<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
ASSOCIATES FIRST CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6141 06-0876639
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation) Classification Code Number) Identification No.)
</TABLE>
250 E. CARPENTER FREEWAY
IRVING, TEXAS 75062-2729
(214) 541-4000
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
CHESTER D. LONGENECKER, ESQ.
250 E. CARPENTER FREEWAY
IRVING, TEXAS 75062-2729
(214) 541-4000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
COPIES TO:
<TABLE>
<S> <C>
DAVID J. SORKIN, ESQ. ARBIE R. THALACKER, ESQ.
SIMPSON THACHER & BARTLETT STUART K. FLEISCHMANN, ESQ.
425 LEXINGTON AVENUE SHEARMAN & STERLING
NEW YORK, NEW YORK 10017-3954 599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022-6069
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration statement number
of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, par value
$.01 per share............... $ $100,000,000 $34,483
=================================================================================================
</TABLE>
(1) Includes shares of Class A Common Stock which the Underwriters
have the option to purchase to cover over-allotments, if any. The shares of
Class A Common Stock are not being registered for the purpose of sales
outside the United States.
(2) Estimated solely for the purpose of calculating the registration fee.
---------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ASSOCIATES FIRST CAPITAL CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ --------------------------------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front and Outside Back
Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors;
Selected Supplemental Combined
Financial Data
4. Use of Proceeds.................................... Prospectus Summary; Use of
Proceeds
5. Determination of Offering Price.................... Outside Front Cover Page;
Underwriting
6. Dilution........................................... *
7. Selling Security Holders........................... *
8. Plan of Distribution............................... Outside Front Cover Page;
Underwriting
9. Description of Securities to be Registered......... Outside Front Cover Page;
Prospectus Summary; Description
of Capital Stock
10. Interests of Named Experts and Counsel............. Legal Matters; Experts
11. Information with Respect to the Registrant......... Outside Front Cover Page; Risk
Factors; Dividend Policy;
Capitalization; Selected
Supplemental Combined Financial
Data; Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Business;
Relationship with Ford;
Management; Ownership of Common
Stock; Shares Available for
Future Sale; Description of
Capital Stock; Description of
Certain Indebtedness;
Supplemental Combined Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... *
</TABLE>
- ---------------
* Omitted from Prospectus because item is inapplicable.
<PAGE> 3
***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 1996
SHARES
[LOGO]
CLASS A COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
---------------------
Of the shares of Class A Common Stock offered, shares
are being offered hereby in the United States and shares are being
offered in a concurrent international offering outside the United States. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting".
The shares of Class A Common Stock offered hereby are being offered by the
Company, which is an indirect, wholly-owned subsidiary of Ford Motor Company.
Upon completion of the Offerings, Ford will own % of the outstanding Class A
Common Stock ( % if the Underwriters' over-allotment options are exercised in
full) and will indirectly own 100% of the outstanding shares of Class B Common
Stock of the Company (which have five votes per share), a class of common stock
separate from the Class A Common Stock (which has one vote per share). Following
the Offerings, the outstanding shares of Class A Common Stock to be offered in
the Offerings will represent approximately % of the combined voting power of
all classes of voting stock and % of the economic interest (or rights of
holders of common equity to participate in distributions in respect of the
common equity) in the Company ( % and %, respectively, if the
Underwriters' over-allotment options are exercised in full). The remainder of
the voting power and economic interest in the Company will be held by Ford. See
"Risk Factors -- Control by and Relationship with Ford" and "Description of
Capital Stock".
Prior to the Offerings, there has been no public market for the Class A
Common Stock of the Company. It is currently estimated that the initial public
offering price per share of Class A Common Stock offered hereby will be between
$ and $ . For factors to be considered in determining the
initial public offering price, see "Underwriting".
Up to shares of Class A Common Stock are being reserved for sale to
certain employees and retirees of the Company and its affiliates at the initial
public offering price. See "Underwriting".
SEE "RISK FACTORS", BEGINNING ON PAGE 10, FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
Application will be made to list the Class A Common Stock on the New York
Stock Exchange under the symbol "AFS".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ----------- -----------
<S> <C> <C> <C>
Per Share........................................................ $ $ $
Total(3)......................................................... $ $ $
</TABLE>
- ---------------
(1) The Company and Ford have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting".
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional shares of Class A Common Stock at the initial
public offering price, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted an over-allotment
option with respect to an additional shares of Class A Common
Stock as part of the international offering. If such options are exercised
in full, the total initial public offering price, underwriting discount and
proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting".
-------------------------
The shares of Class A Common Stock offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that certificates for the shares will be ready for delivery in New
York, New York, on or about , 1996.
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MERRILL LYNCH & CO.
J. P. MORGAN SECURITIES INC.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
---------------------
The date of this Prospectus is , 1996.
<PAGE> 4
[THE ASSOCIATES LOGO] ASSOCIATES FIRST CAPITAL CORPORATION
[PICTURE] [PICTURE]
TRUCK AND TRUCK TRAILER HOME EQUITY LOANS
FINANCING AND LEASING
[PICTURE] [PICTURE]
INTERNATIONAL MARKETS CREDIT CARDS
CONSUMER FINANCE NAME PLATES
[FORD CONSUMER FINANCE [THE ASSOCIATES [FIRST FAMILY FINANCIAL SERVICES
LOGO] LOGO] LOGO]
[ALLIED FINANCE LOGO] [KFC LOGO] [TRANSOUTH LOGO]
[THE ASSOCIATES LOGO]
<PAGE> 5
<TABLE>
<S> <C>
[THE ASSOCIATES LOGO] ASSOCIATES FIRST CAPITAL CORPORATION CANADA
[MAP]
PRODUCTS AND
SERVICES
CONSUMER
- - Home Equity Lending
- - Personal Loans
- - Retail Sales Finance Contracts
- - Credit Cards [MAP]
COMMERCIAL
- - Truck and Truck Trailer
Financing and Leasing
- - Equipment Financing and Leasing
- - Manufactured Housing Financing
- - Fee Based Services
RELATED INSURANCE
JAPAN UNITED KINGDOM
[MAP] [MAP]
HAWAII PUERTO RICO
[MAP] [MAP]
OFFICE LOCATIONS MEXICO
O CONSUMER OFFICES [MAP]
U.S. 1,467
International 400
TOTAL 1,867 O DENOTES NUMBER OF CONSUMER OFFICES
[] DENOTES NUMBER OF COMMERCIAL OFFICES
[] COMMERCIAL OFFICES
U.S. 76
International 4
TOTAL 80
</TABLE>
<PAGE> 6
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
DURING THE OFFERINGS, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE CLASS A COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
---------------------
FOR NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF
THIS DOCUMENT.
2
<PAGE> 7
AVAILABLE INFORMATION
Associates First Capital Corporation (the "Company") has filed with the
Securities and Exchange Commission (the "Commission") a Registration Statement
on Form S-1 (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement"), under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations thereunder, for
the registration of the Class A Common Stock offered hereby. This Prospectus,
which forms a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain parts of which have
been omitted as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Class A Common Stock
offered hereby, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and, where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made. The Registration Statement can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of all or any portion of the Registration
Statement can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Application will be made to list the Class A Common Stock on the New York
Stock Exchange (the "NYSE") under the symbol "AFS". Copies of the Registration
Statement, including all exhibits thereto, and reports and other information are
available for inspection and copying at the office of the NYSE at 20 Broad
Street, New York, New York 10005.
The Company is currently subject to abbreviated informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") in
accordance with General Instruction J.(1)(a) and (b) to Form 10-K and in
accordance therewith files reports and other information with the Commission.
Such reports and other information can be inspected and copied at the offices of
the Commission set forth above. Copies of such material can be obtained from the
Public Reference Section of the Commission at the address set forth above at
prescribed rates. As a result of the Offerings (as defined herein), the Company
will become subject to the full informational requirements of the Exchange Act.
The Company will fulfill its obligations with respect to such requirements by
filing periodic reports and other information with the Commission. In addition,
the Company intends to furnish its stockholders with annual reports containing
consolidated financial statements certified by an independent public accounting
firm and quarterly reports containing unaudited consolidated financial
information for the first three quarters of each fiscal year.
---------------------
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any shares of Class A Common Stock in any jurisdiction in which
such offer or solicitation is unlawful. There are restrictions on the offer and
sale of shares of Class A Common Stock in the United Kingdom. All applicable
provisions of the Financial Services Act of 1986 and the Public Offers of
Securities Regulations 1995 with respect to anything done by any person in
relation to the shares of Class A Common Stock offered hereby in, from or
otherwise involving the United Kingdom must be complied with. See
"Underwriting".
In this Prospectus, references to "Dollars" and to "$" are to United States
dollars.
3
<PAGE> 8
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information and supplemental combined financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
Unless the context otherwise requires, (i) the "Company" means Associates First
Capital Corporation and its consolidated subsidiaries after giving effect to the
recontribution by Ford of certain non-U.S. subsidiaries described below under
"The Company", (ii) "ACONA" means Associates Corporation of North America, the
Company's principal operating subsidiary, (iii) "Ford" means Ford Motor Company
and its consolidated subsidiaries (other than the Company) and (iv) the
information contained in this Prospectus assumes that the Underwriters'
over-allotment options are not exercised. Unless otherwise defined herein,
capitalized terms used in this summary have the respective meanings ascribed to
them elsewhere in this Prospectus. For a description of certain terms and
phrases in this Prospectus, see "Glossary" at the end of this Prospectus. Terms
and phrases set forth in the Glossary are printed in bold face type the first
time they appear in this Prospectus. PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS".
THE COMPANY
The Company is a leading, diversified consumer and commercial finance
organization which provides finance, leasing and related services to
approximately 9.5 million individual consumers and 143,000 businesses in the
United States and internationally. At or for the year ended December 31, 1995,
the Company had aggregate NET FINANCE RECEIVABLES of $39.7 billion, total assets
of $41.3 billion, net earnings of $723.1 million and stockholder's equity of
$4.8 billion. The Company, through its predecessors, commenced operations in
1918 and was acquired by Ford in 1989. The Company believes that it is the
second largest INDEPENDENT FINANCE COMPANY in the United States based on
aggregate net finance receivables outstanding. The Company's operations outside
the United States are conducted principally in Japan ($2.1 billion of net
finance receivables) and are also conducted in, among other places, the United
Kingdom and Canada. The current credit ratings for the long-term debt of ACONA,
through which the Company conducts substantially all of its funding activities,
are Aa3 and AA- as determined by MOODY'S and STANDARD & POOR'S, respectively,
and those of the Company are A1 and A+.
Through various economic conditions and interest rate environments, the
Company has produced growth in pre-tax earnings for twenty-one consecutive
years. As the following graph depicts, over this period, pre-tax earnings have
grown at a compound annual rate in excess of 22% to $1.2 billion for the year
ended December 31, 1995. Such growth resulted principally from internal
expansion (through, among other things, branch openings, new lines of business
and geographic expansion) as well as selective acquisitions.
PRE-TAX EARNINGS TREND(1)
(DOLLARS IN MILLIONS)
[GRAPH]
(1) 1990 and 1991 pre-tax earnings exclude non-recurring
interest expense. See the immediately following
financial information and note (4) thereto.
4
<PAGE> 9
The table below sets forth certain financial information (dollars in
millions):
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31(1)
---------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
CONSUMER NET FINANCE RECEIVABLES:
Home equity lending.............. $ 14,386.2 $ 12,349.9 $ 10,619.7 $ 9,624.8 $ 8,238.1
Personal lending and retail sales
finance....................... 6,117.6 5,284.5 4,354.2 3,646.9 3,226.3
Credit card...................... 4,818.6 3,915.3 3,104.8 2,614.6 2,668.4
COMMERCIAL NET FINANCE RECEIVABLES:
Truck and truck trailer.......... $ 7,648.4 $ 6,681.5 $ 5,540.0 $ 4,350.7 $ 4,000.3
Equipment........................ 3,827.2 2,987.3 2,464.6 2,290.6 2,157.9
Manufactured housing(2).......... 2,034.1 1,669.2 1,290.2 983.9 697.2
Other(3)......................... 416.3 336.5 345.3 324.7 269.8
TOTAL NET FINANCE RECEIVABLES...... 39,702.5 33,685.7 28,294.7 24,371.0 21,672.8
TOTAL ASSETS....................... 41,303.9 35,283.5 30,039.6 25,996.3 23,523.5
STOCKHOLDER'S EQUITY............... 4,801.1 4,436.8 3,774.3 3,231.1 3,061.0
NET EARNINGS(4).................... 723.1 603.3 494.0 410.1 311.9
RETURN ON AVERAGE ASSETS(4)........ 1.89% 1.85% 1.76% 1.66% 1.40%
RETURN ON AVERAGE EQUITY(4)........ 15.66 14.70 14.10 13.04 12.50
RETURN ON AVERAGE TANGIBLE
EQUITY(4)........................ 21.90 21.71 22.31 22.14 24.60
</TABLE>
- ---------------
(1) Amounts in this table reflect the inclusion of certain non-U.S. subsidiaries
of Ford which are expected to be recontributed to the Company prior to the
completion of the Offerings. Such subsidiaries were owned by the Company
prior to its acquisition by Ford and have been continuously managed by the
Company since such acquisition. These subsidiaries had total assets of $4.1
billion at December 31, 1995. See "-- Relationship with Ford" and "The
Company".
(2) Manufactured housing operations are discussed in this Prospectus as part of
the Company's commercial activities because the marketing and management of
manufactured housing products are more closely related to commercial finance
products. See "Business -- Commercial Finance". Except as otherwise
indicated, the dollar amount of manufactured housing receivables is included
in the dollar amount of total consumer net finance receivables throughout
this Prospectus, because the credit and related risks of the manufactured
housing business are similar to those of the Company's consumer finance
business. Similarly, manufactured housing receivables are included with
consumer net finance receivables in determining the percentage of total net
finance receivables which are consumer net finance receivables.
(3) Includes auto fleet leasing and management, small business administration
lending, relocation services and auto club and roadside assistance services.
See "Business -- Commercial Finance -- Other Commercial Activities".
(4) In 1991, certain debt related to Ford's acquisition of the Company's
operation in Japan was converted to equity. Non-recurring interest expense
related to such debt was $39.2 million and $54.2 million in 1991 and 1990,
respectively. If 1991 results treated the converted debt as equity and
excluded the related non-recurring interest expense consistent with
subsequent years, net earnings would have been $351.1 million and the return
on average assets, average equity and average tangible equity would have
been 1.58%, 12.29% and 21.56%, respectively. In addition, if 1990 results
excluded the related non-recurring interest expense, pre-tax earnings would
have been $493.7 million.
CONSUMER FINANCE
The Company's consumer finance business represents approximately $27.6
billion, or 70%, of its 1995 year-end net finance receivables. HOME EQUITY LOANS
account for the largest share, or 52%, of the Company's consumer finance
portfolio based on outstanding net finance receivables at December 31, 1995. In
addition, the Company offers secured and unsecured personal loans and purchases
retail sales finance contracts from consumer goods retailers. The Company also
provides REVOLVING CREDIT through its VISA(R) and MasterCard(R) bankcard and
PRIVATE LABEL CREDIT CARD businesses. In addition, the Company sells a variety
of credit-related and other specialized insurance products to its consumer
finance customers.
At December 31, 1995, the Company had approximately 9.5 million individual
consumer finance customers spanning a wide range of income levels, age groups
and credit histories. The Company markets its consumer finance products through
a number of different channels of distribution, including its network of over
1,400 domestic branch offices and 400 international branch offices as well as
its centralized lending operations. The Company believes that its domestic
branch system is the largest consumer finance branch system in the United
States. In Japan, the Company's branch system and net finance receivables have
been growing in recent years at rates in excess of the Company's overall rates
of growth, and the Company believes that its international markets offer
significant opportunities for future growth. The Company believes that its
domestic and international branches enable it to attract, service and retain
customers through personal relationships with branch employees.
5
<PAGE> 10
COMMERCIAL FINANCE
The Company's commercial finance business, which represents $12.1 billion,
or 30%, of its 1995 year-end net finance receivables, consists of a variety of
retail and WHOLESALE FINANCING and leasing products and services for heavy-duty
(Class 8) and medium-duty (Classes 3 through 7) trucks and truck trailers,
construction and material handling equipment and other industrial equipment. The
Company believes that it is the leading independent source of financing for
heavy-duty trucks, truck trailers and heavy construction equipment in the United
States. The Company also engages in a number of other commercial activities,
including auto fleet leasing and management, small business administration
lending, relocation services and auto club and roadside assistance services. In
addition, the Company's commercial operations' staff manages its $2.0 billion
portfolio of MANUFACTURED HOUSING receivables (which for financial reporting
purposes are treated as consumer receivables). The Company also sells a variety
of credit-related and other specialized insurance products to its commercial
finance customers.
At December 31, 1995, the Company had approximately 143,000 commercial
finance customers ranging from large corporate customers to small,
individually-owned businesses. The Company provides truck and truck trailer
financing and leasing services from 39 branch offices in the United States and
Canada, and provides equipment financing and leasing services through 19 branch
offices in the United States, Mexico and the United Kingdom and, in the case of
material handling and certain other equipment, from two centralized lending and
service operations. Manufactured housing financing is provided from five
regional offices and 14 sales purchase offices, and fee-based services are
provided from centralized locations.
STRATEGY
The Company believes that its consistent growth in profits has resulted
from the balanced pursuit of asset and revenue growth and risk and expense
control. The Company believes that the following operating disciplines have been
key to its success: (i) focusing employees on growth and profitability through
incentives, (ii) maintaining strict credit underwriting standards and collection
policies to reduce losses, (iii) controlling operating expenses and (iv)
sourcing funds on a cost effective basis. The Company believes that adherence to
these disciplines has created a receivables portfolio that is diversified by
market, geography, customer, maturity and product. As a result, the Company
believes that it has been able to reduce its exposure to adverse economic
developments in any particular market or region.
The Company's business objective is to continue to achieve consistent
profitable growth based upon the foregoing operating disciplines, regardless of
economic conditions and interest rate environments. The Company seeks to achieve
this goal by (i) expanding its existing businesses by developing new product
lines in its core businesses and expanding its flexible delivery systems, (ii)
identifying and entering new markets with strong profit potential, (iii)
providing superior customer service through building long-term relationships and
maintaining an intimate knowledge of its business segments, (iv) employing
proven technology to reduce costs and enhance product delivery and portfolio
management and (v) pursuing selective acquisitions designed to leverage
operating costs, increase market share, introduce new product lines and fuel
growth.
The Company believes that its strong, experienced management team has
developed a disciplined operating philosophy and has defined and implemented a
distinct business strategy in each of the Company's diverse business units.
Management believes that employees' commitment to a distinct culture and set of
core values distinguishes the Company from its competitors. The Company seeks to
reinforce its culture and core values to all employees through extensive
training, incentive programs and operating controls at every level. The Company
believes that maintaining its distinct culture, core values and strong
management at every level will continue to be a key element of the Company's
future strategy.
6
<PAGE> 11
THE OFFERINGS
<TABLE>
<S> <C>
Class A Common Stock Offered(1):
United States Offering........ shares
International Offering........ shares
Total................. shares
Common Stock Outstanding After
the Offerings(1)(2):
Class A Common Stock.......... shares
Class B Common Stock.......... shares
Total................. shares
Use of Proceeds................. The estimated proceeds to the Company from the offering
made hereby in the United States (the "U.S. Offering") and
the concurrent international offering (the "International
Offering" and, together with the U.S. Offering, the
"Offerings"), after the deduction of underwriting
discounts, will be $ billion ($ billion if the
Underwriters' over-allotment options are exercised in
full), all of which is expected to be used to reduce
short-term indebtedness of the Company. See "Use of
Proceeds".
Proposed NYSE Symbol for
Class A Common Stock.......... AFS
Dividends; Voting Rights;
Conversion.................... The holders of CLASS A COMMON STOCK and CLASS B COMMON
STOCK (collectively, "Common Stock") share ratably on a per
share basis in all dividends and other distributions
declared by the board of directors; however, the holders of
Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to five votes
per share. See "Description of Capital Stock -- Common
Stock -- Voting Rights". Under certain circumstances,
shares of Class B Common Stock convert or are convertible
into an equivalent number of shares of Class A Common
Stock. See "-- Relationship with Ford" and "Description of
Capital Stock -- Common Stock -- Conversion".
Controlling Stockholder......... For information regarding the Company's controlling
stockholder, see "-- Relationship with Ford" below.
</TABLE>
- ---------------
(1) Excludes up to shares and shares subject to over-allotment
options granted by the Company to the U.S. Underwriters and the
International Underwriters, respectively. See "Underwriting".
(2) Excludes shares of Class A Common Stock reserved for issuance pursuant
to certain employee benefit plans. See "Management -- Additional Material
Employee Compensation Plans and Agreements -- Long-Term Equity Compensation
Plan".
7
<PAGE> 12
DIVIDEND POLICY
The Company's board of directors currently intends to declare quarterly
dividends on both the Class A Common Stock and Class B Common Stock. It is
expected that the first quarterly dividend payment will be $0. per share (a
rate of $0. annually), with the initial dividend to be declared and paid in
the third quarter of 1996. The declaration and payment of dividends by the
Company are subject to the discretion of its board of directors. Any
determination as to the payment of dividends will depend upon, among other
things, general business conditions, the Company's financial results,
contractual, legal and regulatory restrictions regarding the payment of
dividends by the Company's subsidiaries, the credit ratings of the Company and
ACONA and such other factors as the board of directors may consider to be
relevant. See "Risk Factors -- Limitations Upon Liquidity and Capital
Raising -- Limitations upon the payment of dividends" and "-- Holding Company
Structure".
The Company paid cash dividends to Ford of $226.0 million, $288.1 million
and $318.0 million during the years ended December 31, 1993, 1994 and 1995,
respectively, and paid a dividend of $1.75 billion to Ford on February 8, 1996
in the form of an intercompany note. In 1993, 1994 and 1995, Ford made cash
capital contributions to the Company of $200.0 million, $215.1 million and
$200.0 million, respectively. Thus, the dividends historically paid by the
Company are not indicative of its future dividend policy.
RELATIONSHIP WITH FORD
The Company is an indirect, wholly-owned subsidiary of Ford. Upon
completion of the Offerings, Ford will beneficially own % of the
outstanding Class A Common Stock ( % if the Underwriters' over-allotment
options are exercised in full) and 100% of the outstanding Class B Common Stock.
Accordingly, Ford will beneficially own Common Stock representing in the
aggregate approximately % of the combined voting power of all of the
outstanding Common Stock (or approximately % if the Underwriters'
over-allotment options are exercised in full) and will continue to have the
ability to direct the election of members of the board of directors of the
Company and exercise a controlling influence over the business and affairs of
the Company. Ford has advised the Company that its current intent is to continue
to hold all of the Common Stock beneficially owned by it following the
Offerings. However, Ford is not subject to any contractual obligation to retain
its controlling interest, except that Ford and the Company have agreed, subject
to certain exceptions, not to sell or otherwise dispose of any shares of Common
Stock of the Company for a period of 180 days after the date of this Prospectus
without the prior written consent of Goldman, Sachs & Co. See "Underwriting". As
a result, there can be no assurance concerning the period of time during which
Ford will maintain its beneficial ownership of Common Stock owned by it
following the Offerings. See "Risk Factors -- Control by and Relationship with
Ford", "-- Possible Future Sales of Common Stock by Ford" and "Relationship with
Ford". From time to time the Company and Ford have entered into, and can be
expected to continue to enter into, certain agreements and business transactions
in the ordinary course of their respective businesses, and the Company's
Restated Certificate of Incorporation includes certain provisions relating to
the Company's relationship with Ford. See "Relationship with Ford" and
"Description of Capital Stock -- Certain Certificate of Incorporation and By-law
Provisions -- Corporate Opportunities".
The Company was acquired by Ford and became part of its Financial Services
Group in 1989. In connection with this acquisition, the Company's operations in
Japan, the United Kingdom, Canada and Puerto Rico were transferred to certain
non-U.S. subsidiaries of Ford, but the Company continued to manage such
operations. Prior to completion of the Offerings, Ford is expected to
recontribute the operations of Ford's non-U.S. subsidiaries managed by the
Company (principally subsidiaries in Japan, the United Kingdom, Canada, Puerto
Rico and Mexico, the "Foreign Subsidiaries"). In connection with this
transaction, Ford will receive shares of Class A Common Stock and
shares of Class B Common Stock. The Foreign Subsidiaries had aggregate
total assets at December 31, 1995 of $4.1 billion, and the financial and other
information with respect to the Foreign Subsidiaries have been retroactively
included in the financial and other information of the Company contained herein.
See "The Company".
8
<PAGE> 13
SUMMARY SUPPLEMENTAL COMBINED FINANCIAL DATA
The summary supplemental combined financial data of the Company presented
below presents financial information of the Company giving supplemental combined
effect to the expected recontribution by Ford to the Company of the Foreign
Subsidiaries. See "The Company". The summary supplemental combined results of
operations and balance sheet data presented below as of December 31, 1995 and
1994 and for each of the years in the three-year period ended December 31, 1995
was derived from the supplemental combined financial statements of the Company
and the notes thereto set forth herein. The summary supplemental combined
results of operations and balance sheet data presented below as of December 31,
1993, 1992 and 1991 and for each of the years in the two-year period ended
December 31, 1992 was derived from supplemental combined financial statements
and the related notes thereto not presented herein. The data presented below
should be read in conjunction with the supplemental combined financial
statements and the related notes thereto set forth herein (dollars in millions,
except per share data):
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
---------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Total revenue....................................... $ 6,107.2 $ 4,925.8 $ 4,114.8 $ 3,696.2 $ 3,495.8
Finance charge revenue.............................. 5,560.8 4,445.2 3,709.7 3,330.7 3,117.9
Interest expense.................................... 2,177.9 1,657.3 1,421.7 1,352.1 1,452.8
Lending spread...................................... 3,382.9 2,787.9 2,288.0 1,978.6 1,665.1
Operating expenses.................................. 1,754.7 1,456.1 1,216.8 1,007.2 911.7
Provision for losses................................ 834.0 647.1 536.1 568.6 494.3
Insurance benefits paid............................. 142.5 147.9 118.9 103.7 99.9
Earnings before provision for income taxes and
cumulative effect of change in accounting
principles........................................ 1,198.1 1,017.4 821.3 664.6 537.1
Provision for income taxes.......................... 475.0 414.1 327.3 254.5 225.2
Net earnings(1)..................................... 723.1 603.3 494.0 410.1 311.9
Pro forma net earnings per share(2)(3)..............
BALANCE SHEET DATA
Net finance receivables:
Consumer.......................................... 27,575.3 23,627.8 19,912.4 17,412.7 15,275.9
Commercial........................................ 12,127.2 10,057.9 8,382.3 6,958.3 6,396.9
--------- --------- --------- --------- ---------
Total............................................. 39,702.5 33,685.7 28,294.7 24,371.0 21,672.8
========= ========= ========= ========= =========
Allowance for losses................................ (1,268.6) (1,061.6) (892.3) (764.7) (649.7)
Total assets........................................ 41,303.9 35,283.5 30,039.6 25,996.3 23,523.5
Short-term debt (notes payable)..................... 13,747.3 12,431.9 10,385.9 9,086.4 8,632.4
Long-term debt(4)................................... 21,372.6 17,306.2 14,826.8 12,846.5 11,022.3
Stockholder's equity................................ 4,801.1 4,436.8 3,774.3 3,231.1 3,061.0
Pro forma stockholder's equity per share(2)(3)......
SELECTED DATA AND RATIOS
Lending spread as a percentage of average net
finance receivables............................... 9.22% 9.00% 8.69% 8.59% 8.25%
Earnings to fixed charges........................... 1.56x 1.61x 1.57x 1.49x 1.37x
Total debt to equity................................ 7.2:1 6.6:1 6.6:1 6.7:1 6.4:1
Total debt to tangible equity....................... 9.9:1 9.6:1 10.1:1 11.1:1 11.2:1
Return on average assets(1)......................... 1.89% 1.85% 1.76% 1.66% 1.40%
Return on average equity(1)......................... 15.66 14.70 14.10 13.04 12.50
Return on average tangible equity(1)................ 21.90 21.71 22.31 22.14 24.60
60+ days contractual delinquency.................... 1.71 1.35 1.43 1.85 2.56
Net credit losses to average net finance
receivables....................................... 1.70 1.64 1.68 2.04 2.17
Allowance for losses to net finance receivables..... 3.20 3.15 3.15 3.14 3.00
Allowance for losses to net credit losses........... 2.03x 2.09x 2.02x 1.63x 1.49x
Number of employees................................. 16,647 15,318 13,933 12,430 11,142
Number of consumer and commercial branch offices
Domestic.......................................... 1,543 1,472 1,378 1,133 888
International..................................... 404 329 278 256 240
Total............................................. 1,947 1,801 1,656 1,389 1,128
</TABLE>
- ---------------
(1) In 1991, certain debt related to Ford's acquisition of the Company's
operation in Japan was converted to equity, and 1991 results therefore
include $39.2 million of non-recurring interest expense related to the
converted debt. If 1991 results treated the converted debt as equity and
excluded the related non-recurring interest expense consistent with
subsequent years, net earnings would have been $351.1 million and the return
on average assets, average equity and average tangible equity would have
been 1.58%, 12.29% and 21.56%, respectively.
(2) Based on shares to be outstanding after the Offerings. Excludes up
to shares and shares subject to over-allotment options
granted by the Company to the U.S. Underwriters and the International
Underwriters, respectively. See "Underwriting". If such options are
exercised in full, pro forma net earnings per share and pro forma
stockholder's equity per share would be $ and $ , respectively. Also
excludes shares of Class A Common Stock reserved for issuance pursuant
to certain employee benefit plans. See "Management -- Additional Material
Employee Compensation Plans and Agreements -- Long-Term Equity Compensation
Plan".
(3) Due to the change in the Company's capital structure, historical share and
per share data will not be comparable to, or meaningful in the context of,
future periods. See "Capitalization".
(4) Includes current portion of long-term debt.
9
<PAGE> 14
RISK FACTORS
ECONOMIC FACTORS
Risk of economic downturn. The Company's results of operations are affected
by certain economic factors, including the level of economic activity in the
markets in which the Company operates. While the Company historically has been
able to maintain its profitability throughout the business cycle, a decline in
economic activity may adversely affect the Company. First, the Company's growth
is dependent to a significant degree upon its ability to generate new finance
receivables, and in an adverse economic environment, growth in finance
receivables may not be attainable. The Company's growth rate has varied from
year to year, and there can be no assurance that the average growth rates
sustained in the recent past will continue. Second, adverse economic conditions
are likely to result in an increase in non-performing loans and credit losses.
Many of the Company's consumer finance customers may be particularly sensitive
to loss of employment or other adverse economic conditions in terms of their
ability to meet their payment obligations. Although the Company maintains an
allowance for losses on finance receivables at an amount which it believes is
sufficient to provide adequate protection against losses in its portfolios, this
allowance could prove to be inadequate. Third, adverse economic conditions may
contribute to a decline in the net realizable value of collateral securing
certain of the Company's finance receivables (in the case of any collateral, the
realizable value thereof may at any time be less than the loan secured). At
December 31, 1995, 52% of the aggregate outstanding balance of consumer finance
receivables were home equity loans secured by residential real estate and
substantially all of the aggregate outstanding balance of commercial finance
receivables were secured by collateral. The Company believes that its exposure
to borrower default under adverse economic conditions is less with respect to
secured loans than with respect to unsecured loans. Finally, any of the above
factors could contribute to a downgrading of the Company's credit ratings and/or
that of ACONA, its principal operating subsidiary. Any such downgrading could
increase the Company's funding cost and decrease its lending spread. There can
be no assurance that if a decline in economic activity does occur, that it will
not have a material adverse effect on the Company's results of operations or
financial condition.
Interest rate-related risks. While the Company employs a comprehensive
interest rate risk management program and closely monitors its pricing to keep
its lending rates responsive to market conditions and to match maturities of its
financial assets and liabilities, an increase in interest rates, or the
perception that an increase could occur, could adversely affect the Company's
ability to generate new finance receivables, which would limit the Company's
growth. In addition, an increase in interest rates may have a short-term adverse
impact on the Company's profitability, as lending spreads may decline to the
extent that the Company's borrowing costs increase more quickly than its finance
charge rates. For a discussion of the Company's indebtedness in connection with
its finance business, including borrowing costs and maturities, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources". Also, in the event of an
increase in prevailing interest rates, the Company's finance customers with
variable rate loans may have greater difficulty meeting their higher payment
obligations, which could result in an increase in non-performing loans and
credit losses. At December 31, 1995, the interest rates charged on 39% of the
Company's consumer finance loans and 17% of the Company's commercial finance
loans varied during the term of the loan.
Exchange rate risk. For the year ended December 31, 1995, 10% of both the
Company's revenues and net earnings were derived from the operation of its
Japanese subsidiary, AIC Corporation ("AIC"). In recent years, the value of the
Japanese yen has appreciated sharply against the U.S. dollar, and this
appreciation has had a positive impact upon the contribution of AIC to the
Company's revenues and net earnings expressed in U.S. dollars. Any appreciation
of the U.S. dollar against the Japanese yen would adversely affect AIC's
contribution measured in U.S. dollars. The Company has also entered into various
support agreements on behalf of certain non-U.S. subsidiaries, including AIC.
For a discussion of the Company's management of exchange rate risk, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
10
<PAGE> 15
ALLOWANCE FOR CREDIT LOSSES
The Company maintains an allowance for losses on finance receivables at an
amount which it believes is sufficient to provide adequate protection against
losses in its portfolios. The allowance is determined principally on the basis
of historical loss experience and reflects management's judgment of additional
loss potential considering future economic conditions and the nature and
characteristics of the underlying finance receivables. Although the allowance
for losses in finance receivables reflected in the Company's supplemental
combined balance sheet at December 31, 1995 is considered adequate by the
Company's management, there can be no assurance that this allowance will prove
to be adequate over time to cover losses in connection with the Company's
portfolios. This allowance may prove to be inadequate due to unanticipated
adverse changes in the economy or discrete events adversely affecting specific
customers or industries. The Company's results of operations and financial
condition could be materially adversely affected to the extent that the
Company's allowance is insufficient to cover such changes or events. See
"Business -- Additional Information Regarding the Company -- Loan Loss Reserves
and Credit Losses" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
LIMITATIONS UPON LIQUIDITY AND CAPITAL RAISING
Potential restraints upon liquidity. The Company satisfies its funding
requirements principally through sales of commercial paper and the issuance of
long-term debt. At December 31, 1995, commercial paper borrowings and other
short-term indebtedness were $13.7 billion. A downgrade in either the Company's
or ACONA's credit ratings could result in an increase in the Company's funding
costs and could, under certain circumstances, have an adverse impact on the
Company's access to the commercial paper market. In the event that the Company
is unable to access the commercial paper market or otherwise finance its
short-term borrowing needs in the public or private markets upon acceptable
terms, it would seek to satisfy its liquidity requirements through borrowings
under its bank credit facilities. At December 31, 1995, the Company had the
capacity to borrow $10.3 billion under committed credit facilities available to
the Company's domestic businesses, representing 77% of ACONA's net short-term
indebtedness outstanding at that time. While there can be no assurance that
these committed bank lines would provide sufficient liquidity to the Company
under the foregoing conditions, the Company believes that such lines should
provide adequate liquidity under foreseeable conditions.
Limitations upon the payment of dividends. The Company believes that
keeping its DEBT TO EQUITY RATIO within certain limits is important in order to
maintain its existing credit ratings. Thus, under certain circumstances, the
Company's ability to pay dividends while maintaining levels of debt which
management believes are appropriate for the Company could be limited. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition". The Company's holding company structure may
also limit its ability to pay dividends. See "-- Holding Company Structure". For
a discussion of the Company's dividend policy and certain related matters, see
"Dividend Policy".
Potential constraints upon ability to raise capital and fund operations.
Because Ford may seek to maintain its beneficial ownership percentage of the
Company, the Company may be constrained in its ability to raise common or
preferred equity capital in the future. In addition, Ford may not be willing to
make capital contributions to the Company in the future. See "Relationship with
Ford".
Although the Company believes that the business of and outlook for Ford is
not closely related to the business of and outlook for the Company, there can be
no assurance that any future downgrading of Ford's credit ratings would not have
an adverse impact on the Company's or ACONA's credit ratings. Therefore, for so
long as Ford maintains a controlling interest in the Company, a deterioration in
the financial condition of Ford could have the effect of increasing the
Company's borrowing costs and/or impairing its access to the capital markets. To
the extent the Company does not pass on its increased borrowing costs to its
customers, the Company's profitability, and potentially its ability to raise
capital, could be adversely affected. Also, while no
11
<PAGE> 16
such agreements or policies are presently contemplated, Ford will have the
ability in the future to enter into agreements or adopt policies which limit the
Company's ability to incur debt.
HOLDING COMPANY STRUCTURE
As a holding company, the Company relies primarily on dividends and other
intercompany transfers of funds from its subsidiaries for the payment of
dividends to stockholders. The terms of the agreements governing certain
outstanding indebtedness of ACONA currently contain certain limitations on the
payment of dividends and certain other transfers of funds to the Company. The
principal restriction, which is contained in certain issues of debt having
stated maturities no later than , generally limits payments of
dividends on ACONA's common stock in any year to not more than 50% of
consolidated net earnings for such year, subject to certain exceptions. For a
description of certain other limitations, see "Description of Certain
Indebtedness". In addition, the Company's banking subsidiaries, Associates
National Bank (Delaware) ("ANB") and Associates Investment Corporation
("Associates Investment"), and the Company's insurance subsidiaries may pay
dividends and make certain other transfers of funds to the Company only up to
amounts permitted by applicable banking and insurance regulations, respectively,
and the repatriation of funds from the Foreign Subsidiaries may be subject to
withholding taxes or other restrictions. For a discussion of the Company's
dividend policy and certain related matters, see "Dividend Policy".
REGULATION
The Company's consumer and commercial finance and insurance businesses are
subject to extensive regulation and supervision in the jurisdictions in which
the Company operates. Such regulation and supervision are primarily for the
benefit and protection of the Company's customers, and not for the benefit of
investors and could limit the Company's discretion in operating its businesses.
Noncompliance with applicable statutes or regulations could result in the
suspension or revocation of any license or registration at issue, as well as the
imposition of civil fines and criminal penalties. State laws often establish
maximum allowable finance charges for certain consumer and commercial loans;
approximately 92% and 100% of the outstanding consumer and commercial net
finance receivables, respectively, were either not subject to such state
maximums, or if subject, such maximum finance charge did not, in most cases,
materially restrict the interest rate charged. No assurance can be given that
applicable laws or regulations will not be amended or construed differently,
that new laws and regulations will not be adopted or that interest rates will
not rise to state maximum levels, the effect of any of which could be to
adversely affect the business or results of operations of the Company. See
"Business -- Additional Information Regarding the Company -- Regulation". In
addition, the Company is subject to certain litigation with respect to such
matters, see "Business -- Additional Information Regarding the Company -- Legal
Proceedings".
COMPETITION
The markets in which the Company operates are highly competitive.
Competitors include, among others, finance companies, commercial banks, thrifts,
other financial institutions, credit unions and manufacturers and vendors. Many
of the competitors of the Company in different segments and regions are large
companies that have substantial capital, technological and marketing resources,
and some of these competitors are larger than the Company and may have access to
capital at a lower cost than the Company. The Company believes that the finance
charge rate is one of the primary competitive factors in many of its markets.
From time to time, competitors of the Company may seek to compete aggressively
on the basis of pricing, and the Company may lose market share to the extent it
is not willing to match competitor pricing. See "Business -- Additional
Information Regarding the Company -- Competition".
12
<PAGE> 17
CONTROL BY AND RELATIONSHIP WITH FORD
Ford is currently the beneficial owner of all of the common stock of the
Company. Upon completion of the Offerings, Ford will beneficially own % of
the outstanding Class A Common Stock (or approximately % if the Underwriters'
over-allotment options are exercised in full) and 100% of the outstanding Class
B Common Stock of the Company which will, in the aggregate, represent
approximately % of the combined voting power of all the outstanding Common
Stock (or approximately % if the Underwriters' over-allotment options are
exercised in full). For as long as Ford continues to beneficially own shares of
Common Stock representing more than 50% of the combined voting power of the
Common Stock, Ford will be able to direct the election of all of the members of
the Company's board of directors and exercise a controlling influence over the
business and affairs of the Company, including any determinations with respect
to mergers or other business combinations involving the Company, the acquisition
or disposition of assets by the Company, the incurrence of indebtedness by the
Company, the issuance of any additional Common Stock or other equity securities
and the payment of dividends with respect to the Common Stock. See
"-- Limitations Upon Liquidity and Capital Raising -- Potential constraints upon
ability to raise capital and fund operations". Similarly, Ford will have the
power to determine matters submitted to a vote of the Company's stockholders
without the consent of the Company's other stockholders, will have the power to
prevent or cause a change in control of the Company and could take other actions
that might be favorable to Ford. In the foregoing situations or otherwise,
various conflicts of interest between the Company and Ford could arise.
Ownership interests of directors or officers of the Company in common stock of
Ford or service as a director or officer of both the Company and Ford could
create or appear to create potential conflicts of interest when directors and
officers are faced with decisions that could have different implications for the
Company and Ford. The Company's Restated Certificate of Incorporation will
include certain provisions relating to the allocation of business opportunities
that may be suitable for both the Company and Ford. See "Relationship with Ford"
and "Description of Capital Stock -- Certain Certificate of Incorporation and
By-law Provisions -- Corporate Opportunities".
Beneficial ownership of at least 80% of the total voting power and value of
the outstanding Common Stock is required in order for Ford to continue to
include the Company in its consolidated group for federal income tax purposes,
and beneficial ownership of at least 80% of the total voting power and 80% of
each class of nonvoting capital stock is required in order for Ford to effect a
TAX-FREE SPIN-OFF of the Company or certain other tax-free transactions. Each
member of a consolidated group for federal income tax purposes is jointly and
severally liable for the federal income tax liability of each other member of
the consolidated group. Each member of the Ford controlled group, which includes
Ford, the Company and Ford's other subsidiaries, is also jointly and severally
liable for pension and benefit funding and termination liabilities of other
group members, as well as certain benefit plan taxes. Accordingly, the Company
could be liable under such provisions in the event any such liability is
incurred, and not discharged, by any other member of the Ford consolidated or
controlled group. If the Company were no longer to be included in Ford's
consolidated group for federal tax purposes, there is no assurance that the
Company's tax position would not be less favorable than it is at present. See
"Relationship with Ford".
In addition, by virtue of its controlling beneficial ownership and the
terms of a tax-sharing agreement to be entered into between the Company and
Ford, Ford will effectively control all of the Company's tax decisions. Under
the tax-sharing agreement, Ford will have sole authority to respond to and
conduct all tax proceedings (including tax audits) relating to the Company, to
file all returns on behalf of the Company and to determine the amount of the
Company's liability to (or entitlement to payment from) Ford under the
tax-sharing agreement. See "Relationship with Ford--Tax-Sharing Agreement". This
arrangement may result in conflicts of interests between the Company and Ford.
For example, under the tax-sharing agreement, Ford may choose to contest,
compromise or settle any adjustment or deficiency proposed by the relevant
taxing authority in a manner that may be beneficial to Ford and detrimental to
the Company. In connection therewith, however, Ford is
13
<PAGE> 18
obligated under the tax-sharing agreement to act in good faith with regard to
all members included in the applicable returns.
Certain intercompany agreements and arrangements exist between the Company
and Ford. See "Relationship with Ford". Among these is a trademark license
agreement which permits certain use by the Company of certain of Ford's
trademarks. There can be no assurance that the trademark license or services
provided to the Company by Ford under such agreements will continue to be
provided, and if not, whether, or on what terms, such license or services could
be replicated. Any termination of the trademark license agreement could have an
adverse effect on certain operations of the Company. See "Relationship with
Ford -- Trademark License Agreement".
POSSIBLE FUTURE SALES OF COMMON STOCK BY FORD
Subject to applicable federal securities laws and the restrictions set
forth below, after completion of the Offerings, Ford may sell any and all of the
shares of the Common Stock beneficially owned by it or distribute any or all of
such shares of Common Stock to its stockholders. Sales or distribution by Ford
of substantial amounts of Common Stock in the public market or to its
stockholders, or the perception that such sales or distribution could occur,
could adversely affect prevailing market prices for the Class A Common Stock.
Ford has advised the Company that its current intent is to continue to hold all
of the Common Stock beneficially owned by it following the Offerings. However,
Ford is not subject to any contractual obligation to retain its controlling
interest, except that Ford and the Company have agreed, subject to certain
exceptions, not to sell or otherwise dispose of any shares of Common Stock of
the Company for a period of 180 days after the date of this Prospectus without
the prior written consent of Goldman, Sachs & Co. See "Underwriting". As a
result, there can be no assurance concerning the period of time during which
Ford will maintain its beneficial ownership of Common Stock owned by it
following the Offerings. Ford will have registration rights with respect to the
shares of the Common Stock owned by it following the Offerings which would
facilitate any future disposition. See "-- Control by and Relationship with
Ford" above, "Relationship with Ford -- Corporate Agreement" and "Shares
Available for Future Sale".
NO PRIOR MARKET FOR CLASS A COMMON STOCK
Prior to the Offerings, there has been no public market for the Class A
Common Stock of the Company. The initial public offering price of the Class A
Common Stock will be determined by negotiations between the Company and the
representatives of the Underwriters. There can be no assurance that the initial
public offering price will correspond to the price at which the Class A Common
Stock will trade in the public market subsequent to the Offerings or that an
active public market for the Class A Common Stock will develop and continue
after the Offerings. See "Underwriting".
