-----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, KgXvWp5b267bToJ7/32n2h4FLRSx36Rf0F31BWynLHD5Dir66G/ko24EvmgOgfHC /14UfixNeE+dz2/xkTJnEw== 0000950144-02-001517.txt : 20020414 0000950144-02-001517.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950144-02-001517 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OAKWOOD HOMES CORP CENTRAL INDEX KEY: 0000073609 STANDARD INDUSTRIAL CLASSIFICATION: MOBILE HOMES [2451] IRS NUMBER: 560985879 STATE OF INCORPORATION: NC FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07444 FILM NUMBER: 02548738 BUSINESS ADDRESS: STREET 1: 7800 MCCLOUD RD CITY: GREENSBORO STATE: NC ZIP: 27409-9634 BUSINESS PHONE: 9198552400 MAIL ADDRESS: STREET 1: 7800 MCCLOUD RD CITY: GREENSBORO STATE: NC ZIP: 27409-9634 10-Q 1 g74241e10-q.txt OAKWOOD HOMES CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2001 or ( ) Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to ------- ------- Commission File Number: 1-7444 OAKWOOD HOMES CORPORATION ------------------------- (Exact Name of Registrant as Specified in Its Charter) North Carolina 56-0985879 -------------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 7800 McCloud Road, Greensboro, North Carolina 27409-9634 -------------------------------------------------------- (Address of Principal Executive Offices) Post Office Box 27081, Greensboro, North Carolina 27425-7081 ------------------------------------------------------------ (Mailing Address of Principal Executive Offices) (336) 664-2400 -------------- (Registrant's Telephone Number, Including Area Code) N/A --- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 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 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 the number of shares outstanding of each of the issuer's classes of Common Stock as of January 31, 2002. Common Stock, Par Value $.50 Per Share . . . . . . . 9,530,095 PART I. FINANCIAL INFORMATION Item 1. Financial Statements The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. OAKWOOD HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) (in thousands except per share data)
Three months ended December 31, ------------------------- 2001 2000 --------- --------- Revenues Net sales $ 228,979 $ 278,344 Financial services Consumer finance, net of impairment and valuation provisions 23,250 584 Insurance 7,626 10,079 --------- --------- 30,876 10,663 Other income 2,149 2,347 --------- --------- Total revenues 262,004 291,354 --------- --------- Costs and expenses Cost of sales 176,616 219,271 Selling, general and administrative expenses 64,604 80,183 Financial services operating expenses Consumer finance 13,341 9,271 Insurance 3,049 3,060 --------- --------- 16,390 12,331 Reversal of restructuring charges -- -- Provision for losses on credit sales 11,405 750 Interest expense 9,467 14,596 --------- --------- Total costs and expenses 278,482 327,131 --------- --------- Loss before income taxes and cumulative effect of accounting change (16,478) (35,777) Provision for income taxes (6,500) -- --------- --------- Loss before cumulative effect of accounting change (9,978) (35,777) --------- --------- Cumulative effect of accounting change, net of income taxes -- (14,590) --------- --------- Net loss $ (9,978) $ (50,367) ========= ========= Loss per share: Loss before cumulative effect of accounting change Basic $ (1.05) $ (3.81) Diluted $ (1.05) $ (3.81) Net loss Basic $ (1.05) $ (5.36) Diluted $ (1.05) $ (5.36) Dividends per share $ -- $ -- Weighted average number of common shares outstanding Basic 9,463 9,401 Diluted 9,463 9,401
See accompanying notes to the consolidated financial statements. OAKWOOD HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (in thousands)
Three months ended December 31, ---------------------- 2001 2000 ------- -------- Net loss $(9,978) $(50,367) Unrealized gains (losses) on securities available for sale, net of tax 5,044 (713) ------- -------- Comprehensive loss $(4,934) $(51,080) ======= ========
See accompanying notes to the consolidated financial statements. OAKWOOD HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) (in thousands except share and per share data)
December 31, September 30, ASSETS 2001 2001 --------- --------- Cash and cash equivalents $ 20,027 $ 44,246 Loans and investments 150,068 199,403 Other receivables 127,845 124,807 Inventories Manufactured homes 166,043 184,989 Work-in-process, materials and supplies 27,962 30,813 Land/homes under development 12,377 12,770 --------- --------- 206,382 228,572 Properties and facilities 202,907 208,798 Other assets 120,991 116,464 --------- --------- $ 828,220 $ 922,290 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Short-term borrowings $ -- $ 47,500 Notes and bonds payable 323,107 323,120 Accounts payable and accrued liabilities 208,037 250,658 Insurance reserves and unearned premiums 15,996 17,322 Deferred income taxes 8,885 6,169 Other long-term obligations 38,293 38,750 Commitments and contingencies (Note 8) Shareholders' equity Common stock, $.50 par value; 100,000,000 shares authorized; 9,530,000 and 9,528,000 shares issued and outstanding 4,765 4,764 Additional paid-in capital 199,802 199,761 Retained earnings 18,518 28,497 --------- --------- 223,085 233,022 Accumulated other comprehensive income, net of income taxes of $6,497 and $3,780 10,956 5,912 Unearned compensation (139) (163) --------- --------- 233,902 238,771 --------- --------- $ 828,220 $ 922,290 ========= =========
See accompanying notes to the consolidated financial statements. OAKWOOD HOMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (in thousands)
Three months December 31, ------------------------ 2001 2000 --------- --------- Operating activities Net loss $ (9,978) $ (50,367) Adjustments to reconcile net loss to cash provided (used) by operating activities Cumulative effect of accounting change -- 14,590 Depreciation and amortization 8,346 15,414 Deferred income taxes -- -- Provision for losses on credit sales, net of charge-offs 2,906 (786) (Gains) losses on securities sold and loans sold or held for sale (5,258) 3,679 Impairment and valuation provisions (55) 9,656 Excess of cash received over REMIC residual income recognized (income recognized over cash received) 826 (568) Reversal of restructuring charges -- -- Other (2,276) (689) Changes in assets and liabilities Other receivables (2,546) 22,673 Inventories 22,190 51,522 Deferred insurance policy acquisition costs 409 (4,011) Other assets (8,658) (738) Accounts payable and accrued liabilities (39,553) (52,221) Insurance reserves and unearned premiums (1,326) (5,047) Other long-term obligations (402) (458) --------- --------- Cash provided (used) by operations (35,375) 2,649 Loans originated (167,803) (257,448) Sale of loans 223,880 205,972 Principal receipts on loans 3,760 5,102 --------- --------- Cash provided (used) by operating activities 24,462 (43,725) --------- --------- Investing activities Acquisition of properties and facilities (670) (3,222) Other -- (162) --------- --------- Cash used by investing activities (670) (3,384) --------- --------- Financing activities Net borrowings (repayments) on short-term credit facilities (47,500) 59,491 Payments on notes and bonds (511) (2,587) --------- --------- Cash provided (used) by financing activities (48,011) 56,904 --------- --------- Net increase (decrease) in cash and cash equivalents (24,219) 9,795 Cash and cash equivalents Beginning of period 44,246 22,523 --------- --------- End of period $ 20,027 $ 32,318 ========= =========
See accompanying notes to the consolidated financial statements. OAKWOOD HOMES CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) 1. The unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results of operations for the periods presented. These interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K. Results of operations for any interim period are not necessarily indicative of results to be expected for a full year. Unless otherwise indicated, all references to annual periods refer to fiscal years ended September 30. 2. The components of loans and investments are as follows:
December 31, September 30, 2001 2001 --------- --------- (in thousands) Loans held for sale $ 106,995 $ 163,085 Loans held for investment 3,154 2,974 Less: reserve for uncollectible loans receivable (6,126) (3,231) --------- --------- Total loans receivable 104,023 162,828 --------- --------- Retained interests in REMIC securitizations available for sale, exclusive of loan servicing assets and liabilities, at fair value Regular interests 10,193 7,619 Residual interests 35,852 28,956 --------- --------- Total retained REMIC interests, at fair value (amortized cost of $29,071 and $26,883) 46,045 36,575 --------- --------- $ 150,068 $ 199,403 ========= =========
In October 2000 the Emerging Issues Task Force of the Financial Accounting Standards Board (the "EITF") issued EITF 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets," which sets forth new accounting requirements for the recognition of impairment on REMIC interests arising from securitizations. Under the prior accounting rule, declines in the value of retained REMIC interests were recognized in earnings when the present value of estimated cash flows discounted at a risk-free rate using current assumptions was less than the carrying value of the retained interest. Under the new accounting rule, declines in value are recognized when both of the following occur: the fair value of the retained interest is less than its carrying value and the timing and/or amount of cash expected to be received from the retained interest has changed adversely from the previous valuation which determined the carrying value of the retained interest. When both of these circumstances occur, the carrying value of the retained interest is reduced to its estimated fair value. The Company adopted EITF 99-20 as required on April 1, 2001 and accordingly recorded a cumulative effect of an accounting change of $2.3 million as of that date. 3. The Company's retained interests in securitizations are set forth below.
December 31, September 30, 2001 2001 ------- ------- (in thousands) Regular interests $10,193 $ 7,619 Residual interests 35,852 28,956 Net servicing liabilities 17,341 19,643 Guarantee liabilities 36,050 36,180
The Company estimates the fair value of the retained interests by determining the present value of the associated expected future cash flows using modeling techniques that incorporate estimates of key assumptions which include, but may not be limited to, prepayment speeds, net credit losses and interest rates used to discount cash flows. The valuation of retained interests is affected not only by the projected level of prepayments of principal and net credit losses, but also by the projected timing of such prepayments and net credit losses. Should such timing differ materially from the Company's projections, it could have a material effect on the valuation of the Company's retained interests. Additionally, such valuation is determined by discounting cash flows over the entire expected life of the loans sold. The key economic assumptions used in measuring the initial retained interests resulting from securitizations completed in the quarter ended December 31, 2001 were as follows:
December 31, 2001 ------------ Approximate weighted average life of loans (in years) 5.1 Approximate remaining assumed nondiscounted credit losses as a percentage of unpaid principal balance of loans 11.2% Estimated actual plus projected credit losses as a percentage of original principal balance of loans 11.2% Approximate weighted average interest rate used to discount assumed residual cash flows 30.0% Approximate assumed weighted average constant prepayment rate as a percentage of unpaid principal balance 15.7%
The following table sets forth certain data with respect to securitized loans in which the Company retains an interest, and with respect to the key economic assumptions used by the Company in estimating the fair value of such retained interests:
December 31, September 30, 2001 2001 ------------ ------------- (in thousands) Aggregate unpaid principal balance of loans $ 4,892,417 $ 4,854,849 Weighted average interest rate of loans at period end 11.2% 11.0% Approximate assumed weighted average constant prepayment rate as a percentage of unpaid principal balance of loans 16.6% 16.8% Approximate remaining assumed nondiscounted credit losses as a percentage of unpaid principal balance of loans 11.9% 12.4% Approximate weighted average interest rate used to discount assumed residual cash flows 18.2% 19.2% Interest rate used to discount assumed servicing asset cash flows 15.0% 15.0% Interest rate used to discount assumed servicing liability cash flows 5.0% 4.6%
The foregoing data and assumptions may not be comparable because of changes in pool demographics, such as average age of loans and the interaction of assumptions. All data is based on weighted averages using unpaid or original principal balances of loans. The following table summarizes certain cash flows received from and paid to the securitization trusts during the quarter ended December 31, 2001:
December 31, 2001 ------------- (in thousands) Proceeds from new securitizations $223,880 Servicing fees received 12,044 Net advances of principal and interest of trusts 11,923 Guarantee payments 554 Cash flow received on retained regular interests 360 Cash flow received on retained residual interests 2,374
Loans serviced by the Company and related loans past due 90 days or more at December 31, 2001, are set forth below:
Total Amount Principal 90 days or more Amount Past Due ---------- --------------- (in thousands) Loans held for sale $ 103,113 $ 6,513 Securitized loans 4,892,417 371,024
4. The following table sets forth the activity by quarter in each component of the Company's restructuring reserve (in thousands):
Severance Plant, sales and other center and termination office Asset charges closings write-downs Total --------------------------------------------------------------- Original provision $ 7,350 $ 7,384 $ 11,192 $ 25,926 Payments and balance sheet charges (1,707) (141) (11,192) (13,040) --------------------------------------------------------------- Balance 9/30/99 5,643 7,243 -- 12,886 --------------------------------------------------------------- Payments and balance sheet charges (810) (2,750) -- (3,560) --------------------------------------------------------------- Balance 12/31/99 4,833 4,493 -- 9,326 --------------------------------------------------------------- Payments and balance sheet charges (550) (1,183) -- (1,733) Reversal of restructuring charges (2,912) (1,439) -- (4,351) --------------------------------------------------------------- Balance 3/31/00 1,371 1,871 -- 3,242 --------------------------------------------------------------- Payments and balance sheet charges (81) (685) 378 (388) Reversal of restructuring charges (900) (2) (378) (1,280) --------------------------------------------------------------- Balance 6/30/00 390 1,184 -- 1,574 --------------------------------------------------------------- Additional provision 1,974 1,780 15 3,769 Payments and balance sheet charges (1,505) (1,277) (15) (2,797) Reversal of restructuring charges (100) (635) -- (735) --------------------------------------------------------------- Balance 9/30/00 759 1,052 -- 1,811 --------------------------------------------------------------- Payments and balance sheet charges (519) (109) -- (628) --------------------------------------------------------------- Balance 12/31/00 240 943 -- 1,183 --------------------------------------------------------------- Payments and balance sheet charges (114) (31) -- (145) --------------------------------------------------------------- Balance 3/31/01 126 912 -- 1,038 --------------------------------------------------------------- Payments and balance sheet charges (55) (33) -- (88) --------------------------------------------------------------- Balance 6/30/01 71 879 -- 950 --------------------------------------------------------------- Additional provision 681 4,702 12,460 17,843 Payments and balance sheet charges (41) (1,339) (12,460) (13,840) Reversal of 1999 restructuring charges (30) (45) -- (75) --------------------------------------------------------------- Balance 9/30/01 681 4,197 -- 4,878 --------------------------------------------------------------- Payments and balance sheet charges (145) (743) -- (888) --------------------------------------------------------------- Balance 12/31/01 $ 536 $ 3,454 $ -- $ 3,990 ---------------------------------------------------------------
During the fourth quarter of 1999 the Company recorded restructuring charges of approximately $25.9 million, related primarily to the closing of four manufacturing lines, the temporary idling of five others and the closing of approximately 40 sales centers. The charges in 1999 include severance and other termination costs related to approximately 2,150 employees primarily in manufacturing, retail and finance operations, costs associated with closing plants and sales centers, and asset writedowns. During 2000 the Company reversed into income $6.4 million of charges initially recorded in 1999. Approximately $2.9 million of the reversal related to the Company's legal determination that it was not required to pay severance amounts to certain terminated employees under the Worker Adjustment and Retraining Notification Act ("WARN"). Upon the expiration of a six-month waiting period specified by WARN and the Company's final calculation of the number of affected employees in relation to its workforce at the time of the restructuring announcement, the Company determined that it was not required to pay amounts previously accrued. During 2000 the Company also reevaluated its restructuring plans and determined that the losses associated with the closing of retail sales centers, the idling or closing of manufacturing plants, the disposition of certain assets and legal costs were less than anticipated and $3.5 million of the charges was reversed. During 2000 the Company recorded an additional $3.8 million charge, primarily related to severance costs associated with a reduction in headcount of 250 people primarily in the corporate, finance and manufacturing operations area, and the closure of offices. During the fourth quarter of 2001 the Company recorded restructuring charges of approximately $17.8 million, primarily related to the closing of approximately 90 underperforming retail sales centers, a majority of which were located in the South, in areas where the Company has experienced poor operating results as well as poor credit performance. At December 31, 2001 only seven of these underperforming sales centers remained open while 23 were converted to centers that exclusively market repossessed inventory. The remainder were either sold or closed during the quarter ended December 31, 2001. The Company expects to complete these restructuring activities during the second quarter of 2002. Approximately $50,000 of the $4.0 million remaining in the restructuring reserve at December 31, 2001 related to provisions established prior to the fourth quarter of 2001. During the execution of the Company's restructuring plans, approximately 2,800 employees were affected, of which 2,150 and 250 were terminated during the fourth quarters of 1999 and 2000, respectively. The Company terminated approximately 400 employees as part of its fourth quarter 2001 plan. 5. The following table displays the derivation of the weighted average number of shares outstanding used in the computation of basic and diluted earnings per share ("EPS"):
Three months ended December 31, ------------------------ 2001 2000 ------- -------- (in thousands, except per share data) Numerator in earnings (loss) per share calculation: Loss before cumulative effect of accounting change $(9,978) $(35,777) Net loss $(9,978) $(50,367) Denominator in earnings (loss) per share calculation: Weighted average number of common shares outstanding 9,463 9,401 Unearned shares -- -- ------- -------- Denominator for basic EPS 9,463 9,401 Dilutive effect of stock options and restricted shares computed using the treasury stock method -- -- ------- -------- Denominator for diluted EPS 9,463 9,401 ======= ======== Loss per share: Loss before cumulative effect of accounting change Basic $ (1.05) $ (3.81) ======= ======== Diluted $ (1.05) $ (3.81) ======= ======== Net loss Basic $ (1.05) $ (5.36) ======= ======== Diluted $ (1.05) $ (5.36) ======= ========
Stock options to purchase 641,291 and 851,741 shares of common stock and 36,534 and 117,900 unearned restricted shares at December 31, 2001 and 2000, respectively, were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive. 6. During the first quarter of fiscal 2002, the Company formed a wholly-owned qualifying special purpose subsidiary, Oakwood Advance Receivables Company, LLC ("OAR"), to provide up to $50 million of revolving funding for qualifying servicing advance receivables. The Company sells qualifying servicing advance receivables to OAR, which funds its purchases of receivables using the proceeds of debt obligations issued by OAR to third party investors. OAR collects the receivables it purchases from the Company, and such proceeds are available to purchase additional receivables from the Company through August 2003. At December 31, 2001, OAR had approximately $38.6 million of cash available to purchase additional qualifying servicing advance receivables from the Company. Conveyances of receivables to OAR are accounted for as sales under Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - A Replacement of FASB Statement No. 125" ("FAS 140"). 7. The estimated principal payments under notes and bonds payable, assuming the reset debentures are fully redeemed by the holders on the June 1, 2002 redemption date, are $16.7 million, $0.9 million, $125.4 million, $0.8 million, $0.9 million for the 12 months ended December 31, 2002, 2003, 2004, 2005, and 2006, respectively and the balance is payable thereafter. 8. The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. In management's opinion, the ultimate resolution of these matters is not expected to have a material adverse effect on the Company's results of operations, financial condition or cash flows. The Company is contingently liable as guarantor of loans sold to third parties on a recourse basis. The amount of this contingent liability was approximately $16 million at December 31, 2001. The Company is also contingently liable as guarantor on subordinated securities issued by REMIC trusts in the aggregate principal amount of $240 million at December 31, 2001. The Company is also contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for retailers of their products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to retailers in the event of default on payments by the retailer. The risk of loss under these agreements is spread over the numerous retailers and is further reduced by the resale value of repurchased homes. The Company's estimated potential obligations under such repurchase agreements approximated $105 million at December 31, 2001. Losses under these repurchase agreements have not been significant. 9. The Company operates in four major business segments: retail, manufacturing, consumer finance and insurance. The following table summarizes information with respect to the Company's business segments:
Three months ended December 31, --------------------------- (in thousands) 2001 2000 --------- --------- Revenues Retail $ 133,475 $ 197,914 Manufacturing 154,649 156,348 Consumer finance 23,250 584 Insurance 10,890 12,767 Eliminations/other (60,260) (76,259) --------- --------- $ 262,004 $ 291,354 ========= ========= Income (loss) before interest expense, investment income and income taxes Retail $ (11,050) $ (17,813) Manufacturing 4,829 1,834 Consumer finance (1,496) (9,437) Insurance 4,577 7,019 Eliminations/other (3,955) (2,920) --------- --------- (7,095) (21,317) Interest expense (9,467) (14,596) Investment income 84 136 --------- --------- Income (loss) before income taxes and cumulative effect of accounting change $ (16,478) $ (35,777) ========= ========= Depreciation and amortization Retail $ 2,297 $ 3,300 Manufacturing 3,832 4,322 Consumer finance 702 3,411 Eliminations/other 1,515 4,381 --------- --------- $ 8,346 $ 15,414 ========= ========= Capital expenditures Retail $ 20 $ 820 Manufacturing 405 865 Consumer finance 82 944 Eliminations/other 163 593 --------- --------- $ 670 $ 3,222 ========= =========
December 31, September 30, 2001 2001 --------- --------- Identifiable assets Retail $ 457,615 $ 478,976 Manufacturing 247,197 258,498 Consumer finance 304,198 384,244 Insurance 123,452 123,405 Eliminations/other (304,242) (322,833) --------- --------- $ 828,220 $ 922,290 ========= =========
10. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("FAS 141") and Statement No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS 141 mandates the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for the recognition of intangible assets separately from goodwill. FAS 142 addresses the accounting for goodwill and intangible assets subsequent to their acquisition. The most significant changes made by FAS 142 are that goodwill and indefinite-lived intangible assets will no longer be amortized and will be tested for impairment at least annually. The Company is required to adopt FAS 142 at the beginning of 2003. The Company has not yet determined the impact that this statement could have on its financial position or results of operations. However, the application of the non-amortization provisions of FAS 142 would be expected to result in a decrease of pre-tax loss in 2002. For the quarter ended December 31, 2001 amortization of intangible assets was approximately $1.2 million. 11. On June 18, 2001, the Company effected a one-for-five reverse stock split. All shares and per share amounts have been adjusted retroactively to give effect to the reverse split. 12. For the quarters ended December 31, 2001 and 2000 the Company reported net losses of $10.0 million and $50.4 million, respectively. These financial results reflect business conditions within the manufactured housing industry. The Company is currently operating in a highly competitive environment caused principally by the industry's aggressive expansion in the retail channel, excessive amounts of finished goods inventory and a general reduction in the availability of financing at both the wholesale and retail levels. A decline in overall economic conditions has also contributed to a difficult environment. The industry estimates that shipments of manufactured homes from production facilities declined by approximately 28% and 22% during calendar years 2000 and 2001, respectively. The Company began to experience the effect of these cyclical industry factors during late fiscal 1999 and took steps to begin to lower inventory levels, reduce operating expenses and maximize cash flow. These efforts have continued through the first quarter of fiscal 2002 as the Company maintained its focus on areas considered to be within its span of control, principally cost control and inventory management. Many of the actions taken, most notably plant and sales center closings, curtailed production schedules and competitive pricing to effect a $237.2 million reduction in inventories since September 1999, negatively affected the Company's reported earnings for fiscal years 2000 and 2001 and the first quarter of fiscal 2002. Management believes that, unless business conditions improve, the Company is likely to incur a loss in fiscal 2002; however, it plans to continue to manage operations to generate positive cash flow. The Company believes that its operating cash flow, coupled with its continued access to the asset-backed securities market and borrowings under its credit facilities, which are described below, will provide sufficient liquidity to meet obligations, including potential repayment of the 8% reset debentures, and execute its business plan during the remainder of fiscal 2002. In the event of further deterioration in market conditions, the Company would take additional steps to protect liquidity and manage cash flow. Among other things, these actions might include further production curtailments, closing of additional retail sales centers or the selective sale of operational assets. The Company operates its plants to support its captive retail sales centers and its independent retailer base. The Company has, and will continue to adjust production capacity in line with demand, producing at a rate that will allow the Company to lower its inventories. At December 31, 2001, the Company was operating approximately 20 plants, though many were operating at reduced production schedules. Should market conditions worsen from those anticipated, the Company will continue to curtail production by lowering production speed or idling additional production facilities. The Company's primary sources of liquidity include cash generated by operations, borrowing availability under its three credit facilities and its securitization program through which loans are sold into the asset-backed securities market. During 2001 the Company generated $47.5 million of cash from operating activities, principally as a result of a $94.4 million reduction in its inventories and the sale of substantially all subordinated asset-backed securities rated below BBB previously retained by the Company from prior securitizations. The sale of these subordinated securities was finalized during the fourth quarter of 2001 and generated $72.9 million of cash. Subsequent to the sale of the retained subordinated securities, the Company retired its $75 million revolving credit facility, which was scheduled to mature in October 2001. In connection with the retirement, approximately $9.0 million of cash held by the lenders in a cash collateral account was returned to the Company. The net cash proceeds from the sale of the retained subordinated securities and the release of the cash collateral more than offset the $75 million previously available under the revolving credit facility. The Company currently has in place three credit facilities that it believes are adequate to meet liquidity needs during fiscal 2002. During the second quarter of 2001, a newly formed, special purpose entity of the Company entered into a three-year, $200 million loan purchase facility with a financial institution. It provides for funding of up to 81% of qualifying loan principal balances held for sale. The new facility replaced the Company's $250 million facility with a commercial paper issuer, which was scheduled to expire in October 2001. Under the new facility, the Company issued to a sister company of the financial institution a warrant valued at $11.0 million to acquire approximately 1.9 million shares of the Company's common stock with an exercise price of approximately $9.84 per share. The warrant, which is immediately exercisable, expires in February 2009. During the first quarter of fiscal 2002, the Company formed a wholly-owned qualifying special purpose subsidiary, Oakwood Advance Receivables Company, LLC ("OAR"), to provide up to $50 million of revolving funding for qualifying servicing advance receivables. The Company sells qualifying servicing advance receivables to OAR, which funds its purchases of receivables using the proceeds of debt obligations issued by OAR to third party investors. OAR collects the receivables it purchases from the Company, and such proceeds are available to purchase additional receivables from the Company through August 2003. At December 31, 2001, OAR had approximately $38.6 million of cash available to purchase additional qualifying servicing advance receivables from the Company. Conveyances of receivables to OAR are accounted for as sales under FAS 140. Subsequent to December 31, 2001, the Company closed a new $55 million revolving credit facility. The facility matures in January 2007 and is collateralized by substantially all assets of the Company excluding raw materials inventory and loans held for sale. The primary purposes of the facility are to support outstanding letters of credit of approximately $39 million and to provide additional cash borrowing capacity. The completion of this facility also freed up approximately $12 million of cash which was used to secure letters of credit. The agreement contains financial covenants which, among other things, specify minimum levels of tangible net worth and earnings before interest, taxes and depreciation and amortization, and limit capital expenditures. Borrowings outstanding under the facility will bear interest at the greater of prime plus 1.50% or 7%. The Company continues to generate liquidity through its securitization program. The retail financing of sales of the Company's products is an integral part of the Company's integration strategy. Such financing consumes substantial amounts of capital, which the Company has obtained principally by regularly securitizing such loans through the asset-backed securities market. Should the Company's ability to access the asset-backed securities market become impaired, the Company would be required to seek additional sources of funding for its finance business. Such sources might include, but would not be limited to, the sale of whole loans to unrelated third parties and the increased utilization of FHA financing. The Company's inability to find alternative sources of funding could have an adverse impact on the Company's liquidity and operations. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Three months ended December 31, 2001 compared to three months ended December 31, 2000 The following table summarizes certain statistics for the quarters ended December 31, 2001 and 2000:
2001 2000 ------- ------- Retail sales (in millions) $ 131.7 $ 196.0 Wholesale sales (in millions) $ 97.3 $ 82.3 Total sales (in millions) $ 229.0 $ 278.3 Gross profit % - integrated operations 28.9% 25.0% Gross profit % - wholesale operations 14.7% 12.0% New single-section homes sold - retail 590 1,257 New multi-section homes sold - retail 1,856 2,778 Used homes sold - retail 235 310 New single-section homes sold - wholesale 689 428 New multi-section homes sold - wholesale 2,166 1,852 Average new single-section sales price - retail $31,600 $30,300 Average new multi-section sales price - retail $59,000 $55,400 Average new single-section sales price - wholesale $19,100 $22,300 Average new multi-section sales price - wholesale $38,800 $39,000 Weighted average retail sales centers open during the period 258 377
Net sales The Company's sales volume continued to be adversely affected by extremely competitive industry conditions, fewer promotional programs and a reduction in the number of open sales centers during the quarter ended December 31, 2001. Retail sales dollar volume decreased 33%, reflecting a 39% decrease in new unit volume. This decrease was partially offset by increases of 4% and 6% in the average new unit sales prices of single-section and multi-section homes, respectively, and a shift in product mix toward multi-section homes, which have higher average selling prices than single-section homes. Multi-section homes accounted for 76% of retail new unit sales compared to 69% in the quarter ended December 31, 2000. Average retail sales prices on single-section and multi-section homes increased as a result of fewer promotional programs targeted at selling older inventory models in the quarter ended December 31, 2001 compared to the quarter ended December 31, 2000. During the quarter ended December 31, 2001 the Company opened no new sales centers compared to one sales center during the quarter ended December 31, 2000. The Company closed 45 underperforming sales centers during the quarter ended December 31, 2001 and converted three sales centers to centers that exclusively market repossessed inventory. The closure or conversion of sales centers resulted principally from the Company's restructuring plan, which was announced during the fourth quarter of 2001 and is described below. During the quarter ended December 31, 2000 the Company closed three sales centers. At December 31, 2001 the Company had 251 retail sales centers open compared to 376 open at December 31, 2000. Total new retail sales dollars at sales centers open more than one year decreased 23% during the quarter ended December 31, 2001. Wholesale sales represent sales of manufactured homes to independent retailers. Wholesale sales dollar volume increased 18%, reflecting a 25% increase in unit volume. This increase was partially offset by a decrease in the average new unit sales prices of single-section and multi-section homes of 14% and 1%, respectively. Gross profit Gross profit margin - integrated operations reflects gross profit earned on all sales at retail as well as the manufacturing gross profit on retail sales of units manufactured by the Company. Gross profit margin - integrated operations increased from 25.0% in the quarter ended December 31, 2000 to 28.9% in the quarter ended December 31, 2001 primarily as a result of improved manufacturing efficiencies and reduced promotional pricing associated with the Company's planned inventory reduction during the quarter ended December 31, 2001. Gross profit margin - wholesale operations increased from 12.0% in the quarter ended December 31, 2000 to 14.7% in the quarter ended December 31, 2001 as a result of improved manufacturing efficiencies experienced during the quarter ended December 31, 2001. Consumer finance revenues Consumer finance revenues are summarized as follows:
Three months ended December 31, ------------------------- (in thousands) 2001 2000 -------- -------- Interest income $ 3,381 $ 10,176 Servicing fees 12,440 2,306 REMIC residual income 1,547 1,086 Gains (losses) on securities sold and loans sold or held for sale: Gain (loss) on sale of securities and loans 5,258 (940) Valuation (provision) reversal on loans held for sale -- (2,739) -------- -------- 5,258 (3,679) -------- -------- Impairment and valuation (provisions) reversal 55 (9,656) Other 569 351 -------- -------- $ 23,250 $ 584 ======== ========
The decrease in interest income reflects decreased income on retained regular REMIC interests as a result of the sale of the majority of these assets during the fourth quarter of fiscal 2001, lower average outstanding balances of loans held for sale in the warehouse prior to securitization and lower average interest rates on loans held for sale in the warehouse prior to securitization. The lower average warehouse balances resulted from a decrease in loan originations and the timing of securitizations. Loan servicing fees, which are reported net of amortization of servicing assets and liabilities, increased as a result of higher overall servicing cash flows from the Company's securitizations. The timing and amount of servicing cash flows may vary based on the performance of loans in the securitizations and the number of repossessions liquidated. In some instances, however, certain securitizations did not generate sufficient cash flows to enable the Company to receive its full servicing fee. The Company has not recorded revenues or receivables for these shortfalls because the Company's right to receive servicing fees generally is subordinate to the holders of regular REMIC interests. The increase in REMIC residual income primarily reflects increased cash flows from certain retained residual interests as a result of decreased liquidations of repossessions in certain securitizations during the quarter. The gain on sale of securities and loans during the quarter ended December 31, 2001 reflects the securitization of $172 million of installment sale contracts and mortgage loans. The gain resulted principally from an increase in the spread between the yield on loans originated by the Company and the cost of funds obtained when the loans were securitized. Impairment and valuation provisions are summarized as follows:
Three months ended December 31, ----------------------- (in thousands) 2001 2000 ------- ------ Impairment writedowns of residual REMIC interests $ -- $ 144 Valuation allowances on servicing contracts -- 9,512 Additional provision for (amortization of) potential guarantee obligations on REMIC securities sold (55) -- ------- ------ $ (55) $9,656 ======= ======
The prior year charges generally resulted from changes in assumptions of credit losses on securitized loans. Management continues to monitor performance of the loan pools and underlying collateral and adjust the carrying value of assets and liabilities arising from loan securitizations as appropriate. Changes in loan pool performance and market conditions, such as general economic conditions and higher industry inventory levels of repossessed homes, may affect recovery rates and default rates and result in future impairment and valuation provisions. For the quarter ended December 31, 2001 total credit losses on loans originated by the Company, including losses relating to assets securitized by the Company, loans held for investment, loans held for sale and loans sold with full or partial recourse, amounted to approximately 1.63% on an annualized basis of the average principal balance of the related loans, compared to approximately 1.88% on an annualized basis one year ago. Because losses on repossessions are reflected in the loss ratio principally in the period during which the repossessed property is disposed of, fluctuations in the number of repossessed properties disposed of from period to period may cause variations in the charge-off ratio. At December 31, 2001 the Company had a total of 4,108 unsold properties in repossession or foreclosure (approximately 3.24% of the total number of Oakwood originated serviced assets) compared to 3,687, 3,287 and 2,603 at September 30, 2001, December 31, 2000 and September 30, 2000, respectively (approximately 2.83%, 2.57% and 2.06%, respectively, of the total number of Oakwood originated serviced assets). The Company believes that its historical loss experience has been favorably affected by its ability to resell repossessed units through its retail sales centers. In an effort to reduce the cost of repossession and foreclosure, the Company has also increasingly made use of its loan assumption program as an alternative to foreclosure. Under this program, the Company obtains the cooperation of the defaulting obligor and endeavors to find a new buyer that meets the then-current underwriting standards for repossessed homes who is willing to assume the defaulting obligor's loan. The costs of this program for the quarter ended December 31, 2001 were $10.2 million and are reflected in provision for losses on credit sales. For the quarter ended December 31, 2000, the costs associated with the loan assumption program were insignificant. At December 31, 2001 and 2000 the Company had 2,626 and 143 loans, respectively, which were pending assumption under this program. At December 31, 2001 the delinquency rate on Company originated loans was 6.7%, compared to 5.8% at December 31, 2000. Higher delinquency levels may result in increased repossessions and loan assumptions and related future impairment charges and valuation provisions. Insurance revenues Insurance revenues from the Company's captive reinsurance business decreased 24.3% to $7.6 million in the quarter ended December 31, 2001 from $10.1 million in the quarter ended December 31, 2000. A substantial portion of insurance revenues is derived from insurance policies sold in connection with new home sales by the Company's retail operations. If the adverse retail sales trends experienced in 2001 and the first quarter of fiscal 2002 continue, insurance revenues may continue to decline in future periods. Effective June 1, 2000 the Company entered into a quota share agreement that management believes reduces the volatility of the Company's earnings by lowering its underwriting exposure to natural disasters such as hurricanes and floods. The agreement reduced the levels of credit support, which take the form of letters of credit and/or cash, to secure the reinsurance subsidiary's obligations to pay claims and to meet regulatory capital requirements. Under this arrangement, which covers physical damage policies, the Company retro-cedes 50% of the Company's physical damage premiums and losses on an ongoing basis. In return, the Company receives a nonrefundable commission with the potential to receive an incremental commission based on favorable loss experience. As a result of the Company's favorable loss experience since the inception of the quota share agreement, the Company recognized incremental commissions of $1.7 million during the year ended September 30, 2001. In order to further reduce volatility and the required levels of credit support, effective August 1, 2000 the Company entered into a commission-based arrangement for its extended service contract line of business. Policies in force on August 1, 2000 will continue to earn out over the policy term, while the Company earns a commission on all business written after that date. Effective March 1, 2001 the Company entered into an agreement which amended the basis upon which credit life premiums are ceded. Under the terms of the agreement, all unearned credit life premiums and loss reserves were transferred back to the ceding company. Remaining premiums for policies in force at that date and premiums for new policies thereafter are ceded on an earned basis, rather than on a written basis. This agreement reduced the level of credit support required to maintain regulatory compliance. Selling, general and administrative expenses Selling, general and administrative expenses decreased $15.6 million, or 19%, during the quarter ended December 31, 2001 compared to the prior year. As a percentage of net sales, selling, general and administrative expenses decreased to 28.2% in the quarter ended December 31, 2001 from 28.8% in the quarter ended December 31, 2000. The decrease is primarily due to ongoing cost containment measures and the closure of underperforming sales centers having a high ratio of fixed costs to sales. Consumer finance operating expenses Consumer finance operating expenses increased 44% during the quarter ended December 31, 2001 principally as a result of increased headcount. Insurance operating expenses Insurance operating costs remained relatively constant for the quarter ended December 31, 2001 compared to the quarter ended December 31, 2000. Because reinsurance claims costs are recorded as insured events occur, reinsurance underwriting risk may increase the volatility of the Company's earnings, particularly with respect to property and casualty reinsurance. However, the quota share agreement described previously, as well as the Company's purchase of catastrophe reinsurance, should reduce the Company's underwriting exposure to natural disasters. Restructuring charges The following table sets forth the activity by quarter in each component of the Company's restructuring reserve (in thousands):
Severance Plant, sales and other center and termination office Asset charges closings write-downs Total --------------------------------------------------------------- Original provision $ 7,350 $ 7,384 $ 11,192 $ 25,926 Payments and balance sheet charges (1,707) (141) (11,192) (13,040) --------------------------------------------------------------- Balance 9/30/99 5,643 7,243 -- 12,886 --------------------------------------------------------------- Payments and balance sheet charges (810) (2,750) -- (3,560) --------------------------------------------------------------- Balance 12/31/99 4,833 4,493 -- 9,326 --------------------------------------------------------------- Payments and balance sheet charges (550) (1,183) -- (1,733) Reversal of restructuring charges (2,912) (1,439) -- (4,351) --------------------------------------------------------------- Balance 3/31/00 1,371 1,871 -- 3,242 --------------------------------------------------------------- Payments and balance sheet charges (81) (685) 378 (388) Reversal of restructuring charges (900) (2) (378) (1,280) --------------------------------------------------------------- Balance 6/30/00 390 1,184 -- 1,574 --------------------------------------------------------------- Additional provision 1,974 1,780 15 3,769 Payments and balance sheet charges (1,505) (1,277) (15) (2,797) Reversal of restructuring charges (100) (635) -- (735) --------------------------------------------------------------- Balance 9/30/00 759 1,052 -- 1,811 --------------------------------------------------------------- Payments and balance sheet charges (519) (109) -- (628) --------------------------------------------------------------- Balance 12/31/00 240 943 -- 1,183 --------------------------------------------------------------- Payments and balance sheet charges (114) (31) -- (145) --------------------------------------------------------------- Balance 3/31/01 126 912 -- 1,038 --------------------------------------------------------------- Payments and balance sheet charges (55) (33) -- (88) --------------------------------------------------------------- Balance 6/30/01 71 879 -- 950 --------------------------------------------------------------- Additional provision 681 4,702 12,460 17,843 Payments and balance sheet charges (41) (1,339) (12,460) (13,840) Reversal of 1999 restructuring charges (30) (45) -- (75) --------------------------------------------------------------- Balance 9/30/01 681 4,197 -- 4,878 --------------------------------------------------------------- Payments and balance sheet charges (145) (743) -- (888) --------------------------------------------------------------- Balance 12/31/01 $ 536 $ 3,454 $ -- $ 3,990 ---------------------------------------------------------------
During the fourth quarter of 1999 the Company recorded restructuring charges of approximately $25.9 million, related primarily to the closing of four manufacturing lines, the temporary idling of five others and the closing of approximately 40 sales centers. The charges in 1999 include severance and other termination costs related to approximately 2,150 employees primarily in manufacturing, retail and finance operations, costs associated with closing plants and sales centers, and asset writedowns. During 2000 the Company reversed into income $6.4 million of charges initially recorded in 1999. Approximately $2.9 million of the reversal related to the Company's legal determination that it was not required to pay severance amounts to certain terminated employees under the Worker Adjustment and Retraining Notification Act ("WARN"). Upon the expiration of a six-month waiting period specified by WARN and the Company's final calculation of the number of affected employees in relation to its workforce at the time of the restructuring announcement, the Company determined that it was not required to pay amounts previously accrued. During 2000 the Company also reevaluated its restructuring plans and determined that the losses associated with the closing of retail sales centers, the idling or closing of manufacturing plants, the disposition of certain assets and legal costs were less than anticipated and $3.5 million of the charges was reversed. During 2000 the Company recorded an additional $3.8 million charge, primarily related to severance costs associated with a reduction in headcount of 250 people primarily in the corporate, finance and manufacturing operations area, and the closure of offices. During the fourth quarter of 2001 the Company recorded restructuring charges of approximately $17.8 million, primarily related to the closing of approximately 90 underperforming retail sales centers, a majority of which were located in the South, in areas where the Company has experienced poor operating results as well as poor credit performance. At December 31, 2001 only seven of these underperforming sales centers remained open while 23 were converted to centers that exclusively market repossessed inventory. The remainder were either sold or closed during the quarter ended December 31, 2001. The Company expects to complete these restructuring activities during the second quarter of 2002. Approximately $50,000 of the $4.0 million remaining in the restructuring reserve at December 31, 2001 related to provisions established prior to the fourth quarter of 2001. During the execution of the Company's restructuring plans, approximately 2,800 employees were affected, of which 2,150 and 250 were terminated during the fourth quarters of 1999 and 2000, respectively. The Company terminated approximately 400 employees as part of its fourth quarter 2001 plan. Interest expense Interest expense for the quarter ended December 31, 2001 decreased $5.1 million, or 35%, from the first quarter of fiscal 2001 due to lower average balances outstanding on short-term credit facilities during the quarter ended December 31, 2001. Income taxes For the quarter ended December 31, 2001, the Company recorded an income tax benefit of $6.5 million resulting from the completion of an examination of the Company's federal income tax returns for the fiscal years 1997 through 2000 and the favorable resolution of certain income tax contingencies for which the Company had previously recorded a provision. The Company has operated at a loss in its three most recent fiscal years and in the quarter ended December 31, 2001. Because management believes difficult competitive conditions may continue for the foreseeable future, management believes that under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"), it is not appropriate to record income tax benefits on current losses in excess of anticipated refunds of taxes previously paid. Consequently, the Company's results for the quarter ended December 31, 2001 do not reflect a benefit from income taxes other than described above, notwithstanding the fact that the Company reported a loss for the period. Cumulative effect of accounting change Effective October 1, 2000 the Company adopted Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB 101") and recorded a charge of $14.6 million as a cumulative effect of an accounting change as of that date. Under its previous accounting policy, the Company recognized revenue for the majority of retail sales upon closing, which included execution of loan documents and related paperwork and receipt of the customer's down payment. In adopting the provisions of SAB 101, the Company changed its revenue recognition policy on these retail sales to a method based on placement of the home at the customer's site and completion of all contractual obligations. As required by SAB 101 the Company has restated its previously reported financial statements for the first quarter of 2001 to include the cumulated effect of the accounting change and to apply the provisions of SAB 101 to the quarter. LIQUIDITY AND CAPITAL RESOURCES For the quarters ended December 31, 2001 and 2000 the Company reported net losses of $10.0 million and $50.4 million, respectively. These financial results reflect business conditions within the manufactured housing industry. The Company is currently operating in a highly competitive environment caused principally by the industry's aggressive expansion in the retail channel, excessive amounts of finished goods inventory and a general reduction in the availability of financing at both the wholesale and retail levels. A decline in overall economic conditions has also contributed to a difficult environment. The industry estimates that shipments of manufactured homes from production facilities declined by approximately 28% and 22% during calendar years 2000 and 2001, respectively. The Company began to experience the effect of these cyclical industry factors during late fiscal 1999 and took steps to begin to lower inventory levels, reduce operating expenses and maximize cash flow. These efforts have continued through the first quarter of fiscal 2002 as the Company maintained its focus on areas considered to be within its span of control, principally cost control and inventory management. Many of the actions taken, most notably plant and sales center closings, curtailed production schedules and competitive pricing to effect a $237.2 million reduction in inventories since September 1999, negatively affected the Company's reported earnings for fiscal years 2000 and 2001 and the first quarter of fiscal 2002. Management believes that, unless business conditions improve, the Company is likely to incur a loss in fiscal 2002; however, it plans to continue to manage operations to generate positive cash flow. The Company believes that its operating cash flow, coupled with its continued access to the asset-backed securities market and borrowings under its credit facilities, which are described below, will provide sufficient liquidity to meet obligations, including potential repayment of the 8% reset debentures, and execute its business plan during the remainder of fiscal 2002. In the event of further deterioration in market conditions, the Company would take additional steps to protect liquidity and manage cash flow. Among other things, these actions might include further production curtailments, closing of additional retail sales centers or the selective sale of operational assets. The Company operates its plants to support its captive retail sales centers and its independent retailer base. The Company has, and will continue to adjust production capacity in line with demand, producing at a rate that will allow the Company to lower its inventories. At December 31, 2001, the Company was operating approximately 20 plants, though many were operating at reduced production schedules. Should market conditions worsen from those anticipated, the Company will continue to curtail production by lowering production speed or idling additional production facilities. The Company's primary sources of liquidity include cash generated by operations, borrowing availability under its three credit facilities and its securitization program through which loans are sold into the asset-backed securities market. During 2001 the Company generated $47.5 million of cash from operating activities, principally as a result of a $94.4 million reduction in its inventories and the sale of substantially all subordinated asset-backed securities rated below BBB previously retained by the Company from prior securitizations. The sale of these subordinated securities was finalized during the fourth quarter of 2001 and generated $72.9 million of cash. Subsequent to the sale of the retained subordinated securities, the Company retired its $75 million revolving credit facility, which was scheduled to mature in October 2001. In connection with the retirement, approximately $9.0 million of cash held by the lenders in a cash collateral account was returned to the Company. The net cash proceeds from the sale of the retained subordinated securities and the release of the cash collateral more than offset the $75 million previously available under the revolving credit facility. The Company currently has in place three credit facilities that it believes are adequate to meet liquidity needs during fiscal 2002. During the second quarter of 2001, a newly formed, special purpose entity of the Company entered into a three-year, $200 million loan purchase facility with a financial institution. It provides for funding of up to 81% of qualifying loan principal balances held for sale. The new facility replaced the Company's $250 million facility with a commercial paper issuer, which was scheduled to expire in October 2001. Under the new facility, the Company issued to a sister company of the financial institution a warrant valued at $11.0 million to acquire approximately 1.9 million shares of the Company's common stock with an exercise price of approximately $9.84 per share. The warrant, which is immediately exercisable, expires in February 2009. During the first quarter of fiscal 2002, the Company formed a wholly-owned qualifying special purpose subsidiary, Oakwood Advance Receivables Company, LLC ("OAR"), to provide up to $50 million of revolving funding for qualifying servicing advance receivables. The Company sells qualifying servicing advance receivables to OAR, which funds its purchases of receivables using the proceeds of debt obligations issued by OAR to third party investors. OAR collects the receivables it purchases from the Company, and such proceeds are available to purchase additional receivables from the Company through August 2003. At December 31, 2001, OAR had approximately $38.6 million of cash available to purchase additional qualifying servicing advance receivables from the Company. Conveyances of receivables to OAR are accounted for as sales under FAS 140. Subsequent to December 31, 2001, the Company closed a new $55 million revolving credit facility. The facility matures in January 2007 and is collateralized by substantially all assets of the Company excluding raw materials inventory and loans held for sale. The primary purposes of the facility are to support outstanding letters of credit of approximately $39 million and to provide additional cash borrowing capacity. The completion of this facility also freed up approximately $12 million of cash used to secure letters of credit. The agreement contains financial covenants which, among other things, specify minimum levels of tangible net worth and earnings before interest, taxes and depreciation and amortization, and limit capital expenditures. Borrowings outstanding under the facility will bear interest at the greater of prime plus 1.50% or 7%. The Company continues to generate liquidity through its securitization program. The retail financing of sales of the Company's products is an integral part of the Company's integration strategy. Such financing consumes substantial amounts of capital, which the Company has obtained principally by regularly securitizing such loans through the asset-backed securities market. Should the Company's ability to access the asset-backed securities market become impaired, the Company would be required to seek additional sources of funding for its finance business. Such sources might include, but would not be limited to, the sale of whole loans to unrelated third parties and the increased utilization of FHA financing. The Company's inability to find alternative sources of funding could have an adverse impact on the Company's liquidity and operations. The Company, from time to time, has retained certain subordinated securities from its securitizations. At December 31, 2001 the Company owned such subordinated asset-backed securities having a carrying value of $8.4 million associated with the August and December 2001 securitizations, as well as securities having a carrying value of $1.8 million from securitization transactions prior to 1994. The Company considers any asset-backed securities retained to be available for sale and would consider opportunities to liquidate these securities based upon market conditions. A significant decrease in the demand for subordinated asset-backed securities at prices acceptable to the Company would likely require the Company to seek alternative sources of financing for the loans originated by the consumer finance business, or require the Company to seek alternative long-term financing for the subordinated asset-backed securities. There can be no assurance that such alternative financing can be obtained, and the inability of the Company to obtain such alternative financing could adversely impact the Company's liquidity and operations. At December 31, 2001 the Company was in compliance with all covenants contained in its debt agreements. The Company estimates that in 2002 capital expenditures will approximate $14 million comprised principally of improvements at existing facilities, computer equipment and the replacement of certain computer information systems. The decrease in loans and investments from September 30, 2001 principally reflects a decrease in loans held for sale from $163 million at September 30, 2001 to $107 million at December 31, 2001. The Company originates loans and warehouses them until sufficient receivables have been accumulated for a securitization. Changes in loan origination volume, which is significantly affected by retail sales, and the timing of loan securitization transactions affect the amount of loans held for sale at any point in time. FORWARD LOOKING STATEMENTS This Form 10-Q contains certain forward-looking statements and information based on the beliefs of the Company's management as well as assumptions made by, and information currently available to, the Company's management. These statements include, among others, statements relating to the Company's expectation that it will sell a number of the underperforming retail centers that it is closing to independent retailers who will continue to sell the Company's products; the expectation that it will convert other underperforming sales centers to stores that exclusively sell repossessed homes; the expectation that the Company will complete its restructuring activities during the second quarter of 2002; the belief that it will continue to operate other underperforming sales centers that are not sold or converted to liquidate their inventory; the belief that its operating cash flow, coupled with its continued access to the asset-backed securities market and borrowings under its existing credit facilities, will provide sufficient liquidity to meet its obligations, including potential repayment of the 8% reset debentures, and to execute its business plan during 2002; the plan to negotiate an additional credit facility in 2002; the intention to continue to manage operations to generate positive cash flow even though it expects to incur a loss during 2002; the intention to take additional steps to protect liquidity and manage cash flow in the event of further deterioration in market conditions; the intention to continue to adjust production capacity in line with demand thereby enabling it to produce homes at a rate that will allow the Company to lower its inventories; the intention to continue to curtail production by lowering production speed or idling additional production facilities if market conditions worsen from those anticipated; and the reduction in the Company's insurance underwriting exposure as a result of the quota share agreement and its purchase of catastrophe reinsurance. Words like "believe," "expect," "should" and similar expressions used in this Form 10-Q are intended to identify other such forward-looking statements. These forward-looking statements reflect the current views of the Company with respect to future events and are subject to a number of risks, including, among others, the following: competitive industry conditions could further adversely affect sales and profitability; the Company may be unable to access sufficient capital to fund its operations; the Company may recognize special charges or experience increased costs in connection with securitizations or other financing activities; the Company may recognize special charges or experience increased costs in connection with restructuring activities; the Company may not realize anticipated benefits associated with its restructuring activities (including the closing of underperforming sales centers); adverse changes in governmental regulations applicable to its business could negatively impact the Company; it could suffer losses resulting from litigation (including shareholder class actions or other class action suits); the captive Bermuda reinsurance subsidiary could experience significant losses; the Company could experience increased credit losses or higher delinquency rates on loans originated; negative changes in general economic conditions in its markets could adversely impact the Company; it could lose the services of its key management personnel; and any other factors that generally affect companies in these lines of business could also adversely impact the Company. Should the Company's underlying assumptions prove incorrect or should one or more of the risks and uncertainties materialize, actual events or results may vary materially and adversely from those described herein as anticipated, expected, believed or estimated. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. In management's opinion, the ultimate resolution of these matters is not expected to have a material adverse effect on the Company's results of operations or financial condition. Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Shareholders of the Registrant held on January 30, 2002, the shareholders elected Sabin C. Streeter as a director for a term expiring in 2005 and ratified the selection of PricewaterhouseCoopers LLP as independent accountants. The following table sets forth the votes on each such matter:
