained, and (ii) all such consents, licenses and approvals are in full force and effect, OFL has not received any notice of any proceeding for the revocation of any such license, charter, permit or approval, and, to OFL'S knowledge, there is no threatened action or proceeding or any basis therefor; (x) a certificate of an Authorized Officer of the Owner Trustee certifying (i) the names and true signatures of the officers of the Owner Trustee executing and 48 delivering this Agreement, the other Transaction Documents to which the Owner Trustee is a party and the other documents to be executed and delivered by the Owner Trustee hereunder and thereunder, (ii) that approval by the Owner Trustee's equity holders of the execution and delivery of this Agreement, the other Transaction Documents and all other such documents to be executed and delivered, by the Owner Trustee hereunder, has been obtained or is not required, and (iii) that no action for the dissolution of the Owner Trustee has been adopted or contemplated and that no such proceedings have been commenced or are contemplated; (xi) with respect to each Class GP Certificateholder, a certificate of an Authorized Officer of such Class GP Certificateholder certifying (i) the names and true signatures of the officers of such Class GP Certificateholder executing and delivering this Agreement, the other Transaction Documents to which such Class GP Certificateholder is party and the other documents to be executed and delivered by such Class GP Certificateholder hereunder and thereunder, (ii) that approval of such Class GP Certificateholder stockholders of the execution and delivery of this Agreement, the other Transaction Documents and all other such documents to be executed and delivered, by such Class GP Certificateholder hereunder, has been obtained or is not required, and (iii) that no resolution for the dissolution of such Class GP Certificateholder has been adopted or contemplated and that no such proceedings have been commenced or are contemplated; (xii) a certificate of an Authorized Officer of the Seller certifying (i) the names and true signatures of the officers of the Seller executing and delivering this Agreement, the other Transaction Documents to which the Seller is a party and the other documents to be executed and delivered by the Seller hereunder and thereunder, (ii) that approval by the Seller's stockholder of the execution and delivery of this Agreement, the other Transaction Documents and all other such documents to be executed and delivered, by the Seller hereunder, has been obtained or is not required, and (iii) that no resolution for the dissolution of the Seller has been adopted or contemplated and that no such proceedings have been commenced or are contemplated; (xiii) a certificate of an Authorized Officer of OFL certifying (i) the names and true signatures of the officers of OFL executing and delivering this Agreement, the other Transaction Documents to which OFL is a party and the other documents to be executed and delivered by OFL hereunder and thereunder, (ii) that approval by OFL's stockholders of the execution and delivery of this Agreement, the other Transaction Documents and all other such documents to be executed and delivered, by OFL hereunder, has been obtained or is not required, and (iii) that no resolution for the dissolution of OFL has been adopted or contemplated and that no such proceedings have been commenced or are contemplated; (xiv) a certificate of an Authorized Officer of the Trust to the effect that (x) the representations and warranties of the Trust set forth or incorporated by reference in this Agreement are true and correct on and as of the Closing Date and (y) confirming that the conditions precedent set forth herein with respect to the Trust are satisfied; 49 (xv) with respect to each Class GP Certificateholder, a certificate of an Authorized Officer of such Class GP Certificateholder to the effect that (x) the representations and warranties of such Class GP Certificateholder set forth or incorporated by reference in this Agreement are true and correct on and as of the Closing Date, and (y) confirming that the conditions precedent set forth herein with respect to such Class GP Certificateholder are satisfied; (xvi) a certificate of an Authorized Officer of the Seller to the effect that (x) the representations and warranties of the Seller set forth or incorporated by reference in this Agreement are true and correct on and as of the Closing Date and (y) confirming that the conditions precedent set forth herein with respect to the Seller are satisfied; (xvii) a certificate of an Authorized Officer of OFL to the effect that (x) the representations and warranties of OFL set forth or incorporated by reference in this Agreement are true and correct on and as of the Closing Date, and (y) confirming that the conditions precedent set forth herein with respect to OFL are satisfied; (xviii) favorable opinions of counsel and special Texas counsel to the Seller and OFL in form and substance satisfactory to Financial Security and its counsel; (xix) a favorable opinion of counsel to each of the Trust, the Class GP Certificateholders, the Owner Trustee, the Indenture Trustee and the Collateral Agent and the Indenture Collateral Agent, in form and substance satisfactory to Financial Security and its counsel; (xx) evidence that amounts due and payable Financial Security under Section 3.02 of this Agreement have been paid or that acceptable provisions therefor have been made; (xxi) a fully executed copy of each of the Transaction Documents; (xxii) evidence that all actions necessary or, in the opinion of Financial Security, desirable to perfect and protect the interests transferred by the Sale and Servicing Agreement, the liens and security interests created with respect to the Spread Account, the Liens and security interest created in favor of the Indenture Collateral Agent with respect to the Indenture Property pursuant to the Indenture, including, without limitation, the filing of any financing statements required by Financial Security or its counsel, have been taken; (xxiii) a certificate or opinion of Independent Accountants addressed to Financial Security in form and substance satisfactory to Financial Security; (xxiv) evidence that the Seller shall have deposited, or caused to have been deposited, the deposits required under the Sale and Servicing Agreement and the Spread Account Agreement, and any other deposits required to be made on the Closing Date under the Transaction Documents to which the Seller is a party; and 50 (xxv) such other documents, instruments, approvals (and, if requested by Financial Security, certified duplicates of executed copies thereof) or opinions as Financial Security may reasonably request. (c) ISSUANCE OF RATINGS. Financial Security shall have received confirmation that the risk secured by the Policies constitutes an investment grade risk by Standard and Poor's Corporation ("S&P") and an insurable risk by Moody's Investors Service, Inc. ("Moody's") and that the Class A-1 Notes, when issued, will be rated "A-1+" by S&P and "P-1" by Moody's, and that the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class A-5 Notes and the Certificates, when issued, will be rated "AAA" by S&P and "Aaa" by Moody's. (d) DELIVERY OF DOCUMENTS. Financial Security shall have received evidence satisfactory to it that delivery has been made to the Trust or to a Custodian of the Receivable Files required to be so delivered pursuant to Section 2.2 of the Sale and Servicing Agreement. (e) NO DEFAULT. No Default or Event of Default shall have occurred and be continuing. (f) NO LITIGATION, ETC. No suit, action or other proceeding, investigation, or injunction or final judgment relating thereto, shall be pending or threatened before any court or governmental agency in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with any of the Transaction Documents or the consummation of the Transaction. (g) LEGALITY. No statute, rule, regulation or order shall have been enacted, entered or deemed applicable by any government or governmental or administrative agency or court which would make the transactions contemplated by any of the Transaction Documents illegal or otherwise prevent the consummation thereof. (h) SATISFACTION OF CONDITIONS OF UNDERWRITING AGREEMENT. All conditions in the Underwriting Agreement to the Underwriter's obligation to purchase the Notes and Certificates (other than the issuance of the Policies) shall have been concurrently satisfied. Section 3.02. PAYMENT OF FEES AND PREMIUM. (a) LEGAL FEES. On the Closing Date, OFL shall pay or cause to be paid legal fees and disbursements incurred by Financial Security in connection with the issuance of the Policies up to an amount not to exceed $20,000.00, plus disbursements. (b) RATING AGENCY FEES. The initial fees of S&P and Moody's with respect to the Notes and Certificates and the Transaction shall be paid by OFL in full on the Closing Date. All periodic and subsequent fees of S&P or Moody's with respect to, and directly allocable to, the Notes and Certificates shall be for the account of, shall be billed to, and shall be paid by OFL. The fees for any other rating agency shall be paid by the party requesting such other agency's rating, unless such other agency is a substitute for S&P or Moody's in the event that S&P or 51 Moody's is no longer rating the Notes or Certificates, in which case the cost for such agency shall be paid by OFL. (c) AUDITORS' FEES. In the event that Financial Security's auditors are required to provide information or any consent in connection with the Registration Statement fees therefor shall be paid by OFL. Any additional fees incurred by Financial Security after the Closing Date in respect of any additional consents shall be paid by OFL on demand. (d) PREMIUM. In consideration of the issuance by Financial Security of the Policies, OFL shall pay Financial Security the Premium and Premium Supplement, if any, as and when due in accordance with the terms of the Premium Letter. The Premium and Premium Supplement, if any, paid hereunder or under the Sale and Servicing Agreement shall be nonrefundable without regard to whether Financial Security makes any payment under the Policies or any other circumstances relating to the Notes or the Certificates or provision being made for payment of the Notes or the Certificates prior to maturity. Although the Premium is fully earned by Financial Security as of the Closing Date, the Premium shall be payable in periodic installments as provided in the Premium Letter. Anything herein or in any of the Transaction Documents notwithstanding, upon the occurrence of an Event of Default, the entire outstanding balance of further installments of the Premium and Premium Supplement shall be immediately due and payable. All payments of Premium and Premium Supplement, if any, shall be made by wire transfer to an account designated from time to time by Financial Security by written notice to the Seller and OFL. Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION. Each of OFL and the Trust agrees to pay to Financial Security as follows: (a) a sum equal to the total of all amounts paid by Financial Security under the Policies; (b) any and all charges, fees, costs and expenses which Financial Security may reasonably pay or incur, including, but not limited to, attorneys' and accountants' fees and expenses, in connection with (i) any accounts established to facilitate payments under the Policies to the extent Financial Security has not been immediately reimbursed on the date that any amount is paid by Financial Security under the Policies, (ii) the administration, enforcement, defense or preservation of any rights in respect of any of the Transaction Documents, including defending, monitoring or participating in any litigation, proceeding (including any insolvency or bankruptcy proceeding in respect of any Transaction participant or any Affiliate thereof), restructuring or engaging in any protective measures or monitoring activities relating to any of the Transaction Documents, any party to any of the Transaction Documents or the Transaction, (iii) the foreclosure against, sale or other disposition of any collateral securing any obligations under any of the Transaction Documents or otherwise in the discretion of Financial Security, or pursuit of any other remedies under any of the Transaction Documents, to the extent such costs and expenses are not recovered from such foreclosure, sale or other disposition (iv) any amendment, waiver or other action with respect to, or related to, any Transaction Document whether or not executed or completed, (v) preparation of bound volumes of the Transaction Documents, (vi) any review 52 or investigation made by Financial Security in those circumstances where its approval or consent is sought under any of the Transaction Documents; (vii) any federal, state or local tax (other than taxes payable in respect of the gross income of Financial Security) or other governmental charge imposed in connection with the issuance of the Policies; and (viii) Financial Security reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of any of the Transaction Documents (for the purpose of this paragraph (b), costs and expenses shall include a reasonable allocation of compensation and overhead attributable to time of employees of Financial Security spent in connection with the actions described in the foregoing clauses (ii) and (iii)); (c) interest on any and all amounts described in this Section 3.03 from the date payable to or paid by Financial Security until payment thereof in full, and interest on any and all amounts described in Section 3.02, in each case payable to Financial Security at the Late Payment Rate per annum; and (d) any payments made by Financial Security on behalf of, or advanced to, the Seller, OFL, the Indenture Trustee, the Owner Trustee or the Trust including, without limitation, any amounts payable by OFL in its capacity as Servicer or by the Trust, in respect of the Notes or the Certificates and any other amounts owed pursuant to any Transaction Documents; and any payments made by Financial Security as, or in lieu of, any servicing, administration, management, trustee, custodial, collateral agency or administrative fees payable, in the sole discretion of Financial Security to third parties in connection with the Transaction. All such amounts are to be immediately due and payable without demand. Financial Security shall notify OFL of amounts due hereunder. Section 3.04. CERTAIN OBLIGATIONS NOT RECOURSE TO OFL; RECOURSE TO TRUST PROPERTY. (a) Notwithstanding any provision of Section 3.03 to the contrary, the payment obligations provided in Section 3.03(a), b(iii) and (d) (to the extent of advances to the Trust in respect of distributions on the Certificates or to the Indenture Trustee in respect of payments on the Notes), in each case, to the extent that such payment obligations do not arise from any failure or default in the performance by OFL or the Seller of any of its obligations under the Transaction Documents, and any interest on the foregoing in accordance with Section 3.03(c), shall not be recourse to OFL, but shall be payable in the manner and in accordance with priorities provided in the Sale and Servicing Agreement. (b) Financial Security covenants and agrees that it shall not be entitled to any payment from the Trust Property with respect to amounts owed under this Agreement other than as set forth in Section 4.6 and Section 9.1 of the Sale and Servicing Agreement and Section 5.06 of the Indenture. Section 3.05. INDEMNIFICATION. 53 (a) INDEMNIFICATION BY OFL. In addition to any and all rights of reimbursement, indemnification, subrogation and any other rights pursuant hereto or under law or in equity, OFL agrees to pay, and to protect, indemnify and save harmless, Financial Security and its officers, directors, shareholders, employees, agents and each Person, if any, who controls Financial Security within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages, costs or expenses (including, without limitation, fees and expenses of attorneys, consultants and auditors and reasonable costs of investigations) of any nature arising out of or relating to the Transaction by reason of: (i) any statement, omission or action (other than of or by Financial Security) in connection with the offering, issuance, sale or delivery of the Notes or the Certificates; (ii) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft committed by any director, officer, employee or agent of the Trust, either Class GP Certificateholder, the Seller or OFL in connection with the Transaction; (iii) the violation by the Trust, either Class GP Certificateholder, the Seller or OFL of any federal, state or foreign law, rule or regulation, or any judgment, order or decree applicable to it; (iv) the breach by the Trust, either Class GP Certificateholder, the Seller or OFL of any representation, warranty or covenant under any of the Transaction Documents or the occurrence, in respect of the Trust, either Class GP Certificateholder, the Seller or OFL, under any of the Transaction Documents of any event of default or any event which, with the giving of notice or the lapse of time or both, would constitute any event of default; or (v) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statements or the Prospectus or in any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such claims arise out of or are based upon any untrue statement or omission (A) included in the Registration Statements or the Prospectus and furnished by Financial Security in writing expressly for use therein (all such information so furnished being referred to herein as "Financial Security Information"), it being understood that the Financial Security Information is limited to the information included under the caption "Financial Security Assurance Inc.," and the financial statements of Financial Security included in the Registration Statements or the Prospectus or (B) included in the information set forth under the caption "Underwriting" in the Prospectus. (b) CONDUCT OF ACTIONS OR PROCEEDINGS. If any action or proceeding (including any governmental investigation) shall be brought or asserted against Financial Security, any officer, director, shareholder, employee or agent of Financial Security or any Person controlling 54 Financial Security (individually,an "Indemnified Party" and, collectively, the "Indemnified Parties") in respect of which indemnity may be sought from OFL hereunder, Financial Security shall promptly notify OFL in writing, and OFL shall assume the defense thereof, including the employment of counsel satisfactory to Financial Security and the payment of all expenses. The Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof at the expense of the Indemnified Party; PROVIDED, HOWEVER, that the fees and expenses of such separate counsel shall be at the expense of OFL if (i) OFL has agreed to pay such fees and expenses, (ii) OFL shall have failed to assume the defense of such action or proceeding and employ counsel satisfactory to Financial Security in any such action or proceeding or (iii) the named parties to any such action or proceeding (including any impleaded parties) include both the Indemnified Party and the Trust, the Class GP Certificateholders, the Seller or OFL, and the Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Trust, either Class GP Certificateholder, the Seller or OFL (in which case, if the Indemnified Party notifies OFL in writing that it elects to employ separate counsel at the expense of OFL, OFL shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Party, it being understood, however, that OFL shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for the Indemnified Parties, which firm shall be designated in writing by Financial Security). OFL shall not be liable for any settlement of any such action or proceeding effected without its written consent to the extent that any such settlement shall be prejudicial to it, but, if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding with respect to which OFL shall have received notice in accordance with this subsection (c) OFL agrees to indemnify and hold the Indemnified Parties harmless from and against any loss or liability by reason of such settlement or judgment. (c) CONTRIBUTION. To provide for just and equitable contribution if the indemnification provided by OFL is determined to be unavailable for any Indemnified Party (other than due to application of this Section), OFL shall contribute to the losses incurred by the Indemnified Party on the basis of the relative fault of OFL, on the one hand, and the Indemnified Party, on the other hand. Section 3.06. PAYMENT PROCEDURE. In the event of the incurrence by Financial Security of any cost or expense or any payment by Financial Security for which it is entitled to be reimbursed or indemnified as provided above OFL agrees to accept the voucher or other evidence of payment as prima facie evidence of the propriety thereof and the liability therefor to Financial Security. All payments to be made to Financial Security under this Agreement shall be made to Financial Security in lawful currency of the United States of America in immediately available funds to the account number provided in the Premium Letter before 1:00 p.m. (New York, New York time) on the date when due or as Financial Security shall otherwise direct by written notice to OFL. In the event that the date of any payment to Financial Security or the expiration of any time period hereunder occurs on a day which is not a Business Day, then such payment or expiration of time period shall be made or occur on the next succeeding Business Day with the 55 same force and effect as if such payment was made or time period expired on the scheduled date of payment or expiration date. Payments to be made to Financial Security under this Agreement shall bear interest at the Late Payment Rate from the date when due to the date paid. Section 3.07. SUBROGATION. Subject only to the priority of payment provisions of the Sale and Servicing Agreement, each of the Trust, the Indenture Trustee, the Seller and OFL acknowledges that, to the extent of any payment made by Financial Security pursuant to the Policies, Financial Security is to be fully subrogated to the extent of such payment and any additional interest due on any late payment, to the rights of the Noteholders and the Certificateholders to any moneys paid or payable in respect of the Notes or the Certificates respectively under the Transaction Documents or otherwise. Each of the Trust, the Indenture Trustee, the Seller and OFL agrees to such subrogation and, further, agrees to execute such instruments and to take such actions as, in the sole judgment of Financial Security, are necessary to evidence such subrogation and to perfect the rights of Financial Security to receive any such moneys paid or payable in respect of the Notes or the Certificates under the Transaction Documents or otherwise. ARTICLE IV FURTHER AGREEMENTS; MISCELLANEOUS Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall take effect on the Closing Date and shall remain in effect until the later of (a) such time as Financial Security is no longer subject to a claim under the Policies and the Policies shall have been surrendered to Financial Security for cancellation and (b) all amounts payable to Financial Security, the Noteholders, and the Certificateholders under the Transaction Documents and under the Notes and the Certificates have been paid in full; PROVIDED, HOWEVER, that the provisions of Sections 3.02, 3.03, 3.04, 3.05, 3.06 and 4.03 hereof shall survive any termination of this Agreement. Section 4.02. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To the extent permitted by law, each of the Trust, each Class GP Certificateholder, the Seller and OFL agree that it will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as Financial Security may request and as may be required in Financial Security's judgment to effectuate the intention of or facilitate the performance of this Agreement. Section 4.03. OBLIGATIONS ABSOLUTE. (a) The obligations of the Trust, each Class GP Certificateholder, the Seller and OFL hereunder shall be absolute and unconditional, and shall be paid or performed strictly in accordance with this Agreement under all circumstances irrespective of: (i) any lack of validity or enforceability of, or any amendment or other modifications of, or waiver with respect to any of the Transaction Documents, the Notes, 56 the Certificates or the Policies; PROVIDED, that Financial Security shall not have consented to any such amendment, modification or waiver; (ii) any exchange or release of any other obligations hereunder; (iii) the existence of any claim, setoff, defense, reduction, abatement or other right which the Trust, either Class GP Certificateholder, the Seller or OFL may have at any time against Financial Security or any other Person; (iv) any document presented in connection with the Policies proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) any payment by Financial Security under the Policies against presentation of a certificate or other document which does not strictly comply with terms of the Policies; (vi) any failure of the Seller or the Trust to receive the proceeds from the Sale of the Notes to receive the proceeds from the sale of the Certificates; (vii) any breach by the Trust, the Class GP Certificateholders, the Seller or OFL of any representation, warranty or covenant contained in any of the Transaction Documents; or (viii) any other circumstances, other than payment in full, which might otherwise constitute a defense available to, or discharge of, the Trust, either Class GP Certificateholder, the Seller or OFL in respect of any Transaction Document. (b) The Trust, each Class GP Certificateholder, the Seller and OFL and any and all others who are now or may become liable for all or part of the obligations of any of them under this Agreement agree to be bound by this Agreement and (i) to the extent permitted by law, waive and renounce any and all redemption and exemption rights and the benefit of all valuation and appraisement privileges against the indebtedness and obligations evidenced by any Transaction Document or by any extension or renewal thereof; (ii) waive presentment and demand for payment, notices of nonpayment and of dishonor, protest of dishonor and notice of protest; (iii) waive all notices in connection with the delivery and acceptance hereof and all other notices in connection with the performance, default or enforcement of any payment hereunder except as required by the Transaction Documents other than this Agreement; (iv) waive all rights of abatement, diminution, postponement or deduction, or to any defense other than payment, or to any right of setoff or recoupment arising out of any breach under any of the Transaction Documents, by any party thereto or any beneficiary thereof, or out of any obligation at any time owing to the Trust, either Class GP Certificateholder, the Seller or OFL; (v) agree that its liabilities hereunder shall, except as otherwise expressly provided in this Section 4.03, be unconditional and without regard to any setoff, counterclaim or the liability of any other Person for the payment hereof; (vi) agree that any consent, waiver or forbearance hereunder with respect 57 to an event shall operate only for such event and not for any subsequent event; (vii) consent to any and all extensions of time that may be granted by Financial Security with respect to any payment hereunder or other provisions hereof and to the release of any security at any time given for any payment hereunder, or any part thereof, with or without substitution, and to the release of any Person or entity liable for any such payment; and (viii) consent to the addition of any and all other makers, endorsers, guarantors and other obligors for any payment hereunder, and to the acceptance of any and all other security for any payment hereunder, and agree that the addition of any such obligors or security shall not affect the liability of the parties hereto for any payment hereunder. (c) Nothing herein shall be construed as prohibiting the Trust, either Class GP Certificateholder, Seller or OFL from pursuing any rights or remedies it may have against any other Person in a separate legal proceeding. Section 4.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS. (a) This Agreement shall be a continuing obligation of the parties hereto and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither the Trust, First Class GP Certificateholder, Second Class GP Certificateholder, the Seller nor OFL may assign its rights under this Agreement, or delegate any of its duties hereunder, without the prior written consent of Financial Security. Any assignment made in violation of this Agreement shall be null and void. (b) Financial Security shall have the right to give participations in its rights under this Agreement and to enter into contracts of reinsurance with respect to the Policies upon such terms and conditions as Financial Security may in its discretion determine; PROVIDED, HOWEVER, that no such participation or reinsurance agreement or arrangement shall relieve Financial Security of any of its obligations hereunder or under the Policies. (c) In addition, Financial Security shall be entitled to assign or pledge to any bank or other lender providing liquidity or credit with respect to the Transaction or the obligations of Financial Security in connection therewith any rights of Financial Security under the Transaction Documents or with respect to any real or personal property or other interests pledged to Financial Security, or in which Financial Security has a security interest, in connection with the Transaction. (d) Except as provided herein with respect to participants and reinsurers, nothing in this Agreement shall confer any right, remedy or claim, express or implied, upon any Person, including, particularly, any Noteholder or Certificateholder (except to the extent provided herein and without limitation of their rights to receive payments with respect to the Trust Property, including without limitation payments under the respective Policies), other than Financial Security, against the Trust, either Class GP Certificateholder, the Seller, OFL or the Servicer, and all the terms, covenants, conditions, promises and agreements contained herein shall be for the sole and exclusive benefit of the parties hereto and their successors and permitted assigns. Neither the Trustee, the Owner Trustee nor any Noteholder or Certificateholder shall have any right to 58 payment from any premiums paid or payable hereunder or from any other amounts paid by the Seller or OFL pursuant to Section 3.02, 3.03 or 3.04 hereof (without limitation to the rights of the Noteholders and the Certificateholders to receive payments with respect to the Trust Property, as provided in the Indenture and the Trust Agreement). Section 4.05. LIABILITY OF FINANCIAL SECURITY. Neither Financial Security nor any of its officers, directors or employees shall be liable or responsible for: (a) the use which may be made of the Policies by the Owner Trustee or the Indenture Trustee or for any acts or omissions of the Owner Trustee or the Indenture Trustee in connection therewith; or (b) the validity, sufficiency, accuracy or genuineness of documents delivered to Financial Security (or its Fiscal Agent) in connection with any claim under the Policies, or of any signatures thereon, even if such documents or signatures should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged (unless Financial Security shall have actual knowledge thereof). In furtherance and not in limitation of the foregoing, Financial Security (or its Fiscal Agent) may accept documents that appear on their face to be in order, without responsibility for further investigation. ARTICLE V EVENTS OF DEFAULT; REMEDIES Section 5.01. EVENTS OF DEFAULT. The occurrence of any of the following events shall constitute an Event of Default hereunder: (a) any demand for payment shall be made under either of the Policies; (b) any representation or warranty made by the Trust, either of the Class GP Certificateholders, the Seller, OFL or the Servicer under any of the Related Documents, or in any certificate or report furnished under any of the Related Documents, shall prove to be untrue or incorrect in any material respect; (c) (i) the Trust, either Class GP Certificateholder, the Seller, OFL or the Servicer shall fail to pay when due any amount payable by the Seller, OFL or the Servicer under any of the Related Documents (other than payments of principal and interest on the Notes and the Certificates); (ii) the Trust, either Class GP Certificateholder, the Seller, OFL or the Servicer shall have asserted that any of the Transaction Documents to which it is a party is not valid and binding on the parties thereto; or (iii) any court, governmental authority or agency having jurisdiction over any of the parties to any of the Transaction Documents or property thereof shall find or rule that any material provision of any of the Transaction Documents is not valid and binding on the parties thereto. (d) the Trust, either Class GP Certificateholder, the Seller, OFL or the Servicer shall fail to perform or observe any other covenant or agreement contained in any of the Related Documents (except for the obligations described under clause (b) or (c) above) and such failure shall continue for a period of 30 days after written notice given to the Trust, either Class GP 59 Certificateholder, the Seller, OFL or the Servicer (as applicable); PROVIDED that, if such failure shall be of a nature that it cannot be cured within 30 days, such failure shall not constitute an Event of Default hereunder if within such 30-day period such party shall have given notice to Financial Security of corrective action it proposes to take, which corrective action is agreed in writing by Financial Security to be satisfactory and such party shall thereafter pursue such corrective action diligently until such default is cured; (e) there shall have occurred an "Event of Default" as specified in Section 6.01(i) or 6.01(ii) of the Senior Note Indenture or the unpaid principal amount of, premium, if any, and accrued and unpaid interest on the Securities (as defined in the Senior Note Indenture) shall have, upon the declaration of the holders of the Securities, as specified in Section 6.02 of the Senior Note Indenture, become immediately due and payable; (f) the Trust shall adopt a voluntary plan of liquidation or shall fail to pay its debts generally as they come due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors, or shall institute any proceeding seeking to adjudicate the Trust insolvent or seeking a liquidation, or shall take advantage of any insolvency act, or shall commence a case or other proceeding naming the Trust as debtor under the United States Bankruptcy Code or similar law, domestic or foreign, or a case or other proceeding shall be commenced against the Trust under the United States Bankruptcy Code or similar law, domestic or foreign, or any proceeding shall be instituted against the Trust seeking liquidation of its assets and the Trust shall fail to take appropriate action resulting in the withdrawal or dismissal of such proceeding within 30 days or there shall be appointed or the Trust consent to, or acquiesce in, the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of the Trust or the whole or any substantial part of its properties or assets, or the Trust shall take any corporate action in furtherance of any of the foregoing or the Trust terminates pursuant to Section 9.2 of the Trust Agreement; (g) the Trust becomes taxable as an association (or publicly traded partnership) taxable as a corporation for federal or state income tax purposes; (h) on any Distribution Date, the sum of Available Funds with respect to such Distribution Date and the amounts available in the Series 1996-D Spread Account (prior to any deposits into such Spread Account from Spread Accounts related to any other Series) and the amount that may be withdrawn from the Reserve Account pursuant to Section 5.1 of the Sale and Servicing Agreement is less than the sum of the amounts payable on such Distribution Date pursuant to clauses (i) through (viii) of Section 4.6 of the Sale and Servicing Agreement; (i) any default in the observance or performance of any covenant or agreement of the Trust made in the Indenture (other than a default in the payment of the interest or principal on any Note when due) or any representation or warranty of the Trust made in the Indenture or in any certificate or other writing delivered pursuant thereto or in connection therewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and such default shall continue or not be cured, or the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise 60 cured, for a period of 30 days after there shall have been given, by registered or certified mail, to the Trust and the Indenture Trustee by Financial Security, a written notice specifying such default or incorrect representation or warranty and requiring it to be remedied; (j) the Average Delinquency Ratio with respect to any Determination Date shall have been equal to or greater than 7.3%. (k) the Cumulative Default Rate shall be equal to or greater than (A) 3.73%, with respect to any Determination Date occurring prior to or during the third calendar month succeeding the Series 1996-D Closing Date, (B) 7.13%, with respect to any Determination Date occurring after the third, and prior to or during the 6th, calendar month succeeding the Series 1996-D Closing Date, (C) 9.99%, with respect to any Determination Date occurring after the 6th, and prior to or during the 9th, calendar month succeeding the Series 1996-D Closing Date, (D) 12.33%, with respect to any Determination Date occurring after the 9th, and prior to or during the 12th, calendar month succeeding the Series 1996-D Closing Date, (E) 13.46%, with respect to any Determination Date occurring after the 12th, and prior to or during the 15th, calendar month succeeding the Series 1996-D Closing Date, (F) 14.95%, with respect to any Determination Date occurring after the 15th, and prior to or during the 18th, calendar month succeeding the Series 1996-D Closing Date, (G) 16.31%, with respect to any Determination Date occurring after the 18th, and prior to or during the 21st, calendar month succeeding the Series 1996-D Closing Date, (H) 17.34%, with respect to any Determination Date occurring after the 21st, and prior to or during the 24th, calendar month succeeding the Series 1996-D Closing Date, (I) 18.26%, with respect to any Determination Date occurring after the 24th, and prior to or during the 27th, calendar month succeeding the Series 1996-D Closing Date, (J) 19.05%, with respect to any Determination Date occurring after the 27th, and prior to or during the 30th, calendar month succeeding the Series 1996-D Closing Date, (K) 19.64%, with respect to any Determination Date occurring after the 30th, and prior to or during the 33rd, calendar month succeeding the Series 1996-D Closing Date, (L) 20.09%, with respect to any Determination Date occurring after the 33rd, and prior to or during the 36th, calendar month succeeding the Series 1996-D Closing Date, (M) 20.48%, with respect to any Determination Date occurring after the 36th, and prior to or during the 39th, calendar month succeeding the Series 1996-D Closing Date, (N) 20.71%, with respect to any Determination Date occurring after the 39th, and prior to or during the 42nd, calendar month succeeding the Series 1996-D Closing Date, (O) 20.94%, with respect to any Determination Date occurring after the 42nd, and prior to or during the 45th calendar month succeeding the Series 1996-D Closing Date, (P) 21.12%, with respect to any Determination Date occurring after the 45th, and prior to or during the 48th, calendar month succeeding the Series 1996-D Closing Date, (Q) 21.22%, with respect to any Determination Date occurring after the 48th, and prior to or during the 51st, calendar month succeeding the Series 1996-D Closing Date, (R) 21.32%, with respect to any Determination Date occurring after the 51st, and prior to or during the 54th, calendar month succeeding the Series 1996-D Closing Date, (S) 21.36%, with respect to any Determination Date occurring after the 54th, and prior to or during the 57th, calendar month succeeding the Series 1996-D Closing Date, (T) 21.41%, with respect to any Determination Date occurring after the 57th, and prior to or during the 60th, calendar month succeeding the Series 1996-D Closing Date, (U) 21.43%, with respect to any Determination Date occurring after the 60th, and prior to or during the 63rd, calendar month succeeding the Series 61 1996-D Closing Date, (V) 21.45%, with respect to any Determination Date occurring after the 63rd, and prior to or during the 66th, calendar month succeeding the Series 1996-D Closing Date, (W) 21.47%, with respect to any Determination Date occurring after the 66th, and prior to or during the 69th, calendar month succeeding the Series 1996-D Closing Date, or (X) 21.50%, with respect to any Determination Date occurring after the 69th calendar month succeeding the Series 1996-D Closing Date; (l) the Cumulative Net Loss Rate shall be equal to or greater than (A) 2.60%, with respect to any Determination Date occurring prior to or during the third calendar month succeeding the Series 1996-D Closing Date, (B) 4.76%, with respect to any Determination Date occurring after the third, and prior to or during the 6th, calendar month succeeding the Series 1996-D Closing Date, (C) 6.66%, with respect to any Determination Date occurring after the 6th, and prior to or during the 9th, calendar month succeeding the Series 1996-D Closing Date, (D) 8.22%, with respect to any Determination Date occurring after the 9th, and prior to or during the 12th, calendar month succeeding the Series 1996-D Closing Date, (E) 8.97%, with respect to any Determination Date occurring after the 12th, and prior to or during the 15th, calendar month succeeding the Series 1996-D Closing Date, (F) 9.97%, with respect to any Determination Date occurring after the 15th, and prior to or during the 18th, calendar month succeeding the Series 1996-D Closing Date, (G) 10.87%, with respect to any Determination Date occurring after the 18th, and prior to or during the 21st, calendar month succeeding the Series 1996-D Closing Date, (H) 11.56%, with respect to any Determination Date occurring after the 21st, and prior to or during the 24th, calendar month succeeding the Series 1996-D Closing Date, (I) 12.17%, with respect to any Determination Date occurring after the 24th, and prior to or during the 27th, calendar month succeeding the Series 1996-D Closing Date, (J) 12.70%, with respect to any Determination Date occurring after the 27th, and prior to or during the 30th, calendar month succeeding the Series 1996-D Closing Date, (K) 13.09%, with respect to any Determination Date occurring after the 30th, and prior to or during the 33rd, calendar month succeeding the Series 1996-D Closing Date, (L) 13.39%, with respect to any Determination Date occurring after the 33rd, and prior to or during the 36th, calendar month succeeding the Series 1996-D Closing Date, (M) 13.65%, with respect to any Determination Date occurring after the 36th, and prior to or during the 39th, calendar month succeeding the Series 1996-D Closing Date, (N) 13.81%, with respect to any Determination Date occurring after the 39th, and prior to or during the 42nd, calendar month succeeding the Series 1996-D Closing Date, (O) 13.96%, with respect to any Determination Date occurring after the 42nd, and prior to or during the 45th calendar month succeeding the Series 1996-D Closing Date, (P) 14.08%, with respect to any Determination Date occurring after the 45th, and prior to or during the 48th, calendar month succeeding the Series 1996-D Closing Date, (Q) 14.15%, with respect to any Determination Date occurring after the 48th, and prior to or during the 51st, calendar month succeeding the Series 1996-D Closing Date, (R) 14.21%, with respect to any Determination Date occurring after the 51st, and prior to or during the 54th, calendar month succeeding the Series 1996-D Closing Date, (S) 14.25%, with respect to any Determination Date occurring after the 54th, and prior to or during the 57th, calendar month succeeding the Series 1996-D Closing Date, (T) 14.28%, with respect to any Determination Date occurring after the 57th, and prior to or during the 60th, calendar month succeeding the Series 1996-D Closing Date, (U) 14.30%, with respect to any Determination Date occurring after the 60th, and prior to or during the 63rd, calendar month succeeding the Series 62 1996-D Closing Date, (V) 14.32%, with respect to any Determination Date occurring after the 63rd, and prior to or during the 66th, calendar month succeeding the Series 1996-D Closing Date, (W) 14.33%, with respect to any Determination Date occurring after the 66th, and prior to or during the 69th, calendar month succeeding the Series 1996-D Closing Date, or (X) 14.35%, with respect to any Determination Date occurring after the 69th calendar month succeeding the Series 1996-D Closing Date; (m) the occurrence of an Event of Servicing Termination under the Sale and Servicing Agreement; or (n) the occurrence of an "Event of Default" under and as defined in any Insurance and Indemnity Agreement among Financial Security, OFL, the Seller and any other parties thereto, which "Event of Default" is not defined as a "Portfolio Performance Event of Default" in such Insurance and Indemnity Agreement. Section 5.02. REMEDIES; WAIVERS. (a) Upon the occurrence of an Event of Default, Financial Security may exercise any one or more of the rights and remedies set forth below: (i) declare the Premium Supplement to be immediately due and payable, and the same shall thereupon be immediately due and payable, whether or not Financial Security shall have declared an "Event of Default" or shall have exercised, or be entitled to exercise, any other rights or remedies hereunder; (ii) exercise any rights and remedies available under the Transaction Documents in its own capacity or in its capacity as the Person entitled to exercise the rights of Controlling Party under the Transaction Documents; or (iii) take whatever action at law or in equity as may appear necessary or desirable in its judgment to enforce performance of any obligation of the Trust, each Class GP Certificateholder, the Seller or OFL under the Transaction Documents; PROVIDED, HOWEVER, that Financial Security shall not be entitled hereunder to file any petition with respect to the Trust or the Trust Property under any bankruptcy or insolvency law. (b) Unless otherwise expressly provided, no remedy herein conferred upon or reserved is intended to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under the Transaction Documents or existing at law or in equity. No delay or failure to exercise any right or power accruing under any Transaction Document upon the occurrence of any Event of Default or otherwise shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle Financial Security to exercise any remedy reserved to Financial Security in this Article, it shall not be necessary to give any notice. 63 (c) If any proceeding has been commenced to enforce any right or remedy under this Agreement, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to Financial Security, then and in every such case the parties hereto shall, subject to any determination in such proceeding, be restored to their respective former positions hereunder, and, thereafter, all rights and remedies of Financial Security shall continue as though no such proceeding had been instituted. (d) Financial Security shall have the right, to be exercised in its complete discretion, to waive any covenant, Default or Event of Default by a writing setting forth the terms, conditions and extent of such waiver signed by Financial Security and delivered to the Seller and OFL. Any such waiver may only be effected in writing duly executed by Financial Security, and no other course of conduct shall constitute a waiver of any provision hereof. Unless such writing expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence so waived and not to any other similar event or occurrence which occurs subsequent to the date of such waiver. ARTICLE VI MISCELLANEOUS Section 6.01. AMENDMENTS, ETC. This Agreement may be amended, modified or terminated only by written instrument or written instruments signed by the parties hereto. No act or course of dealing shall be deemed to constitute an amendment, modification or termination hereof. Section 6.02. NOTICES. All demands, notices and other communications to be given hereunder shall be in writing (except as otherwise specifically provided herein) and shall be mailed by registered mail or overnight carrier, personally delivered or telecopied (with confirmation by registered mail) to the recipient as follows: (a) To Financial Security: Financial Security Assurance Inc. 350 Park Avenue New York, New York 10022 Attention: Surveillance Department Confirmation: (212) 826-0100 Telecopy Nos.: (212) 339-3518 (212) 339-3529 (in each case in which notice or other communication to Financial Security refers to an Event of Default, a claim on either Policy or with respect to which failure on the part of Financial Security to respond shall be deemed to constitute consent or acceptance, then a copy of such notice or other communication should also be sent to the attention of each of the General 64 Counsel and the Head--Financial Guaranty Group and shall be marked to indicate "URGENT MATERIAL ENCLOSED.") (b) To the Seller: Olympic Receivables Finance Corp. 7825 Washington Avenue South, Suite 410 Minneapolis, Minnesota 55439-2435 Telephone: (612) 942-9888 Telecopier: (612) 942-6730 (c) To OFL: Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, Minnesota 55439-2435 Telephone: (612) 942-9880 Telecopier: (612) 942-6730 (d) To First Class GP Certificateholder: Olympic First GP Inc. 7825 Washington Avenue South Minneapolis, Minnesota 55439-2435 Telephone: (612) 942-9880 Telecopier: (612) 942-6730 (e) To Second Class GP Certificateholder: Olympic Second GP Inc. 7825 Washington Avenue South Minneapolis, Minnesota 55439-2435 Telephone: (612) 942-9880 Telecopier: (612) 942-6730 65 (f) To the Trust: Olympic Automobile Receivables Trust, 1996-D c/o Mellon Bank (DE), National Association, as Owner Trustee 919 North Market Street, Second Floor Wilmington, Delaware 19801 Attention: Robert H. Bell Telephone: (302) 421-2283 Telecopier: (302) 421-2323 with a copy to: Mellon Bank, National Association Two Mellon Bank Center Room 325 Pittsburgh, Pennsylvania 15259 Attention: Kent Christman Telephone: (412) 234-5737 Telecopier: (412) 234-9196 A party may specify an additional or different address or addresses by writing mailed or delivered to the other party as aforesaid. All such notices and other communications shall be effective upon receipt. Section 6.03. SEVERABILITY. In the event that any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, the parties hereto agree that such holding shall not invalidate or render unenforceable any other provision hereof. The parties hereto further agree that the holding by any court of competent jurisdiction that any remedy pursued by any party hereto is unavailable or unenforceable shall not affect in any way the ability of such party to pursue any other remedy available to it. Section 6.04. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 6.05. CONSENT TO JURISDICTION. (a) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES THERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE 66 TRANSACTION OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. (b) To the extent permitted by applicable law, the parties hereto shall not seek and hereby waive the right to any review of the judgment of any such court by any court of any other nation or jurisdiction which may be called upon to grant an enforcement of such judgment. (c) Each of the Class GP Certificateholders, OFL and the Seller hereby irrevocably appoints and designates CT Corporation System, whose address is 1633 Broadway, New York, New York 10019, as its true and lawful attorney and duly authorized agent for acceptance of service of legal process. Each of the Class GP Certificateholders, the Seller and OFL agrees that service of such process upon such Person shall constitute personal service of such process upon it. (d) Nothing contained in the Agreement shall limit or affect Financial Security's right to serve process in any other manner permitted by law or to start legal proceedings relating to any of the Transaction Documents against the Seller or OFL or its property in the courts of any jurisdiction. Section 6.06. CONSENT OF FINANCIAL SECURITY. In the event that Financial Security's consent is required under any of the Transaction Documents, the determination whether to grant or withhold such consent shall be made by Financial Security in its sole discretion without any implied duty towards any other Person, except as otherwise expressly provided therein. Section 6.07. COUNTERPARTS. This Agreement may be executed in counterparts by the parties hereto, and all such counterparts shall constitute one and the same instrument. Section 6.08. HEADINGS. The headings of articles and sections and the table of contents contained in this Agreement are provided for convenience only. They form no part of this Agreement and shall not affect its construction or interpretation. Unless otherwise indicated, all references to articles and sections in this Agreement refer to the corresponding articles and sections of this Agreement. 