<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20594
--------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994 Commission File Number 1-7543
--------------------
FINOVA CAPITAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 94-1278569
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1850 North Central Ave., P. O. Box 2209
Phoenix, AZ 85002-2209
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code - 602-207-4900
--------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- --------------------
$175,000,000 Principal Amount of New York Stock Exchange
9-1/8% Notes Due February 27, 2002
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes____X______ No__________
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Registration S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, if definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. /X/
As of March 13, 1995, 25,000 shares of Common Stock ($1.00 par value) were
outstanding and were held by an affiliate.
Registrant meets the conditions set forth in General Instruction J(1)(a) and (b)
of Form 10-K and is therefore filing this Form with the reduced disclosure
format.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Part Where
Document Incorporated
- -------- ------------
<S> <C>
1. Prospectuses and Prospectus Supplements dated February 14,
1994 filed pursuant to SEC rule 424(b) for $100,000,000
of the Company's Floating-Rate Notes and $250,000,000
of Medium-Term Notes, respectively I
</TABLE>
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item # Name of Item Page
- ------- ------------ ----
<S> <C> <C>
PART I
Item 1 Business:
Introduction 1
General 1
Lines of Business 2
Portfolio Composition 4
Investment in Financing Transactions 5
Cost and Utilization of Borrowed Funds 10
Credit Ratings 11
Residual Realization Experience 11
Business Development and Competition 12
Credit Quality 13
Risk Management 13
Portfolio Management 14
Delinquencies and Workouts 14
Governmental Regulation 15
Employees 15
Item 2 Properties 15
Item 3 Legal Proceedings 15
Item 4 Submission of Matters to a Vote of Security Holders 16
PART II
Item 5 Market Price of and Dividends on the Registrant's
Common Equity & Related Stockholder Matters 16
Item 6 Selected Financial Data 16
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 8 Financial Statements & Supplementary Data 16
Item 9 Changes in and Disagreements with Accountants
on Accounting & Financial Disclosure 16
PART III
Item 10 Directors & Executive Officers of the Registrant 16
Item 11 Executive Compensation 16
Item 12 Security Ownership of Certain Beneficial Owners &
Management 16
Item 13 Certain Relationships & Related Transactions 16
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 16
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS.
INTRODUCTION
The following discussion relates to FINOVA Capital Corporation (formerly
known as Greyhound Financial Corporation) and its subsidiaries (collectively,
"FINOVA" or the "Company"), including Ambassador Factors ("Ambassador") acquired
on February 14, 1994 and TriCon Capital ("TriCon") acquired on April 30, 1994.
Both Ambassador and TriCon were merged into FINOVA in 1994. Recognizing the
substantial increase in the Company's size and scope of operations and its use
of several names in its operations, Greyhound Financial Corporation changed its
name to FINOVA Capital Corporation, a wholly owned subsidiary of The FINOVA
Group Inc. ("FINOVA Group") (formerly known as GFC Financial Corporation). Both
name changes were effective February 1, 1995.
FINOVA Group is the successor to the former financial services
businesses of The Dial Corp ("Dial"). On March 18, 1992, Dial consummated the
spin-off (the "Spin-Off") of FINOVA Group by distributing one share of FINOVA
Group's common stock (the "shares") for every two shares of Dial common stock
held by each stockholder. Prior to the Spin-Off, Dial contributed its 100%
interest in Greyhound European Financial Group ("GEFG"), Dial's European
commercial and consumer finance businesses not previously managed by the Company
and Greyhound BID Holding Corp. ("Greyhound BID") to the Company and contributed
all of the common stock of the Company to FINOVA Group.
The historical consolidated financial statements of FINOVA have been
retroactively restated to include the accounts and results of operations of GEFG
and Greyhound BID for all periods presented as if a pooling of interests of
companies under common control occurred. All intercompany accounts and
transactions have been eliminated from the consolidated financial statements.
GENERAL
FINOVA is a financial services company primarily engaged in providing
collateralized financing and leasing products to commercial enterprises in
focused market niches, principally in the United States. FINOVA was incorporated
in 1965 in Delaware and is the successor to a California corporation that
commenced operations in 1954. FINOVA has conducted business continuously since
that time. Foreign financial services are provided primarily in the United
Kingdom, where GEFG has provided such services since 1964. Domestic and foreign
financial operations prior to the Spin-Off had been conducted independently of
each other for many years. Following the Spin-Off, they have been conducted as a
consolidated enterprise; however, following the Spin-Off, FINOVA announced its
intention to phase out the London based financing operations of GEFG. This phase
out is expected to be substantially completed by the end of 1996.
FINOVA extends revolving credit facilities, term loans and equipment and
real estate financing to "middle-market" businesses with financing needs falling
generally between $500,000 to $35 million. FINOVA also offers sales financing
programs to manufacturers, distributors, vendors and franchisors which
facilitate sales of their products to customers. FINOVA currently operates in 15
specific industry or market niches in which its expertise in evaluating the
creditworthiness of prospective customers and its ability to provide value-added
services enables it to differentiate itself
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from its competitors and to command product pricing which provides a
satisfactory spread over the Company's borrowing costs.
The Company seeks to maintain a high quality portfolio and to minimize
nonearning assets and write-offs by using clearly defined underwriting criteria,
stringent portfolio management techniques and by diversifying its lending
activities geographically and among a range of industries, customers and loan
products. Because of the diversity of the Company's portfolio, the Company
believes it is better able to manage competitive changes in its markets and to
withstand the impact of deteriorating economic conditions on a regional or
national basis, although there can be no assurance that competitive changes or
economic conditions will not result in an adverse impact on the Company's
results of operations or financial condition.
FINOVA generates interest and other income through charges assessed on
outstanding loans, loan servicing, leasing and other fees. FINOVA's primary
expenses are the costs of funding its loan and lease business (including
interest paid on debt), provisions for possible credit losses, marketing
expenses, salaries and employee benefits, servicing and other operating expenses
and income taxes.
LINES OF BUSINESS
FINOVA's activities currently include the following principal lines of
business:
+ Corporate Finance. FINOVA Corporate Finance (which includes the
asset based lending activity acquired in February 1993 from
U.S. Bancorp) provides financing, generally in the range of $3
million to $35 million, focusing on middle market businesses
nationally, including distribution, wholesale, specialty
retail, manufacturing and services industries. The group's
lending is primarily in the form of revolving credit facilities
and term loans secured by the assets of the borrower, with
significant emphasis on the borrower's cash flow as the source
of repayment of the secured loan.
+ Transportation Finance. FINOVA Transportation Finance
structures secured financings for specialized areas of the
transportation industry, principally involving domestic and
foreign used aircraft, as well as domestic short-line railroads
including new and used rail equipment. Typical transactions
involve financing up to 80% of the fair market value of used
equipment in the $3 million to $30 million range. Traditionally
focused on the domestic marketplace, FINOVA Transportation
Finance has been active in international aircraft lending and
leasing since 1992 through GEFG's operations in London,
England.
+ Communications Finance. FINOVA Communications Finance
specializes in radio and television financing. Other markets
include cable television, print and outdoor media services in
the United States. FINOVA extends secured loans to
communications businesses requiring funds for
recapitalizations, refinancings or acquisitions. Loan sizes
generally are from $3 million to $35 million.
+ Commercial Real Estate Finance. FINOVA Commercial Real Estate
Finance provides cash-flow-based financing primarily for
acquisitions and refinancings to experienced real estate
developers and owner/occupants of income-producing properties
in the United States. FINOVA concentrates on secured financing
2
<PAGE> 5
opportunities, generally between $3 million and $30 million,
involving senior mortgage term loans on owner-occupied
commercial real estate. FINOVA's portfolio of real estate
leveraged leases is also managed as part of the commercial real
estate portfolio.
+ Resort Finance. FINOVA Resort Finance focuses on successful,
experienced resort developers, primarily of timeshare resorts,
second home resort communities, golf resorts and resort hotels.
Extending funds through a variety of lending options, FINOVA
Resort Finance provides loans and lines of credit ranging from
$3 million to $30 million for construction, acquisitions,
receivables financing and purchases and other uses. Through
FINOVA Portfolio Services, Inc., FINOVA Resort Finance offers
expanded convenience and service to its customers. Professional
receivables collections and cash management give developers the
ability of having loan-related administrative functions
performed for them by FINOVA.
+ Rediscount Finance. FINOVA Rediscount Finance offers $1
million to $35 million revolving credit lines to regional
consumer finance companies, which in turn extend credit to
consumers. FINOVA's customers provide credit to consumers to
finance home improvements, automobile purchases, insurance
premiums and a variety of other financial needs.
+ Factoring Services. On February 14, 1994, FINOVA purchased
Ambassador from Fleet Financial Group, Inc. FINOVA Factoring
Services provides full service factoring and accounts
receivable management services for entrepreneurial and larger
firms in the textile and apparel industries who generate an
average annual factored volume between $5 million and $25
million.
+ Commercial Finance. FINOVA Commercial Finance offers
collateral-oriented revolving credit facilities and term loans
for manufacturers, distributors, wholesalers and service
companies. Typical transaction sizes range from $500,000 to $3
million.
TriCon was an indirect wholly-owned subsidiary of Bell Atlantic
Corporation ("Bell Atlantic"). The acquisition of TriCon expanded the
Company's activities from eight to fifteen principal lines of business:
+ Medical Finance. FINOVA Medical Finance offers a full range
of equipment and real estate financing and asset management
services for the U.S. health care industry, targeting the top
2,400 health care providers in the United States. Transaction
sizes typically range from $500,000 to $25 million.
+ Commercial Equipment Finance. FINOVA Commercial Equipment
Finance offers equipment leases, loans and "turnkey" financing
to the supermarket, manufacturing, packaging and general
aviation industries. Typical transaction sizes are $500,000 to
$15 million.
+ Government Finance. FINOVA Government Finance provides
primarily tax-exempt financing to state and local governments
and non-profit corporations. Typical transaction sizes range
from $100,000 to $5 million.
3
<PAGE> 6
+ Manufacturer and Dealer Services. FINOVA Manufacturer and
Dealer Services provides point-of-sale financing programs and
support services for regional and national manufacturers,
distributors and vendors of equipment classified as "small
ticket" in transaction size (generally transactions with an
equipment cost of less than $100,000). The equipment which
FINOVA leases to the ultimate end-user is typically sold to
FINOVA by the vendor participating in the financing program.
+ Franchise Finance. FINOVA Franchise Finance offers equipment,
real estate and acquisition financing programs for operators of
established franchise concepts. The equipment which FINOVA
leases to the ultimate end-user is typically purchased by
FINOVA from the equipment manufacturer, vendor or dealer
selected by the end-user. Typical transaction sizes range from
$500,000 to $15 million.
+ Inventory Finance. FINOVA Inventory Finance provides inventory
financing, combined inventory/accounts receivable lines of
credit and purchase order financing for equipment distributors,
value-added resellers and dealers. Transaction sizes generally
range from $1 million to $35 million.
+ Capital Services. FINOVA Capital Services focuses on the
management and origination of highly structured financing of
"large ticket" commercial equipment (generally transactions
involving the sale or lease of equipment with a cost in excess
of $15 million) primarily leveraged leases for major
corporations. The equipment which FINOVA leases to its
customers is typically purchased from an equipment
manufacturer, vendor or dealer selected by the customer. This
group focuses on investments generally ranging from $5 million
to $25 million.
PORTFOLIO COMPOSITION
The total assets under the management of the Company consist of
the Company's net investment in financing contracts plus certain assets
that are owned by others but managed by the Company and are not
reflected on the Company's balance sheet ("securitized assets"). At
December 31, 1994, the net investment in financing transactions was
approximately $5,667,644,000 and securitized assets totaled $253,386,000
resulting in total managed assets of $5,921,030,000.
The Company's investment in financing transactions is primarily
settled in U.S. dollars, except for approximately $87,000,000,
$100,000,000 and $128,000,000 at December 31, 1994, 1993 and 1992,
respectively, which is primarily due in British pounds. The exchange
rate of British pounds to dollars at December 31, 1994, 1993 and 1992
was 1.57:1, 1.48:1 and 1.52:1, respectively.
INVESTMENT IN FINANCING TRANSACTIONS
At December 31, 1994, 1993, 1992, 1991 and 1990, FINOVA's investment in
financing transactions (before reserve for possible credit losses) was
$5,667,644,000, $2,846,571,000, $2,485,844,000, $2,281,872,000 and
$2,198,441,000, respectively, and consisted of the following:
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<PAGE> 7
INVESTMENT IN FINANCING TRANSACTIONS
BY TYPES OF FINANCING
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------------------
1994 % 1993 % 1992 % 1991 % 1990 %
---------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, conditional sales and
other financing contracts:
Commercial $2,797,160 49.4 $1,397,863 49.1 $1,085,502 43.7 $ 967,693 42.4 $1,046,333 47.6
Real estate 1,237,488 21.8 945,892 33.2 891,190 35.8 772,285 33.9 619,414 28.2
Direct financing leases 774,834 13.6 71,812 2.5 138,871 5.6 201,327 8.8 246,756 11.2
Operating leases 412,782 7.3 147,222 5.2 100,911 4.1 75,204 3.3 10,303 0.5
Leveraged leases 287,518 5.1 283,782 10.0 269,370 10.8 265,363 11.6 275,635 12.5
Factored receivables 157,862 2.8
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
$5,667,644 100.0 $2,846,571 100.0 $2,485,844 100.0 $2,281,872 100.0 $2,198,441 100.0
========== ===== ========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
DECEMBER 31, 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
Revenue Accruing Nonaccruing
--------------------------------- ------------------------------
Repos-
sessed 90 Days Repos- Total
Original Rewritten Assets Delin- sessed Carrying
Rate Contracts (3) quent Assets Other Amount %
--------------------------------- ------------------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Finance $ 746,671 $21,275 $ $ 3,581 $ 6,045 $ $ 777,572 13.8
Commercial Real Estate Finance 672,522 7,237 40,510 994 28,147 749,410 13.2
Transportation Finance (1) 706,242 14,620 720,862 12.7
Resort Finance 634,735 4,506 7,314 32,975 679,530 12.0
Communications Finance 551,218 6,288 7,282 6,593 16,647 671 588,699 10.4
Medical Finance 470,717 1,719 472,436 8.3
Manufacturer and Dealer
Services (5) 301,251 113 19,715 321,079 5.7
Commercial Equipment Finance 293,609 769 7,589 301,967 5.3
Franchise Finance 281,890 7,632 12,242 301,764 5.3
Commercial Finance 181,741 10,061 1,942 193,744 3.4
Factoring Services 157,090 772 157,862 2.8
European Financial Group (2) 93,700 1,561 9,065 2 104,328 1.8
Rediscount Finance 99,353 99,353 1.8
Government Finance 93,491 144 93,635 1.7
Inventory Finance 58,595 642 59,237 1.0
Other 36,951 8,918 297 46,166 0.8
---------- ------- ------- ------- ------- ---- ---------- -----
TOTAL (4) $5,379,776 $64,001 $55,106 $82,035 $85,758 $968 $5,667,644 100.0
========== ======= ======= ======= ======= ==== ========== =====
</TABLE>
- --------------------
NOTES:
(1) Transportation Finance includes $66.9 million of new aircraft finance
business booked through the London office.
(2) European Financial Group balance includes transactions in Europe and
other continents (including the U.S.) originated from the Company's
London office, including Transportation Finance transactions prior to
July 1, 1993. Also, European Financial Group includes $39.2 million of
Consumer Finance assets, of which $4.8 million are nonaccruing. Consumer
Finance accounts are generally considered nonaccruing after being 180
days delinquent.
(3) The Company earned income totaling $3.3 million on repossessed assets
during 1994, including $2.0 million in Commercial Real Estate Finance,
$0.8 million in Communications Finance and $0.5 million in Resort
Finance.
(4) Excludes $253.4 million of assets securitized which the Company manages.
(5) Manufacturer and Dealer Services accounts are generally considered
nonaccruing after being 120 days delinquent.
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INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
DECEMBER 31, 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
Revenue Accruing Nonaccruing
--------------------------------- -----------------------------
Repos-
sessed 90 Days Repos- Total
Original Rewritten Assets Delin- sessed Carrying
Rate Contracts (4) quent Assets Other Amount %
--------------------------------- ----------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Finance (1) $ 397,779 $27,921 $ $ 2,277 $ 7,428 $386 $ 435,791 15.3
Commercial Real Estate
Finance (1) $ 500,598 $ 1,574 $27,844 $ 1,055 $25,542 $ 556,613 19.6
Transportation Finance (1)(2) 604,416 841 605,257 21.2
Resort Finance 530,617 4,869 12,163 19,001 440 567,090 19.9
Communications Finance 487,890 7,989 8,949 8,264 25,030 538,122 18.9
European Financial Group (3) 107,486 4,430 12,320 23 124,259 4.4
Rediscount Finance 19,439 19,439 0.7
---------- ------- ------- ------- ------- ---- ---------- -----
$2,648,225 $46,783 $48,956 $24,757 $77,024 $826 $2,846,571 100.0
========== ======= ======= ======= ======= ==== ========== =====
</TABLE>
- --------------------
NOTES:
(1) Reclassifications (effective January 1, 1993): Approximately $169
million of accruing assets were reclassified from Corporate Finance with
$163 million going to Transportation Finance because they primarily
represented aircraft financing and $6 million to Commercial Real Estate
Finance. Additionally, $6.5 million of nonaccruing assets ($5.1 million
classified as repossessed assets and $1.4 million classified as 90 days
delinquent) were reclassified from Corporate Finance to Commercial Real
Estate Finance.
(2) Transportation Finance included $31.9 million of new aircraft finance
business booked through the London office.
(3) The European Financial Group balance included transactions in Europe and
other continents (including the U.S.) originated from the Company's
London office, including Transportation Finance transactions prior to
July 1, 1993. Also, European Financial Group included $45.3 million of
Consumer Finance assets, of which $9.6 million were nonaccruing.
Consumer Finance accounts are generally considered nonaccruing after
being 180 days delinquent.
(4) The Company earned income totaling $2.7 million on repossessed accruing
assets during 1993, including $1.5 million in Commercial Real Estate
Finance, $0.6 million in Communications Finance and $0.6 million in
Resort Finance.
--------------------
INVESTMENT IN FINANCING TRANSACTIONS
BY LINES OF BUSINESS
DECEMBER 31, 1992
(Dollars in Thousands)
<TABLE>
<CAPTION>
Revenue Accruing Nonaccruing
--------------------------------- ----------------------------
Repos-
sessed 90 Days Repos- Total
Original Rewritten Assets Delin- sessed Carrying
Rate Contracts (3) quent Assets Other Amount %
--------------------------------- ---------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Finance (1) $ 477,327 $16,081 $ $ 7,820 $11,808 $ 530 $ 513,566 20.7
Commercial Real Estate Finance 463,571 12,482 21,509 6,302 15,052 518,916 20.9
Transportation Finance 328,962 328,962 13.2
Resort Finance 488,224 1,356 13,889 635 504,104 20.3
Communications Finance 382,914 32,548 8,744 13,182 437,388 17.6
European Financial Group (2) 154,609 5,839 22,400 60 182,908 7.3
---------- ------- ------- ------- ------- ------ ---------- -----
$2,295,607 $68,306 $21,509 $45,266 $53,991 $1,165 $2,485,844 100.0
========== ======= ======= ======= ======= ====== ========== =====
</TABLE>
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NOTES:
(1) Included $5.1 million of public sector Latin American loans that were
written-down to estimated market value. During 1992, FINOVA successfully
liquidated 72% of the face value of public sector Latin American loans
at favorable market prices, which were approximately $3.1 million in
excess of the carrying amount.
(2) The European Financial Group balance included transactions in Europe and
other countries (including the U.S.) originated from the Company's
London office, including Transportation Finance transactions prior to
July 1, 1993. European Financial Group included $57.8 million of
Consumer Finance assets, of which $16.4 million were nonaccruing.
Consumer Finance accounts are generally considered nonaccruing after
being 180 days delinquent.
(3) The Company earned income of $1.9 million on repossessed accruing assets
in Commercial Real Estate Finance during 1992.
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INVESTMENT IN FINANCING TRANSACTIONS
BY LINES OF BUSINESS
DECEMBER 31, 1991
(Dollars in Thousands)
<TABLE>
<CAPTION>
Revenue Accruing Nonaccruing
----------------------- -----------------------------------
Total
Original Rewritten 90 Days Repossessed Carrying
Terms Contracts Delinquent Assets Other Amount %
----------------------- ----------------------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Corporate Finance $ 429,053 $14,594 $ 7,386 $ $3,694 $ 454,727 19.9
Commercial Real Estate Finance 431,097 15,734 10,504 20,002 477,337 20.9
Transportation Finance 223,803 223,803 9.8
Resort Finance 430,113 1,511 7,317 1,056 439,997 19.3
Communications Finance 321,918 12,340 16,636 350,894 15.4
European Financial Group (1) 263,995 5,095 43,875 826 313,791 13.8
Latin America (2) 21,323 21,323 0.9
---------- ------- ------- ------- ------ ---------- -----
$2,121,302 $49,274 $78,401 $28,145 $4,750 $2,281,872 100.0
========== ======= ======= ======= ====== ========== =====
</TABLE>
- --------------------
NOTES:
(1) The European Financial Group balance included transactions in Europe and
other continents (including the U.S.) originated from the Company's
London office, including Transportation Finance transactions prior to
July 1, 1993. Also, European Financial Group included $94.3 million of
Consumer Finance assets of which $31.9 million were nonaccruing.
Consumer Finance accounts are generally considered nonaccruing after
being 180 days delinquent.
(2) Included $15.5 million of Latin American loans written-down to market
value.
--------------------
INVESTMENT IN FINANCING TRANSACTIONS
BY LINES OF BUSINESS
DECEMBER 31, 1990
(Dollars in Thousands)
<TABLE>
<CAPTION>
Revenue Accruing Nonaccruing
----------------------- -----------------------------------
Total
Original Rewritten 90 Days Repossessed Carrying
Terms Contracts Delinquent Assets Other Amount %
----------------------- ----------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Corporate Finance $ 478,456 $ 2,833 $ 4,345 $ 968 $ 4,511 $ 491,113 22.4
Commercial Real Estate Finance 408,201 13,713 14,312 11,942 6,605 454,773 20.7
Transportation Finance 167,988 167,988 7.6
Resort Finance 374,698 215 94 378 1,247 376,632 17.2
Communications Finance 253,519 11,464 6,222 3,866 275,071 12.5
European Financial Group (1) 308,566 7,720 39,776 2,611 358,673 16.2
Latin America 7,549 66,642 74,191 3.4
---------- ------- ------- ------- ------- ---------- -----
$1,998,977 $35,945 $64,749 $15,899 $82,871 $2,198,441 100.0
========== ======= ======= ======= ======= ========== =====
</TABLE>
- --------------------
NOTE:
(1) The European Financial Group balance included transactions in Europe and
other continents (including the U.S.) originated from the Company's
London office, including Transportation Finance transactions prior to
July 1, 1993. Also, European Financial Group included $120.0 million of
Consumer Finance assets of which $32.0 million were nonaccruing.
Consumer Finance accounts are generally considered nonaccruing after
being 180 days delinquent.
--------------------
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<PAGE> 10
The Company's geographic portfolio diversification at December 31, 1994
is as follows:
<TABLE>
<CAPTION>
State Total Percent
----- ----- -------
<S> <C> <C>
California $ 840,556 14.8%
Texas 521,655 9.2%
Florida 317,715 5.6%
New York 314,959 5.6%
Michigan 226,367 4.0%
Pennsylvania 224,347 4.0%
New Jersey 204,824 3.6%
Arizona 170,041 3.0%
Illinois 162,798 2.9%
Nevada 157,639 2.8%
Virginia 119,320 2.1%
Georgia 116,783 2.0%
Washington 111,668 2.0%
Other (1) 2,178,972 38.4%
---------- -----
$5,667,644 100.0%
========== =====
</TABLE>
- --------------------
NOTE:
(1) Other includes all other states which, on an individual basis, represent
less than 2% of the total and international, which represents
approximately 5% of the total.
--------------------
An analysis of nonaccruing contracts and repossessed assets at December
31 of each year shown is as follows:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Nonaccruing contracts:
Domestic $ 73,938 $ 13,263 $ 24,031 $ 39,276 $ 41,201
Foreign 9,065 12,320 22,400 43,875 39,777
-------- -------- -------- -------- --------
83,003 25,583 46,431 83,151 80,978
-------- -------- -------- -------- --------
Latin America:
Brazil 22,775
Ecuador 40,487
Other 3,380
-------- -------- -------- -------- --------
66,642
-------- -------- -------- -------- --------
Total nonaccruing contracts 83,003 25,583 46,431 83,151 147,620
-------- -------- -------- -------- --------
Repossessed assets:
Domestic 85,756 77,001 53,931 27,319 13,288
Foreign 2 23 60 826 2,611
Latin America
-------- -------- -------- -------- --------
Total repossessed assets 85,758 77,024 53,991 28,145 15,899
-------- -------- -------- -------- --------
Total nonaccruing contracts
and repossessed assets $168,761 $102,607 $100,422 $111,296 $163,519
======== ======== ======== ======== ========
Nonaccruing contracts and repossessed
assets as a percentage of investment
in financing transactions and
securitizations 2.9% 3.6% 4.0% 4.9% 7.4%
======== ======== ======== ======== ========
</TABLE>
In addition to the repossessed assets in the above table, FINOVA had
repossessed assets, with a total carrying amount of $55.1 million, $49.0 million
and $21.5 million at December 31, 1994, 1993 and 1992, respectively, which
earned income of $3.3 million, $2.7 million and $1.9 million during 1994, 1993
and 1992, respectively.
8
<PAGE> 11
The following is an analysis of the reserve for possible credit losses
for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance, beginning of year $ 64,280 $69,291 $87,600 $77,098 $72,636
Provision for possible credit
losses (1) 16,670 5,706 6,740 77,687 10,529
Write-offs (1) (35,127) (12,575) (23,661) (68,346) (7,862)
Recoveries 1,898 717 749 663 1,247
Other (2) 61,524 1,141 (2,137) 498 548
-------- -------- -------- -------- -------
Balance, end of year $109,245 $64,280 $69,291 $87,600 $77,098
======== ======== ======== ======== =======
</TABLE>
- -------------------
NOTES:
(1) In 1991, the Company recorded a special provision for possible credit
losses of $65 million and recorded a $47.8 million write-down of Latin
American assets and recorded write-offs of $15 million in the foreign
operations (GEFG) portfolio.
(2) Includes reserves for possible credit losses acquired with TriCon and
Ambassador in 1994.
--------------------
Additionally, the Company has accrued liabilities of $12,998,000 at
December 31, 1994 representing reserves for estimated losses under certain
recourse provisions on $253,386,000 of assets securitized.
FINOVA does not allocate a dollar amount of its reserve for possible
credit losses to specific categories of loans and financing contracts. Upon
adoption of Statement of Financial Accounting Standards ("SFAS") Nos. 114 and
118, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114") and
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" ("SFAS 118"), in the first quarter of 1995, a specific reserve for
possible credit losses will be allocated to impaired loans in the amount equal
to the total impairment on such loans. Adoption of SFAS 114 and SFAS 118 is not
expected to have a material impact on the Company's financial position or
results of operations.
9
<PAGE> 12
Write-offs by line of business, experienced by the Company during the
years ended December 31, are as follows:
WRITE-OFFS BY LINE OF BUSINESS
(Dollars in Thousands)
<TABLE>
<CAPTION>
TOTAL
------------------------------------------------------
1994 1993 1992 1991 1990
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Communications Finance $ 8,300 $ 1,488 $ 1,500 $ 1,200 $
Manufacturer and Dealer Services (1) 7,018
European Financial Group 5,140 5,026 15,838 15,593 1,748
Corporate Finance 4,233 3,741 1,000 668 2,890
Resort Finance 2,730 330
Franchise Finance (1) 2,247
Commercial Real Estate Finance 1,461 2,320 4,417 2,204 1,976
Commercial Equipment Finance (1) 1,257
Factoring Services (1) 1,148
Commercial Finance (1) 774
Inventory Finance (1) 442
Medical Finance (1) 377
Latin America 47,759 419
Other 906 592 829
------- ------- ------- ------- ------
$35,127 $12,575 $23,661 $68,346 $7,862
======= ======= ======= ======= ======
Write-offs as a percentage
of ending investments in
financing transactions and
securitizations 0.59% 0.44% 0.95% 3.00% 0.36%
======= ======= ======= ======= ======
</TABLE>
- --------------------
NOTES:
(1) These Lines of Business were not part of the Company's portfolio prior
to 1994.
(2) In the fourth quarter of 1991, the Company recorded a special provision
for possible credit losses of $65.0 million and recorded write-offs of
$15.0 million related to nonearning assets in the GEFG (foreign)
portfolio and a $47.8 million write-down to reduce Latin American assets
to current market value.
--------------------
A further breakdown of the portfolio by line of business can be found in
Note B of Notes to Consolidated Financial Statements in Annex A.
COST AND UTILIZATION OF BORROWED FUNDS
FINOVA relies on borrowed funds as well as internal cash flow to finance
its operations. FINOVA follows a policy of relating provisions under its loans
and leases to the terms on which it obtains funds so that, to the extent
feasible, floating-rate assets are funded with floating-rate borrowings and
fixed-rate assets are funded with fixed-rate borrowings. For further discussion
on FINOVA's debt and matched funding policy, see Notes D and E of Notes to
Consolidated Financial Statements included in Annex A.
The following table reflects the approximate average pre-tax effective
cost of borrowed funds and pre-tax equivalent rate earned on accruing assets for
FINOVA for each of the periods listed:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1994 1993 1992 1991 1990
------------------------------------
<S> <C> <C> <C> <C> <C>
Short-term and variable rate long-term debt (1) 5.5% 4.7% 5.3% 8.1% 10.2%
Fixed-rate long-term debt (1) 8.1% 11.4% 10.6% 10.9% 11.4%
Aggregate borrowed funds (1) 6.3% 6.3% 7.2% 9.3% 10.8%
Rate earned on average earning assets (2) (3) 11.6% 10.8% 11.9% 13.6% 15.7%
Spread percentage (4) 6.0% 5.4% 5.1% 4.9% 5.0%
</TABLE>
- --------------------
NOTES:
(1) Includes the effect of interest rate swap agreements.
(2) Earning assets are net of average nonaccruing assets and average
deferred taxes applicable to leveraged leases.
(3) Earnings are net of depreciation and include gains on sale of assets
excluding gains on securitizations.
(4) Spread percentages represent interest margins earned as a percentage of
average earning assets.
--------------------
10
<PAGE> 13
The effective costs presented above include costs of commitment fees and
related borrowing costs and do not purport to predict the costs of funds in the
future.
For further information on FINOVA's cost of funds, refer to Note D of
the Notes to Consolidated Financial Statements included in Annex A.
Following are the ratios of income to combined fixed charges and
preferred stock dividends ("ratio") for each of the past five years:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1.54 1.46 1.34 -- 1.23
==== ==== ==== ==== ====
</TABLE>
Variations in interest rates generally do not have a substantial impact
on the ratio because fixed-rate and floating-rate assets are generally matched
with liabilities of similar rate and term.
Income available for fixed charges, for purposes of the computation of
the ratio of income to combined fixed charges and preferred stock dividends,
consists of the sum of income before income taxes and fixed charges. Combined
fixed charges include interest and related debt expense and a portion of rental
expense determined to be representative of interest and preferred stock
dividends grossed up to a pre-tax basis.
For the year ended December 31, 1991, earnings were inadequate to cover
combined fixed charges by $37.0 million. The decline in the ratio in 1991 was
due to restructuring and other charges and transaction costs recorded in the
fourth quarter of 1991. Those charges and costs were recorded in connection with
the Spin-Off.
CREDIT RATINGS
FINOVA currently has investment-grade credit ratings from the following
rating agencies:
<TABLE>
<CAPTION>
Commercial Senior
Paper Debt
---------- ------
<S> <C> <C>
Duff & Phelps D1- A-
Fitch Investors Services, Inc. F1 A
Moody's Investors Service, Inc. P2 Baa2
Standard & Poor's Ratings Group A2 BBB+
</TABLE>
There can be no assurance that FINOVA's ratings will be maintained. Such
ratings can be modified at any time. A credit rating is not a recommendation to
buy, sell or hold securities. Each rating should be evaluated independently of
any other rating. Neither The FINOVA Group Inc. nor any of FINOVA's subsidiaries
have applied for credit ratings.
RESIDUAL REALIZATION EXPERIENCE
In approximately the last 40 years, FINOVA has realized, in the
aggregate, proceeds from the sale of assets upon lease terminations (other than
foreclosures) in excess of carrying amounts; however, there can be no assurance
that such results will be realized in future years. Sales proceeds upon lease
terminations in excess of carrying amounts are reported as income when the
assets are sold.
11
<PAGE> 14
Income from leasing activities is affected by gains from asset sales
upon lease termination and, hence, can be somewhat less predictable than income
from non-leasing activities. During the five years ended December 31, 1994, the
proceeds to FINOVA from sales of assets upon early termination of leases and at
the expiration of leases have exceeded the respective carrying amounts and
estimated residual values as follows:
<TABLE>
<CAPTION>
Early Terminations Terminations at End of Lease
(Notes 1, 2 ,4 and 5) Term (Note 3)
-------------------------------------------------- ----------------------------------
Proceeds
Proceeds Estimated as a % of
Carrying as a % of Residual Estimated
Sales Amount Carrying Sales Value of Residual
Year Proceeds of Assets Amount Proceeds Assets Value
-------------------------------------------------- ----------------------------------
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
1994 $ 6,477 $ 5,865 110% $30,161 $25,682 117%
1993 -- -- -- 486 248 196%
1992 20,493 17,527 117% 2,164 1,768 122%
1991 25,027 21,904 114% 10,114 6,553 154%
1990 10,854 7,127 152% 20,210 11,719 172%
</TABLE>
- --------------------
Notes:
(1) Excludes foreclosures for credit reasons which are immaterial to the
above amounts.
(2) Excludes proceeds of $3,201,000 in 1993 on assets held for sale.
(3) Excludes proceeds of $2,000,000 in 1993 received on guarantees.
(4) Excludes proceeds of $460,000 in 1990 from the disposal of warrants.
(5) Excludes gain on securitizations of $3,954,000 in 1994.
--------------------
The estimated residual value of leased assets in the accounts of FINOVA
at December 31, 1994 aggregated 28.3% of the original cost of such assets (15.3%
excluding the original costs of the assets and residuals applicable to real
estate leveraged leases, which typically have higher residuals than other
leases). The financing contracts and leases outstanding at that date had initial
terms ranging generally from one to 25 years. The average initial term weighted
by carrying amount at inception and the weighted average remaining term of
financing contracts at December 31, 1994 for financing contracts excluding
leveraged leases were 6.5 and 3.7 years, respectively, and for leveraged leases
were approximately 20 and 11 years, respectively. The comparable average initial
term and remaining term at December 31, 1993 for financing contracts excluding
leveraged leases were 7.3 and 3.7 years, respectively, and for leveraged leases
were approximately 20 and 12 years, respectively. FINOVA utilizes either
employed or outside appraisers to determine the collateral value of assets to be
leased or financed and the estimated residual or collateral value thereof at the
expiration of each lease.