BROKER FOR AGAINST ABSTAIN NON-VOTES --- ------- ------- --------- Election of Director (by nominee) Sabin C. Streeter 8,482,170 -- 153,217 897,493 Approval of selection of PricewaterhouseCoopers LLP as Independent Accountants 8,498,356 121,257 15,774 897,493
Item 6. Exhibits and Reports on Form 8-K a) Exhibits (3) Amended and Restated Bylaws of Oakwood Homes Corporation (4) Agreement to Furnish Copies of Instruments with Respect to Long-term Debt (10.1) Note Purchase Agreement dated as of September 28, 2001 by and among Oakwood Advance Receivables Company, L.L.C. and the Purchasers listed on Schedule I attached thereto (10.2) Indenture by and among Oakwood Advance Receivables Company, L.L.C. as Issuer and The Chase Manhattan Bank as Trustee, Verification Agent and Paying Agent and Oakwood Acceptance Corporation, individually and as REMIC Servicer, dated as of September 28, 2001 (10.3) Receivables Contribution Agreement by and between Oakwood Acceptance Corporation as Seller and Oakwood Advance Receivables Company, L.L.C. as Issuer, dated September 28, 2001 b) Reports on Form 8-K None Items 2, 3 and 5 are not applicable and are omitted. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 14, 2002 OAKWOOD HOMES CORPORATION BY: /s/ Suzanne H. Wood --------------------- Suzanne H. Wood Executive Vice President and Chief Financial Officer SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBITS ITEM 6(a) FORM 10-Q QUARTERLY REPORT For the quarter ended Commission File Number December 31, 2001 1-7444 OAKWOOD HOMES CORPORATION EXHIBIT INDEX
Exhibit No. Exhibit Description ----------- ------------------- 3 Amended and Restated Bylaws of Oakwood Homes Corporation 4 Agreement to Furnish Copies of Instruments with Respect to Long-term Debt 10.1 Note Purchase Agreement dated as of September 28, 2001 by and among Oakwood Advance Receivables Company, L.L.C. and the Purchasers listed on Schedule I attached thereto 10.2 Indenture by and among Oakwood Advance Receivables Company, L.L.C. as Issuer and The Chase Manhattan Bank as Trustee, Verification Agent and Paying Agent and Oakwood Acceptance Corporation, individually and as REMIC Servicer, dated as of September 28, 2001 10.3 Receivables Contribution Agreement by and between Oakwood Acceptance Corporation as Seller and Oakwood Advance Receivables Company, L.L.C. as Issuer, dated September 28, 2001
EX-3 3 g74241ex3.txt AMENDED AND RESTATED BYLAWS EXHIBIT 3 BYLAWS OF OAKWOOD HOMES CORPORATION ARTICLE I - OFFICES Section 1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be located at such place, within or without the State of North Carolina, as shall be determined from time to time by the Board of Directors and as shall have been so designated most recently in the annual report of the Corporation or amendment thereto, filed with the North Carolina Secretary of State pursuant to the North Carolina Business Corporation Act (the Act). Section 1.2 REGISTERED OFFICE. The Corporation shall maintain a registered office in the State of North Carolina as required by law, which may be, but need not be, identical with the principal office. Section 1.3 OTHER OFFICES. The Corporation may have offices at such other places, either within or without the State of North Carolina, as the Board of Directors may from time to time determine, or as the business of the Corporation may require. ARTICLE II - MEETINGS OF SHAREHOLDERS Section 2.1 PLACE OF MEETINGS. All meetings of shareholders shall be held at the principal office of the Corporation, or at such other place, either within or without the State of North Carolina, as shall be designated by the Board of Directors or the Chief Executive Officer of the Corporation. Section 2.2 ANNUAL MEETINGS. The annual meeting of the shareholders shall be held at 2:00 p.m. on the fifth Wednesday in each calendar year, if not a legal holiday, and, if a legal holiday, then at the same time on the next day following which is not a legal holiday, for the purpose of electing directors of the Corporation and for the transaction of such other business as may be properly brought before the meeting. Section 2.3 SUBSTITUTE ANNUAL MEETINGS. If the annual meeting shall not be held on the day provided for by these Bylaws, a substitute annual meeting may be called in accordance with the provisions of Section 2.4. A meeting so called shall be designated and treated for all purposes as the annual meeting. Section 2.4 SPECIAL MEETINGS. Special meetings of the shareholders may be called at any time by or at the request of the Chief Executive Officer or the Board of Directors. Section 2.5 NOTICE OF MEETINGS. Written or printed notice stating the date, time and place of the meeting shall be given not less than 10 nor more than 60 days before the date thereof, either personally or by mail, at the direction of the person or persons calling the meeting, to each shareholder entitled to vote at such meeting and each other shareholder entitled to notice pursuant to the Articles of Incorporation or applicable law. In the case of a special meeting, the notice of meeting shall specifically state the purpose or purposes for which the meeting is called. In the case of an annual meeting, the notice of meeting need not specifically state the purpose or purposes thereof or the business to be transacted thereat unless such statement is expressly required by the provisions of these Bylaws or by applicable law. If a meeting is adjourned for more than 120 days after the date fixed for the original meeting, or if a new record date is fixed for the adjourned meeting, or if the date, time and place for the adjourned meeting is not announced prior to adjournment, then notice of the adjourned meeting shall be given as in the case of an original meeting; otherwise, it is not necessary to give any notice of the adjourned meeting other than by announcement at the meeting at which the adjournment is taken. A shareholder's attendance at a meeting constitutes a waiver by such shareholder of (a) objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting and (b) objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the notice of the meeting, unless the shareholder objects to considering the matter before it is voted upon. Section 2.6 RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such record date in any case to be not more than 70 days immediately preceding the date of the meeting or the date on which the particular action requiring such determination of shareholders is to be taken, or such earlier date as may be required by the rules of any exchange upon which the Corporation's securities may be listed. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, the close of business on the day before the date on which notice of the meeting is first mailed to shareholders shall be the record date for such determination of shareholders. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. Section 2.7 SHAREHOLDERS' LIST. Not later than two business days after the date notice of a meeting of shareholders is first given, the Secretary or other officer or person having charge of the stock transfer books of the Corporation shall prepare an alphabetical list of the shareholders entitled to notice of such meeting, with the address of and number of shares held by each shareholder, which list shall be kept on file at the principal office of the Corporation (or such other place in the city where the meeting is to be held as may be identified in the notice of the meeting) for the period commencing two business days after notice of the meeting is first given and continuing through such meeting, and which list shall be available for inspection by any shareholder, or his or her agent or attorney, upon his or her demand, at any time during regular business hours. This list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder, or his or her agent or attorney, during the whole time of the meeting and any adjournment thereof. Section 2.8 QUORUM. The holders of shares entitled to a majority of votes entitled to be cast (as described in Section 2.10), present in person or represented by proxy, shall constitute a quorum at all meetings of shareholders for purposes of acting on any matter for which action by the shareholders is required. If there is no quorum at the opening of a meeting of shareholders, such meeting may be adjourned from time to time by the vote of a majority of the shares voting on the motion to adjourn; and, at any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment thereof unless a new record date is or must be set for that adjourned meeting. Section 2.9 ORGANIZATION. Each meeting of shareholders shall be presided over by the Chief Executive Officer, or, in the absence or at the request of the Chief Executive Officer, by such other officer as the Chief Executive Officer or the Board of Directors may designate, or in their absence and in the absence of such designation, by any person selected to preside by plurality vote of the shares represented and entitled to vote at the meeting, with each share having the same number of votes to which it would be entitled on any other matter on which all shares represented and entitled to vote at the meeting would be entitled to vote. The Secretary, or in the absence or at the request of the Secretary, any person designated by the person presiding at the meeting, shall act as secretary of the meeting. Section 2.10 VOTING OF SHARES. Except as otherwise provided in the Articles of Incorporation, each outstanding share having the right to vote on a matter or matters submitted to a vote at a meeting of shareholders shall be entitled to one vote on each such matter. A shareholder may vote in person or by proxy. Except in the election of directors (as provided in Section 3.4), if a quorum exists, action on a matter by the shareholders entitled to vote on the matter is approved by such shareholders if the votes cast favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law or the Articles of Incorporation or a Bylaw adopted by the shareholders. Voting on all matters including the election of directors shall be by voice vote or by a show of hands unless, as to any matter, the holders of shares entitled to at least 25% of the votes of shares represented at the meeting and entitled to vote on that matter shall demand, prior to the voting on such matter, a ballot vote on such matter. Section 2.11 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if one or more written consents, setting forth the action so taken, shall be signed by all of the persons who would be entitled to vote upon such action at a meeting, whether before or after the action so taken, and delivered to the Corporation to be included in the corporate minute book or filed with the corporate records. Such consent has the same effect as a meeting vote and may be described as such in any document. ARTICLE III - DIRECTORS Section 3.1 GENERAL POWERS. All corporate powers of the Corporation shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors. Section 3.2 NUMBER, TERM AND QUALIFICATION. The Number of Directors of the Corporation shall be a maximum of fifteen (15) and a minimum of seven (7) and the exact number of directors within these limits shall be fixed from time to time by resolution of the Board of Directors. Any directorships not filled by the shareholders shall be treated as vacancies to be filled by and in the discretion of the Board of Directors. The directors shall be divided into three classes, each class to be as nearly equal in number as possible. Each class of directors shall be elected to serve for terms of three (3) years and until their successors shall be elected and qualified. In the event of any increase in the authorized number of directors, the additional directors shall be classified so that all classes of directors shall be increased equally, as nearly as possible, and, in the event of any decrease in the authorized number of directors, all classes of directors shall be decreased equally, as nearly as possible. In the event of the death, resignation, retirement, removal or disqualification of a director during his elected term of office, his successor shall be elected to serve only until the expiration of the term of his predecessor. Directors need not be residents of the State of North Carolina or shareholders of the Corporation. Section 3.3 ELECTION OF DIRECTORS. Except as provided in Section 3.6, directors shall be elected at the annual meeting of shareholders. Section 3.4 VOTING FOR DIRECTORS. Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election of directors at a meeting at which a quorum is present. Shareholders shall have the right to cumulate their votes for directors except (a) if on the record date for a meeting of shareholders, shares of any class or series are listed on a national securities exchange or held of record by more than 2,000 shareholders or (b) as provided in the Articles of Incorporation or required by applicable law. If the shareholders have the right to cumulate their votes, then this right of cumulative voting shall not be exercised unless some shareholder or proxy holder announces in open meeting, before the voting for the directors starts, his intention so to vote cumulatively; and if such announcement is made, the chair shall declare that all shares entitled to vote have the right to vote cumulatively and shall thereupon grant a recess of not less than one nor more than four hours, as he shall determine, or of such other period of time as is unanimously then agreed upon. Section 3.5 REMOVAL. Directors may be removed from office with or without cause by a vote of shareholders holding at least seventy-five percent (75%) of the shares entitled to vote at an election of directors. However, unless the entire Board is removed, an individual director may not be removed if the number of shares voting against the removal would be sufficient to elect a director if such shares were voted cumulatively at an annual election. If any directors are so removed, new directors may be elected at the same meeting. Section 3.6 VACANCIES. A vacancy occurring in the Board of Directors, including positions not filled by the shareholders or those resulting from an increase in the number of directors, may be filled by a majority of the remaining directors, though less than a quorum, or by the sole remaining director. The shareholders may elect a director at any time to fill any vacancy not filled by the directors. Section 3.7 COMPENSATION. The Board of Directors, in its discretion, may compensate directors for their services as such and may provide for the payment of all expenses reasonably incurred by directors in attending meetings of the Board or of any Committee or in the performance of their other duties as directors. Nothing herein contained, however, shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 3.8 COMMITTEES. The Board of Directors, by resolution adopted by a majority of the number of directors then in office, may designate and appoint from among its members one or more Committees, including an Executive Committee, each consisting of two or more directors, who shall serve as members of such Committee at the pleasure of the Board of Directors. Each such Committee, to the extent provided in such resolution, shall have and may exercise all of the authority of the Board of Directors in the management of the Corporation, including such powers as may be given to the Board of Directors by these Bylaws, except that no such Committee shall have authority to: (a) authorize dividends or other distributions not permitted by applicable law to be authorized by a Committee; (b) approve or propose to shareholders action that applicable law requires to be approved by shareholders; (c) fill vacancies on the Board of Directors or on any Committee; (d) amend the Articles of Incorporation; (e) adopt, amend or repeal bylaws; (f) approve a plan of merger not requiring shareholder approval; (g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; (h) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares (except that the Board of Directors may authorize a Committee or a senior executive officer to do so within limits specifically prescribed by the Board of Directors); or (i) amend or repeal any resolution of the Board of Directors that by its terms provides that it is not so amendable or repealable. Nothing herein shall preclude the Board of Directors from establishing and appointing any committee, whether of directors or otherwise, not having or exercising the authority of the Board of Directors. Section 3.9 CHAIRMAN. The Board of Directors may elect a Chairman of the Board who shall serve at the pleasure of the Board. ARTICLE IV - MEETINGS OF DIRECTORS Section 4.1 REGULAR MEETINGS. A regular annual meeting of the Board of Directors shall be held immediately after, and at the same place as, the annual meeting or substitute annual meeting of shareholders. In addition, the Board of Directors may provide the time and place, either within or without the State of North Carolina, for the holding of additional regular meetings. Section 4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board (if there shall be a person holding such office), the Chief Executive Officer or any two directors. Such meetings may be held either within or without the State of North Carolina. Section 4.3 NOTICE OF MEETINGS. Regular meetings of the Board of Directors may be held without notice. The person or persons calling a special meeting of the Board of Directors shall give notice of the meeting to the directors by any usual means of communication. If such notice is given to a director in writing by mail, it shall be mailed, correctly addressed to such director with postage prepaid, no later than six days prior to the date of the meeting. If such notice is given to a director in writing otherwise than by mail, it shall be given so that it is received by such director no later than two days prior to the meeting. If such notice is given orally to a director, it shall be communicated orally to such director no later than two days prior to the meeting. Delivery or completion of transmission of written notice to the address of a director shall be deemed receipt by such director, and any such written notice given to a director by mail that is not timely mailed shall nevertheless be valid and effective if so received by such director no later than two days prior to the date of the meeting. The person or persons giving such notice may conclusively presume that the address of a director to which such notice is to be directed is the business address of such director appearing in the Corporation's most current annual report to the North Carolina Secretary of State, unless prior to the sending of such notice, the Corporation shall have received from such director notice of a different address to which notices to such director should be directed. A director's attendance at or participation in a meeting shall constitute a waiver by such director of notice of such meeting, unless the director at the beginning of the meeting (or promptly upon his or her arrival) objects to holding the meeting or to the transaction of business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Section 4.4 QUORUM. A majority of the number of directors fixed or prescribed by these Bylaws shall be required for, and shall constitute, a quorum for the transaction of business at any meeting of the Board of Directors. Section 4.5 MANNER OF ACTING. Except as otherwise provided in these Bylaws or required by applicable law, the affirmative vote of a majority of the directors present at a meeting of the Board of Directors shall be the act of the Board of Directors, if a quorum is present when the vote is taken. Section 4.6 ORGANIZATION. Each meeting of the Board of Directors shall be presided over by the Chief Executive Officer (if there shall be a person holding such office), or, in the absence or at the request of the Chief Executive Officer, by the Chairman of the Board, and in their absence or at their request, by any person selected to preside by vote of a majority of the directors present. The Secretary, or in the absence or at the request of the Secretary, any person designated by the person presiding at the meeting, shall act as secretary of the meeting. Section 4.7 ACTION WITHOUT MEETING. Action required or permitted to be taken by the Board of Directors or a Committee at a meeting may be taken without a meeting if one or more written consents describing the action taken are signed by each of the directors or members of the Committee, as the case may be, whether before or after the action so taken, and filed with the corporate records or the minutes of the proceedings of the Board or Committee. Action so taken is effective when the last director or Committee member signs such consent, unless the consent specifies a different effective date. Such consent has the effect of a meeting vote and may be described as such in any document. Section 4.8 PARTICIPATION BY CONFERENCE TELEPHONE. Any one or more directors or members of a Committee may participate in a meeting of the Board of Directors or Committee by means of a conference telephone or similar communications device that allows all persons participating in the meeting to simultaneously hear each other during the meeting, and such participation in a meeting shall be deemed presence in person at such meeting. ARTICLE V - OFFICERS Section 5.1 GENERAL. The officers of the Corporation shall consist of a Chief Executive Officer (who shall be either the Chairman of the Board or the President, as provided in these Bylaws), a President, a Secretary and a Treasurer, and may also include a Chief Operating Officer and such Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers as may be appointed by the Board of Directors or otherwise provided in these Bylaws. The Chairman of the Board shall be an officer of the Corporation if so designated by the Board of Directors and shall be an officer of the Corporation if the Chairman is appointed as the Chief Executive Officer pursuant to Section 5.5. In all other circumstances, the Chairman of the Board shall not be an officer of the Corporation. Any two or more offices may be simultaneously held by the same person, but no person may act in more than one capacity where action of two or more officers is required. The title of any officer may include any additional designation descriptive of such officer's duties as the Board of Directors may prescribe. Section 5.2 APPOINTMENT AND TERM. The officers of the Corporation shall be appointed from time to time by the Board of Directors; provided, that the Board of Directors may authorize a duly appointed officer to appoint one or more other officers or assistant officers, other than appointment of the Chief Executive Officer, the Chairman of the Board, the President or the Chief Operating Officer. Each officer shall serve as such at the pleasure of the Board of Directors. Section 5.3 REMOVAL. Any officer may be removed by the Board of Directors at any time with or without cause; but such removal shall not itself affect the contract rights, if any, of the person so removed. Section 5.4 COMPENSATION. The compensation of all officers of the Corporation shall be fixed by, or in the manner prescribed by, the Board of Directors. Section 5.5 CHIEF EXECUTIVE OFFICER. If there is a Chairman of the Board and the Board of Directors designates the Chairman of the Board as the Chief Executive Officer, then the Chairman of the Board shall be the Chief Executive Officer of the Corporation. Otherwise, the President shall be the Chief Executive Officer of the Corporation. Subject to the direction and control of the Board of Directors, the Chief Executive Officer shall supervise and control the management of the Corporation and shall have such duties and authority as are normally incident to the position of chief executive officer of a corporation and such other duties and authority as may be prescribed from time to time by the Board of Directors or as are provided for elsewhere in these Bylaws. The title of the Chairman of the Board or President, as the case may be, serving as the Chief Executive Officer may, but need not, also refer to his or her position as Chief Executive Officer. Section 5.6 CHAIRMAN OF THE BOARD. The Board of Directors may, but need not, appoint from among its members an officer designated as the Chairman of the Board. If there is appointed a Chairman of the Board and such Chairman of the Board is also designated by the Board of Directors to be the Chief Executive Officer, then the Chairman of the Board shall have all of the duties and authority of the Chief Executive Officer and shall also, when present, preside over meetings of the Board of Directors. If there is a Chairman of the Board but such Chairman of the Board is not also designated as the Chief Executive Officer, then the Chairman of the Board shall, in the absence of the Chief Executive Officer, preside over meetings of the Board of Directors and shall have such other duties and authority as may be prescribed from time to time by the Board of Directors or as are provided for elsewhere in these Bylaws. Section 5.7 CHIEF OPERATING OFFICER. If there is appointed a Chairman of the Board who is also the Chief Executive Officer, then the President shall be the Chief Operating Officer. If the President is the Chief Executive Officer, then the President shall also serve as the Chief Operating Officer unless the Board of Directors shall designate some other officer of the Corporation as the Chief Operating Officer. Subject to the direction and control of the Chief Executive Officer and the Board of Directors, the Chief Operating Officer shall supervise and control the operations of the Corporation, shall have such duties and authority as are normally incident to the position of chief operating officer of a corporation and such other duties as may be prescribed from time to time by the Chief Executive Officer or the Board of Directors, and, in the absence or disability of the Chief Executive Officer, shall have the authority and perform the duties of the Chief Executive Officer. The title of the President or other officer serving as the Chief Operating Officer may, but need not, also refer to his or her position as Chief Operating Officer. Section 5.8 PRESIDENT. Unless there is appointed a Chairman of the Board who is also designated the Chief Executive Officer, the President shall be the Chief Executive Officer of the Corporation and shall have all of the duties and authority of that office. If the President is not the Chief Executive Officer, then the President shall be the Chief Operating Officer and shall have all of the duties and authority of that office. If the President shall be the Chief Executive Officer and no other officer shall have been designated by the Board of Directors as the Chief Operating Officer, then the President shall also have all of the duties and authority of the Chief Operating Officer. The President shall also have such other duties and authority as may be prescribed from time to time by the Board of Directors. Section 5.9 VICE PRESIDENT. The Vice President, and if there be more than one, the Executive Vice President or other Vice President designated by the Board of Directors, shall, in the absence or disability of the President, have the authority and perform the duties of said office (including the duties and authority of the President as either Chief Executive Officer or Chief Operating Officer or both, if the President serves as such). In addition, each Vice President shall perform such other duties and have such other powers as are normally incident to the office of Vice President or as shall be prescribed by the Chief Executive Officer, the Chief Operating Officer or the Board of Directors. Section 5.10 SECRETARY. The Secretary shall have the responsibility and authority to maintain and authenticate the records of the Corporation; shall keep, or cause to be kept, accurate records of the acts and proceedings of all meetings of shareholders, directors and Committees; shall give, or cause to be given, all notices required by law and by these Bylaws; shall have general charge of the corporate books and records and of the corporate seal, and shall affix the corporate seal to any lawfully executed instrument requiring it; shall have general charge of the stock transfer books of the Corporation and shall keep, or cause to be kept, all records of shareholders as are required by applicable law or these Bylaws; shall sign such instruments as may require the signature of the Secretary; and, in general, shall perform all duties incident to the office of Secretary and such other duties as may be assigned to him or her from time to time by the Chief Executive Officer, the Chief Operating Officer or the Board of Directors. Section 5.11 TREASURER. The Treasurer shall have custody of all funds and securities belonging to the Corporation and shall receive, deposit or disburse the same under the direction of the Board of Directors; shall keep, or cause to be kept, full and accurate accounts of the finances of the Corporation in books especially provided for that purpose, and shall generally have charge over the Corporation's accounting and financial records; shall cause a true statement of its assets and liabilities as of the close of each fiscal year, and of the results of its operations and of cash flows for such fiscal year, all in reasonable detail, including particulars as to convertible securities then outstanding, to be made as soon as practicable after the end of such fiscal year. The Treasurer shall also prepare and file, or cause to be prepared and filed, all reports and returns required by Federal, State or local law and shall generally perform all other duties incident to the office of Treasurer and such other duties as may be assigned to him or her from time to time by the Chief Executive Officer, the Chief Operating Officer or the Board of Directors. Section 5.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant Secretaries and Assistant Treasurers, if any, shall, in the absence or disability of the Secretary or the Treasurer, respectively, have all the powers and perform all of the duties of those offices, and they shall in general perform such other duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or by the Chief Executive Officer, the Chief Operating Officer or the Board of Directors. Section 5.13 BONDS. The Board of Directors may by resolution require any or all officers, agents and employees of the Corporation to give bond to the Corporation, with sufficient sureties, conditioned on the faithful performance of the duties of their respective offices or positions, and to comply with such other conditions as may from time to time be required by the Board of Directors. ARTICLE VI - CONTRACTS, LOANS AND DEPOSITS Section 6.1 CONTRACTS. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any document or instrument on behalf of the Corporation, and such authority may be general or confined to specific instances. Any resolution of the Board of Directors authorizing the execution of documents by the proper officers of the Corporation or by the officers generally and not specifying particular officers shall be deemed to authorize such execution by the Chief Executive Officer, the Chief Operating Officer, the Chairman of the Board, the President, or any Vice President, or by any other officer if such execution is within the scope of the duties and of such other office. The Board of Directors may by resolution authorize such execution by means of one or more facsimile signatures. Section 6.2 LOANS. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by the Board of Directors. Such authority may be general or confined to specific instances. Section 6.3 CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner, as shall from time to time be determined by resolution of the Board of Directors. Section 6.4 DEPOSITS. All funds of the Corporation not otherwise employed or invested shall be deposited from time to time to the credit of the Corporation in such depositories as the Board of Directors direct. ARTICLE VII - SHARE CERTIFICATES Section 7.1 CERTIFICATES FOR SHARES. Unless the Board of Directors authorizes the issue of some or all of the shares of any or all classes or series without certificates, certificates representing shares of the Corporation shall be issued, in such form as the Board of Directors shall determine, to every shareholder for the fully paid shares owned by him. These certificates shall be signed by the Chief Executive Officer, the Chief Operating Officer, the Chairman of the Board, the President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, either manually or in facsimile (provided that certificates bearing facsimile signatures of both officers shall be manually countersigned by a registrar, transfer agent or other authenticating agent) and shall be sealed with the seal of the Corporation or a facsimile thereof. Such certificates shall be consecutively numbered or otherwise identified and the name and address of the persons to whom they are issued, with the number of shares and the date of issue, shall be entered on the stock transfer books of the Corporation. Section 7.2 TRANSFER OF SHARES. Transfer of shares represented by certificates shall be made on the stock transfer books of the Corporation only upon the surrender of the certificates for the shares sought to be transferred by the record holder thereof or by his or her duly authorized agent, transferee or legal representative, or as otherwise provided by applicable law. All certificates surrendered for transfer shall be cancelled before new certificates for the transferred shares shall be issued. Section 7.3 LOST CERTIFICATES. The Board of Directors may authorize the issuance of a new share certificate in place of a certificate claimed to have been lost, destroyed or wrongfully taken, upon receipt of an affidavit of such fact from the person claiming the loss or destruction. When authorizing such issuance of a new certificate, the Board may require the claimant to give the Corporation a bond in such sum and with such sureties as it may direct to indemnify the Corporation against loss from any claim with respect to the certificate claimed to have been lost, destroyed or wrongfully taken; or the Board may, by resolution reciting that the circumstances justify such action, authorize the issuance of the new certificate without requiring such a bond with respect to a certificate claimed to have been lost or destroyed. Any such authorization by the Board of Directors may be general or confined to specific instances. Nothing herein shall require the Board of Directors to authorize the issuance of any such replacement certificate under any circumstances in which the Corporation is not required to issue such certificate, this provision being permissive and not mandatory. ARTICLE VIII - RECORDS AND REPORTS Section 8.1 GENERAL. The Corporation shall keep all records and submit and file all reports and filings as are required by applicable law. Unless the Board of Directors otherwise directs, the Treasurer shall be responsible for keeping, or causing to be kept, all financial and accounting records of the Corporation and for submitting or filing, or causing to be submitted or filed, all reports and filings of a financial or accounting nature, and the Secretary shall be responsible for keeping, or causing to be kept, all other records and for submitting or filing, or causing to be submitted or filed, all other reports and filings. The Corporation shall keep as permanent records minutes of all meetings of its incorporators, shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by Committees of the Board of Directors. The Corporation shall maintain appropriate accounting records. The Corporation or its agent shall maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each. The Corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time. Section 8.2 RECORDS AT PRINCIPAL OFFICE. The Corporation shall keep a copy of the following records at the Corporation's principal office: (a) its Articles or restated Articles of Incorporation and all amendments to them currently in effect; (b) its Bylaws or restated Bylaws and all amendments to them currently in effect; (c) resolutions adopted by the Board of Directors creating one or more classes or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding; (d) the minutes of all shareholders' meetings, and records of all action taken by shareholders without a meeting, for the past three years; (e) all written communications to shareholders generally within the past three years and the financial statements required by law to be made available to the shareholders for the past three years; (f) a list of the names and business addresses of its current directors and officers; and (g) its most recent annual report delivered to the North Carolina Secretary of State pursuant to the Act. Section 8.3 FINANCIAL STATEMENTS. The Corporation shall make available to its shareholders annual financial statements, which may be consolidated or combined statements of the Corporation and one or more of its subsidiaries, as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of cash flows for the year unless that information appears elsewhere in the financial statements. If financial statements are prepared for the Corporation on the basis of generally accepted accounting principles, the annual financial statements shall also be prepared on that basis. If the annual financial statements are reported upon by a public accountant, such accountant's report shall accompany them. If not, the statements shall be accompanied by a statement of the President or the Treasurer or other person responsible for the Corporation's accounting records (a) stating his or her reasonable belief whether the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation and (b) describing any respects in which the statements were not prepared on a basis of accounting consistent with the statements prepared for the preceding year. The Corporation shall mail the annual financial statements, or a written notice of their availability, to each shareholder within 120 days after the close of each fiscal year; provided that the failure of the Corporation to comply with this requirement shall not constitute the basis for any claim of damages by any shareholder unless such failure was in bad faith. Thereafter, on written request from a shareholder who was not mailed the statements, the Corporation shall mail such shareholder the latest financial statements. Section 8.4 ANNUAL REPORT. The Corporation shall prepare and deliver to the North Carolina Secretary of State for filing each year the annual report required by the Act. Such annual report shall be filed each year within 60 days after the end of the month of March, or at such other time as is then required by applicable law. The Corporation may, and when required by law shall, file all necessary or appropriate corrections and amendments to such annual report, and shall promptly file an amendment to its annual report to reflect any change in the location of the principal office of the Corporation. ARTICLE IX - GENERAL PROVISIONS Section 9.1 DIVIDENDS. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Articles of Incorporation of the Corporation. The Board of Directors may fix in advance a record date for determining the shareholders entitled to a dividend. If such record date is not fixed by the Board of Directors, the date the Board of Directors authorizes such dividend shall be the record date. Section 9.2 SEAL. The corporate seal of the Corporation shall consist of two concentric circles between or within which are the name of the Corporation, the state of incorporation, the year of incorporation and the word "SEAL." The seal may be used by causing it or a facsimile thereof to be impressed, affixed, stamped or reproduced by any means. Any officer of the Corporation authorized to execute or attest a document on behalf of the Corporation may affix or reproduce on such document, as and for the corporate seal of the Corporation, a seal in any other form sufficient to evidence that it is intended by such officer to represent the corporate seal of the Corporation, in which case such seal shall be as effective as the corporate seal in the form herein prescribed. Section 9.3 NOTICE AND WAIVER OF NOTICE. Except as otherwise provided in the Articles of Incorporation or these Bylaws, any notice permitted or required to be given pursuant to these Bylaws may be given in any manner permitted by applicable law and with the effect therein provided. Without limiting the generality of the forgoing, written notice by the Corporation to a shareholder is effective when deposited in the United States mail with postage thereon prepaid and correctly addressed to the shareholder's address shown in the Corporation's current record of shareholders. Whenever any notice is required to be given to any shareholder or director under the provisions of the Act or under the provisions of the Articles of Incorporation or Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice and included in the minutes or filed with the corporate records, whether done before or after the time stated in the notice, shall be equivalent to the giving of such notice. Section 9.4 FISCAL YEAR. The fiscal year of the Corporation shall be from October 1 through September 30. Section 9.5 INDEMNIFICATION. Any person who at any time serves or has served as a director of the Corporation shall have a right to be indemnified by the Corporation to the fullest extent permitted by law against (a) expenses, including reasonable attorneys' fees, actually and necessarily incurred by him or her in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, and whether or not brought by or on behalf of the Corporation, arising out of his or her status as such director, or his or her status as an officer, employee or agent of the Corporation, or his or her service, at the request of the Corporation, as a director, officer, partner, trustee, employee or agent of any other corporation, partnership, joint venture, trust or other enterprise or as a trustee or administrator under an employee benefit plan, or his or her activities in any of the foregoing capacities, and (b) any liability incurred by him or her, including without limitation, satisfaction of any judgment, money decree, fine (including any excise tax assessed with respect to an employee benefit plan), penalty or settlement, for which he or she may have become liable in connection with any such action, suit or proceeding. The Board of Directors of the Corporation shall take all such action as may be necessary and appropriate to authorize the Corporation to pay the indemnification required by this Bylaw, including without limitation, to the extent necessary, (a) making a good faith evaluation of the manner in which the claimant for indemnity acted and of the reasonable amount of indemnity due him or her and (b) giving notice to and obtaining approval by the shareholders of the Corporation. Expenses incurred by a director in defending an action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director to pay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by the Corporation against such expenses. Any person who at any time after the adoption of this Bylaw serves or has served as a director of the Corporation shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the right of indemnification provided herein, and any modification or repeal of these provisions for indemnification shall be prospective only and shall not affect any rights or obligations existing at the time of such modification or repeal. Such right shall inure to the benefit of the legal representatives of any such person, shall not be exclusive of any other rights to which such person may be entitled apart from the provisions of this Bylaw, and shall not be limited by the provisions for indemnification in Sections 55-8-51 through 55-8-56 of the Act or any successor statutory provisions. Any person who is entitled to indemnification by the Corporation hereunder shall also be entitled to reimbursement of reasonable costs, expenses and attorneys' fees incurred in obtaining such indemnification. Section 9.6 CONSTRUCTION. All references in these Bylaws to "shareholder" or "shareholders" refer to the person or persons in whose names shares are registered in the records of the Corporation, except to the extent that a beneficial owner of shares that are registered in the name of a nominee is recognized by the Corporation as a "shareholder" in accordance with a procedure therefor that the Corporation may, but need not, establish pursuant to applicable law. All personal pronouns used in these Bylaws shall include persons of any gender. All terms used herein and not specifically defined herein but defined in the Act shall have the same meanings herein as given under the Act, unless the context otherwise requires. Section 9.7 AMENDMENTS. Except as otherwise provided herein or in the Articles of Incorporation or by applicable law, these Bylaws may be amended or repealed and new bylaws may be adopted by action of the Board of Directors or the shareholders. Sections 3.2 and 3.5 of these Bylaws have been adopted by the shareholders of this Corporation and may not be amended, repealed or annulled except by a vote of the shareholders holding at least seventy-five percent (75%) of the shares of the Corporation entitled to vote. EX-4 4 g74241ex4.txt AGREEMENT TO FURNISH COPIES OF INSTRUMENTS EXHIBIT 4 AGREEMENT TO FURNISH COPIES OF INSTRUMENTS WITH RESPECT TO LONG-TERM DEBT The Registrant has entered into certain agreements with respect to long-term indebtedness, which do not exceed ten percent of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant hereby agrees to furnish a copy of such agreements to the Commission upon request of the Commission. OAKWOOD HOMES CORPORATION By: /s/ Suzanne H. Wood ------------------------------- Suzanne H. Wood Executive Vice President and Chief Financial Officer EX-10.1 5 g74241ex10-1.txt NOTE PURCHASE AGREEMENT DATED AS OF 9-28-2001 EXHIBIT 10.1 NOTE PURCHASE AGREEMENT THIS NOTE PURCHASE AGREEMENT (the "Agreement"), is dated as of September 28, 2001 and is among Oakwood Advance Receivables Company, L.L.C. (the "Company"), a Nevada limited liability company, Oakwood Acceptance Corporation ("Oakwood Acceptance"), a North Carolina corporation, and each of their respective successors, and the Purchasers listed on Schedule I attached hereto, and their successors and assigns (individually, a "Purchaser" and collectively, the "Purchasers"). WITNESSETH: Pursuant to a Receivables Contribution Agreement, dated as of September 28, 2001 (the "Receivables Contribution Agreement"), by and between Oakwood Acceptance and the Company, Oakwood Acceptance will convey certain Receivables to the Company and the Company shall purchase such Receivables on the Closing Date and during the Funding Period. The Company will fund its purchase of such Receivables by issuing the Notes to the Purchasers on the Closing Date pursuant to an Indenture dated as of September 28, 2001 (the "Indenture"), by and among the Company, as Issuer, The Chase Manhattan Bank, as Trustee (the "Trustee"), Verification Agent and Paying Agent, and Oakwood Acceptance, individually and as REMIC Servicer. The Notes will be secured by the Receivables and certain other assets of the Trust (collectively, the "Trust Estate"). The sale of the Notes to the Purchasers will be made without registration of the Notes under the Securities Act in reliance upon an exemption from the registration requirements of the Securities Act. NOW THEREFORE, the parties agree as follows: ARTICLE I DEFINITIONS All capitalized terms used but not defined in this Agreement have the meanings ascribed to them in the Indenture. ARTICLE II NOTES Section 2.1 On the Closing Date, the Company shall in accordance with the terms of the Indenture issue the Notes. The Company hereby agrees to sell $50,000,000 principal amount of such Notes to the Purchasers and, subject to the terms and conditions and in reliance upon the covenants, representations and warranties herein set forth, the Purchasers agree to purchase such Notes on the Closing Date in the denominations and at the purchase prices (the "Purchase Price") set forth on Schedule I attached hereto. Section 2.2 The closing of the issuance and sale of the Notes (the "Closing") shall be held at the offices of Dewey Ballantine LLP, New York, New York, at 10:00 a.m., New York City time, or at such other place as the parties shall designate, on September 28, 2001, or at such later date as the parties shall designate, which date and time may be postponed by agreement between the Purchasers and the Company (such date and time of delivery and payment for such Notes being herein referred to as the "Closing Date"). The Notes to be issued on the Closing Date shall be registered in such names and in such denominations as the Purchasers may request not less than one Business Day in advance of the Closing Date. Section 2.3 The Purchase Price for the Notes shall be paid on the Closing Date by wire transfer of immediately available federal funds or in other immediately available funds to the account set forth in Schedule II hereto. In addition to delivery of the Notes, the Company shall, at the request of the Purchasers, execute and deliver at the Closing Date such receipts, endorsements, and other documents as the Purchasers may reasonably request. Section 2.4 If by 1:00 p.m., New York City time, on the Closing Date, the Company fails to deliver to the Purchasers the Notes to be purchased or if the conditions set forth in Article III hereof have not been fulfilled or waived by the Purchasers in accordance with the terms hereof, the Purchasers thereupon may elect to be relieved of all further obligations under this Agreement. ARTICLE III CONDITIONS TO THE CLOSING Section 3.1 The obligation of the Purchasers to purchase the Notes and to be bound by the terms of this Agreement and to pay their respective Purchase Price on the Closing Date is subject to (i) performance by the Company and Oakwood Acceptance of all their obligations under this Agreement on each of their parts to be performed on or prior to the Closing Date, (ii) the accuracy of the representations and warranties of each of the Company and Oakwood Acceptance set forth herein and in the Indenture, (iii) the accuracy of the statements of the Company or Oakwood Acceptance, as applicable, in any certificates delivered pursuant to the provisions hereof and (iv) satisfaction of the conditions hereinafter set forth as of the Closing Date. On the Closing Date, the following conditions shall have been satisfied: 3.1.1 The representations and warranties made by each of the Company and Oakwood Acceptance in each Transaction Document to which it is a party shall be true and correct in all material respects on and as of the Closing Date as if they had been made on the Closing Date (except to the extent a different date is specified in any such agreement or document); each of the Company and Oakwood Acceptance shall have performed and complied with all agreements and conditions in each Transaction Document to which it is a party required to be performed or complied with on or before the Closing Date; and no event shall have occurred and no condition shall exist which would constitute a Default or an Event of Default 2 under, and as defined in, the Indenture or any other Transaction Document, either with or without notice or lapse of time, or both. Each of the Company and Oakwood Acceptance shall have delivered to the Purchasers an Officer's Certificate, to the effect that the signer of such certificate has carefully examined each Transaction Document and that (i) the representations and warranties of the Company and Oakwood Acceptance in each Transaction Document to which it is a party are true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date; and (ii) the Company or Oakwood Acceptance, as applicable, has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to the Closing Date pursuant to the terms of each Transaction Document to which it is a party. The Trustee shall have delivered an Officer's Certificate signed by a duly authorized officer to the effect that the Transaction Documents to which the Trustee is a party have been duly authorized, executed and delivered and with respect to authorizing resolutions and organizational documents of the Trustee. 3.1.2 Each Transaction Document shall have been duly authorized, executed and delivered by the respective party or parties thereto, shall be in full force and effect on the Closing Date and shall be satisfactory in all respects in form and substance to the Purchasers, and the Notes shall be validly issued and outstanding and entitled to the benefit of the Indenture. 3.1.3 All corporate, limited liability company and other proceedings in connection with the establishment and capitalization of the Company and all documents and certificates incident thereto shall be satisfactory in form and substance to the Purchasers and its special counsel, and the Purchasers shall have received such other documents and certificates incident to such transaction as the Purchasers or such counsel shall reasonably request. 3.1.4 Each party shall have performed and complied with all agreements and conditions contained herein and in the other Transaction Documents and all other documents delivered in connection herewith or therewith which are required to be performed or complied with by such party before or at the Closing Date. 3.1.5 The Purchasers shall have received the following, in each case in form and substance satisfactory to it and its special counsel: (i) an Officer's Certificate, dated the Closing Date, signed by an authorized representative of the Company, to the effect that the issuance, sale and delivery of the Notes by the Company and the execution, delivery and performance by the Company, and the authority of the person or persons executing and delivering each Transaction Document to which it is a party and any other documents executed by or on behalf of the Company in connection with the transactions contemplated hereby have been duly authorized; (ii) a copy of resolutions of Oakwood Acceptance, certified by an officer of Oakwood Acceptance as of the Closing Date, duly authorizing the execution, delivery and performance by Oakwood Acceptance of each Transaction Document to which it is a party and any other documents executed by or on behalf of Oakwood Acceptance in connection with the transactions contemplated hereby; and an incumbency 3 certificate of Oakwood Acceptance as to the person or persons executing and delivering each such document; and (iii) such other documents and evidence with respect to the Company, Oakwood Acceptance and the Trustee as the Purchasers may reasonably request in order to establish the natural, corporate or limited liability company existence and (with respect to the Company, Oakwood Acceptance and the Trustee) good standing of each thereof, the proper taking of all appropriate proceedings in connection with the transactions contemplated hereby and the compliance with the conditions set forth in Article III hereof. 3.1.6 No action or proceeding shall have been instituted nor shall any governmental action be threatened before any court or government agency nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency to set aside, restrain, enjoin or prevent the performance of any Transaction Documents or any of the other agreements or the transactions contemplated hereby. 3.1.7 The Purchasers shall have received, on or before the Closing Date, evidence reasonably satisfactory to them that the Collection Account and all other trust accounts shall have been established pursuant to the Indenture. 3.1.8 The Purchasers shall have received, on or before the Closing Date, evidence reasonably satisfactory to them that the Reserve Account has been established pursuant to the Indenture, and that the Company shall have deposited an amount equal to the amount required to be deposited pursuant to the Indenture in the Reserve Account on or before the Closing Date. 3.1.9 All actions, approvals, consents, waivers, exemptions, variances, franchises, orders, permits, authorizations, rights and licenses required to be taken, given or obtained by or from any federal, state or other governmental authority or agency, or by or from any trustee or holder of any indebtedness or obligation of the Company or Oakwood Acceptance, or that are necessary or, in the opinion of counsel to the Purchasers, advisable in connection with the transactions contemplated in the Transaction Documents and herein shall have been delivered to the Purchasers. 