67 Section 6.09. TRIAL BY JURY WAIVED. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTION. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER. Section 6.10. LIMITED LIABILITY. No recourse under any Transaction Document shall be had against, and no personal liability shall attach to, any officer, employee, director, affiliate or shareholder of any party hereto, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise in respect of any of the Transaction Documents, the Notes, the Certificates or the Policies, it being expressly agreed and understood that each Transaction Document is solely a corporate obligation of each party hereto, and that any and all personal liability, either at common law or in equity, or by statute or constitution, of every such officer, employee, director, affiliate or shareholder for breaches by any party hereto of any obligations under any Transaction Document is hereby expressly waived as a condition of and in consideration for the execution and delivery of this Agreement. Section 6.11. LIMITED LIABILITY OF MELLON BANK (DE), NATIONAL ASSOCIATION. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Mellon Bank (DE), National Association, not individually or personally but solely as Owner Trustee on behalf of the Trust, (b) each of the representations, undertakings and agreements herein made on the part of the Trust is made and intended not as personal representations, undertakings and agreements by Mellon Bank (DE), National Association, but are made and intended for the purpose of binding only the Trust Estate, (c) nothing herein contained shall be construed as creating any liability on Mellon Bank (DE), National Association, individually or personally, to perform any covenant of the Trust either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any person claiming by, through or under such parties and (d) under no circumstances shall Mellon Bank (DE), National Association be personally liable for the payment of any indebtedness or expenses of the Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Agreement. Section 6.12. ENTIRE AGREEMENT. This Agreement and the Policies set forth the entire agreement between the parties with respect to the subject matter thereof, and this Agreement supersedes and replaces any agreement or understanding that may have existed between the parties prior to the date hereof in respect of such subject matter. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Insurance and Indemnity Agreement, all as of the day and year first above written. 68 FINANCIAL SECURITY ASSURANCE INC. By: ----------------------------------- Authorized Officer OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1996-D By: Mellon Bank (DE), National Association, not in its individual capacity, but solely in its capacity as Owner Trustee under the Trust Agreement By: ----------------------------------- E.D. Renn Vice President OLYMPIC FIRST GP INC. By: ----------------------------------- John A. Witham Vice President and Chief Financial Officer OLYMPIC SECOND GP INC. By: ----------------------------------- John A. Witham Vice President and Chief Financial Officer OLYMPIC FINANCIAL LTD. By: ----------------------------------- John A. Witham Executive Vice President and Chief Financial Officer OLYMPIC RECEIVABLES FINANCE CORP. By: ----------------------------------- John A. Witham Senior Vice President and Chief Financial Officer EX-10.59 44 EMPLOYMENT AGREE 1/6/97 REGISTRANT & RICHARD A. EMPLOYMENT AGREEMENT THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and Richard A. Greenawalt (the "Executive") is dated as of this 6th day of January, 1997. W I T N E S S E T H : WHEREAS, the Company and the Executive wish to enter into an agreement setting forth the terms and conditions upon which the Executive shall be employed by the Company; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is hereby agreed by and between the Company and the Executive as follows: 1. EFFECTIVE DATE. This Agreement shall govern the terms and conditions of the Executive's employment, which shall commence as of a date to be mutually agreed upon between the Company and the Executive (the "Effective Date"). 2. GRANT OF OPTIONS. Not later than the Effective Date, the Company will grant to the Executive an option to purchase 1,200,000 shares of the Company's common stock at an exercise price of $14.87 per share, subject to the terms and conditions of the stock option agreement (the "Option Agreement") between the Company and the Executive of even date herewith attached hereto as Exhibit A (the "Option"). The Option will vest in three equal installments on the first three anniversaries of the date of grant, and will have a maximum term of 10 years, subject to earlier termination upon termination of employment in accordance with the terms of options granted to other senior executives of the Company. The Option grant will not be subject to shareholder approval. The Company will undertake to file a registration statement on Form S-8 with respect to the Option shares as soon as practicable after the date of grant. Option vesting will be accelerated in the event of the Executive's death, Disability (as herein defined), termination without Cause (as herein defined), termination for Good Reason (as herein defined), or a Change in Control (as defined in the Option Agreement). 3. EMPLOYMENT PERIOD. The Company agrees to employ the Executive, and the Executive agrees to remain in the employ of the Company, for the period (the "Employment Period") commencing on the Effective Date and ending on the date of any termination of the Executive's employment in accordance with Section 7 of the Agreement. 4. POSITION; DUTIES; RESPONSIBILITIES. (a) POSITION AND DUTIES. During the Employment Period, the Executive shall serve as Chief Executive Officer of the Company, and shall report directly to the Board or one or more designated members thereof. (b) BUSINESS TIME. During the Employment Period, the Executive shall devote his full business time during normal business hours to the business and affairs of the Company and use his best efforts to perform faithfully and efficiently the responsibilities assigned to him hereunder, to the extent necessary to discharge such responsibilities, except for (i) reasonable time spent in serving on corporate, civic or charitable boards or committees of the nature similar to those on which the Executive served prior to the Effective Date, or otherwise approved by the Board, in each case only if and to the extent not substantially interfering with the performance of such responsibilities, and (ii) periods of vacation and sick leave to which he is entitled. It is expressly understood and agreed that the Executive's continuing to serve on any boards and committees on which he is serving or with which he is otherwise associated immediately preceding the Effective Date (other than his prior employer) shall not be deemed to interfere with the performance of the Executive's services to the Company. 5. PLACE OF PERFORMANCE. During the Employment Period, the Executive's principal places of performance will be at the Company's offices in Minneapolis, Minnesota and at a location to be determined outside of Philadelphia, Pennsylvania, with the Executive dividing his time between the two locations on such basis as shall be mutually agreeable to the Executive and the Company, except for reasonably required travel on behalf of the Company. 6. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Employment Period, the Executive shall receive a base salary ("Base Salary") at an annual rate of not less than $100,000, paid in accordance with the Company's regular payroll practices. The Base Salary shall be reviewed at least once each year after the Effective Date, and may be increased (but not decreased) at any time and from time to time by action of the Board of Directors (the "Board") or any committee thereof. Neither payment of the Base Salary nor payment of any increased Base Salary after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. For purposes of the remaining provisions of this Agreement, the term "Base Salary" shall mean Base Salary as defined in this 2 Section 6(a) or, if increased after the Effective Date, the Base Salary as so increased. (b) ANNUAL BONUS. (i) In addition to the Base Salary, the Executive shall be awarded for each fiscal year of the Company ending during the Employment Period an annual bonus, to be based on reasonable and customary criteria consistent with the Company's past practices (the "Annual Bonus"), with a target amount at least equal to $300,000. If a fiscal year of the Company begins, but does not end, during the Employment Period, the Executive shall receive an amount with respect to such fiscal year at least equal to the amount of the Annual Bonus multiplied by a fraction, the numerator of which is the number of days in such fiscal year occurring during the Employment Period and the denominator of which is 365. Each amount payable in respect of the Executive's Annual Bonus shall be paid not later than 90 days after the fiscal year next following the fiscal year for which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the Annual Bonus nor any bonus amount paid in excess thereof after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. (ii) The Executive's Annual Bonus shall be applied toward participation in the Company's 1994-1997 and 1998-2000 Restricted Stock Election Plans on a basis commensurate with an executive having a base salary of $500,000 (or, if greater, the Executive's annual Base Salary). (c) FRINGE BENEFITS. During the Employment Period, the Company shall provide the following fringe benefits to Executive: (i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to satisfaction of the eligibility requirements of such plans and the rules and regulations applicable thereto, Executive and his family members shall be entitled to be covered by the Company's group health and dental insurance plans presently in effect or hereafter adopted by the Company and applicable to employees of the Company generally and Executive shall be entitled to be covered by the Company's group disability and life insurance plans presently in effect or hereafter adopted by the Company and applicable to the employees of the Company in general or, if more favorable, plans applicable to the Company's executives. The Company shall pay the premiums associated with such coverage. In the event Executive makes a claim against any disability policy provided to Executive by the Company pursuant to this Section 6(c)(i) and such policy calls for a waiting period which is applicable to Executive's claim, the Company shall pay to Executive during such waiting period his monthly base salary due during such period and shall provide the other benefits due him under this Section 5(c)(i). 3 (ii) VACATION. Executive shall be entitled to not less than four weeks of vacation without loss of compensation or other benefits pursuant to such general policies and procedures of the Company as are from time to time adopted by the Company. (iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the conduct of the Company's business for which he furnishes appropriate documentation in accordance with Company policy. (iv) AUTOMOBILE. The Company shall at Executive's option either (A) provide to Executive use of an automobile to be used by Executive in conducting the Company's business; or (B) pay to Executive a monthly auto expense not less than Four Hundred Dollars ($400) per month. In addition, the Company shall reimburse Executive (1) an amount equal to the cost of insuring and maintaining the automobile used by Executive for the Company's business and for the Executive's personal use, and (2) the cost of maintenance and the cost of gasoline and oil used in the automobile and in the event of a loss under the policies insuring said automobile the amount of any deductible thereunder applicable to such loss. Such insurance and the coverage and deductibles thereof shall cover both the business and personal use of such automobile by Employee, his family and invitees and shall include such other terms and conditions as are reasonably acceptable to Executive. Any such reimbursements shall be made upon the Company's receipt of invoices evidencing incurrence of such expenses. Executive shall also be paid a monthly amount equal to the reasonable value of personal use of such automobile, determined in accordance with applicable federal income tax regulations. (v) CLUB DUES. The Company shall reimburse Executive the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain his status as a member of the Flagship Athletic Club or of any other athletic club having equal or lesser membership costs in lieu of such club. The Company shall also permit Executive and his family to a membership at Olympic Hills Golf Club and shall reimburse the Executive for the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain such membership. If either such membership is a corporate membership and is subsequently converted to an individual membership, the Company shall reimburse Executive for any fees charged in connection with such conversion. 4 (vi) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by his predecessor employer at any time during the 90-day period immediately preceding the Effective Date. 7. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon his death. The Company may terminate Executive's employment during the Employment Period, after having established the Executive's Disability, by giving the Executive written notice of its intention to terminate his employment, and his employment with the Company shall terminate effective on the 90th day after receipt of such notice if, within 90 days after such receipt, the Executive shall fail to return to full-time performance of his duties. For purposes of this Agreement, "Disability" means disability which, after the expiration of more than 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or his legal representatives (such agreement to acceptability not to be withheld unreasonably). (b) VOLUNTARY TERMINATION. Notwithstanding anything in this Agreement to the contrary, the Executive may, upon not less than 15 days' advance written notice to the Company, voluntarily terminate employment during the Employment Period for any reason, provided that any termination by the Executive pursuant to Section 7(d) of this Agreement on account of Good Reason (as defined therein) shall not be treated as a voluntary termination under this Section 7(b). (c) CAUSE. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" means (I) gross misconduct on the Executive's part which is demonstrably willful and deliberate and which results in material damage to the Company's business or reputation or (II) repeated material violations by the Executive of his obligations under Section 4 of this Agreement which violations are demonstrably willful and deliberate. (d) GOOD REASON. The Executive may terminate his employment during the Employment Period for Good Reason. For purposes of this Agreement, "Good Reason" means (i) a good faith determination by the Executive that, without his prior written consent, the Company or any of its officers has taken or failed to take any action (including, without limitation, (A) exclusion of the Executive from consideration of material matters within his area of responsibility, other than an insubstantial or inadvertent exclusion remedied by the Company promptly after 5 receipt of notice thereof from the Executive, (B) statements or actions which undermine the Executive's authority with respect to persons under his supervision or reduce his standing with his peers, other than an insubstantial or inadvertent statement or action which is remedied by the Company promptly after receipt of the notice thereof from the Executive, (C) a pattern of discrimination against or harassment of the Executive or persons under his supervision and (D) the subjection of the Executive to procedures not generally applicable to other similarly situated executives) which changes the Executive's position (including titles), authority or responsibilities under Section 4 of this Agreement or reduces the Executive's ability to carry out his duties and responsibilities under Section 4 of this Agreement; (ii) any failure by the Company to comply with any of the provisions of Section 6 of this Agreement, other than an insubstantial or inadvertent failure remedied by the Company promptly after receipt of notice thereof from the Executive; (iii) the Company's requiring the Executive to perform his services at any location more than 35 miles from the places of performance described in Section 5 hereof; or (iv) any failure by the Company to obtain the assumption of and agreement to perform this Agreement by a successor as contemplated by Section 14(b) of this Agreement. (e) WITHOUT CAUSE. The Company shall give Executive at least 15 days' advance written notice of any termination of Executive's employment which is not for Cause and not on account of Executive's Disability. (f) NOTICE OF TERMINATION. Any termination of Executive's employment by the Company for Cause or by the Executive for Good Reason during the Employment Period shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 15(c) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice given, in the case of a termination by the Company for Cause, within 10 business days of the Company's having actual knowledge of all of the events giving rise to such termination, and in the case of a termination by Executive for Good Reason, within 180 days of the Executive's having actual knowledge of the events giving rise to such termination, and which (I) indicates the specific termination provision in this Agreement relied upon, (II) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (III) if the termination date is other than the date of receipt of such notice, specifies such termination date (which date shall be not 6 more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. (g) DATE OF TERMINATION. For purposes of this Agreement, the term "Date of Termination" means (I) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination or, if later, the date specified therein and (II) in all other cases, the actual date on which the Executive's employment terminates during the Employment Period. 8. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment is terminated during the Employment Period by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement other than those obligations accrued hereunder at the date of his death, including, for this purpose (I) the Executive's full Base Salary through the Date of Termination, (II) the product of the Annual Bonus and a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (III) any compensation previously deferred by the Executive (together with any accrued earnings thereon) and not yet paid by the Company, (IV) any other amounts or benefits owing to the Executive under any of the Company's incentive compensation plans (including any accrued but unpaid bonus for prior year(s)), stock option plans, restricted stock plans or other similar plans and (V) any amounts or benefits owing to the Executive under any of the Company's employee benefit plans or policies (such amounts specified in clauses (i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless otherwise directed by the Executive in writing prior to his death, all Accrued Obligations shall be paid to the Executive's estate. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability, the Executive shall receive all Accrued Obligations and, in addition, from the Date of Termination until the date when the Employment Period would otherwise have terminated, shall continue to participate in or be covered under the benefit plans and programs referred to in Section 6(c)(i) of this Agreement or, at the Company's option, to receive equivalent benefits by alternate means at least equal to those provided in accordance with Section 6(c)(i) of this Agreement. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to receive disability and other benefits at least equal to the most favorable level of benefits available to disabled employees of the Company and/or their families in accordance with the plans, 7 programs and policies maintained by the Company or its affiliates relating to disability at any time during the 90-day period immediately preceding the Effective Date. (c) CAUSE AND VOLUNTARY TERMINATION. If, during the Employment Period, the Executive's employment shall be terminated for Cause or voluntarily terminated by the Executive (other than on account of Good Reason), the Executive shall receive all Accrued Obligations other than the Pro-rated Bonus Obligation. (d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the Employment Period, the Company terminates the Executive's employment other than for Cause or Disability, or the Executive terminates his employment for Good Reason, the Executive shall receive all Accrued Obligations. In addition, the Company shall pay to the Executive in a lump sum, within 15 days after the Date of Termination, a cash amount equal to two (2) times the sum of the following amounts: (1) the Executive's annual Base Salary at the rate specified in Section 6(a) of this Agreement; (2) the Annual Bonus; (3) an amount equal to the average annual amount paid and/or reimbursed to the Executive pursuant to Section 6(c)(iv) and (v) hereof during the two calendar years preceding the Date of Termination; and (4) the present value, calculated using the annual federal short-term rate as determined under Section 1274(d) of the Code, of (without duplication) the annual cost to the Company (based on the premium rates or other costs to it) of obtaining coverage equivalent to the coverage under the plans and programs described in Section 6(c)(i) of this Agreement; provided, however, that with respect to the life and medical insurance coverage referred to in Section 6(c)(i) of this Agreement, at the Executive's election made prior to the Date of Termination, the Company shall use its best efforts to secure conversion coverage and shall pay the cost of such coverage in lieu of paying the lump sum amount attributable to such life or medical insurance coverage. 9. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have with respect to awards granted to him during 8 the Employment Period under any stock option, restricted stock or other plans or agreements with the Company or any of its affiliated companies including, without limitation, the Option. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its affiliated companies shall be payable in accordance with such plan or program. 10. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution, acceleration of vesting or other benefit which the Executive receives or becomes entitled to receive, whether alone or in combination, and whether pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company or any of its affiliates or any of their respective successors or assigns, but determined without regard to any additional payments required under this Section 10 (collectively, the "Payments"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of (i) all taxes with respect to the Gross-Up Payment (including any interest or penalties imposed with respect to such taxes) including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto), and (ii) the Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick or such other nationally recognized accounting firm then auditing the accounts of the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is unwilling or unable to perform its obligations pursuant to this Section 10, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, determined pursuant to this Section 10, shall be paid by the Company to the 9 Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the potential uncertainty in the application of Section 4999 of the Code (or any successor provision) at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 20 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without 10 limiting the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 10(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 10(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 11. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others whether by reason of the subsequent employment of the Executive or otherwise. In no event shall the Executive be obligated to seek 11 other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and no amount payable under this Agreement shall be reduced on account of any compensation received by the Executive from other employment. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined by mutual consent of the Executive and the Company or by a tribunal having jurisdiction over the matter that Good Reason did not exist, the employment of the Executive shall, unless the Company and the Executive shall otherwise mutually agree, be deemed to have terminated, at the date of giving such purported Notice of Termination, by mutual consent of the Company and the Executive and, except as provided in the last preceding sentence, the Executive shall be entitled to receive only those payments and benefits which he would have been entitled to receive at such date otherwise than under this Agreement. 12. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively and finally by expedited arbitration, conducted before a single arbitrator in Minneapolis, Minnesota, in accordance with the rules governing employment disputes then in effect of the American Arbitration Association. The arbitrator shall be approved by both the Company and the Executive. Judgment may be entered on the arbitrator's award in any court having jurisdiction. (b) In the event that any claim by the Executive under this Agreement is disputed, the Company shall pay all reasonable legal fees and expenses incurred by the Executive in pursuing such claim, provided that the Executive is successful as to at least part of the disputed claim by reason of arbitration, settlement or otherwise. 13. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, (I) obtained by the Executive during his employment by the Company or any of its affiliated companies and (II) not otherwise public knowledge (other than by reason of an unauthorized act by the Executive). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, unless compelled pursuant to an order of a court or other body having jurisdiction over such matter, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. 12 (b) It is mutually acknowledged that by virtue of the Executive's positions with the Company and its subsidiaries, he will have become possessed of certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company and its subsidiaries. It is further understood that the Executive will be developing contacts among the customers of the Company and its subsidiaries, and it is mutually understood and agreed that the customers of the Company and its subsidiaries and the business methods and procedures and techniques developed by the Company and its subsidiaries are valuable assets and properties of the Company and its subsidiaries. Without limitation, it is also specifically acknowledged that great trust on the part of the Company and its subsidiaries will reside in the Executive, since his duties will include the management, promotion and development of the Company's business. Accordingly, the parties deem it necessary to enter into the protective covenants set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: (i) The Executive agrees that during the Employment Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or on the behalf of any third party, perform management, accounting, financial, marketing, sales, administrative or executive duties, in any business conducted within the Territories (as defined below) which engages in purchasing automobile or truck loans or leases from automobile or truck dealers, packaging such loans or leases, reselling such loans or leases or servicing such loans or leases (the "Restricted Activities"). As used in this Agreement, the term "Territories" means any state in which any loans or leases acquired by the Company originated (determined by the location of the dealers from whom the loans or leases were purchased). (ii) The Executive agrees that during the Employment Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, solicit, divert, take away or attempt to solicit, divert, or take away from away from the Company, or any subsidiary, any of the dealers and other sources from which the Company or any subsidiary acquires loans or leases or from whom the loan or lease packages are received by the Company or any subsidiary. (iii) The Executive agrees that during the Employment Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or in the service or on behalf of others, solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away any person employed by the Company or any subsidiary, whether or not such employee is a full-time employee or a temporary employee of the Company or any subsidiary, and whether or not such employment was pursuant to a written or oral contract of 13 employment and whether or not such employment was for a determined period or was at will. (c) The Executive acknowledges that the provisions of this Section 13 constitute a material inducement to the Company to enter into this Agreement. The Executive further acknowledges that the Company's remedy at law for a breach by him of the provisions of this Section 13 will be inadequate. Accordingly, in the event of a breach or threatened breach by the Executive of any provision of this Section 13, the Company will be entitled to any provision of this Section 13, the Company will be entitled to injunctive relief in addition to any other remedy it may have. If any of the provisions of, or covenants contained in, this Section 13 are hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the provisions or the enforceability thereof in any other jurisdiction, which will be given full effect, without regard to the invalidity or unenforceability in such other jurisdiction. If any of the provisions of, or covenants contained in, this Section 13 are held to be unenforceable in any jurisdiction because of the duration or geographical scope thereof, the parties agree that the court making such determination will have the power to reduce the duration or geographical scope of such provision or covenant and, in its reduced form, such provision or covenant will be enforceable; provided, however, that the determination of such court will not affect the enforceability of this Section 13 in any other jurisdiction. (d) In no event shall an asserted violation of the provisions of this Section 13 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement or under any other agreement, plan or arrangement. 14. SUCCESSORS. (a) This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place. 15. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, applied without reference to principles of conflict of laws. 14 (b) AMENDMENTS. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Richard A. Greenawalt 8800 Montgomery Avenue Wyndmoor, PA 19038 If to the Company: Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, MN 55439 Attention: Secretary (with a copy to the attention of the General Counsel) or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee. (d) TAX WITHHOLDING. The Company may withhold from any amounts payable under this Agreement such Federal, State or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) CAPTIONS. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. 15 IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. OLYMPIC FINANCIAL LTD. By /s/ Warren Kantor ------------------------------------- Name: Warren Kantor Title: Chairman /s/ Richard A. Greenawalt --------------------------------------- Richard A. Greenawalt 16 EX-10.64 45 AMENDMENT EMPLOY AGREE 12/20/95 BY & BETWEEN AMENDMENT OF EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 20th day of December, 1995 by and between Olympic Financial Ltd. (the "Company") and Jeffrey C. Mack ("Associate"). WHEREAS, the Company and Associate entered into that certain Employment and Non-Compete Agreement dated as of August 1, 1991, pursuant to which the Company employed Associate as its Chief Executive Officer/President. Such agreement together with subsequent amendments thereto, are hereinafter referred to as the "Employment Agreement"; and WHEREAS, the Board of Directors and the Compensation Committee of the Company have approved an increase in Associate's base salary as of January 1, 1996. NOW THEREFORE, in consideration of the mutual covenants contained herein, the Company and Associate agree as follows: 1. BASE SALARY. Associate's base salary for fiscal 1996 shall be $495,000 commencing January 1, 1996. 2. RATIFICATION. The Employment Agreement as amended hereby is ratified and affirmed. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OLYMPIC FINANCIAL LTD. By: /s/ Scott H. Anderson --------------------------------- Scott H. Anderson Its: Vice Chairman ASSOCIATE: /s/ Jeffrey C. Mack --------------------------------- Jeffrey C. Mack EX-10.65 46 JEFFREY C. MACK SEVERANCE PACKAGE AUG. 26, 1996 JEFFREY C. MACK SEVERANCE PACKAGE SUBJECT PROPOSAL 1. Employment Contract - Effective immediately, Jeffrey C. Mack ("Employee") shall resign his position as Chief Executive Officer, President and member of the Board of Directors of Olympic Financial Limited (the "Company"), and his existing employment contract shall be canceled by mutual consent of the parties. Employee will continue as an "employee-consultant" of the Company for 2 years. - Cash payments equal to Employee's current annual base salary shall be paid by the Company in periodic installments on the same basis as currently paid to Employee for 2 years. - Employee's participation in the Company's benefit plans (retirement, health, disability and group life insurance) shall be continued for 2 years in accordance with the terms of such Plans. 2. 1990 Stock Option Plan - If a "change in control" occurs within the next 2 years, all outstanding unvested stock options (194,928 options with a current value of $1,274,116 at $17/share) will become immediately vested and exercisable. - If a "change in control" does not occur within 2 years, outstanding unvested stock options will vest as follows: DATE EXERCISE VALUE@ SHARES VESTED PRICE $17/SHARE ------------------------------------- 33,333 12/19/96 $16.19 $ 27,000 19,500 01/01/97 $ 4.63 $241,215 2,187 01/01/97 $ 4.38 $ 27,600 33,333 12/19/97 $16.19 $ 27,000 22,779 01/01/98 $ 4.38 $287,471 3. 1994-1997 TARSAP - If a "change in control" occurs within the next 2 years, all unvested restricted stock (51,248 shares with a current value of $874,276 at $17 per share) will become immediately vested. - If a "change in control" does not occur within 2 years, unvested restricted stock will vest as follows: DATE EXERCISE VALUE@ SHARES VESTED PRICE $17/SHARE ------------------------------------- 25,714 12/31/96 $ 0 $437,138 25,714 12/31/97 $ 0 $437,138 4. 1998-2000 TARSAP - If a "change in control" occurs within the next 2 years, all unvested restricted stock (55,042 shares with a current value of $935,714 at $17/share) will become immediately vested. - if a "change in control" does not occur within 2 years, none of the unvested restricted shares will become vested. 5. D&O Coverage; - D&O coverage for 2 years. Indemnification Indemnification in By-Laws to continue for 2 years. 6. Split-Dollar Life - Company will continue to pay Split-Dollar Insurance Plan Life Insurance Plan premiums for the next 2 years. If a "change in control" occurs within 2 years, Company will continue to pay premiums as provided in Split-Dollar Life Insurance Plan (until the 10th anniversary of the effective date). 7. Noncompete - Employee to sign noncompete agreement for 2 years. 8. No Disparagement - Parties to agree to language in press release concerning resignation and agree to refrain from making any negative statements about the other. OLYMPIC FINANCIAL LTD. BY: ITS BOARD OF DIRECTORS /s/ Warren Kantor ------------------ Warren Kantor Chairman of the Executive Committee of the Board of Directors Agreed and Accepted this 26th day of August, 1996 /s/ Jeffrey C. Mack - -------------------------- Jeffrey C. Mack JEFFREY C. MACK UNVESTED STOCK VALUATIONS PLAN VALUATION ---- --------- 1. 1990 Stock Option Plan - If a "change in control" occurs within Value at $30/Share the next 2 years, all outstanding unvested stock options (194,928 options with a value of $3,808,180 at $30/share) will become immediately vested and exercisable. If a "change in control" does not occur within 2 years, outstanding unvested stock options will vest as follows: DATE EXERCISE VALUE @ SHARES VESTED PRICE $30/SHARE ---------------------------------------- 33,333 12/19/96 $16.19 $460,329 19,500 01/01/97 $ 4.63 $494,715 2,187 01/01/97 $ 4.38 $ 56,031 33,333 12/19/97 $16.19 $460,329 22,779 01/01/98 $ 4.38 $583,598 2. 1994-1997 TARSAP - If a "change in control" occurs within Value at $30/Share the next 2 years, all unvested restricted stock (51,248 shares with a value of $1,537,440 at $30 per share) will become immediately vested. - If a "change in control" does not occur within 2 years, unvested restricted stock will vest as follows: DATE EXERCISE VALUE @ SHARES VESTED PRICE $30/SHARE ---------------------------------------- 25,714 12/31/96 $ 0 $768,720 25,714 12/31/97 $ 0 $768,720 3. 1998-2000 TARSAP - If a "change in control" occurs within the next 2 years, all unvested Value at $30/Share restricted stock (55,042 shares with a value of $1,651,260 at $30/share) will become immediately vested. - If a "change in control" does not occur within 2 years, none of the unvested restricted shares will become vested. 4. TOTAL VALUES - If a "change of control" occurs within 2 years: $6,996,880 at $30/share. - If a "change in control" does not occur within 2 years: $3,592,442 at $30/share. EX-10.66 47 ADDENDUM NOV. 11, 1996 AGREE REGISTRANT & J. MACK ADDENDUM TO AGREEMENT BETWEEN OLYMPIC FINANCIAL LTD. AND JEFFREY C. MACK This ADDENDUM dated November 11, 1996 (the "Addendum") sets forth additional agreements and covenants between Olympic Financial Ltd. (the "Company") and Jeffrey C. Mack ("Employee") with regard to his resignation from the position of Chief Executive Officer, President and member of the Board of Directors of the Company on August 26, 1996 (the "Resignation"). WHEREAS, the Company and Employee have entered into an agreement regarding the Resignation dated August 26, 1996, pursuant to which Employee will continue as an employee-consultant of the Company until August 26, 1998 (the "Agreement"), and WHEREAS, since entering into the Agreement, the Company and Employee have agreed on certain additional terms, and wish to clarify certain covenants set forth in the Agreement. NOW, THEREFORE, the parties hereby agree as follows: 1. LEGAL FEES. The Company will pay Employee $10,000 as partial reimbursement for legal fees incurred by him in connection with the Resignation. 2. CIRCUMSTANCES OF RESIGNATION. The Company and Employee hereby acknowledge that, other than the press release issued on August 26, 1996, they have not, and agree that they will not at any time, issue internal or external communications concerning the Resignation, whether written or verbal, including interviews. 3. SERVICES; CONTACT WITH COMPANY EMPLOYEES. (a) During the term of the Agreement, Employee shall render such services and perform such duties as may reasonably be directed by the Company from time to time. (b) Employee will refrain from contacting any employees of the Company at the Company's offices during normal business hours, whether by telephone, facsimile or otherwise, except to the extent that such contact is necessitated by the services he renders at the Company's direction. This covenant will not preclude Employee from contacting or socializing with Company employees outside of the Company's offices during non-business hours. 4. FORWARDING OF MAIL. The Company will forward to Employee all personal messages, and all mail sent to Employee at the Company's offices which is marked "personal" or "confidential" or is hand addressed. Mail which is not marked "personal" or "confidential" will be reviewed by Company personnel and, if such mail involves Company business which is not related to any services being provided by the Employee, will be retained by the Company. Mail which does not involve Company business will also be forwarded to Employee. Messages will be faxed to Employee at the following number: (612) 934-0440, or at such other number as Employee advises the Company in writing. Personal mail will be sent to Employee at the following address: 18453 Nicklaus Way, Eden Prairie, MN 55347 or to such other address as Employee advises the Company in writing. 5. CAR PAYMENTS. The Company will either make, or reimburse Employee for the cost of, loan payments with respect to his current BMW automobile until August 26, 1998, and will either make, or reimburse Employee for the cost of, lease payments through the end of the term of Employee's existing lease on his current Jaguar automobile. The Company will also pay, or reimburse Employee for the cost of, insurance premiums for such automobiles. All other expenses relating to the automobiles, including maintenance, repairs and gas, shall be the responsibility of Employee. 6. CLUB DUES. Until August 26, 1998, the Company will either pay, or reimburse Employee for the cost or, club dues and assessments (but not personal disbursements) for Employee for the following clubs in accordance with its past practices: * Olympic Hills Golf Club; * Bear Path Golf Club; * Flagship. To the extent that such amounts are not paid directly and are incurred by Employee, the Company will reimburse Employee for such amounts within fifteen days of Employee's presentment of proper documentation therefor. 7. D&O COVERAGE; INDEMNIFICATION. The provisions of Section 5 of the Agreement notwithstanding, the Company will continue to maintain for Employee Director 2 & Officer Liability Coverage, and continue to provide him with indemnification under its bylaws, until August 26, 2002. 8. NONCOMPETITION. (a) It is mutually acknowledged that by virtue of Employee's former positions with the Company and its subsidiaries, he has become possessed of certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company and its subsidiaries. It is further understood that Employee has developed contacts among the customers of the Company and its subsidiaries, and it is mutually understood and agreed that the customers of the Company and its subsidiaries and the business methods and procedures and techniques developed by the Company and its subsidiaries are valuable assets and properties of the Company and its subsidiaries. Without limitation, it is also specifically acknowledged that great trust on the part of the Company and its subsidiaries has resided in Employee, since Employee's former duties have included involvement in the management, promotion and development of the Company's business. Accordingly, the parties deem it necessary to enter into the protective covenants set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: (i) Employee agrees that until August 26, 1998, he will not, directly or indirectly, on his own behalf or on the behalf of any third party, perform management, accounting, financial, marketing, sales, administrative or executive duties, in any business conducted within the Territories (as defined below) which engages in originating automobile or truck loans or leases, purchasing automobile or truck loans or leases from automobile or truck dealers, packaging such loans or leases, reselling such loans or leases or servicing such loans or leases (the "Restricted Activities"). As used in this Addendum, the term "Territories" means any state in which any such loans or leases originated (determined by the location of the dealers from whom the loans or leases were purchased or, in the case of loans or leases originated by the Company, the location of the borrowers or lessees). (ii) Employee agrees that until August 26, 1998, he will not, directly or indirectly, solicit, divert, take away or attempt to solicit, divert, or take away from the Company, or any subsidiary, any of the dealers and other sources from which the Company or any subsidiary acquires loans or leases or from whom the loan or lease packages are received by the Company or any subsidiary. (iii) Employee agrees that until August 26, 1998, he will not, directly or indirectly, on his own behalf 3 or in the service or on behalf of others, solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away any person employed by the Company or any subsidiary, whether or not such employee is a full-time employee or a temporary employee of the Company or any subsidiary, and whether or not such employment was pursuant to a written or oral contract of employment and whether or not such employment was for a determined period or was at will. (b) Employee acknowledges that the provisions of this Section 8 constitute a material inducement to the Company to enter into the Agreement and this Addendum. Employee further acknowledges that the Company's remedy at law for a breach by him of the provisions of this Section 8 will be inadequate. Accordingly, in the event of a breach or threatened breach by Employee of any provision of this Section 8, the Company will be entitled to injunctive relief in addition to any other remedy it may have. If any of the provisions of, or covenants contained in, this Section 8 are hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the provisions or the enforceability thereof in any other jurisdiction, which will be given full effect, without regard to the invalidity or unenforceability in such other jurisdiction. If any of the provisions of, or covenants contained in, this Section 8 are held to be unenforceable in any jurisdiction because of the duration or geographical scope thereof, the parties agree that the court making such determination will have the power to reduce the duration or geographical scope of such provision or covenant and, in its reduced form, such provision or covenant will be enforceable; provided, however, that the determination of such court will not affect the enforceability of this Section 8 in any other jurisdiction. 9. SPLIT-DOLLAR LIFE INSURANCE PLAN. Employee's rights under the Split-Dollar Life Insurance Plan shall be governed by the terms of that Plan consistent with his status as an employee of the Company through August 26, 1998. 10. OPTIONS; RESTRICTED STOCK. Sections 2 and 4 of the Agreement notwithstanding, upon termination of Employee's employment under the Agreement on August 26, 1998, and provided that a "change in control" has not occurred prior to such date, (i) all outstanding options to purchase Company common stock held by the Employee which have not vested as of such date shall vest and thereafter be exercisable in accordance with the terms thereof; and (ii) the Employee shall become vested in 12,225 shares of restricted stock under the Company's 1998-2000 Restricted 4 Stock Election Plan, and all other shares granted to Employee pursuant to such plan shall be forfeited.* 11. AGREEMENT STILL IN EFFECT. The parties hereby acknowledge that the Agreement will continue in effect in accordance with its terms, except to the extent that such terms have been specifically modified or clarified by this Addendum. The Agreement, as so modified and clarified, supercedes all prior agreements between the Company and Employee relating to his employment including, without limitation, Employee's Employment Agreement with the Company dated August 1, 1991, as amended (the "Employment Agreement"). 12. WITHHOLDING. The Company will withhold from amounts payable to Employee hereunder and under the Agreement any federal, state and local income and employment taxes which are required to be so withheld. 13. RELEASE OF CLAIMS. The Company and Employee agree that this Addendum and the Agreement represent the full agreement of the parties with respect to the Resignation and any events or circumstances relating thereto. Accordingly, the Company, on its own behalf and on behalf of its successors and assigns, and Employee, on his own behalf and on behalf of his marital community, heirs, successors and assigns, each do hereby fully and forever release, discharge, and acquit the other and the other's respective successors, assigns, affiliates, shareholders, officers, employees, agents, directors, and attorneys, from any and all actions, causes of action, liabilities, claims, debts, attorneys' fees, costs of suit, and other obligations whatsoever (i) which arise out of, or which concern in any way, the Resignation or any events or circumstances relating thereto, or (ii) which arise out of, or which concern in any way, the Employment Agreement. Each of the Company and Employee represent that they have not commenced, and covenant that they shall not hereafter commence, against the other, any legal proceedings of any kind, including, but not limited to, administrative proceedings, which arise out of, or which concern in any way, the Resignation, any events or circumstances relating thereto, or the Employment Agreement. 14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument. * All of Employees Rights to pursue common shares of the Company under the Company's's 1994-1997 Restricted Stock Election Plan shall vest according to the terms of that plan. 5 IN WITNESS WHEREOF, the parties have duly executed this Addendum effective as of the date first above written. OLYMPIC FINANCIAL LTD. By: /s/ Scott H. Anderson V.C. ----------------------------- Name: Scott H. Anderson Title: Vice-Chairman /s/ Jeffrey C. Mack -------------------------------- Jeffrey C. Mack 6 EX-10.71 48 AMEND EMPLOY AGREE 12/20/95 REG & S. ANDERSON AMENDMENT OF EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 20th day of December, 1995 by and between Olympic Financial Ltd. (the "Company") and Scott H. Anderson ("Associate"). WHEREAS, the Company and Associate entered into that certain Employment and Non-Compete Agreement dated as of April 1, 1991, pursuant to which the Company employed Associate as its Executive Vice President/Chief Credit Officer. Such agreement together with subsequent amendments thereto, if any, are hereinafter referred to as the "Employment Agreement"; and WHEREAS, the Board of Directors and the Compensation Committee of the Company have approved a promotion of Associate and an increase in Associate's base salary as hereinafter set forth. NOW THEREFORE, in consideration of the mutual covenants contained herein, the Company and Associate agree as follows: 1. PROMOTION. During the term of the Employment Agreement Associate shall perform the duties of Vice Chairman in charge of Credit and Operations. 2. BASE SALARY. Associate's base salary for the fiscal 1996 shall be $310,000 commencing January 1, 1996. 3. GOLF CLUB MEMBERSHIP. The Company shall pay the cost of Associate and his family joining Bear Path Golf Course and shall reimburse Associate the reasonable cost of the monthly or annual dues as the case may be paid by Associate to maintain his and his family members' status as members of the Bear Path Golf Club. 4. RATIFICATION. The Employment Agreement as amended hereby is ratified and affirmed. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OLYMPIC FINANCIAL, LTD. By: /s/ Jeffrey C. Mack ----------------------------------- Its: ------------------------------- ASSOCIATE: /s/ Scott H. Anderson ---------------------------------------- Scott H. Anderson EX-10.72 49 EMPLOY RETENTION AGREE 11/7/96 REG & S. ANDERSON EMPLOYMENT RETENTION AGREEMENT THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and Scott H. Anderson (the "Executive") is dated as of this 7 day of November, 1996. WITNESSETH: WHEREAS, the Company and the Executive have agreed to enter into an agreement providing the Company and the Executive with certain rights to assure the Company of continuity of management; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is hereby agreed by and between the Company and the Executive as follows: 1 . EFFECTIVE DATE; TERM. This Agreement shall govern the terms and conditions of Executive's employment commencing as of the date hereof (the "Effective Date"). 2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this Agreement shall supersede the Executive's Employment Agreement with the Company dated April 1, 1991, as amended. 3. RETENTION PERIOD. The Company agrees to continue the Executive in its employ, and the Executive agrees to remain in the employ of the Company, for the period (the "Retention Period") commencing on the Effective Date and ending on the date of any termination of the Executive's employment in accordance with Section 6 of this Agreement. 