For a discussion of accounting for lease transactions, refer to Notes A
and B of Notes to Consolidated Financial Statements included in Annex A.
BUSINESS DEVELOPMENT AND COMPETITION
FINOVA develops business primarily through direct solicitation by
its own sales force. Customers are also introduced by independent brokers and
referred by other financial institutions.
12
<PAGE> 15
At December 31, 1994, FINOVA had 88,034 financing contracts with 70,892
customers (including 2,313 contracts with consumer finance customers and small
ticket transactions on 79,027 contracts and 64,886 customers in FINOVA
Manufacturer and Dealer Services), compared to 3,798 financing contracts with
3,490 customers (including 2,886 contracts with consumer finance customers) at
December 31, 1993.
FINOVA is engaged in an extremely competitive activity. It competes with
banks, insurance companies, leasing companies, the credit units of equipment
manufacturers and other finance companies. Some of these competitors have
substantially greater financial resources and are able to borrow at costs below
those of FINOVA. FINOVA's principal means of competition is through a
combination of service, the interest rate charged for money and concentration in
focused market niches. The interest rate it charges for money is a function of
its borrowing costs, its operating costs and other factors. While many of
FINOVA's larger competitors are able to offer lower interest rates based upon
their lower borrowing costs, FINOVA seeks to maintain the competitiveness of the
interest rates it offers by emphasizing strict control of its operating costs.
The Company's ability to manage costs is, in part, dependent on factors beyond
the Company's control, such as the cost of funds, outside litigation expenses
and competitive salaries.
CREDIT QUALITY
As a result of the use of clearly defined underwriting standards,
portfolio management techniques, monitoring of covenant compliance and active
collections and workout departments, FINOVA seeks to maintain a high-quality
customer base.
RISK MANAGEMENT
FINOVA generally conducts investigations of its prospective customers
through a review of historical financial statements, published credit reports,
credit references, discussions with management, analysis of location
feasibility, personal visits and property inspections. In many cases, depending
upon the results of its credit investigations and the nature and type of
property involved, FINOVA obtains additional collateral or guarantees from
others.
As part of its underwriting process, FINOVA generally pays close
attention to the management, industry, financial position and level of
collateral of a proposed borrower. The purpose, term, amortization and amount of
any proposed transaction generally must be clearly defined and within
established corporate policy. In addition, underwriters attempt to avoid undue
concentrations in any one credit, industry or regional location.
+ Management. FINOVA generally considers the reputation,
experience and depth of management; quality of product or
service; adaptability to changing markets and demand; and prior
banking, finance and trade relationships.
+ Industry. FINOVA usually evaluates critical aspects of each
industry to which it lends, including the seasonality and
cyclicality of the industry; governmental regulation; the
effects of taxes; the economic value of goods or services
provided; and potential environmental liability.
+ Financial. FINOVA's review of a prospective borrower includes a
thorough analysis of the borrower's financial trends. Items
considered often include net worth; composition of assets and
liabilities; debt coverage and servicing requirements;
liquidity; sales growth and earning power; and cash flow needs
and generation.
+ Collateral. FINOVA regards collateral as an important factor in
a credit evaluation and has established maximum loan to value
ratios, normally ranging from 60% - 95%, for each of its lines
of business. However, collateral is only one of the many
factors considered.
13
<PAGE> 16
The underwriting process includes, in addition to the analysis of the
factors set forth above, the design and implementation of transaction structures
and strategies to mitigate identified risks; a review of transaction pricing
relative to product-specific return requirements and acknowledged risk elements;
a multi-step, interdepartmental review and approval process, with varying levels
of authority based on the size of the transaction; and periodic
interdepartmental reviews and revision of underwriting guidelines.
FINOVA also monitors loan portfolio concentrations in the areas of
aggregate exposure to a single borrower and related entities, within a given
geographical area and with respect to an industry and/or product type within an
industry. FINOVA has established concentration guidelines for each line of
business it conducts for the various product types it may entertain within that
line of business. Geographical concentrations are reviewed periodically and
evaluated based on historical loan experience and prevailing market and economic
conditions.
FINOVA's financing contracts and leases generally require the customer
to pay taxes, license fees and insurance premiums and to perform maintenance and
repairs at the customer's expense. Contract payment rates are based on several
factors, including the cost of borrowed funds, term of contract,
creditworthiness of the prospective customer, type and nature of collateral and
other security and, in leasing transactions, the timing of tax effects and
estimated residual values. In leasing transactions, lessees generally are
granted an option to purchase the equipment at the end of the lease term at its
then fair market value or, in some cases, are granted an option to renew the
lease at its then fair rental value. The extent to which lessees exercise their
options to purchase leased equipment varies from year to year, depending on,
among other factors, the status of the economy, the financial condition of the
lessee, interest rates and technological developments.
PORTFOLIO MANAGEMENT
In addition to the review at the time of original underwriting, FINOVA
attempts to preserve and enhance the earnings quality of its portfolio through
proactive management of its financing relationships with its clients and its
underlying collateral. This process generally includes the periodic appraisal or
verification of the collateral to determine loan exposure and residual values;
sales of residual and warrant positions to generate supplemental income; and
review and management of covenant compliance. The Portfolio Management
department and dedicated personnel within the business units regularly review
financial statements to assess customer cash flow performance and trends;
periodically confirm operations of the customer; conduct periodic reappraisals
of the underlying collateral; seek to identify issues concerning the
vulnerability of debt service capabilities of the customer; seeks to resolve
outstanding issues with the borrower; and prepare quarterly summaries of the
aggregate portfolio quality for management review. To facilitate the monitoring
of a client's account, each client is assigned to a customer service
representative who is responsible for all follow-up with that client.
DELINQUENCIES AND WORKOUTS
FINOVA monitors timely payment of all accounts. Generally, when an
invoice is 10 days past due, the customer is contacted, and a determination is
made as to the extent of the problem, if any. A commitment for immediate payment
is pursued and the account is observed closely. If payment is not received after
this contact, all guarantors of the account are contacted within the next 20
days. If an invoice becomes 31 days past due, it is reported as delinquent. A
notice of default is generally sent prior to an invoice becoming 45 days past
due and, between 60 and 90 days past the due date, if satisfactory negotiations
are not underway, outside counsel is generally retained to help protect FINOVA's
rights and to pursue its remedies.
14
<PAGE> 17
When accounts become more than 90 days past due (or in the cases of
Manufacturer and Dealer Services, 120 days past due, or United Kingdom consumer
finance accounts, 180 days past due), income recognition is suspended, and
FINOVA vigorously pursues its legal remedies. Foreclosed or repossessed assets
are considered to be nonperforming, and are reported as such unless such assets
generate sufficient cash to result in a reasonable rate of return. Such accounts
are continually reviewed, and write-downs are taken as deemed necessary. While
pursuing collateral and obligors, FINOVA generally continues to negotiate the
restructuring or other settlement of the debt, as appropriate.
Management believes that collateral values significantly reduce loss
exposure and that the reserve for possible credit losses is adequate. For
additional information regarding the reserve for possible credit losses, see
Note C of Notes to Consolidated Financial Statements included in Annex A.
GOVERNMENTAL REGULATION
FINOVA's domestic activities, including the financing of its operations,
are subject to a variety of federal and state regulations such as those imposed
by the Federal Trade Commission, the Securities and Exchange Commission, the
Consumer Credit Protection Act, the Equal Credit Opportunity Act and the
Interstate Land Sales Full Disclosure Act. Additionally, a majority of states
have ceilings on interest rates chargeable to customers in financing
transactions. Some of FINOVA's financing transactions are subject to additional
government regulation, such as aircraft leasing, which is regulated by the
Federal Aviation Authority, and communications, which is regulated by the
Federal Communication Commission. FINOVA's international activities are also
subject to a variety of laws and regulations promulgated by the governments and
various agencies of the countries in which the business is conducted.
EMPLOYEES
At December 31, 1994, the Company had 916 employees. None of such
employees were covered by collective bargaining agreements. The Company believes
its employee relations are satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive offices are located in premises leased
from Dial in Phoenix, Arizona. FINOVA operates 30 additional offices in the
United States and one office in Europe. All such properties are leased.
Alternative office space could be obtained without difficulty in the event
leases are not renewed.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party either as plaintiff or defendant to various
actions, proceedings and pending claims, including legal actions, certain of
which involve claims for compensatory, punitive or other damages in significant
amounts. Such litigation, in part, often results from the Company's attempts to
enforce its lending agreements against borrowers and other parties to such
transactions. Litigation is subject to many uncertainties and it is possible
that some of the legal actions, proceedings or claims referred to above could be
decided against the Company. Although the ultimate amount for which the Company
may be held liable is not ascertainable, the Company believes that any
resulting liability should not materially affect the Company's financial
position or results of operations.
15
<PAGE> 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY & RELATED STOCKHOLDER MATTERS.
There is no market for the Company's common stock or redeemable
preferred stock as the Company is wholly owned by FINOVA Group. The preferred
stock was redeemed through contribution from FINOVA Group in March 1994.
Dividends paid on the common stock for the first through fourth quarters of 1994
were $3,600,000, $5,050,000, $5,130,000 and $5,604,000, respectively. Dividends
paid on the common stock for the first through fourth quarters of 1993 were
$3,200,000, $3,200,000, $3,600,000 and $3,600,000, respectively.
The agreements pertaining to senior debt and revolving credit agreements
of FINOVA include various restrictive covenants and require the maintenance of
certain defined financial ratios with which FINOVA has complied. Under one such
covenant, dividend payments are limited to 50 percent of accumulated earnings
after December 31, 1991. As of December 31, 1994, FINOVA had $24,383,000 of
excess accumulated earnings available for distribution.
ITEM 6. SELECTED FINANCIAL DATA.
Omitted.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
See pages 1 - 6 of Annex A.
ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTARY DATA.
1. Financial Statements - See Item 14 hereof and Annex A.
2. Supplementary Data - See Condensed Quarterly Results included
in Supplemental Selected Financial Data of Notes to
Consolidated Financial Statements included in Annex A.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
& FINANCIAL DISCLOSURE.
NONE.
PART III
ITEM 10. DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted.
ITEM 11. EXECUTIVE COMPENSATION.
Omitted.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT.
Omitted.
ITEM 13. CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS.
Omitted.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed.
1. Financial Statements.
(i) The following financial statements of FINOVA are included in
Annex A:
<TABLE>
<CAPTION>
Annex
Page
-----
<S> <C>
Management's Discussion and Analysis of Financial
Condition and Results of Operations 1-6
Report of Management and Independent Auditors' Report 7-8
Consolidated Balance Sheet 9-10
Statement of Consolidated Operations 11
Statement of Consolidated Stockholder's Equity 12
Statement of Consolidated Cash Flows 13
Notes to Consolidated Financial Statements 14-39
Supplemental Selected Financial Data 35-36
</TABLE>
2. All Schedules have been omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
16
<PAGE> 19
3. Exhibits.
Exhibit No.
------------
(3.A) Certificate of Incorporation, as amended through the
date of this filing.*
(3.B) By-Laws, as amended through the date of this filing.*
(4.A) Instruments with respect to issues of long-term debt
have not been filed as exhibits to this Annual Report
on Form 10-K if the authorized principal amount of any
one of such issues does not exceed 10% of total assets
of the Company and its subsidiaries on a consolidated
basis. The Company agrees to furnish a copy of each
such instrument to the Securities and Exchange
Commission upon request.
(4.B) Form of Common Stock Certificate of the Company.*
(4.C) Relevant portions of the Company's Certificate of
Incorporation and Bylaws included in Exhibits 3.A and
3.B above, respectively, are hereby incorporated by
reference.
(4.D) Rights Agreement dated as of February 15, 1992 between
the Company and the Rights Agent named therein
(incorporated by reference from the Company's
Registration Statement on Form S-1, SEC File No.
33-45452 (the "Registration Statement"), Annex V to
Prospectus and Exhibit 4.1).
(4.E) Indenture dated as of November 1, 1990 between FINOVA
and the Trustee named therein (incorporated by
reference from Greyhound Financial Corporation's
Registration Statement on Form S-3, Registration No.
33- 37743, Exhibit 4).
(4.F) Fourth Supplemental Indenture dated as of April 17,
1992 between FINOVA and the Trustee named therein,
supplementing the Indenture referenced in Exhibit 4.E
above, is hereby incorporated by reference from
Greyhound Financial Corporation's Annual Report on
Form 10-K for the year 1992 (the "1992 10-K"), Exhibit
4.F.
(4.G) Form of Indenture dated as of September 1, 1992
between FINOVA and the Trustee names therein
(incorporated by reference from the Greyhound
Financial Corporation Registration Statement on Form
S-3, Registration No. 33-51216, Exhibit 4).
(10.A) Sixth Amendment and Restatement dated as of May 16,
1994 of the Credit Agreement dated as of May 31, 1976
among FINOVA and the lender parties thereto, and Bank
of America National Trust and Savings Association,
Bank of Montreal, Chemical Bank, Citibank, N.A. and
National Westminster Bank USA, as agents (the
"Agents") and Citibank, N.A., as Administrative Agent
(incorporated by reference from the Corporation's
Current Report on Form 8-K dated May 23, 1994, Exhibit
10.1).
(10.A.1) First Amendment dated as of September 30, 1994, to the
Sixth Amendment and Restatement, noted in 10.A above.*
(10.B) Credit Agreement (Short-Term Facility) dated as of May
16, 1994 among FINOVA, the Lender parties thereto, the
Agents and Citibank, N.A., as Administrative Agent
(incorporated by reference from the Company's Report
on Form 8-K dated May 23, 1994, Exhibit 10.2).
(10.B.1) First Amendment dated as of September 30, 1994 to the
Credit Agreement noted in 10.B above.*
(10.C) Interim Services Agreement dated January 28, 1992
among the Company, The Dial Corp and others, is hereby
incorporated by reference from the 1992 10-K, Exhibit
10.JJ.
17
<PAGE> 20
Exhibit No.
-----------
(10.D) Tax Sharing Agreement dated February 19, 1992 among
the Company, The Dial Corp and others, is hereby
incorporated by reference from the 1992 10-K, Exhibit
10.KK.
(10.E) Certificate of Designations of Series A Redeemable
Preferred Stock of FINOVA, dated March 17, 1992, is
hereby incorporated by reference from the 1992 10-K,
Exhibit 10.MM.
(10.F) Sublease dated as of April 1, 1991, among the Company,
The Dial Corp and others, relating to the Company's
principal office space, is hereby incorporated by
reference from the 1992 10-K, Exhibit 10.NN.
(10.G) Stock Purchase Agreement between Bell Atlantic TriCon
Leasing Corporation and Greyhound Financial
Corporation dated as of March 4, 1994 is hereby
incorporated by reference from the 1993 10-K, Exhibit
10.F.
(10.H) Form of Assets Purchase Agreement between Bell
Atlantic TriCon Leasing Corporation and TriCon Capital
Corporation is hereby incorporated by reference from
the 1993 10-K, Exhibit 10.G.
(10.I) Form of Distribution Agreement among the Company,
Greyhound Financial Corporation, The Dial Corp and
certain other parties named therein, dated as of
January 28, 1992 (incorporated by reference from the
Registration Statement, Annex II to the Prospectus and
Exhibit 2.1).
(10.J) Asset Purchase Agreement dated as of February 3, 1995
between Transamerica Business Credit Corporation and
FINOVA.*
(10.K) Stock Purchase Agreement among The FINOVA Group Inc.,
FINOVA and GE Capital Mortgage Corporation dated May
26, 1993, incorporated by reference from the Company's
Report on Form 8-K dated July 15, 1993, Exhibit 2.
(12) Computation of Ratio of Income to Combined Fixed
Charges and Preferred Stock Dividends.*
(23) Independent Auditors' Consent.*
(27) Financial Data Schedule.*
* Filed herewith.
(b) Reports on Form 8-K:
A Report on Form 8-K dated October 20, 1994 was filed by
Registrant, which reported under Items 5 and 7 the revenues, net income
and selected financial data and ratios for the nine months ended
September 30, 1994 (unaudited).
A Report on Form 8-K dated January 25, 1995 was filed by
Registrant, which reported under Items 5 and 7 the name change from GFC
Financial Corporation to The FINOVA Group Inc. and from Greyhound
Financial Corporation to FINOVA Capital Corporation.
A Report on Form 8-K dated January 26, 1995 was filed by
Registrant, which reported under Items 5 and 7 the revenues, net income
and selected financial data and ratios for the twelve months ended
December 31, 1994 (unaudited).
A Report on Form 8-K dated February 3, 1995 was filed by
Registrant, which reported under Item 7 the Underwriting Agreement and
certain other information relating to the sale of FINOVA's $100,000,000
8% Notes due February 1, 2000.
A Report on Form 8-K dated February 9, 1995 was filed by
Registrant, which reported under Items 5 and 7 the definitive agreement
to acquire a substantial portion of the rediscount portfolio of the
Lender Finance Division of Transamerica Business Credit Corporation.
A Report on Form 8-K dated February 27, 1995 was filed by
Registrant, which reported under Item 7 the Underwriting Agreement and
certain other information relating to the sale of FINOVA's $150,000,000
Floating-Rate Notes due March 6, 1998.
18
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in the capacities
indicated, in Phoenix, Arizona on the 20th day of March, 1995.
FINOVA CAPITAL CORPORATION
By: /s/ Samuel L. Eichenfield
--------------------------------------------------------------
Samuel L. Eichenfield
Chairman, President and Chief Executive Officer
(Chief Executive Officer)
By: /s/ Bruno A. Marszowski
--------------------------------------------------------------
Bruno A. Marszowski
Senior Vice President - Controller and Chief Financial Officer
(Chief Accounting and Financial Officer)
---------------------
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
/s/ W. Carroll Bumpers /s/ Samuel L. Eichenfield
- -------------------------------- --------------------------------
W. Carroll Bumpers (Director) Samuel L. Eichenfield (Chairman)
March 20, 1995 March 20, 1995
/s/ Robert J. Fitzsimmons /s/ Gregory C. Smalis
- -------------------------------- --------------------------------
Robert J. Fitzsimmons (Director) Gregory C. Smalis (Director)
March 20, 1995 March 20, 1995
19
<PAGE> 22
ANNEX A
<PAGE> 23
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-------
<S> <C>
Management's Discussion and Analysis of Financial Condition and
Results of Operations 1-6
Report of Management 7
Independent Auditors' Report 8
Consolidated Balance Sheet at December 31, 1994 and 1993 9-10
Statement of Consolidated Operations for the Years Ended
December 31, 1994, 1993 and 1992 11
Statement of Consolidated Stockholder's Equity for the Years
Ended December 31, 1994, 1993 and 1992 12
Statement of Consolidated Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 13
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1994, 1993 and 1992 14-39
Supplemental Selected Financial Data 35-36
</TABLE>
<PAGE> 24
FINOVA CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion relates to FINOVA Capital Corporation
(formerly known as Greyhound Financial Corporation) and its subsidiaries
(collectively, "FINOVA" or the "Company"), including Ambassador Factors
("Ambassador") acquired on February 14, 1994 and TriCon Capital ("TriCon")
acquired on April 30, 1994. Both Ambassador and TriCon were merged into FINOVA
in 1994. Recognizing the substantial increase in the Company's size and scope
of operations and its use of several names in its operations, Greyhound
Financial Corporation changed its name to FINOVA Capital Corporation, a wholly
owned subsidiary of The FINOVA Group Inc. ("FINOVA Group") (formerly known as
GFC Financial Corporation). Both name changes were effective February 1, 1995.
FINOVA Group is the successor to the former financial services
businesses of The Dial Corp ("Dial"). On March 18, 1992, Dial consummated the
spin-off (the "Spin-Off") of FINOVA Group by distributing one share of FINOVA
Group's common stock (the "shares") for every two shares of Dial common stock
held by each stockholder. Prior to the Spin-Off, Dial contributed its 100%
interest in Greyhound European Financial Group ("GEFG"), Dial's European
commercial and consumer finance businesses not previously managed by the Company
and Greyhound BID Holding Corp. ("Greyhound BID") to the Company and contributed
all of the common stock of the Company to FINOVA Group.
The historical consolidated financial statements of FINOVA have been
retroactively restated to include the accounts and results of operations of GEFG
and Greyhound BID for all periods presented as if a pooling of interests of
companies under common control occurred. All intercompany accounts and
transactions have been eliminated from the consolidated financial statements.
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Net income for the 1994 period rose to $74.3 million from $36.4 million
in 1993, an increase of 104%. The 1994 results include income for Ambassador
and TriCon from the acquisition dates. Net income in 1993 included a $4.9
million adjustment for tax rate increases applicable to deferred income taxes
generated by the Company's leveraged lease portfolio.
INTEREST MARGINS EARNED. Interest margins earned, which represent the
difference between interest earned from financing transactions and interest
expense, increased to $243.7 million for 1994 from $122.5 million for 1993, an
increase of 99%. This increase was driven by portfolio growth, together with
the addition of TriCon and Ambassador in 1994. The primary source of the
portfolio growth was new business, which totaled $1.8 billion for 1994 compared
to $1.0 billion for 1993 (an increase of 80%).
Interest margins earned, measured as a percent of average earning
assets, were strong at 6.0%. This measurement compares to 5.2% for the 1993
period and reflects the contributions of the acquisitions made in 1994, the
continuing healthy returns of the charter financial operations and the Company's
access to lower cost capital. Growth in interest margins more than offset the
higher
1
<PAGE> 25
FINOVA CAPITAL CORPORATION
provisions for possible credit losses and the higher selling, administrative and
other operating expenses.
In early 1995, FINOVA helped protect its margins on floating-rate
transactions by hedging an additional $750 million of floating-rate debt to lock
in the spread between the Company's lending and borrowing rates. With this
hedge, the Company helped to protect its margins on $1.5 billion of
floating-rate transactions (or approximately 50% of its floating-rate
liabilities), during the terms of those hedging transactions.
NON-INTEREST EXPENSE. Loss provisions, which increase the reserve for
possible credit losses ("reserve"), were greater by $11.0 million during 1994
compared to 1993. The greater loss provisions were consistent with the
requirements of a larger portfolio and the loss experience of the businesses
acquired. Higher interest margins generated by Ambassador and certain TriCon
businesses are used to cover the risk profiles associated with those businesses.
Management believes that reserve coverage (reserve and accrued
liabilities/nonaccruing assets) remains adequate at 72.4% of nonaccruing assets
and at 2.1% of funds employed and securitizations. Details of the write-offs by
line of business, as well as changes in the reserve for possible credit losses,
can be found in Note C of Notes to Consolidated Financial Statements.
Selling, administrative and other operating expenses increased by
approximately $54.1 million in 1994 consistent with the growth in assets. The
running rate of these expenses (measured as a percent of interest margins
earned) was 46.1% (for the combined entities) in 1994, an improvement over 47.5%
in 1993 (which excluded TriCon and Ambassador). See Note L of Notes to
Consolidated Financial Statements.
GAINS ON SECURITIZATIONS AND SALE OF ASSETS. Gains on securitizations
and sale of assets were $3.6 million higher in 1994 compared to 1993. The
increase principally is the result of a $4.0 million ($2.4 million after-tax)
gain from the securitization of assets recorded in 1994.
During 1994, FINOVA entered into one transaction resulting in a gain on
the securitization of selected assets. The securitization of assets was
consistent with TriCon's historical experience; however, the Company does not
currently intend to use asset securitizations as a form of financing. Reduced
utilization of securitizations will have the result of reducing net income in
the near term since no gain on the sale of assets will be recorded. However,
earnings from assets retained and not securitized would continue to be
recognized over the life of the assets.
INCOME TAXES. Income taxes for 1994 increased to $49.4 million from
$27.7 million in 1993. This increase is attributable to: (a) higher income
before income taxes; (b) higher state income tax rates in 1994 because of the
apportionment of the Company's assets to states with higher income tax rates and
(c) increased foreign income taxes due to the increase in foreign income. The
overall effective income tax rate for the Company, including both federal and
state income taxes, approximates 40.0% for 1994 and 35.6% for 1993, excluding
the $4.9 million tax adjustment for the Company's leveraged lease portfolio.
See Note G of Notes to Consolidated Financial Statements.
1993 COMPARED TO 1992
Net income for 1993 was $36.4 million compared to $36.8 million in
1992. The 1993 results included a $4.9 million adjustment in the third quarter
for deferred taxes applicable to leveraged
2
<PAGE> 26
FINOVA CAPITAL CORPORATION
leases and $1.6 million (pre-tax) of expenses that can no longer be allocated to
FINOVA Group's discontinued mortgage insurance subsidiary. Excluding these
amounts, net income for 1993 was $42.3 million, an increase of 15% over 1992.
The $4.9 million adjustment in 1993 represented the effects of increases in
federal and state income tax rates in 1993 as they applied to deferred income
taxes generated by the Company's leveraged lease portfolio.
INTEREST MARGINS EARNED. Interest margins earned increased by 17% in
1993 compared to 1992. These margins were improved significantly by more
favorable debt costs in 1993 when compared to 1992 (approximately a 1% reduction
in the aggregate cost of debt). Also contributing to the improved margins was
the growth of the domestic portfolio and higher prepayment fees, partially
offset by the effects of larger foreign exchange gains reported by GEFG in 1992
and the continued winding down of the GEFG portfolio.
The $10.0 million reduction in interest expense was attributable to
more favorable debt costs in 1993. The more favorable debt costs, in comparison
to 1992, primarily related to the Company's ability to consistently maintain a
matched position throughout 1993 relative to financing its floating-rate assets
with floating-rate debt. During the second and third quarters of 1992, FINOVA,
because of the significant refinancing done in connection with the Spin-Off, had
to finance a major portion of its floating-rate assets with fixed-rate debt.
That fixed-rate debt was subsequently converted to floating-rate debt through
interest rate conversion agreements. However, the timing between the issuance
of fixed-rate debt and the execution of the interest rate conversion agreements
caused interest margins to shrink by approximately $2.8 million in 1992.
NON-INTEREST EXPENSE. Although the provision for possible credit
losses was lower in 1993 versus 1992, in the opinion of management, such
provision was adequate to cover the growth and risk in the portfolio. The
reserve for possible credit losses, which is increased by the loss provisions
and reduced by write-offs, was 2.3% of funds employed at December 31, 1993.
Details of the write-offs by line of business, as well as changes in the reserve
for possible credit losses, can be found in Note C of Notes to Consolidated
Financial Statements.
Selling, administrative and other operating expenses increased during
1993 due to the addition of the asset based lending operations acquired from
U.S. Bancorp expenses that were no longer allocated to discontinued operations
and legal expenses incurred in connection with certain problem accounts. See
Note L of Notes to Consolidated Financial Statements.
GAINS ON SALE OF ASSETS. Gains on sale of assets were higher in 1993
than in 1992 due to the amount and type of assets sold. Gains in 1993 primarily
were derived from the sale of aircraft and other assets held for sale.
INCOME TAXES. Income taxes, excluding the $4.9 million adjustment
applicable to deferred taxes, were higher in 1993 and more in the range of an
ongoing effective tax rate (approximately 36% of income before income taxes) for
the Company. The higher income taxes were attributable to the effects of a 1%
increase in both federal and state income tax rates, which increased the
provision for taxes by approximately $1 million, and to higher income before
income taxes. Additionally, in 1992, income taxes were reduced by $3.1 million
representing tax adjustments related to the refinancing of the Company's debt.
See Note G of Notes to Consolidated Financial Statements.
3
<PAGE> 27
FINOVA CAPITAL CORPORATION
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Funds employed increased by $2.9 billion to $5.7 billion at December
31, 1994 from $2.8 billion at December 31, 1993. This increase is attributable
to the acquisitions of TriCon ($1.8 billion) and Ambassador ($329 million) and
new business generated ($1.8 billion), less securitization of assets and
portfolio amortization.
The reserve and accrued liabilities for possible credit losses
increased by $58.0 million in 1994 to $122.2 million. The increase in the
reserve and accrued liabilities consisted of increases due to loss provisions of
$16.7 million which were applicable to portfolio growth, $62.6 million of
reserves and accrued liabilities acquired with TriCon and $10.4 million of
reserves acquired with Ambassador, partially offset by decreases due to
write-offs of $35.1 million.
Nonaccruing contracts and repossessed assets increased to $168.8
million at December 31, 1994 from $102.6 million at December 31, 1993, primarily
due to the inclusion of nonaccruing assets of TriCon ($60 million) and
Ambassador ($14.7 million). When measured as a percent of funds employed and
securitizations, nonearning assets declined to 2.9% at December 31, 1994 from
3.6% of funds employed at December 31, 1993. For more information on write-offs
and nonaccruing assets see Note C of Notes to Consolidated Financial Statements.
The Company had total debt of approximately $4.6 billion or 5.85 times
its equity base of $782 million at December 31, 1994. The Company also had
deferred income taxes of $209 million, generally used to reduce debt and,
therefore, help finance lending activities.
Growth in funds employed is generally financed by internally generated
cash flow and additional borrowings. During 1994, FINOVA issued $827.6 million
in new senior debt, which, together with general corporate funds, net commercial
paper borrowings and $212 million of net advances and contributions from FINOVA
Group, was used to finance new business, redeem or retire $1.2 billion of debt
and acquire TriCon and Ambassador. The majority of the net advances and
contributions from FINOVA Group were proceeds from an equity offering completed
in May 1994 for 8,050,000 shares of FINOVA Group common stock.
FINOVA satisfies a significant portion of its cash requirements from a
diversified group of worldwide funding sources and is not dependent upon any one
lender. Additionally, FINOVA relies on the issuance of commercial paper as a
major funding source. During 1994, FINOVA issued $9.5 billion of commercial
paper (with an average of $1.0 billion outstanding during the year) and raised
$827.6 million, as noted above, through new long-term financings of one to seven
year durations. At December 31, 1994 and 1993, commercial paper and short-term
bank borrowings totaling $2.0 billion and $516 million, respectively, were
supported by available unused revolving credit lines which if not renewed are
convertible to long-term debt at FINOVA's option. In 1994, FINOVA filed a
shelf-registration statement with the Securities and Exchange Commission that
would allow for the issuance of up to $1.0 billion of senior debt securities,
$822 million of which remained available as of December 31, 1994.
4
<PAGE> 28
FINOVA CAPITAL CORPORATION
FINOVA currently maintains a three-year revolving credit facility with
numerous lenders, in the aggregate principal amount of $1.0 billion. Under the
terms of this agreement, the Company has the option to periodically select
either domestic dollars or Eurodollars as the basis of borrowings. Interest is
based on the lenders' Prime rate for domestic dollar advances or London
interbank offered rates ("LIBOR") for Eurodollar advances. The agreements also
provide for a commitment fee on the unused credit. Separately, FINOVA also has
a 364 day revolving credit facility with the same lenders in the aggregate
principal amount of $1.0 billion. In addition, FINOVA has another 364 day
facility with the administrative agent for $100 million. All of these
facilities support FINOVA's outstanding commercial paper and short-term
borrowings. The Company intends to borrow under the domestic revolving credit
agreements to refinance commercial paper and short-term bank loans to the,
extent that it experiences significant difficulties in rolling over its
outstanding commerical paper and short-term bank loans. The Company has never
borrowed under these facilities. The 364 day $1.1 billion revolving credit
agreements will be subject to renewal in 1995 while the three year $1 billion
credit facility is subject to renewal in 1997.
The agreements pertaining to long-term debt of FINOVA include various
restrictive covenants and require the maintenance of certain defined financial
ratios with which FINOVA has complied. Under one such covenant, dividend
payments are limited to 50 percent of accumulated earnings after December 31,
1991.
FINOVA's aggregate cost of funds remained constant at 6.3% for 1994
and 1993, notwithstanding rising interest rates generally in 1994. The
Company's cost of and access to capital is dependent, in a large part, on its
credit ratings. FINOVA has maintained investment grade ratings since 1976, and
recently received an upgrade in those ratings from Standard and Poor's Ratings
Group. Neither FINOVA Group nor any of FINOVA's subsidiaries have applied for
credit ratings. FINOVA currently has investment-grade ratings from the
following agencies:
<TABLE>
<CAPTION>
Commercial Senior
Paper Debt
---------- ------
<S> <C> <C>
Duff & Phelps D1- A-
Fitch Investors Services, Inc. F1 A
Moody's Investors Service, Inc. P2 Baa2
Standard & Poor's Ratings Group A2 BBB+
</TABLE>
At December 31, 1994, FINOVA had outstanding 57 interest rate
conversion agreements with notional principal amounts totaling $2.5 billion.
Twenty-six agreements with notional principal amounts of $1.0 billion were
arranged to effectively convert certain floating interest rate obligations into
fixed interest rate obligations and require interest payments on the stated
principal amount at rates ranging from 4.1% to 9.3% (remaining terms of one to
six years) in return for receipts calculated on the same notional amounts at
floating interest rates. In addition, 26 agreements with notional principal
amounts of $1.19 billion were arranged to effectively convert certain fixed
interest rate obligations into floating interest rate obligations and require
interest payments on the stated principal amount at the three month or six
month LIBOR (remaining terms of one to eight years) in return for receipts
calculated on the same notional amounts at fixed interest rates of 4.9% to
7.6%. FINOVA has also entered into five basis swaps with notional principal
amounts of $254 million and remaining terms of one month to three years.
5
<PAGE> 29
FINOVA CAPITAL CORPORATION
In 1993, FINOVA entered into four three-year interest rate hedge
agreements on $750 million of floating-rate borrowings. In early 1995, FINOVA
hedged an additional $750 million of floating-rate debt to lock in a spread
between its lending and borrowing rates. FINOVA's assets are primarily Prime
based while a significant portion of its liabilities are either LIBOR based or
tied to the 30-day commercial paper composite rate. The agreements enable
FINOVA to hedge against a narrowing of the spread between the Prime rate
(lending rate) and its borrowing rates (LIBOR and commercial paper). With this
additional hedge, the Company helped to protect its margins on $1.5 billion of
floating-rate transactions (or approximately 50% of its floating-rate
liabilities). For more information on derivative financial instruments, see
Note E of Notes to Consolidated Financial Statements.
RECENT DEVELOPMENTS AND BUSINESS OUTLOOK
Following the Spin-Off in 1992, the Company decided to focus its
resources and capital on its domestic commercial finance activities. The
Company embarked on a program of selling or winding down those businesses
included in the Spin-Off that were not associated with the Company's charter
domestic commercial finance activities. The Company concentrated on redeploying
the capital previously invested in such businesses and raised additional capital
to support internal portfolio growth and to make selected acquisitions to
complement the Company's charter operations. This strategy has resulted in (i)
the managed liquidation and sale of the GEFG and Latin American loan portfolios,
(ii) an increase (excluding acquisitions) in FINOVA's domestic loan portfolio
each year, (iii) the acquisition of the asset based lending activity of U.S.
Bancorp, (iv) the acquisition of Ambassador and (v) the acquisition of TriCon.
More recently, on February 27, 1995, FINOVA acquired substantially all of the
rediscount portfolio of the Lender Finance Division of Transamerica Business
Credit Corporation, a wholly owned subsidiary of Transamerica Corporation. The
rediscount portfolio is comprised of secured revolving credit facilities to
independent consumer finance companies. The principal amount of the loans
purchased amounted to approximately $118 million.