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and By-laws may render more difficult or have the effect of discouraging
unsolicited takeover bids from third parties or the removal of incumbent
management of the Company. See "Description of Capital Stock -- Certain
Certificate of Incorporation and By-law Provisions". Although such provisions do
not have a substantial practical significance to investors while Ford controls
the Company, such provisions could have the effect of depriving stockholders of
an opportunity to sell their shares at a premium over prevailing market prices
should Ford's combined voting power decrease to less than 50%.
14
<PAGE> 19
THE COMPANY
The Company is a leading, diversified consumer and commercial finance
organization which provides finance, leasing and related services to
approximately 9.5 million individual consumers and 143,000 businesses in the
United States and internationally. At or for the year ended December 31, 1995,
the Company had aggregate net finance receivables of $39.7 billion, total assets
of $41.3 billion, net earnings of $723.1 million and stockholder's equity of
$4.8 billion. The Company believes that it is the second largest independent
finance company in the United States based on aggregate net finance receivables
outstanding. The Company's operations outside the United States are conducted
principally in Japan ($2.1 billion of net finance receivables) and are also
conducted in, among other places, the United Kingdom and Canada.
The Company's consumer finance operations consist of a variety of
specialized consumer financing products and services, including home equity
lending, personal installment lending, retail sales financing and credit cards.
The Company's commercial operations primarily provide retail financing, leasing
and wholesale financing for heavy-duty and medium-duty trucks and truck
trailers, construction, material handling and other industrial equipment and
manufactured housing. The Company also provides a number of other products and
services, including credit-related and non-credit-related insurance to its
consumer and commercial customers as well as certain fee-based services such as
auto fleet leasing and management, small business administration lending,
relocation services and auto club and roadside assistance services.
The Company, through its predecessors, was organized in 1918 to provide
financing for the automobile industry. The Company's Common Stock was first
listed on the New York Stock Exchange in 1937 and was publicly traded until
1968, when Gulf + Western Industries, Inc. acquired the Company. In 1979, the
Company expanded into international markets in Japan and the United Kingdom. In
1989, Ford acquired the Company and, in connection with such acquisition, the
Company's operations in Japan, the United Kingdom, Canada and Puerto Rico were
transferred to certain non-U.S. subsidiaries of Ford, but the Company continued
to manage such operations. Prior to completion of the Offerings, Ford is
expected to recontribute the Foreign Subsidiaries to the Company. In connection
with this transaction, Ford will receive shares of Class A Common
Stock, which upon completion of the Offerings will represent approximately
% of the outstanding Class A Common Stock ( % if the Underwriters'
over-allotment options are exercised in full), and shares of Class B
Common Stock. Financial and other information with respect to the Foreign
Subsidiaries, which in the aggregate had total assets at December 31, 1995 of
$4.1 billion, have been retroactively included in the financial and other
information relating to the Company contained herein.
The Company's principal executive offices are located at 250 East Carpenter
Freeway, Irving, Texas 75062, and its telephone number is (214) 541-4000.
USE OF PROCEEDS
The estimated proceeds to the Company from the Offerings, after the
deduction of underwriting discounts, will be $ billion ($ billion if
the Underwriters' over-allotment options are exercised in full), all of which is
expected to be used to reduce short-term indebtedness of the Company. Such
indebtedness will be incurred to repay an intercompany note issued by the
Company to FFSG in the amount of $1.75 billion.
15
<PAGE> 20
DIVIDEND POLICY
The Company's board of directors currently intends to declare quarterly
dividends on both the Class A Common Stock and Class B Common Stock. It is
expected that the first quarterly dividend payment will be $0. per share (a
rate of $0. annually), with the initial dividend to be declared and paid in the
third quarter of 1996. The declaration and payment of dividends by the Company
are subject to the discretion of its board of directors. Any determination as to
the payment of dividends will depend upon, among other things, general business
conditions, the Company's financial results, contractual, legal and regulatory
restrictions regarding the payment of dividends by the Company's subsidiaries,
the credit ratings of the Company and ACONA and such other factors as the board
of directors may consider to be relevant. See "Risk Factors -- Limitations Upon
Liquidity and Capital Raising -- Limitations upon the payment of dividends" and
" -- Holding Company Structure".
The Company paid cash dividends to Ford of $226.0 million, $288.1 million
and $318.0 million during the years ended December 31, 1993, 1994 and 1995,
respectively, and paid a dividend of $1.75 billion to Ford on February 8, 1996
in the form of an intercompany note. In 1993, 1994 and 1995, Ford made cash
capital contributions to the Company of $200.0 million, $215.1 million and
$200.0 million, respectively. Thus, the dividends historically paid by the
Company are not indicative of its future dividend policy.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1995 (i) on a supplemental combined basis giving effect to the
FOREIGN SUBSIDIARIES RECONTRIBUTION and (ii) as adjusted to give effect to (a)
the reclassification of 250 shares of common stock, no par value, of the Company
beneficially held by Ford into shares of Class B Common Stock, the
issuance to Ford of shares of Class A Common Stock and
shares of Class B Common Stock in connection with the Foreign Subsidiaries
Recontribution and the issuance and sale by the Company of shares of
Class A Common Stock in the Offerings at an assumed initial public offering
price of $ per share, (b) the payment of a dividend of $1.75 billion to
Ford on February 8, 1996 in the form of an intercompany note and (c), assuming
an initial public offering price of $ per share, the receipt of net
proceeds of $ billion from the sale by the Company of shares of Class A
Common Stock in the Offerings and application of such proceeds as set forth in
"Use of Proceeds". This table should be read in conjunction with the
supplemental combined financial statements and the related notes thereto set
forth herein (in millions).
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------
COMBINED AS ADJUSTED
--------- -----------
<S> <C> <C>
Debt
Short-term debt (notes payable)................................... $13,747.3
Long-term debt.................................................... 21,372.6
---------
Total debt................................................ $35,119.9
=========
Stockholder's Equity
Preferred Stock...................................................
Common Stock...................................................... $ 47.0
Class A Common Stock..............................................
Class B Common Stock..............................................
Paid-in capital................................................... 2,124.3
Retained earnings................................................. 2,287.0
Foreign currency translation adjustments.......................... 330.6
Unrealized gain on available-for-sale securities.................. 12.2
---------
Total stockholder's equity................................ 4,801.1
---------
Total capitalization...................................... $39,921.0
=========
</TABLE>
16
<PAGE> 21
SELECTED SUPPLEMENTAL COMBINED FINANCIAL DATA
The selected supplemental combined financial data of the Company presented
below presents financial information of the Company giving supplemental combined
effect to the expected recontribution by Ford to the Company of the Foreign
Subsidiaries. See "The Company". The selected supplemental combined results of
operations and balance sheet data presented below as of December 31, 1995 and
1994 and for each of the years in the three-year period ended December 31, 1995
was derived from the supplemental combined financial statements of the Company
and the notes thereto set forth herein. The selected supplemental combined
results of operations and balance sheet data presented below as of December 31,
1993, 1992 and 1991 and for each of the years in the two-year period ended
December 31, 1992 was derived from supplemental combined financial statements
and the related notes thereto not presented herein. The data presented below
should be read in conjunction with the supplemental combined financial
statements and the related notes thereto set forth herein (dollars in millions,
except per share data):
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
---------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Total revenue.................................................. $ 6,107.2 $ 4,925.8 $ 4,114.8 $ 3,696.2 $ 3,495.8
Finance charge revenue......................................... 5,560.8 4,445.2 3,709.7 3,330.7 3,117.9
Interest expense............................................... 2,177.9 1,657.3 1,421.7 1,352.1 1,452.8
Lending spread................................................. 3,382.9 2,787.9 2,288.0 1,978.6 1,665.1
Operating expenses............................................. 1,754.7 1,456.1 1,216.8 1,007.2 911.7
Provision for losses........................................... 834.0 647.1 536.1 568.6 494.3
Insurance benefits paid........................................ 142.5 147.9 118.9 103.7 99.9
Earnings before provision for income taxes and cumulative
effect of change in accounting principles.................... 1,198.1 1,017.4 821.3 664.6 537.1
Provision for income taxes..................................... 475.0 414.1 327.3 254.5 225.2
Net earnings(1)................................................ 723.1 603.3 494.0 410.1 311.9
Pro forma net earnings per share(2)(3).........................
BALANCE SHEET DATA
Net finance receivables:
Consumer..................................................... 27,575.3 23,627.8 19,912.4 17,412.7 15,275.9
Commercial................................................... 12,127.2 10,057.9 8,382.3 6,958.3 6,396.9
-------- -------- -------- -------- --------
Total........................................................ 39,702.5 33,685.7 28,294.7 24,371.0 21,672.8
======== ======== ======== ======== ========
Allowance for losses........................................... (1,268.6) (1,061.6) (892.3) (764.7) (649.7)
Total assets................................................... 41,303.9 35,283.5 30,039.6 25,996.3 23,523.5
Short-term debt (notes payable)................................ 13,747.3 12,431.9 10,385.9 9,086.4 8,632.4
Long-term debt(4).............................................. 21,372.6 17,306.2 14,826.8 12,846.5 11,022.3
Stockholder's equity........................................... 4,801.1 4,436.8 3,774.3 3,231.1 3,061.0
Pro forma stockholder's equity per share(2)(3).................
SELECTED DATA AND RATIOS
Lending spread as a percentage of average net finance
receivables.................................................. 9.22% 9.00% 8.69% 8.59% 8.25%
Earnings to fixed charges...................................... 1.56x 1.61x 1.57x 1.49x 1.37x
Total debt to equity........................................... 7.2:1 6.6:1 6.6:1 6.7:1 6.4:1
Total debt to tangible equity.................................. 9.9:1 9.6:1 10.1:1 11.1:1 11.2:1
Return on average assets(1).................................... 1.89% 1.85% 1.76% 1.66% 1.40%
Return on average equity(1).................................... 15.66 14.70 14.10 13.04 12.50
Return on average tangible equity(1)........................... 21.90 21.71 22.31 22.14 24.60
60+ days contractual delinquency............................... 1.71 1.35 1.43 1.85 2.56
Net credit losses to average net finance receivables........... 1.70 1.64 1.68 2.04 2.17
Allowance for losses to net finance receivables................ 3.20 3.15 3.15 3.14 3.00
Allowance for losses to net credit losses...................... 2.03x 2.09x 2.02x 1.63x 1.49x
Number of employees............................................ 16,647 15,318 13,933 12,430 11,142
Number of consumer and commercial branch offices
Domestic..................................................... 1,543 1,472 1,378 1,133 888
International................................................ 404 329 278 256 240
Total........................................................ 1,947 1,801 1,656 1,389 1,128
</TABLE>
- ---------------------
(1) In 1991, certain debt related to Ford's acquisition of the Company's
operation in Japan was converted to equity, and 1991 results therefore
include $39.2 million of non-recurring interest expense related to the
converted debt. If 1991 results treated the converted debt as equity and
excluded the related non-recurring interest expense consistent with
subsequent years, net earnings would have been $351.1 million and the return
on average assets, average equity and average tangible equity would have
been 1.58%, 12.29% and 21.56%, respectively.
(2) Based on shares to be outstanding after the Offerings. Excludes up to
shares and shares subject to over-allotment options granted by the
Company to the U.S. Underwriters and the International Underwriters,
respectively. See "Underwriting". If such options are exercised in full, pro
forma net earnings per share and pro forma stockholder's equity per share
would be $ and $ , respectively. Also excludes shares of Class A
Common Stock reserved for issuance pursuant to certain employee benefit
plans. See "Management -- Additional Material Employee Compensation Plans
and Agreements -- Long-Term Equity Compensation Plan".
(3) Due to the change in the Company's capital structure, historical share and
per share data will not be comparable to, or meaningful in the context of,
future periods. See "Capitalization".
(4) Includes current portion of long-term debt.
17
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is in the consumer and commercial finance business, providing
finance, leasing and related insurance products as well as other services. The
Company's revenues principally consist of income through finance charges and, to
a lesser extent, insurance premiums and investment income. The Company's primary
expenses are interest expense for the funding of its finance business, provision
for loan losses and operating expenses. A principal factor determining the
profitability of the Company is the Company's finance charge revenue less
interest expense ("lending spread").
The following discussion and analysis provides information that management
believes to be relevant to understanding the Company's supplemental combined
financial condition and results of operations. This discussion should be read in
conjunction with the supplemental combined financial statements of the Company
and the related notes thereto included in this Prospectus. The following
information gives effect to the Foreign Subsidiaries Recontribution. See "The
Company".
RESULTS OF OPERATIONS
SUMMARY RESULTS OF OPERATIONS
The following table summarizes the Company's net earnings and related data
(dollars in millions):
NET EARNINGS AND RELATED DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Net Earnings............................................... $723.1 $603.3 $494.0
Change in Net Earnings
Amount................................................... $119.8 $109.3 $ 83.9
Percent.................................................. 19.9% 22.1% 20.5%
Return
On average assets........................................ 1.89% 1.85% 1.76%
On average equity........................................ 15.66% 14.70% 14.10%
</TABLE>
The primary factors influencing the changes in net earnings are finance
charge revenue and interest expense, operating expenses and loan losses, all of
which are described below.
The Company derived approximately 13% of its net earnings in 1995 from the
Foreign Subsidiaries, principally in Japan. See Note 17 to the Company's
supplemental combined financial statements. Management believes that the overall
trends affecting the profitability of the Foreign Subsidiaries were generally
similar to the trends affecting the profitability of its analogous businesses in
the United States.
18
<PAGE> 23
FINANCE CHARGE REVENUE AND INTEREST EXPENSE
The Company's lending spread was as follows (dollars in millions):
LENDING SPREAD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------------------
1995 1994 1993
--------------------- --------------------- ---------------------
AMOUNT PERCENT(1) AMOUNT PERCENT(1) AMOUNT PERCENT(1)
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Finance Charge Revenue..... $5,560.8 15.15% $4,445.2 14.34% $3,709.7 14.09%
Interest Expense........... 2,177.9 6.62 1,657.3 6.03 1,421.7 5.98
-------- -------- --------
Lending Spread............. $3,382.9 9.22% $2,787.9 9.00% $2,288.0 8.69%
======== ======== ========
</TABLE>
- ---------------
(1) Finance charge revenue and lending spread are expressed as a percent of
average net finance receivables outstanding for the indicated period;
interest expense is expressed as a percent of average debt outstanding for
the indicated period.
Finance charge revenue increased in each of the years in both the Company's
domestic and international operations. The increase principally resulted from
growth in net finance receivables in each of the periods which caused
corresponding increases in the average net finance receivables outstanding
("ANR"). To a lesser extent, an increase in the composite finance charge yield
(finance charges as a percent of ANR) contributed to the increase in 1995 and
1994. However, in 1993, a decrease in the composite finance charge yield
partially offset the increase in finance charge revenue due to growth in ANR.
The components of the change in finance charge revenue attributable to net
receivable growth and changes in finance charge yields are set forth in the
following table (in millions):
COMPONENTS OF CHANGES IN FINANCE CHARGE REVENUE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1995 1994 1993
-------- ------ ------
<S> <C> <C> <C>
Change Due to:
Growth in receivables................................... $ 864.3 $668.1 $466.4
Finance charge yield.................................... 251.3 67.4 (87.4)
-------- ------ ------
Total................................................... $1,115.6 $735.5 $379.0
======== ====== ======
</TABLE>
For further discussion regarding growth in the Company's net finance
receivables, see "-- Financial Condition". The finance charge yields for each of
the Company's business segments were as follows:
FINANCE CHARGE YIELDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1995 1994 1993 1992
----- ----- ----- -----
<S> <C> <C> <C> <C>
Consumer Segment.................................. 17.42% 17.11% 16.85% 17.01%
Commercial Segment................................ 10.32 9.65 10.05 10.88
Total Company..................................... 15.15% 14.34% 14.09% 14.47%
</TABLE>
The principal factors which influence finance charge yields are (i) the
interest rate environment, (ii) the level of business competition and (iii) the
varying composition of the finance receivable portfolios (i.e., "product mix").
The consumer segment composite finance charge yield is principally influenced by
shifts in product mix between higher yielding unsecured finance products and
lower yielding secured finance products. Change in product mix was the principal
cause of the decrease in finance charge yield in 1993 and the increases in 1994
and 1995. The commercial
19
<PAGE> 24
segment composite finance charge yield is principally influenced by the level of
business competition and the interest rate environment and not by the mix of
secured and unsecured products since substantially all commercial finance
receivables are secured. The commercial segment experienced increased
competition from other lenders entering the commercial markets during the period
from 1992 to 1995, which caused the finance charge yields to decrease as a
result of competitive pricing. Changes in the prime lending rate over this
period introduced additional sensitivity in the composite finance charge yields
because commercial business pricing is substantially tied to the prime lending
rate. However, the Company's initiatives to increase pricing more than offset
the changes due to competition and the interest rate environment in 1995.
Total interest expense increased from 1993 through 1995. The increases were
principally due to higher average outstanding debt, primarily resulting from the
Company's growth in net finance receivables (see "-- Financial Condition") and,
to a lesser extent, an overall increase in the Company's borrowing rate
(interest expense divided by average outstanding debt). Interest expense and
average borrowing rates were as follows (dollars in millions):
INTEREST EXPENSE AND AVERAGE BORROWING RATES
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992
------------------------------- ------------------------------- ------------------------------- ---------
AVERAGE AVERAGE AVERAGE AVERAGE
INTEREST MIX OF BORROWING INTEREST MIX OF BORROWING INTEREST MIX OF BORROWING BORROWING
EXPENSE DEBT RATE EXPENSE DEBT RATE EXPENSE DEBT RATE RATE
-------- ------ --------- -------- ------ --------- -------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short-term
Debt........ -- 40.1 % 5.85% -- 41.4 % 4.27% -- 40.7 % 3.13% 3.76%
Long-term
Debt(1)..... -- 59.9 7.13 -- 58.6 7.27 -- 59.3 7.94 8.69
----- ----- -----
Total Debt.... $2,177.9 100.0 % 6.62% $1,657.3 100.0 % 6.03% $1,421.7 100.0 % 5.98% 6.60%
======== ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) Includes the current portion of long-term debt.
The increases in the short-term average borrowing rate from 1993 to 1995,
which principally relate to commercial paper issued by the Company, generally
reflect the overall market increases in short-term interest rates over the
three-year period. The concurrent decreases in the long-term average borrowing
rates are the result of decreases in long-term market rates and the refinancing
of maturing debt at the prevailing lower rates. The mix of debt (i.e.,
short-term versus long-term) is determined by the interest rate and maturity mix
of the finance receivables. The Company seeks to match fund its total finance
receivables in each of the countries in which it does business through the
issuance of debt denominated in local currencies with maturity and interest rate
characteristics that reasonably match the characteristics of its composite
portfolio. Interest rate risk is measured and controlled through the use of two
different techniques: (i) static gap analysis and (ii) financial forecasting.
See "-- Liquidity and Capital Resources".
20
<PAGE> 25
For purposes of measuring business segment profitability, the Company
generally allocates the interest expense incurred to the business segments based
on ANR. Management believes that analysis of the principal components of changes
in interest expense is only meaningful on a total Company basis. The change in
interest expense attributable to growth in average outstanding debt and changes
in average borrowing rates are set forth in the following table (in millions):
COMPONENTS OF CHANGES IN INTEREST EXPENSE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Change Due to:
Growth in debt...................................... $358.4 $223.7 $ 196.6
Borrowing rate...................................... 162.2 11.9 (127.0)
------ ------ -------
Total............................................... $520.6 $235.6 $ 69.6
====== ====== =======
</TABLE>
As a result of the forgoing changes in finance charge revenue and interest
expense, the Company's lending spreads increased in each of the three years
ended December 31, 1995, 1994 and 1993, respectively.
INSURANCE PREMIUM REVENUE
Insurance premium revenue was $370.6 million, $329.0 million and $270.9
million for the years ended December 31, 1995, 1994 and 1993, respectively.
Insurance premium revenue, which is earned over the coverage term, increased
$41.6 million (12.6%) in 1995, $58.1 million (21.4%) in 1994, and $20.7 million
(8.3%) in 1993. The insurance operation is engaged in underwriting credit-
related and other specialized insurance products for customers of the consumer
and commercial finance businesses. See "Business -- Related Insurance".
Therefore, insurance sales, and resulting revenue, are largely dependent on the
business activities and volumes of the consumer and commercial finance
businesses. The increase in insurance revenue in each of the years was
principally caused by increased sales of insurance products associated with the
increase in net finance receivables outstanding. For a summary of premium
revenue generated by general product grouping, see "Business -- Related
Insurance".
INVESTMENT AND OTHER REVENUE
Investment and other revenue for the years ended December 31, 1995, 1994
and 1993 was $175.8 million, $151.6 million and $134.2 million, respectively.
Investment income is derived from investments in marketable securities which are
principally owned by the Company's insurance operation. Other revenue is
primarily derived from the Company's fee-based financial services (i.e.,
relocation services and auto club and roadside assistance services). In each of
the years 1995, 1994 and 1993, the year-over-year increase in investment and
other revenue principally resulted from increases in the Company's investments
in marketable securities and related returns and, to a lesser extent, an
increase in other revenue related to the growth in the fee-based businesses.
21
<PAGE> 26
OPERATING EXPENSES
Operating expenses, which do not include interest expense were as follows
(dollars in millions):
OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------------
1995 1994 1993
------------------ ------------------ ------------------
AMOUNT % ANR AMOUNT % ANR AMOUNT % ANR
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Salaries and Benefits............. $ 807.7 2.20% $ 700.8 2.26% $ 622.3 2.36%
Occupancy, Data Processing, and
Other........................... 947.0 2.58 755.3 2.44 594.5 2.26
-------- ---- -------- ---- -------- ----
Total............................. $1,754.7 4.78% $1,456.1 4.70% $1,216.8 4.62%
======== ===== ======== ===== ======== =====
Efficiency Ratio.................. 46.34% 46.66% 47.27%
===== ===== =====
</TABLE>
Total operating expenses increased from 1993 to 1995, principally due to
higher levels of business volume and outstanding receivables in each of the
years. The increases in salaries and benefits is primarily due to increases in
the number of employees to support the higher business volume and outstanding
receivables. As a percentage of ANR, salaries and benefits decreased in each of
the years. This decrease reflects continued reductions in the proportion of
employee labor required to support the higher business volumes and outstanding
net receivables and results from improved operating efficiency. In addition, the
Company has achieved improved operating efficiency through focused initiatives
it has undertaken over the last three years, such as electronic credit
applications, centralized payment processing and automated loan documentation.
The principal cause for the increases in occupancy, data processing and other
expenses was growth in the number of business locations, the aforementioned
increase in employees and the cost to implement its efficiency improvement
initiatives. The increases in the percentage of these expenses to ANR were
primarily due to the Company's investments in certain start-up expenses to
expand the number of locations, fund and implement its efficiency initiatives,
and support its increased number of employees, which are in part incurred in
advance of generating expected incremental finance receivables outstanding. As a
result of such investments, the Company's total operating efficiency, as
measured by the ratio of total operating expenses to revenues net of interest
expense and insurance benefits paid or provided ("Efficiency Ratio") improved
from 1993 through 1995.
ALLOWANCE FOR LOSSES, LOSSES AND ASSET QUALITY
The Company maintains an allowance for losses on finance receivables at an
amount which it believes is sufficient to provide adequate protection against
losses in its portfolios. The allowance is determined principally on the basis
of historical loss experience and reflects management's judgment of additional
loss potential considering future economic conditions and the nature and
characteristics of the underlying finance receivables. For purposes of measuring
business segment profitability, each business segment establishes an allowance
for loan loss when a loan is made with a corresponding charge to the provision
for losses. The Company manages its allowance for losses on finance receivables
on a Company-wide basis taking into account actual and expected losses in each
business segment and the relationship of the allowance to net finance
receivables and total net credit losses; the resulting charge is included in the
provision for losses.
22
<PAGE> 27
The components of the changes in the aggregate allowance for losses on
finance receivables during the periods indicated were as follows (dollars in
millions):
COMPONENTS OF CHANGES IN THE ALLOWANCE FOR LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Balance at Beginning of Period............................. $1,061.6 $ 892.3 $ 764.7
Provision for losses..................................... 834.0 647.1 536.1
Losses, net of recoveries................................ (624.2) (508.6) (441.2)
Reserves of acquired businesses and other................ (2.8) 30.8 32.7
-------- -------- -------
Balance at End of Period................................... $1,268.6 $1,061.6 $ 892.3
======== ======== =======
Allowance for Losses to Net Finance Receivables............ 3.20% 3.15% 3.15%
Allowance for Losses to Net Credit Losses.................. 2.03x 2.09x 2.02x
</TABLE>
The provision for losses is principally influenced by growth in net finance
receivables and, to a lesser extent, net credit loss experience. Additions to
the allowance are charged to the provision for losses. Losses are charged to the
allowance as incurred and recoveries on losses previously charged to the
allowance are credited to the allowance at the time the recovery is collected.
The provision for losses increased in each of the years 1995, 1994 and 1993
primarily as a result of growth in finance receivables. The components of the
changes in the provision for losses in each of the years ended 1995, 1994 and
1993 are as follows (in millions):
COMPONENTS OF CHANGES IN PROVISION FOR LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Change Due to
Growth in receivables....................................... $ 184.6 $ 155.6 $ 94.9
Net loss experience......................................... 2.3 (44.6) (127.4)
------- ------- --------
Total....................................................... $ 186.9 $ 111.0 $ (32.5)
======= ======= ========
</TABLE>
For further discussion regarding growth in net finance receivables, see
"-- Financial Condition". Net loss experience improved year-over-year in 1994
and 1993, with the improved loss experience in 1993 more than offsetting the
increase in the provision resulting from growth. Loss experience increased
moderately in 1995 in substantially all of the Company's portfolios as reflected
in the following table (dollars in millions):
CONTRACTUAL DELINQUENCY AND NET CREDIT LOSSES
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
---------------------------------------
1995 1994 1993 1992
------ ------ ------ ------
<S> <C> <C> <C> <C>
60+Days Contractual Delinquency
Consumer........................................... 2.19% 1.80% 1.81% 2.25%
Commercial......................................... 0.64 0.28 0.52 0.82
Total...................................... 1.71% 1.35% 1.43% 1.85%
Total dollars delinquent................... $755.4 $510.3 $454.6 $506.2
Net Credit Losses to ANR
Consumer........................................... 2.35% 2.30% 2.24% 2.62%
Commercial......................................... 0.19 0.09 0.29 0.63
Total...................................... 1.70% 1.64% 1.68% 2.04%
Total dollars.............................. $624.2 $508.6 $441.2 $470.5
</TABLE>
CONTRACTUAL DELINQUENCY and NET CREDIT LOSSES improved, on a ratio basis,
across all portfolios domestically and internationally from 1992, approaching
historical lows in 1994, reflecting similar
23
<PAGE> 28
trends in overall economic conditions. These trends reversed across all
portfolios in 1995, principally as a result of generally less favorable trends
in economic conditions. The relationship of the allowance for losses to net
finance receivables at December 31, 1995 increased from 1994, reflecting
management's opinion that delinquency and net credit losses will continue to
increase in 1996. See "Business -- Additional Information Regarding the
Company -- Loan Loss Reserves and Credit Losses". Management believes the
allowance for losses at December 31, 1995 is sufficient to provide adequate
protection against losses in its portfolios.
INSURANCE BENEFITS PAID OR PROVIDED
Insurance benefits paid or provided were $142.5 million in 1995, $147.9
million in 1994 and $118.9 million in 1993. Benefits paid or provided are
influenced by the amount of insurance in force, underwriting standards, loss
experience, term of coverage and product mix. Benefits paid or provided
increased in 1994 compared to 1993 primarily as a result of more insurance in
force. For 1995, benefits paid or provided decreased when compared to 1994
primarily as a result of favorable loss experience. See "Business -- Related
Insurance" for a description of the Company's insurance activities.
PROVISION FOR INCOME TAXES
The Company's provision for income taxes and effective tax rates were as
follows (dollars in millions):
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------
1995 1994 1993
-------------------- -------------------- --------------------
EFFECTIVE EFFECTIVE EFFECTIVE
AMOUNT TAX RATE AMOUNT TAX RATE AMOUNT TAX RATE
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. Statutory Rate................. $ 419.4 35.0% $ 356.1 35.0% $ 287.5 35.0%
State income taxes................ 14.0 1.2 20.5 2.0 13.3 1.6
Non-deductible goodwill........... 10.9 0.9 11.7 1.2 13.5 1.6
Foreign rates in excess of U.S.
rate and other................. 30.7 2.5 25.8 2.5 13.0 1.7
------- ---- ------- ---- ------- ----
Provision for Income Taxes.......... $ 475.0 39.6% $ 414.1 40.7% $ 327.3 39.9%
======= ==== ======= ==== ======= ====
</TABLE>
The Company provides for income taxes on its foreign earnings at the
statutory tax rate in effect for the applicable country where such earnings
arise. The principal foreign earnings of the Company arise from its operation in
Japan, where the statutory tax rate is significantly higher than the U.S.
statutory tax rate.
The state income tax provision, and impact on the Company's effective tax
rate, increased from 1993 to 1994 due to changes in the Company's state
tax-sharing arrangement with Ford, which generally had the effect of increasing
the amount of taxable income in certain states in which the Company does
business. The provision and resulting impact on effective tax rate decreased
from 1994 to 1995 principally due to a one-time benefit provided to the Company
by Ford under its state tax-sharing agreement. Had the Company not received such
benefit, the 1995 provision and resulting impact on the effective rate would
have been substantially the same as that in 1994.
A substantial portion of the Company's total goodwill is related to, and
has been recorded by, its operation in Japan. The decrease in the tax provision
and the related impact on the effective tax rate for each year results from
changes in the Company's estimate of the amount of such goodwill that will
ultimately be tax deductible in Japan.
24
<PAGE> 29
The increase in the provision resulting from foreign rates in excess of the
U.S. statutory rate and other, in each of the years, was principally due to
increases in Japanese earnings, on a percentage basis relative to total
earnings, which are subject to a higher tax rate than the U.S. rate.
NET EARNINGS
Net earnings of the Company for the years ended December 31, 1995, 1994 and
1993 increased $119.8 million (19.9%), $109.3 million (22.1%) and $83.9 million
(20.5%), respectively. The profitability of the Company, as measured by returns
on average assets and average equity, also increased.
FINANCIAL CONDITION
GROWTH IN NET FINANCE RECEIVABLES
The Company experienced growth in its consumer and commercial finance
receivable portfolios in 1995 and 1994 as follows (dollars in millions):
GROWTH IN NET FINANCE RECEIVABLES
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
--------------------------------------------------------------
1995 1994
----------------------------- -----------------------------
INCREASE FROM INCREASE FROM
PRIOR YEAR PRIOR YEAR
---------------- ----------------
BALANCE AMOUNT % BALANCE AMOUNT %
--------- -------- ---- --------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Consumer Finance................. $27,575.3 $3,947.5 16.7% $23,627.8 $3,715.4 18.7%
Commercial Finance............... 12,127.2 2,069.3 20.6 10,057.9 1,675.6 20.0
--------- -------- --------- --------
Total.................. $39,702.5 $6,016.8 17.9% $33,685.7 $5,391.0 19.1%
========= ======== ========= ========
</TABLE>
The growth in net finance receivables, in both the consumer and commercial
finance segments, during 1994 and 1995, was principally due to expansion through
the addition of 145 branches in 1994 and 146 branches in 1995, as well as
increased penetration of existing markets through expanded lines of business,
new products, acquisitions and other activities.
DEBT
Outstanding debt was $35.1 billion, $29.7 billion, and $25.2 billion at
December 31, 1995, 1994, and 1993, respectively. Such amounts of debt reflect
net increases of $5.4 billion (18.1%) in 1995 and $4.5 billion (17.9%) in 1994.
In both years, the increase was primarily a result of the growth in net finance
receivables. Debt is the primary source of funding to support the Company's
growth in net finance receivables. At December 31, 1995 and 1994, short-term
debt as a percent of total debt was 48% and 50%, respectively. Short-term debt
for these purposes includes the current portion of long-term debt.
Total debt to equity (the ratio of interest-bearing debt net of short-term
investments to total stockholder's equity) at December 31, 1995 and 1994 was
7.2:1 and 6.6:1, respectively. The increase was primarily due to a special,
one-time return of capital made by the Company's operation located in Japan, to
a Ford subsidiary, in the amount of $228.9 million in September 1995. Without
the repatriation of capital by the operation in Japan, the December 31, 1995
total debt to equity would have been approximately 6.9:1.
STOCKHOLDER'S EQUITY
Stockholder's equity increased to $4.8 billion in 1995 from $4.4 billion in
1994. The primary cause for this increase was the amount of net earnings from
the Company's operations in the amount of $723.1 million in 1995 and $603.3
million in 1994. In 1995 and 1994, the Company paid dividends to Ford of $318.0
million and $288.1 million, respectively. The Company received capital
25
<PAGE> 30
contributions from Ford in 1995 and 1994 of $200.0 million and $215.1 million,
respectively. Also in 1995, the Company made a one-time return of capital from
its operation in Japan to Ford in the amount of $228.9 million. A portion of the
Company's assets, liabilities and earnings are denominated in foreign
currencies. The Company records the financial impact of translating these
balances for financial accounting purposes as unrealized translation gains and
losses directly to equity. The balance of unrealized translation gains and
losses at December 31, 1995 and 1994 was $330.6 million and $372.3 million,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Through its asset and liability management function, the Company maintains
a disciplined approach to the management of liquidity, capital, interest rate
risk and foreign exchange risk. The Company has a formal process for managing
its liquidity in the U.S. and internationally to ensure that funds are available
at all times to meet the Company's commitments.
The Company's principal sources of cash are proceeds from the issuance of
short-term and long-term debt and cash provided from the Company's operations.
In the past, Ford has made periodic capital contributions to the Company. As a
result of Ford's decreased ownership interest in the Company, Ford may not be
willing to make capital contributions to the Company in the future. See "Risk
Factors -- Limitations upon Liquidity and Capital Raising -- Potential
constraints upon ability to raise capital and fund operations". Nevertheless,
the Company believes that it has available sufficient liquidity, from a
combination of cash provided from operations and external borrowings, to support
its operations.
A principal strength of the Company is its ability to access the global
debt markets in a cost-efficient manner. Continued access to the public and
private debt markets is critical to the Company's ability to continue to fund
its operations. The Company seeks to maintain a conservative liquidity position
and actively manage its liability and capital levels, debt maturities,
diversification of funding sources and asset liquidity to ensure that the
Company is able to meet its obligations. The Company's U.S. operations are
principally funded through domestic borrowings made by ACONA and, to a much
lesser extent, directly by the Company. The Company's Foreign Subsidiaries are
principally financed through private debt borrowings made directly by the
particular foreign entity in the local currency and, to a lesser extent, fully
hedged intercompany borrowings.
At December 31, 1995, the Company had short-term debt outstanding of $13.7
billion. Short-term debt principally consists of commercial paper issued by
ACONA and represents the Company's primary source of short-term liquidity.
Commercial paper is issued with maturities ranging from 1 to 270 days. The
average interest rate on short-term debt in 1995 and 1994 was 5.85% and 4.27%,
respectively. The change in average rates was principally due to the overall
changes in market rates during such years.
At December 31, 1995, the Company had long-term debt outstanding of $21.4
billion. Long-term debt principally consists of unsecured long-term debt issued
publicly and privately by ACONA in the United States and abroad, and to a lesser
extent, private borrowings made by the Company's foreign subsidiaries. During
the years ended 1995 and 1994 the Company raised debt aggregating $6.3 billion
and $4.8 billion, respectively, through public and private offerings at weighted
average effective interest rates and weighted average terms of 6.59% and 5.7
years and 6.94% and 4.7 years, respectively. The change in effective average
interest rates was primarily caused by overall changes in market rates during
such years. A portion of the long-term debt raised was used to retire
outstanding indebtedness. For the years ended 1995 and 1994, the Company
replaced maturing long-term debt in the amount of $2.5 billion and $2.4 billion,
respectively.
Interest rate risk management is measured and controlled through the use of
two different techniques: static gap analysis and financial forecasting, both of
which incorporate assumptions as to future events. The Company's GAP POSITION is
defined as the sum of floating rate asset balances and principal payments on
fixed rate assets, less the sum of floating rate liability balances and fixed
26
<PAGE> 31
rate liability maturities. The Company measures its gap position at various time
horizons, ranging from three months to five years. The Company seeks to maintain
a positive one-year gap position within a range of 15% of total earning assets,
although the one-year gap position is not necessarily illustrative of the gap
position at shorter or longer time horizons. The Company's three-, six- and
twelve-month gap positions at December 31, 1995 were -2.8%, 1.4% and 9.2%,
respectively. A positive gap position at one year indicates that a greater
percentage of assets than liabilities reprice within a one-year time frame.
Generally, the combination of a positive gap position and a rising rate
environment will result in assets repricing to higher rates more quickly than
liabilities, thereby producing wider lending spreads over a given time frame.
Conversely, the combination of a positive gap and a falling rate environment
will generally result in narrowing lending spreads over a given time frame. The
Company believes that its portfolio has repricing characteristics that mitigate
the impact of rate movements over both the short- and long-term. In addition to
the gap analysis, the Company uses financial forecasting to evaluate the impact
on earnings under a variety of scenarios that may incorporate changes in the
absolute level of interest rates, the shape of the yield curve, prepayments,
interest rate spread relationships and changes in the volumes and rates of
various asset and liability categories.
Management believes that the Company has limited exposure to exchange rate
risk related to its foreign operations. At December 31, 1995, the Company had
$55.7 million of outstanding hedged borrowings with its foreign operations. For
the year ended December 31, 1995, approximately 10% of the Company's revenues
and 10% of its net earnings were derived from its operation in Japan. In recent
years, the value of the Japanese yen has appreciated sharply against the U.S.
dollar. Appreciation had a positive impact upon the contribution of AIC to the
Company's revenues and net earnings expressed in U.S. dollars. Any appreciation
of the U.S. dollar against the Japanese yen would adversely affect AIC's
contribution measured in U.S. dollars. The Company has also entered into various
support agreements on behalf of certain non-U.S. subsidiaries, including AIC.
Under these support agreements, the Company has either guaranteed specific
issues of such subsidiaries' debt denominated in foreign currency or agreed to
supervise operations in a responsible manner and to provide additional support
on a lender's reasonable request. See Notes 6, 7 and 15 to the Company's
supplemental combined financial statements for a further description of the
Company's borrowings and currency hedging activities.
Substantial additional liquidity is available to the Company's domestic
operations through established credit facilities in support of its net
short-term borrowings. Such credit facilities provide a means of refinancing its
maturing short-term obligations as needed. At December 31, 1995, short-term bank
lines, revolving credit facilities and receivable purchase facilities totaled
$10.3 billion, none of which was in use at that date. These facilities
represented 77% of domestic net short-term indebtedness outstanding at December
31, 1995.
Additionally, the Company believes it has access to other sources of
liquidity, which to date it has not accessed, including, among others, the
securitization or sale of its assets and issuance of alternative forms of
capital, including preferred stock.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation", ("SFAS
No. 123") effective in 1996. Although the Company has not yet determined how it
will apply this new pronouncement, under any scenario, the Company has not
determined whether it will adopt the fair value-based method prescribed by SFAS
No. 123 or use the accounting prescribed by APB No. 25, "Accounting for Stock
Issued to Employees". In any event, the effect is not expected to be significant
to the Company's results of operations or financial condition.
27
<PAGE> 32
BUSINESS
OVERVIEW
The Company is a leading, diversified consumer and commercial finance
organization which provides finance, leasing and related services to
approximately 9.5 million individual consumers and 143,000 businesses in the
United States and internationally. At or for the year ended December 31, 1995,
the Company had aggregate net finance receivables of $39.7 billion, total assets
of $41.3 billion, net earnings of $723.1 million and stockholder's equity of
$4.8 billion. The Company believes that it is the second largest independent
finance company in the United States based on aggregate net finance receivables
outstanding. The Company's operations outside the United States are conducted
principally in Japan ($2.1 billion of net finance receivables) and are also
conducted in, among other places, the United Kingdom and Canada.
As the following graph depicts, over the last five years after-tax earnings
have grown at a compound annual rate in excess of 19% to $723.1 million and
return on average equity has grown to 15.66% for the year ended December 31,
1995. Such growth resulted principally from internal expansion (through, among
other things, branch openings, new lines of business and geographic expansion)
as well as selective acquisitions.
AFTER-TAX EARNINGS AND RETURN ON AVERAGE EQUITY
(DOLLARS IN MILLIONS)
- --------------- [GRAPH]
(1) In order to present 1991 return on average equity and after-tax earnings on
a basis consistent with subsequent years, certain debt related to Ford's
acquisition of the Company's operation in Japan which was converted to
equity during 1991 has been treated as if it were converted as of December
31, 1990 and the related 1991 non-recurring interest expense of $39.2
million has been excluded. If this debt had not been so treated and the
related non-recurring interest expense included, return on average equity
would have been 12.50% and after-tax net earnings would have been $311.9
million.
28
<PAGE> 33
The Company divides its diverse activities into consumer finance and
commercial finance. The Company's consumer finance operations consist of a
variety of specialized consumer financing products and services, including home
equity lending, personal lending, retail sales financing and credit cards. The
Company's commercial operations primarily provide retail financing, leasing and
wholesale financing for heavy-duty and medium-duty trucks and truck trailers,
construction, material handling and other industrial equipment and manufactured
housing.
The business of the Company and its products are depicted in the following
chart:
[GRAPH]
29
<PAGE> 34
As shown in the table below, the Company has expanded its business over the
last five years, both through internal growth and selective acquisitions. The
table sets forth data for the respective periods (dollars in millions):
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
-------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Consumer Net Finance
Receivables....................... $27,575.3 $23,627.8 $19,912.4 $17,412.7 $15,275.9
Commercial Net Finance
Receivables....................... 12,127.2 10,057.9 8,382.3 6,958.3 6,396.9
--------- --------- --------- --------- ---------
Total Receivables................... $39,702.5 $33,685.7 $28,294.7 $24,371.0 $21,672.8
========= ========= ========= ========= =========
Composition of Receivables Growth
Internal(1)....................... $ 5,717.9 $ 4,878.7 $ 2,885.7 $ 1,685.8 $ 3,537.8(2)
Acquisitions...................... 298.9 512.3 1,038.0 1,012.4 1,834.2
--------- --------- --------- --------- ---------
Total Growth........................ $ 6,016.8 $ 5,391.0 $ 3,923.7 $ 2,698.2 $ 5,372.0
========= ========= ========= ========= =========
Percent of Growth from
Acquisitions...................... 5.0% 9.5% 26.5% 37.5% 34.1%
</TABLE>
- ---------------
(1) Internal growth includes receivables generated by acquired businesses from
the date of acquisition.
(2) Includes $2.5 billion of receivables from the transfer of Ford Consumer
Finance Company, Inc. from Ford to the Company.
Internal expansion has resulted from, among other things, branch openings,
new lines of business and geographic expansion. The Company actively pursues
attractive acquisition opportunities, and, over the past five years,
acquisitions have represented a significant percentage of the Company's net
receivables growth in any particular year. There can be no assurance, however,
that such acquisition opportunities will continue to be available to the Company
in the future. Set forth below is certain information concerning several of the
Company's more significant acquisitions from 1991 through 1995 (in millions):
<TABLE>
<CAPTION>
NET FINANCE
RECEIVABLES
ACQUISITION ACQUIRED DESCRIPTION
- ----------------------------------- ----------- ---------------------------------------------
<S> <C> <C>
LCA (1995)......................... $ 247 Commercial leasing receivables, principally
related to machine tool finance
Amoco (1994)....................... 452 Private label credit card receivables
Mack Financial (1993).............. 626 The assets of the financing division of Mack
Trucks Inc., consisting of commercial
finance receivables, principally secured by
heavy-duty trucks and truck trailers
Allied Finance (1993).............. 146 Consumer finance branch office franchise
operating principally in Texas
First Family Financial (1992)...... 546 Consumer finance branch office franchise
operating principally in the Southeastern
United States
Signal Finance (1992).............. 294 Consumer finance receivables and branch
offices
Chase Manhattan Leasing (formerly
Clark Equipment Credit) (1991)... 800 Equipment finance business operating in the
United States and Canada
Kentucky Finance (1991)............ 270 Consumer finance branch office franchise
operating principally in Kentucky
</TABLE>
30
<PAGE> 35
STRATEGY
The Company believes that its consistent growth in profits has resulted
from the balanced pursuit of asset and revenue growth and risk and expense
control. The Company attempts to increase its net finance receivables by
emphasizing customer service and convenient product delivery and expanding its
relationships with existing customers. The Company also seeks to develop
products and services for new markets believed to have strong profit potential.
OPERATING DISCIPLINES. The Company believes that the following operating
disciplines have been key to its success: (i) focusing employees on growth and
profitability through incentives, (ii) maintaining strict credit underwriting
standards and collection policies to reduce losses, (iii) controlling operating
expenses and (iv) sourcing funds on a cost effective basis. The Company believes
that adherence to these disciplines has created a receivables portfolio that is
diversified by market, geography, customer, maturity and product. As a result,
the Company believes that it has been able to reduce its exposure to adverse
economic developments in any particular market or region. The Company has also
developed flexible branch and centralized delivery systems that it believes
allow it to best serve the diversified nature of its business activities and
customer base.