4. POSITION AND DUTIES. (a) NO REDUCTION IN POSITION. During the Retention Period, the Executive's position (including titles), authority and responsibilities shall be at least commensurate with the highest of those held or exercised by him at any time during the 90-day period immediately preceding the Effective Date. (b) BUSINESS TIME. During the Retention Period, the Executive shall devote his full business time during normal business hours to the business and affairs of the Company and use his best efforts to perform faithfully and efficiently the responsibilities assigned to him hereunder, to the extent necessary to discharge such responsibilities, except for (i) reasonable time spent in serving on corporate, civic or charitable boards or committees of the nature similar to those on which the Executive served prior to the Change of Control, or otherwise approved by the Board, in each case only if and to the extent not substantially interfering with the performance of such responsibilities, and (ii) periods of vacation and sick leave to which he is entitled. It is expressly understood and agreed that the Executive's continuing to serve on any boards and committees on which he is serving or with which he is otherwise associated immediately preceding the Effective Date shall not be deemed to interfere with the performance of the Executive's services to the Company. 5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention Period, the Executive shall receive a base salary ("Base Salary") at a monthly rate at least equal to the monthly salary paid to the Executive by the Company and any of its affiliated companies immediately prior to the Effective Date. The Base Salary shall be reviewed at least once each year after the Effective Date, and may be increased (but not decreased) at any time and from time to time by action of the Board or any committee thereof or any individual having authority to take such action in accordance with the Company's regular practices. Neither payment of the Base Salary nor payment of any increased Base Salary after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. For purposes of the remaining provisions of this Agreement, the term "Base Salary" shall mean Base Salary as defined in this Section 5(a) or, if increased after the Effective Date, the Base Salary as so increased. (b) ANNUAL BONUS. In addition to the Base Salary, the Executive shall be awarded for each fiscal year of the Company ending during the Retention Period an annual bonus, to be based on reasonable and customary criteria consistent with the Company's past practices (the "Annual Bonus"), with a target amount at least equal to 50% of his Base Salary (I.E., that percentage of the Executive's Base Salary designated by the Company's Compensation Committee for purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election Plan). If a fiscal year of the Company begins, but does not end, during the Retention Period, the Executive shall receive an amount with respect to such fiscal year at least equal to the amount of the Annual Bonus multiplied by a fraction, the numerator of which is the number of days in such fiscal year occurring during the Retention Period and the denominator of which is 365. Each amount payable in respect of the Executive's Annual Bonus shall be paid not later than 90 days after the fiscal year next following the fiscal year for which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the Annual Bonus nor any bonus amount paid in excess thereof after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. (c) FRINGE BENEFITS. During the Retention Period, the Company shall provide the following fringe benefits to Executive: (i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to satisfaction of the eligibility requirements of such plans and the rules and regulations applicable thereto, Executive and his family members shall be entitled to be covered by the Company's group health and dental insurance plans presently in effect or hereafter adopted by the Company and applicable to employees of the Company generally and Executive shall be entitled to be covered by the Company's group disability and life insurance plans presently in effect or hereafter adopted by the Company and applicable to the employees of the Company in general. The Company shall pay the premiums associated with such 2 coverage. In the event Executive makes a claim against any disability policy provided to Executive by the Company pursuant to this Section 5(c)(i) and such policy calls for a waiting period which is applicable to Executive's claim, the Company shall pay to Executive during such waiting period his monthly base salary due during such period and shall provide the other benefits due him under this Section 5(c)(i). (ii) VACATION. Executive shall be entitled to four weeks of vacation without loss of compensation or other benefits pursuant to such general policies and procedures of the Company as are from time to time adopted by the Company. (iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the conduct of the Company's business for which he furnishes appropriate documentation. (iv) AUTOMOBILE. In the event the Company shall institute a Company car policy, Executive shall receive the benefits thereunder in keeping with his position with the Company. During any period that the Company has not instituted a Company car policy, the Company shall provide to Executive use of an automobile reasonably acceptable to Executive to be used by Executive in conducting the Company's business. In addition, the Company shall during such period reimburse Executive (1) an amount equal to the reasonable cost of insuring and maintaining the automobile used by Executive for the Company's business, and (2) the cost of maintenance and the cost of gasoline and oil used in the automobile and in the event of a loss under the policies insuring said automobile, the amount of any deductible thereunder applicable to such loss. Such insurance and the coverage and deductibles thereof shall cover both the business and personal use of such automobile by Employee, his family and invitee and shall include such other terms and conditions as are reasonably acceptable to Executive. Any such reimbursements shall be made upon the Company's receipt of invoices evidencing incurrence of such expenses. Executive shall also be paid a monthly amount equal to the reasonable value of personal use of such automobile, determined in accordance with applicable federal income tax regulations. (v) CLUB DUES. The Company shall reimburse Executive the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain his status as a member of the Flagship Athletic Club or of any other athletic club having equal or lesser membership costs in lieu of such club. The Company shall also provide to Executive and his family a membership at Bearpath Golf Club and shall reimburse the Executive for the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain such membership. If either such membership is a corporate membership and is subsequently converted to an individual membership, the Company shall reimburse Executive for any fees charged in connection with such conversion. (vi) OFFICE AND SUPPORT STAFF. During the Retention Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other 3 appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive at any time during the 90-day period immediately preceding the Effective Date. 6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon his death. The Company may terminate Executive's employment during the Retention Period, after having established the Executive's Disability, by giving the Executive written notice of its intention to terminate his employment, and his employment with the Company shall terminate effective on the 90th day after receipt of such notice if, within 90 days after such receipt, the Executive shall fail to return to full-time performance of his duties. For purposes of this Agreement, "Disability" means disability which, after the expiration of more than 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or his legal representatives (such agreement to acceptability not to be withheld unreasonably). (b) VOLUNTARY TERMINATION. Notwithstanding anything in this Agreement to the contrary, the Executive may, upon not less than 15 days' advance written notice to the Company, voluntarily terminate employment during the Retention Period for any reason, provided that any termination by the Executive pursuant to Section 6(d) of this Agreement on account of Good Reason (as defined therein) shall not be treated as a voluntary termination under this Section 6(b). (c) CAUSE. The Company may terminate the Executive's employment during the Retention Period for Cause. For purposes of this Agreement, "Cause" means (i) gross misconduct on the Executive's part which is demonstrably willful and deliberate and which results in material damage to the Company's business or reputation or (ii) repeated material violations by the Executive of his obligations under Section 4 of this Agreement which violations are demonstrably willful and deliberate. (d) GOOD REASON. The Executive may terminate his employment during the Retention Period for Good Reason. For purposes of this Agreement, "Good Reason" means (i) a good faith determination by the Executive that, without his prior written consent, the Company or any of its officers has taken or failed to take any action (including, without limitation, (A) exclusion of the Executive from consideration of material matters within his area of responsibility, other than an insubstantial or inadvertent exclusion remedied by the Company promptly after receipt of notice thereof from the Executive, (B) statements or actions which undermine the Executive's authority with respect to persons under his supervision or reduce his standing with his peers, other than an insubstantial or inadvertent statement or action which is remedied by the Company promptly after receipt of the notice thereof from the Executive, (C) a pattern of discrimination against or harassment of the Executive or persons under his supervision and (D) the subjection of the Executive to procedures not generally applicable to other similarly situated executives) which changes the Executive's position (including titles), 4 authority or responsibilities under Section 4 of this Agreement or reduces the Executive's ability to carry out his duties and responsibilities under Section 4 of this Agreement; (ii) any failure by the Company to comply with any of the provisions of Section 5 of this Agreement, other than an insubstantial or inadvertent failure remedied by the Company promptly after receipt of notice thereof from the Executive; (iii) the Company's requiring the Executive to be employed at any location more than 35 miles further from his principal residence than the location at which the Executive was employed immediately preceding the Effective Date; or (iv) any failure by the Company to obtain the assumption of and agreement to perform this Agreement by a successor as contemplated by Section 13(b) of this Agreement. (e) WITHOUT CAUSE. The Company shall give Executive at least 15 days' advance written notice of any termination of Executive's employment which is not for Cause and not on account of Executive's Disability. (f) NOTICE OF TERMINATION. Any termination of Executive's employment by the Company for Cause or by the Executive for Good Reason during the Retention Period shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(c) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice given, in the case of a termination by the Company for Cause, within 10 business days of the Company's having actual knowledge of all of the events giving rise to such termination, and in the case of a termination by Executive for Good Reason, within 180 days of the Executive's having actual knowledge of the events giving rise to such termination, and which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies such termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. (g) DATE OF TERMINATION. For purposes of this Agreement, the term "Date of Termination" means (i) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination or, if later, the date specified therein and (ii) in all other cases, the actual date on which the Executive's employment terminates during the Retention Period. 7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment is terminated during the Retention Period by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal 5 representatives under this Agreement other than those obligations accrued hereunder at the date of his death, including, for this purpose (i) the Executive's full Base Salary through the Date of Termination, (ii) the product of the Annual Bonus and a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (iii) any compensation previously deferred by the Executive (together with any accrued earnings thereon) and not yet paid by the Company, (iv) any other amounts or benefits owing to the Executive under any of the Company's incentive compensation plans, stock option plans, restricted stock plans or other similar plans and (v) any amounts or benefits owing to the Executive under any of the Company's employee benefit plans or policies (such amounts specified in clauses (i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless otherwise directed by the Executive prior to his death, all Accrued Obligations shall be paid to the Executive's estate. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability, the Executive shall receive all Accrued Obligations and, in addition, from the Date of Termination until the second anniversary of such date, shall continue to participate in or be covered under the benefit plans and programs referred to in Section 5(c)(i) of this Agreement or, at the Company's option, to receive equivalent benefits by alternate means at least equal to those provided in accordance with Section 5(c)(i) of this Agreement. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to receive disability and other benefits at least equal to the most favorable level of benefits available to disabled employees and/or their families in accordance with the plans, programs and policies maintained by the Company or its affiliates relating to disability at any time during the 90-day period immediately preceding the Effective Date. (c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention Period, the Executive's employment shall be terminated for Cause or voluntarily terminated by the Executive (other than on account of Good Reason), the Executive shall receive all Accrued Obligations other than the Pro-rated Bonus Obligation. (d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the Retention Period, the Company terminates the Executive's employment other than for Cause or Disability, or the Executive terminates his employment for Good Reason, the Executive shall receive all Accrued Obligations. In addition, the Company shall pay to the Executive in a lump sum, within 15 days after the Date of Termination, a cash amount equal to two (2) times the sum of the following amounts: (1) the Executive's annual Base Salary at the rate specified in Section 5(a) of this Agreement; (2) the Annual Bonus; 6 (3) an amount equal to the average annual amount paid and/or reimbursed to the Executive pursuant to Section 5(c)(iv) and (v) hereof during the two calendar years preceding the Date of Termination; and (4) the present value, calculated using the annual federal short-term rate as determined under Section 1274(d) of the Code, of (without duplication) the annual cost to the Company (based on the premium rates or other costs to it) of obtaining coverage equivalent to the coverage under the plans and programs described in Section 5(c)(i) of this Agreement; provided, however, that with respect to the life and medical insurance coverage referred to in Section 5(c)(i) of this Agreement, at the Executive's election made prior to the Date of Termination, the Company shall use its best efforts to secure conversion coverage and shall pay the cost of such coverage in lieu of paying the lump sum amount attributable to such life or medical insurance coverage. 8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have with respect to awards granted to him prior to or during the Retention Period under any stock option, restricted stock or other plans or agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its affiliated companies shall be payable in accordance with such plan or program. 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution, acceleration of vesting or other benefit which the Executive receives or becomes entitled to receive, whether alone or in combination, and whether pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company or any of its affiliates or any of their respective successors or assigns, but determined without regard to any additional payments required under this Section 9 (collectively, the "Payments"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of (i) all taxes with respect to the Gross-Up Payment (including any interest or penalties imposed with respect to such taxes) including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto), and (ii) the Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. 7 (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick or such other nationally recognized accounting firm then auditing the accounts of the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is unwilling or unable to perform its obligations pursuant to this Section 9, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the potential uncertainty in the application of Section 4999 of the Code (or any successor provision) at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 20 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and 8 (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others whether by reason of the subsequent employment of the Executive or otherwise. In no event shall the Executive be 9 obligated to seek other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and no amount payable under this Agreement shall be reduced on account of any compensation received by the Executive from other employment. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined by mutual consent of the Executive and the Company or by a tribunal having jurisdiction over the matter that Good Reason did not exist, the employment of the Executive shall, unless the Company and the Executive shall otherwise mutually agree, be deemed to have terminated, at the date of giving such purported Notice of Termination, by mutual consent of the Company and the Executive and, except as provided in the last preceding sentence, the Executive shall be entitled to receive only those payments and benefits which he would have been entitled to receive at such date otherwise than under this Agreement. 11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively and finally by expedited arbitration, conducted before a single arbitrator in Minneapolis, Minnesota in accordance with the rules governing employment disputes then in effect of the American Arbitration Association. The arbitrator shall be approved by both the Company and the Executive. Judgment may be entered on the arbitrator's award in any court having jurisdiction. (b) In the event that any claim by the Executive under this Agreement is disputed, the Company shall pay all reasonable legal fees and expenses incurred by the Executive in pursuing such claim, provided that the Executive is successful as to at least part of the disputed claim by reason of arbitration, settlement or otherwise. 12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, (i) obtained by the Executive during his employment by the Company or any of its affiliated companies and (ii) not otherwise public knowledge (other than by reason of an unauthorized act by the Executive). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, unless compelled pursuant to an order of a court or other body having jurisdiction over such matter, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. (b) It is mutually acknowledged that by virtue of Employee's former positions with the Company and its subsidiaries, he has become possessed of certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company and its subsidiaries. It is further understood that Employee has developed contacts among the customers of the Company and its subsidiaries, and it is mutually understood and agreed that the customers of the Company and its subsidiaries and the business methods and procedures and techniques developed by the Company and its subsidiaries are valuable assets and properties of the Company and its subsidiaries. Without limitation, it is also specifically acknowledged that great trust on the part of the Company and its subsidiaries has resided in 10 Employee, since Employee's former duties have included involvement in the management, promotion and development of the Company's business. Accordingly, the parties deem it necessary to enter into the protective covenants set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: (i) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or on the behalf of any third party, perform management, accounting, financial, marketing, sales, administrative or executive duties, in any business conducted within the Territories (as defined below) which engages in originating or purchasing automobile or truck loans or leases from automobile or truck dealers, packaging such loans or leases, reselling such loans or leases or servicing such loans or leases (the "Restricted Activities"). As used in this Addendum, the term "Territories" means any state in which any loans or leases originated or acquired by the Company originated (determined by the location of the dealers from whom the loans or leases were purchased or, in the case of loans or leases originated by the Company, where the borrower or lessee resides). (ii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, solicit, divert, take away or attempt to solicit, divert, or take away from the Company, or any subsidiary, any of the dealers and other sources from which the Company or any subsidiary acquires loans or leases or from whom the loan or lease packages are received by the Company or any subsidiary. (iii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or in the service or on behalf of others, solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away any person employed by the Company or any subsidiary, whether or not such employee is a full-time employee or a temporary employee of the Company or any subsidiary, and whether or not such employment was pursuant to a written or oral contract of employment and whether or not such employment was for a determined period or was at will. (c) Employee acknowledges that the provisions of this Section 12 constitute a material inducement to the Company to enter into the Agreement. Employee further acknowledges that the Company's remedy at law for a breach by him of the provisions of this Section 12 will be inadequate. Accordingly, in the event of a breach or threatened breach by Employee of any provision of this Section 12, the Company will be entitled to injunctive relief in addition to any other remedy it may have. If any of the provisions of, or covenants contained in, this Section 12 are hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the provisions or the enforceability thereof in any other jurisdiction, which will be given full effect, without regard to the invalidity or unenforceability in such other jurisdiction. If any of the provisions of, or covenants contained in, this Section 12 are held to be unenforceable in any jurisdiction because of the duration or geographical scope thereof, the parties agree that the court making such determination will have the power to reduce the duration or geographical scope of such provision or covenant and, in its reduced form, such 11 provision or covenant will be enforceable; provided, however, that the determination of such court will not affect the enforceability of this Section 12 in any other jurisdiction. (d) In no event shall an asserted violation of the provisions of this Section 12 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement or under any other agreement, plan or arrangement. 13. SUCCESSORS. (a) This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place. 14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, applied without reference to principles of conflict of laws. (b) AMENDMENTS. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Scott H. Anderson 15155 Boulder Point Road Eden Prairie, MN 55347 If to the Company: Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, MN 55439 Attention: Secretary (with a copy to the attention of the General Counsel) 12 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee. (d) TAX WITHHOLDING. The Company may withhold from any amounts payable under this Agreement such Federal, State or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) CAPTIONS. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (g) POOLING TRANSACTIONS. The parties acknowledge that certain of the provisions of this Agreement may grant to the Executive benefits in excess of those granted to the Executive pursuant to the prior employment agreement (the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The parties agree that (i) in the event the grant of any such additional benefit would, in the opinion of Ernst & Young LLP or such other nationally recognized accounting firm selected by the Company, prevent the Company from receiving a pooling of interests treatment under Accounting Principles Board Opinion No. 16, and (ii) in the further event that such a pooling transaction shall be consummated by the Company and an acquiring entity; then in such events, the Executive agrees that the grant of any such additional benefits hereunder shall be amended as of the day prior to the closing of such pooling transaction to the extent necessary to enable the Company to gain pooling treatment under Accounting Principles Board Opinion No. 16 for such transaction; provided such amendment shall not reduce any such benefit such that it is less than that which was granted to the Executive under the Prior Agreement. IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. OLYMPIC FINANCIAL LTD. By: /s/ Warren Kantor --------------------------- Name: Warren Kantor ------------------------- Title: Chairman of the Board ------------------------ /s/ Scott H. Anderson 1/18/96 ------------------------------ Scott H. Anderson 13 EX-10.75 50 EMPLOY RETENTION AGREE 11/7/96 REG & JOHN WITHAM EMPLOYMENT RETENTION AGREEMENT THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and John A. Witham (the "Executive") is dated as of this 7 day of November, 1996. W I T N E S S E T H : WHEREAS, the Company and the Executive have agreed to enter into an agreement providing the Company and the Executive with certain rights to assure the Company of continuity of management; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is hereby agreed by and between the Company and the Executive as follows: 1. EFFECTIVE DATE; TERM. This Agreement shall govern the terms and conditions of Executive's Employment commencing as of the date hereof (the "Effective Date"). 2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this Agreement shall supersede the Executive's Employment Agreement with the Company dated February 1, 1994, as amended. 3. RETENTION PERIOD. The Company agrees to continue the Executive in its employ, and the Executive agrees to remain in the employ of the Company, for the period (the "Retention Period") commencing on the Effective Date and ending on the date of any termination of the Executive's employment in accordance with Section 6 of this Agreement. 4. POSITION AND DUTIES. (a) NO REDUCTION IN POSITION. During the Retention Period, the Executive's position (including titles), authority and responsibilities shall be at least commensurate with the highest of those held or exercised by him at any time during the 90-day period immediately preceding the Effective Date. (b) BUSINESS TIME. During the Retention Period, the Executive shall devote his full business time during normal business hours to the business and affairs of the Company and use his best efforts to perform faithfully and efficiently the responsibilities assigned to him hereunder, to the extent necessary to discharge such responsibilities, except for (i) reasonable time spent in serving on corporate, civic or charitable boards or committees of the nature similar to those on which the Executive served prior to the Change of Control, or otherwise approved by the Board, in each case only if and to the extent not substantially interfering with the performance of such responsibilities, and (ii) periods of vacation and sick leave to which he is entitled. It is expressly understood and agreed that the Executive's continuing to serve on any boards and committees on which he is serving or with which he otherwise associated preceding the Effective Date shall not be deemed to interfere with the performance of the Executive's services to the Company. 5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention Period, the Executive shall receive a base salary ("Base Salary") at a monthly rate at least equal to the monthly salary paid to the Executive by the Company and any of its affiliated companies immediately prior to the Effective Date. The Base Salary shall be reviewed at least once each year after the Effective Date, and may be increased (but not decreased) at any time and from time to time by action of the Board or any committee thereof or any individual having authority to take such action in accordance with the Company's regular practices. Neither payment of the Base Salary nor payment of any increased Base Salary after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. For purposes of the remaining provisions of this Agreement, the term "Base Salary" shall mean Base Salary as defined in this Section 5(a) or, if increased after the Effective Date, the Base Salary as so increased. (b) ANNUAL BONUS. In addition to the Base Salary, the Executive shall be awarded for each fiscal year of the Company ending during the Retention Period an annual bonus, to be based on reasonable and customary criteria consistent with the Company's past practices (the "Annual Bonus"), with a target amount at least equal to 40% of his Base Salary (I.E., that percentage of the Executive's Base Salary designated by the Company's Compensation Committee for purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election Plan). If a fiscal year of the Company begins, but does not end, during the Retention Period, the Executive shall receive an amount with respect to such fiscal year at least equal to the amount of the Annual Bonus multiplied by a fraction, the numerator of which is the number of days in such fiscal year occurring during the Retention Period and the denominator of which is 365. Each amount payable in respect of the Executive's Annual Bonus shall be paid not later than 90 days after the fiscal year next following the fiscal year for which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the Annual Bonus nor any bonus amount paid in excess thereof after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. (c) FRINGE BENEFITS. During the Retention Period, the Company shall provide the following fringe benefits to Executive: (i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to satisfaction of the eligibility requirements of such plans and the rules and regulations applicable thereto, Executive and his family members shall be entitled to be covered by the Company's group health and dental insurance plans presently in effect or hereafter adopted by the Company and applicable to employees of the Company generally and Executive shall be entitled to be covered by the Company's group disability and life insurance plans presently in effect or hereafter adopted by the Company and applicable to the employees of the Company in general. The Company shall pay the premiums associated with such coverage. In the event Executive makes a claim against any disability policy provided to 2 Executive by the Company pursuant to this Section 5(c)(i) and such policy calls for a waiting period which is applicable to Executive's claim, the Company shall pay to Executive during such waiting period his monthly base salary due during such period and shall provide the other benefits due him under this Section 5(c)(i). (ii) VACATION. Executive shall be entitled to four weeks of vacation without loss of compensation or other benefits pursuant to such general policies and procedures of the Company as are from time to time adopted by the Company. (iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the conduct of the Company's business for which he furnishes appropriate documentation. (iv) AUTOMOBILE. In the event the Company shall institute a Company car policy, Executive shall receive the benefits thereunder in keeping with his position with the Company. During any period that the Company has not instituted a Company car policy, the Company shall provide to Executive use of an automobile reasonably acceptable to Executive to be used by Executive in conducting the Company's business. In addition, the Company shall during such period reimburse Executive (1) an amount equal to the reasonable cost of insuring and maintaining the automobile used by Executive for the Company's business, and (2) the cost of maintenance and the cost of gasoline and oil used in the automobile and in the event of a loss under the policies insuring said automobile, the amount of any deductible thereunder applicable to such loss. Such insurance and the coverage and deductibles thereof shall cover both the business and personal use of such automobile by Employee, his family and invitees and shall include such other terms and conditions as are reasonably acceptable to Executive. Any such reimbursements shall be made upon the Company's receipt of invoices evidencing incurrence of such expenses. Executive shall also be paid a monthly amount equal to the reasonable value of personal use of such automobile, determined in accordance with applicable federal income tax regulations. (v) CLUB MEMBERSHIPS. The Company shall reimburse Executive the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain his status as a member of the Flagship Athletic Club or of any other athletic club having equal or lesser membership costs in lieu of such club. The Company shall also provide to Executive and his family a membership at Olympic Hills Golf Club and shall reimburse Executive for the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain such membership. If either such membership is a corporate membership, upon termination of Executive's employment other than for Cause or Death, such membership shall be converted to an individual membership in Executive's name and the Company shall pay any fees charged in connection with such conversion. (vi) OFFICE AND SUPPORT STAFF. During the Retention Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other 3 appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive at any time during the 90-day period immediately preceding the Effective Date. 6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon his death. The Company may terminate Executive's employment during the Retention Period, after having established the Executive's Disability, by giving the Executive written notice of its intention to terminate his employment, and his employment with the Company shall terminate effective on the 90th day after receipt of such notice if, within 90 days after such receipt, the Executive shall fail to return to full-time performance of his duties. For purposes of this Agreement, "Disability" means disability which, after the expiration of more than 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or his legal representatives (such agreement to acceptability not to be withheld unreasonably). (b) VOLUNTARY TERMINATION. Notwithstanding anything in this Agreement to the contrary, the Executive may, upon not less than 15 days' advance written notice to the Company, voluntarily terminate employment during the Retention Period for any reason, provided that any termination by the Executive pursuant to Section 6(d) of this Agreement on account of Good Reason (as defined therein) shall not be treated as a voluntary termination under this Section 6(b). (c) CAUSE. The Company may terminate the Executive's employment during the Retention Period for Cause. For purposes of this Agreement, "Cause" means (i) gross misconduct on the Executive's part which is demonstrably willful and deliberate and which results in material damage to the Company's business or reputation or (ii) repeated material violations by the Executive of his obligations under Section 4 of this Agreement which violations are demonstrably willful and deliberate. (d) GOOD REASON. The Executive may terminate his employment during the Retention Period for Good Reason. For purposes of this Agreement, "Good Reason" means (i) a good faith determination by the Executive that, without his prior written consent, the Company or any of its officers has taken or failed to take any action (including, without limitation, (A) exclusion of the Executive from consideration of material matters within his area of responsibility, other than an insubstantial or inadvertent exclusion remedied by the Company promptly after receipt of notice thereof from the Executive, (B) statements or actions which undermine the Executive's authority with respect to persons under his supervision or reduce his standing with his peers, other than an insubstantial or inadvertent statement or action which is remedied by the Company promptly after receipt of the notice thereof from the Executive, (C) a pattern of discrimination against or harassment of the Executive or persons under his supervision and (D) the subjection of the Executive to procedures not generally applicable to other similarly situated executives) which changes the Executive's position (including titles), 4 authority or responsibilities under Section 4 of this Agreement or reduces the Executive's ability to carry out his duties and responsibilities under Section 4 of this Agreement; (ii) any failure by the Company to comply with any of the provisions of Section 5 of this Agreement, other than an insubstantial or inadvertent failure remedied by the Company promptly after receipt of notice thereof from the Executive; (iii) the Company's requiring the Executive to be employed at any location more than 35 miles further from his principal residence than the location at which the Executive was employed immediately preceding the Effective Date; or (iv) any failure by the Company to obtain the assumption of and agreement to perform this Agreement by a successor as contemplated by Section 13(b) of this Agreement. (e) WITHOUT CAUSE. The Company shall give Executive at least 15 days' advance written notice of any termination of Executive's employment which is not for Cause and not an account of Executive's Disability. (f) NOTICE OF TERMINATION. Any termination of Executive's employment by the Company for Cause or by the Executive for Good Reason during the Retention Period shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(c) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice given, in the case of a termination by the Company for Cause, within 10 business days of the Company's having actual knowledge of all of the events giving rise to such termination, and in the case of a termination by Executive for Good Reason, within 180 days of the Executive's having actual knowledge of the events giving rise to such termination, and which (i)indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies such termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. (g) DATE OF TERMINATION. For purposes of this Agreement, the term "Date of Termination" means (i) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination or, if later, the date specified therein and (ii) in all other cases, the actual date on which the Executive's employment terminates during the Retention Period. 7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment is terminated during the Retention Period by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal 5 representatives under this Agreement other than those obligations accrued hereunder at the date of his death, including, for this purpose (i) the Executive's full Base Salary through the Date of Termination, (ii) the product of the Annual Bonus and a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (iii) any compensation previously deferred by the Executive (together with any accrued earnings thereon) and not yet paid by the Company, (iv) any other amounts or benefits owing to the Executive under any of the Company's incentive compensation plans, stock option plans, restricted stock plans or other similar plans and (v) any amounts or benefits owing to the Executive under any of the Company's employee benefit plans or policies (such amounts specified in clauses (i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless otherwise directed by the Executive prior to his death, all Accrued Obligations shall be paid to the Executive's estate. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability, the Executive shall receive all Accrued Obligations and, in addition, from the Date of Termination until the second anniversary of such date shall continue to participate in or be covered under the benefit plans and programs referred to in Section 5(c)(i) of this Agreement or, at the Company's option, to receive equivalent benefits by alternate means at least equal to those provided in accordance with Section 5(c)(i) of this Agreement. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to receive disability and other benefits at least equal to the most favorable level of benefits available to disabled employees and/or their families in accordance with the plans, programs and policies maintained by the Company or its affiliates relating to disability at any time during the 90-day period immediately preceding the Effective Date. (c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention Period, the Executive's employment shall be terminated for Cause or voluntarily terminated by the Executive (other than on account of Good Reason), the Executive shall receive all Accrued Obligations other than the Pro-rated Bonus Obligation. (d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE AND DISABILITY AND TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the Retention Period, the Company terminates the Executive's employment other than for Cause or Disability, or the Executive terminates his employment for Good Reason, the Executive shall receive all Accrued Obligations. In addition, the Company shall pay to the Executive in a lump sum, within 15 days after the Date of Termination, a cash amount equal to two (2) times the sum of the following amounts: (1) the Executive's annual Base Salary at the rate specified in Section 5(a) of this Agreement; (2) the Annual Bonus; 6 (3) an amount equal to the average annual amount paid and/or reimbursed to the Executive pursuant to Section 5(c)(iv) and (v) hereof during the two calendar years preceding the Date of Termination; and (4) the present value, calculated using the annual federal short- term rate as determined under Section 1274(d) of the Code, of (without duplication) the annual cost to the Company (based on the premium rates or other costs to it) of obtaining coverage equivalent to the coverage under the plans and programs described in Section 5(c)(i) of this Agreement; provided, however, that with respect to the life and medical insurance coverage referred to in Section 5(c)(i) of this Agreement, at the Executive's election made prior to the Date of Termination, the Company shall use its best efforts to secure conversion coverage and shall pay the cost of such coverage in lieu of paying the lump sum amount attributable to such life or medical insurance coverage. 8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have with respect to awards granted to him prior to or during the Retention Period under any stock option, restricted stock or other plans or agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its affiliated companies shall be payable in accordance with such plan or program. 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution, acceleration of vesting or other benefit which the Executive receives or becomes entitled to receive, whether alone or in combination, and whether pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company or any of its affiliates or any of their respective successors or assigns, but determined without regard to any additional payments required under this Section 9 (collectively, the "Payments"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of (i) all taxes with respect to the Gross-Up Payment (including any interest or penalties imposed with respect to such taxes) including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto), and (ii) the Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. 7 (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick or such other nationally recognized accounting firm then auditing the accounts of the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is unwilling or unable to perform its obligations pursuant to this Section 9, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the potential uncertainty in the application of Section 4999 of the Code (or any successor provision) at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 20 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and 8 (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others whether by reason of the subsequent employment of the Executive or otherwise. In no event shall the Executive be 9 obligated to seek other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and no amount payable under this Agreement shall be reduced on account of any compensation received by the Executive from other employment. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined by mutual consent of the Executive and the Company or by a tribunal having jurisdiction over the matter that Good Reason did not exist, the employment of the Executive shall, unless the Company and the Executive shall otherwise mutually agree, be deemed to have terminated, at the date of giving such purported Notice of Termination, by mutual consent of the Company and the Executive and, except as provided in the last preceding sentence, the Executive shall be entitled to receive only those payments and benefits which he would have been entitled to receive at such date otherwise than under this Agreement. 11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively and finally by expedited arbitration, conducted before a single arbitrator in Minneapolis, Minnesota, in accordance with the rules governing employment disputes then in effect of the American Arbitration Association. The arbitrator shall be approved by both the Company and the Executive. Judgment may be entered on the arbitrator's award in any court having jurisdiction. (b) In the event that any claim by the Executive under this Agreement is disputed, the Company shall pay all reasonable legal fees and expenses incurred by the Executive in pursuing such claim, provided that the Executive is successful as to at least part of the disputed claim by reason of arbitration, settlement or otherwise. 12. CONFIDENTIAL INFORMATION; NON-COMPETITION. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, (i) obtained by the Executive during his employment by the Company or any of its affiliated companies and (ii) not otherwise public knowledge (other than by reason of an unauthorized act by the Executive). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, unless compelled pursuant to an order of a court or other body having jurisdiction over such matter, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. (b) It is mutually acknowledged that by virtue of Employee's former positions with the Company and its subsidiaries, he has become possessed of certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company and its subsidiaries. It is further understood that Employee has developed contacts among the customers of the Company and its subsidiaries, and it is mutually understood and agreed that the customers of the Company and its subsidiaries and the business methods and procedures and techniques developed by the Company and its subsidiaries are valuable assets and properties of the Company and its subsidiaries. Without limitation, it is also specifically acknowledged that great trust on the part of the Company and its subsidiaries has resided in 10 Employee, since Employee's former duties have included involvement in the management, promotion and development of the Company's business. Accordingly, the parties deem it necessary to enter into the protective covenants set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: (i) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or on the behalf of any third party, perform management, accounting, financial, marketing, sales, administrative or executive duties, in any business conducted within the Territories (as defined below) which engages in originating or purchasing automobile or truck loans or leases from automobile or truck dealers, packaging such loans or leases, reselling such loans or leases or servicing such loans or leases (the "Restricted Activities"). As used in this Addendum, the term "Territories" means any state in which any loans or leases originated or acquired by the Company originated (determined by the location of the dealers from whom the loans or leases were purchased or, in the case of loans or leases originated by the Company, where the borrower or lessee resides). (ii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination he will not, directly or indirectly, solicit, divert, take away or attempt to solicit, divert, or take away from the Company, or any subsidiary, any of the dealers and other sources from which the Company or any subsidiary acquires loans or leases or from whom the loan or lease packages are received by the Company or any subsidiary. (iii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or in the service or on behalf of others, solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away any person employed by the Company or any subsidiary, whether or not such employee is a full-time employee or a temporary employee of the Company or any subsidiary, and whether or not such employment was pursuant to a written or oral contract of employment and whether or not such employment was for a determined period or was at will. (c) Employee acknowledges that the provisions of this Section 12 constitute a material inducement to the Company to enter into the Agreement. Employee further acknowledges that the Company's remedy at law for a breach by him of the provisions of this Section 12 will be inadequate. Accordingly, in the event of a breach or threatened breach by Employee of any provision of this Section 12, the Company will be entitled to injunctive relief in addition to any other remedy it may have. If any of the provisions of, or covenants contained in, this Section 12 are hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the provisions or the enforceability thereof in any other jurisdiction, which will be given full effect, without regard to the invalidity or unenforceability in such other jurisdiction. If any of the provisions of, or covenants contained in, this Section 12 are held to be unenforceable in any jurisdiction because of the duration or geographical scope thereof, the parties agree that the court making such determination will have the power to reduce the duration or geographical scope of such provision or covenant and, in its reduced form, such 11 provision or covenant will be enforceable; provided, however, that the determination of such court will not affect the enforceability of this Section 12 in any other jurisdiction. (d) In no event shall an asserted violation of the provisions of this Section 12 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement or under any other agreement, plan or arrangement. 13. SUCCESSORS. (a) This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place. 14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, applied without reference to principles of conflict of laws. (b) AMENDMENTS. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: John A. Witham 10456 Purdey Road Eden Prairie, MN 55347 If to the Company: Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, MN 55439 Attention: Secretary (with a copy to the attention of the General Counsel) 12 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee. (d) TAX WITHHOLDING. The Company may withhold from any amounts payable under this Agreement such Federal, State or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) CAPTIONS. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (g) POOLING TRANSACTIONS. The parties acknowledge that certain of the provisions of this Agreement may grant to the Executive benefits in excess of those granted to the Executive pursuant to the prior employment agreement (the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The parties agree that (i) in the event the grant of any such additional benefit would, in the opinion of Ernst & Young LLP or such other nationally recognized accounting firm selected by the Company, prevent the Company from receiving a pooling of interests treatment under Accounting Principles Board Opinion No. 16, and (ii) in the further event that such a pooling transaction shall be consummated by the Company and an acquiring entity; then in such events, the Executive agrees that the grant of any such additional benefits hereunder shall be amended as of the day prior to the closing of such pooling transaction to the extent necessary to enable the Company to gain pooling treatment under Accounting Principles Board Opinion No. 16 for such transaction; provided such amendment shall not reduce any such benefit such that it is less than that which was granted to the Executive under the Prior Agreement. IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. OLYMPIC FINANCIAL LTD. By: /s/ Warren Kantor --------------------------- Name: --------------------------- Title: Chairman of the Board --------------------------- /s/ John A. Witham --------------------------- John A. Witham 13 EX-10.78 51 EMPLOY RETENTION AGREE 11/7/96 REG & AM BERLIN EMPLOYMENT RETENTION AGREEMENT THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and A. Mark Berlin, Jr. (the "Executive") is dated as of this 7 day of November, 1996. W I T N E S S E T H : WHEREAS, the Company and the Executive have a agreed to enter into an agreement providing the Company and the Executive with certain rights to assure the Company of continuity of management; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is hereby agreed by and between the Company and the Executive as follows: 1. EFFECTIVE DATE; TERM. This Agreement shall govern the terms and conditions of Executive's employment commencing as of the date hereof (the "Effective Date"). 2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this Agreement shall supersede the Executive's Employment Agreement with the Company dated December 5, 1994, as amended. 3. RETENTION PERIOD. The Company agrees to continue the Executive in its employ, and the Executive agrees to remain in the employ of the Company, for the period (the "Retention Period") commencing on the Effective Date and ending on the date of any termination of the Executive's employment in accordance with Section 6 of this Agreement. 4. POSITION AND DUTIES. (a) NO REDUCTION IN POSITION. During the Retention Period, the Executive's position (including titles), authority and responsibilities as an officer of the Company shall be at least commensurate with the highest of those held or exercised by him at any time during the 90-day period immediately preceding the Effective Date. (b) BUSINESS TIME. During the Retention Period, the Executive shall devote his full business time during normal business hours to the business and affairs of the Company and use his best efforts to perform faithfully and efficiently the responsibilities assigned to him hereunder, to the extent necessary to discharge such responsibilities, except for (i) reasonable time spent in serving on corporate, civic or charitable boards or committees of the nature similar to those on which the Executive served prior to the Change of Control, or otherwise approved by the Board, in each case only if and to the extent not substantially interfering with the performance of such responsibilities, and (ii) periods of vacation and sick leave to which he is entitled. It is expressly understood and agreed that the Executive's continuing to serve on any boards and committees on which he is serving or with which he is otherwise associated immediately preceding the Effective Date shall not be deemed to interfere with the performance of the Executive's services to the Company. 5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention Period, the Executive shall receive a base salary ("Base Salary") at a monthly rate at least equal to the monthly salary paid to the Executive by the Company and any of its affiliated companies immediately prior to the Effective Date. The Base Salary shall be reviewed at least once each year after the Effective Date, and may be increased (but not decreased) at any time and from time to time by action of the Board or any committee thereof or any individual having authority to take such action in accordance with the Company's regular practices. Neither payment of the Base Salary nor payment of any increased Base Salary after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. For purposes of the remaining provisions of this Agreement, the term "Base Salary" shall mean Base Salary as defined in this Section 5(a) or, if increased after the Effective Date, the Base Salary as so increased. (b) ANNUAL BONUS. In addition to the Base Salary, the Executive shall be awarded for each fiscal year of the Company ending during the Retention Period an annual bonus, to be based on reasonable and customary criteria consistent with the Company's past practices (the "Annual Bonus"), with a target amount at least equal to 40% of his Base Salary (I.E., that percentage of the Executive's Base Salary designated by the Company's Compensation Committee for purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election Plan). If a fiscal year of the Company begins, but does not end, during the Retention Period, the Executive shall receive an amount with respect to such fiscal year at least equal to the amount of the Annual Bonus multiplied by a fraction, the numerator of which is the number of days in such fiscal year occurring during the Retention Period and the denominator of which is 365. Each amount payable in respect of the Executive's Annual Bonus shall be paid not later than 90 days after the fiscal year next following the fiscal year for which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the Annual Bonus nor any bonus amount paid in excess thereof after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. (c) FRINGE BENEFITS. During the Retention Period, the Company shall provide the following fringe benefits to Executive: (i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to satisfaction of the eligibility requirements of such plans and the rules and regulations applicable thereto, Executive and his family members shall be entitled to be covered by the Company's group health and dental insurance plans presently in effect or hereafter adopted by the Company and applicable to employees of the Company generally and Executive shall be entitled to be covered by the Company's group disability and life insurance plans presently in effect or hereafter adopted by the Company and applicable to the employees of the Company in general. The Company shall pay the premiums associated with such 2 coverage. In the event Executive makes a claim against any disability policy provided to Executive by the Company pursuant to this Section 5(c)(i) and such policy calls for a waiting period which is applicable to Executive's claim, the Company shall pay to Executive during such waiting period his monthly base salary due during such period and shall provide the other benefits due him under this Section 5(c)(i). (ii) VACATION. Executive shall be entitled to four weeks of vacation without loss of compensation or other benefits pursuant to such general policies and procedures of the Company as are from time to time adopted by the Company. (iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the conduct of the Company's business for which he furnishes appropriate documentation. (iv) AUTOMOBILE. In the event the Company shall institute a Company car policy, Executive shall receive the benefits thereunder in keeping with his position with the Company. During any period that the Company has not instituted a Company car policy, the Company shall pay to Executive a monthly auto expense in the amount of not less than Five Hundred Fifty Dollars ($550) per month. (v) CLUB DUES. The Company shall reimburse Executive the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain his status as a member of the Flagship Athletic Club or of any other clubs having equal or lesser aggregate membership costs in lieu of such club. The Company shall also provide to Executive and his family a membership at Wayzata Country Club and shall reimburse the Executive for the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain such membership. If either such membership is a corporate membership and is subsequently converted to an individual membership, the Company shall reimburse Executive for any fees charged in connection with such conversion. (vi) OFFICE AND SUPPORT STAFF. During the Retention Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive at any time during the 90-day period immediately preceding the Effective Date. 6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon his death. The Company may terminate Executive's employment during the Retention Period, after having established the Executive's Disability, by giving the Executive written notice of its intention to terminate his employment, and his employment with the Company shall terminate effective on the 90th day after receipt of such notice if, within 90 days after such receipt, the Executive shall fail to return to full-time performance of his duties. For purposes of this Agreement, "Disability" means disability which, after the expiration of more than 26 weeks after its commencement, is determined to be total and permanent by a physician 3 selected by the Company or its insurers and acceptable to the Executive or his legal representatives (such agreement to acceptability not to be withheld unreasonably). (b) VOLUNTARY TERMINATION. Notwithstanding anything in this Agreement to the contrary the Executive may, upon not less than 15 days' advance written notice to the Company, voluntarily terminate employment during the Retention Period for any reason, provided that any termination by the Executive pursuant to Section 6(d) of this Agreement on account of Good Reason (as defined therein) shall not be treated as a voluntary termination under this Section 6(b). (c) CAUSE. The Company may terminate the Executive's employment during the Retention Period for Cause. For purposes of this Agreement, "Cause" means (i) gross misconduct on the Executive's part which is demonstrably willful and deliberate and which results in material damage to the Company's business or reputation or (ii) repeated material violations by the Executive of his obligations under Section 4 of this Agreement which violations are demonstrably willful and deliberate. (d) GOOD REASON. The Executive may terminate his employment during the Retention Period for Good Reason. For purposes of this Agreement, "Good Reason" means (i) a good faith determination by the Executive that, without his prior written consent, the Company or any of its officers has taken or failed to take any action (including, without limitation, (A) exclusion of the Executive from consideration of material matters within his area of responsibility, other than an insubstantial or inadvertent exclusion remedied by the Company promptly after receipt of notice thereof from the Executive, (B) statements or actions which undermine the Executive's authority with respect to persons under his supervision or reduce his standing with his peers, other than an insubstantial or inadvertent statement or action which is remedied by the Company promptly after receipt of the notice thereof from the Executive, (C) a pattern of discrimination against or harassment of the Executive or persons under his supervision and (D) the subjection of the Executive to procedures not generally applicable to other similarly situated executives) which changes the Executive's position (including titles), authority or responsibilities under Section 4 of this Agreement or reduces the Executive's ability to carry out his duties and responsibilities under Section 4 of this Agreement; (ii) any failure by the Company to comply with any of the provisions of Section 5 of this Agreement, other than an insubstantial or inadvertent failure remedied by the Company promptly after receipt of notice thereof from the Executive; (iii) the Company's requiring the Executive to be employed at any location more than 35 miles further from his principal residence than the location at which the Executive was employed immediately preceding the Effective Date; or 4 (iv) any failure by the Company to obtain the assumption of and agreement to perform this Agreement by a successor as contemplated by Section 13(b) of this Agreement. (e) WITHOUT CAUSE. The Company shall give Executive at least 15 days' advance written notice of any termination of Executive's employment which is not for Cause and not on account of Executive's Disability. (f) NOTICE OF TERMINATION. Any termination of Executive's employment by the Company for Cause or by the Executive for Good Reason during the Retention Period shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(c) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice given, in the case of a termination by the Company for Cause, within 10 business days of the Company's having actual knowledge of all of the events giving rise to such termination, and in the case of a termination by Executive for Good Reason, within 180 days of the Executive's having actual knowledge of the events giving rise to such termination, and which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies such termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. (g) DATE OF TERMINATION. For purposes of this Agreement, the term "Date of Termination" means (i) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination or, if later, the date specified therein and (ii) in all other cases, the actual date on which the Executive's employment terminates during the Retention Period. 7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment is terminated during the Retention Period by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement other than those obligations accrued hereunder at the date of his death, including, for this purpose (i) the Executive's full Base Salary through the Date of Termination, (ii) the product of the Annual Bonus and a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (iii) any compensation previously deferred by the Executive (together with any accrued earnings thereon) and not yet paid by the Company, (iv) any other amounts or benefits owing to the Executive under any of the Company's incentive compensation plans, stock option plans, restricted stock plans or other similar plans and (v) any amounts or benefits owing to the Executive under any of the Company's employee benefit plans or policies (such amounts specified in clauses (i), (ii), (iii), 5 (iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless otherwise directed by the Executive prior to his death, all Accrued Obligations shall be paid to the Executive's estate. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability, the Executive shall receive all Accrued Obligations and, in addition, from the Date of Termination until the second anniversary of such date, shall continue to participate in or be covered under the benefit plans and programs referred to in Section 5(c)(i) of this Agreement or, at the Company's option, to receive equivalent benefits by alternate means at least equal to those provided in accordance with Section 5(c)(i) of this Agreement. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to receive disability and other benefits at least equal to the most favorable level of benefits available to disabled employees and/or their families in accordance with the plans, programs and policies maintained by the Company or its affiliates relating to disability at any time during the 90-day period immediately preceding the Effective Date. (c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention Period, the Executive's employment shall be terminated for Cause or voluntarily terminated by the Executive (other than on account of Good Reason), the Executive shall receive all Accrued Obligations other than the Pro-rated Bonus Obligation. (d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the Retention Period, the Company terminates the Executive's employment other than for Cause or Disability, or the Executive terminates his employment for Good Reason, the Executive shall receive all Accrued Obligations. In addition, the Company shall pay to the Executive in a lump sum, within 15 days after the Date of Termination, a cash amount equal to two (2) times the sum of the following amounts: (1) the Executive's annual Base Salary at the rate specified in Section 5(a) of this Agreement; (2) the Annual Bonus; (3) an amount equal to the average annual amount paid and/or reimbursed to the Executive pursuant to Section 5(c)(iv) and (v) hereof during the two calendar years preceding the Date of Termination; and (4) the present value, calculated using the annual federal short-term rate as determined under Section 1274(d) of the Code, of (without duplication) the annual cost to the Company (based on the premium rates or other costs to it) of obtaining coverage equivalent to the coverage under the plans and programs described in Section 5(c)(i) of this Agreement; 6 provided, however, that with respect to the life and medical insurance coverage referred to in Section 5(c)(i) of this Agreement, at the Executive's election made prior to the Date of Termination, the Company shall use its best efforts to secure conversion coverage and shall pay the cost of such coverage in lieu of paying the lump sum amount attributable to such life or medical insurance coverage. 8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have with respect to awards granted to him prior to or during the Retention Period under any stock option, restricted stock or other plans or agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its affiliated companies shall be payable in accordance with such plan or program. 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution, acceleration of vesting or other benefit which the Executive receives or becomes entitled to receive, whether alone or in combination, and whether pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company or any of its affiliates or any of their respective successors or assigns, but determined without regard to any additional payments required under this Section 9 (collectively, the "Payments"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of (i) all taxes with respect to the Gross-Up Payment (including any interest or penalties imposed with respect to such taxes) including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto), and (ii) the Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick or such other nationally recognized accounting firm then auditing the accounts of the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is unwilling or unable to perform its obligations pursuant to this Section 9, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder 7 (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Finn shall be binding upon the Company and the Executive. As a result of the potential uncertainty in the application of Section 4999 of the Code (or any successor provision) at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 20 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such 8 contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others whether by reason of the subsequent employment of the Executive or otherwise. In no event shall the Executive be obligated to seek other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and no amount payable under this Agreement shall be reduced on account of any compensation received by the Executive from other employment. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined by mutual consent of the Executive and the Company or by a tribunal having jurisdiction over the matter that Good Reason did not exist, the employment of the Executive shall, unless the Company and the Executive shall otherwise mutually agree, be deemed to have terminated, at the date of giving such purported Notice of Termination, by mutual consent of the Company and the Executive and, except as provided in the last preceding sentence, the Executive shall be entitled to receive 9 only those payments and benefits which he would have been entitled to receive at such date otherwise than under this Agreement. 11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively and finally by expedited arbitration, conducted before a single arbitrator in Minneapolis, Minnesota, in accordance with the rules governing employment disputes then in effect of the American Arbitration Association. The arbitrator shall be approved by both the Company and the Executive. Judgment may be entered on the arbitrator's award in any court having jurisdiction. (b) In the event that any claim by the Executive under this Agreement is disputed, the Company shall pay all reasonable legal fees and expenses incurred by the Executive in pursuing such claim, provided that the Executive is successful as to at least part of the disputed claim by reason of arbitration, settlement or otherwise. 12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies and their respective businesses, (i) obtained by the Executive during his employment by the Company or any of its affiliated companies and (ii) not otherwise public knowledge (other than by reason of an unauthorized act by the Executive). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, unless compelled pursuant to an order of a court or other body having jurisdiction over such matter, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. (b) It is mutually acknowledged that by virtue of Employee's former positions with the Company and its subsidiaries, he has become possessed of certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company and its subsidiaries. It is further understood that Employee has developed contacts among the customers of the Company and its subsidiaries, and it is mutually understood and agreed that the customers of the Company and its subsidiaries and the business methods and procedures and techniques developed by the Company and its subsidiaries are valuable assets and properties of the Company and its subsidiaries. Without limitation, it is also specifically acknowledged that great trust on the part of the Company and its subsidiaries has resided in Employee, since Employee's former duties have included involvement in the management, promotion and development of the Company's business. Accordingly, the parties deem it necessary to enter into the protective covenants set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: (i) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or on the behalf of any third party, perform management, accounting, financial, marketing, sales, administrative or executive duties, in any business conducted within the Territories (as defined below) which engages in originating or purchasing automobile or truck loans or leases from 10 automobile or truck dealers, packaging such loans or leases, reselling such loans or leases or servicing such loans or leases (the "Restricted Activities"). As used in this Addendum, the term "Territories" means any state in which any loans or leases originated or acquired by the Company originated (determined by the location of the dealers from whom the loans or leases were purchased or, in the case of loans or leases originated by the Company, where the borrower or lessee resides). (ii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination he will not, directly or indirectly, solicit, divert, take away or attempt to solicit, divert, or take away from the Company, or any subsidiary, any of the dealers and other sources from which the Company or any subsidiary acquires loans or leases or from whom the loan or lease packages are received by the Company or any subsidiary. (iii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or in the service or on behalf of others, solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away any person employed by the Company or any subsidiary, whether or not such employee is a full-time employee or a temporary employee of the Company or any subsidiary, and whether or not such employment was pursuant to a written or oral contract of employment and whether or not such employment was for a determined period or was at will. (c) Employee acknowledges that the provisions of this Section 12 constitute a material inducement to the Company to enter into the Agreement. Employee further acknowledges that the Company's remedy at law for a breach by him of the provisions of this Section 12 will be inadequate. Accordingly, in the event of a breach or threatened breach by Employee of any provision of this Section 12, the Company will be entitled to injunctive relief in addition to any other remedy it may have. If any of the provisions of, or covenants contained in, this Section 12 are hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the provisions or the enforceability thereof in any other jurisdiction, which will be given full effect, without regard to the invalidity or unenforceability in such other jurisdiction. If any of the provisions of, or covenants contained in, this Section 12 are held to be unenforceable in any jurisdiction because of the duration or geographical scope thereof, the parties agree that the court making such determination will have the power to reduce the duration or geographical scope of such provision or covenant and, in its reduced form, such provision or covenant will be enforceable; provided, however, that the determination of such court will not affect the enforceability of this Section 12 in any other jurisdiction. (d) In no event shall an asserted violation of the provisions of this Section 12 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement or under any other agreement, plan or arrangement. 13. SUCCESSORS. (a) This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. 11 (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place. 14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, applied without reference to principles of conflict of laws. (b) AMENDMENTS. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: A. Mark Berlin, Jr. 136 Birch Lane West Wayzata, MN 55391 If to the Company: Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, MN 55439 Attention: Secretary (with a copy to the attention of the General Counsel) or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee. (d) TAX WITHHOLDING. The Company may withhold from any amounts payable under this Agreement such Federal, State or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 12 (f) CAPTIONS. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (g) POOLING TRANSACTIONS. The parties acknowledge that certain of the provisions of this Agreement may grant to the Executive benefits in excess of those granted to the Executive pursuant to the prior employment agreement (the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The parties agree that (i) in the event the grant of any such additional benefit would, in the opinion of Ernst & Young LLP or such other nationally recognized accounting firm selected by the Company, prevent the Company from receiving a pooling of interests treatment under Accounting Principles Board Opinion No. 16, and (ii) in the further event that such a pooling transaction shall be consummated by the Company and an acquiring entity; then in such events, the Executive agrees that the grant of any such additional benefits hereunder shall be amended as of the day prior to the closing of such pooling transaction to the extent necessary to enable the Company to gain pooling treatment under Accounting Principles Board Opinion No. 16 for such transaction; provided such amendment shall not reduce any such benefit such that it is less than that which was granted to the Executive under the Prior Agreement. IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. OLYMPIC FINANCIAL LTD. By: /s/ Warren Kantor -------------------------- Name: ------------------------ Title: Chairman of the Board ----------------------- /s/ A. Mark Berlin, Jr. ------------------------------ A. Mark Berlin, Jr. 13 EX-10.81 52 AMEND OF EMPLOY AGREE 12/20/95 REG & J. ATKINSON AMENDMENT OF EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 20th day of December, 1995 by and between Olympic Financial Ltd. (the "Company") and James D. Atkinson III ("Associate"). WHEREAS, the Company and Associate entered into that certain Employment and Non-Compete Agreement dated as of August 29th, 1994 pursuant to which the Company employed Associate as its Vice President/Corporate Counsel. Such agreement together with subsequent amendments thereto, if any, are hereinafter referred to as the "Employment Agreement"; and WHEREAS, the Board of Directors and the Compensation Committee of the Company have approved a promotion of Associate and an increase in Associate's base salary as hereinafter set forth. NOW THEREFORE, in consideration of the mutual covenants contained herein, the Company and Associate agree as follows: 1. PROMOTION. During the term of the Employment Agreement Associate shall perform the duties of Senior Vice President/Corporate Counsel/Secretary. 2. BASE SALARY. Associate's base salary for fiscal 1996 shall be $175,000 commencing January 1, 1996. 3. RATIFICATION. The Employment Agreement as amended hereby is ratified and affirmed. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OLYMPIC FINANCIAL LTD. By: /s/ Jeffrey Mack ------------------------------- Its: Chief Executive Officer --------------------------- /s/ James D. Atkinson III ----------------------------------- James D. Atkinson III EX-10.82 53 EMPLOY RETENTION AGREE 11/7/96 REG & JD ATKINSON EMPLOYMENT RETENTION AGREEMENT THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and James D. Atkinson III (the "Executive") is dated as of this 7 day of November, 1996. WITNESSETH: WHEREAS, the Company and the Executive have agreed to enter into an agreement providing the Company and the Executive with certain rights to assure the Company of continuity of management; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is hereby agreed by and between the Company and the Executive as follows: 1. EFFECTIVE DATE; TERM. This Agreement shall govern the terms and conditions of Executive's employment commencing as of the date hereof (the "Effective Date"). 2. PRIOR EMPLOYMENT. As of the Effective Date, this Agreement shall supersede the Executive's Employment Agreement with the Company dated September 1, 1994, as amended. 3. RETENTION PERIOD. The Company agrees to continue the Executive in its employ, and the Executive agrees to remain in the employ of the Company, for the period (the "Retention Period") commencing on the Effective Date and ending on the date of any termination of the Executive's employment in accordance with Section 6 of this Agreement. 4. POSITION AND DUTIES. (a) NO REDUCTION IN POSITION. During the Retention Period, the Executive's position (including titles), authority and responsibilities shall be at least commensurate with the highest of those held or exercised by him at any time during the 90-day period immediately preceding the Effective Date. (b) BUSINESS TIME. During the Retention Period, the Executive shall devote his full business time during normal business hours to the business and affairs of the Company and use his best efforts to perform faithfully and efficiently the responsibilities assigned to him hereunder, to the extent necessary to discharge such responsibilities, except for (i) reasonable time spent in serving on corporate, civic or charitable boards or committees of the nature similar to those on which the Executive served prior to the Change of Control, or otherwise approved by the Board, in each case only if and to the extent not substantially interfering with the performance of such responsibilities, and (ii) periods of vacation and sick leave to which he is entitled. It is expressly understood and agreed that the Executive's continuing to serve on any boards and committees on which he is serving or with which he is otherwise associated immediately preceding the Effective Date shall not be deemed to interfere with the performance of the Executive's services to the Company. 5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention Period, the Executive shall receive a base salary ("Base Salary") at a monthly rate at least equal to the monthly salary paid to the Executive by the Company and any of its affiliated companies immediately prior to the Effective Date. The Base Salary shall be reviewed at least once each year after the Effective Date, and may be increased (but not decreased) at any time and from time to time by action of the Board or any committee thereof or any individual having authority to take such action in accordance with the Company's regular practices. Neither payment of the Base Salary nor payment of any increased Base Salary after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. For purposes of the remaining provisions of this Agreement, the term "Base Salary" shall mean Base Salary as defined in this Section 5(a) or, if increased after the Effective Date, the Base Salary as so increased. (b) ANNUAL BONUS. In addition to the Base Salary, the Executive shall be awarded for each fiscal year of the Company ending during the Retention Period an annual bonus, to be based on reasonable and customary criteria consistent with the Company's past practices (the "Annual Bonus"), with a target amount at least equal to 35% of his Base Salary (I.E., that percentage of the Executive's Base Salary designated by the Company's Compensation Committee for purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election Plan). If a fiscal year of the Company begins, but does not end, during the Retention Period, the Executive shall receive an amount with respect to such fiscal year at least equal to the amount of the Annual Bonus multiplied by a fraction, the numerator of which is the number of days in such fiscal year occurring during the Retention Period and the denominator of which is 365. Each amount payable in respect of the Executive's Annual Bonus shall be paid not later than 90 days after the fiscal year next following the fiscal year for which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the Annual Bonus nor any bonus amount paid in excess thereof after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. (c) FRINGE BENEFITS. During the Retention Period, the Company shall provide the following fringe benefits to Executive: (i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to satisfaction of the eligibility requirements of such plans and the rules and regulations applicable thereto, Executive and his family members shall be entitled to be covered by the Company's group health and dental insurance plans presently in effect or hereafter adopted by the Company and applicable to employees of the Company generally and Executive shall be entitled to be covered by the Company's group disability and life insurance plans presently in effect or hereafter adopted by the Company and applicable to the employees of the Company in general. The Company shall pay the premiums associated with such 2 coverage. In the event Executive makes a claim against any disability policy provided to Executive by the Company pursuant to this Section 5(c)(i) and such policy calls for a waiting period which is applicable to Executive's claim, the Company shall pay to Executive during such waiting period his monthly base salary due during such period and shall provide the other benefits due him under this Section 5(c)(i). (ii) VACATION. Executive shall be entitled to four weeks of vacation without loss of compensation or other benefits pursuant to such general policies and procedures of the Company as are from time to time adopted by the Company. (iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the conduct of the Company's business for which he furnishes appropriate documentation. (iv) AUTOMOBILE. In the event the Company shall instituted a Company car policy, Executive shall receive the benefits thereunder in keeping with his position with the Company. During any period that the Company has not instituted a Company car policy, the Company shall pay to Executive a monthly auto expense in the amount not less than Four Hundred Dollars ($400) per month. (v) CLUB DUES. The Company shall reimburse Executive the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain his status as a member of the Flagship Athletic Club or of any other athletic club having equal or lesser membership costs in lieu of such club. If such membership is a corporate membership and is subsequently converted to an individual membership, the Company shall reimburse Executive for any fees charged in connection with such conversion. (vi) OFFICE AND SUPPORT STAFF. During the Retention Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive at any time during the 90-day period immediately preceding the Effective Date. 6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon his death. The Company may terminate Executive's employment during the Retention Period, after having established the Executive's Disability, by giving the Executive written notice of its intention to terminate his employment, and his employment with the Company shall terminate effective on the 90th day after receipt of such notice if, within 90 days after such receipt, the Executive shall fail to return to full-time performance of his duties. For purposes of this Agreement, "Disability" means disability which, after the expiration of more than 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or his legal representatives (such agreement to acceptability not to be withheld unreasonably). 3 (b) VOLUNTARY TERMINATION. Notwithstanding anything in this Agreement to the contrary, the Executive may, upon not less than 15 days' advance written notice to the Company, voluntarily terminate employment during the Retention Period for any reason, provided that any termination by the Executive pursuant to Section 6(d) of this Agreement on account of Good Reason (as defined therein) shall not be treated as a voluntary termination under this Section 6(b). (c) CAUSE. The Company may terminate the Executive's employment during the Retention Period for Cause. For purposes of this Agreement, "Cause" means (I) gross misconduct on the Executive's part which is demonstrably willful and deliberate and which results in material damage to the Company's business or reputation or (II) repeated material violations by the Executive of his obligations under Section 4 of this Agreement which violations are demonstrably willful and deliberate. (d) GOOD REASON. The Executive may terminate his employment during the Retention Period for Good Reason. For purposes of this Agreement, "Good Reason" means (i) a good faith determination by the Executive that, without his prior written consent, the Company or any of its officers has taken or failed to take any action (including, without limitation, (A) exclusion of the Executive from consideration of material matters within his area of responsibility, other than an insubstantial or inadvertent exclusion remedied by the Company promptly after receipt of notice thereof from the Executive, (B) statements or actions which undermine the Executive's authority with respect to persons under his supervision or reduce his standing with his peers, other than an insubstantial or inadvertent statement or action which is remedied by the Company promptly after receipt of the notice thereof from the Executive, (C) a pattern of discrimination against or harassment of the Executive or persons under his supervision and (D) the subjection of the Executive to procedures not generally applicable to other similarly situated executives) which changes the Executive's position (including titles), authority or responsibilities under Section 4 of this Agreement or reduces the Executive's ability to carry out his duties and responsibilities under Section 4 of this Agreement; (ii) any failure by the Company to comply with any of the provisions of Section 5 of this Agreement, other than an insubstantial or inadvertent failure remedied by the Company promptly after receipt of notice thereof from the Executive; (iii) the Company's requiring the Executive to be employed at any location more than 35 miles further from his principal residence than the location at which the Executive was employed immediately preceding the Effective Date; or (iv) any failure by the Company to obtain the assumption of and agreement to perform this Agreement by a successor as contemplated by Section 13(b) of this Agreement. 4 (e) WITHOUT CAUSE. The Company shall give Executive at least 15 days' advance written notice of any termination of Executive's employment which is not for Cause and not on account of Executive's Disability. (f) NOTICE OF TERMINATION. Any termination of Executive's employment by the Company for Cause or by the Executive for Good Reason during the Retention Period shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(c) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice given, in the case of a termination by the Company for Cause, within 10 business days of the Company's having actual knowledge of all of the events giving rise to such termination, and in the case of a termination by Executive for Good Reason, within 180 days of the Executive's having actual knowledge of the events giving rise to such termination, and which (I) indicates the specific termination provision in this Agreement relied upon, (II) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (III) if the termination date is other than the date of receipt of such notice, specifies such termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. (g) DATE OF TERMINATION. For purposes of this Agreement, the term "Date of Termination" means (I) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination or, if later, the date specified therein and (II) in all other cases, the actual date on which the Executive's employment terminates during the Retention Period. 7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment is terminated during the Retention Period by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement other than those obligations accrued hereunder at the date of his death, including, for this purpose (I) the Executive's full Base Salary through the Date of Termination, (II) the product of the Annual Bonus and a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (III) any compensation previously deferred by the Executive (together with any accrued earnings thereon) and not yet paid by the Company, (IV) any other amounts or benefits owing to the Executive under any of the Company's incentive compensation plans, stock option plans, restricted stock plans or other similar plans and (V) any amounts or benefits owing to the Executive under any of the Company's employee benefit plans or policies (such amounts specified in clauses (i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless otherwise directed by the Executive prior to his death, all Accrued Obligations shall be paid to the Executive's estate. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability, the Executive shall receive all Accrued Obligations and, in addition, from 5 the Date of Termination until the second anniversary of such date, shall continue to participate in or be covered under the benefit plans and programs referred to in Section 5(c)(i) of this Agreement or, at the Company's option, to receive equivalent benefits by alternate -means at least equal to those provided in accordance with Section 5(c)(i) of this Agreement. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to receive disability and other benefits at least equal to the most favorable level of benefits available to disabled employees and/or their families in accordance with the plans, programs and policies maintained by the Company or its affiliates relating to disability at any time during the 90-day period immediately preceding the Effective Date. (c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention Period, the Executive's employment shall be terminated for Cause or voluntarily terminated by the Executive (other than on account of Good Reason), the Executive shall receive all Accrued Obligations other than the Pro-rated Bonus Obligation. (d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the Retention Period, the Company terminates the Executive's employment other than for Cause or Disability, or the Executive terminates his employment for Good Reason, the Executive shall receive all Accrued Obligations. In addition, the Company shall pay to the Executive in a lump sum, within 15 days after the Date of Termination, a cash amount equal to two (2) times the sum of the following amounts: (1) the Executive's annual Base Salary at the rate specified in Section 5(a) of this Agreement; (2) the Annual Bonus; (3) an amount equal to the average annual amount paid and/or reimbursed to the Executive pursuant to Section 5(c)(iv) and (v) hereof during the two calendar years preceding the Date of Termination; and (4) the present value, calculated using the annual federal short-term rate as determined under Section 1274(d) of the Code, of (without duplication) the annual cost to the Company (based on the premium rates or other costs to it) of obtaining coverage equivalent to the coverage under the plans and programs described in Section 5(c)(i) of this Agreement; provided, however, that with respect to the life and medical insurance coverage referred to in Section 5(c)(i) of this Agreement, at the Executive's election made prior to the Date of Termination, the Company shall use its best efforts to secure conversion coverage and shall pay the cost of such coverage in lieu of paying the lump sum amount attributable to such life or medical insurance coverage. 6 8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have with respect to awards granted to him prior to or during the Retention Period under any stock option, restricted stock or other plans or agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its affiliated companies shall be payable in accordance with such plan or program. 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution, acceleration of vesting or other benefit which the Executive receives or becomes entitled to receive, whether alone or in combination, and whether pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company or any of its affiliates or any of their respective successors or assigns, but determined without regard to any additional payments required under this Section 9 (collectively, the "Payments"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of (i) all taxes with respect to the Gross-Up Payment (including any interest or penalties imposed with respect to such taxes) including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto), and (ii) the Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick or such other nationally recognized accounting firm then auditing the accounts of the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is unwilling or unable to perform its obligations pursuant to this Section 9, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the potential uncertainty in the application of Section 4999 of the Code (or any successor provision) 7 at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 20 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the 8 Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others whether by reason of the subsequent employment of the Executive or otherwise. In no event shall the Executive be obligated to seek other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and no amount payable under this Agreement shall be reduced on account of any compensation received by the Executive from other employment. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined by mutual consent of the Executive and the Company or by a tribunal having jurisdiction over the matter that Good Reason did not exist, the employment of the Executive shall, unless the Company and the Executive shall otherwise mutually agree, be deemed to have terminated, at the date of giving such purported Notice of Termination, by mutual consent of the Company and the Executive and, except as provided in the last preceding sentence, the Executive shall be entitled to receive only those payments and benefits which he would have been entitled to receive at such date otherwise than under this Agreement. 11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively and finally by expedited arbitration, conducted before a single arbitrator in Minneapolis, Minnesota, in accordance with 9 the rules governing employment disputes then in effect of the American Arbitration Association. The arbitrator shall be approved by both the Company and the Executive. Judgment may be entered on the arbitrator's award in any court having jurisdiction. (b) In the event that any claim by the Executive under this Agreement is disputed, the Company shall pay all reasonable legal fees and expenses incurred by the Executive in pursuing such claim, provided that the Executive is successful as to at least part of the disputed claim by reason of arbitration, settlement or otherwise. 12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, (I) obtained by the Executive during his employment by the Company or any of its affiliated companies and (II) not otherwise public knowledge (other than by reason of an unauthorized act by the Executive). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, unless compelled pursuant to an order of a court or other body having jurisdiction over such matter, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. (b) It is mutually acknowledged that by virtue of Employee's former positions with the Company and its subsidiaries, he has become possessed of certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company and its subsidiaries. It is further understood that Employee has developed contacts among the customers of the Company and its subsidiaries, and it is mutually understood and agreed that the customers of the Company and its subsidiaries and the business methods and procedures and techniques developed by the Company and its subsidiaries are valuable assets and properties of the Company and its subsidiaries. Without limitation, it is also specifically acknowledged that great trust on the part of the Company and its subsidiaries has resided in Employee, since Employee's former duties have included involvement in the management, promotion and development of the Company's business. Accordingly, the parties deem it necessary to enter into the protective covenants set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: (i) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or on the behalf of any third party, perform management, accounting, financial, marketing, sales, administrative or executive duties, in any business conducted within the Territories (as defined below) which engages in originating or purchasing automobile or truck loans or leases from automobile or truck dealers, packaging such loans or leases, reselling such loans or leases or servicing such loans or leases (the "Restricted Activities"). As used in this Addendum, the term "Territories" means any state in which any loans or leases originated or acquired by the Company originated (determined by the location of the dealers from whom the loans or leases were purchased or, in the case of loans or leases originated by the Company, where the borrower or lessee resides). 10 (ii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, solicit, divert, take away or attempt to solicit, divert, or take away from the Company, or any subsidiary, any of the dealers and other sources from which the Company or any subsidiary acquires loans or leases or from whom the loan or lease packages are received by the Company or any subsidiary. (iii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or in the service or on behalf of others, solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away any person employed by the Company or any subsidiary, whether or not such employee is a full-time employee or a temporary employee of the Company or any subsidiary, and whether or not such employment was pursuant to a written or oral contract of employment and whether or not such employment was for a determined period or was at will. (c) Employee acknowledges that the provisions of this Section 12 constitute a material inducement to the Company to enter into the Agreement. Employee further acknowledges that the Company's remedy at law for a breach by him of the provisions of this Section 12 will be inadequate. Accordingly, in the event of a breach or threatened breach by Employee of any provision of this Section 12, the Company will be entitled to injunctive relief in addition to any other remedy it may have. If any of the provisions of, or covenants contained in, this Section 12 are hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the provisions or the enforceability thereof in any other jurisdiction, which will be given full effect, without regard to the invalidity or unenforceability in such other jurisdiction. If any of the provisions of, or covenants contained in, this Section 12 are held to be unenforceable in any jurisdiction because of the duration or geographical scope thereof, the parties agree that the court making such determination will have the power to reduce the duration or geographical scope of such provision or covenant and, in its reduced form, such provision or covenant will be enforceable; provided, however, that the determination of such court will not affect the enforceability of this Section 12 in any other jurisdiction. (d) In no event shall an asserted violation of the provisions of this Section 12 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement or under any other agreement, plan or arrangement. 