3.1.10 Any taxes, fees and other governmental charges which are due and payable in connection with the execution, delivery and performance of the Transaction Documents and the execution, delivery, sale and performance of the Notes shall have been paid by the Company or Oakwood Acceptance, as applicable, at or prior to the Closing Date. 3.1.11 [Reserved] 3.1.12 The Company shall have good and marketable title to the Receivables and the other assets of the Trust Estate, free and clear of all liens and encumbrances, and shall not have sold, transferred, pledged or assigned to any Person other than the Trustee any of its right, title or interest in the Receivables or any other assets of the Trust Estate. 4 3.1.13 The Trustee or its agent shall have received, and shall hold in trust pursuant to the Indenture, the Trust Estate, including the Receivables and all documents, instruments and other assets required by the Indenture to be delivered to the Trustee with respect thereto as of the Closing Date. 3.1.14 No event has occurred and is continuing or would result from such issuance that would constitute an Event of Default under the Indenture or any supplement thereto but for the requirement that notice be given or time elapsed or both. 3.1.15 [Reserved] 3.1.16 The Purchasers shall have received evidence on or before the Closing Date that the Company and Oakwood Acceptance shall have (i) caused all required UCC-1 and UCC-3 financing statements and/or other registrations in respect of the Receivables to be prepared and, promptly upon the Closing Date, duly filed in the manner required by the laws of each appropriate jurisdiction and performed all other actions required to perfect the interest of the Trustee for the benefit of the Noteholders in the Receivables, (ii) paid, or caused to be paid, upon the Closing Date, all transfer taxes, documentary stamp taxes and filing fees incurred in connection therewith and (iii) upon request of the Purchasers, delivered UCC lien and any other applicable search results to the Purchasers with respect to the Company and Oakwood Acceptance. 3.1.17 Since the Closing Date, there has been no material adverse change in the business, operations, properties, assets or condition or prospects (financial or otherwise) of Oakwood Acceptance or any affiliate thereof, or any development involving a material adverse prospective change in or affecting the business or properties of Oakwood Acceptance or any affiliate thereof, the effect of which, in the judgment of the Purchasers, can be reasonably expected to have a material and adverse effect on the Purchasers investment or contemplated investment in the Notes or to make it impractical or inadvisable to proceed with the offering or the delivery of the Notes as contemplated by the Indenture and this Agreement. 3.1.18 The Purchasers shall have received a copy of a certification from the Trustee provided pursuant to Section 2.05 of the Indenture that it has received a copy of the underlying REMIC Pooling Agreements and all the amendments thereto. 3.1.19 No fact or condition shall exist under applicable law or applicable regulations thereunder or interpretations thereof by any regulatory authority which in the Purchasers' reasonable opinion would make it illegal for the Company to issue and sell the Notes or for the Company or any of the other parties thereto to perform their respective obligations under the Indenture or any other Transaction Document. 3.1.20 The Purchasers shall have received the original executed and authenticated Notes, and the Company, Oakwood Acceptance, the Purchasers and the Trustee shall each have received a fully executed counterpart original and any required conformed copies of all Transaction Documents and any related documents delivered at or prior to the Closing Date. 3.1.21 All corporate, limited liability company, trust and other proceedings in connection with the sale of the Notes and the transactions contemplated hereby and all 5 documents and certificates incident thereto shall be satisfactory in form and substance to the Purchasers and their special counsel, and the Purchasers shall have received such other documents and certificates incident to such transaction as the Purchasers or such counsel shall reasonably request. 3.1.22 The Purchasers shall have received favorable opinion letters, addressed to the Purchasers, in form and substance acceptable to the Purchasers and their special counsel (which may be relied upon by assignees and participants), dated the Closing Date, of (i) Hunton & Williams, special counsel to the Company and Oakwood Acceptance and (ii) legal counsel to the Trustee. 3.1.23 The Company and Oakwood Acceptance shall, by the Closing Date, cause to be obtained and delivered in writing to the Purchasers a private placement number assigned by Standard & Poor's Ratings Group CUSIP Service Bureau with respect to the Notes. All fees and expenses payable in connection with such number shall be paid by the Company. 3.1.24 The Initial Fixed Rate Note Balance shall be $50,000,000 and the Collateral Requirement, calculated immediately subsequent to the issue of the Notes, will be satisfied. 3.1.25 [Reserved] 3.1.26 [Reserved] 3.1.27 The fees, expenses and disbursements of Dewey Ballantine LLP, as counsel to the Purchasers, have been paid on or prior to Closing. 3.1.28 The Rating Agency shall have delivered a rating letter, dated the Closing Date, assigning a rating to the Notes of "A". 3.1.29 The purchase by the Purchasers of the Notes shall be permitted by the laws and regulations to which the Purchasers are subject, without recourse to the provisions permitting limited investments without restriction as to the character thereof. If any of the conditions specified in this Article III shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and Notes mentioned above or elsewhere in this Agreement shall not be in all respects satisfactory in form and substance to the Purchasers, this Agreement and all obligations of the Purchasers hereunder may be canceled at, or at any time prior to, the Closing Date by the Purchasers. Notice of such cancellation shall be given to the Company in writing or by telephone or telecopy confirmed in writing. ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS Section 4.1 In order to induce the Purchasers to purchase the Notes from the Company, each of the Company and Oakwood Acceptance, as to itself only, severally represents, 6 warrants and covenants to the Purchasers on the Closing Date and on each Funding Date as follows (but in each case only with respect to the portions of the representations, warranties and covenants that specifically refer to it): 4.1.1 Each of the Company and Oakwood Acceptance, as applicable, (i) is a corporation, business trust or a limited liability company, duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization; (ii) has all requisite power and authority and all licenses and permits to own and operate its properties and to carry on its business as now conducted, and to enter into and perform its obligations under each Transaction Document to which it is a party and the transactions contemplated thereby, including, in the case of the Company, the issuance and sale of the Notes and the performance of its obligations thereunder; and (iii) has duly qualified and is authorized to do business and, if applicable, is in good standing as a foreign corporation or limited liability company (or is exempt from such requirements) and has obtained all necessary licenses and approvals in each jurisdiction where the character of its properties or the nature of its activities makes such qualification materially necessary. 4.1.2 Each Transaction Document to which the Company and Oakwood Acceptance, as applicable, is a party has been duly authorized and, when executed and delivered by such Person will constitute valid, binding and enforceable obligations of such Person in accordance with its terms, subject, as to the enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforceability of creditors' rights generally applicable in the event of the bankruptcy, insolvency or reorganization of such Person and to general principles of equity. 4.1.3 No event has occurred and is continuing that constitutes, or with the passage of time or the giving of notice or both would constitute a Default or an Event of Default under, and as defined in, the Indenture or any other Transaction Document. Neither the execution and delivery of the Transaction Documents by the Company or Oakwood Acceptance, as applicable, the consummation of the transactions contemplated thereby nor the satisfaction of the terms and conditions of the Transaction Documents (i) conflicts with or results in any breach or violation of any provision of the certificate of incorporation, articles of organization, operating agreements, bylaws or other organizational document of the Company or Oakwood Acceptance, as applicable, or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to the Company or Oakwood Acceptance, as applicable, or any of their respective properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over the Company or Oakwood Acceptance, as applicable; or (ii) constitutes a default by the Company or Oakwood Acceptance, as applicable, under or a breach of any provision of any indenture, contract, agreement, mortgage, deed of trust or other instrument to which they are a party or by which they or any of their properties are or may be bound or affected. 4.1.4 The Notes have been duly and validly authorized by the Company and, when duly and validly executed and authenticated by the Trustee in accordance with the Indenture, will be validly issued and outstanding and entitled to the benefits of the Indenture. 7 4.1.5 The Company had at all relevant times and now has full power and authority to purchase and own the Receivables and has full power and authority to Grant the Trust Estate, has duly authorized such Grant by all necessary action, and does not require any member approval, or approval or consent of any trustee or holders of any indebtedness or obligations of the Company other than such as have been obtained. 4.1.6 The consummation of the transactions contemplated by this Agreement and the other Transaction Documents to which either the Company or Oakwood Acceptance is a party and the fulfillment of the terms hereof and thereof are legal and will not (i) conflict with, or result in a breach of any of the provisions of, or constitute a default under, any of the provisions of any indenture, mortgage, deed of trust, contract, agreement, charter instrument, by-law or other instrument to which such Person is a party or by which such Person or their respective property is bound, (ii) result in the creation or imposition of any lien upon any of the properties or assets of such Person pursuant to the terms of any such indenture, mortgage, deed of trust, contract, agreement, charter instrument, by-law or other instrument, or (iii) in the case of each of the Company and Oakwood Acceptance, violate any of the provisions of the articles of incorporation or articles of organization, as applicable, or by-laws or operating agreement, as applicable, of such Person. 4.1.7 No form of general solicitation or general advertising was used by the Company or Oakwood Acceptance or their representatives in connection with the offer and sale of the Notes. Neither the Company nor Oakwood Acceptance has offered, in this offering or any offering that would be integrated with this offering under any applicable securities law, any of the Notes or any similar security of the Company for sale to, or solicited offers to buy any thereof from, or otherwise approached or negotiated with respect thereto with, any prospective purchaser, other than not more than two institutional investors, which was offered a portion of the Notes at private sale for investment. Neither the Company nor Oakwood Acceptance, nor anyone acting on their behalf have offered or sold, nor will any of them offer or sell, any Note or any part thereof or any similar security for issue or sale to, or solicit any offer to acquire any of the same from, anyone in any manner that would render the issuance and sale of the Notes a violation of the Securities Act, the rules or regulations thereunder, or the securities laws of any state of the United States or require registration pursuant thereto, nor have they authorized, nor will they authorize, any Person to act in such manner. It is not necessary in connection with the offer, sale and delivery of the Notes to register the Notes under the Securities Act. 4.1.8 [RESERVED] 4.1.9 The Company is not required to register as an "investment company" and is not under the control of an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the Indenture is not required to be qualified as an "indenture" pursuant to the terms of the Trust Indenture Act of 1939, as amended. 4.1.10 There is no pending action, suit, proceeding or investigation, including but not limited to any such proceeding or investigation resulting from the ownership or use of any of the Receivables, against or affecting the Company or Oakwood Acceptance before any court, administrative agency, arbitrator or governmental body against the Company or Oakwood Acceptance or, to the best knowledge of either the Company or Oakwood Acceptance, any 8 threatened action or proceeding, including but not limited to any such proceeding or investigation resulting from the ownership or use of any of the Receivables, against or affecting the Company or Oakwood Acceptance before any of the foregoing which, if decided adversely to such Person, would materially affect (i) the condition (financial or otherwise), business, properties, prospects, profits or operations of such Person, (ii) the ability of such Person to perform their respective obligations under, or the validity or enforceability of, any Transaction Document to which it is a party or (iii) the Trustee's ability to foreclose or otherwise enforce its interest in the Receivables as contemplated under the Indenture and the Administration Agreement. Neither the Company nor Oakwood Acceptance is subject to any order of any court, governmental authority or agency or arbitration board or tribunal. 4.1.11 No consent, approval, authorization, order of, or filing, registration, qualification with any court or other governmental authority in respect of either of the Company or Oakwood Acceptance is necessary or required in connection with the authorization, execution, delivery or performance by such Person of this Agreement or any other Transaction Document to which it is a party or any of the other documents or transactions contemplated thereby, including without limitation, the sale, transfer and assignment of the Trust Estate to the Trustee, the filing of any appropriate UCC financing statements or the offer, issue, sale, delivery or performance of the Notes, other than that consent, approval, authorization, order, filing, registration or qualification which has been obtained. 4.1.12 No information supplied in writing by, or on behalf of, the Company or Oakwood Acceptance to the Purchasers in connection with the transactions contemplated by the Indenture and the Transaction Documents, in each case as of the Closing Date, other than information supplied by or on behalf of an Obligor (as to which the Company makes no representation), contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or herein not misleading. There is no fact peculiar to the Company, Oakwood Acceptance or any Affiliate of such Person or, to the knowledge of such Person, any Receivable or other Person which such Person, as applicable, has not disclosed to the Purchasers in writing which materially affects adversely nor, so far as such Person, as applicable, can now reasonably foresee, will materially affect adversely the financial condition, affairs or prospects of, or the ability of, such Person, as applicable, to perform the transactions contemplated by the Transaction Documents. 4.1.13 None of the transactions contemplated herein (including, without limitation thereof, the use of the proceeds from the sale of the Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act, or any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Company does not own or intend to carry or purchase, and no proceeds from the sale of the Notes will be used to carry or purchase, any "margin stock" within the meaning of Regulation U or to extend "purpose credit" within the meaning of Regulation U. 4.1.14 The representations and warranties of the Company and Oakwood Acceptance, as the case may be, in the Indenture and the other Transaction Documents to which it is a party are true and correct and are hereby incorporated by reference as if each such representation and warranty were specifically made herein. 9 4.1.15 Each of the Company and Oakwood Acceptance, as applicable, is not a party to any contract or agreement, or subject to any charter or other corporate or limited liability company restriction, which materially and adversely affects its business. The Company has not agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its properties or any of the Trust Estate, whether now owned or hereafter acquired, to be subject to a lien not permitted by the Transaction Documents. 4.1.16 For so long as any of the Notes are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, the Company will cause to be provided to any Noteholder and any prospective purchaser of Notes designated by a holder of such Notes, upon the request of such holder or prospective purchaser, the information required to be provided to such holder or prospective purchaser by Rule 144A(d)(4) under the Securities Act. 4.1.17 The Company and Oakwood Acceptance will comply in all material respects with all requirements of law applicable to such Person relating to the performance of its obligations under this Agreement and the Notes. 4.1.18 The Company agrees upon request to furnish the Purchasers copies of the Transaction Documents, the underlying REMIC Pooling Agreements listed in Schedule 2 to the Indenture and any documents furnished to the Company pursuant to the terms of the Transaction Documents and such other information and documents relating to the Notes and the Receivables as the Purchasers may request. 4.1.19 The Company and Oakwood Acceptance agree not to enter into any amendment or supplement to or modification of the Transaction Documents or grant any waiver or consent under the Transaction Documents without the consent of the Majority Noteholders or the Noteholders, as the case may be, as required under the Transaction Documents. 4.1.20 The Company and Oakwood Acceptance agree not to enter into any material amendment or supplement to or modification of the underlying REMIC Pooling Agreements listed in Schedule 2 to the Indenture without the consent of the Majority Noteholders. 4.1.21 The Company and Oakwood Acceptance agree to furnish the Purchasers with all reports and information relating to the Notes and the underlying REMIC Trusts which are delivered pursuant to the Transaction Documents promptly upon receipt thereof. 4.1.22 [Reserved]. 4.1.23 [Reserved]. 4.1.24 [Reserved]. Section 4.2 (a) The Purchasers understand and acknowledge that the Notes have not been registered under the Securities Act nor pursuant to the securities or blue sky laws of any State. Each of the Purchasers represents that it is not acquiring the Notes with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act, 10 provided that the disposition of its property shall at all times be and remain within its control. Each of the Purchasers represents that it is an "accredited investor" as defined in Regulation D of the Securities Act and an "insurance company" as defined in Section 2(13) of the Securities Act. Each Purchaser represents that it is a sophisticated investor capable of evaluating the risks involved in an investment in the Notes, that it can afford a complete loss of its investment, has received a copy of the Transaction Documents and acknowledges that it has had access to such financial and other information, and has been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as each such Purchaser deems necessary in connection with its decision to purchase Notes. (b) Each of the Purchasers represents that it is an insurance company duly and validly existing under the laws of the state of its organization and represents that the source of funds from which its investment is to be made is either (i) a general account of an insurance company and all requirements for exemption under Prohibited Transaction Class Exemption 95-60 are met with respect to the use of the general account's funds to purchase the Notes or (ii) a separate account within the meaning of Section 3(17) of ERISA, which account is both a "pooled separate account" within the meaning of Prohibited Transaction Class Exemption 90-1 ("PTE 90-1") and an "investment fund" within the meaning of Part V of Prohibited Transaction Class Exemption 84-14 ("PTE 84-14"); provided, with respect to an investment from a source of funds pursuant to (ii) above: (A) all requirements for exemption under PTE 90-1 are met with respect to the use of the separate account's funds to purchase the Notes; (B) it meets the definition of a "Qualified Professional Asset Manager" within the meaning of Part V(a) of PTE 84-14; (C) it has negotiated the terms, and made the decision, on behalf of the separate account to enter into the purchase of the Notes, which was not a part of an arrangement designed to benefit a party in interest; and (D) to the best of its knowledge after reasonable investigation and on the basis of the disclosure provided by the Company to date, all conditions for application of PTE 84-14 are met with respect to those plans holding interests of ten percent or greater in the separate account. ARTICLE V EXPENSES Section 5.1 Whether or not the transactions contemplated hereby shall be consummated, the Company will pay or cause to be paid all present and future recording and filing fees, and all reasonable legal, financial and miscellaneous out-of-pocket expenses and costs incurred in connection with the negotiation and consummation of this Agreement, the issuance and sale of the Notes and the transactions hereby contemplated, including, but not limited to (i) all taxes, including without limitation, sales, transfer, documentary stamp and similar taxes, applicable to such transactions, together with interest and penalties, if any, thereon, 11 but excluding any taxes of the Purchasers imposed on or measured by the Purchasers' income, (ii) the fees and out-of-pocket expenses of the Trustee incurred in connection with such transactions on or before the Closing Date (including reasonable legal fees or expenses), (iii) the fees and expenses of Standard & Poor's in connection with obtaining a private placement number with respect to the Notes and (iv) the fees and expenses incurred in connection with obtaining a rating for the Notes from a Rating Agency, including, but not limited to, all reasonable fees, expenses and disbursements of counsel, independent accountants or other third parties necessary to effect such a rating. The Company further agrees to pay the fees, charges and expenses of Dewey Ballantine LLP, special counsel for the Purchasers. The Company further agrees that it will pay or cause to be paid, promptly upon demand, any reasonable expense incurred by the Purchasers in connection with the making of any amendment to, or the giving of any release, consent or waiver in respect of, this Agreement and any document executed pursuant hereto or thereto, whether or not consummated, including the reasonable fees and disbursements of counsel for the Purchasers in connection therewith. The Company further agrees that it will pay, or reimburse the Purchasers for, promptly upon demand, all costs and expenses (including legal fees and disbursements) incident to or in connection with any proceeding or governmental investigation against or with respect to the Company or any obligor or any subsidiary or affiliate of any of them, and which result because of the ownership by the Purchasers of the Notes. The obligations of the Company under the immediately preceding sentence shall survive the termination of the Indenture, the transfer of any Note or portion thereof or interest therein by the Purchasers and the payment of any Note. Section 5.2 Each of the Company and Oakwood Acceptance agrees (each as to its own obligations) to indemnify and hold harmless each Purchaser for the amount of any and all losses, claims, damages and liabilities to the extent that such loss, claim, damage or liability arose out of, or was imposed upon such Purchaser by reason of, the failure by the Company or Oakwood Acceptance, as the case may be, to perform any of its obligations under this Agreement and the Transaction Documents or the breach of a representation or warranty made by the Company or Oakwood Acceptance, as the case may be, herein. ARTICLE VI MISCELLANEOUS Section 6.1 All agreements, indemnities, covenants, representations and warranties (which representations and warranties shall be deemed to be made as of the date specified therefor) made by the Company and Oakwood Acceptance herein and in Notes and other instruments delivered pursuant to this Agreement (and the representations and warranties of the Purchasers in Section 4.2 hereof, which representations and warranties shall be deemed to be made as of the Closing Date) shall survive the execution and delivery of this Agreement and the delivery of the Notes to the Purchasers and shall continue in effect so long as any Note remains outstanding. Section 6.2 All notices, demands and other communications hereunder shall be in writing and hand delivered, telecopied, mailed (by registered or certified mail, postage prepaid) or delivered by a nationally recognized overnight courier service addressed: 12 (a) if to Oakwood Acceptance: Oakwood Acceptance Corporation 7800 McCloud Road Greensboro, NC 27409-9634 (b) if to the Company: Oakwood Advance Receivables Company, L.L.C. c/o Nevada Holdings Services, Inc. Bank of America Plaza 101 Convention Center Drive - Suite 850 Las Vegas, Nevada 89109 (c) if to the Purchasers: at their respective addresses set forth in Schedule I or to such other addresses as may hereafter be designated in the manner above provided by any party for such purpose, and shall be effective upon receipt. All payments to be made to a Purchaser shall be made by wire transfer to its account specified in Schedule I, or to such other account as it shall specify in writing to the Trustee. Section 6.3 The Indenture and the Notes have been structured with the intention that the Notes will qualify under applicable tax law as indebtedness, and each of the Company, Oakwood Acceptance and the Purchasers by acceptance of the Notes (and any Person which is a beneficial owner of any interest in any such Note, by virtue of such person's acquisition of a beneficial interest therein) agrees to treat the Notes for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as indebtedness. Section 6.4 This Agreement shall be binding upon, and inure to the benefit of, the Company, Oakwood Acceptance and the Purchasers and its successors and assigns, except that the Company and Oakwood Acceptance may not assign or transfer their rights hereunder without the prior written consent of the Purchasers. Nothing expressed herein is intended or shall be construed to give any person other than the persons referred to in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement. Section 6.5 If any provision hereof shall be invalid, illegal or unenforceable in any jurisdiction, the remaining provisions shall continue to be valid and enforceable in such jurisdiction and such provision shall continue to be valid and enforceable in all other jurisdictions. Section 6.6 THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS. 13 This Agreement may not be waived, modified or amended without the written consent of the party against whom such waiver, modification or amendment is claimed. This Agreement may be executed in any number of counterparts, and by the different parties on different counterparts, each counterpart constituting an original, but all together constituting only one agreement. Section 6.7 EACH PARTY HERETO EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES OR ANY OTHER AGREEMENT RELATED HERETO OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OTHER AGREEMENT RELATED HERETO, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY. Section 6.8 Each of Oakwood Acceptance and the Company hereby submits to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in The City of New York, for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each of the Company and Oakwood Acceptance irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum, and further waives the right to object with respect to such proceedings that such court does not have any jurisdiction over such party. 14 IN WITNESS WHEREOF, the parties hereto have caused this Note Purchase Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. OAKWOOD ADVANCE RECEIVABLES COMPANY, L.L.C. By: /s/ Dennis W. Hazelrigg ------------------------------------------------- Name: Dennis W. Hazelrigg Title: President OAKWOOD ACCEPTANCE CORPORATION By: /s/ Douglas R. Muir ------------------------------------------------- Name: Douglas R. Muir Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Michael J. Bozzo ------------------------------------------------- Name: Michael J. Bozzo Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Advisor to the ABS Fund By: /s/ Michael J. Bozzo ------------------------------------------------- Name: Michael J. Bozzo Title: Vice President NORWEST BANK MINNESOTA, N.A., as Trustee for Norwest Stable Return Fund By: The Prudential Insurance Company of America, Investment Advisor By: /s/ Michael J. Bozzo ------------------------------------------------- Name: Michael J. Bozzo Title: Vice President 15 [Schedules and Exhibits Omitted.] EX-10.2 6 g74241ex10-2.txt INDENTURE BY AND AMONG OAKWOOD ADVANCE RECEIVABLES EXHIBIT 10.2 INDENTURE OAKWOOD ADVANCE RECEIVABLES COMPANY, L.L.C. as Issuer and THE CHASE MANHATTAN BANK, AS TRUSTEE, VERIFICATION AGENT AND PAYING AGENT and OAKWOOD ACCEPTANCE CORPORATION, INDIVIDUALLY AND AS REMIC SERVICER DATED AS OF SEPTEMBER 28, 2001 ------------------ OAC ADVANCE RECEIVABLES BACKED NOTES, SERIES 2001-ADV ------------------ TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS..........................................................................................1 Section 1.01. Definitions............................................................................1 Section 1.02. Interpretation........................................................................17 ARTICLE II CREATION OF TRUST ESTATE; CUSTODY OF RECEIVABLE FILES; REPRESENTATIONS REGARDING RECEIVABLES; DISCHARGE..............................................................................18 Section 2.01. Creation of Trust Estate..............................................................18 Section 2.02. Receivable Files......................................................................21 Section 2.03. Acceptance By Trustee.................................................................22 Section 2.04. Reacquisition of Receivables Upon Breach..............................................22 Section 2.05. Duties of Trustee with Respect to the Receivable Files................................23 Section 2.06. RESERVED..............................................................................24 Section 2.07. Satisfaction and Discharge of Indenture...............................................24 Section 2.08. Application of Trust Money............................................................24 ARTICLE III ADMINISTRATION OF RECEIVABLES.......................................................................25 Section 3.01. Duties of the Verification Agent and the Trustee......................................25 Section 3.02. Monthly REMIC Servicer Report; Payment Date Report....................................27 Section 3.03. Annual Statement as to Compliance; Notice of Default..................................28 Section 3.04. Verification Agent Duties; Periodic Accountants' Report...............................29 Section 3.05. Access to Certain Documentation and Information.......................................32 Section 3.06. Reports to Noteholders and the Rating Agency..........................................33 Section 3.07. Tax Treatment.........................................................................33 ARTICLE IV THE ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS...................................................34 Section 4.01. Accounts..............................................................................34 Section 4.02. Collections...........................................................................34 Section 4.03. Additional Deposits...................................................................35 Section 4.04. Allocations and Payments..............................................................36 Section 4.05. Reserve Account.......................................................................38 Section 4.06. Note Payment Account..................................................................38 Section 4.07. Statements to Noteholders.............................................................39 Section 4.08. Securities Accounts...................................................................39 Section 4.09. Notice of Adverse Claims..............................................................42 ARTICLE V [RESERVED]..........................................................................................42
-i- ARTICLE VI THE NOTES...........................................................................................42 Section 6.01. The Notes.............................................................................42 Section 6.02. Authentication and Delivery of the Notes..............................................43 Section 6.03. Registration of Transfer and Exchange of Notes........................................43 Section 6.04. Mutilated, Destroyed, Lost or Stolen Notes............................................47 Section 6.05. Persons Deemed Owners.................................................................48 Section 6.06. Access to List of Noteholders' Names and Addresses....................................48 Section 6.07. Surrendering of Notes.................................................................48 Section 6.08. Maintenance of Office or Agency.......................................................49 Section 6.09. Interest Calculations; Interest Payments..............................................49 Section 6.10. Payments of Principal and Reborrowings during the Funding Period......................49 Section 6.11. Purchases of Additional Receivables during Funding Period.............................49 Section 6.12. Asset-Based Receivables...............................................................50 ARTICLE VII THE ISSUER..........................................................................................51 Section 7.01. Representations, Warranties and Certain Covenants of Issuer...........................51 Section 7.02. Repayment in Respect of Receivables Upon Breach.......................................56 Section 7.03. Liability of Issuer; Indemnities......................................................57 Section 7.04. Merger or Consolidation of, or Assumption of the Obligations of, the Issuer; Certain Limitations...................................................................58 Section 7.05. RESERVED..............................................................................60 Section 7.06. Issuer May Not Own Notes..............................................................60 Section 7.07. Covenants of Issuer...................................................................60 ARTICLE VIII OAC.................................................................................................65 Section 8.01. Liability of OAC; Indemnities.........................................................65 Section 8.02. Merger or Consolidation of, or Assumption of the Obligations of OAC...................66 ARTICLE IX EVENTS OF DEFAULT; REMEDIES.........................................................................67 Section 9.01. Events of Default.....................................................................67 Section 9.02. Acceleration of Maturity; Rescission and Annulment....................................70 Section 9.03. Collection of Indebtedness and Suits for Enforcement by Trustee.......................71 Section 9.04. Remedies..............................................................................71 Section 9.05. Trustee May File Proofs of Claim......................................................72 Section 9.06. Trustee May Enforce Claims without Possession of Notes................................72 Section 9.07. Application of Money Collected........................................................73 Section 9.08. Limitation on Suits...................................................................73 Section 9.09. Unconditional Rights of Noteholders to Receive Principal and Interest.................73 Section 9.10. Restoration of Rights and Remedies....................................................74 Section 9.11. Rights and Remedies Cumulative........................................................74 Section 9.12. Delay or Omission Not Waiver..........................................................74 Section 9.13. Control by Majority Noteholders.......................................................74 Section 9.14. Waiver of Past Defaults...............................................................75
-ii- Section 9.15. Undertaking for Costs.................................................................75 Section 9.16. Waiver of Stay or Extension Laws......................................................75 Section 9.17. Sale of Trust Estate..................................................................75 Section 9.18. Action on Notes.......................................................................77 Section 9.19. No Recourse to Other Trust Estates or Other Assets of the Issuer......................77 ARTICLE X THE TRUSTEE.........................................................................................77 Section 10.01. Duties of Trustee.....................................................................77 Section 10.02. Trustee's Certificate.................................................................79 Section 10.03. Trustee's Release of Removed Receivables..............................................79 Section 10.04. Certain Matters Affecting the Trustee.................................................79 Section 10.05. Limitation on Trustee's Liability.....................................................81 Section 10.06. Trustee May Own Notes.................................................................82 Section 10.07. Trustee's Fees and Expenses...........................................................82 Section 10.08. Indemnity of Trustee..................................................................82 Section 10.09. Eligibility Requirements for Trustee..................................................83 Section 10.10. Resignation or Removal of Trustee.....................................................83 Section 10.11. Successor Trustee.....................................................................84 Section 10.12. Merger or Consolidation of Trustee....................................................84 Section 10.13. Appointment of Co-Trustee or Separate Trustee.........................................85 Section 10.14. Representations and Warranties of Trustee.............................................86 Section 10.15. Tax Returns...........................................................................87 ARTICLE XI REDEMPTION..........................................................................................87 Section 11.01. Redemption at the Option of the Issuer; Election to Redeem............................87 Section 11.02. Deposit of Redemption Amount..........................................................87 Section 11.03. Notice of Redemption by the Trustee...................................................88 Section 11.04. Payment and Surrendering of Notes.....................................................88 ARTICLE XII MISCELLANEOUS PROVISIONS............................................................................88 Section 12.01. Amendment.............................................................................88 Section 12.02. Protection of Security Interest in Trust Estate......................................90 Section 12.03. Limitation of Rights of Noteholders...................................................91 Section 12.04. Governing Law.........................................................................91 Section 12.05. Notices...............................................................................92 Section 12.06. Severability of Provisions; Counterparts..............................................92 Section 12.07. Assignment............................................................................92 Section 12.08. No Petition...........................................................................92 Section 12.09. Noteholder Direction..................................................................93 Section 12.10. No Substantive Review of Compliance Documents.........................................93 Section 12.11. Prevention of Trading of Notes........................................................93
-iii- Exhibit A Form of Monthly REMIC Servicer Report Exhibit B Trustee's Certificate Exhibit C Form of Fixed Rate Note Exhibit D Transferee Certificates Exhibit E Form of Funding Date Report Exhibit F Form of Payment Date Report Exhibit I Form of Trust Certification Schedule 1-A List of Initial Asset-Based REMIC Trusts Schedule 1-B List of Initial Series-Based REMIC Trusts Schedule 2 List of all REMIC Pooling Agreements and all Amendments and Supplements thereto -iv- This Indenture, dated as of September 28, 2001 (the "Indenture") is executed by and among Oakwood Advance Receivables Company, L.L.C., as issuer (the "Issuer"), The Chase Manhattan Bank, as trustee (in such capacity, the "Trustee"), as verification agent (the "Verification Agent") and as paying agent (the "Paying Agent"), and Oakwood Acceptance Corporation, together with any successor entity, individually ("OAC") and as servicer of the REMIC Trusts (the "REMIC Servicer"). In consideration of the mutual agreements herein contained, each party agrees as follows for the benefit of the other parties and the Noteholders to the extent provided herein: ARTICLE I DEFINITIONS SECTION 1.01. DEFINITIONS. Except as otherwise provided in this Indenture, whenever used herein, the following words and phrases, unless the context otherwise requires, shall have the following meanings: "Accounts" means the Collection Account, the Reserve Account and the Note Payment Account. "Additional Receivables" means all receivables created as a result of the Seller's making P&I Advances pursuant to a REMIC Pooling Agreement during the Funding Period. Any receivables created at any time with respect to a REMIC Trust with respect to which OAC no longer acts at such time as REMIC Servicer shall not constitute Additional Receivables. The Additional Receivables to be funded on any Funding Date shall be included in the list of Receivables reported in the related Funding Date Report as provided in Section 6.11 hereof. "Adverse Claim" means a lien, security interest, charge, encumbrance or other right or claim of any Person. "Affiliate" means, with respect to any specified Person, any other Person controlling or controlled by or under 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 term "controlling" and "controlled" have meanings correlative to the foregoing. "Aggregate Receivables" means all Initial Receivables and all Receivables under Designated REMIC Trusts contributed by the Seller to the Issuer under the Receivables Contribution Agreement. "Applicants" shall have the meaning specified in Section 6.06. "Asset" shall have the meaning assigned to such term in the respective REMIC Pooling Agreements. "Asset-Based Net Proceeds Coverage Percentage" means, for any Collection Period, the percentage equivalent of a fraction, the numerator of which is the aggregate amount of Net Proceeds received by the Trustee during such Collection Period attributable to Asset-Based Receivables, and the denominator of which is the highest aggregate Receivables Balance of all Asset-Based Receivables in the Trust Estate at any date during such Collection Period. "Asset-Based Receivable" means a Receivable related to a P&I Advance made with respect to an Asset-Based REMIC Trust. "Asset-Based Receivables Acceptance Date" shall mean, for any Asset-Based REMIC Trust, the date, if any, on which the Issuer and OAC shall have received a written instrument signed by the Majority Noteholders confirming that the Majority Noteholders are satisfied that the REMIC Servicer is able to report and track the funding and reimbursement of P&I Advances with respect to such Asset-Based REMIC Trust accurately, on an Asset-by-Asset basis. "Asset-Based REMIC Trust" means a REMIC Trust for which, pursuant to the related REMIC Pooling Agreement, the determination as to whether P&I Advance Reimbursement Amounts related to such P&I Advance have been recovered is made on an Asset-by-Asset basis. The Asset-Based REMIC Trusts as of the Closing Date are listed on Schedule 1-A attached hereto. "Available Funds" means, with respect to any Payment Date, all funds on deposit in the Collection Account as of the close of business on the last day of the preceding Collection Period; plus all funds deposited into the Note Payment Account on such Payment Date pursuant to Section 4.05(d). "Benefit Plan" means with respect to any Person any employee benefit plan as defined in Section 3(3) of ERISA in respect of which the Person or any ERISA Affiliate of such Person is, or at any time during the immediately preceding six years was, an "employer" as defined in Section 3(5) of ERISA. "Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions in the State of New York, the State of North Carolina or the State of Nevada are required or authorized by law, regulation, executive order or governmental decree to be closed. "Certificate Account" shall have the meaning assigned to such term in the respective REMIC Pooling Agreements. "Certificate of Formation" means the Certificate of Formation of the Issuer. "Clearing Corporation" shall have the meaning given such term in Section 8-102(a)(5) of the UCC. "Closing Date" means October 2, 2001. "Code" means the Internal Revenue Code of 1986, as amended. -2- "Collateral Balance" means, on any date, the sum of (a) the product of (i) the outstanding Receivables Balance of the Asset-Based Receivables in the Trust Estate, and (ii) 0.90, and (b) the product of (i) the outstanding Receivables Balance of the Series-Based Receivables in the Trust Estate, and (ii) 0.99; provided, that any Receivable as to which a breach of representation or warranty made by the Seller in the Receivables Contribution Agreement has occurred and not been cured shall have a Collateral Balance of zero. "Collateral Requirement" means, on any date, the requirement that the sum of (1) the Collateral Balance plus (2) the amount of cash then on deposit in the Collection Account and the Note Payment Account, shall be greater than the Fixed Rate Note Balance as of the opening of business on such date (after giving effect to any required payments on such date, if any). "Collection Account" means the segregated account or accounts, each of which shall be an Eligible Account, established and maintained pursuant to Section 4.01 and entitled "The Chase Manhattan Bank, as Trustee under the Indenture dated as of September 28, 2001 among Oakwood Advance Receivables Company, L.L.C., The Chase Manhattan Bank, as Trustee, as Verification Agent and as Paying Agent, and Oakwood Acceptance Corporation, Collection Account." "Collection Period" means, with respect to any Payment Date, the calendar month preceding the calendar month in which the Payment Date occurs, except that with respect to the Initial Payment Date, the Collection Period shall begin on the Closing Date and end on September 30, 2001. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 450 W. 33rd Street, New York, New York 10001, Attn: Institutional Trust Services - OAC Advance Receivables Backed Notes, Series 2001-ADV. "Custodian" shall have the meaning specified in Section 2.05(a). "Default Rate" means the Fixed Rate plus 2.00% per annum. "Designated REMIC Trust" shall have the meaning assigned to such term in the Receivables Contribution Agreement. "Discount Factor" means with respect to Asset-Based Receivables, 90%, and with respect to Series-Based Receivables, 99%. "Eligible Account" means (A) a segregated account or accounts maintained with an institution the deposits of which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC, the unsecured and uncollateralized debt obligations of which shall be rated "AA" or "Aa2" or better by the Rating Agency then providing a long term debt rating for such institution and in the highest available short term rating category by the Rating Agency then providing a short term debt rating for such institution, and that is (i) a federal savings and loan association duly organized, validly existing and in good standing under the federal banking laws, (ii) a banking or savings and loan association duly organized, validly existing and in good standing under the applicable laws of any state, (iii) a national banking -3- association duly organized, validly existing and in good standing under the federal banking laws, or (iv) a principal subsidiary of a bank holding company, or (B) a segregated trust account (which shall be a "special deposit account") maintained in the trust department of a federal or state chartered depository institution or trust company, having capital and surplus of not less than $50,000,000, acting in its fiduciary capacity. Any Eligible Accounts maintained with the Trustee shall conform to the preceding clause (B). "Employee Benefit Plan" shall have the meaning specified in Section 6.01(i). "Entitlement Order" shall have the meaning given such term in Section 8-102(a)(8) of the UCC. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means with respect to any Person (a) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as such Person; (b) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Code) with such Person, or (c) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as such Person, any corporation described in clause (a) above or any trade or business described in clause (b) above. "Event of Default" shall have the meaning specified in Section 9.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "FDIC" means the Federal Deposit Insurance Corporation, and its successors. "Final Payment Date" shall mean the earliest of (i) the Stated Maturity Date, (ii) after the end of the Funding Period, the Payment Date on which the Note Balance has been reduced to zero, or (iii) the Payment Date which follows the Payment Date on which all proceeds of a sale of the Trust Estate were distributed pursuant to Section 9.17(d). "Financial Asset" shall have the meaning assigned to such term in Section 8-102(a)(9) of the UCC. "Fixed Rate" means 5.262% per annum. "Fixed Rate Note" means one of the OAC Advance Receivables Backed Notes, Series 2001-ADV executed by the Issuer and authenticated by the Trustee in substantially the form attached hereto as Exhibit C. "Fixed Rate Note Balance" means the Initial Fixed Rate Note Balance less all amounts paid to Holders of the Fixed Rate Notes and applied in reduction of the Fixed Rate Note Balance. "FNMA" means Fannie Mae, and its successors. -4- "Flow-Through Entity" means any partnership, limited liability company, S corporation, grantor trust, or any other "flow-through entity" (within the meaning of United States Treasury Regulations Section 1.7704-1(h)(3)) which may directly or indirectly acquire any Notes. "Funding Account" shall have the meaning specified in Section 4.02(a). "Funding Amount" means the cash amount disbursed to the Issuer or the Issuer's designee with respect to any Receivable on the related Funding Date, which amount shall be equal to the product of the Receivable Balance of such Receivable and the related Discount Factor, to the extent the disbursement of such Funding Amount would not result in the aggregate outstanding Collateral Balance attributable to Receivables in respect of which the Funding Amount has been paid, exceeding the initial Fixed Rate Note Balance. "Funding Conditions" shall mean, with respect to any proposed Funding Date, (i) no breach of representation, warranty or covenant of the Seller, OAC, the Issuer or with respect to the Receivables hereunder or under the Receivables Contribution Agreement shall exist or continue to exist, (ii) no Event of Default, Funding Interruption Event or Funding Termination Event shall have occurred and be continuing, (iii) OAC shall have provided the Trustee and the Noteholders, no later than 11:00 AM Eastern time on such Funding Date, (A) a Funding Date Report reporting information with respect to the Receivables in the Trust Estate and demonstrating the satisfaction of the Collateral Requirement, as required by Section 6.11(a) and (B) other related information that the Trustee and/or the Majority Noteholders shall have reasonably requested from OAC; (iv) as of each Funding Date, the Issuer and OAC shall not be insolvent nor shall the Issuer have been made insolvent by such Grant nor shall it be aware of any pending insolvency; (v) such Grant shall not result in a material adverse tax consequence to the Trust Estate or the Noteholders; (vi) the Funding Period shall not have terminated, and (vii) such Grant shall not result in the Notes receiving a lower credit rating from the Rating Agency than the rating that was obtained upon the Closing Date. In addition, it shall be a Funding Condition for the first Funding Date following the closing of the merger of Oakwood Acceptance Corporation with and into Oakwood Acceptance Corporation, LLC, a Delaware limited liability company (the "Successor"), that the Trustee shall have received one or more Opinions of Counsel to the reasonable satisfaction of the Majority Noteholders to the effect that (1)the Successor is duly organized, (2) the Successor has the power and authority to perform the transactions contemplated by the Transaction Documents, (3) the Successor has duly authorized, executed and delivered an assignment and assumption agreement substantially in the form of Exhibit B attached to the Receivables Contribution Agreement, (4) that the Transaction Documents are the legal, valid and binding obligations of the Successor, enforceable against the Successor in accordance with their respective terms, subject to customary exceptions for bankruptcy, receivership, insolvency and other similar laws affecting the rights of creditors, general principles of equity, and other customary exceptions and assumptions of the same type as those taken in the Opinions of Counsel delivered by counsel to OAC at the Closing Date, and (5) that a financing statement, when filed with the Secretary of State of the State of Delaware, will be sufficient to perfect the Issuer's security interest in the Receivables, to the extent the transfer of any Receivables from the Successor to the Issuer is recharacterized as a pledge rather than as a sale and/or a contribution, subject to customary exceptions and assumptions of the same type as those taken in the Opinions of Counsel delivered by counsel to OAC at the Closing Date. -5- "Funding Date" means any date during the Funding Period on which amounts on deposit in the Collection Account, less the Required Expense Reserve for the next upcoming Payment Date, are (or are to be) applied toward the Funding Amount of Additional Receivables as contemplated by Section 6.11. In the case of most Additional Receivables, it is expected that the Funding Date will be the same date on which the related P&I Advances are made by OAC. "Funding Date Report" means a report delivered by the REMIC Servicer in respect of each Funding Date pursuant to Section 6.11(a), in substantially the form of Exhibit E attached hereto. "Funding Interruption Event" means the occurrence of an event which with the giving of notice or the passage of time, or both, would constitute an Event of Default. "Funding Period" means the period of time which begins on the Closing Date and which terminates upon the earlier to occur of (i) the Scheduled Termination Date, and (ii) the occurrence of a Funding Termination Event. "Funding Termination Event" means any of the following conditions or events which is not waived by the Majority Noteholders: (a) the occurrence of any Event of Default; (b) the rating of the Notes shall be withdrawn or reduced below "A" by the Rating Agency; (c) a payment default under any indebtedness for borrowed money of Oakwood Homes in excess of $10,000,000 which default (i) is not cured within the time periods specified within the instruments creating or evidencing such indebtedness, (ii) involves the failure to pay a matured obligation or (iii) permits the present acceleration of the maturity of obligations; (d) any REMIC Event of Default that is not cured or waived within the time periods specified in the related REMIC Pooling Agreement; (e) as of the close of business on any date, if the Collateral Requirement is not satisfied; (f) the redemption of the Notes in full pursuant to Section 11.01; (g) OAC is terminated as REMIC Servicer under any of the REMIC Trusts; (h) as of the last day of any Collection Period commencing with the Collection Period related to the seventh Payment Date, the (1) arithmetic average of the Asset-Based Net Proceeds Coverage Percentage for such Collection Period and the immediately preceding five Collection Periods shall be less than 9%, or (2) the arithmetic average of the Series-Based Net Proceeds Coverage Percentage for such Collection Period and the immediately preceding five Collection Periods shall be less than 80%; or -6- (i) the Issuer fails to remit the Net Proceeds withdrawn by the Issuer from the Certificate Accounts for the REMIC Trusts on any date to the Collection Account within two (2) Business Days after the date the Issuer withdrew such amounts. "GAAP" means generally accepted accounting principles that are (i) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (ii) consistently applied with past financial statements of Oakwood Homes and its subsidiaries; provided that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. "Grant[ed]" means 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 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 immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of such collateral or other agreement or instrument 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. "Gross Proceeds" means for any date all of the P&I Advance Reimbursement Amounts withdrawn by the Issuer from the Certificate Accounts for each of the REMIC Trusts pursuant to each of the related REMIC Pooling Agreements on such date. "Holder" shall mean Noteholder. "Indenture" means this Indenture, relating to the OAC Advance Receivables Backed Notes, Series 2001-ADV dated as of September 28, 2001 among Oakwood Advance Receivables Company, L.L.C., as Issuer, The Chase Manhattan Bank, as Trustee, as Verification Agent and as Paying Agent, and Oakwood Acceptance Corporation, individually and as REMIC Servicer, as the same may be amended or supplemented from time to time. "Initial Asset-Based Receivables" shall have the meaning assigned to such term in the Receivables Contribution Agreement. "Initial Fixed Rate Note Balance" means $50,000,000.00. "Initial Noteholders" means The Prudential Insurance Company of America, ABS Fund, and Norwest Bank Minnesota, N.A., as Trustee for Norwest Stable Return Fund. "Initial Payment Date" means November 7, 2001. -7- "Initial Receivables" means the receivables as of the Closing Date contributed by the Seller to the Issuer on the Closing Date pursuant to the Receivables Contribution Agreement and Granted by the Issuer to the Trust Estate, and which consist of receivables arising from the making by the REMIC Servicer of P&I Advances with respect to the Series-Based REMIC Trusts listed on Schedule 1-B attached hereto, and which receivables are in existence on the Closing Date. "Insolvency Event" means, with respect to a specified Person, (a) the filing of a decree or 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 bankruptcy, insolvency or other similar law now or hereafter in effect, or the filing of a petition against such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, which case remains unstayed or undismissed within 60 days of such filing, or the appointing of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the ordering of the winding-up or liquidation of such Person's business; or (b) the commencement by such Person of a voluntary case under any applicable 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 admission by such Person of its inability to pay its debts generally as they become due. "Insolvency Proceeding" means any proceeding of the sort described in the definition of Insolvency Event. "Interest Carryover Shortfall" means, with respect to any Payment Date, the excess of (i) the sum of (a) the Interest Distributable Amount for the Notes for such Payment Date and (b) without duplication, any unpaid Interest Carryover Shortfall for any preceding Payment Date, plus interest thereon accrued from the preceding Payment Date to the current Payment Date at the Default Rate, over (ii) the amount of interest, if any, actually paid to Noteholders on such Payment Date. "Interest Distributable Amount" means, with respect to any Payment Date and for the related Interest Distribution Period for the Fixed Rate Notes, an amount equal to (x) the Fixed Rate times (y) the Fixed Rate Note Balance immediately prior to such Payment Date (or with respect to the first Payment Date, as of the Closing Date) times (z) one-twelfth (1/12) (or with respect to the first Payment Date a fraction, the numerator of which is the actual number of days elapsed during the related Interest Distribution Period and the denominator of which is 360). "Interest Distribution Period" means, with respect to the Initial Payment Date, the period of time from the Closing Date to the day preceding the Initial Payment Date, and with respect to any other Payment Date, from the immediately preceding Payment Date to the day preceding such Payment Date. Each Interest Distribution Period after the initial Interest Distribution Period