Employee Focus. The Company recognizes and rewards employee performance at
all levels of the organization. Performance measures are tailored to the
specific objectives of each business unit. Individual rewards for meeting
specific pre-set targets represent a meaningful portion of an employee's
compensation package. For example, in certain branches the Company provides
incentives to branch employees enabling the employees to earn bonuses when the
branches meet established performance objectives. Performance objectives include
measures of sales, service, collections and profitability.
Credit Quality. To maintain profit margins and minimize risk, the Company
employs various credit analysis techniques, including proprietary credit and
BEHAVIORAL SCORING SYSTEMS to price loans according to risk. The Company places
significant emphasis on proper assessment of customer credit profiles as well as
maintaining appropriate loss reserves. While approaches for CREDIT SCORING,
reserving and portfolio monitoring are developed at the corporate level, the
Company believes that both delinquencies and credit losses have been reduced
through close contact with its customers and early attention to problem
situations.
Expense Control. The Company seeks to control operational expenses at every
level. For example, the Company has invested in technology and other systems
designed to improve the level of service provided to customers as well as
centralize those functions that can be administered more prudently and
efficiently on a Company-wide basis.
Funds and Capital. The Company seeks to source funds on a cost effective
basis by maintaining strong credit ratings and a conservative capital structure,
accessing selected global markets and managing asset/liability and interest rate
exposures. The current long-term credit ratings of ACONA are Aa3 and AA- as
determined by Moody's and Standard & Poor's, respectively. Those for the Company
are A1 and A+, respectively. ACONA's commercial paper ratings are P-1 and A-1+
from Moody's and Standard & Poor's, respectively, the highest ratings available
for commercial paper.
BUSINESS OBJECTIVE. The Company's business objective is to continue to
achieve consistent profitable growth based upon the foregoing operating
disciplines, regardless of market conditions and interest rate environments. The
Company believes this objective can be met by the following strategies:
Expanding Existing Businesses. The Company seeks to generate growth from
its current businesses by expanding its relationships with customers, increasing
its number of branches and developing new products. The Company also seeks to
enhance profitability through productivity improvements, including investments
in proven technology. The Company strives to establish additional customer
relationships and arrangements with third parties, such as major oil companies
31
<PAGE> 36
(private label credit cards) and selected manufacturers (financing for material
handling equipment), to provide financing services that enhance the distribution
of their products.
Identifying New Markets. The Company also seeks to achieve profitable
domestic and international growth by developing delivery systems and marketing
strategies that target niche markets and customer segments with strong profit
potential. In recent years, for example, the Company has begun to focus on
sourcing home improvement loans and providing financing and leasing for
medium-duty trucks. See "-- Consumer Finance" and "-- Commercial Finance".
Building Customer Relationships. Through its multiple distribution systems,
the Company seeks to design marketing strategies and servicing standards not
only to identify new customers and originate initial loans but also to retain
existing customers. The Company believes that this strategy has enabled it to
generate repeat loans and migrate existing customers to other finance products.
In its consumer branch delivery systems, the Company seeks to migrate existing
finance customers toward home equity loans by employing analytical tools to
identify those customers who have good payment and credit histories and who may
desire additional credit. Home equity loans typically have higher balances and
lower levels of risk to the Company. The Company's commercial finance businesses
are structured so that the Company's sales representatives and managers maintain
ongoing close contact with dealers and manufacturers (the primary "customers" in
the truck finance and equipment finance arena) as well as product purchasers.
Selective Acquisitions. Although the Company does not rely on acquisitions
for growth, management seeks to continue to pursue opportunistic acquisitions
which meet Company growth and profitability standards. Historically, strategic
acquisitions have, in both the U.S. and international markets, leveraged
operating costs, increased market share, introduced new product lines, enhanced
profitability and fueled growth. Management believes that its disciplined,
financial and operational approach to acquisitions has enabled the Company to
develop the skills required to successfully acquire and integrate acquisitions
into its operations.
DISTINCTIVE CULTURE AND EXPERIENCED MANAGEMENT. Management believes that
employees' commitment to a distinct culture and set of core values distinguishes
the Company from its competitors. Core values include: (i) working hard to
exceed customers' expectations, (ii) taking pride in each employee's work and in
the Company, (iii) conducting business with integrity and trust, (iv) responding
quickly to customer needs, (v) mutual respect and recognition of excellent
performance, (vi) the importance of constant improvement by each employee, (vii)
the belief that intensity and competition fuel success and (viii) the belief in
being a good corporate neighbor. The Company believes its strong, experienced
management team has developed a disciplined operating philosophy and has
implemented a distinct business strategy in each of the Company's diverse
business units. The Company seeks to reinforce such culture and core values to
all employees through extensive training, incentive programs and operating
controls at every level. The Company believes that maintaining its distinct
culture, core values and strong management will continue to be a key element of
the Company's strategy.
CONSUMER FINANCE
GENERAL
The Company's consumer finance business consists of a variety of consumer
financing services and a credit card business. The Company distributes its
consumer finance products through multiple delivery systems, which include (i)
over 1,800 domestic and international consumer branch offices, (ii) a
centralized lending operation principally for third party sourced home equity
loans and (iii) centralized credit card operations. Home equity loans account
for the largest portion of the Company's consumer finance portfolio, and are
distributed through branch delivery systems and a centralized lending operation.
The Company also offers personal installment loans and purchases consumer retail
sales finance contracts through various domestic and international branch
delivery systems. In addition, the Company provides revolving credit financing
through its
32
<PAGE> 37
credit card business, which consists of issuing VISA and MasterCard bankcards
and private label credit cards. The Company, through certain subsidiaries and
others, also makes available various credit-related and non-credit-related
insurance products to its consumer finance customers, including CREDIT LIFE,
CREDIT ACCIDENT AND HEALTH, ACCIDENTAL DEATH AND DISMEMBERMENT, INVOLUNTARY
UNEMPLOYMENT and PERSONAL PROPERTY INSURANCE. See "-- Related Insurance".
The Company's consumer finance customers span a wide range of income
levels, age groups and credit histories. These customers generally have a
history of using credit from a variety of sources and include homeowners,
purchasers of consumer durables (such as furniture, electronics and appliances)
and college students. Customer credit factors generally include, among other
things, job stability, length of time at residence and, in many cases, home
ownership. With respect to its branch delivery system, the Company believes that
an important characteristic is the personal relationships developed between the
branch employee and its customers.
The following table shows net finance receivables outstanding and the
annual growth rates attributable to the various types of consumer financing
products (dollars in millions):
CONSUMER NET FINANCE RECEIVABLES OUTSTANDING
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------------- -------------------- -------------------- -------------------- --------------------
NET ANNUAL NET ANNUAL NET ANNUAL NET ANNUAL NET ANNUAL
RECEIVABLES GROWTH RECEIVABLES GROWTH RECEIVABLES GROWTH RECEIVABLES GROWTH RECEIVABLES GROWTH
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Home Equity
Lending....... $ 14,386.2 16.5% $ 12,349.9 16.3% $ 10,619.7 10.3% $ 9,624.8 16.8% $ 8,238.1 16.3%
Personal
Lending/Sales
Finance....... 6,117.6 15.8 5,284.5 21.4 4,354.2 19.4 3,646.9 13.0 3,226.3 16.7
Credit Card..... 4,818.6 23.1 3,915.3 26.1 3,104.8 18.7 2,614.6 (2.0) 2,668.4 3.2
Manufactured
Housing(1).... 2,034.1 21.9 1,669.2 29.4 1,290.2 31.1 983.9 41.1 697.2 34.6
Accruals and
Other......... 218.8 408.9 543.5 542.5 445.9
---------- ---------- ---------- ---------- ----------
Total
Consumer...... $ 27,575.3 16.7% $ 23,627.8 18.7% $ 19,912.4 14.4% $ 17,412.7 14.0% $ 15,275.9 17.1%
========== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) Except as otherwise indicated, the dollar amount of manufactured housing
receivables is included in the dollar amount of total consumer net finance
receivables throughout this Prospectus, because the credit and related risks
of the manufactured housing business are similar to those of the Company's
consumer finance business. Manufactured housing receivables are included
with consumer net finance receivables in determining the percentage of total
net finance receivables which are consumer net finance receivables. However,
manufactured housing operations are discussed in this Prospectus as part of
the Company's commercial activities because the marketing and management of
manufactured housing products are more closely related to commercial finance
products. See "-- Commercial Finance".
At December 31, 1995, the finance charge yield on all types of consumer net
finance receivables averaged approximately 18% per annum. Variable rates were
charged on 39% of the consumer net finance receivables outstanding at such date.
State laws often establish maximum allowable finance charges for certain
consumer loans; approximately 92% of the outstanding consumer net finance
receivables were either not subject to such state maximums, or if subject, such
maximum finance charges did not, in most cases, materially restrict the interest
rates charged. See "-- Additional Information Regarding the
Company -- Regulation".
HOME EQUITY LENDING, PERSONAL LENDING AND RETAIL SALES FINANCE
OVERVIEW. Home equity loans account for the largest share (52%) of the
Company's consumer finance portfolio and are distributed through its U.S. and
international branch delivery systems and a centralized lending operation. The
Company offers personal installment loans and purchases retail sales finance
contracts from retailers through its various domestic and international branch
delivery systems.
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<PAGE> 38
The Company's consumer finance branch system traces its roots to 1918 in
South Bend, Indiana. Throughout the Company's history, its branch delivery
system has been at the core of its success. The Company believes its branch
delivery system is the largest consumer finance branch system in the United
States and has been a key factor in the growth and profitability of its consumer
finance business. In the United States, the Company has in excess of 1,400
branch offices in 44 states and serves approximately 2.7 million customers.
Internationally the Company operates principally in Japan, with 294 branches
serving approximately 371,000 customers. The Company also operates branch
systems in the United Kingdom (64 branches) and Puerto Rico (34 branches) and
recently commenced consumer finance operations in Canada and Mexico.
In the late 1980's, to maintain the core business focus of the branch
delivery system and in recognition of the growth potential in home equity
lending, the Company formed a centralized operation devoted to originating and
servicing home equity loans from mortgage brokers. In 1991, Ford transferred its
centralized home equity lending operation, Ford Consumer Finance Company, Inc.
("FCFC"), to the Company. The Company combined its then-existing broker-sourced
home equity lending operations with those of FCFC and continues to operate its
centralized home equity lending business under the FCFC name. The Company's use
of the name "Ford" is subject to a trademark license agreement. See
"Relationship with Ford -- Trademark License Agreement".
HOME EQUITY LENDING -- PRODUCTS. The Company's home equity lending
activities consist of originating and servicing fixed and variable rate mortgage
loans that are primarily secured by single family residential properties. Such
loans are made to borrowers primarily for the purpose of debt consolidation,
including the refinancing of existing mortgage loans, home improvements and a
variety of other purposes. Relatively few of the Company's originations of home
equity loans are mortgages used for the acquisition of homes.
The following table shows certain information with respect to the Company's
home equity lending receivables:
HOME EQUITY LENDING
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
---------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Receivables (In Millions)..... $14,386.2 $12,349.9 $ 10,619.7 $ 9,624.8 $ 8,238.1
Average Account Balance........... $ 41,356 $ 39,746 $ 35,844 $ 34,393 $ 32,783
Number of Accounts................ 347,864 310,717 296,271 279,851 251,289
Finance Charge Yield.............. 13.95% 13.62% 13.44% 15.43% 14.21%
Original Term (In Months)......... 157 155 153 158 158
60 + Days Contractual
Delinquency..................... 1.88% 1.45% 1.50% 1.95% 2.65%
Losses as a Percentage of Average
Amount Advanced................. 1.08% 1.05% 1.14% 1.34% 1.20%
</TABLE>
The Company's home equity loans typically have maturities of up to 180
months. Approximately 38% of the Company's home equity loans are variable rate
loans. While home equity loans may be secured by either first or second
mortgages, at December 31, 1995, approximately 70% of the aggregate net
outstanding balance of home equity lending receivables were secured by first
mortgages.
The Company makes credit decisions based on pre-established guidelines
principally regarding each applicant's credit history and ability to repay.
Company representatives or, in the case of centralized lending, correspondent
lenders or brokers, are responsible for completing, evaluating and processing
each loan application based on information obtained from the borrower or third
parties. Such information includes annual income, length of time at residence
and job stability. A debt to income ratio is calculated, including the monthly
payment on the proposed loan, in
34
<PAGE> 39
determining the ability of the customer to repay. In addition, the Company
reviews credit bureau records to determine the applicant's credit history and
may use credit scoring models to assess the applicant's credit risk profile.
Because many branch customers have borrowed previously from the Company, the
branch may also have direct credit experience with that customer, and this
experience can often add a further level of reliability to the Company's credit
evaluation. Loans generally do not exceed 90% of the appraised value of the
property with the maximum LOAN TO VALUE RATIO available to any customer
depending on the credit quality of the customer and local economic and real
estate market conditions. The Company grants to employees varying levels of
lending authority based on the individual's performance, qualifications and
experience. Management approval outside the local branch is necessary for
deviations from the Company's standard lending practices.
Branch employees receive training concerning the Company's collection
policies, procedures and techniques. The Company seeks to leverage the personal
relationships it develops with its branch customers to make personal contact
with customers whose accounts are delinquent. A branch employee generally
contacts a customer whose account has become ten days contractually delinquent
to learn of any changes in the customer's financial situation and to make
arrangements for payment. A branch manager generally contacts a customer whose
account has become 30 days contractually delinquent to assess the customer's
willingness and ability to repay, including potential loan restructuring
alternatives. Home equity loans more than 90 days contractually past due are
collected through centralized units which manage foreclosures. Collections by
the centralized lending operations are handled from the outset by regional
service centers. Once any foreclosure is completed, the property is marketed by
the Company's real estate owned unit.
PERSONAL LOANS/RETAIL SALES FINANCE -- PRODUCTS. The Company's personal
lending business consists of direct origination and servicing of secured and
unsecured revolving and CLOSED-END PERSONAL LOANS to individuals. Personal loans
are direct consumer loans that are generally not secured by real estate. Such
loans may be secured by existing personal property, including automobiles, as
well as consumer durables and/or guarantees by third parties. Personal loans
generally involve disbursements at the inception of the loan with installment
payments leading to full amortization by maturity, which ranges up to 60 months.
In general, personal loans are made for debt consolidation, home improvement,
education, vacation, taxes and major purchases of appliances and other durable
goods. The Company sources personal loan customers through solicitation of
existing retail sales finance customers, direct mail, advertising and referrals.
The relationships between the Company and its personal loan customers permit the
Company to offer other loan products based on each customer's credit needs.
Retail sales finance contracts are generally for the purchase of items such
as household electronic appliances, furniture and home improvements. The Company
generally purchases retail finance sales contracts from retailers of such items.
These activities provide an important source of new loan customers, since,
following the purchase of a retail sales finance contract, the Company has a
direct relationship with the borrower. The newly-established relationship often
leads to other types of financing for the customer based on the individual's
credit needs. As with personal loans, the terms of retail sales finance
contracts differ based on the amount financed and the credit quality of the
customer. Generally, retail sales finance contracts have terms ranging from 24
to 36 months.
35
<PAGE> 40
Statistical information for average personal loan and average retail sales
finance contract receivables is generally similar. For example, at December 31,
1995, the average balance of the Company's outstanding personal loans was
$2,490, and the average balance of the Company's outstanding retail sales
finance contracts was $1,820. The following table shows certain information with
respect to the Company's aggregate personal lending and retail sales finance
contract receivables:
PERSONAL LENDING/RETAIL SALES FINANCE
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
--------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Receivables (In
Millions).................... $ 6,117.6 $ 5,284.5 $ 4,354.2 $ 3,646.9 $ 3,226.3
Average Account Balance........ $ 2,213 $ 2,123 $ 2,116 $ 2,034 $ 2,104
Number of Accounts............. 2,764,050 2,489,322 2,057,894 1,792,545 1,533,666
Finance Charge Yield........... 25.22% 25.26% 25.12% 23.31% 23.51%
Original Term (In Months)...... 37 36 35 39 37
60 + Days Contractual
Delinquency.................. 2.63% 2.37% 2.48% 3.29% 3.80%
Losses as a Percentage of
Average Amount Advanced...... 4.33% 3.67% 3.32% 4.02% 4.51%
</TABLE>
Credit decisions and collections with respect to personal loans and retail
sales finance contracts are generally handled in a manner consistent with home
equity loans, although actual credit scoring models and credit criteria differ.
Retail sales finance programs feature timely credit approval decisions that, in
many cases, are automated through the Company's centralized credit application
processing systems.
Even where credit decisions have been made centrally, the branches play the
primary role in collections of personal loans and retail sales finance
contracts. Collection responsibility remains with the appropriate branch until
the loan is charged off, at which point collection responsibility moves to a
recovery center. It is the Company's policy to report delinquencies and defaults
from customers on their obligations to credit reporting agencies.
DELIVERY OF HOME EQUITY LOANS, PERSONAL LOANS AND RETAIL SALES FINANCING.
The Company provides its home equity and personal loans and retail sales
financing through both domestic and international branch systems and through a
centralized lending operation. The following table sets forth the distribution
of home equity and personal lending/retail sales finance outstanding net
receivables among the various delivery systems (in millions):
HOME EQUITY AND PERSONAL LENDING/RETAIL SALES FINANCE
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------------------
DOMESTIC INTERNATIONAL
BRANCH BRANCH CENTRALIZED
SYSTEM SYSTEM LENDING TOTAL
--------- -------------- ------------ ---------
<S> <C> <C> <C> <C>
Home Equity Lending......................... $ 6,245.0 $1,112.4 $7,028.8 $14,386.2
Personal Lending/Retail Sales Finance....... 4,716.2 1,381.4 20.0 6,117.6
--------- -------- --------- ---------
Total............................. $10,961.2 $2,493.8 $7,048.8 $20,503.8
========= ======== ========= =========
</TABLE>
Domestic Branch System. At December 31, 1995, the Company's consumer
finance domestic branch system consisted of more than 1,400 geographically
dispersed locations in the United States. These locations operate under five
different nameplates -- Associates Financial Services, TranSouth Financial,
First Family Financial Services, Kentucky Finance and Allied Finance. The
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<PAGE> 41
Company retained the latter four nameplates following their acquisition by the
Company in order to retain name recognition and awareness, customer
relationships and market niches.
Each nameplate operates under similar strategies in specific niche product
or geographic markets. Associates Financial Services operates in 44 states,
typically in retail shopping areas. TranSouth Financial operates in 19 states,
principally in the Southeastern United States. First Family Financial Services
operates in 6 states, principally in the Southeastern United States. Kentucky
Finance operates primarily in Kentucky. Allied Finance operates in Texas. All
offices offer home equity loans (except Allied Finance) and personal loans and
purchase retail sales finance contracts. In addition, TranSouth offices
specialize in retail installment financing through automobile dealers.
The following table shows certain information with respect to the Company's
domestic branch system (dollars in millions):
DOMESTIC BRANCH SYSTEM
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Receivables
Home equity lending..... $ 6,245.0 $ 5,456.1 $ 4,820.7 $ 4,469.6 $ 3,745.5
Personal lending/retail
sales finance........ 4,716.2 4,125.3 3,449.6 2,855.8 2,400.1
----------- ----------- ----------- ----------- -----------
Total
receivables... $ 10,961.2 $ 9,581.4 $ 8,270.3 $ 7,325.4 $ 6,145.6
=========== =========== =========== =========== ===========
Number of Branches........ 1,416 1,356 1,269 1,021 762
Number of Accounts........ 2,479,009 2,175,095 1,844,686 1,631,951 1,341,454
</TABLE>
Since 1991, the Company's domestic branch delivery system has increased by
654 branches (86%), a significant portion of which resulted from new branch
openings.
A key objective of the Company's branches is to establish and maintain
continuing personal relationships with its customers. As a result of the
Company's familiarity and frequent contact with its customers, the principal
source of business at the branch level is from repeat customers. Many of these
customers begin their relationship with the Company through personal loans and
retail sales finance contracts. Once a payment history has been established (or
the financing has been repaid), the Company seeks to encourage customers for
whom an appropriate risk profile has been developed to utilize the Company's
real estate-secured products to satisfy their credit needs. Real estate-secured
products generally provide the borrower with lower-cost financing and reduce the
credit risk to the Company. The customer relationships developed at each branch
are also an important part of the collections process.
The Company also seeks to obtain customers in a number of other ways,
including through purchases of retail sales finance contracts from local
merchants and dealers of consumer goods, new branch openings and related
advertising and direct-mail and telephone solicitations in each branch's target
market. Referrals from existing customers are also important sources of new
business.
Each branch services the loans it originates. Subsequent to credit
investigation and loan approval, ongoing servicing includes processing payments,
soliciting additional business and collecting past due accounts.
In an effort to improve productivity, the Company has recently implemented
a number of technological initiatives, such as electronic credit applications,
centralized payment processing and automated loan documentation. These
initiatives are intended to enable each branch to operate more efficiently,
while preserving its access to information so that it can effectively maintain
its
37
<PAGE> 42
relationships with its customers and monitor account performance. Such
technology is also expected to benefit customers by accelerating the credit
decision process.
The Company also operates a central processing operation for national or
regional sales finance programs to provide more efficient service to retailers,
such as electronic application processing and contract preparation, during their
business hours. Subsequent to origination, sales contracts are generally sent to
local branches in proximity to the customer for servicing. The Company believes
that it distinguishes itself in the market by providing retail merchants with
rapid application turnaround, quick funding, marketing assistance and in-store
technological support.
International Branch System. At December 31, 1995, the Company's
international consumer finance branch system consisted of 400 locations. The
Company operates its international consumer finance business principally in
Japan, but also has operations in the United Kingdom, Puerto Rico, Canada and
Mexico. The Company's international branches employ similar operational
disciplines as the domestic branches. Set forth below is a description of the
Company's international consumer finance branch system.
- Japan. The Company operates 294 branches in Japan through its
wholly-owned subsidiary, AIC. AIC provides home equity and personal loans and
purchases retail sales finance contracts from retailers. In addition, AIC
recently introduced credit cards to its portfolio of products. At December 31,
1995, AIC had $3.0 billion of total assets and employed approximately 1,300
individuals. Since 1991, AIC has increased its number of branches by 75%, and
net receivables have grown at a compound annual rate of 25.9%, to $2.1 billion
at December 31, 1995 with approximately 325,000 accounts. At or for the year
ended December 31, 1995, AIC's home equity loans had average original maturities
of 158 months, average account balances of $65,264 and average finance charge
yields of 19.9%. At or for the year ended December 31, 1995, personal loans and
retail sales finance contracts had average original terms of 36 months, average
account balances of $3,533 and average finance charge yields of 34.7%.
Similarly, AIC's operating income has grown from $52.3 million in 1992 to $164.8
million in 1995, a compound annual growth rate of 46.6%. AIC has been operating
in Japan since 1978. At present, AIC operates in every prefecture in Japan. The
Company believes AIC has attractive growth opportunities through opening new
branches and introducing new products in Japan.
- United Kingdom. At December 31, 1995, the Company had 64 branches in the
United Kingdom, approximately 166,200 accounts and $552.6 million of total
assets. The operation offers to consumers home equity and personal loans and
purchases consumer retail sales finance contracts from retailers. In the early
1990s, the size of the Company's operations in the United Kingdom decreased, due
in large part to generally less favorable economic conditions in the United
Kingdom. However, over the last two years the Company's United Kingdom operation
has increased its net receivables by an average of $63.1 million per year.
- Other Consumer International Operations. The Company has 34 branches in
Puerto Rico, which make personal and home equity loans and purchase retail sales
finance contracts from retailers. In 1995, the Company opened two branches in
Mexico, which make personal loans. In Canada, the Company opened six branches in
1995, where the Company purchases retail sales finance contracts from retailers
and makes personal and home equity loans.
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<PAGE> 43
The following table shows certain information with respect to the Company's
international branches (dollars in millions):
INTERNATIONAL BRANCH SYSTEM
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Japan
Net Receivables
Home equity lending.................. $ 998.5 $ 870.0 $ 665.5 $ 487.8 $ 385.6
Personal lending/sales finance....... 1,068.9 849.5 628.7 505.1 438.3
-------- -------- -------- ------- -------
Total........................... $2,067.4 $1,719.5 $1,294.2 $ 992.9 $ 823.9
======== ======== ======== ======= =======
Number of Branches...................... 294 249 201 182 168
Other International (principally United
Kingdom)
Net Receivables
Home equity lending.................. $ 113.9 $ 118.2 $ 121.7 $ 150.7 $ 223.8
Personal lending/sales finance....... 312.5 300.5 271.2 279.9 377.8
-------- -------- -------- ------- -------
Total........................... $ 426.4 $ 418.7 $ 392.9 $ 430.6 $ 601.6
======== ======== ======== ======= =======
Number of Branches...................... 106 77 72 70 69
</TABLE>
Centralized Lending. The Company's centralized home equity lending
operation, conducted through FCFC, extends both closed-end loans and lines of
credit to customers. A majority of the home equity loans at December 31, 1995 in
the Company's centralized home equity lending operation were originated through
financial institutions and mortgage brokers. Mortgage brokers are independent
agents who match their customers with a lender based on the customer's needs and
the credit profile requirements of the lender. The remainder of the home equity
loans in the centralized lending operation at December 31, 1995 were originated
as a result of existing customer relationships, direct mail and telemarketing
efforts or customer referrals. The Company's centralized lending operation
covers most of the United States through three regional service centers and 44
district sales offices located in 41 states. The regional service centers handle
all administrative activities, including underwriting and quality control, as
well as customer service and collections, allowing the sales offices to
concentrate on originating new business and servicing clients.
The table below sets forth certain information with respect to the
Company's centralized lending operation (dollars in millions):
CENTRALIZED LENDING
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Receivables
Home equity lending................. $7,028.8 $5,905.6 $5,011.7 $4,516.7 $3,883.2
Personal lending/sales finance...... 20.0 9.1 4.8 6.1 10.2
-------- -------- -------- -------- --------
Total receivables........... $7,048.8 $5,914.7 $5,016.5 $4,522.8 $3,893.4
======== ======== ======== ======== ========
Number of Accounts.................. 124,967 113,674 105,452 108,265 110,182
</TABLE>
STRATEGIC INITIATIVES. The Company has expanded its core consumer finance
businesses by investing in new offices, providing consumers with more convenient
access to credit, enhancing customer retention and nurturing long-term
relationships, identifying new niche market opportunities and improving
productivity and cost efficiency. Recent Company initiatives include:
39
<PAGE> 44
Branch Expansion. Based on its belief that consumers generally prefer a
local, face-to-face lending source, the Company has aggressively pursued branch
expansion activities in the United States and targeted international markets,
primarily Japan. The Company believes that it has gained considerable experience
in selecting local markets for expansion that provide incremental growth and
profit.
Convenient Sources of Funds for Consumers. Consumers are increasingly
demanding convenience and quality service. The Company has responded by
improving the response time to customer needs and providing convenient access to
funds. Under one new program, currently in testing, the Associates Cash
Transaction card issued by Associates Investment enables approved domestic
branch customers to obtain cash advances through automated teller machines.
Customer Retention. The Company has established innovative marketing
programs designed to increase customer satisfaction and retention. For example,
in 1994 the Company began an incentive program for its home equity loan
customers called "Ford Reward". Under this program, borrowers with current
accounts earn discounts of up to $2,500 on the purchase or lease of Ford,
Lincoln or Mercury automobiles and light trucks. All costs of this program are
borne by the Company and paid directly to dealers of Ford products.
Home Improvement Market. The Company has recently created a centralized
operation to concentrate on sourcing home improvement loans from quality
national and regional home improvement dealers. This centralized group seeks to
establish relationships with qualified dealers of home improvement products,
such as kitchen and bathroom remodeling, heating and air conditioning systems
and windows and siding. Home improvement loan customers are also viewed as a
potential source of customers for the Company's home equity products.
Productivity Improvements. The Company seeks to improve its productivity
and cost efficiency. For example, the Company recently centralized payment
processing and certain collection and recovery functions. Furthermore, a new and
improved credit application processing system is being installed in the
centralized home equity lending operation which is expected to reduce paperwork
and manual processing.
CREDIT CARDS
PRODUCTS. The Company's credit card business consists primarily of issuing
VISA and MasterCard bankcards and private label credit cards to consumers. The
strategy of providing both bankcards and private label credit cards has enabled
the Company to grow in the highly competitive credit card market. Through its
banking subsidiary, ANB, the Company acquires customer accounts and seeks to
increase average balances through direct mail and telemarketing solicitations,
CO-BRANDED marketing programs and acquisitions. At December 31, 1995, the
Company had approximately 6.1 million customers with ACTIVE ACCOUNTS.
VISA and MasterCard bankcards are offered directly to the public and
through co-marketing programs with, among others, Amoco Oil Company ("Amoco"),
GTE Vantage Incorporated and GTE Telephone Operations ("GTE"), Citgo Petroleum
Corporation ("Citgo") and Union Oil Company of California ("Unocal"). The
Company issues its credit cards across a wide risk spectrum with interest rates
based on customer credit profiles. In addition to standard VISA and MasterCard
bankcards, the Company offers a VISA Gold bankcard directed primarily to high
credit balance individuals (the "Gold Card"), a VISA and MasterCard program
oriented primarily to customers with a higher risk profile (the "Finance Card")
and VISA and MasterCard programs directed to college students (the "College
Program"). The Gold Card is designed to attract customers with outstanding
balances on credit cards issued by other companies, who will transfer their
balances to a Company credit card in return for a lower interest rate. The
Finance Card is designed for customers who may not qualify for a credit card
from another issuer because they may be new credit users or have had prior
credit problems. The College Program is oriented towards first time credit card
users who are undergraduate or graduate students.
40
<PAGE> 45
The private label credit card business principally consists of a customized
private label revolving charge program for customers of Amoco, who utilize the
cards to purchase gasoline and other automotive products at Amoco gasoline
stations nationwide. In addition, the Company believes that the Amoco credit
card is currently the only gasoline credit card that has a cash advance feature
that may be used at automated teller machines. The Company seeks to target
retailers for potential expansion of its private label credit card business.
The following table shows certain information regarding the Company's
credit card receivables:
CREDIT CARD
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
----------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Receivables (In
Millions)............ $ 4,818.6 $ 3,915.3 $ 3,104.8 $ 2,614.6 $ 2,668.4
Average Account
Balance(1)........... $ 782 $ 701 $ 1,231 $ 1,522 $ 1,566
Number of
Accounts(1).......... 6,163,673 5,581,799 2,521,292 1,717,376 1,703,494
Finance Charge Yield... 20.56% 19.99% 20.29% 21.71% 22.01%
60 + Days Contractual
Delinquency.......... 3.50% 3.02% 2.71% 3.04% 3.63%
Losses as a Percentage
of Average Amount
Advanced............. 4.89% 4.65% 4.67% 6.63% 6.81%
</TABLE>
- ---------------
(1) In 1994, the Company acquired Amoco's private label gasoline credit card
program, which added 3.2 million accounts. These accounts generally carried
smaller balances than the Company's bankcard accounts, which had the effect
of decreasing the average balance for the Company's credit card receivables
in 1994 and 1995.
The Company earns revenues as the result of finance charges on revolving
accounts, the interchange fees derived from merchant discounts, annual
membership and other account fees and fees earned from the sale of insurance and
other fee-based products. The Company's credit cards typically bear variable
interest rates.
More than 90% of the credit granted to new accounts results from direct
solicitation of consumers from pre-approved lists which have been reviewed using
proprietary criteria. Risk management is accomplished using proprietary
behavioral scoring systems and generic credit bureau data. To control delinquent
accounts and reduce losses, the Company has developed a system of delinquency
follow-up incorporating written and telephone communication with delinquent
cardmembers. The Company classifies accounts as delinquent when no payment has
been received by the second billing date. Accounts with a high probability of
charge-off are outplaced to collection agencies while accounts which are deemed
to be more easily collectible remain with the Company.
DELIVERY OF CREDIT CARD SERVICES. From its centralized operations the
Company offers its bankcards through direct mail and telemarketing solicitations
and through co-branded marketing programs with major corporations. Of the
accounts at December 31, 1995, approximately 50% resulted from either direct
mail or telemarketing. Approximately 35% were developed as a result of the
marketing of affinity and co-branding relationships. The Company offers
co-branded VISA and MasterCard bankcards (in certain cases featuring low
introductory interest rates) to the customer bases of major corporations, with
the offer of rebates that the customer can use to purchase the goods and
services of the co-brand companies. The Company's co-branded bankcards involve
marketing programs with GTE, Amoco, Unocal and Citgo, among others.
The Company's credit card business focuses on customer service, operating
efficiency and productivity improvements. The Company offers cardmembers 24-hour
service, 365 days a year.
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<PAGE> 46
The Company's bankcard operation handles incoming customer service telephone
call volume of approximately 1.4 million calls per month. The Company employs an
automated voice response unit to handle most routine requests. However, customer
service representatives are available for customers who prefer to speak with a
person or to handle non-routine requests. The Company routinely monitors the
performance of customer service representatives against established standards.
Customer surveys are regularly conducted in measuring customer satisfaction and
identifying areas for improvement. Customer service representatives are also
trained to sell the Company's products and services. The private label operation
center employs many of the same functions and operational techniques as the
bankcard center.
Data processing functions for the bankcards have been outsourced to
increase product flexibility and operating efficiencies and reduce systems
development costs. However, the Company continues to utilize its proprietary
technology with respect to key elements of the customer relationship including
card issuance, statement production, credit application processing and payment
processing.
STRATEGIC INITIATIVES. The Company's initiatives in the U.S. are to pursue
additional co-branding marketing opportunities with oil, retail and other
businesses, target retailers for potential expansion of its private label cards
and take advantage of selective acquisition opportunities. The Company also
intends to continue marketing its specialty products including its Gold Card,
Finance Card and College Program.
The Company has recently begun to offer bankcards to its customers in Japan
and the United Kingdom. In Japan, the Company is offering a MasterCard bankcard,
which is directed primarily to existing customers of its consumer branch system.
In the United Kingdom, the Company acquired a retail credit card portfolio in
1994 and converted the portfolio to the VISA brand. The Company is seeking to
expand the portfolio through direct mail as well as offers to other new
customers of the Company.
COMMERCIAL FINANCE
GENERAL
The Company's commercial finance business provides a variety of retail and
wholesale financing and leasing products and services for heavy-duty and
medium-duty trucks and truck trailers, construction and material handling
equipment and other industrial equipment. The Company believes that it is the
leading independent source of financing for heavy-duty trucks, truck trailers
and heavy construction equipment in the United States. In addition, the Company
believes that it is the third largest provider of financing to dealers and
purchasers of manufactured housing in the United States with a $2.0 billion
portfolio of manufactured housing receivables (which for financial reporting
purposes are included in the Company's consumer receivables portfolio). The
Company also engages in a number of other commercial activities, including auto
fleet leasing and management, small business administration lending, relocation
services and auto club and roadside assistance services. The Company also makes
available various credit-related and non-credit-related insurance products to
its commercial finance customers, including COMMERCIAL AUTO AND DEALERS' OPEN
LOT PHYSICAL DAMAGE, credit life, motor truck cargo and extended coverage
insurance. See "-- Related Insurance".
The Company believes that its focus on serving these highly specialized
niche markets and its ability to provide premium service through experienced
employees has been a key factor in the growth and profitability of its
commercial finance business.
At December 31, 1995, the Company had approximately 143,000 commercial
finance customers, consisting mainly of businesses acquiring or leasing trucks,
truck trailers and other equipment, as well as dealers of these types of
equipment. The Company's commercial finance business is focused on developing
long-term relationships with manufacturers, distributors and users of income
producing equipment. Relationships with manufacturers include, among others,
Paccar, Inc. (Peterbilt and Kenworth trucks), Freightliner Corporation, Mack
Trucks, Inc., Volvo GM Heavy
42
<PAGE> 47
Truck Corporation, Great Dane Trailers, Inc. and Utility Trailer Manufacturing
Company in truck and truck trailer financing and leasing; Ingersoll-Rand Co.
Inc., Volvo Construction Equipment North America, Inc., Clark Material Handling
Co., Melroe Company, a business unit of Clark Equipment Company and Club Car
Inc. in equipment financing and leasing; and Fleetwood Enterprises, Inc.,
Oakwood Homes Corp. and Redman Industries, Inc. in manufactured housing
financing.
The Company provides truck and truck trailer financing and leasing services
from 39 branch offices in the United States and Canada. The Company provides
equipment financing and leasing services from 19 branch offices in the United
States, Mexico and the United Kingdom and, in the case of material handling and
certain other equipment, utilizes two centralized lending and service
operations. Fee-based services are provided from centralized locations. The
Company provides manufactured housing financing through five regional offices
and 14 sales purchase offices to approximately 68,000 individuals. The Company
markets its insurance products to its commercial finance customers through the
same delivery systems used to market its commercial finance products.
The following table shows net finance receivables outstanding and the
annual growth rates attributable to the various types of commercial financing
products (dollars in millions):
COMMERCIAL NET FINANCE RECEIVABLES OUTSTANDING
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------------- -------------------- -------------------- -------------------- --------------------
NET ANNUAL NET ANNUAL NET ANNUAL NET ANNUAL NET ANNUAL
RECEIVABLES GROWTH RECEIVABLES GROWTH RECEIVABLES GROWTH RECEIVABLES GROWTH RECEIVABLES GROWTH
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Truck and Truck
Trailer....... $ 7,648.4 14.5% $ 6,681.5 20.6% $ 5,540.0 27.3% $ 4,350.7 8.8% $ 4,000.3 0.9%
Equipment(1).... 3,827.2 28.1 2,987.3 21.2 2,464.6 7.6 2,290.6 6.1 2,157.9 54.8
Other
Commercial(2).. 416.3 23.7 336.5 (2.5) 345.3 6.3 324.7 20.3 269.8 (11.0)
Accruals and
Other......... 235.3 52.6 32.4 (7.7) (31.1)
---------- ---------- --------- --------- ---------
Total
Commercial.... $ 12,127.2 20.6% $ 10,057.9 20.0% $ 8,382.3 20.5% $ 6,958.3 8.8% $ 6,396.9 14.8%
========== ========== ========= ========= =========
Manufactured
Housing(3).... $ 2,034.1 21.9% $ 1,669.2 29.4% $ 1,290.2 31.1% $ 983.9 41.1% $ 697.2 34.6%
========== ========== ========= ========= =========
</TABLE>
- ---------------
(1) 1991 reflects the Company's acquisition of Chase Manhattan Leasing (formerly
Clark Equipment Credit). See "-- Overview".
(2) Includes auto fleet leasing, small business administration lending and
fee-based businesses.
(3) Except as otherwise indicated, the dollar amount of manufactured housing
receivables is included in the dollar amount of total consumer net finance
receivables throughout this Prospectus, because the credit and related risks
of the manufactured housing business are similar to those of the Company's
consumer finance business. Manufactured housing receivables are included
with consumer net finance receivables in determining the percentage of total
net finance receivables which are consumer net finance receivables. However,
manufactured housing operations are discussed in this Prospectus as part of
the Company's commercial activities because the marketing and management of
manufactured housing products are more closely related to commercial finance
products.
At December 31, 1995, the interest rates charged on approximately 17% of
the commercial net finance receivables were variable rates. Commercial finance
receivables are generally not subject to maximum finance charges established by
state law, and where such restrictions apply, at the present time, they do not
materially restrict the interest rates charged. See "-- Additional Information
Regarding the Company -- Regulation". At December 31, 1995, the finance charge
yield on all types of commercial finance receivables averaged approximately 10%
per annum.
Except for lease or rental transactions in which the Company owns the
equipment, liens on the equipment financed secure the receivables. Generally,
the dealer and/or manufacturer provides some form of loss protection to the
Company.
43
<PAGE> 48
TRUCK AND TRUCK TRAILER FINANCING AND LEASING
OVERVIEW. The Company believes that it is the leading provider of financing
to the heavy-duty truck and truck trailer industry in the United States based on
units financed. The Company provides wholesale and retail financing services to
dealers to assist manufacturers in selling their products and also provides
financing to purchasers, including owner operators and fleet operators.
In 1974, the Company decided to target heavy-duty truck and truck trailer
sales financing by establishing a dedicated management, credit, marketing and
distribution effort. The unit has grown by maintaining long-standing formal
relationships with the majority of domestic and foreign truck and truck trailer
manufacturers in the United States and Canada. The Company has also expanded its
presence in the heavy-duty truck and truck trailer markets through acquisitions,
and by focusing on selective niches. For example, in 1991 the Company formed its
environmental division through the acquisition of a business specializing in
liquid and solid waste transportation equipment financing and leasing.
At December 31, 1995, the Company had net truck and truck trailer finance
and lease receivables in excess of $7.6 billion. The Company provides financing
and leasing to more than 1,800 dealers and more than 70,000 trucking firms and
private carriers. The Company's traditional market focuses on owner operators
and small to medium fleets of less than 500 vehicles, but it also has some
larger fleet relationships.
According to industry estimates, there are approximately 323,000 trucking
companies in the United States operating more than 4.1 million trucks of all
classes. The majority of these companies are small, with approximately 60% of
such companies believed to be operating six or fewer trucks. Domestic sales of
heavy-duty trucks depend on the trucking industry's capital requirements, which
are in turn affected by the country's general economic conditions. In addition,
heavy-duty truck sales are sensitive to other factors such as fuel costs,
interest rates, federal excise and highway use taxes and taxation of the
acquisition and use of capital goods. Over the last 20 years, heavy-duty truck
sales have ranged from a low of 75,800 units in 1982 to 201,300 units in 1995,
the best year for sales of such trucks in the United States, and there can be no
assurance that sales of heavy-duty trucks will continue at 1995 levels.
The Company believes that it has been relatively successful during economic
downturns. Unlike many competitors, the Company has not withdrawn or retreated
from the truck and truck trailer financing market during economic downturns. The
Company believes that this long-standing commitment, sustained over many years,
has attracted dealers and carriers to the Company as a reliable source of
funding in all economic environments.
PRODUCTS AND SERVICES. The Company provides retail financing and leasing
for purchasers and users of medium-duty through heavy-duty trucks and truck
trailers, as well as wholesale financing, ACCOUNTS RECEIVABLE FINANCING and
working capital loans to dealers and trucking companies. The Company also
provides financing and leasing for truck and truck trailer purchases by truck
leasing and rental companies.
44
<PAGE> 49
The following table shows certain information regarding the Company's truck
and truck trailer financing and leasing receivables:
TRUCK AND TRUCK TRAILER
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
-----------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Receivables (In Millions)
Retail........................... $ 5,342.2 $ 4,850.5 $ 4,093.3 $ 3,233.7 $ 2,992.5
Lease............................ 1,258.5 1,080.4 874.2 797.3 734.3
Wholesale........................ 1,047.7 750.6 572.5 319.7 273.5
----------- ----------- --------- --------- ---------
Total.................... $ 7,648.4 $ 6,681.5 $ 5,540.0 $ 4,350.7 $ 4,000.3
=========== =========== ========= ========= =========
Retail and Leasing Receivables
Average account balance.......... $ 37,127 $ 36,147 $ 32,544 $ 29,166 $ 27,794
Number of accounts............... 177,789 164,076 152,638 138,210 134,085
Finance charge yield............. 10.24% 9.94% 10.49% 11.32% 12.35%
Original term (In Months)........ 53 52 52 51 51
60 + days contractual
delinquency................... .82% .32% .68% 1.02% 2.22%
Losses as a percentage of average
amount advanced............... .16% .06% .26% .52% .66%
Wholesale Receivables
Average balance per dealer....... $ 1,427,384 $ 1,055,696 $ 822,557 $ 556,000 $ 467,521
Number of active dealers......... 734 711 696 575 585
</TABLE>
Retail Financing. The Company provides retail financing of new and used
medium-duty through heavy-duty trucks and truck trailers primarily on an
indirect basis through truck and truck trailer dealers. The Company has
agreements in place with approximately 40 truck and truck trailer manufacturers
to provide retail financing for their dealership organizations. Under an
installment sales contract, the dealer and purchaser enter into a financing
arrangement for the installment purchase of a truck or truck trailer. Subject to
credit approval by the Company, the dealer assigns the installment contract to
the Company. The Company funds the transaction by a payment to the dealer for
the net amount financed in the contract. The Company also sources retail truck
and truck trailer financing on a direct basis with the truck or truck trailer
purchaser.
Generally, retail financing transactions provide for terms up to 60 months
for trucks and up to 84 months for truck trailers at fixed rates of interest.
The interest rate varies depending on, among other things, the credit quality of
the purchaser, the transaction size, the term and down payment, and whether the
collateral is new or used.
Leasing. The Company also provides fleet leasing for users of medium-duty
through heavy-duty trucks and truck trailers. The Company offers a variety of
truck and truck trailer lease options, but more than 90% of its truck and truck
trailer leases are non-maintenance, net OPEN-END LEASES commonly referred to as
T.R.A.C. (Terminal Rental Adjustment Clause) leases. Under such leases, the
customer is responsible for the maintenance and residual value of the vehicle
and the Company retains the depreciation benefit. Therefore, these leases do not
result in any RESIDUAL RISK to the Company, although the risk of the lessee's
failure to make lease payments still exists. The Company also offers CLOSED-END
LEASES pursuant to which the lessee leases the vehicle for a specified term
subject to certain restrictions, including mileage restrictions. The Company is
the owner of the vehicles under closed-end leases and is fully responsible for
the residual value. Residual values are established at the inception of a lease
and are based on a percentage of the estimated value of the vehicles at the time
the Company expects to dispose of the vehicles. These estimates are derived by
the Company from, among other things, market information on sales of used
vehicles and estimated
45
<PAGE> 50
obsolescence trends. The Company regularly reviews the residual values of leased
vehicles. If the residual values have declined, adjustments are made that may
result in a charge to income.