In 1994, FINOVA Group raised an additional $226 million of equity
through the sale of 8,050,000 shares in a secondary offering, the proceeds of
which were contributed to the Company, FINOVA expanded its debt sources through
a $1 billion shelf registration with the Securities and Exchange Commission
("SEC") and FINOVA increased its revolving credit lines to $2.1 billion. As a
result of the execution of its business strategy, management believes that the
Company now ranks among the largest independent commercial finance companies,
based on assets, in the United States, and can direct its energies primarily to
its principal business operations, including those businesses acquired since
1993.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") has issued two
accounting standards which the Company will adopt effective January 1, 1995:
Statements of Financial Accounting Standards ("SFAS") Nos. 114 and 118,
"Accounting by Creditors for Impairment of a Loan" ("SFAS 114") and "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures"
("SFAS 118"). These standards require that impaired loans which are within the
scope of these statements generally be measured based on the present value of
expected cash flows discounted at the loan's effective interest rate or the fair
value of the collateral, if the loan is collateral dependent. Under SFAS 114, a
loan is considered impaired when, based on current information and events, it is
probable that a creditor will be unable to collect all amounts due. Presently,
the reserve for possible credit losses represents management's estimate of the
amount necessary to cover potential losses in the portfolio considering
delinquencies, loss experience and collateral. These standards, effective for
fiscal years beginning after December 15, 1994, which for the Company would be
1995, are not expected to have a material impact on the Company's financial
position or results of operations.
During 1994, FINOVA adopted SFAS No. 119, "Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments." The disclosures
required by SFAS No. 119 are included in Notes E and K of Notes to Consolidated
Financial Statements.
New accounting standards adopted by FINOVA in 1993 included SFAS No.
112, "Employers' Accounting for Postemployment Benefits," which did not have a
material impact on the Company's financial position or results of operations.
6
<PAGE> 30
FINOVA CAPITAL CORPORATION
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of FINOVA Capital Corporation is responsible for the
preparation, integrity and objectivity of the financial statements and other
financial information included in this Annual Report. The financial statements
are presented in accordance with generally accepted accounting principles
reflecting, where applicable, management's best estimates and judgments.
Management of the Company has established and maintains a system of
internal controls to reasonably assure the fair presentation of the financial
statements, the safeguarding of the Company's assets and the prevention or
detection of fraudulent financial reporting. The internal control structure is
supported by careful selection and training of personnel, policies and
procedures and regular review by both internal auditors and the independent
auditors.
The Board of Directors also oversees the financial reporting of the
Company and its adherence to established procedures and controls. Periodically,
members of the Board meet, jointly and separately, with management, the internal
auditors and the independent auditors to review auditing, accounting and
financial reporting matters.
The Company's financial statements have been audited by Deloitte &
Touche LLP, independent auditors. Management has made available to Deloitte &
Touche LLP all of the Company's financial records and related data and has made
valid and complete written and oral representations and disclosures in
connection with the audit.
Management believes it is essential to conduct its business in
accordance with the highest ethical standards, which are characterized and set
forth in the Company's written Code of Conduct. These standards are
communicated to and acknowledged by all of the Company's employees.
/s/ SAMUEL L. EICHENFIELD
- --------------------------
Samuel L. Eichenfield
Chairman, President and Chief Executive Officer
/s/ BRUNO A. MARSZOWSKI
- --------------------------
Bruno A. Marszowski
Senior Vice President - Controller and Chief Financial Officer
/s/ DEREK C. BRUNS
- --------------------------
Derek C. Bruns
Vice President - Internal Audit
7
<PAGE> 31
FINOVA CAPITAL CORPORATION
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of FINOVA Capital Corporation
We have audited the accompanying consolidated balance sheet of FINOVA
Capital Corporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholder's equity and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of FINOVA Capital Corporation
and subsidiaries at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Phoenix, Arizona
March 8, 1995
8
<PAGE> 32
FINOVA CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
December 31, 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 52,753 $ 2,859
Investment in financing transactions:
Loans and other financing contracts, less unearned
income of $249,550 and $72,747, respectively 4,034,648 2,343,755
Direct financing leases 774,834 71,812
Operating leases 412,782 147,222
Leveraged leases 287,518 283,782
Factored receivables 157,862
- -------------------------------------------------------------------------------------------
5,667,644 2,846,571
Less reserve for possible credit losses (109,245) (64,280)
- -------------------------------------------------------------------------------------------
Investment in financing transactions - net 5,558,399 2,782,291
Other assets and deferred charges 236,397 49,747
- -------------------------------------------------------------------------------------------
$5,847,549 $2,834,897
===========================================================================================
</TABLE>
See notes to consolidated financial statements.
9
<PAGE> 33
FINOVA CAPITAL CORPORATION
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
December 31, 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities:
Accounts payable and accrued expenses $ 154,151 $ 33,222
Due to factored clients 91,049
Due to Parent 130,760
Interest payable 37,710 23,633
Senior debt 4,573,354 1,992,496
Subordinated debt 86,790
Deferred income taxes 209,299 197,705
- -------------------------------------------------------------------------------------
5,065,563 2,464,606
- -------------------------------------------------------------------------------------
Redeemable preferred stock 25,000
- -------------------------------------------------------------------------------------
Stockholder's equity:
Common stock, $1.00 par value, 100,000 shares
authorized, 25,000 shares issued and outstanding 25 25
Additional capital 677,947 298,665
Retained income 108,740 54,374
Cumulative translation adjustments (4,726) (7,773)
- -------------------------------------------------------------------------------------
781,986 345,291
- -------------------------------------------------------------------------------------
$5,847,549 $2,834,897
=====================================================================================
</TABLE>
See notes to consolidated financial statements.
10
<PAGE> 34
FINOVA CAPITAL CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and other income $386,566 $218,171 $210,873
Financing lease income 62,990 20,838 24,896
Operating lease income 53,795 16,207 7,568
- ----------------------------------------------------------------------------------------------
Interest earned from financing transactions 503,351 255,216 243,337
Interest expense 222,929 126,152 136,107
Depreciation 36,737 6,516 2,531
- ----------------------------------------------------------------------------------------------
Interest margins earned 243,685 122,548 104,699
Provision for possible credit losses 16,670 5,706 6,740
- ----------------------------------------------------------------------------------------------
Net interest margins earned 227,015 116,842 97,959
Gains on securitizations and sale of assets 9,045 5,439 3,362
- ----------------------------------------------------------------------------------------------
236,060 122,281 101,321
- ----------------------------------------------------------------------------------------------
Selling, administrative and other operating
expenses 112,305 58,158 50,728
- ----------------------------------------------------------------------------------------------
Income before income taxes 123,755 64,123 50,593
Income taxes 49,442 27,682 13,843
- ----------------------------------------------------------------------------------------------
NET INCOME $ 74,313 $ 36,441 $ 36,750
==============================================================================================
</TABLE>
See notes to consolidated financial statements.
11
<PAGE> 35
FINOVA CAPITAL CORPORATION
STATEMENT OF CONSOLIDATED STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK:
- ---------------------------------------------------------------------------------------------
Balance, beginning and end of year $ 25 $ 25 $ 25
- ---------------------------------------------------------------------------------------------
ADDITIONAL CAPITAL:
Balance, beginning of year 298,665 298,665 270,680
Contributions from FINOVA Group 379,282
Contributions from The Dial Corp 27,985
- ---------------------------------------------------------------------------------------------
Balance, end of year 677,947 298,665 298,665
- ---------------------------------------------------------------------------------------------
RETAINED INCOME:
Balance, beginning of year 54,374 33,783 10,605
Net income 74,313 36,441 36,750
Dividends (19,947) (15,850) (13,572)
- ---------------------------------------------------------------------------------------------
Balance, end of year 108,740 54,374 33,783
- ---------------------------------------------------------------------------------------------
CUMULATIVE TRANSLATION ADJUSTMENTS:
Balance, beginning of year (7,773) (6,685) (1,639)
Unrealized translation gain (loss) 3,047 (1,088) (5,046)
- ---------------------------------------------------------------------------------------------
Balance, end of year (4,726) (7,773) (6,685)
- ---------------------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY $781,986 $345,291 $325,788
=============================================================================================
</TABLE>
See notes to consolidated financial statements.
12
<PAGE> 36
FINOVA CAPITAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 74,313 $ 36,441 $ 36,750
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible credit losses 16,670 5,706 6,740
Depreciation and amortization 46,470 9,318 4,501
Gains on securitizations and sale of assets (9,045) (5,439) (3,362)
Deferred income taxes 11,594 21,608 (4,837)
Change in assets and liabilities, net of effects from
subsidiaries purchased:
Increase in other assets (20,198) (2,189) (8,148)
(Decrease) increase in accounts payable (85,716) (9,742) 3,841
Increase (decrease) in interest payable 14,077 (5,429) 3,576
Other (2,435) (1,088) (3,841)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 45,730 49,186 35,220
- ----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from sale of assets 35,106 5,681 22,657
Proceeds from sale of securitized assets 115,507
Principal collections on financing transactions 908,862 638,423 454,390
Expenditures for financing transactions (1,505,208) (1,007,794) (684,900)
Net change in short-term financing transactions (294,123)
Purchase of Asset Based Lending (69,808)
Purchase of Ambassador (246,285)
Purchase of TriCon (344,212)
Net related party advances 57,321 (57,321)
Other 1,898 221 392
- ----------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (1,328,455) (375,956) (264,782)
- ----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Long-term borrowings 827,550 200,000 644,091
Net borrowings under commercial paper 1,508,564 185,735 330,141
Repayment of long-term borrowings (1,186,191) (190,136) (829,212)
Net advances and contributions from Parent 211,941 130,760
Issuance of preferred stock 25,000
Advances and contributions from The Dial Corp 54,331
Dividends (19,947) (15,850) (13,572)
Net change in due to factored clients (9,298)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,332,619 310,509 210,779
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 49,894 (16,261) (18,783)
Cash and cash equivalents, beginning of year 2,859 19,120 37,903
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 52,753 $ 2,859 $ 19,120
================================================================================================================
</TABLE>
See notes to consolidated financial statements.
13
<PAGE> 37
FINOVA CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS IN TABLES)
NOTE A SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION -- The
consolidated financial statements present the financial position, results of
operations and cash flows of FINOVA Capital Corporation (formerly known as
Greyhound Financial Corporation) and its subsidiaries (collectively, "FINOVA" or
the "Company"), including Ambassador Factors ("Ambassador") acquired on February
14, 1994 and TriCon Capital ("TriCon") acquired on April 30, 1994. Both
Ambassador and TriCon were merged into FINOVA in 1994. Recognizing the
substantial increase in the Company's size and scope of operations and its use
of several names in its operations, Greyhound Financial Corporation changed its
name to FINOVA Capital Corporation, a wholly owned subsidiary of The FINOVA
Group Inc. ( "FINOVA Group") (formerly known as GFC Financial Corporation). Both
name changes were effective February 1, 1995.
FINOVA Group is the successor to the former financial services
businesses of The Dial Corp ("Dial"). On March 18, 1992, Dial consummated the
spin-off (the "Spin-Off") of FINOVA Group by distributing one share of FINOVA
Group's common stock (the "shares") for every two shares of Dial common stock
held by each stockholder. Prior to the Spin-Off, Dial contributed its 100%
interest in Greyhound European Financial Group ("GEFG"), Dial's European
commercial and consumer finance businesses not previously managed by the Company
and Greyhound BID Holding Corp. ("Greyhound BID") to the Company and contributed
all of the common stock of the Company to FINOVA Group.
The historical consolidated financial statements of FINOVA have been
retroactively restated to include the accounts and results of operations of GEFG
and Greyhound BID for all periods presented as if a pooling of interests of
companies under common control occurred. All intercompany accounts and
transactions have been eliminated from the consolidated financial statements.
These consolidated financial statements are prepared in accordance with
generally accepted accounting principles. Described below are those accounting
policies particularly significant to FINOVA, including those selected from
acceptable alternatives.
FINANCING TRANSACTIONS -- For loans and other financing contracts
earned income is recognized over the life of the contract, using the interest
method.
For leases classified as direct financing leases, the difference
between (a) aggregate lease rentals and (b) the cost of the related assets less
estimated residual value at the end of the lease term is recorded as unearned
income. Earned income is recognized over the life of the contracts using the
interest method.
For operating leases, earned income is recognized on a straight-line
basis over the lease term and depreciation is taken on a straight-line basis
over the estimated useful life.
14
<PAGE> 38
FINOVA CAPITAL CORPORATION
Leases that are financed by nonrecourse borrowings and meet certain
other criteria are classified as leveraged leases. For leveraged leases,
aggregate rentals receivable are reduced by the related nonrecourse debt service
obligation including interest ("net rentals receivable"). The difference
between (a) the net rentals receivable and (b) the cost of the asset less
estimated residual value at the end of the lease term is recorded as unearned
income. Earned income is recognized over the life of the lease at a constant
rate of return on the positive net investment, which includes the effects of
deferred income taxes.
Fees received in connection with loan commitments are deferred in
accounts payable and accrued expenses until the loan is advanced and are then
recognized over the term of the loan as an adjustment of the yield. Fees on
commitments that expire unused are recognized at expiration.
Income recognition is generally suspended for leases, loans and other
financing contracts at the earlier of the date at which payments become 90 days
past due (other than consumer finance accounts of GEFG, which are considered
nonaccruing when 180 days past due and the accounts of Manufacturer and Dealer
Services, which are considered nonaccruing when 120 days past due) or when, in
the opinion of management, a full recovery of income and principal becomes
doubtful. Income recognition is resumed when the loan becomes contractually
current and performance is demonstrated to be resumed.
The reserve for possible credit losses is available to absorb credit
losses. The provision for possible credit losses is the charge to income to
increase the reserve for possible credit losses to the level that management
estimates to be adequate considering delinquencies, loss experience and
collateral. Other factors include changes in geographic and product
diversification, size of the portfolio and current economic conditions. Accounts
are either written-off or written-down when the probability of loss has been
established in amounts determined to cover such losses after giving
consideration to the customer's financial condition and the value of the
underlying collateral, including any guarantees. Any deficiency between the
carrying amount of an asset and the ultimate sales price of repossessed
collateral is charged to the reserve for possible credit losses. Recoveries of
amounts previously written-off as uncollectible are credited to the reserve for
possible credit losses.
Under certain limited recourse provisions of receivable transfer
agreements (securitizations), the Company repurchases defaulted leases and
subsequently classifies these leases as nonaccruing. At the time the defaulted
leases are repurchased, the Company transfers from accrued liabilities for
securitized assets to the reserve for possible credit losses, the amount of the
estimated loss relating to the repurchased assets. If the accounts have to be
written-down, they are charged to the reserve for possible credit losses.
Repossessed assets are carried at the lower of cost or fair value.
Loans classified as in-substance foreclosures are included in repossessed
assets. Loans are classified as in-substance foreclosed assets, even though
legal foreclosure has not occurred, when (i) the borrower has little or no
equity in the collateral at its current fair value, (ii) proceeds for repayment
are expected to come only from the operation or sale of the collateral and (iii)
it is doubtful that the borrower will rebuild equity in the collateral or
otherwise repay the loan in the foreseeable future.
The Financial Accounting Standards Board ("FASB") has issued two new
accounting
15
<PAGE> 39
FINOVA CAPITAL CORPORATION
standards: Statements of Financial Accounting Standards ("SFAS") Nos. 114 and
118, "Accounting by Creditors for Impairment of a Loan" ("SFAS 114") and
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures" ("SFAS 118"). These standards require that impaired loans that are
within the scope of these statements generally be measured based on the present
value of expected cash flows discounted at the loan's effective interest rate or
the fair value of the collateral, if the loan is collateral dependent. Under
SFAS 114, a loan is considered impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts
due. Presently, the reserve for possible credit losses represents management's
estimate of the amount necessary to cover potential losses in the portfolio
considering delinquencies, loss experience and collateral. These new standards,
effective for fiscal years beginning after December 15, 1994, are not expected
to have a material impact on the Company's financial position or results of
operations. Adoption of SFAS 114 and 118 will be applied by the Company,
effective January 1, 1995. Under SFAS 114, assets classified as in-substance
foreclosures will generally be reclassified as impaired loans.
PENSION AND OTHER BENEFITS -- Trusteed, noncontributory pension plans
cover substantially all employees. Benefits are based primarily on final
average salary and years of service. Net periodic pension cost for FINOVA is
based on the provisions of SFAS No. 87, "Employers' Accounting for Pensions."
Funding policies provide that payments to pension trusts shall be at least equal
to the minimum funding required by applicable regulations.
Effective January 1, 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," which
requires accrual of such benefits during the years the employees provide
services. Prior to 1993, the costs of such benefits were expensed as incurred.
The adoption of SFAS No. 106 had no material effect on the Company's financial
condition or results of operations.
Effective January 1, 1994, the Company adopted SFAS Statement No. 112,
"Employers' Accounting for Postemployment Benefits." Analogous to SFAS No. 106
for postretirement benefits, this standard requires companies to accrue for
estimated future postemployment benefits during the periods when employees are
working. Postemployment benefits are any benefits other than retirement
benefits that are provided after employment ceases. Prior to 1994, the costs of
such benefits were expensed as incurred. The adoption of SFAS No. 112 had no
material effect on the Company's financial condition or results of operations.
SAVINGS PLAN -- The Company participates in the FINOVA Group Inc.
Savings Plan (the "Savings Plan"), a qualified 401(k) program. The Savings Plan
is available to substantially all employees. Voluntary wage reductions may be
elected by the employee ranging from 1% to 22% of taxable compensation. The
Company matching contributions are based on employee pre-tax salary reductions,
up to a maximum of 100% of the first 3% of salary reductions (increased to 6%
effective January 1, 1995).
EMPLOYEE STOCK OWNERSHIP PLAN -- Employees of the Company are eligible
to participate in FINOVA Group's Employee Stock Ownership Plan in the month
following the last twelve consecutive month period during which they have at
least 1,000 hours of service with the Company. Company contributions are made
in the form of matching stock contributions, consisting of FINOVA Group stock,
of 100% of the first 3% of salary reduction contributions made by participants
of the
16
<PAGE> 40
FINOVA CAPITAL CORPORATION
Savings Plan.
Expenses under the Savings Plan and Employee Stock Ownership Plan were
approximately $900,000 in 1994, $400,000 in 1993 and $300,000 in 1992.
INCOME TAXES -- Income taxes are provided based upon the provisions of
SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109,
deferred tax assets and liabilities are recognized for the estimated future tax
effects attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax law.
CASH EQUIVALENTS -- The Company classifies highly liquid investments
with original maturities of three months or less from date of purchase as cash
equivalents.
DERIVATIVE FINANCIAL INSTRUMENTS -- The Company enters into derivative
financial instruments as part of its interest rate risk management. The Company
uses interest rate swaps and interest rate hedge agreements. These interest
rate derivatives are accounted for using settlement or matched swap accounting.
Periodic net cash settlements are recognized when they occur.
ACQUISITIONS -- During 1994, FINOVA, in transactions accounted for as
purchases, acquired Ambassador Factors (February 14, 1994) and TriCon (April 30,
1994). The consolidated financial statements include the results of operations
of the acquired companies since the date of acquisition and reflect final
adjustments for purchase accounting. The prior years 1993 and 1992 consolidated
financial statements have not been restated for acquisitions made subsequent to
such dates. The unaudited pro forma results of operations of these acquisitions
are included in Note M to Notes to Consolidated Financial Statements. Cost in
excess of net assets ("goodwill") of acquired businesses is being amortized
using the straight-line method over 20 years. The amortization of goodwill
resulting from the acquisitions is tax deductible under Section 197 of the
Internal Revenue Code.
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES -- During
1994, FINOVA Group contributed $127,716,000 of intercompany loans and other
assets and $25,000,000 of preferred stock to FINOVA as additional paid in
capital.
RECLASSIFICATIONS -- Certain reclassifications have been made to the
1993 and 1992 financial statements to conform to the 1994 presentation.
17
<PAGE> 41
FINOVA CAPITAL CORPORATION
NOTE B INVESTMENT IN FINANCING TRANSACTIONS
The Company provides secured financing to commercial and real estate
enterprises principally under financing contracts (such as loans and other
financing contracts, direct financing leases, operating leases, leveraged leases
and factored receivables). At December 31, 1994 and 1993, the carrying amount of
the investment in financing transactions, including the estimated residual value
of leased assets upon lease termination, was $5,667,644,000 and $2,846,571,000
(before reserve for possible credit losses), respectively, and consisted of the
following percentage of carrying amount by line of business:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Percent of Total
Carrying Amount
- ----------------------------------------------------------------
1994 1993
- ----------------------------------------------------------------
<S> <C> <C>
Corporate Finance 13.8% 15.3%
Commercial Real Estate Finance 13.2% 19.6%
Transportation Finance 12.7% 21.2%
Resort Finance 12.0% 19.9%
Communications Finance 10.4% 18.9%
Medical Finance 8.3%
Manufacturer and Dealer Services (1) 5.7%
Commercial Equipment Finance (1) 5.3%
Franchise Finance (1) 5.3%
Commercial Finance 3.4%
Factoring Services 2.8%
Rediscount Finance 1.8% 0.7%
European Financial Services 1.8% 4.4%
Government Finance 1.7%
Inventory Finance 1.0%
Other 0.8%
- ----------------------------------------------------------------
100.0% 100.0%
================================================================
</TABLE>
(1) Excludes assets sold under securitization agreements that are managed
by the Company.
18
<PAGE> 42
FINOVA CAPITAL CORPORATION
Aggregate installments on loans and other financing contracts, direct
financing leases, operating leases, leveraged leases and factored receivables at
December 31, 1994 (excluding repossessed assets of $85,758,000 and estimated
residual values) are due during each of the years ending December 31, 1995 to
1999 and thereafter as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
There-
1995 1996 1997 1998 1999 after
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans and other financing
contracts:
Commercial:
Fixed interest rate $ 209,944 $ 197,825 $ 173,295 $141,158 $129,900 $272,710
Floating interest rate 600,935 371,039 349,562 368,201 151,183 185,457
Real Estate:
Fixed interest rate 55,397 51,055 34,890 30,746 72,306 75,394
Floating interest rate 178,483 213,536 215,154 121,738 91,267 65,127
Operating and direct
financing leases,
primarily at fixed
interest rates 329,110 282,894 219,582 151,842 104,705 161,726
Leveraged leases 4,543 6,828 14,367 10,431 5,783 164,673
- -----------------------------------------------------------------------------------------------------------
$1,378,412 $1,123,177 $1,006,850 $824,116 $555,144 $925,087
===========================================================================================================
</TABLE>
The net investment in leveraged leases at December 31 consisted of the
following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rentals receivable $ 1,268,843 $ 1,377,107
Less principal and interest payable on nonrecourse debt (1,062,218) (1,165,466)
- -----------------------------------------------------------------------------------------------------------
Net rentals receivable 206,625 211,641
Estimated residual values 306,204 306,894
Less unearned income (225,311) (234,753)
- -----------------------------------------------------------------------------------------------------------
Investment in leveraged leases 287,518 283,782
Less deferred taxes arising from leveraged leases (226,115) (223,006)
- -----------------------------------------------------------------------------------------------------------
Net investment in leveraged leases $ 61,403 $ 60,776
===========================================================================================================
</TABLE>
The components of income from leveraged leases, after the effects of
interest on nonrecourse debt and other related expenses, for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lease and other income $9,240 $11,376 $9,172
Income tax expense 3,143 8,363 2,757
- -----------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 43
FINOVA CAPITAL CORPORATION
The investment in direct financing leases at December 31 consisted of
the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rentals receivable $ 885,148 $ 91,153
Estimated residual values 86,191 23,121
Unearned income (196,505) (42,462)
- -------------------------------------------------------------------------------------------------------------
Investment in direct financing leases $ 774,834 $ 71,812
=============================================================================================================
</TABLE>
The investment in operating leases at December 31 consisted of the
following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cost of assets $ 526,191 $157,823
Accumulated depreciation (113,409) (10,601)
- -------------------------------------------------------------------------------------------------------------
Investment in operating leases $ 412,782 $147,222
=============================================================================================================
</TABLE>
The Company has a substantial number of loans and leases with payments
that fluctuate with changes in index rates, primarily Prime interest rates and
the London interbank offered rates ("LIBOR"). The investment in loans and
leases with floating interest rates (excluding nonaccruing contracts and
repossessed assets) at December 31 was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Receivables due on financing transactions $2,928,287 $1,661,602
Less unearned income (65,327) (25,928)
- -------------------------------------------------------------------------------------------------------------
Investment in loans and leases $2,862,960 $1,635,674
=============================================================================================================
</TABLE>
Interest earned from financing transactions with floating interest
rates was approximately $269,000,000 in 1994, $154,000,000 in 1993 and
$127,000,000 in 1992. The adjustments, which arise from changes in index rates,
can have a significant effect on interest earned from financing transactions;
however, the effects on interest margins earned and net income are substantially
offset by related interest expense changes on debt obligations with floating
interest rates. The Company's matched funded policy is more fully described in
Note E.
At December 31, 1994, the Company had a committed backlog of new
business of approximately $764,000,000 compared to $420,000,000 at December 31,
1993. The committed backlog includes lines of credit totaling $540,000,000 and
$272,000,000 for December 31, 1994 and 1993, respectively. Historically, the
Company has booked a substantial portion of its backlog, although there can be
no assurance that such trend will continue. Loan commitments and lines of
credit have generally the same credit risk in extending loans to borrowers.
These commitments are subject to the same credit quality and collateral
requirements involved in normal lending transactions. Commitments generally
have a fixed expiration and usually require payment of a fee.
RECEIVABLE TRANSFER AGREEMENTS (SECURITIZATIONS) -- During 1994, the
Company transferred its interest in approximately $125,400,000 of its direct
finance lease portfolio for $135,000,000. These transfers provide limited
recourse for credit losses to the Company and
20
<PAGE> 44
FINOVA CAPITAL CORPORATION
certain of its assets. As of December 31, 1994, $58,540,000 of finance lease
receivables were the sole collateral for certain limited recourse provisions. In
addition to such finance lease receivables, the Company has recourse exposure at
December 31, 1994 limited to $78,846,000. At December 31, 1994, an outstanding
allowance for estimated losses under these recourse provisions of $12,988,000 is
included in accounts payable and accrued expenses. The outstanding gross
receivable balance of transferred receivables completed and assumed in the
acquisitions in 1994 was $253,386,000 at December 31, 1994. The Company
services these lease contracts for the transferee and has deferred a portion of
the proceeds to be recognized as service fee income over the term of the
agreements.
NOTE C RESERVE FOR POSSIBLE CREDIT LOSSES
The following is an analysis of the reserve for possible credit losses
for the years ended December 31:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 64,280 $ 69,291 $ 87,600
Provision for possible credit losses 16,670 5,706 6,740
Write-offs (35,127) (12,575) (23,661)
Recoveries 1,898 717 749
Other (including addition of TriCon and Ambassador
reserves in 1994) 61,524 1,141 (2,137)
- --------------------------------------------------------------------------------------------------------------
Balance, end of year $109,245 $ 64,280 $ 69,291
==============================================================================================================
</TABLE>
Additionally, the Company has recorded accrued liabilities of
$12,988,000 that represent an allowance for estimated losses under certain
recourse provisions on $253,386,000 of assets securitized.
Write-offs by lines of business experienced by the Company during the
years ended December 31 are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993 (1) 1992 (1)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Communications Finance $ 8,300 $ 1,488 $ 1,500
Manufacturer and Dealer Services 7,018
European Financial Services 5,140 5,026 15,838
Corporate Finance 4,233 3,741 1,000
Resort Finance 2,730
Franchise Finance 2,247
Commercial Real Estate Finance 1,461 2,320 4,417
Commercial Equipment Finance 1,257
Factoring Services 1,148
Commercial Finance 774
Inventory Finance 442
Medical Finance 377
Other 906
- -------------------------------------------------------------------------------------------------------------
$35,127 $12,575 $23,661
=============================================================================================================
Write-offs as a percentage of investment in
financing transactions and securitizations 0.59% 0.44% 0.95%
=============================================================================================================
</TABLE>
(1) The 1993 and 1992 periods exclude line of business write-offs for
acquisitions made subsequent to such dates.
21
<PAGE> 45
FINOVA CAPITAL CORPORATION
An analysis of nonaccruing contracts and repossessed assets at December
31 is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993 (1)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonaccruing contracts:
Domestic $ 73,938 $ 13,263
Foreign 9,065 12,320
- -------------------------------------------------------------------------------------------------------------
Total nonaccruing contracts 83,003 25,583
Repossessed assets 85,758 77,024
- -------------------------------------------------------------------------------------------------------------
Total nonaccruing contracts and repossessed assets $168,761 $102,607
=============================================================================================================
Nonaccruing contracts and repossessed assets as a percentage of
investment in financing transactions and securitizations 2.9% 3.6%
=============================================================================================================
</TABLE>
(1) The 1993 period excludes nonaccruing and repossessed assets for
acquisitions made subsequent to such dates.
In addition to the repossessed assets included in the above table, the
Company had repossessed assets, with a total carrying amount of $55,106,000 and
$48,956,000 at December 31, 1994 and 1993 which earned income of $3,316,000 and
$2,700,000 during 1994 and 1993, respectively.
In the normal course of business, the Company has renegotiated and
modified certain contracts with respect to rates and other terms. The Company
had approximately $64,000,000, or 1.1% of ending funds employed and
securitizations in 1994, and $47,000,000, or 1.6% of ending funds employed in
1993, of these rewritten contracts requiring disclosure under the provisions of
SFAS No. 15, "Accounting by Debtors and Creditors for Troubled Debt
Restructurings". These contracts are yielding, on a weighted average basis, a
return of approximately 10.2%.
Had all contracts placed in a nonaccrual status outstanding at December
31, 1994, 1993 and 1992, remained accruing, interest earned would have been
increased by approximately $14,000,000, $11,000,000 and $12,600,000,
respectively. Income recognized on these accounts was approximately $1,742,000,
$1,732,000 and $589,000 in 1994, 1993 and 1992, respectively.
Included in repossessed assets are in-substance foreclosures of
$35,400,000 and $31,700,000 at December 31, 1994 and 1993, respectively, which
were accounted for in the same manner as collateral that had been formally
repossessed, even though the Company did not hold legal title.
NOTE D DEBT
The Company satisfies its short-term financing requirements from the
issuance of commercial paper supported by bank lines of credit, other bank loans
and public notes. The Company's commercial paper borrowings are supported by
unused long-term revolving bank credit agreements totaling $2,100,000,000. Under
the terms of these agreements, the Company has the option to periodically select
either domestic dollars or Eurodollars as the basis of borrowings. Interest is
based on the lenders' Prime rate for domestic dollar advances or London
interbank offered rates ("LIBOR") for Eurodollar advances. The agreements also
provide for a commitment fee on the unused credit. FINOVA currently maintains a
three-year revolving credit facility with numerous lenders, in the aggregate
principal amount of $1,000,000,000. Separately, FINOVA also has a 364 day
revolving credit facility with the same lenders in the aggregate principal
amount of $1,000,000,000. In addition, FINOVA has another 364 day facility with
the administrative agent for $100,000,000. The 364 day $1,100,000,000 revolving
credit agreements will be subject to renewal in 1995 while the three year
$1,000,000,000 credit facility is subject to renewal in 1997.
22
<PAGE> 46
FINOVA CAPITAL CORPORATION
The following information pertains to all short-term financing,
including bank loans and commercial paper issued by FINOVA
for the years ended December 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum amount of short-term debt outstanding
during year $2,024,441 $516,386 $504,829
Average short-term debt outstanding during year 1,050,358 336,672 322,176
Weighted average short-term interest rates
at end of year:
Short-term borrowings 6.2% 3.5% 4.1%
Commercial paper* 6.0% 3.6% 4.2%
Weighted average interest rate on short-term debt
outstanding during year* 4.8% 3.5% 4.3%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Exclusive of the cost of maintaining bank lines in support of
outstanding commercial paper and the effects of interest rate
conversion agreements.
Senior debt at December 31 was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper and short-term bank loans supported by unused long-term
bank revolving credit agreements, less unamortized discount $2,024,441 $ 516,386
Medium-term notes due to 2003, 4.5% to 10.2% 1,167,811 751,500
Term loans payable to banks due to 1996, 6.0% to 6.9% 130,000 150,000
Senior notes due to 2002, 6.75% to 16.0%, less unamortized discount 1,233,013 555,666
Nonrecourse installment notes due to 2002, 10.6% (assets of
$25,648 and $25,613, respectively, pledged as collateral) 18,089 18,944
- -------------------------------------------------------------------------------------------------------------
Total senior debt $4,573,354 $1,992,496
=============================================================================================================
</TABLE>
Subordinated debt outstanding at December 31, 1993, in the amount of
$86,790,000 (14.1%), was repaid in 1994.
Annual maturities of senior debt outstanding at December 31, 1994 due
through June 2003 (excluding the amount supported by the revolving credit
agreements expected to be renewed) approximate $568,767,000 (1995), $399,116,000
(1996), $358,137,000 (1997), $347,960,000 (1998), $334,324,000 (1999) and
$540,609,000 (thereafter).
The agreements pertaining to senior debt and revolving credit
agreements of FINOVA include various restrictive covenants and require the
maintenance of certain defined financial ratios with which FINOVA has complied.
Under one such covenant, dividend payments are limited to 50 percent of
accumulated earnings after December 31, 1991. As of December 31, 1994, FINOVA
had $24,383,000 of excess accumulated earnings available for distribution.
Total interest paid is not significantly different from interest
expense.
23
<PAGE> 47
FINOVA CAPITAL CORPORATION
NOTE E DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into interest rate swaps and interest rate hedge
agreements as part of its interest rate risk management policy of match funding
its assets and liabilities. The derivative instruments utilized are
straightforward and involve little complexity. The Company continually monitors
its position relative to derivatives and utilizes derivative instruments for
non- trading purposes only.
The Company utilizes derivative instruments to minimize its exposure to
fluctuations in interest rates. The Company strives to minimize its overall
debt costs while limiting the short-term variability of interest expense and
funds required for debt service. To achieve this objective, the Company
diversifies its borrowing sources (short- and long-term debt with a fixed or a
variable rate) and maintains a portfolio that is matched funded. The Company's
matched funding policy generally requires that floating-rate assets be financed
with floating-rate liabilities and fixed-rate assets be financed with fixed-rate
liabilities. The Company's matched funding policy requires that the difference
between floating-rate liabilities and floating-rate assets, as measured as a
percent of investment in financing transactions ("funds employed"), should not
vary by more than 3% for any extended period. The amount of derivatives used is
a function of this 3% gap policy with the maturities of the derivatives being
correlated to the maturities of the assets being financed.
The notional amounts of derivatives do not represent amounts exchanged
by the parties and, thus, are not a measure of FINOVA's exposure through its use
of derivatives. The amounts exchanged are determined by reference to the
notional amounts and the other terms of the derivatives.
Under interest rate swaps, the Company agrees to exchange with the
counterparty, at specified intervals, the payment streams calculated on a
specified notional amount, with at least one stream based on a floating interest
rate. Generic swap notional amounts do not change for the life of the
contract. Amortizing swap notional amounts amortize over the life of the
transaction. Basis swaps involve the exchange of floating-rate indices, such as
the Prime rate, the Commercial Paper Composite rate and LIBOR.