13. SUCCESSORS. (a) This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the 11 same manner and to the same extent as the Company would be required to perform if no such succession had taken place. 14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, applied without reference to principles of conflict of laws. (b) AMENDMENTS. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: James D. Atkinson III 6969 Edgebrook Place Eden Prairie, MN 55346 If to the Company: Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, MN 55439 Attention: Secretary (with a copy to the attention of the General Counsel) or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee. (d) TAX WITHHOLDING. The Company may withhold from any amounts payable under this Agreement such Federal, State or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (g) POOLING TRANSACTIONS. The parties acknowledge that certain of the provisions of this Agreement may grant to the Executive benefits in excess of those granted to the Executive pursuant to the prior employment agreement (the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The parties agree that (i) in the event the grant of any such additional benefit would, in the opinion of Ernst & Young LLP or such other nationally recognized accounting firm selected by the Company, prevent the Company from receiving a 12 pooling of interests treatment under Accounting Principles Board Opinion No. 16, and (ii) in the further event that such a pooling transaction shall be consummated by the Company and an acquiring entity; then in such events, the Executive agrees that the grant of any such additional benefits hereunder shall be amended as of the day prior to the closing of such pooling transaction to the extent necessary to enable the Company to gain pooling treatment under Accounting Principles Board Opinion No. 16 for such transaction; provided such amendment shall not reduce any such benefit such that it is less than that which was granted to the Executive under the Prior Agreement. (f) CAPTIONS. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. OLYMPIC FINANCIAL LTD. By: /s/ Warren Kantor ------------------------- Name: ------------------------- Title: Chairman of the Board ------------------------- /s/ James D. Atkinson III ----------------------------- James D. Atkinson III 13 EX-10.83 54 AMEND EMPLOY RETEN AGREE 12/31/96 REG & J ATKINSON AMENDMENT OF EMPLOYMENT RETENTION AGREEMENT THIS AGREEMENT made as of the 31st day of December, 1996 by and between Olympic Financial Ltd. (the "Company") and James D. Atkinson III ("Associate"). WHEREAS, the Company and Associate entered into that certain Employment Retention Agreement dated as of November 7, 1996, pursuant to which the Company employed Associate as its Senior Vice President/Corporate Counsel. Such agreement is hereinafter referred to as the "Employment Agreement"; and WHEREAS, the Board of Directors and the Compensation Committee of the Company have approved the grant of a club membership as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and Associate agree to amend the Employment Agreement as follows: 1. AMENDMENT. Section 5(c)(v) of the Employment Agreement is hereby amended in its entirety to provide as follows: (v) CLUB MEMBERSHIPS. The Company shall reimburse Executive the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain his status as a member of the Flagship Athletic Club or of any other athletic club having equal or lesser membership costs in lieu of such club. The Company shall also provide to Executive and his family a membership at Olympic Hills Golf Club and shall reimburse Executive for the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain such membership. If either such membership is a corporate membership, upon termination of Executive's employment other than for Cause or Death, such membership shall be converted to an individual membership in Executive's name and the Company shall pay any fees charged in connection with such conversion. 2. RATIFICATION. The Employment Agreement as amended hereby is ratified and affirmed. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OLYMPIC FINANCIAL LTD. By: /s/ Scott Anderson --------------------------- Scott Anderson Its: Vice Chairman ASSOCIATE: /s/ James D. Atkinson III ------------------------------ James D. Atkinson III EX-10.86 55 AMEND EMPLOY AGREE 12/20/95 REG & ROBERT BARBEE AMENDMENT OF EMPLOYMENT AGREEMENT THIS AGREEMENT made as of the 20th day of December, 1995 by and between Olympic Financial Ltd. (the "Company") and Robert A. Barbee ("Associate"). WHEREAS, the Company and Associate entered into that certain Employment and Non-Compete Agreement dated as of September 21, 1994, pursuant to which the Company employed Associate as its Senior Vice President/Sales and Marketing. Such agreement together with subsequent amendments thereto, if any, are hereinafter referred to as the "Employment Agreement"; and WHEREAS, the Board of Directors and the Compensation Committee of the Company have approved a promotion of Associate and an increase in Associate's base salary as hereinafter set forth. NOW THEREFORE, in consideration of the mutual covenants contained herein, the Company and Associate agree as follows: 1. PROMOTION. During the term of the Employment Agreement Associate shall perform the duties of Executive Vice President/Sales and Marketing. 2. BASE SALARY. Associate's base salary for the fiscal 1996 shall be $200,000 commencing January 1, 1996. 3. RATIFICATION. The Employment Agreement as amended hereby is ratified and affirmed. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OLYMPIC FINANCIAL LTD. By: /s/ Jeffrey Mack --------------------------- Its: ----------------------- ASSOCIATE: /s/ Robert A. Barbee ------------------------------ Robert A. Barbee EX-10.87 56 EMPLOY RETENT AGREE 11/7/96 REG & ROBERT BARBEE EMPLOYMENT RETENTION AGREEMENT THIS AGREEMENT between Olympic Financial Ltd. (the "Company") and Robert A. Barbee (the "Executive") is dated as of this 7 day of November, 1996. WITNESSETH: WHEREAS, the Company and the Executive have agreed to enter into an agreement providing the Company and the Executive with certain rights to assure the Company of continuity of management; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is hereby agreed by and between the Company and the Executive as follows: 1. EFFECTIVE DATE: TERM. This Agreement shall govern the terms and conditions of Executive's employment commencing as of the date hereof (the "Effective Date"). 2. PRIOR EMPLOYMENT AGREEMENT. As of the Effective Date, this Agreement shall supersede the Executive's Employment Agreement with the Company dated September 21, 1994, as amended. 3. RETENTION PERIOD. The Company agrees to continue the Executive in its employ, and the Executive agrees to remain in the employ of the Company, for the period (the "Retention Period") commencing on the Effective Date and ending on the date of any termination of the Executive's employment in accordance with Section 6 of this Agreement. 4. POSITION AND DUTIES (a) NO REDUCTION IN POSITION. During the Retention Period, the Executive's position (including titles), authority and responsibilities shall be at least commensurate with the highest of those held or exercised by him at any time during the 90-day period immediately preceding the Effective Date. (b) BUSINESS TIME. During the Retention Period, the Executive shall devote his full business time during normal business hours to the business and affairs of the Company and use his best efforts to perform faithfully and efficiently the responsibilities assigned to him hereunder, to the extent necessary to discharge such responsibilities, except for (i) reasonable time spent in serving on corporate, civic or charitable boards or committees of the nature similar to those on which the Executive served prior to the Change of Control, or otherwise approved by the Board, in each case only if and to the extent not substantially interfering with the performance of such responsibilities, and (ii) periods of vacation and sick leave to which he is entitled. It is expressly understood that the Executive's continuing to serve on any boards and committees on which he is serving or with which he is otherwise associated immediately preceding the Effective Date shall not be deemed to interfere with the performance of the Executive's services to the Company. 5. COMPENSATION AND BENEFITS. (a) BASE SALARY. During the Retention Period, the Executive shall receive a base salary ("Base Salary") at a monthly rate at least equal to the monthly salary paid to the Executive by the Company and any of its affiliated companies immediately prior to the Effective Date. The Base Salary shall be reviewed at least once each year after the Effective Date, and may be increased (but not decreased) at any time and from time to time by action of the Board or any committee thereof or any individual having authority to take such action in accordance with the Company's regular practices. Neither payment of the Base Salary nor payment of any increased Base Salary after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. For purposes of the remaining provisions of this Agreement, the term "Base Salary" shall mean Base Salary as defined in this Section 5(a) or, if increased after the Effective Date, the Base Salary as so increased. (b) ANNUAL BONUS. In addition to the Base Salary, the Executive shall be awarded for each fiscal year of the Company ending during the Retention Period an annual bonus, to be based on reasonable and customary criteria consistent with the Company's past practices (the "Annual Bonus"), with a target amount at least equal to 40% of his Base Salary (I.E., that percentage of the Executive's Base Salary designated by the Company's Compensation Committee for purposes of Section 4.1 of the Company's 1998-2000 Restricted Stock Election Plan). If a fiscal year of the Company begins, but does not end, during the Retention Period, the Executive shall receive an amount with respect to such fiscal year at least equal to the amount of the Annual Bonus multiplied by a fraction, the numerator of which is the number of days in such fiscal year occurring during the Retention Period and the denominator of which is 365. Each amount payable in respect of the Executive's Annual Bonus shall be paid not later than 90 days after the fiscal year next following the fiscal year for which the Annual Bonus (or pro-rated portion) is earned or awarded. Neither the Annual Bonus nor any bonus amount paid in excess thereof after the Effective Date shall serve to limit or reduce any other obligation of the Company hereunder. (c) FRINGE BENEFITS. During the Retention Period, the Company shall provide the following fringe benefits to Executive: (i) HEALTH, DISABILITY AND LIFE INSURANCE. Subject to satisfaction of the eligibility requirements of such plans and the rules and regulations applicable thereto, Executive and his family members shall be entitled to be covered by the Company's group health and dental insurance plans presently in effect or hereafter adopted by the Company and applicable to employees of the Company generally and Executive shall be entitled to be covered by the Company's group disability and life insurance plans presently in effect or hereafter adopted by the Company and applicable to the employees of the Company in general. The Company shall pay the premiums associated with such 2 coverage. In the event Executive makes a claim against any disability policy provided to Executive by the Company pursuant to this Section 5(c)(i) and such policy calls for a waiting period which is applicable to Executive's claim, the Company shall pay to Executive during such waiting period his monthly base salary due during such period and shall provide the other benefits due him under this Section 5(c)(i). (ii) VACATION. Executive shall be entitled to four weeks of vacation without loss of compensation or other benefits pursuant to such general policies and procedures of the Company as are from time to time adopted by the Company. (iii) EXPENSE REIMBURSEMENT. Executive shall be reimbursed by the Company for all reasonable expenses incurred by him in connection with the conduct of the Company's business for which he furnishes appropriate documentation. (iv) AUTOMOBILE. In the event the Company shall institute a Company car policy, Executive shall receive benefits thereunder in keeping with his position with the Company. During any period that the Company has not instituted a Company car policy, the Company shall provide to Executive use of an automobile reasonably acceptable to Executive to be used by Executive in conducting the Company's business. In addition, the Company shall during such period reimburse Executive (1) an amount equal to the reasonable cost of insuring and maintaining the automobile used by Executive for the Company's business, and (2) the cost of maintenance and the cost of gasoline and oil used in the automobile and in the event of a loss under the policies insuring said automobile, the amount of any deductible thereunder applicable to such loss. Such insurance and the coverage and deductibles thereof shall cover both the business and personal use of such automobile by Employee, his family and invitees and shall include such other terms and conditions as are reasonably acceptable to Executive. Any such reimbursements shall be made upon the Company's receipt of invoices evidencing incurrence of such expenses. Executive shall also be paid a monthly amount equal to the reasonable value of personal use of such automobile, determined in accordance with applicable federal income tax regulations. (v) CLUB DUES. The Company shall reimburse Executive the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain his status as a member of the Flagship Athletic Club or of any other athletic club having equal or lesser membership costs in lieu of such club. The Company shall also provide to Executive and his family a membership at Olympic Hills Golf Club and shall reimburse the Executive for the reasonable cost of the monthly or annual dues, as the case may be, paid by Executive to maintain such membership. If either such membership is a corporate membership and is subsequently converted to an individual membership, the Company shall reimburse Executive for any fees charged in connection with such conversion. (vi) OFFICE AND SUPPORT STAFF, During the Retention Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other 3 appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive at any time during the 90-day period immediately preceding the Effective Date. 6. TERMINATION. (a) DEATH OR DISABILITY. The Executive's employment shall terminate automatically upon his death. The Company may terminate Executive's employment during the Retention Period, after having established the Executive's Disability, by giving the Executive written notice of its intention to terminate his employment, and his employment with the Company shall terminate effective on the 90th day after receipt of such notice if, within 90 days after such receipt, the Executive shall fail to return to full-time performance of his duties. For purposes of this Agreement, "Disability" means disability which, after the expiration of more than 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or his legal representatives (such agreement to acceptability not to be withheld unreasonably). (b) VOLUNTARY TERMINATION. Notwithstanding anything in this Agreement to the contrary, the Executive may, upon not less than 15 days' advance written notice to the Company, voluntarily terminate employment during the Retention Period for any reason, provided that any termination by the Executive pursuant to Section 6(d) of this Agreement on account of Good Reason (as defined therein) shall not be treated as a voluntary termination under this Section 6(b). (c) CAUSE. The Company may terminate the Executive's employment during the Retention Period for Cause. For purposes of this Agreement, "Cause" means (i) gross misconduct on the Executive's part which is demonstrably willful and deliberate and which results in material damage to the Company's business or reputation or (ii) repeated material violations by the Executive of his obligations under Section 4 of this Agreement which violations are demonstrably willful and deliberate. (d) GOOD REASON. The Executive may terminate his employment during the Retention Period for Good Reason. For purposes of this Agreement, "Good Reason" means (i) a good faith determination by the Executive that, without his prior written consent, the Company or any of its officers has taken or failed to take any action (including, without limitation, (A) exclusion of the Executive from consideration of material matters within this area of responsibility, other than an insubstantial or inadvertent exclusion remedied by the Company promptly after receipt of notice thereof from the Executive, (B) statements or actions which undermine the Executive's authority with respect to persons under his supervision or reduce his standing with his peers, other than an insubstantial or inadvertent statement or action which is remedied by the Company promptly after receipt of the notice thereof from the Executive, (C) a pattern of discrimination against or harassment of the Executive or persons under his supervision and (D) the subjection of the Executive to procedures not generally applicable to other similarly situated executives) which changes the Executive's position (including titles), 4 authority or responsibilities under Section 4 of this Agreement or reduces the Executive's ability to carry out his duties and responsibilities under Section 4 of this Agreement; (ii) any failure by the Company to comply with any of the provisions of Section 5 of this Agreement, other than an insubstantial or inadvertent failure remedied by the Company promptly after receipt of notice thereof from the Executive; (iii) the Company's requiring the Executive to be employed at any location more than 35 miles further from his principal residence than the location at which the Executive was employed immediately preceding the Effective Date; or (iv) any failure by the Company to obtain the assumption of and agreement to perform this Agreement by a successor as contemplated by Section 13(b) of this Agreement. (e) WITHOUT CAUSE. The Company shall give Executive at least 15 days' advance written notice of any termination of Executive's employment which is not for Cause and not on account of Executive's Disability. (f) NOTICE OF TERMINATION. Any termination of Executive's employment by the Company for Cause or by the Executive for Good Reason during the Retention Period shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 14(c) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice given, in the case of a termination by the Company for Cause, within 10 business days of the Company's having actual knowledge of all of the events giving rise to such termination, and in the case of a termination by Executive for Good Reason, within 180 days of the Executive's having actual knowledge of the events giving rise to such termination, and which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies such termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. (g) DATE OF TERMINATION. For purposes of this Agreement, the term "Date of Termination" means (i) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination or, if later, the date specified therein and (ii) in all other cases, the actual date on which the Executive's employment terminates during the Retention Period. 7. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the Executive's employment is terminated during the Retention Period by reason of the Executive's death, this Agreement shall terminate without further obligations to the Executive's legal 5 representatives under this Agreement other than those obligations accrued hereunder at the date of his death, including, for this purpose (i) the Executive's full Base Salary through the Date of Termination, (ii) the product of the Annual Bonus and a fraction, the numerator of which is the number of days in the current fiscal year of the Company through the Date of Termination, and the denominator of which is 365 (the "Pro-rated Bonus Obligation"), (iii) any compensation previously deferred by the Executive (together with any accrued earnings thereon) and not yet paid by the Company, (iv) any other amounts or benefits owing to the Executive under any of the Company's incentive compensation plans, stock option plans, restricted stock plans or other similar plans and (v) any amounts or benefits owing to the Executive under any of the Company's employee benefit plans or policies (such amounts specified in clauses (i), (ii), (iii), (iv) and (v) are hereinafter referred to as "Accrued Obligations"). Unless otherwise directed by the Executive prior to his death, all Accrued Obligations shall be paid to the Executive's estate. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability, the Executive shall receive all Accrued Obligations and, in addition, from the Date of Termination until second anniversary of such date, shall continue to participate in or be covered under the benefit plans and programs referred to in Section 5(c)(i) of this Agreement or, at the Company's option, to receive equivalent benefits by alternate means at least equal to those provided in accordance with Section 5(c)(i) of this Agreement. Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to receive disability and other benefits at least equal to the most favorable level of benefits available to disabled employees and/or their families in accordance with the plans, programs and policies maintained by the Company or its affiliates relating to disability at any time during the 90-day period immediately preceding the Effective Date. (c) CAUSE AND VOLUNTARY TERMINATION. If, during the Retention Period, the Executive's employment shall be terminated for Cause or voluntarily terminated by the Executive (other than on account of Good Reason), the Executive shall receive all Accrued Obligations other than the Pro-rated Bonus Obligation. (d) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR DISABILITY AND TERMINATION BY EXECUTIVE FOR GOOD REASON. LUMP SUM PAYMENT. If, during the Retention Period, the Company terminates the Executive's employment other than for Cause or Disability, or the Executive terminates his employment for Good Reason, the Executive shall receive all Accrued Obligations. In addition, the Company shall pay to the Executive in a lump sum, within 15 days after the Date of Termination, a cash amount equal to two (2) times the sum of the following amounts: (1) the Executive's annual Base Salary at the rate specified in Section 5(a) of this Agreement; (2) the Annual Bonus; 6 (3) an amount equal to the average annual amount paid and/or reimbursed to the Executive pursuant to Section 5(c)(iv) and (v) hereof during the two calendar years preceding the Date of Termination; and (4) the present value, calculated using the annual federal short-term rate as determined under Section 1274(d) of the Code, of (without duplication) the annual cost to the Company (based on the premium rates or other costs to it) of obtaining coverage equivalent to the coverage under the plans and programs described in Section 5(c)(i) of this Agreement; provided, however, that with respect to the life and medical insurance coverage referred to in Section 5(c)(i) of this Agreement, at the Executive's election made prior to the Date of Termination, the Company shall use its best efforts to secure conversion coverage and shall pay the cost of such coverage in lieu of paying the lump sum amount attributable to such life or medical insurance coverage. 8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have with respect to awards granted to him prior to or during the Retention Period under any stock option, restricted stock or other plans or agreements with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its affiliated companies shall be payable in accordance with such plan or program. 9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment, distribution, acceleration of vesting or other benefit which the Executive receives or becomes entitled to receive, whether alone or in combination, and whether pursuant to the terms of this Agreement or any other agreement, plan or arrangement with the Company or any of its affiliates or any of their respective successors or assigns, but determined without regard to any additional payments required under this Section 9 (collectively, the "Payments"), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of (i) all taxes with respect to the Gross-Up Payment (including any interest or penalties imposed with respect to such taxes) including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto), and (ii) the Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed on the Payments. 7 (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG Peat Marwick or such other nationally recognized accounting firm then auditing the accounts of the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is unwilling or unable to perform its obligations pursuant to this Section 9, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the potential uncertainty in the application of Section 4999 of the Code (or any successor provision) at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 20 business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and 8 (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. FULL SETTLEMENT. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations thereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others whether by reason of the subsequent employment of the Executive or otherwise. In no event shall the Executive be 9 obligated to seek other employment by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and no amount payable under this Agreement shall be reduced on account of any compensation received by the Executive from other employment. In the event that the Executive shall in good faith give a Notice of Termination for Good Reason and it shall thereafter be determined by mutual consent of the Executive and the Company or by a tribunal having jurisdiction over the matter that Good Reason did not exist, the employment of the Executive shall, unless the Company and the Executive shall otherwise mutually agree, be deemed to have terminated, at the date of giving such purported Notice of Termination, by mutual consent of the Company and the Executive and, except as provided in the last preceding sentence, the Executive shall be entitled to receive only those payments and benefits which he would have been entitled to receive at such date otherwise than under this Agreement. 11. DISPUTES; LEGAL FEES AND EXPENSES. (a) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively and finally by expedited arbitration, conducted before a single arbitrator in Minneapolis, Minnesota, in accordance with the rules governing employment disputes then in effect of the American Arbitration Association. The arbitrator shall be approved by both the Company and the Executive. Judgment may be entered on the arbitrator's award in any court having jurisdiction. (b) In the event that any claim by the Executive under this Agreement is disputed, the Company shall pay all reasonable legal fees and expenses incurred by the Executive in pursuing such claim, provided that the Executive is successful as to at least part of the disputed claim by reason of arbitration, settlement or otherwise. 12. CONFIDENTIAL INFORMATION; NONCOMPETITION. (a) The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, (I) obtained by the Executive during his employment by the Company or any of its affiliated companies and (II) not otherwise public knowledge (other than by reason of an unauthorized act by the Executive). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company, unless compelled pursuant to an order of a court or other body having jurisdiction over such matter, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. (b) It is mutually acknowledged that by virtue of Employee's former positions with the Company and its subsidiaries, he has become possessed of certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company and its subsidiaries. It is further understood that Employee has developed contacts among the customers of the Company and its subsidiaries, and it is mutually understood and agreed that the customers of the Company and its subsidiaries and the business methods and procedures and techniques developed by the Company and its subsidiaries are valuable assets and properties of the Company and its subsidiaries. Without limitation, it is also specifically acknowledged that great trust on the part of the Company and its subsidiaries has resided in 10 Employee, since Employee's former duties have included involvement in the management, promotion and development of the Company's business. Accordingly, the parties deem it necessary to enter into the protective covenants set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: (i) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or on the behalf of any third party, perform management, accounting, financial, marketing, sales, administrative or executive duties, in any business conducted within the Territories (as defined below) which engages in originating or purchasing automobile or truck loans or leases from automobile or truck dealers, packaging such loans or leases, reselling such loans or leases or servicing such loans or leases (the "Restricted Activities"). As used in this Addendum, the term "Territories" means any state in which any loans or leases originated or acquired by the Company originated (determined by the location of the dealers from whom the loans or leases were purchased or, in the case of loans or leases originated by the Company, where the borrower or lessee resides). (ii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, solicit, divert, take away or attempt to solicit, divert, or take away from the Company, or any subsidiary, any of the dealers and other sources from which the Company or any subsidiary acquires loans or leases or from whom the loan or lease packages are received by the Company or any subsidiary. (iii) Employee agrees that during the Retention Period and until the first anniversary of the Date of Termination, he will not, directly or indirectly, on his own behalf or in the service or on behalf of others, solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away any person employed by the Company or any subsidiary, whether or not such employee is a full-time employee or a temporary employee of the Company or any subsidiary, and whether or not such employment was pursuant to a written or oral contract of employment and whether or not such employment was for a determined period or was at will. (c) Employee acknowledges that the provisions of this Section 12 constitute a material inducement to the Company to enter into the Agreement. Employee further acknowledges that the Company's remedy at law for a breach by him of the provisions of this Section 12 will be inadequate. Accordingly, in the event of a breach or threatened breach by Employee of any provision of this Section 12, the Company will be entitled to injunctive relief in addition to any other remedy it may have. If any of the provisions of, or covenants contained in, this Section 12 are hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the provisions or the enforceability thereof in any other jurisdiction, which will be given full effect, without regard to the invalidity or unenforceability in such other jurisdiction. If any of the provisions of, or covenants contained in, this Section 12 are held to be unenforceable in any jurisdiction because of the duration or geographical scope thereof, the parties agree that the court making such determination will have the power to reduce the duration or geographical scope of such provision or covenant and, in its reduced form, such 11 provision or covenant will be enforceable; provided, however, that the determination of such court will not affect the enforceability of this Section 12 in any other jurisdiction. (d) In no event shall an asserted violation of the provisions of this Section 12 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement or under any other agreement, plan or arrangement. 13. SUCCESSORS. (a) This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place. 14. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, applied without reference to principles of conflict of laws. (b) AMENDMENTS. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (c) NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Robert A. Barbee 7446 Cahill Road Edina, MN 55349 If to the Company: Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, MN 55439 Attention: Secretary (with a copy to the attention of the General Counsel) 12 or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee. (d) TAX WITHHOLDING. The Company may withhold from any amounts payable under this Agreement such Federal, State or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) CAPTIONS. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (g) POOLING TRANSACTIONS. The parties acknowledge that certain of the provisions of this Agreement may grant to the Executive benefits in excess of those granted to the Executive pursuant to the prior employment agreement (the "Prior Agreement") superseded hereby pursuant to Section 2 hereof. The parties agree that (i) in the event the grant of any such additional benefit would, in the opinion of Ernst & Young LLP or such other nationally recognized accounting firm selected by the Company, prevent the Company from receiving a pooling of interests treatment under Accounting Principles Board Opinion No. 16, and (ii) in the further event that such a pooling transaction shall be consummated by the Company and an acquiring entity; then in such events, the Executive agrees that the grant of any such additional benefits hereunder shall be amended as of the day prior to the closing of such pooling transaction to the extent necessary to enable the Company to gain pooling treatment under Accounting Principles Board Opinion No. 16 for such transaction; provided such amendment shall not reduce any such benefit such that it is less than that which was granted to the Executive under the Prior Agreement. IN WITNESS WHEREOF, the Executive has hereunto set his hand and the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. OLYMPIC FINANCIAL LTD. By: /s/ Warren Kantor -------------------------- Name: ------------------------ Title: Chairman of the Board ----------------------- /s/ Robert A. Barbee ------------------------------ Robert A. Barbee 13 EX-10.89 57 CONSULTING AGREE DATED 1/1/96 REG. & WARREN KANTOR CONSULTING AGREEMENT THIS CONSULTING AGREEMENT, herein referred to as "Agreement" made and entered into as of the 1st day of January, 1996, by and between Olympic Financial Ltd., a Minnesota corporation (the "Company") and Warren Kantor ("Consultant"). WHEREAS, the Company engages in the sales finance business, and WHEREAS, the Consultant has numerous years of experience in the financial services accounting and finance profession, and WHEREAS, the Company desires to engage Consultant to perform certain consulting services for the Company, and WHEREAS, Consultant is seeking such engagement, and WHEREAS, the parties desire to set forth the terms and conditions of consulting services to be provided by Consultant to the Company. NOW, THEREFORE, in consideration of the promises and the mutual benefits which will accrue to the parties to this Agreement, it is mutually understood and agreed as follows: 1. DESCRIPTION OF SERVICES. Consultant shall furnish and perform the consulting services pertinent to the operations of the Company which are specifically set forth in Exhibit A attached hereto and made a part hereof (the "Consulting Services"). The Consulting Services shall be provided as needed by the Company; provided, however, that Consulting Services are not to exceed one hundred fifty (150) hours. Consultant and the Company may from time to time agree that additional hours are desired, for which additional Consulting Services Consultant shall be paid at an hourly rate to be agreed upon by Consultant and the Company. The terms of this Agreement shall apply to any such additional hours per year. Such services shall be performed to be best of the Consultant's ability and in a competent, efficient and satisfactory manner. The Company acknowledges that Consultant is engaged in various other substantial business activities, that the Company's request for Consulting Services hereunder from Consultant shall not unreasonably interfere with Consultant's other business activities and that Consultant shall be entitled to engage in other business for other persons or entities during the term hereof subject to the provisions of paragraph 6 hereof. 2. PAYMENT FOR SERVICES. In consideration of the Consulting Services to be provided by Consultant to the Company and of other obligations of Consultant contained herein, the Company shall, concurrent with the execution hereof, execute and deliver to Consultant a non-statutory stock option in the form and substance of Exhibit B attached hereto (the "Option Agreement"). Pursuant to the Option Agreement, the Company shall grant to Consultant the option to purchase up to 40,000 shares of the $.01 par value 1 common stock of the Company ("Common Stock") at an option price equal to the fair market value of the Common Stock on the date of this Agreement, subject to the terms and conditions of the Option Agreement. 3. REIMBURSEMENT OF EXPENSES. Consultant shall be reimbursed for any and all travel or other expenses borne or expended by Consultant in connection with the Consulting Services. Any reasonable expenses incurred by Consultant in performing his duties hereunder shall be reimbursed by the Company when he furnishes appropriate documentation. Provided however, Consultant shall not incur any expenses on behalf of the Company in excess of $1,000.00 per individual expense without the prior written authorization of the Company. 4. TERM OF ENGAGEMENT. Subject to the terms and conditions hereof, the term of Consultant's engagement hereunder (the "Consulting Term") shall commence as of the date of this Agreement and shall continue until December 31, 1996, unless earlier terminated pursuant to paragraph 5.1. 5. TERMINATION. 5.1 Termination. Consultant's engagement hereunder shall terminate upon the happening of any of the following events: a. by the mutual written agreement of the Company and Consultant; b. upon the death of Consultant; c. upon 14 days' prior written notice from the Company to Consultant with Cause (as defined below); or d. upon 14 days' prior written notice from Consultant to the Company, if the Company shall fail to make any payment to Consultant required to be made pursuant hereto within 15 days after such payment was due. As used in this Agreement, the term "Cause" shall mean (i) any fraud, misappropriation or embezzlement by Consultant in connection with the business of the Company; (ii) any failure by Consultant to perform the Consulting Services assigned hereunder, provided that Consultant shall first have received a written notice from the Company which sets forth in reasonable detail the manner in which Consultant has failed to perform his duties, in which case Consultant shall ahve a period of thirty (30) days to cure the same, unless the same cannot be reasonably cured within said thirty (30) day period, in which event Consultant shall have up to an additional ninety (90) days to cure the same; (iii) any material breach by Consultant of this Agreement, provided that Consultant shall first have received written notice from the Company which sets forth in reasonable detail the breach by Consultant and Consultant shall have a period of thirty (30) days after receipt of such notice to cure such breach, unless the same cannot be 2 reasonably cured within said thirty (30) day period, in which event Consultant shall have up to an additional ninety (90) days to cure the same; (iv) willful destruction of the property or records of the Company; (v) dishonesty or deliberate falsification of the Company records; or (vi) harassment (including sexual harassment) of a Company employee. The sole remedy of the Company in the event of a breach of this Agreement shall be to terminate this Agreement. 6. PROPRIETARY INFORMATION. 6.1 PROPRIETARY INFORMATION. Except by the prior written permission from the Company, Consultant shall never disclose or use any proprietary information ("Proprietary Information") of the Company of which Consultant becomes or has become informed during his past or future engagement with the Company or any of its subsidiaries, whether or not developed by Consultant, except as required by his duties to the Company or any of its subsidiaries. Proprietary Information shall mean information concerning the Company, its business or its customers that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use. Proprietary Information includes, but is not limited to, the following types of information and other information of a similar nature (whether or not reduced to writing), all of which Consultant agrees constitutes the valuable trade secrets of the Company; research, development, know-how, plans and processes, marketing plans and techniques, existing and contemplated products and services, customer and prospect names and related information, prices, sales, credit scoring, personnel, computer programs and related documentation, technical and strategic plans, and finances. Proprietary Information also includes any information of the foregoing nature that the Company treats as a proprietary or designates as Proprietary Information, whether or not owned or developed by the Company. Information does not lose its Proprietary Information status merely because it was known by a limited number of other persons or entities or because it did not entirely originate with the Company. Such nondisclosure and non-use shall mean, without limiting the generality the generality of the foregoing, during the Consulting Term and at all times thereafter, the Consultant agrees to receive, maintain, and use Proprietary Information in the strictest confidence and, except with the consent of the Company will not directly or indirectly reveal, report, publish, disclose, or transfer any Proprietary Information to any person, firm, corporation, or other entity or utilize any Proprietary Information for the Consultant's own benefit or intended benefit or for the benefit or intended benefit of any other person, firm, corporation or other entity. 6.2 DELIVERY OF PROPRIETARY INFORMATION. Upon the request of the Company or the termination of his engagement, Consultant agrees to deliver to the Company all materials that include Proprietary Information, including without limitation customer lists, instruction sheets, manuals, computer programs (including source codes), letters, financial records, notes, notebooks, reports and copies thereof, and all other materials which are under his control and which relate to the business of the Company or its subsidiaries. Consultant agrees and understands that the Proprietary Information and all information 3 contained therein shall be at all times the property of the Company. Further, upon termination of his engagement, Consultant agrees to make available to any person designated by the Company all information concerning pending or preceding transactions or programs which may affect the operation of the Company or any of its subsidiaries about which Consultant has knowledge. The obligations of Consultant contained in this paragraph are in addition to the obligation of Consultant to return to the Company, upon the request of the Company or the termination of his engagement, all property of the Company then in his possession. 6.3 NON-COMPETITION. It is mutually acknowledged that by virtue of Consultant's position as a director of the Company and his engagement hereunder, the Company has divulged and will divulge or make accessible to Consultant, and Consultant has and will become possessed of, certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company. It is further understood that Consultant, in the course of and because of his position as a director of the Company and his engagement hereunder, has developed and will develop contacts among the customers of the Company, and it is mutually understood and agreed that the customers of the Company and the business methods and procedures and techniques developed by the Company are valuable assets and properties of the Company. Without limitation, it is also specifically acknowledged that great trust on the part of the Company has and will reside in Consultant because Consultant's duties will include involvement in the promotion and development of the Company's business. Consultant acknowledges that the restrictions and covenants set forth below constitute a material inducement to the Company to enter into this Agreement. Accordingly, the parties deem it necessary to enter into the protective agreements set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: a. Consultant agrees with the Company and for the benefit of the Company that through the actual date of termination of Consultant's engagement, and for a period of one (1) year thereafter (the "Non-Compete Period"), Consultant will not, in his own behalf or on the behalf of any third party, engage in, manage, operate, join, control or participate in the ownership, management operation or control of, or be connected in any manner with, directly or indirectly, in any business conducted within the Territories (as defined below) which competes with the business of the Company (as such exists during the term of Consultant's engagement); provided, however, Consultant's relationship with Advanta Corp., whether direct or indirect, either during the Consulting Term or the Non-Compete Period, shall not be prohibited by, and shall not constitute a breach of, the provisions of this subparagraph 6.3. As used in this Agreement, the term "Territories" shall mean the States of Arizona, California, Colorado, Connecticut, Florida, Georgia, Iowa, Illinois, Kansas, Massachusetts, Minnesota, Missouri, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, 4 Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah and Washington and any other state in which at least 5% of the loans acquired by the Company originated (determined by the location of the dealers from whom the loans were purchased). Provided, however, the foregoing restriction shall not prevent Consultant from owning less than 5% of publicly traded securities of any company engaged in a business competing with that of the Company. b. Consultant agrees that during his engagement by the Company and for a period of twelve (12) months following the termination, for whatever reason, of his engagement by the Company, he will not, either directly or indirectly, on his own behalf or in the service or on behalf of others solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away to any competitor of the Company, any person employed by the Company, whether or not such employee is a full-time employee or a temporary employee of the Company, and whether or not such employment was pursuant to a written or oral contract of employment and whether or not such employment was for a determined period or was at will. 6.4 SEVERABILITY. The covenants of Consultant set forth in this paragraph 6 are separate and independent covenants for which valuable consideration has been or will be paid or given, receipt of which is acknowledged by Consultant, and have also been made by Consultant to induce the Company to enter into this Agreement. Each of the aforesaid covenants may be availed of or relied upon by the Company in any court of competent jurisdiction. 6.5 SPECIFIC ENFORCEMENT. Consultant understands and agrees that a breach by him of any provisions of this Agreement will cause the Company irreparable injury and damage which cannot by compensable by receipt of money damages. Consultant, therefore, expressly agrees that the Company shall be entitled, in addition to any other remedies legally available, to injunctive and/or other equitable relief to prevent a breach of this Agreement or any part thereof. 7. OWNERSHIP OF PROPRIETARY INFORMATION. All Proprietary Information prepared, created or assembled by Consultant or caused by Consultant to be prepared, created or assembled in connection with this Agreement, as well as any copyright, patent and trademark rights related thereto, shall be work made for hire and shall at all times remain the sole and exclusive property of the Company. 8. RELATIONSHIP OF PARTIES. Consultant is engaged by the Company only for the purpose and to the extent set forth in this Agreement, and Consultant's relationship to the Company shall, during the period covered by this Agreement, be that of an independent contractor. Consultant shall not be considered an employee of the Company and shall not be entitled to participate in any plans, arrangements or distributions by the Company pertaining to or in connection with any insurance, pension, stock, bonus, profit 5 sharing or similar employee benefits given employees of the Company. Consultant shall be under the control of the Company as to the result of Consultant's work only and not as to the means by which such result is accomplished. Consultant shall not represent that Consultant has any power to bind the Company or to assume or to create any obligation or responsibility, express or implied, on behalf of the Company or in its name. The Company shall not be liable for any losses, injuries, damages, or claims of any nature whatsoever arising out of Consultant's activities or representations under or in connection with this Agreement. 9. TAXES. Consultant acknowledges and agrees that it shall be the obligation of Consultant to report as income, all compensation received by Consultant hereunder and agrees to reimburse, indemnify and to hold and save the Company harmless to the extent of any obligations imposed by law on the Company to pay withholding taxes, social security, unemployment or disability liability insurance or similar items in connection with any compensation paid to the Consultant. 10. MISCELLANEOUS. 10.1 VALIDITY. Whenever possible, each provision of this Agreement shall be interpreted so that it is valid under applicable law. In case one or more of the provisions of this Agreement is to any extent found to be invalid, illegal or unenforceable in any respect under applicable law, that provision shall still be effective to the extent it remains valid and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. If, moreover, any one or more of the restrictions contained in this Agreement is for any reason held excessively broad, it shall be construed or rewritten (blue-lined) so as to be enforceable to the extent of the greatest protection to the Company compatible with applicable law. 10.2 APPLICABLE LAW. This Agreement is entered into in the State of Minnesota and shall be construed, interpreted and enforced according to the statutes, rules of law and court decisions of said state. 10.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Option Agreement constitute the entire agreement of the Company and Consultant with respect to Consultant's engagement by the Company and supercedes any other understandings or agreements, whether written or oral. This Agreement may be amended or superceded only by an agreement in writing by the Company and Consultant. 10.4 NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed by registered or certified mail, return receipt requested, to the Company and its executive office and to Consultant at his address set forth below or in either case such other address specified by a party hereto in a written notice hereunder, or when personally delivered. 6 10.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns. This Agreement shall also be binding upon the inure to the benefit of Consultant and his heirs and representatives. This Agreement may not be assigned by either party without the prior written consent of the other party. 10.6 RESERVATION OF RIGHTS. Nothing contained herein shall limit any other rights the Company has at law in connection with Consultant's obligations to the Company, all of which are preserved. 