The Company actively manages its residual risk by working with lessees
during the lease term to encourage lessees to extend their leases, exercise
options to purchase the leased vehicles or upgrade and enhance their leased
vehicles, as appropriate, and by monitoring the various trucking industry
segments for obsolescence trends. The Company uses its asset management
capabilities (including asset remarketing) and technical expertise to help
manage its residual positions. As of December 31, 1995, aggregate truck and
truck trailer residuals for leases in the Company's portfolio approximated $444
million. Of this amount, approximately $26 million were under closed-end leases
under which the Company contractually bears the residual risk.
Wholesale Financing. The Company provides new and used vehicle wholesale
financing to more than 700 truck and truck trailer dealers throughout the United
States and Canada. The Company has agreements in place with approximately 40
truck and truck trailer manufacturers to provide wholesale financing for their
dealer organizations. Generally, wholesale loans are short-term loans with
variable rates (prime based) and are secured by inventory. Subject to, among
other things, the level of retail financing transactions purchased from a dealer
in the preceding quarter, the Company generally assesses a flat charge service
fee for each unit in inventory and generally requires periodic principal
reductions. These reductions are scheduled to compensate for any potential
decline in the value of the collateral.
In addition, the Company makes available working capital loans to truck and
truck trailer dealers that generally are secured by real estate and/or parts
inventory and receivables. Proceeds are used generally for expansion of the
dealer's business or acquisition of other dealerships. The maturities of these
loans generally do not exceed 60 months, and the interest rate charged generally
is fixed for the life of the loan.
The Company also engages in receivables financing and other asset-based
lending to truckload carriers and manufacturers. These products generally are
variable rate loans and are secured by accounts receivable. Both revolving and
term loans are generally variable rate loans.
RISK MANAGEMENT. The Company employs a variety of techniques to manage
credit risk and reduce credit losses in its financing and leasing of trucks and
truck trailers. The Company has developed written policies to govern the credit
and risk management aspects of the Company's business. Individual credit
approval authorities for retail transactions may vary and are delegated based on
the employee's position and experience. Credit approval requests for
transactions beyond the established credit approval limits are submitted through
a tiered credit committee system which the Company believes provides a thorough
risk management control system. Branches do not approve wholesale, accounts
receivable or working capital financing; a senior credit officer of the Company
is responsible for these approvals. Compliance with these policies is monitored
through a series of audits and portfolio reviews conducted by internal audit and
senior risk management personnel. Dealers are reviewed through the branch and/or
centralized credit processes, including financial statement analysis. Such
analysis is done before the beginning of the financing relationship and
periodically throughout the life of the relationship.
Retail Financing and Lease Transactions. The credit review of new business
solicited through the branch distribution system is initiated at the branch
level. A credit review generally includes credit investigation, collateral
evaluation and, if required, a review of the financial statements of the
purchaser or lessee. The Company also uses credit scoring models for certain
smaller transactions. Terms and conditions are based on creditworthiness,
financial condition of the customer and collateral position and are subject to
the terms of any dealer or manufacturer purchasing program, which may provide
certain loss protection. Transactions exceeding branch credit limit
authorizations require additional levels of management approval.
46
<PAGE> 51
Wholesale Transactions. The Company periodically reviews its wholesale and
working capital loans to ensure that each dealer remains viable and is capable
of meeting its retail and direct obligations to the Company. Reviews are
conducted centrally, with branches providing periodic inspections of collateral
as well as credit, financial and other relevant material. Periodic inspections
of collateral are important in part because liens on collateral for wholesale
financing may not be effective against third party purchasers of such
collateral. Corporate risk management personnel approve and review all
wholesale, accounts receivable and working capital financing limits.
Branch Collection Activities. The Company's collection process is handled
at the branch level which provides local collection personnel with the
knowledge, understanding and ability to respond to diverse and fluctuating local
market conditions. In those cases where collection contact is necessary, account
history is reviewed prior to contact. On-line data technology is utilized to
facilitate timely follow-up during all stages of delinquency. In the event
repossession is necessary, the Company believes its local presence in every
major market is a distinct advantage in the repossession process because of its
ability to locate, recover and return collateral. The Company believes that this
capability is attractive to manufacturers and dealers who provide some form of
loss protection to the Company.
DELIVERY OF TRUCK AND TRUCK TRAILER FINANCING AND LEASING. The Company
distributes its finance and lease products and services for trucks and truck
trailers though a network of 39 branch offices throughout the United States (35
offices) and Canada (4 offices). The Company believes that its local presence
gives it an advantage over many of its competitors, which generally operate
regionally or centrally. At the same time, the Company believes that the
geographic and industry dispersion of its receivables reduces its exposure to
downturns in any particular region or industry (such as logging in the Pacific
Northwest and mining in the Southeast).
The Company believes that the experience of its branch personnel is an
important competitive advantage. Branch managers average 24 years of experience
with the Company and sales representatives average 17 years of experience with
the Company. Through the Company's emphasis on education, training, development
and advancement programs, branch personnel have the opportunity to develop
expertise in the technical aspects of the truck and truck trailer industry.
Sales representatives call on dealers for the purpose of establishing and
maintaining relationships, promoting the Company as a source of wholesale and
retail financing and leasing and assisting in the underwriting and processing of
individual finance transactions. Sales representatives also call on purchasers
directly.
STRATEGIC INITIATIVES. The Company seeks to increase its penetration in the
truck and truck trailer financing and leasing markets by continuing to invest in
its delivery system, technology, personnel and marketing programs. While the
number of branch offices has remained relatively constant, the Company has added
sales personnel in markets that provide additional opportunities for growth.
Several new initiatives reflect the Company's continued commitment to enhancing
its position in the truck and truck trailer market.
Customer Service. The Company seeks to differentiate itself from its
competitors by providing premium service to manufacturers, dealers, distributors
and users of truck and truck trailer financing products. Elements of this
premium service include, among other things, timely response to customer needs,
employing marketing professionals with in-depth product and industry knowledge
and emphasizing long-standing personal relationships.
Dealer-based Services. The Company continues to develop both internal and
dealer-based technology to improve services to its dealer customer base by
automating dealer financing tasks, including preparing finance, lease and
insurance premium quotations and electronic document preparation.
International Expansion. The Company is seeking continued growth from
international expansion. A 1993 acquisition expanded the Company's Canadian
business. In addition, a branch in
47
<PAGE> 52
Mexico was opened in 1995, and the Company also expanded its presence in the
United Kingdom during 1995. The Company believes that its long-standing
relationships with domestic and foreign manufacturers will benefit the Company
in global markets.
Medium-duty Trucks. In 1995, the Company expanded its presence in the
medium-duty truck market. While the Company believes that the medium-duty market
approximates the size of the heavy-duty market, the Company's market share in
the medium-duty truck segment has lagged behind its heavy-duty truck market
share. The Company recently employed a dedicated sales force and centralized
marketing function in its effort to improve its market share in selected U.S.
medium-duty truck markets. The Company has centralized and automated the credit
application process for medium-duty truck financing and leasing while relying on
the Company's branch system for local collections and account servicing.
Truck Trailer Rental. In 1995, the Company entered the short-term truck
trailer rental business. Marketing efforts target existing private fleet and
truckload carriers. The Company believes that the increasing use by
manufacturers of "just-in-time" inventory management will result in fleet owners
having periodic peaks in demand for truck trailers and that truck trailer
rentals will become an integral part of fleet management programs.
EQUIPMENT FINANCING AND LEASING
OVERVIEW. The Company is a leading independent source of financing and
leasing of new and used construction, mining, forestry, industrial, machine
tool, material handling, communications and turf maintenance equipment and golf
cars in the United States and Canada. The Company offers wholesale and rental
fleet financing to dealers (who may either sell or rent the equipment to end-
users) and retail financing and leasing to end-users of equipment in niche
markets.
The Company originally modeled its equipment finance business after the
early success of the Company's truck and truck trailer finance business by
establishing dedicated branches throughout the United States. The Company seeks
to develop and maintain relationships with manufacturers and their distributors
and dealers. Such relationships may take the form of CAPTIVE FINANCE PROGRAMS,
factory endorsed programs or other forms of lender programs. In the mid-1980's,
the Company responded to changing market demands in which equipment users
demanded greater access to rental equipment by offering wholesale financing
plans to support manufacturers who neither had the capital nor the financial
infrastructure to provide such financing to their dealers. During the early
1990's, the Company expanded its activities through strategic acquisitions of
certain finance companies and the acquisition of finance and lease portfolios.
The Company combined these operations in 1995 to form a centralized operation,
complementing its branch system, to provide specialized financing products to
specific niche markets, primarily through operating agreements with
manufacturers. The Company's distribution systems, specialized sales
representatives and growing list of manufacturer relationships provide the
Company with a diversified base of industries that the Company believes reduces
the risk to the Company from specific industry and regional economic cycles.
The Company seeks to provide financing products and services to support the
entire distribution chain (manufacturers, dealers, and purchasers) in specific,
identifiable niche markets. The Company searches for new niche opportunities
which offer strong growth and profit potential.
48
<PAGE> 53
PRODUCTS AND SERVICES. The Company provides specialized retail financing
and leasing products as well as wholesale financing to dealers and users in a
variety of industries.
The following table shows certain information regarding the Company's
equipment financing and leasing receivables:
EQUIPMENT
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Receivables (In Millions)
Retail....................... $ 2,133.0 $ 1,868.4 $ 1,614.0 $ 1,544.9 $ 1,569.0
Lease........................ 1,024.4 565.6 431.3 316.2 267.4
Wholesale.................... 669.8 553.3 419.3 429.5 321.5
--------- --------- --------- --------- ---------
Total................ $ 3,827.2 $ 2,987.3 $ 2,464.6 $ 2,290.6 $ 2,157.9
========= ========= ========= ========= =========
Retail and Leasing Receivables
Average account balance...... $ 24,424 $ 20,979 $ 18,167 $ 16,505 $ 14,288
Number of accounts........... 129,276 116,019 112,584 112,756 128,525
Finance charge yield......... 10.82% 10.65% 10.93% 12.30% 12.48%
Original term (In Months).... 51 48 47 47 47
60 + days contractual
delinquency............... .66% .34% .41% .69% 1.33%
Losses as a percentage of
average amount advanced... .22% .11% .26% .51% .60%
Wholesale Receivables
Average balance per dealer... $ 674,522 $ 580,588 $ 449,411 $ 535,536 $ 399,379
Number of active dealers..... 993 953 933 802 805
</TABLE>
Retail Financing. The Company provides retail financing for the purchase of
new and used equipment through installment sales contracts purchased from
dealers and distributors, and through direct loans to purchasers. Generally,
retail financing transactions for equipment provide for maturities of up to 60
months at fixed rates of interest. The interest rate varies depending on, among
other things, the credit quality of the purchaser, transaction size, term, down
payment and whether the collateral is new or used.
Leasing. The Company also provides leasing for end-users of equipment,
either directly to the customer or through dealers. As part of residual risk
management, FINANCE LEASES typically include an option for the lessee to acquire
the equipment at a set time before the termination of the lease for a specified
price (designed to offer the lessee an incentive to purchase) and typically
include an option for the lessee to acquire the equipment at the end of the
lease term for the fair market value. Certain residual values are guaranteed by
the selling dealer or manufacturer. Residual values are established at the
inception of a lease and are based on a percentage of the estimated value of the
equipment at the time the Company expects to dispose of the equipment. These
estimates are derived by the Company from, among other things, market
information on sales of used equipment and estimated obsolescence trends. The
Company regularly reviews the residual values of leased equipment and records a
charge to income in the event of declined residual values.
The Company actively manages its residual risk by working with lessees
during the lease term to encourage lessees to extend their leases, exercise
options to purchase the leased equipment or upgrade and enhance their leased
equipment, as appropriate, and by monitoring the various equipment industry
segments for obsolescence trends. The Company uses its asset management
capabilities (including asset remarketing) and technical expertise to help
manage its residual positions. As of December 31, 1995, the Company's aggregate
equipment residuals approximated $178 million, of which approximately $61
million were unguaranteed residuals under closed-end leases.
49
<PAGE> 54
Wholesale Financing. The Company provides wholesale and rental fleet
financing for selected dealers. Generally, wholesale loans are short-term loans
with variable rates (prime rate based) and are secured by inventory. In some
instances, equipment manufacturers provide interest rate subsidies and other
credit support arrangements to induce the Company to finance their dealers.
The Company also provides capital financing to dealers primarily for
start-up, expansion or buy-out of existing dealers. These loans are usually
guaranteed by a manufacturer and are secured by some or all of the assets of the
dealership.
RISK MANAGEMENT. The Company employs a variety of techniques to manage
credit risk and minimize credit losses. The Company's equipment finance business
employs risk management techniques similar to those employed by the Company's
truck and truck trailer finance business. See "-- Truck and Truck Trailer
Financing and Leasing -- Risk Management".
DELIVERY OF EQUIPMENT FINANCING AND LEASING. The Company delivers equipment
financing and leasing products and services through 19 full-service branch
offices in the United States, Mexico and the United Kingdom, as well as through
two centralized operations.
Equipment Branches. Through relationships developed with distributors and
purchasers, branch offices provide financing for higher-priced industrial
equipment (such as heavy construction and mining equipment and machine tools).
In addition, branch offices support manufacturer marketing efforts by promoting
specific retail finance plans and providing quick credit responses. Because of
their experience in the industry, branch office personnel conduct all aspects of
the operations including sales activities, credit reviews, collections and
customer and account servicing.
Centralized Equipment Operations. The Company's centralized vendor support
operations for equipment financing and leasing provide specialized financing
products to specific niche markets, such as material handling and light
construction equipment, golf cars and turf maintenance equipment. These products
are provided primarily on the basis of operating agreements with manufacturers
in a quasi-captive market environment. The centralized operation allows the
Company to take advantage of operating efficiencies in light of the size of the
individual transactions it handles (generally less than $50,000) and the
Company's close relationship with manufacturers. In addition, the Company has a
separate centralized operation devoted to providing financing and supporting
vendor programs in the communications equipment industry.
STRATEGIC INITIATIVES. The Company seeks to increase its penetration in the
equipment financing and leasing markets by continuing to invest in its delivery
systems, technology, personnel and marketing programs.
Customer Service. The Company seeks to differentiate itself from its
competitors by providing premium service to manufacturers, dealers, distributors
and users of equipment financing and leasing products. Elements of this premium
service include, among other things, timely response to customer needs,
employing marketing professionals with in-depth product and industry knowledge
and emphasizing long-standing personal relationships.
Dealer-based Services. The Company continues to develop both internal and
dealer-based technology to improve services to the dealer customer base by
automating dealer financing tasks, including preparing finance, lease and
insurance premium quotations and electronic document preparation.
Machine Tool Financing. In late 1995, the Company acquired a machine tool
financing company in order to increase its financing activity for the machine
tool market. Financing in this market is very fragmented. The Company intends to
use the same approach to this market as it does in other equipment financing
markets, by targeting manufacturers, establishing and expanding relationships
with dealers and providing retail, wholesale and lease programs with the user in
mind.
International Expansion. The Company's business in Canada and the United
Kingdom is marketed on both an indirect (dealer sourced) and direct (purchaser
sourced) basis. The Company
50
<PAGE> 55
believes its long-standing relationships in the United States with manufacturers
will benefit its presence in Canada and the United Kingdom. In addition, the
Company believes the Mexican market provides the Company with growth
opportunities.
MANUFACTURED HOUSING
OVERVIEW. The Company believes it is the third largest provider of
financing to the manufactured housing industry in the United States, providing
financing both to dealers and purchasers of manufactured housing. The Company's
manufactured housing finance business, conducted through FCFC, purchases
manufactured housing retail installment contracts originated by retail dealers
in financing the sale of manufactured housing, originates and services direct
loans to purchasers, and provides wholesale financing to approved manufactured
housing dealers. The Company also offers commercial business loans to selected
dealers to provide capital to build new retail sales centers, update existing
facilities or expand into community park sales.
According to the U.S. Department of Commerce, manufactured housing
shipments represented 20.2% of new single-family housing starts and 31.2% of new
single-family homes sold in 1994. The Company maintains agreements with leading
manufacturers of manufactured housing, and the Company originates a significant
portion of its retail manufactured housing financing receivables through one
such relationship. By working through the manufactured housing distribution
channel, the Company has developed relationships with the key dealers in the
industry which have helped the Company's manufactured housing net receivables to
increase from $697.2 million in 1991 to $2.0 billion in 1995. The Company
considers its manufactured housing activities to be a commercial business
principally because the predominant portion of its financing receivables is
obtained from its relationships with manufacturers and dealers, notwithstanding
that the credit and related risks typically are that of the consumer purchaser
of the housing.
PRODUCTS AND SERVICES. The Company offers a variety of financing products
and services to dealers and individual retail purchasers of both new and
pre-owned manufactured homes.
The following table sets forth certain information regarding the Company's
manufactured housing receivables:
MANUFACTURED HOUSING
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Receivables (In Millions)
Retail.......................... $1,601.6 $1,329.2 $1,042.5 $ 812.4 $ 597.8
Wholesale....................... 432.5 340.0 247.7 171.5 99.4
-------- -------- -------- -------- --------
Total...................... $2,034.1 $1,669.2 $1,290.2 $ 983.9 $ 697.2
======== ======== ======== ======== ========
Retail Receivables
Average account balance....... $ 23,990 $ 22,134 $ 20,306 $ 19,045 $ 17,732
Number of accounts............ 66,762 60,052 51,339 42,656 33,713
Finance charge yield.......... 11.47% 11.94% 12.44% 12.99% 12.96%
Original term (In Months)..... 210 200 194 187 181
60+ days contractual
delinquency................ 0.85% 0.64% 0.67% 0.81% 1.19%
Losses as a percentage of
average amount advanced.... 1.05% 0.81% 0.83% 0.93% 1.11%
Wholesale Receivables
Average balance per dealer.... $443,135 $354,906 $312,753 $283,471 $261,579
Number of active dealers...... 976 958 792 605 380
</TABLE>
51
<PAGE> 56
Retail Financing. Retail finance products provided by the Company include
(i) the purchase of a retail installment contract or a direct loan for the
purchase of a manufactured home only, (ii) a retail installment contract or loan
on a manufactured home and added amenities such as furnishings, air
conditioning, skirting, appliances and patios and (iii) loans covering both a
manufactured home and the related real estate. Additionally, the Company
purchases retail loans from captive finance companies of manufacturers which
normally carry some form of loss protection. Retail financing products are
generally secured by a lien on the home and have varying maturities, down
payments and interest rates. Original loan terms range up to 25 years. Rates
offered include fixed, variable and graduated rate programs.
Wholesale Financing. The Company provides revolving lines of credit to in
excess of 900 approved manufactured housing retailers in connection with their
inventory purchases of manufactured homes from approximately 90 pre-approved
manufacturers. Generally, wholesale loans are short-term loans with variable
rates (prime rate based) and are secured by inventory. Agreements with
manufacturers provide for repurchase of inventory in the event of retailer
default. Manufacturers may also subsidize the cost of the wholesale financing,
thereby allowing the Company to offer reduced rate financing and extensions on
the initiation of principal payments by retailers.
In addition, in order to stimulate incremental retail and wholesale finance
volume, the Company offers programs and products to key retailers, such as
financing for construction or upgrade of model home centers or development
financing for manufactured home communities. The Company has developed products
and services for manufacturers and retailers of manufactured homes in order to
strengthen strategic alliances and private label finance programs.
RISK MANAGEMENT. Risk management in the Company's manufactured housing
lending operations combines elements of risk management in both the consumer and
commercial segments. As manufactured housing loans are marketed as a commercial
finance product, the Company generally obtains applications for retail
installment sales contracts from approved retailers, and generally performs an
initial credit scoring analysis to determine how the application should be
processed. Applications which are not denied continue to the next stage where
the Company generally conducts a full credit background review consistent with
the consumer finance nature of the individual credit risk, verifying employment,
income and credit references, rental or mortgage experience and credit sources.
As with consumer finance lending, credit decisions are based on established
underwriting guidelines, and an appropriate credit grade is assigned to each
application approved.
Credit underwriting is performed individually on each application submitted
on individual purchaser transactions. Dealers are reviewed periodically to
determine performance and financial status under all terms and conditions of
agreements. Dealer principals generally provide personal guarantees and agree to
repurchase or indemnify the Company from loss for any contracts where fraudulent
conditions are discovered.
DELIVERY OF MANUFACTURED HOUSING FINANCING. The Company distributes
manufactured housing financing through a network of five regional and 14 sales
purchase offices located throughout the United States. The Company's sales
purchase offices establish and maintain relationships with retailers and also
process, review and fund retail credit applications generated from direct or
indirect sources. The Company's regional offices are responsible for approving
and reviewing retailers as well as performing collections and servicing
activities for the retail portfolio. Additionally, the Company has established a
centralized processing center to consolidate certain aspects of its operations.
The Company believes that this distribution system allows the Company to
maintain close relationships with dealers and individual customers while
realizing efficiencies through centralizing certain functions.
52
<PAGE> 57
STRATEGIC INITIATIVES. The Company supplements its retail and wholesale
financing products by providing commercial business loans and dealer training
programs and seminars for dealers. Additional initiatives are designed to
further strengthen the Company's competitive advantage while also tapping into
new market niches:
Customer Service. The Company seeks to differentiate itself from its
competitors by providing premium service to manufacturers, dealers and
purchasers of manufactured housing. Elements of this premium service include,
among other things, timely response to customer needs, employing marketing
professionals with in-depth product and industry knowledge and emphasizing long-
standing personal relationships.
Expanded Distribution Network. The Company seeks additional distribution
networks such as manufactured home community operators and community banks. The
Company believes that these new business sources will enhance the Company's
penetration of the pre-owned manufactured housing market.
OTHER COMMERCIAL ACTIVITIES
AUTO FLEET LEASING AND MANAGEMENT. The Company provides leasing and
management services for corporations and municipalities that generally have auto
and light truck fleets of 100 or more vehicles. Fleet leasing service activities
are centralized with nine regional sales offices from which the Company
emphasizes customer service.
The Company's auto fleet management operations provide vehicle leasing and,
for a fee, vehicle management services that primarily include the administration
of vehicle purchase, maintenance and disposal. Auto fleet revenue consists of
leasing revenue and fees for providing various management services. Upon
assuming management of a fleet, the Company seeks to replace vehicles with those
leased by the Company. Typical leases are open-ended, in which the customer is
responsible for the residual value at the end of the lease. Less than 5% of the
Company's leases are closed-end, under which the Company accepts residual risk
at the end of the lease. Leases are usually 36 to 60 months in duration, but the
customer has a contractual right to end the lease any time after 12 months. The
Company had approximately $340 million in auto fleet management related assets
at December 31, 1995.
SMALL BUSINESS ADMINISTRATION LENDING. The Company recently entered the
small business administration loan market under which it extends credit that is
partially guaranteed by the federal government. Financing is provided to small
business customers on a nationwide basis. Operating through two regional offices
at December 31, 1995, the Company had approximately $41 million in net
guaranteed receivables and servicing rights for approximately $83 million of net
receivables.
RELOCATION SERVICES. The Company provides corporations and certain agencies
of the federal government with assistance in employee relocation, origination of
mortgages and management and disposal of residential real estate. The Company
believes that it is a significant provider of relocation services to certain
agencies of the federal government. Ford is presently the Company's largest
corporate client for relocation services.
The Company markets relocation services by competitive pricing, superior
customer service and comprehensive capabilities through two centralized service
centers. Revenue consists primarily of fees from consulting services which
include the marketing, management, acquisition and resale of residential real
estate, the transportation and storage of personal property, and tracking and
reporting of related expenses for clients. While the Company generally bears no
resale risk on real estate marketed in connection with corporate relocations,
the Company does bear the resale risk on homes marketed in connection with
relocations of federal government employees. Market value of these properties is
determined by independent appraisals and the properties are acquired at a pre-
determined discount to the appraised values. On December 31, 1995, the Company
held an ownership position in 835 properties for a total investment of $125
million.
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<PAGE> 58
AUTO CLUB AND ROADSIDE ASSISTANCE. The Company offers various emergency
roadside assistance and related auto club services to consumers through major
corporations, primarily automobile manufacturers, including Ford (the largest
client of the Company's auto club). Services offered include emergency road
service, custom trip routing, discounts on lodging and car rentals and ambulance
service reimbursement.
Based on industry data, the Company believes it operates the second largest
auto club in the United States, with approximately 9.2 million members at
December 31, 1995. The auto club has been increasing its customer base by
approximately 300,000 members per month, substantially all of which is due to
Ford's roadside assistance program operated by the Company. The portion of
non-Ford vehicle-related customer base has decreased in each of the last five
years, primarily as a result of other automakers including roadside assistance
benefits as a standard option on all new vehicles as a sales enhancement.
INTERNATIONAL OPERATIONS
The Company has operations in Japan, the United Kingdom, Canada, Puerto
Rico and Mexico. The foreign operations of the Company consist principally of
its consumer operation in Japan (more than 70% of total foreign operations based
on assets at December 31, 1995). Total net receivables in Japan have grown from
$1.0 billion in 1992 to $2.1 billion in 1995, representing a compound annual
growth rate of 25.9%. Similarly, operating income from the Company's operation
in Japan has grown from $52.3 million in 1992 to $164.8 million in 1995, a
compound annual growth rate of 46.6%. Likewise, the number of branch offices in
Japan has risen from 182 to 294 during this period. The Company believes that
its operation in Japan represents a significant growth opportunity, a platform
for possible expansion in the Pacific Rim and a model for other international
expansion.
The following table sets forth certain information relating to the
Company's international operations (dollars in millions):
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Net Receivables......... $3,093.0 $2,509.7 $1,930.0 $1,537.4 $1,523.9
Total Assets.................. 4,102.8 3,649.7 2,971.5 2,551.9 2,703.5
Operating Income (Loss)....... 197.8 133.9 72.5 58.3 (3.2)
Number of Branches............ 404 329 278 256 240
</TABLE>
The Company's international operations have represented an increasingly
important source of new business for the Company. Total net finance receivables
have grown from $1.5 billion in 1992 to $3.1 billion in 1995, representing a
compound annual growth rate of 26.5%. Likewise, total operating income has risen
from $58.3 million in 1992 to $197.8 million in 1995, a compound annual growth
rate of 49.2%. An increase of 148 branches over this period has provided the
foundation for this growth.
RELATED INSURANCE
The Company, through certain subsidiaries, makes available various credit
and non-credit insurance products to its finance customers. Insurance products
offered to the Company's consumer finance customers include credit life, credit
accident and health, accidental death and dismemberment, involuntary
unemployment and personal property insurance. Insurance products offered to the
Company's commercial finance customers include commercial auto and dealers' open
lot physical damage, credit life, motor truck cargo and extended coverage
insurance. In addition to INSURANCE UNDERWRITING, the Company also receives
compensation for certain insurance programs underwritten by other companies. The
Company does not underwrite liability insurance. The Company markets its
insurance products to its consumer and commercial finance customers
54
<PAGE> 59
through the same delivery systems used to market its consumer and commercial
finance products, respectively.
The purchase of insurance by a finance customer is optional with the
exception of physical damage insurance on loan collateral which is required. The
customer can purchase such insurance either from the Company or an alternative
carrier. Premiums for insurance coverage are generally financed as part of the
insured's finance obligation. In addition to leveraging the Company's
distribution systems, the Company seeks to leverage its existing insurance
customer base by marketing to its customers non-credit insurance products.
The Company continues to market new insurance products to complement its
core lines of business. In November 1995, the Company began marketing inventory
insurance for dealers of manufactured housing.
STATISTICAL INFORMATION. The following tables set forth certain information
relating to the Company's insurance operations (in millions):
INSURANCE STATISTICAL DATA(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Written Premium
Credit life, accident and other
related............................... $240.6 $242.4 $195.1 $148.3 $112.3
Physical damage.......................... 180.3 168.7 138.9 107.7 85.0
Other casualty........................... 69.6 54.5 35.7 36.1 32.7
------ ------ ------ ------ ------
Total................................. $490.5 $465.6 $369.7 $292.1 $230.0
====== ====== ====== ====== ======
Premium Revenue(2)
Credit life, accident and other
related............................... $164.8 $148.1 $123.6 $107.4 $ 99.7
Physical damage.......................... 148.5 136.7 116.9 107.0 98.6
Other casualty........................... 57.3 44.2 30.4 35.7 38.0
------ ------ ------ ------ ------
$370.6 $329.0 $270.9 $250.1 $236.3
====== ====== ====== ====== ======
Investment Income.......................... $ 68.5 $ 47.3 $ 41.4 $ 47.5 $ 61.7
====== ====== ====== ====== ======
Benefits Paid or Provided.................. $142.5 $147.9 $118.9 $103.7 $ 99.9
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) This table does not reflect any direct or indirect expenses that may be
associated with the Company's insurance operations. The Company markets its
insurance products through its consumer and commercial distribution systems
and, accordingly, does not allocate overhead and related expenses to its
insurance operations.
(2) Includes compensation for insurance proceeds underwritten by other
companies.
INSURANCE RISK. The Company seeks to manage its insurance underwriting risk
through (i) strict underwriting guidelines applied either on an individual
policy or group basis, (ii) the REINSURANCE of certain risks with non-affiliated
reinsurers and (iii) the maintenance of reserves which are reviewed annually. In
addition, the Company's geographically and demographically diverse lending and
insurance customer base reduces concentrations of risk.
Underwriting Guidelines. Where permitted, the Company generally utilizes
health questionnaires to evaluate risks for prospective insureds under life and
health products. For certain casualty products, the Company evaluates risks
based on historical data and characteristics of the prospective insured
including equipment, usage/driving patterns and, for motor truck cargo
insurance, the goods being transported.
Reinsurance. The Company seeks to limit its loss exposures by securing
catastrophe and per risk EXCESS OF LOSS COVERAGES in the reinsurance
marketplace. These coverages are placed through brokers. The underlying
reinsurers are reviewed and approved by the Company with no first level
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<PAGE> 60
coverage provider rated less than "A" by A.M. Best Company. Within the last five
years, no catastrophe coverage claim has been filed.
Reserves. Reserves are established based on historical and actuarially
reviewed data to account for the estimated ultimate costs of claims and claim
adjustment expenses. Reserves are reviewed annually by an independent actuary.
Claims include those that have been reported but not yet settled, reopened
claims, and claims which have been incurred but not reported.
ADDITIONAL INFORMATION REGARDING THE COMPANY
LOAN LOSS RESERVES AND CREDIT LOSSES. The Company maintains an allowance
for losses on finance receivables at an amount which it believes is sufficient
to provide adequate protection against anticipated losses in the portfolios. The
allowance is determined principally on the basis of historical loss experience,
and reflects management's judgment of additional loss potential considering
future economic conditions and the nature and characteristics of the underlying
finance receivables. Additions to the allowance are charged to the provision for
losses on finance receivables.
Finance receivables are charged to the allowance for losses when they are
deemed to be uncollectible. Additionally, Company policy generally provides for
CHARGE-OFF of various types of accounts on a contractual basis. Consumer direct
and other installment and credit card receivables are charged to the allowance
for losses when they become 180 days delinquent. All other finance receivables
are charged to the allowance for losses when any of the following conditions
occur: (i) the related security has been converted or destroyed; (ii) the
related security has been repossessed and sold or held for sale for one year; or
(iii) the related security has not been repossessed and the receivable has
become one year delinquent. A delinquent account is one on which the customer
has not made payments as contractually agreed. Recoveries on losses previously
charged to the allowance are credited to the allowance at the time recovery is
collected.
Although the allowance for losses in finance receivables reflected in the
Company's supplemental combined balance sheet at December 31, 1995 is considered
adequate by the Company's management, there can be no assurance that this
allowance will prove to be adequate over time to cover ultimate losses in
connection with the Company's finance receivables. This allowance may prove to
be inadequate due to unanticipated adverse changes in the economy or discrete
events adversely affecting specific customers or industries. The Company's
results of operations, financial condition and the market value of the Common
Stock could be materially adversely affected to the extent that the Company's
allowance is insufficient to cover such changes or events.
The Company employs a variety of credit analysis techniques appropriately
tailored to each of its lines of business. Additionally, the Company has
developed and regularly updates proprietary credit scoring systems designed to
improve its risk-based pricing. The Company uses credit scoring in most, but not
all, extensions of consumer credit. In addition, the Company aggressively
employs VINTAGE ANALYSIS and customer service and collection procedures for
early detection and resolution of potential credit problems.
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<PAGE> 61
The following table sets forth information as of the dates shown concerning
net finance receivables, contractually delinquent net finance receivables,
allowance for losses and net credit losses. This information should be read in
conjunction with the discussion of the Company's financial condition under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Financial Condition" (dollars in millions).
ANALYSIS OF NET FINANCE RECEIVABLES, 60 + DAYS CONTRACTUAL DELINQUENCY AND
LOSSES AS A PERCENT OF AVERAGE AMOUNT ADVANCED
<TABLE>
<CAPTION>
YEAR ENDED OR AT DECEMBER 31
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Finance Receivables
Home equity lending............................. $14,386.2 $12,349.9 $10,619.7 $ 9,624.8 $ 8,238.1
Personal lending/retail sales finance........... 6,117.6 5,284.5 4,354.2 3,646.9 3,226.3
Credit card..................................... 4,818.6 3,915.3 3,104.8 2,614.6 2,668.4
Truck and truck trailer......................... 7,648.4 6,681.5 5,540.0 4,350.7 4,000.3
Equipment....................................... 3,827.2 2,987.3 2,464.6 2,290.6 2,157.9
Manufactured housing............................ 2,034.1 1,669.2 1,290.2 983.9 697.2
Other commercial................................ 416.3 336.5 345.3 324.7 269.8
Premium and accruals............................ 454.1 461.5 575.9 534.8 414.8
--------- --------- --------- --------- ---------
Total net finance receivables................... $39,702.5 $33,685.7 $28,294.7 $24,371.0 $21,672.8
========= ========= ========= ========= =========
60 + Days Contractually Delinquent
Home equity lending............................. 1.88% 1.45% 1.50% 1.95% 2.65%
Personal lending/retail sales finance........... 2.63 2.37 2.48 3.29 3.80
Credit card..................................... 3.50 3.02 2.71 3.04 3.63
Truck and truck trailer......................... .82 .32 .68 1.02 2.22
Equipment....................................... .66 .34 .41 .69 1.33
Manufactured housing............................ .85 .64 .67 .81 1.19
Total Company................................... 1.71 1.35 1.43 1.85 2.56
Losses as a Percent of Average Amount Advanced
Home equity lending............................. 1.08 1.05 1.14 1.34 1.20
Personal lending/retail sales finance........... 4.33 3.67 3.32 4.02 4.51
Credit card..................................... 4.89 4.65 4.67 6.63 6.81
Truck and truck trailer......................... .16 .06 .26 .52 .66
Equipment....................................... .22 .11 .26 .51 .60
Manufactured housing............................ 1.05 .81 .83 .93 1.11
Total Company................................... 1.70 1.64 1.68 2.04 2.17
</TABLE>
RECEIVABLES CONCENTRATION. The Company's ten largest accounts at December
31, 1995 (all of which were current at December 31, 1995) represented 0.7% of
the Company's total gross finance receivables outstanding. All ten of such
accounts are commercial finance accounts and are secured.
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<PAGE> 62
The following table shows the concentration of the Company's net finance
receivables in the ten states and foreign jurisdictions with the highest
concentrations (dollars in millions):
NET FINANCE RECEIVABLES
TEN LARGEST STATES OR FOREIGN JURISDICTIONS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------------------------------------------------
PERCENT OF PERCENT OF PERCENT OF
TOTAL NET CONSUMER COMMERCIAL
TOTAL FINANCE CONSUMER NET FINANCE COMMERCIAL NET FINANCE
AMOUNT RECEIVABLES AMOUNT RECEIVABLES AMOUNT RECEIVABLES
--------- ----------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
California..... $ 4,350.9 10.9% $ 3,138.5 11.3% $1,212.4 9.9%
Florida........ 2,396.0 6.0 1,876.2 6.8 519.8 4.2
Texas.......... 2,282.8 5.7 1,279.7 4.6 1,003.1 8.2
Japan.......... 2,125.7 5.3 2,125.7 7.7 -- --
Georgia........ 1,640.9 4.1 1,215.2 4.4 425.7 3.5
Pennsylvania... 1,582.6 3.9 1,006.4 3.6 576.2 4.7
North
Carolina..... 1,581.2 3.9 1,242.5 4.5 338.7 2.7
New York....... 1,576.9 3.9 1,118.3 4.0 458.6 3.7
Illinois....... 1,531.5 3.8 929.4 3.3 602.1 4.9
Ohio........... 1,523.5 3.8 1,043.7 3.7 479.8 3.9
--------- ----- --------- ----- -------- -----
Total........ $20,592.0 51.3% $14,975.6 53.9% $5,616.4 45.7%
========= ===== ========= ===== ======== =====
</TABLE>
COMPETITION. The markets in which the Company operates are highly
competitive. Many of the competitors of the Company in different segments and
regions are large companies that have substantial capital, technological and
marketing resources, and some of these competitors are larger than the Company
and may have access to capital at a lower cost than the Company. The Company
believes that the finance charge rate is one of the primary competitive factors
in many of its markets. From time to time, competitors of the Company may seek
to compete aggressively on the basis of pricing, and the Company may lose market
share to the extent it is not willing to match competitor pricing, in order to
maintain interest margins.
Consumer Finance. Traditional competitors in the consumer finance business
include captive and independent finance companies, commercial banks and thrift
institutions, credit unions, industrial banks, credit card issuers, leasing
companies, manufacturers and vendors. On a local level, community banks and
smaller independent finance and/or mortgage companies are a competitive force.
Additionally, substantial national financial services networks have been formed
by major brokerage firms, insurance companies and bank holding companies. Some
competitors have substantial local market positions; others are part of large,
diversified organizations. Because of their longstanding insured deposit base,
many banks that compete with the Company are able to offer financial services on
very competitive terms.
Competition varies across products offered. While there is considerable
competition in the home equity loan market, the market is fragmented with no
single competitor claiming more than a 10% market share. The Company, as a
portfolio lender, maintains considerable product and delivery flexibility, which
the Company believes is a competitive advantage.
Competition in the credit card industry has been intense over the last
several years. Large money-center banks have been seeking to expand their
profitable credit card units through aggressive pricing and marketing. In
addition, many non-bank competitors specialize in certain growth strategies,
such as partnership and database marketing. The Company addresses these
competitive pressures by focusing on targeted segments of the consumer market,
co-branding relationships and its private label credit card programs.
Competition also differs between the operating divisions of the Company.
For example, competitors of the Company's branch system are distinct from the
competitors of the Company's
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<PAGE> 63
centralized lending operation. In addition, competition varies a great deal
across geographic regions.
Commercial Finance. In its commercial finance business, the Company
competes with captive and independent finance companies, commercial banks,
thrift and other financial institutions, leasing companies, lease brokers,
manufacturers, vendors and others who extend or arrange credit for the
acquisition of truck and truck trailers and equipment.
The Company believes, based on its experience in the industry, that the
primary competitive factors in the commercial finance and leasing business are
price, product quality, risk management, new account marketing and retention of
customers through emphasis on superior customer service. In addition, the
Company believes that innovation is necessary to compete in the industry,
including enhanced customer service, specialization in certain types of
equipment, exploitation of alternative channels of distribution and, in certain
lines of business, optimization of tax treatment between owner and user.
Purchasers of equipment financed by the Company generally seek transactions that
are simple, flexible and customer responsive.
Insurance. Competitors in the insurance business include national, regional
and local insurance companies, as well as self-insurance programs and captive
insurers. Competition in the insurance business is based upon price, product
design and service levels rendered to producers and policyholders. The insurance
business is extremely competitive, in both price and services, and no single
insurer is dominant. The Company believes that its ability to market its
insurance products through its consumer and commercial distribution systems
gives it a distinct competitive advantage over its competitors who do not have
such ability.
EMPLOYEES. At December 31, 1995, the Company had approximately 16,600
full-time and part-time employees, approximately 12,500 of whom were employed in
connection with the consumer finance business and approximately 2,500 of whom
were employed in connection with the commercial finance business. The Company is
not subject to any collective bargaining arrangements. The Company believes that
its employee relations are good.
PROPERTIES. The Company owns its administrative headquarters in Irving,
Texas, consisting of approximately 550,000 square feet. At December 31, 1995,
the Company had approximately 2,100 offices worldwide, including 1,947 consumer
and commercial branch offices as well as other offices performing centralized
functions. Substantially all of these offices are leased pursuant to leases with
terms of generally five years or less. The Company believes that its properties
are suitable and adequate for its business as presently conducted.
LEGAL PROCEEDINGS. The Company is a defendant in various lawsuits arising
in the ordinary course of its business. The Company aggressively manages its
litigation and assesses appropriate responses to its lawsuits in light of a
number of factors, including potential impact of the actions on the conduct of
the Company's operations. While, in the opinion of management, the resolution of
any of these matters is not expected to have a material adverse effect on the
Company's financial condition or results of operations, there can be no
assurance that an adverse decision in one or more of such lawsuits will not have
such a material adverse effect. The outcome of various individual lawsuits,
however, may affect the manner in which the Company conducts its business, as
further described below.
Alabama Concentration. The Company and certain of its subsidiaries are
defendants in a higher concentration of lawsuits in the State of Alabama as
compared to the remainder of the United States. Management believes that the
aggregate amount of lawsuits instituted in Alabama represents additional
exposure to the Company because of the recent history of juries in Alabama to
award significant damages, both compensatory and punitive, in civil cases. For
example, in 1994, a jury in Alabama awarded damages in excess of $30,000,000
against the Company in one case relating to a $25,000 real estate-secured loan.
The Company's post-trial motion in that case was granted, and the jury verdict
overturned. The case was subsequently settled. In addition, a recent
59
<PAGE> 64
Alabama Supreme Court decision, McCullar v. Universal Underwriters Life Ins.
Co., et al., (a case in which the Company was not a party), has cast doubt on
the method many lenders, including the Company, have used to calculate coverage
amounts and premiums with respect to credit insurance. A motion for
reconsideration is currently pending in that case. Although the impact of this
decision on the Company's past activities and pending litigation is not clear,
as a result of this ruling the Company has changed its practices in this area to
conform to the Court's opinion as it currently stands. At December 31, 1995, the
Company was a defendant in 81 lawsuits in Alabama, 17 of which were class action
lawsuits. Eight of the class action lawsuits involve similar claims related to
the sale of credit insurance. The other lawsuits involved various claims related
to credit transactions, insurance products or the collection of credit accounts.
Credit Card Fee Litigation. In various states consumers have filed lawsuits
against credit card issuers that claim the issuer does not have the authority to
export fees and charges that exceed the numerical interest rate authorized by
the law of the state where the issuer is domiciled. For example, the California
and Colorado State Supreme Courts have upheld the ability of an out-of-state
bank to export all fees and charges, while the New Jersey State Supreme Court
and a Pennsylvania state appeals court have ruled that only the numerical
interest rate can be exported. In a similar case against a subsidiary of the
Company, Szydlik v. Associates National Bank (Delaware), ANB was sued in a
Pennsylvania class action that alleged ANB's late fees, overlimit fees and
returned check fees were in excess of those allowed by Pennsylvania law. The
trial court in Szydlik dismissed the case, and the United States Court of
Appeals for the Third Circuit has held that such fees constitute interest and
may be exported by a national bank from its state of domicile. With respect to
certain issues relating to fees allowed under California law relating to a
predecessor bank, the case was remanded to federal district court for further
proceedings. An adverse ultimate judgment in Szydlik or an adverse United States
Supreme Court ruling in a similar case could affect ANB's future ability to
export fees and charges, which could adversely impact its results of operations.
The United States Supreme Court has recently agreed to hear arguments in one
such case.
REGULATION. The Company's operations are subject to extensive state and
Federal regulations including, but not limited to, the following Federal
statutes and regulations: the Consumer Credit Protection Act of 1968, as amended
(including certain provisions thereof commonly known as the "Truth-in-Lending
Act" or "TILA"), the Equal Credit Opportunity Act of 1974, as amended (the
"ECOA"), the Fair Credit Reporting Act of 1970, as amended (the "FCRA") and the
Real Estate Settlement Procedures Act (the "RESPA"). In addition, the Company is
subject to state laws and regulations with respect to the amount of interest and
other charges which lenders can collect on loans.
In the judgment of the Company, existing statutes and regulations have not
had a materially adverse effect on the operations of the Company. However, it is
not possible to forecast the nature of future legislation, regulations, judicial
decisions, orders or regulatory interpretations with respect to the foregoing or
their impact on the future business, financial condition or prospects of the
Company.
Consumer Finance. The Company's consumer finance business, including its
credit card business, is subject to detailed supervision by Federal and state
authorities under legislation and regulations which generally require licensing
of the lender, limitations on the amount, duration and charges for various
categories of loans, adequate disclosure of certain contract terms and
limitations on certain collection practices and creditor remedies. Licenses are
renewable, and may be subject to revocation for violations of such laws and
regulations. In addition, most states have usury laws which limit interest
rates. Federal legislation preempts state interest rate ceilings on first
mortgage loans and state laws which restrict various types of alternative home
equity receivables, except in those states which have specifically opted out of
such preemption.