The Company purchased interest rate hedge agreements to reduce the
impact of increases in interest rates on its floating- rate debt. These
agreements effectively lock in a spread of approximately 2.3% between the
Company's borrowing rate, LIBOR, and its lending rate (Prime based). In early
1995, the Company further protected its margins on floating-rate transactions by
entering into basis swaps with a notional amount of $750,000,000 to lock in the
spread between the Company's lending and borrowing rates. With these
agreements, the Company protected its margins on $1,500,000,000 of floating-rate
transactions (or approximately 50% of its floating-rate liabilities).
The Company's off-balance sheet derivative instruments involve credit
and interest rate risks. The credit risk would be the nonperformance by the
counterparties to the financial instruments. All financial instruments have
been entered into with major financial institutions, which are expected to fully
perform under the terms of the agreements, thereby mitigating the credit risk
from the transactions, although there can be no assurance that any such
institution will perform under its agreement. The Company's derivative policy
stipulates that the maximum exposure to any one counterparty, relative to the
derivative products, is limited on a net basis, to 10% of the Company's
outstanding debt at the time of that transaction. Interest rate risks relate to
changes in interest rates and the impact on earnings. The Company mitigates
interest rate risks through its matched funding policy.
The use of derivatives decreased interest expense by $13,655,000, a
decrease in the aggregate cost of funds of 0.4% in 1994, $25,875,000, a decrease
in the aggregate cost of funds of 1.3% in 1993 and $8,155,000, a decrease in the
aggregate cost of funds of 0.4% in 1992. These reductions in interest expense
from off-balance sheet derivatives effectively alters on-balance sheet costs and
must be viewed as total interest rate management. At December 31, 1994 and
1993, unamortized premiums amounted to $1,875,000 and $3,138,000, respectively.
There were no deferred gains or losses associated with derivatives.
The following table provides annual maturities and weighted-average
interest rates for each significant derivative product type. The rates
presented are as of December 31, 1994. To the extent that rates change,
variable interest information will change.
24
<PAGE> 48
FINOVA CAPITAL CORPORATION
DERIVATIVE MATURITIES AND WEIGHTED-AVERAGE INTEREST RATES
(Dollars in Millions)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Maturities of Derivative Products
December 31, -----------------------------------------------------------------
1994 1995 1996 1997 1998 1999 Thereafter
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RECEIVED FIXED-RATE SWAPS:
Notional value $1,190 $ 40 $ 100 $ 275 $ 325 $ 250 $ 200
Weighted average received rate 6.66% 5.52% 5.34% 6.70% 6.83% 6.82% 7.00%
Weighted average pay rate 6.56% 7.00% 6.50% 6.50% 6.50% 6.50% 6.74%
PAY FIXED-RATE GENERIC SWAPS:
Notional value $ 780 $ 30 $ 325 $ 225 $ 100 $ 50 $ 50
Weighted average receive rate 6.58% 7.00% 6.56% 6.50% 6.75% 6.50% 6.50%
Weighted average pay rate 7.43% 9.05% 6.89% 7.32% 8.37% 7.98% 8.09%
PAY FIXED-RATE AMORTIZING SWAPS:
Notional value $ 242 $ 154 $ 70 $ 18
Weighted average receive rate 6.03% 6.03% 6.03% 6.03%
Weighted average pay rate 5.04% 4.83% 5.20% 6.18%
INTEREST RATE HEDGE AGREEMENTS:
Notional value $ 750 $ 750
Weighted average receive rate 2.50% 2.50%
Weighted average pay rate 2.50% 2.50%
BASIS SWAPS:
Notional value $ 254 $ 126 $ 128
Weighted average receive rate 5.91% 5.74% 6.08%
Weighted average pay rate 6.73% 6.52% 6.93%
TOTAL NOTIONAL VALUE $3,216 $ 350 $1,245 $ 518 $ 553 $ 300 $ 250
=====================================================================================================================
Total weighted average rates on s
Receive rate 5.56% 5.95% 3.99% 6.59% 6.64% 6.77% 6.90%
=====================================================================================================================
Pay rate 5.72% 6.05% 4.12% 6.85% 6.94% 6.75% 7.01%
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Pay Fixed- Pay Fixed-
Received Rate Rate Interest
Fixed-Rate Generic Amortizing Rate Hedge Basis
Swaps Swaps Swaps Agreements Swaps TOTAL
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1991 $ 50 $205 $ $ $ $ 255
Expired (50) (50)
Additions 890 890
- ------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1992 890 205 1,095
Expired (50) (25) (75)
Additions 300 750 1,050
- ------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1993 1,140 180 750 2,070
Expired (50) (50) (148) (248)
Additions 100 650 390 254 1,394
- ------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1994 $1,190 $780 $ 242 $750 $254 $3,216
==================================================================================================================
</TABLE>
NOTE F REDEEMABLE PREFERRED STOCK
In connection with the Spin-Off, the Company issued 2,500 shares of its
Series A Redeemable Preferred Stock (the "preferred stock") to a subsidiary of
Dial for $25,000,000. In July 1993, FINOVA Group acquired all 2,500 shares of
the preferred stock. In March 1994, FINOVA Group contributed all 2,500 shares
of the preferred stock to FINOVA as additional paid in capital.
NOTE G INCOME TAXES
Prior to the Spin-Off, Dial credited or charged the Company an amount
equal to the tax reductions realized or tax payments made by Dial as a result of
including the Company's tax results and credits in Dial's consolidated federal
and other applicable income tax returns. In all other respects, the Company's
tax provisions have been computed on a separate return basis.
25
<PAGE> 49
FINOVA CAPITAL CORPORATION
The consolidated provision (benefit) for income taxes consist of the
following for the years ended December 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States:
Federal $31,412 $ 4,976 $16,265
State 6,436 1,254 2,069
Foreign (156) 346
- -------------------------------------------------------------------------------------
37,848 6,074 18,680
- -------------------------------------------------------------------------------------
Deferred:
United States 11,682 21,608 (2,377)
Foreign (88) (2,460)
- -------------------------------------------------------------------------------------
11,594 21,608 (4,837)
- -------------------------------------------------------------------------------------
Provision for income taxes $49,442 $27,682 $13,843
=====================================================================================
</TABLE>
Income taxes paid in 1994, 1993 and 1992 amounted to approximately
$39,055,000, $10,511,000 and $19,096,000, respectively.
The significant components of deferred tax liabilities and deferred tax
assets at December 31, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Deferred income from leveraged leases $226,115 $223,006
Deferred income from lease financing 32,833 35,950
Other 8,353 622
- ------------------------------------------------------------------------------------------------
Gross deferred tax liability 267,301 259,578
- ------------------------------------------------------------------------------------------------
Deferred tax assets:
Reserve for possible credit losses 29,363 27,272
Investment in foreign subsidiary carrying value difference 23,193 23,193
Accrued expenses 1,462 2,233
Other 3,984 9,175
- ------------------------------------------------------------------------------------------------
Gross deferred tax asset 58,002 61,873
- ------------------------------------------------------------------------------------------------
Net deferred tax liability $209,299 $197,705
================================================================================================
</TABLE>
26
<PAGE> 50
FINOVA CAPITAL CORPORATION
The federal statutory income tax rate is reconciled to the effective
income tax rate as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 34.0%
State income taxes 5.1% 3.4% 2.7%
Foreign tax effects 1.2% (2.1%) (2.4%)
Municipal income (1.2%)
Recognition of tax benefit on refinancing charges
accrued in 1991 (6.2%)
Other (0.1%) (0.7%) (0.7%)
- ------------------------------------------------------------------------------------------------------------
Current provision for income taxes 40.0% 35.6% 27.4%
Adjustments to deferred taxes 7.6%
- ------------------------------------------------------------------------------------------------------------
Provision for income taxes 40.0% 43.2% 27.4%
============================================================================================================
</TABLE>
NOTE H PENSION AND OTHER BENEFITS
PENSION BENEFITS
Net periodic pension cost (income) for the years ended December 31,
included the following components:
<TABLE>
<CAPTION>
United States Foreign
- --------------------------------------------------------------------------------------------------------------
1994 1993 1992 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost benefits earned during period $ 1,508 $ 603 $ 493 $ 66 $ 215 $ 341
Interest cost on projected benefit 1,217 638 499 308 293 345
obligation
Actual return on plan assets 78 (1,504) (1,071) 242 (736) (382)
Net amortization and deferral (1,538) 625 303 (544) 459 79
- --------------------------------------------------------------------------------------------------------------
Periodic pension cost 1,265 362 224 72 231 383
Curtailment loss (gain) 135 (777) 21
- --------------------------------------------------------------------------------------------------------------
Net periodic pension cost (income) $ 1,400 $ (415) $ 224 $ 93 $ 231 $ 383
==============================================================================================================
</TABLE>
Assumptions regarding the determination of net periodic pension cost
(income) for the years ended December 31, were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
United States Foreign
- ------------------------------------------------------------------------------------------------------------
1994 1993 1992 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate for obligation 7.75% 8.50% 9.00% 8.00% 9.00% 9.00%
Rate of increase in compensation levels 4.25% 5.50% 6.00% 6.00% 8.00% 8.00%
Long-term rate of return on assets 9.50% 9.50% 9.50% 8.00% 9.00% 9.00%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 51
FINOVA CAPITAL CORPORATION
The following table indicates the plans' funded status and amounts
recognized in the Company's consolidated balance sheet at December 31, 1994 and
1993:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
United States Foreign
- -------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations $13,200 $12,000 $3,785 $3,440
=============================================================================================================
Accumulated benefit obligations $13,800 $12,600 $3,785 $3,440
=============================================================================================================
Projected benefit obligation $14,800 $14,400 $3,785 $3,755
Market value of plan assets, primarily equity and fixed
income securities 17,134 17,606 3,785 3,781
- -------------------------------------------------------------------------------------------------------------
Plan assets over projected benefit obligation $ 2,334 $ 3,206 $ -- $ 26
Unrecognized transition asset (390) (451) (105) (109)
Unrecognized prior service cost reduction (1,088) 404 72
Unrecognized net loss 2,707 1,804 105 101
- -------------------------------------------------------------------------------------------------------------
Prepaid pension costs $ 3,563 $ 4,963 $ -- $ 90
=============================================================================================================
</TABLE>
Assumptions regarding the funded status of pension plans as of December
31, 1994 and 1993 are:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
United States Foreign
- ------------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate for obligation 8.50% 7.75% 8.50% 8.00%
Rate of increase in compensation levels 5.00% 4.25% -- 6.00%
Long-term rate of return on assets 9.50% 9.50% -- 9.00%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
There are restrictions on the use of excess pension plan assets in the
event of a defined change in control of the Company.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective January 1, 1993, the Company adopted the provisions of SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
("OPEB"), which requires the accrual of retiree benefits during the years the
employees provide services. OPEB requires the recognition of a transition
obligation that represents the aggregate amount that would have accrued in the
years prior to adoption of OPEB had the standard been in effect for those years.
The Company elected to accrue the transition obligation over 20 years. The
adoption of SFAS No. 106 has no cash impact because the plans are not funded and
the pattern of benefit payments did not change.
28
<PAGE> 52
FINOVA CAPITAL CORPORATION
Net periodic postretirement benefit cost for the year ended December
31, 1994 and 1993 included the following components:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost benefits earned during period $159 $ 55
Interest cost on accumulated postretirement benefit obligation 244 143
Net amortization and deferral 140 85
- -------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $543 $283
=================================================================================================
</TABLE>
Assumptions regarding the determination of net periodic postretirement
benefit costs at December 31, 1994 and 1993 were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Discount rate for obligation 7.75% 8.50%
Rate of increase in compensation levels 4.25% 5.50%
Rate of increase in health care costs (1) 12.25% 14.00%
==================================================================================================
</TABLE>
(1) Rate of increase in health care costs was 12.25% in 1994, scaled down
to 6.25% by 2000 and thereafter.
The following table indicates the amounts recognized in the Company's
consolidated balance sheet at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 1,257 $ 1,680
Actives eligible for full benefits 183 230
Other actives 2,125 370
- -------------------------------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation 3,565 2,280
Unrecognized transition obligation (1,523) (1,607)
Unrecognized prior service cost (1,547)
Unrecognized net gain (loss) 264 (437)
- -------------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $ 759 $ 236
=======================================================================================================
</TABLE>
Assumptions regarding the accrued postretirement benefit cost at
December 31, 1994 and 1993 were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Discount rate for obligation 8.50% 7.75%
Rate of increase in compensation levels 5.00% 4.25%
Rate of increase in health care costs (1) 12.25% 13.25%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Rate of increase in health care costs was 12.25% in 1994, scaled down
to 6.25% by 2000 and thereafter.
A one percentage point increase in the assumed health care cost trend
rate for each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by approximately 5% and the ongoing annual
expense by approximately 3%.
29
<PAGE> 53
FINOVA CAPITAL CORPORATION
NOTE I TRANSACTIONS WITH DIAL
Pursuant to the Spin-Off, the Company and Dial entered into several
agreements, including the Distribution Agreement, Tax Sharing Agreement,
Sublease Agreement, Interim Services Agreement and Trademark Assignment and
Agreement. These agreements do not result in significant additional expenses
over comparable third party services.
The Company leases its corporate office facilities from Dial under an
agreement which expires March 31, 2001. Annual rentals under the lease are
approximately $1,616,000 to 1996 and $1,806,000 thereafter.
NOTE J LITIGATION AND CLAIMS
The Company is party either as plaintiff or defendant to various
actions, proceedings and pending claims, including legal actions, certain of
which involve claims for compensatory, punitive or other damages in significant
amounts. Such litigation, in part, often results from the Company's attempts to
enforce its lending agreements against borrowers and other parties to such
transactions. Litigation is subject to many uncertainties and it is possible
that some of the legal actions, proceedings or claims referred to above could be
decided against the Company. Although the ultimate amount for which the Company
may be held liable is not ascertainable, the Company believes that any resulting
liability should not materially affect the Company's financial position or
results of operations.
NOTE K FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company using available market
information and valuation methodologies described below. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein may not be indicative
of the amounts that the Company could realize in a current market exchange. The
use of different market assumptions or valuation methodologies may have a
material effect on the estimated fair value amounts.
The carrying amounts and estimated fair values of the Company's
financial instruments are as follows for the years ended December 31:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1994 1993
- ------------------------------------------------------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance Sheet -
Financial Instruments:
Assets:
Loans and other financing contracts $3,810,781 $3,829,881 $2,192,192 $2,172,154
Liabilities:
Senior debt 4,573,354 4,510,043 1,992,496 2,149,387
Subordinated debt -- -- 86,790 88,390
Off-Balance Sheet -
Financial Instruments:
Interest rate swaps -- (47,937) -- 37,202
Interest rate hedge agreements -- (4,049) -- (841)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The carrying values of cash and cash equivalents, factored receivables,
accounts payable and accrued expenses, due to factored clients and interest
payable approximate fair values due to the short-term maturities of these
instruments.
30
<PAGE> 54
FINOVA CAPITAL CORPORATION
The methods and assumptions used to estimate the fair values of other
financial instruments are summarized as follows:
LOANS AND OTHER FINANCING CONTRACTS:
The fair value of loans and other financing contracts was
estimated by discounting expected cash flows using the current rates at
which loans of similar credit quality, size and remaining maturity
would be made as of December 31, 1994 and 1993. Management believes
that the risk factor embedded in the entry-value interest rates
applicable to performing loans for which there are no known credit
concerns results in a fair valuation of such loans on an entry value
basis. As of December 31, 1994 and 1993, the fair value of nonaccruing
contracts with a carrying amount of $83,003,000 and $25,583,000,
respectively, was not estimated because it is not practicable to
reasonably assess the credit adjustment that would be applied in the
marketplace for such loans. As of December 31, 1994 and 1993, the
carrying amount of loans and other financing contracts excludes
repossessed assets with a total carrying amount of $140,864,000 and
$125,980,000, respectively.
SENIOR AND SUBORDINATED DEBT:
The fair value of senior and subordinated debt was estimated by
discounting future cash flows using rates currently available for debt
of similar terms and remaining maturities. The carrying values of
commercial paper and borrowings under revolving credit facilities, if
any, were assumed to approximate fair values due to their short
maturities.
INTEREST RATE SWAPS:
The fair values of interest rate swaps is based on quoted
market prices obtained from participating banks and dealers for
transactions of similar remaining duration.
INTEREST RATE HEDGE AGREEMENTS:
The fair values of interest rate hedge agreements is based on
quoted market prices obtained from participating banks and dealers for
transactions of similar remaining duration.
The fair value estimates presented herein were based on information
available as of December 31, 1994 and 1993. Although management is not aware of
any factors that would significantly affect the estimated fair values, such
values have not been updated since December 31, 1994 and 1993; therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.
NOTE L SELLING, ADMINISTRATIVE AND OTHER OPERATING EXPENSES:
The following represents a summary of the major components of selling,
administrative and other operating expenses for the three years ended December
31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and employee benefits $ 63,891 $29,502 $27,247
Problem account costs 13,505 11,822 7,642
Depreciation and amortization 9,733 2,802 1,970
Professional services 7,357 2,201 2,868
Occupancy expense 6,124 4,160 4,494
Travel and entertainment 6,099 2,182 1,661
Other 5,596 5,489 4,846
- -------------------------------------------------------------------------------------------------------
$112,305 $58,158 $50,728
=======================================================================================================
</TABLE>
31
<PAGE> 55
FINOVA CAPITAL CORPORATION
NOTE M PURCHASE OF AMBASSADOR FACTORS AND TRICON CAPITAL CORPORATION.
On February 14, 1994, FINOVA acquired Ambassador, which represented
Fleet Financial Group, Inc.'s ("Fleet") factoring and asset based lending
subsidiary. The cash purchase price of the acquisition was $246,285,000, which
included repayment of $170,000,000 intercompany balance due from Ambassador to
Fleet. In addition, FINOVA assumed $101,471,000 due to factored clients,
$5,851,000 of accrued liabilities and $10,987,000 of additional liabilities and
transaction costs. The acquisition has been accounted for as a purchase and
created approximately $40,800,000 of goodwill, which is being amortized on a
straight line basis over 20 years. The amortization of goodwill is tax
deductible.
The acquisition was financed with proceeds received from the sale of
FINOVA Group's discontinued mortgage insurance subsidiary and cash generated
from operations. FINOVA Group, simultaneous with the acquisition, increased its
investment in FINOVA by contributing $40,000,000 of intercompany loans as
additional paid in capital of FINOVA.
On April 30, 1994, FINOVA acquired all of the stock of TriCon from Bell
Atlantic Corporation ("Bell Atlantic"), in an all- cash transaction. The cash
purchase price of the acquisition was $344,212,000. In addition, FINOVA assumed
outstanding indebtedness and liabilities of TriCon totaling $1,500,650,000 and
incurred additional liabilities and acquisition costs of $41,301,000. The
acquisition has been accounted for as a purchase and created approximately
$102,000,000 of goodwill, which is being amortized on a straight line basis over
20 years. The amortization of goodwill is tax deductible.
The cash purchase price was financed initially with the proceeds from
the issuance of $300,000,000 of debt and the remainder with internally generated
funds. A portion of the interim debt was replaced with the net proceeds from a
public offering completed in May 1994 of 8,050,000 shares of the FINOVA Group's
common stock (the "Offering"). The net proceeds, along with approximately
$88,000,000 of intercompany loans, were contributed from FINOVA Group to the
Company as additional paid in capital.
The following Pro Forma Statements of Consolidated Income (unaudited)
for the years ended December 31, 1994 and 1993 have been prepared to reflect net
income as adjusted to reflect the acquisitions of Ambassador and TriCon as if
such acquisitions had occurred on January 1, 1994 and 1993, respectively, and
give effect to the Offering as of such dates. The Pro Forma Statements of
Consolidated Income are unaudited and are not necessarily indicative of the
results that would have occurred if the acquisitions had been consummated as of
January 1, 1994 or January 1, 1993, nor are they necessarily indicative of the
results of future operations.
32
<PAGE> 56
FINOVA CAPITAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
YEAR ENDED DECEMBER 31, 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Historical (1) ProForma Adjustments(1)
- -------------------------------------------------------------------------------------------------------------------------------
TriCon
January
Ambassador thru
January April Pro
Company 1994 1994 Ambassador TriCon Forma
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned from financing transactions $503,351 $3,072 $74,263 $ $(3,158) (7) $577,528
Interest expense and depreciation 259,666 563 37,711 131 (2) 949 (9) 299,020
- -------------------------------------------------------------------------------------------------------------------------------
Interest margins earned 243,685 2,509 36,552 (131) (4,107) 278,508
Provision for possible credit losses 16,670 500 7,749 24,919
- -------------------------------------------------------------------------------------------------------------------------------
Net interest margins earned 227,015 2,009 28,803 (131) (4,107) 253,589
Gains on securitizations and sale of assets 9,045 1,303 10,348
- -------------------------------------------------------------------------------------------------------------------------------
236,060 2,009 30,106 (131) (4,107) 263,937
Selling, administrative and other operating expenses 112,305 634 18,198 249 (3) 1,700 (10) 133,422
83 (4) 253 (8)
- -------------------------------------------------------------------------------------------------------------------------------
123,755 1,375 11,908 (463) (6,060) 130,515
Income taxes 49,442 649 4,059 (185) (5) (2,424) (11) 51,442
(99) (6)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 74,313 $ 726 $ 7,849 $(179) $(3,636) $ 79,073
===============================================================================================================================
</TABLE>
FINOVA CAPITAL CORPORATION
PRO FORMA STATEMENT OF CONSOLIDATED INCOME
YEAR ENDED DECEMBER 31, 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma Adjustments
- --------------------------------------------------------------------------------------------------------------------------------
Pro
Company Ambassador TriCon Ambassador TriCon Forma
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earned from financing transactions $255,216 $35,235 $245,300 $ $ (7,667) (7) $529,584
1,500 (8)
Interest expense and depreciation 132,668 5,780 121,793 3,026 (2) 3,514 (9) 266,781
- --------------------------------------------------------------------------------------------------------------------------------
Interest margins earned 122,548 29,455 123,507 (3,026) (9,681) 262,803
Provision for possible credit losses 5,706 7,177 21,634 34,517
- --------------------------------------------------------------------------------------------------------------------------------
Net interest margins earned 116,842 22,278 101,873 (3,026) (9,681) 228,286
Gains on sale of assets 5,439 5,439
- --------------------------------------------------------------------------------------------------------------------------------
122,281 22,278 101,873 (3,026) (9,681) 233,725
Selling, administrative and other operating
expenses 58,158 8,125 48,128 2,990 (3) 5,100 (10) 124,260
1,000 (4) 759 (8)
- --------------------------------------------------------------------------------------------------------------------------------
64,123 14,153 53,745 (7,016) (15,540) 109,465
Income taxes 27,682 6,481 22,164 (2,806) (5) (6,242) (11) 43,215
(820) (6) (3,244) (12)
- --------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 36,441 7,672 31,581 (3,390) (6,054) 66,250
Cumulative effect of changes in accounting
principles 480 5,530 6,010
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 36,441 $ 8,152 $ 37,111 $(3,390) $ (6,054) $ 72,260
================================================================================================================================
</TABLE>
33
<PAGE> 57
FINOVA CAPITAL CORPORATION
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Pro forma adjustments included in the Pro Forma Statement of
Consolidated Income for the year ended December 31, 1994 related to the
acquisitions of Ambassador and TriCon present the effects of the one
month and four months, respectively, not included in the Company's
historical financial statements.
ACQUISITION OF AMBASSADOR
(2) To record the estimated interest expense ($131,000 - 1994; $3,026,000 -
1993) arising from the debt incurred to fund the acquisition and the
repayment of the intercompany payable due to Fleet. The adjustments
are partially offset by interest saved as a result of the equity
contribution by FINOVA Group of the intercompany loans.
(3) To record tax deductible amortization of goodwill ($249,000 - 1994;
$2,990,000 - 1993) based on an amortization period of twenty years and
amortization of the covenant not to compete over one year.
(4) To record administrative expenses for additional employees and general
overhead ($83,000 - 1994; $1,000,000 - 1993).
(5) To record the income tax effect ($185,000 - 1994; $2,806,000 - 1993) of
Notes (2), (3) and (4) at the Company's effective incremental income
tax rate of 40%.
(6) To adjust income taxes for the lower state income tax rate applicable
to the Company ($99,000 - 1994; $820,000 - 1993).
ACQUISITION OF TRICON
(7) To reduce interest earned from financing transactions for the income
recorded on assets not purchased by the Company in 1994 and 1993
($3,158,000 - 1994; $7,667,000 - 1993).
(8) To reflect base fees ($1,500,000 - 1993) and incremental costs
($253,000 - 1994; $759,000 - 1993) related to an agreement to manage
leveraged leases for Bell Atlantic by TriCon.
(9) To record interest expense ($949,000 - 1994; $3,514,000 - 1993)
resulting from the additional debt issued to purchase TriCon and
certain debt to Bell Atlantic incurred to fund a deferred tax payment
and dividends, reduced by the interest savings applicable to the debt
not transferred in the TriCon acquisition and interest saved as a
result of the equity contribution by FINOVA Group of the intercompany
loans.
(10) To record tax deductible amortization of goodwill ($1,700,000 - 1994;
$5,100,000 - 1993) based on an amortization period of twenty years.
(11) To record the income tax effect ($2,424,000 - 1994; $6,242,000 - 1993)
of Notes (7) through (10) at the Company's effective incremental income
tax rate of 40%.
34
<PAGE> 58
FINOVA CAPITAL CORPORATION
(12) To reduce TriCon's income taxes for the effect of increases in income
tax rates for 1993 (principally the increase in the federal tax rate)
due to the deferred tax payment and the new tax basis in assets at the
beginning of the pro forma period ($3,244,000).
SUPPLEMENTAL SELECTED FINANCIAL DATA
CONDENSED QUARTERLY RESULTS (UNAUDITED)
(Dollars in Thousands)
The following represents the condensed quarterly results for the two
years ended December 31, 1994:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest earned from financing transactions:
1994 $73,961 $121,891 $147,649 $159,850
1993 59,514 63,948 64,944 66,810
- --------------------------------------------------------------------------------------------------------
Interest expense:
1994 33,862 53,648 65,881 69,538
1993 30,568 31,423 30,788 33,373
- --------------------------------------------------------------------------------------------------------
Gains on securitizations and sale of assets:
1994 3 4,500 1,169 3,373
1993 2,061 179 -- 3,199
- --------------------------------------------------------------------------------------------------------
Non-interest expenses (includes provision for
possible credit losses):
1994 21,448 42,176 46,151 55,937
1993 17,591 16,614 15,883 20,292
- --------------------------------------------------------------------------------------------------------
Net income:
1994 11,596 17,517 22,056 23,144
1993 8,545 10,323 6,750 (1) 10,823
========================================================================================================
</TABLE>
(1) Income from continuing operations and net income for the third quarter
of 1993 included an adjustment of $4,857,000 representing the effect of
federal and state income tax rate increases applicable to deferred
income taxes generated by the Company's leveraged lease portfolio.
35
<PAGE> 59
FINOVA CAPITAL CORPORATION
AVERAGE BALANCES/INTEREST MARGIN/AVERAGE ANNUAL RATES (UNAUDITED)
(Dollars in Thousands)
The following represents the breakdown of the Company's average balance
sheet, interest margins and average annual rates for the years ended December
31, 1994 and 1993:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 (1) 1993
- ---------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 25,038 $ $ 10,990 $
Investment in financing transactions 4,446,745 466,614 11.5% (2) 2,666,208 248,700 10.6% (2)
Less reserve (97,704) (66,786)
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in financing transactions - net 4,349,041 2,599,422
Other assets and deferred charges 182,412 47,200
- ---------------------------------------------------------------------------------------------------------------------------------
$4,556,491 $2,657,612
=================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Other liabilities $ 249,463 $ 130,612
Senior and subordinated debt 3,468,498 222,929 6.4% 1,980,562 126,152 6.4%
Deferred income taxes 209,088 185,898
- ---------------------------------------------------------------------------------------------------------------------------------
3,927,049 2,297,072
Redeemable preferred stock 7,692 25,000
Stockholders' equity 621,750 335,540
- ---------------------------------------------------------------------------------------------------------------------------------
$4,556,491 $2,657,612
=================================================================================================================================
Interest income/average earning assets (2) 466,614 11.5% 248,700 10.6%
Interest expense/average earning assets (2) (3) 222,929 5.5% 126,152 5.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Interest margins earned (3) $243,685 6.0% $122,548 5.2%
=================================================================================================================================
</TABLE>
(1) Includes financial results from the acquisitions of Ambassador
(February 14, 1994) and TriCon (April 30, 1994).
(2) Average earning assets ($4,064,971 and $2,350,019 for 1994 and 1993,
respectively) are net of average deferred taxes on leveraged leases and
average nonaccruing assets.
(3) For the year ended December 31, 1994, excluding the impact of
derivatives, interest expense would have been $236,584 or 5.8% of
average earning assets and interest margins earned would have been
$230,030 or 5.7% of average earning assets. For the year ended
December 31, 1993, excluding the impact of derivatives, interest
expense would have been $152,027 or 6.5% of average earning assets and
interest margins earned would have been $96,673 or 4.1% of average
earning assets.
36
<PAGE> 60
FINOVA CAPITAL CORPORATION
COMMISSION FILE NUMBER 94-1278569
EXHIBIT INDEX
DECEMBER 31, 1994 FORM 10-K
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(3.A) Certificate of Incorporation, as amended through the date of this filing.*
(3.B) By-Laws, as amended through the date of this filing.*
(4.A) Instruments with respect to issues of long-term debt have not been filed as exhibits to
this Annual Report on Form 10-K if the authorized principal amount of any one of such issues does
not exceed 10% of total assets of the Company and its subsidiaries on a consolidated basis. The Company
agrees to furnish a copy of each such instrument to the Securities and Exchange Commission upon request.
(4.B) Form of Common Stock Certificate of the Company*.
(4.C) Relevant portions of the Company's Certificate of Incorporation and Bylaws included in Exhibits 3.A and
3.B above, respectively, are hereby incorporated by reference.
(4.D) Rights Agreement dated as of February 15, 1992 between the Company and the Rights Agent named therein
(incorporated by reference from the Company's Registration Statement on Form S-1, SEC File No. 33-45452
(the "Registration Statement"), Annex V to Prospectus and Exhibit 4.1).
(4.E) Indenture dated as of November 1, 1990 between FINOVA and the Trustee named therein (incorporated by
reference from Greyhound Financial Corporation's Registration Statement on Form S-3,
Registration No. 33-37743, Exhibit 4).
(4.F) Fourth Supplemental Indenture dated as of April 17, 1992 between FINOVA and the Trustee named therein,
supplementing the Indenture referenced in Exhibit 4.E above, is hereby incorporated by reference
from Greyhound Financial Corporation's Annual Report on Form 10-K for the year 1992 (the "1992 10-K"), Exhibit 4.F.
(4.G) Form of Indenture dated as of September 1, 1992 between FINOVA and the Trustee names therein (incorporated
by reference from the Greyhound Financial Corporation Registration Statement on Form S-3,
Registration No. 33-51216, Exhibit 4).
(10.A) Sixth Amendment and Restatement dated as of May 16, 1994 of the Credit Agreement dated as of May 31, 1976
among FINOVA and the lender parties thereto, and Bank of America National Trust and Savings Association,
Bank of Montreal, Chemical Bank, Citibank, N.A. and National Westminster Bank USA, as agents (the "Agents")
and Citibank, N.A., as Administrative Agent (incorporated by reference from the Corporation's Current Report on
Form 8-K dated May 23, 1994, Exhibit 10.1).
(10.A.1) First Amendment dated as of September 30, 1994, to the Sixth Amendment and Restatement, noted in 10.A above.*
(10.B) Credit Agreement (Short-Term Facility) dated as of May 16, 1994 among FINOVA, the Lender parties thereto, the
Agents and Citibank, N.A., as Administrative Agent (incorporated by reference from the Company's Report on
Form 8-K dated May 23, 1994, Exhibit 10.2).
(10.B.1) First Amendment dated as of September 30, 1994 to the Credit Agreement noted in 10.B above.*
(10.C) Interim Services Agreement dated January 28, 1992 among the Company, The Dial Corp and others, is hereby
incorporated by reference from the 1992 10-K, Exhibit 10.JJ.
(10.D) Tax Sharing Agreement dated February 19, 1992 among the Company, The Dial Corp and others, is hereby incorporated
by reference from the 1992 10-K, Exhibit 10.KK.
(10.E) Certificate of Designations of Series A Redeemable Preferred Stock of FINOVA, dated March 17, 1992, is hereby
incorporated by reference from the 1992 10-K, Exhibit 10.MM.
(10.F) Sublease dated as of April 1, 1991, among the Company, The Dial Corp and others, relating to the Company's
principal office space, is hereby incorporated by reference from the 1992 10-K, Exhibit 10.NN.
(10.G) Stock Purchase Agreement between Bell Atlantic TriCon Leasing Corporation and Greyhound Financial Corporation
dated as of March 4, 1994 is hereby incorporated by reference from the 1993 10-K, Exhibit 10.F
(10.H) Form of Assets Purchase Agreement between Bell Atlantic TriCon Leasing Corporation and TriCon Capital Corporation
is hereby incorporated by reference from the 1993 10-K, Exhibit 10.G
(10.I) Form of Distribution Agreement among the Company, Greyhound Financial Corporation, The Dial Corp and certain
other parties named therein, dated as of January 28, 1992 (incorporated by reference from the Registration
Statement, Annex II to the Prospectus and Exhibit 2.1).
(10.J) Asset Purchase Agreement dated as of February 3, 1995 between Transamerica Business Credit Corporation and FINOVA.*
(10.K) Stock Purchase Agreement among The FINOVA Group Inc., FINOVA and GE Capital Mortgage Corporation dated
May 26, 1993, incorporated by reference from the Company's Report on Form 8-K dated July 15, 1993, Exhibit 2.
(12) Computation of Ratio of Income to Combined Fixed Charges and Preferred Stock Dividends.*
(23) Independent Auditors' Consent.*
(27) Financial Data Schedule.*
* Filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 3.A.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FINOVA CAPITAL CORPORATION
1. The name of the corporation (which is hereinafter referred to as the
"Corporation") is "FINOVA Capital Corporation."
2. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on July 21, 1965, under the name
Northern Investment Corporation.
3. This Amended and Restated Certificate of Incorporation has been duly
proposed by resolutions adopted and declared advisable by the Board of Directors
of the Corporation, duly adopted by written consent of the sole stockholder of
the Corporation in lieu of a meeting and vote and duly executed and acknowledged
by the officers of the Corporation in accordance with the provisions of Sections
103, 228, 242 and 245 of the General Corporation Law of the State of Delaware
and, upon filing with the Secretary of State in accordance with Section 103,
shall thenceforth supersede the original Certificate of Incorporation and shall,
as it may thereafter be amended in accordance with its terms and applicable law,
be the Certificate of Incorporation of the Corporation.
4. The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
ARTICLE I
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
FINOVA Capital Corporation
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is The Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the Corporation's registered agent
at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware.