shall be deemed to consist of 30 days and for the initial Interest Distribution Period such Interest -8- Distribution Period shall consist of the actual number of days and a year assumed to consist of 360 days. "Interested Noteholders" shall mean any Noteholder holding Notes evidencing not less than 25% of the Voting Interests. "Investment Company Act" means the Investment Company Act of 1940, as amended. "Issuer" means Oakwood Advance Receivables Company, L.L.C., in its capacity as issuer of the Notes pursuant to this Indenture, and each successor thereto (in the same capacity) pursuant to Section 7.04. "Issuer Affiliate" means any person involved in the organization or operation of the Issuer or an affiliate of such a person within the meaning of Rule 3a-7 of the Investment Company Act. "Lien" means any security interest, lien, charge, pledge, equity or encumbrance of any kind. "Majority Noteholders" means the Noteholders holding Voting Interests of at least 51% of all outstanding Voting Interests. "Monthly REMIC Servicer Report" means a report delivered by the REMIC Servicer as described in Section 3.02(a), containing such information substantially in the format attached hereto as Exhibit A, which shall be delivered in the form of one or more electronic files. "Net Proceeds" means, for any date, Gross Proceeds minus Seller Proceeds. "Note Balance" means, as of any date, the Fixed Rate Note Balance as of such date. "Note Payment Account" means the segregated account or accounts, each of which shall be an Eligible Account, established and maintained pursuant to Section 4.01 and entitled "The Chase Manhattan Bank, as Trustee in trust for the Noteholders of the OAC Advance Receivables Backed Notes, Series 2001-ADV, Note Payment Account." "Note Purchase Agreement" means the Note Purchase Agreement signed by the Initial Noteholders, OAC and the Issuer. "Note Register" means the register maintained pursuant to Section 6.03. "Note Registrar" means the Trustee unless a successor thereto is appointed pursuant to Section 6.03. The Note Registrar initially designates its offices as the Corporate Trust Office for purposes of Section 6.08. "Noteholder" means the Person in whose name a Note is registered in the Note Register, except that, solely for the purposes of giving certain consents, waivers, requests or demands pursuant to this Indenture, the interests evidenced by any Note registered in the name of, or in the name of a Person or entity holding for the benefit of, the Issuer, the Seller or any Person that -9- is an Affiliate of either or both of the Issuer and the Seller, shall not be taken into account in determining whether the requisite percentage necessary to effect any such consent, waiver, request or demand shall have been obtained. The Trustee shall have no liability for counting any Person as a Noteholder unless a Responsible Officer of the Trustee has actual knowledge that such Person is an Affiliate of either or both of the Issuer and Seller. "Notes" means the Fixed Rate Notes. "OAC" means Oakwood Acceptance Corporation, a North Carolina corporation, and any successor thereto, including, without limitation, Oakwood Acceptance Corporation, LLC, a Delaware limited liability company, when and if the merger described in Section 4(r) of the Receivables Contribution Agreement is consummated. "Oakwood Homes" means Oakwood Homes Corporation, the parent of OAC. "Obligor" on a Mortgage Loan means any Person who owes or may be liable for payments under such Mortgage Loan. "Officer's Certificate" means a certificate signed by a Responsible Officer of the Issuer or OAC, as the case may be, and delivered to the Trustee. "Operating Agreement" means the operating agreement of Oakwood Advance Receivables Company, L.L.C., dated as of September 28, 2001. "Opinion of Counsel" means a written opinion of counsel, who may be (unless otherwise specified herein) an employee of or outside counsel to the Person responsible for providing such opinion, and which opinion shall be reasonably acceptable to the Trustee and the other recipients thereof. "Optional Termination Date " means the Payment Date immediately following a Payment Date on which the Note Balance is less than 10% of the Initial Fixed Rate Note Balance. "P&I Advance" shall have the meaning assigned to such term in the respective REMIC Pooling Agreements, as amended. "P&I Advance Reimbursement Amount" shall have the meaning assigned to such term in the respective REMIC Pooling Agreements, as amended. "Paying Agent" means The Chase Manhattan Bank, as paying agent. "Payment Date" means, in any month, the 7th day of such month or, if such 7th day is not a Business Day, the next Business Day following such 7th day. "Payment Date Report" means the report prepared and delivered by the REMIC Servicer pursuant to Section 3.02(b) for each Payment Date, reporting the amounts of all payments to be made on that Payment Date pursuant to Section 4.04(b), in substantially the form of Exhibit F attached hereto. -10- "PBGC" shall mean the Pension Benefit Guaranty Corporation and any Person succeeding to the functions thereof. "Permitted Investments" means, at any time, any one or more of the following obligations and securities: (i) direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof, provided that such obligations are backed by the full faith and credit of the United States; (ii) repurchase agreements on obligations specified in clause (i) maturing not more than three months from the date of acquisition thereof, provided that the short-term unsecured debt obligations of the party agreeing to repurchase such obligations are at the time rated by the Rating Agency in its highest short-term rating category (which is "A-1+" for S&P); (iii) certificates of deposit, time deposits and bankers' acceptances of any U.S. depository institution or trust company incorporated under the laws of the United States or any state thereof and subject to supervision and examination by federal and/or state banking authorities, provided that the unsecured short-term debt obligations of such depository institution or trust company at the date of acquisition thereof have been rated by the Rating Agency in its highest unsecured short-term debt rating category; (iv) commercial paper (having original maturities of not more than 90 days) of any corporation incorporated under the laws of the United States or any state thereof which on the date of acquisition has been rated by the Rating Agency in its highest short-term rating categories; (v) short term investment funds ("STIFS") sponsored by any trust company or national banking association incorporated under the laws of the United States or any state thereof which on the date of acquisition has been rated by the Rating Agency in its highest rating category of long term unsecured debt; (vi) interests in any money market fund which at the date of acquisition of the interests in such fund including any such fund that is managed by the Trustee or an Affiliate of the Trustee or for which the Trustee or an Affiliate acts as advisor and throughout the time as the interest is held in such fund has a rating of "AAA" by the Rating Agency; and (vii) other obligations or securities that are acceptable to the Rating Agency as a Permitted Investment hereunder and will not result in a reduction in the then current rating of the Notes, as evidenced by a letter to such effect from such Rating Agency and with the written consent of the Majority Noteholders. provided that each of the foregoing investments above shall mature no later than the Business Day prior to the Payment Date immediately following the date of purchase thereof (other than in -11- the case of the investment of monies in instruments of which the Trustee is the obligor, which may mature on the related Payment Date), and shall be required to be held to such maturity; and provided further, that each of the Permitted Investments may be purchased by the Trustee through an Affiliate of the Trustee. Permitted Investments are only those which are acquired by the Trustee in its name and in its capacity as Trustee, and with respect to which (a) the Trustee has noted its interest therein on its books and records, and (b) the Trustee has purchased such investments for value without notice of any adverse claim thereto (and, if such investments are securities or other financial assets or interests therein, within the meaning of Section 8-102 of the UCC, without acting in collusion with a Securities Intermediary in violating such Securities Intermediary's obligations to entitlement holders in such assets, under Section 8-504 of the UCC, to maintain a sufficient quantity of such assets in favor of such entitlement holders), and (c) either (i) such investments are in the possession of the Trustee or (ii) such investments, (A) if certificated securities and in bearer form, have been delivered to the Trustee, or in registered form, have been delivered to the Trustee and either registered by the issuer in the name of the Trustee or endorsed by effective endorsement to the Trustee or in blank; (B) if uncertificated securities, the ownership of which has been registered to the Trustee on the books of the issuer thereof (or another person, other than a Securities Intermediary, either becomes the registered owner of the uncertified security on behalf of the Trustee or, having previously become the registered owner, acknowledges that it holds for the Trustee); or (C) if Securities Entitlements representing interests in securities or other financial assets (or interests therein) held by a Securities Intermediary, a Securities Intermediary indicates by book entry that a security or other financial asset has been credited to the Trustee's Securities Account with such Securities Intermediary. No instrument described hereunder may be purchased at a price greater than par, if such instrument may be prepaid or called at a price less than its purchase price prior to its stated maturity. "Person" means any legal person, including any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Placement Agent" means Credit Suisse First Boston Corporation. "Principal Distributable Amount" means, with respect to any Payment Date, an amount equal to the Available Funds remaining after payment of amounts required to be paid pursuant to subsections (i), (ii) and (iii) of Section 4.04(b), and which shall be payable only as required by Section 4.04(b)(iv). "Purchaser" means Oakwood Advance Receivables Company, L.L.C., in its capacity as transferee of the Receivables under the Receivables Contribution Agreement. "Qualified Institutional Buyer" has the meaning assigned to such term in Rule 144A under the Securities Act. "Rating Agency" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. -12- "Receivable" means the contractual right to reimbursement from a REMIC Trust for a P&I Advance made by OAC as REMIC Servicer in connection with such REMIC Trust, which P&I Advance has not previously been reimbursed, and which contractual right to reimbursement has been Granted to the Trust Estate by the Issuer hereunder, and including all rights of OAC to enforce payment of such obligation under the related REMIC Pooling Agreement, consisting of the Initial Receivables and all Additional Receivables. "Receivable Balance" means as of any date of determination and with respect to a Receivable the outstanding amount of such Receivable. "Receivable File" means the documents described in Section 2.02(a) and (b) pertaining to a particular Receivable. "Receivables Contribution Agreement" means the Receivables Contribution Agreement, dated as of September 28, 2001, between the Seller and the Purchaser. "Record Date" means, with respect to each Payment Date, the last Business Day of the calendar month immediately preceding such Payment Date. Any amount stated "as of a Record Date" or "on a Record Date" shall give effect to all applications of collections, and all payments to any party under this Indenture or to the related Obligor, as the case may be, in each case as determined as of the opening of business of the Note Registrar on the related Record Date. "Redemption Amount" means, with respect to a redemption of the Notes by the Issuer pursuant to Section 11.01, an amount, which when applied pursuant to Section 4.04(b), shall be sufficient to pay an amount equal to the sum of (i) the Note Balance as of the date the Issuer elects to redeem the Notes, (ii) all accrued and unpaid interest on the Notes through the end of the Interest Distribution Period ending on the day prior to the Payment Date as of which such redemption will occur, (iii) any and all amounts owing to the Trustee, the Verification Agent and the Paying Agent from the Issuer pursuant to the terms hereof, and (iv) any and all other amounts due and payable hereunder. "Redemption Notice" shall have the meaning set forth in Section 11.03. "Redemption Payment Date" shall have the meaning set forth in Section 11.01. "Release Payment" means, with respect to any Removed Receivable in respect of which a payment is required to be made by the Issuer or the Seller under this Indenture and as of the Payment Date on which the "Release Payment" must be made, all of the outstanding and unpaid balance of such Receivable as of such Payment Date. "REMIC Event of Default" shall mean an event of default under any REMIC Pooling Agreement that is not cured or waived within the time periods specified therein. "REMIC Pooling Agreement" means each pooling and servicing agreement pursuant to which the related REMIC Trust is formed, each as amended, modified or supplemented from time to time and collectively referred to herein as the "REMIC Pooling Agreements". -13- "REMIC Servicer" means OAC in its capacity as servicer of the REMIC Trusts and any successor servicer appointed thereunder. "REMIC Trust" means any of the trusts listed on Schedule 1-A AND SCHEDULE 1-B attached hereto, and such other trusts which may be added or removed from time to time as provided in Section 2.01(f) hereof and collectively referred to herein as the "REMIC Trusts"; PROVIDED, HOWEVER, THAT NO ASSET-BASED REMIC TRUST SHALL BE INCLUDED AMONG THE "REMIC TRUSTS" FOR PURPOSES HEREOF UNLESS AND UNTIL AN ASSET-BASED RECEIVABLES ACCEPTANCE DATE SHALL HAVE OCCURRED FOR SUCH ASSET-BASED REMIC TRUST." "REMIC Trust Remittance Report" means, for any REMIC Trust, the monthly report(s) prepared by the related servicer and delivered to the related REMIC Trustee. "REMIC Trustee" means each trustee appointed under a REMIC Pooling Agreement in connection with a REMIC Trust. "Remittance Date" shall have the meaning assigned to such term in the respective REMIC Pooling Agreements. "Removed Receivable" means a Receivable in respect of which the Issuer or the Seller is obligated to make a payment, pursuant to Section 2.04 or 7.02, or in the event the Issuer has elected to make a redemption pursuant to Section 11.01, all of the Receivables. "Required Expense Reserve" means, with respect to any Payment Date, an amount equal to the aggregate of amounts required to be paid pursuant to Section 4.04(b)(i)-(iii) on such Payment Date. "Required Reserve Amount" means (x) for any Payment Date prior to the Stepdown Date, 4% of the Fixed Rate Note Balance as of the Closing Date, reduced by any amount paid to reduce such Fixed Rate Note Balance pursuant to Section 6.12, and (y) for any Payment Date on or after the Stepdown Date, an amount equal to the greater of (i) 2.5% of the Fixed Rate Note Balance as of the Closing Date, reduced by any amount paid to reduce such Fixed Rate Note Balance pursuant to Section 6.12, and (ii) 4% of the Fixed Rate Note Balance at the opening of business on such Payment Date; provided, however, that if the parties execute and deliver an amendment to this Indenture providing that no Asset-Based Receivables may be included in the Trust Estate, then the references to "4%" in clause (x) shall be automatically changed to "3%." "Reserve Account" means the segregated account or accounts, each of which shall be an Eligible Account, established and maintained pursuant to Section 4.01 and entitled, "The Chase Manhattan Bank, as Trustee in trust for the Noteholders of the OAC Advance Receivables Backed Notes, Series 2001-ADV, Reserve Account." "Reserve Fund Reimbursement Amount" means, with respect to any Payment Date, the excess of the Required Reserve Amount over the amount then on deposit in the Reserve Account. "Responsible Officer" means, -14- (i) When used with respect to the Trustee, the Verification Agent or the Paying Agent, any officer or employee within the Institutional Trust Services of the Trustee, the Verification Agent or the Paying Agent, including any vice president, assistant vice president, assistant treasurer, assistant secretary or any other officer of the Trustee, the Verification Agent or the Paying Agent customarily performing functions similar to those performed by any of the above designated officers, in each case having direct responsibility for the administration of this Indenture and also, with respect to a particular matter, any other officer or employee to whom such matter is referred because of such officer's or employee's knowledge of and familiarity with such particular subject, and (viii) when used with respect to the Issuer, the Seller, OAC, Oakwood Homes or the REMIC Servicer, the president, the chief financial officer or any vice president of the Issuer, the Seller, OAC, or the REMIC Servicer, as the case may be. "Sale" means any sale of any portion of the Trust Estate. "Schedule of Initial Receivables" means a schedule, which shall be delivered and maintained in an electronic form, listing the Initial Receivables conveyed to the Issuer under the Receivables Contribution Agreement and Granted to the Trustee on the Closing Date, identifying such Receivables by REMIC Trust, dollar amount of the related P&I Advance and, in the case of any Asset-Based Receivables, related loan number and date of the related P&I Advance. "Schedule of Receivables" means, on any date, a schedule, which shall be delivered and maintained in an electronic form, listing the outstanding Receivables sold and/or contributed to the Issuer under the Receivables Contribution Agreement and Granted to the Trustee, as updated from time to time to list Additional Receivables Granted to the Trustee and deducting any amounts paid against the Receivables as of such date, identifying such Receivables by REMIC Trust, dollar amount of the related P&I Advance and, in the case of any Asset-Based Receivables, related loan number and date of the related P&I Advance. "Scheduled Termination Date" means the Payment Date occurring in August 2003. "Securities Account" shall have the meaning given such term in Section 8-501(a) of the UCC. "Securities Act" means the Securities Act of 1933, as amended. "Securities Intermediary" shall have the meaning given such term in Section 8-102(a)(14) of the UCC, and where appropriate, shall mean The Chase Manhattan Bank or its successor, in its capacity as securities intermediary pursuant to Section 4.08 hereof. "Security Entitlement" shall have the meaning given such term in Section 8-102(a)(17) of the UCC. "Seller" means Oakwood Acceptance Corporation, in its capacity as transferor of the Receivables under the Receivables Contribution Agreement. -15- "Seller Proceeds" means for any date, that portion, if any, of the related Gross Proceeds that consists of (1) P&I Advance Reimbursement Amounts allocable to P&I Advances made by a Person other than OAC and (2) Receivables not Granted to the Trust Estate because they were made after the termination of the Funding Period. "Series-Based Net Proceeds Coverage Percentage" means, for any Collection Period, the percentage equivalent of a fraction, the numerator of which is the aggregate amount of Net Proceeds received by the Trustee during such Collection Period attributable to Series-Based Receivables, and the denominator of which is the highest aggregate Receivables Balance of all Series-Based Receivables in the Trust Estate at any date during such Collection Period. "Series-Based Receivable" means a Receivable related to a P&I Advance made with respect to a Series-Based REMIC Trust. "Series-Based REMIC Trust" means a REMIC Trust for which, pursuant to the related REMIC Pooling Agreement, the determination as to whether P&I Advance Reimbursement Amounts related to such P&I Advance have been recovered is made on a Series-by-Series basis. The Series-Based REMIC Trusts as of the Closing Date are listed on Schedule 1-B attached hereto. "Stated Maturity Date" means October 7, 2010. "Stepdown Date" means the 24th Payment Date after termination of the Funding Period. "Subsequent Receivables" means all receivables created as a result of P&I Advances made pursuant to the REMIC Pooling Agreements from and after the Closing Date. "Transaction Documents" means, collectively, this Indenture, the Receivables Contribution Agreement, the Schedule of Receivables as amended, modified or supplemented from time to time, the Notes, the Note Purchase Agreement, the P&I Advance Disbursement and Purchase Administration Agreement, of even date herewith, among OAC, the Issuer, the Trustee and The Chase Manhattan Bank, as OAC's agent, and each of the other documents, instruments and agreements entered into on the date hereof and thereafter in connection with any of the foregoing or the transactions contemplated thereby. "Transfer" shall have the meaning specified in Section 6.03(g). It is expressly provided that the term "Transfer" in the context of the Notes includes, without limitation, any distribution of the Notes by (i) a corporation to its shareholders, (ii) a partnership to its partners, (iii) a limited liability company to its members, (iv) a trust to its beneficiaries or (v) any other business entity to the owners of the beneficial interests in such entity. "Transferee Agreement" shall have the meaning specified in Section 6.03(g). "Transferee Certificate" means a certificate in the form of Exhibit D. "Transferor Interest" means the Issuer's interest in the Receivables the amount of which, as of any date of determination, shall equal the excess, if any, of (i) the sum of (a) the Collateral -16- Balance and (b) the amount in the Collection Account as of such date, over (ii) the Note Balance as of such date. "Transferor Interest Payment Report" shall have the meaning specified in Section 4.02(c). "Trust Estate" or "OAC Advance Receivables Backed Notes, Series 2001-ADV Trust Estate" means the trust estate established under this Indenture for, the benefit of the Noteholders, which consists of the property described in Section 2.01(a). "Trust Property" means the property, or interests in property, constituting the Trust Estate from time to time. "Trustee" means The Chase Manhattan Bank, and any successor trustee appointed pursuant to Section 10.11. "Trustee Fee" means the fee payable to the Trustee on each Payment Date for services rendered under this Indenture, which shall be equal to $2,300 per month. In addition, the Trustee shall be paid an initial fee of $5,000 on the Closing Date. "Trustee's Certificate" means a certificate completed and executed by a Responsible Officer of the Trustee pursuant to Section 10.02 or 10.03, substantially in the form attached hereto as Exhibit B. "UCC" means the Uniform Commercial Code as in effect in the State of New York. "United States" means the United States of America. "Verification Agent" means The Chase Manhattan Bank or any successor thereto. "Voting Interests" means the aggregate voting power evidenced by the Notes, corresponding to the outstanding Note Balance of the Notes held by individual Noteholders; provided, however, that where the Voting Interests are relevant in determining whether the vote of the requisite percentage of Noteholders necessary to effect any consent, waiver, request or demand shall have been obtained, the Voting Interests shall be deemed to be reduced by the amount equal to the Voting Interests (without giving effect to this provision) represented by the interests evidenced by any Note registered in the name of, or in the name of a Person or entity holding for the benefit of, the Issuer, the Seller or any Person that is an Affiliate of either or both of the Issuer and the Seller. The Trustee shall have no liability for counting a Voting Interest of any Person unless a Responsible Officer of the Trustee has actual knowledge that such Person is an Affiliate of either or both of the Issuer and the Seller. SECTION 1.02. INTERPRETATION. Unless otherwise indicated in this Indenture: (a) reference to and the definition of any document (including this Indenture) shall be deemed a reference to such document as it may be amended or modified from time to time; -17- (b) all references to an "Article," "Section," "Schedule" or "Exhibit" are to an Article or Section hereof or to a Schedule or an Exhibit attached hereto; (c) defined terms in the singular shall include the plural and vice versa and the masculine, feminine or neuter gender shall include all genders; (d) the words "hereof," "herein" and "hereunder" and words of similar import when used in this Indenture shall refer to this Indenture as a whole and not to any particular provision of this Indenture; (e) in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding"; (f) periods of days referred to in this Indenture shall be counted in calendar days unless Business Days are expressly prescribed and references in this Indenture to months and years shall be to calendar months and calendar years unless otherwise specified; (g) accounting terms not otherwise defined herein and accounting terms partly defined herein to the extent not defined, shall have the respective meanings given to them under GAAP; and (h) the headings in this Indenture are for the purpose of reference only and do not limit or affect its meaning. ARTICLE II CREATION OF TRUST ESTATE; CUSTODY OF RECEIVABLE FILES; REPRESENTATIONS REGARDING RECEIVABLES; DISCHARGE SECTION 2.01. CREATION OF TRUST ESTATE. (a) The Issuer hereby Grants to the Trustee at the Closing Date, as trustee for the benefit of the Holders of the Notes, all of the Issuer's right, title and interest in and to the following whether now existing or hereafter created: (i) all right, title and interest of the Issuer in and to the Initial Receivables, the Initial Asset-Based Receivables related to each Asset-Based REMIC Trust on and as of the Asset-Based Receivables Acceptance Date for such Asset-Based REMIC Trust, and any Additional Receivables on the date they are acquired by the Issuer, and all monies due thereon or paid thereunder or in respect thereof (including, without limitation, any proceeds of any Sales) on and after the Closing Date, (including any Release Payments made with respect to Removed Receivables for which a payment is made by the Issuer or the Seller pursuant to Sections 2.04 or 7.02); -18- (ii) all rights of the Issuer as Purchaser under the Receivables Contribution Agreement, including, without limitation, to enforce the obligations of the Seller thereunder with respect to the Receivables; (iii) the Collection Account, the Note Payment Account and the Reserve Account, and all monies, "securities," "instruments," "accounts" "general intangibles," "chattel paper," "financial assets," "investment property" (the terms in quotations are defined in the UCC) and other property on deposit or credited to the Collection Account (excluding investment earnings thereon), the Note Payment Account (excluding investment earnings thereon) and the Reserve Account (excluding investment earnings thereon) from time to time (whether or not constituting or derived from payments, collections or recoveries received, made or realized in respect of the Receivables); (iv) all right, title and interest of the Issuer as assignee of the Seller to rights to payment on the Receivables under each REMIC Pooling Agreement and all related documents, instruments and agreements pursuant to which the Seller acquired, or acquired an interest in, any of the Receivables from each of the REMIC Trusts; (v) true and correct copies of all books, records and documents relating to the Receivables in any medium, including without limitation paper, tapes, disks and other electronic media; (vi) all other monies, securities, reserves and other property now or at any time in the possession of the Trustee or its bailee, agent or custodian and relating to any of the foregoing; and (vii) all present and future claims, demands, causes and choses in action in respect of any and 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 and all payments on or under, and all proceeds of every kind and nature whatsoever in conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, checks, deposit accounts, 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. (b) The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, equally or ratably without prejudice, priority or distinction, to secure all other amounts payable under this Indenture, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. The Trustee on behalf of the Holders of the Notes, acknowledges such Grant, accepts the trust under -19- this Indenture in accordance with the provisions hereof and agrees to perform its duties as Trustee as required herein. (c) The Issuer hereby irrevocably constitutes and appoints the Trustee and any officer or agent thereof, effective upon the occurrence and continuation of an Event of Default, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Issuer and in the name of such Issuer, for the purpose of carrying out the terms of this Indenture, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Indenture and the Receivables Contribution Agreement, and, without limiting the generality of the foregoing, the Issuer hereby gives the Trustee the power and right (i) to take possession of and endorse and collect any wired funds, checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable Granted by the Issuer to the Trustee from the REMIC Trust or the REMIC Servicer as the case may be, (ii) to file any claim or proceeding in any court of law or equity or take any other action otherwise deemed appropriate by the Trustee for the purpose of collecting any and all such moneys due from the REMIC Trust or the REMIC Servicer under such Receivable whenever payable and to enforce any other right in respect of any Receivable or related to the Trust Estate, (iii) to direct the REMIC Trustee or the REMIC Servicer to make payment of any and all moneys due or to become due under the Receivable directly to the Trustee or as the Trustee shall direct, (iv) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due from the REMIC Trust or the REMIC Servicer at any time in respect of or arising out of any Receivable, (v) to sign and endorse any assignments, notices and other documents in connection with the Receivables or the Trust Estate, (vi) to sell, transfer, pledge and make any agreement with respect to or otherwise deal with the Receivables and the Trust Estate as fully and completely as though the Trustee were the absolute owner thereof for all purposes, and do, at the Trustee's option and at the expense of the Issuer, at any time, or from time to time, all acts and things which the Trustee deems necessary to protect, preserve or realize upon the Receivable or the Trust Estate and the Trustee's and the Issuer's respective security interests and ownership interests therein and to effect the intent of this Indenture, all as fully and effectively as the Issuer might do. Nothing contained herein shall in any way be deemed to be a grant of power or authority to the Trustee or any officer or agent thereof to take any of the actions described in this paragraph with respect to any underlying Obligor under any Asset in any REMIC Trust for which a P&I Advance was made. (d) The parties hereto intend that the security interest granted under this Indenture shall give the Trustee on behalf of the Noteholders a first priority perfected security interest in, to and under the Receivables, and all other property described in this Section 2.01 as a part of the Trust Estate and all proceeds of any of the foregoing in order to secure the obligations of the Issuer to the Trustee, the Noteholders under the Notes, this Indenture, the Note Purchase Agreement, and all of the other Transaction Documents. The Trustee on behalf of the Noteholders shall have all the rights, powers and privileges of a secured party under the UCC. The Issuer agrees to execute and file all filings (including filings under the UCC) and take all other actions reasonably necessary in any jurisdiction to provide third parties with notice of the security interest granted pursuant to this Indenture and to perfect such security interest under the UCC. -20- (e) The REMIC Pooling Agreements as of the Closing Date have been amended to indicate that each Receivable is subject to the Trustee's security interest. The Issuer shall cause any pooling and servicing agreement which may subsequently be added as a REMIC Pooling Agreement to be amended or written similarly to indicate the Trustee's security interest. These provisions indicating the interest of the Trustee in the Receivables relating to a particular REMIC Trust shall be deleted or modified when, and only when, the related Receivables have been paid in full or have been released from the lien hereof pursuant to this Indenture. In addition, each Funding Date Report and Monthly REMIC Servicer Report shall include a list of the Receivables, and any such list or related trial balance or Schedule of Receivables, and any other list of the Receivables provided by the REMIC Servicer or the Issuer to any third party shall include language indicating that the Receivables identified therein are subject to the Trustee's security interest. (f) Subject to the terms and conditions of Section 2(b) of the Receivables Contribution Agreement, OAC may with the written consent of the Majority Noteholders at any time (i) designate any trust as a Designated REMIC Trust under the Receivables Contribution Agreement, whereupon such trust shall become a "REMIC Trust" for purposes of this Indenture, and (ii) remove a REMIC Trust as a Designated REMIC Trust under the Receivables Contribution Agreement, whereupon such trust shall no longer constitute a "REMIC Trust" for purposes of this Indenture (except that P&I Advances made in respect of such trust prior to its removal shall continue to be part of the Trust Estate). The Issuer shall promptly notify the Trustee and the Noteholders of such designation or removal. SECTION 2.02. RECEIVABLE FILES. (a) The Trustee agrees to hold in trust on behalf of the Noteholders, upon the execution and delivery of this Indenture, the following documents relating to each Receivable, with no responsibility to ensure the validity or sufficiency of such Receivables: (i) a copy of the related REMIC Pooling Agreement and each amendment and modification thereto; (ii) copy of the Monthly REMIC Servicer Reports in electronic form listing the current outstanding balance of the Receivables Granted to the Trust Estate; and (iii) a copy of each Funding Date Report delivered by the REMIC Servicer, which shall be maintained in electronic format. (b) To reduce administrative costs, the Trustee, on behalf of the Noteholders, upon the execution and delivery of this Indenture, appoints OAC, and OAC accepts such appointment, to act as the agent of the Trustee as custodian for the benefit of the Noteholders of the following documents relating to each Receivable: (i) any documents other than those identified in Section 2.02(a) received from or made available by the related REMIC Trust in respect of such Receivable; and -21- (ii) any and all other documents that the Issuer or OAC, as the case may be, shall keep on file, in accordance with its customary procedures, relating to such Receivable or the related REMIC Trust. In the event OAC is terminated or resigns as the REMIC Servicer, it will immediately upon such termination or resignation, as applicable, deliver all documents held by it hereunder to the Trustee or the successor REMIC Servicer. (c) Within 30 days of the Closing Date, OAC shall provide to the Trustee a copy of the REMIC Pooling Agreement and any separate asset conveyance documentation and servicing agreement, and REMIC Trust Remittance Reports prepared by REMIC Trustees pursuant to the REMIC Pooling Agreements over the 24 months preceding the month in which the Closing Date occurs, with respect to each REMIC Trust. In addition, immediately following the addition of a new Designated REMIC Trust, OAC shall provide to the Trustee a complete set of the documents referred to above for such new Designated REMIC Trust. Within five Business Days of receipt of such documents, the Trustee shall provide a certification in substantially the form attached hereto as Exhibit I acknowledging its receipt and possession of each of the REMIC Pooling Agreements and all amendments and supplements thereto listed on Schedule 2 attached hereto. OAC represents and warrants that Schedule 2 is a complete and accurate list of all such amendments and supplements. The Trustee shall make such documents available to the Noteholders, at the expense of such Noteholders, upon reasonable notice of any such Noteholder's request therefor. SECTION 2.03. ACCEPTANCE BY TRUSTEE. The Trustee hereby acknowledges its acceptance, on behalf of the Noteholders, pursuant to this Indenture, of the security interest in the Receivables and the other Trust Property Granted by the Issuer pursuant to this Indenture, and declares and shall declare from and after the date hereof that the Trustee, on behalf of the Noteholders, holds and shall hold such Trust Property, pursuant to the trusts set forth in this Indenture. SECTION 2.04. REACQUISITION OF RECEIVABLES UPON BREACH. Upon discovery by the Issuer or upon the actual knowledge of a Responsible Officer of the Trustee or a Noteholder of a breach of any of the representations and warranties of the Seller set forth in Section 4(aa) of the Receivables Contribution Agreement, the party discovering such breach shall give prompt written notice to the others. If such breach has or would have a material adverse effect on the rights or interests of the Noteholders with respect to all or a portion of the Receivables, then, unless such breach and the resulting impairment shall have been cured within 30 days after the earlier to occur of the discovery of such breach by the Issuer or receipt by the Issuer of written notice of such breach, such that the relevant representation and warranty shall be true and correct in all material respects as if made on such day, and the Issuer shall have delivered to the Trustee and each Noteholder an Officer's Certificate describing the nature of such breach and the manner in which the relevant representation and warranty became true and correct, the Issuer shall pay the Release Payment with respect to the affected Receivable(s) to the Collection Account on the first Business Day after the expiration of such 30-day period. This repurchase obligation shall pertain to all representations and warranties of the -22- Seller contained in Section 4(aa) of the Receivables Contribution Agreement, whether or not the Seller has knowledge of the breach at the time of the breach or at the time the representations and warranties were made. If the Issuer fails to pay such Release Payment within five (5) Business Days of the date when it is due pursuant to the Receivables Contribution Agreement, the Trustee shall enforce the Issuer's remedies against the Seller under the Receivables Contribution Agreement for the breach of such representation and warranty. Upon any such receipt of the Release Payment in the Collection Account, the Trustee on behalf of the Noteholders shall, without further action, be deemed to release its security interest in, to and under the Removed Receivable so repurchased, all monies due or to become due with respect thereto after the date of such release and all proceeds thereof and the Trustee shall indicate such release on the most current Schedule of Receivables. The Trustee shall (at the Issuer's expense) execute such documents and instruments of release and take such other actions as shall be reasonably requested and prepared by the Issuer to effect the security interest release pursuant to this Section. The sole remedies of the Trustee and the Noteholders with respect to a breach of the Seller's representations and warranties pursuant to Section 4(aa) of the Receivables Contribution Agreement shall be to enforce the obligation of the Issuer hereunder and the remedies of the Issuer against the Seller under the Receivables Contribution Agreement. The Trustee shall have no duty to conduct any affirmative investigation as to the occurrence of any condition requiring the repayment for any Receivable pursuant to this Section, except as otherwise provided in Section 10.02. SECTION 2.05. DUTIES OF TRUSTEE WITH RESPECT TO THE RECEIVABLE FILES (a) Safekeeping. The Trustee or OAC, in its capacity as custodian (each, a "Custodian") pursuant to Section 2.02, shall hold the portion of the Receivable Files that it is required to maintain under Section 2.02 in its possession from time to time for the use and benefit of all present and future Noteholders, and maintain such accurate and complete accounts, records and computer systems pertaining to each Receivable File as shall enable the Verification Agent and the Trustee to comply with this Indenture. Each Custodian shall act with reasonable care, using that degree of skill and attention that it would exercise with respect to the receivable files of comparable receivables that such Custodian owns for itself (whether or not the Custodian shall then own such comparable receivables for itself). Each Custodian shall promptly report to the Issuer any failure on its part to hold the Receivable Files and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. (b) Maintenance of and Access to Records. Each Custodian shall maintain each portion of the Receivable File that it is required to maintain under this Indenture at its offices at the Corporate Trust Office (in the case of the Trustee) or 7800 McCloud Road, Greensboro, NC 27409-9634 (in the case of OAC) as the case may be, or at such other office as shall be specified to the Trustee, the Noteholders, the Issuer and the Verification Agent by 30 days' prior written notice. The Trustee shall take all actions necessary or reasonably requested by the Majority Noteholders to amend any existing financing statements and continuation statements, and file additional financing statements and any other steps reasonably requested by the Majority Noteholders to further perfect or evidence the rights, claims or security interests of the Trustee under any of the Transaction Documents, it being understood that all costs incurred in -23- connection with complying with any such reasonable request of the Majority Noteholders shall be borne by OAC. The Trustee and OAC, in their capacities as Custodian(s), shall make available to the Issuer, the Verification Agent, a group of Interested Noteholders and the Trustee (in the case of OAC) or their duly authorized representatives, attorneys or auditors the portion of the Receivable Files that it is required to maintain under this Indenture and the accounts, records and computer systems maintained by the Trustee or OAC with respect thereto upon not less than two Business Days' prior written notice for examination during normal business hours. SECTION 2.06. RESERVED. SECTION 2.07. SATISFACTION AND DISCHARGE OF INDENTURE. Whenever the following conditions shall have been satisfied: (a) an amount sufficient to pay and discharge the outstanding Note Balance, plus accrued and unpaid interest on the Notes, plus all other amounts due and owing to the Noteholders has been paid to the Noteholders; (b) the Issuer has paid or caused to be paid all other sums payable hereunder; and (c) the Issuer has delivered to the Trustee an Officers' Certificate of the Issuer and an Opinion of Counsel each stating that all conditions precedent herein provided for the satisfaction and discharge of this Indenture with respect to the Notes have been complied with; then this Indenture and the lien, rights and interests created hereby shall cease to be of further effect with respect to the Notes, and the Trustee shall, at the expense of the Issuer, (i) execute and deliver all such instruments as may be necessary to acknowledge the satisfaction and discharge of this Indenture with respect to the Notes, (ii) pay, or assign or transfer and deliver, to the Issuer, all cash, securities and other property held by it as part of the Trust Estate or other assets remaining after satisfaction of the conditions specified in clauses (a) and (b) above, and (iii) notify the REMIC Trustees of the satisfaction and discharge of this Indenture and instruct the REMIC Trustees with respect to such REMIC Trusts to permit the REMIC Servicer, rather than the Issuer, to withdraw P&I Advance Reimbursement Amounts from the related Certificate Accounts. Notwithstanding the satisfaction and discharge of this Indenture with respect to the Notes, the obligations of the Issuer to the Trustee under Section 10.07, the obligations of the Trustee to the Issuer, and to the Noteholders under Section 4.04, the obligations of the Trustee to the Noteholders under Section 4.07, and rights to receive payments of principal of and interest on the Notes, and the rights, privileges and immunities of the Trustee under Articles IX and X, shall survive. SECTION 2.08. APPLICATION OF TRUST MONEY. All money deposited with the Trustee or the Paying Agent pursuant to Sections 4.02 and 4.03 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment to the Persons entitled thereto, of the principal, interest, fees, costs -24- and expenses (or Transferor Interest, Funding Amount or other amount) for whose payment such money has been deposited with the Trustee or the Paying Agent. ARTICLE III ADMINISTRATION OF RECEIVABLES SECTION 3.01. DUTIES OF THE VERIFICATION AGENT AND THE TRUSTEE. (a) The Verification Agent shall initially be The Chase Manhattan Bank. The Verification Agent, as agent for the Noteholders, shall perform the duties required of it pursuant to Section 3.04 (based solely on the information received from the REMIC Servicer and maintained with the Trustee pursuant to Section 2.02) with reasonable care, using that degree of skill and attention that the Verification Agent would exercise with respect to the receivable files of comparable receivables that it administers for itself (whether or not the Verification Agent shall then be administering comparable receivables for itself). The Verification Agent's duties shall include recording amounts received from the Issuer and amounts remitted to the Collection Account, responding to inquiries of the Trustee or by federal, state or local government authorities with respect to the Receivables, sending payment information to the Trustee, reporting tax information to the Noteholders in accordance with its customary practices, accounting for collections, publishing monthly and annual statements to the Trustee with respect to payments, generating federal income tax information and performing the other duties specified herein. In performing the above-referenced services, the Verification Agent shall perform in accordance with customary procedures. (b) The Issuer (with the consent of the Majority Noteholders) or the Majority Noteholders may at any time terminate the Verification Agent or Paying Agent without cause upon 60 days' prior notice, and if so, the Majority Noteholders shall also remove the Trustee as provided in Section 10.10(c). If at any time the Verification Agent or Paying Agent shall fail to resign after written request therefor by the Issuer or the Majority Noteholders, or if at any time the Verification Agent or Paying Agent shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Verification Agent or Paying Agent or of its property shall be appointed, or any public officer shall take charge or control of the Verification Agent or Paying Agent or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Majority Noteholders may remove the Verification Agent or Paying Agent and if so, the Majority Noteholders shall also remove the Trustee as provided in Section 10.10(c). If the Verification Agent or Paying Agent is removed under the authority of the immediately preceding sentence, the Issuer shall promptly appoint a successor Verification Agent or Paying Agent reasonably acceptable to the Majority Noteholders, by written instrument, in duplicate, one copy of which instrument shall be delivered to the Verification Agent or Paying Agent so removed and one copy to the successor Verification Agent or Paying Agent, and pay all fees owed to the outgoing Verification Agent or Paying Agent. A copy of such instrument shall be delivered to the Noteholders and the REMIC Servicer by the Verification Agent or Paying Agent or the Issuer. Any resignation or removal of the Verification Agent or Paying Agent and appointment of a successor Verification Agent or Paying Agent pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Verification Agent or Paying Agent as provided herein. The Issuer -25- shall give the Rating Agency and the Noteholders notice of any such resignation or removal of the Verification Agent or Paying Agent and appointment and acceptance of a successor Verification Agent or Paying Agent. Notwithstanding the foregoing, no resignation, removal or termination of the Verification Agent or the Paying Agent shall be effective until the resignation, removal or termination of the Trustee. Any successor Trustee appointed shall also be the successor Verification Agent and Paying Agent hereunder. Any expenses incurred by the Trustee, the Verification Agent or Paying Agent in conjunction with a removal without cause shall be at the expense of the terminating party. (c) Any successor Verification Agent or Paying Agent appointed hereunder shall execute, acknowledge and deliver to the Issuer and to its predecessor Verification Agent or Paying Agent an instrument accepting such appointment under this Indenture, and thereupon the resignation or removal of the predecessor Verification Agent or Paying Agent shall become effective and such successor Verification Agent or Paying Agent, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Indenture, with like effect as if originally named as Verification Agent or Paying Agent. The predecessor Verification Agent or Paying Agent shall deliver to the successor Verification Agent or Paying Agent all documents and statements held by it under this Indenture; the Issuer, and the predecessor Verification Agent or Paying Agent 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 Verification Agent or Paying Agent all such rights, powers, duties and obligations. Upon acceptance of appointment by a successor Verification Agent or Paying Agent as provided in this Section, the Issuer shall mail notice of the successor of such Verification Agent or Paying Agent under this Indenture to all Noteholders at their addresses as shown in the Note Register and shall give notice by mail to the Rating Agency. If the Issuer fails to mail such notice within ten (10) days after acceptance of appointment by the successor Verification Agent or Paying Agent, the successor Verification Agent or Paying Agent shall cause such notice to be mailed at the expense of OAC. (d) Without limiting the generality of the foregoing, the Trustee at the direction of the Majority Noteholders shall be authorized and empowered by the Issuer to execute and deliver, on behalf of itself, the Noteholders, 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 as provided hereunder. To the extent not prohibited by applicable law, the Trustee is hereby authorized to commence at the direction of the Majority Noteholders, in its own name or in the name of the Issuer, legal proceedings to enforce any Receivable against the related REMIC Trustee or the REMIC Servicer, as the case may be, or to commence or participate in a legal proceeding (including without limitation a bankruptcy proceeding) relating to or involving a Receivable or the REMIC Servicer. If the Trustee is directed to commence or participate in such a legal proceeding in its own name, the Issuer shall thereupon be deemed to have automatically assigned, solely for the purpose of collection on behalf of the party retaining an interest in such Receivable, such Receivable and the other property Granted as part of the Trust Estate pursuant to Section 2.01 with respect to such Receivable to the Trustee for purposes of commencing or participating in any such proceeding as a party or claimant, and the Trustee is authorized and empowered by the Issuer to execute and deliver in the Trustee's name any notices, demands, claims, complaints, responses, affidavits or other documents or instruments in connection with any such proceeding (to the fullest extent permitted by applicable law). If in -26- any such enforcement suit or legal proceeding it shall be held that the Trustee may not enforce a Receivable on the grounds that it shall not be a real party in interest or a holder entitled to enforce such Receivable, the Issuer on behalf of the Noteholders shall, at the Issuer's expense and at the written direction of the Trustee, take all commercially reasonable steps to enforce such Receivable. To the extent an assignment is prohibited, prior consent by the Issuer is hereby given to the Trustee authorizing the transfer of Receivables to legal counsel (selected by the Trustee) for the purpose of commencing legal proceedings on behalf of the Issuer or the Trustee. It is understood by the Trustee that nothing contained herein will permit or allow the Trustee to control or interfere with the relationship between counsel, the Issuer or the Trustee, but the Trustee is hereby authorized on behalf of the Issuer to receive and convey information and instructions in order to facilitate and coordinate the collection of transferred Receivables. The Trustee shall deposit or cause to be deposited into the Collection Account, all amounts realized in connection with any such action pursuant to Section 4.02. Nothing contained herein shall in any way be deemed a grant of authority to the Trustee to commence any suit or proceeding with respect to any underlying Obligor under any Asset in any REMIC Trust for which a P&I Advance was made. SECTION 3.02. MONTHLY REMIC SERVICER REPORT; PAYMENT DATE REPORT. (a) By no later than the third Business Day before each Payment Date, the REMIC Servicer shall deliver to the Issuer, the Initial Noteholders, the Trustee and the Verification Agent a Monthly REMIC Servicer Report (in electronic form) listing (A) the aggregate Receivables Balance of both the Series-Based Receivables and the Asset-Based Receivables for each REMIC Trust as of the close of business on the last Business Day of the Collection Period preceding such Payment Date and listing the balance of all P&I Advances the rights to reimbursement for which are not included in the Receivables (summarized in each case by REMIC Trust), taking into account collections of Net Proceeds received by such REMIC Trusts from Obligors by the close of business on such date, even if not remitted by the Issuer to the Collection Account until the next Business Day as long as such collections have been received in the REMIC Trust's Certificate Account, (B) the aggregate Receivables Balance of both the Series-Based Receivables and the Asset-Based Receivables for each REMIC Trust as of the beginning of the preceding Collection Period (summarized in each case by REMIC Trust), (C) a reconciliation (by REMIC Trust) of the amounts set forth in clauses (A) and (B) above showing, in the aggregate, P&I Advances made and recoveries thereof during the preceding Collection Period and separately identifying Seller Proceeds and Net Proceeds, (D) the aggregate Receivables Balance of the Series-Based Receivables and the Asset-Based Receivables for each day during the Collection Period, (E) a trial balance listing all Assets included in the Asset-Based REMIC Trusts and listing all P&I Advances outstanding with respect to such Assets as of the end of the related Collection Period and identifying each Asset-Based Receivables by the related loan numbers and dates of each such P&I Advance, and (F) setting forth such additional information as may be reasonably requested by the Trustee, the Verification Agent, the Rating Agency or the Majority Noteholders from time to time. (b) In addition, no later than the third Business Day before each Payment Date, the REMIC Servicer shall deliver to the Issuer, the Trustee, the Verification Agent, the Payment Agent and the Initial Noteholders a report (the "Payment Date Report") reporting (i) the amount of Available Funds that will be transferred into the Note Payment Account on such Payment -27- Date, the amount on deposit in the Reserve Account, and, if applicable, the amount the Trustee is to withdraw from the Reserve Account and deposit into the Note Payment Account on such Payment Date, and (ii) the amount of each payment required to be made by the Trustee or the Paying Agent pursuant to Section 4.04(b) on such Payment Date. Without limiting the generality of the foregoing, the Payment Date Report shall specify the Trustee Fee, the Interest Distributable Amount for the Notes, any Interest Carryover Shortfall, the Required Reserve Amount, the Reserve Fund Reimbursement Amount, the aggregate Principal Distributable Amount (for Payment Dates occurring after the end of the Funding Period), and the unpaid Note Balance (before and after giving effect to any Principal Distributable Amount). The Payment Date Report shall also report on Collection Account activity during the preceding Collection Period, by reporting (1) the amount on deposit in the Collection Account at the beginning of such Collection Period, (2) the amount of all Net Proceeds deposited into the Collection Account during the Collection Period, (3) the aggregate amount of Release Payments deposited into the Collection Account during the Collection Period, (4) the aggregate amount of deposits into the Collection Account from the Note Payment Account in respect of the Payment Date occurring during the Collection Period, (5) the daily total of all payments made in respect of the Transferor Interest and all Funding Amounts paid in respect of Additional Receivables on each date during the related Collection Period on which any such payment was made, and (6) the amount transferred from the Collection Account to the Note Payment Account in respect of the Payment Date that occurred during such preceding Collection Period. The Payment Date Report shall also state any other information necessary for the Paying Agent and the Trustee to make the payments required by Section 4.04 on such Payment Date and all information necessary for the Trustee to send statements to Noteholders pursuant to Section 4.07(a). Each Payment Date Report shall also (A) commencing with the Payment Date Report for the seventh Payment Date, report the Asset-Based Net Proceeds Coverage Percentage and the Series-Based Net Proceeds Coverage Percentage as of the end of the preceding Collection Period, (B) state the aggregate Collateral Balance as of the end of the preceding Collection Period and demonstrate that the Collateral Requirement was met at such time, and (C) list each Funding Termination Event and present a yes or no answer beside each indicating whether each possible Funding Termination Event has occurred as of the end of the preceding Collection Period. (c) Notwithstanding anything contained herein to the contrary, none of the Verification Agent (except as described in Section 3.04(a)), the Trustee nor the Paying Agent shall have any obligation to verify or recalculate any information provided to them by the REMIC Servicer. SECTION 3.03. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT. (a) OAC shall deliver to each Noteholder, the Rating Agency and the Trustee, on or before March 31 of each calendar year, beginning in March 31, 2002, an Officer's Certificate executed by the chief financial officer of OAC, stating that (i) a review of the activities of the Issuer and OAC during the preceding 12-month period ended September 30 (or, in the case of the first such statement, from the Closing Date through September 30, 2001) and of its performance under this Indenture and the Receivables Contribution Agreement has been made under the supervision of the officer executing the Officer's Certificate, and (ii) each of the Issuer and OAC has fulfilled all its obligations under this Indenture and the Receivables Contribution -28- Agreement in all material respects throughout such period or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. (b) The Verification Agent shall deliver to the Noteholders, the Trustee and the Issuer promptly after a Responsible Officer has obtained actual knowledge thereof, but in no event later than three Business Days thereafter, written notice specifying the nature and status of any Event of Default, or other occurrence which would have a material adverse effect on the rights or interests of the Noteholders. (c) OAC shall, on or before the last Business Day of the fifth month following the end of OAC's fiscal year (September 30) beginning in 2001, deliver to the Trustee and the Interested Noteholders a copy of the results of any Uniform Single Attestation Program for Mortgage Bankers or similar review conducted on OAC by its accountants and such other reports as OAC may prepare relating to its servicing functions as the REMIC Servicer. SECTION 3.04. VERIFICATION AGENT DUTIES; PERIODIC ACCOUNTANTS' REPORT. (a) The Verification Agent shall perform the procedures set forth below with respect to each Monthly REMIC Servicer Report and shall report to the Trustee (with a copy to each Noteholder and the REMIC Servicer) exceptions, if any, on or before the related Payment Date. If the Verification Agent reports any exceptions, the Verification Agent shall provide the Trustee (with a copy to each Noteholder and the REMIC Servicer) with written notice describing such exceptions, and the REMIC Servicer and the Verification Agent shall attempt to reconcile such exceptions prior to the third Business Day following the related Payment Date. If the Verification Agent and the REMIC Servicer are unable to reconcile exceptions with respect to a Monthly REMIC Servicer Report, then the Majority Noteholders, in their sole discretion, may, through their designated representatives, including without limitation any independent certified public accountants they select, examine the REMIC Servicer's books and records and conduct other procedures as described in Section 3.05, at OAC's expense, to reconcile such exceptions or or correct errors associated with them. The Monthly REMIC Servicer report shall be amended and redistributed to reflect the effect, if any, of such reconciliation or corrections, as soon as reasonably practicable. (i) Confirm that the aggregate Receivables Balance as of the beginning of the Collection Period agrees with the aggregate Receivables Balance as of the end of the second preceding Collection Period appearing in the Monthly REMIC Servicer Report for the preceding month. (ii) Confirm that the amounts shown in the Monthly REMIC Servicer Report as "P&I Advances" agree with the corresponding amounts set forth in the REMIC Trust Remittance Reports for each REMIC Trust for the same Collection Period. (iii) Confirm that the aggregate Receivables Balance as of the end of the Collection Period for each Asset-Based REMIC Trust agrees with the total of the itemized Receivables Balances appearing in the listing of all -29- outstanding Assets for such REMIC Trust in the Monthly REMIC Servicer Report. (iv) Verify the REMIC Servicer's calculations of the Asset-Based Net Proceeds Coverage Percentage and the Series-Based Net Proceeds Coverage Percentage set forth in the Monthly REMIC Servicer Report. (v) Determine that the Monthly REMIC Servicer Report is mathematically accurate. (b) The Verification Agent shall perform the procedures set forth below with respect to each Funding Date Report and Transferor Interest Payment Report prior to making any funding on such date: (i) Confirm that the aggregate Receivables Balance reported in such report for each Asset-Based REMIC Trust agrees with the total of the itemized Receivables Balances appearing in the listing of all outstanding Assets for such REMIC Trust. (ii) Confirm that such report indicates that the Collateral Requirement will be satisfied (based solely upon the information contained in such report). (iii) Determine that the amount reported to be on deposit in the Collection Account, after payment of the related Funding Amount, in such Funding Date Report at least equals the appropriate Required Expense Reserve. (iv) Determine that such report is mathematically accurate. (c) The Verification Agent shall perform the procedures set forth below with respect to each Payment Date Report and report to the Trustee (with a copy to each Noteholder and the REMIC Servicer) exceptions, if any, on or before the related Payment Date. If the Verification Agent reports any exceptions, the Verification Agent shall provide the Trustee (with a copy to each Noteholder and the REMIC Servicer) with written notice describing such exceptions and the REMIC Servicer and the Verification Agent shall reconcile such exceptions prior to the third Business Day following the related Payment Date. If the Verification Agent and the REMIC Servicer are unable to reconcile exceptions with respect to a Payment Date Report, then the Majority Noteholders, in their sole discretion, may, through their designated representatives, including without limitation any independent certified public accountants they select, examine the REMIC Servicer's books and records and conduct other procedures as described in Section 3.05, at OAC's expense, to reconcile such exceptions or correct errors associated with them. The effect, if any, of such reconciliation shall be reflected in the succeeding Payment Date Report. (i) Confirm that the deposits to and withdrawals from the Collection Account reflected in the Payment Date Report during the preceding Collection Period (e.g., amounts of Net Proceeds and Release Payments deposited into the Collection Account during such Collection Period, and amounts deposited into the Collection Account from the Note Payment Account during such Collection Period, and amounts of Funding Amounts and -30- payments in respect of the Transferor Interest withdrawn from the Collection Account during the Collection Period) agree with the corresponding amounts reflected in the bank statement(s) for the Collection Account, and that the aggregate Funding Amounts and Transferor Interest Payments reported in the Payment Date Report equal the sum of all amounts reported for Funding Amounts and Transferor Interest Payments reported in all Funding Date Reports and Transferor Interest Payment Reports delivered during the preceding Collection Period. (ii) Confirm that the Available Funds remitted by the Trustee to the Note Payment Account for the Payment Date and each amount required to be remitted on such Payment Date pursuant to Section 4.04(b) agree with the corresponding amounts reported in the Payment Date Report. (iii) Determine that the Payment Date Report is mathematically accurate. (d) OAC, at its own expense, shall cause PricewaterhouseCoopers, LLP or another firm of nationally recognized independent public accountants (who may also render other services to OAC or to the Issuer) to deliver to the Trustee (with a copy to each Noteholder) a report of agreed upon procedures containing the procedures described below. The first reporting period is from the Closing Date through September 30, 2002, and each subsequent reporting period is each 12-month period ending September 30 thereafter. Each such annual report must be delivered on or before the last Business Day of the third month following the end of each reporting period, beginning with the annual reporting period ending September 30, 2002. Such report shall also indicate that the firm is independent from the Issuer and OAC within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants. (i) Select at random two months from the reporting period. (ii) Select at random 12 REMIC Trusts (at least six of which shall be Asset-Based REMIC Trusts, if six such REMIC Trusts are included in the Trust Estate, for each of the two months selected in (i). (iii) Obtain the REMIC Servicer's records supporting the amounts shown in the reconciliation described in Section 3.02(a)(C) for the 24 test items selected in (ii) above. (iv) Select one Business Day's activity for each of the 24 test items. Trace the P&I Advances and P&I Advance Recoveries for each of the 24 test items to postings in the bank statement for the Certificate Account for the related REMIC Trust. (v) Aggregate the P&I Advances and P&I Advance Recoveries for the 24 test items selected in (ii) above for each Business Day in the related Collection Period and compare the results to the corresponding amounts shown in the related Monthly REMIC Servicer Report. -31- (vi) Select at random two Monthly REMIC Servicer Reports from the reporting period and the related loan level listings of Asset-Based Receivables and select at random six Asset-Based REMIC Trusts for each of the two Collection Periods related to such reports. From each of the twelve (12) loan level listings, select at random four (4) loans and, using the obligor payment data reflected in the REMIC Servicer's detailed servicing records, recompute the P&I Advance with respect to such loans as of the end of the related Collection Period and compare the recomputed amounts to the corresponding amounts shown in the loan level listings. (vii) Select at random two Monthly REMIC Servicer Reports from the reporting period and compare the total Receivables appearing thereon to the corresponding amount appearing in the REMIC Servicer's general ledger. If the two amounts do not agree, obtain a reconciliation of the two amounts, note the number and magnitude of unreconciled amounts, if any. All fees in connection with the agreed upon procedures letter will be paid directly by OAC. SECTION 3.05. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION. The Custodians shall provide the Interested Noteholders with access to the documentation relating to the Receivables as provided in Section 2.05(b). In each case, access to documentation relating to the Receivables shall be afforded without charge but only upon reasonable request and during normal business hours at the offices of the Custodians. Nothing in this Section shall impair the obligation of the Custodians to observe any applicable law prohibiting disclosure of information regarding the Trust Estate and the failure of the Custodians to provide access as provided in this Section as a result of such obligation shall not constitute a breach of this Section. Notwithstanding anything to the contrary contained in this Section 3.05, Section 2.05, Section 7.07 or in any other Section hereof, OAC, on reasonable prior notice, shall permit any representative of the Trustee or any Interested Noteholder, including, without limitation, independent certified public accountants selected by the Trustee or the Interested Noteholder, as the case may be, during OAC's normal business hours, to examine all the books of account, records, reports and other papers of OAC relating to the Assets and the Receivables, to make copies and extracts therefrom, and to discuss OAC's affairs, finances and accounts relating to the Assets and the Receivables with OAC's officers, employees and independent public accountants (and by this provision OAC hereby authorizes OAC's accountants to discuss with such representatives such affairs, finances and accounts), all at such times and as often as reasonably may be requested. Unless an Event of Default or a Funding Termination Event that has not been waived by the Majority Noteholders shall have occurred, or there is an Interest Carryover Shortfall or the Notes have been downgraded below the ratings assigned on the Closing Date, any out-of-pocket costs and expenses incident to the exercise by the Trustee or any Interested Noteholder of any right under this Section 3.05 shall be borne by the Interested Noteholder(s). The parties hereto acknowledge that the Trustee shall not exercise any right pursuant to this Section 3.05 prior to any event set forth in the preceding sentence unless directed to do so by any Interested Noteholder, and the Trustee shall have no liability for action in accordance with this -32- sentence. In the event that such right is exercised (i) following the occurrence of a Funding Termination Event that has not been waived by the Majority Noteholders, (ii) following the occurrence of an Event of Default that has not been waived by the Majority Noteholders, (iii) while there is an Interest Carryover Shortfall or (iv) while the Notes have been downgraded below the ratings assigned on the Closing Date, such out-of-pocket costs and expenses shall be borne by OAC, or if OAC does not pay such expenses within 60 days, then by the Trust Estate. Prior to any such payment, OAC shall be provided with commercially reasonable documentation of such costs and expenses. Notwithstanding anything contained in this Section 3.05 or Section 7.07(r) to the contrary, in no event shall the books of account, records, reports and other papers of OAC or the Issuer relating to the Assets and the Receivables be examined by independent certified public accountants at the direction of the Trustee or any Interested Noteholder pursuant to the exercise of any right under this Section 3.05 or Section 7.07(r) more than two times during any 12-month period, unless (i) a Funding Termination Event that has not been waived by the Majority Noteholders has occurred during such 12-month period, (ii) an Event of Default has occurred that has not been waived by the Majority Noteholders during such 12-month period, (iii) there is an Interest Carryover Shortfall or (iv) the Notes have been downgraded below the ratings assigned on the Closing Date, in which case more than two examinations may be conducted during a 12-month period, but such extra audits shall be at the sole expense of the Interested Noteholder(s) requesting such audit(s). SECTION 3.06. REPORTS TO NOTEHOLDERS AND THE RATING AGENCY. The Trustee shall provide to each Noteholder and the Rating Agency (i) the Officer's Certificate comprising an annual statement as to compliance described in Section 3.03(a), (ii) written notice with respect to Events of Default, as required by Section 3.03(b) and (iii) the Trustee's Certificate delivered pursuant to Section 10.02 or 10.03. SECTION 3.07. TAX TREATMENT. Notwithstanding anything to the contrary set forth herein, the Issuer has entered into this Indenture with the intention that for federal, state and local income and franchise tax purposes (i) the Notes will qualify as indebtedness secured by the Receivables and (ii) the Trust Estate shall not be treated as an association or publicly traded partnership taxable as a corporation. The Issuer, by entering into this Indenture, each Noteholder, by its acceptance of a Note and each purchaser of a beneficial interest therein, by accepting such beneficial interest, agree to treat such Notes as debt for federal, state and local income and franchise tax purposes. The Trustee shall treat the Trust Estate as a security device only, and shall not file tax returns or obtain an employer identification number on behalf of the Trust Estate. The provisions of this Indenture shall be construed in furtherance of the foregoing intended tax treatment. Notwithstanding the foregoing, if the Trust Estate is required to be recognized as a partnership for federal or state income tax purposes, including by reason of a determination by the Internal Revenue Service or any other taxing authority that the Notes should not be properly characterized as debt and therefore that the Trust Estate constitutes a partnership for income tax purposes, the Issuer and the Noteholders agree that payments made to the Noteholders pursuant to Section 4.04(b)(i) shall be treated as "guaranteed payments" (within the meaning of Section -33- 707(c) of the Code) and all remaining taxable income or loss and any separably allocable items thereof shall be allocated to the Issuer. ARTICLE IV THE ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS SECTION 4.01. ACCOUNTS. The Trustee shall establish and maintain, or cause to be established and maintained, the Collection Account, the Reserve Account and the Note Payment Account, each of which shall be an Eligible Account, for the benefit of the Noteholders. All amounts held in the Collection Account, the Reserve Account or the Note Payment Account shall, to the extent permitted by this Indenture and applicable laws, rules and regulations, be invested in Permitted Investments by the depository institution or trust company then maintaining such Account only upon written direction of the Issuer to the Trustee, provided, however, in the event the Issuer fails to provide such written direction to the Trustee, and until the Issuer provides such written direction, the Trustee shall invest in such Permitted Investments satisfying the requirements of clause (i) or (vi) of the definition thereof. Investments held in Permitted Investments in the Accounts shall not be sold or disposed of prior to their maturity. Earnings on investment of funds in the Accounts shall be remitted by the Trustee upon the Issuer's request to the account or other location of the Issuer's designation on the first Business Day of the month following the month in which such earnings on investment of funds is received. Such earnings shall not be available to the Trust Estate, shall not constitute Available Funds and shall not be available for the funding of purchases of Additional Receivables or distributions to be made pursuant to Section 4.04. Any losses and investment expenses relating to any investment of funds in any of the Accounts shall be for the account of the Issuer, which shall deposit or cause to be deposited the amount of such loss (to the extent not offset by income from other investments of funds in the related Account) in the related Account promptly upon the realization of such loss. The taxpayer identification number associated with each of the Accounts shall be that of the Issuer and the Issuer will report for federal, state and local income tax purposes the income, if any, earned on funds in the relevant Account. The Issuer hereby acknowledges that all amounts on deposit in each Account (excluding investment earnings on deposit in the Accounts) are held in trust by the Trustee for the benefit of the Noteholders, subject to any express rights of the Issuer set forth herein, and shall remain at all times during the term of this Indenture under the sole dominion and control of the Trustee. So long as the Trustee complies with the provisions of this Section 4.01, the Trustee shall not be liable for the selection of investments or for investment losses incurred thereon by reason of investment performance, liquidation prior to stated maturity or otherwise. The Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any investment prior to its stated maturity or the failure to be provided with timely written investment direction. SECTION 4.02. COLLECTIONS. (a) The Trustee shall deposit to the Collection Account all Net Proceeds it receives from the Issuer daily, on the day on which such amounts are received. The Issuer may arrange -34- for daily automated clearing house ("ACH") debit pursuant to which all Net Proceeds are automatically transferred to the Collection Account or to the "Funding Account" (the "Funding Account") maintained by The Chase Manhattan Bank, as agent for the REMIC Servicer, pursuant to that certain P&I Advance Disbursement and Purchase Administration Agreement, of even date herewith, among OAC, the Issuer, the Trustee and The Chase Manhattan Bank, as OAC's agent, from the Certificate Accounts maintained pursuant to the REMIC Pooling Agreements. In the event Net Proceeds are transferred to the Funding Account, the REMIC Servicer hereby authorizes and directs the Trustee to withdraw such Net Proceeds from the Funding Account and deposit them into the Collection Account. (b) On each Payment Date, the Trustee shall transfer from the Collection Account to the Note Payment Account all Available Funds on deposit in the Collection Account. Other than as specifically contemplated pursuant to Section 4.03, the REMIC Servicer, the Issuer, the Verification Agent or the Trustee shall not remit to the Note Payment Account, and each shall take all reasonable actions to prevent other Persons from remitting to the Note Payment Account, amounts which do not constitute payments, collections or recoveries received, made or realized in respect of the Receivables or the initial cash deposited by the Noteholders with the Trustee on the Closing Date, and the Trustee will return to the Issuer or the REMIC Servicer any such amounts upon receiving written evidence reasonably satisfactory to the Trustee that such amounts are not a part of the Trust Estate. (c) On each Business Day on which the Trustee receives a remittance of Net Proceeds from the Issuer or withdraws Net Proceeds from the Funding Account, the Trustee shall deposit such amounts received into the Collection Account. On any Business Day during the Funding Period on which the Issuer wishes to receive a payment in respect of the Transferor Interest, the Issuer shall deliver, or cause to be delivered, to the Trustee and the Initial Noteholders a report demonstrating the Issuer's right to receive such payment (a "Transferor Interest Payment Report"), demonstrating that the Collateral Requirement is satisfied on such date, and stating the amount of the Transferor Interest as of such date, the amount of funds on deposit in the Collection Account on such date, the amount of the Required Expense Reserve for the next upcoming Payment Date, and the amount to be paid to the Issuer pursuant to this Section 4.02(c). The Trustee shall be entitled to rely conclusively on any such Transferor Interest Payment Report. The Transferor Interest Payment Report on any Funding Date may be part of the related Funding Date Report, and no report separate from the Funding Date Report shall be required for a Transferor Interest payment that is to be made on a Funding Date. If the Collateral Requirement is satisfied, then the Trustee shall withdraw from the Collection Account, and shall remit to the Issuer, cash in an amount equal to the lesser of (1) the amount of the Transferor Interest and (2) the amount by which (x) funds on deposit in the Collection Account exceed (y) the amount of the Required Expense Reserve for the next upcoming Payment Date. For purposes of this Section 4.02(c), to the extent the Trustee receives Net Proceeds from the Issuer later than 2:00 PM Eastern time on a Business Day, such funds shall be deemed to have been received on the following Business Day. Notwithstanding the foregoing, no payment in respect of the Transferor Interest shall be made during the period from the end of a Collection Period through the Payment Date occurring in the following month. -35- SECTION 4.03. ADDITIONAL DEPOSITS. The Issuer shall remit any Redemption Amount to the Trustee and the Trustee shall remit such Redemption Amount pursuant to Section 11.02. SECTION 4.04. ALLOCATIONS AND PAYMENTS. (a) As required by Section 3.02(b), the REMIC Servicer shall deliver a Payment Date Report to the Issuer, the Trustee, the Verification Agent, the Payment Agent and the Noteholders by no later than the second Business Day before each Payment Date. (b) On each Payment Date, the Paying Agent shall make the following payments from Available Funds on deposit in the Note Payment Account and amounts on deposit in the Reserve Account in the following order of priority and in the amounts set forth in the Payment Date Report for such Payment Date; provided however, such payments shall be made only to the extent of funds then on deposit in the applicable Account: (i) to the Noteholders, pro rata, based on their respective Note Balances (A) from Available Funds on deposit in the Note Payment Account, an amount equal to the sum of the Interest Distributable Amount for the Notes for such Payment Date, plus any outstanding amount of Interest Carryover Shortfall, if any, for prior Payment Dates provided that (B) if Available Funds are insufficient to pay the amount described in clause (A) above, the Trustee shall withdraw from the Reserve Account an amount equal to the lesser of the amount then on deposit in the Reserve Account and the amount of such interest shortfall and shall disburse such amount to the Noteholders in reduction of such shortfall; (ii) to the Trustee (A) from Available Funds on deposit in the Note Payment Account, an amount equal to the sum of the Trustee Fee for such Payment Date, plus all accrued and unpaid Trustee Fees, if any, for prior Payment Dates provided that (B) if Available Funds are insufficient to pay the amount described in clause (A) above, the Trustee will withdraw from the Reserve Account an amount equal to the lesser of the amount then on deposit in the Reserve Account and the amount of such shortfall for disbursement to the Trustee in reduction of such shortfall; (iii) to the Reserve Account, from Available Funds on deposit in the Note Payment Account, an amount equal to the lesser of remaining Available Funds and the Reserve Fund Reimbursement Amount for such Payment Date, if applicable; (iv) after the Funding Period, to the Noteholders, pro-rata, based on their respective Note Balances (A) any remaining Available Funds and any other amounts available on deposit in the Note Payment Account, in reduction of the Note Balance of the Notes, until such Note Balance is reduced to zero, (B) if on the Final Payment Date there is an outstanding Note Balance (after payment of the amounts described in clause (A) -36- above), the Trustee shall withdraw from the Reserve Account an amount equal to the lesser of the amount then on deposit in the Reserve Account and the amount of the outstanding Note Balance and remit such lesser amount to the Noteholders in reduction of the outstanding Note Balance; (v) (A) pro rata (1) to the Trustee, any of the Trustee's reasonable, out of pocket expenses and indemnities to which the Trustee is entitled to payment (to the extent expressly set forth in this Indenture), and for which the Trustee shall have delivered a written invoice to the Issuer and the REMIC Servicer no later than three Business Days prior to such Payment Date, which expenses shall not exceed $250,000 in the aggregate during the term of this Indenture; provided that, if the Scheduled Termination Date is extended past August 2003, an additional $100,000 shall be available annually under this clause, beyond the initial $250,000 available in the aggregate for the term of the Indenture, for each 12-month period for which the Scheduled termination Date shall have been extended, and that such additional annual amount available shall be pro-rated for any partial year extension, it being understood that any such $100,000 additional amount or portion thereof shall be available for the year to which it relates, and shall not be available after the expiration of the extension period in respect of which it arose, and (2) to the Securities Intermediary for any indemnification amounts owed by the Trust Estate to the Securities Intermediary pursuant to Section 4.08(c); and (vi) (A) during the Funding Period, any remaining amounts to the Collection Account, and (B) after the Funding Period has ended, any remaining amounts to the Issuer and in such case, such amounts paid shall be released from the lien of this Indenture. If the Trust Estate is required to be recognized as a partnership for federal or state income tax purposes, including by reason of a determination by the Internal Revenue Service or any other taxing authority that the Notes should not be properly characterized as debt and that the Trust Estate therefore constitutes a partnership for income tax purposes, amounts withheld by the Trustee in compliance with federal and state income tax laws, including without limitation, amounts withheld with respect to foreign persons in accordance with the Code (and the corresponding provisions of state and local law), shall be treated for all purposes of this Indenture as amounts actually paid to the relevant Noteholder. Additionally, all other amounts withheld in accordance with the terms of the Code (and the corresponding provisions of state and local law) shall be treated for all purposes of this Indenture as amounts actually paid to the relevant Noteholder. (c) On each Payment Date, the Trustee shall instruct the Paying Agent to distribute to each Noteholder of record on the related Record Date by wire transfer of immediately available funds, the amount to be paid to such Noteholder in respect of the related Note on such Payment Date or, if a wire transfer cannot be effected, by check delivered to each Noteholder of record on the related Record Date at the address listed on the records of the Note Registrar. -37- (d) The provisions of this Section 4.04 (including Section 4.04(b)) are subject to Section 6.10 hereof. SECTION 4.05. RESERVE ACCOUNT. (a) Pursuant to Section 4.01, the Trustee shall establish and maintain the Reserve Account, which shall be an Eligible Account, for the benefit of the Noteholders. On or prior to the Closing Date, the Issuer shall deposit an amount equal to the Required Reserve Amount into the Reserve Account. Thereafter, on each Payment Date, the Trustee shall withdraw amounts from the Note Payment Account and deposit them into the Reserve Account pursuant to, and to the extent required by, Section 4.04(b)(iii). (b) Consistent with the limited purposes for which the Reserve Account is to be established, (x) on each Payment Date, an amount equal to the aggregate of amounts described in Sections 4.04(b)(i)(B), 4.04(b)(ii)(B) and 4.04(b)(iv)(B) if any, shall be withdrawn from the Reserve Account by the Trustee and remitted for payment as described in those Sections, and (y) upon payment of all sums payable hereunder with respect to the Notes, any amounts then on deposit in the Reserve Account shall be remitted by the Trustee to the Issuer and shall be released from the lien of the Trust Estate. (c) Amounts held in the Reserve Account shall be invested in Permitted Investments at the direction of the Issuer as provided in Section 4.01. (d) The Trustee shall pay, prior to the Stepdown Date, to the Issuer on each Payment Date, and on or after the Stepdown Date to the Note Payment Account, the amount by which the amount in the Reserve Account exceeds the Required Reserve Amount, after giving effect to all distributions required to be made from the Reserve Account and the Note Payment Account on such date and to the extent such funds are paid to the Issuer, all such amounts shall thereupon be released from the lien of the Trust Estate. SECTION 4.06. NOTE PAYMENT ACCOUNT. (a) Pursuant to Section 4.01, the Trustee shall establish and maintain the Note Payment Account, which shall be an Eligible Account, for the benefit of the Noteholders. The Note Payment Account shall be funded to the extent that (1) the Issuer shall remit to the Trustee the Redemption Amount pursuant to Section 11.02, (2) the Trustee shall remit any Available Funds from the Collection Account pursuant to Section 4.02(b) and (3) the Trustee shall transfer amounts from the Reserve Account pursuant to, and to the extent required by Section 4.05. (b) On each Payment Date, an amount equal to the aggregate of amounts described in Section 4.04(b) shall be withdrawn from the Note Payment Account by the Trustee and remitted to the Noteholders and other persons or Accounts described therein for payment as described in that Section, and upon payments of all sums payable hereunder with respect to the Notes, any remaining amounts then on deposit in the Note Payment Account shall be released from the lien of the Trust Estate and paid to the Issuer. (c) Amounts held in the Note Payment Account shall be invested in Permitted Investments at the direction of the Issuer as provided in Section 4.01. -38- SECTION 4.07. STATEMENTS TO NOTEHOLDERS. (a) On each Payment Date, the Trustee will make the Monthly REMIC Servicer Report and the Payment Date Report described in Section 3.02 (and, at its option, any additional files containing the same information in an alternative format) available to the Noteholders of record, the Issuer and any other party designated by the Issuer, via the Trustee's internet website. Access to the Payment Date Report via the Trustee's internet website will be restricted by use of log-on identification and a password provided by the Trustee. The Trustee shall only provide such password to the Rating Agency, the Issuer and Noteholders of record. The Trustee's internet website shall initially be located at "www.jpmorganchase.com". Assistance in using the website can be obtained by calling the Trustee's customer service desk at (212) 946-7565. Parties that are unable to use the above distribution options are entitled to have a paper copy mailed to them via first class mail by calling the customer service desk and indicating such. The Trustee shall have the right to change the way the Payment Date Reports are distributed in order to make such distribution more convenient and/or more accessible to the above parties and the Trustee shall provide timely and adequate notification to all above parties regarding any such changes. (b) Within a reasonable period of time after the end of each calendar year, but not later than the latest date permitted by law, the Trustee shall provide to each Person who at any time during such calendar year shall have been a Noteholder the information that is necessary under the Code for the preparation of the income tax returns of such Noteholder. In addition, upon request, the Trustee shall mail a statement containing such information to such Persons. SECTION 4.08. SECURITIES ACCOUNTS. (a) Securities Intermediary. The Issuer and the Trustee hereby appoint The Chase Manhattan Bank as Securities Intermediary with respect to the Collection Account, the Note Payment Account and the Reserve Account (individually, an "Account," and collectively, the "Accounts"). The Security Entitlements and all Financial Assets credited to the Accounts, including without limitation all amounts, securities, investments, Financial Assets, investment property and other property from time to time deposited in or credited to such account and all proceeds thereof, held from time to time in the Accounts will continue to be held by the Securities Intermediary for the Trustee for the benefit of the Noteholders. Upon the termination of this Indenture, the Trustee shall inform the Securities Intermediary of such termination. By acceptance of their Notes or interests therein, the Noteholders and all beneficial owners of Notes shall be deemed to have appointed The Chase Manhattan Bank as Securities Intermediary. The Chase Manhattan Bank hereby accepts such appointment as Securities Intermediary. (i) With respect to any portion of the Trust Estate that is credited to the Accounts, the Securities Intermediary agrees that: (A) with respect to any portion of the Trust Estate that is held in deposit accounts, each such deposit account shall be subject to the security interest granted pursuant to this Indenture, and the Securities Intermediary shall comply with instructions originated by the Trustee directing dispositions of funds in the deposit -39- accounts without further consent of the Issuer and otherwise shall be subject to the exclusive custody and control of the Securities Intermediary, and the Securities Intermediary shall have sole signature authority with respect thereto; (B) the sole assets permitted in the Accounts shall be those that the Securities Intermediary agrees to treat as Financial Assets; (C) any portion of the Trust Estate that is, or is treated as, a Financial Asset shall be physically delivered (accompanied by any required endorsements) to, or credited to an account in the name of, the Securities Intermediary or other eligible institution maintaining any Account in accordance with the Securities Intermediary's customary procedures such that the Securities Intermediary or such other institution establishes a Security Entitlement in favor of the Trustee with respect thereto over which the Securities Intermediary or such other institution has Control; and (D) it will use reasonable efforts to promptly notify the Trustee and the Depositor if any other Person claims that it has a property interest in a Financial Asset in any Account and that it is a violation of that Person's rights for anyone else to hold, transfer or deal with such Financial Asset. (ii) The Securities Intermediary hereby confirms that (A) each Account is an account to which Financial Assets are or may be credited, and the Securities Intermediary shall, subject to the terms of this Indenture , treat the Trustee as entitled to exercise the rights that comprise any Financial Asset credited to any Account, (B) any portion of the Trust Estate in respect of any Account will be promptly credited by the Securities Intermediary to such account, and (C) all securities or other property underlying any Financial Assets credited to any Account shall be registered in the name of the Securities Intermediary, endorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary, and in no case will any Financial Asset credited to any Account be registered in the name of the Issuer, the REMIC Servicer or the Seller, payable to the order of the Issuer, the REMIC Servicer or the Seller or specially endorsed to any of such Persons. (iii) If at any time the Securities Intermediary shall receive an Entitlement Order from the Trustee directing transfer or redemption of any Financial Asset relating to any Account, the Securities Intermediary shall comply with such Entitlement Order without further consent by the Issuer, the REMIC Servicer, the Seller or any other Person. If at any time the Trustee notifies the Securities -40- Intermediary in writing that this Indenture has been discharged in accordance herewith, then thereafter if the Securities Intermediary shall receive any order from the Issuer directing transfer or redemption of any Financial Asset relating to any Account, the Securities Intermediary shall comply with such Entitlement Order without further consent by the Trustee or any other Person. (iv) In the event that the Securities Intermediary has or subsequently obtains by agreement, operation of law or otherwise a security interest in any Account or any Financial Asset or Security Entitlement credited thereto, the Securities Intermediary hereby agrees that such security interest shall be subordinate to the security interest of the Trustee. The Financial Assets and Security Entitlements credited to the Accounts will not be subject to deduction, set-off, banker's lien, or any other right in favor of any Person other than the Trustee in the case of the Accounts. (v) There are no other agreements entered into between the Securities Intermediary in such capacity, and the Securities Intermediary agrees that it will not enter into any agreement with, the Issuer, the REMIC Servicer, the Seller or any other Person with respect to any Account. In the event of any conflict between this Agreement (or any provision of this Agreement) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail. (vi) The rights and powers granted herein to the Trustee have been granted in order to perfect its interest in the Accounts and the Security Entitlements to the Financial Assets credited thereto, and are powers coupled with an interest and will neither be affected by the bankruptcy of the Issuer, the REMIC Servicer or the Seller nor by the lapse of time. The obligations of the Securities Intermediary hereunder shall continue in effect until the interest of the Trustee in the Accounts and in such Security Entitlements, has been terminated pursuant to the terms of this Indenture and the Trustee has notified the Securities Intermediary of such termination in writing. (b) Definitions; Choice of Law. Capitalized terms used in this Section 4.08 and not defined herein shall have the meanings assigned to such terms in the New York UCC. For purposes of Section 8-110(e) of the New York UCC, the "securities intermediary's jurisdiction" shall be the State of New York. (c) Limitation on Liability; Indemnification. None of the Securities Intermediary or any director, officer, employee or agent of the Securities Intermediary shall be under any liability to the Trustee or the Noteholders for any action taken, or not taken, in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Securities Intermediary against any liability to the Trustee or the Noteholders which would otherwise be imposed by reason of the Securities Intermediary's willful misconduct, bad faith or negligence in the performance of its obligations or duties hereunder. The Securities Intermediary and any director, officer, employee or agent of the Securities Intermediary may rely in good faith on any document of any kind which, prima facie, is properly executed and submitted by any Person respecting any matters arising hereunder. The Securities Intermediary shall be under no -41- duty to inquire into or investigate the validity, accuracy or content of such document. Pursuant to Section 4.04(b)(5) hereof, the Trust Estate shall indemnify the Securities Intermediary for and hold it harmless against any loss, liability or expense arising out of or in connection with this Indenture and carrying out it duties hereunder, including the costs and expenses of defending itself against any claim of liability, except in those cases where the Securities Intermediary has been guilty of bad faith, negligence or willful misconduct. The foregoing indemnification shall survive any termination of this Indenture or the resignation or removal of the REMIC Servicer. SECTION 4.09. NOTICE OF ADVERSE CLAIMS. Except for the claims and interests of the Noteholders in the Accounts, Chase does not know of any claim to, or interest in, the Account or in any financial asset credited thereto. If any Person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against any Account or in any financial asset carried therein, Chase will promptly notify the Interested Noteholders, the Trustee and the Issuer thereof. ARTICLE V [RESERVED] ARTICLE VI THE NOTES SECTION 6.01. THE NOTES. (a) The Notes shall be non-recourse obligations of the Issuer and the Trust Estate shall be the sole source of payments of principal thereof and interest thereon. Notwithstanding anything else to the contrary contained herein, the Notes shall not be considered a general obligation of the Issuer for any purpose. (b) The Notes shall be issued on the Closing Date in the amount of the Initial Fixed Rate Note Balance. On the Closing Date, the Initial Noteholders shall pay to the Trustee cash in the amount of the Initial Fixed Rate Note Balance. The Issuer or OAC shall deliver to the Trustee the Schedule of Initial Receivables. On the Closing Date, the Issuer or OAC shall pay to the Trustee an initial Trustee Fee of $5,000, and the amount of the fees and disbursements of the Trustee's legal counsel invoiced to OAC. The Trustee shall remit to the Issuer, from the cash received from the Initial Noteholders, the Funding Amount for the Initial Receivables, and shall deposit the balance of such cash into the Collection Account, such that the sum of the Collateral Balance and the amount on deposit in the Collection Account shall equal the Initial Fixed Rate Note Balance. The Notes shall accrue interest at the Fixed Rate from and including the Closing Date. (c) The Notes shall be substantially in the form attached hereto as Exhibit C and shall be issuable in minimum denominations of $1,000,000 and integral multiples of $1,000 in excess thereof. The Notes shall each be executed by the Issuer and authenticated by the Trustee by the manual or facsimile signature of a Responsible Officer of the Trustee pursuant to a written order -42- of the Issuer requesting the Trustee to authenticate such Notes. Notes bearing the manual or facsimile signatures of individuals who were, at the time when such signatures were affixed, authorized to sign on behalf of the Issuer or the Trustee shall be valid and binding obligations of the Issuer, notwithstanding that such individuals or any of them have ceased to be so authorized prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. The Notes shall be dated the date of their authentication. (d) The Notes shall be issued only in a transaction (or transactions) that was not required to be registered under the Securities Act. For purposes of the preceding sentence, the term "Securities Act" shall mean the provisions thereof exclusive of Regulation S (17 CFR 230.901 through 230.904). SECTION 6.02. AUTHENTICATION AND DELIVERY OF THE NOTES. The Trustee shall cause, the Notes, in authorized denominations equaling in the aggregate the Initial Fixed Rate Note Balance, to be authenticated and delivered upon the written order of the Issuer, simultaneously with the Grant to the Trustee of the Receivables and the delivery to the Trustee of the Schedule of Initial Receivables and the other components of the Trust Estate, and after the receipt by the Trustee from the Initial Noteholders of the cash referred to in Section 6.01(b) above. No Note shall be entitled to any benefit under this Indenture or be valid for any purpose, unless there appears thereon a certificate of authentication substantially in the form set forth in the form of such Note attached hereto as Exhibit C, executed by the Trustee by manual or facsimile signature, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered under this Indenture. SECTION 6.03. REGISTRATION OF TRANSFER AND EXCHANGE OF NOTES. (a) The Note Registrar shall maintain a Note Register in which, subject to such reasonable regulations as it may prescribe, the Note Registrar shall provide for the registration of the Notes and issuances, transfers and exchanges thereof as provided in this Indenture. The Trustee is hereby initially appointed Note Registrar for the purpose of registering the Notes and issuances, transfers and exchanges thereof as provided in this Indenture. In the event that, subsequent to the Closing Date, the Trustee notifies the Issuer that it is unable to act as Note Registrar, the Issuer shall appoint another bank or trust company, agreeing to act in accordance with the provisions of this Indenture applicable to it, and otherwise acceptable to the Trustee with notice to the Majority Noteholders, to act as successor Note Registrar under this Indenture. (b) Subject to the provisions of this Indenture, upon surrender for registration of transfer of any Note at the Corporate Trust Office, the Issuer shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes in authorized denominations of a like aggregate principal amount. (c) Notes may be exchanged for other Notes of authorized denominations of a like aggregate principal amount, at the option of the related Noteholder upon surrender of the Note to be exchanged at any such office or agency. Whenever any Note is so surrendered for exchange, the Issuer shall execute and the Trustee shall authenticate and deliver the Note that the Noteholder making the exchange is entitled to receive. Every Note presented or surrendered for -43- registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Note Registrar duly executed by the Noteholder thereof or his or her attorney duly authorized in writing. (d) No service or other charge shall be made for any registration of issuance, transfer or exchange of Notes by the Trustee, but the Trustee 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 Notes. (e) Any Notes surrendered for registration of transfer or exchange shall be canceled and subsequently destroyed by the Trustee. (f) Each purchaser of a Note or of a beneficial interest therein shall be deemed to have represented and warranted, by accepting such Note or beneficial interest as follows: (i) it is acquiring the Notes for its own account or for an account with respect to which it exercises sole investment discretion, and that it or such account is (1) a Qualified Institutional Buyer acquiring the Notes for investment purposes and not for distribution or (2) a person involved in the organization or operation of the Issuer or an Affiliate of such person within the meaning of Rule 3a-7 of the Investment Company Act (including, but not limited to, OAC); (ii) it acknowledges that the Notes have not been registered under the Securities Act or any state securities laws and may not be sold except as permitted below; (iii) it understands and agrees that such Notes are being offered only in a transaction not involving any public offering within the meaning of the Securities Act, and that such Notes may be resold, pledged or transferred only in accordance with Section 6.03(g) below (a) to a person whom the transferor reasonably believes after due inquiry is, and who has certified that it is, a Qualified Institutional Buyer that purchases for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A or (b) to a person involved in the organization or operation of the Issuer or an Affiliate of such person within the meaning of Rule 3a-7 of the Investment Company Act (including, but not limited to, OAC) in a transaction that is registered under the Securities Act and applicable state securities laws or that is exempt from the registration requirements of the Securities Act and such laws; (iv) it understands that the following legend will be placed on the Notes, unless otherwise agreed by the Issuer: "THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND MAY NOT BE DIRECTLY OR INDIRECTLY SOLD OR -44- OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT TO (1) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, IN A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO RULE 144A OR (2) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUER OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, IN A TRANSACTION THAT IS REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS NOTE UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN THE INDENTURE UNDER WHICH THIS NOTE IS ISSUED (A COPY OF WHICH IS AVAILABLE FROM THE TRUSTEE UPON REQUEST). PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT THE SELLER OF ANY NOTES MAY BE RELYING ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A UNDER THE SECURITIES ACT." (v) it (x) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the Notes; and (y) it (or any account for which it is purchasing) has the ability to bear the economic risks of its prospective investment for an indefinite period and can afford the complete loss of such investment; (vi) if it is acquiring the Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgments, representations, warranties and agreements on behalf of each such account; (vii) it understands that a Note may not be transferred to an Employee Plan, or an entity, account or other pooled investment fund the underlying assets of which include or are deemed to include assets of an Employee Plan unless the prospective transferee provides a certification to the Trustee to the effect that a prohibited transaction class exemption, including but not limited to Department of Labor Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption for Plan Asset Transactions Determined by Independent Qualified Professional Asset Managers); PTE 91-38 (Class Exemption for Certain Transactions Involving Bank Collective Investment Funds); PTE 90-1 (Class Exemption for Certain Transactions Involving Insurance Company Pooled Separate Accounts), PTE 95-60 (Class Exemption for Certain Transactions Involving Insurance Company General Accounts), and PTCE 96-23 (Class Exemption for Plan Asset Transactions Determined by In-House Asset Managers), will apply to the prospective transferee's acquisition and continued holding of a Note; -45- (viii) in the case of the acquisition of Notes, directly or indirectly, by a partnership, limited liability company, S corporation, grantor trust, or any other "flow through entity" (within the meaning of United States Treasury Regulations Section 1.7704-1(h)(3)) (a "Flow-Through Entity"), the Flow-Through Entity, on behalf of each beneficial owner of interests, directly or indirectly, in such Flow-Through Entity, acknowledges that (A) substantially all of the value of the beneficial owner's interest in the Flow-Through Entity is not attributable to the Flow-Through Entity's interest (direct or indirect) in the Trust Estate and (B) no principal purpose of the use of such Flow-Through Entity to acquire and hold Notes (as opposed to direct acquisition or ownership of Notes by the beneficial owners of the Flow-Through Entity) is to permit the Trust Estate to satisfy the 100-partner limitation of Treasury Regulation Section 1.7704-1(h)(1)(ii) (assuming for purposes of the foregoing that the Trust Estate were classified as a partnership for federal and state income tax purposes and not solely as a security device for such purposes); and (ix) it understands that there are restrictions on the transfer of Notes that are intended to avoid classification of the Trust Estate as a "publicly traded partnership" within the meaning of Section 7704(b) of the Code. (g) No sale, pledge or other transfer (a "Transfer") of any Notes shall be made unless that Transfer is made pursuant to an effective registration statement under the Securities Act and effective registration or qualification under applicable state securities laws or is made in a transaction that does not require such registration or qualification. If such a Transfer is made without registration under the Securities Act (other than in connection with the initial issuance thereof by the Issuer), then the Issuer shall refuse to register such Transfer unless the Note Registrar receives (and upon receipt, may conclusively rely upon) either: (i) an affidavit from such Noteholder's prospective transferee substantially in the form attached as Exhibit D hereto certifying among other things, facts which would demonstrate that the Transfer would be exempt pursuant to Rule 144A under the Securities Act (the "Transferee Agreement"); or (ii) in the case that the Transfer is to be made to an Issuer Affiliate in a transaction that is exempt from registration under the Securities Act, an Opinion of Counsel reasonably satisfactory to the Issuer and the Note Registrar to the effect that such Transfer may be made without registration under the Securities Act (which Opinion of Counsel shall not be an expense of the Trust Estate or of the Issuer, OAC, the Trustee or the Note Registrar in their respective capacities as such), together with the written certification(s) as to the facts surrounding such Transfer from the Noteholder desiring to effect such Transfer and/or such Noteholder's prospective transferee on which such Opinion of Counsel is based. None of the Issuer, the Trustee or the Note Registrar is obligated to register or qualify the Notes under the Securities Act or any other securities law or to take any action not otherwise required under this Indenture to permit the transfer of any Note without registration or qualification. Any Holder of a Note desiring to effect such a Transfer shall, and upon acquisition of such a Note shall be deemed to have agreed to, indemnify the Trustee, the Note Registrar and the Issuer against any liability that may result if the Transfer is not so exempt or is not made in accordance with such federal and state laws. In connection with a Transfer of the Notes, the Issuer shall furnish upon request of a Noteholder to such Holder and any -46- prospective purchaser designated by such Noteholder the information required to be delivered under paragraph (d)(4) of Rule 144A of the Securities Act. (h) No Transfer of any Notes shall be made if such Transfer would result in the beneficial ownership of Notes by more than 75 Persons; provided, however, that no Transfer of Notes shall be made if the transferee of Notes is a Flow-Through Entity, unless such Flow-Through Entity is able to make and makes the acknowledgment in paragraph 8 of Exhibit D attached hereto. The Trustee shall be authorized to rely on a signed transferee agreement in the form of Exhibit D attached hereto, in determining whether or not any Transfer is authorized under this Section 6.03(h). Each Noteholder, by its acceptance of a Note, acknowledges and agrees that the foregoing restriction on transfer of the Notes is reasonable given the potentially adverse treatment to the Trust Estate and the Noteholders of classification of the Partnership as a "publicly traded partnership" within the meaning of Section 7704(b) of the Code. (i) The Note Registrar shall not register the Transfer of any Note unless the prospective transferee has delivered to the Trustee a certification to the effect that either (i) the source of funds to be used to acquire the Note does not include assets of any employee benefit plan, trust, annuity or account described in Section 3(3) of ERISA or Section 4975(e)(1) of the Code which is subject to Section 406 of ERISA or Section 4975 of the Code (any such plan, trust, annuity or account being referred to herein as an "Employee Plan") or an entity, account or other pooled investment fund the underlying assets of which include or are deemed to include Employee Plan assets by reason of an Employee Plan's investment in the entity, account or other pooled investment fund or (ii) a prohibited transaction class exemption, including but not limited to Department of Labor Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption for Plan Asset Transactions Determined by Independent Qualified Professional Asset Managers); PTE 91-38 (Class Exemption for Certain Transactions Involving Bank Collective Investment Funds); PTE 90-1 (Class Exemption for Certain Transactions Involving Insurance Company Pooled Separate Accounts), PTE 95-60 (Class Exemption for Certain Transactions Involving Insurance Company General Accounts), and PTCE 96-23 (Class Exemption for Plan Asset Transactions Determined by In-House Asset Managers), will apply to the prospective transferee's acquisition of a Note. (j) To the extent permitted under applicable law, the Trustee shall be under no liability to any Person for any registration of transfer of any Note that is in fact not permitted by this Section 6.03 or for making any payments due to the Noteholder thereof or taking any other action with respect to such Noteholder under the provisions of this Indenture so long as the transfer was registered by the Trustee in accordance with the requirements of this Indenture. SECTION 6.04. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any mutilated Note is surrendered to the Note Registrar, or the Note Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Note Registrar, the Trustee and the Issuer such security or indemnity as may be required by them to save each of them harmless (the general obligation of an institutional investor that is investment grade rated being sufficient indemnity), then, in the absence of notice that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, -47- destroyed, lost or stolen Note, a new Note of like tenor and denomination or ownership interest, as applicable. In connection with the issuance of any new Note under this Section, neither the Issuer nor the Trustee shall charge any fee, except that the Trustee may require the payment by the Noteholder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. If, after the delivery of such replacement Note or payment with respect to a destroyed, lost or stolen Note, 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 any 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. SECTION 6.05. PERSONS DEEMED OWNERS. Prior to due presentation of a Note for registration of transfer, the Issuer, the Trustee, the Note Registrar and any of their respective agents may treat the Person in whose name any Note is registered as the owner of such Note for the purpose of receiving payments pursuant to Section 4.04 and for all other purposes whatsoever, and neither the Issuer, the Trustee, the Note Registrar nor any of their respective agents shall be affected by any notice to the contrary. SECTION 6.06. ACCESS TO LIST OF NOTEHOLDERS' NAMES AND ADDRESSES. The Note Registrar shall furnish or cause to be furnished to the Issuer, within 15 days after receipt by the Note Registrar of a written request therefor from the Issuer, a list of the names and addresses of the Noteholders as of the most recent Record Date. If any Noteholder, (hereinafter referred to as "Applicant"), applies in writing to the Trustee, and such application states that the Applicants desire to communicate with other Noteholders with respect to their rights under this Indenture or under the Notes, then the Trustee shall, within five (5) Business Days after the receipt of such application, afford such Applicants access, during normal business hours, to the current list of Noteholders as reflected in the Note Register. Every Noteholder, by receiving and holding a Note, agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Noteholders under this Indenture, regardless of the source from which such information was derived. SECTION 6.07. SURRENDERING OF NOTES. Each Noteholder shall surrender its Note within 14 days after receipt of the final payment received in connection therewith. Notwithstanding the preceding sentence, the Trustee shall distribute such final payment to the Noteholders without surrender or presentment of the Notes and shall have no liability therefore so long as the payment is made to the Noteholders of record. Following such payment such Note shall be deemed canceled. Each Noteholder, by its acceptance of the final payment with respect to its Note, will be deemed to have relinquished any -48- further right to receive payments under this Indenture and any interest in the Trust Estate so long as all amounts due and owing the Noteholders hereunder have been paid. Each Noteholder shall indemnify and hold harmless the Issuer, the Trustee and any other Person against whom a claim is asserted in connection with such Noteholder's failure to tender the Note to the Trustee for cancellation. SECTION 6.08. MAINTENANCE OF OFFICE OR AGENCY. The Trustee shall maintain in the City of New York, State of New York, an office or offices or agency or agencies where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustee in respect of the Notes and this Indenture may be served. The Trustee initially shall designate the Corporate Trust Office as its office for such purposes. The Trustee shall give prompt written notice to the Issuer and the Noteholders of any change in the location of the Note Register or any such office or agency. SECTION 6.09. INTEREST CALCULATIONS; INTEREST PAYMENTS. The amount of interest to be paid in respect of the Notes on each Payment Date in accordance with Section 4.04(b) shall equal the Interest Distributable Amount and any Interest Carryover Shortfall. Interest shall be due and payable in arrears on each Payment Date. SECTION 6.10. PAYMENTS OF PRINCIPAL AND REBORROWINGS DURING THE FUNDING PERIOD. Subject to Section 6.11(b), any amounts on deposit in the Collection Account shall be available for the Funding Amount of any Additional Receivables Granted to the Trust Estate during the Funding Period provided no Funding Interruption Event shall have occurred. Further, on each Business Day during the Funding Period, any amounts on deposit in the Collection Account shall be available to reduce the Transferor Interest, if any, to zero, subject to Section 4.02(c). Except as provided in Section 4.04, amounts on deposit in the Collection Account will not be available to the Trustee or the Holders of the Notes as payments of principal on the Notes. The Funding Period may be extended at the request of the Issuer with the prior written consent of all of the Noteholders upon written notice given by the Issuer to all of the Noteholders with a copy of the notice to the Trustee no later than sixty days prior to the Scheduled Termination Date and upon confirmation by the Rating Agency of a rating of "A" or higher for the Notes after giving effect to the extension. On each Payment Date after the Funding Period, the Issuer shall cause to be made pursuant to Section 4.04 payments in respect of principal on the Notes in the amount, if any, of the Principal Distributable Amount for the Notes for such Payment Date. SECTION 6.11. PURCHASES OF ADDITIONAL RECEIVABLES DURING FUNDING PERIOD. (a) By no later than 11:00 AM Eastern time on each Funding Date, OAC shall deliver to the Issuer, the Trustee, the Verification Agent and the Majority Noteholders a report (each, a "Funding Date Report") (A) listing all Receivables as of the close of business on such Funding Date (summarized in each case by REMIC Trust), and including the aggregate Receivables Balance of both the Series-Based Receivables and the Asset-Based Receivables for each REMIC Trust at such date (summarized in each case by REMIC Trust) and including a trial balance listing all Assets in the Asset-Based REMIC Trusts and identifying each Asset-Based Receivable by loan number, and each Asset-Based Receivable by the date of the related P&I Advance and -49- Receivables Balance, (B) the aggregate amount of the Funding Amount to be paid on the Funding Date, (C) the aggregate amount of the Transferor Interest payments to be paid on the Funding Date, (D) a statement as to whether all Funding Conditions have been satisfied, and (E) a computation demonstrating that on the Business Day next succeeding such Funding Date, the Collateral Requirement will be satisfied after any Additional Receivables to be funded on such Funding Date have been funded, and after payment of the Funding Amount and any Transferor Interest payment on such Funding Date. (b) The Trustee shall remit to the Issuer (or the Issuer's designee) by the close of business on each Funding Date, out of funds on deposit in the Collection Account, the amount of the aggregate Funding Amount for such Additional Receivables, to the extent the amount of funds on deposit in the Collection Account, after disbursement of Funding Amounts would not be less than the amount of the Required Expense Reserve for the next upcoming Payment Date. SECTION 6.12. ASSET-BASED RECEIVABLES. Notwithstanding anything to the contrary in this Agreement, no Asset-Based Receivables related to any Asset-Based REMIC Trust shall be sold or contributed by OAC to the Issuer, or pledged by the Issuer to the Trust Estate, and no Funding Amount shall be paid in respect of any Asset-Based Receivable, until the REMIC Servicer shall have received from the Majority Noteholders a written notice confirming that the Majority Noteholders are satisfied that the REMIC Servicer's accounting system properly and accurately accounts for and reports the creation and reimbursement of the Asset-Based Receivables related to such Asset-Based REMIC Trust. The Majority Noteholders shall deliver written notice of such satisfaction at such time as the REMIC Servicer shall have demonstrated such ability to the satisfaction of the Majority Noteholders. On the Asset-Based Receivables Acceptance Date for any Asset-Based REMIC Trust, OAC shall sell and contribute the Initial Asset-Based Receivables from such REMIC Trust to the Issuer pursuant to Section 2(a) of the Receivables Contribution Agreement, and such Initial Asset-Based Receivables shall be thereupon Granted by the Issuer to the Trust Estate. The Funding Date for any Initial Asset-Based Receivables shall be on the related Asset-Based Receivables Acceptance Date or as soon thereafter as possible. In addition, from and after the Asset-Based Receivables Acceptance Date for any Asset-Based REMIC Trust, such Asset-Based REMIC Trusts shall be automatically included among the Designated REMIC Trusts, as described in the Receivables Contribution Agreement. If the Majority Noteholders, in their sole discretion, are not satisfied with respect to the REMIC Servicer's accounting system with respect to the Asset-Based REMIC Trusts as described above within 90 days following the Closing Date, then the Noteholders shall be entitled to receive on the next succeeding Payment Date, a payment of principal sufficient to reduce the Fixed Rate Note Balance to $30,000,000. OAC may convert one or more Asset-Based REMIC Trusts into Series-Based REMIC Trusts with the consent of the Majority Noteholders. When and if this occurs with respect to any REMIC Trust(s), OAC shall provide written notice of such event to the Issuer and the Trustee, and shall provide updated versions of Schedules 1-A and 1-B hereto, which shall supplant the previous versions of such schedules. -50- EXHIBIT 10.2 ARTICLE VII THE ISSUER SECTION 7.01. REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF ISSUER. The Issuer hereby makes the following representations, warranties and covenants for the benefit of the Trustee and the Noteholders. The representations shall be made as of the execution and delivery of this Indenture and as of each Funding Date and as of each date of Grant and shall survive the grant of a security interest in the Receivables to the Trustee. (a) Organization and Good Standing. The Issuer is duly organized and validly existing as a limited liability company in good standing under the laws of the State of Nevada, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire, own, hold, transfer, assign and convey the Receivables. (b) Due Qualification. The Issuer is duly qualified to do business as a foreign limited liability company in good standing, and has obtained and will keep in full force and effect all necessary licenses, permits and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business requires such qualifications, licenses, permits or approvals, the noncompliance with which would have a material adverse effect on the Noteholders. (c) Power and Authority. The Issuer has and will continue to have the power and authority to execute and deliver this Indenture and the other Transaction Documents to which it is or will be a party, and to carry out their respective terms; the Issuer has full power and authority to grant a security interest in the Trust Estate and has duly authorized such grant to the Trustee by all necessary action; and the execution, delivery and performance by the Issuer of this Indenture and each of the other Transaction Documents to which it is a party has been duly authorized by all necessary action of the Issuer. (d) Valid Transfers; Binding Obligations. This Indenture evidences a valid grant of a first priority perfected security interest under the UCC in the Receivables, and such other portion of the Trust Estate as to which a security interest may be perfected under the UCC, which is effective for so long as the Notes remain outstanding, enforceable against creditors of and purchasers from the Issuer, and each of the Transaction Documents to which the Issuer is a party constitutes a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally or by general equity principles. (e) No Violation. The consummation of the transactions contemplated by this Indenture and the other Transaction Documents and the fulfillment of the terms of this Indenture and the other Transaction Documents do not conflict with, result in any breach of any of the terms or provisions of, nor constitute (with or without notice or lapse of time or both) a default under the Certificate of Formation or Operating Agreement of the Issuer or any material -51- indenture, agreement or other material instrument to which the Issuer is a party or by which it shall be bound, nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than this Indenture), nor violate any law, order, judgment, decree, writ, injunction, award, determination, rule or regulation applicable to the Issuer of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Issuer or its properties, which breach, default, conflict, Lien or violation would have a material adverse effect on the rights or interests of the Noteholders. (f) No Proceedings. There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or to the Issuer's knowledge, threatened, against or affecting the Issuer: (i) asserting the invalidity of this Indenture, the Notes or any of the other Transaction Documents to which the Issuer is a party, (ii) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Indenture, or any of the other Transaction Documents, (iii) seeking any determination or ruling that might materially and adversely affect (A) the performance by the Issuer of its obligations under, or the validity or enforceability of, this Indenture, the Notes or any other Transaction Documents or (B) the condition (financial or otherwise), business or operations of the Issuer, or (iv) relating to the Issuer and which might adversely affect the federal income tax attributes of the Notes. (g) No Subsidiaries. The Issuer has no, and will not create any, subsidiaries. (h) Not an Investment Company. Neither the Issuer nor the Trust Estate is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act, and none of the issuance of the Notes, the execution and delivery of the Transaction Documents to which the Issuer is a party, the acquisition by the Issuer of Receivables, or the performance by the Issuer of its obligations under the Transaction Documents, or the use of the proceeds of the Notes by the Issuer will violate any provision of the Investment Company Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder. (i) [RESERVED] (j) No Violation of Exchange Act or Regulations T, U or X. None of the transactions contemplated in the Transaction Documents (including the use of the proceeds from the sale of the Notes) will result in a violation of Section 8 of the Exchange Act, or any regulations issued pursuant thereto, including Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Issuer does not own nor does it intend to carry or purchase any "margin security" within the meaning of said Regulation U, including margin securities originally issued by it or any "margin stock" within the meaning of said Regulation U. (k) All Tax Returns, True, Correct and Timely Filed. All tax returns required to be filed by the Issuer in any jurisdiction have in fact been filed and all taxes, assessments, fees and other governmental charges upon the Issuer or upon any of its properties, and all income of franchises, shown to be due and payable on such returns have been paid except for any such taxes, assessments, fees and charges the amount, applicability or validity of which is currently -52- being contested in good faith by appropriate proceedings and with respect to which the Issuer had established adequate reserves in accordance with GAAP. All such tax returns were true and correct in all material respects and the Issuer knows of no proposed additional tax assessment against it that could reasonably be expected to have a material adverse effect upon the ability of the Issuer to perform its obligations hereunder nor of any basis therefor. The provisions for taxes on the books of the Issuer are in accordance with generally accepted accounting principles. (l) No Restriction on Issuer Affecting its Business. The Issuer is not a party to any contract or agreement, or subject to any charter or other restriction which materially and adversely affects its business nor has it agreed or consented to cause any of its properties to become subject to any Lien other than the Lien created hereby. (m) Perfection of Security Interest. All filings and recordings as may be necessary to perfect the interest of the Issuer in the Receivables and such other portion of the Trust Estate as to which a sale or security interest may be perfected by filing under the UCC, have been accomplished and are in full force and effect. All filings and recordings against the Issuer required to perfect the security interest of the Trustee on such Receivables and such other portion of the Trust Estate as to which a security interest may be perfected by filing under the UCC, have been accomplished and are in full force and effect. The Issuer will from time to time, at its own expense, execute and file such additional financing statements (including continuation statements) as may be necessary to ensure that at any time, the interest of the Issuer in all of the Receivables and such other portion of the Trust Estate as to which a security interest may be perfected by filing under the UCC, and the security interest of the Trustee in all of the Receivables and such other portion of the Trust Estate as to which a security interest may be perfected by filing under the UCC are fully protected. (n) All Taxes, Fees and Charges Relating to Transaction and Transaction Documents Paid. Any taxes, fees and other governmental charges assessed or assessable against the Issuer or the Trust Estate in connection with the execution and delivery of the Transaction Documents and the execution and delivery and sale of the Notes that are due on or before the Closing Date have been or will be paid by the Issuer at or prior to the Closing Date. (o) No Requirement that Issuer File a Registration Statement. There are no contracts, agreements or understandings between the Issuer and any person granting said person the right to require the Issuer to file a registration statement under the Securities Act with respect to any Notes owned or to be owned by such person. (p) No Broker, Finder or Financial Adviser Other than the Placement Agent. The Issuer or any of its respective officers, directors, employees or agents has not employed any broker, finder or financial adviser other than the Placement Agent or incurred any liability for fees or commissions to any person other than the Placement Agent in connection with the offering, issuance or sale of the Notes. (q) Notes Authorized, Executed, Authenticated, Validly Issued and Outstanding. The Notes have been duly and validly authorized and, when duly and validly executed and authenticated by the Trustee in accordance with the terms of this Indenture and delivered to and -53- paid for by each Purchaser as provided herein, will be validly issued and outstanding and entitled to the benefits hereof. (r) Location of Chief Executive Office and Records. The principal place of business and chief executive office of the Issuer, and the office where Issuer maintains all of its records, is located at 7800 McCloud Road, Greensboro, NC 27409-9634; provided that, at any time after the Closing Date, upon 30 days' prior written notice to the Trustee and the Noteholders, the Issuer may relocate its jurisdiction of formation, and/or its principal place of business and chief executive office, and/or the office where it maintains all of its records, to another location or jurisdiction, as the case may be, within the United States to the extent that the Issuer shall have taken all actions necessary or reasonably requested by the Trustee or the Majority Noteholders to amend its existing financing statements and continuation statements, and file additional financing statements and to take any other steps reasonably requested by the Trustee or the Majority Noteholders to further perfect or evidence the rights, claims or security interests of the Trustee and the Noteholders under any of the Transaction Documents. (s) Ownership of the Issuer. Oakwood Acceptance Corporation owns a 100% membership interest in the Issuer. No one other than Oakwood Acceptance Corporation has or will have any rights to acquire membership interests in the Issuer. (t) Solvency. During the term of this Indenture:(i) the Issuer is not and will not be "insolvent" (as such term is defined in ss. 101(32)(A) of the Bankruptcy Code); (ii) is and will be able to pay its debts as they become due; and (iii) does not and will not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage. (u) Reporting and Accounting Treatment. For reporting and accounting purposes, and in its books of account and records, the Issuer will treat each transfer of Receivables pursuant to the Receivables Contribution Agreement as an irrevocable sale and/or capital contribution of OAC's full right, title and ownership interest in each such Receivable and the Issuer has not accounted for or treated in any other manner and will not account for or treat in any other manner the transactions. (v) Governmental and Other Consents. No consents, approvals, authorization or orders of, registration or filing with, or notice to any Person, governmental authority or court is required for the execution, delivery and performance of, or compliance with, the Transaction Documents by the Issuer, except such consent, approvals, authorizations, filings and notices that have already been made or obtained. (w) Enforceability of Transaction Documents. Each of the Transaction Documents to which it is a party has been duly authorized, executed and delivered by the Issuer and constitutes the legal, valid and binding obligation of the Issuer, enforceable against it in accordance with its terms. (x) Accuracy of Information. The representations and warranties of the Issuer in the Transaction Documents are true and correct in all material respects as of the Closing Date and, -54- except for representations and warranties expressly made as of a different date, each Funding Date and each other date of Grant. (y) Separate Identity. The Issuer is operated as an entity separate from Oakwood Acceptance Corporation. The Issuer will comply with all covenants set forth in its Operating Agreement. (z) ERISA Compliant. The Issuer and all ERISA Affiliates are in compliance with all applicable federal or state laws, including the rules and regulations promulgated thereunder, relating to discrimination in the hiring, promotion or pay of employees, any applicable federal or state wages and hours law, and the provisions of ERISA applicable to its business, except where such noncompliance would not, individually or in the aggregate, have a Material Adverse Effect. The employee benefit plans, including employee welfare benefit plans (the "Employee Plans") of the Issuer and all ERISA Affiliates have been operated in compliance with the Code, all regulations, rulings and announcements promulgated or issued thereunder and all other applicable governmental laws and regulations (except to the extent such noncompliance would not, individually or in the aggregate, have a Material Adverse Effect). No reportable event under Section 4043(b) of ERISA or any prohibited transaction under Section 406 of ERISA has occurred with respect to any Employee Plan maintained by the Issuer or any ERISA Affiliate (except to the extent that any such event or transaction would not, individually or in the aggregate, have a Material Adverse Effect). There are no pending or, to the Issuer's best knowledge, threatened, claims by or on behalf of any employee plan, by any employee or beneficiary covered under any such plan or by any governmental authority or otherwise involving such plans or any of their respective fiduciaries (other than for routine claims for benefits). All Employee Plans that are group health plans have been operated in compliance with the group health plan continuation coverage requirements of Section 4980B of the Code in all material respects (except to the extent that such noncompliance would not, individually or in the aggregate, have a Material Adverse Effect). "Material Adverse Effect" means, when used in connection with the Issuer, any development, change or effect that is materially adverse to the business, properties, assets, net worth, financial condition, or results of operations of the Issuer. Neither the Issuer nor any of its ERISA Affiliates have a "defined benefit plan" as defined in ERISA. (aa) Default. The Issuer is not in default under any material agreement, contract, instrument or indenture to which the Issuer is a party or by which it or its properties is or are bound, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder; and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such agreement, contract, instrument or indenture, or with respect to any such order of any court, administrative agency, arbitrator or governmental body. (bb) Information. No document, certificate or report furnished by the Issuer, in writing, pursuant to this Agreement, any other Transaction Document or in connection with the transactions contemplated hereby or thereby, contains or will contain when furnished any untrue statement of a material fact. There are no facts relating to the Issuer which materially adversely affect the financial condition or assets or business of the Issuer, or which may impair the ability of the Issuer to perform its obligations under this Indenture or any other Transaction Document, -55- which have not been disclosed herein or in the certificates and other documents furnished by or on behalf of the Issuer pursuant hereto or thereto specifically for use in connection with the transactions contemplated hereby or thereby. All books, records and documents delivered to the Trustee or the Noteholders are and will be true, correct and complete. (cc) Name. The legal name of the Issuer is as set forth in this Indenture and the Issuer does not use any other tradenames, fictitious names, assumed names or "doing business as" names. (dd) No Adverse Change. Since its formation, there has been no change in the business, operations, financial condition, properties or assets of the Issuer which would have a material adverse effect on its ability to perform its obligations under this Indenture or any other Transaction Document or materially adversely affect the transactions contemplated under this Indenture or any other Transaction Document. (ee) Funding Conditions Satisfied. As of each date on which payments of a Funding Amount are made hereunder, all Funding Conditions will have been satisfied. (ff) Title. Immediately prior to its subjection to the Lien hereof, the Issuer had good and marketable title to each related Receivable, free and clear of all Liens and rights of others. (gg) Validity of Security Interest. This Indenture creates a valid and continuing security interest (as defined in the UCC) in the Aggregate Receivables in favor of the Trustee, which security interest is prior to all other Liens, and is enforceable as such as against creditors of and purchasers from the Issuer. (hh) UCC Characterization. The Aggregate Receivables constitute "general intangibles" within the meaning of the UCC and the Uniform Commercial Codes in effect in Nevada and North Carolina. (ii) Financing Statements relating to the Receivables. Other than the security interest granted to the Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Aggregate Receivables. The Issuer has not authorized the filing of and is not aware of any financing statement filed against the Issuer that includes a description of collateral covering the Aggregate Receivables other than (i) any financing statement related to the security interest granted to the Trustee hereunder or (ii) that has been terminated. SECTION 7.02. REPAYMENT IN RESPECT OF RECEIVABLES UPON BREACH. Upon discovery by the Issuer (which discovery shall be deemed to have occurred upon the receipt of notice by a Responsible Officer of the Issuer) or upon the actual knowledge of a Responsible Officer of the Trustee or Noteholders of a breach of any of the representations and warranties of the Issuer set forth in Section 7.01 or of the Seller set forth in the Receivables Contribution Agreement, the party discovering such breach shall give prompt written notice to the others. If such breach has or would have a material adverse effect on the rights or interests of the Noteholders with respect to all or a portion of the Receivables, then unless such breach shall have been cured within thirty (30) days after the earlier to occur of the discovery of such breach -56- by the Issuer or receipt of written notice of such breach by the Issuer, such that the relevant representation and warranty shall be true and correct in all material respects as if made on such day, and the Issuer shall have delivered to the Trustee and the Noteholders a certificate of any Responsible Officer of the Issuer describing the nature of such breach and the manner in which the relevant representation and warranty became true and correct the Issuer shall pay the Release Payment with respect to the affected Receivables(s) to the Collection Account on the first Business Day after the expiration of such 30-day period. This repayment obligation shall pertain to all representations and warranties of the Issuer contained in Section 7.01, whether or not the Issuer has knowledge of the breach at the time of the breach or at the time the representations and warranties were made. If the Issuer fails to pay such Release Payment, the Trustee shall enforce the Issuer's remedies, if any, against the Seller under the Receivables Contribution Agreement for the breach of such representation and warranty. Upon any such repayment, the Trustee on behalf of the Noteholders shall, without further action, be deemed to have released its security interest in, to and under the Removed Receivables, all monies due or to become due with respect thereto after the aforementioned Payment Date and all proceeds thereof. The Trustee shall execute such documents and instruments and take such other actions as shall be reasonably requested by the Issuer to effect the security interest release pursuant to this Section. Notwithstanding the foregoing, the Majority Noteholders may by delivery of prior written notice waive any breach and repayment obligation of the Issuer pursuant to this Section 7.02. The Trustee shall have no duty to conduct any affirmative investigation as to the occurrence of any condition requiring the repayment for any Receivables pursuant to this Section, except as otherwise provided in Section 10.02. SECTION 7.03. LIABILITY OF ISSUER; INDEMNITIES. (a) Obligations. The Issuer shall be liable in accordance with this Indenture only to the extent of the obligations in this Indenture specifically undertaken by the Issuer in such capacity under this Indenture and shall have no other obligations or liabilities hereunder. The Issuer shall indemnify, defend and hold harmless the Trustee, the Verification Agent, the Paying Agent, the Noteholders and the Trust Estate from and against any taxes that may at any time be asserted against the Trustee or the Trust Estate with respect to the transactions contemplated in this Indenture or any of the other Transaction Documents, 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, the transfer of the Receivables to the Trust Estate, the issuance and original sale of the Notes, or asserted with respect to ownership of the Receivables, or federal, state or local income or franchise taxes or any other tax, or other income taxes arising out of payments on the Notes, or any interest or penalties with respect thereto or arising from a failure to comply therewith) and costs and expenses in defending against the same. (b) Notification and Defense. Promptly after any party seeking indemnification hereunder (an "Indemnified Party") shall have been served with the summons or other first legal process or shall have received written notice of the threat of a claim in respect of which an indemnity may be claimed against the Issuer under this Section 7.03, the Indemnified Party shall notify the Issuer in writing of the service of such summons, other legal process or written notice, giving information therein as to the nature and basis of the claim, but failure so to notify the -57- Issuer shall not relieve the Issuer from any liability which it may have hereunder or otherwise except to the extent that the Issuer is prejudiced by such failure so to notify the Issuer. The Issuer will be entitled, at its own expense, to participate in the defense of any such claim or action and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, and, after notice from the Issuer to such Indemnified Party to assume the defense of any such action, the Issuer will not be liable to such Indemnified Party under this Section 7.03 for any legal or other expenses subsequently reasonably incurred by such Indemnified Party in connection with the defense of any such action other than reasonable costs of investigation unless, (i) the defendants in any such action include both the Indemnified Party and the Issuer, and the Indemnified Party (upon the advice of counsel) shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Issuer, or one or more Indemnified Parties, and which in the reasonable judgment of such counsel are sufficient to create a conflict of interest for the same counsel to represent both the Issuer and such Indemnified Party, (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action, or (iii) the Issuer has authorized the employment of counsel for the Indemnified Party at the expense of the Issuer; then, in any such event, described in this Section 7.03, such Indemnified Party shall have the right to employ its own counsel in such action, and in such event the reasonable fees and expenses of such counsel shall be borne by the Issuer; provided, however, that the Issuer shall not in connection with any such action or separate but substantially similar or related actions 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 all Indemnified Parties. Each Indemnified Party, as a condition of the indemnity agreement contained herein, shall use its commercially reasonable efforts to cooperate with the Issuer in the defense of any such action or claim. The Issuer shall not, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding or threatened proceeding. (c) Expenses. Indemnification under this Section shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If the Issuer has made any indemnity payments pursuant to this Section and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to the Issuer, without interest, so long as no amounts are outstanding to the Trustee, the Verification Agent and the Paying Agent then due and owing to the Trustee, the Verification Agent and the Paying Agent by the Issuer in which event such amounts shall offset such obligations. SECTION 7.04. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, THE ISSUER; CERTAIN LIMITATIONS. (a) Merger, Etc. Any corporation (i) into which the Issuer may be merged or consolidated, (ii) which may result from any merger, conversion or consolidation to which the Issuer shall be a party, or (iii) which may succeed to all or substantially all of the business or assets of the Issuer, which corporation in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Issuer under this Indenture, shall be the successor -58- to the Issuer under this Indenture without the execution or filing of any document or any further act on the part of any of the parties to this Indenture, except that if the Issuer in any of the foregoing cases is not the surviving entity, then the surviving entity shall execute an agreement of assumption to perform every obligation of the Issuer hereunder, and the surviving entity shall have taken all actions necessary or reasonably requested by the Issuer, the Majority Noteholders or the Trustee to amend its existing financing statements and continuation statements, and file additional financing statements and to take any other steps reasonably requested by the Issuer, the Majority Noteholders or the Trustee to further perfect or evidence the rights, claims or security interests of the Issuer, the Noteholders or the Trustee under any of the Transaction Documents. The Issuer (1) shall provide notice of any merger, consolidation or succession pursuant to this Section to the Rating Agency, the Trustee and the Noteholders, (2) for so long as the Notes are outstanding, shall receive from the Rating Agency a letter to the effect that such merger, consolidation or succession will not result in a qualification, downgrading or withdrawal of the then current rating of the Notes, (3) shall obtain an Opinion of Counsel addressed to and approved by the Trustee that such merger, consolidation or succession complies with the terms hereof, and (4) shall receive from the Majority Noteholders their prior written consent to such merger, consolidation or succession, absent which consent, the Issuer shall not become a party to such merger, consolidation or succession. (b) Certain Limitations. (i) The business, activities and purpose of the Issuer shall be limited as specified in its Operating Agreement. (ii) [reserved] (iii) The Issuer shall not issue unsecured notes or otherwise borrow money, or otherwise grant any consensual Lien in favor of any Person (other than the Lien granted pursuant hereto) absent the prior written consent of the Majority Noteholders. (c) Unanimous Consent. Notwithstanding any other provision of this Section and any provision of law, the Issuer shall not do any of the following without the affirmative vote of its Independent Manager as such term is defined in the Operating Agreement. (i) (A) dissolve or liquidate, in whole or in part, or institute proceedings to be adjudicated bankrupt or insolvent, (B) consent to the institution of bankruptcy or insolvency proceedings against it, (C) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, (D) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuer or a substantial part of its property, (E) make any assignment for the benefit of creditors, (F) admit in writing its inability to pay its debts generally as they become due, or (G) take any action in furtherance of the actions set forth in clauses (A) through (F) above; or -59- (ii) merge or consolidate with or into any other person or entity or sell or lease its property or all or substantially all of its assets to any person or entity; or (iii) modify any provision of its Certificate of Formation or Operating Agreement. SECTION 7.05. RESERVED. SECTION 7.06. ISSUER MAY NOT OWN NOTES. The Issuer may not become the owner or pledgee of one or more of the Notes. Any Person controlling, controlled by or under common control with the Issuer may, in its individual or any other capacity, become the owner or pledgee of one or more Notes with the same rights as it would have if it were not an affiliate of the Issuer, except as otherwise specifically provided in the definition of the term "Noteholder." The Notes so owned by or pledged to such controlling or commonly controlled Person shall have an equal and proportionate benefit under the provisions of this Indenture, without preference, priority or distinction as among any of the Notes, except as set forth herein with respect to, among other things, rights to vote, consent or give directions to the Trustee as a Noteholder. SECTION 7.07. COVENANTS OF ISSUER. (a) Operating Agreement and Certificate of Formation. The Issuer hereby covenants not to change, or agree to any change of, its Operating Agreement or Certificate of Formation without (i) notice to the Trustee and the Rating Agency, and (ii) the prior written consent of the Majority Noteholders. (b) Merger of the Issuer, Asset Sales and Purchases. Without the prior written consent of the Majority Noteholders, the Issuer shall not merge with or into, or transfer or sell all or substantially all of its assets to, or buy all or substantially all the assets of, any person or admit any new members. (c) Preservation of Existence. The Issuer hereby covenants to do or cause to be done all things necessary on its part to preserve and keep in full force and effect its existence as a limited liability company, and to maintain each of its licenses, approvals, permits, registrations or qualifications in all jurisdictions in which its ownership or lease of property or the conduct of its business requires such licenses, approvals, registrations or qualifications, except for failures to maintain any such licenses, approvals, registrations or qualifications which, individually or in the aggregate, would not have a material adverse effect on the ability of Issuer to perform its obligations hereunder or under any of the other Transaction Documents. (d) Compliance with Laws. The Issuer hereby covenants to comply in all material respects with all applicable laws, rules and regulations and orders of any governmental authority, the noncompliance with which would have a material adverse effect on the business, financial condition or results of operations of the Issuer or on the ability of the Issuer to repay the Notes, or perform any of its other obligations under this Indenture or the other Transaction Documents. -60- (e) Payment of Taxes. The Issuer hereby covenants to pay and discharge promptly or cause to be paid and discharged promptly all taxes, assessments and governmental charges or levies imposed upon the Issuer or upon its income and profits, or upon any of its property or any part thereof, before the same shall become in default, provided that the Issuer shall not be required to pay and discharge any such tax, assessment, charge or levy so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Issuer shall have set aside on its books adequate reserves with respect to any such tax, assessments, charge or levy so contested, or so long as the failure to pay any such tax, assessment, charge or levy would not have a material adverse effect on the ability of the Issuer to perform its obligations hereunder. (f) Exercise of Rights Under the Transaction Documents. The Issuer hereby covenants to enforce and exercise its rights as the Purchaser under the Receivables Contribution Agreement and take such other action in connection with the Transaction Documents as may be appropriate or desirable, to maximize the collection of amounts payable to the Trust Estate. (g) Investments. The Issuer hereby covenants that it will not, without the prior written consent of the Majority Noteholders, acquire or hold any indebtedness for borrowed money of another person, or any capital stock, debentures, partnership interests or other ownership interests or other securities of any Person, other than Permitted Investments as provided hereunder and the Receivables acquired under any Receivables Contribution Agreement. (h) Keeping Records and Books of Account. The Issuer hereby covenants and agrees to maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing the Receivables in the event of the destruction or loss of the originals thereof) and keep and maintain, all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of all collections with respect to, and adjustments of amounts payable under, each Receivable). (i) Benefit Plan. The Issuer hereby covenants and agrees to comply in all material respects with the provisions of ERISA, the Code, and all other applicable laws, and the regulations and interpretations thereunder to the extent applicable, with respect to each Benefit Plan. The Issuer covenants that it will not, and it will cause all ERISA Affiliates to not: (i) engage in any non-exempt prohibited transaction (within the meaning of Code Section 4975 or ERISA Section 406) with respect to any Benefit Plan which would result in a material liability to the Issuer; (ii) permit to exist any material accumulated funding deficiency as defined in Section 302(a) of ERISA and Section 412(a) of the Code, with respect to any Benefit Plan which is subject to Section 302(q) of ERISA or 412 of the Code; -61- (iii) terminate, amend or change any Benefit Plan of the Issuer or any ERISA Affiliate if such termination would result in any material liability to the Issuer or an ERISA Affiliate; (iv) create any defined benefit plan (as defined in ERISA); or (v) take or fail to take any other action which could reasonably be expected to result in material liability to the Issuer or any ERISA Affiliate under ERISA, the Code or any other laws applicable to employees or benefits. (j) No Release. The Issuer shall not take any action and shall 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 covenants or obligations under any document, instrument or agreement included in the Trust Estate, or which would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such document, instrument or agreement. (k) Separate Identity. The Issuer hereby covenants and agrees to take all actions required to maintain the Issuer's status as a separate legal entity. Without limiting the foregoing, the Issuer shall comply with the covenants in Section 7.01(y). (l) Compliance with all Transaction Documents. The Issuer hereby covenants and agrees to comply in all respects with the terms of, employ the procedures outlined in and enforce the obligations of the parties to all of the Transaction Documents to which the Issuer is a party, and take all such action to such end as may be from time to time reasonably requested by the Trustee, and/or the Majority Noteholders, maintain all such Transaction Documents in full force and effect and make to the parties thereto such reasonable demands and requests for information and reports or for action as the Issuer is entitled to make thereunder and as may be from time to time reasonably requested by the Trustee. (m) No Sales, Liens, Etc. Against Receivables and Trust Property. The Issuer hereby covenants and agrees, except for releases specifically permitted hereunder, not to sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist, any Lien (other than the Lien created hereby) upon or with respect to, any Receivables or Trust Estate, or any interest in either thereof, or upon or with respect to any Account, or assign any right to receive income in respect thereof; provided, however, that the existence of the Transferor Interest shall not constitute a breach of this covenant. The Issuer shall promptly, but in no event later than one (1) Business Day after a Responsible Officer has obtained actual knowledge thereof, notify the Trustee of the existence of any Lien on any Receivables or Trust Estate, and the Issuer shall defend the right, title and interest of each of the Issuer and the Trustee in, to and under the Receivables and Trust Estate, against all claims of third parties. (n) No Change in Business. The Issuer covenants that it shall not make any change in the character of its business. (o) No Change in Name, Etc. The Issuer covenants that it shall not make any change to its company name, or use any trade names, fictitious names, assumed names or "doing business as" names. -62- (p) No Institution of Insolvency Proceedings. The Issuer covenants that it shall not institute Insolvency Proceedings with respect to the Issuer or any Affiliate thereof or consent to the institution of Insolvency Proceedings against the Issuer or any Affiliate thereof or take any action in furtherance of any such action, or seek dissolution or liquidation in whole or in part of the Issuer or any Affiliate thereof. (q) No Change in Chief Executive Office or Location of Records. The Issuer covenants that it will comply with the representation in Section 7.01(r). As of each Funding Date and any other date of Grant, each Receivable File shall be kept by a Custodian at its office as described in Section 2.05(b), or at such other office permitted pursuant to Section 2.05(b). (r) Access to Certain Documentation and Information. Notwithstanding anything to the contrary contained in Section 3.05, Section 2.05, this Section 7.07(r) or in any other Section hereof, the Issuer, on reasonable prior notice, shall permit any representative of the Trustee or any Interested Noteholder, including, without limitation, independent certified public accountants selected by the Trustee or such Interested Noteholder, as the case may be, during the Issuer's normal business hours, to examine all the books of account, records, reports and other papers of the Issuer relating to the Assets and the Receivables, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts relating to the Assets and the Receivables with its officers, employees and independent public accountants (and by this provision the Issuer hereby authorizes said accountants to discuss with such representatives such affairs, finances and accounts), all at such times and as often as reasonably may be requested. Unless an Event of Default or a Funding Termination Event that has not been waived by the Majority Noteholders shall have occurred, or there is an Interest Carryover Shortfall or the Notes have been downgraded below the ratings assigned on the Closing Date, any out-of-pocket costs and expenses incident to the exercise by the Trustee or any Interested Noteholder of any right under this Section 7.07(r) shall be borne by the Interested Noteholder. In the event that such right is exercised (i) following the occurrence of a Funding Termination Event that has not been waived by the Majority Noteholders, (ii) following the occurrence of an Event of Default that has not been waived by the Majority Noteholders, (iii) while there is an Interest Carryover Shortfall or (iv) while the Notes have been downgraded below the ratings assigned on the Closing Date, such out-of-pocket costs and expenses shall be borne by the Issuer, or if the Issuer does not pay such expenses within 60 days, then by the Trust Estate. The parties hereto acknowledge that the Trustee shall not exercise any right pursuant to this Section 7.07(r) prior to any event set forth in the preceding sentence unless directed to do so by any Interested Noteholder, and the Trustee shall have no liability for acting in accordance with this sentence. Prior to any such payment, the Issuer shall be provided with commercially reasonable documentation of such costs and expense. Notwithstanding anything contained in Section 3.05 or this Section 7.07(r) to the contrary, in no event shall the books of account, records, reports and other papers of OAC or the Issuer relating to the Assets and the Receivables be audited by independent certified public accountants at the direction of the Trustee or any Interested Noteholder pursuant to the exercise of any right under this Section 3.05 or this Section 7.07(r) more than two times during any 12-month period, unless (i) a Funding Termination Event that has not been waived by the Majority Noteholders has occurred during such 12-month period, (ii) an Event of Default has occurred that has not been waived by the Majority Noteholders during such 12-month period, (iii) there is an Interest Carryover Shortfall or (iv) the Notes have been downgraded below the ratings assigned on the Closing Date. -63- (s) Money for Note Payments To Be Held in Trust. The Issuer shall 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 shall: (i) hold all sums held by it in respect of payments on Notes in trust for the benefit of the Noteholders entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (ii) give the Trustee notice of any default by the Issuer (or any other obligor upon the Notes) in the making of any payment; and (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. 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 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. (t) Protection of Trust Estate. The Issuer shall from time to time execute and deliver all such supplements and amendments hereto (a copy of which shall be provided to the Noteholders) and all such financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as is necessary or advisable to: (i) Grant more effectively all or any portion of the Trust Estate; (ii) maintain or preserve the lien of 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 Receivables or, where appropriate, any security interest in the Trust Estate and the proceeds thereof, or (v) preserve and defend title to the Trust Estate and the rights of the Trustee and the Noteholders therein against the claims of all persons and parties. (u) Investment Company Act. The Issuer shall conduct its operations in a manner which shall not subject it to registration as an "investment company" under the Investment Company Act of 1940. (v) Payment of Review and Renewal Fees. The Issuer shall pay or cause to be paid to the Rating Agency, the annual rating review and renewal fee in respect of the Notes, if any. -64- ARTICLE VIII OAC SECTION 8.01. LIABILITY OF OAC; INDEMNITIES. (a) Obligations. OAC shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by OAC under this Indenture and shall have no other obligations or liabilities under this Indenture. Such obligations shall include the following: (i) OAC shall indemnify, defend and hold harmless the Trustee, the Trust Estate 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, and was imposed upon the Trustee, the Verification Agent, the Paying Agent, the Trust Estate or any Noteholder through the violation of law, negligence, willful misfeasance or bad faith of OAC in connection with the transactions contemplated by this Indenture and the other Transaction Documents, or the REMIC Pooling Agreements or by reason of the breach by OAC of any of its representations, warranties or covenants hereunder or under any of the other Transaction Documents or the REMIC Pooling Agreements; and (ii) OAC shall indemnify, defend and hold harmless the Trustee, the Verification Agent and the Paying Agent from and against all reasonable costs, 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 this Indenture, except to the extent that such cost expense, loss, claim, damage or liability: (A) shall be due to the willful misfeasance, bad faith or negligence of the Trustee, the Verification Agent or the Paying Agent, (B) shall arise from the breach by the Trustee, the Verification Agent or the Paying Agent of any of its representations or warranties set forth in Section 10.14, or (C) relates to any tax other than the taxes with respect to which either the Issuer or OAC shall be required to indemnify the Trustee, the Verification Agent, the Noteholders or the Paying Agent. (b) Notification and Defense. Promptly after any party seeking indemnification hereunder (an "Indemnified Party") shall have been served with the summons or other first legal process or shall have received written notice of the threat of a claim in respect of which an indemnity may be claimed against OAC under this Section 8.01, the Indemnified Party shall notify OAC in writing of the service of such summons, other legal process or written notice, giving information therein as to the nature and basis of the claim, but failure so to notify OAC shall not relieve OAC from any liability which it may have hereunder or otherwise except to the extent that OAC is prejudiced by such failure so to notify OAC. OAC will be entitled, at its own expense, to participate in the defense of any such claim or action and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified -65- Party, and, after notice from OAC to such Indemnified Party to assume the defense of any such action, OAC will not be liable to such Indemnified Party under this Section 8.01 for any legal or other expenses subsequently reasonably incurred by such Indemnified Party in connection with the defense of any such action other than reasonable costs of investigation unless, (i) the defendants in any such action include both the Indemnified Party and OAC, and the Indemnified Party (upon the advice of counsel) shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to OAC, or one or more Indemnified Parties, and which in the reasonable judgment of such counsel are sufficient to create a conflict of interest for the same counsel to represent both OAC and such Indemnified Party, (ii) OAC shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action, or (iii) OAC has authorized the employment of counsel for the Indemnified Party at the expense of OAC; then, in any such event, described in this Section 8.01, such Indemnified Party shall have the right to employ its own counsel in such action, and in such event the reasonable fees and expenses of such counsel shall be borne by OAC; provided, however, that OAC shall not in connection with any such action or separate but substantially similar or related actions 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 all Indemnified Parties. Each Indemnified Party, as a condition of the indemnity agreement contained herein, shall use its commercially reasonable efforts to cooperate with OAC in the defense of any such action or claim. OAC shall not, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding or threatened proceeding. (c) Expenses. Indemnification under this Section shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation. If OAC has made any indemnity payments pursuant to this Section and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to OAC, without interest, so long as no amounts are outstanding to the Trustee, the Verification Agent and the Paying Agent then due and owing to the Trustee, the Verification Agent and the Paying Agent by OAC in which event such amounts shall offset such obligations. (d) Survival. The provisions of this Section shall survive the resignation or removal of the Trustee, the Verification Agent and the Paying Agent and the termination of this Indenture. SECTION 8.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF OAC. Any corporation (i) into which OAC may be merged or consolidated, (ii) which may result from any merger, conversion or consolidation to which OAC shall be a party, or (iii) which may succeed to all or substantially all of the business or assets of OAC, which corporation in any of the foregoing cases executes an agreement of assumption to perform every obligation of OAC under this Indenture, shall be the successor to OAC under this Indenture without the execution or filing of any paper or any further act on the part of any of the parties to this Indenture; provided, -66- however, that (a) such merger, consolidation or conversion shall not cause an Event of Default or an event which with notice, the passage of time or both would become an Event of Default, (b) prior to any such merger, consolidation or conversion, OAC shall have provided to the Trustee and the Noteholders a letter from the Rating Agency indicating that such merger, consolidation or conversion will not result in the qualification, reduction or withdrawal of the then current rating of the Notes, and (c) prior to any such merger, consolidation or conversion OAC shall have delivered to the Trustee an Opinion of Counsel to the effect that such merger, consolidation or conversion complies with the terms of this Indenture; provided, further, however, that the requirements of clauses (b) and (c) above shall not apply to the merger of OAC with and into Oakwood Acceptance Corporation, LLC, a Delaware limited liability company, as described in Section 4(r) of the Receivables Contribution Agreement. OAC shall provide notice of any merger, consolidation or succession pursuant to this Section to the Trustee, the Noteholders and the Rating Agency. ARTICLE IX EVENTS OF DEFAULT; REMEDIES SECTION 9.01. EVENTS OF DEFAULT. "Event of Default" wherever used herein, means, with respect to Notes issued hereunder, 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): (a) default in the payment of (i) any interest or any other amounts due and owing on any Note (which default continues for a period of two (2) Business Days), or (ii) failure to pay the Notes in full on or before the Final Payment Date; (b) any failure by the Issuer to remit or cause to be transferred to the Trustee any Net Proceeds required to be so remitted under the terms of the REMIC Pooling Agreements, this Indenture or any of the other Transaction Documents to which it is a party that continues unremedied for a period of two (2) Business Days after the date the Issuer withdrew such amounts; or (c) any failure by the REMIC Servicer to deliver any Monthly REMIC Servicer Report pursuant to Section 3.02(a) that continues unremedied for a period of two (2) Business Days after the date such report was due; (d) if the Issuer shall breach or default in the due observance of any of the covenants of the Issuer set forth in Sections 2.01(e), 2.04 and 7.07, other than the covenants contained in Section 7.07(f) or (h) thereof; (e) if the Issuer shall breach or default in the due observance or performance of, any other of its covenants in this Indenture, which breach or default would have a material adverse effect on the rights or interests of the Noteholders, and such default shall continue for a period of 30 days after the earlier to occur of (x) actual discovery by a Responsible Officer of the Issuer or -67- the Trustee or (y) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer; (f) if any representation or warranty of the Issuer made in this Indenture, or any certificate or other writing delivered pursuant hereto or in connection herewith shall prove to have been breached in any material respect as of the time when the same shall have been made or deemed made, which breach would have a material adverse effect on the rights or interests of the Noteholders, and such breach shall continue for a period of 30 days after the earlier to occur of (x) actual discovery by a Responsible Officer of the Issuer or the Trustee or (y) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer; (g) the entry of a decree or order for relief by a court having jurisdiction in respect of the Issuer in an involuntary 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 appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or of any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; (h) the commencement by the Issuer 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 Issuer to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or of any substantial part of its property or the making by the Issuer of an assignment for the benefit of creditors or the failure by the Issuer generally to pay its debts as such debts become due or the taking of any action by the Issuer in furtherance of any of the foregoing; (i) (A) any failure of OAC to indemnify the Issuer upon breach of a representation or warranty as set forth in the Receivables Contribution Agreement, or (B) any failure on the part of OAC duly to observe or perform any other covenants or agreements of OAC set forth in the Notes, this Indenture, or any of the other Transaction Documents which failure (i) would have a material adverse effect on the rights or interests of the Noteholders, the Trustee or the Trust Estate and (ii) continues unremedied for a period of 30 days after the earlier to occur of (x) actual discovery by a Responsible Officer of OAC, the Issuer or the Trustee (provided that a breach of Section 8(b) of the Receivables Contribution Agreement shall be deemed to have a material adverse effect on the rights to the Noteholders) or (y) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to OAC; (j) the entry of a decree or order for relief by a court having jurisdiction in respect of OAC in an involuntary 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 appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of OAC or of any substantial part of its property, or ordering the winding up or liquidation of the affairs of OAC and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; -68- (k) the commencement by OAC 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 OAC to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of OAC or of any substantial part of its property or the making by OAC of an assignment for the benefit of creditors or the failure by OAC generally to pay its debts as such debts become due or the taking of any limited liability company action by OAC in furtherance of any of the foregoing; (l) any representation, warranty or certification made by OAC in this Indenture, or in any other Transaction Document or in any certificate delivered pursuant to this Indenture or in any other Transaction Document, proves to have been incorrect in any material respect when made, which (i) would have a material adverse effect on the rights of the Noteholders or the Trust Estate, respectively (without regard to any amount deposited in the Reserve Account), and (ii) if capable of remedy, continues unremedied for a period of 30 days after the earlier to occur of (x) actual discovery by a Responsible Officer of OAC or (y) the date on which written notice thereof, requiring the same to be remedied, shall have been given to OAC; (m) the Internal Revenue Service or the PBGC shall have filed notice of one or more Adverse Claims against the Issuer or any of their ERISA Affiliates under ERISA or the Code, which constitutes a Lien on the Receivables or any other portion of the Trust Estate, and such notice shall have remained in effect for more than thirty (30) Business Days unless, prior to the expiration of such period, such Adverse Claims shall have been adequately bonded by such Issuer, or the ERISA Affiliate (as the case may be). (n) the Issuer or the Trust Estate shall have become subject to registration as an "investment company" within the meaning of the Investment Company Act as determined by a court of competent jurisdiction in a final and non-appealable order; (o) [RESERVED]; (p) the Issuer shall fail to own the Trust Estate free and clear of Liens other than the Liens contemplated hereby or the Trustee shall fail to have a first priority perfected security interest in the Trust Estate; (q) OAC suffers the loss or suspension of any license or permit required for OAC to act as the REMIC Servicer in any State of the United States (or the District of Columbia) where Obligors are located which, in the aggregate for such State (or the District of Columbia), accounts for more than $2,000,000 of the current balance of Receivables, unless such loss or suspension is cured within 60 days after any Responsible Officer of OAC has actual knowledge of such loss, suspension or material impairment; or (r) OAC sells, transfers, pledges or otherwise disposes of any of its membership interest in the Issuer, whether voluntarily or by operation of law, foreclosure or other enforcement by a Person of its remedies against OAC, except pursuant to a merger, consolidation or a sale of all or substantially all the assets of OAC in a transaction not prohibited by this Indenture. -69- Upon the occurrence of any such event OAC shall not be relieved from using its best efforts to perform its obligations in a timely manner in accordance with the terms of this Indenture and OAC shall provide the Trustee, the Rating Agency and the Noteholders prompt notice of such failure or delay by it, together with a description of its effort to so perform its obligations. OAC shall notify the Trustee in writing of any Event of Default or an event which with notice, the passage of time or both would become an Event of Default that it discovers within one Business Day of such discovery. For purposes of this Section 9.01, the Trustee shall not be deemed to have knowledge of an Event of Default unless a Responsible Officer of the Trustee assigned to and working in the Trustee's Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such an Event of Default is received by the Trustee and such notice references the Notes, the Trust Estate or this Indenture. SECTION 9.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default of the kind specified in clause (g), (h), (j) or (k) of Section 9.01 occurs, the unpaid principal amount of all of the Notes shall automatically become immediately due and payable without notice, presentment or demand of any kind. If any other Event of Default occurs and is continuing, then and in every such case, so long as such Event of Default has not been cured or waived pursuant hereto, (i) the Trustee shall, upon the direction of the Majority Noteholders, by notice then given in writing to the Issuer and OAC, declare all of the Notes to be immediately due and payable and upon on any such declaration such Notes, in an amount equal to the Note Balance of such Notes, together with accrued and unpaid interest thereon to the date of such acceleration, and together with all unpaid Trustee Fees, shall become immediately due and payable and (ii) OAC, upon the written request of the Majority Noteholders, shall deliver all material, in its control, which may be necessary for the collection of the Receivables by a party other than OAC to the Trustee, as the Majority Noteholders may direct in writing to OAC, provided, however, OAC may retain copies of the above. At any time after such a declaration of acceleration of maturity of the Notes 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 Majority Noteholders by written notice to the Issuer and the Trustee, may rescind and annul such declaration and its consequences if: (a) the Issuer has paid or deposited with the Trustee a sum sufficient to pay: (i) all payments of principal of, and interest on, all Notes and all other amounts which would then be due hereunder or upon such Notes if the Event of Default giving rise to such acceleration had not occurred; and (ii) all sums paid by the Trustee hereunder and the reasonable compensation, expenses and disbursements of the Trustee, its agents and counsel; and (iii) all Events of Default, other than the nonpayment of the principal of Notes which have become due solely by such acceleration, have been cured or waived as provided in Section 9.14. No such rescission shall affect any subsequent default or impair any right consequent thereon. -70- SECTION 9.