10.7 SURVIVAL. Notwithstanding any termination of Consultant's engagement hereunder or any termination of this Agreement, the provisions of paragraph 6 hereof shall survive termination of this Agreement and termination of Consultant's engagement hereunder. 10.8 1994 AGREEMENT. The parties' obligations under this Agreement are in addition to, and not in lieu of, those obligations of the parties under that certain Consulting Agreement dated December 19, 1994 between the parties. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the day and year first above written. Olympic Financial Ltd. By /s/ Jeffrey C. Mack - ---------------------------------- ----------------------------- Warren Kantor Jeffrey C. Mack 720 Springmill Road Its Chief Executive Officer Villanova, PA 19185 7825 Washington Avenue South Minneapolis, MN 55439-2435. 7 CONSULTING AGREEMENT EXHIBIT A CONSULTANT'S SERVICES. Consultant shall endeavor to promote the interests of the Company and shall provide to the Company advice as to its manner of doing business in such of the following areas as are requested by the Company: long range planning, tax strategies development, treasury function review, internal audit function review, asset liability strategy development, asset backed securitization development, asset backed securitization planning, corporate development (merger, acquisition) investor relations, due diligence (re: acquisitions), financing strategies, SEC relations, capital raising strategies, reserving architecture, asset quality review, and note program strategy. Consultant shall provide advice and services as to such other related areas of the business of the Company as may be reasonably requested from time to time by the Chief Executive Officer of the Company. The Company desires to retain the services of Consultant, even though Consultant may become disabled or incapacitated. Accordingly, notwithstanding anything to the contrary contained herein, it is expressly understood that the inability of Consultant from time to time to render services to the Company by reason of absences, or temporary, or permanent illness, disability, or incapacity, or for any other reasonable cause beyond the control of Consultant, shall not constitute a failure by him to perform, his obligations hereunder and shall not be deemed a breach or default by him hereunder. 8 EXHIBIT B OLYMPIC FINANCIAL LTD. NON-STATUTORY STOCK OPTION AGREEMENT Olympic Financial Ltd., a Minnesota corporation (the "Company"), hereby grants to Warren Kantor (the "Optionee"), an option (the "Option") to purchase a total of 40,000 shares of the $.01 par value common stock ("Common Stock") of the Company (the "Shares"), at the price determined as provided herein, and in all respects subject to the terms, definitions and provisions hereof. The grant of this Option is subject to the approval thereof by the shareholders of the Corporation (if such approval is required by applicable laws or regulations) and by the Board of Directors of the Corporation. 1. NATURE OF THE OPTION. This Non-Statutory Stock Option is not intended to qualify as an Incentive Stock Option as defined in Section 422A of the Code. 2. EXERCISE PRICE. The exercise price is $16.25 for each share of Common Stock, which price the Board of Directors of the Company (the "Board") has determined is not less than the fair market value per share of the Common Stock on the date of grant. 3. EXERCISE OF OPTION. The Option shall be exercisable during its term as follows: (i) RIGHT TO EXERCISE. (a) Subject to subsections 3(i)(b), (c) and (d) below, this Option shall be exercisable to the extent of one hundred percent (100%) of the Shares subject to the Option commencing on December 31, 1996. Provided, however, as of the date of the occurrence of the first to occur of any of the following events prior to December 31, 1996, notwithstanding the previous sentence of this subsection 3(i)(a), this Option shall be exercisable cumulatively to the extent of one hundred percent (100%) of the Shares subject to the Option regardless of whether otherwise exercisable by the Optionee: x) the termination by the Company of the Consulting Agreement dated December 31, 1996, by and between the Company and the Optionee (the "Consulting Agreement") without Cause as such term is defined in the Consulting Agreement; or y) a "Change of Control" of the Company. As used herein the term "Change of Control" shall mean any transaction or series of transactions by which the Company shall merge with or consolidate into any other person or lease or sell substantially all of its and its subsidiaries assets (other than asset sales in connection with automobile loan securitization transactions) substantially as an entirety to any other person or by which any person or group (within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934) acquires, directly or 1 indirectly, 51% or more of the Company's outstanding common stock (calculated on a fully diluted basis). (b) This Option may not be exercised for a fraction of a share. (c) In the event of Optionee's death, disability or other termination of the Consulting Agreement, the exercisability of the Option is governed by Section 7, 8 and 9 below, subject to the limitations contained in subsection 3(i)(d). (d) In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in Section 11 below. (ii) METHOD OF EXERCISE. This Option shall be exercisable by written notice which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such shares of Common Stock as may be required by the Company. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. Until certificates for the Shares are issued to the Optionee, such Optionee shall not have any rights as a shareholder of the Company. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date of which the Option is exercised with respect to such Shares. 4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, concurrently with the exercise of all or any portion of this Option, deliver to the Company his Investment Representation Statement in the form attached hereto as Exhibit A. 5. METHOD OF PAYMENT. Payment of the exercise price shall be by (i) cash; (ii) check or (iii) if authorized by the Board of Directors of the Company, the surrender of other shares of Common Stock of the Company which (A) either have been owned by the Optionee for more than six (6) months on the date of surrender or were not acquired, directly or indirectly, from the Company and (B) have a fair market value (as determined by the Board) on the date of surrender equal to the exercise price of the Shares as to which the Option is being exercised. 6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of such Shares upon such exercise or the method or payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the 2 Company may require Optionee to make any representation and warranty to the Company as may be required by an applicable law or regulation. 7. TERMINATION OF STATUS AS A DIRECTOR. In the event of termination of Optionee's status as a member of the Board of Directors of the Company for any reason other than his death or disability, Optionee may, but only within six months after the date of such termination (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), exercise this Option to the extent that he was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise this Option at the date of such termination, or if he does not exercise this Option within the time specified herein, the Option shall terminate. 8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 7 above, in the event of termination of Optionee's status as a member of the Board of Directors of the Company as a result of his disability, he may, but only within one year from the date of such termination (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), exercise his Option to the extent he was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate. 9. DEATH OF OPTIONEE. In the event of the death of Optionee: (i) during the term of this Option and while a member of the Board of Directors of the Company and having been a continuous member thereof (as determined by the Board in its sole discretion) since the date of grant of the Option, the Option may be exercised, at any time within one (1) year following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee was entitled to exercise the Option at the date of death; or (ii) within three months after termination of Optionee's status as a member of the Board of Directors, the Option may be exercised, at any time within nine (9) months following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of his status as a member thereof. 10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him. The terms of this Option shall be binding upon the Optionee and his or her personal representatives, heirs, successors and assigns. 11. TERM OF OPTION. This Option may not be exercised after December 31, 2005, and may be exercised only in accordance with the terms of this Option. 3 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of shares of Common Stock covered by this Option and the exercise price shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, or options or rights to purchase shares of stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to this Option. In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that the Option shall terminate as of a date fixed by the Board and give the Optionee the right to exercise his Option as to all or any part of the Shares. In the event of a change of control of the Company, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of ten (10) days from the date of such notice, and the Option will terminate upon the expiration of such period. 13. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a shareholder with respect to any Shares subject to this Option prior to the date of issuance to him of a certificate or certificates for such shares. DATE OF GRANT: January 1, 1996 OLYMPIC FINANCIAL LTD. By: /s/ Jeffrey C. Mack ----------------------------------- Jeffrey C. Mack Title: Chief Executive Officer 4 OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND CERTAIN INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH THE TERMS AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF. OPTIONEE HAS REVIEWED THIS OPTION IN ITS ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION. OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER THE OPTION. OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN THE RESIDENCE ADDRESS INDICATED BELOW. Dated: January 1 , 1996 Optionee: /s/ Warren Kantor ------------------------------------- Warren Kantor Residence Address: 720 Springmill Road Villanova, PA 19185 5 EXHIBIT A INVESTMENT REPRESENTATION STATEMENT PURCHASER: Warren Kantor ISSUER: OLYMPIC FINANCIAL LTD. SECURITY: COMMON STOCK AMOUNT: 40,000 SHARES DATE: , In connection with the purchase of the Common Stock ("Securities") of OLYMPIC FINANCIAL LTD. (the "Company"), the undersigned represents to the Company the following: (a) I am aware of the Company's business affairs and financial condition, and have acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. I am purchasing these Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. In this connection, I understand that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. Moreover, I understand that the Company is under no obligation to register the Securities. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) I am familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof, in a non-public 6 offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of issuance of the Securities, such issuance will be exempt from registration under the Securities Act. In the event the Company later becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including other things: (1) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, and the amount of securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge and agree to the restrictions set forth in paragraph (e) hereof. In the event that the Company does not qualify under Rule 701 at the time of issuance of the Securities, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires among other things: (1) the availability of certain public information about the Company, (2) the resale occurring not less than two years after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than three years, (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934) and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. (e) I further understand that in the event all of the applicable requirements of Rule 144 or Rule 701 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact Rule 144 and Rule 701 are not exclusive, the staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 or Rule 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Signature of Purchaser: /s/ Warren Kantor --------------------------------------- Warren Kantor Date: January 1, 1996 7 EX-10.90 58 LETTER AGREE 8/26/96 REG & WARREN KANTOR [LETTERHEAD] August 26, 1996 Mr. Warren Kantor c/o Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, MN 55439-2435 Dear Mr. Kantor: This letter is to confirm the terms pursuant to which you have agreed to serve as Chairman of the Executive Committee (the "Committee") of the Board of Directors (the "Board") of Olympic Financial Ltd. (the "Company"), effective as of August 26, 1996. You shall serve as Chairman of the Committee until the earliest of: (i) your removal by the Board, (ii) your resignation from such position, or (iii) August 14, 1997. During this period you will normally devote two and one half (2 1/2) days per week to the affairs of the Company, two (2) of which will normally be spent at the Company's offices in Minneapolis, Minnesota. It is understood that you have unchangeable commitments approximately one week per month when you will not be in Minneapolis, Minnesota and you will only be available by phone. In your capacity as Chairman of the Committee, you shall serve as neither an employee nor an executive officer of the Company. In consideration for your services as Chairman of the Committee, you shall be entitled to the following compensation: 1. 200,000 options to purchase shares of the Company's common stock at $17.375 per share (100,000 options to be immediately vested and exercisable, and the remainder to be proportionately vested and exercisable on the basis of your tenure as Chairman of the Committee on and after February 14, 1997 through August 14, 1997). Options to purchase shares which have not vested on the date your duties as Chairman of the Committee cease shall be forfeited. 2. A bonus of up to 25,714 shares of the Company's common stock to be paid as follows: (i) you will receive a bonus of 12,857 shares on August 26, 1996, and (ii) if your duties as Chairman of the Committee end on or after February 14, 1997, the number of additional bonus shares you Mr. Warren Kantor August 26, 1996 Page 2 will be determined by multiplying 12,857 shares by the percentage of the time that you will serve as Chairman of the Committee for the period from February 14, 1997 through August 14, 1997. Such additional shares, if any, will be issued upon the termination of your service as Chairman. 3. The Company shall provide reimbursement for all reasonable expenses incurred in connection with the performance of your duties as the Chairman of the Committee, including expenses for travel, lodging, telephonic communications and similar items. If the terms of this letter meet with your approval and understanding, please so indicate by signing your name as printed below. OLYMPIC FINANCIAL LTD. By: The Compensation Committee of its Board of Directors /s/ James L. Davis ----------------------------------- James L. Davis Agreed and Accepted as of the date first written above. /s/ Warren Kantor - ----------------------------- Warren Kantor EX-10.91 59 LETTER AGREE 12/18/96 REG WARREN KANTOR [LETTERHEAD] December 18, 1996 Mr. Warren Kantor c/o Olympic Financial Ltd. 7825 Washington Avenue South Minneapolis, MN 55439 Re: Letter Agreement dated August 26, 1996 Dear Mr. Kantor: By letter agreement dated August 26, 1996 (the "Letter Agreement") you and Olympic Financial Ltd. ("Olympic") set forth the terms and conditions pursuant to which you would act as Chairman of the Executive Committee of the Board of Directors of Olympic. On or about such date, you were awarded an option to purchase 200,000 shares of Olympic Common Stock (with 100,000 of such options vesting as of such date) and were issued 12,857 shares of such stock. In addition, it was agreed that Olympic would grant to you a bonus comprised of the vesting of up to an additional 100,000 of such options and the issuance of up to an additional 12,857 shares of such stock. The number of bonus option shares vesting and the number of bonus shares granted was to be dependent upon the days you served in your capacity of the Chairman of the Executive Committee on and after February 14, 1997. In light of the changes in circumstances since the date of the Letter Agreement including, without limitation, the likelihood that the Company will not be acquired in the near future, the number of hours you have served in your capacity as Chairman to date and the likelihood that a Chief Executive Officer of the Company will be selected in the near future, the Board and the Compensation Committee have concluded that it is in the best interest of Olympic that the vesting of the 100,000 bonus options granted on August 26, 1996 be accelerated to February 14, 1997 in the event you continue to act as the Chairman of the Executive Committee or Chairman of the Board through such date and that the additional 12,857 bonus shares of common stock also be issued on such date if you hold either such position through such date. Notwithstanding such vesting and issuance, it is the Company's understanding that you will continue to act in either or both Warren Kantor December 26, 1996 Page 2 such capacities through August 14, 1997 or until such earlier date as the Board removes you therefrom. If the above-stated terms are acceptable to you, please so indicate by signing below and returning this letter to me. OLYMPIC FINANCIAL LTD. By: The Compensation Committee of its Board of Directors By: /s/James L. Davis ---------------------------- James L. Davis Its Chairman Agreed and Accepted as of the date first above written. /s/ Warren Kantor - ---------------------------- Warren Kantor JDA:mrs EX-10.92 60 CONSULTING AGREE 1/1/97 REG & WARREN KANTOR CONSULTING AGREEMENT THIS CONSULTING AGREEMENT, herein referred to as "Agreement" made and entered into as of the 1st day of January, 1997, by and between Olympic Financial Ltd., a Minnesota corporation (the "Company") and Warren Kantor ("Consultant"). WHEREAS, the Company engages in the sales finance business, and WHEREAS, the Consultant has numerous years of experience in the financial services accounting and finance profession, and WHEREAS, the Company desires to engage Consultant to perform certain consulting services for the Company, and WHEREAS, Consultant is seeking such engagement, and WHEREAS, the parties desire to set forth the terms and conditions of consulting services to be provided by Consultant to the Company. NOW, THEREFORE, in consideration of the promises and the mutual benefits which will accrue to the parties to this Agreement, it is mutually understood and agreed as follows: 1. DESCRIPTION OF SERVICES. Consultant shall furnish and perform the consulting services pertinent to the operations of the Company which are specifically set forth in Exhibit A attached hereto and made a part hereof (the "Consulting Services"). The Consulting Services shall be provided as needed by the Company; provided, however, that Consulting Services are not to exceed four hundred fifty (450) hours. Consultant and the Company may from time to time agree that additional hours are desired, for which additional Consulting Services Consultant shall be paid at an hourly rate to be agreed upon by Consultant and the Company. The terms of this Agreement shall apply to any such additional hours per year. Such services shall be performed to be best of the Consultant's ability and in a competent, efficient and satisfactory manner. The Company acknowledges that Consultant is engaged in various other substantial business activities, that the Company's request for Consulting Services hereunder from Consultant shall not unreasonably interfere with Consultant's other business activities and that Consultant shall be entitled to engage in other business for other persons or entities during the term hereof subject to the provisions of paragraph 6 hereof. 2. PAYMENT FOR SERVICES. In consideration of the Consulting Services to be provided by Consultant to the Company and of other obligations of Consultant contained herein, the Company shall, concurrent with the execution hereof, execute and deliver to Consultant a non-statutory stock option in the form and substance of Exhibit B attached hereto (the "Option Agreement"). Pursuant to the Option Agreement, the Company shall grant to Consultant the option to purchase up to 125,000 shares of the $.01 par value 1 common stock of the Company ("Common Stock") at an option price equal to the fair market value of the Common Stock on the date of this Agreement, subject to the terms and conditions of the Option Agreement. 3. REIMBURSEMENT OF EXPENSES. Consultant shall be reimbursed for any and all travel or other expenses borne or expended by Consultant in connection with the Consulting Services. Any reasonable expenses incurred by Consultant in performing his duties hereunder shall be reimbursed by the Company when he furnishes appropriate documentation. 4. TERM OF ENGAGEMENT. Subject to the terms and conditions hereof, the term of Consultant's engagement hereunder (the "Consulting Term") shall commence as of the date of this Agreement and shall continue until December 31, 1997, unless earlier terminated pursuant to paragraph 5.1. 5. TERMINATION. 5.1 Termination. Consultant's engagement hereunder shall terminate upon the happening of any of the following events: a. by the mutual written agreement of the Company and Consultant; b. upon the death of Consultant; c. upon 14 days' prior written notice from the Company to Consultant with Cause (as defined below); or d. upon 14 days' prior written notice from Consultant to the Company, if the Company shall fail to make any payment to Consultant required to be made pursuant hereto within 15 days after such payment was due. As used in this Agreement, the term "Cause" shall mean (i) any fraud, misappropriation or embezzlement by Consultant in connection with the business of the Company; (ii) any failure by Consultant to perform the Consulting Services assigned hereunder, provided that Consultant shall first have received a written notice from the Company which sets forth in reasonable detail the manner in which Consultant has failed to perform his duties, in which case Consultant shall have a period of thirty (30) days to cure the same, unless the same cannot be reasonably cured within said thirty (30) day period, in which event Consultant shall have up to an additional ninety (90) days to cure the same; (iii) any material breach by Consultant of this Agreement, provided that Consultant shall first have received written notice from the Company which sets forth in reasonable detail the breach by Consultant and Consultant shall have a period of thirty (30) days after receipt of such notice to cure such breach, unless the same cannot be reasonably cured within said thirty (30) day period, in which event Consultant shall have up to an additional ninety (90) days to cure the same; (iv) willful destruction of the 2 property or records of the Company; (v) dishonesty or deliberate falsification of the Company records; or (vi) harassment (including sexual harassment) of a Company employee. The sole remedy of the Company in the event of a breach of this Agreement shall be to terminate this Agreement. 6. PROPRIETARY INFORMATION. 6.1 PROPRIETARY INFORMATION. Except by the prior written permission from the Company, Consultant shall never disclose or use any proprietary information ("Proprietary Information") of the Company of which Consultant becomes or has become informed during his past or future engagement with the Company or any of its subsidiaries, whether or not developed by Consultant, except as required by his duties to the Company or any of its subsidiaries. Proprietary Information shall mean information concerning the Company, its business or its customers that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use. Proprietary Information includes, but is not limited to, the following types of information and other information of a similar nature (whether or not reduced to writing), all of which Consultant agrees constitutes the valuable trade secrets of the Company; research, development, know-how, plans and processes, marketing plans and techniques, existing and contemplated products and services, customer and prospect names and related information, prices, sales, credit scoring, personnel, computer programs and related documentation, technical and strategic plans, and finances. Proprietary Information also includes any information of the foregoing nature that the Company treats as proprietary or designates as Proprietary Information, whether or not owned or developed by the Company. Information does not lose its Proprietary Information status merely because it was known by a limited number of other persons or entities or because it did not entirely originate with the Company. Such nondisclosure and non-use shall mean, without limiting the generality of the foregoing, during the Consulting Term and at all times thereafter, the Consultant agrees to receive, maintain, and use Proprietary Information in the strictest confidence and, except with the consent of the Company will not directly or indirectly reveal, report, publish, disclose, or transfer any Proprietary Information to any person, firm, corporation, or other entity or utilize any Proprietary Information for the Consultant's own benefit or intended benefit or for the benefit or intended benefit of any other person, firm, corporation or other entity. 6.2 DELIVERY OF PROPRIETARY INFORMATION. Upon the request of the Company or the termination of his engagement, Consultant agrees to deliver to the Company all materials that include Proprietary Information, including without limitation customer lists, instruction sheets, manuals, computer programs (including source codes), letters, financial records, notes, notebooks, reports and copies thereof, and all other materials which are under his control and which relate to the business of the Company or its subsidiaries. Consultant agrees and understands that the Proprietary Information and all information contained therein shall be at all times the property of the Company. Further, upon termination of his engagement, Consultant agrees to make available to any person 3 designated by the Company all information concerning pending or preceding transactions or programs which may affect the operation of the Company or any of its subsidiaries about which Consultant has knowledge. The obligations of Consultant contained in this paragraph are in addition to the obligation of Consultant to return to the Company, upon the request of the Company or the termination of his engagement, all property of the Company then in his possession. 6.3 NON-COMPETITION. It is mutually acknowledged that by virtue of Consultant's position as a director of the Company and his engagement hereunder, the Company has divulged and will divulge or make accessible to Consultant, and Consultant has and will become possessed of, certain valuable and confidential information concerning the customers, business methods, procedures and techniques of the Company. It is further understood that Consultant, in the course of and because of his position as a director of the Company and his engagement hereunder, has developed and will develop contacts among the customers of the Company, and it is mutually understood and agreed that the customers of the Company and the business methods and procedures and techniques developed by the Company are valuable assets and properties of the Company. Without limitation, it is also specifically acknowledged that great trust on the part of the Company has and will reside in Consultant because Consultant's duties will include involvement in the promotion and development of the Company's business. Consultant acknowledges that the restrictions and covenants set forth below constitute a material inducement to the Company to enter into this Agreement. Accordingly, the parties deem it necessary to enter into the protective agreements set forth below, the terms and conditions of which have been negotiated by and between the parties hereto: a. Consultant agrees with the Company and for the benefit of the Company that through the actual date of termination of Consultant's engagement, and for a period of one (1) year thereafter (the "Non-Compete Period"), Consultant will not, in his own behalf or on the behalf of any third party, engage in, manage, operate, join, control or participate in the ownership, management operation or control of, or be connected in any manner with, directly or indirectly, in any business conducted within the Territories (as defined below) which competes with the business of the Company (as such exists during the term of Consultant's engagement); provided, however, Consultant's relationship with Advanta Corp., whether direct or indirect, either during the Consulting Term or the Non-Compete Period, shall not be prohibited by, and shall not constitute a breach of, the provisions of this subparagraph 6.3. As used in this Agreement, the term "Territories" shall mean the any state in which at least .5% of the loans acquired by the Company originated (determined by the location of the dealers from whom the loans were purchased). Provided, however, the foregoing restriction shall not prevent Consultant from owning less than 4 5% of publicly traded securities of any company engaged in a business competing with that of the Company. b. Consultant agrees that during his engagement by the Company and for a period of twelve (12) months following the termination, for whatever reason, of his engagement by the Company, he will not, either directly or indirectly, on his own behalf or in the service or on behalf of others solicit, divert or hire away, or in any manner attempt to solicit, divert or hire away to any competitor of the Company, any person employed by the Company, whether or not such employee is a full-time employee or a temporary employee of the Company, and whether or not such employment was pursuant to a written or oral contract of employment and whether or not such employment was for a determined period or was at will. 6.4 SEVERABILITY. The covenants of Consultant set forth in this paragraph 6 are separate and independent covenants for which valuable consideration has been or will be paid or given, receipt of which is acknowledged by Consultant, and have also been made by Consultant to induce the Company to enter into this Agreement. Each of the aforesaid covenants may be availed of or relied upon by the Company in any court of competent jurisdiction. 6.5 SPECIFIC ENFORCEMENT. Consultant understands and agrees that a breach by him of any provisions of this Agreement will cause the Company irreparable injury and damage which cannot by compensable by receipt of money damages. Consultant, therefore, expressly agrees that the Company shall be entitled, in addition to any other remedies legally available, to injunctive and/or other equitable relief to prevent a breach of this Agreement or any part thereof. 7. OWNERSHIP OF PROPRIETARY INFORMATION. All Proprietary Information prepared, created or assembled by Consultant or caused by Consultant to be prepared, created or assembled in connection with this Agreement, as well as any copyright, patent and trademark rights related thereto, shall be work made for hire and shall at all times remain the sole and exclusive property of the Company. 8. RELATIONSHIP OF PARTIES. Consultant is engaged by the Company only for the purpose and to the extent set forth in this Agreement, and Consultant's relationship to the Company shall, during the period covered by this Agreement, be that of an independent contractor. Consultant shall not be considered an employee of the Company and shall not be entitled to participate in any plans, arrangements or distributions by the Company pertaining to or in connection with any insurance, pension, stock, bonus, profit sharing or similar employee benefits given employees of the Company. Consultant shall be under the control of the Company as to the result of Consultant's work only and not as to the means by which such result is accomplished. Consultant shall not represent that Consultant has any power to bind the Company or to assume or to create any obligation or responsibility, express or implied, on behalf of the Company or in its name. The 5 Company shall not be liable for any losses, injuries, damages, or claims of any nature whatsoever arising out of Consultant's activities or representations under or in connection with this Agreement. 9. TAXES. Consultant acknowledges and agrees that it shall be the obligation of Consultant to report as income, all compensation received by Consultant hereunder and agrees to reimburse, indemnify and to hold and save the Company harmless to the extent of any obligations imposed by law on the Company to pay withholding taxes, social security, unemployment or disability liability insurance or similar items in connection with any compensation paid to Consultant. 10. MISCELLANEOUS. 10.1 VALIDITY. Whenever possible, each provision of this Agreement shall be interpreted so that it is valid under applicable law. In case any one or more of the provisions of this Agreement is to any extent found to be invalid, illegal or unenforceable in any respect under applicable law, that provision shall still be effective to the extent it remains valid and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. If, moreover, any one or more of the restrictions contained in this Agreement is for any reason held excessively broad, it shall be construed or rewritten (blue-lined) so as to be enforceable to the extent of the greatest protection to the Company compatible with applicable law. 10.2 APPLICABLE LAW. This Agreement is entered into in the State of Minnesota and shall be construed, interpreted and enforced according to the statutes, rules of law and court decisions of said state. 10.3 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Option Agreement constitute the entire agreement of the Company and Consultant with respect to Consultant's engagement by the Company and supersedes any other understandings or agreements, whether written or oral. This Agreement may be amended or superseded only by an agreement in writing by the Company and Consultant. 10.4 NOTICES. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be sufficiently given if and when mailed by registered or certified mail, return receipt requested, to the Company and its executive offices and to Consultant at his address set forth below or in either case such other address specified by a party hereto in a written notice hereunder, or when personally delivered. 10.5 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns. This Agreement shall also be binding upon the inure to the benefit of Consultant and his heirs and representatives. This Agreement may not be assigned by either party without the prior written consent of the other party. 6 10.6 RESERVATION OF RIGHTS. Nothing contained herein shall limit any other rights the Company has at law in connection with Consultant's obligations to the Company, all of which are preserved. 10.7 SURVIVAL. Notwithstanding any termination of Consultant's engagement hereunder or any termination of this Agreement, the provisions of paragraph 6 hereof shall survive termination of this Agreement and termination of Consultant's engagement hereunder. 10.8 1994 AGREEMENT. The parties' obligations under this Agreement are in addition to, and not in lieu of, those obligations of the parties under that certain Consulting Agreement dated December 19, 1994 between the parties. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the day and year first above written. Olympic Financial Ltd. /s/ Warren Kantor By: /s/ Scott H. Anderson - ----------------------------- -------------------------------- Warren Kantor Scott H. Anderson 720 Springmill Road Its Vice Chairman Villanova, PA 19185 7825 Washington Avenue South Minneapolis, MN 55439-2435 7 CONSULTING AGREEMENT EXHIBIT A CONSULTANT'S SERVICES. Consultant shall endeavor to promote the interests of the Company and shall provide to the Company advice as to its manner of doing business in such of the following areas as are requested by the Company: long range planning, tax strategies development, treasury function review, internal audit function review, asset liability strategy development, asset backed securitization development, asset backed securitization planning, corporate development (merger, acquisition) investor relations, due diligence (re: acquisitions), financing strategies, SEC relations, capital raising strategies, reserving architecture, asset quality review, and note program strategy. Consultant shall provide advice and services as to such other related areas of the business of the Company as may be reasonably requested from time to time by the Chief Executive Officer of the Company. The Company desires to retain the services of Consultant, even though Consultant may become disabled or incapacitated. Accordingly, notwithstanding anything to the contrary contained herein, it is expressly understood that the inability of Consultant from time to time to render services to the Company by reason of absences, or temporary, or permanent illness, disability, or incapacity, or for any other reasonable cause beyond the control of Consultant, shall not constitute a failure by him to perform his obligations hereunder and shall not be deemed a breach or default by him hereunder. 8 EX-10.95 61 NON-STAT STOCK OPTION AGREE 8/26/96 REG & W KANTOR OLYMPIC FINANCIAL LTD. NON-STATUTORY STOCK OPTION AGREEMENT Olympic Financial Ltd., a Minnesota corporation (the "Company"), hereby grants to Warren Kantor (the "Optionee"), an option (the "Option") to purchase a total of 200,000 shares of the $.01 par value common stock ("Common Stock") of the Company (the "Shares"), at the price determined as provided herein, and in all respects subject to the terms, definitions and provisions hereof. Such option is granted pursuant to the terms and conditions of a letter agreement between the Company and the Optionee dated August 26, 1996. Such letter agreement and the Option have been approved by the Board of Directors at a meeting thereof held August 26, 1996. 1. NATURE OF THE OPTION. This Non-Statutory Stock Option is not intended to qualify as an Incentive Stock Option as defined in Section 422A of the Code. 2. EXERCISE PRICE. The exercise price is $17.375 for each share of Common Stock. 3. EXERCISE OF OPTION. The Option shall be exercisable during its term as follows: (i) RIGHT TO EXERCISE. (a) Subject to subsections 3(i)(b), (c) and (d) below, this Option shall be exercisable to the extent of (i) one hundred thousand (100,000) of the Shares subject to the Option commencing on August 26, 1996; and (ii) that additional number of Shares equal to one hundred thousand (100,000) times the percentage (but not more than 100%) determined by dividing (a) the number of days elapsed from February 14, 1997 to the date the Optionee ceases for any reason to act as the Chairman of the Executive Committee of the Company (the "Termination Date") or August 14, 1997, whichever first occurs; by (b) one hundred eighty two (182), commencing on the earlier of the Termination Date and August 14, 1997. The Option as to any Shares which are not exercisable as of the Termination Date pursuant to the previous sentence of this Subsection 3(i) (a) shall lapse and be null and void as of the Termination Date. (b) This Option may not be exercised for a fraction of a share. (c) In the event of Optionee's death, the exercisability of the Option is governed by Section 7 below, subject to the limitations contained in subsection 3(i)(d). (d) In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in Section 9 below. (ii) METHOD OF EXERCISE. This Option shall be exercisable by written notice which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's 1 investment intent with respect to such shares of Common Stock as may be required by the Company. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. Until certificates for the Shares are issued to the Optionee, such Optionee shall not have any rights as a shareholder of the Company. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, concurrently with the exercise of all or any portion of this Option, deliver to the Company his Investment Representation Statement in the form attached hereto as Exhibit A. 5. METHOD OF PAYMENT. Payment of the exercise price shall be by (i) cash; (ii) check; or (iii) if authorized by the Board of Directors of the Company, the surrender of other shares of Common Stock of the Company which (A) either have been owned by the Optionee for more that six (6) months on the date of surrender or were not acquired, directly or indirectly, from the Company and (B) have a fair market value (as determined by the Board) on the date of surrender equal to the exercise price of the Shares as to which the Option is being exercised. 6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 7. DEATH OF OPTIONEE. In the event of the death of Optionee during the term of this Option, the Option may be exercised, at any time within one (1) year following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 9 below), by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee was entitled to exercise the Option at the date of death. 8. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him. The terms of this Option shall be binding upon the Optionee and his or her personal representatives, heirs, successors and assigns. 2 9. TERM OF OPTION. This Option may not be exercised after August 26, 2006, and may be exercised only in accordance with the terms of this Option. 10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of shares of Common Stock covered by this Option and the exercise price shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, or options or rights to purchase shares of stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to this Option. In the event of the proposed dissolution or liquidation of the Company, each Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation. 11. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a shareholder with respect to any Shares subject to this Option prior to the date of issuance to him of a certificate or certificates for such shares. DATE OF GRANT: August 26, 1996 OLYMPIC FINANCIAL LTD. By: /s/ Scott H. Anderson ------------------------------- Scott H. Anderson Title: Vice Chairman 3 OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND CERTAIN INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH THE TERMS AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF. OPTIONEE HAS REVIEWED THIS OPTION IN ITS ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION. OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER THE OPTION. OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN THE RESIDENCE ADDRESS INDICATED BELOW. Optionee: Dated: August 26, 1996 /s/ Warren Kantor ------------------------------ Warren Kantor Residence Address: 720 Springmill Road Villanova, PA 19185 4 EXHIBIT A INVESTMENT REPRESENTATION STATEMENT PURCHASER: Warren Kantor ISSUER: OLYMPIC FINANCIAL LTD. SECURITY: COMMON STOCK AMOUNT: ______ SHARES DATE: __________, ____ In connection with the purchase of the Common Stock ("Securities") of OLYMPIC FINANCIAL LTD. (the "Company"), the undersigned represents to the Company the following: (a) I am aware of the Company's business affairs and financial condition, and have acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. I am purchasing these Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. In this connection, I understand that, in the view of the Securities and exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. Moreover, I understand that the Company is under no obligation to register the Securities. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) I am familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof, in a non-public 5 offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of issuance of the Securities, such issuance will be exempt from registration under the Securities Act. In the event the Company later becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including among other things: (1) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, and the amount of securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge and agree to the restrictions set forth in paragraph (e) hereof In the event that the Company does not qualify under Rule 701 at the time of issuance of the Securities, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires among other things: (1) the availability of certain public information about the Company, (2) the resale occurring not less than two years after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than three years, (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934) and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. (e) I further understand that in the event all of the applicable requirements of Rule 144 or Rule 701 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact Rule 144 and Rule 701 are not exclusive, the staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 or Rule 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Signature of Purchaser: ------------------------------ Warren Kantor Date: _________ __, 199_ 6 EX-10.96 62 NON-STAT STOCK OPT DATED 12/18/96 REG & W. KANTOR OLYMPIC FINANCIAL LTD. NON-STATUTORY STOCK OPTION AGREEMENT Olympic Financial Ltd., a Minnesota corporation (the "Company"), hereby grants to Warren Kantor (the "Optionee"), an option (the "Option") to purchase a total of 125,000 shares of the $.01 par value common stock ("Common Stock") of the Company (the "Shares"), at the price determined as provided herein, and in all respects subject to the terms, definitions and provisions hereof. The grant of this Option is subject to the approval thereof by the shareholders of the Corporation (if such approval is required by applicable laws or regulations) and by the Board of Directors of the Corporation. 1. NATURE OF THE OPTION. This Non-Statutory Stock Option is not intended to qualify as an Incentive Stock Option as defined in Section 422A of the Code. 2. EXERCISE PRICE. The exercise price is $14.87 for each share of Common Stock, which price the Board of Directors of the Company (the "Board") has determined is not less than the fair market value per share of the Common Stock on the date of grant. 3. EXERCISE OF OPTION. The Option shall be exercisable during its term as follows: (i) RIGHT TO EXERCISE. (a) Subject to subsections 3(i)(b),(c) and (d) below, this Option shall be exercisable to the extent of one hundred percent (100%) of the Shares subject to the Option commencing on December 31, 1997. Provided, however, as of the date prior to the date of the occurrence of the first to occur of any of the following events prior to December 31, 1997, notwithstanding the previous sentence of this subsection 3(i)(a), this Option shall be exercisable cumulatively to the extent of one hundred percent (100%) of the Shares subject to the Option regardless of whether otherwise exercisable by the Optionee: x) the death or disability of Optionee; or y) the termination by the Company of the Consulting Agreement dated as of December 18, 1996, by and between the Company and the Optionee (the "Consulting Agreement") without Cause as such term is defined in the Consulting Agreement; or the termination of the Consulting Agreement by Optionee due to the material breach thereof by the Company; or z) a "Change of Control" of the Company. As used herein the term "Change of Control" shall mean the closing of any transaction or series of transactions by which the Company shall merge with or consolidate into any other person or lease or sell substantially all of its and its subsidiaries assets (other than asset sales in connection with automobile loan securitization transactions) 1 substantially as an entirety to any other person or by which any person or group (within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934) acquires, directly or indirectly, 51% or more of the Company's outstanding common stock (calculated on a fully diluted basis); or and, provided further, in the event the Consulting Agreement is terminated prior to December 18, 1997 by the mutual agreement of the Company and the Optionee, notwithstanding the previous sentence of this subsection 3(i)(a), this Option shall be exercisable cumulatively to the extent of that fraction of the Shares subject to the Option the numerator of which shall be the number of days elapsed in 1997 as of the date of such termination and the denominator of which shall be 365, rounded down to the next lower full share amount. (b) This Option may not be exercised for a fraction of a share. (c) In the event of Optionee's death, disability or other termination of the Consulting Agreement, the exercisability of the Option is governed by Sections 7, 8 and 9 below, subject to the limitations contained in subsection 3(i)(d). (d) In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in Section 11 below. (ii) METHOD OF EXERCISE. This Option shall be exercisable by written notice which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such shares of Common Stock as may be required by the Company. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. Until certificates for the Shares are issued to the Optionee, such Optionee shall not have any rights as a shareholder of the Company. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, concurrently with the exercise of all or any portion of this Option, deliver to the Company his Investment Representation Statement in the form attached hereto as Exhibit A. 5. METHOD OF PAYMENT. Payment of the exercise price shall be by (i) cash; (ii) check; or (iii) if authorized by the Board of Directors of the Company, the surrender of other shares of Common Stock of the Company which (A) either have been owned by the Optionee for more 2 that six (6) months on the date of surrender or were not acquired, directly or indirectly, from the Company and (B) have a fair market value (as determined by the Board) on the date of surrender equal to the exercise price of the Shares as to which the Option is being exercised. 6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 7. TERMINATION OF CONSULTING AGREEMENT. In the event of termination of the Consulting Agreement (i) by Optionee other than due to the material breach of the terms thereof by the Company or (ii) by the Company for Cause, the Option shall terminate. 8. DISABILITY OF OPTIONEE. In the event of termination of the Consulting Agreement, as a result of Optionee's disability, he may, but only within one year from the date of such termination (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), exercise his Option to the extent he was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate. 9. DEATH OF OPTIONEE. In the event of the death of Optionee during the term of this Option, the Option may be exercised, at any time within one (1) year following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee was entitled to exercise the Option at the date of death. 10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him. The terms of this Option shall be binding upon the Optionee and his or her personal representatives, heirs, successors and assigns. 11. TERM OF OPTION. This Option may not be exercised after December 18, 2006, and may be exercised only in accordance with the terms of this Option. 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of shares of Common Stock covered by this Option and the exercise price shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that 3 conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, or options or rights to purchase shares of stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to this Option. In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that the Option shall terminate as of a date fixed by the Board and give the Optionee the right to exercise his Option as to all or any part of the Shares. In the event of a change of control of the Company, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of ten (10) days from the date of such notice, and the Option will terminate upon the expiration of such period. 13. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a shareholder with respect to any Shares subject to this Option prior to the date of issuance to him of a certificate or certificates for such shares. DATE OF GRANT: December 18, 1996 OLYMPIC FINANCIAL LTD. By: /s/ Scott H. Anderson --------------------------------- Scott H. Anderson Title: Vice Chairman 4 OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND CERTAIN INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH THE TERMS AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF. OPTIONEE HAS REVIEWED THIS OPTION IN ITS ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION. OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER THE OPTION. OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN THE RESIDENCE ADDRESS INDICATED BELOW. Optionee: Dated: December 18, 1996 /s/ Warren Kantor ---------------------------------- Warren Kantor Residence Address: 720 Springmill Road Villanova, PA 19185 5 EXHIBIT A INVESTMENT REPRESENTATION STATEMENT PURCHASER: Warren Kantor ISSUER: OLYMPIC FINANCIAL LTD. SECURITY: COMMON STOCK AMOUNT: 125,000 SHARES DATE: __________________,_________ In connection with the purchase of the Common Stock ("Securities") of OLYMPIC FINANCIAL LTD. (the "Company"), the undersigned represents to the Company the following: (a) I am aware of the Company's business affairs and financial condition, and have acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. I am purchasing these Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. In this connection, I understand that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. Moreover, I understand that the Company is under no obligation to register the Securities. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) I am familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof, in a non-public 6 offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of issuance of the Securities, such issuance will be exempt from registration under the Securities Act. In the event the Company later becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including among other things: (1) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, and the amount of securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge and agree to the restrictions set forth in paragraph (e) hereof. In the event that the Company does not qualify under Rule 701 at the time of issuance of the Securities, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires among other things: (1) the availability of certain public information about the Company, (2) the resale occurring not less than two years after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than three years, (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934) and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. (e) I further understand that in the event all of the applicable requirements of Rule 144 or Rule 701 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact Rule 144 and Rule 701 are not exclusive, the staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 or Rule 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Signature of Purchaser: -------------------------------------- Warren Kantor Date: _________________, 199___ 7 EX-10.97 63 NON-STAT STOCK OPT DATED 1/1/97 REG & W. KANTOR OLYMPIC FINANCIAL LTD. NON-STATUTORY STOCK OPTION AGREEMENT Olympic Financial Ltd., a Minnesota corporation (the "Company"), hereby grants to Warren Kantor (the "Optionee"), an option (the "Option") to purchase a total of 125,000 shares of the $.01 par value common stock ("Common Stock") of the Company (the "Shares"), at the price determined as provided herein, and in all respects subject to the terms, definitions and provisions hereof. The grant of this Option is subject to the approval thereof by the shareholders of the Corporation (if such approval is required by applicable laws or regulations) and by the Board of Directors of the Corporation. 1. NATURE OF THE OPTION. This Non-Statutory Stock Option is not intended to qualify as an Incentive Stock Option as defined in Section 422A of the Code. 2. EXERCISE PRICE. The exercise price is $14.87 for each share of Common Stock, which price the Board of Directors of the Company (the "Board") has determined is not less than the fair market value per share of the Common Stock on the date of grant. 3. EXERCISE OF OPTION. The Option shall be exercisable during its term as follows: (i) RIGHT TO EXERCISE. (a) Subject to subsections 3(i)(b), (c) and (d) below, this Option shall be exercisable to the extent of one hundred percent (100%) of the Shares subject to the Option commencing on December 31, 1997. Provided, however, as of the date prior to the date of the occurrence of the first to occur of any of the following events prior to December 31, 1997, notwithstanding the previous sentence of this subsection 3(i)(a), this Option shall be exercisable cumulatively to the extent of one hundred percent (100%) of the Shares subject to the Option regardless of whether otherwise exercisable by the Optionee: x) the death or disability of Optionee; or y) the termination by the Company of the Consulting Agreement dated as of January 1, 1997, by and between the Company and the Optionee (the "Consulting Agreement") without Cause as such term is defined in the Consulting Agreement; or the termination of the Consulting Agreement by Optionee due to the material breach thereof by the Company; or z) a "Change of Control" of the Company. As used herein the term "Change of Control" shall mean the closing of any transaction or series of transactions by which the Company shall merge with or consolidate into any other person or lease or sell substantially all of its and its subsidiaries assets (other than asset sales in connection with automobile loan securitization transactions) 1 substantially as an entirety to any other person or by which any person or group (within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934) acquires, directly or indirectly, 51% or more of the Company's outstanding common stock (calculated on a fully diluted basis); or and, provided further, in the event the Consulting Agreement is terminated prior to December 31, 1997 by the mutual agreement of the Company and the Optionee, notwithstanding the previous sentence of this subsection 3(i)(a), this Option shall be exercisable cumulatively to the extent of that fraction of the Shares subject to the Option the numerator of which shall be the number of days elapsed in 1997 as of the date of such termination and the denominator of which shall be 365, rounded down to the next lower full share amount. (b) This Option may not be exercised for a fraction of a share. (c) In the event of Optionee's death, disability or other termination of the Consulting Agreement, the exercisability of the Option is governed by Sections 7, 8 and 9 below, subject to the limitations contained in subsection 3(1)(d). (d) In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in Section 11 below. (ii) METHOD OF EXERCISE. This Option shall be exercisable by written notice which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such shares of Common Stock as may be required by the Company. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. Until certificates for the Shares are issued to the Optionee, such Optionee shall not have any rights as a shareholder of the Company. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, concurrently with the exercise of all or any portion of this Option, deliver to the Company his Investment Representation Statement in the form attached hereto as Exhibit A. 5. METHOD OF PAYMENT. Payment of the exercise price shall be by (i) cash; (ii) check; or (iii) if authorized by the Board of Directors of the Company, the surrender of other shares of Common Stock of the Company which (A) either have been owned by the Optionee for more 2 that six (6) months on the date of surrender or were not acquired, directly or indirectly, from the Company and (B) have a fair market value (as determined by the Board) on the date of surrender equal to the exercise price of the Shares as to which the Option is being exercised. 6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation "G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 7. TERMINATION OF CONSULTING AGREEMENT. In the event of termination of the Consulting Agreement (i) by Optionee other than due to the material breach of the terms thereof Company or (ii) by the Company for Cause, the Option shall terminate. 8. DISABILITY OF OPTIONEE. In the event of termination of the Consulting Agreement, as a result of Optionee's disability, he may, but only within one year from the date of such termination (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), exercise his Option to the extent he was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if he does not exercise such Option (which he was entitled to exercise) within the time specified herein, the Option shall terminate. 9. DEATH OF OPTIONEE. In the event of the death of Optionee during the term of this Option, the Option may be exercised, at any time within one (1) year following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee was entitled to exercise the Option at the date of death. 10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him. The terms of this Option shall be binding upon the Optionee and his or her personal representatives, heirs, successors and assigns. 11. TERM OF OPTION. This Option may not be exercised after December 31, 2006, and may be exercised only in accordance with the terms of this Option. 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of shares of Common Stock covered by this Option and the exercise price shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that 3 conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, or options or rights to purchase shares of stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to this Option. In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that the Option shall terminate as of a date fixed by the Board and give the Optionee the right to exercise his Option as to all or any part of the Shares. In the event of a change of control of the Company, the Board shall notify the Optionee that the Option shall be fully exercisable a period of ten (10) days from the date of such notice, and the Option will terminate up expiration of such period. 13. NO RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a shareholder with respect to any Shares subject to this Option prior to the date of issuance to him of a certificate or certificates for such shares. DATE OF GRANT: January 1, 1997 OLYMPIC FINANCIAL LTD. By: /s/ Scott H. Anderson --------------------------- Scott H. Anderson Title: Vice Chairman 4 OPTIONEE ACKNOWLEDGES RECEIPT OF A COPY OF THE OPTION AGREEMENT AND CERTAIN INFORMATION RELATED THERETO AND REPRESENTS THAT HE IS FAMILIAR WITH THE TERMS AND PROVISIONS THEREOF, AND HEREBY ACCEPTS THIS OPTION SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF. OPTIONEE HAS REVIEWED THIS OPTION IN ITS ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO EXECUTING THIS OPTION AND FULLY UNDERSTANDS ALL PROVISIONS OF THE OPTION. OPTIONEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE BOARD UPON ANY QUESTIONS ARISING UNDER THE OPTION. OPTIONEE FURTHER AGREES TO NOTIFY THE COMPANY UPON ANY CHANGE IN THE RESIDENCE ADDRESS INDICATED BELOW. Optionee: Dated: January 1, 1997 /s/ Warren Kantor ------------------------------ Warren Kantor Residence Address: 720 Springmill Road Villanova, PA 19185 5 EXHIBIT A INVESTMENT REPRESENTATION STATEMENT PURCHASER: Warren Kantor ISSUER: OLYMPIC FINANCIAL LTD. SECURITY: COMMON STOCK AMOUNT: 125,000 SHARES DATE: _____________, ____ In connection with the purchase of the Common Stock ("Securities") of OLYMPIC FINANCIAL LTD. (the "Company"), the undersigned represents to the Company the following: (a) I am aware of the Company's business affairs and financial condition, and have acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. I am purchasing these Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. In this connection, I understand that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. Moreover, I understand that the Company is under no obligation to register the Securities. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) I am familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof, in a non-public 6 offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of issuance of the Securities, such issuance will be exempt from registration under the Securities Act. In the event the Company later becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including among other things: (1) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, and the amount of securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge and agree to the restrictions set forth in paragraph (e) hereof. In the event that the Company does not qualify under Rule 701 at the time of issuance of the Securities, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires among other things: (1) the availability of certain public information about the Company, (2) the resale occurring not less than two years after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than three years, (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934) and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. (e) I further understand that in the event all of the applicable requirements of Rule 144 or Rule 701 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact Rule 144 and Rule 701 are not exclusive, the staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 or Rule 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Signature of Purchaser: ------------------------------ Warren Kantor Date: __________ __, 199_ 7 EX-10.98 64 OLYMPIC FIN 1990 STOCK OPTION PLAN OLYMPIC FINANCIAL LTD. 1990 STOCK OPTION PLAN (AS AMENDED) 1. PURPOSE The purpose of this 1990 Stock Option Plan (the "Plan") is to promote the interests of Olympic Financial, Ltd., a Minnesota corporation (the "Company"), by providing employees of the Company and certain independent contractors with an opportunity to acquire a proprietary interest in the Company, and thereby develop a stronger incentive to contribute to the Company's continued success and growth. In addition, the opportunity to acquire a proprietary interest in the Company by the offering and availability of stock options will assist the Company in attracting and retaining key personnel and consultants of outstanding ability. 2. DEFINITIONS Wherever used in the Plan, the following terms have the meanings set forth below: 2.1 "Board" means the Board of Directors of the Company. 2.2 "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. 2.3 "Committee" means the Committee which may be designated from time to time by the Board to administer the Plan pursuant to Section 3.5. 2.4 "Incentive Stock Option" or "ISO" means a stock option which is intended to qualify as an incentive stock option as defined in Section 422A of the Code. 2.5 "Non-Statutory Stock Option" or "NSO" means a stock option that is not intended to, or does not, qualify as an incentive stock option as defined in Section 422A of the Code. 2.6 "Option" means, where required by the context of the Plan, an ISO and/or NSO granted pursuant to the Plan. 2.7 "Optionee" means a Participant in the Plan who has been granted one or more Options under the Plan. 2.8 "Participant" means an individual described in Section 5 of this Plan who may be granted Options under the Plan. 2.9 "Stock" means the Common Stock, $.01 par value, of the Company. 2.10 "Subsidiary" means any corporation, other than the Company, in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns 50% or more of the voting stock in one of the other corporations in such chain. 3. ADMINISTRATION 3.1 The Plan shall be administered by the Board, which shall have full power, subject to the provisions of the Plan, to grant Options, construe and interpret the Plan, establish rules and regulations with respect to the Plan and Options granted hereunder, and perform all other acts, including the delegation of administrative responsibilities, that it believes reasonable and necessary. 3.2 The Board shall have the sole discretion, subject to the provisions of the Plan, to determine the Participants eligible to receive Options pursuant to the Plan and the amount, type, and terms of any Options and the terms and conditions of option agreements relating to any Option. 3.3 The Board may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any Option granted hereunder in the manner and to the extent it shall deem necessary to carry out the terms of the Plan. 3.4 Any decision made, or action taken, by the Board arising out of or in connection with the interpretation and administration of the Plan shall be final, conclusive and binding upon all Optionees. 3.5 The Board may designate a Committee from time to time to administer the Plan. If designated, the Committee shall be composed of not less than two persons (who need not be members of the Board) who are appointed from time to time by the Board. If the Board has appointed a Committee pursuant to this Section 3.5 of the Plan, then the Committee may administer the Plan and exercise all of the rights and powers granted to the Board in this Plan, including, without limitation, the right to grant Options pursuant to the Plan and to establish the Option price as provided in the Plan. 4. SHARES SUBJECT TO THE PLAN 4.1 NUMBER. The total number of shares of Stock reserved for issuance upon exercise of Options under the Plan is 2,000,000. Such shares shall consist of authorized but unissued Stock. If any Option granted under the Plan lapses or terminates for any reason 2 before being completely exercised, the shares covered by the unexercised portion of such Option may again be made subject to Options under the Plan. 4.2 CHANGES IN CAPITALIZATION. In the event of any change in the outstanding shares of Stock of the Company by reason of any stock dividend, split, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, or rights offering to purchase stock at a price substantially below fair market value, or other similar corporate change, the aggregate number of shares which may be subject to Options under the Plan and the terms of any outstanding Option, including the number and kind of shares subject to such Options and the purchase price per share thereof, shall be appropriately adjusted by the Board, consistent with such change and in such manner as the Board, in its sole discretion, may deem equitable to prevent substantial dilution or enlargement of the rights granted to or available for Optionees. Notwithstanding the preceding sentence, in no event shall any fraction of a share of Stock be issued upon the exercise of an Option. 5. ELIGIBLE PARTICIPANTS The following persons are Participants eligible to participate in the Plan: 5.1 INCENTIVE STOCK OPTIONS. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary, including officers and directors who are also employees of the Company or any Subsidiary. 5.2 NON-STATUTORY STOCK OPTIONS. Non-statutory stock options may be granted to (i) any employee of the Company or any Subsidiary, including any officer or director who is also an employee of the Company or any Subsidiary; and (ii) any consultant to, or other independent contractor of, the Company. 6. GRANT OF OPTIONS Subject to the terms, conditions, and limitations set forth in this Plan, the Company, by action of its Board, may from time to time grant Options to purchase shares of the Company's Stock to those eligible Participants as may be selected by the Board, in such amounts and on such other terms as the Board in its sole discretion shall determine. Such Options may be (i) "Incentive Stock Options" so designated by the Board and which, when granted, are intended to qualify as incentive stock options as defined in Section 422A of the Code; (ii) "Non-Statutory Stock Options" so designated by the Board and which, when granted, are not intended to, or do not, qualify as incentive stock options under Section 422A of the Code; or (iii) a combination of both. The date on which the Board approves the granting of an Option shall be the date of grant of such Option, unless a different date is specified by the Board on such date of approval. Notwithstanding the foregoing, with respect to the grant of any Incentive Stock Option under the Plan, the aggregate fair market value of Stock (determined as of the date the Option is granted) with respect to which incentive stock options are exercisable for the first time by an Optionee in any calendar year (under all such stock option plans of the Company or Subsidiaries) shall 3 not exceed $100,000. Each grant of an Option under the Plan shall be evidenced by a written stock option agreement between the Company and the Optionee setting forth the terms and conditions, not inconsistent with the Plan, under which the Option so granted may be exercised pursuant to the Plan and containing such other terms with respect to the Option as the Board in its sole discretion may determine. 7. OPTION PRICE AND FORM OF PAYMENT 7.1 INCENTIVE STOCK OPTIONS. The purchase price for a share of Stock subject to an Incentive Stock Option granted hereunder shall not be less than 100% of the fair market value of the Stock. Notwithstanding the foregoing, in the case of an Incentive Stock Option granted to any Optionee then owning more than 10% of the voting power of all classes of the Company's stock, the purchase price per share of the Stock subject to such Option shall not be less than 110% of the fair market value of the Stock on the date of grant of the Incentive Stock Option, determined as provided in Section 7.3. 7.2 NON-STATUTORY STOCK OPTIONS. The purchase price for a share of Stock subject to a non-statutory stock option shall be not less than 85% of the fair market value of the Stock, but in no event less than $6.00 per share. 7.3 DETERMINATION OF FAIR MARKET VALUE. For purposes of this Section 7, the "fair market value" of the Stock shall be determined as follows: (a) if the Stock of the Company is listed or admitted to unlisted trading privileges on a national securities exchange, the fair market value on any given day shall be the closing sale price for the Stock, or if no sale is made on such day, the closing bid price for such day on such exchange; (b) if the Stock is not listed or admitted to unlisted trading privileges on a national securities exchange, the fair market value on any given day shall be the closing sale price for the Stock as reported on the NASDAQ National Market System on such day, or if no sale is made on such day, the closing bid price for such day as entered by a market maker for the Stock; (c) if the Stock is not listed on a national securities exchange, is not admitted to unlisted trading privileges on any such exchange, and is not eligible for inclusion in the NASDAQ National Market System, the fair market value on any given day shall be the average of the closing representative bid and asked prices as reported by the National Quotation Bureau, Inc. or, if the Stock is not quoted on the National Association of Securities Dealers Automated Quotations System, then as reported in any publicly available compilation of the bid and asked prices of the Stock in any over-the-counter market on which the Stock is traded; or (d) if there exists no public trading market for the Stock, the fair market value on any given day shall be an amount determined in good faith by the Board in 4 such manner as it may reasonably determine in its discretion, provided that such amount shall not be less than the book value per share as reasonably determined by the Board as of the date of determination or less than the par value of the Stock. 7.4 PAYMENT OF PURCHASE PRICE. Except as provided herein, the purchase price of each share of Stock purchased upon the exercise of any Option shall be paid: (a) in United States dollars in cash or by check, bank draft or money order payable to the order of the Company; or (b) at the discretion of the Board, through the delivery of shares of Stock, having initially or as a result of successive exchanges of shares, an aggregate fair market value (as determined in the manner provided under this Plan) equal to the aggregate purchase price for the Stock as to which the Option is being exercised; or (c) at the discretion of the Board, by a combination of both (a) and (b) above; or (d) by such other method as may be permitted in the written stock option agreement between the Company and the Optionee. If such form of payment is permitted, the Board shall determine procedures for tendering Stock as payment upon exercise of an Option and may impose such additional limitations and prohibitions on the use of Stock as payment upon the exercise of an Option as it deems appropriate. If the Board in its sole discretion so agrees, the Company may finance the amount payable by an Optionee upon exercise of any Option upon such terms and conditions as the Board may determine at the time such Option is granted under this Plan. 8. EXERCISE OF OPTIONS 8.1 MANNER OF EXERCISE. An Option, or any portion thereof, shall be exercised by delivering a written notice of exercise to the Board and paying to the Company the full purchase price of the Stock to be acquired upon the exercise of the Option. Until certificates for the Stock acquired upon the exercise of an Option are issued to an Optionee, such Optionee shall not have any rights as a shareholder of the Company. 8.2 LIMITATIONS AND CONDITIONS ON EXERCISE OF OPTIONS. In addition to any other limitations or conditions contained in this Plan or that may be imposed by the Board from time to time or in the stock option agreement to be entered into with respect to Options granted hereunder, the following limitations and conditions shall apply to the exercise of Options granted under this Plan: 5 8.2.1 No Incentive Stock Option may be exercisable by its terms after the expiration of 10 years from the date of the grant thereof. 8.2.2 No Incentive Stock Option granted pursuant to the Plan to an eligible Participant then owning more than 10% of the voting power of all classes of the Company's stock may be exercisable by its terms after the expiration of five years from the date of the grant thereof. 9. INVESTMENT PURPOSES Unless a registration statement under the Securities Act of 1933 is in effect with respect to Stock to be purchased upon exercise of Options to be granted under the Plan, the Company shall require that an Optionee agree with and represent to the Company in writing that he or she is acquiring such shares of Stock for the purpose of investment and with no present intention to transfer, sell or otherwise dispose of such shares of Stock other than by transfers which may occur by will or by the laws of descent and distribution, and no shares of Stock may be transferred unless, in the opinion of counsel to the Company, such transfer would be in compliance with applicable securities laws. In addition, unless a registration statement under the Securities Act of 1933 is in effect with respect to the Stock to be purchased under the Plan, each certificate representing any shares of Stock issued to an Optionee hereunder shall have endorsed thereon a legend in substantially the following form: THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND WITHOUT REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS, IN RELIANCE UPON EXEMPTION(S) CONTAINED THEREIN. NO TRANSFER OF THESE SHARES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT PURSUANT TO EFFECTIVE REGISTRATION STATEMENTS UNDER SAID LAWS UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER OR DISPOSITION DOES NOT REQUIRE REGISTRATION UNDER SAID LAWS AND, FOR ANY SALES UNDER RULE 144 OF THE ACT, SUCH EVIDENCE AS IT SHALL REQUEST FOR COMPLIANCE WITH THAT RULE, OR APPLICABLE STATE SECURITIES LAWS. 10. TRANSFERABILITY OF OPTIONS No Option granted under the Plan shall be transferable by an Optionee (whether by sale, assignment, hypothecation or otherwise) other than by will or the laws of descent and distribution, and shall be exercisable during the Optionee's lifetime only by the Optionee. 6 11. TERMINATION OF EMPLOYMENT 11.1 GENERALLY. Except as otherwise provided in this Section 11, if an Optionee's employment with the Company or Subsidiary is terminated (hereinafter "Termination") other than by death or Disability (as hereinafter defined), the Optionee may exercise any Option granted under the Plan, to the extent the Optionee was entitled to exercise the Option at the date of Termination, for a period of 3 months after the date of Termination or until the term of the Option has expired, whichever date is earlier. 11.1.1 The Optionee may exercise any Incentive Stock Option granted under the Plan, to the extent the Optionee was entitled to exercise the Incentive Stock Option at the date of Termination, for a period of three (3) months after the date of Termination or until the term of the Incentive Stock Option has expired, whichever date is earlier. 11.1.2 The Optionee may exercise any Non-Statutory Stock Option granted under the Plan, to the extent the Optionee was entitled to exercise the Non-Statutory Stock Option at the date of Termination, for a period of up to eighteen (18) months after the date of Termination, as determined by the Committee, or until the term of the Non-Statutory Option has expired, whichever date is earlier. 11.2 DEATH OR DISABILITY OF OPTIONEE. In the event of the death or Disability of an Optionee prior to expiration of an Option held by him or her, the following provisions shall apply: 11.2.1 If the Optionee is at the time of his or her Disability employed by the Company or a Subsidiary and has been in continuous employment (as determined by the Board in its sole discretion) since the date of grant of the Option, then the Option may be exercised by the Optionee until the earlier of one year following the date of such Disability or the expiration date of the Option, but only to the extent the Optionee was entitled to exercise such Option at the time of his or her Disability. For the purpose of this Section 11, the term "Disability" shall mean a permanent and total disability as defined in Section 22(e)(3) of the Code. The determination of whether an Optionee has a Disability within the meaning of Section 22(e)(3) shall be made by the Board in its sole discretion. 11.2.2 If the Optionee is at the time of his or her death employed by the Company or a Subsidiary and has been in continuous employment (as determined by the Board in its sole discretion) since the date of grant of the Option, then the Option may be exercised by the Optionee's estate or by a person who acquired the right to exercise the Option by will or the laws of descent and distribution, until the earlier of one year from the date of the Optionee's death or the expiration date of the Option, but only to the extent the Optionee was entitled to exercise the Option at the time of death. 7 11.2.3 If the Optionee dies within three months after Termination, the Option may be exercised until the earlier of nine months following the date of death or the expiration date of the Option, by the Optionee's estate or by a person who acquires the right to exercise the Option by will or the laws of descent or distribution, but only to the extent the Optionee was entitled to exercise the Option at the time of Termination. 11.3 TERMINATION FOR CAUSE. If the employment of an Optionee is terminated by the Company or a Subsidiary for cause, then the Board shall have the right to cancel any Options granted to the Optionee under the Plan. 12. AMENDMENT AND TERMINATION OF PLAN 12.1 The Board, may at any time and from time to time suspend or terminate the Plan in whole or in part or amend it from time to time in such respects as may be in the best interests of the Company; provided, however, that no such amendment shall be made without the approval of the shareholders if it would: (a) materially modify the eligibility requirements for Participants as set forth in Section 5 hereof; (b) increase the maximum aggregate number of shares of Stock which may be issued pursuant to Options, except in accordance with Section 4.2 of the Plan; (c) reduce the minimum Option price per share as set forth in Section 7 of the Plan, except in accordance with Section 4.2 of the Plan; (d) extend the period of granting Options; or (e) materially increase in any other way the benefits accruing to Optionees. 12.2 No amendment, suspension or termination of this Plan shall, without the Optionee's consent, alter or impair any of the rights or obligations under any Option theretofore granted to him or her under the Plan. 12.3 The Board may amend the Plan, subject to the limitations cited above, in such manner as it deems necessary to permit the granting of Incentive Stock Options meeting the requirements of future amendments to the Code. 12.4 Upon the dissolution or liquidation of the Company, or upon a merger, consolidation, acquisition of property or stock, or reorganization as a result of which the Company is not the surviving corporation or upon a sale of substantially all the property or stock of the Company to another corporation, any option granted hereunder shall terminate and no such event shall cause any option to be exercisable for any shares other than those as to which it was exercisable prior to such termination in accordance with its terms; provided, however, that the Company may in its discretion and immediately prior to any such transaction, cause a new option to be substituted for such option or cause such old option to be assumed, by an employer corporation, or a parent or subsidiary of such corporation; and such new or substituted option shall apply to all shares issued in addition to or in substitution, replacement or modification of the shares theretofore covered by such option; provided that: 8 (a) the excess of the aggregate fair market value of the shares subject to the option immediately after the substitution or assumption over the aggregate option price of such shares shall not be more than the excess of the aggregate fair market value of all shares subject to the option immediately before such substitution or assumption over the aggregate option price of such shares, (b) the new option or the assumption of the existing option shall not give the optionee additional benefits which he did not have under the old option or prior to such assumption, and (c) a propriety adjustment of the original option price shall be made among original shares subject to the option and any additional share or shares issued in substitution, replacement or modification thereof. 13. MISCELLANEOUS PROVISIONS 13.1 RIGHT TO CONTINUED EMPLOYMENT. No person shall have any claim or right to be granted an Option under the Plan, and the grant of an Option under the Plan shall not be construed as giving an Optionee the right to continued employment with the Company. The Company further expressly reserves the right at any time to dismiss an Optionee or reduce an Optionee's compensation with or without cause, free from any liability, or any claim under the Plan, except as provided herein or in a stock option agreement. 13.2 WITHHOLDING TAXES. The Company shall have the right to require that payment or provision for payment of any and all withholding taxes due upon the grant or exercise of an Option hereunder or the disposition of any Stock or other property acquired upon exercise of an Option be made by an Optionee. In connection therewith, the Board shall have the right to establish such rules and regulations or impose such terms and conditions in any agreement relating to an Option granted hereunder with respect to such withholding as the Board may deem necessary and appropriate. 13.3 GOVERNING LAW. The Plan shall be administered in the State of Minnesota, and the validity, construction, interpretation, and administration of the Plan and all rights relating to the Plan shall be determined solely in accordance with the laws of such state, unless controlled by applicable federal law, if any. 14. EFFECTIVE DATE The effective date of the Plan is January 18, 1991. No Option may be granted after January 17, 2001, provided, however, that the Plan and all outstanding Options shall remain in effect until such outstanding Options have expired or been canceled. 9 EX-10.99 65 1992 DIRECTOR OPTION PLAN OLYMPIC FINANCIAL LTD. 1992 DIRECTOR STOCK OPTION PLAN (As Amended) 1. PURPOSE OF THE PLAN. The purpose of this 1992 Director Stock Option Plan, initially adopted by the Board on January 7, 1992, is to attract and retain the best available individuals to serve as Directors of the Company, to provide additional incentive to the Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board. The Company intends that the options granted hereunder shall not constitute incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986. The Plan is intended to comply with the requirements of Rule 16b-3 under the Exchange Act. 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "BOARD" shall mean the Board of Directors of the Company. (b) "COMMON STOCK" shall mean the Common Stock, $.01 par value per share, of the Company. (c) "COMPANY" shall mean Olympic Financial Ltd., a Minnesota corporation. (d) "COMMITTEE" shall mean a committee of the Board appointed by the Board to administer the Plan. (e) "CONTINUOUS SERVICE AS A DIRECTOR" shall mean the absence of any interruption or termination of service as a Director. Continuous Service as a Director shall not be considered interrupted in the case of sick leave, military leave, or any other leave of absence approved by the Board or Committee. (f) "DIRECTOR" shall mean a member of the Board. (g) "EMPLOYEE" shall mean any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of fees to a Director shall not be sufficient in and of itself to constitute "employment" by the Company. (h) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended. 1 (i) "OPTION" shall mean a stock option granted pursuant to the Plan. (j) "OPTIONED STOCK" shall mean the Common Stock subject to an Option. (k) "OPTIONEE" shall mean an Outside Director who receives an option. (l) "OUTSIDE DIRECTOR" shall mean a Director who is not an Employee. (m) "PARENT" shall mean a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Internal Revenue Code of 1986, as amended. (n) "PLAN" shall mean this 1992 Director Stock Option Plan. (o) "SHARE" shall mean a share of Common Stock, as adjusted in accordance with Section 12 of the Plan. (p) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended. 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of shares which may be optioned and sold under the Plan is 840,000 shares of Common Stock. The shares may be authorized, but unissued, or reacquired Common Stock. If an Option expires or becomes unexercisable for any reason without having been exercised in full, the unexercised Shares which were subject thereto shall, unless the Plan has been terminated, become available for future grant under the Plan. If Shares which were acquired upon exercise of an Option are subsequently repurchased by the Company, such Shares shall not become available for future grant under the Plan. 4. AUTOMATIC GRANT OF OPTIONS. All grants of Options hereunder shall be automatic and non-discretionary and shall be made strictly in accordance with the following provisions: (a) No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number of Shares to be covered by Options granted to Outside Directors. (b) Each Outside Director, including persons who are Outside Directors on the date of adoption of the Plan, shall be automatically granted an option to purchase 15,000 Shares (the "First Option") upon the later to occur of (i) the effective date of the Plan, as determined in accordance with Section 8 hereof, or (ii) the date on which such person first becomes an Outside Director, whether through election by the 2 shareholders of the Company or appointment by the Board to fill a vacancy; provided, however, commencing with the calendar year 1996 such automatic grant shall be reduced to an option to purchase 5,000 shares. (c) Subject to the following, after the First Option has been granted to an Outside Director, such Outside Director shall thereafter be automatically granted an Option to purchase 15,000 shares on the first and each successive anniversary of the grant of the First Option. Commencing with calendar year 1996 and thereafter such Outside Director shall be automatically granted an Option to purchase 5,000 shares on each successive anniversary of the grant of the First Option; provided, however, that in no event shall an Outside Director be granted options to purchase in the aggregate more than 120,000 shares pursuant to the Plan. (d) Notwithstanding the provisions of Sections 4(b) and (c) hereof, in the event that a grant would cause the number of Shares subject to outstanding Options to Outside Directors plus Shares previously purchased upon exercise of Options by Outside Directors to exceed 840,000 Shares, then each such automatic grant shall be for that number of Shares determined by dividing the total number of Shares remaining available for grant by the number of Outside Directors on the automatic grant date. Any further grants shall then be deferred until such time, if any, as additional Shares become available for grant under the Plan through action of the shareholders to increase the number of Shares which may be issued under the Plan or through cancellation or expiration of Options previously granted hereunder. 5. OPTION TERMS AND CONDITIONS. The terms and conditions of an Option granted hereunder shall be as follows: (a) subject to Sections 12 and 13 hereof, the terms of each Option granted prior to January 1, 1996 shall be five (5) years and the term of each Option granted after such date shall be ten (10) years. (b) the First Option shall become exercisable in full beginning on the later of (i) the first anniversary of the grant of the Option or (ii) six (6) months after the date on which the Plan is first approved by the shareholders of the Company in accordance with Rule 16b-3 under the Exchange Act and each subsequent Option shall become exercisable in full beginning on the first anniversary of the grant of such Option, provided in each case that the Outside Director shall have maintained Continuous Service as an Outside Director throughout such 12-month period. (c) the Option shall be exercisable only while the Outside Director serves as an Outside Director of the Company, and (i) as to Options granted hereunder prior to January 1, 1996 for a period of six (6) months after ceasing to be an Outside Director pursuant to section 10(b) hereof, and (ii) as to Options granted after such date, for a period of two (2) years after ceasing to be an Outside Director pursuant to Section 10(b) hereof. 3 (d) the exercise price per Share shall be 100% of the fair market value per Share on the date of grant of the Option, as determined in accordance with Section 9(a) hereof. (e) the effectiveness of any Options granted hereunder is conditioned upon shareholder approval of the Plan in accordance with Rule 16b-3 under the Exchange Act. 6. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN. (a) ADMINISTRATION. Except as otherwise required herein, the Plan shall be administered by the Board or a Committee. (b) POWERS OF THE BOARD OR COMMITTEE. Subject to the provisions and restrictions of the Plan, the Board or Committee shall have the authority, in its discretion: (i) to determine, upon review of relevant information and in accordance with Section 9(a) hereof, the fair market value of the Common Stock; (ii) to interpret the Plan; (iii) to prescribe, amend and rescind rules and regulations relating to the Plan; (iv) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option granted hereunder; (v) to accelerate the exercise date of any Option granted hereunder; and (vi) to make all other determinations deemed necessary or advisable for the administration of the Plan. (c) EFFECT OF BOARD'S DECISION. All decisions, determinations and interpretations of the Board or Committee shall be final and binding on all Optionees and any other holders of any Options granted under the Plan. (d) SUSPENSION OR TERMINATION OF OPTION. If the Board or Committee reasonably believes that an Optionee has committed an act of misconduct, it may suspend the Optionee's right to exercise any Option pending a determination by the Board or Committee (excluding the Outside Director accused of such misconduct). If the Board or Committee (excluding the Outside Director accused of such misconduct) determines that an Optionee has committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the Company, breach of fiduciary duty or deliberate disregard of the Company's rules resulting in loss, damage or injury to the Company, or if an Optionee makes an unauthorized disclosure of any Company trade secret or confidential information, engages in any conduct constituting unfair competition with respect to the Company, or induces any party to breach a contract with the Company, neither the Optionee nor the Optionee's estate shall be entitled to exercise any Option whatsoever. In making such determination, the Board or Committee (excluding the Outside Director accused of such misconduct) shall act fairly and shall give the Optionee an opportunity to appear and present evidence on the Optionee's behalf at a hearing before the Board or Committee. 4 (e) DATE OF GRANT OF OPTIONS. The date of grant of an Option shall, for all purposes, be the date determined in accordance with Section 4 hereof, notwithstanding the fact that an Optionee may not have entered into an option agreement with the Company on such date. Notice of the grant of an Option shall be given to the Optionee within a reasonable time after the date of such grant. 7. ELIGIBILITY. Options may be granted only to Outside Directors. All options shall be automatically granted in accordance with the terms set forth in Section 4 hereof. The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which a Director or the Company may have to terminate such Director's directorship at any time. 8. TERM OF PLAN. The effective date of this Plan is January 7, 1992, the date upon which it was adopted by the Board. The Plan shall continue in effect for a term of ten (10) years unless terminated sooner under Section 13 hereof. 9. FAIR MARKET VALUE AND FORM OF CONSIDERATION. (a) FAIR MARKET VALUE. The fair market value per share shall be determined as follows: (i) if the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange, the fair market value on any given day shall be the closing sale price for the Common Stock on such day, as reported in the Wall Street Journal or other newspaper of general circulation; (ii) if the Common Stock is not listed on a national securities exchange, the fair market value on any given day shall be the closing sale price for the Common Stock on the NASDAQ National Market System on such day, as reported in the Wall Street Journal or other newspaper of general circulation; (iii) if the Common Stock is not listed on a national securities exchange, is not admitted to unlisted trading privileges on any such exchange, and is not eligible for inclusion on the NASDAQ National Market System, the fair market value on any given day shall be the average of the closing representative bid and asked prices on such day, as reported on the NASDAQ System, and if not reported on such system, then as reported by the National Quotation Bureau, Inc. or such other publicly available compilation of the bid and asked prices of the Common Stock in any over-the-counter market on which the Common Stock is traded; or 5 (iv) if there exists no public trading market for the Common Stock, the fair market value on any given day shall be an amount determined by the Board or Committee in such manner as it may reasonably determine in its discretion, provided that such amount shall not be less than the book value per share as reasonably determined by the Board or Committee as of the date of determination nor less than the par value of the Stock. (b) FORM OF CONSIDERATION. The consideration to be paid for the Shares to be issued upon exercise of an Option shall consist entirely of cash or such other form of consideration as the Board or Committee may determine, in its sole discretion, to be appropriate for payment, including but not limited to other shares of Common Stock having a fair market value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option is exercised, or any combination of such methods of payment. 10. EXERCISE OF OPTION (a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted hereunder shall be exercisable at such times as are set forth in Section 5 hereof. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when a written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 9(b) hereof. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 hereof. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option was exercised. (b) TERMINATION OF STATUS AS A DIRECTOR. If an Optionee ceases to serve as a Director, the Optionee may, but (i) as to Options granted hereunder prior to January 1, 1996, only within six (6) months after the date Optionee ceases to be an Outside Director and (ii) as to Options granted after such date, within two (2) years after the date the Optionee ceases to be an Outside Director of the Company, exercise his or her Option to the extent the Optionee was entitled to exercise it at the date of such 6 termination. To the extent that the Optionee was not entitled to exercise an Option at the date of such termination, or if the Optionee does not exercise such Option within the time specified herein, the Option shall terminate. (c) DEATH OF OPTIONEE. In the event of the death of an Optionee occurring: (i) during the term of the Option, and provided that the Optionee was at the time of death a Director of the Company and had been in Continuous Service as a Director since the date of grant of the Option, the Option may be exercised, at any time within six (6) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that would have accrued had the Optionee continued living and remained in Continuous Service a Director for six (6) months after the date of death. (ii) within thirty (30) days after the termination of Continuous Service as a Director, the Option may be exercised, at any time within six (6) months following the date of death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination of Continuous Service as a Director. 11. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. The number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which Options have not yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, or options or rights to purchase shares of stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. 7 In the event of the proposed dissolution or liquidation of the Company, each Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, that the Optionee shall have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of ten (10) days from the date of such notice, and the Option will terminate upon the expiration of such period. 13. AMENDMENT, TERMINATION AND APPROVAL OF THE PLAN. The Board may at any time amend or terminate the Plan, except that the Board shall not amend the Plan more than once every six (6) months with respect to the provisions of the Plan relating to the amount, price, and timing of grants, other than to comply with changes in the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974, as amended, or the regulations thereunder. No Option may be granted after the Plan is terminated. The foregoing provisions of this Section notwithstanding, no amendment or termination shall, without the consent of the holder of an Option, alter or impair any rights or obligations under any Option theretofore granted under the Plan except as is permitted pursuant to Section 12 of the Plan. If any amendment to the Plan requires approval by the shareholders of the Company for continued applicability of Rule 16b-3 under the Exchange Act, or for initial or continued listing of the Common Stock or other securities of the Company upon any stock exchange, then such amendment shall be approved by the holders of a majority of the Company's outstanding capital stock entitled to vote. 14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the requirements of the NASD or any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or 8 distribute such Shares, if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law. Such Shares may also be issued with appropriate legends on stock certificates representing such Shares, and the Company may place stop transfer orders with respect to such Shares. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 15. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 16. OPTION AGREEMENT. Options shall be evidenced by written option agreements in substantially the form attached hereto or in such other form as the Board or Committee shall approve. 17. INFORMATION TO OPTIONEES. The Company shall provide to each Optionee, during the period for which such Optionee has one or more Options outstanding, copies of all annual reports and other information which are provided to all shareholders of the Company. 