ARTICLE IV
The Corporation shall be authorized to issue 105,000 shares of capital
stock, of which 100,000 shares shall be shares of Common Stock, $1.00 par value
("Common Stock"), and 5,000 shares shall be shares of Preferred Stock, $10,000
par value ("Preferred Stock").
Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Corporation is hereby authorized to
fix the voting rights, if any, designations, powers, preferences and the
relative, participation, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, of any unissued series of
Preferred Stock; and to fix the number of shares constituting such series, and
to increase or decrease the number of shares of any such series (but not below
the number of shares thereof then outstanding).
Except as otherwise provided by law or by the resolution or resolutions
adopted by the Board of Directors designating the rights, powers and preferences
of any series of Preferred Stock, the Common Stock shall have the exclusive
right to vote for the election of directors and for all other purposes. Each
share of Common Stock shall have one vote, and the Common Stock shall vote
together as a single class.
ARTICLE V
In furtherance of, and not in limitation of, the powers conferred by
law, the Board of Directors is expressly authorized and empowered:
(a) to adopt, amend or repeal the Bylaws of the Corporation; provided,
however, that the Bylaws adopted by the Board of Directors under the powers
hereby conferred may be amended or repealed by the Board of Directors or by the
stockholders having voting power with respect thereto, provided further that in
the case of amendments by stockholders, the affirmative vote of the holders of
at least 80 percent of the voting power of the then outstanding Voting Stock,
voting together as a single class, shall be required to alter, amend or repeal
any provision of the Bylaws; and
(b) from time to time to determine whether and to what extent, and at
what times and places, and under what conditions and regulations, the accounts
and books of the Corporation, or any of them, shall be open to inspection of
stockholders; and, except as so determined or as expressly provided in this
Certificate of Incorporation or in any Preferred Stock Designation, no
stockholder shall have any right to inspect any account, book or document of the
Corporation other than such rights as may be conferred by applicable law.
The Corporation may in its Bylaws confer powers upon the Board of
Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by applicable law.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of the
<PAGE> 2
holders of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class, shall be required to amend,
repeal or adopt any provision inconsistent with paragraph (a) of this Article V.
For the purposes of this Certificate of Incorporation, "Voting Stock" shall mean
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors.
ARTICLE VI
Subject to the rights of the holders of any series of Preferred Stock
or any other series or class of stock as set forth in the Certificate of
Incorporation to elect additional directors under specific circumstances, any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders of
the Corporation and may not be affected by any consent in writing in lieu of a
meeting of such stockholders. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of at least
80 percent of the voting power of the then outstanding Voting Stock, voting
together as a single class, shall be required to amend, repeal or adopt any
provision inconsistent with this Article VI.
ARTICLE VII
Each person who is or was or had agreed to become a director or officer
of the Corporation, or each such person who is or was serving or who had agreed
to serve at the request of the Board of Directors or an officer of the
Corporation as an employee or agent of the Corporation or as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executor, administrators or
estate of such person), shall be indemnified by the Corporation, in accordance
with the Bylaws of the Corporation, to the fullest extent permitted from time to
time by the General Corporation Law of the State of Delaware as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) or any other applicable laws as presently or hereafter in
effect. Without limiting the generality or the effect of the foregoing, the
Corporation may enter into one or more agreements with any person which provide
for indemnification greater or different than that provided in this Article VII.
Any amendment or repeal of this Article VII shall not adversely affect any right
or protection existing hereunder in respect of any act or omission occurring
prior to such amendment or repeal.
ARTICLE VIII
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. Any amendment or repeal of this
Article VIII shall not adversely affect any right or protection of a director
of the Corporation existing hereunder in respect of any act or omission
occurring prior to such amendment or repeal.
ARTICLE IX
Except as may be expressly provided in this Certificate of
Incorporation, the Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation or a Preferred Stock Designation, and any other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed herein or by
applicable law, and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in this Article IX;
provided, however, that any amendment or repeal of Article VII or Article VIII
of this Certificate of Incorporation shall not adversely affect any right or
protection existing hereunder in respect of any act or omission occurring prior
to such amendment or repeal; and provided further that no Preferred Stock
Designation shall be amended after the issuance of any shares of the series of
Preferred Stock created thereby, except in accordance with the terms of such
Preferred Stock Designation and the requirements of applicable law.
IN WITNESS WHEREOF, said FINOVA Capital Corporation has caused this
Amended and Restated Certificate of Incorporation to be signed by its Senior
Vice President and attested by its Assistant Secretary and has caused its
corporate seal to be hereunto affixed, this 17th day of March, 1995.
FINOVA CAPITAL CORPORATION
(SEAL)
/s/ William J. Hallinan
-----------------------------------
William J. Hallinan
Senior Vice President
Attest: /s/ Betty J. Pecha
-------------------------
Betty J. Pecha
Assistant Secretary
<PAGE> 1
Exhibit 3.B
AMENDED AND RESTATED
BYLAWS
OF
FINOVA CAPITAL CORPORATION,
A DELAWARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
(The headings in these Bylaws are for convenience only; they
form no part of these Bylaws and shall not affect its interpretation.)
ARTICLE I
<TABLE>
<S> <C> <C>
Section 1.01. Principal Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Place of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.02. Annual Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.03. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.04. Notice and Purpose of Meetings; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.05 Voting List. Right to Examine. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.06. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.07. Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.08. Judges of Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.09. Consent of Stockholders in Lieu of Meeting. . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.02. Number and Term of Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.03. Annual Organizational Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.04. Regular and Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.05. Quorum; Interested Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.06. Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.07. Action of Directors in Lieu of Meeting. . . . . . . . . . . . . . .. . . . . . . . . . 8
Section 3.08. Attendance Via Telecommunications. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.09. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV
NOTICES - WAIVERS - MEETINGS
Section 4.01. Notice, What Constitutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.02. Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V
OFFICERS
Section 5.01. Number, Qualifications and Resignation. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.02. Term of Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.03. Subordinate Officers, Committees and Agents. . . . . . . . . . . . . . . . . . . . . . 10
Section 5.04. The President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.05. The Vice President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.06. The Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.07. The Assistant Secretaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.08. The Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.09. The Assistant Treasurers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.10. The Chairman and Vice Chairman of the Board. . . . . . . . . . . . . . . . . . . . . . 11
Section 5.11. The Chief Executive Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI
CERTIFICATES OF STOCK
Section 6.01. Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.02. Subscriptions of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.03. Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.04. Share Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.05. Record Holder of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.06. Lost, Destroyed, Mutilated or Stolen Certificates. . . . . . . . . . . . . . . . . . . 12
Section 6.07. Transfer Agent and Registrar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.08. Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII
INDEMNIFICATION
Section 7.01. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.02. Proceedings Other Than Proceedings by or in the Right of the
Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.03. Proceedings by or in the Right of the Corporation. . . . . . . . . . . . . . . . . . . 13
Section 7.04. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. . . . . . . 13
Section 7.05. Indemnification for Expenses of a Witness. . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.06. Advancement of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.07. Procedure for Determination of Entitlement to Indemnification. . . . . . . . . . . . . 14
Section 7.08. Presumptions and Effect of Certain Proceedings. . . . . . . . . . . . . . . . . . . . . 16
Section 7.09. Remedies of Indemnitee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.10. Non-Exclusivity; Survival of Rights; Insurance; Subrogation. . . . . . . . . . . . . . 19
Section 7.11. Certain Persons Not Entitled to Indemnification or Advancement of Expenses. . . . . . . 19
Section 7.12. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII
AMENDMENTS
Section 8.01. Amendments by Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.02. Amendments by Director. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX
MISCELLANEOUS
Section 9.01. Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.02. Authorized Signor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.03. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.04. Corporation Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.05. Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.06. Repeal and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.07. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
<PAGE> 3
AMENDED AND RESTATED
BYLAWS
OF
FINOVA CAPITAL CORPORATION
ARTICLE I
OFFICES
SECTION 1.01. PRINCIPAL OFFICE. The registered office of
the Corporation shall be located at Phoenix, Maricopa County, Arizona. The
name of the Corporation's registered agent is The Corporation Trust Company,
1209 Orange Street, Wilmington, Delaware 19801.
SECTION 1.02. OTHER OFFICES. The Corporation may have
offices also at the other places within and without the State of Delaware as
the board of directors may from time to time determine or as the business of
the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. PLACE OF MEETINGS. Meetings of
stockholders shall be held at the place, within or without the State of
Delaware, as shall be designated from time to time by the board of directors.
SECTION 2.02. ANNUAL MEETINGS. Annual meetings of
stockholders shall, unless otherwise provided by the board of directors, be
held on the second Wednesday in March in each calendar year, commencing in
March, 1994, if not a legal holiday, and if a legal holiday, then on the next
full business day following, at 10:00 a.m. at which time they shall elect a
board of directors and transact the other business as may properly be brought
before the meeting.
SECTION 2.03. SPECIAL MEETINGS.
(a) Special meetings of stockholders may
be called by the board of directors, by the president, or by stockholders
owning a majority in amount of the entire capital stock of the Corporation
issued and outstanding and entitled to vote.
(b) At any time, upon written request to
the secretary of the Corporation by any person or persons authorized to call a
special meeting of stockholders, which written request shall state the purposes
for the special meeting, the secretary of the Corporation shall set the place,
date and time of the special meeting and shall deliver notice of the special
meeting in accordance with section 2.04 hereof. If the secretary fails
to set the place, date and time of the meeting or deliver the notice, the
person calling the meeting may do so.
(c) Business transacted at any special
meeting of stockholders shall be limited to the purposes stated in the notice.
SECTION 2.04. NOTICE AND PURPOSE OF MEETINGS; WAIVER.
(a) Written notice stating the place, date
and time of meetings of stockholders and, in case of a special meeting of
stockholders, the purpose or purposes for which the meeting is called, shall be
delivered to each stockholder of record entitled to vote at the meeting at this
address of record, at least ten (10) but not more than sixty (60) days prior to
the date of the meeting. If mailed, the notice shall be deemed to be delivered
when mailed to the stockholder at his address as it appears on the stock
transfer books of the Corporation.
(b) No action taken at any meeting of
stockholders shall be void because the action was not specified as a purpose of
the meeting in the applicable notice of the meeting provided the meeting is not
a special meeting and if, in the notice of the meeting, it is stated that the
purpose of the meeting shall also be to consider all other matters which could
properly be brought before the meeting.
(c) Whenever the language of a proposed
resolution is included in a written notice of a meeting of stockholders, that
resolution may be adopted at that meeting with any deletions, additions,
modifications and amendments as are deemed appropriate by the vote of the
requisite number of shares of the Corporation present at the meeting, either in
person or by proxy; provided, however, that those deletions, additions,
modifications and amendments will not materially alter or modify the original
purpose of the resolution without further notice to stockholders not present in
person or proxy.
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SECTION 2.05 VOTING LIST. RIGHT TO EXAMINE. The
officer who has charge of the stock ledger of the Corporation shall prepare and
make, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order with the address of and the number of voting shares
registered in the name of each. The list shall be open for ten (10) days to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not so specified, at the place where the meeting is to be held, and
shall be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.06 QUORUM. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, the quorum shall
not be present or represented at any meeting of stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time without notice other than
announcement at the meeting if the adjournment is not for more than thirty (30)
days and a new record date is not fixed for the adjourned meeting, until a
quorum shall be present or represented. If a quorum shall be present or
represented at the adjourned meeting, any business may be transacted that might
have been transacted at the original meeting.
SECTION 2.07. VOTING.
(a) When a quorum is present at any
meeting, the affirmative vote of a majority of the votes cast, either in person
or by proxy, shall decide any question brought before the meeting, unless the
question is one upon which by express provision of the statutes or of the
certificate of incorporation a different vote is required, in which case the
express provision shall govern and control the decision of the question.
(b) Each stockholder shall at every
meeting of stockholders be entitled to one vote in person or by proxy for each
share of the capital stock having voting power held by the stockholder, but no
proxy shall be voted on after three (3) years from its date, unless the proxy
provides for a longer period.
(c) The vote on any matter, including the
election of directors, need not be by written ballot.
SECTION 2.08. JUDGES OF ELECTION.
(a) Before any meeting of stockholders,
the board of directors may appoint judges of election, who need not be
stockholders, to act at that meeting or any adjournment thereof. If judges of
election are not so appointed, the chairman of the meeting shall appoint judges
of election upon the demand of any stockholder or his proxy present at the
meeting and before voting begins. The number of judges of election shall be
either one (1) or, upon demand of a stockholder, three (3), as to be determined
in the case of judges of election appointed by a vote of the majority of the
shares of the voting common stock of the Corporation present and entitled to
vote at the meeting, whether in person or by proxy. If there are three (3)
judges of election, the decision, act or certification of a majority of those
judges shall be effective in all respects as the decision, act or
certification of all.
(b) No person who is a candidate for an
office to which the election relates may act as a judge of election.
(c) In case of any person appointed as a
judge of election fails to appear or fails or refuses to act, the vacancy may
be filled by appointment made by the board of directors before the meeting is
convened, or by the chairman of the meeting during a meeting.
(d) If judges of election are appointed
pursuant to this section 2.08, they shall determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, and the validity and
effect of proxies. The judges of election shall also receive votes or ballots,
hear and determine all challenges and questions in any way arising in
connection with the right to vote, count and tabulate all votes, determine the
result, and do those other acts as may be proper to conduct and tally the vote
or election with fairness to all stockholders.
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(e) On request of the chairman of the
meeting or of any stockholder or his proxy, the judges of election shall make a
report in writing of any challenge or question or matter determined by them,
and execute a certificate setting forth any fact found by them.
SECTION 2.09. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Whenever the vote of stockholders at a meeting thereof is required or permitted
to be taken for or in connection with any corporate action by any provisions of
the statutes, the meeting and vote of stockholders may be dispensed with if all
the stockholders who would have been entitled to vote, or less than all but not
less than the holders of a majority of the stock entitled to vote upon the
action if the meeting were held, shall consent in writing to the corporate
action being taken, provided that the written consent shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take the action at a meeting at which
all shares entitled to vote thereon were present and voted, and provided that
prompt notice must be given to all stockholders of the taking of corporate
action without a meeting and by less than unanimous written consent.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of its board of
directors which shall exercise all the powers of the Corporation and do all the
lawful acts and things as are not by statute or by the certificate of
incorporation or by these bylaws directed or required to be exercised or done
by the stockholders.
SECTION 3.02. NUMBER AND TERM OF OFFICE.
(a) The board of directors shall consist
of not less than one (1) nor more than fifteen (15) members. The number of
directors may be increased or decreased from time to time by resolution of the
board of directors, but no decrease in the number of directors shall change the
term of any director in office at the time thereof. The directors shall be
elected at the annual meeting of stockholders, except as provided in paragraph
(b) of this section, and each director shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Any
director may resign at any time upon written notice to the Corporation.
Directors need not be stockholders.
(b) Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, and each of the directors so chosen shall hold office until the next
annual election and until his successor is elected and qualified or until his
earlier resignation or removal.
(c) Any director or the entire board of
directors may be removed, with or without cause, at any time by the holders of
a majority of the shares then entitled to vote at an election of directors, and
the vacancy in the board of directors caused by the removal may be filled by
the stockholders at the time of the removal.
SECTION 3.03. ANNUAL ORGANIZATIONAL MEETING. The first
meeting of each newly elected board of directors shall be held within thirty
(30) days after the adjournment of the annual meeting of stockholders. No
notice of the meeting shall need to be given to the directors in order legally
to constitute the meeting, provided a quorum shall be present and provided the
organizational meeting is held generally at the time and at the place of the
meeting of stockholders at which the board of directors were elected. In the
event the meeting is not so held, the meeting may be held at the time and place
as shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors.
SECTION 3.04. REGULAR AND SPECIAL MEETINGS. The board of
directors of the Corporation or any committee thereof may hold meetings, both
regular and special, either within or without the State of Delaware . Regular
meetings of the board of directors may be held without notice at the time and
at the place as shall from time to time be determined by the board of
directors. Special meetings of the board of directors may be called by the
president, and the president or the secretary shall call a special meeting
upon request of two directors. If given personally, by telephone or by
telegram, the notice shall be given at least the day prior to the meeting.
Notice may be given by mail if it is mailed at least three days
before the meeting. The notice need not specify the business to be transacted.
In the event of an emergency which in the judgment of the president requires
immediate action, a special meeting may be convened without notice, consisting
of those directors who are immediately available in person or by telephone and
can be joined in the meeting in person or by conference telephone. The actions
taken at the meeting shall be valid if at least a quorum of the directors
participates either personally or by conference telephone.
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SECTION 3.05. QUORUM; INTERESTED DIRECTORS.
(a) At meetings of the board of directors,
a majority of the directors at the time in office shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the board of
directors. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
(b) No contract or transaction shall be
void or voidable solely because the contract or transaction is between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest; nor shall any contract or transaction
be void or voidable solely because the director or officer is present at or
participates in the meeting of the board of directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for the purpose, if:
1) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the board of directors or the committee, and the board of
directors or committee in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum;
(2) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(3) the contract or transaction if
fair as to the Corporation as of the time it is authorized, approved or
ratified, by the board of directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee which
authorizes the contract or transaction.
SECTION 3.06. COMMITTEES.
(a) The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees of the board of directors, each committee to consist of one or more
of the directors of the Corporation, which, to the extent provided in the
resolution, shall have and may exercise the powers of the board of directors in
the management of the business and affairs of the Corporation, which power
shall not include the power and authority to (1) declare a dividend; (2)
authorize the issuance of stock; (3) amend the certificate of incorporation;
(4) adopt an agreement of merger or consolidation; (5) recommend to the
stockholders the sale, lease or exchange of all or substantially all the
Corporation's property and assets; (6) recommend to the stockholders a
dissolution of the Corporation or a revocation of a dissolution; or (7) amend
the bylaws of the Corporation. The committee or committees shall have the name
or names as may be determined from time to time by resolution adopted by the
board of directors.
(b) Unless the board of directors
designates one or more directors as alternate members of any committee, who may
replace an absent or disqualified member at any meeting of the committee, the
members of any committee present at any meeting and not disqualified from
voting may, whether or not they constitute a quorum, unanimously appoint
another member of the board of directors to act at the meeting in the place of
any absent or disqualified member of the committee. At meetings of any
committee, a majority of the members or alternate members of the committee
shall constitute a quorum for the transaction of business and act of the
committee.
(c) The committees shall keep regular
minutes of their proceedings.
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SECTION 3.07. ACTION OF DIRECTORS IN LIEU OF MEETING.
Any action required or permitted to be taken at any meeting of the board of
directors or of any committee thereof may be taken without a meeting if a
written consent thereto is signed by all members of the board or of the
committee, as the case may be, and the written consent is filed with the
minutes of proceedings of the board or committee.
SECTION 3.08. ATTENDANCE VIA TELECOMMUNICATIONS. The
members of the board of directors or any committee thereof may participate in a
meeting of the board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meetings can hear each other without interruption. The participation shall
constitute presence in person at the meeting for purposes of determining a
quorum and for voting.
SECTION 3.09. COMPENSATION. The directors may be paid
their expenses of attendance at each meeting of the board of directors and may
be paid a fixed sum for attendance at each meeting of the board of directors or
a stated salary as director. No payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
reimbursement and compensation for attending committee meetings.
ARTICLE IV
NOTICE - WAIVERS - MEETINGS
SECTION 4.01. NOTICE, WHAT CONSTITUTES. Whenever written
notice is required to be given to any person under the provisions of the
Articles of Incorporation, these bylaws, or the Delaware General Corporation
Law, it shall be given to each director at his business or residence in
writing or by telegram or by telephone communication. If mailed,
such notice shall be deemed adequately delivered when deposited in the United
States mails so addressed, with postage thereon prepaid, at least five days
before such meeting. If by telegram, such notice shall be deemed adequately
delivered when the telegram is delivered to the telegraph company at least
twenty-four hours before such meeting. If by facsimile transmission, such
notice shall be transmitted at least twenty-four hours before such meeting. If
by telephone, the notice shall be given at least twelve hours prior to the time
set for the meeting. If by hand delivery, the notice shall be delivered at
least twenty-four hours prior to the time set for the meeting.
SECTION 4.02. WAIVER OF NOTICE.
(a) Whenever any written notice is
required to be given under the provisions of the Articles of Incorporation,
these bylaws, or the Delaware General Corporation Law, as amended from time to
time, a waiver thereof in writing, signed by the person or persons entitled to
the notice, whether before or after the time stated herein, shall be deemed
equivalent to the giving of the notice.
(b) Attendance of a person (in the case of
a stockholder, either in person or by proxy) at any meeting shall constitute a
waiver of notice of the meeting, except when a person attends a meeting for the
express purpose of objecting to the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
SECTION 5.01. NUMBER, QUALIFICATIONS AND DESIGNATION.
The officers of the Corporation shall be chosen by the board of directors at
its first meeting after each annual meeting of stockholders and shall be a
president, a secretary and a treasurer. The board of directors may also choose
vice presidents and additional officers or assistant officers as it may deem
advisable. Any number of offices may be held by the same person, except the
offices of president and secretary. Officers may, but need not, be directors
or stockholders of the Corporation. The board of directors may elect from its
membership a chairman of the board of directors and a vice-chairman of the
board of directors who shall be officers of the Corporation.
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SECTION 5.02. TERM OF OFFICE. The officers of the
Corporation shall hold office at the pleasure of the board of directors.
Each officer shall hold his office until his successor is elected
and qualified or until his earlier resignation or removal. Any officer may
resign at any time upon written notice to the Corporation. Any officer elected
or appointed by the board of directors may be removed at any time by the board
of directors. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise shall be filled by the board of directors.
SECTION 5.03. SUBORDINATE OFFICERS, COMMITTEES AND
AGENTS. The board of directors may elect any other officers and appoint any
committees, employees or other agents as it desires who shall hold their
offices for the terms and shall exercise the powers and perform the duties as
shall be determined from time to time by the board to be required by the
business of the Corporation. The directors may delegate to any officer or
committee the power to elect subordinate officers and retain or appoint
employees or other agents.
SECTION 5.04. THE PRESIDENT. The president shall have
general and active management of the business of the Corporation, and shall see
that all orders and resolutions of the board of directors are carried into
effect. He shall execute on behalf of the Corporation and may affix the seal
or cause the seal to be affixed to all instruments requiring the execution,
except to the extent the signing and execution thereof shall be expressly
delegated by the board of directors to some other officer or agent of the
Corporation.
SECTION 5.05. THE VICE PRESIDENT. The vice president or
vice presidents, as the case may be, shall act under the direction of the
president and in the absence or disability of the president shall perform the
duties and exercise the powers of the president. They shall perform the other
duties and have the other powers as the president or the board of directors may
from time to time prescribe. The board of directors may designate one or more
executive vice presidents or may otherwise specify the order of seniority of
the vice presidents, and in that event, the duties and powers of the president
shall descent to the vice presidents in the specified order of seniority.
SECTION 5.06. THE SECRETARY. The secretary shall act
under the direction of the president. Subject to the direction of the
president he shall attend all meetings of the board of directors and all
meetings of stockholders and record the proceedings in a book to be kept for
that purpose and shall perform like duties for the committees designated by the
board of directors when required. He shall give, or cause to be given, notice
of all meetings of stockholders and special meetings of the board of directors,
and shall perform the other duties as may be prescribed by the president or the
board of directors. He shall keep in safe custody the seal of the Corporation
and cause it to be affixed to any instrument requiring it.
SECTION 5.07. THE ASSISTANT SECRETARIES. The assistant
secretaries in the order of their seniority, unless otherwise determined by the
president or the board of directors, shall, in the absence or disability of the
secretary, perform the duties and exercise the powers of the secretary. They
shall perform the other duties and have the others as the president or the
board of directors may from time to time prescribe.
SECTION 5.08. THE TREASURER. The treasurer shall act
under the direction of the president. Subject to the direction of the
president he shall have the custody of the corporate funds and securities and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in the depositories as
may be designated by the board of directors. He shall disburse the funds of
the Corporation as may be ordered by the president or the board of directors,
taking proper vouchers for the disbursements, and shall render to the president
and the board of directors, at its regular meetings, or when the board of
directors, at it regular meetings, or when the board of directors so requires,
an account of all his transactions as treasurer and of the financial conditions
of the Corporation.
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SECTION 5.09. THE ASSISTANT TREASURERS. The assistant
treasurers in the order of seniority, unless otherwise determined by the
president or the board of directors, shall, in the absence or disability of the
treasurer, perform the duties and exercise the powers of the treasurer. They
shall perform their other duties and have the other powers as the president or
the board of directors may from time to time prescribe.
SECTION 5.10. THE CHAIRMAN AND VICE CHAIRMAN OF THE
BOARD. The chairman of the board of directors or in his absence, the vice
chairman of the board of directors, shall preside at all meetings of the
stockholders and the board of directors, and shall perform all other duties as
may from time to time be requested of him by the board of directors.
SECTION 5.11. THE CHIEF EXECUTIVE OFFICER. The Board of
directors may designate a chief executive officer who shall perform all other
duties as from time to time may be requested of him by the board of directors.
In the absence of the designation, the president shall serve as the chief
executive officer.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 6.01. ISSUANCE. The interest of each stockholder
in the Corporation shall be evidenced by certificates for shares of
stock. The share certificates of the Corporation shall be numbered and
registered in the share ledger and transfer books of the Corporation as they
are issued. They shall be signed by the chief executive officer, president or
a vice president and by the secretary or an assistant secretary, and may bear
the corporate seal, which may be a facsimile, engraved or imprinted; but where
the certificate is signed by a transfer agent or a registrar, the signature of
any corporate officer upon the certificate may be a facsimile, engraved or
printed. In case any officer who has singed or whose facsimile signature has
been placed upon any share certificate shall have ceased to be an officer
because of death, resignation or otherwise before the certificate is issued, it
may be issued by the Corporation with the same effect as if the officer had not
ceased to be an officer because of death, resignation or otherwise as of the
date of its issue.
SECTION 6.02. SUBSCRIPTIONS FOR SHARES. Unless the
subscription agreement provides otherwise, subscriptions for shares, regardless
of the time when they are made, shall be paid at that time as shall be
specified by the board of directors. All calls for payments on subscriptions
shall carry the same terms with regard to all shares of the same class.
SECTION 6.03. TRANSFERS. Transfers of shares of the
capital stock of the Corporation shall be made on the books of the Corporation
by the registered owner thereof, or by his duly authorized attorney, with
a transfer clerk or transfer agent appointed as provided in section 6.07
hereof, and upon surrender of the certificate or certificates for the shares
properly endorsed and with all taxes thereon paid.
SECTION 6.04. SHARE CERTIFICATE. Certificates for shares
of the Corporation shall be in the form provided by statute and approved by the
board directors. The share record books and the blank share certificate books
shall be kept by the secretary of the Corporation or by any agency designated
by the board of directors for that purpose. Every certificate exchanged or
returned to the Corporation shall be marked "Cancelled," with the date of
cancellation noted thereon.
SECTION 6.05. RECORD HOLDER OF SHARES. The Corporation
shall be entitled to treat the person in whose name any share or shares of the
Corporation stand on the books of the Corporation as the absolute owner
thereof, and shall not be bound to recognize any equitable or other claim to,
or interest in, the share or shares on the part of any other person. However,
if any transfer of shares is made only for the purpose of furnishing collateral
security, and that fact is made known to the secretary of the Corporation, or
to the Corporation's transfer clerk or transfer agent, an entry of the transfer
shall record that fact.
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SECTION 6.06. LOST, DESTROYED, MUTILATED OR STOLEN
CERTIFICATES. The holder of any shares of the Corporation shall immediately
notify the Corporation of any loss, destruction, mutilation or theft of the
certificate therefor, and the board of directors may, in its discretion, cause
a new certificate or certificates to be issued to him, in case of mutilation of
the certificate, upon the surrender of the mutilated certificate, or, in case
of loss, destruction or theft of the certificate, upon satisfactory proof of
the loss, destruction or theft, and, if the board of directors shall so
determine, the submission of a properly executed lost security affidavit and
indemnity agreement, or the deposit of a bond in the form and in the sum, and
with the surety or sureties, as the board of directors directs.
SECTION 6.07. TRANSFER AGENT AND REGISTRAR. The board of
directors may appoint one (1) or more transfer agents or transfer clerks and
one (1) or more registrars, and may require all certificates for shares to bear
the signature or signatures of any of them.
SECTION 6.08. RECORD DATE. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights to in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the board of directors may
fix, in advance, a record date, which shall not be more than sixty (60) or less
than ten (10) days before the date of the meeting and not more than sixty (60)
days prior to any other action. A determination of stockholders shall apply to
any adjournment of the meeting, provided, however, that the board of directors
may fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. GENERAL. The Corporation shall indemnify,
and advance Expenses to Indemnitee as provided in this Article and to the
fullest extent permitted by applicable law. (Capitalized terms used in this
Article are defined in Section 7.12 hereof unless defined elsewhere herein.)
SECTION 7.02. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN
THE RIGHT OF THE CORPORATION. Indemnitee shall be entitled to the rights of
indemnification provided in this section 7.02 if, by reason of his Corporate
Status, he is, or is threatened to be made, a party to any threatened, pending
or completed Proceeding, other than a Proceeding by or in the right of the
Corporation. Pursuant to this section 7.02, Indemnitee shall be indemnified
against Expenses, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with the
Proceeding or any claim, issue or matter therein, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his conduct was unlawful.
SECTION 7.03. PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION. Indemnitee shall be entitled to the rights of indemnification
provided in this section 7.03 if, by reason of his Corporate Status, he is, or
is threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Corporation to procure a judgment
in its favor. Pursuant to this Section, Indemnitee shall be indemnified
against Expenses actually and reasonably incurred by him or on his behalf in
connection with the Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation. Notwithstanding the foregoing, no indemnification against the
Expenses shall be made in respect of any claim, issue or matter in the
Proceeding as to which Indemnitee shall have been adjudged to be liable to the
Corporation if applicable law prohibits the indemnification; provided, however,
that, if applicable law so permits, indemnification against Expenses shall
nevertheless be made by the Corporation in the event if and only to the extent
that the Court of Chancery of the State of Delaware, or the court in which the
Proceeding shall have been brought or is pending, shall determine.
SECTION 7.04. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO
IS WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this
Article, to the extent that Indemnitee is, by reason of his Corporate Status, a
party to and is successful, on the merits or otherwise, in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith. If Indemnitee is not wholly
successful in the Proceeding but is successful, on the merits or otherwise, as
to one or more but less than all claims, issues or matters in the Proceeding,
the Corporation shall indemnify Indemnitee against all Expenses actually and
reasonably incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this section
7.04 and without limitation, the termination of any claim, issue or matter in
the proceeding by dismissal with or without prejudice, shall be deemed to be a
successful result as to the claim, issue or matter.
9
<PAGE> 11
SECTION 7.05. INDEMNIFICATION FOR EXPENSES OF A WITNESS.
Notwithstanding any other provision of this Article, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding,
he shall be indemnified against all Expenses actually and reasonably incurred
by him or on his behalf in connection therewith.
SECTION 7.06 ADVANCEMENT OF EXPENSES. The Corporation
shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in
connection with any Proceeding within twenty (20) days after the receipt by the
Corporation of a statement or statements from Indemnitee requesting the advance
or advances from time to time, whether prior to or after final disposition of
the Proceeding. The statement or statements shall reasonably evidence the
Expenses incurred by Indemnitee and shall include or be preceded or accompanied
by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced
in the event Independent Counsel or the board of directors, as the case may be,
shall reasonably determine that Indemnitee is not entitled to be indemnified
against the Expenses pursuant to section 7.07(a) hereof.
SECTION 7.07. PROCEDURE FOR DETERMINATION OF ENTITLEMENT
TO INDEMNIFICATION.
(a) To obtain indemnification under this
Article, Indemnitee shall submit to the Corporation a written request,
including therein or therewith the documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification. The
secretary of the Corporation shall, promptly upon receipt of a request for
indemnification, advise the board of directors in writing that Indemnitee has
requested indemnification.
(b) Upon written request by Indemnitee for
indemnification pursuant to the first sentence of section 7.07(a) hereof, a
determination, if required by applicable law, with respect to Indemnitee's
entitlement thereto shall be made in the specific case in the following manner:
(1) if a Change in Control shall have
occurred, by Independent Counsel (unless Indemnitee shall request that the
determination be made by the board of directors or the stockholders, in which
case by the person or persons or in the manner provided for in clauses (2) or
(3) of this section 7.07(b)) in a written opinion to the board of directors, a
copy of which shall be delivered to Indemnitee;
(2) if a Change of Control shall not
have occurred, (A) by the board of directors upon a majority vote of a quorum
consisting of Disinterested Directors, or (B) if a quorum of the board of
directors consisting of Disinterested Directors is not obtainable or, even if
obtainable, the quorum of Disinterested Directors so directs, by Independent
Counsel in a written opinion to the board of directors, a copy of which shall
be delivered to indemnitee or (C) by the stockholders of the Corporation; or
(3) as provided in section 7.08 of
this Article.
If it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after
the determination. Indemnitee shall cooperate with the person, persons or
entity making the determination with respect to Indemnitee's entitlement to
indemnification, including providing to the person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to the determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making the
determination shall be borne by the Corporation (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the
Corporation hereby agrees to indemnify and hold Indemnitee harmless therefrom.
(c) In the event the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
section 7.07(b) hereof, the Independent Counsel shall be selected as provided
in this section 7.07(c):
(1) If a Change of Control shall not
have occurred, the Independent Counsel shall be selected by the board of
directors, and the Corporation shall give written notice to Indemnitee advising
him of the identity of the Independent Counsel so selected.
10
<PAGE> 12
(2) If a Change of Control shall have
occurred, the Independent Counsel shall be selected by Indemnitee (unless
Indemnitee shall request that the selection be made by the board of directors,
in which event the preceding sentence shall apply), and Indemnitee shall give
written notice to the Corporation advising it of the identity of the
Independent Counsel so selected.
(3) In either event, Indemnitee or the
Corporation, as the case may be, may, within 7 days after the written notice of
selection shall have been given, deliver to the Corporation or to Indemnitee,
as the case may be, a written objection to the selection. The objection may be
asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of "Independent Counsel" as defined in section 7.12
hereof, and the objection shall set forth with particularity the factual basis
of the assertion. If the written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that the objection is without merit.
(4) If, within twenty (20) days after
submission by Indemnitee of a written request for indemnification pursuant to
section 7.07(a) hereof, no Independent Counsel shall have been selected or that
Independent Counsel selected has been objected to by the other party, either
the Corporation or Indemnitee may petition the Court of Chancery of the State
of Delaware or other court of competent jurisdiction for the appointment as
Independent Counsel of a person selected by the Court or by the other person as
the Court shall designate, and/or for resolution of any objection which shall
have been made by the Corporation or Indemnitee to the other's selection of
Independent Counsel and the person so appointed or the person with respect to
whom an objection is so resolved shall act as Independent Counsel under section
7.07(b) hereof.
The Corporation shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by the Independent Counsel in
connection with acting pursuant to section 7.07(b) hereof, and the Corporation
shall pay all reasonable fees and expenses incident to the procedures of this
section 7.07(c), regardless of the manner in which the Independent Counsel was
selected or appointed. Upon the due commencement of any judicial proceeding or
arbitration pursuant to section 7.09 hereof, Independent Counsel shall be
discharged and relieved of any further responsibility in the capacity (subject
to the applicable standard of professional conduct then prevailing).