The Company is required to comply with TILA and Regulation Z promulgated
thereunder. TILA requires, among other things, disclosure of pertinent elements
of consumer credit transactions,
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including the finance charges and the comparative costs of credit expressed in
terms of an annual percentage rate. The TILA disclosure requirements are
designed to provide consumers with uniform, understandable information with
respect to the terms and conditions of loans and credit transactions in order to
enable them to compare credit terms. TILA also guarantees consumers a three-day
right to cancel certain credit transactions, including refinanced mortgages and
junior mortgage loans on a consumer's primary residence. Section 32 of
Regulation Z mandates that applicants for real estate loans which contain
certain rate and fee amounts be provided an additional three days waiting period
prior to signing loan documents.
In addition, the Company is required to comply with the ECOA which, in
part, prohibits credit discrimination on the basis of race, color, religion,
sex, marital status, national origin and age. Regulation B promulgated under
ECOA restricts the type of information that may be obtained by creditors in
connection with a credit application. It also requires certain disclosures by
the lender regarding consumer rights and requires lenders to advise applicants
who are denied credit of the reasons therefor. In instances where a loan
application is denied or the rate or charge on a loan is increased as a result
of information obtained from a consumer credit agency, the FCRA requires the
lender to supply the applicant with the name and address of the reporting
agency.
RESPA has been extended to cover real estate secured loans that are
subordinated to other mortgage loans. RESPA and Regulation X thereunder require
disclosure of certain information to customers within prescribed time frames and
regulate the receipt or payment of fees or charges for services performed.
ANB is under the supervision of, and subject to examination by, the Office
of the Comptroller of the Currency ("OCC"). ANB's charter limits its activities
to credit card operations. In addition, ANB is subject to the rules and
regulations of the Federal Reserve Board and the Federal Deposit Insurance
Corporation ("FDIC"). Associates Investment is regulated by the FDIC and the
Utah Department of Financial Institutions. ANB and Associates Investment are
subject to regulation relating to capital adequacy, leverage, loans, deposits,
consumer protection, the payment of dividends, transactions with affiliates and
other aspects of operations. In addition, both ANB and Associates Investment are
subject to the provisions of the Community Reinvestment Act.
The right of federally insured depositary institutions, including ANB and
Associates Investment, to export certain charges to consumers, such as late
fees, overlimit fees and returned check fees, is not settled in some states
under existing law. The restrictions imposed by such laws and regulations could
limit the Company's discretion in operating ANB and Associates Investment.
Federal and state legislation seeking to regulate the maximum interest rate
and/or other charges on consumer finance receivables has been introduced in the
past, and may from time to time be introduced in the future. However, it is not
possible to predict the nature of future legislation with respect to the
foregoing or its impact on the future business, financial condition or prospects
of the Company.
Commercial Finance. Although most states do not regulate commercial
finance, certain states do require licensing of lenders and financers,
limitations on interest rates and other charges, adequate disclosure of certain
contract terms and limitations on certain collection practices and creditor
remedies. The Company is also required to comply with certain provisions of the
ECOA which are applicable to commercial loans.
Small business administration loans made by the Company are governed by the
Small Business Act and the Small Business Investment Act of 1958, as amended,
and may be subject to the same regulations by certain states as are other
commercial finance operations. The federal statutes and regulations specify the
types of loans and loan amounts which are eligible for the Small Business
Administration's guaranty as well as the servicing requirements imposed on the
lender to maintain small business administration guarantees.
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Insurance. The insurance operations of the Company are subject to detailed
regulation and supervision in each state or other jurisdiction in which they
conduct business. The laws of the various jurisdictions establish supervisory
and regulatory agencies with broad administrative powers. Generally, such laws
cover, among other things, types of insurance that may be sold, policy forms,
reserve requirements, permissible investments, premiums charged, trade
practices, limitations on the amount of dividends payable by any insurance
company and guidelines and standards with respect to dealings between insurance
companies and affiliates.
Foreign Regulation. The Company is subject to regulation in those countries
in which the Company has operations and in most cases has been required to
obtain central governmental approval before commencing business. In the United
Kingdom, the Company's lending activities are generally subject to regulation
and licensing under the Consumer Credit Act by the Office of Fair Trading, and
its insurance activities are regulated by the Department of Trade. Japanese
lending activities are licensed and regulated by the Ministry of Finance
pursuant to the Moneylenders Law. In Canada, legislation and regulation relating
to disclosure and consumer protection vary from province to province, and the
Company is subject to limitations on the effective rate of interest. Supervision
of the Company's activities in Mexico is provided, at the federal level, by the
Treasury Ministry, Banking Commission and the Central Bank (Banco de Mexico).
RELATIONSHIP WITH FORD
Immediately prior to the Offerings, Ford and FFSG, an indirect,
wholly-owned subsidiary of Ford, will be the only stockholders of the Company.
Upon completion of the Offerings, Ford will beneficially own % of the
outstanding Class A Common Stock ( % if the Underwriters' over-allotment
options are exercised in full) and 100% of the outstanding Class B Common Stock
of the Company (which Class B Common Stock is entitled to five votes per share
on any matter submitted to a vote of the Company's stockholders). Upon
completion of the Offerings, the Common Stock beneficially owned by Ford will
represent in the aggregate approximately % of the combined voting power of
all of the outstanding Common Stock (or approximately % if the Underwriters'
over-allotment options are exercised in full). For as long as Ford continues to
beneficially own shares of Common Stock representing more than 50% of the
combined voting power of the Common Stock, Ford will be able to direct the
election of all of the members of the Company's board of directors and exercise
a controlling influence over the business and affairs of the Company, including
any determinations with respect to mergers or other business combinations
involving the Company, the acquisition or disposition of assets by the Company,
the incurrence of indebtedness by the Company, the issuance of any additional
Common Stock or other equity securities, and the payment of dividends with
respect to Common Stock. Similarly, Ford will have the power to determine
matters submitted to a vote of the Company's stockholders without the consent of
the Company's other stockholders, will have the power to prevent a change in
control of the Company and could take other actions that might be favorable to
Ford. See "Management".
Ford has advised the Company that its current intent is to continue to hold
all of the Common Stock beneficially owned by it following the Offerings.
However, Ford is not subject to any contractual obligation to retain its
controlling interest, except that Ford and the Company have agreed, subject to
certain exceptions, not to sell or otherwise dispose of any shares of Common
Stock of the Company for a period of 180 days after the date of this Prospectus
without the prior written consent of Goldman, Sachs & Co. As a result, there can
be no assurance concerning the period of time during which Ford will maintain
its beneficial ownership of Common Stock owned by it following the Offerings.
See "Underwriting".
Beneficial ownership of at least 80% of the total voting power and value of
the outstanding Common Stock is required in order for Ford to continue to
include the Company in its consolidated group for federal income tax purposes
and beneficial ownership of at least 80% of the total voting
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power and 80% of each class of nonvoting capital stock is required in order for
Ford to be able to effect a Tax-Free Spin-Off or certain other tax-free
transactions.
In addition, by virtue of its controlling beneficial ownership and the
terms of a tax-sharing agreement to be entered into between the Company and
Ford, Ford will effectively control all of the Company's tax decisions, and
conflicts of interest regarding tax matters between the Company and Ford may
arise. See "-- Tax-Sharing Agreement".
For a description of certain provisions of the Company's Restated
Certificate of Incorporation concerning the allocation of business opportunities
that may be suitable for both the Company and Ford, see "Description of Capital
Stock -- Certain Certificate of Incorporation and By-law Provisions -- Corporate
Opportunities".
Set forth below are descriptions of certain agreements, relationships and
transactions between the Company and Ford:
CORPORATE AGREEMENT. The Company and Ford intend to enter into a corporate
agreement (the "Corporate Agreement") under which the Company will grant to Ford
a continuing option, assignable to any of its subsidiaries, to purchase, under
certain circumstances, additional shares of Class B Common Stock or shares of
nonvoting capital stock of the Company (the "Stock Option"). The Stock Option
may be exercised simultaneously with the issuance of any equity security of the
Company (other than in the Offerings or upon the exercise of the Underwriters'
over-allotment options), with respect to Class B Common Stock, only to the
extent necessary to maintain its then-existing percentage of the total voting
power and value of the Company and, with respect to shares of nonvoting capital
stock, to the extent necessary to own 80% of each outstanding class of such
stock. The purchase price of the shares of Class B Common Stock purchased upon
any exercise of the Stock Option, subject to certain exceptions, will be based
on the market price of the Class A Common Stock, and the purchase price of
nonvoting capital stock will be the price at which such stock may be purchased
by third parties. The Stock Option expires in the event that Ford reduces its
beneficial ownership of Common Stock in the Company to Common Stock representing
less than 45% of the outstanding shares of Common Stock.
The Corporate Agreement will further provide that, upon the request of
Ford, the Company will use its best efforts to effect the registration under the
applicable federal and state securities laws of any of the shares of Common
Stock and nonvoting capital stock (and any other securities issued in respect of
or in exchange for either) beneficially owned by Ford for sale in accordance
with Ford's intended method of disposition thereof, and will take such other
actions as may be necessary to permit the sale thereof in other jurisdictions,
subject to certain specified limitations. Ford will also have the right which,
subject to certain limitations, it may exercise at any time and from time to
time, to include the shares of Common Stock and nonvoting capital stock (and any
other securities issued in respect of or in exchange for either) beneficially
owned by it in certain other registrations of common equity securities of the
Company initiated by the Company on its own behalf or on behalf of its other
stockholders. The Company will agree to pay all out-of-pocket costs and expenses
in connection with each such registration that Ford requests or in which Ford
participates. Subject to certain limitations specified in the Corporate
Agreement, such registration rights will be assignable by Ford and its assigns.
The Corporate Agreement will contain indemnification and contribution
provisions: (i) by Ford and its permitted assigns for the benefit of the Company
and related persons; and (ii) by the Company for the benefit of Ford and the
other persons entitled to effect registrations of Common Stock (and other
securities) pursuant to its terms and related persons.
The Corporate Agreement will also provide that for so long as Ford
maintains beneficial ownership of a majority of the number of outstanding shares
of Common Stock, the Company may not take any action or enter into any
commitment or agreement which may reasonably be anticipated to result, with or
without notice and with or without lapse of time, or otherwise, in a
contravention (or an event of default) by Ford of: (i) any provision of
applicable law or regulation, including but not limited to provisions pertaining
to the Code or the Employee Retirement Income Security Act of
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1974, as amended; (ii) any provision of Ford's, Ford Holdings, Inc.'s (an
indirect, wholly-owned subsidiary of Ford) or FFSG's certificates of
incorporation or by-laws; (iii) any credit agreement or other material
instrument binding upon Ford, Ford Holdings, Inc. or FFSG or any of their
respective assets or (iv) any judgment, order or decree of any governmental
body, agency or court having jurisdiction over Ford, Ford Holdings, Inc. or FFSG
or any of their respective assets.
The Corporate Agreement will provide that the Company will enter into a
similar agreement for the benefit of the Class B Transferee (as defined below),
if any.
TRADEMARK LICENSE AGREEMENT. The Company and Ford are parties to a
trademark license agreement pursuant to which Ford has granted to the Company a
nonexclusive license that permits the Company to use Ford's name and trademark
for general corporate identification purposes and in connection with the
business of FCFC in the United States (i.e., home equity lending and
manufactured housing lending) and the Company's credit card operations. The
agreement is terminable at the will of either party upon at least 180 days'
prior written notice and will automatically terminate if at any time Ford ceases
to own, directly or indirectly, more than 50% of the outstanding Common Stock of
the Company. Within 90 days following termination of the agreement, the Company
must cease using Ford's name and trademark; provided that it shall not be
required to replace trademark branded credit cards except in the normal course
of business on the normal expiration date of each such card, but in any event,
within 2 years of the date of termination. Effective January 1, 1996, the
Company has agreed to pay to Ford an annual royalty for such license in an
amount equal to 0.01% of the Company's total domestic assets at December 31 of
each year. Based upon the Company's total domestic assets at December 31, 1995,
such payment will be approximately $3.7 million for 1996. Prior to January 1,
1996, the Company's use of Ford's name and trademark was royalty free. The
royalty is subject to review by the parties every five years and may be changed
by the parties based on advice from an independent appraiser as to the market
value of the license.
TAX-SHARING AGREEMENT. The Company is, and after the Offerings will
continue to be, included in Ford's federal consolidated income tax group, and
the Company's federal income tax liability will be included in the consolidated
federal income tax liability of Ford and its subsidiaries. In certain
circumstances, certain of the Company's subsidiaries will also be included with
certain Ford subsidiaries in combined, consolidated or unitary income tax groups
for state and local tax purposes. The Company and Ford intend to enter into a
tax-sharing agreement (the "Tax-Sharing Agreement"). Pursuant to the Tax-Sharing
Agreement, the Company and Ford will make payments between them such that, with
respect to any period, the amount of taxes to be paid by the Company, subject to
certain adjustments, will be determined as though the Company were to file
separate federal, state and local income tax returns (including, except as
provided below, any amounts determined to be due as a result of a
redetermination of the tax liability of Ford arising from an audit or otherwise)
as the common parent of an affiliate group of corporations filing combined,
consolidated or unitary (as applicable) federal, state and local returns rather
than a consolidated subsidiary of Ford with respect to federal, state and local
income taxes. With respect to certain tax attributes, however, such as foreign
tax credits, the Company's right to reimbursement will be determined based on
the usage of such attributes by the consolidated group.
In determining the amount of tax-sharing payments under the Tax-Sharing
Agreement, Ford will prepare pro forma returns with respect to federal and
applicable state and local income taxes that reflect the same positions and
elections used by Ford in preparing the returns for Ford's consolidated group
and other applicable groups. Ford will continue to have all the rights of a
parent of a consolidated group (and similar rights provided for by applicable
state and local law with respect to a parent of a combined, consolidated or
unitary group), will be the sole and exclusive agent for the Company in any and
all matters relating to the income, franchise and similar liabilities of the
Company, will have sole and exclusive responsibility for the preparation and
filing of consolidated federal and consolidated or combined state and local
income tax returns (or amended returns), and will have the power, in its sole
discretion, to contest or compromise any asserted tax adjustment or
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deficiency and to file, litigate or compromise any claim for refund on behalf of
the Company. In addition, Ford has agreed to undertake to provide the
aforementioned services with respect to the Company's separate state and local
returns and the Company's foreign returns.
In general, the Company will be included in Ford's consolidated group for
federal income tax purposes for so long as Ford beneficially owns at least 80%
of the total voting power and value of the outstanding Common Stock. Each member
of a consolidated group is jointly and severally liable for the federal income
tax liability of each other member of the consolidated group. Accordingly,
although the Tax-Sharing Agreement allocates tax liabilities between the Company
and Ford, during the period in which the Company is included in Ford's
consolidated group, the Company could be liable in the event that any federal
tax liability is incurred, but not discharged, by any other member of Ford's
consolidated group. See "Risk Factors -- Control by and Relationship with Ford".
MANAGEMENT SERVICES AGREEMENT. Ford has provided (and as long as Ford
beneficially owns more than 50% of the outstanding Common Stock of the Company,
Ford expects to continue to provide), at the request of the Company, certain
services to the Company for commercially reasonable fees. These services, which
are the subject of a management services agreement between the Company and Ford,
include: (i) management and other technical and professional (e.g., legal and
tax) support; (ii) accounting and bookkeeping, including assistance with
policies, principles and procedures, budget and cost controls, and audit
programs; (iii) pension asset management; (iv) sales, marketing and operational
planning, including providing the Company with Ford customer data to facilitate
cross-marketing; and (v) insurance coverage under Ford's property and casualty
insurance policies such as liability, crime, property, workers' compensation and
directors' and officers' insurance. The aggregate annual payments by the Company
for (i) the services provided in clauses (i) through (iv) of the preceding
sentence are $3.5 million, subject to adjustment for inflation and (ii) the
insurance coverage provided in clause (v) of the preceding sentence will be
based on the Company's proportional share of the premium costs of such
coverages. Ford and the Company may each terminate the management services
agreement by giving the other party at least 180 days prior written notice. In
addition, if at any time Ford ceases to beneficially own more than 50% of the
outstanding voting stock of the Company or ceases for any reason, as determined
in Ford's reasonable discretion, to have effective control of the Company, then
the management services agreement shall terminate automatically. Following any
termination of the management services agreement, the Company will remain liable
for any retroactive insurance premium adjustments for the periods the Company
participated in Ford's insurance programs.
As described under "Business -- Commercial Finance -- Other Commercial
Activities", the Company provides relocation services to Ford and, through its
auto club operations, administers Ford's roadside assistance program. In
addition, the Company operates a computer system that supports the term-funding
operations of a Ford subsidiary. See Note 14 to the supplemental combined
financial statements.
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MANAGEMENT
The following table sets forth certain information concerning the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE AND FIVE-YEAR EMPLOYMENT HISTORY
- --------------------------- --- -----------------------------------------------------------
<S> <C> <C>
Keith W. Hughes............ 49 Chairman of the Board, Chief Executive Officer and Director
of the Company since February 1995; President and Director
of the Company from August 1991 until February 1995; Vice
Chairman of the Board and Director of the Company from
November 1988 until August 1991. Mr. Hughes is a director
of American Eagle Group, Inc. (insurance).
Joseph M. McQuillan........ 64 Vice Chairman of the Board and Director of the Company
since August 1991; Senior Executive Vice President,
Comptroller and Chief Accounting Officer from November
1988 until August 1991.
Harold D. Marshall......... 59 Vice Chairman of the Board and Director of the Company
since November 1988.
James E. Jack.............. 54 Senior Executive Vice President and Chief Financial Officer
of the Company since October 1993; Director of the Company
since December 1993; Executive Vice President and Chief
Financial Officer of the Company from March 1981 until
October 1993.
Roy A. Guthrie............. 42 Executive Vice President, Comptroller, Chief Accounting
Officer and Director of the Company since June 1995;
Senior Vice President, Comptroller and Chief Accounting
Officer of the Company from February 1990 until June
1995.
Chester D. Longenecker..... 49 Executive Vice President and General Counsel of the Company
since June 1986.
James B. Watts............. 60 Executive Vice President of the Company since May 1990.
James F. Metevier.......... 54 Senior Vice President of the Company since December 1995;
Senior Vice President of ACONA since March 1981.
Fredrick H. Stern.......... 43 Senior Vice President of the Company since February 1995;
Senior Vice President of Associates Corporation of North
America (A Texas Corporation) since February 1987.
</TABLE>
Upon completion of the Offerings, the Company will have a board of
directors consisting of the five current members of the Company's board of
directors identified above. After completion of the Offerings, the Company
anticipates that the size and composition of the board of directors will be
changed and will include three directors who will be officers of the Company,
two directors who will be officers of Ford and two directors who will be persons
not associated with the Company or Ford. Ford will have the ability to change
the size and composition of the Company's board of directors and committees of
the board of directors. See "Relationship with Ford".
The Company's board of directors is expected to appoint members to a
compensation committee of the board of directors (the "Compensation Committee")
and an audit committee of the board of directors (the "Audit Committee") after
independent directors are elected. Both such committees will be comprised solely
of independent directors. The Compensation Committee will establish remuneration
levels for officers of the Company, review management organization and
development, review significant employee benefit programs and establish and
administer executive compensation programs. The Audit Committee will recommend
to the board of directors the
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independent public accountants to be selected to audit the Company's annual
financial statements and approve any special assignments given to such
accountants. The Audit Committee will also review the planned scope of the
annual audit and the independent accountants' letter of comments and
management's responses thereto, any major accounting changes made or
contemplated and the effectiveness and efficiency of the Company's internal
audit staff.
The board of directors may, from time to time, establish certain other
committees to facilitate the management of the Company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's
Chairman and Chief Executive Officer, the Company's former Chairman and Chief
Executive Officer and the four other most highly paid executive officers of the
Company (the "Named Executive Officers") for the Company's last three fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- -------------------------
AWARDS PAYOUTS
------------ ----------
SECURITIES
UNDERLYING
STOCK
NAME AND BASE OTHER ANNUAL OPTIONS/SARS LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) (#) PAYOUTS($) COMPENSATION($)
- --------------------------- ---- --------- -------- --------------- ------------ ---------- ---------------
(5) (6) (9)
<S> <C> <C> <C> <C> <C> <C> <C>
Keith W. Hughes............ 1995 $ 431,667 $700,000 $ 17,176 0 $1,088,050(7) $ 29,596(10)
Chairman and Chief
Executive Officer(1)
Reece A. Overcash, Jr...... 1995 92,863(3) 0 4,328 0 0 2,107,518(11)
Former Chairman and 1994 729,150 700,000 35,491 0 5,258,770 67,689(11)
Chief Executive 1993 675,925 650,000 28,140 0 765,000 64,496(11)
Officer(2)
Joseph M. McQuillan........ 1995 315,250 410,000 16,820 0 438,000 73,050(12)
Vice Chairman 1994 296,625 385,000 14,665 10,000 365,000 64,509(12)
1993 278,250 324,000 12,471 0 330,000 48,819(12)
Harold D. Marshall......... 1995 342,750 350,000 13,919 0 458,000 100,989(13)
Vice Chairman 1994 323,900 330,000 15,139 10,000 1,114,828 24,648(13)
1993 309,175 286,000 13,698 0 565,518 30,338(13)
James E. Jack.............. 1995 253,950 200,000 11,698 0 582,090(8) 43,103(14)
Senior Executive Vice 1994 238,500 224,000 11,374 0 572,880 16,574(14)
President and Chief 1993 221,525 200,000 7,962 0 276,960 15,296(14)
Financial Officer
Chester D. Longenecker..... 1995 216,250 127,000 7,298 0 121,000 159,046(15)
Executive Vice President 1994 205,500 113,000 8,667 0 541,701 13,238(15)
and General Counsel 1993 195,250 103,000 4,528 0 100,000 46,758(15)
</TABLE>
- ---------------
(1) Mr. Hughes was elected Chairman and Chief Executive Officer on February 1,
1995 following the death of Reece A. Overcash, Jr., the immediately
preceding Chairman and Chief Executive Officer of the Company. Compensation
information is provided for 1995, including the period before Mr. Hughes
was elected Chairman and Chief Executive Officer.
(2) Reece A. Overcash, Jr. was the Chairman and Chief Executive Officer of the
Company from August 1, 1979 through January 17, 1995, the date of his
death. Compensation information for 1995 includes all compensation earned
by Mr. Overcash prior to his death, as well as additional amounts paid to
Mr. Overcash's estate and/or beneficiaries as post-death compensation
continuation payments pursuant to Mr. Overcash's Employment Agreement with
the Company (see footnote 11).
(3) Compensation reported is base salary earned through February 15, 1995, the
close of the pay period ending within the month following Mr. Overcash's
death.
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(4) Compensation reported is the Company's payment to cover a Named Executive
Officer's taxes with respect to the value of benefits and perquisites
includable in the Named Executive Officer's taxable income for the year
reported (commonly known as a "tax gross-up").
(5) The options reported in the "Securities Underlying Stock Options/SARs"
column are nonqualified stock options to purchase shares of Ford common
stock granted pursuant to the Ford Motor Company 1990 Long-Term Incentive
Plan. The Company has also made grants of "phantom stock appreciation
rights" ("PSARs") under the Associates First Capital Corporation Phantom
Stock Appreciation Right Plan (the "PSAR Plan"). PSARs have been classified
as long-term incentive plan compensation throughout this Executive
Compensation section rather than as stock appreciation rights because the
value of the PSARs is based on a profit-based formula rather than
appreciation in the Company's stock price (for a description of the PSAR
Plan, see footnote 1 to the Long-Term Incentive Plans table).
(6) Compensation reported in the "LTIP Payouts" column is the amount paid in
the year reported to a Named Executive Officer under the Associates First
Capital Corporation Long-Term Performance Plan (the "LTPP") and, if
specifically noted, the amount paid under the PSAR Plan with respect to
PSARs exercised by the Named Executive Officer during the year (for a
description of the LTPP, see footnote 3 to the Long-Term Incentive Plans
table).
(7) For Mr. Hughes for 1995, the LTPP award was $700,000, and he received
$388,050 for PSARs exercised in 1995.
(8) For Mr. Jack for 1995, the LTPP award was $284,000, and he received
$298,090 for PSARs exercised in 1995.
(9) Compensation reported in the "All Other Compensation" column includes
Company contributions on behalf of a Named Executive Officer pursuant to
the Company's tax-qualified and non-qualified supplemental defined
contribution plans ("Company DCP Contributions"), above-market earnings
accrued by the Company for the reported year with respect to a Named
Executive Officer's elective deferrals of salary, bonus, PSAR payouts,
and/or LTPP payouts ("Above-Market Earnings on Deferred Compensation"), and
amounts includable in compensation for Company-paid premiums for additional
term life insurance ("Term Insurance Compensation"). Earnings are
above-market to the extent they exceed one-hundred-twenty percent of the
applicable federal rate.
(10) For Mr. Hughes for 1995, Company DCP Contributions were $25,900,
Above-Market Earnings on Deferred Compensation were $898 and Term Insurance
Compensation was $2,798.
(11) For Mr. Overcash for 1995, compensation reported includes amounts payable
to Mr. Overcash's estate pursuant to the post-death compensation
continuation provisions of Mr. Overcash's five-year Employment Agreement
with the Company dated October 25, 1991 which for 1995 provides for (i) the
continued monthly payment of Mr. Overcash's base salary for February 16,
1995 through December 31, 1995 ($649,594), (ii) the payment of a bonus for
1995 equal to the average bonus paid for the three preceding fiscal years
($650,000) plus (iii) the payment of a long-term incentive for 1995 under
the LTPP equal to the average incentive paid under the LTPP to Mr. Overcash
for the three preceding fiscal years ($805,000). These post-death
compensation continuation payments end on October 24, 1996, the date Mr.
Overcash's Employment Agreement terminates. Company DCP Contributions were
(i) $929 for 1995, (ii) $43,749 for 1994, and (iii) $40,556 for 1993. Term
Insurance Compensation was (i) $1,995 for 1995, (ii) $23,940 for 1994 and
(iii) $23,940 for 1993. Mr. Overcash received no Above-Market Earnings on
Deferred Compensation for any reported year.
(12) For Mr. McQuillan, Company DCP Contributions were (i) $18,915 for 1995,
(ii) $17,798 for 1994 and (iii) $16,695 for 1993. Above-Market Earnings on
Deferred Compensation were (i) $44,939 for 1995, (ii) $38,638 for 1994 and
(iii) $25,048 for 1993. Term Insurance Compensation was (i) $9,196 for
1995, (ii) $8,073 for 1994 and (iii) $7,076 for 1993.
(13) For Mr. Marshall, Company DCP Contributions were (i) $20,565 for 1995, (ii)
$19,554 for 1994 and (iii) $18,551 for 1993. Above-Market Earnings on
Deferred Compensation were (i) $74,781 for 1995, (ii) $0 for 1994 and (iii)
$7,026 for 1993. Term Insurance Compensation was (i) $5,643 for 1995, (ii)
$5,094 for 1994 and (iii) $4,761 for 1993.
(14) For Mr. Jack, Company DCP Contributions were (i) $15,237 for 1995, (ii)
$14,310 for 1994 and (iii) $13,292 for 1993. Above-Market Earnings on
Deferred Compensation were (i) $25,378 for 1995, (ii) $0 for 1994 and (iii)
$0 for 1993. Term Insurance Compensation was (i) $2,488 for 1995, (ii)
$2,264 for 1994 and (iii) $2,004 for 1993.
(15) For Mr. Longenecker, Company DCP Contributions were (i) $12,975 for 1995,
(ii) $12,330 for 1994 and (iii) $11,715 for 1993. Above-Market Earnings on
Deferred Compensation were (i) $145,090 for 1995, (ii) $0 for 1994 and
(iii) $34,204 for 1993. Term Insurance Compensation was (i) $981 for 1995,
(ii) $908 for 1994 and (iii) $839 for 1993.
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<PAGE> 73
OPTIONS/STOCK APPRECIATION RIGHTS
The following table sets forth certain information regarding the exercise
of options to purchase common stock of Ford during the fiscal year ending
December 31, 1995 and exercisable/unexercisable options to purchase common stock
of Ford held at December 31, 1995 and the value thereof by the Named Executive
Officers. No options were exercised by the Named Executive Officers during 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/95(#) 12/31/95($)
SHARES -------------- --------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Keith W. Hughes
Chairman and Chief Executive
Officer............................ 0 $ 0 3,750/11,250 $938/2,813
Reece A. Overcash, Jr.
Former Chairman and Chief Executive
Officer............................ 0 0 0 0
Joseph M. McQuillan
Vice Chairman......................... 0 0 2,500/7,500 625/1,875
Harold D. Marshall
Vice Chairman......................... 0 0 2,500/7,500 625/1,875
James E. Jack
Senior Executive Vice President and
Chief Financial Officer............ 0 0 0 0
Chester D. Longenecker
Executive Vice President and General
Counsel............................ 0 0 0 0
</TABLE>
- ---------------
(1) The options reported in this table are incentive stock options and
nonqualified stock options to purchase shares of common stock of Ford
granted pursuant to the Ford Motor Company 1990 Long-Term Incentive Plan.
The exercise price of the options is $28.625 per share, and the closing
trading price on the NYSE of Ford common stock on December 31, 1995 was
$28.875.
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<PAGE> 74
LONG-TERM INCENTIVE PLANS
The following table sets forth certain information regarding awards made
during 1995 to the Named Executive Officers under the Company's long-term
incentive compensation plans: the PSAR Plan and the LTPP.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
NUMBER OF PERIOD ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNTIL NON-STOCK PRICE-BASED PLANS(3)
UNITS OR MATURATION ----------------------------------------
NAME OTHER RIGHTS(#) OR PAYOUT THRESHOLD($) TARGET($) MAXIMUM($)
- --------------------------- --------------- ----------- ------------ --------- ----------
(1) (2)
<S> <C> <C> <C> <C> <C>
Keith W. Hughes
Chairman and Chief
Executive Officer
PSAR Plan................... 35,000 1/1/96 N/A(4) N/A N/A
LTPP........................ (5) 12/31/95 $110,500 $ 276,300 $828,900
Reece A. Overcash, Jr.
Former Chairman and Chief
Executive Officer
PSAR Plan(6)................ 0 1/1/96 N/A N/A N/A
LTPP(7)..................... (5) 12/31/95 0 0 0
Joseph M. McQuillan
Vice Chairman
PSAR Plan................... 13,245 1/1/96 N/A N/A N/A
LTPP........................ (5) 12/31/95 75,500 188,700 566,100
Harold D. Marshall
Vice Chairman
PSAR Plan................... 13,000 1/1/96 N/A N/A N/A
LTPP........................ (5) 12/31/95 75,500 188,700 566,100
James E. Jack
Senior Executive Vice
President and Chief
Financial Officer
PSAR Plan................... 7,755 1/1/96 N/A N/A N/A
LTPP........................ (5) 12/31/95 42,500 106,200 318,600
Chester D. Longenecker
Executive Vice President and
General Counsel
PSAR Plan................... 5,000 1/1/96 N/A N/A N/A
LTPP........................ (5) 12/31/95 33,800 84,500 253,500
</TABLE>
- ---------------
(1) Reports the number of PSARs granted during 1995 under the PSAR Plan. The
Company terminated the PSAR Plan as of December 31, 1995 and intends to cash
out all outstanding PSARs prior to completion of the Offerings. See
"-- Additional Material Employee Compensation Plans and Agreements".
(2) With respect to the PSAR Plan, the date disclosed in this column refers to
the date upon which the grant of PSARs becomes exercisable. With respect to
the LTPP, the performance period is the four-consecutive years ending on the
last day of the current year, December 31, 1995.
(3) Amounts listed represent estimated payout levels for interests granted
during 1995 under the LTPP. Awards payable under the LTPP are determined
based on the Company's average performance in achieving annual profitability
targets for the four-consecutive years ending with the current year. An
award pool is created based on the performance of the Company for the
four-year performance period. The award pool is allocated among eligible
participants based on the performance of a business unit and the performance
of a participant in achieving individual performance objectives. For
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<PAGE> 75
1995, the performance period is 1992-1995, inclusive. Awards determined for
1995 were paid in December 1995. See "-- Additional Material Employee
Compensation Plans and Agreements".
(4) N/A means not applicable.
(5) Interests granted under the LTPP are not evidenced by shares, units or other
rights or indicia of ownership.
(6) No PSARs were granted during 1995 to Mr. Overcash or his estate.
(7) Pursuant to Mr. Overcash's Employment Agreement with the Company, an award
for 1995 under the LTPP was paid to Mr. Overcash's estate (see footnote 11
to the Summary Compensation table for additional information).
PENSION/DEFINED BENEFIT RETIREMENT PLANS
The Company sponsors three defined benefit retirement plans (collectively,
the "Company's DB Plans") pursuant to which retirement income is payable to
covered employees, including the Named Executive Officers. The Associates First
Capital Corporation Pension Plan (the "Qualified Plan") is a tax-qualified
defined benefit retirement plan covering all eligible employees of the Company.
The Excess Benefit Plan of Associates First Capital Corporation (the "EBP")
covers participants in the Qualified Plan whose retirement income is affected by
(i) elections to defer compensation, and (ii) limitations imposed on qualified
retirement plans, in general, by Sections 401(a)(17), 414(s) and 415 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). The
purpose of the EBP is to restore benefits which, if it were not for such limits,
would otherwise be available under the Qualified Plan. While Messrs. Hughes,
McQuillan, Marshall, Jack and Longenecker are participants in the EBP, based on
assumed retirement at normal retirement age, only Mr. Longenecker will receive a
benefit pursuant to the EBP.
The following table illustrates the yearly pension commencing at "normal
retirement age" for Mr. Longenecker pursuant to the Company's Qualified Plan and
the EBP.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(2)(3)
--------------------------------------------------------
REMUNERATION($)(1) 20 25 30 35 40
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$250,000............................ $100,000 $112,500 $125,500 $137,500 $150,000
275,000............................ 110,000 123,750 137,500 151,250 165,000
300,000............................ 120,000 135,000 150,000 165,000 180,000
325,000............................ 130,000 146,250 162,500 178,750 195,000
350,000............................ 140,000 157,500 175,000 192,500 210,000
375,000............................ 150,000 168,750 187,500 206,250 225,000
400,000............................ 160,000 180,000 200,000 220,000 240,000
425,000............................ 170,000 191,250 212,500 233,750 255,000
450,000............................ 180,000 202,500 225,000 247,500 270,000
475,000............................ 190,000 213,750 237,500 261,250 285,500
</TABLE>
- ---------------
(1) Remuneration is the sum of a participant's base salary plus annual bonus
(excluding amounts payable under the LTPP and the PSAR Plan) paid or payable
for a fiscal year, including elective deferrals (see "Base Salary" and
"Bonus" columns in the Summary Compensation table).
(2) The estimated credited service at December 31, 1995 for Mr. Longenecker is
21 years.
(3) The estimated annual benefits illustrated in the table are to be offset by
the Named Executive Officer's Social Security benefits. The normal form of
payment is a life annuity for a single participant and an actuarially
equivalent 50% joint and survivor annuity for a married participant. The
estimated annual benefits illustrated in the table are in the form of a life
annuity.
The Associates Corporation of North America Supplemental Retirement Income
Plan (the "SRIP") covers only designated eligible executives of the Company and
is designed to provide a target retirement income for participants. Retirement
benefits are payable under the SRIP to the extent the Company's Qualified Plan
does not achieve the target level of retirement income. Messrs. Hughes,
McQuillan, Marshall and Jack are participants in the SRIP and, based on assumed
retirement at normal retirement age, will receive a benefit under the SRIP. Mr.
Overcash was a participant in the SRIP at his death and his surviving spouse is
receiving a survivor benefit under the SRIP.
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<PAGE> 76
The SRIP provides participants with a retirement annuity commencing at
"normal retirement age" equal to 50% of the participant's "final average
earnings", offset by benefits payable pursuant to the Company's Qualified Plan
and Social Security. For purposes of the SRIP, "normal retirement age" is
defined as age 62, "final average earnings" is defined as the average "annual
earnings" for a participant's highest five-consecutive years of the last ten
years immediately preceding retirement and "annual earnings" is defined as the
sum of a participant's base salary plus annual bonus (excluding amounts payable
under the LTPP and the PSAR Plan) paid or payable for a calendar year, including
elective deferrals (see "Base Salary" and "Bonus" columns in the Summary
Compensation table).
The following table illustrates the estimated projected annual pension
payable for the Named Executive Officers (excluding Mr. Longenecker) under the
Company's Qualified Plan and the SRIP commencing at "normal retirement age".
<TABLE>
<CAPTION>
PROJECTED ANNUAL RETIREMENT
BENEFITS AT NORMAL
RETIREMENT
NAME AND PRINCIPAL POSITION AGE($)(1)(2)
- -------------------------------------------------------------------- ----------------------------
<S> <C>
Keith W. Hughes
Chairman and Chief Executive Officer.............................. $814,990
Reece A. Overcash, Jr.
Former Chairman and Chief Executive Officer(3).................... 459,988
Joseph M. McQuillan
Vice Chairman..................................................... 300,780
Harold D. Marshall
Vice Chairman..................................................... 407,731
James E. Jack
Senior Executive Vice President and Chief Financial Officer....... 390,394
</TABLE>
- ---------------
(1) Projected annual retirement benefits reflect the total amount payable to the
Named Executive Officer commencing at normal retirement age pursuant to the
SRIP and the Company's Qualified Plan (on a combined basis), and are subject
to offset by the Officer's Social Security benefits.
(2) Annual retirement benefits are determined by projecting current "final
average earnings" for each Named Executive Officer to the Officer's normal
retirement age at 6% per annum, compounded annually. The normal form of
benefit is a single life annuity for the life of the Named Executive
Officer.
(3) Mr. Overcash died on January 17, 1995, and a survivor benefit commenced to
his spouse as of February 1, 1995 in the amount set forth above, payable for
the life of Mr. Overcash's spouse (see footnote 11 to the Summary
Compensation table).
COMPENSATION OF DIRECTORS
It is anticipated that directors who do not receive compensation as
officers or employees of the Company or any of its affiliates will be paid an
annual board membership fee of $25,000, an attendance fee of $1,000 for each
meeting of the board of directors, and an annual membership fee of $5,000 for
service on any committee of the board of directors. The Company does not pay any
additional compensation to directors who receive compensation as officers or
employees of the Company or any of its affiliates.
EMPLOYMENT CONTRACTS AND TERMINATION, SEVERANCE AND CHANGE-IN-CONTROL
ARRANGEMENTS
EMPLOYMENT CONTRACTS
The Company has entered into individual employment contracts with
twenty-one senior executives, including each Named Executive Officer
(individually, an "Employment Agreement" and collectively, the "Employment
Agreements"). The terms of the Employment Agreements for all Named Executive
Officers, other than Mr. Overcash, are substantially identical (except for
commencement dates) and are summarized in the following paragraphs. The terms of
the Employment
72
<PAGE> 77
Agreements covering senior executives who are not Named Executive Officers are
substantially identical to the Employment Agreements described below (except for
commencement dates). The relevant death benefits provisions of Mr. Overcash's
Employment Agreement are summarized in footnote 11 to the Summary Compensation
table.
The term of each Employment Agreement is three years. For Messrs. Jack and
Longenecker, the three-year term commenced on September 13, 1995. For Messrs.
Hughes, McQuillan and Marshall, the three-year term commenced on November 16,
1995.
Each Employment Agreement provides for certain cash and non-cash
compensation, including current base salaries for Messrs. Hughes, McQuillan,
Marshall, Jack and Longenecker of $440,000, $320,000, $347,000, $257,600 and
$219,000, respectively. Each Named Executive Officer is required to execute the
Company's standard confidentiality, conflict of interest and proprietary
information agreement. Furthermore, the Named Executive Officer agrees not to
solicit, during the twelve month period following the termination of the
Officer's employment, any Company employee to leave employment with the Company.
The Company may terminate a Named Executive Officer at any time with
fifteen days' prior written notice, with or without "cause" (as defined in each
Employment Agreement). If the Company terminates a Named Executive Officer for
cause, the Company's obligations under the Employment Agreement cease. If the
Company terminates a Named Executive Officer other than for "cause", the Named
Executive Officer will continue to receive, for the duration of the term of the
Employment Agreement, (i) a monthly base salary, (ii) the annual payments under
the Company's Corporate Annual Performance Plan (the "CAPP") and the LTPP based
on average performance over the three performance periods immediately preceding
the annual payment and (iii) life, medical, dental and disability coverage. The
Named Executive Officer will also receive an amount payable as if credit were
given under the Company's retirement plans for service through the end of the
employment term. The right to termination benefits described in the preceding
sentences shall cease if the board of directors determines that the Named
Executive Officer, either before or after termination of employment, directly or
indirectly competed with the Company or any affiliate or engaged in any activity
adverse to the best interests of the Company or any affiliate.
In the event of a Named Executive Officer's "permanent disability" (as
defined in the Company's long-term disability plan), the Named Executive Officer
shall continue to receive a monthly base salary plus the bonuses referred to in
subsection (ii) of the preceding paragraph for six months after the
determination of permanent disability or, if later, the end of the employment
term, reduced by any amounts received through any disability or salary
continuation plan or program provided by the Company. If a Named Executive
Officer's employment terminates due to death during the employment term, the
Named Executive Officer's estate or designated beneficiary shall continue to
receive compensation equal to the Named Executive Officer's base salary plus the
bonuses referred to in subsection (ii) of the preceding paragraph for one year
following the Named Executive Officer's date of death, or, if later, the end of
the employment term.
The Company intends to amend the Employment Agreements prior to or after
the completion of the Offerings to provide that if a "change-in-control" of the
Company occurs and the Company either actually or "constructively" terminates a
Named Executive Officer other than for "cause" (as such terms will be defined in
the Employment Agreements), the Named Executive Officer shall receive the
following change-in-control severance benefits:
(i) A cash severance payment equal to the sum of (i) the Named Executive
Officer's base salary then in effect multiplied by 3 if the Named
Executive Officer is one of the designated top three executive
officers of the Company, or by 2, for all other Named Executive
Officers, plus (ii) the Named Executive Officer's target bonus
under the CAPP for the year of termination multiplied by the base
salary multiple determined in (i) above, plus (iii) a pro rata
portion of the Named Executive Officer's target bonus under the
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<PAGE> 78
CAPP for the year of termination, plus (iv) a pro rata portion of
the Named Executive Officer's target award under the LTPP for the
year of termination.
(ii) All outstanding awards granted to the Named Executive Officer
pursuant to the Associates First Capital Corporation Long-Term
Equity Compensation Plan (the "ECP") shall become 100% vested on
the date the change-in-control occurs.
(iii) Continued coverage shall be provided under the Company's life,
medical, dental and disability plans for the number of years equal
to the base salary multiple determined above with regard to the
Named Executive Officer's change-in-control base salary cash
severance payment. Coverage will terminate earlier, however, if the
Named Executive Officer becomes covered by similar coverage
provided by a successor employer.
(iv) The Named Executive Officer's accrued benefits under the EBP and/or
the SRIP shall become 100% vested and the Named Executive Officer
will receive a cash payment equal to the actuarial present value of
these benefits.
On the date the change-in-control occurs, the Company will fund a trust
with cash equal to the Company's accrued liabilities under all nonqualified
deferred compensation plans and make payments in accordance with the terms of
these plans. See "-- Additional Material Employee Compensation Plans and
Agreements". A "change-in-control" of the Company means any of the following:
(i) Any merger, consolidation or similar combination with or involving
the Company, as of the date of the conclusion of such event, other
than a merger, consolidation or similar combination of the Company
with Ford or any of its affiliates.
(ii) Any transaction or series of transactions that results in the sale
or divestiture of all or substantially all of the Company's assets,
as of the conclusion of such transaction or series of
transactions.
(iii) Any capital reorganization, transaction or series of transactions
that results in Ford and its affiliates owning common stock of the
Company having less than 50% of the combined voting power of the
outstanding capital stock of the Company, as of the date of the
conclusion of such reorganization, transaction or series of
transactions.
(iv) The successful completion of a public offering, or distribution to
the public by dividend or spinoff, that results in Ford and its
affiliates owning Common Stock of the Company having less than 50%
of the combined voting power of the outstanding capital stock of
the Company.
ADDITIONAL MATERIAL EMPLOYEE COMPENSATION PLANS AND AGREEMENTS
In addition to the Employment Agreements and retirement benefits described
above, the Company sponsors material compensation plans and arrangements
covering certain designated employees, including the Named Executive Officers.
These material compensation plans and arrangements are described below.
CORPORATE ANNUAL PERFORMANCE PLAN
The Company sponsors an annual bonus plan, the CAPP, covering the Named
Executive Officers and other executives of the Company. The payments reported in
the "Bonus" column of the Summary Compensation table are paid to the Named
Executive Officers pursuant to the CAPP. The performance period for determining
awards under the CAPP is the Company's fiscal year ending December 31. Bonuses
under the CAPP are generally paid during December of each fiscal year.
The CAPP is administered by the Executive Committee of the board of
directors. After the completion of the Offerings, the CAPP will be administered
by the Compensation Committee. The
74
<PAGE> 79
administrator of the CAPP is responsible for annually establishing performance
goals under the CAPP.
CAPP bonuses for a fiscal year are determined based on the performance of
the Company, the business unit in which a participant is employed and the
participant, personally. A bonus pool is created based on the relative
performance of the Company in achieving a profit target established for the
fiscal year. The bonus pool is allocated among eligible participants based on
the performance of a business unit in achieving targeted objectives for the
fiscal year and the performance of a participant in achieving individual
performance objectives.