9 EX-10.102 66 1998-2000 RESTRICTED STOCK OPTION PLAN OLYMPIC FINANCIAL LTD. 1998-2000 RESTRICTED STOCK ELECTION PLAN ARTICLE I. PURPOSE The purpose of this Plan is to reward executive performance and to build each executive participant's equity interest in the stock of OLYMPIC FINANCIAL LTD., a Minnesota corporation (the "Company"), by providing long-term incentives and rewards to officers and other key management associates of the Company and its subsidiaries who contribute to its continuing success by their management, innovation, ability, industry, loyalty and exceptional service. This Plan provides such management associates with an opportunity to acquire Common Stock of the Company, par value $0.01 per share (the "Common Stock"). ARTICLE II. DEFINITIONS 2.1 "Active Participant" means a Participant who is employed by the Company and actively at work. 2.2 "Company" means Olympic Financial Ltd. and its subsidiaries. 2.3 "Board of Directors" means the Board of Directors of Olympic Financial Ltd. 2.4 "Committee" means the Compensation Committee of the Board of Directors of the Company. 2.5 "Disability" means the inability of a Participant to perform the regular duties of his or her normal occupation due to accident or illness as determined by the Company's long-term disability carrier. 2.6 "Disability Retirement Date" means the date on which a Participant permanently ceases being an Active Participant by reason of Disability. 2.7 "Eligible Associate" means an officer or other management associate of the Company determined by the Committee to be eligible to participate in the Plan pursuant to criteria adopted from time to time by the Committee. 2.8 "Effective Date of Award" means (i) December 20, 1995, as to an Eligible Associate who received a Restricted Stock Award on such date; (ii) as to an Eligible Associate who is employed by the Company after December 20, 1995 ("New Associate"), the first day of the New Associate's employment by the 1 Company or such later date as determined by the Committee, and (iii) as to an associate who is not an Eligible Associate on December 20, 1995, the date of the event or circumstance giving rise to the associate's eligibility as determined by the Committee. Provided, however, in the event the New Associate's first day of employment, or the date of the event or circumstance giving rise to the associate's eligibility occurs during the last calendar quarter of 1997, 1998 or 1999, notwithstanding the foregoing, the Effective Date shall be as of January 1, of the next consecutive year after such quarter. Notwithstanding the foregoing, solely for purposes of an election under Section 83(b) of the Internal Revenue Code, the Effective Date of Award shall be the date of grant of a Restricted Share Award. 2.9 "Normal Retirement Date" means the date of voluntary termination of employment on or after an associate reaches age fifty-five. 2.10 "Participant" means an Eligible Associate who elects to participate in the Plan. 2.11 "Plan" means the Olympic Financial Ltd. 1998-2000 Restricted Stock Election Plan. 2.12 "Plan Year" means the annual period on which the records of the Plan are kept, that being the fiscal year of the Company. The Plan Years for the Plan shall be the calendar years 1998, 1999 and 2000. 2.13 "Restricted Stock Award" means an award of the Company's Common Stock with restrictions as to disposition by the recipient and subject to a risk of forfeiture until certain conditions described in the Plan have been met. 2.14 "Restriction Period" means the period from the date of grant of the Restricted Stock Award until the later of (i) the date five years after the Effective Date of the Award or (ii) December 31, 2002. 2.15 "Retired Participant" means a participant who has retired under the provisions of an applicable Company-sponsored retirement plan at Normal or Disability Retirement Date. Retirement Participant will not, however, include any Participant who was terminated for cause (as determined by the Board of Directors or by one or more Section 16 officers) or whose employment terminated prior to death or Normal or Disability Retirement. ARTICLE III. ELIGIBILITY The Committee will select the officers and other key executive and management associates to be eligible to participate in the Plan and to receive Restricted Stock Awards. The Committee shall make this determination for associates of the Company as of 2 December 20, 1995 on such date. The Committee may select new and additional associates for participation subsequent to December 20, 1995. ARTICLE IV. RESTRICTED STOCK AWARDS 4.1 TARGET BONUS. The Committee may select Participants who shall be eligible to receive incentive bonuses for the Plan Years 1998, 1999 and 2000 in amounts determined by the Committee. The amount of any such bonus which may be earned by a Participant shall be determined as a percentage of the Participant's base salary as of the Effective Date or such later date determined by the Committee. Such Participant's aggregate bonuses for the three Plan Years or a portion thereof ("Target Bonus") shall be calculated by (i) multiplying the Participant's base salary as of the Effective Date or such later date determined by the Committee times his or her bonus percentage as determined by the Committee; (ii) dividing that product by three hundred sixty-five (365), and (iii) multiplying that quotient times the number of days from and including the Effective Date of the Award through and including December 31, 2000. Prior to the commencement of each Plan Year, the Committee shall establish an annual performance target for each Participant which target must be achieved by the Participant as a condition to earning his or her bonus for the relevant Plan Year. 4.2 ELECTION. Each Participant shall be permitted to make an irrevocable election that a portion of his/her bonuses for fiscal years 1998- 2000 shall be received in the form of Common Stock. To participate in the Plan, the Eligible Associate shall execute and submit to the Committee or its representative an election form no later than thirty (30) days following the date the Eligible Associate was first informed of his or her eligibility to participate. The Participant shall irrevocably designate on such election form the percentage (the "Elected Percentage") of the Target Bonus he or she elects to receive in the form of Restricted Stock in increments of 0%, 25%, 50%, 75% or 100%. 4.3 ELECTION BY SECTION 16 OFFICERS. All officers of the Company who are subject to Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act") as identified by the Board of Directors must elect to apply 100% of their Target Bonuses to Restricted Stock Awards under this Plan. 4.4 NUMBER OF RESTRICTED SHARES. Subject to the provisions of this Plan, the Committee may grant a Restricted Stock Award to each Participant who has elected to participate in the Plan ("Award Recipient"). The Restricted Stock Award shall be equal to the number of shares of the Company's Common Stock (rounded down to the nearest whole number) calculated by (i) multiplying the Target Bonus times the Elected Percentage and (ii) dividing the product thereof by the market price of the Common Stock as of the Effective Date. Provided, however, any grants made prior to the approval of the Plan by the Company's shareholders at the 1996 annual meeting shall be subject to and contingent upon such approval being given. 3 4.5 STOCK CERTIFICATES. Restricted shares awarded pursuant to the Plan may be evidenced by the Stock certificates described in Section 7.3 and such other written documents (the "Restricted Stock Award Documents") in such form as the Committee shall approve from time to time. The Company may at its option issue uncertificated shares until such time as Participants' shares become vested. When vested, stock certificates shall be issued in the name of the Participant. Restricted Stock Award Documents shall comply with and be subject to the terms and conditions of this Plan and such other terms and conditions which the Committee shall require from time to time which are not inconsistent with the terms of this Plan. The Committee shall have the right to amend the Restricted Stock Award Documents issued to an Award Recipient subject to his or her consent. 4.6 FUTURE AWARDS. At its discretion the Committee may in the future determine to make Restricted Stock Awards which are in accordance with the terms of this Plan. ARTICLE V. VESTING 5.1 AUTOMATIC LAPSE OF RESTRICTIONS. An Active Participant shall become fully vested in his/her Restricted Stock Awards upon the lapse of the applicable Restriction Period. 5.2 ACCELERATED VESTING. As soon as reasonably practical after the end of 1998, 1999 and 2000, the Committee shall determine whether each Active, Retired or deceased Participant has achieved his or her annual target performance goals established by the Committee for the relevant fiscal year. As of the date the Committee determines that such performance goals for said year have been achieved, vesting of a portion of the Participant's Restricted Stock Awards shall be accelerated. For each such Plan Year, an Active Participant who has achieved his or her performance goals shall vest in the number of shares determined by multiplying the Participant's total Restricted Stock Award shares for that year times a fraction, the numerator of which is the number of days during such year that the Participant was participating in the Plan and the denominator of which is the total number of days from and including the Participant's Effective Date to December 31, 2000. 5.3 CONDITIONS RESULTING IN FORFEITURES. In the event that an Active Participant's employment is terminated and such termination is not by reason of death, Normal or Disability Retirement or Change of Control, all unvested Restricted Stock Awards will be forfeited. 5.4 PRO RATA ACCELERATION OF VESTING OF RESTRICTED SHARES IN THE EVENT OF THE AWARD RECIPIENT'S RETIREMENT, DEATH OR DISABILITY. In the event of the death or Normal or Disability Retirement of the Award Recipient, at the end of the fiscal year of the Company in which such event occurred, in the event the Participant's target performance 4 goals have been achieved, the Board of Directors or its delegee shall make a recommendation to the Committee that such Participant is entitled to a performance bonus. On the basis of that recommendation, the Committee shall take the following actions: (a) determine that the Participant vested in a portion of his/her Restricted Stock Award, and (b) calculate the number of accelerated vested shares in the portion of the Restricted Stock Award earned. The vested portion shall be that proportion of the total shares which could have become vested for that fiscal year which is equal to the Participant's employment period during that fiscal year as a proportion of the entire fiscal year. 5.5 ACCELERATION OF VESTING OF RESTRICTED SHARES IN THE EVENT OF CHANGE OF CONTROL. In the event of, or upon the date set by the Committee to be an accelerated vesting date in anticipation of, the occurrence of a transaction or series of related transactions in which (A) the Company is dissolved or liquidated or sells substantially all of its operating assets, (B) the Company is party to a merger or consolidation in which the Company is not the surviving or acquiring entity, or (C) the Company becomes an 80% or more owned subsidiary of another company (any of such transactions being hereinafter referred to as a "Change of Control"), the Committee shall direct that vesting with respect to all Restricted Shares be accelerated and that such Restricted Shares become fully vested. ARTICLE VI. COMMITTEE 6.1 COMPOSITION OF THE COMMITTEE. The Committee shall consist of not less than two members of the Board. Any grant of Awards to officers who are subject to Section 16 of the Exchange Act shall be made only by a Committee of two or more outside directors each of whom is a "disinterested person" as defined in Rule 16(b)-3(c)(2) of the Exchange Act. 6.2 RULES AND REGULATIONS. The Committee shall adopt such administrative rules and regulations under this Plan as it may deem appropriate for the operation of the Plan. The Committee shall also have the power to alter, amend or revoke any rules or regulations it has adopted. 6.3 AUTHORITY. The Committee shall have full authority to interpret the Plan and, subject to the provisions herein, to determine when, to whom and the size of the Restricted Stock Awards to be granted to any Participant, taking into account the elections made by Participants. 5 6.4 ACTIONS OF THE COMMITTEE. The Committee shall hold its meetings at such times and places as it may determine. A majority of the members shall constitute a quorum. All decisions of the Committee taken in meeting shall be made on the action of a majority of the members of the Committee. Decisions of the Committee may be taken by written action without meeting only upon unanimous vote in favor thereof. 6.5 EXPENSES. All expenses incurred by the Committee in the administration of this Plan shall be paid by the Company. ARTICLE VII. PLAN ADMINISTRATION 7.1 EFFECTIVE DATE. The effective date of this Plan shall be December 20, 1995, provided that the shareholders of the Company have approved or will approve the Plan within twelve months of that date. 7.2 SHARES AVAILABLE FOR AWARD. Common Stock to be used for Restricted Stock Awards under the Plan shall be made available at the discretion of the Board of Directors either from authorized but unissued common shares or from previously issued common shares reacquired by the Company, including shares purchased on the open market. The total number of common shares which may be used in payment of awards under the Plan shall not exceed in the aggregate 600,000 shares, provided, however, that such number of shares shall be proportionately adjusted for any increase or decrease in the number of outstanding shares resulting from a stock split or other subdivision or consolidation of shares or for other capital adjustments or payment of stock dividends or distributions or other increases or decreases in the outstanding shares effected without receipt of consideration by the Company. Common shares awarded under the Plan which are subsequently forfeited shall revert to the Plan and shall be available for subsequent award to Participants. 7.3 STOCK CERTIFICATES. If issued, the stock certificate(s) evidencing a Restricted Stock Award shall be registered in the name of the Award Recipient and shall bear a legend referring to the terms, conditions and restrictions applicable to such shares. The Committee shall direct the Company to either retain physical possession or custody of or place into escrow the certificate(s) evidencing the Restricted Shares until such time as such shares are vested. Uncertificated shares shall be maintained by the Committee or at its direction. 7.4 DIVIDEND AND VOTING RIGHTS. Subject to Section 7.5 hereof, during the period from the date a Restricted Stock Award is granted to the date Restricted Shares are vested, the Award Recipient will be entitled to all rights of a stockholder of the Company, including the right to vote the shares and receive dividends declared on such shares, as paid. 6 7.5 TRANSFER OF RESTRICTED SHARES. No Restricted Shares awarded under this Plan may be transferred, pledged, or encumbered until such time as any such shares become vested. 7.6 WITHHOLDING OF TAXES. Whenever Restricted Shares vest or, if sooner, whenever an Award Recipient must include the Restricted Shares in income for federal income tax purposes, the Company shall have the right to (a) require the recipient to remit or otherwise make available to the Company an amount sufficient to satisfy all federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Restricted Shares, or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities, including, without limitation, redeeming a portion of any Restricted Shares otherwise deliverable pursuant to this Plan with a then fair market value equal to such tax liabilities. The Company's obligation to make any delivery or transfer of vested Restricted Shares shall be conditioned on the Award Recipient's compliance with any withholding requirement to the Company's satisfaction. ARTICLE VIII. AMENDMENT AND TERMINATION 8.1 AMENDMENT OF THE PLAN. The Board of Directors of the Company may amend this Plan from time to time in such manner as they may deem advisable; provided, however, that only the Committee can make grants and awards. Any amendment that will result in a grant or an award shall be made only by disinterested members of the Board of Directors. No amendment to this Plan shall adversely affect any outstanding Restricted Stock Award without the consent of the Award Recipient. 8.2 EXPIRATION, SUSPENSION OR TERMINATION OF PLAN. No Restricted Stock Awards shall be granted after December 31, 2000. However, the Board of Directors may suspend or terminate this Plan at any time. ARTICLE IX. MISCELLANEOUS 9.1 NO CONTINUED EMPLOYMENT. The award of a Restricted Stock Award pursuant to this Plan shall not be construed to imply or to constitute evidence of any agreement, express or implied, on the part of the Company or any subsidiary thereof to retain the Award Recipient in the employ of the Company or any subsidiary thereof, and each such Award Recipient shall remain subject to discharge to the same extent as if this Plan had not been adopted. 9.2 CHOICE OF LAW. This Plan shall be operated in accordance with the laws of the State of Minnesota, to the extent not preempted by federal law. 7 EX-11.1 67 COMP OF EARNINGS PER SHARE OLYMPIC FINANCIAL LTD. COMPUTATION OF EARNINGS PER SHARE (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, --------------------------------------------- (Dollars in thousands, except per share amounts) 1994 1995 1996 ------------- ------------- ------------- PRIMARY: Income before extraordinary item and preferred dividends.............................................. $ 4,185 $ 29,317 $ 60,316 Less preferred dividends................................. (2,300) (2,213) (1,152) ------------- ------------- ------------- Net income before extraordinary item applicable to common stock.................................................. 1,885 27,104 59,164 Less extraordinary item.................................. -- (3,856) -- ------------- ------------- ------------- Net income applicable to common stock.................. $ 1,885 $ 23,248 $ 59,164 ------------- ------------- ------------- ------------- ------------- ------------- Weighted average number of common shares outstanding..... 9,842,173 17,261,810 30,897,426 Net effect of assumed exercise of stock options and warrants............................................... 976,735 2,767,959 2,168,047 ------------- ------------- ------------- Weighted average primary shares.......................... 10,818,908 20,029,769 33,065,473 ------------- ------------- ------------- ------------- ------------- ------------- Net income per common share before extraordinary item.... $ 0.17 $ 1.35 $ 1.79 Extraordinary item per common share...................... -- (0.19) -- ------------- ------------- ------------- Net income per common share............................ $ 0.17 $ 1.16 $ 1.79 ------------- ------------- ------------- ------------- ------------- ------------- FULLY DILUTED: Income before extraordinary item and preferred dividends.............................................. $ 4,185 $ 29,317 $ 60,316 Less extraordinary item.................................. -- (3,856) -- ------------- ------------- ------------- Net income, as adjusted................................ $ 4,185 $ 25,461 $ 60,316 ------------- ------------- ------------- ------------- ------------- ------------- Weighted average number of common shares outstanding..... 9,842,173 17,261,810 30,897,426 Net effect of assumed exercise of stock options and warrants............................................... 1,479,907 4,200,896 2,484,195 Net effect of assumed conversion of 8% Cumulative Convertible Exchangeable Preferred stock............... 5,361,300 4,993,170 3,068,374 ------------- ------------- ------------- Weighted average fully diluted shares.................... 16,683,380 26,455,876 36,449,995 ------------- ------------- ------------- ------------- ------------- ------------- Net income per share before extraordinary item........... $ 0.17 $ 1.11 $ 1.65 Extraordinary item per share............................. -- (0.15) -- ------------- ------------- ------------- Net income per share................................... $ 0.17 $ 0.96 $ 1.65 ------------- ------------- ------------- ------------- ------------- -------------
- ------------------------ (1) For the year ended December 31, 1994 the computation of fully diluted earnings per share results in an anti-dilutive earnings per share amount and is therefore reported equal to primary earnings per share. EX-12.1 68 COMP OF RATIO EARNINGS TO FIXED CHARGES OLYMPIC FINANCIAL LTD. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- (Dollars in thousands) 1992 1993 1994 1995 1996 ----------- ----------- ----------- ----------- ----------- COMPUTATION OF INCOME: Income (loss) before income taxes and extraordinary item........................... $ (1,342) $ 1,395 $ 6,030 $ 48,835 $ 96,004 Capitalized interest........................... -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Income before income taxes and capitalized interest..................................... (1,342) 1,395 6,030 48,835 96,004 Fixed charges.................................. 878 1,927 5,700 17,784 26,366 ----------- ----------- ----------- ----------- ----------- Total income (loss) for computation............ $ (464) $ 3,322 $ 11,730 $ 66,619 $ 122,370 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- COMPUTATION OF FIXED CHARGES: Portion of rentals deemed representative of interest (a)................................. $ 68 $ 129 $ 284 $ 614 $ 1,173 INTEREST: Interest on long-term debt..................... 702 1,648 4,885 15,529 21,153 Interest other than funding of purchase of auto loans........................................ 70 63 116 945 2,836 Amortization of debt placement................. 38 87 415 696 1,204 Capitalized interest........................... -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total fixed charges............................ $ 878 $ 1,927 $ 5,700 $ 17,784 $ 26,366 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Ratio of earnings to fixed charges............. -- 1.72x 2.06x 3.75x 4.64x Deficiency in earnings to fixed charges........ $ (1,342) -- -- -- -- ADDITIONAL INFORMATION: Net rental expense............................. $ 207 $ 391 $ 861 $ 1,842 $ 3,520 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------ (a) Portion of rental deemed representative of interest equals one third of rental expense. EX-12.2 69 COMP OF RATIO EARN TO FIXED CHARGES/PREFER STOCK OLYMPIC FINANCIAL LTD. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- (Dollars in thousands) 1992 1993 1994 1995 1996 ----------- ----------- ----------- ----------- ----------- COMPUTATION OF INCOME: Income (loss) before income taxes and extraordinary item........................... $ (1,342) $ 1,395 $ 6,030 $ 48,835 $ 96,004 Capitalized interest........................... -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Income before income taxes and capitalized interest..................................... (1,342) 1,395 6,030 48,835 96,004 Fixed charges.................................. 878 1,927 5,700 17,784 26,366 ----------- ----------- ----------- ----------- ----------- Total income (loss) for computation............ $ (464) $ 3,322 $ 11,730 $ 66,619 $ 122,370 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- COMPUTATION OF FIXED CHARGES: Portion of rentals deemed representative of interest (a)................................. $ 68 $ 129 $ 284 $ 614 $ 1,173 INTEREST: Interest on long-term debt..................... 702 1,648 4,885 15,529 21,153 Interest other than funding of purchase of auto loans........................................ 70 63 116 945 2,836 Amortization of debt placement................. 38 87 415 696 1,204 Capitalized interest........................... -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total fixed charges............................ $ 878 $ 1,927 $ 5,700 $ 17,784 $ 26,366 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Preferred stock dividends on a pre-tax basis... -- 192 3,286 3,688 1,829 Total combined fixed charges and preferred stock dividends.............................. $ 878 $ 2,119 $ 8,986 $ 21,472 $ 28,195 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Ratio of earnings to combined fixed charges and preferred stock dividends.................... -- 1.57x 1.31x 3.10x 4.34x Deficiency in earnings to combined fixed charges and preferred stock dividends........ $ (1,342) -- -- -- -- ADDITIONAL INFORMATION: Net rental expense............................. $ 207 $ 391 $ 861 $ 1,842 $ 3,520 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------ (a) Portion of rental deemed representative of interest equals one third of rental expense. EX-21.1 70 SUBSIDIARIES OF THE REGISTRANT OLYMPIC FINANCIAL LTD. SUBSIDIARIES STATE OF NUMBER OF PERCENT OF INCORPORATION SHARES OWNERSHIP -------------- --------- --------- Olympic Receivables Financing Corporation MN 1,000 100% Olympic Receivables Capital Corp. DE 100 100% Olympic 1992-B Receivables Capital Corp. DE 100 100% Olympic Receivables Marketing Corp. MN 1,000 100% Olympic Receivables Finance Corp. DE 100 100% Olympic First GP Inc. DE 100 100% Olympic Second GP Inc. DE 100 100% Olympic Receivables Finance Corp. II DE 100 100% Arcadia Receivables Conduit Corp. DE 100 100% EX-23.1 71 CONSENT OF ERNST & YOUNG EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the following Registration Statements of Olympic Financial Ltd. and related Prospectuses of our report dated January 21, 1997, with respect to the consolidated financial statements of Olympic Financial Ltd., as amended, included in the Annual Report (Form 10-K) for the year ended December 31, 1996. Registration Form Statement No. Purpose - ---- ------------- ------- S-3 33-94018 Warrants to Purchase Common Stock S-3 33-98080 Warrants to Purchase Common Stock S-3 33-81512 Subordianted Extendible and Fixed-Term Notes S-3 333-18027 Universal Shelf S-8 33-53670 Olympic Financial Ltd. 1990 Stock Option Plan, the Olympic Financial Ltd. 1992 Director Stock Option Plan, and the Employee Stock Purchase Plan S-8 33-86484 Olympic Financial Ltd. 1994-1997 Restricted Stock Election Plan S-8 33-94228 Olympic Financial Ltd. 1998-2000 Restricted Stock Election Plan /s/ Ernst & Young LLP Minneapolis, Minnesota January 31, 1997 EX-27.1 72 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 12/31/96 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 16,057 0 719,254 0 0 29,289 17,778 4,148 778,230 178,719 206,418 0 0 364 392,729 778,230 0 213,495 0 92,298 0 0 25,193 96,004 35,688 60,316 0 0 0 60,316 1.79 1.65
EX-99.1 73 RISK FACTORS CAUTIONARY STATEMENT OLYMPIC FINANCIAL LTD. (THE "COMPANY"), OR PERSONS ACTING ON BEHALF OF THE COMPANY, OR OUTSIDE REVIEWERS RETAINED BY THE COMPANY MAKING STATEMENTS ON BEHALF OF THE COMPANY, OR UNDERWRITERS OF THE COMPANY'S SECURITIES, FROM TIME TO TIME, MAY MAKE, IN WRITING OR ORALLY, "FORWARD-LOOKING STATEMENTS" AS DEFINED UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE "ACT"). THIS CAUTIONARY STATEMENT, WHEN USED IN CONJUNCTION WITH AN IDENTIFIED FORWARD-LOOKING STATEMENT, IS FOR THE PURPOSE OF QUALIFYING FOR THE "SAFE HARBOR" PROVISIONS OF THE ACT AND IS INTENDED TO BE A READILY AVAILABLE WRITTEN DOCUMENT THAT CONTAINS FACTORS WHICH COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS ARE IN ADDITION TO ANY OTHER CAUTIONARY STATEMENTS, WRITTEN OR ORAL, WHICH MAY BE MADE OR REFERRED TO IN CONNECTION WITH ANY SUCH FORWARD-LOOKING STATEMENT. THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS, FINANCIAL OR OTHERWISE, OF THE COMPANY. REFERENCE TO THIS CAUTIONARY STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT OR STATEMENTS. LIQUIDITY AND ACCESS TO CAPITAL RESOURCES NEGATIVE OPERATING CASH FLOWS. The Company's business requires substantial cash to support amounts necessary to purchase and finance automobile loans pending securitization, the payment of dealer participations, cash held from time to time in restricted spread accounts in connection with securitizations or warehouse facilities, repossessed inventory, interest advances to securitization trusts, interest expense and other cash requirements, in addition to debt service and dividends. These cash requirements increase as the volume of the Company's loan purchases increases. To the extent that increases in the volume of loan purchases and securitizations provide income, a substantial portion of such income is received by the Company in cash over the life of the loans. The Company has operated historically on a negative operating cash flow basis and expects to continue to do so for so long as the Company's volume of loan purchases continues to grow at a significant rate. As a result of the Company's historical growth rate, the Company has used increasingly larger amounts of cash than it has generated from its operating activities. The Company has funded these negative operating cash flows principally through borrowings from financial institutions, sales of equity securities and sales of senior and subordinated notes. The Company's ability to execute its growth strategy depends upon its continued ability to obtain substantial additional long-term debt and equity capital through access to the capital markets or otherwise. There can be no assurance that the Company will have access to the capital markets when needed or will be able to obtain financing upon terms reasonably satisfactory to the Company. Factors which could affect the Company's access to the capital markets, or the costs of such capital, include changes in interest rates, general economic conditions, the perception in the capital markets of the Company's business, results of operations, leverage, financial condition and business prospects, and the performance of the Company's securitization trusts. In addition, covenants with respect to the Company's debt securities and credit facilities may significantly restrict the Company's ability to incur additional indebtedness and to issue new classes of preferred stock. POTENTIAL INABILITY TO REFINANCE EXISTING INDEBTEDNESS. The Company's ability to repay its outstanding indebtedness at maturity may depend on its ability to refinance such indebtedness, which could be adversely affected if the Company does not have access to the capital markets for the sale of additional debt or equity through public offerings or private placements on terms reasonably satisfactory to the Company. See "Negative Operating Cash Flows" above. DEPENDENCE ON WAREHOUSE FINANCING. The Company depends on warehouse facilities with financial institutions or institutional lenders to finance its purchase of loans on a short-term basis pending securitization. At December 31, 1996, the Company had $800.0 million of warehouse facilities through banks and institutionally managed asset-backed securities conduits, of which $688.9 million was available. These facilities expire at various times in 1997, subject to renewal or extension. Implementation of the Company's growth strategy requires continued availability of warehouse facilities and may require increases in the capacity of warehouse facilities. There can be no assurance that such financing will be available on terms reasonably satisfactory to the Company. The inability of the Company to arrange additional warehouse facilities or to extend or replace existing facilities when they expire would have a material adverse effect on the Company's business, financial condition and results of operations and on the Company's outstanding securities. DEPENDENCE ON SECURITIZATION. The Company has relied upon its ability to aggregate and sell loans as asset-backed securities in the secondary market to generate cash proceeds for repayment of warehouse facilities and to purchase new loans from dealers. Through December 31, 1996 the Company had securitized approximately $5.8 billion of automobile loans, approximately $3.8 billion of which were outstanding at December 31, 1996. Accordingly, adverse changes in the Company's asset-backed securities program or in the asset-backed securities market for automobile receivables generally could materially adversely affect the Company's ability to purchase and resell loans on a timely basis and upon terms reasonably satisfactory to the Company. The Company endeavors to effect public securitizations of its loans on at least a quarterly basis. However, market and other considerations, including the conformity of loans to insurance company and rating agency requirements, could affect the timing of such transactions. Any delay in the sale of loans beyond a quarter-end would eliminate the related gain on sale in the given quarter and adversely affect the Company's reported earnings for such quarter. All of the Company's securitizations from March 1993 through December 31, 1996 and one of the Company's warehouse facilities have utilized credit enhancement in the form of financial guaranty insurance policies issued by FSA to achieve "AAA/Aaa" ratings with respect to the asset-backed securities. The Company believes that financial guaranty insurance policies reduce the costs of the securitizations and such warehouse facility relative to alternative forms of credit enhancements available to the Company. The Company has committed to use FSA for future credit enhancement on insured securitizations through 1997 in consideration for certain limitations on FSA insurance premiums. FSA is not required to insure Company-sponsored securitizations and there can be no assurance that it will continue to do so or that future Company-sponsored securitizations will be similarly rated. LOAN PERFORMANCE RISKS POTENTIAL NEGATIVE EFFECTS ON FINANCIAL CONDITION, RESULTS OF OPERATIONS AND LIQUIDITY. The Company's business, financial condition, results of operations and liquidity depend, to a material extent, on the performance of loans purchased and sold by the Company. When such loans are sold in securitizations, the Company recognizes gain on sale. Finance income receivable, the Company's principal asset, has been calculated using assumptions concerning future default and prepayment rates on securitized loans that are consistent with the Company's historical experience and market conditions and present value discount rates that the Company believes would be requested by an unrelated purchaser of an identical stream of estimated cash flows. Management believes that the Company's estimates of excess cash flow were reasonable at the time each gain on sale of loans was recorded. However, the actual rates of default and/or prepayment on such loans may exceed those estimated for purposes of calculating the Company's finance income receivable and consequently may adversely affect anticipated future excess cash flow. The Company periodically reviews its prepayment and loss assumptions in relation to current performance of the loans and market conditions, and, if necessary, writes down the balance of finance income receivable. The Company's business, financial condition and results of operations could be materially adversely affected by such adjustments in the future. No assurance can be given that loan losses and prepayments will not exceed the Company's estimates or that finance income receivable could be sold at its stated value on the balance sheet, if at all. POSSIBLE RESTRICTIONS ON CASH FLOW FROM SECURITIZATIONS. The Company's future liquidity and financial condition, and its ability to finance the growth of its business and to repay or refinance its indebtedness, will depend to a material extent on distributions of excess cash flow from securitization trusts. The Company's agreements with FSA provide that the Company must maintain in a spread account for each insured securitization trust specified levels of excess cash during the life of the trust. These spread accounts are initially funded out of initial deposits or cash flows from the related trust. Thereafter, during each month, excess cash flow due to ORFC from all insured securitization trusts is first used to replenish any 2 spread account deficiencies and is then distributed to the Company. If excess cash flow from all insured securitization trusts, plus cash flow from recoveries, is not sufficient to replenish all such spread accounts, no cash flow would be available to the Company from ORFC for that month. Each insured securitization trust has certain portfolio performance tests relating to levels of delinquency, defaults and net losses on the loans in such trust. If any of these levels are exceeded, the amount required to be retained in the related spread account, and not passed through to ORFC, will be increased. Such levels have historically been exceeded prior to 1996 and the Company has obtained waivers from FSA to permit distributions of cash from certain spread accounts to ORFC. There can be no assurance that such levels will not be exceeded in the future or that, if exceeded, waivers will be available. In certain events with respect to any series of asset-backed securities insured by FSA, the Company will be in default under its insurance agreement with FSA and distributions of cash flow to ORFC from the related securitization trust may be suspended until the asset-backed securities have been redeemed. Such events include the cumulative net loss rate, as defined, equaling or exceeding an agreed upon percentage of the principal balance of loans included in the securitization trust related to such series. Certain of the Company's securitization trusts have exceeded such insurance agreement thresholds prior to 1996 and the Company has obtained waivers from FSA to permit distributions of cash to ORFC. There can be no assurance that such thresholds will not be exceeded in the future or that, if exceeded, waivers will be available. In addition, the spread account for each securitization is cross-collateralized to the spread accounts established in connection with the Company's other securitization trusts (including one of its warehouse facilities) such that excess cash flow from a performing securitization trust may be used to support negative cash flow from, or to replenish a deficient spread account in connection with, a nonperforming securitization trust, thereby further restricting excess cash flow available to ORFC. FSA also has a collateral security interest in the stock of ORFC. If FSA were to foreclose on such security interest following an event of default under an insurance agreement with respect to a securitization trust, FSA could preclude payment of dividends by ORFC to the Company, thereby eliminating the Company's right to receive distributions of excess cash flow from all the FSA- insured securitization trusts. The Company's right to service the loans sold in securitizations insured by FSA is also generally subject to the discretion of FSA. Accordingly, there can be no assurance that the Company will continue as servicer for such loans and receive related servicing fees. Any increase in limitations on the Company's cash flow from securitization trusts or inability to obtain any necessary waivers from FSA or termination of servicing arrangements could materially adversely affect the Company's cash flow and liquidity, and ultimately its business, financial condition and results of operations and its outstanding securities. IMPACT OF PORTFOLIO GROWTH AND NEW PRODUCTS. The Company has experienced rapid growth in its loan servicing portfolio. Historically, the statistical incidence of delinquencies and defaults in connection with automobile loans tends to vary over the age of the loan. For example, statistically, loans that are between six and fourteen months old have had a higher likelihood of being delinquent or defaulting than loans with similar credit characteristics that are three months old. Accordingly, to the extent that portfolio growth results in a servicing portfolio containing disproportionately more loans originated within the prior six months, the current and historical delinquency and default rates of loans in the servicing portfolio may understate future delinquency and default rates. Also, there can be no assurance that the Company's transition from centralized to regional servicing and collection will not adversely affect the rate of loan delinquencies and defaults. In addition, to the extent the Company offers new loan products which involve different underwriting policies, the delinquency and default rates of the Company's servicing portfolio may change. The Company has instituted a tiered pricing system and has periodically increased the authorized amount of loans purchased under its Classic program involving borrowers who do not meet all of the underwriting standards in the Company's Premier program and are charged rates of interest higher than those under the Company's Premier program. As a result of the increases in Classic loans as a proportion of the Company's portfolio, there has been an increase in the rates of, and reserves for, delinquency, repossession and loss historically reported by the Company. To estimate future delinquency, repossession and loss experience related to Classic loans, the Company uses a combination of factors, including actual 3 loan performance experience on Premier loans, adjusted for the estimated effects of less favorable credit characteristics, and industry experience on loans with similar credit characteristics. However, there can be no assurance that the Classic loans will perform under varying economic conditions in the manner estimated by the Company. Any increase in delinquency, repossession and loss rates related to Classic loans above the rates estimated by the Company could have a material adverse effect on the Company's business, financial condition and results of operations, as well as its liquidity. Furthermore, because loan default and delinquency rates tend to increase during the six- to fourteen-month period from loan origination, the impact of increases in the Classic program on the Company's overall delinquency, repossession and loss rates will not be fully realized until the amount of Classic loans which have entered this six- to fourteen-month period is proportionate to the amount of Classic loans being purchased by the Company relative to Premier loans. In addition, certain of the Company's loan products which produce higher delinquency, repossession and loss rates than initially expected may continue to have an impact on the Company's overall loan performance, even after being discontinued or modified, until the initially generated loans mature beyond the six- to fourteen-month period. In March 1996, the Company discontinued a Classic loan product directed at first-time credits. In 1996, the Company increased the number of loans purchased to finance the sale of its repossessed inventory in retail markets. Both of these products have experienced significantly higher than expected delinquency, repossession and loss rates, which has increased the risk that the Company may trigger loan performance tests under agreements with FSA or warehouse facilities. The increase in loans purchased under the Classic program has also increased the percentage of loans in the Company's servicing portfolio subject to loan extensions or rewrites, or with obligors under bankruptcy workout arrangements, which arrangements may have the effect of reducing delinquency, but may ultimately result in higher defaults and net losses. POTENTIAL NEGATIVE IMPACT OF COVENANTS UNDER FINANCE AGREEMENTS. Increases in loan delinquency and loss rates with respect to any securitization trust may result in the trust's portfolio exceeding the various pool performance levels established by FSA, thereby restricting or cutting off cash distributions to ORFC from the securitization spread accounts. See "Cash Flow from Securitizations" above. In addition, such increases may cause the Company to exceed certain pool performance tests established in other agreements governing its indebtedness. Under the terms of the indenture governing the Company's outstanding Senior Term Notes due 2000 (the "Senior Term Notes"), if at any month-end the amount of charge-offs (net of recoveries) of automobile loans in the Company's servicing portfolio during the preceding six-month period, times two, exceeds 1.65% of the average servicing portfolio in the preceding seven months ("Portfolio Loss Ratio"), the Company will be prohibited from purchasing new automobile loans in excess of 20% of the Company's Adjusted Consolidated Cash Flow (as defined in the indenture governing the Senior Term Notes) plus proceeds of warehouse facilities and certain other available cash. If the Portfolio Loss Ratio exceeds 1.65% for two consecutive months, then 50% of such Adjusted Consolidated Cash Flow (as defined in the indenture governing the Senior Term Notes) must be used to offer to repurchase Senior Term Notes. Such a restriction on purchases of new automobile loans could have a material adverse effect on the Company's business, financial condition and results of operations. Covenants with respect to a series of Debt Securities may contain similar restrictions or other covenants relating to portfolio performance. In addition, if at the end of any month the Portfolio Loss Ratio exceeds 2.5% or the Company's delinquency level exceeds 3.5%, an event of default will occur under one of the Company's outstanding warehouse facilities. The delinquency level is calculated as a percentage of outstanding principal balance of all automobile loans owned or securitized by the Company as to which a payment is more than thirty days past due. Upon the occurrence of an event of default under such warehouse facility, the lending banks under such facility may accelerate the payment of amounts outstanding thereunder and would have no further obligation to extend additional credit. Furthermore, any such event of default or acceleration may trigger cross-defaults under other outstanding indebtedness of the Company and may result in the acceleration of amounts due thereunder. The increase in Classic loans during 1996, among other things, has increased the risk that the Company may trigger its Portfolio Loss Ratio covenants in the future. 4 ECONOMIC CONDITIONS AUTOMOBILE MARKET CONDITIONS. Periods of economic slowdown or recession, whether general, regional or industry-related, may increase the risk of default on automobile loans and may have an adverse effect on the Company's business, financial condition and results of operations. Such periods also may be accompanied by decreased consumer demand for automobiles, resulting in reduced demand for automobile loans and declining values of automobiles securing outstanding loans, thereby weakening collateral coverage and increasing the possibility of losses in the event of default. The increased proportion of loans under the Company's Classic program has increased the Company's sensitivity to changes in economic conditions. Significant increases in the inventory of used automobiles during recessionary economies may depress the prices at which repossessed automobiles may be sold or delay the timing of such sales. There can be no assurance that the used automobile markets will be adequate for the sale of repossessed automobiles and any material deterioration of such markets could increase the Company's loan losses or reduce recoveries from the sale of repossession inventory. In addition, the Company has channeled a significant portion of its repossession inventory through retail resale markets instead of wholesale markets, including the financing of such retail sales through its Classic program, which had the effect of reducing the Company's loan losses while delaying cash flow recovered from inventory turnover. The Company has experienced significant growth in its repossesion inventory, which increased from $17.7 million at December 31, 1995 to $64.9 million at December 31, 1996. There can be no assurance that the Company will continue to use such retail resale channels, that it will be able to realize such benefits to loan losses in the future or that its inventories will not reach levels at which they cannot readily be liquidated through such channels. Any such event might have an adverse effect on loan loss levels. INTEREST RATES. The Company's profitability may be directly affected by the level of and fluctuations in interest rates, which affect the Company's gross interest rate spread. The Company monitors the interest rate environment and employs prefunding or other hedging strategies designed to mitigate the impact of changes in interest rates on its gross interest rate spread. However, there can be no assurance that the profitability of the Company would not be adversely affected during any period of changes in interest rates. MANAGEMENT OF RAPID GROWTH The rapid growth of the Company's servicing portfolio has resulted in increased demands on the Company's personnel and systems. The Company's ability to support, manage and control continued growth is dependent upon, among other things, its ability to hire, train, supervise and manage its larger workforce. Furthermore, the Company's ability to manage portfolio delinquency and loss rates is dependent upon the maintenance of efficient collection and repossession procedures and adequate staffing therefor. There can be no assurance that the Company will have trained personnel and systems adequate to support such growth. COMPETITION The business of financing automobiles is highly competitive. Existing and potential competitors include well-established financial institutions, such as banks, other automobile finance companies, small loan companies, thrifts, leasing companies and captive finance companies owned by automobile manufacturers, such as General Motors Acceptance Corporation, Chrysler Credit Corp. and Ford Motor Credit Company. Many of these competitors have greater financial, technical and marketing resources than the Company and from time to time offer special buyer incentives in the form of below-market interest rates on certain classes of vehicles. Many of such competitors also have longstanding relationships with automobile dealers and some of such major competitors provide other forms of financing to automobile dealers, including dealer floor plan financing and leasing, which is not provided by the Company. There can be no assurance that the Company will be able to compete successfully with such competitors. 5 REGULATION The Company's business is subject to numerous federal and state consumer protection laws and regulations, which, among other things: (i) require the Company to obtain and maintain certain licenses and qualifications; (ii) limit the interest rates, fees and other charges the Company is allowed to charge; (iii) limit or prescribe certain other terms of the Company's automobile loan contracts; (iv) require specific disclosures; and (v) define the Company's rights to repossess and sell collateral. The Company believes it is in substantial compliance with all such laws and regulations, and that such laws and regulations have had no material effect on the Company's ability to operate its business. Changes in existing laws or regulations, or in the interpretation thereof, or the promulgation of any additional laws or regulations, could have a material adverse effect on the Company's business, financial condition and results of operations and upon its outstanding securities. SHARES ELIGIBLE FOR FUTURE SALES Additional shares of Common Stock may be issued upon the exercise of outstanding stock options, the conversion of outstanding convertible preferred stock and the exercise of outstanding warrants. Certain holders thereof have registration rights with respect to such shares. The Company has registered pursuant to such rights the sale from time to time of up to 3,871,364 shares of Common Stock when, as and if issued upon the exercise of outstanding warrants. Such issuances, or the resale of the Common Stock so acquired, could have an adverse effect on the market price of the Company's Common Stock. UNDESIGNATED SHARES; ANTI-TAKEOVER CONSIDERATIONS The authorized and unissued stock of the Company, other than shares reserved for issuance pursuant to options and warrants, consists of undesignated shares. The Board of Directors, without any action by the Company's shareholders, is authorized to designate and issue the undesignated shares in such classes or series as it deems appropriate and to establish the rights, preferences and privileges of such shares, including dividend, liquidation and voting rights. The Company has adopted a shareholder rights plan to deter a hostile takeover. Further, certain provisions of the Minnesota Business Corporation Act may operate to discourage a negotiated acquisition or unsolicited takeover of the Company. See "Description of Common Stock." Each or any of the foregoing could have the effect of entrenching the Company's directors, impeding or deterring an unsolicited tender offer or takeover proposal regarding the Company and thereby depriving the then current shareholders of the ability to sell their shares at a premium over the market price, or otherwise adversely affecting the voting power, dividend, liquidation and other rights of holders of Common Stock. 6 -----END PRIVACY-ENHANCED MESSAGE-----