SECTION 7.08. PRESUMPTIONS AND EFFECT OF CERTAIN
PROCEEDINGS.
(a) If a Change of Control shall have
occurred, in making a determination with respect to entitlement to
indemnification hereunder, the person, persons or entity making the
determination shall presume that Indemnitee is entitled to indemnification
under this Article if Indemnitee has submitted a request for indemnification in
accordance with section 7.07(a) hereof, and the Corporation shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that
presumption.
(b) If the person, persons or entity
empowered or selected under section 7.07 hereof to determine whether Indemnitee
is entitled to indemnification shall not have made the determination within
sixty (60) days after receipt by the Corporation of the request therefor, the
requisite determination of entitlement to indemnification shall be deemed to
have been made and Indemnitee shall be entitled to the indemnification, absent
(1) a misstatement by Indemnitee of a material fact, or an omission of
a material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (2) a
prohibition of the indemnification under applicable law; provided, however,
that the sixty (60) day period may be extended for a reasonable time, not to
exceed an additional thirty (30) days, if the person, persons or entity making
the determination with respect to entitlement to indemnification in good faith
requires the additional time for the obtaining or evaluating of documentation
and/or information relating thereto.
The foregoing provisions of this section 7.08(b) shall not
apply:
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<PAGE> 13
(1) if the determination of
entitlement to indemnification is to be made by the stockholders pursuant to
section 7.07(b) hereof and if (A) within 15 days after receipt by the
Corporation of the request for the determination the board of directors has
resolved to submit the determination to the stockholders for their
consideration at an annual meeting thereof to be held within seventy-five (75)
days after the receipt of the determination is made thereat, or (B) a special
meeting of stockholders is called within fifteen (15) days after the receipt
for the purpose of making the determination, the meeting is held for the
purpose within sixty (60) days after having been so called and the
determination is made thereat; or
(2) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
section 7.07(b) hereof.
(c) The termination of any Proceeding or
of any claim, issue or matter therein by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not
(except as otherwise expressly provided in this section) of itself adversely
affect the right of Indemnitee to indemnification or create a presumption that
Indemnitee did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal Proceeding, that Indemnitee had reasonable cause
to believe that his conduct was unlawful.
SECTION 7.09. REMEDIES OF INDEMNITEE.
(a) Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of his entitlement to the indemnification or
advancement of Expenses upon the occurrence of the following:
(1) a determination is made pursuant
to section 7.07(b) hereof that Indemnitee is not entitled to indemnification
under this Article;
(2) advancement of Expenses is not
timely made pursuant to section 7.06 hereof;
(3) the determination of entitlement
to indemnification is to be made by Independent Counsel pursuant to section
7.07(b) the determination shall not have been made and delivered in
a written opinion within 90 days after receipt by the Corporation of the
request for indemnification;
(4) payment of indemnification is not
made pursuant to section 6.4(e) within ten (10) days after receipt by the
Corporation of a written request therefor; or
(5) payment of indemnification is not
made within ten (10) days after a determination has been made that Indemnitee
is entitled to indemnification or the determination is deemed to have been made
pursuant to section 7.08.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to
be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association. Indemnitee shall commence the proceeding seeking an
adjudication or any award in arbitration within 180 days following the date on
which Indemnitee first has the right to commence the proceeding pursuant to
this section 7.09. The Corporation shall not oppose Indemnitee's right to seek
any adjudication or award in arbitration.
(b) In the event that a determination
shall have been made pursuant to section 7.07 that Indemnitee is not entitled
to indemnification, any judicial proceeding or arbitration commenced pursuant
to this section 7.09 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, the
Corporation shall have the burden of providing that Indemnitee is not entitled
to indemnification or advancement of Expenses, as the case may be, in any
judicial proceeding or arbitration commenced pursuant to this section 7.09.
(c) If a determination shall have been
made or deemed to have been made pursuant to sections 7.07 or 7.08 that
Indemnitee is entitled to indemnification, the Corporation shall be bound by
the determination in any judicial proceeding or arbitration commenced pursuant
to this Section 7.09, absent (1) a misstatement by Indemnitee's statement not
materially misleading, in connection with the request for indemnification, or
(2) a prohibition of the indemnification under applicable law.
(d) The Corporation shall be precluded
from asserting in any judicial proceeding or arbitration commenced pursuant to
this section 7.09 that the procedures and presumptions of this Article are not
valid, binding and enforceable and shall stipulate in any court or before any
arbitrator that the Corporation is bound by all the provisions of this Article.
(e) In the event that Indemnitee, pursuant
to this section 7.09, seeks a judicial adjudication of or an award
12
<PAGE> 14
in arbitration to enforce his rights under or to recover damages for breach of
this Article, Indemnitee shall be entitled to recover from the Corporation, and
shall be indemnified by the Corporation against, any and all expenses (of the
types described in the definition of expenses in section 7.12) actually and
reasonable incurred by him in the judicial adjudication or arbitration, but
only if he prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses sought, the expenses
incurred by Indemnitee in connection with the judicial adjudication or
arbitration shall be appropriately prorated.
SECTION 7.10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS;
INSURANCE; SUBROGATION.
(a) The rights of indemnification and to
receive advancement of Expenses as provided by this Article shall not be deemed
exclusive of any other rights to which indemnitee may at any time be entitled
under applicable law, the certificate of incorporation, these bylaws, any
agreement, a vote of stockholders or a resolution of directors, or otherwise.
No amendment, alteration or repeal of this Article or of any provision hereof
shall be effective as to any Indemnitee with respect to any action taken or
omitted by the Indemnitee in his Corporate Status prior to the amendment,
alteration or repeal. The provisions of this Article shall continue as to any
Indemnitee whose Corporate Status has ceased and shall inure to the benefit of
his heirs, executors and administrators.
(b) To the extent that the Corporation
maintains an insurance policy or policies providing liability insurance for
directors, officers, employees, agents or fiduciaries of the Corporation or of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise which the person serves at the request of the Corporation,
Indemnitee shall be covered by the policy or policies in accordance with its or
their terms to the maximum extent of the coverage available for any director,
officer, employee or agent under the policy or policies.
(c) In the event of any payment under this
Article, the Corporation shall be subrogated to the extent of the payment to
all of the rights of recovery of Indemnitee, who shall execute all papers
required and take all action necessary to secure the rights, including
execution of the documents as are necessary to enable the Corporation to bring
suit to enforce the rights.
(d) The Corporation shall not be liable
under this Article to make any payment of amounts otherwise indemnifiable
hereunder if and to the extent that Indemnitee has otherwise actually received
the payment under any insurance policy, contract, agreement or otherwise.
SECTION 7.11. CERTAIN PERSONS NOT ENTITLED TO
INDEMNIFICATION OR ADVANCEMENT OF EXPENSES. Notwithstanding any other
provision of this Article, no person shall be entitled to indemnification or
advancement of Expenses under this Article with respect to any Proceeding, or
any claim therein, brought or made by him against the Corporation.
SECTION 7.12. DEFINITIONS. For purposes of these Bylaws:
(a) "Change in Control" means a change in
control of the Corporation occurring after the Effective Date of a nature that
would be required to be reported in response to Item 5(f) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule or
form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Corporation is then subject to the reporting requirement:
provided, however, that, without limitation, a Change in Control shall be
deemed to have occurred if after the Effective Date (1) any "person" (as the
term is used in Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Corporation representing more than 50% of the
combined voting power of the Corporation's then outstanding securities without
the prior approval of at least two-thirds of the members of the board of
directors in office immediately prior to the person attaining the percentage
interest; (2) the Corporation is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a consequence of which
members of the board of directors in office immediately prior to the
transaction or event constitute less than a majority of the board of directors
thereafter; or (3) during any period of two (2) consecutive years, individuals
who at the beginning of the period constituted the board of directors
(including for this purpose any new director whose election or nomination for
election by the Corporation's stockholders was approved by a vote of at least
two- thirds (2/3) of the directors then still in office who were directors at
the beginning of the period) cease for any reason to constitute at least a
majority of the board of directors.
(b) "Corporate status" means the status of
a person who is or was a director, officer, employee, agent or fiduciary of the
Corporation or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which the person is or was serving at
the request of the Corporation.
(c) "Disinterested Director" means a
director of the Corporation who is not and was not a party to the Proceeding in
respect of which indemnification is sought by Indemnitee.
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<PAGE> 15
(d) "Effective Date" means the date the
Corporation was incorporated under the laws of the State of Delaware.
(e) "Expenses" shall include all
reasonable attorneys' fees, retainers, court costs, transcript costs, fees of
experts, witness fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, and all other
disbursements or expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, or
being or preparing to be a witness in a Proceeding.
(f) "Indemnitee" includes any person who
is, or is threatened to be made, a witness in or a party to any Proceeding as
described in sections 7.02, 7.03, 7.04 or 7.05 by reason of his Corporate
Status.
(g) "Independent Counsel" means a law
firm, or a member of a law firm, that is experienced in matters of corporation
law and neither presently is, nor in the past five (5) years has been, retained
to represent: (1) the Corporation or Indemnitee in any matter material to
either the party, or (2) any other party to the Proceeding giving rise to a
claim for indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Corporation or Indemnitee in any action to
determine Indemnitee's rights under this Article.
(h) "Proceeding" includes any action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative, except one initiated by an Indemnitee pursuant
to this Article to enforce his rights under this Article.
ARTICLE VIII
AMENDMENTS
SECTION 8.01. AMENDMENTS BY STOCKHOLDERS. The bylaws may
be amended by the stockholders at any annual or special meeting of
stockholders, provided notice of intention to amend shall have been contained
in the notice of the meeting.
SECTION 8.02. AMENDMENTS BY DIRECTOR. The board of
directors by a two-third (2/3) vote of the whole board at any meeting may amend
these bylaws, including bylaws adopted by the stockholders, provided the
stockholders may from time to time specify particular provisions of the bylaws
that shall not be amended by the board of directors.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. RESERVES. There may be set aside out of
any funds of the Corporation available for dividends the sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for the purchase
of additional property, or for the other purpose as the directors shall think
conducive to the interest of the Corporation, and the directors may modify or
abolish any reserve.
SECTION 9.02. AUTHORIZED SIGNOR. All checks or demands
for money and notes of the Corporation shall be signed by the officer or
officers or the other person or persons as the board of directors may from time
to time designate by resolution.
SECTION 9.03. FISCAL YEAR. The fiscal year of the
Corporation shall be fixed by resolution of the board of directors.
SECTION 9.04. CORPORATION SEAL. The corporate seal shall
have inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed, affixed or in any other
manner reproduced.
SECTION 9.05. GENDER. Any reference to the masculine,
feminine or neuter shall be intended to include all.
SECTION 9.06. REPEAL AND AMENDMENT. These bylaws may be
altered or repealed, and new bylaws made, by the board of directors.
SECTION 9.07. SEVERABILITY. If any provision of these
bylaws shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, the validity, legality and enforceability of the remaining
provisions of these bylaws shall not in any way be affected or impaired thereby
and to the fullest extent possible, the provisions of these bylaws shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
CERTIFICATION
I hereby certify that the foregoing amended and restated
bylaws were adopted by unanimous written consent of the board of directors of
the Corporation as of March 21, 1994.
/s/ WILLIAM J. HALLINAN
- -----------------------
William J. Hallinan,
Secretary
16
<PAGE> 1
EXHIBIT 4.B
[FORM OF FACE OF SPECIMAN CERTIFICATE]
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER [DRAWING OF EAGLE] SHARES
FINOVA Capital Corporation
a Delaware Corporation
AUTHORIZED CAPITAL _______________ SHARES $1.00 PAR VALUE
THIS CERTIFIES THAT ______________________________ is the owner of
_____________________________________ full paid and non-assassable SHARES OF
FINOVA Capital Corporation, a Delaware corporation
CAPITAL STOCK OF ___________________________________________________________
transferable on the books of the Corporation in person or by duty authorized
Attorney upon surrender of this Certificat properly endorsed.
IN WITNESS WHEREOF the said Corporation has caused this Certificate to be signed
by its duty authorized officers and sealed with the Seal of the Corporation,
this _________________________ day of ___________________ A.D. 19____
___________________________ ____________________________
SECRETARY PRESIDENT
- --------------------------------------------------------------------------------
[FORM OF REVERSE OF SPECIMAN CERTIFICATE]
FOR VALUE RECEIVED, ________ hereby sell, assign and transfer unto ____________
____________________________________________________________ Shares represented
by the within Certificate, and do hereby irrevocably constitute and appoint
____________________________________________________________ Attorney to
transfer the said Shares on the books of the within named Corporation with full
power of substitution in the premises.
Dated ______________ 19____
In presence of
_______________________________
_______________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
THIS SPACE IS NOT TO BE COVERED IN ANY WAY
<PAGE> 1
EXHIBIT 10.A.1
GREYHOUND FINANCIAL CORPORATION
FIRST AMENDMENT DATED AS OF SEPTEMBER 30, 1994
TO SIXTH AMENDMENT AND RESTATEMENT OF CREDIT AGREEMENT
This FIRST AMENDMENT TO SIXTH AMENDMENT AND RESTATEMENT OF CREDIT
AGREEMENT (this "Amendment") is dated as of September 30, 1994 and entered into
by and among GREYHOUND FINANCIAL CORPORATION, a Delaware corporation (the
"Company"), the undersigned lenders (collectively the "Lenders"), the
undersigned Agents, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, BANK
OF MONTREAL, CHEMICAL BANK, CITIBANK, N.A., and NATIONAL WESTMINSTER BANK USA,
individually and as agents (the "Agents") for the Lenders hereunder, and
CITIBANK, N.A., a national banking association, as administrative agent (the
"Administrative Agent") for the Lenders hereunder, and is made with reference to
that certain Sixth Amendment and Restatement dated as of May 16, 1994 of Credit
Agreement dated as of May 31, 1976, by and among the Company, the Lenders, the
Agents and the Administrative Agent (the "Credit Agreement"). Capitalized terms
used herein without definition shall have the same meanings herein as set forth
in the Credit Agreement.
RECITALS
WHEREAS, the Company has requested that (i) the definition of
"Margin" in Section 1.01 of the Credit Agreement be amended, (ii) the fees
referred to in Section 2.10 of the Credit Agreement be amended and (iii) the
Commitment of certain Lenders be increased;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
A. NEW DEFINITIONS. Section 1.01 of the Credit Agreement is hereby
amended by deleting therefrom the definition of the term "Margin" and
substituting the following therefor:
"`Margin' shall mean with respect to any day in any Interest
Period in relation to any Advance, the percentages set forth in Table A below,
with respect to determinations of the Base Rate, or Table B below, with respect
to determinations of the Eurodollar Rate:
1
<PAGE> 2
Table A
Base Rate Margins
(in basis points)
<TABLE>
<CAPTION>
Outstanding Advances as a
Percentage of Commitments
(without giving effect
to any B Reduction)
-------------------------
Greater than
Level Less than 50% or equal to 50%
------- ------------- ---------------
<S> <C> <C>
Level 1 -15.00 -15.00
Level 2 -17.50 -17.50
Level 3 -20.00 -20.00
Level 4 -35.00 -10.00
Level 5 0.00 50.00
</TABLE>
Table B
Eurodollar Margins
(in basis points)
<TABLE>
<CAPTION>
Outstanding Advances as a
Percentage of Commitments
(without giving effect
to any B Reduction)
-------------------------
Greater than
Level Less than 50% or equal to 50%
------- ------------- ---------------
<S> <C> <C>
Level 1 22.50 35.00
Level 2 32.50 45.00
Level 3 42.50 55.00
Level 4 65.00 90.00
Level 5 100.00 150.00
</TABLE>
The applicable Margin shall be adjusted daily to reflect changes in the
outstanding principal amount of the Advances (determined for any day as of
the close of business) and the Level applicable to Long-term Debt in
accordance with Section 2.07."
B. AMENDMENT TO SECTION 2.01. Section 2.01(a) of the Credit Agreement is
hereby amended by replacing the phrase "the signature pages" appearing therein
with the phrase "Schedule 2".
C. AMENDMENT TO SECTION 2.10. Section 2.10 of the Credit Agreement is
hereby amended by deleting all of the text appearing after the colon and before
the period in the first sentence of such Section and substituting the following
therefor:
2
<PAGE> 3
" with respect to each day that (i) Level 1 is
applicable, 0.15% per annum, (ii) Level 2 is applicable, 0.175%
per annum, (iii) Level 3 is applicable, 0.20% per annum, (iv)
Level 4 is applicable, 0.35% per annum, or (v) Level 5 is
applicable, 0.50% per annum".
D. ADDITION OF SCHEDULE; CHANGES TO COMMITMENTS. The Credit
Agreement is hereby amended by adding thereto a new Schedule 2 in the form of
Annex I to this Amendment. The Commitments set forth on the signature pages to
the Agreement are hereby deleted and the Commitments set forth on Schedule 2 are
substituted therefor.
SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, the Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. The Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement, as amended by this Amendment (the "Amended Agreement").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the consummation of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of the Company.
C. NO CONFLICT. The execution and delivery by the Company of
this Amendment and the consummation by the Company of the Amended Agreement do
not and will not (i) violate any provision of any law or any governmental rule
or regulation applicable to the Company or its Subsidiaries, the certificate of
incorporation or bylaws of the Company or any order, judgment or decree of any
court or other agency of government binding on the Company or its Subsidiaries,
(ii) conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any Contractual Obligation of the Company
or its Subsidiaries, (iii) result in or require the creation or imposition of
any Lien upon any of the properties or assets of the Company or its
Subsidiaries, or (iv) require any approval of stockholders or any approval or
consent of any Person under any contractual obligation of the Company or its
Subsidiaries (other than the parties hereto).
D. GOVERNMENTAL CONSENTS. The execution and delivery by the
Company of this Amendment and the consummation by the Company of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other
3
<PAGE> 4
action to, with or by, any federal, state or other governmental authority or
regulatory body.
E. BINDING OBLIGATION. This Amendment has been duly executed
and delivered by the Company and this Amendment and the Amended Agreement are
the legally valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors' rights generally or by principles of equity and
commercial reasonableness.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 3.01 of the
Credit Agreement are true, correct and complete in all material respects to the
same extent as though made on and as of the date hereof, except as provided
above or to the extent such representations and warranties specifically relate
to an earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Amendment that would, upon the giving of notice, the passage of time, or
otherwise, constitute an Event of Default.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective on the first
date on or after October 3, 1994 on which all of the following conditions
precedent shall have been satisfied (such date being referred to herein as the
"First Amendment Effective Date"):
A. On or before the First Amendment Effective Date, the Company
shall deliver to the Lenders (or to the Agents with sufficient originally
executed copies, where appropriate, for each Lender and its counsel) the
following, each, unless otherwise noted, dated the First Amendment Effective
Date:
1. Resolutions of its Board of Directors approving and
authorizing the execution, delivery, and performance of this Amendment,
certified as of the First Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment;
2. Signature and incumbency certificates of its officers
executing this Amendment; and
3. Executed copies of this Amendment.
4
<PAGE> 5
B. The Lenders and their respective counsel shall have received
originally executed copies of one or more favorable written opinions of W. J.
Hallinan, Vice President-General Counsel and Secretary of the Company, in form
and substance reasonably satisfactory to the Agents and their counsel, dated as
of the First Amendment Effective Date and setting forth substantially the
matters in the opinions designated in Annex II to this Amendment and as to such
other matters as the Agents acting on behalf of the Lenders may reasonably
request.
C. On or before the First Amendment Effective Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incidental thereto not
previously found acceptable by the Agents, acting on behalf of the Lenders, and
their counsel shall be satisfactory in form and substance to the Agents and such
counsel, and the Agents and such counsel shall have received all such
counterpart originals or certified copies of such documents as the Agents may
reasonably request.
D. On or before the First Amendment Effective Date, the Company
shall have paid to the Administrative Agent for distribution to each Lender
party to this Amendment, an amount equal to (i) 0.05% multiplied by the amount
set forth opposite such Lender's name under Column A of Annex III plus (ii)
0.10% multiplied by the amount set forth opposite such Lender's name under
Column B of Annex III to this Amendment.
SECTION 4. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
(i) On and after the date this Amendment becomes effective in
accordance with its terms, each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof", "herein" or words of like
import referring to the Credit Agreement, and each reference in the
Notes to the "Credit Agreement", "thereunder", "thereof" or words of
like import referring to the Credit Agreement shall mean and be a
reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the Notes shall remain in full force and effect
and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of, any right, power or remedy
of the Agent or any Lender under, the Credit Agreement or the Notes.
5
<PAGE> 6
B. FEES AND EXPENSES. The Company acknowledges that all costs,
fees and expenses as described in Section 8.05 of the Credit Agreement incurred
by the Administrative Agent and its counsel with respect to this Amendment and
the documents and transactions contemplated hereby shall be for the account of
the Company.
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective as of the date hereof upon the execution and delivery of a counterpart
hereof by the Company and the Lenders.
[Remainder of page intentionally left blank]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
The Company:
GREYHOUND FINANCIAL CORPORATION
/s/
By__________________________
Title_______________________
/s/
By__________________________
Title_______________________
The Lenders:
CITIBANK, N.A. (Individually and as an Agent
and Administrative Agent)
/s/
By ___________________________
Title_________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
/s/
By ___________________________
Title ________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (as an Agent)
/s/
By ___________________________
Title ________________________
BANK OF MONTREAL (Individually
and as an Agent)
/s/
By ___________________________
Title ________________________
CHEMICAL BANK (Individually
and as an Agent)
/s/
By ___________________________
Title ________________________
NATIONAL WESTMINSTER BANK USA
(Individually and as an Agent)
/s/
By ___________________________
Title ________________________
BANK OF AMERICA ILLINOIS
/s/
By ___________________________
Title_________________________
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
/s/
By ___________________________
Title_________________________
CREDIT SUISSE
/s/
By ___________________________
Title_________________________
/s/
By ___________________________
Title_________________________
S-1
<PAGE> 8
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
/s/
By ___________________________
Title_________________________
NATIONSBANK OF GEORGIA, N.A.
/s/
By ___________________________
Title_________________________
UNION BANK OF SWITZERLAND LOS ANGELES BRANCH
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
WESTDEUTSCHE LANDESBANK GIROZENTRALE -
NEW YORK AND CAYMAN ISLANDS BRANCHES
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
CREDIT LYONNAIS SAN FRANCISCO BRANCH
/s/
By ___________________________
Title_________________________
FIRST INTERSTATE BANK OF ARIZONA, N.A.
/s/
By ___________________________
Title_________________________
NATIONAL WESTMINSTER BANK PLC
/s/
By ___________________________
Title_________________________
ROYAL BANK OF CANADA
/s/
By ___________________________
Title_________________________
SOCIETE GENERALE
/s/
By ___________________________
Title_________________________
BANK ONE, ARIZONA, N.A.
/s/
By ___________________________
Title_________________________
DRESDNER BANK AG LOS ANGELES AGENCY
/s/
By ___________________________
Title_________________________
/s/
By ___________________________
Title_________________________
UNION BANK
/s/
By ___________________________
Title_________________________
S-2
<PAGE> 9
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
THE MITSUBISHI TRUST AND BANKING CORPORATION,
ACTING THROUGH ITS LOS ANGELES AGENCY
/s/
By ___________________________
Title_________________________
ARAB BANKING CORPORATION
/s/
By ___________________________
Title_________________________
THE BANK OF NOVA SCOTIA
/s/
By ___________________________
Title_________________________
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
/s/
By ___________________________
Title_________________________
BANK HAPOALIM, B.M., LOS ANGELES BRANCH
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
BANK OF AMERICA ARIZONA
/s/
By ___________________________
Title_________________________
BANK OF HAWAII
/s/
By ___________________________
Title_________________________
BANQUE NATIONALE DE PARIS
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
COMERICA BANK
/s/
By ___________________________
Title_________________________
CREDIT AGRICOLE
/s/
By ___________________________
Title_________________________
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
/s/
By ___________________________
Title_________________________
S-3
<PAGE> 10
KREDIETBANK N.V.
/s/
By ___________________________
Title_________________________
/s/
By ___________________________
Title_________________________
NBD BANK, N.A.
/s/
By ___________________________
Title_________________________
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
SANWA BANK, LTD.
/s/
By____________________________
Title_________________________
UNITED STATES NATIONAL BANK OF OREGON
/s/
By____________________________
Title_________________________
ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH
/s/
By____________________________
Title_________________________
By____________________________
Title_________________________
BANK OF IRELAND
/s/
By____________________________
Title_________________________
THE BANK OF CALIFORNIA, N.A.
/s/
By____________________________
Title_________________________
FUJI BANK, LTD.
/s/
By____________________________
Title_________________________
THE SAKURA BANK, LTD.
/s/
By____________________________
Title_________________________
BANQUE PARIBAS
/s/
By____________________________
Title_________________________
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
S-4
<PAGE> 11
SUMITOMO BANK, LTD.
/s/
By____________________________
Title_________________________
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
COMMERZBANK
/s/
By____________________________
Title_________________________
THE DAI-ICHI KANGYO BANK, LTD.
LOS ANGELES AGENCY
/s/
By____________________________
Title_________________________
MONTE DEI PASCHI DI SIENA
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
THE SUMITOMO TRUST AND BANKING CO., LTD.,
LOS ANGELES AGENCY
/s/
By____________________________
Title_________________________
S-5
<PAGE> 12
ANNEX I
TO FIRST AMENDMENT
TO CREDIT AGREEMENT (SHORT TERM FACILITY)
SCHEDULE 2
TO FIRST AMENDMENT TO CREDIT AGREEMENT
(SHORT TERM FACILITY)
<TABLE>
<CAPTION>
COMMITMENT LENDERS
----------- -------
<S> <C>
$60,000,000 CITIBANK, N.A.
$60,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
$60,000,000 BANK OF MONTREAL
$60,000,000 CHEMICAL BANK
$25,000,000 NATIONAL WESTMINSTER BANK USA
$5,000,000 BANK OF AMERICA ILLINOIS
$50,000,000 THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
$25,000,000 CREDIT SUISSE
$37,500,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY
$32,500,000 NATIONSBANK OF GEORGIA, N.A.
$27,500,000 UNION BANK OF SWITZERLAND LOS ANGELES BRANCH
$27,500,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE - NEW YORK AND CAYMAN ISLANDS BRANCHES
$25,000,000 CREDIT LYONNAIS SAN FRANCISCO BRANCH
$25,000,000 FIRST INTERSTATE BANK OF ARIZONA, N.A.
$25,000,000 NATIONAL WESTMINSTER BANK PLC
$25,000,000 ROYAL BANK OF CANADA
$25,000,000 SOCIETE GENERALE
$20,000,000 BANK ONE, ARIZONA, N.A.
$17,500,000 DRESDNER BANK AG LOS ANGELES AGENCY
$25,000,000 UNION BANK
$15,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY
$15,000,000 THE MITSUBISHI TRUST AND BANKING CORPORATION, acting through its LOS ANGELES AGENCY
$12,500,000 ARAB BANKING CORPORATION
$25,000,000 THE BANK OF NOVA SCOTIA
$12,500,000 FIRST FIDELITY BANK, NATIONAL ASSOCIATION
$10,000,000 BANK HAPOALIM, B.M., LOS ANGELES BRANCH
$10,000,000 BANK OF AMERICA ARIZONA
$12,500,000 BANK OF HAWAII
$10,000,000 BANQUE NATIONALE DE PARIS
$10,000,000 COMERICA BANK
$15,000,000 CREDIT AGRICOLE
$10,000,000 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
$15,000,000 KREDIETBANK N.V.
$10,000,000 NBD BANK, N.A.
$10,000,000 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
</TABLE>
Annex I-1
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C>
$10,000,000 SANWA BANK, LTD.
$10,000,000 UNITED STATES NATIONAL BANK OF OREGON
$10,000,000 ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH
$7,500,000 BANK OF IRELAND
$7,500,000 THE BANK OF CALIFORNIA, N.A.
$10,000,000 FUJI BANK, LTD.
$5,000,000 THE SAKURA BANK, LTD.
$15,000,000 BANQUE PARIBAS
$12,500,000 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
$5,000,000 SUMITOMO BANK, LTD.
$27,500,000 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES
$10,000,000 COMMERZBANK AG, LOS ANGELES BRANCH
$5,000,000 THE DAI-ICHI KANGYO BANK, LTD. LOS ANGELES AGENCY
$5,000,000 MONTE DEI PASCHI DI SIENA
$10,000,000 THE SUMITOMO TRUST AND BANKING CO., LTD., LOS ANGELES AGENCY
Total Commitments:
$1,000,000,000
</TABLE>
Annex I-2
<PAGE> 14
ANNEX III
TO FIRST AMENDMENT TO SIXTH AMENDED AND
RESTATED CREDIT AGREEMENT
AMOUNTS FOR PURPOSES OF CALCULATION IN SECTION 3D
<TABLE>
<CAPTION>
COLUMN A COLUMN B
AMOUNT FOR AMOUNT FOR
PURPOSES OF PURPOSES OF
CALCULATION IN CALCULATION IN
SECTION 3D(I) SECTION 3D(II) LENDERS
- -------------- -------------- --------
<S> <C> <C>
$13,000,000 $47,000,000 CITIBANK, N.A.
$60,000,000 $0 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
$60,000,000 $0 BANK OF MONTREAL
$55,500,000 $4,500,000 CHEMICAL BANK
$25,000,000 $0 NATIONAL WESTMINSTER BANK USA
$5,000,000 $0 BANK OF AMERICA ILLINOIS
$50,000,000 $0 THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
$25,000,000 $0 CREDIT SUISSE
$37,500,000 $0 THE INDUSTRIAL BANK OF JAPAN LIMITED, LOS ANGELES AGENCY
$32,500,000 $0 NATIONSBANK OF GEORGIA, N.A.
$27,500,000 $0 UNION BANK OF SWITZERLAND LOS ANGELES BRANCH
$27,500,000 $0 WESTDEUTSCHE LANDESBANK GIROZENTRALE - NEW YORK
AND CAYMAN ISLANDS BRANCHES
$25,000,000 $0 CREDIT LYONNAIS SAN FRANCISCO BRANCH
$25,000,000 $0 FIRST INTERSTATE BANK OF ARIZONA, N.A.
$25,000,000 $0 NATIONAL WESTMINSTER BANK PLC
$25,000,000 $0 ROYAL BANK OF CANADA
$25,000,000 $0 SOCIETE GENERALE
$20,000,000 $0 BANK ONE, ARIZONA, N.A.
$17,500,000 $0 DRESDNER BANK AG LOS ANGELES AGENCY
$17,500,000 $7,500,000 UNION BANK
$15,000,000 $0 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY
$15,000,000 $0 THE MITSUBISHI TRUST AND BANKING CORPORATION,
acting through its LOS ANGELES AGENCY
$12,500,000 $0 ARAB BANKING CORPORATION
$12,500,000 $12,500,000 THE BANK OF NOVA SCOTIA
$12,500,000 $0 FIRST FIDELITY BANK, NATIONAL ASSOCIATION
$10,000,000 $0 BANK HAPOALIM, B.M., LOS ANGELES BRANCH
$10,000,000 $0 BANK OF AMERICA ARIZONA
$10,000,000 $2,500,000 BANK OF HAWAII
$10,000,000 $0 BANQUE NATIONALE DE PARIS
$10,000,000 $0 COMERICA BANK
$10,000,000 $5,000,000 CREDIT AGRICOLE
</TABLE>
Annex III -1
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C> <C>
$10,000,000 $0 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
$10,000,000 $5,000,000 KREDIETBANK N.V.
$10,000,000 $0 NBD BANK, N.A.
$10,000,000 $0 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
$10,000,000 $0 SANWA BANK, LTD.
$10,000,000 $0 UNITED STATES NATIONAL BANK OF OREGON
$10,000,000 $0 ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH
$7,500,000 $0 BANK OF IRELAND
$5,000,000 $2,500,000 THE BANK OF CALIFORNIA, N.A.
$5,000,000 $5,000,000 FUJI BANK, LTD.
$5,000,000 $0 THE SAKURA BANK, LTD.
$15,000,000 $0 BANQUE PARIBAS
$10,500,000 $2,000,000 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
$5,000,000 $0 SUMITOMO BANK, LTD.
$27,500,000 $0 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES
$10,000,000 $0 COMMERZBANK AG, LOS ANGELES BRANCH
$5,000,000 $0 THE DAI-ICHI KANGYO BANK, LTD. LOS ANGELES AGENCY
$5,000,000 $0 MONTE DEI PASCHI DI SIENA
$10,000,000 $0 THE SUMITOMO TRUST AND BANKING CO., LTD., LOS ANGELES AGENCY
</TABLE>
Annex III-2
<PAGE> 1
EXHIBIT 10.B.1
GREYHOUND FINANCIAL CORPORATION
FIRST AMENDMENT DATED AS OF SEPTEMBER 30, 1994
TO CREDIT AGREEMENT (SHORT TERM FACILITY)
This FIRST AMENDMENT TO CREDIT AGREEMENT (SHORT TERM FACILITY)
(this "Amendment") is dated as of September 30, 1994 and entered into by and
among GREYHOUND FINANCIAL CORPORATION, a Delaware corporation (the "Company"),
the undersigned lenders (collectively the "Lenders"), the undersigned Agents,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, BANK OF MONTREAL,
CHEMICAL BANK, CITIBANK, N.A., and NATIONAL WESTMINSTER BANK USA, individually
and as agents (the "Agents") for the Lenders hereunder, and CITIBANK, N.A., a
national banking association, as administrative agent (the "Administrative
Agent") for the Lenders hereunder, and is made with reference to that certain
Credit Agreement (Short Term Facility) dated as of May 16, 1994, by and among
the Company, the Lenders, the Agents and the Administrative Agent (the "Credit
Agreement"). Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, the Company has requested that (i) the definition of
"Margin" in Section 1.01 of the Credit Agreement be amended, (ii) the fees
referred to in Section 2.09 of the Credit Agreement be amended and (iii) the
Commitments of certain Lenders be increased;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
A. NEW DEFINITIONS. Section 1.01 of the Credit Agreement is
hereby amended by deleting therefrom the definition of the term "Margin" and
substituting the following therefor:
"'Margin' shall mean with respect to any day in any
Interest Period in relation to any Advance, the percentages set forth
in Table A below, with respect to determinations of the Base Rate, or
Table B below, with respect to determinations of the Eurodollar Rate:
-1-
<PAGE> 2
Table A
Base Rate Margins
(in basis points)
<TABLE>
<CAPTION>
Outstanding Advances as a
Percentage of Commitments
Greater than
Level Less than 50% or equal to 50%
----- ------------- ---------------
<S> <C> <C>
Level 1 -12.50 -12.50
Level 2 -13.75 -13.75
Level 3 -15.00 -15.00
Level 4 -25.00 0.00
Level 5 10.00 60.00
</TABLE>
Table B
Eurodollar Margins
(in basis points)
<TABLE>
<CAPTION>
Outstanding Advances as a
Percentage of Commitments
Greater than
Level Less than 50% or equal to 50%
----- ------------- ---------------
<S> <C> <C>
Level 1 25.00 37.50
Level 2 36.25 48.75
Level 3 47.50 60.00
Level 4 75.00 100.00
Level 5 110.00 160.00
</TABLE>
The applicable Margin shall be adjusted daily to reflect changes in
the outstanding principal amount of the Advances (determined for any
day as of the close of business) and the Level applicable to Long-term
Debt in accordance with Section 2.06."