To receive an award under the CAPP, a participant must remain in the employ
of the Company or its affiliates through the date awards are payable. However, a
participant whose employment with the Company or its affiliates terminates
during a fiscal year due to the participant's death, disability or retirement
(as defined) shall remain eligible to receive a portion of the award otherwise
payable to the participant, in proportion to the period of the fiscal year the
participant was employed. In addition, the administrator of the CAPP retains the
right, exercisable in its reasonable discretion, to approve payment of an award
to a participant whose employment terminates prior to the date awards are
payable for reasons other than death, disability or retirement. Notwithstanding
the foregoing, a participant forfeits the right to receive an award under the
CAPP for a fiscal year during which, prior to the date awards are payable under
the CAPP, the participant either (i) directly or indirectly competes with the
Company or any affiliate, or (ii) divulges any trade secrets, methods, processes
or other proprietary or confidential information of the Company or any affiliate
without the consent of the Company.
Awards under the CAPP are payable in a lump sum cash payment unless a
participant has elected to defer receipt of all or a specified portion of an
award for a fiscal year. A deferred award earns interest based on a
participant's election of one of two interest rate indices. A deferred CAPP
award is generally payable in the manner selected by the participant.
LONG-TERM PERFORMANCE PLAN
The Company sponsors a long-term cash incentive plan, the LTPP, covering
the Named Executive Officers and other executives of the Company. The payments
reported in the "LTIP Payouts" column of the Summary Compensation table include
awards paid to the Named Executive Officers pursuant to the LTPP. The
performance period for the LTPP is the Company's then current fiscal year and
the three immediately preceding fiscal years. Awards under the LTPP are
determined annually for the relevant four-year performance period during
December of each fiscal year and paid in that December.
The LTPP is administered by the board of directors. Following the
completion of the Offerings, the LTPP will be administered by the Compensation
Committee. The administrator of the LTPP is responsible for establishing
performance goals under the LTPP.
LTPP awards are determined for a performance period based on the success of
the Company in achieving a target level of profits established for each year of
the performance period, with such annual performance then averaged for the
performance period. An award pool is then created based on the performance of
the Company for the four-year performance period and the award pool is allocated
among eligible participants based on the performance of a business unit and the
performance of a participant in achieving individual performance objectives.
To receive an award under the LTPP, a participant must remain in the employ
of the Company or its affiliates through the date awards are payable. However, a
participant whose employment with the Company or its affiliates terminates
during a fiscal year due to the participant's death, disability or retirement
(as defined) shall remain eligible to receive a portion of the award otherwise
payable to the participant, in proportion to the period of the performance
period the participant was employed. In addition, the administrator of the LTPP
retains the right, exercisable in its reasonable
75
<PAGE> 80
discretion, to approve payment of an award to a participant whose employment
terminates prior to the date awards are payable for reasons other than death,
disability or retirement. Notwithstanding the foregoing, a participant forfeits
the right to receive an award under the LTPP for a fiscal year during which,
prior to the date awards are payable under the LTPP, the participant either (i)
directly or indirectly competes with the Company or any affiliate, or (ii)
divulges any trade secrets, methods, processes or other proprietary or
confidential information of the Company or any affiliate without the consent of
the Company.
Awards under the LTPP are payable in a lump sum cash payment unless a
participant has elected to defer receipt of all or a specified portion of an
award for a fiscal year. A deferred award earns interest based on a
participant's election of one of two interest rate indices. A deferred LTPP
award is generally payable in the manner selected by the participant.
PHANTOM STOCK APPRECIATION RIGHT PLAN
The Company sponsored a long-term cash plan, the PSAR Plan, which covered
the Named Executive Officers and other executives of the Company. The Company
terminated the PSAR Plan as of December 31, 1995, although distributions have
not yet been completed. The payments reported in the "LTIP Payouts" column of
the Summary Compensation table include awards paid to the Named Executive
Officers pursuant to the PSAR Plan.
A PSAR granted under the PSAR Plan entitled the holder to receive from the
Company, upon the exercise of such PSAR, an amount in cash (less required tax
withholding) equal to the amount by which the "Phantom Share Price" of a phantom
share of stock of Ford Financial Services Group ("Ford FSG") on the exercise
date exceeded the "Base Share Price" of such PSAR, multiplied by the number of
PSARs exercised. The Phantom Share Price and the Base Share Price were
determined pursuant to a formula set forth in the PSAR Plan which was based on
Ford FSG's profits for the four most recent calendar quarters, a price/earnings
ratio determined for comparable companies and the total number of PSARs
established under the PSAR Plan. A PSAR had a term of five years and vested 100%
on the first anniversary of the date of grant.
The Company has terminated the PSAR Plan, effective as of December 31, 1995
and intends to cash out all outstanding PSARs prior to the completion of the
Offerings. The amount payable for each outstanding PSAR will be equal to the sum
of (i) the amount by which the Phantom Share Price of a PSAR on December 31,
1995 exceeds the Base Share Price of such PSAR, plus (ii) the present value,
determined pursuant to a modified Black-Scholes option pricing model, of the
estimated foregone future appreciation of the PSAR for the period of January 1,
1996 through the last day of the term of the PSAR.
Except as provided in the immediately following paragraph, amounts payable
in satisfaction of outstanding PSARs will be paid in a lump sum cash payment,
unless a participant has elected to defer receipt of all or a specified portion
of such cash payment. The deferred payment earns interest based on a
participant's election of one of two interest rate indices. A deferred PSAR
payment is generally payable in the manner selected by the participant.
The Company also amended the PSAR Plan to provide that the Named Executive
Officers and certain other officers of the Company (all of whom were granted
PSARs in 1995) are required to defer one-half of the amount payable in
satisfaction of their respective PSARs granted in 1995. The amounts so deferred
will be administered by the Company in accordance with the terms of the
Associates First Capital Corporation Equity Deferral Plan (the "EDP").
EQUITY DEFERRAL PLAN
The EDP covers the Named Executive Officers and certain other officers of
the Company (approximately 20 participants). The Company adopted the EDP in
connection with the termination of the PSAR Plan and the requirement that these
EDP participants defer one-half of the amount
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<PAGE> 81
payable in satisfaction of their PSARs granted in 1995. The objective is for
these participants to have the amount so deferred be deemed to be invested in
shares of Class A Common Stock. The EDP will govern the manner in which these
deferred amounts are administered and paid out.
The EDP is administered by a committee appointed by the board of directors.
Following the completion of the Offerings, the EDP will be administered by the
Compensation Committee.
Amounts deferred pursuant to the EDP will be credited to individual
unfunded accounts (the "EDP Accounts") which will earn interest at the prime
rate of interest, as determined from time to time, from the date the amounts so
deferred would otherwise be distributed to the participants upon termination of
the PSAR Plan to the completion of the Offerings. Upon the completion of the
Offerings, EDP Accounts will be deemed to be invested in the number of shares of
Class A Common Stock determined by dividing (i) such EDP Account balance, by
(ii) the price of one share of Class A Common Stock under the Offerings.
Dividends paid on Class A Common Stock thereafter will be credited to
participants and will be deemed to be reinvested in additional shares of Class A
Common Stock.
A participant's EDP Account may not be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated, except by will or by the laws of
intestate succession. EDP Accounts will be distributed on the earlier of (i) the
fifth anniversary of the completion of the Offerings or (ii) the participant's
termination of employment for any reason other than retirement, death or
disability (as defined), in cash, in shares of Class A Common Stock or in any
combination thereof, reduced by applicable withholding of taxes, based on the
closing price of the Company's Class A Common Stock on the NYSE on the trading
day preceding such date, and the EDP Account will terminate. Payment may be
accelerated as provided in the EDP for a participant who terminates by reason of
retirement, death or disability. The EDP will terminate when no EDP Accounts are
outstanding. The board of directors may, from time to time, terminate, amend or
modify the EDP; provided, however, that no such amendment, modification or
termination may materially adversely affect a participant without the
participant's consent, and no such amendment or modification will be effective
unless and until the same is approved by the shareholders of the Company when
such shareholder approval is required to comply with Rule 16b-3 under the
Exchange Act, or other applicable law, regulation or stock exchange rule. Rule
16b-3 currently requires shareholder approval if the amendment would, among
other things, materially increase the benefits accruing to optionees or grantees
under the EDP.
EXECUTIVE DEFERRED SALARY PLAN
The Company sponsors a deferred salary plan, the Associates First Capital
Corporation Executive Deferred Salary Plan (the "EDSP"), covering the Named
Executive Officers and other executives of the Company. Pursuant to the EDSP, a
participant may elect to defer up to thirty-five percent of the participant's
base salary. The amount deferred is deducted from the participant's wages each
pay period. Elections under the EDSP to defer base salary are made annually
prior to the commencement of each year. A deferred salary amount earns interest
based on a participant's election of one of two interest rate indices. A salary
deferral is generally payable in the manner selected by the participant.
The EDSP is administered by a Committee appointed by the board of
directors. Following the completion of the Offerings, the EDSP will be
administered by the Compensation Committee.
Certain senior executives of the Company, including Named Executive
Officers, have also been participants in similar deferred compensation plans,
the Associates Corporation of North America Deferred Compensation Unit Plan
Agreement and/or Executive Incentive Plan. These plans are administered by a
Committee appointed by the board of directors. After the completion of the
Offerings, these plans will be administered by the Compensation Committee. These
plans are frozen to new participants and have been replaced by the EDSP and
CAPP. For participants in these frozen plans, their accounts continue to be
active even though new deferrals are not permitted. As under
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the EDSP, a deferral under these frozen plans earns interest based on a
participant's election of one of two interest rate indices. A deferral is
generally payable in the manner selected by the participant.
LONG-TERM EQUITY COMPENSATION PLAN
The Company sponsors a stock-based incentive plan, the ECP, covering the
Named Executive Officers and other executives of the Company. The Company
adopted the ECP in 1996 prior to the Offerings. Awards granted under the ECP are
based on shares of Class A Common Stock.
The ECP is administered by a committee appointed by the board of directors.
After the completion of the Offerings, the ECP will be administered by the
Compensation Committee. The ECP provides for the grant of incentive and
nonqualified stock options, stock appreciation rights, restricted stock,
performance shares and performance units (individually, an "Award" or
collectively, "Awards"). Only officers or certain salaried employees of the
Company with potential to contribute to the future success of the Company or its
subsidiaries will be eligible to receive Awards under the ECP (approximately 600
employees). The administrator of the ECP has the discretion to select the
employees to whom Awards will be granted, to determine the type, size and terms
and conditions applicable to each Award and the authority to interpret, construe
and implement the provisions of the ECP. The administrator's decisions will be
binding.
The total number of shares of Class A Common Stock that may be subject to
Awards under the ECP is shares (including Awards granted prior to the
Offerings and subject to adjustment as provided in the ECP), or approximately
% of all outstanding Common Stock after the completion of the Offerings.
For Awards to a participant which are intended to qualify for exemption from
Section 162(m) of the Internal Revenue Code, no more than shares may
be made subject to all such Awards designated as performance shares or
performance units granted in any one calendar year, and no more than $3 million
may be paid with respect to all such Awards granted in any one calendar year.
Class A Common Stock issued under the ECP may be either authorized but unissued
shares, treasury shares or any combination thereof. The Company has reserved
shares of its Class A Common Stock for purposes of the ECP. See
"Prospectus Summary -- The Offerings". These shares are intended to be issued as
Awards of restricted stock. Any additional shares of Class A Common Stock to be
issued as Awards under the ECP or pursuant to Awards granted under the ECP will
be obtained by the Company either through forfeitures of shares of restricted
stock (to the extent that such shares are made available again for issuance
under the ECP) or from treasury shares (to the extent that the Company is
permitted by applicable law to acquire its own shares). To the fullest extent
permitted under Rule 16b-3 under the Exchange Act and Section 422 of the Code,
any shares of Class A Common Stock subject to an Award which lapses, expires or
is otherwise terminated without the issuance of such shares may become available
for new Awards.
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The Company intends to grant Awards to the Named Executive Officers and
other selected participants which will be contingent on the successful
completion of the Offerings. The terms of the Awards will be set forth in award
agreements ("Award Agreements"). These Awards are summarized in the following
table and are described below:
ECP TABLE
<TABLE>
<CAPTION>
NONQUALIFIED
STOCK OPTIONS
WITH TANDEM SARS
RESTRICTED STOCK ---------------------------
------------------------ NO. OF
NO. OF DOLLAR TANDEM DOLLAR
NAME AND POSITION SHARES(#) AMOUNT($)(1) NOSS/SARS(#) AMOUNT($)(1)
- ---------------------------------------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Keith W. Hughes
Chairman and Chief Executive
Officer............................ $ $ 0
Joseph M. McQuillan
Vice Chairman......................... 0
Harold D. Marshall
Vice Chairman......................... 0
James E. Jack
Senior Executive Vice President and
Chief Financial Officer............ 0
Chester D. Longenecker
Executive Vice President and General
Counsel............................ 0
All Executive Officers as a Group
(including those listed above)........ 0
Non-Employee Directors 0 0 0 0
All Other Employees as a Group.......... 0 0 0
</TABLE>
- ---------------
(1) Represents a per share price under the Offering of $ .
The principal terms of the Awards Agreements are as follows:
(i) An Award will be granted to each Named Executive Officer and to
approximately 16 other officers which will consist of shares of Restricted
Stock and Tandem Option/SARs which will vest on the fifth anniversary of
the date of grant, presuming continued employment through such date, or
earlier upon termination of employment due to death, disability or
retirement.
(ii) An Award will be granted to each Named Executive Officer and to a
significantly larger group of eligible employees which will consist of
Tandem Option/SARs which will vest one-third on each of the first three
anniversaries of the date of grant, presuming continued employment through
such date, or earlier upon termination of employment due to death,
disability or retirement.
Set forth below is a brief description of the Awards that may be granted
under the ECP:
Stock Options. Options (each an "Option") to purchase shares of Class A
Common Stock, which may be incentive or nonqualified stock options, may be
granted under the ECP at an exercise price (the "Option Price") determined by
the administrator of the ECP in its discretion, provided that the Option Price
may be no less than the trading price of the Class A Common Stock on the date of
grant. Each Option represents the right to purchase one share of Class A Common
Stock at the specified Option Price.
Options will expire not later than 10 years after the date on which they
are granted and will become exercisable at such times and in such installments
as determined by the administrator of the
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ECP. Payment of the Option Price must be made in full at the time of exercise in
cash, certified or bank check. As determined by the administrator of the ECP,
payment in full or in part may also be made by tendering to the Company shares
of Class A Common Stock having a fair market value equal to the Option Price (or
such portion thereof).
Stock Appreciation Rights. An Award of a stock appreciation right ("SAR")
may be granted under the ECP with respect to shares of Class A Common Stock.
Generally, one SAR is granted with respect to one share of Class A Common Stock.
The SAR entitles the participant, upon the exercise of the SAR, to receive an
amount equal to the appreciation in the underlying share of Class A Common
Stock. The appreciation is equal to the difference between (i) the "base value"
of the SAR (which is determined with reference to the trading price of the Class
A Common Stock on the NYSE on the date the SAR is granted), and (ii) the closing
trading price of the Class A Common Stock on the NYSE on the date the SAR is
exercised. Upon the exercise of a vested SAR, the exercising participant will be
entitled to receive the appreciation in the value of one share of Class A Common
Stock as so determined, payable at the discretion of the participant in cash or
in shares of Class A Common Stock.
SARs will expire not later than 10 years after the date on which they are
granted. SARs become exercisable at such times and in such installments as
determined by the administrator of the ECP; provided that currently no SAR may
be exercised by an individual who is subject to Section 16(b) of the Exchange
Act except during the quarterly exercise window period allowable under Section
16(b).
Tandem Option/SARs. An Option and a SAR may be granted "in tandem" with
each other (a "Tandem Option/SAR"). An Option and an SAR are considered to be in
tandem with each other because the exercise of the Option aspect of the tandem
unit automatically cancels the right to exercise the SAR aspect of the tandem
unit, and vice versa. The Option may be an incentive stock option or a
nonqualified stock option, and the Option may be coupled with one SAR, more than
one SAR or a fractional SAR in any proportionate relationship selected by the
Compensation Committee. Descriptions of the terms of the Option and the SAR
aspects of a Tandem Option/SAR are provided above.
Restricted Stock. An Award of restricted stock ("Restricted Stock") is an
Award of Class A Common Stock that is subject to such restrictions as the
administrator of the ECP deems appropriate, including forfeiture conditions and
restrictions against transfer for a period specified by the administrator of the
ECP. Restricted Stock Awards may be granted under the ECP for services and/or
payment of cash. Restrictions on Restricted Stock may lapse in installments
based on factors selected by the administrator of the ECP. Prior to the
expiration of the restricted period, except as and only if provided by the
administrator of the ECP, a grantee who has received a Restricted Stock Award
generally has the rights of a shareholder of the Company, including the right to
vote and to receive cash dividends on the shares subject to the Award. Stock
dividends issued with respect to a Restricted Stock Award may be treated as
additional shares under such Award and may be subject to the same restrictions
and other terms and conditions that apply to the shares with respect to which
such dividends are issued.
Performance Shares and Performance Units. A performance share Award (a
"Performance Share") and/or a performance unit Award (a "Performance Unit") may
be granted under the ECP. Each Performance Unit will have an initial value that
is established by the administrator of the ECP at the time of grant. Each
Performance Share will have an initial value equal to the trading price of one
share of Class A Common Stock on the NYSE on the date of grant. Such Awards may
be earned based upon satisfaction of certain specified performance criteria,
subject to such other terms and conditions as the administrator of the ECP deems
appropriate. Performance objectives will be established before, or as soon as
practicable after, the commencement of the performance period during which
performance will be measured (the "Performance Period") and may be based on net
earnings, operating earnings or income, net income, absolute and/or relative
return on equity,
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capital invested or assets, earnings per share, cash flow, profits, earnings
growth, revenue growth, comparisons to peer companies, share price, total
shareholder return, economic value added, expense reduction, customer
satisfaction, any combination of the foregoing and/or such other measures,
including individual measures of performance, as the administrator of the ECP
deems appropriate. Prior to the end of a Performance Period, the administrator
of the ECP, in its discretion, may adjust the performance objectives to reflect
an event that may materially affect the performance of the Company, including,
but not limited to, market conditions or a significant acquisition or
disposition of assets or other property by the Company. The extent to which a
grantee is entitled to payment in settlement of such an Award at the end of the
Performance Period will be determined by the administrator of the ECP, in its
sole discretion, based on whether the performance criteria have been met and
payment will be made in cash or in shares of Class A Common Stock in accordance
with the terms of the applicable Award Agreements.
Additional Information. Under the ECP, if there is any change in the
capitalization of the Company, a corporate transaction, a reorganization or a
liquidation of the Company, such proportionate adjustments as may be necessary
(in the form determined by the administrator of the ECP) to reflect such change
will be made to prevent dilution or enlargement of the rights with respect to
the aggregate number of shares of Class A Common Stock for which Awards in
respect thereof may be granted under the ECP, the number of shares of Class A
Common Stock covered by each outstanding Award and the price per share in
respect thereof. Unless otherwise provided in an Award Agreement, an
individual's rights under the ECP may not be assigned or transferred (except in
the event of death).
In the event of a change-in-control of the Company: (i) all Options, SARs
and Tandem Options/SARs then outstanding will become fully exercisable as of the
date of the change-in-control, whether or not then exercisable; (ii) all
restrictions and conditions of all Restricted Stock Awards then outstanding will
lapse as of the date of the change-in-control; and (iii) all Performance
Share/Unit Awards will be deemed to have been fully earned at target levels as
of the date of the change-in-control. For a description of change-in-control,
see "-- Employment Contracts and Termination, Severance and Change-in-Control
Arrangements".
The ECP will remain in effect until terminated by the board of directors
and thereafter until all Awards granted thereunder are satisfied by the issuance
of shares of Class A Common Stock or the payment of cash or the ECP is otherwise
terminated pursuant to the terms of the ECP or under any Award Agreements.
Notwithstanding the foregoing, no Awards may be granted under the ECP after the
tenth anniversary of the effective date of the ECP. The board of directors may
at any time terminate, modify or amend the ECP; provided, however, that no such
amendment, modification or termination may materially adversely affect an
optionee's or grantee's rights under any Award theretofore granted under the
ECP, except with the consent of such optionee or grantee, and no such amendment
or modification will be effective unless and until the same is approved by the
shareholders of the Company when such shareholder approval is required to comply
with Rule 16b-3 under the Exchange Act, or other applicable law, regulation or
stock exchange rule. Rule 16b-3 currently requires shareholder approval if the
amendment would, among other things, materially increase the benefits accruing
to optionees or grantees under the ECP.
Certain Federal Income Tax Consequences of Awards. Certain of the federal
income tax consequences to ECP participants and the Company of Awards granted
under the ECP are generally set forth in the following summary.
An employee to whom an Option which is an incentive stock option ("ISO")
that qualifies under Section 422 of the Internal Revenue Code is granted will
not recognize income at the time of grant or exercise of such Option. No federal
income tax deduction will be allowable to the Company upon the grant or exercise
of such ISO. However, upon the exercise of an ISO, any excess in the fair market
price of the Class A Common Stock over the Option Price constitutes a tax
preference item that may have alternative minimum tax consequences for the
employee. When the employee sells such
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shares more than 1 year after the date of transfer of such shares and more than
2 years after the date of grant of such ISO, the employee will normally
recognize a long-term capital gain or loss equal to the difference, if any,
between the sale prices of such shares and the aggregate Option Price and the
Company will not be entitled to a federal income tax deduction with respect to
the exercise of the ISO or the sale of such shares. If the employee does not
hold such shares for the required period, when the employee sells such shares,
the employee will recognize ordinary compensation income and possibly capital
gain or loss in such amounts as are prescribed by the Internal Revenue Code and
the regulations thereunder and the Company will generally be entitled to a
federal income tax deduction in the amount of such ordinary compensation income.
An employee to whom an Option which is a nonqualified stock option ("NSO")
is granted will not recognize income at the time of grant of such Option. When
the employee exercises such NSO, the employee will recognize ordinary
compensation income equal to the difference, if any, between the Option Price
paid and the fair market value, as of the date of Option exercise, of the shares
of Class A Common Stock the employee receives. The tax basis of such shares to
such employee will be equal to the Option Price paid plus the amount includible
in the employee's gross income, and the employee's holding period for such
shares will commence on the date of exercise. Subject to the applicable
provisions of the Internal Revenue Code and regulations thereunder, the Company
will generally be entitled to a federal income tax deduction in respect of an
NSO in an amount equal to the ordinary compensation income recognized by the
employee upon the exercise of the NSO.
OWNERSHIP OF COMMON STOCK
Ford beneficially owns 100% of the common stock of the Company outstanding
prior to the Offerings. Upon completion of the Offerings, Ford will beneficially
own 100% of the outstanding Class B Common Stock and % of the outstanding
Class A Common Stock ( % if the Underwriters' over-allotment options are
exercised in full) and, accordingly, will in the aggregate own Common Stock
representing approximately % of the economic interest in the Company
( % if the Underwriters' over-allotment options are exercised in full) and
representing approximately % of the combined voting power of the Company's
outstanding Common Stock ( % if the Underwriters' over-allotment options are
exercised in full). See "Relationship with Ford".
The principal executive offices of Ford are located at The American Road,
Dearborn, MI 48121.
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have shares of
Class A Common Stock issued and outstanding ( if the Underwriters'
over-allotment options are exercised in full) and shares of Class B Common
Stock issued and outstanding. All of the shares of Class A Common Stock to be
sold in the Offerings will be freely tradeable without restrictions or further
registration under the Securities Act, except for any shares purchased by an
"affiliate" of the Company (as that term is defined in Rule 144 adopted under
the Securities Act ("Rule 144")), which will be subject to the resale
limitations of Rule 144. All of the outstanding shares of Class B Common Stock
and shares of Class A Common Stock are beneficially owned by Ford and have
not been registered under the Securities Act and may not be sold in the absence
of an effective registration statement under the Securities Act other than in
accordance with Rule 144 or another exemption from registration. Ford has
certain rights to require the Company to effect registration of shares of Common
Stock owned by Ford, which rights may be assigned. See "Relationship with
Ford -- Corporate Agreement".
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned shares of
Common Stock for at least two years, including a person who may be deemed an
"affiliate", is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1 percent of the total number
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of shares of the class of stock being sold or the average weekly reported
trading volume of the class of stock being sold during the four calendar weeks
preceding such sale. A person who is not deemed an "affiliate" of the Company at
any time during the three months preceding a sale and who has beneficially owned
shares for at least three years is entitled to sell such shares under Rule 144
without regard to the volume limitations described above. As defined in Rule
144, an "affiliate" of an issuer is a person that directly or indirectly through
the use of one or more intermediaries controls, is controlled by, or is under
common control with, such issuer. Rule 144A under the Securities Act ("Rule
144A") provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act for specified resales of restricted
securities to certain institutional investors. In general, Rule 144A allows
unregistered resales of restricted securities to a "qualified institutional
buyer", which generally includes an entity, acting for its own account or for
the account of other qualified institutional buyers, that in the aggregate owns
or invests at least $100 million in securities of unaffiliated issuers. Rule
144A does not extend an exemption to the offer or sale of securities that, when
issued, were of the same class as securities listed on a national securities
exchange or quoted on an automated quotation system. The shares of Class B
Common Stock outstanding as of the date of this Prospectus would be eligible for
resale under Rule 144A because such shares, when issued, were not of the same
class as any listed or quoted securities. The foregoing summary of Rule 144 and
Rule 144A is not intended to be a complete description thereof.
Prior to the Offerings, there has been no market for the Class A Common
Stock, and no prediction can be made as to the effect, if any, that market sales
of outstanding shares of Class B Common Stock, or the availability of such
shares for sale, will have on the market price of the Class A Common Stock
prevailing from time to time. Nevertheless, sales of substantial amounts of
Class B Common Stock or the shares of Class A Common Stock beneficially owned by
Ford in the public market, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Class A Common Stock offered
in the Offerings.
Although Ford in the future may effect or direct sales or other
dispositions of Common Stock that would reduce its beneficial ownership interest
in the Company, Ford has advised the Company that its current intent is to
continue to hold all of the Common Stock beneficially owned by it following the
Offerings. However, Ford is not subject to any contractual obligation to retain
its controlling interest except that Ford and the Company have agreed, subject
to certain exceptions, not to sell or otherwise dispose of any shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of Goldman, Sachs & Co. As a result, there can be no
assurance concerning the period of time during which Ford will maintain its
beneficial ownership of Common Stock owned by it following the Offerings. See
"Underwriting". Beneficial ownership of at least 80% of the total voting power
and value of the outstanding Common Stock is required in order for Ford to
continue to include the Company in its consolidated group for federal income tax
purposes, and beneficial ownership of at least 80% of the total voting power and
80% of each class of nonvoting capital stock is required in order for Ford to be
able to effect a Tax-Free Spin-Off or certain other tax-free transactions. See
"Relationship with Ford".
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company will consist of (i)
shares of Class A Common Stock and shares of Class B Common Stock and
(ii) shares of Preferred Stock, par value $0.01 per share, none of
which is outstanding as of the date hereof. Of the shares of
Class A Common Stock, shares will have been issued to Ford in
connection with the Foreign Subsidiaries Recontribution, shares are
being offered in the Offerings, shares are reserved for issuance upon
conversion of Class B Common Stock into Class A Common Stock and
shares have been reserved for issuance pursuant to certain employee benefit
plans. See "Management -- Additional Material Employee Compensation
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Plans and Agreements -- Long-Term Equity Compensation Plan". Of the
shares of Class B Common Stock, shares will be outstanding and held by
Ford or one or more of its subsidiaries, including FFSG, upon consummation of
the Offerings. A description of the material terms and provisions of the
Company's Restated Certificate of Incorporation affecting the relative rights of
the Class A Common Stock, the Class B Common Stock and the Preferred Stock is
set forth below. The following description of the capital stock of the Company
is intended as a summary only and is qualified in its entirety by reference to
the form of the Company's Restated Certificate of Incorporation filed with the
Registration Statement of which this Prospectus forms a part and to Delaware
corporate law.
COMMON STOCK
VOTING RIGHTS. The holders of Class A Common Stock and Class B Common Stock
generally have identical rights except that holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to five votes per share on all matters to be voted on by stockholders.
Holders of shares of Class A Common Stock and Class B Common Stock are not
entitled to cumulate their votes in the election of directors. Generally, all
matters to be voted on by stockholders must be approved by a majority (or, in
the case of election of directors, by a plurality) of the votes entitled to be
cast by all shares of Class A Common Stock and Class B Common Stock present in
person or represented by proxy, voting together as a single class, subject to
any voting rights granted to holders of any Preferred Stock. Except as otherwise
provided by law, and subject to any voting rights granted to holders of any
outstanding Preferred Stock, amendments to the Company's Restated Certificate of
Incorporation must be approved by a majority of the combined voting power of all
of Class A Common Stock and Class B Common Stock, voting together as a single
class. However, amendments to the Company's Restated Certificate of
Incorporation that would alter or change the powers, preferences or special
rights of the Class A Common Stock or the Class B Common Stock so as to affect
them adversely also must be approved by a majority of the votes entitled to be
cast by the holders of the shares affected by the amendment, voting as a
separate class. Notwithstanding the foregoing, any amendment to the Company's
Restated Certificate of Incorporation to increase or decrease the authorized
shares of any class shall be approved upon the affirmative vote of the holders
of a majority of the Common Stock, voting together as a single class.
DIVIDENDS. Holders of Class A Common Stock and Class B Common Stock will
share ratably in any dividend declared by the board of directors, subject to any
preferential rights of any outstanding Preferred Stock. Dividends consisting of
shares of Class A Common Stock and Class B Common Stock may be paid only as
follows: (i) shares of Class A Common Stock may be paid only to holders of
shares of Class A Common Stock, and shares of Class B Common Stock may be paid
only to holders of Class B Common Stock; and (ii) shares shall be paid
proportionally with respect to each outstanding share of Class A and Class B
Common Stock.
The Company may not subdivide or combine shares of either class of Common
Stock without at the same time proportionally subdividing or combining shares of
the other class.
CONVERSION. Each share of Class B Common Stock is convertible while held by
Ford, any of its subsidiaries or the Class B Transferee (as defined below), if
any, at the option of the holder thereof into one share of Class A Common Stock.
Following the occurrence of a Tax-Free Spin-Off, if any, shares of Class B
Common Stock shall not be convertible into shares of Class A Common Stock at the
option of the holder thereof.
Except as provided below, any shares of Class B Common Stock transferred to
a person other than Ford or any of its subsidiaries or the Class B Transferee or
any of its subsidiaries shall automatically convert to shares of Class A Common
Stock upon such disposition. Shares of Class B Common Stock representing more
than a 50% economic interest in the Company transferred by
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Ford or any of its subsidiaries in a single transaction to one unrelated person
(the "Class B Transferee") shall not automatically convert to shares of Class A
Common Stock upon such disposition. Any shares of Class B Common Stock retained
by Ford or any of its subsidiaries following any such disposition to the Class B
Transferee shall automatically convert to shares of Class A Common Stock upon
such disposition. Shares of Class B Common Stock transferred to stockholders of
Ford or stockholders of the Class B Transferee as a dividend intended to be a
Tax-Free Spin-Off shall not convert to shares of Class A Common Stock upon the
occurrence of a Tax-Free Spin-Off. Following a Tax-Free Spin-Off, shares of
Class B Common Stock shall be transferable as Class B Common Stock, subject to
applicable laws; provided, however, that shares of Class B Common Stock shall
automatically convert into shares of Class A Common Stock on the fifth
anniversary of the Tax-Free Spin-Off, unless prior to such Tax-Free Spin-Off,
Ford or the Class B Transferee, as the case may be, delivers to the Company an
opinion of counsel reasonably satisfactory to the Company (which, in the case of
Ford, shall include Ford's Chief Tax Officer) to the effect that such conversion
would preclude Ford or the Class B Transferee, as the case may be, from
obtaining a favorable ruling from the Internal Revenue Service that the
distribution would be a Tax-Free Spin-Off. If such an opinion is received,
approval of such conversion shall be submitted to a vote of the holders of the
Common Stock as soon as practicable after the fifth anniversary of the Tax-Free
Spin-Off unless Ford or the Class B Transferee, as the case may be, delivers to
the Company an opinion of counsel reasonably satisfactory to the Company (which,
in the case of Ford, shall include Ford's Chief Tax Officer) prior to such
anniversary that such vote would adversely affect the status of the Tax-Free
Spin-Off. Approval of such conversion will require the affirmative vote of the
holders of a majority of the shares of both the Class A Common Stock and Class B
Common Stock present and voting, voting together as a single class, with each
share entitled to one vote for such purpose. No assurance can be given that such
conversion would be consummated. The requirement to submit such conversion to a
vote of the holders of Common Stock is intended to ensure tax treatment of the
Tax-Free Spin-Off is preserved should the Internal Revenue Service challenge
such automatic conversion as violating the 80% vote requirement. Ford has no
current plans with respect to a Tax-Free Spin-Off of the Company.
All shares of Class B Common Stock shall automatically convert into Class A
Common Stock if a Tax-Free Spin-Off has not occurred and the number of
outstanding shares of Class B Common Stock beneficially owned by Ford or the
Class B Transferee, as the case may be, falls below 45% of the aggregate number
of outstanding shares of Common Stock. This will prevent Ford or the Class B
Transferee, as the case may be, from decreasing its economic interest in the
Company to less than 45% while still retaining control of more than 80% of the
Company's voting power. Automatic conversion of the Class B Common Stock into
Class A Common Stock if a Tax-Free Spin-Off has not occurred and Ford or the
Class B Transferee, as the case may be, decreases its economic interest in the
Company to less than 45% is intended to ensure that Ford or the Class B
Transferee, as the case may be, retains voting control by virtue of its
ownership of Class B Common Stock only if it has a substantial economic interest
in the Company. All conversions will be effected on a share-for-share basis.
OTHER RIGHTS. In the event of any merger or consolidation of the Company
with or into another company in connection with which shares of Common Stock are
converted into or exchangeable for shares of stock, other securities or property
(including cash), all holders of Common Stock, regardless of class, will be
entitled to receive the same kind and amount of shares of stock and other
securities and property (including cash).
On liquidation, dissolution or winding up of the Company, after payment in
full of the amounts required to be paid to holders of Preferred Stock, if any,
all holders of Common Stock, regardless of class, are entitled to share ratably
in any assets available for distribution to holders of shares of Common Stock.
No shares of either class of Common Stock are subject to redemption or have
preemptive rights to purchase additional shares of Common Stock. However, see
"Relationship with Ford -- Corpo-
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rate Agreement" with respect to certain rights of Ford to purchase additional
shares of Common Stock.
Upon consummation of the Offerings, all the outstanding shares of Class A
Common Stock and Class B Common Stock will be legally issued, fully paid and
nonassessable.
PREFERRED STOCK
The Preferred Stock is issuable from time to time in one or more series and
with such designations and preferences for each series as shall be stated in the
resolutions providing for the designation and issue of each such series adopted
by the board of directors of the Company. The board of directors is authorized
by the Company's Restated Certificate of Incorporation to determine, among other
things, the voting, dividend, redemption, conversion and liquidation powers,
rights and preferences and the limitations thereon pertaining to such series.
The board of directors, without stockholder approval, may issue Preferred Stock
with voting and other rights that could adversely affect the voting power of the
holders of the Common Stock and could have certain anti-takeover effects. The
Company has no present plans to issue any shares of Preferred Stock. The ability
of the board of directors to issue Preferred Stock without stockholder approval
could have the effect of delaying, deferring or preventing a change in control
of the Company or the removal of existing management.
CERTAIN CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS
CORPORATE OPPORTUNITIES. The Company's Restated Certificate of
Incorporation will provide that: Ford shall have no duty to refrain from
engaging in the same or similar activities or lines of business as the Company,
and neither Ford nor any officer or director thereof (except as provided below)
shall be liable to the Company or its stockholders for breach of any fiduciary
duty by reason of any such activities of Ford. In the event that Ford acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both Ford and the Company, Ford shall have no duty to
communicate or offer such corporate opportunity to the Company and shall not be
liable to the Company or its stockholders for breach of any fiduciary duty as a
stockholder of the Company by reason of the fact that Ford pursues or acquires
such corporate opportunity for itself, directs such corporate opportunity to
another person, or does not communicate information regarding such corporate
opportunity to the Company.
In the event that a director or officer of the Company who is also a
director or officer of Ford acquires knowledge of a potential transaction or
matter which may be a corporate opportunity for both the Company and Ford, such
director or officer of the Company shall have fully satisfied and fulfilled the
fiduciary duty of such director or officer to the Company and its stockholders
with respect to such corporate opportunity if such director or officer acts in a
manner consistent with the following policy:
(i) a corporate opportunity offered to any person who is an officer of
the Company, and who is also a director but not an officer of Ford, shall
belong to the Company;
(ii) a corporate opportunity offered to any person who is a director
but not an officer of the Company, and who is also a director or officer of
Ford, shall belong to the Company if such opportunity is expressly offered
to such person in writing solely in his or her capacity as a director of
the Company, and otherwise shall belong to Ford; and
(iii) a corporate opportunity offered to any person who is an officer
of both the Company and Ford shall belong to the Company if such
opportunity is expressly offered to such person in writing solely in his or
her capacity as an officer of the Company, and otherwise shall belong to
Ford.
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For purposes of the foregoing:
(i) A director of the Company who is chairman of the board of
directors of the Company or of a committee thereof shall not be deemed to
be an officer of the Company by reason of holding such position (without
regard to whether such position is deemed an office of the Company under
the By-laws of the Company), unless such person is a full-time employee of
the Company; and
(ii) (A) The term "Company" shall mean the Company and all
corporations, partnerships, joint ventures, associations and other entities
in which the Company beneficially owns (directly or indirectly) fifty
percent or more of the outstanding voting stock, voting power, partnership
interests or similar voting interests, and (B) the term "Ford" shall mean
Ford and all corporations, partnerships, joint ventures, associations and
other entities (other than the Company, defined in accordance with clause
(A) of this section (ii)) in which Ford beneficially owns (directly or
indirectly) fifty percent or more of the outstanding voting stock, voting
power, partnership interests or similar voting interests.
The foregoing provisions of the Company's Restated Certificate of
Incorporation shall expire on the date that Ford ceases to own beneficially
Common Stock representing at least 20% of the total voting power of all classes
of outstanding Common Stock and no person who is a director or officer of the
Company is also a director or officer of Ford or any of its subsidiaries (other
than the Company).
In addition to any vote of the stockholders required by the Company's
Restated Certificate of Incorporation, until the time that Ford ceases to own
beneficially Common Stock representing at least 20% of the total voting power of
all classes of outstanding Common Stock, the affirmative vote of the holders of
more than 80% of the total voting power of all classes of outstanding Common
Stock shall be required to alter, amend or repeal in a manner adverse to the
interests of Ford and its subsidiaries (other than the Company), or adopt any
provision adverse to the interests of Ford and its subsidiaries (other than the
Company), and inconsistent with, the corporate opportunity provisions described
above. Accordingly, so long as Ford beneficially owns Common Stock representing
at least 20% of the total voting power of all classes of outstanding Common
Stock, it can prevent any such alteration, amendment, repeal or adoption.
Any person purchasing or otherwise acquiring Common Stock will be deemed to
have notice of, and to have consented to, the foregoing provisions of the
Company's Restated Certificate of Incorporation.
PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT. Certain provisions of the
Company's Restated Certificate of Incorporation and By-laws summarized below may
be deemed to have an anti-takeover effect and may delay, deter or prevent a
tender offer or takeover attempt that a stockholder might consider to be in its
best interest, including attempts that might result in a premium being paid over
the market price for the shares held by stockholders.
The Company's Restated Certificate of Incorporation will provide that,
subject to any rights of holders of Preferred Stock to elect additional
directors under specified circumstances, the number of directors of the Company
will be fixed by the By-laws. The By-laws will provide that, subject to any
rights of holders of Preferred Stock to elect directors under specified
circumstances, the number of directors will be fixed from time to time
exclusively by resolution of the board of directors adopted by the vote of
directors constituting a majority of the total number of directors that the
Company would have if there were no vacancies on the Company's board of
directors, but shall consist of not more than twelve nor less than three
directors. In addition, the Restated Certificate of Incorporation and By-laws
will provide that, subject to any rights of holders of Preferred Stock, and
unless the Company's board of directors otherwise determines, any vacancies will
be filled by the affirmative vote of a majority of the remaining members of the
board of directors, though less than a quorum, or by a sole remaining director;
except as otherwise provided by law, any such vacancy may not be filled by the
stockholders.
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<PAGE> 92
The Company's By-laws will provide for an advance notice procedure for the
nomination, other than by or at the direction of the board of directors, of
candidates for election as directors as well as for other stockholder proposals
to be considered at annual meetings of stockholders. In general, notice of
intent to nominate a director or raise matters at such meetings will have to be
received in writing by the Company not less than 60 nor more than 90 days prior
to the anniversary of the previous year's annual meeting of stockholders, and
must contain certain information concerning the person to be nominated or the
matters to be brought before the meeting and concerning the stockholder
submitting the proposal. The Company's Restated Certificate of Incorporation
and By-laws will also provide that special meetings of stockholders may be
called only by certain specified officers of the Company or by any such officer
at the request in writing of the board of directors; special meetings of
stockholders cannot be called by stockholders. In addition, the Company's
Restated Certificate of Incorporation will provide that any action required or
permitted to be taken by stockholders may be effected by written consent;
provided, however, that on and after the date on which neither Ford nor the
Class B Transferee continue to beneficially own 50% or more of the total voting
power of all classes of outstanding Common Stock, any action required or
permitted to be taken by stockholders may be effected only at a duly called
annual or special meeting of stockholders and may not be effected by a written
consent by stockholders in lieu of such a meeting.
The Company's Restated Certificate of Incorporation will also provide that
the affirmative vote of the holders of at least 75% of the total voting power of
all classes of outstanding Common Stock, voting together as a single class, is
required to amend, repeal or adopt any provision inconsistent with the foregoing
provisions of the Restated Certificate of Incorporation. The Restated
Certificate of Incorporation and By-laws will further provide that the By-laws
may be altered, amended or repealed by the Company's board of directors or by
the affirmative vote of the holders of at least 75% of the total voting power of
all classes of outstanding Common Stock, voting together as a single class.
REGULATORY MATTERS. Because of the nature of the businesses in which the
Company operates, the acquisition of various amounts of its equity securities
may not be permitted without regulatory approval. Set forth below are certain
principal regulatory thresholds. The information set forth below is not meant to
be complete, and any person desiring to acquire in excess of 5% of any class of
the Company's voting securities is advised to consult its own advisors.
The Company indirectly owns all of the shares of stock of insurance
companies domiciled in the states of Delaware, Indiana, Nevada, Tennessee and
Texas. The respective insurance laws of these states require prior approval by
the state's insurance commissioner of any acquisition of control of a domestic
insurance company or of any company which controls a domestic insurance company.
"Control" is presumed to exist through the ownership of 10% or more of the
voting securities of a domestic insurance company or of any company which
controls a domestic insurance company. Therefore, any person owning 10% or more
of the value of the outstanding Common Stock may, following the conversion of
some (and will following the conversion of all) of the Class B Common Stock into
Class A Common Stock, be presumed to have acquired control of the Company's
insurance subsidiaries unless the insurance commissioners of Delaware, Indiana,
Nevada, Tennessee and Texas, following application by such purchaser in each
such state, determine otherwise.
The United Kingdom's Insurance Companies Act 1982 requires the prior
approval by the Department of Trade and Industry of anyone proposing to become a
"controller" of an insurance company regulated under such Act. Any company or
individual that directly or indirectly exercises 10% or more of the voting power
at a general meeting of a regulated insurance company is considered a
"controller". Therefore, any person owning 10% or more of the value of the
outstanding Common Stock will, following any conversion of all of the Class B
Common Stock into Class A Common Stock, be a controller of the Company's U.K.
subsidiaries, Cumberland Insurance Company Limited and Cumberland Life Insurance
Co. Limited.
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<PAGE> 93
The Company indirectly owns all of the shares of stock of ANB and
Associates Investment, the deposits of which are insured by the FDIC. The
federal Change in Bank Control Act and the regulations issued thereunder require
that a person (including an individual) file a notice with the appropriate
federal bank regulatory agency prior to acquiring 10% or more of any class of
voting securities of a company that controls an insured depository institution
such as ANB or Associates Investment. In addition, as long as the Company
controls Associates Investment, the laws of the State of Utah require that the
prior approval of the Utah Commissioner of Financial Institutions be obtained
before any individual acquires the power to vote 20% or more of any class of
voting securities of the Company and before any person other than an individual
acquires the power to vote 5% or more of any class of voting securities of the
Company.