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. (a) Subject to the following sentence, if an Event of Default occurs and is continuing, the Trustee shall, at the direction of the Majority Noteholders, and may in its discretion proceed to protect and enforce its rights and the rights of the Noteholders by any proceedings the Trustee, being advised by counsel, deems appropriate 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 enforce any other proper remedy. Any proceedings brought by the Trustee on behalf of the Noteholders or by any Noteholder against the Issuer shall be limited to the preservation, enforcement and foreclosure of the liens, assignments, rights and security interests under this Indenture and the other Transaction Documents and no attachment, execution or other suit or process shall be sought, issued or levied upon any assets, properties or funds of the Issuer, other than the Trust Estate relative to the Notes in respect of which such Event of Default has occurred. If there is a foreclosure of any such liens, assignments, rights and security interests under this Indenture, by private power of sale or otherwise, no judgment for any deficiency upon the indebtedness represented by the Notes may be sought or obtained by the Trustee or any Noteholder against the Issuer. The Trustee shall be entitled to recover the costs and expenses expended by it pursuant to this Section 9.03 including reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. (b) Promptly upon the occurrence and continuation of an Event of Default, OAC shall deliver all material and all other information relating to the Receivables, in its control, which may be necessary for the collection of the Receivables by a party other than OAC to the Trustee, as the Majority Noteholders may direct in writing to OAC; provided, however, that OAC may retain copies of the above. SECTION 9.04. REMEDIES. If an Event of Default shall have occurred and be continuing and the Notes have become due and payable or have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Trustee (subject to Section 9.17, to the extent applicable) shall, at the direction of the Majority Noteholders, and may (with the written consent of the Majority Noteholders) at its discretion, do one or more of the following: (a) institute proceedings for the collection of all amounts then payable on the Notes, or under this Indenture or under any of the other Transaction Documents, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer monies adjudged due, subject in all cases to the provisions of Section 9.03; (b) in accordance with Section 9.17, 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; (c) institute proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate; -71- (d) exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Trustee or the Noteholders hereunder subject in all cases to the provisions of Section 9.03; and (e) refrain from selling the Trust Estate and apply all Available Funds pursuant to Section 9.07. SECTION 9.05. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, composition or other judicial proceeding relative to the Issuer or any other obligor upon any of the Notes or the property of the Issuer or of such other obligor or their creditors or of OAC, the Trustee (irrespective of whether the 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 on the Issuer for the payment of any overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise to: (a) file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes and 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 of the Noteholders allowed in such Proceeding, and (b) collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, liquidator, or sequestrator (or other similar official) in any such proceeding is hereby authorized by each Noteholder 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 Noteholders, to pay to the Trustee any amount due to 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 10.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting any of the Notes or the rights of any Noteholder, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such Proceeding. SECTION 9.06. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES. All rights of action and claims under this Indenture or any of the Notes or any of the other Transaction Documents may be prosecuted and enforced by the Trustee without the possession of any of the Notes 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. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses and disbursements of the Trustee, its agents and counsel, be for the ratable benefit of the Noteholders in respect of which such judgment has been obtained, in the order of priority specified in Section 4.04(b). -72- SECTION 9.07. APPLICATION OF MONEY COLLECTED. If the Notes have been declared due and payable following an Event of Default and such declaration and its consequences have not been rescinded and annulled, any money collected by the Trustee with respect to such Notes pursuant to this Article or otherwise and any other monies that may then be held or thereafter received by the Trustee as security for such Notes shall, subject to Section 9.17(e), be treated like Available Funds and applied as provided in Section 4.04(b). SECTION 9.08. LIMITATION ON SUITS. No Noteholder shall have any right to institute any proceedings, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) such Noteholder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Noteholders representing not less than 25% of the Voting Interests 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 (and such request shall have not been rescinded); (c) such Noteholders have offered to the Trustee indemnity in full against the costs, expenses and liabilities to be incurred in compliance with such request (the general obligation of an institutional investor that is rated investment grade being sufficient indemnity); (d) the Trustee for 30 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 30-day period by the Majority Noteholders; it being understood and intended that no one or more Noteholders 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 Noteholders or to obtain or to seek to obtain priority or preference over any other Noteholders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Noteholders. SECTION 9.09. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Subject to the provisions in this Indenture (including Section 9.03) limiting the right to recover amounts due on a Note to recovery from amounts in the Trust Estate, the Noteholder shall have the right to the extent permitted by applicable law, which right is absolute and unconditional, to receive payment of principal of and interest on such Note on the Final Payment Date and to institute suit for the enforcement of any such payment and such right shall not be impaired without the consent of such Noteholder. -73- SECTION 9.10. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee 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 Trustee or to such Noteholder, then and in every such case the Issuer, the Trustee 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 Trustee and the Noteholders shall continue as though no such proceeding had been instituted. SECTION 9.11. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Trustee 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 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 9.12. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Noteholder to exercise any right or remedy accruing upon any Event of Default 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 by this Article 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 9.13. CONTROL BY MAJORITY NOTEHOLDERS. The Majority Noteholders 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; provided that: (a) such direction shall not be in conflict with any rule of law, with this Indenture or any inconsistent direction of the Majority Noteholders; and (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; provided, however, that, subject to Section 10.01, the Trustee need not take any action which it determines might (1) be unjustly prejudicial to the Noteholders not consenting or (2) subject the Trustee to liability, unless the Majority Noteholders shall have made available to the Trustee security or indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities (including reasonable fees and expenses of counsel) which might reasonably be expected to be incurred by the Trustee if the Trustee acts in compliance with the direction of the Majority Noteholders (it being agreed that an unsecured agreement of indemnity from The Prudential Insurance Company of America shall suffice as security or indemnity acceptable to the Trustee). -74- SECTION 9.14. WAIVER OF PAST DEFAULTS. The Majority Noteholders may on behalf of the Noteholders of all the Notes waive any past default hereunder and its consequences, except a default: (a) in the payment of any installment of principal of or interest on, any Note; or (b) in respect of a covenant or provision hereof which under Section 12.01 cannot be modified or amended without the consent of the Noteholders. 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. Notwithstanding the foregoing, the breach of any representation and warranty identified in Sections 7.01(m) and 7.01(ff) through 7.01(ii), inclusive, hereof shall not be waived by the Majority Noteholders on behalf of the Noteholders, under any circumstances. SECTION 9.15. UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Noteholder by its acceptance of a Note hereunder 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 9.15 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Noteholder, or group of Noteholders representing more than 30% of the Voting Interests, or to any suit instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on the Final Maturity Date. SECTION 9.16. 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 of law wherever enacted, now or at any time hereafter in force, which may affect the covenants in, or the performance of, this Indenture; and the Issuer (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. SECTION 9.17. SALE OF TRUST ESTATE. (a) The power to effect any Sale of any portion of the Trust Estate pursuant to Section 9.04 shall not be exhausted by any one or more Sales as to any portion of the Trust Estate remaining unsold, but shall continue unimpaired until the entire Trust Estate shall have been sold or all amounts payable on the Notes and under this Indenture with respect thereto shall -75- have been paid. The Trustee may from time to time postpone any public Sale by public announcement made at the time and place of such Sale. (b) To the extent permitted by law, the Trustee shall not in any private Sale sell or otherwise dispose of the Trust Estate, or any portion thereof, unless the Majority Noteholders shall consent to, or direct the Trustee to make such Sale. The purchase by the Trustee of all or any portion of the Trust Estate at a private Sale shall not be deemed a Sale or disposition thereof for purposes of this Section 9.17(b). (c) Unless the Majority Noteholders have otherwise consented or directed the Trustee, at any public Sale of all or any portion of the Trust Estate at which a minimum bid equal to or greater than all amounts due to the Trustee hereunder and the entire amount which would be distributable to the Noteholders in full payment thereof in accordance with Section 9.07, on the Payment Date next succeeding the date of such sale, the Trustee shall prevent such sale and bid an amount at least $1.00 more than the highest other bid in order to preserve the Trust Estate. (d) In connection with a Sale of all or any portion of the Trust Estate: (i) any of the Noteholders may bid for and purchase the property offered for Sale, and upon compliance with the terms of sale may hold, retain and possess and dispose of such property, without further accountability; (ii) the Trustee may bid for and acquire the property offered for Sale in connection with any public Sale thereof; (iii) the Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Trust Estate in connection with a Sale thereof; (iv) the Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the Issuer to transfer and convey its interest in any portion of the Trust Estate in connection with a Sale thereof, and to take all action necessary to effect such Sale; and (v) no purchaser or transferee at such a Sale shall be bound to ascertain the Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (e) Notwithstanding anything to the contrary in this Indenture, if an Event of Default has occurred and is continuing and the Notes have become due and payable or have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, any proceeds received by the Trustee with respect to a foreclosure, sale or other realization resulting from a transfer of the assets of the Trust Estate shall be allocated on a pro rata basis between the Noteholders and the Issuer in proportion to all amounts due and owing the Noteholders and the Transferor Interest. The amount, if any, so allocated to the Issuer shall be paid by the Trustee to or to the order of the Issuer free and clear of the Lien of this Indenture and the Noteholders shall have no claim or rights to the amount so allocated. -76- SECTION 9.18. ACTION ON NOTES. The Trustee's right to seek and recover judgment 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. SECTION 9.19. NO RECOURSE TO OTHER TRUST ESTATES OR OTHER ASSETS OF THE ISSUER. The Trust Estate granted to the Trustee as security for the Notes serves as security only for the Notes. Holders of the Notes shall have no recourse against the trust estate granted as security for any other series of notes issued by the Issuer, and no judgment against the Issuer for any amount due with respect to the Notes may be enforced against either the trust estate securing any other series or any other assets of the Issuer, nor may any prejudgment lien or other attachment be sought against any such other trust estate or any other assets of the Issuer. ARTICLE X THE TRUSTEE SECTION 10.01. DUTIES OF TRUSTEE. (a) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. 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 person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) The Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee that shall be specifically required to be furnished pursuant to any provision of this Indenture shall examine them to determine whether they conform to the requirements of this Indenture provided, however, that the Trustee shall not be responsible for the accuracy or content of any resolution, certificate, statement, report, document, order or other instrument furnished by the Issuer, the REMIC Servicer or OAC hereunder. If any such instrument is found not to conform in any material respect to the requirements of this Indenture, the Trustee shall notify the Noteholders of such instrument in the event that the Trustee, after so requesting, does not receive a satisfactorily corrected instrument. (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, its own bad faith or its own willful misfeasance; provided, however, that: (i) prior to the occurrence of an Event of Default actually known to a Responsible Officer of the Trustee, and after the curing or waiving of all such Events of Default that may have occurred, the duties and obligations of the Trustee shall be determined solely by the express provisions of this -77- Indenture, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, no implied rights or obligations shall be read into this Indenture against the Trustee, the permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and, in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; (ii) the Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in performing its duties in accordance with the terms of this Indenture; and (iii) the Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken in good faith in accordance with the direction or consent of the Majority Noteholders (unless a different percentage is otherwise specifically set forth herein with respect to any applicable action) in each case 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. (d) The Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties under this Indenture, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it and none of the provisions contained in this Indenture shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any of the obligations of the Issuer or the REMIC Servicer. (e) Except for actions expressly authorized by this Indenture, the Trustee shall take no action reasonably likely to impair the security interests created or existing under any Receivable or to impair the value of any Receivable. (f) All information obtained by the Trustee regarding the Obligors and the Receivables, whether upon the exercise of its rights under this Indenture or otherwise, shall be maintained by the Trustee in confidence and shall not be disclosed to any other Person, unless such disclosure is required by this Indenture or any applicable law or regulation. (g) The Trustee shall not be required to take notice or be deemed to have notice or knowledge of any default (except a nonpayment under the Receivables) or an Event of Default (other than a nonpayment under the Receivables) unless a Responsible Officer of the Trustee has actual notice thereof. In the absence of receipt of such notice or actual knowledge, the Trustee may conclusively assume that there is no Event of Default. -78- (h) Subject to the other provisions of this Agreement and without limiting the generality of this Section 10.01, the Trustee shall have no duty (A) to see to any recording, filing, or depositing of this Indenture or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any re-recording, refiling or redepositing of any thereof, (B) to see to any insurance, (C) 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 other than from funds available in the Note Payment Account, (D) to confirm or verify the contents of any reports or certificates of the REMIC Servicer or OAC delivered to the Trustee pursuant to this Indenture believed by the Trustee to be genuine and to have been signed or presented by the proper party or parties. SECTION 10.02. TRUSTEE'S CERTIFICATE. On or as soon as practicable after each date on which the Seller or the Issuer acquires Removed Receivables, the Trustee, upon receipt of written notice of such acquisition, shall submit to the Seller or the Issuer, as applicable, with a copy to each Noteholder, a Trustee's Certificate (substantially in the form attached hereto as Exhibit B), identifying the acquirer and the Receivables so acquired, executed by the Trustee and completed as to its date and the date of this Indenture, and accompanied by a copy of the Monthly REMIC Servicer Report and the Payment Date Report for the related Collection Period. The Trustee's Certificate submitted with respect to such Payment Date shall operate, as of such Payment Date, as an assignment without recourse, representation or warranty, to the Issuer or the Seller, as the case may be, of all the Trustee's right, title and interest in and to such Removed Receivable and to the other property conveyed to the Trust Estate pursuant to Section 2.01 with respect to such Removed Receivable, and all security and documents relating thereto, such assignment being an assignment outright and not for security. SECTION 10.03. TRUSTEE'S RELEASE OF REMOVED RECEIVABLES. With respect to all Removed Receivables, the Trustee shall, by a Trustee's Certificate (substantially in the form attached hereto as Exhibit B), release all the Trustee's right, title and interest in and to each Removed Receivable and the other property included in the Trust Estate pursuant to Section 2.01 with respect to such Removed Receivable, and all security and any documents relating thereto; and the Issuer or the Seller, as applicable, shall thereupon own each such Removed Receivable, and all such related security and documents, free of any further obligation to the Trustee or the Noteholders with respect thereto. SECTION 10.04. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise provided in Section 10.01: (i) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; -79- (ii) the Trustee, at the expense of the Trust Estate and payable to the Trustee pursuant to Section 4.04(b), may consult with counsel and any advice of counsel or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it under this Indenture in good faith and in accordance with such advice of counsel or Opinion of Counsel; (iii) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture, or 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 Noteholders pursuant to the provisions of this Indenture, unless any such Noteholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred therein or thereby (the general obligation of an institutional investor that is investment grade rated being sufficient indemnity); nothing contained in this Indenture shall, however, relieve the Trustee of the obligations, upon the occurrence of an Event of Default actually known to a Responsible Officer of the Trustee (that shall not have been cured or waived), to exercise such of the rights and powers vested in it by this Indenture, and to use 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 his or her own affairs; (iv) the Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture absent negligence of its part; (v) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default that may have occurred, the Trustee shall not be bound to make any investigation into the facts of 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 Noteholders evidencing not less than 25% of the Voting Interests; 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, the Trustee may require reasonable indemnity against such cost, expense or liability as a condition to so proceeding (the general obligation of an institutional investor that is investment grade rated being sufficient indemnity); the reasonable expense of every such examination shall be paid by the Issuer or, if paid by the Trustee, shall be reimbursed by the Issuer upon demand; (vi) the Trustee may execute any of the trusts or powers under this Indenture or perform any duties under this Indenture either directly or by or through agents or attorneys or a custodian and shall not be liable or responsible for the misconduct or negligence of any of its agents or attorneys or a custodian appointed with due care by the Trustee; -80- (vii) the right of the Trustee to perform any discretionary act enumerated in this Indenture shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such act; (viii) the Trustee shall not be required to give any bond or surety in respect of the execution of the Trust Estate created hereby or the powers granted hereunder; and (ix) anything in this Indenture to the contrary notwithstanding, in no event shall the Trustee be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. SECTION 10.05. LIMITATION ON TRUSTEE'S LIABILITY. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes (other than the certificate of authentication thereon, as applicable), or of any Receivable or related document. The Trustee shall have no obligation to perform any of the duties of the Issuer unless explicitly set forth in this Indenture. The Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any security interest in any Receivable, or the perfection and priority of such a security interest or the maintenance of any such perfection and priority, or for or with respect to the efficacy of the Trust Estate or its ability to generate the payments to be paid to Noteholders under this Indenture, including without limitation the existence and contents of any Receivable or any computer file or other record thereof; the validity of the grant of a security interest in any Receivable to the Trustee or of any intervening assignment; the completeness of any Receivable; the performance or enforcement of any Receivable; the compliance by the Issuer with any covenant or the breach by the Issuer of any warranty or representation made under this Indenture or in any related document and the accuracy of any such warranty or representation prior to the Trustee's receipt of notice or other discovery of any noncompliance therewith or any breach thereof, any investment of monies by the Issuer or any loss resulting therefrom (it being understood that the Trustee shall remain responsible as Trustee for any property that it may hold as part of the Trust Estate); the acts or omissions of the Issuer; or any action by the Trustee taken at the instruction of OAC; provided however, that the foregoing shall not relieve the Trustee of its obligation to perform its duties under this Indenture. Except with respect to a claim based on the failure of the Trustee to perform its duties under this Indenture or based on the Trustee's negligence, willful misconduct or bad faith, no recourse shall be had for any claim based on any provision of this Indenture, the Notes or any Receivable or assignment thereof against the institution serving as Trustee in its individual capacity. The Trustee shall not have any personal obligation, liability or duty whatsoever to any Noteholder or any other Person with respect to any such claim, and any such claim shall be asserted solely against the Trust Estate or any indemnitor who shall furnish indemnity as provided in this Indenture. The Trustee shall not be accountable for the use or application by the Issuer of the Notes or the proceeds thereof. The Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to prepare or file any Securities and Exchange Commission filing with respect to the Notes or to record this Indenture. -81- The Trustee shall have no responsibility to determine whether any Funding Termination Event specified in clause (e) of the definition of "Funding Termination Event" has occurred, or to determine whether any of the conditions precedent to a purchase of Additional Receivables have occurred except to the extent that a Responsible Officer of Trustee has knowledge that any such conditions have not been satisfied. The recitals contained in this Indenture and in the Notes, except the certificates of authentication on the Notes, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness or completeness. The Trustee makes no representations as to the validity or condition of any Trust Estate or any part thereof, or as to the title of the Issuer thereto or as to the security afforded thereby or hereby, or as to the validity or genuineness of any securities at any time pledged and deposited with the Trustee hereunder or as to the validity or sufficiency of this Indenture or the Notes. The Trustee shall not be accountable for the use or application by the Issuer of the Notes or the proceeds thereof or of any money paid to the Issuer under any provisions hereof. The Trustee will not be responsible for any losses incurred in connection with investments in Permitted Investments made in accordance with the terms of this Indenture, other than losses arising out of the Trustee's gross negligence, bad faith or willful misconduct. SECTION 10.06. TRUSTEE MAY OWN NOTES. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes. The Trustee in its individual or any other capacity may deal with the Issuer and the Seller in banking transactions, with the same rights as it would have if it were not the Trustee. SECTION 10.07. TRUSTEE'S FEES AND EXPENSES. The Trustee shall be entitled to reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trusts created by this Indenture and in the exercise and performance of any of the powers and duties of the Trustee under this Indenture, which shall equal the Trustee Fee, paid as provided in Section 4.04, and payment or reimbursement for all reasonable expenses and disbursements (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) incurred or made by the Trustee in defense of any action brought against it in connection with this Indenture except any such expense or disbursement as may arise from its gross negligence, willful misfeasance or bad faith or that is the responsibility of Noteholders under this Indenture (not to exceed $100,000 in the aggregate). Additionally, OAC, pursuant to Section 8.01, shall indemnify the Trustee with respect to certain matters. In the event the Trustee Fee and any other expenses or disbursements are unpaid or unreimbursed under Section 4.04, the Trustee shall not be entitled to payment or reimbursement from any of the REMIC Trusts or the REMIC Servicer. SECTION 10.08. INDEMNITY OF TRUSTEE. Pursuant to Section 4.04(b) of this Agreement, the Trustee and its agents and employees shall be indemnified by the Trust Estate and held harmless against any loss, liability, or expense (including reasonable attorney's fees and expenses) arising out of or incurred in connection with -82- the acceptance of performance of the trusts and duties contained in this Indenture to the extent that (i) the Trustee shall not be indemnified for such loss, liability or expense by the Issuer; (ii) such loss, liability, or expense shall not have been incurred by reason of the Trustee's willful misfeasance, bad faith or negligence; and (iii) such loss, liability or expense shall not have been incurred by reason of the Trustee's breach of its representations and warranties pursuant to Sections 10.09 and 10.14. SECTION 10.09. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. Except as otherwise provided in this Indenture, the Trustee under this Indenture shall at all times be a bank having its corporate trust office in the same state (or the District of Columbia or the Commonwealth of Puerto Rico) as the location of the Corporate Trust Office as specified in this Indenture; organized and doing business under the laws of such state (or the District of Columbia or the Commonwealth of Puerto Rico) or the United States; authorized under such laws to exercise corporate trust powers; having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities; and shall have the highest available long-term unsecured debt rating by the Rating Agency then providing such a rating or be otherwise acceptable to the Rating Agency and the Majority Noteholders, as evidenced by a letter to such effect from the Rating Agency (which acceptance may be evidenced in the form of a letter, dated on or shortly before the Closing Date, assigning an initial rating to the Notes). If the Trustee 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 Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 10.10. SECTION 10.10. RESIGNATION OR REMOVAL OF TRUSTEE. (a) The Trustee may at any time resign and be discharged from the trusts created by this Indenture by giving at least 60 days' prior written notice thereof to the Issuer and the Noteholders. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor Trustee acceptable to the Majority Noteholders by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 60 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. (b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 10.09 and shall fail to resign after written request therefor by the Issuer or the Majority Noteholders, or if at any time the Trustee shall be legally unable to act, or shall be adjudged 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 the Majority Noteholders may remove the Trustee. If the Trustee is removed under the authority of the immediately preceding -83- sentence, the Issuer shall promptly appoint a successor Trustee acceptable to the Majority Noteholders (which acceptance shall not be unreasonably withheld), by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, and pay all fees owed to the outgoing Trustee. (c) The Majority Noteholders may at any time, remove the Trustee and appoint a successor with the consent of the Issuer (such consent not to be unreasonably withheld) by written instrument or instruments, in triplicate, signed by the Issuer, one complete set of which instruments shall be delivered to the Issuer, one complete set to the Trustee so removed and one complete set to the successor so appointed. A copy of such instrument shall be delivered to the Noteholders and the REMIC Servicer by the Trustee or the Issuer. (d) 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 of appointment by the successor Trustee as provided in Section 10.11. The Issuer shall give the Rating Agency and the Noteholders notice of any such resignation or removal of the Trustee and appointment and acceptance of a successor Trustee. (e) Notwithstanding the foregoing, in the event the Trustee is removed or resigns, the Verification Agent and Paying Agent shall also be removed and any successor Trustee shall also be the successor Verification Agent and Paying Agent. SECTION 10.11. SUCCESSOR TRUSTEE. Any successor Trustee appointed as provided in Section 10.10 shall execute, acknowledge and deliver to the Issuer and to its predecessor Trustee an instrument accepting such appointment under this Indenture, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor 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 Indenture, with like effect as if originally named as Trustee. The predecessor Trustee shall deliver to the successor Trustee all documents and statements held by it under this Indenture; and the Issuer and the predecessor 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 Trustee all such rights, powers, duties and obligations. No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 10.09. Upon acceptance of appointment by a successor Trustee as provided in this Section, the Issuer shall mail notice of the successor of such Trustee under this Indenture to all Noteholders at their addresses as shown in the Note Register and shall give notice by mail to the Rating Agency. If the Issuer fails to mail such notice within ten (10) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of OAC. SECTION 10.12. MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation (i) into which the Trustee may be merged or consolidated, (ii) which may result from any merger, conversion, or consolidation to which the Trustee shall be a party or -84- (iii) which may succeed to all or substantially all the corporate trust business of the Trustee, which corporation executes an agreement of assumption to perform every obligation of the Trustee under this Indenture, shall be the successor of the Trustee hereunder, provided such corporation shall be eligible pursuant to Section 10.09, 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. Notice of any such merger shall be given by the Trustee to the Rating Agency and the Noteholders. SECTION 10.13. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. Notwithstanding any other provisions of this Indenture, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate may at the time be located, the Issuer and the Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee to act as co-trustee, jointly with the Trustee or separate trustee or separate trustees, of all or any part of the Trust Estate, and to vest in such Person, in such capacity and for the benefit of the Noteholders, such title to the Trust Estate, or any part thereof, and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Issuer and the Trustee may consider necessary or desirable. If the Issuer shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in the case an Event of Default shall have occurred and be continuing, the Trustee alone shall have the power to make such appointment. Each co-trustee or separate trustee under this Indenture shall be required to meet the terms of eligibility as a successor trustee pursuant to Section 10.09 but no notice of a successor Trustee pursuant to Section 10.11 and no notice to Noteholders of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 10.11. 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 Trustee shall be conferred 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, (whether as Trustee under this Indenture) 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 Estate 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 under this Indenture shall be personally liable by reason of any act or omission of any other trustee under this Indenture; (iii) the Issuer and the Trustee acting jointly (or during the continuation of an Event of Default the Trustee alone) may at any time accept the resignation of or remove any separate trustee or co-trustee; and -85- (iv) the Trustee shall remain primarily liable for the actions of any separate trustees and co-trustee. 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 Indenture and the conditions of this Section. Each separate trustee and co-trustee, upon its acceptance of the rights 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, including, but not limited to, every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Each such instrument shall be filed with the Trustee and a copy thereof given to the Issuer. Any separate trustee or co-trustee may at any time appoint 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 or successor trustee. Notwithstanding anything to the contrary in this Indenture, the appointment of any separate trustee or co-trustee shall not relieve the Trustee of its obligations and duties under this Indenture. SECTION 10.14. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee hereby makes the following representations and warranties on which the Issuer and the Noteholders are relying: (i) Organization and Good Standing. The Trustee is a national banking association duly organized, validly existing and in good standing; (ii) Power and Authority. The Trustee has full power, authority and right to execute, deliver and perform this Indenture and has taken all necessary action to authorize the execution, delivery and performance by it of this Indenture; (iii) No Violation. The execution, delivery and performance by the Trustee of this Indenture (a) shall not violate any provision of any law governing the banking and trust powers of the Trustee or, to the best of the Trustee's knowledge, any order, writ, judgment, or decree of any court, arbitrator, or governmental authority applicable to the Trustee or any of its assets, (b) shall not violate any provision of the charter or bylaws of the Trustee, and (c) shall not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any Lien on any properties included in the Trust Estate pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or Lien could reasonably be expected to materially and adversely affect the Trustee's -86- performance or ability to perform its duties under this Indenture or the transactions contemplated in this Indenture; (iv) No Authorization Required. The execution, delivery and performance by the Trustee of this Indenture shall not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency regulating the banking and corporate trust activities of the Trustee; and (v) Duly Executed. This Indenture shall have been duly executed and delivered by the Trustee and shall constitute the legal, valid, and binding agreement of the Trustee, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general principles of equity. SECTION 10.15. TAX RETURNS. In the event the Trustee shall be required to file tax returns on behalf of the Trust Estate, the Issuer shall prepare or shall cause to be prepared any tax returns required to be filed by the Trust Estate and shall remit such returns to the Trustee for signature at least five days before such returns are due to be filed. The Trustee, upon request, shall furnish the Issuer with all such information known to the Trustee as may be reasonably required in connection with the preparation of all tax returns of the Trust Estate, and shall, upon request, execute such returns. ARTICLE XI REDEMPTION SECTION 11.01. REDEMPTION AT THE OPTION OF THE ISSUER; ELECTION TO REDEEM. The Issuer shall have the option to redeem the Notes in full on any Payment Date on or after the Optional Termination Date (such Payment Date, a "Redemption Payment Date"). The election of the Issuer to redeem the Notes pursuant to this Section shall be evidenced by delivery to the Trustee no later than thirty days prior to the Payment Date as of which such redemption will be effected of an Officer's Certificate of the Issuer stating the Issuer's intention to redeem the Notes and specifying the Redemption Amount therefor. No prepayment premium or penalty is payable with respect to any such redemption. SECTION 11.02. DEPOSIT OF REDEMPTION AMOUNT. In the case of any redemption pursuant to Section 11.01, the Issuer shall, at or before 11:00 AM Eastern time on the Payment Date on which such redemption is to be effected, deposit in the Note Payment Account, pursuant to Section 4.03, an amount equal to the Redemption Amount, and the lien, rights and interests created hereby shall cease to be of further effect, subject to Section 2.07. The Redemption Amount shall be paid as provided in Section 4.04(b). -87- SECTION 11.03. NOTICE OF REDEMPTION BY THE TRUSTEE. Upon receipt of notice from the Issuer of its election to redeem the Notes pursuant to Section 11.01 and deposit by the Issuer of the Redemption Amount pursuant to Section 11.02, the Trustee shall provide notice of redemption of the Notes ("Redemption Notice") by first class mail, postage prepaid, mailed no later than the Business Day following the date on which such deposit was made, to each Noteholder at such Noteholder's address as listed in the Note Register. Notice of redemption of Notes shall be given by the Trustee in the name and at the expense of the Issuer, as applicable. SECTION 11.04. PAYMENT AND SURRENDERING OF NOTES. The Trustee shall cause to be distributed to the holders thereof on the Redemption Payment Date the final payment due in connection with each such Note. In the event that all of the Noteholders shall not surrender their Notes for final payment and cancellation on or before ten (10) Business Days following such Redemption Payment Date, the Trustee shall promptly following such date cause all funds in the Note Payment Account not distributed in final distribution to Noteholders to be withdrawn therefrom and credited to the remaining Noteholders by depositing such funds in a separate escrow account for the benefit of such Noteholders and the Issuer shall give a second written notice to the remaining Noteholders to surrender their Notes for cancellation and receive the final payment with respect thereto. If within one year after the second notice all the Notes shall not have been surrendered for cancellation, the Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Noteholders concerning surrender of their Notes, and the cost thereof shall be paid out of the funds on deposit in such escrow account. Upon the deposit of the Redemption Amount into the Note Payment Account in accordance with Section 11.02, each Noteholder, will be deemed to have relinquished any further right to receive payments under this Indenture and any interest in the Trust Estate. Each Noteholder shall indemnify and hold harmless the Issuer, the Trustee and any other Person against whom a claim is asserted in connection with such Noteholder's failure to tender the Note to the Trustees for cancellation. ARTICLE XII MISCELLANEOUS PROVISIONS SECTION 12.01. AMENDMENT. (a) This Indenture may be amended by the Issuer and the Trustee, with the consent of the Majority Noteholders, to cure any ambiguity, to correct or supplement any provision in this Indenture which may be inconsistent with any other provision of this Indenture, to add, change or eliminate any other provision of this Indenture with respect to matters or questions arising under this Indenture that shall not be inconsistent with the provisions of this Indenture or to add or provide for any credit enhancement. Upon satisfaction of the foregoing conditions the Trustee shall execute such amendment; provided that the Trustee may decline to execute an amendment which as evidenced by an Opinion of Counsel at the expense of the party requesting such amendment, adversely affects in any material respect the rights, duties and obligations of the Trustee. -88- (b) This Indenture may also be amended from time to time by the Issuer and the Trustee, with the consent of the Majority Noteholders (which consent of any Noteholder given pursuant to this Section or pursuant to any other provision of this Indenture shall be conclusive and binding on such Noteholder 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 Indenture, or of modifying in any manner the rights of such Noteholders; provided, however, that no such amendment shall (i) except as otherwise provided in Section 12.01(a), reduce in any manner the amount of, or delay the timing of, any payments that shall be required to be made on any Note or deposits of amounts to be so paid or the Required Reserve Amount of the Reserve Account without the consent of each Noteholder (provided that an amendment of the terms of an Event of Default shall not be deemed to be within the scope of this clause (i)); or (ii) change the definition or the manner of calculating the interest accrued on the Notes without the consent of each Noteholder; or (iii) reduce the aforesaid percentage of the Voting Interest required to consent to any such amendment, without the consent of each Noteholder. Upon satisfaction of the foregoing conditions the Trustee shall execute such amendment; provided that the Trustee may decline to execute an amendment which as evidenced by an Opinion of Counsel at the expense of the party requesting such amendments, adversely affects in any material respect the rights, duties and obligations of the Trustee. (c) Prior to the execution of any amendment to this Indenture or consent thereto pursuant to this Section 12.01, the Trustee shall furnish a copy of such amendment or consent to the Rating Agency, each Noteholder, and each Rating Agency under the REMIC Trusts each as defined in the related REMIC Pooling Agreement. (d) Promptly after the execution of any amendment or consent thereto pursuant to Section 12.01(b), the Trustee shall furnish a copy of such amendment or consent to each Noteholder. The manner of obtaining such consents and of evidencing the authorization by Noteholders of the execution thereof shall be subject to such reasonable requirements as the Trustee may prescribe. (e) Prior to the execution of any amendment to this Indenture, the 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 Indenture. The Trustee may, but shall not be obligated to, enter into any such amendment which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. (f) There will be no change in the identity of the Verification Agent, the Paying Agent, or the Trustee without the prior written consent of the Majority Noteholders, subject to the rights of the Verification Agent, the Paying Agent and the Trustee to resign in accordance with the provisions of this Indenture. (g) This Indenture may be amended by the Issuer and the Trustee with the consent of the Majority Noteholders to make any change required to minimize the possibility of classification of the Issuer as a "publicly traded partnership" within the meaning of Code Section 7704(b), assuming for purposes of the foregoing that the Trust Estate were classified as a partnership for federal or state income tax purposes and not solely as a security device for such -89- purposes. Upon satisfaction of the foregoing conditions the Trustee shall execute such amendment; provided that the Trustee may decline to execute an amendment which as evidenced by an Opinion of Counsel adversely affects in any material respect the rights, duties and obligations of the Trustee. Further, this Indenture may be amended by the Issuer and the Trustee, with the consent of the Majority Noteholders to minimize the restrictions on transfers of the Notes described in Section 6.03(h) if the Issuer, in reliance upon an Opinion of Counsel delivered to the Trustee, determines that such amendment would not otherwise result in classification of the Trust Estate or render the Trust Estate susceptible to classification as a "publicly traded partnership" within the meaning of Code Section 7704(b) assuming for purposes of the foregoing that the Trust Estate were classified as a partnership for federal or state income tax purposes and not solely as a security device for such purposes. Upon satisfaction of the foregoing conditions the Trustee shall execute such amendment; provided that the Trustee may decline to execute an amendment which as evidenced by an Opinion of Counsel at the expense of the party requesting such amendment, adversely affects in any material respect the rights, duties and obligations of the Trustee. SECTION 12.02. PROTECTION OF SECURITY INTEREST IN TRUST ESTATE. (a) The Issuer 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 interests of the Noteholders and the Trustee under this Indenture in the Receivables and in the proceeds thereof. The Issuer shall deliver (or cause to be delivered) to the Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. (b) The Issuer shall not change its name, identity or organizational structure in any manner that would, could or might make any financing statement or continuation statement filed 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 Trustee and the Noteholders at least thirty (30) days' prior written notice thereof and shall have filed prior to such change appropriate amendments to all such previously filed financing statements or continuation statements. (c) The Issuer shall maintain accounts and records as to each Receivable accurately and in sufficient detail to permit (i) after reasonable prior notice to the Issuer, 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, if applicable) and (ii) reconciliation between payments or recoveries on (or with respect to) each Receivable and the amounts from time to time deposited in the Accounts (or any of them) in respect of such Receivables. (d) The Issuer shall maintain its records so that, from and after the time of the granting of the security interest under this Indenture of the Receivables to the Trustee, the Issuer's records (including any computer records and back-up archives) that refer to any Receivables indicate clearly the interest of the Trustee in such Receivables and that the Receivable is held by the Trustee on behalf of the Noteholders. Indication of the Trustee's interest in a Receivable shall be deleted from or modified on the Issuer's records when, and only when, the Receivable has been paid in full, or released from the lien hereof pursuant to this Indenture. -90- (e) If at any time the Issuer proposes to assign, convey, grant a security interest in, or otherwise transfer any interest in receivables to any prospective purchaser, lender or other transferee, the Issuer shall give to such prospective acquirer, lender or other transferee computer tapes, records or print-outs (including any restored from back-up archives) that, if they refer in any manner whatsoever to any Receivable, indicate clearly that such Receivable is subject to a security interest in favor of the Trustee unless such Receivable has been paid in full, acquired or assigned pursuant to this Indenture. (f) The Issuer shall permit the Trustee, any Noteholder and their respective agents, upon not less than two Business Days' prior written notice and during normal business hours, to inspect, audit and make copies of and abstracts from the Issuer's records regarding any Receivables then or previously included in the Trust Estate. Nothing in this Section shall impair the obligation of the Issuer to observe any applicable law prohibiting disclosure of information regarding the Obligors, and the failure of the Issuer to provide access as provided in this Section as a result of such obligation shall not constitute a breach of this Section. (g) Upon request, the Issuer shall furnish to the Trustee, within three Business Days of such request, a Schedule of Receivables then held as part of the Trust Estate. (h) The Issuer shall deliver to the Trustee, promptly after the execution and delivery of each amendment to any financing statement, an Opinion of Counsel stating that, in the opinion of such counsel, either (i) all financing statements and continuation statements have been executed and filed that are necessary fully to preserve and protect the interest of the Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) no such action is necessary to preserve and protect such interest. SECTION 12.03. LIMITATION OF RIGHTS OF NOTEHOLDERS. (a) The death or incapacity of any Noteholder shall not operate to terminate this Indenture or the Trust Estate, nor entitle its legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust Estate, nor otherwise affect the rights, obligations and liabilities of the parties to this Indenture or any of them. (b) No Noteholder shall have any right to vote (except as expressly provided in this Indenture) or in any manner otherwise control the operation and management of the Trust Estate, or the obligations of the parties to this Indenture, nor shall anything set forth in this Indenture, or contained in the terms of the Notes, be construed so as to constitute the Noteholders from time to time as partners or members of an association; nor shall any Noteholder be under any liability to any third person by reason of any action pursuant to any provision of this Indenture. SECTION 12.04. GOVERNING LAW. This Indenture shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of laws provisions thereof, and the obligations, rights and remedies of the parties under this Indenture shall be determined in accordance with such laws. -91- SECTION 12.05. NOTICES. All demands, notices and communications under this Indenture shall be in writing, and either personally delivered, mailed by certified mail, return receipt requested, or sent by facsimile transmission (provided that a copy thereof is also promptly mailed as provided in this Section), and shall be deemed to have been duly given upon receipt (i) in the case of the Issuer at 7800 McCloud Road, Greensboro, NC 27409-9634; (ii) in the case of the Trustee, at the Corporate Trust Office; and (iii) in the case of the Rating Agency at 55 Water Street, New York, New York 10041. 