B. AMENDMENT TO SECTION 2.01. Section 2.01(a) of the Credit
Agreement is hereby amended by replacing the phrase "the signature pages"
appearing therein with the phrase "Schedule 2".
C. AMENDMENT TO SECTION 2.09. Section 2.09 of the Credit
Agreement is hereby amended by deleting all of the text appearing after the
colon and before the period in the first sentence of such Section and
substituting the following therefor:
2
<PAGE> 3
"with respect to each day that
(i) Level 1 is applicable, 0.125% per annum,
(ii) Level 2 is applicable, 0.1375% per annum,
(iii) Level 3 is applicable, 0.15% per annum,
(iv) Level 4 is applicable, 0.25% per annum, or
(v) Level 5 is applicable, 0.40% per annum".
D. ADDITION OF SCHEDULE; CHANGES TO COMMITMENTS. The Credit
Agreement is hereby amended by adding thereto a new Schedule 2 in the form of
Annex I to this Amendment. The Commitments set forth on the signature pages to
the Agreement are hereby deleted and the Commitments set forth on Schedule 2
are substituted therefor.
SECTION 2. COMPANY'S REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, the Company
represents and warrants to each Lender that the following statements are true,
correct and complete:
A. CORPORATE POWER AND AUTHORITY. The Company has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Credit Agreement, as amended by this Amendment (the "Amended Agreement").
B. AUTHORIZATION OF AGREEMENTS. The execution and
delivery of this Amendment and the consummation of the Amended Agreement have
been duly authorized by all necessary corporate action on the part of the
Company.
C. NO CONFLICT. The execution and delivery by the
Company of this Amendment and the consummation by the Company of the Amended
Agreement do not and will not (i) violate any provision of any law or any
governmental rule or regulation applicable to the Company or its Subsidiaries,
the certificate of incorporation or bylaws of the Company or any order,
judgment or decree of any court or other agency of government binding on the
Company or its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of the Company or its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of the Company or its Subsidiaries, or (iv) require any approval of
stockholders or any approval or consent of any Person under any contractual
obligation of the Company or its Subsidiaries (other than the parties hereto).
D. GOVERNMENTAL CONSENTS. The execution and delivery by
the Company of this Amendment and the consummation by the Company of the
Amended Agreement do not and will not require any registration with, consent or
approval of, or notice to, or other
3
<PAGE> 4
action to, with or by, any federal, state or other governmental authority or
regulatory body.
E. BINDING OBLIGATION. This Amendment has been duly
executed and delivered by the Company and this Amendment and the Amended
Agreement are the legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
principles of equity and commercial reasonableness.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM
CREDIT AGREEMENT. The representations and warranties contained in Section 3.01
of the Credit Agreement are true, correct and complete in all material respects
to the same extent as though made on and as of the date hereof, except as
provided above or to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is
continuing or will result from the consummation of the transactions
contemplated by this Amendment that would, upon the giving of notice, the
passage of time, or otherwise, constitute an Event of Default.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective on the
first date on or after October 3, 1994 on which all of the following conditions
precedent shall have been satisfied (such date being referred to herein as the
"First Amendment Effective Date"):
A. On or before the First Amendment Effective Date, the
Company shall deliver to the Lenders (or to the Agents with sufficient
originally executed copies, where appropriate, for each Lender and its counsel)
the following, each, unless otherwise noted, dated the First Amendment
Effective Date:
1. Resolutions of its Board of Directors
approving and authorizing the execution, delivery, and performance of
this Amendment, certified as of the First Amendment Effective Date by
its corporate secretary or an assistant secretary as being in full
force and effect without modification or amendment;
2. Signature and incumbency certificates of its
officers executing this Amendment; and
3. Executed copies of this Amendment.
4
<PAGE> 5
B. The Lenders and their respective counsel shall have
received originally executed copies of one or more favorable written opinions
of W.J. Hallinan, Vice President-General Counsel and Secretary of the Company,
in form and substance reasonably satisfactory to the Agents and their counsel,
dated as of the First Amendment Effective Date and setting forth substantially
the matters in the opinions designated in Annex II to this Amendment and as to
such other matters as the Agents acting on behalf of the Lenders may reasonably
request.
C. On or before the First Amendment Effective Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incidental thereto not
previously found acceptable by the Agents, acting on behalf of the Lenders, and
their counsel shall be satisfactory in form and substance to the Agents and
such counsel, and the Agents and such counsel shall have received all such
counterpart originals or certified copies of such documents as the Agents may
reasonably request.
D. On or before the First Amendment Effective Date, the
Company shall have paid to the Administrative Agent for distribution to each
Lender party to this Amendment, an amount equal to (i) 0.05% multiplied by the
amount set forth opposite such Lender's name under Column A of Annex III plus
(ii) 0.10% multiplied by the amount set forth opposite such Lender's name under
Column B of Annex III to this Amendment.
SECTION 4. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
(i) On and after the date this Amendment becomes
effective in accordance with its terms, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each
reference in the Notes to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement
shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the Notes shall remain in full force and effect
and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of, any right,
power or remedy of the Agents or any Lender under, the Credit
Agreement or the Notes.
B. FEES AND EXPENSES. The Company acknowledges that all
costs, fees and expenses as described in Section 8.05 of the
5
<PAGE> 6
Credit Agreement incurred by the Administrative Agent and its counsel with
respect to this Amendment and the documents and transactions contemplated
hereby shall be for the account of the Company.
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective as of the date hereof upon the execution and delivery of a
counterpart hereof by the Company and the Lenders.
[Remainder of page intentionally left blank]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
The Company:
GREYHOUND FINANCIAL CORPORATION
/s/
By __________________________
Title _______________________
/s/
By __________________________
Title _______________________
The Lenders:
CITIBANK, N.A. (Individually and as
an Agent and Administrative Agent)
/s/
By __________________________
Title _______________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
/s/
By __________________________
Title _______________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION (as an
Agent)
/s/
By __________________________
Title _______________________
BANK OF MONTREAL (Individually
and as an Agent)
/s/
By __________________________
Title _______________________
CHEMICAL BANK (Individually
and as an Agent)
/s/
By __________________________
Title _______________________
NATIONAL WESTMINSTER BANK USA
(Individually and as an Agent)
/s/
By __________________________
Title _______________________
BANK OF AMERICA ILLINOIS
/s/
By __________________________
Title _______________________
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
/s/
By __________________________
Title _______________________
CREDIT SUISSE
/s/
By __________________________
Title _______________________
/s/
By __________________________
Title _______________________
S-1
<PAGE> 8
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
/s/
By __________________________
Title _______________________
NATIONSBANK OF GEORGIA, N.A.
/s/
By __________________________
Title _______________________
UNION BANK OF SWITZERLAND LOS ANGELES BRANCH
/s/
By __________________________
Title _______________________
/s/
By __________________________
Title _______________________
WESTDEUTSCHE LANDESBANK GIROZENTRALE -
NEW YORK AND CAYMAN ISLANDS BRANCHES
/s/
By __________________________
Title _______________________
/s/
By __________________________
Title _______________________
CREDIT LYONNAIS SAN FRANCISCO BRANCH
/s/
By __________________________
Title _______________________
FIRST INTERSTATE BANK OF ARIZONA, N.A.
/s/
By __________________________
Title _______________________
NATIONAL WESTMINSTER BANK PLC
/s/
By __________________________
Title _______________________
ROYAL BANK OF CANADA
/s/
By __________________________
Title _______________________
SOCIETE GENERALE
/s/
By __________________________
Title _______________________
BANK ONE, ARIZONA, N.A.
/s/
By __________________________
Title _______________________
DRESDNER BANK AG LOS ANGELES AGENCY
/s/
By __________________________
Title _______________________
/s/
By __________________________
Title _______________________
UNION BANK
/s/
By __________________________
Title _______________________
S-2
<PAGE> 9
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., LOS ANGELES AGENCY
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
THE MITSUBISHI TRUST AND BANKING CORPORATION,
ACTING THROUGH ITS LOS ANGELES AGENCY
/s/
By ___________________________
Title_________________________
ARAB BANKING CORPORATION
/s/
By ___________________________
Title_________________________
THE BANK OF NOVA SCOTIA
/s/
By ___________________________
Title_________________________
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
/s/
By ___________________________
Title_________________________
BANK HAPOALIM, B.M., LOS ANGELES BRANCH
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
BANK OF AMERICA ARIZONA
/s/
By ___________________________
Title_________________________
BANK OF HAWAII
/s/
By ___________________________
Title_________________________
BANQUE NATIONALE DE PARIS
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
COMERICA BANK
/s/
By ___________________________
Title_________________________
CREDIT AGRICOLE
/s/
By ___________________________
Title_________________________
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
/s/
By ___________________________
Title_________________________
S-3
<PAGE> 10
KREDIETBANK N.V.
/s/
By ___________________________
Title_________________________
/s/
By ___________________________
Title_________________________
NBD BANK, N.A.
/s/
By ___________________________
Title_________________________
ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
SANWA BANK, LTD.
/s/
By____________________________
Title_________________________
UNITED STATES NATIONAL BANK OF OREGON
/s/
By____________________________
Title_________________________
ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
BANK OF IRELAND
/s/
By____________________________
Title_________________________
THE BANK OF CALIFORNIA, N.A.
/s/
By____________________________
Title_________________________
FUJI BANK, LTD.
/s/
By____________________________
Title_________________________
THE SAKURA BANK, LTD.
/s/
By____________________________
Title_________________________
BANQUE PARIBAS
/s/
By____________________________
Title_________________________
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
S-4
<PAGE> 11
SUMITOMO BANK, LTD.
/s/
By____________________________
Title_________________________
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
COMMERZBANK
/s/
By____________________________
Title_________________________
THE DAI-ICHI KANGYO BANK, LTD. LOS ANGELES AGENCY
/s/
By____________________________
Title_________________________
MONTE DEI PASCHI DI SIENA
/s/
By____________________________
Title_________________________
/s/
By____________________________
Title_________________________
THE SUMITOMO TRUST AND BANKING CO., LTD.,
LOS ANGELES AGENCY
/s/
By____________________________
Title_________________________
S-5
<PAGE> 12
ANNEX I
TO FIRST AMENDMENT TO CREDIT AGREEMENT
(SHORT TERM FACILITY)
SCHEDULE 2
TO SIXTH AMENDED AND RESTATED CREDIT AGREEMENT
<TABLE>
<CAPTION>
COMMITMENT LENDERS
---------- -------
<S> <C>
$60,000,000 CITIBANK, N.A.
$60,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
$60,000,000 BANK OF MONTREAL
$60,000,000 CHEMICAL BANK
$25,000,000 NATIONAL WESTMINSTER BANK USA
$5,000,000 BANK OF AMERICA ILLINOIS
$50,000,000 THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
$25,000,000 CREDIT SUISSE
$37,500,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY
$32,500,000 NATIONSBANK OF GEORGIA, N.A.
$27,500,000 UNION BANK OF SWITZERLAND LOS ANGELES BRANCH
$27,500,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE - NEW YORK AND CAYMAN ISLANDS BRANCHES
$25,000,000 CREDIT LYONNAIS SAN FRANCISCO BRANCH
$25,000,000 FIRST INTERSTATE BANK OF ARIZONA, N.A.
$25,000,000 NATIONAL WESTMINSTER BANK PLC
$25,000,000 ROYAL BANK OF CANADA
$25,000,000 SOCIETE GENERALE
$20,000,000 BANK ONE, ARIZONA, N.A.
$17,500,000 DRESDNER BANK AG LOS ANGELES AGENCY
$25,000,000 UNION BANK
$15,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY
$15,000,000 THE MITSUBISHI TRUST AND BANKING CORPORATION, acting through its LOS ANGELES AGENCY
$12,500,000 ARAB BANKING CORPORATION
$25,000,000 THE BANK OF NOVA SCOTIA
$12,500,000 FIRST FIDELITY BANK, NATIONAL ASSOCIATION
$10,000,000 BANK HAPOALIM, B.M., LOS ANGELES BRANCH
$10,000,000 BANK OF AMERICA ARIZONA
$12,500,000 BANK OF HAWAII
$10,000,000 BANQUE NATIONALE DE PARIS
$10,000,000 COMERICA BANK
$15,000,000 CREDIT AGRICOLE
$10,000,000 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
$15,000,000 KREDIETBANK N.V.
$10,000,000 NBD BANK, N.A.
$10,000,000 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A.
</TABLE>
Annex I -1
<PAGE> 13
<TABLE>
<S> <C>
$10,000,000 SANWA BANK, LTD.
$10,000,000 UNITED STATES NATIONAL BANK OF OREGON
$10,000,000 ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH
$7,500,000 BANK OF IRELAND
$7,500,000 THE BANK OF CALIFORNIA, N.A.
$10,000,000 FUJI BANK, LTD.
$5,000,000 THE SAKURA BANK, LTD.
$15,000,000 BANQUE PARIBAS
$12,500,000 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
$5,000,000 SUMITOMO BANK, LTD.
$27,500,000 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES
$10,000,000 COMMERZBANK
$5,000,000 THE DAI-ICHI KANGYO BANK, LTD. LOS ANGELES AGENCY
$5,000,000 MONTE DEI PASCHI
$10,000,000 THE SUMITOMO TRUST AND BANKING CO., LTD., LOS ANGELES AGENCY
Total Commitments:
$1,000,000,000
</TABLE>
Annex I-2
<PAGE> 14
ANNEX III
TO FIRST AMENDMENT TO CREDIT AGREEMENT
(SHORT TERM FACILITY)
AMOUNTS FOR PURPOSES OF CALCULATION IN SECTION 3D
<TABLE>
<CAPTION>
COLUMN A COLUMN B
AMOUNT FOR AMOUNT FOR
PURPOSES OF PURPOSES OF
CALCULATION IN CALCULATION IN
SECTION 3D(i) SECTION 3D(ii) LENDERS
- -------------- -------------- -------
<S> <C> <C>
$13,000,000 $47,000,000 CITIBANK, N.A.
$60,000,000 $0 BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
$60,000,000 $0 BANK OF MONTREAL
$55,500,000 $4,500,000 CHEMICAL BANK
$25,000,000 $0 NATIONAL WESTMINSTER BANK USA
$5,000,000 $0 BANK OF AMERICA ILLINOIS
$50,000,000 $0 THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
$25,000,000 $0 CREDIT SUISSE
$37,500,000 $0 THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY
$32,500,000 $0 NATIONSBANK OF GEORGIA, N.A.
$27,500,000 $0 UNION BANK OF SWITZERLAND LOS ANGELES BRANCH
$27,500,000 $0 WESTDEUTSCHE LANDESBANK GIROZENTRALE - NEW YORK
AND CAYMAN ISLANDS BRANCHES
$25,000,000 $0 CREDIT LYONNAIS SAN FRANCISCO RANCH
$25,000,000 $0 FIRST INTERSTATE BANK OF ARIZONA, N.A.
$25,000,000 $0 NATIONAL WESTMINSTER BANK PLC
$25,000,000 $0 ROYAL BANK OF CANADA
$25,000,000 $0 SOCIETE GENERALE
$20,000,000 $0 BANK ONE, ARIZONA, N.A.
$17,500,000 $0 DRESDNER BANK AG LOS ANGELES AGENCY
$17,500,000 $7,500,000 UNION BANK
$15,000,000 $0 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY
$15,000,000 $0 THE MITSUBISHI TRUST AND BANKING CORPORATION, acting through its
LOS ANGELES AGENCY
$12,500,000 $0 ARAB BANKING CORPORATION
$12,500,000 $12,500,000 THE BANK OF NOVA SCOTIA
$12,500,000 $0 FIRST FIDELITY BANK, NATIONAL ASSOCIATION
$10,000,000 $0 BANK HAPOALIM, B.M., LOS ANGELES BRANCH
$10,000,000 $0 BANK OF AMERICA ARIZONA
$10,000,000 $2,500,000 BANK OF HAWAII
$10,000,000 $0 BANQUE NATIONALE DE PARIS
$10,000,000 $0 COMERICA BANK
$10,000,000 $5,000,000 CREDIT AGRICOLE
</TABLE>
Annex III -1
<PAGE> 15
<TABLE>
<S> <C> <C>
$10,000,000 $0 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
$10,000,000 $5,000,000 KREDIETBANK N.V.
$10,000,000 $0 NBD BANK, N.A.
$10,000,000 $0 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A
$10,000,000 $0 SANWA BANK, LTD.
$10,000,000 $0 UNITED STATES NATIONAL BANK OF OREGON
$10,000,000 $0 ABN AMRO BANK N.V., LOS ANGELES INTERNATIONAL BRANCH
$7,500,000 $0 BANK OF IRELAND
$5,000,000 $2,500,000 THE BANK OF CALIFORNIA, N.A.
$5,000,000 $5,000,000 FUJI BANK, LTD.
$5,000,000 $0 THE SAKURA BANK, LTD.
$15,000,000 $0 BANQUE PARIBAS
$10,500,000 $2,000,000 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
$5,000,000 $0 SUMITOMO BANK, LTD.
$27,500,000 $0 DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCHES
$10,000,000 $0 COMMERZBANK
$5,000,000 $0 THE DAI-ICHI KANGYO BANK, LTD. LOS ANGELES AGENCY
$5,000,000 $0 MONTE DEI PASCHI
$10,000,000 $0 THE SUMITOMO TRUST AND BANKING CO., LTD., LOS ANGELES AGENCY
</TABLE>
Annex III-2
<PAGE> 1
EXHIBIT 10.J
[EXECUTION COPY]
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February
3, 1995, between Transamerica Business Credit Corporation, a Delaware
corporation, having its principal place of business at 225 North Michigan
Avenue, Suite 2100, Chicago, Illinois 60601 (the "SELLER"), and FINOVA Capital
Corporation, a Delaware corporation having its principal place of business at
1850 N. Central Avenue, Suite 1159, P.O. Box 2209, Phoenix, Arizona 85002-2209
(the "BUYER").
W I T N E S S E T H :
WHEREAS, the Seller has previously provided financing to the Borrowers
(as hereinafter defined) in the form of loans secured by, among other things,
chattel paper or security interests therein, equipment and accounts receivable,
and is a party to, or otherwise possesses an interest in certain loan and line
of credit agreements, and any and all other security agreements, guarantees,
letters of credit, documents, instruments, and other agreements executed or
furnished in connection with such loan agreements, all of which are identified
in SCHEDULE 1 hereto (all such loans being collectively referred to herein as
"LOANS," and all such agreements, guarantees, letters of credit, documents and
instruments, including such loan and line of credit agreements, as amended,
supplemented or otherwise modified through the date hereof, being collectively
referred to herein as the "LOAN DOCUMENTS"); and
WHEREAS, the Seller desires to sell to the Buyer and the Buyer desires
to purchase from the Seller all of the Seller's right, title and interest in
and to the Loans, and under the Loan Documents, but excluding the Excluded
Liabilities (as hereafter defined) and, with respect to the Seller's Consumer
Rediscount Group (the "CRG"), certain business records concerning the Borrowers
and certain business information and records including, without limitation, the
customer lists and prospect lists of the CRG concerning loans of a type similar
to the Loans with respect to which the CRG has issued a written proposal or
commitment (the "PURCHASED RIGHTS"), upon the terms and conditions set forth
herein.
NOW, THEREFORE in consideration of the promises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Sale, Assignment and Assumption.
(a) Subject to the satisfaction of the conditions in
paragraphs 5 and 6 hereof, on the Closing Date (as hereafter defined), the
Seller will irrevocably sell, transfer, assign and convey to the Buyer, its
successors and assigns, and the Buyer will purchase and receive, all right,
title, and interest of the Seller in and to the Purchased Rights and all
indebtedness owed to the Seller evidenced thereby and all of the Seller's right
to receive any distributions of cash, securities, obligations or other property
of any kind in respect of the Purchased Rights and thereupon the Buyer will
perform in accordance with their terms the Assumed Liabilities, except as such
performance may be prohibited or excused by Law (as hereafter defined).
"ASSUMED LIABILITIES" means all claims, costs, expenses (including reasonable
attorneys' and other professionals' and experts' fees and expenses (including
allocated costs and expenses of internal attorneys, professionals and
experts)), losses, judgments, settlements, damages, taxes, commitments,
liabilities and obligations (collectively, "CLAIMS") of the Seller of any kind
or nature, accrued or contingent, now existing or hereafter arising from or
related to any of the Loans or the Loan Documents, excluding only the Excluded
Liabilities (as hereafter defined), and expressly including any act or omission
of the Seller or any of its agents or employees taken at the direction or
deemed direction of the Buyer in accordance with paragraph 2(a) hereof, but
only to the extent or as a consequence of such direction.
(b) The Purchased Rights do not include any Claim by a
third party asserting any liability or damage relating to any Loan or Purchased
Right which Claim is based on the actual or alleged act or omission (including
any actual or alleged negligence or misconduct or any breach of contract) of
the Seller or any of its agents or employees prior to the Closing Date, but
excluding any act or omission of the Seller or any of its agents or employees
taken at the direction or deemed direction of the Buyer in accordance with
paragraph 2(a) hereof (the "EXCLUDED LIABILITIES").
(c) This sale (i) is, as of the Closing Date, intended to
be a presently effective sale and assignment, (ii) is a sale without recourse
to or warranty by the Seller of any kind whatsoever except as expressly
provided in this Agreement and (iii) shall entitle the Buyer to collect and
receive all payments or other distributions and to exercise and enforce all
rights and remedies in respect of the Purchased Rights from and after the
Closing Date.
<PAGE> 2
(d) The aggregate purchase price paid to the Seller for the
Purchased Rights shall be (i) 107% of the principal balance of the Loans (net
of the amount of participating interest in the Loans granted to third parties),
which principal balance shall be determined by reference to the Loan Documents
and the books and records maintained by the Seller with respect thereto, plus
(ii) the amount of all unpaid interest accrued on the principal balance of the
Loans since the last scheduled interest payment dates applicable to the Loans,
plus (iii) any amount payable by the Buyer pursuant to paragraph 4(b) hereof
(collectively, the "PURCHASE PRICE"). As a condition to the effectiveness of
this Agreement, the Buyer shall pay within one business day of the date hereof
to the Seller a deposit to be credited toward the Purchase Price in the amount
of $350,000 (the "Deposit").
(e) On the closing date, which shall occur by the fifth
business day following the satisfaction of the conditions to closing specified
in paragraphs 5 and 6 hereof, but in no event later than the latest of (i)
March 15, 1995, (ii) April 15, 1995, if the HSR ACT Consent (as hereafter
defined) is required but has not yet been obtained and (iii) such later date as
the Seller and the Buyer shall agree in writing (the "CLOSING DATE") at the
offices of the Seller at 13760 Noel Road, Dallas, Texas, the Buyer shall pay
the Purchase Price less the amount of the Deposit by wire transfer to the
account of the Seller at:
First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Account No. 5260213
ABA No. 071000013
Reference: A. DiMartino
(f) With respect to any Loan (i) with an outstanding
principal balance as of the Closing Date in excess of $10,000,000 that is
prepaid as a result of a third party refinancing during the six-month period
following the Closing Date and (ii) in connection with which the Buyer has used
its reasonable best efforts during such period to remain as the lender (each a
"PREPAID LOAN"), an adjustment shall be made to the Purchase Price in an amount
equal to 7% of the outstanding principal balance of such Prepaid Loan as of the
Closing Date. The amount of the adjustment determined under this paragraph
shall be paid by the Seller to the Buyer on the first business day that is six
months after the Closing Date.
(g) The parties shall make the following post-closing
adjustments to the Purchase Price:
(i) In the event that, within sixty days after the Closing
Date, either party delivers to the other party a written notice
asserting that the amount of the aggregate principal balance of the
Loans (which amount is used to calculate the Purchase Price) certified
by the Buyer under paragraph 6(c)(xi) hereof was incorrect on the date
thereof, along with a detailed summary of the facts and calculations
supporting the assertion in such notice and a statement of the correct
(in the notifying party's opinion) aggregate amount of the principal
balance of the Loans as of the Closing Date, then within ten days
after the receipt of such notice, the noticed party shall inform the
notifying party whether the noticed party agrees with the assertion in
the notice and the statement of the correct aggregate amount of the
principal balance of the Loans. In the event that the parties agree,
they shall make arrangements with one another for the prompt transfer
of funds between themselves so as to adjust the Purchase Price based
on the correct aggregate amount of the principal balance of the Loans
as of the Closing Date. In the event that the parties disagree, they
shall use their best efforts to negotiate in good faith a resolution
to the disagreement. In the event that the parties thereafter cannot
resolve their disagreement, each shall have its respective rights and
remedies hereunder and under applicable Law.
(ii) Except as provided in subparagraph (i) above, in the
event that any other amounts required to be paid or credited under this
Agreement cannot be precisely determined and confirmed by the parties
by the Closing Date, the parties shall make such determination promptly
following the Closing Date and transfer such amounts as may be required
hereunder.
2. Servicing of the Loans, Conduct of Business.
(a) From the date hereof until the Closing Date, the Seller
shall service and administer the Loans in accordance with its current servicing
standards and practices and the reasonable requests of the Buyer (which shall be
made in writing), if any; provided, however, that the Seller shall be absolved
of its obligation to maintain such standards or practices to the extent the
Buyer so informs the Seller in writing. Further, without the prior written
consent of the Buyer, the Seller shall not (i) except as required by law or by
the terms of any of the Loan Documents, (A) release any collateral from the lien
securing, or (B) compromise or settle any Claims of the Seller with respect to,
any of the Loans, in each case which would have a material adverse effect on the
rights of the Seller with respect to the Loans, (ii) initiate, complete or
otherwise take any action with respect to a foreclosure of any of the collateral
securing any of the Loans,
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except to the extent that, in the Seller's reasonable judgment, such actions
are required as the result of actions taken prior to the date hereof, or (iii)
sell or encumber or contract to sell or encumber any Loan, or any portion
thereof or any interest therein, except in each case to the extent that the
Seller has disclosed its undertaking of such action in writing to the Buyer
prior to the date hereof; and provided, further, however, that, except for
amendments, waivers or modifications (x) currently being negotiated or
documented or (y) that, in the reasonable judgment of the Seller, do not have a
material adverse effect on the rights of the Seller under the applicable Loan
Documents, the Seller shall not amend, waive or modify the Loan Documents
without the Buyer's prior written consent. SCHEDULE 2 hereto contains a list
of all such future actions and pending amendments, waivers and modifications as
of the date hereof. The Seller, as servicer, shall notify the Buyer in the
event that, in the Seller's judgment, an action prohibited under clause (i),
(ii) or (iii) above should be taken to protect the value of any Loan or in the
event that the Seller, as servicer, desires to obtain the Buyer's consent to
any action taken or proposed to be taken by the Seller in connection with the
servicing of the Loans. Within five days after the Buyer's receipt of the
Seller's notification, the Buyer shall direct the Seller whether to take such
action. If written direction is not received by the Seller by the later of (i)
five days after the Buyer's receipt of the Seller's notification and (ii) five
days after the Buyer's receipt of all information reasonably requested by the
Buyer (which request shall be delivered to the Seller within five days after
the Buyer's receipt of the Seller's notice) to enable it to make an informed
decision thereon, the Buyer shall be deemed to have directed the Seller to take
such action as the Seller, in its reasonable judgment, determines is
appropriate (including, without limitation, no action). From and after the
Closing Date, the Seller shall have no obligation for servicing the Loans,
except to the extent otherwise provided herein or agreed in writing by the
parties.
(b) Subject to the foregoing, from and after the date hereof
and through the Closing Date, the Seller shall (i) conduct its business
relationships with respect to any of the Purchased Rights, the Borrowers,
prospective borrowers and the Seller's employees consistent with the current
ordinary course of business practices and standards of the Seller, (ii) not
terminate any of the Seller's employees engaged in connection with the servicing
of the Loans, except for cause or to the extent the Seller reasonably deems such
employees to be unnecessary for the servicing of the Loans, (iii) use reasonable
efforts consistent with the Seller's business judgment to preserve intact the
presently existing business responsible for the origination, retention and
servicing of the Loans or the origination of loans, (iv) not make any loan or
extend any line of credit (with respect to which a commitment to provide
financing did not exist as of the date hereof) to any of the Borrowers or any
other borrower of a type evidenced by the Loan Documents other than to the
borrowers specified in SCHEDULE 3 hereto (the "EXCLUDED BORROWERS") without the
Buyer's prior written consent, (v) not make any material changes to its
lending, accounting, or tax practices or standards, except in accordance with
generally accepted accounting principles or as required by Law, and (vi) not
increase or agree to increase by more than 5% the compensation or benefits
payable to its employees specified in SCHEDULE 4 hereto (the "DESIGNATED
EMPLOYEES"), except as specified in such schedule, or make or agree to make any
other changes in the terms of their employment, without the Buyer's prior
written consent.
3. The Seller's Employees.
(a) The Buyer may, in its discretion, employ, as employees
of the Buyer or any of its affiliates, with such employment to begin on or after
the Closing Date, up to fifteen of the Designated Employees (the Designated
Employees who are employed by the Buyer or any of its affiliates are hereafter
referred to as the "ENGAGED EMPLOYEES") on terms acceptable to the Buyer and any
such employee. The Engaged Employees shall receive credit for prior service with
the Seller to the same extent recognized by the Seller's pension plan (as
specified in SCHEDULE 4 hereto) for vesting and eligibility purposes under the
Buyer's pension plan, if any, in effect from time to time, but not for accruing
additional benefits thereunder. The Buyer shall have no liability or obligation
under any employment, consulting or severance agreements established by the
Seller. As between the Seller and the Buyer, the Seller shall be liable for all
obligations to its employees, former employees, participants and their
respective dependents and beneficiaries arising under any of the Seller's
employee benefit plans, including, without limitation, any obligations for
salary, bonuses, vacation, pensions, options, retirement and disability or other
benefits or payments, or severance under any plan, policy or contract of the
Seller, for all such persons, whether an Engaged Employee or otherwise, except
with regard to such benefits or obligations of the Buyer or its affiliates to
Engaged Employees accruing after the commencement of their employment with the
Buyer or one of its affiliates. The Seller shall be responsible for any notices
and liabilities arising out of the Worker Adjustment and Retraining Notification
Act or any similar state or local employment Law. The Buyer shall have no
obligation to hire any employees of the Seller and shall have no liability to
the Seller for failure to do so.
(b) Neither the Seller nor the Buyer shall, for a period of
one year after the Closing Date, solicit for employment or otherwise invite
employment applications from any employee of the other party hereto as of the
Closing Date, except that (i)
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<PAGE> 4
the Buyer may solicit for employment the Designated Employees and (ii) either
party may solicit employees of the other party who, at the time of such
solicitation, are no longer employed by such other party. The foregoing shall
not limit or restrict the Buyer's right to confer with the Seller's employees
while conducting its due diligence review, as described in paragraph 6(a)
hereof, or to contact certain of the Seller's employees, as designated by the
Seller in writing, following the Closing Date, in connection with the Seller's
agreement under paragraph 12 hereof.
(c) The Buyer shall be entitled, during its due diligence
review, as described in paragraph 6(a) hereof, to review the personnel files of
an employee of the Seller if, and only if, (i) the employee is a Designated
Employee, (ii) the employee consents in writing (the "CONSENT") to the review of
the employee's personnel file by the Buyer, and (iii) the employee waives in
writing (the "WAIVER") any Claim that such employee may have against the Seller
under any Law relating, in any way, to the review of such employee's personnel
file by the Buyer. Each of the Consent and the Waiver shall be in form and
substance satisfactory to the Seller and the Buyer. Upon confirmation by the
Buyer that the condition specified in paragraph 6(b) hereof has been satisfied,
the Buyer shall be permitted at reasonable times and upon reasonable notice to
the Seller to conduct further employment interviews with Designated Employees at
the Buyer's Dallas office or other locations approved by the Seller.
4. No Competition.
(a) Neither the Seller nor any of its present or future
affiliates shall, for a period of two years beginning on the Closing Date, make
any loans, or otherwise provide financing of the type evidenced by the Loan
Documents, to any person or entity who or which as of the Closing Date is a
borrower (i) under any of the Loan Documents (collectively, the "BORROWERS")
other than the Excluded Borrowers, or (ii) of the Buyer's Rediscount Group
(collectively, the "BUYER'S BORROWERS"). The Buyer shall provide the Seller
with a list of the Buyer's Borrowers before the Closing Date. In the event that
a court of competent jurisdiction finds any provision of paragraph 3(b) or this
paragraph to be unenforceable, the provision shall be deemed to be conformed to
the maximum period and scope permitted by applicable Law.
(b) Until the Closing Date, the Buyer shall neither
solicit any Borrower with respect to the extension of credit nor make or offer
to make any loan or otherwise provide any financing of a type evidenced by the
Loan Documents to any Borrower, except with respect to the Buyer's loan proposal
to C. L. Thaxton & Sons, Inc. In the event the Buyer makes a loan to C. L.
Thaxton & Sons, Inc. by the Closing Date, the Buyer shall pay to the Seller,
as a component of the Purchase Price, an amount equal to 7% of the outstanding
principal amount of such loan as of the Closing Date.
5. Conditions Precedent to the Seller's Obligations. The
obligation of the Seller to sell and assign the Purchased Rights by the Closing
Date shall be subject to the following conditions:
(a) The Buyer shall have delivered to the Seller each of the
following, in form and substance satisfactory to the Seller;
(i) a certified copy of the resolutions of the board of
directors of the Buyer approving this Agreement and authorizing the
Buyer to execute and deliver this Agreement and the documents and
instruments contemplated hereby and to perform the Buyer's obligations
hereunder and thereunder together with a certificate of incumbency, a
certificate of good standing and other evidence of corporate or
regulatory authority as the Seller or its counsel may reasonably
request;
(ii) copies of all documents evidencing other corporate
action and governmental consents or approvals, or notifications to or
filings with any court or governmental agency, if any, that are
required with respect to this Agreement or the transactions
contemplated hereby including, without limitation, any filing required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), except that the Buyer may omit any
confidential materials from such copies furnished to the Seller
contained in such filings; and
(iii) a certificate of the Buyer reaffirming as of the
Closing Date its representations and warranties made herein, as if such
representations and warranties were made as of the Closing Date;
(b) the Seller shall have received the amount due to the
Seller under paragraph 1 hereof;
(c) the Buyer shall not have materially breached any
covenants hereunder required to be performed by it through the Closing Date; and
(d) the parties shall have obtained any consent required
pursuant to the HSR Act (the "HSR ACT CONSENT"), or any waiting period imposed
thereby shall have expired, and no stop order or similar injunction directing
that the transaction not
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proceed shall have been entered or asserted by any governmental entity, court
or arbitrator of competent jurisdiction.