The Company indirectly owns all of the shares of stock of licensed lenders
in the states of Georgia, Hawaii, Nevada and Virginia and in the Commonwealth of
Puerto Rico. The lender licensing laws of these states and Puerto Rico require
approval by the appropriate regulatory agency prior to any acquisition of
control of any company which controls a license. "Control" is presumed to exist
through the ownership of 10% or more (25% in Georgia and Virginia) of the voting
securities of a licensee or a company that controls a licensee. Therefore any
person owning 10% or more (25% in Georgia and Virginia) of the value of the
outstanding Common Stock will, following any conversion of all of the Class B
Common Stock into Class A Common Stock, be presumed to have acquired control of
the Company's licensed lenders in these jurisdictions unless the appropriate
regulatory agency determines otherwise.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is a Delaware corporation subject to Section 203 of the
Delaware General Corporation Law (the "Delaware Law"). Section 203 provides
that, subject to certain exceptions specified therein, a corporation shall not
engage in any business combination with any "interested stockholder" for a
three-year period following the time that such stockholder becomes an interested
stockholder unless (i) prior to such time, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares) or (iii) on or subsequent to such time, the
business combination is approved by the board of directors of the corporation
and by the affirmative vote of at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder. Except as specified in Section
203 of the Delaware Law, an interested stockholder is defined to include (x) any
person that is the owner of 15% or more of the outstanding voting stock of the
corporation, or is an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation, at any
time within three years immediately prior to the relevant date and (y) the
affiliates and associates of any such person. Under certain circumstances,
Section 203 of the Delaware Law makes it more difficult for an "interested
stockholder" to effect various business combinations with a corporation for a
three-year period, although the stockholders may elect to exclude a corporation
from the restrictions imposed thereunder. By virtue of its ownership of 15% or
more of the outstanding voting stock of the Company for more than a three-year
period, Ford and its subsidiaries are not themselves restricted from engaging in
a business combination with the Company pursuant to Section 203 of the Delaware
Law.
LIMITATIONS ON DIRECTORS' LIABILITY
The Company's Restated Certificate of Incorporation provides that no
director of the Company shall be liable to the Company 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 Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct
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<PAGE> 94
or a knowing violation of law, (iii) in respect of certain unlawful dividend
payments or stock redemptions or repurchases or (iv) for any transaction from
which the director derived an improper personal benefit. The effect of these
provisions will be to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of fiduciary duty as a director
(including breaches resulting from grossly negligent behavior), except in the
situations described above.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
DESCRIPTION OF CERTAIN INDEBTEDNESS
GENERAL
In connection with the funding of its operations, the Company and its
principal operating subsidiary, ACONA, each from time to time issue publicly and
privately held debt securities (the "Senior Debt"). At December 31, 1995, the
Company and its subsidiaries had an aggregate of $21.4 billion in Senior Debt
outstanding. The following is a brief summary of the material terms of such
Senior Debt.
MATURITIES AND INTEREST RATES
The Senior Debt has maturities ranging from 1996 to 2010 with interest
rates ranging from 2.66% to 13.75%.
COVENANTS
No provisions in the Senior Debt issued by the Company limit the amount of
other debt which may be issued by the Company or the amount of dividends or
other payments which may be paid with respect to, or the redemption or
acquisition of, its equity securities by the Company or its subsidiaries. Except
as otherwise set forth below, no terms of the Senior Debt issued by ACONA limit
the amount of other debt which may be issued by ACONA or the amount of dividends
or other payments which may be paid with respect to, or the redemption or
acquisition of, its equity securities by ACONA or its subsidiaries. Each
indenture governing the terms of ACONA's publicly issued Senior Debt contains a
covenant that neither ACONA nor any finance or insurance subsidiary of ACONA
will create or incur any mortgage, pledge, or charge of any kind on any of its
properties, except for: (i) intercompany mortgages or pledges from subsidiary to
parent corporation or to any other finance or insurance subsidiary; (ii)
purchase money liens or leases; (iii) acquisitions of subsidiaries, the physical
properties or assets of which are subject to liens; (iv) liens created in the
ordinary course of business by subsidiaries for money borrowed if such
subsidiaries operate in foreign countries or prior to becoming a subsidiary had
borrowed on a secured basis; (v) sale and leaseback arrangements upon any real
property; (vi) renewals or refundings of any of the foregoing; and (vii) certain
other minor exceptions. Each such indenture also contains a covenant restricting
certain transactions by ACONA or its subsidiaries with any affiliate.
A restriction contained in one bank term loan of ACONA, the maturity date
of which is January 1, 1997, limits the amount of receivables which ACONA may
have at any time from its affiliates to 7% of the gross receivables of ACONA. A
restriction contained in one other bank term loan of ACONA, the maturity date of
which is April 30, 1996, requires ACONA to enter into transactions with its
affiliates under the same terms and conditions as such transaction would be
entered into with a nonaffiliate. A restriction contained in numerous revolving
credit facilities of ACONA, the final maturity date of which is April 1, 2001,
requires ACONA to maintain a tangible net worth of at least $1,500,000,000. A
restriction, which is contained in certain issues of Senior Debt having stated
maturities no later than
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, generally limits payments of dividends on ACONA's common stock in any
year to not more than 50% of consolidated net earnings for such year, subject
to certain exceptions.
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Class A
Common Stock by a Non-U.S. Holder. For this purpose, a "Non-U.S. Holder" is any
person who is, for United States federal income tax purposes, a foreign
corporation, a non-resident alien individual, a foreign partnership or a foreign
estate or trust. This discussion does not address all aspects of United States
federal income and estate taxes and does not deal with foreign, state and local
consequences that may be relevant to such Non-U.S. Holders in light of their
personal circumstances. Furthermore, this discussion is based on provisions of
the Internal Revenue Code, existing and proposed regulations promulgated
thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change (possibly with retroactive
effect). EACH PROSPECTIVE PURCHASER OF CLASS A COMMON STOCK IS ADVISED TO
CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX
CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF CLASS A COMMON STOCK AS WELL
AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE,
MUNICIPALITY OR OTHER TAXING JURISDICTION.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States on at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three-year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). Resident aliens are
subject to U.S. federal tax as if they were U.S. citizens.
DIVIDENDS
Dividends paid to a Non-U.S. Holder of Class A Common Stock generally will
be subject to withholding of United States federal income tax either at a rate
of 30% of the gross amount of the dividends or at such lower rate as may be
specified by an applicable income tax treaty. However, dividends that are
effectively connected with the conduct of a trade or business by the Non-U.S.
Holder within the United States and, where a tax treaty applies, are
attributable to a United States permanent establishment of the Non-U.S. Holder,
are not subject to the withholding tax, but instead are subject to United States
federal income tax on a net income basis at applicable graduated individual or
corporate rates. Any such effectively connected dividends received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Dividends paid to an address outside the United States are presumed to be
paid to a resident of such country (unless the payer has knowledge to the
contrary) for purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. Under proposed United States
Treasury regulations not currently in effect, however, a Non-U.S. Holder of
Class A Common Stock who wishes to claim the benefit of an applicable treaty
rate would be required to satisfy applicable certification and other
requirements. Currently, certain certification and disclosure requirements must
be complied with in order to be exempt from withholding under the effectively
connected income exemption discussed above.
A Non-U.S. Holder of Class A Common Stock eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for refund
with the Internal Revenue Service (the "IRS").
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GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder will generally not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Class A Common Stock unless (i) the gain is effectively connected with a trade
or business of the Non-U.S. Holder in the United States, and, where a tax treaty
applies, is attributable to a United States permanent establishment of the Non-
U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an individual and
holds the Class A Common Stock as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year of the sale or other
disposition and certain other conditions are met, or (iii) the Company is or has
been a "U.S. real property holding corporation" for United States federal income
tax purposes. The Company believes it is not and does not anticipate becoming a
"U.S. real property holding corporation" for United States federal income tax
purposes.
If an individual Non-U.S. Holder falls under clause (i) above, he will,
unless an applicable treaty provides otherwise, be taxed on his net gain derived
from the sale under regular graduated United States federal income tax rates. If
an individual Non-U.S. Holder falls under clause (ii) above, he will be subject
to a flat 30% tax on the gain derived from the sale, which may be offset by
certain United States capital losses.
If a Non-U.S. Holder that is a foreign corporation falls under clause (i)
above, it will be taxed on its gain under regular graduated United States
federal income tax rates and may be subject to an additional branch profits tax
at a 30% rate, unless it qualifies for a lower rate under an applicable income
tax treaty.
FEDERAL ESTATE TAX
Class A Common Stock held by an individual Non-U.S. Holder at the time of
death will be included in such holder's gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.
A backup withholding tax is imposed at the rate of 31% on certain payments
to persons that fail to furnish certain identifying information to the payor.
Backup withholding generally will not apply to dividends paid to a Non-U.S.
Holder at an address outside the United States (unless the payer has knowledge
that the payee is a U.S. person). Backup withholding and information reporting
generally will also apply to dividends paid on Class A Common Stock at addresses
inside the United States to Non-U.S. Holders that fail to provide certain
identifying information in the manner required.
Payment of the proceeds of a sale of Class A Common Stock by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless the beneficial owner provides the payor with its
name and address and certifies under penalties of perjury that it is a Non-U.S.
Holder, or otherwise establishes an exemption. In general, backup withholding
and information reporting will not apply to a payment of the proceeds of a sale
of Class A Common Stock by or through a foreign office of a foreign broker. If,
however, such broker is, for United States federal income tax purposes a U.S.
person, a controlled foreign corporation, or a foreign person that derives 50%
or more of its gross income for certain periods from the conduct of a trade or
business in the United States, such payments will be subject to information
reporting, but not backup withholding, unless (1) such broker has documentary
evidence in its records that
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the beneficial owner is a Non-U.S. Holder and certain other conditions are met,
or (2) the beneficial owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.
The backup withholding and information reporting rules are under review by
the Treasury Department and their application to the Class A Common Stock could
be changed by future regulations.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., CS First Boston
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc. and Salomon
Brothers Inc are acting as representatives (the "Representatives"), has
severally agreed to purchase from the Company, the respective number of shares
of Class A Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITERS COMMON STOCK
---------------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co...................................................
CS First Boston Corporation...........................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated....................
J.P. Morgan Securities Inc............................................
Bear, Stearns & Co. Inc...............................................
Lehman Brothers Inc...................................................
Salomon Brothers Inc .................................................
Total.......................................................
========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain brokers and dealers. After the shares of Class A Common
Stock are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Representatives.
The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the International Offering
(the "International Underwriters") providing for the concurrent offer and sale
of shares of Class A Common Stock in an International Offering outside
the United States. The initial public offering price and aggregate underwriting
discounts and commissions per share for the Offerings are identical. The closing
of the offering made hereby is a condition to the closing of the International
Offering, and vice versa. The representatives of the International Underwriters
are Goldman Sachs International, CS First Boston Limited, Merrill Lynch
International Limited, J.P. Morgan Securities Ltd., Bear, Stearns International
Limited, Lehman Brothers International (Europe) and Salomon Brothers
International Limited.
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Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the U.S.
Underwriters named herein has agreed that, as a part of the distribution of the
shares offered as a part of the U.S. Offering and subject to certain exceptions,
it will offer, sell or deliver the shares of Class A Common Stock, directly or
indirectly, only in the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas subject
to its jurisdiction (the "United States") and to U.S. persons, which term shall
mean, for purposes of this paragraph: (i) any individual who is a resident of
the United States or (ii) any corporation, partnership or other entity organized
in or under the laws of the United States or any political subdivision thereof
and whose office most directly involved with the purchase is located in the
United States. Each of the International Underwriters has agreed, or will agree,
pursuant to the Agreement Between that, as a part of the International Offering,
and subject to certain exceptions, it will (i) not, directly or indirectly,
offer, sell or deliver shares of Class A Common Stock (a) in the United States
or to any U.S. persons or (b) to any person whom it believes intends to reoffer,
resell or deliver the shares in the United States or to any U.S. persons and
(ii) cause any dealer to whom it may sell such shares at any concession to agree
to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial public offering price, less an amount not greater than the
selling concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
additional shares of Class A Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the shares of Class A Common Stock offered hereby. The
Company has granted the International Underwriters a similar option exercisable
for up to an aggregate of additional shares of Class A Common Stock.
The Company and Ford have agreed that, during the period beginning from the
date of this Prospectus and continuing to and including the date 180 days after
the date of this Prospectus, they will not offer, sell, contract to sell or
otherwise dispose of, except as provided in the U.S. Underwriting Agreement and
the International Underwriting Agreement, any shares of Common Stock or any
security convertible into or exchangeable for, or that represents the right to
receive, shares of Common Stock or enter into any swap, option, future, forward
or other agreement that transfers, in whole or in part, the economic consequence
of ownership of Common Stock, without the prior written consent of Goldman,
Sachs & Co.
The Underwriters have reserved for sale, at the initial public offering
price, shares of the Class A Common Stock for certain employees and
retirees of the Company and its affiliates in the United States and, subject to
local laws, internationally who have expressed an interest in purchasing such
shares of Class A Common Stock in the Offerings. The number of shares available
for sale to the general public in the Offerings will be reduced to the extent
such persons purchase such reserved shares. Any reserved shares not so purchased
will be offered to the general public on the same basis as the other shares
offered hereby.
Prior to the Offerings, there has been no public market for the shares of
Class A Common Stock. The initial public offering price will be negotiated among
the Company and the representatives of the U.S. Underwriters and the
International Underwriters. Among the factors to be considered in determining
the initial public offering price of the Class A Common Stock in addition to
prevailing market conditions, will be the Company's historical performance,
estimates of the business potential and earnings prospects of the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
94
<PAGE> 99
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of Class A Common Stock, including shares initially sold in the
International Offering, to persons located in the United States.
Application will be made to list the Class A Common Stock on the New York
Stock Exchange under the symbol "AFS". In order to meet one of the requirements
for listing of the Class A Common Stock on the New York Stock Exchange, the U.S.
Underwriters will undertake to sell lots of 100 or more shares to a minimum of
2,000 beneficial owners.
The Company and Ford have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
From time to time, in the ordinary course of their respective businesses,
certain of the Underwriters and their affiliates have engaged, and may in the
future engage, in commercial banking transactions with the Company.
LEGAL MATTERS
The validity of the Class A Common Stock offered hereby will be passed upon
for the Company by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York and for the Underwriters by
Shearman & Sterling, New York, New York. Simpson Thacher & Bartlett and Shearman
& Sterling have in the past provided, and may continue to provide, legal
services to Ford and its affiliates.
EXPERTS
The Supplemental Combined Balance Sheets of the Company as of December 31,
1995 and 1994 and the Supplemental Combined Statements of Earnings, Changes in
Stockholder's Equity and Cash Flows for each of the three years in the period
ended December 31, 1995 included in this Prospectus, have been included herein
in reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
95
<PAGE> 100
GLOSSARY
<TABLE>
<S> <C>
Accidental Death and Dismem-
berment Insurance............. Insurance that pays the balance of the principal amount fi-
nanced upon the covered death or disability of the
obligor.
Accounts Receivable Financing... A type of lending to a dealer of commercial goods which is
secured by such dealer's accounts receivable.
Active Accounts................. A credit card account that has either an outstanding
balance or has had credit or debit activity during the
billing cycle for which activity is determined.
Behavioral Scoring System....... A system used to assess the credit risk of a finance
customer based upon the actual credit history of such
customer.
Captive Finance Program......... A finance program which is operated by a finance company
under the name of the manufacturer or dealer of the goods
being financed.
Charge-Off...................... A loan which is deemed uncollectible and the balance of
which is charged against the allowance for loan losses.
Generally, unsecured loans are charged off when they
become 180 days contractually delinquent and secured
loans at the earlier of certain specific events but in no
event later than when the account becomes one year
contractually delinquent.
Class A Common Stock............ Class A Common Stock, par value $0.01 per share, of the
Company.
Class B Common Stock............ Class B Common Stock, par value $0.01 per share, of the
Company.
Closed-End Lease................ A lease with a specified term under which the lessor bears
the residual risk of the property subject to the lease.
Closed-End Personal Loans....... A direct consumer loan with a specified term, which is
generally unsecured, that may be used for a variety of
purposes.
Co-Branded...................... A type of credit card that bears the name of third party
businesses with whom the issuer of the credit card has a
marketing relationship.
Commercial Auto and Dealers'
Open Lot Physical Damage
Insurance..................... Insurance that provides a benefit in the event of a loss to
the insured's property pledged as collateral. In the case
of property owned and used by truck owner-operators and
fleet customers, coverage is for the term of the loan or
the policy term and may not exceed three years. In the
case of property held in inventory for resale, coverage
is for one year.
Contractual Delinquency......... Failure to pay when due any amount as called for by the
terms of the contract.
Credit Accident and Health
Insurance..................... Insurance that provides a benefit in the event an insured
becomes disabled because of a covered accident or illness
during the term of the insurance.
Credit Life Insurance........... Insurance that provides coverage that may pay off an
insured's credit balance in the event of a covered death
during the term of the insurance.
</TABLE>
96
<PAGE> 101
<TABLE>
<S> <C>
Credit Scoring.................. A credit approval system used to evaluate the perceived
credit worthiness of an applicant based upon information
regarding the applicant and the transaction in question.
Debt to Equity Ratio............ The ratio of interest bearing debt to total stockholder's
equity.
Excess of Loss Coverages........ Reinsurance under which the reinsurer is responsible for
the losses exceeding a specific dollar amount during the
term of reinsurance coverage.
Finance Lease................... A lease under which the lessee is obligated to pay to the
lessor over the term of the lease an amount equal to the
cost of the goods being leased plus a finance charge. The
lessee becomes the owner of the goods at the end of the
lease.
Foreign Subsidiaries
Recontribution................ The expected recontribution by Ford to the Company of the
Foreign Subsidiaries, as described under "The Company".
Gap Position.................... The sum of floating rate asset balances and principal
payments on fixed rate assets, less the sum of floating
rate liability balances and fixed rate liability
maturities.
Home Equity Loan................ A loan secured by the borrower's home.
Independent Finance Company..... A company engaged in providing finance products and/or
services whose business is directed by its internal
management and is not dependent upon the business of an
affiliated party.
Insurance Underwriting.......... The process whereby a company applies a set of standards to
the risks presented to it to determine whether to insure
such risks.
Involuntary Unemployment
Insurance..................... Insurance that provides a benefit for a specified period of
time in the event of the insured's involuntary loss of work
(for example, layoff, strike or lockout) equal to the
monthly installment amount due on the loan extended by
the Company.
LTV -- Loan to Value Ratio...... The ratio (expressed as a percentage) of the dollar amount
of the loan to the value of the property (at the lower of
purchase price or appraised value) on the date of the
loan.
Manufactured Housing............ Residential housing constructed at a manufacturing facility
and transported to the site at which it will be located.
Moody's......................... Moody's Investors Service
Net Credit Loss................. The loss from accounts charged off as a result of the
borrowers' failure to repay the amount owed on the account
after a payment has been past due for a specified period
of time. Net credit losses exclude interest and fees not
paid and include present period recoveries on loans
charged off in prior periods.
Net Finance Receivables......... Finance receivables net of unearned income.
Open-End Lease.................. A lease under which (i) the lessee bears the residual risk
of the property subject to the lease and (ii) the lessor
retains the benefit of depreciation for tax purposes.
</TABLE>
97
<PAGE> 102
<TABLE>
<S> <C>
Personal Property Insurance..... Insurance that provides a benefit in the event of a loss of
or damage to property pledged as collateral on direct,
non-real estate loans and retail sales finance contracts.
Private Label Credit Card....... A credit card issued by a retailer of consumer goods, or by
a financial institution pursuant to an agreement with a
retailer, for the purchase or financing of the retailer's
goods and services.
Reinsurance..................... The practice whereby one party, called the reinsurer, in
consideration of a premium paid to it, agrees to indemnify
another party for part or all of the liability assumed by
the reinsured under a contract or contracts of insurance
which it has issued. The reinsured may be referred to as
the original or primary insurer, the direct writing
company or the ceding company.
Residual Risk................... The risk that at the end of a lease the market value of the
personal property subject to the lease will be less than
the residual value on which the lease payments were
based.
Return on Average Assets........ A fraction, the numerator of which is annual net earnings
and the denominator of which is the average of total assets
at the beginning and end of the annual period.
Return on Average Equity........ A fraction, the numerator of which is annual net earnings
and the denominator of which is the average of total stock-
holder's equity at the beginning and end of the annual
period.
Return on Average Tangible
Equity........................ A fraction, the numerator of which is annual net earnings
and the denominator of which is the average of total stock-
holder's equity less goodwill and other intangibles at
the beginning and end of the annual period.
Revolving Credit................ A credit arrangement whereby a borrower may repeatedly
borrow and repay specified amounts.
Standard & Poor's............... Standard & Poor's Ratings Group
Tax-Free Spin-Off............... The disposition of the Common Stock beneficially owned by
Ford or the Class B Transferee, if any, effected in
connection with a transfer of such Common Stock to
stockholders of Ford or stockholders of the Class B
Transferee, as the case may be, as a dividend intended to
be on a tax-free basis under the Code.
Variable Rate................... An interest rate that adjusts based on the movement of an
index.
Vintage Analysis................ A comparison of the behavior of portfolio segments at
specified months from the date the loans were made.
Wholesale Financing............. Financing to a dealer of consumer or commercial goods se-
cured by such dealer's product inventory.
</TABLE>
98
<PAGE> 103
ASSOCIATES FIRST CAPITAL CORPORATION
INDEX TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Supplemental Combined Financial Statements
Report of Independent Accountants................................................... F-2
Supplemental Combined Statement of Earnings -- Years Ended December 31, 1995, 1994
and 1993......................................................................... F-3
Supplemental Combined Balance Sheet -- December 31, 1995 and 1994................... F-4
Supplemental Combined Statement of Changes in Stockholder's Equity -- Years Ended
December 31, 1995, 1994 and 1993................................................. F-5
Supplemental Combined Statement of Cash Flows -- Years Ended December 31, 1995, 1994
and 1993......................................................................... F-6
Notes to Supplemental Combined Financial Statements................................. F-7
</TABLE>
F-1
<PAGE> 104
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Associates First Capital Corporation
We have audited the supplemental combined statements of financial position
of Associates First Capital Corporation (an indirect subsidiary of Ford Motor
Company) and subsidiaries as of December 31, 1995 and 1994, and the related
supplemental combined statements of earnings, changes in stockholder's equity,
and cash flows for each of the years in the three-year period ended December 31,
1995. 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.
The supplemental combined financial statements give retroactive effect to
the proposed contributions by Ford Motor Company of certain foreign subsidiaries
to Associates First Capital Corporation, to be accounted for as a pooling of
interests as described in NOTE 2 to the supplemental combined financial
statements. Generally accepted accounting principles proscribe giving effect to
a consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation;
however, they will become the historical consolidated financial statements of
Associates First Capital Corporation and subsidiaries after financial statements
covering the date of consummation of the business combination are issued.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the supplemental combined financial position of
Associates First Capital Corporation and subsidiaries at December 31, 1995 and
1994, and the supplemental combined results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1995, in
conformity with generally accepted accounting principles applicable after
financial statements are issued for a period which includes the date of
consummation of the proposed business combination.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
January 26, 1996, except for Note 18,
as to which the date is February 8, 1996
F-2
<PAGE> 105
ASSOCIATES FIRST CAPITAL CORPORATION
SUPPLEMENTAL COMBINED STATEMENT OF EARNINGS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
REVENUE
Finance charges......................................... $5,560.8 $4,445.2 $3,709.7
Insurance premiums...................................... 370.6 329.0 270.9
Investment and other income............................. 175.8 151.6 134.2
-------- -------- --------
6,107.2 4,925.8 4,114.8
EXPENSES
Interest expense........................................ 2,177.9 1,657.3 1,421.7
Operating expenses...................................... 1,754.7 1,456.1 1,216.8
Provision for losses on finance receivables -- NOTE 4... 834.0 647.1 536.1
Insurance benefits paid or provided..................... 142.5 147.9 118.9
-------- -------- --------
4,909.1 3,908.4 3,293.5
-------- -------- --------
EARNINGS BEFORE PROVISION FOR INCOME TAXES................ 1,198.1 1,017.4 821.3
PROVISION FOR INCOME TAXES -- NOTE 8...................... 475.0 414.1 327.3
-------- -------- --------
NET EARNINGS.............................................. $ 723.1 $ 603.3 $ 494.0
======== ======== ========
NET EARNINGS PER SHARE*................................... $ $ $
======== ======== ========
</TABLE>
- ---------------
* Based on an assumed million shares outstanding and in whole dollars.
See notes to supplemental combined financial statements.
F-3
<PAGE> 106
ASSOCIATES FIRST CAPITAL CORPORATION
SUPPLEMENTAL COMBINED BALANCE SHEET
(IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH AND CASH EQUIVALENTS........................................... $ 532.2 $ 606.0
INVESTMENTS IN DEBT AND EQUITY SECURITIES -- NOTE 16................ 881.1 605.1
FINANCE RECEIVABLES, net of unearned finance income -- NOTE 3
Consumer Finance.................................................. 27,575.3 23,627.8
Commercial Finance................................................ 12,127.2 10,057.9
--------- ---------
Total net finance receivables.................................. 39,702.5 33,685.7
ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES -- NOTE 4............... (1,268.6) (1,061.6)
INSURANCE POLICY AND CLAIMS RESERVES................................ (625.4) (565.7)
OTHER ASSETS -- NOTE 13............................................. 2,082.1 2,014.0
--------- ---------
Total assets.............................................. $41,303.9 $35,283.5
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
NOTES PAYABLE -- NOTE 6
Commercial Paper.................................................. $12,902.9 $11,807.4
Bank Loans........................................................ 844.4 624.5
ACCOUNTS PAYABLE AND ACCRUALS....................................... 1,382.9 1,108.6
LONG-TERM DEBT -- NOTES 7 and 9..................................... 21,372.6 17,306.2
STOCKHOLDER'S EQUITY
Common Stock, no par value, 250 shares authorized, issued and
outstanding, at stated value................................... 47.0 47.0
Paid-in Capital................................................... 2,124.3 2,153.2
Retained Earnings................................................. 2,287.0 1,881.9
Foreign Currency Translation Adjustments -- NOTE 2................ 330.6 372.3
Unrealized Gain (Loss) on Available-for-Sale Securities -- NOTES 2
and 16......................................................... 12.2 (17.6)
--------- ---------
Total stockholder's equity................................ 4,801.1 4,436.8
--------- ---------
Total liabilities and stockholder's equity................ $41,303.9 $35,283.5
========= =========
</TABLE>
See notes to supplemental combined financial statements.
F-4
<PAGE> 107
ASSOCIATES FIRST CAPITAL CORPORATION
SUPPLEMENTAL COMBINED STATEMENT OF
CHANGES IN STOCKHOLDER'S EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN
FOREIGN (LOSS) ON TOTAL
CURRENCY AVAILABLE- STOCK-
COMMON PAID-IN RETAINED TRANSLATION FOR-SALE HOLDER'S
STOCK CAPITAL EARNINGS ADJUSTMENTS SECURITIES EQUITY
------ -------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1992.................. $47.0 $1,738.1 $1,298.7 $ 143.6 $ 3.7 $3,231.1
Net Earnings..................... 494.0 494.0
Contributions from Parent........ 200.0 200.0
Cash Dividends................... (226.0) (226.0)
Current Period Adjustment........ 74.9 0.3 75.2
----- -------- -------- ------- ------ --------
DECEMBER 31, 1993.................. 47.0 1,938.1 1,566.7 218.5 4.0 3,774.3
Net Earnings..................... 603.3 603.3
Contributions from Parent........ 215.1 215.1
Cash Dividends................... (288.1) (288.1)
Current Period Adjustment........ 153.8 (21.6) 132.2
----- -------- -------- ------- ------ --------
DECEMBER 31, 1994.................. 47.0 2,153.2 1,881.9 372.3 (17.6) 4,436.8
Net Earnings..................... 723.1 723.1
Contributions from Parent........ 200.0 200.0
Capital distribution to Ford..... (228.9) (228.9)
Cash Dividends................... (318.0) (318.0)
Current Period Adjustment........ (41.7) 29.8 (11.9)
----- -------- -------- ------- ------ --------
DECEMBER 31, 1995.................. $47.0 $2,124.3 $2,287.0 $ 330.6 $ 12.2 $4,801.1
===== ======== ======== ======= ====== ========
</TABLE>
See notes to supplemental combined financial statements.
F-5
<PAGE> 108
ASSOCIATES FIRST CAPITAL CORPORATION
SUPPLEMENTAL COMBINED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net earnings....................................................... $ 723.1 $ 603.3 $ 494.0
Adjustments to net earnings for noncash items:
Provision for losses on finance receivables..................... 834.0 647.1 536.1
Depreciation and amortization................................... 193.8 187.4 264.8
Increase in accounts payable and accruals....................... 166.5 91.1 172.5
Deferred income taxes........................................... 101.1 (18.8) 33.6
Increase in insurance policy and claims reserves................ 59.7 118.9 67.6
Unrealized gain on trading securities........................... (3.6) (1.6)
Purchases of trading securities.................................... (5.8) (23.8)
Sales and maturities of trading securities......................... 38.7 17.4
Other.............................................................. (6.8) (5.0)
--------- --------- ---------
Net cash provided from operating activities................ 2,107.5 1,614.2 1,563.6
--------- --------- ---------
Cash Flows from Investing Activities
Finance receivables originated or purchased........................ (37,051.1) (30,431.1) (22,868.8)
Finance receivables liquidated..................................... 30,689.1 24,942.8 19,217.5
Acquisitions of other finance businesses, net...................... (143.9) (484.9) (329.1)
Proceeds from sale of investment in mortgage servicing rights...... 97.1
(Increase) decrease in real estate loans held for sale............. (3.7) 51.9 0.8
Increase in other assets........................................... (176.5) (200.3) (208.3)
Purchases of available-for-sale securities......................... (893.9) (306.0)
Sales and maturities of available-for-sale securities.............. 635.9 318.1
Purchases of marketable securities................................. (639.6)
Sales and maturities of marketable securities...................... 519.0
--------- --------- ---------
Net cash used for investing activities..................... (6,944.1) (6,012.4) (4,308.5)
--------- --------- ---------
Cash Flows from Financing Activities
Issuance of long-term debt......................................... 6,327.8 4,837.2 4,073.1
Retirement of long-term debt....................................... (2,491.8) (2,357.7) (2,092.9)
Increase in notes payable.......................................... 1,315.4 2,046.0 797.4
Capital contributions.............................................. 200.0 215.1 200.0
Capital distribution............................................... (228.9)
Cash dividends..................................................... (318.0) (288.1) (226.0)
Other.............................................................. (20.7) (0.4)
--------- --------- ---------
Net cash provided from financing activities................ 4,804.5 4,431.8 2,751.2
--------- --------- ---------
Effect of foreign currency translation adjustments on cash........... (41.7) 153.8 74.9
--------- --------- ---------
(Decrease)increase in cash and cash equivalents...................... (73.8) 187.4 81.2
Cash and cash equivalents at beginning of period..................... 606.0 418.6 337.4
--------- --------- ---------
Cash and cash equivalents at end of period........................... $ 532.2 $ 606.0 $ 418.6
========= ========= =========
Cash paid for:
Interest........................................................... $ 2,175.8 $ 1,693.6 $ 1,448.1
========= ========= =========
Income taxes....................................................... $ 399.7 $ 465.3 $ 375.3
========= ========= =========
</TABLE>
See notes to supplemental combined financial statements.
F-6
<PAGE> 109
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY
Associates First Capital Corporation ("First Capital" or the "Company"), a
Delaware corporation, is a subsidiary of Ford FSG, Inc. and an indirect
subsidiary of Ford Motor Company ("Ford"). Associates Corporation of North
America ("Associates") is the principal U.S.-based operating subsidiary of First
Capital. AIC Corporation is the principal foreign-based operating subsidiary of
First Capital.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
Basis of Presentation
The supplemental combined financial statements of First Capital and
subsidiaries have been prepared to give retroactive effect to the contribution
by Ford of certain foreign operations to First Capital. First Capital was
acquired by Ford in 1989. At that time, First Capital transferred its finance
operations in Japan, the United Kingdom, Canada and Puerto Rico to other foreign
subsidiaries of Ford but maintained management supervision over such operations.
In 1995, First Capital also commenced management supervision of operations in
Mexico. As part of an organizational restructuring of Ford's financial services
companies expected to be completed prior to completion of the Company's public
offering, Ford expects to recontribute the previously owned foreign operations,
and Mexico, collectively referred to hereafter as the "Foreign Operations", back
to First Capital. The results of these operations have been retroactively
included in First Capital's results contained herein. Generally accepted
accounting principles proscribe giving effect to a consummated business
combination accounted for by the pooling-of-interests method in financial
statements that do not include the date of consummation. These financial
statements do not extend through the date of consummation; however, they will
become the historical consolidated financial statements of First Capital after
financial statements covering the date of consummation of the business
combination are issued.
Amounts of goodwill relating to acquisitions are being amortized by the
straight-line method over periods not exceeding forty years. The carrying value
of goodwill is reviewed if the facts and circumstances suggest that it may be
impaired. If the review indicates that goodwill will not be recoverable, as
determined based on undiscounted cash flows, the carrying value of the goodwill
is reduced by the estimated short-fall of discounted cash flows.
All significant intercompany balances and transactions have been eliminated
in consolidation.
The preparation of these supplemental combined financial statements in
conformity with generally accepted accounting principles requires the use of
management's estimates. These estimates are subjective in nature and involve
matters of judgment. Actual results could differ from these estimates.
Revenue Recognition
Finance charges on receivables are recognized as revenue using the interest
(actuarial) method. Premiums and discounts on purchased receivables are
considered as yield adjustments. The unamortized balance is included in finance
receivables and the associated amortization is included in finance charge
revenue. Finance charge accruals are suspended on accounts when they become 60
days contractually delinquent. The accrual is resumed when the loan becomes
contractually current. At December 31, 1995 and 1994, net finance receivables on
which revenue was not accrued approximated $678.9 million and $454.8 million,
respectively.
F-7
<PAGE> 110
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Insurance premiums are recorded as unearned premiums when collected or when
written and are subsequently amortized into income based on the nature and term
of the underlying insurance contracts. The methods of amortization used are pro
rata, sum-of-the-years-digits and a combination thereof.
Gains or losses on sales of debt securities are included in revenue when
realized. Unrealized gains or losses on debt securities are reported as a
component of stockholder's equity, net of tax. Realized and unrealized gains or
losses on equity securities are included in revenue as incurred. The cost of
debt and equity securities sold is determined by the specific identification
method.
Allowance for Losses on Finance Receivables
The Company maintains an allowance for losses on finance receivables at an
amount which it believes is sufficient to provide adequate protection against
losses in the portfolios. The allowance is determined principally on the basis
of historical loss experience, and reflects management's judgment of additional
loss potential considering future economic conditions and the nature and
characteristics of the underlying finance receivables. The allowance is managed
on an aggregate basis considering the relationship of the allowance to net
finance receivables and net credit losses. Additions to the allowance are
charged to the provision for losses on finance receivables.
Finance receivables are charged to the allowance for losses when they are
deemed to be uncollectible. Additionally, Company policy provides for charge-off
of various types of accounts on a contractual basis described as follows:
Consumer direct and other installment and credit card receivables are charged to
the allowance for losses when they become 180 days delinquent. All other finance
receivables are charged to the allowance for losses when any of the following
conditions occur: (i) the related security has been converted or destroyed; (ii)
the related security has been repossessed and sold or held for sale for one
year; or (iii) the related security has not been repossessed and the receivable
has become one year delinquent. A delinquent account is one on which the
customer has not made payments as contractually agreed. Extensions are granted
on receivables from customers with satisfactory credit and with prior approval
of management. Recoveries on losses previously charged to the allowance are
credited to the allowance at the time the recovery is collected.
Insurance Reserves
The reserves for future benefits and refunds upon cancellation of credit
life and health insurance and property and casualty insurance are provided for
in the unearned premium reserve for each class of insurance. In addition,
reserves for reported claims on credit accident and health insurance are
established based on standard morbidity tables used in the insurance business
for such purposes. Claim reserves for reported property and casualty insurance
claims are based on estimates of costs and expenses to settle each claim.
Additional amounts of reserves, based on prior experience and insurance in
force, are provided for each class of insurance for claims which have been
incurred but not reported as of the balance sheet date.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated at the rate
of exchange in effect on the balance sheet date; income and expenses are
translated at the average rate of exchange prevailing during the year. The
related translation adjustments are reflected in the stockholder's equity
section of the supplemental combined balance sheet. Foreign currency gains and
losses resulting from transactions are included in earnings. Such foreign
currency losses approximated
F-8
<PAGE> 111
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
$0.6 million, $0.5 million and $0.3 million during the years ended December 31,
1995, 1994 and 1993, respectively.
Income Taxes
First Capital and its subsidiaries are included in the consolidated Federal
income tax return of Ford. The provision for income taxes is computed on a
separate-return basis. Deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
In 1993, the Company entered into a tax-sharing agreement with Ford whereby
state income taxes are provided on a separate-return basis.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The amounts reported
in the supplemental combined balance sheet approximate fair value.
Disclosures About Fair Value of Financial Instruments
The supplemental combined financial statements present the information
required by Statement of Financial Accounting Standards ("SFAS") No. 107,
"Disclosures about Fair Value of Financial Instruments". Amounts disclosed
represent estimates of fair values at a particular point in time. Significant
assumptions regarding economic conditions, loss experience and risk
characteristics associated with particular financial instruments and other
factors were used for purposes of this disclosure. These assumptions are
subjective in nature and involve matters of judgment. Changes in assumptions
could have a material impact on these estimates.
Derivative Financial Instruments
The Company does not hold or issue derivative financial instruments for
trading purposes. The Company's derivative activity is limited to currency swap
transactions designed to hedge its currency risk on specific foreign
currency-denominated assets denominated in British Sterling. Gains and losses on
qualifying hedges are deferred and are recognized in income or as adjustments of
carrying amounts when the hedged transaction occurs. See NOTE 15 to the
supplemental combined financial statements for additional information related to
currency swap transactions.
Earnings Per Share
Net earnings per share are determined by dividing net earnings during each
year by an assumed million shares outstanding after completion of the
Company's initial public offering.
F-9
<PAGE> 112
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- NET FINANCE RECEIVABLES
Composition of Net Finance Receivables
At December 31, 1995 and 1994, net finance receivables consisted of the
following (in millions):
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Consumer Finance
Home equity lending....................................... $ 14,316.3 $ 12,449.9
Personal lending and retail sales finance................. 6,225.1 5,420.3
Credit card............................................... 4,984.6 4,076.5
Manufactured housing...................................... 2,049.3 1,681.1
---------- ----------
27,575.3 23,627.8
---------- ----------
Commercial Finance
Truck and truck trailer................................... 7,578.9 6,653.4
Equipment................................................. 4,201.9 3,133.4
Other..................................................... 346.4 271.1
---------- ----------
12,127.2 10,057.9
---------- ----------
Net finance receivables........................... $ 39,702.5 $ 33,685.7
========== ==========
</TABLE>
At December 31, 1995, contractual maturities of net finance receivables
were as follows (in millions):
<TABLE>
<CAPTION>
CONSUMER COMMERCIAL
YEAR DUE FINANCE FINANCE TOTAL
------------------------------------------------- --------- ---------- ----------
<S> <C> <C> <C>
1996............................................ $ 3,899.7 $ 5,461.9 $ 9,361.6
1997............................................ 3,230.7 3,013.2 6,243.9
1998............................................ 2,849.7 2,032.0 4,881.7
1999............................................ 2,576.4 1,092.0 3,668.4
2000 and thereafter............................. 15,018.8 528.1 15,546.9
--------- --------- ---------
$27,575.3 $12,127.2 $ 39,702.5
========= ========= =========
</TABLE>
It is the Company's experience that a substantial portion of the consumer
loan portfolio generally is renewed or repaid prior to contractual maturity
dates. The above maturity schedule should not be regarded as a forecast of
future cash collections.
Included in commercial finance receivables are direct financing leases as
follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
Minimum lease rentals......................................... $3,147.1 $2,315.5
Unguaranteed residual values.................................. 77.1 52.4
-------- --------
Future minimum lease rentals................................ 3,224.2 2,367.9
Unearned finance income....................................... (448.6) (332.7)
-------- --------
Net investment in direct financing leases........... $2,775.6 $2,035.2
======== ========
</TABLE>
Future net minimum lease rentals on direct financing leases for each of the
years succeeding December 31, 1995 are as follows (in millions): 1996 -- $856.2;
1997 -- $727.6; 1998 -- $578.5; 1999 -- $383.8; 2000 -- $160.9 and 2001 and
thereafter -- $68.6.
F-10
<PAGE> 113
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Estimated Fair Value of Net Finance Receivables
The estimated fair value of net finance receivables at December 31, 1995
and 1994 was $43.4 billion and $36.4 billion, respectively. In order to
determine the fair values of loans, the loan portfolio was segmented based on
loan type, credit quality and repricing characteristics. The fair value was
estimated by discounting the expected cash flows from such loans at discount
rates which approximate gross finance charge rates that would achieve an
expected return on assets with similar risk characteristics. The estimated fair
value of the credit card receivables was based on the Company's experience in
pricing similar portfolios for acquisition purposes.
Dispersion of Finance Receivables
The Company has geographically dispersed finance receivables. At December
31, 1995, approximately 93% of the Company's total receivables were dispersed
across the United States, 5% were in Japan and the remaining 2% were in other
foreign countries. Of the total receivables dispersed across the United States
or foreign jurisdictions, 11% were in California, 6% in Florida, 6% in Texas, 4%
in Georgia, 4% in Pennsylvania, 4% in North Carolina, 4% in New York, 4% in
Illinois, and 4% in Ohio; no other individual state had more than 4%.
Acquisitions of Finance Businesses
During the years ended December 31, 1995, 1994 and 1993, the Company made
acquisitions of finance businesses accounted for as purchases, the most
significant of which were as follows:
On January 1, 1995, Associates acquired $116 million of net home
equity receivables and certain other assets from Ford Motor Credit Company,
an affiliate. The transaction was recorded at historical cost, which
approximated market.
In October 1995, Associates acquired the stock of LCA Corporation,
principally consisting of leasing receivables. The fair market value of
total assets acquired and liabilities assumed was $253 million and $225
million, respectively.
In September 1994, Associates acquired the credit card portfolio and
certain other assets of Amoco Oil Company. The fair market value of assets
acquired totaled $426 million.
In December 1994, Associates acquired the assets of First Collateral
Services, Inc., principally consisting of warehouse loan facilities
extended to mortgage brokers secured by mortgage contracts. The fair market
value of total assets acquired and liabilities assumed was $62 million and
$3 million, respectively.
In April 1993, Associates purchased the stock of Allied Finance
Company, with assets primarily consisting of $146 million of net consumer
finance receivables, principally comprised of home equity and personal
lending and sales finance receivables. The fair market value of total
assets acquired and liabilities assumed was $197 million and $112 million,
respectively.
In September 1993, Associates purchased the assets of Mack Financial
Corporation, the financing division of Mack Trucks, Inc., consisting of
$626 million of net commercial finance receivables, principally secured by
heavy-duty trucks and truck trailers. The fair market value of total assets
acquired and liabilities assumed was $663 million and $419 million,
respectively.
The pro forma effect of the above acquisitions was not significant to
current or prior periods.
F-11
<PAGE> 114
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES
Changes in the allowance for losses on finance receivables during the
periods indicated were as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Balance at beginning of period....................... $1,061.6 $ 892.3 $ 764.7
Provision for losses............................... 834.0 647.1 536.1
Recoveries on receivables charged off.............. 132.9 118.2 101.3
Losses sustained................................... (757.1) (626.8) (542.5)
Reserves of acquired businesses and other.......... (2.8) 30.8 32.7
-------- -------- -------
Balance at end of period............................. $1,268.6 $1,061.6 $ 892.3
======== ======== =======
</TABLE>
NOTE 5 -- CREDIT FACILITIES
At December 31, 1995, available credit facilities were as follows (in
millions):
<TABLE>
<CAPTION>
FACILITY
ENTITY CREDIT FACILITY DESCRIPTION AMOUNT
- --------------------- ------------------------------- ---------
<S> <C> <C>
Associates Lines of Credit $ 3,959.7*
Revolving Lines 5,105.0*
Receivables Purchase Facilities 1,275.0
---------
$10,339.7
=========
Foreign Operations:
Japan Lines of Credit $ 136.1
United Kingdom Lines of Credit 51.5
Canada Lines of Credit 33.1
---------
$ 220.7
=========
</TABLE>
- ---------------
* Included in the Associates Lines of Credit and Revolving Lines are $90.0
million and $1,080.0 million of Lines of Credit and Revolving Lines,
respectively, that are available to First Capital.
Lines of Credit, Revolving Lines and Receivables Purchase Facilities may be
withdrawn only under certain standard conditions. Associates principally pays
fees for the availability of its credit facilities. Bank fees incurred during
1995, 1994 and 1993 were $11.8 million, $11.4 million and $9.8 million,
respectively, and are .07 to .25 of 1% per annum of the amount of the
facilities.
F-12
<PAGE> 115
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- NOTES PAYABLE
Commercial paper notes are issued by Associates in the minimum amount of
$100,000 with terms from 1 to 270 days. Bank loan terms range from 1 to 90 days.
Information pertaining to the Company's commercial paper notes and bank loans is
set forth below for the periods indicated (dollar amounts in millions):
<TABLE>
<CAPTION>
COMMERCIAL BANK
PAPER NOTES LOANS
----------- ------
<S> <C> <C>
Ending balance at December 31, 1995......................... $12,902.9 $844.4
Weighted average interest rate at December 31, 1995......... 5.73% 6.48%
Ending balance at December 31, 1994......................... $11,807.4 $624.5
Weighted average interest rate at December 31, 1994......... 5.89% 6.82%
</TABLE>
The amounts reported in the supplemental combined balance sheet approximate
fair value.