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 Noteholder as shown in the Note Register. Any notice so mailed within the time prescribed in this Indenture shall be conclusively presumed to have been duly given, whether or not the Noteholder shall receive such notice. Any notices required to be given to the Initial Noteholders by the Issuer or the REMIC Servicer shall be deemed given if sent pursuant to the delivery instructions provided to the Issuer and the REMIC Servicer in writing by such Initial Noteholders. SECTION 12.06. SEVERABILITY OF PROVISIONS; COUNTERPARTS. (a) If any one or more of the covenants, agreements, provisions or terms of this Indenture shall be for any reason whatsoever held invalid or unenforceable in any jurisdiction, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Indenture and shall in no way affect the validity or enforceability of the other provisions of this Indenture or the Notes, or the rights of the Noteholders. (b) This Indenture may be executed simultaneously in any number of counterparts, each of which shall be deemed to be an original, and all of which shall constitute but one and the same instrument. SECTION 12.07. ASSIGNMENT. Notwithstanding anything to the contrary contained in this Indenture, except as provided in Sections 7.04 and 8.02, this Indenture may not be assigned by the Issuer without the prior written consent of the Noteholders evidencing not less than 66-2/3% of the Voting Interests. SECTION 12.08. NO PETITION. Each of OAC and the Trustee covenants and agrees that prior to the date which is one year and one day after the termination of this Indenture, it will not institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law. Notwithstanding the foregoing, nothing herein shall be deemed to prohibit the Trustee from filing proofs of claim or otherwise participating in any such proceeding instituted by another person. This Section 12.08 shall survive the termination of this Indenture or the termination of the Trustee, as the case may be, under this Indenture. -92- SECTION 12.09. NOTEHOLDER DIRECTION. Notwithstanding anything to the contrary contained in this Indenture, provided the Trustee has sent out notices to Noteholders in accordance with this Indenture, the Trustee may act as directed by a majority of the outstanding Noteholders (but only to the extent the Noteholders are entitled under this Indenture to so direct the Trustee with respect to such action) responding in writing to the request contained in such notice; provided, however, that Noteholders representing at least 66-2/3% of the outstanding principal balance of the Notes as of the time such notice is sent to Noteholders must have responded to such notice from the Trustee. In addition, the Trustee shall not have any liability to any Noteholder with respect to any action taken pursuant to such notice if the Noteholder does not respond to such notice within the time period set forth in such Notice. SECTION 12.10. NO SUBSTANTIVE REVIEW OF COMPLIANCE DOCUMENTS. Other than as specifically set forth in this Indenture, any reports, information or other documents provided to the Trustee are for purposes only of enabling the sending party to comply with its document delivery requirements hereunder and the Trustee's receipt of any such information shall not constitute constructive or actual notice of any information contained therein or determinable from any information contained therein, including the Issuer's or OAC's compliance with any of its covenants, representations or warranties hereunder. SECTION 12.11. PREVENTION OF TRADING OF NOTES. The Issuer shall, to the extent practicable and in an effort to reduce the likelihood of classification of the Trust Estate as "publicly traded partnership" (within the meaning of Code Section 7704(b)), assuming that the Trust Estate were classified as a partnership for federal or state income tax purposes and not solely as a security device for such purposes, take all steps necessary to prevent the trading of Notes on an "established securities market" (within the meaning of United States Treasury Regulations Section 1.7704-1(b)) or other trading of Notes that is comparable, economically, to trading on an "established securities market." * * * * [signatures appear on next page] -93- IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed by their respective officers as of the day and year first above written. OAKWOOD ADVANCE RECEIVABLES COMPANY, L.L.C., as Issuer By: /s/ Dennis Hazelrigg ------------------------------------- Name: Dennis Hazelrigg Title: President OAKWOOD ACCEPTANCE CORPORATION, individually and as REMIC Servicer By: /s/ Douglas R. Muir ------------------------------------- Name: Douglas R. Muir Title: Vice President THE CHASE MANHATTAN BANK, as Trustee, as Verification Agent and as Paying Agent By: /s/ Kevin Crombie ------------------------------------- Name: Kevin Crombie Title: Asst. Vice President -94- [Schedules and Exhibits Omitted.] EX-10.3 7 g74241ex10-3.txt RECEIVABLES CONTRIBUTION AGREEMENT EXHIBIT 10.3 RECEIVABLES CONTRIBUTION AGREEMENT OAKWOOD ACCEPTANCE CORPORATION (Seller) OAKWOOD ADVANCE RECEIVABLES COMPANY, L.L.C. (Issuer) Dated as of September 28, 2001 OAC ADVANCE RECEIVABLES BACKED NOTES, SERIES 2001-ADV RECEIVABLES CONTRIBUTION AGREEMENT This RECEIVABLES CONTRIBUTION AGREEMENT (this "Agreement") is made as of September 28, 2001, by and between OAKWOOD ACCEPTANCE CORPORATION, a North Carolina corporation (together with any successors, the "Seller"), and OAKWOOD ADVANCE RECEIVABLES COMPANY, L.L.C., a Nevada limited liability company (the "Issuer"). RECITALS A. The Issuer is a special purpose limited liability company, the sole member of which is the Seller. B. The Issuer, Oakwood Acceptance Corporation, individually ("OAC") and as REMIC servicer (the "REMIC Servicer") and The Chase Manhattan Bank, as trustee (the "Trustee"), as verification agent (the "Verification Agent") and as paying agent (the "Paying Agent") propose to enter into an Indenture (the "Indenture") dated as of September 28, 2001 pursuant to which the OAC Advance Receivables Backed Notes, Series 2001-ADV (the "Notes") will be issued. C. The Notes to be issued by the Issuer pursuant to the Indenture will be collateralized by certain Receivables and related property and certain monies in respect thereof now owned and to be hereafter acquired by the Issuer. D. As of the date hereof, the Seller has a 100% membership interest in the Issuer and, in consideration of the transfer to the Issuer of the Aggregate Receivables and related property, BEGINNING ON THE CLOSING DATE, both THEN owned and THEREAFTER acquired by the Seller, upon the terms and subject to the conditions set forth in this Agreement, the Issuer has agreed to pay to the Seller a purchase price (for each Receivable, its "Purchase Price") in an amount equal to the "Funding Amount" (as defined in the Indenture) for such Receivable. To the extent the Purchase Price paid in cash by the Issuer for any Receivable is less than 100% of the fair market value thereof, the Seller shall be deemed to have contributed the balance of the fair market value of the Receivable to the capital of the Issuer. AGREEMENT NOW, THEREFORE, in consideration of the above premises and of the mutual promises hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. DEFINITIONS. This Agreement is entered into in connection with the terms and conditions of the Indenture. Any capitalized term used but not defined herein shall have the meaning given to it in the Indenture. "Advance Financing Person" shall have the meaning specified in the related REMIC Pooling Agreement. "Aggregate Receivables" means all Initial Receivables and all Additional Receivables under a Designated REMIC Trust sold and/or contributed by the Seller to the Issuer hereunder. "Aggregate Receivables Balance" means as of any date of determination and with respect to the Aggregate Receivables, the aggregate current outstanding amount of such Aggregate Receivables. "Asset-Based REMIC Trusts" shall have the meaning assigned to such term in Section 2(a) of this Agreement. "CLOSING DATE" MEANS OCTOBER 2, 2001. "Designated REMIC Trusts" means the REMIC Trusts listed on Schedule 1 hereto, as amended or modified from time to time in accordance with the terms and conditions hereunder, subject to the provisions of Section 2(a). "Initial Receivables" shall have the meaning specified in Section 2(a). "Initial Receivables Balance" means the aggregate Receivables Balance of the Initial Receivables. "Lien" means any security interest, lien, charge, pledge, equity or encumbrance of any kind. "Purchase Price" has the meaning assigned to that term in paragraph D. in the "RECITALS" section of this Agreement. "Qualified Insurer" means, with respect to any required insurance policy or bond, an insurance company or security or bonding company qualified to issue such policy or bond in the relevant jurisdiction and who has a "financial strength" and/or "claims paying ability" rating of at least "BBB" from the Rating Agency or, if not rated by the Rating Agency, a comparable rating from at least two nationally recognized statistical rating organizations. "Receivable" means the contractual right to reimbursement from a REMIC Trust for a P&I Advance made by OAC as REMIC Servicer in connection with such REMIC Trust, which P&I Advance has not previously been reimbursed, and which P&I Advance has been Granted to the Trust Estate by the Issuer under the Indenture, and including all rights of OAC to enforce payment of such obligation under the related REMIC Pooling Agreement. "Subsidiary" of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. -2- SECTION 2. TRANSFER AND ASSIGNMENT OF RECEIVABLES. (a) On the Closing Date, the Seller shall, subject to the provisions hereof, sell and contribute to the Issuer, and the Issuer shall acquire from the Seller, the contractual rights to reimbursement for all P&I Advances existing as of the Closing Date under the REMIC Pooling Agreements with respect to the Designated REMIC Trusts (except the Asset-Based REMIC Trusts) together with all rights of the Seller to enforce such rights to reimbursement (the "Initial Receivables"). No Asset-Based Receivables related to any Asset-Based REMIC Trust listed on Attachment A to Schedule 1 (the "Initial Asset-Based REMIC Trusts") shall be sold or contributed by the Seller to the Issuer, and each Initial Asset-Based REMIC Trust shall not be a Designated REMIC Trust, in each case until the Majority Noteholders are satisfied that the Seller's accounting system properly and accurately accounts for and reports the creation and reimbursement of the Asset-Based Receivables related to such Asset-Based REMIC Trust. Pursuant to Section 6.12 of the Indenture, the Majority Noteholders shall deliver written notice of such satisfaction at such time as the Seller shall have demonstrated such ability to the satisfaction of the Majority Noteholders. Upon delivery by the Majority Noteholders to the Seller of a written instrument confirming such satisfaction with respect to any Initial Asset-Based REMIC Trust(s), such Trust(s) identified in such instrument shall be eligible for inclusion in the Designated REMIC Trusts, and, on the Business Day following that date (the "Asset-Based Receivables Acceptance Date" for those REMIC Trusts identified in the instrument delivered by the Majority Noteholders), subject to the provisions hereof, the Seller shall sell and contribute to the Issuer, and the Issuer shall acquire from the Seller, the contractual rights to reimbursement for P&I Advances existing as of such Asset-Based Receivables Acceptance Date under the REMIC Pooling Agreements with respect to such Asset-Based REMIC Trusts, together with all rights of the Seller to enforce such rights to reimbursement. The Receivables sold and contributed to the Issuer on the Asset-Based Receivables Acceptance Dates are referred to herein as the "Initial Asset-Based Receivables." After the Closing Date and during the Funding Period, upon the making of a P&I Advance under a REMIC Pooling Agreement, the Seller automatically and without any further action on its part shall sell and contribute to the Issuer and the Issuer shall accept the right to be reimbursed by the Designated REMIC Trust for such P&I Advance together with all rights of the Seller to enforce such rights to reimbursement under the related REMIC Pooling Agreement (each, an "Additional Receivable"). The Aggregate Receivables at any time of determination shall consist of the Initial Receivables, the Initial Asset-Based Receivables sold and contributed to the issuer prior to such time of determination, and the Additional Receivables sold and contributed to the Issuer prior to such time of determination. (b) The REMIC Trusts that constitute the Designated REMIC Trusts as of the Closing Date are listed on Attachment B to Schedule 1 attached hereto (Schedule 1 is referred to herein as the "Designated Trust Schedule"). Each Asset-Based REMIC Trust listed on Attachment A to Schedule 1 shall automatically be included among the Designated REMIC Trusts on the related Asset-Based Receivables Acceptance Date upon the occurrence of the conditions specified in Section 2(a) above. In addition, the Seller may at any time designate any other REMIC Trust as a Designated REMIC Trust under this Agreement (each such REMIC Trust so designated being sometimes referred to herein as an "Added REMIC Trust") with the prior written consent of the Majority Noteholders by executing with the Issuer an updated Designated Trust -3- Schedule and delivering a copy of such executed updated Designated Trust Schedule to the Trustee and Noteholders. Upon such designation, all rights to reimbursement for P&I Advances relating to such Added REMIC Trust as of such date of designation shall be sold and contributed hereunder to the Issuer and shall be Granted to the Trust Estate pursuant to the terms of the Indenture. Following any such designation of a REMIC Trust as a Designated REMIC Trust, the Issuer shall withdraw or cause to be withdrawn the P&I Advance Reimbursement Amount from the related Certificate Accounts, pursuant to the related REMIC Pooling Agreements. The Issuer shall deliver or cause to be delivered the portion of the P&I Advance Reimbursement Amount that constitutes Net Proceeds to the Advance Financing Person. The Seller may at any time with the prior written consent of the Majority Noteholders, in their sole and absolute discretion, remove a REMIC Trust as a Designated REMIC Trust under this Agreement (each such REMIC Trust so removed being sometimes referred to herein as a "De-Designated REMIC Trust"). Upon receipt of such consent, the Seller and the Issuer shall execute an updated Designated Trust Schedule and deliver a copy thereof to the Trustee, the Noteholders and the Issuer. Such prior written consent of the Majority Noteholders is not required for the Seller to remove a REMIC Trust as a Designated REMIC Trust under this Agreement if: (i) OAC engages a financial guarantor to guarantee the Notes; (ii) such financial guarantor is MBIA Insurance Corporation ("MBIA"), Ambac Assurance Corporation ("AMBAC"), Financial Security Assurance Inc. ("FSA") or Financial Guaranty Insurance Company ("FGIC") or any other financial guarantor that is rated Aaa, AAA and AAA by Moody's, Fitch and Standard and Poors, respectively; (iii) the financial guarantee is a timely interest guarantee; (iv) the financial guarantee guarantees principal no later than the Final Payment Date; and (v) any amendment to the Transaction Documents required to engage such financial guarantor is subject to and so receives the reasonable approval of the Majority Noteholders. Upon such removal, (i) all Receivables related to such De-Designated REMIC Trust shall be released from the lien of the Indenture, and (ii) all rights to reimbursement for P&I Advances related to such De-Designated REMIC Trust arising on or after the date of such release shall not be sold or contributed to the Issuer, and shall not be included in any calculation of Additional Receivables. Each such Designated Trust Schedule is incorporated by this reference into this Agreement. (c) Subject to the terms and conditions contained herein, the Seller hereby sells, assigns, conveys, contributes and transfers to the Issuer without recourse, and the Issuer hereby accepts, all of the Seller's right, title and interest in, to and under the following described property and interests in property (the "Contributed Assets"): (i) as of the Closing Date, the Initial Receivables with respect to the Designated REMIC Trusts identified on Attachment B to Schedule 1 attached hereto and -4- entered into between the Seller and the Issuer, delivered by the Seller to the Issuer and the Trustee and all monies due thereon or paid thereunder or in respect thereof on and after the Closing Date; (ii) as of the related Asset-Based Receivables Acceptance Date, the Initial Asset-Based Receivables with respect to the REMIC Trusts identified on Attachment A to Schedule 1 attached hereto which are accepted by the Majority Noteholders as of such Asset-Based Receivables Acceptance Date, as described in Section 2(a) above, and all monies due thereon or paid thereunder or in respect thereof on and after the Asset-Based Receivables Acceptance Date; (iii) after the Closing Date (or after the related Asset-Based Receivables Acceptance Date in the case of the Initial Asset-Based Receivables with respect to any Asset-Based REMIC Trust) and during the Funding Period, all right, title and interest of the Seller to Additional Receivables as of the date of creation thereof with respect to the Designated REMIC Trusts identified on the Designated Trust Schedule attached hereto, as updated and amended from time to time, including without limitation, the right to receive Aggregate Servicing Amounts; (iv) copies of all books, records and documents relating to the Aggregate Receivables in any medium including without limitation paper, tapes, disks and other electronic media; and (v) all proceeds, products, rents and profits of any of the foregoing and all other amounts payable in respect of the foregoing. (d) [RESERVED] (e) It is the intention of the Seller and the Issuer that each transfer and assignment contemplated by this Agreement shall constitute a sale and/or contribution and absolute assignment of the Contributed Assets from the Seller to the Issuer and that the Contributed Assets 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. The Seller agrees to execute and file all filings (including filings under the UCC) necessary in any jurisdiction to provide third parties with notice of the sale and/or contribution and assignment of the Contributed Assets pursuant to this Agreement to perfect such sale, contribution and assignment and to perfect the first priority security interest in the Contributed Assets (as referenced in Section 2(f)) under the UCC. (f) Although the parties hereto intend that the transfer and assignment contemplated by this Agreement be a true sale and/or contribution outright and not as security, in the event such transfer and assignment is deemed to be other than a sale and/or contribution, the parties intend that (i) all filings described in the foregoing paragraph shall give the Issuer a first priority perfected security interest in, to and under the Contributed Assets, and other property conveyed hereunder and all proceeds of any of the foregoing and (ii) this Agreement shall be a security agreement and shall be deemed to be the grant of a security interest from the Seller to the Issuer in the Contributed Assets and the Issuer shall have all rights, powers and privileges of -5- a secured party under the UCC. In furtherance of the foregoing intent, the Seller hereby grants to the Issuer a security interest in the Contributed Assets to secure the obligations of the Seller to the Issuer under the related Transaction Documents. (g) In connection with the foregoing conveyance, the Seller shall ensure that, from and after the time of sale and/or contribution and conveyance of the Aggregate Receivables to the Issuer under this Agreement, the records (including any computer records and back-up archives) maintained by or on behalf of the Seller that refer to any Aggregate Receivable indicate clearly the interest of the Issuer in such Aggregate Receivable and that such Aggregate Receivable is owned by the Issuer. Indication of the Issuer's ownership of an Aggregate Receivable shall be deleted from or modified on such records when, and only when, such Aggregate Receivable has been paid in full, repurchased or assigned by the Issuer. (h) The Seller has notified the related REMIC Trustees with respect to the initial Designated REMIC Trusts of the assignment, transfer of ownership and pledge of Aggregate Receivables related to such REMIC Trusts, including the related P&I Advance Reimbursement Amounts, pursuant to amendments to the related REMIC Pooling Agreements. In the event any additional REMIC Trusts are added as Designated REMIC Trusts in the future, the Seller shall similarly notify the related REMIC Trustees and any other parties to the related REMIC Pooling Agreements. (i) The Seller agrees that all Contributed Assets transferred, assigned and delivered to the Issuer hereunder shall comply with all the representations and warranties set forth in this Agreement and all other Transaction Documents. (j) On each Funding Date on or prior to which Additional Receivables are or have been sold and/or contributed to the Issuer and for which the Issuer shall pay the related Purchase Price, the Seller and the Issuer shall execute a Schedule of Receivables which shall list the Aggregate Receivables with respect to the Designated REMIC Trusts described therein and any related Contributed Assets that are subject to the provisions hereof and the other Transaction Documents as of such Funding Date. SECTION 3. SELLER'S ACKNOWLEDGMENT AND CONSENT TO ASSIGNMENT. Seller hereby acknowledges that the Issuer has Granted to the Trustee, on behalf of the Noteholders, the rights of the Issuer as Purchaser under this Agreement, including, without limitation, the right to enforce the obligations of the Seller hereunder. The Seller hereby consents to such Grant by the Issuer to the Trustee in the Indenture. The Seller acknowledges that the Trustee shall be a third party beneficiary in respect of the representations, warranties, covenants, rights and benefits arising hereunder that are so Granted by the Issuer. Moreover, the Seller hereby authorizes and appoints as its attorney-in-fact the Issuer and the Trustee, as the Issuer's assignee, on behalf of the Seller, to execute and deliver such documents or certificates as may be necessary in order to enforce its rights to or collect under the Receivables. SECTION 4. REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF SELLER. The Seller hereby makes the following representations and warranties for the benefit of the Issuer and the Noteholders on which the Issuer is relying in accepting the Aggregate -6- Receivables and executing this Agreement and on which the Noteholders are relying in purchasing the Notes. The representations are made as of the CLOSING DATE, and as of each date of sale and/or contribution of the Aggregate Receivables. Such representations and warranties shall survive the transfer, sale, assignment and contribution of any Aggregate Receivables to the Issuer and are as follows: (a) Organization and Good Standing. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina with corporate power and authority to own its properties and to conduct its business as such properties shall be currently owned and such business is presently conducted, and had at all relevant times, and now has and so long as any Notes are outstanding, will continue to have, power, authority and legal right to acquire, own, hold, transfer, assign and convey the Aggregate Receivables. (b) Due Qualification. The Seller is and will continue to be duly qualified to do business as a foreign corporation in good standing, and has obtained and will keep in full force and effect all necessary licenses, permits and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications, licenses, permits or approvals and as to which the failure to obtain or to keep in full force and effect such licenses, permits or approvals would have a material and adverse impact upon the value or collectability of the Aggregate Receivables. (c) Power and Authority. The Seller has and will continue to have all requisite corporate power and authority to own the Aggregate Receivables, to execute and deliver this Agreement, the Indenture, each Schedule of Receivables and any and all other instruments and documents necessary to consummate the transactions contemplated hereby (the "Seller's Related Documents") and to perform each of its obligations under this Agreement and under the Seller's Related Documents, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each of the Seller's Related Documents by the Seller, the performance by the Seller of its obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby have each been duly authorized by the Board of Directors of the Seller and no further corporate actions are required to be taken by the Seller in connection therewith. (d) Valid Transfer; Binding Obligation. Upon the execution and delivery of this Agreement and each Schedule of Receivables by each of the parties hereto, this Agreement shall evidence a valid sale, transfer, assignment and contribution of the Aggregate Receivables, which is enforceable against creditors of and purchasers from the Seller, except as such enforceability may be limited by bankruptcy, insolvency or similar laws and by equitable principles. This Agreement and each of the other Transaction Documents to which the Seller is a party has been, or when delivered will have been duly executed and delivered and constitutes the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or similar laws and by equitable principles. (e) No Violation. Neither the execution, delivery and performance of this Agreement, the other Transaction Documents or the Seller's Related Documents by the Seller -7- nor the consummation by the Seller of the transactions contemplated hereby or thereby nor the fulfillment of or compliance with the terms and conditions of this Agreement, the Seller's Related Documents or the other Transaction Documents to which the Seller is a party (i) will violate the articles of incorporation or the bylaws or other organizational documents of the Seller, (ii) will constitute a default (or an event which, with notice or lapse of time or both, would constitute a default), or result in a breach or acceleration of, any material indenture, agreement or other material instrument to which the Seller or any of its subsidiaries is a party or by which it is bound, or which may be applicable to the Seller, (iii) constitutes a default (whether with notice or lapse of time or both), or results in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Seller, under the terms of any of the foregoing or (iv) violates any statute, ordinance or law or any rule, regulation, order, writ, injunction or decree of any court or of any public, governmental or regulatory body, agency or authority applicable to the Seller or its properties. (f) No Proceedings. There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or to the Seller's knowledge, threatened, against or affecting the Seller: (i) in which a third party not affiliated with the Trustee or a Noteholder asserts the invalidity of any of the Transaction Documents, (ii) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by any of the Transaction Documents, (iii) except as set forth in Schedule 3, seeking any determination or ruling that should reasonably be expected to materially and adversely affect (A) the performance by the Seller or its Affiliates of their obligations under, or the validity or enforceability of, any of the Transaction Documents or (B) the condition (financial or otherwise), business or operations of the Seller, or (iv) relating to the Seller or its Affiliates and which should reasonably be expected to adversely affect the federal income tax attributes of the Notes. (g) [RESERVED] (h) No Violation of Exchange Act or Regulations T, U or X. None of the transactions contemplated in the Transaction Documents (including the use of the proceeds from the sale of the Notes) will result in a violation of Section 7 of the Exchange Act, or any regulations issued pursuant thereto, including Regulations T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. (i) [RESERVED] (j) All Consents Obtained. All approvals, authorizations, consents, orders or other actions of any persons or of any governmental body or official required in connection with the execution and delivery by the Seller of this Agreement and the Transaction Documents to which the Seller is a party, the performance by the Seller of the transactions contemplated by this Agreement and the other Transaction Documents to which it is a party and the fulfillment by the Seller of the terms hereof and thereof, have been obtained. (k) Not an Investment Company. The Seller is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act, and none of the execution, delivery or performance of obligations under this -8- Agreement or any of the Seller's Related Documents, or the consummation of any of the transactions contemplated thereby (including, without limitation, the sale and contribution of the Contributed Assets hereunder) will violate any provision of the Investment Company Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder. (l) All Tax Returns True, Correct and Timely Filed. All material tax returns required to be filed by the Seller in any jurisdiction have in fact been filed and all taxes, assessments, fees and other governmental charges upon the Seller or upon any of its properties, income or franchises shown to be due and payable on such returns have been paid other than those being contested in good faith and for which an adequate reserve has been established in accordance with GAAP. To the best of the Seller's knowledge all such tax returns were true and correct in all material respects and the Seller knows of no proposed material additional tax assessment against it nor of any basis therefor. The provisions for taxes on the books of the Seller and each subsidiary are in accordance with generally accepted accounting principles. (m) No Restrictions on Seller Affecting Its Business. The Seller is not a party to any contract or agreement, or subject to any charter or other corporate restriction which materially and adversely affects its business. (n) Perfection of Security Interest. All filings and recordings as may be necessary to perfect the interest of the Issuer in the Aggregate Receivables have been accomplished and are in full force and effect. After giving effect to these filings the Issuer will have a valid first priority perfected security interest in the Aggregate Receivables not subject to prior liens. The Seller will from time to time, at its own expense, execute and file such additional financing statements (including continuation statements) as may be necessary to ensure that at any time, the interest of the Issuer, the Trustee and the Noteholders in all of the Aggregate Receivables are fully protected. (o) All Taxes, Fees and Charges Relating to Transaction and Transaction Documents Paid. Any taxes, fees and other governmental charges due and payable by the Seller in connection with the execution and delivery of the Agreement and the transactions contemplated hereby have been or will be paid by the Seller at or prior to the Closing Date. (p) RESERVED. (q) No Broker, Finder or Financial Adviser Other Than Credit Suisse First Boston. Neither the Seller nor any of its officers, directors, employees or agents has employed any broker, finder or financial adviser other than Credit Suisse First Boston Corporation or incurred any liability for fees or commissions to any person other than Credit Suisse First Boston Corporation in connection with the offering, issuance or sale of the Notes. All fees and commissions payable to Credit Suisse First Boston Corporation and to any such entity shall be paid by the Seller and the Seller agrees to indemnify, defend and hold harmless the Noteholders from and against any and all claims, liabilities, damages and related costs and expenses (including, without limitation reasonable attorneys fees and disbursements) relating to or arising out of such fees and commissions. (r) Location of Jurisdiction of Organization and Records. The principal place -9- of business and chief executive office of the Seller, and the office where the Seller maintains all of its records, is located at 7800 McCloud Road, Greensboro, NC 27409-9634; provided that, at any time after the Closing Date, upon 30 days' prior written notice to each of the Issuer, the Noteholders and the Trustee, the Seller may relocate its jurisdiction of incorporation, principal place of business and chief executive office, and/or the office where it maintains all of its records, to another location or jurisdiction, as the case may be within the United States to the extent that the Seller shall have taken all actions necessary or reasonably requested by the Issuer, the Majority Noteholders or the Trustee to amend its existing financing statements and continuation statements, and file additional financing statements and to take any other steps reasonably requested by the Issuer, the Majority Noteholders or the Trustee to further perfect or evidence the rights, claims or security interests of any of the Issuer or any assignee or beneficiary of the Issuer's rights under this Agreement, including the Trustee and the Noteholders under any of the Transaction Documents; provided, however, that the prerequisites set forth in this sentence shall not apply to the merger contemplated by the following sentence, if all preconditions specified in the following sentence are satisfied. It is understood and agreed that the Seller intends to merge into Oakwood Acceptance Corporation, LLC, a Delaware limited liability company (the "Successor") on or around September 30, 2001, and that, prior to effecting the merger, (1) OAC shall ensure that the Successor executes an assignment and assumption agreement substantially in the form of Exhibit B attached hereto on or before the Closing Date, and (2) the Seller shall file financing statements in Delaware naming the Successor as debtor, the Issuer as secured party, and the Trustee as assignee of the secured party, with the same collateral description as that provided with respect to the UCC-1 financing statements filed naming such parties in such capacities with the North Carolina Secretary of State and in Guilford County, North Carolina, in connection with the closing of the transactions contemplated hereby. (s) Ownership of the Issuer. One hundred percent (100%) of the membership interests in the Issuer are directly owned (both beneficially and of record) by the Seller. Such membership interests are fully paid and nonassessable and no one other than the Seller has any rights to acquire membership interests in the Issuer. (t) Solvency. The Seller, both prior to and after giving effect to each sale and contribution of Aggregate Receivables with respect to the Designated REMIC Trusts identified in a Schedule of Receivables on the Closing Date or on any date of sale or contribution thereafter (i) is not, and will not be, "insolvent" (as such term is defined in ss. 101(32)(A) of the Bankruptcy Code), (ii) is, and will be, able to pay its debts as they become due, and (iii) does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage. (u) Reporting and Accounting Treatment. For reporting and accounting purposes, and in its books of account and records, the Seller will treat the conveyance of Aggregate Receivables pursuant to this Agreement as an absolute sale, assignment and contribution to the capital of the Issuer of the Seller's full right, title and ownership interest in each such Aggregate Receivable and the Seller has not accounted for or treated in any other manner and will not account for or treat the transactions in any other manner. If a third party, including a potential purchaser of the Aggregate Receivables, should inquire, the Seller will promptly indicate that the Aggregate Receivables have been sold, assigned and contributed and will claim no ownership interest therein. -10- (v) Location of Receivable Files. As of the Closing Date and as of each Payment Date, each Receivable File is kept by OAC, as Custodian, at 7800 McCloud Road, Greensboro, NC 27409-9634, or such other address permitted pursuant to Section 2.05(b) of the Indenture. (w) Necessary Actions Taken. The Seller has performed all actions necessary to sell, contribute and absolutely assign the Aggregate Receivables to the Issuer, including, without limitation, any necessary notifications to the REMIC Trustee or other parties. (x) Delivery of Documents. All of the REMIC Pooling Agreements have been delivered to the Issuer, and such copies constitute true and correct copies of such agreements and there are no amendments, modifications, or other agreements pertaining to the REMIC Pooling Agreements which would affect the Aggregate Receivables which have not been delivered to the Issuer as of the date hereof. (y) No Fraudulent Conveyance. The Seller is not selling and contributing the Aggregate Receivables to the Issuer with any intent to hinder, delay or defraud any of its creditors. (z) Financial Statements. The consolidated balance sheets of Oakwood Homes as at September 30, 2000 and for the fiscal year then ended and as at June 30, 2001 and for the nine-month period then ended, and the related consolidated statements of income, fairly present the financial condition and operations of Oakwood Homes as at such dates and the results of the operations of Oakwood Homes for the periods ended on such dates (subject to normal year end adjustments), all in accordance with generally accepted accounting principles consistently applied. (aa) Aggregate Receivables. (i) Each Aggregate Receivable is payable in United States dollars and has been created pursuant to a REMIC Pooling Agreement between the Seller and the trustee of a REMIC Trust, in accordance with the terms of such REMIC Pooling Agreement and with the customary procedures and in the ordinary course of business of the Seller and is being transferred, sold, assigned and contributed by the Seller to the Issuer hereunder. Each Aggregate Receivable arises from a P&I Advance for which the REMIC Servicer is entitled to reimbursement pursuant to a REMIC Pooling Agreement. (ii) The rights to reimbursement for the P&I Advances under each REMIC Pooling Agreement are eligible for assignment and Grant to the Trust Estate and such assignment and Grant will not violate the terms or require any consent under the related REMIC Pooling Agreement or any other document or agreements to which the Seller is a party or to which its assets or properties are subject, except any such consents of lenders to Oakwood Homes as have been previously obtained. (iii) The information set forth in any Schedule of Receivables hereto shall be true and correct as of the Closing Date and each date of delivery thereof. -11- (iv) It is the intention of the Seller that the transfer and assignment herein contemplated, taken as a whole, constitute a sale and/or contribution and assignment of the Aggregate Receivables from the Seller to the Issuer and that the Aggregate Receivables 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. No Aggregate Receivable has been sold, transferred, contributed, assigned or pledged by the Seller to any Person other than the Issuer. Immediately prior to the transfer and assignment herein contemplated, the Seller had good and marketable title to each Aggregate Receivable, free and clear of all Liens and rights of others; immediately upon the transfer and assignment thereof, the Issuer will have good and marketable title to each Aggregate Receivable, free and clear of all Liens and rights of others; and the transfer and assignment herein contemplated has been perfected under the UCC and any other applicable law. (v) As of any date of sale and/or contribution of Aggregate Receivables, with respect to the Aggregate Receivables transferred on such date, the Seller has not taken any action that, or failed to take any action the omission of which, would materially impair the rights of the Issuer with respect to any Aggregate Receivable. (vi) As of any date of sale and/or contribution of Aggregate Receivables, with respect to the Aggregate Receivables transferred on such date, no Aggregate Receivable has been identified by the Seller or reported to the Seller by the related REMIC Trust as having resulted from fraud perpetrated by any Person with respect to the related account. (vii) All filings (including UCC filings) necessary in any jurisdiction to provide third parties with notice of the transfer, sale, contribution and assignment herein contemplated, to perfect the transfer, sale and contribution of the Aggregate Receivables hereunder and to give the Issuer a complete ownership interest or (in the event that such transfer is not deemed an absolute assignment, sale and contribution) a security interest in the Aggregate Receivables that is prior to any other interest held by any other person (except the Trustee on behalf of the Noteholders) shall have been made. (viii) No Aggregate Receivable is secured by "real property" or "fixtures" or evidenced by an "instrument" under and as defined in the UCC. (ix) Each Aggregate Receivable is and shall continue to be the legal, valid and binding obligation of the related REMIC Trust and is and shall continue to be enforceable in accordance with its terms. Each P&I Advance complied with all laws, including those relating to consumer protection, is valid and enforceable and at the time sold and contributed to the Issuer, will not be subject to any set-off, counterclaim or other defense to payment by the Obligor or any other person. (x) Each Aggregate Receivable is entitled to be paid, has not been repaid in whole or in part or been compromised, adjusted, extended, satisfied, subordinated, rescinded, amended or modified, and is not subject to compromise, -12- adjustment, extension, satisfaction, subordination, rescission, set-off, counterclaim, defense, amendment or modification by the Seller. (xi) Each REMIC Pooling Agreement provides that it is governed by and is to be construed in accordance with the laws of the Commonwealth of Virginia, the State of New York or the State of North Carolina. (xii) Each Aggregate Receivable is assignable by the Seller, the Issuer and their successors and assigns without the consent of any other Person (except any such consent that shall have been obtained) and upon acquiring the Aggregate Receivables the Issuer will have the right to pledge the Receivables without the consent of any other Person and without any other restrictions on such pledge. (xiii) The Seller has not taken (or omitted to take) and will not take (or omit to take), and has no notice that any other party has taken (or omitted to take) or will take (or omit to take) any action that could impair the collectibility of any Aggregate Receivable. (xiv) Each Aggregate Receivable is, and the creation thereof was, in compliance with all applicable laws rules and regulations. (xv) It is the intention of the Seller that the transfer and assignment herein contemplated, taken as a whole, constitute a sale and/or contribution and assignment of the Aggregate Receivables from the Seller to the Issuer and that the Aggregate Receivables 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. If and to the extent this Agreement does not create a true sale of the Aggregate Receivables from the Seller to the Issuer, however, this Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Aggregate Receivables in favor of the Issuer, which security interest is prior to all other Liens, and is enforceable as such as against creditors of and purchasers from the Seller. (xvi) The Aggregate Receivables constitute "general intangibles" within the meaning of the applicable UCC. (xvii) The Seller owns and has good and marketable title to the Aggregate Receivables free and clear of any Liens of any Person. (xviii) The Seller has caused or will have caused, within ten (10) days, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Aggregate Receivables granted to the Issuer hereunder. (xix) Other than the ownership interest transferred, or the security interest granted, to the Issuer pursuant to this Agreement, the Seller has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Aggregate Receivables. The Seller has not authorized the filing of and is not aware of any financing statement against the Seller that includes a description of collateral covering the -13- Aggregate Receivables other than any financing statement related to the security interest granted to the Issuer hereunder or (ii) that has been terminated. (bb) Information. No document, certificate or report furnished by the Seller, in writing pursuant to this Agreement, any other Transaction Document or in connection with the transactions contemplated hereby or thereby contains or will contain when furnished any untrue statement of a material fact. There are no facts relating to and known by the Seller which when taken as a whole, materially adversely affect the financial condition or assets or business of the Seller, or which may impair the ability of the Seller to perform its obligations under this Agreement or any other Transaction Document, which have not been disclosed herein or in the certificates and other documents furnished by or on behalf of the Seller pursuant hereto or thereto specifically for use in connection with the transactions contemplated hereby or thereby. All books, records and documents delivered or contributed to the Issuer are and will be true, correct and complete. (cc) No Deficiency Accumulation. The Seller has not incurred any "accumulated funding deficiency" (as such term is defined under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Code) with respect to any "employee benefit plan" (as such term is defined under ERISA) sponsored by the Seller. (dd) Fair Consideration. The Seller received fair consideration and reasonably equivalent value in exchange for the transfer of the Aggregate Receivables to the Issuer. (ee) Bulk Transfer. No sale, contribution, transfer, assignment or conveyance of Aggregate Receivables by the Seller to the Issuer contemplated by this Agreement will be subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction. (ff) Name. The legal name of the Seller is as set forth in this Agreement and the Seller does not have any tradenames, fictitious names, assumed names or "doing business" names other than Nationwide Mortgage Company, Destiny Financial Services and Golden Circle Financial Services. (gg) Default. The Seller is not in default under any material agreement, ontract, instrument or indenture to which the Seller is a party or by which it or its properties is or are bound (including without limitation, each REMIC Pooling Agreement), or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such agreement, contract, instrument or indenture, or with respect to any such order of any court, administrative agency, arbitrator or governmental body. (hh) No Adverse Change. Since September 30, 2000, there has been no change in the business, operations, financial condition, properties or assets of the Seller which would have a material adverse effect on its ability to perform its obligations under this Agreement or any other Transaction Document or materially adversely affect the transactions contemplated under this Agreement or any other Transaction Document, except as disclosed in the reports filed -14- by Oakwood Homes and its Affiliates since September 30, 2000 with the Securities and Exchange Commission, listed on Schedule 2 attached hereto. (ii) Repayment of Receivables. The Seller has no reason to believe that at the time of the transfer of the Aggregate Receivables to the Issuer pursuant hereto, the Aggregate Receivables will not be paid in full. (jj) Amendments. Each amendment to each REMIC Pooling Agreement provided to the Noteholders (a) is a true, correct and complete copy of such amendment, (b) is in full force and effect and (c) is the legal, valid and binding obligation of each party thereto, enforceable against each such party in accordance with the terms thereof. Other than the amendments to the REMIC Pooling Agreements that have been provided to the Noteholders, no other amendments to any REMIC Pooling Agreement exist. Each REMIC Pooling Agreement, as amended, is in full force and effect and no default exists thereunder. Each REMIC Pooling Agreement has been amended by an amendment in substantially the form of the form amendment attached as Exhibit A hereto that is identified as applicable to that REMIC Pooling Agreement. (kk) Mortgage Loans. Each of the representations and warranties relating to the Assets made in the related REMIC Pooling Agreement were true and correct at the time such representations and warranties were made. SECTION 5. REMEDIES UPON BREACH The Issuer or the Seller, as the case may be, shall, and the Trustee or any Noteholder may, inform the Issuer or the Seller (as applicable) and the Trustee and the Noteholders promptly, in writing, upon the discovery of any breach of the Seller's representations and warranties hereunder that pertain to a Receivable, which breach materially and adversely affects the interests of the Noteholders in such Receivable. Unless such breach shall have been cured or waived within thirty (30) days after the earlier to occur of the discovery of such breach by the Issuer or the Seller (as applicable) or receipt of written notice of such breach by the Issuer or the Seller (as applicable), such that the relevant representation and warranty shall be true and correct in all material respects as if made on such day, and the Seller shall have delivered to the Trustee an Officer's Certificate describing the nature of such breach and the manner in which the relevant representation and warranty became true and correct, the Seller shall indemnify the Issuer against and hold the Issuer harmless from any cost, liability and expense, including without limitation, reasonable attorneys' fees and expenses, whether incurred in enforcement proceedings between the parties or otherwise, incurred as a result of, or arising from, such breach which indemnification shall include, without limitation, payment of an amount at least equal to the Release Payment for the affected Receivable. This Section 5 sets forth the exclusive remedy for a breach of representation or warranty pertaining to a Receivable. Notwithstanding the foregoing, the breach of any representation and warranty identified in Section 4(aa)(xv) through 4(aa)(xix), inclusive, shall not be waived by the Issuer under any circumstances. SECTION 6. [RESERVED] SECTION 7. TERMINATION. -15- This Agreement (a) may not be terminated prior to the termination of the Indenture and (b) may be terminated at any time thereafter by either party upon written notice to the other party. SECTION 8. GENERAL COVENANTS OF SELLER. The Seller covenants and agrees that from the Closing Date until the termination of the Indenture.: (a) RESERVED (b) RESERVED (c) Investments. The Seller hereby covenants that it will not without the prior written consent of the Majority Noteholders (which consent shall not be unreasonably conditioned, withheld or delayed), acquire or hold any indebtedness for borrowed money of another person, or any capital stock, debentures, partnership interests or other ownership interests or other securities of any Person, other than (i) the Issuer, other special purpose, bankruptcy remote limited liability companies or other special purpose, bankruptcy remote, corporations, (ii) receivables of similar type to the Aggregate Receivables, (iii) retail installment sales contracts and mortgage notes and other similar consumer debt, and (iv) investments in its subsidiaries or to acquire new subsidiaries in the consumer or commercial finance business. (d) Merger. Without the prior written consent of the Majority Noteholders (which consent shall not be unreasonably withheld or delayed) enter into any transaction of merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, wind up or dissolution), except for the merger of the Seller with and into Oakwood Acceptance Corporation, LLC, a Delaware limited liability company, as described in Section 4(r) above. (e) Bankruptcy. The Seller shall not take any action in any capacity to file any bankruptcy, reorganization or Insolvency Proceedings against the Issuer, or cause the Issuer to commence any reorganization, bankruptcy proceedings, or Insolvency Proceedings under any applicable state or federal law, including without limitation any readjustment of debt, or marshaling of assets or liabilities or similar proceedings. The Seller has not engaged in and does not expect to engage in a business for which its remaining property represents an unreasonably small capitalization. The Seller is not transferring and will not transfer any of the Aggregate Receivables with an intent to hinder, delay or defraud any Person. (f) Legal Existence. The Seller shall do or cause to be done all things necessary on its part to preserve and keep in full force and effect its existence as a corporation in the jurisdiction of its incorporation, and to maintain each of its licenses, approvals, registrations and qualifications in all jurisdictions in which its ownership or lease of property or the conduct of its business requires such licenses, approvals, registrations or qualifications; except for failures to maintain any such licenses, approvals, registrations or qualifications which, individually or in the aggregate, would not have a material adverse effect on the ability of the Seller or the Issuer to perform its obligations hereunder or under any of the other Transaction Documents. -16- (g) Compliance With Laws. The Seller shall comply in all material respects with all laws, rules and regulations and orders of any governmental authority applicable to its operation, the noncompliance with which would have a material adverse effect on the business, financial condition or results of operations of the Seller or on the ability of the Seller or the Issuer to perform their obligations hereunder or under any of the other Transaction Documents. (h) Taxes. The Seller shall pay and discharge all taxes, assessments and governmental charges or levies imposed upon the Seller or upon its income and profits, or upon any of its property or any part thereof, before the same shall become in default, provided that the Seller shall not be required to pay and discharge any such tax, assessment, charge or levy so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Seller shall have set aside on its books adequate reserves with respect to any such tax, assessment, charge or levy so contested, or so long as the failure to pay any such tax, assessment, charge or levy would not have a material adverse effect on the ability of the Seller to perform its obligations hereunder or under the REMIC Pooling Agreements. (i) Financial Statements. Oakwood Homes shall maintain its financial books and records in accordance with GAAP. The Seller shall furnish to the Issuer and the Noteholders: (i) Quarterly Statements. As soon as available and in any event within 45 days after the end of each of the first three calendar quarters of each fiscal year of Oakwood Homes, the consolidated balance sheet of Oakwood Homes and the related consolidated statements of income, shareholders' equity and cash flows, each for the period commencing at the end of the preceding fiscal year and ending with the end of such fiscal quarter, prepared in accordance with GAAP consistently applied; and (ii) Annual Statements. As soon as available and in any event within 90 days after the end of each fiscal year of Oakwood Homes, the audited consolidated balance sheets of Oakwood Homes and the related consolidated statements of income, shareholder's equity and cash flows for the fiscal year then ended, each prepared in accordance with GAAP consistently applied and reported on by a firm of nationally recognized independent public accountants. (iii) In the event the Seller prepares and distributes to third parties financial statements for any fiscal period as set forth in (i) and (ii) above, the Seller shall deliver such financial statements to the Issuer, the Noteholders and the Trustee. (j) No Change in Name or Location of Records. The Seller covenants that it shall comply with its representation in Section 4(r) hereof. (k) Separate Identity. The Seller hereby covenants and agrees to take all actions necessary to maintain the Issuer's status as a separate legal entity. The Seller conducts its business solely in its own name and all written and oral communications of the Seller are made solely in the name of the Seller. Neither the assets nor the creditworthiness of the Seller is or are generally held out as being available for the payment of any liability of the Issuer. The Seller views the Issuer as a separate legal entity. The Seller is not liable for the payment of any -17- debt of the Issuer. (l) No Liens, Etc. Against Receivables and Trust Property. The Seller hereby covenants and agrees not to create or suffer to exist (by operation of law or otherwise), any Lien upon or with respect to, any Aggregate Receivables or any of its interest therein, if any, or upon or with respect to any of its interest in any Account, or assign any right to receive income in respect thereof, except for the Lien created by the Indenture. The Seller shall immediately notify the Trustee and the Noteholders of the existence of any Lien on any Aggregate Receivables and the Seller shall defend, at the Seller's expense, the right, title and interest of each of the Issuer, the Trustee and the Noteholders in, to and under the Aggregate Receivables and Trust Estate, against all claims of third parties. (m) Amendments to REMIC Pooling Agreements. OAC, in its capacity as seller under the REMIC Pooling Agreements, hereby covenants and agrees not to amend the REMIC Pooling Agreements except for such amendments that would not have an adverse effect upon the collectibility or timing of payment of the Aggregate Receivables or the performance of its or the Issuer's obligations under the Transaction Documents or otherwise adversely affect the interest of the Noteholders, without the prior written consent of the Majority Noteholders. OAC will, within five (5) Business Days following the effectiveness of such amendments, deliver to the Trustee and the Noteholders copies of all such amendments. (n) Maintenance of Security Interest. The Seller will from time to time, at its own expense, execute and file such additional financing statements (including continuation statements) as may be necessary to ensure that at any time, the interest of the Issuer, the Trustee and the Noteholder in all of the Aggregate Receivables and the Receivables is fully protected in accordance with the UCC. (o) Losses on Accounts. To the extent that the Issuer fails to make a deposit for losses and investment expenses relating to an investment of funds in the Accounts as required pursuant to Sections 4.01 of the Indenture, the Seller shall deposit such amount to such Accounts. (p) Fidelity Bond and Errors and Omissions Insurance. The Seller shall obtain and maintain at its own expense and keep in full force and effect so long as any Notes are outstanding, a blanket fidelity bond and an errors and omissions insurance policy with one or more Qualified Insurers covering the Seller's officers and employees and other persons acting on behalf of the Seller in connection with its activities under this Agreement meeting the criteria required by the REMIC Pooling Agreement. The Seller shall cause the Trustee, on behalf of the Noteholders, to be named as a loss payee on each such fidelity bond and errors and omissions policy. Coverage of the Seller under a policy or bond obtained by an Affiliate of the Seller and providing the coverage required by this clause (p) shall satisfy the requirements of this clause (p). The Seller will promptly report in writing to the Trustee any material changes that may occur in their respective fidelity bonds, if any, and/or their respective errors and omissions insurance policies, as the case may be, and will furnish to the Trustee copies of all binders and polices or certificates evidencing that such bonds, if any, and insurance policies are in full force and effect. -18- (q) Keeping of Records and Books of Account. The Seller shall maintain accurate, complete and correct documents, books, records and other information which is reasonably necessary for the collection of all Aggregate Receivables (including, without limitation, records adequate to permit the prompt identification of each new Aggregate Receivable and all collections of, and adjustments to, each existing Aggregate Receivable). (r) Compliance with REMIC Pooling Agreements. The Seller shall not fail to comply with its obligations as the REMIC Servicer under each of the REMIC Pooling Agreements, which failure would have a material adverse effect on the interests of the Noteholders under the Indenture. SECTION 9. PROTECTION OF TRUSTEE'S SECURITY INTEREST IN TRUST ESTATE. (a) OAC shall maintain accounts and records as to each Aggregate Receivable accurately and in sufficient detail to permit the reader thereof to know at any time following reasonable prior notice delivered to OAC, the status of such Aggregate Receivable, including payments and recoveries made and payments owing. (b) OAC shall maintain its records so that, from and after the time of the granting of the security interest under the Indenture in the Receivables to the Trustee, OAC's records (including computer records any back-up archives) that refer to any Receivables indicate clearly the interest of the Trustee in such Receivables and that the Receivable is held by the Trustee on behalf of the Noteholders. Indication of the Trustee's interest in a Receivable shall be deleted from or modified on OAC's records when, and only when, the Receivable has been paid in full or released from the lien of the Indenture pursuant to the Indenture. (c) If at any time the Issuer or OAC proposes to assign, convey, grant a security interest in, or otherwise transfer any interest in receivables to any prospective purchaser, lender or other transferee, OAC shall give to such prospective acquirer, lender or other transferee computer tapes, records or print-outs (including any restored from back-up archives) that, if they refer in any manner whatsoever to any Receivable, indicate clearly that such Receivable is subject to a security interest in favor of the Trustee unless such Receivable has been paid in full, acquired or assigned pursuant to the Indenture. SECTION 10. INDEMNIFICATION. (a) Without limiting any other rights that an Indemnified Party (as defined herein) may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts which may be imposed on, incurred by or asserted against an Indemnified Party in any way arising out of or relating to any breach of the Seller's obligations under this Agreement or the ownership of the Aggregate Receivables or in respect of any Aggregate Receivable, excluding, however, Indemnified Amounts to the extent resulting from (x)the gross negligence or willful misconduct on the part of such Indemnified Party or (y) the failure of the applicable REMIC Trust to generate sufficient cash flow to pay its Aggregate Receivables. (b) Without limiting or being limited by the foregoing, the Seller shall pay on demand to each Indemnified Party any and all amounts necessary to indemnify such Indemnified -19- Party from and against any and all Indemnified Amounts relating to or resulting from: (i) reliance on any representation or warranty made by the Seller under or in connection with this Agreement (except with respect to an Aggregate Receivable, as to which the Issuer's remedies are set forth in Sections 5 and 6 hereof), any other Transaction Document, any report or any other information delivered by the Seller pursuant hereto, which shall have been incorrect in any material respect when made or deemed made or delivered; (ii) the failure by the Seller to comply with any term, provision or covenant contained in this Agreement, or any agreement executed by it in connection with this Agreement or any other Transaction Document or with any applicable law, rule or regulation with respect to any Aggregate Receivable, or the nonconformity of any Aggregate Receivable with any such applicable law, rule or regulation; or (iii) the failure to vest and maintain vested in the Issuer, or to transfer, to the Issuer, legal and equitable title to and ownership of the Aggregate Receivables which are, or are purported to be, Receivables, together with all collections in respect thereof, free and clear of any adverse claim (except as permitted hereunder) whether existing at the time of the transfer of such Aggregate Receivable or at any time thereafter. (c) Any Indemnified Amounts subject to the indemnification provisions of this Section 10 shall be paid to the Indemnified Party within five (5) Business Days following demand therefor. "Indemnified Party" means any of the Issuer, the Trustee and the Noteholders. "Indemnified Amounts" means any and all claims, losses, liabilities, obligations, damages, penalties, actions, judgments, suits, and related reasonable costs and reasonable expenses of any nature whatsoever, including reasonable attorneys' fees and disbursements, incurred by an Indemnified Party with respect to this Agreement as a result of a breach by the Seller as described in Section 10(a), including without limitation, the enforcement hereof. (d) Promptly after an Indemnified Party shall have been served with the summons or other first legal process or shall have received written notice of the threat of a claim in respect of which an indemnity may be claimed against the Seller under this Section 10, the Indemnified Party shall notify the Seller in writing of the service of such summons, other legal process or written notice, giving information therein as to the nature and basis of the claim, but failure so to notify the Seller shall not relieve the Seller from any liability which it may have hereunder or otherwise except to the extent that the Seller is prejudiced by such failure so to notify the Seller. The Seller will be entitled, at its own expense, to participate in the defense of any such claim or action and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, and, after notice from the Seller to such Indemnified Party to assume the defense of any such action, the Seller will not be liable to such Indemnified Party under this Section 10 for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense of any such action unless, (i) the defendants in any such action include both the Indemnified Party and the Seller, and the Indemnified Party (upon the advice of counsel) shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Seller, or one or more Indemnified Parties, and which in the reasonable judgment of such -20- counsel are sufficient to create a conflict of interest for the same counsel to represent both the Seller and such Indemnified Party, (ii) the Seller shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action, or (iii) the Seller has authorized the employment of counsel for the Indemnified Party at the expense of the Seller; then, in any such event, described in clauses (i), (ii) and (iii) of this Section 10(d), such Indemnified Party shall have the right to employ its own counsel in such action, and in such event the reasonable fees and expenses of such counsel shall be borne by the Seller; provided, however, that the Seller shall not in connection with any such action or separate but substantially similar or related actions 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 all Indemnified Parties. Each Indemnified Party, as a condition of the indemnity agreement contained herein, shall use its commercially reasonable efforts to cooperate with the Seller in the defense of any such action or claim. The Seller shall not, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding or threatened proceeding. SECTION 11. MISCELLANEOUS. (a) This Agreement may not be amended except by an instrument in writing signed by the Seller and the Issuer. In addition, so long as the Notes are outstanding, this Agreement may not be amended without the prior written consent of the Majority Noteholders. Any such amendment requested by Seller shall be at the expense of the Seller. (b) The covenants, agreements, rights and obligations contained in this Agreement shall be binding upon the successors and assigns of the Seller and shall inure to the benefit of the successors and assigns of the Issuer, and all persons claiming by, through or under the Issuer. (c) Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. (d) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the conflicts of laws provisions thereof. (e) This Agreement may be executed in several counterparts and all so executed shall constitute one agreement binding on all parties hereto, notwithstanding that all the parties have not signed the original or the same counterpart. Any counterpart hereof signed by a party against whom enforcement of this Agreement is sought shall be admissible into evidence as an original hereof to prove the contents thereof. -21- (f) Notwithstanding anything to the contrary contained in this Agreement, the representations and warranties identified in Sections 4(aa)(xv) through 4(aa)(xix), inclusive, shall survive the termination of the Indenture. -22- IN WITNESS WHEREOF, the parties hereto have caused this Receivables Contribution Agreement to be duly executed as of the date first above written. OAKWOOD ACCEPTANCE CORPORATION, as Seller By: /s/ Douglas R. Muir ---------------------------------------- Name: Douglas R. Muir Title: Vice President OAKWOOD ADVANCE RECEIVABLES COMPANY, L.L.C., as Issuer By: /s/ Dennis Hazelrigg ---------------------------------------- Name: Dennis Hazelrigg Title: President Signature Page for Receivables Contribution Agreement -23- [Schedules and Exhibits Omitted.] -----END PRIVACY-ENHANCED MESSAGE-----