6. Conditions Precedent to the Buyer's Obligations. The
obligation of the Buyer to purchase the Purchased Rights by the Closing Date
shall be subject to the following conditions:
(a) the Buyer and its auditors and other agents shall have
been given access for up to five consecutive days (of which no more than three
shall be business days) at the premises of the Seller to complete due diligence,
including, without limitation, (i) interviewing the Designated Employees, (ii)
subject to the prior delivery of the Consents and the Waivers to the Seller,
reviewing the employee personnel files of such employees, (iii) reviewing the
Loan Documents and related books, records, and correspondence and (iv) reviewing
and analyzing the Purchased Rights;
(b) the results of the due diligence referred to in
subparagraph (a) above shall not, in the reasonable judgment of the Buyer,
differ materially and adversely from the information regarding the Purchased
Rights provided to the Buyer on or before the date hereof which results shall be
deemed not to differ materially and adversely unless the Buyer has notified the
Seller to the contrary within seven days of the first date on which the Buyer
has had access to the Seller's premises to conduct due diligence;
(c) the Seller shall have delivered to the Buyer each of the
following, in form and substance satisfactory to the Buyer:
(i) to the extent in the possession of the Seller, originals
or copies of each of the Loan Documents (other than the notes referred
to in the following clause) and, except for privileged or confidential
documents reasonably designated by the Seller and specified in SCHEDULE
5 hereto which schedule shall contain a description of the item
withheld, the names of the author and any addressee, the date thereof,
and a description thereof to enable the Buyer to assess the claim of
privilege or confidentiality but which does not reveal information that
is itself privileged or confidential, supporting business files
(including computerized records and environmental reports and similar
materials) concerning the Loans;
(ii) either the original notes as defined or referred to in
the Loan Documents, endorsed to the Buyer without warranty or recourse
(except as expressly provided herein) or, where such notes are not in
the possession of the Seller, lost note affidavits in the form of
EXHIBIT A hereto;
(iii) Notices of Assignment relating to each of the loans
included in the Purchased Rights, in the form of EXHIBIT B hereto
(prepared by the Buyer and acceptable to the Seller), duly executed by
the Seller;
(iv) copies of the most recent tax, judgment and Uniform
Commercial Code search reports obtained by the Seller with respect to
the Borrowers and copies of all UCC-1 financing statements naming the
Seller as secured party, and all related continuation, assignment,
release and termination statements, filed with respect to the Purchased
Rights, in each case to the extent such reports and statements are in
the possession of the Seller;
(v) executed UCC-3 statements assigning the Seller's security
interests (prepared by the Buyer and acceptable to the Seller) plus a
limited power of attorney in the form of EXHIBIT C hereto, authorizing
the Buyer to execute additional UCC statements as may be required in
connection with the Loans and the transactions contemplated hereby;
(vi) a certificate of the Seller reaffirming as of the Closing
Date its representations and warranties made herein, as if such
representations and warranties were made as of the Closing Date;
(vii) a duly executed bill of sale conveying all of the
Seller's right, title and interest in and to the filing cabinets and
other furniture containing any of the Loan Documents or the supporting
business records;
(viii) all items of collateral securing any of the Loans in the
Seller's possession, with, as appropriate, endorsements in blank,
assignments and other documents required to transfer the Seller's
interest in such collateral to the Buyer or the Buyer's permitted
designee;
(ix) a certificate of the Secretary or Assistant Secretary of
the Seller certifying (A) that such individual is the duly elected,
qualified and acting Secretary or Assistant Secretary of the Seller and
has the custody of the corporate records and minutes of the Seller, (B)
the name of the person who has been properly designated, elected and
assigned to the corporate office of the Seller indicated in such
certificate, that such person holds such office as of
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the date of the certificate and that the specimen signature appearing
beside the name of such officer is the true and correct signature of
such officer, and (C) that (I) the Seller is authorized to execute,
deliver and perform its obligations under this Agreement and (II) the
officer specified in such certificate is authorized to execute on
behalf of the Seller this Agreement and any and all ancillary and
supporting documents related to this Agreement;
(x) copies of all documents evidencing other corporate action
and governmental consents or approvals, or notifications to or filings
with any court or governmental agency, if any, that are required with
respect to this Agreement or the transactions contemplated hereby;
(xi) a certificate of a duly authorized officer of the Seller
certifying to the Seller's knowledge after due inquiry, including a
diligent search of the Seller's records relating to the Purchased
Rights (hereafter referred to as "DUE INQUIRY"), the aggregate amount
of the principal balance of the Loans, and that such amount was the
amount used to calculate the Purchase Price under paragraph 1(d)(i)
hereof; and
(xii) Schedules 1 through 13 hereto, which shall be in form and
substance satisfactory to the Buyer in its sole and absolute
discretion.
(d) from the date hereof through the Closing Date, no events
shall have occurred, and no facts or circumstances shall have arisen or been
discovered by the Seller or the Buyer, which would have a material adverse
effect on the Purchased Rights and the Seller shall have represented that, to
its knowledge after Due Inquiry, no such event has occurred and no such facts or
circumstances have arisen;
(e) except as specified in SCHEDULE 6 hereto, from the date
hereof through the Closing Date, the Seller shall not have consented to or
become aware of any change in the identity of any of the Borrowers;
(f) from the date hereof through the Closing Date, the
Seller shall (i) have conducted its business relationships with respect to any
of the Purchased Rights and the Borrowers consistent with its current ordinary
course of business practices and standards and (ii) not have made any changes to
its lending, accounting or tax practices or standards, except in accordance with
generally accepted accounting principles or as required by Law;
(g) from the date hereof through the Closing Date, the
Seller shall not have terminated its commitment to provide financing under any
of the Loan Documents;
(h) the parties shall have obtained the HSR Act Consent or
any waiting period imposed thereby shall have expired, and no stop order or
similar injunction directing that the transaction not proceed shall have been
entered or asserted by any governmental entity, court or arbitrator of competent
jurisdiction; and
(i) the Seller shall not have materially breached any
covenants hereunder required to be performed by it through the Closing Date.
7. Not an Extension of Credit. This Agreement constitutes a
sale of one hundred (100%) percent of the ownership interest of the Seller in
the Purchased Rights and shall in no way be construed as an extension of credit
by the Buyer to the Seller.
8. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Buyer and its successors and permitted
assigns that:
(a) the Seller is the sole legal, record and beneficial
owner of the Purchased Rights, free and clear of all liens, claims, interests,
contractual subordinations and encumbrances of any kind (collectively, "LIENS")
and has made no prior assignment, pledge, or other disposition of the Purchased
Rights to any person or entity, in whole or in part, except in each case as
specified in SCHEDULE 7 hereto;
(b) the Seller is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
with the requisite power and authority to execute, deliver and perform its
obligations under this Agreement, to consummate the transactions contemplated
herein, and to own the Purchased Rights and to conduct its business as it is
now being conducted;
(c) the Seller is duly qualified or otherwise authorized as
a foreign corporation to conduct the business conducted by it and is in good
standing in each jurisdiction in which qualification or authorization to conduct
its business is required under applicable Law, except jurisdictions where the
failure to be so qualified would not be expected to have a material adverse
effect on the Purchased Rights;
(d) the execution, delivery and consummation by the Seller
of this Agreement have been duly authorized by all necessary action on the part
of the Seller and do not and will
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<PAGE> 7
not (i) require any consent or approval of any affiliates, subsidiaries,
participants or stockholders of the Seller or of any Borrower, except as has
been obtained or will have been obtained by the Closing Date, (ii) violate any
material provision of the charter or by-laws of the Seller or any law, rule,
regulation, order, judgment, injunction, decree, determination or award
(collectively, "LAWS") presently in effect having applicability to the Seller
or (iii) result in a material breach or constitute a material default under any
indenture or loan or credit agreement or other material agreement or instrument
to which the Seller is a party (including the Loan Documents) or by which it is
bound or result in the creation of any Lien on the Purchased Rights;
(e) no authorizations, consents or approvals from, or
notifications to or filings with, any court, governmental agency or other person
or entity are or will be necessary to the valid execution, delivery or
performance by the Seller of this Agreement, including, without limitation, any
Bulk Sales Act or similar notice requirements except for the HSR Act Consent;
(f) this Agreement constitutes the legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms, except as may be limited by bankruptcy, reorganization, receivership,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by principles of equity and commercial reasonableness regardless
of whether considered in a proceeding in equity or at law;
(g) the documents specified in SCHEDULE 1 hereto constitute
the only material documents which evidence the Loans and the Purchased Rights,
and, except as specified in SCHEDULE 8 hereto, there are no other documents or,
to the Seller's knowledge after discussions with current employees, verbal
agreements which would materially and adversely affect the Purchased Rights or
materially modify the Loans or the Loan Documents;
(h) except as specified in SCHEDULE 9 hereto, none of the
Loans or the Loan Documents have been amended or modified since December 1,
1994;
(i) (A) each of the Loan Documents is legal, valid and
binding and enforceable in accordance with its terms with respect to the Seller
as lender and (B) to the Seller's knowledge, each of the Loan Documents is
legal, valid and enforceable in accordance with its terms with respect to the
Borrowers and the other loan parties, in each case, except as enforcement may be
limited by bankruptcy, insolvency, moratorium, arrangement or other similar laws
of general application applying to creditors, or to principles of equity or
commercial reasonableness, regardless of whether enforcement is sought in
a proceeding at law or in equity;
(j) except as specified in SCHEDULE 10 hereto, to the
Seller's knowledge, the collateral securing the Loans is located where it is
purported by the Borrowers to be located under the Loan Documents;
(k) to the Seller's knowledge, upon the execution and
delivery of this Agreement, the Seller will have conveyed to the Buyer a
security interest in all of the collateral securing or purported to secure the
Loans;
(l) to the Seller's knowledge, there are no pending or
threatened proceedings or Claims under Laws relating to the
environment or hazardous waste that affect any collateral securing the Loans;
(m) the Seller is a sophisticated seller with respect to
the Purchased Rights and has adequate information concerning the business and
financial condition of the Borrowers to make an informed decision regarding the
sale of the Purchased Rights, and has independently, and without reliance upon
the Buyer, and based on such information as the Seller has deemed appropriate,
made its own analysis and decision to enter into this Agreement, except that the
Seller has relied upon the representations and warranties of the Buyer contained
in this Agreement;
(n) without implying characterization of the Purchased Rights
hereunder as a "security" within the meaning of any applicable securities laws,
no offer to sell or solicitation of any offer to buy the Purchased Rights has
been made by the Seller in a manner which would violate the registration
requirements of Section 5 of the Securities Act of 1933, as amended, and the
offer, sale and transfer of the Purchased Rights to the Buyer in accordance with
the provisions of this Agreement do not require registration under any Federal
or state securities law;
(o) except as specified in SCHEDULE 11 hereto, to the
Seller's knowledge, there are no payment defaults or other defaults which would
or could reasonably be expected to, individually or in the aggregate, materially
and adversely affect any of the Loans or the Purchased Rights;
(p) all Loans made by the Seller since December 1, 1994
were made in conformity with its lending practices and in its ordinary course of
business as in effect as of such date;
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(q) except as specified in SCHEDULE 12 hereto, no action,
suit, investigation, claim, litigation or proceeding is pending or, to the
Seller's knowledge, threatened, which involves any claim asserted by any
Borrower against the Seller with respect to a Loan;
(r) except as specified in SCHEDULE 13 hereto, there are
no outstanding commitments to make a loan similar to the Loans presently in
effect or likely to be issued by the CRG prior to the Closing Date other than
commitments to the Excluded Borrowers;
(s) to the Seller's knowledge after Due Inquiry, the UCC
financing and other statements to be delivered by the Seller on the Closing Date
under paragraph 6(c)(iv) hereof are all the UCC financing and related statements
filed or in the process of being filed by or on behalf of the Seller or any
prior lender in connection with the Loans other than expired or superseded
statements;
(t) SCHEDULE 4 hereto contains a complete and accurate list
of each Designated Employee's date of hire, the number of years of service of
such employee for purposes of the Seller's pension plan, whether such employee
held continuous service for the Seller's pension plan calculation purposes, and
such employee's current salary and 1994 bonus, if any;
(u) except as specified in SCHEDULE 4 hereto, the Seller
has not granted any increases in salary or overall compensation to any
Designated Employee in excess of 5% of such employee's previous level within one
year preceding the Closing Date; and
(v) no broker, finder, investment banker or other person or
entity is entitled, based on arrangements made by or on behalf of the Seller, to
any brokerage, finder, origination or other similar fee or commission in
connection with the transactions contemplated hereby or with respect to the
Loans.
9. Representations and Warranties of the Buyer. The
Buyerrepresents and warrants to the Seller and its successors and permitted
assigns that:
(a) the Buyer is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware, with all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated herein;
(b) the execution, delivery and consummation by the Buyer
of this Agreement have been duly authorized by all necessary action on the part
of the Buyer and do not and will not (i) require any consent or approval of any
affiliates, subsidiaries, parent or stockholders of the Buyer, except as has
been obtained or will have been obtained by the Closing Date, (ii) violate any
material provisions of any Laws presently in effect having applicability to the
Buyer or (iii) result in a material breach or constitute a material default
under any indenture or loan or credit agreement or other material agreement or
instrument to which the Buyer is a party or by which it is bound;
(c) no authorizations, consents or approvals from, or
notifications to or filings with, any court, governmental agency or other person
or entity are or will be necessary to the valid execution, delivery or
performance by the Buyer of this Agreement except for the HSR Act Consent;
(d) this Agreement constitutes the legal, valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, except as may be limited by bankruptcy, reorganization, receivership,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and by principles of equity and commercial reasonableness regardless
of whether considered in a proceeding in equity or at law;
(e) the Buyer (i) has such knowledge and experience in
financial matters that it is capable of evaluating and has sufficient
information to evaluate the merits and risks of the purchase of the Purchased
Rights, (ii) is knowledgeable concerning the rights and remedies of a lender
under a credit facility, (iii) shall purchase the Purchased Rights on the basis
of its own independent investigation, evaluation, and credit determination and
the representations, warranties and covenants of the Seller contained herein,
(iv) except as expressly set forth in paragraph 8 hereof and the documents and
certificates delivered by the Seller in connection herewith, has not sought,
received, or relied upon any verbal or written representation or warranty or
information or statements from the Seller regarding or relating to the parties
to the Loan Documents, their businesses, operations, or future prospects, or the
consideration that might be paid or distributed in respect of the Loan
Documents, and (v) is aware that the Purchase Price may differ from the amount
ultimately received by the Buyer on account of the Purchased Rights;
(f) the Buyer is an "accredited investor" within the meaning
of Section 2(15) of the Securities Act of 1933; without implying
characterization of the Purchased Rights hereunder as a "security" within the
meaning of any applicable securities laws, the Buyer is not purchasing the
Purchased Rights with a view to resale or distribution in a manner that would
violate applicable securities laws; and
-8-
<PAGE> 9
(g) no broker, finder, investment banker or other person or
entity is entitled, based on arrangements made by or on behalf of the Buyer, to
any brokerage, finder, origination or other similar fee or commission in
connection with the transactions contemplated hereby or with respect to the
Loans other than arrangements for which the Buyer is solely responsible and
hereby indemnifies the Seller.
10. Subsequent Payment or Distribution. In the event tSeller shall
receive or obtain any payment or distribution with respect to the Purchased
Rights after the Closing Date, including cash, securities, obligations, or other
property of any kind, the Seller shall accept and hold such payment or
distribution in trust on behalf of the Buyer and for the benefit of the Buyer as
the Buyer's agent and to deliver the same forthwith to the Buyer in the same
form received, with the endorsement, when necessary or appropriate (which
endorsement shall not thereby render the Seller liable as an accommodation party
under Section 3-414 of the Uniform Commercial Code or otherwise), of the Seller.
In the event the Seller shall receive any documents, instruments, notices, or
correspondence relating to the Purchased Rights after the Closing Date, the
Seller shall promptly forward such materials to the Buyer at its address
specified below.
11. Confidentiality.
(a) The Buyer and the Seller will hold, and will cause each
of their respective directors, officers, employees, agents, counsel and other
representatives (each, a "RELATED PARTY" and collectively, the "RELATED
PARTIES") to hold, in strict confidence, unless compelled to disclose by Law,
all documents and information (oral or written) concerning the other party, the
Loans or the transactions contemplated hereby furnished or disclosed by such
other party or its Related Parties in connection with the transactions
contemplated by this Agreement (except to the extent that such information (i)
is or becomes generally available to the public other than as a result of a
breach of this paragraph or (ii) is or becomes available on a non-confidential
basis from a source other than the other party or its Related Parties provided
that such source was not known by the party receiving such information after due
inquiry, to be prohibited from disclosing such information under a contractual
or other legal obligation), and each party will use such information solely for
the purpose of evaluating or consummating the transactions contemplated hereby
and not release or disclose such information to any other person, except its
officers, directors, employees, agents, counsel or other representatives who
need to know such information in connection with this Agreement and evaluating
the transactions contemplated hereby, all of whom shall be informed of the
confidential nature of such information and directed to treat it confidentially,
and who shall agree to be bound by the terms of this paragraph, except that such
restrictions shall not apply to the Buyer with respect to the disclosure of its
ownership of the Purchased Rights or engagement of the Engaged Employees and
the use of such information in connection therewith from and after the Closing
Date. Unless and until the transactions contemplated by this Agreement are
consummated, such confidence shall be maintained to the extent required above,
and such information shall not be used to the detriment of the other party. If
the transactions contemplated by this Agreement are not consummated by the
Closing Date, all information subject to this paragraph 11 (including, without
limitation, all documents, memoranda, computer files, notes and other writings
and all copies thereof) shall be returned to the other party immediately upon
the request of the other party or shall be destroyed and certified to have been
so destroyed. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
(b) In the event that the Buyer, the Seller or their
respective Related Parties are requested, or become legally compelled, to
disclose any of the information subject to the restrictions hereunder, such
party shall provide the other party with prompt notice before such information
is disclosed so that the other party may seek a protective order or other
appropriate remedy or waive compliance with the terms of this paragraph 11. In
the event that such protective order or other remedy is not obtained or that
such party, in its sole discretion, waives any provisions of this paragraph, the
party required or requested to disclose such information shall exercise
reasonable efforts to obtain reasonable assurance that confidential treatment
shall be accorded such information and furnish only that portion of the
information which it is advised by counsel to be legally required.
(c) No publication, press release or public announcement of
any nature shall be issued pertaining to this Agreement or the transactions
contemplated hereby without the prior written consent of the other party hereto
(which shall not be unreasonably withheld) or except as required by Law or by
obligations pursuant to any listing agreement with any securities exchange or
any securities exchange regulation, in which case the party proposing to issue
such publication or press release or make such announcement shall use reasonable
efforts to consult with the other party before issuing any such publication or
press release.
(d) If either party hereto decides not to proceed with the
transactions contemplated by this Agreement, it shall promptly notify the other
party and at any time thereafter it
-9-
<PAGE> 10
shall, upon such other party's request, promptly deliver to such other party
all copies of all written material constituting information subject to this
paragraph 11 and destroy all documents, memoranda, computer files, notes and
other writings whatsoever prepared by it or its Related Parties based on, or
containing, any such information, whereupon it shall promptly advise the other
party in writing that such destruction has been completed.
(e) The Buyer and the Seller acknowledge that any breach or
threatened breach of this paragraph 11 by a party or its Related Parties will
cause irreparable injury to the other party and remedies at law may be
inadequate to protect them against any actual or threatened breach of this
Agreement by a party or its Related Parties, and, without prejudice to any other
rights and remedies otherwise available to a party, each agrees to the granting
of equitable relief, including injunctive relief and specific performance, in
the other party's favor without proof of actual damages, and each party further
agrees to waive, and to use its best efforts to cause its Related Parties to
waive, any requirement for the securing or posting of any bond in connection
with such remedy. In the event of litigation relating to this paragraph 11, if
a court of competent jurisdiction determines in a final, nonappealable judgment
or order that this paragraph 11 has been breached by a party or by its Related
Parties, then it will additionally reimburse the other party and its Related
Parties for their costs and expenses (including, without limitation, legal fees
and expenses) incurred in connection with all such litigation.
12. Further Assurances. From and after the date hereparties shall
use reasonable efforts to satisfy promptly the conditions to closing to be
satisfied by each of them. Upon confirmation by the Buyer that the condition
specified in paragraph 6(b) hereof has been satisfied, a representative of the
Buyer shall be permitted access to the premises of the Seller for up to three
one-half days per week during normal business hours up to and including the
Closing Date to observe the business and operations of the CRG and to discuss
the same with a representative of the Seller knowledgeable of such business and
operations. From and after the Closing Date, the Seller shall execute and
deliver all such documents and any items of collateral securing the Loans in its
possession and take all such further actions as the Buyer may reasonably deem
necessary, from time to time, to carry out the intent and purposes of this
Agreement and to consummate the transactions contemplated hereby. Without
limiting the foregoing, this covenant includes providing written factual
information regarding the history of the Loans and the Purchased Rights. The
Seller shall not destroy any Loan-related records not furnished to the Buyer
hereunder, including tax and accounting records, except in conformity with the
Seller's record retention policy.
13. Notices. All notices between the parties pursuant Agreement
shall be in writing and shall be deemed to have been duly given (a) when
delivered, if sent by registered or certified mail (return receipt requested),
(b) when delivered, if delivered personally or by telecopier transmission with a
copy sent by overnight courier or (c) on the next business day, if sent by
overnight mail or overnight courier, in each case to the parties at the
following addresses:
If to the Seller:
Transamerica Business Credit Corporation
Lender Finance Division
225 North Michigan Avenue, Suite 2100
Chicago, Illinois 60601
Attention: Legal Department
Telecopier: (312) 329-6737
Telephone: (312) 329-6500
If to the Buyer:
FINOVA Capital Corporation
1850 N. Central Avenue, Suite 1159
P.O. Box 2209
Phoenix, Arizona 85002-2209
Attention: Senior Vice President - General Counsel
Telecopier: (602) 207-4099
Telephone: (602) 207-4900
The parties may designate from time to time by notice delivered in accordance
with this paragraph other and additional places to which notices shall be sent.
14. Miscellaneous.
(a) This Agreement and the exhibits and schedules hereto
constitute the complete agreement of the parties hereto with respect to the
subject matter hereof and supersede all verbal or written prior or
contemporaneous negotiations, promises, covenants, agreements, or
representations. This Agreement cannot be amended, modified, or supplemented
except by an instrument in writing executed by the parties hereto. No waiver of
any provision of this Agreement, or consent to any departure by the Seller or
the Buyer therefrom, shall be effective unless it is in writing and signed by
the party to be charged thereby, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of either party to exercise, and no delay in
exercising, any right hereunder or under any related document shall operate as a
waiver thereof by such party, nor shall any single or partial exercise of any
right hereunder or under any other related document preclude any other
-10-
<PAGE> 11
or further exercise thereof or the exercise of any other right. The rights and
remedies of each party provided herein are cumulative and are in addition to,
and not exclusive of, any rights or remedies provided by law.
(b) The terms of this Agreement shall be binding upon and
shall inure to the benefit of the Seller and the Buyer, and their respective
successors and assigns. All representations and warranties made herein shall
survive the consummation of the transactions contemplated herein. This Agreement
may be executed in counterparts each of which when so executed shall be an
original, but all such counterparts shall together constitute but one and the
same instrument. This Agreement may be executed and delivered by telecopier and
shall be effective upon receipt of the respective counterparts sent by such
method. Notwithstanding the above, the Seller and the Buyer shall not, without
the other party's prior written consent, assign their rights or delegate the
performance of their obligations hereunder, except to their respective
affiliates in which case the assignor shall continue to be bound by all of its
obligations hereunder. Nothing herein shall restrict the Buyer's rights to
sell, assign or otherwise dispose of after the Closing Date any of the Loans or
any of the other Purchased Rights.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to
principles of conflicts of law (other than Section 5-1401 of the New York
General Obligations Law).
(d) Paragraph headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
(e) Each of the Seller and the Buyer shall be responsible
for any and all costs and expenses (including attorneys' fees and expenses) paid
or incurred by it in connection with the preparation and execution of this
Agreement and in connection with the transactions contemplated hereby, except as
provided herein to the contrary.
15. Termination; HSR Act Consent.
(a) This Agreement may be terminated and abandoned at any
time prior to the closing hereof:
(i) by the mutual written consent of the Seller and
the Buyer;
(ii) by either the Seller or the Buyer, (A)(I) by
March 15, 1995, if the HSR Act Consent has been obtained by such date or neither
party has given the notice specified in paragraph 15(b) hereof or (II) April 15,
1995, if the HSR Act Consent is required but has not been obtained and the
terminating party has complied with all of its filing and reporting obligations
with respect thereto and (B) the terminating party has performed or tendered
performance of all of the conditions applicable to it under paragraph 5 or 6
hereof, as the case may be;
(iii) by either the Seller or the Buyer in the event
any court of competent jurisdiction or other federal, state or local
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining, or otherwise prohibiting the transactions
contemplated hereby and such order, decree or ruling or other action shall have
become final and nonappealable after the affected party or parties have made all
reasonable efforts to contest and appeal the issuance of such order, decree,
ruling or other action; and
(iv) the Buyer or the Seller if (A) the other party
shall have failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with by such other party
at or prior to such date of termination within five business days following
receipt by the noncomplying party of written notice of such failure to comply or
(B) any representation or warranty of the other party shall not be true in all
material respects when made or at the time of termination (provided such breach
has not been cured within five business days following receipt by the breaching
party of written notice of the breach).
(b) If the Buyer or the Seller believes that the HSR Consent
is required, it shall so notify the other party in writing within three business
days of the date hereof, whereupon the parties shall make all filings and
provide all information required to obtain such consent within ten days of the
date hereof and thereafter promptly take all actions necessary to obtain such
consent.
(c) In the event of any termination and abandonment of this
Agreement pursuant to this paragraph 15, the terminating party shall promptly
give written notice thereof to the other party and this Agreement shall
forthwith become void and have no effect, and neither party to this Agreement
will have any liability to the other hereunder, except with respect to any
breach of any provisions of this Agreement and as provided in subparagraph (d)
hereof. Notwithstanding the foregoing, the provisions of paragraphs 11 and 16
hereof shall survive the termination and abandonment of this Agreement.
(d) The Deposit shall be (i) returned to the Buyer in the
event of a termination and abandonment of this Agreement by the Buyer in
accordance with paragraph 15(a) hereof and (ii) retained by the Seller in the
event of a termination and
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<PAGE> 12
abandonment of this Agreement by the Seller in accordance with paragraph
15(a)(iv) hereof.
16. Indemnification.
(a) The Seller shall indemnify, defend and hold the Buyer
(including the Buyer's affiliates, successors and assigns and their respective
directors, officers, employees (including the Engaged Employees), shareholders,
counsel, and other representatives) harmless from and against and in respect of:
(i) any and all Claims that it may suffer, sustain, incur or become subject to,
arising out of, in connection with or due to any material breach of a
representation or warranty of the Seller contained in this Agreement without
regard to whether any such action or inaction giving rise to such Claim is
initiated prior to or after the Closing Date, (ii) all Claims with respect to
any material breach of a covenant of the Seller contained in this Agreement, and
(iii) all Claims directly relating to the Excluded Liabilities, provided that
the Seller shall not be liable under clause (i) or (ii) for Claims that are each
in an amount less than $25,000 or $100,000 in the aggregate.
(b) The Buyer shall indemnify, defend and hold the Seller
(including the Seller's affiliates, successors and assigns and their respective
directors, officers, employees, shareholders, counsel, and other
representatives) harmless from and against and in respect of: (i) any and all
Claims that it may suffer, sustain, incur or become subject to, arising out of,
in connection with or due to any material breach of a representation or warranty
of the Buyer contained in this Agreement without regard to whether any such
action or inaction giving rise to a Claim is initiated prior to or after the
Closing Date, (ii) all Claims with respect to a material breach of a covenant of
the Buyer contained in this Agreement, and (iii) all Claims directly relating to
the Assumed Liabilities other than those resulting from the Seller's breaches of
the representations, warranties and covenants made by it hereunder, provided
that the Buyer shall not be liable under clause (i) or (ii) for Claims that are
each in an amount less than $25,000 or $100,000 in the aggregate.
(c) Except as provided in paragraph 16(d), if there occurs
an event which a party asserts is an indemnifiable event pursuant to this
paragraph 16, including any action or proceeding commenced by a third
party, the Buyer or, as the case may be, the Seller (each an "INDEMNIFIED
PARTY") shall notify the other party obligated to provide
indemnification (the "INDEMNIFYING PARTY") promptly, provided, that the failure
to give prompt notice shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent such failure actually prejudices the
Indemnifying Party hereunder. In case any such action shall be brought against
any Indemnified Party and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to participate
therein and, if permitted by the Indemnified Party, to assume the defense
thereof, at its sole cost and expense, with counsel reasonably satisfactory to
the Indemnified Party (provided that the Indemnifying Party first agrees in
writing to pay the full amount of indemnification with respect to such action to
the Indemnified Party). After notice from the Indemnifying Party to the
Indemnified Party of such election so to assume the defense thereof, the
Indemnified Party shall have the right to retain its own separate counsel, but
the fees and expenses of such counsel shall be at the Indemnified Party's
expense unless (i) the Indemnifying Party and the Indemnified Party shall have
agreed in writing to the contrary, (ii) the Indemnifying Party has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Party, or (iii) the named party in any such proceeding (including any impleaded
parties) include both the Indemnified Party and the Indemnifying Party and
representation of both parties by the same counsel could be inappropriate due to
actual or potential differing interests between them. In any matter described
above where the Indemnified Party has obtained counsel to represent it in
addition to counsel obtained by the Indemnifying Party, counsel selected by the
Indemnifying Party shall be required to cooperate fully with counsel selected by
the Indemnified Party in such matter. So long as the Indemnifying Party is
defending in good faith any claim for which indemnification is sought, the
Indemnifying Party shall not be liable for any claim settled without its
consent, which consent shall not be unreasonably withheld.
(d) (i) In the event of a Claim by a third person
relating to the Purchased Rights which Claim has arisen from facts occurring
both before and after the Closing Date, which Claim could reasonably be likely
to relate directly to the Excluded Liabilities, the Buyer shall give the Seller
prompt written notice of such Claim (whether such Claim involves the
commencement of an action or proceeding, a counterclaim or otherwise) and the
Buyer shall have the right to conduct the defense of such Claim; provided,
however, that the failure to provide prompt notice as provided herein will not
relieve the Seller of its obligation hereunder except to the extent that such
failure actually prejudices the Seller. The defense of such Claim relating to
events prior to the Closing Date or to the Excluded Liabilities shall be at the
sole cost and expense of the Seller. The Buyer shall have the right to
participate in the defense of any such Claim and to retain its own separate
counsel with respect thereto (and to assume the defense of any such Claim in the
event that the Seller has failed within a reasonable time to retain counsel
reasonably satisfactory to the Buyer), but the fees and expenses of such counsel
shall be borne by the Indemnifying Party. In any matter described above where
the Buyer has obtained counsel to represent it in addition to counsel
-12-
<PAGE> 13
obtained by the Seller, counsel selected by the Seller shall be required to
cooperate fully with counsel selected by the Buyer.
(ii) In the event of a Claim referred to in the first
sentence of paragraph 16(d) hereof, the Buyer and the Seller promptly shall
negotiate in good faith their respective shares of the cost and expense of such
resulting liability or settlement based on the extent to which the liability or
settlement relates directly to the Excluded Liabilities. No such settlement
shall be effected by any party without the prior written consent of the other
party, which consent shall not be unreasonably withheld. Neither the Seller nor
the Buyer shall be entitled to call into question the validity of any finding by
the relevant court or other forum of competent jurisdiction as a defense to the
sharing of any such liability.
17. Seller's Default. In the event the Seller materially ba
representation, warranty or covenant hereunder, then the Buyer may avail itself
of any legal or equitable rights that the Buyer may have under this Agreement
with respect to the Seller, except the Buyer shall have no right to incidental
or consequential damages or to any award for lost profits. Notwithstanding
anything herein contained to the contrary, in no event shall the Seller have any
liability hereunder or at law or in equity in excess of the Purchase Price, paid
to and retained by the Seller, except that these limitations shall not apply to
any liability of the Seller arising out of or relating to the Excluded
Liabilities.
18. Waiver of Trial by Jury. THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW)
ANY RIGHT THAT EITHER PARTY MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING
UNDER OR RELATING TO THIS AGREEMENT AND ANY SUCH DISPUTE SHALL BE TRIED BEFORE A
JUDGE SITTING WITHOUT A JURY.
19. Severability. Any provision of this Agreement invalid, illegal
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering any other provision of this Agreement invalid, illegal
or unenforceable in any other jurisdiction.
20. No Third Party Beneficiaries. Except for paragraph 16, which
is intended to benefit and to be enforceable by any Indemnified Party, nothing
in this Agreement, expressed or implied, is intended to or shall confer on any
person other than the parties hereto and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
TRANSAMERICA BUSINESS CREDIT CORPORATION
/s/ STEVEN A. READ
By:________________________________________
Steven A. Read
President
FINOVA CAPITAL CORPORATION
/s/ ROBERT E. RADWAY
By:________________________________________
Robert E. Radway
Senior Vice President
[Schedules omitted.]
-13-
<PAGE> 1
EXHIBIT 12
FINOVA CAPITAL CORPORATION
COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1994 1993 1992 1991 1990
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss) before income taxes $ 123,755 $ 64,123 $ 50,593 $ (37,014) $ 40,216
Add fixed charges:
Interest expense 222,929 126,152 136,107 157,560 171,652
One-third of rent expense 2,041 1,387 1,498 1,148 581
----------- ----------- ----------- ----------- -----------
Total fixed charges 224,970 127,539 137,605 158,708 172,233
----------- ----------- ----------- ----------- -----------
Net income as adjusted $ 348,726 $ 191,662 $ 188,198 $ 121,694 $ 212,449
----------- ----------- ----------- ----------- -----------
Ratio of income to fixed charges 1.55 1.50 1.37 --- 1.23
=========== =========== =========== =========== ===========
Preferred stock dividends on a pre-tax basis $ 930 $ 3,682 $ 2,826
Total combined fixed charges and
preferred stock dividends $ 225,900 $ 131,221 $ 140,431 $ 158,708 $ 172,233
----------- ----------- ----------- ----------- -----------
Ratio of income to combined fixed charges and
preferred stock dividends 1.54 1.46 1.34 --- 1.23
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-51216 of Greyhound Financial Corporation on Form S-3 of our report dated
March 4, 1994, appearing in this Annual Report on Form 10-K of Greyhound
Financial Corporation for the year ended December 31, 1994.
Deloitte & Touche LLP
March 8, 1994
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 52,753
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 5,667,644
<ALLOWANCE> (109,245)
<TOTAL-ASSETS> 5,847,549
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 492,209
<LONG-TERM> 4,573,354
<COMMON> 25
0
0
<OTHER-SE> 781,961
<TOTAL-LIABILITIES-AND-EQUITY> 5,847,549
<INTEREST-LOAN> 503,351
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 222,929
<INTEREST-INCOME-NET> 243,685
<LOAN-LOSSES> 16,670
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 112,305
<INCOME-PRETAX> 123,755
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,313
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 6.0
<LOANS-NON> 168,761
<LOANS-PAST> 0
<LOANS-TROUBLED> 64,001
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 64,280
<CHARGE-OFFS> (35,127)
<RECOVERIES> 1,898
<ALLOWANCE-CLOSE> 109,245
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