NOTE 7 -- LONG-TERM DEBT
Outstanding balances of long-term debt at December 31 were as follows (in
millions):
<TABLE>
<CAPTION>
INTEREST
RATE
RANGE MATURITIES 1995 1994
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Senior:
Notes........................... 2.66-13.75% 1996-2010 $20,801.7 $16,809.8
Investment notes................ 4.90- 9.50 1996-2000 429.1 354.6
--------- ---------
21,230.8 17,164.4
--------- ---------
Subordinated and Capital:
Subordinated.................... 7.63- 8.15 1998-2009 141.2 141.2
Capital......................... 4.68- 9.00 1996-2002 0.6 0.6
--------- ---------
141.8 141.8
--------- ---------
Total long-term debt.... $21,372.6 $17,306.2
========= =========
</TABLE>
The weighted average interest rate for total long-term debt was 6.92% at
December 31, 1995 and 7.15% at December 31, 1994.
The estimated fair value of long-term debt at December 31, 1995 and 1994
was $22.5 billion and $16.8 billion, respectively. The fair value was determined
by discounting expected cash flows at discount rates currently available to the
Company for debt with similar terms and remaining maturities.
Long-term borrowing maturities during the next five years, including the
current portion of notes payable after one year, are: 1996, $3,166.7 million;
1997, $3,676.8 million; 1998, $3,790.0 million; 1999, $2,674.0 million; 2000,
$2,981.0 million and 2001 and thereafter, $5,084.1 million.
Certain debt issues contain call provisions or may be subject to repayment
provisions at the option of the holder on specified dates prior to the maturity
date. At December 31, 1995, 3,509 warrants were outstanding to purchase $154.8
million aggregate principal amount of senior notes at par with interest rates
ranging from 7.00% to 10.50%. The warrants are exercisable at various dates
through October 1, 1999 at prices ranging from $1,000 to $25,000,000 per
warrant. All of the above issues are unsecured, except for a $50 million, 8.25%
Senior Note due August 15, 2001, which is collateralized by First Capital's
corporate offices.
F-13
<PAGE> 116
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- INCOME TAXES
The following table sets forth the components of the provision for income
taxes and deferred income tax (benefit) for the periods indicated (in millions):
<TABLE>
<CAPTION>
UNITED STATES
----------------
FEDERAL STATE FOREIGN TOTAL
------- ----- ------- -------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995
Current............................................ $ 342.0 $21.5 $ 10.4 $ 373.9
------- ----- ------- -------
Deferred:
Leasing transactions............................ 66.7 66.7
Finance revenue................................. 14.0 14.0
Net operating loss utilized..................... 167.4 167.4
Goodwill amortization........................... (11.0) (11.0)
Provision for losses on finance receivables and
other......................................... (71.8) (64.2) (136.0)
------- ----- ------- -------
Total deferred............................. 8.9 92.2 101.1
------- ----- ------- -------
$ 350.9 $21.5 $ 102.6 $ 475.0
======= ===== ======= =======
Year Ended December 31, 1994
Current............................................ $ 400.1 $31.5 $ 1.3 $ 432.9
------- ----- ------- -------
Deferred:
Leasing transactions............................ 29.2 29.2
Finance revenue................................. (5.7) (5.7)
Net operating loss utilized..................... 187.3 187.3
Goodwill amortization........................... (119.4) (119.4)
Provision for losses on finance receivables and
other......................................... (115.2) 5.0 (110.2)
------- ----- ------- -------
Total deferred............................. (91.7) 72.9 (18.8)
------- ----- ------- -------
$ 308.4 $31.5 $ 74.2 $ 414.1
======= ===== ======= =======
Year Ended December 31, 1993
Current............................................ $ 337.1 $20.5 $ (63.9) $ 293.7
------- ----- ------- -------
Deferred:
Leasing transactions............................ 3.6 3.6
Finance revenue................................. 3.9 3.9
Net operating loss utilized..................... (342.6) (342.6)
Goodwill amortization........................... 450.3 450.3
Provision for losses on finance receivables and
other......................................... (83.4) 1.8 (81.6)
------- ----- ------- -------
Total deferred............................. (75.9) 109.5 33.6
------- ----- ------- -------
$ 261.2 $20.5 $ 45.6 $ 327.3
======= ===== ======= =======
</TABLE>
F-14
<PAGE> 117
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995 and 1994, the components of the Company's net deferred
tax asset and liability were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred tax assets:
Provision for losses on finance receivables and other....... $ 744.0 $ 593.7
Net operating loss.......................................... 2.6 160.1
Postretirement and other employee benefits.................. 56.0 74.0
------- -------
802.6 827.8
Deferred tax liabilities:
Leasing transactions........................................ (241.8) (175.1)
Unamortized tax deductible goodwill......................... (339.0) (361.5)
Finance revenue and other................................... (261.7) (237.0)
------- -------
(842.5) (773.6)
------- -------
Net deferred tax (liability)/asset.................. $ (39.9) $ 54.2
======= =======
</TABLE>
Deferred income taxes have not been provided on approximately $48.3 million
of undistributed earnings related to foreign subsidiaries as the earnings are
considered to be permanently reinvested. If these amounts were not considered
permanently reinvested, additional deferred taxes of $16.9 million would have
been provided.
Due to the Company's earnings level, no valuation allowance related to the
deferred tax asset has been recorded.
The effective tax rate differed from the statutory U.S. Federal income tax
rate as follows:
<TABLE>
<CAPTION>
% OF PRETAX INCOME
YEAR ENDED DECEMBER 31
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate............................................ 35.0% 35.0% 35.0%
State tax rate................................................ 1.2 2.0 1.6
Non-deductible goodwill....................................... 0.9 1.2 1.6
Foreign rates in excess of U.S. rates and other............... 2.5 2.5 1.7
---- ---- ----
Effective tax rate.......................................... 39.6% 40.7% 39.9%
==== ==== ====
</TABLE>
NOTE 9 -- DEBT RESTRICTIONS
Associates, First Capital's principal operating subsidiary, is subject to
various limitations under the provisions of its outstanding debt and credit
facilities. The most significant of these limitations are summarized as follows:
Limitation on Payment of Dividends
A restriction contained in one series of Associates debt securities
maturing August 1, 1996, generally limits payments of dividends on Associates
Common Stock in any year to not more than 50% of Associates consolidated net
earnings for such year, subject to certain exceptions, plus increases in
contributed capital and extraordinary gains. Any such amounts available for the
payment of dividends in such fiscal year and not so paid, may be paid in any one
or more of the five subsequent fiscal years. In accordance with this provision,
at December 31, 1995, $727.6 million was available for dividends.
F-15
<PAGE> 118
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Limitation on Minimum Tangible Net Worth
A restriction contained in certain revolving credit agreements requires
Associates to maintain a minimum tangible net worth, as defined, of $1.5
billion. At December 31, 1995, Associates tangible net worth was $4.1 billion.
NOTE 10 -- LEASE COMMITMENTS
Leases are primarily short-term and generally provide for renewal options
not exceeding the initial term. Total rent expense for the years ended December
31, 1995, 1994 and 1993 was $92.6 million, $75.4 million, and $63.7 million,
respectively. Minimum rental commitments as of December 31, 1995 for all
noncancelable leases (primarily office leases) for the years ending December 31,
1996, 1997, 1998, 1999 and 2000 are $71.4 million, $52.3 million, $35.0 million,
$20.3 million and $7.5 million, respectively, and $21.5 million thereafter.
NOTE 11 -- EMPLOYEE BENEFITS
Defined Benefit Plans
The Company sponsors various qualified and nonqualified pension plans (the
"Plan" or "Plans"), which together cover substantially all permanent employees,
other than those of the foreign operations, who meet certain eligibility
requirements.
Net periodic pension cost for the years indicated includes the following
components (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost........................................... $ 13.1 $ 13.7 $ 10.0
Interest cost.......................................... 23.1 21.3 18.1
Actual return on Plan assets........................... (51.1) (0.4) (21.6)
Net amortization....................................... 33.9 (10.9) 7.4
------- ------- -------
Net periodic pension cost.................... $ 19.0 $ 23.7 $ 13.9
======= ======= =======
Assumed discount rate, beginning of year............... 8.25% 7.00% 8.00%
</TABLE>
F-16
<PAGE> 119
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the Plan is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------
1995 1994
-------------------------- --------------------------
QUALIFIED NONQUALIFIED QUALIFIED NONQUALIFIED
PLAN PLANS PLAN PLANS
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested................................ $ 255.9 $ 23.7 $ 187.6 $ 16.8
Nonvested............................. 11.5 0.3 9.0 0.8
------- ------ ------- ------
Accumulated benefit obligation.......... 267.4 24.0 196.6 17.6
Effect of projected future salary
increases............................. 76.1 9.3 50.4 6.2
------- ------ ------- ------
Projected benefit obligation............ 343.5 33.3 247.0 23.8
Plan assets at fair market value........ 322.0 204.7
------- ------ ------- ------
Excess of plan obligation over plan
assets................................ 21.5 33.3 42.3 23.8
Unamortized transition obligation and
amendments............................ (5.1) (3.8) (6.5) (4.3)
Unamortized net loss.................... (53.0) (8.8) (13.3) (1.5)
Adjustment required to recognize minimum
liability............................. 3.3
------- ------ ------- ------
(Prepaid)/accrued pension liability... $ (36.6) $ 24.0 $ 22.5 $ 18.0
======= ====== ======= ======
Assumed discount rate................... 7.00% 7.00% 8.25% 8.25%
Projected compensation increases........ 6.00% 6.00% 6.00% 6.00%
Expected return......................... 9.00% 9.00% 9.00% 9.00%
</TABLE>
A determination of the Federal income tax status related to the qualified
Pension Plan has not been received. An application was filed with the Internal
Revenue Service in March 1995. If a favorable determination letter is not
received, First Capital has agreed to make any changes required to receive a
favorable determination letter.
Retirement Savings and Profit Sharing Plan
The Company sponsors a defined contribution plan which covers substantially
all employees, other than those of the foreign operations, intended to provide
assistance in accumulating personal savings for retirement and is designed to
qualify under Sections 401(a) and 401(k) of the Internal Revenue Code. An
application for determination was filed with the Internal Revenue Service in
March 1995. If a favorable determination letter is not received, First Capital
has agreed to make any changes required to receive a favorable determination
letter. For the years ended December 31, 1995, 1994 and 1993, the Company's
pretax contributions to the plan were $18.2 million, $16.1 million and $14.1
million, respectively.
Employers' Accounting for Postretirement Benefits Other than Pensions
The Company provides certain postretirement benefits through unfunded plans
sponsored by First Capital. These benefits are currently provided to
substantially all permanent employees, other than those of the foreign
operations, who meet certain eligibility requirements. The benefits of the plan
can be modified or terminated at the discretion of the Company. The amount paid
for postretirement benefits for the years ended December 31, 1995, 1994 and 1993
was $2.0 million, $1.8 million and $1.5 million, respectively.
F-17
<PAGE> 120
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic postretirement benefit cost for 1995, 1994 and 1993 includes
the following components (in millions):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost................................................. $ 5.5 $ 5.5 $ 4.2
Interest cost................................................ 7.7 6.3 6.3
Net amortization............................................. (1.3) (1.0) (0.7)
------ ------ ------
Net periodic postretirement benefit cost........... $ 11.9 $ 10.8 $ 9.8
====== ====== ======
Assumed discount rate, beginning of year..................... 8.75% 7.50% 8.50%
====== ====== ======
</TABLE>
Accrued postretirement benefit cost at December 31, 1995 and 1994 is
composed of the following (in millions):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1994
------- ------
<S> <C> <C>
Accumulated postretirement benefit obligation ("APBO"):
Retired participants............................................ $ 45.2 $ 33.9
Fully eligible participants..................................... 26.9 18.6
Other active participants....................................... 45.7 29.5
------- ------
Total APBO.............................................. 117.8 82.0
Unamortized amendments............................................ 5.4 9.8
Unrecognized actuarial loss....................................... (24.2) (2.7)
------- ------
Accrued postretirement benefit cost............................. $ 99.0 $ 89.1
======= ======
Assumed discount rate............................................. 7.25% 8.75%
======= ======
</TABLE>
For measurement purposes, a 13.00% and 12.10% weighted average annual rate
of increase in per capita cost of covered health care benefits was assumed for
1995 and 1994, respectively, decreasing gradually to 5.50% by the year 2010.
Increasing the assumed health care cost trend rate by one percentage point each
year would increase the APBO as of December 31, 1995 and 1994 by $8.6 million
and $6.0 million, respectively, and the aggregate of the service and interest
cost components of the net periodic postretirement benefit cost by $1.0 million
and $0.9 million, respectively.
Incentive Compensation Programs
The Company sponsors compensation plans covering certain officers and
employees.
Corporate Annual Performance Plan and Long-Term Performance Plan
The Corporate Annual Performance Plan ("CAPP") is an annual bonus plan.
CAPP bonuses are determined based on the performance of the Company, the
business unit in which a participant is employed, and the participant,
personally. The Long-Term Performance Plan ("LTPP") is a long-term cash
incentive plan. LTPP awards are determined for a performance period based on the
success of the Company in achieving a target level of profits established for
each year of the performance period, with such annual performance then averaged
for the performance period. Amounts charged to expense under CAPP and LTPP
amounted to $16.1 million, $16.2 million and $14.8 million during the years
ended December 31, 1995, 1994 and 1993, respectively.
F-18
<PAGE> 121
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Phantom Stock Appreciation Right Plan
The Company sponsored a long-term cash plan, the Phantom Stock Appreciation
Right Plan (the "PSAR Plan"). The Company terminated the PSAR Plan as of
December 1995 and intends to cash out all outstanding phantom stock appreciation
rights ("PSARs") prior to completion of the Company's public offering. A PSAR
granted under the PSAR Plan entitled the holder thereof to receive from the
Company, upon exercise of such PSAR, a specified amount of cash. A PSAR had a
term of five years and vested 100% on the first anniversary of the date of
grant. Amounts charged to expense under the PSAR Plan amounted to $30.1 million,
$4.1 million and $36.1 million during the years ended December 31, 1995, 1994
and 1993, respectively. The company also amended the PSAR Plan to provide that
certain officers of the Company (all of whom were granted PSARs in 1995) are
required to defer one-half of the amount payable in satisfaction of their
respective PSARs granted in 1995. The amounts so deferred will be administered
by the Company in accordance with the terms of the Associates First Capital
Corporation Equity Deferral Plan.
Long-Term Equity Compensation Plan
The Long-Term Equity Compensation Plan ("ECP") is a stock-based incentive
plan that will be adopted in 1996 prior to the Company's public offering. The
ECP provides for the grant of incentive and nonqualified stock options, stock
appreciation rights, restricted stock, performance shares and performance units.
Awards granted under the ECP are based on shares of Class A Common Stock.
NOTE 12 -- COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits arising in the ordinary
course of its business. The Company aggressively manages its litigation and
assesses appropriate responses to its lawsuits in light of a number of factors,
including potential impact of the actions on the conduct of the Company's
operations. In the opinion of management, the resolution of any of these matters
is not expected to have a material adverse effect on the Company's financial
condition or results of operations.
NOTE 13 -- OTHER ASSETS
The components of Other Assets at December 31, 1995 and 1994 were as
follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994
--------- ---------
<S> <C> <C>
Goodwill...................................................... $ 1,278.9 $ 1,354.3
Other......................................................... 803.2 659.7
--------- ---------
Total other assets.................................. $ 2,082.1 $ 2,014.0
========= =========
</TABLE>
NOTE 14 -- TRANSACTIONS AND BALANCES WITH RELATED PARTIES
The Company paid cash dividends to Ford of $226.0 million, $288.1 million
and $318.0 million during the years ended December 31, 1993, 1994 and 1995,
respectively. In 1993, 1994 and 1995, Ford made cash capital contributions to
the Company of $200.0 million, $215.1 million and $200.0 million, respectively.
The Company provides certain auto club and relocation services to Ford.
Revenues related to these services were $29.7 million, $19.4 million and $12.1
million for the years ended December 31, 1995, 1994 and 1993, respectively.
F-19
<PAGE> 122
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company pays fees for certain administrative services provided by its
Ford-affiliated parent. Such fees were $8.8 million, $5.0 million and $4.3
million for the years ended December 31, 1995, 1994 and 1993, respectively.
At December 31, 1995 and 1994, First Capital's current income taxes payable
to its Ford-affiliated parent amounted to $45.1 million and $30.4 million,
respectively.
NOTE 15 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISKS
The Company maintains cash, cash equivalents, investments, and certain
other financial instruments with various major financial institutions. To the
extent such deposits exceed maximum insurance levels, they are uninsured.
As explained in NOTE 2 to the supplemental combined financial statements,
the Company does not hold or issue derivative financial instruments for trading
purposes. The Company's derivative activity is limited to currency swap
transactions designed to hedge its currency risk on specific foreign
currency-denominated assets denominated in British Sterling. One interest rate
swap transaction for $40.0 million, assumed in 1993 as part of a business
acquisition, matured in April 1995 and is no longer outstanding. The Company is
a buyer in each transaction.
The Company's currency swap transactions are not material to its
supplemental combined balance sheet and do not represent a material exposure to
its supplemental combined net earnings. Amounts under currency and interest rate
swap contracts at December 31, 1995 and 1994 were $55.7 million and $95.7
million, respectively. At December 31, 1995, the Company was at market risk for
any currency differential should a counterparty to these contracts fail to meet
the terms of the contracts. The contracts expire in October 1996. At December
31, 1995, the Company's estimated exposure to loss resulting from currency
differentials, in the event of nonperformance by certain counterparties, was
$1.1 million; the Company estimates its benefit resulting from currency
differentials, in the event of nonperformance by certain counterparties, was
$0.2 million. The estimated fair value of amounts under contract approximated
$0.9 million and $0.7 million at December 31, 1995 and 1994, respectively. Such
value was determined based on the foreign currency exchange rates/interest rate
for similar transactions in effect at the balance sheet date. It is the
Company's policy that each counterparty's public debt rating must be rated Aa3,
AA- or better by at least two nationally recognized rating agencies at the time
any such contract is entered into. The Company monitors such ratings on an
ongoing basis. The Company does not employ other methods to assess credit risk,
because swap transactions are not a significant part of its operating activities
and because the Company does not enter into complex derivative transactions.
Subsidiaries of First Capital make available credit lines to holders of
their credit cards. The unused portion of the available credit is revocable by
the bank under specified conditions. The unused portion of the available credit
at December 31, 1995 and 1994 was $12.8 billion and $9.4 billion, respectively.
The potential risk associated with, and the estimated fair value of, the unused
credit lines are not considered to be significant.
Associates Investment Corporation, an indirect subsidiary of First Capital,
makes available credit lines to holders of their private label credit cards. The
unused portion of the available credit is revocable by Associates Investment
Corporation under specified conditions. The unused portion of the available
credit at December 31, 1995 and 1994 was $4.8 billion and $5.1 billion,
respectively. The potential risk associated with, and the estimated fair value
of, the unused credit lines are not considered to be significant.
The consumer finance business grants revolving lines of credit to certain
of its customers. At December 31, 1995 and 1994, the unused portion of these
lines aggregated $783.9 million and
F-20
<PAGE> 123
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
$543.3 million, respectively. The potential risk associated with, and the
estimated fair value of, the unused credit lines are not considered to be
significant.
The commercial finance business grants lines of credit to certain dealers
of truck, construction equipment and manufactured housing. At December 31, 1995
and 1994, the unused portion of these lines aggregated $1.3 billion and $881.7
million, respectively. The potential risk associated with, and the estimated
fair value of, the unused credit lines are not considered to be significant.
NOTE 16 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES
Debt Securities
The Company invests in debt securities, principally bonds and notes held by
the Company's insurance subsidiaries, with the intention of holding them to
maturity. However, if market conditions change, the Company may sell these
securities prior to maturity. Accordingly, concurrent with the adoption of SFAS
No. 115 in 1994, the Company classified its investments in debt securities as
available for sale and adjusted its recorded value to market. Prior to adoption
of this standard, the Company carried these investments at amortized cost.
During 1995, gross realized gains on sales amounted to $0.2 million. Gross
realized gains and losses on sales during 1994 amounted to $2.1 million and $0.3
million, respectively. Unrealized gains or losses are reported as a component of
stockholder's equity, net of tax. The following tables set forth, by type of
security issuer, the amortized cost, gross unrealized holding gains, gross
unrealized holding losses, and estimated market value at December 31, 1995 and
1994 (in millions):
<TABLE>
<CAPTION>
1995
--------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED HOLDING HOLDING MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Government obligations............. $ 400.2 $ 14.4 $ $ 414.6
Corporate obligations................... 222.3 3.5 225.8
Mortgage-backed......................... 215.6 0.8 216.4
Other................................... 11.7 11.7
------- ------ ------ -------
Total debt securities......... $ 849.8 $ 18.7 $ $ 868.5
======= ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
AMORTIZED HOLDING HOLDING MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Government obligations............. $ 422.4 $0.7 $(25.2) $ 397.9
Corporate obligations................... 66.8 0.2 (0.5) 66.5
Mortgage-backed......................... 96.3 (2.3) 94.0
Other................................... 4.8 4.8
------- ------ ------- -------
Total debt securities......... $ 590.3 $0.9 $(28.0) $ 563.2
======= ====== ======= =======
</TABLE>
F-21
<PAGE> 124
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and estimated market value of debt securities at
December 31, 1995 and 1994, by contractual maturity, are shown below (in
millions):
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Due in one year or less................ $ 159.0 $ 159.6 $ 93.2 $ 92.1
Due after one year through five
years................................ 379.9 390.4 384.3 369.6
Due after five years through ten
years................................ 187.5 194.6 110.8 99.6
Due after ten years.................... 123.4 123.9 2.0 1.9
------- ------- ------- -------
$ 849.8 $ 868.5 $ 590.3 $ 563.2
======= ======= ======= =======
</TABLE>
Equity Securities
Equity security investments are recorded at market value. Concurrent with
the adoption of SFAS No. 115 in 1994, the Company classified its investments in
equity securities as trading securities and included in earnings unrealized
gains or losses on such securities. Prior to adoption, unrealized gains or
losses were reported as a component of stockholder's equity, net of tax. The
estimated market value at December 31, 1995 and 1994 was $12.6 million and $41.9
million, respectively. Historical cost at December 31, 1995 and 1994 was $8.5
million and $38.9 million, respectively.
Estimated market values of debt and equity securities are based on quoted
market prices.
NOTE 17 -- BUSINESS SEGMENT INFORMATION
First Capital's primary business activities are consumer finance and
commercial finance. The consumer finance operation is engaged in making and
investing in home equity, personal lending and sales finance receivables, credit
card receivables, primarily through a wholly-owned credit card bank, and
providing sales financing of manufactured housing. The commercial finance
operation is principally engaged in financing sales of transportation and
industrial equipment and leasing, and sales of other financial services,
including auto fleet leasing and management, relocation services and auto club
and roadside assistance services. The Company has an insurance operation which
is engaged in underwriting credit life, credit accident and health, property and
casualty, and accidental death and dismemberment insurance, principally for
customers of the finance operations. Such insurance activity is conducted by the
company's licensed insurance agents and managed as a separate activity.
Insurance sales are dependent on the business activities and volumes of the
consumer and commercial business. Accordingly, insurance revenues and related
claims are included in the consumer and commercial business to which they
relate.
F-22
<PAGE> 125
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth information by business segment (in
millions):
<TABLE>
<CAPTION>
BUSINESS SEGMENT(1)
-----------------------
CONSUMER COMMERCIAL FOREIGN
FINANCE FINANCE(2) COMBINED OPERATIONS(1)
--------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Year Ended or at December 31, 1995
Revenue.................................. $ 4,595.6 $ 1,511.6 $ 6,107.2 $ 765.3
========= ========= ========= =========
Operating income:
From segment.......................... $ 1,010.2 $ 313.7 $ 1,323.9 $ 284.4
Corporate and other(3)................ (95.6) (30.2) (125.8) (90.7)
--------- --------- --------- ---------
Total............................ $ 914.6 $ 283.5 $ 1,198.1 $ 197.8
========= ========= ========= =========
Total assets............................. $27,128.2 $14,175.7 $41,303.9 $ 4,102.8
========= ========= ========= =========
Year Ended or at December 31, 1994
Revenue.................................. $ 3,691.3 $ 1,234.5 $ 4,925.8 $ 587.5
========= ========= ========= =========
Operating income:
From segment.......................... $ 823.7 $ 288.2 $ 1,111.9 $ 217.8
Corporate and other(3)................ (70.6) (23.9) (94.5) (88.4)
--------- --------- --------- ---------
Total............................ $ 753.1 $ 264.3 $ 1,017.4 $ 133.9
========= ========= ========= =========
Total assets............................. $23,322.9 $11,960.6 $35,283.5 $ 3,649.7
========= ========= ========= =========
Year Ended or at December 31, 1993
Revenue.................................. $ 3,039.2 $ 1,075.6 $ 4,114.8 $ 467.7
========= ========= ========= =========
Operating income:
From segment.......................... $ 649.8 $ 261.9 $ 911.7 $ 137.9
Corporate and other(3)................ (65.1) (25.3) (90.4) (68.4)
--------- --------- --------- ---------
Total............................ $ 584.7 $ 236.6 $ 821.3 $ 72.5
========= ========= ========= =========
Total assets............................. $19,884.3 $10,155.3 $30,039.6 $ 2,971.5
========= ========= ========= =========
</TABLE>
- ---------------
(1) The revenues, operating income and total assets of the Company's foreign
operations are included in the business segments of the Company as set forth
above. The foreign operations of the Company consist principally of its
consumer finance operation in Japan (more than 70% of total foreign
operations) and, to a lesser extent, its consumer and commercial operations
in the United Kingdom, Canada, Puerto Rico and Mexico. Total revenue,
operating income and total assets, respectively, for Japan were:
1995 -- $587.7 million, $164.8 million and $3.0 billion, respectively;
1994 -- $448.1 million, $129.5 million and $2.8 billion, respectively; and
1993 -- $345.1 million, $78.7 million and $2.2 billion, respectively.
(2) Includes information pertaining to the financing of manufactured housing
purchases which are managed by the commercial finance operation.
(3) Includes operating income pertaining to the Company's non-operating
subsidiaries.
Capital expenditures and depreciation and amortization expense are not
significant.
F-23
<PAGE> 126
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18 -- SUBSEQUENT EVENT
On February 8, 1996, the Company paid a dividend in the amount of $1.75
billion to its Ford-affiliated parent in the form of an intercompany note.
NOTE 19 -- UNAUDITED QUARTERLY FINANCIAL DATA
The following table sets forth the unaudited quarterly results of
operations (in millions, except earnings per share):
<TABLE>
<CAPTION>
1995
-----------------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Finance charges............................. $1,467.4 $1,426.6 $1,377.8 $1,289.0
======== ======== ======== ========
Interest expense............................ $ 570.9 $ 557.5 $ 540.3 $ 509.2
======== ======== ======== ========
Earnings before provision for income
taxes..................................... $ 324.6 $ 327.6 $ 272.1 $ 273.8
Provision for income taxes.................. 129.7 130.1 109.7 105.5
-------- -------- -------- --------
Net earnings................................ $ 194.9 $ 197.5 $ 162.4 $ 168.3
======== ======== ======== ========
Net earnings per share...................... $ $ $ $
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1994
-----------------------------------------
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Finance charges............................. $1,235.4 $1,135.9 $1,053.7 $1,020.2
======== ======== ======== ========
Interest expense............................ $ 468.6 $ 429.1 $ 393.1 $ 366.5
======== ======== ======== ========
Earnings before provision for income
taxes..................................... $ 280.8 $ 272.0 $ 232.0 $ 232.6
Provision for income taxes.................. 117.5 109.3 95.0 92.3
-------- -------- -------- --------
Net earnings................................ $ 163.3 $ 162.7 $ 137.0 $ 140.3
======== ======== ======== ========
Net earnings per share...................... $ $ $ $
======== ======== ======== ========
</TABLE>
F-24
<PAGE> 127
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20 -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)
Condensed unconsolidated financial information of Associates First Capital
Corporation as of or for the years ended December 31, 1995, 1994 and 1993 were
as follows (in millions):
CONDENSED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Revenue
Interest and other income...................................... $ 10.2 $ 8.7 $ 6.7
Dividends from subsidiaries.................................... 284.0 270.5 242.7
------- ------- -------
294.2 279.2 249.4
Expenses
Interest expense............................................... 66.0 54.8 51.1
Operating expenses............................................. 23.3 16.2 15.3
------- ------- -------
89.3 71.0 66.4
------- ------- -------
Income before credit for Federal income taxes and equity in net
earnings of subsidiaries....................................... 204.9 208.2 183.0
Credit for Federal income taxes resulting from tax agreements
with subsidiaries.............................................. 28.0 21.7 21.2
------- ------- -------
Earnings before equity in undistributed earnings of
subsidiaries................................................... 232.9 229.9 204.2
Equity in undistributed earnings of subsidiaries................. 490.2 373.4 289.8
------- ------- -------
Net earnings..................................................... $ 723.1 $ 603.3 $ 494.0
======= ======= =======
</TABLE>
See notes to condensed financial information.
F-25
<PAGE> 128
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO SUPPLEMENTAL COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
Assets
Investment in and advances to subsidiaries, eliminated in
consolidation, and other......................................... $5,774.5 $5,306.3
-------- --------
Total assets................................................ $5,774.5 $5,306.3
======== ========
Liabilities and Stockholder's Equity
Accounts payable and accruals....................................... $ 52.5 $ 33.0
Bank lines.......................................................... 85.0
Notes payable and long-term debt(2)................................. 835.9 836.5
Stockholder's equity(1)............................................. 4,801.1 4,436.8
-------- --------
Total liabilities and stockholder's equity.................. $5,774.5 $5,306.3
======== ========
</TABLE>
The estimated fair value of notes payable and long-term debt at December
31, 1995 and 1994 was $878.6 million and $829.4 million, respectively. Fair
values were estimated by discounting expected cash flows at discount rates
currently available to the Company for debt with similar terms and remaining
maturities.
See notes to condensed financial information.
F-26
<PAGE> 129
CONDENSED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net earnings................................................ $ 723.1 $ 603.3 $ 494.0
Adjustments to net earnings for noncash items:
Amortization and depreciation............................ 0.1 0.1 0.1
Increase (decrease) in accounts payable and accruals..... 19.5 13.1 (6.5)
Equity in undistributed earnings of subsidiaries......... (490.2) (373.4) (289.8)
Other....................................................... 29.5 (20.9) (0.6)
-------- -------- --------
Net cash provided from operating activities......... 282.0 222.2 197.2
-------- -------- --------
Cash Flows from Investing Activities
Cash dividends from subsidiaries(1)......................... 284.0 270.5 242.7
Increase in investments in and advances to subsidiaries..... (492.6) (737.5) (477.6)
-------- -------- --------
Net cash used for investing activities.............. (208.6) (467.0) (234.9)
-------- -------- --------
Cash Flows from Financing Activities
Increase in notes payable and long-term debt(2)............. 438.9 352.7 231.6
Capital contribution from parent............................ 200.0 215.1 200.0
Cash dividends paid......................................... (318.0) (288.1) (226.0)
Retirement of long-term debt................................ (354.4) (188.9) (244.2)
-------- -------- --------
Net cash (used for) provided from financing
activities........................................ (33.5) 90.8 (38.6)
Effect of foreign currency translation adjustments on cash.... (41.7) 153.8 74.9
-------- -------- --------
Decrease in cash and cash equivalents......................... (1.8) (0.2) (1.4)
Cash and cash equivalents at beginning of period.............. (1.1) (0.9) 0.5
-------- -------- --------
Cash and cash equivalents at end of period.................... $ (2.9) $ (1.1) $ (0.9)
======== ======== ========
</TABLE>
NOTES TO CONDENSED FINANCIAL INFORMATION:
(1) The ability of the Company's subsidiaries to transfer funds to the Company
in the form of cash dividends is restricted pursuant to the terms of certain
debt agreements entered into by the Company's principal operating
subsidiary, Associates Corporation of North America. See NOTE 9 to the
supplemental combined financial statements for a summary of the most
significant of these restrictions.
(2) Notes payable and long-term debt bear interest at rates from 4.79% to
13.75%. The estimated maturities of the notes outstanding, at December 31,
1995, during subsequent years were as follows (in millions):
<TABLE>
<S> <C>
1996................................................ $ 279.5
1997................................................ 208.1
1998................................................ 142.2
1999................................................ 113.9
2000................................................ 92.2
--------
$ 835.9
========
</TABLE>
F-27
<PAGE> 130
[THE ASSOCIATES LOGO] ASSOCIATES FIRST CAPITAL CORPORATION
[PICTURE] [PICTURE]
EQUIPMENT FINANCING AND LEASING MANUFACTURED HOUSING FINANCING
[PICTURE] [PICTURE]
AUTO FLEET MANAGEMENT AND AUTO CLUBS PERSONAL LOANS AND RETAIL SALES FINANCE
OUR CORE VALUES
HARD WORK We work hard to exceed the expectations of our customers.
PRIDE We take pride in our work and our company.
INTEGRITY We conduct business with integrity and trust.
RESPOND QUICKLY We respond quickly to customer needs.
RESPECT We respect each other and recognize excellent performance.
PASSION We believe in constant improvement -- a passion to be better.
INTENSITY We believe intensity and competition fuel success.
EMPLOYEE CORE VALUES
<PAGE> 131
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SALE IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................... 3
Prospectus Summary....................... 4
Risk Factors............................. 10
The Company.............................. 15
Use of Proceeds.......................... 15
Dividend Policy.......................... 16
Capitalization........................... 16
Selected Supplemental Combined Financial
Data................................... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 18
Business................................. 28
Relationship with Ford................... 62
Management............................... 66
Ownership of Common Stock................ 82
Shares Available for Future Sale......... 82
Description of Capital Stock............. 83
Description of Certain Indebtedness...... 90
Certain United States Tax Consequences to
Non-United States Holders.............. 91
Underwriting............................. 93
Legal Matters............................ 95
Experts.................................. 95
Glossary................................. 96
Index to Supplemental Combined Financial
Statements............................. F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
CLASS A COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
------------------
PROSPECTUS
------------------
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MERRILL LYNCH & CO.
J.P. MORGAN SECURITIES INC.
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 132
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration fee.................................................................. $ 34,483
NASD fee.......................................................................... 30,500
NYSE listing fee.................................................................. *
Blue Sky fees and expenses........................................................ *
Printing and engraving expenses................................................... *
Legal fees and expenses........................................................... *
Accounting fees and expenses...................................................... *
Miscellaneous..................................................................... *
--------
Total................................................................... $
========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his or her conduct was illegal.
A Delaware corporation may indemnify officers and directors against expenses
(including attorneys' fees) in connection with the defense or settlement of an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such officer or director actually and reasonably incurred.
In accordance with the Delaware Law, the Restated Certificate of
Incorporation of the Company contains a provision to limit the personal
liability of the directors of the Company for violations of their fiduciary
duty. This provision eliminates each director's liability to the Company or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company 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 Delaware Law providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions, or (iv) for any transaction from which a director derived an
improper personal benefit. The effect of this provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any such actions involving
gross negligence.
Pursuant to underwriting agreements filed as exhibits to registration
statements relating to underwritten offerings of securities, the underwriters
parties thereto have agreed to indemnify each officer and director of the
Company and each person, if any, who controls the Company within the meaning of
the Securities Act of 1933, against certain liabilities, including liabilities
under said Act.
II-1
<PAGE> 133
The directors and officers of the Company are covered by directors' and
officers' insurance policies relating to Ford Motor Company and its
subsidiaries.
The Restated Certificate of Incorporation of the Company provides for
indemnification of the officers and directors of the Company to the full extent
permitted by applicable law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, the Company has not sold any unregistered
securities required to be described pursuant to this item.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------------------
<C> <S>
1.1 -- Form of Underwriting Agreement (U.S. Version)*
1.2 -- Form of Underwriting Agreement (International Version)*
3.1 -- Form of Restated Certificate of Incorporation of the Company*
3.2 -- Form of Restated By-laws of the Company*
3.3 -- Specimen Certificate of Class A Common Stock of the Company
5.1 -- Form of Opinion of Simpson Thacher & Bartlett regarding the legality
of the Class A Common Stock
10.1 -- Form of Corporate Agreement between the Company and Ford*
10.2 -- Form of Tax-Sharing Agreement between the Company and Ford*
10.3 -- Form of Management Services Agreement between the Company and Ford
10.4 -- Form of Trademark License Agreement between the Company and Ford
10.5 -- Form of Employment Agreement
10.6 -- Employment Agreement between the Company and Reece A. Overcash, Jr.
10.7 -- Form of Company's Equity Deferral Plan*
10.8 -- Form of Company's Long-Term Equity Compensation Plan*
10.9 -- The Company's Phantom Stock Appreciation Right Plan (1990-1993)
10.10 -- The Company's Phantom Stock Appreciation Right Plan (1993-1995)
10.11 -- The Company's Corporate Annual Performance Plan
10.12 -- The Company's Long-Term Performance Plan
10.13 -- The Company's Executive Deferred Salary Plan
10.14 -- The Company's Deferred Compensation Unit Plan Agreement
10.15 -- ACONA Executive Incentive Plan
10.16 -- The Company's Supplemental Retirement Plan
10.17 -- The Company's Excess Benefits Plan
10.18 -- Ford Motor Company 1990 Long-Term Incentive Plan*
12 -- Statement Regarding Computation of Ratio of Earnings to Fixed Charges
21 -- Subsidiaries of the Company
23.1 -- Consent of Independent Accountants
23.2 -- Consent of Simpson Thacher & Bartlett
</TABLE>
II-2
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------------------
<C> <S>
24 -- Power of Attorney
27 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
FINANCIAL STATEMENT SCHEDULES
All applicable financial statement schedule disclosure requirements are set
forth in the notes to the supplemental combined financial statements.
ITEM 17. UNDERTAKINGS
The undersigned hereby undertakes that:
1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on the 9th day of February, 1996.
ASSOCIATES FIRST CAPITAL CORPORATION
By: /s/ ROY A. GUTHRIE
----------------------------------
Title: Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
KEITH W. HUGHES* Chairman of the Board, February 9, 1996
- --------------------------------------------- Principal Executive
(Keith W. Hughes) Officer and Director
/s/ ROY A. GUTHRIE Executive Vice President, February 9, 1996
- --------------------------------------------- Comptroller, and Principal
(Roy A. Guthrie) Accounting Officer and
Director
JAMES E. JACK* Senior Executive Vice February 9, 1996
- --------------------------------------------- President, Principal
(James E. Jack) Financial Officer and
Director
HAROLD D. MARSHALL* Director February 9, 1996
- ---------------------------------------------
(Harold D. Marshall)
JOSEPH M. MCQUILLAN* Director February 9, 1996
- ---------------------------------------------
(Joseph M. McQuillan)
</TABLE>
- ---------------
* By signing his name hereto, Roy A. Guthrie signs this document on behalf of
each of the persons indicated above pursuant to powers of attorney duly
executed by such persons.
By: /s/ ROY A. GUTHRIE
----------------------------
Attorney in Fact
II-4
<PAGE> 136
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ---------- ---------------------------------------------------------------------- -----------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement (U.S. Version)*
1.2 -- Form of Underwriting Agreement (International Version)*
3.1 -- Form of Restated Certificate of Incorporation of the Company*
3.2 -- Form of Restated By-laws of the Company*
3.3 -- Specimen Certificate of Class A Common Stock of the Company
5.1 -- Form of Opinion of Simpson Thacher & Bartlett regarding the legality
of the Class A Common Stock
10.1 -- Form of Corporate Agreement between the Company and Ford*
10.2 -- Form of Tax-Sharing Agreement between the Company and Ford*
10.3 -- Form of Management Services Agreement between the Company and Ford
10.4 -- Form of Trademark License Agreement between the Company and Ford
10.5 -- Form of Employment Agreement
10.6 -- Employment Agreement between the Company and Reece A. Overcash, Jr.
10.7 -- Form of Company's Equity Deferral Plan*
10.8 -- Form of Company's Long-Term Equity Compensation Plan*
10.9 -- The Company's Phantom Stock Appreciation Right Plan (1990-1993)
10.10 -- The Company's Phantom Stock Appreciation Right Plan (1993-1995)
10.11 -- The Company's Corporate Annual Performance Plan
10.12 -- The Company's Long-Term Performance Plan
10.13 -- The Company's Executive Deferred Salary Plan
10.14 -- The Company's Deferred Compensation Unit Plan Agreement
10.15 -- ACONA Executive Incentive Plan
10.16 -- The Company's Supplemental Retirement Plan
10.17 -- The Company's Excess Benefits Plan
10.18 -- Ford Motor Company 1990 Long-Term Incentive Plan*
12 -- Computation of Ratio of Earnings to Fixed Charges
21 -- Subsidiaries of the Company
23.1 -- Consent of Independent Accountants
23.2 -- Consent of Simpson Thacher & Bartlett
24 -- Power of Attorney
27 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
<PAGE> 1
[FRONT SIDE OF STOCK CERTIFICATE]
CLASS A COMMON STOCK CLASS A COMMON STOCK
NUMBER SHARES
INCORPORATED UNDER THE LAWS THIS CERTIFICATE IS TRANSFERRABLE IN
OF THE STATE OF DELAWARE NEW YORK, NY
ASSOCIATES FIRST CAPITAL CORPORATION
THIS IS TO CERTIFY THAT CUSIP
SEE REVERSE FOR
CERTAIN DEFINITIONS
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF CLASS A COMMON STOCK OF THE PAR VALUE
OF $.01 EACH OF
Associates First Capital Corporation, transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid
unless countersigned by the Transfer Agent and registered by the Registrar.
Witness the seal of the Corporation and the signatures of its duly
authorized Officers.
Dated COUNTERSIGNED AND REGISTERED:
[ ]
TRANSFER AGENT
AND REGISTRAR
By
CHAIRMAN AND CHIEF EXECUTIVE OFFICER Authorized Signature
SECRETARY
[CORPORATE SEAL]
--------------------------
<PAGE> 2
[REVERSE SIDE OF STOCK CERTIFICATE]
ASSOCIATES FIRST CAPITAL CORPORATION
The Corporation will furnish without charge to each stockholder who so
requests a statement of the designations, powers, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof of the Corporation and the qualifications, limitations or
restrictions of such preferences and/or rights. Such request may be made to the
Corporation or the Transfer Agent.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________ Custodian _________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform gifts to Minors
Act _________________________
JT TEN - as joint tenants with (State)
right of survivorship
and not as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________ Attorney to transfer the
said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated
------------------------
----------------------------
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.
<PAGE> 1
[FORM OF OPINION]
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TEL: (212) 455-2000
FAX: (212) 455-2502
February , 1996
Associates First Capital Corporation
250 E. Carpenter Freeway
Irving, Texas 75062-2729
Dear Sirs:
We have acted as special counsel to Associates First Capital Corporation, a
Delaware corporation (the "Company"), in connection with the proposed sale of up
to shares of Class A Common Stock, par value $.01 per share, of the
Company (the "Shares"), as described in the Registration Statement on Form S-1
(the "Registration Statement") filed by the Company with the Securities and
Exchange Commission under the Securities Act of 1933. The Shares are to be
purchased by certain underwriters and offered for sale to the public pursuant to
the terms of an Underwriting Agreement (U.S. Version) and an Underwriting
Agreement (International Version) (together, the "Underwriting Agreements"), the
forms of which will be filed as exhibits to the Registration Statement.
We have examined, and have relied upon as to matters of fact, such
documents, corporate records and other instruments as we have deemed necessary
for the purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized by the Company and, upon payment and delivery in accordance with
the Underwriting Agreements, will be validly issued, fully paid and
nonassessable.
Very truly yours,
<PAGE> 1
[DRAFT 2/5/96]
February , 1996
Associates First Capital Corporation
250 E. Carpenter Freeway
Irving, TX 75062
Dear Sirs:
Management Services Agreement
This letter shall serve to confirm the agreement between you ("AFCC")
and us ("Ford") under which Ford will provide certain management, financial,
administrative and insurance services to you.
1. Services to be Provided. Except as otherwise provided by separate
agreement of the parties, when and as reasonably requested by AFCC or its
subsidiaries, Ford shall provide, or cause to be provided, to AFCC assistance,
advice and services in respect of the following matters:
(a) Management and other technical and professional (e.g., legal and tax)
support;
(b) Accounting and bookkeeping, including policies, principles and procedures,
budget and cost controls, and audit programs;
(c) Pension asset management;
(d) Sales, marketing and operational planning, including providing AFCC with
Ford customer data to facilitate cross- marketing; and
(e) Insurance coverage under Ford's property and casualty insurance policies
such as liability, crime, property, workers' compensation and directors and
officers insurance.
2. Fees for Services. With respect to the services enumerated in
Section 1(a) through (d) above, an annual fee of $3.5 million shall be paid by
AFCC to Ford in equal quarterly installments on the last business day of March,
June, September and December of each year during the term of this Agreement,
commencing March 29, 1996. Such fee shall be adjusted upward or downward each
year to reflect any increase or decrease in the Consumer Price Index for the
immediately prior calendar year, as published by the U.S. Department of Labor.
With respect to insurance coverage provided pursuant to Section 1(e) above,
AFCC shall pay to Ford its proportional share of the premium costs of such
coverages. Ford shall from time to time provide written notice to AFCC of
<PAGE> 2
-2-
the portion of the insurance premiums paid by Ford that are attributable to
AFCC, whereupon AFCC shall promptly pay such amounts.
3. Termination. Ford and AFCC may terminate this Agreement at any
time so desired, at will and without cause, by giving the other party at least
180 days' prior written notice; provided, however, if at any time Ford ceases
to own (either directly or indirectly) more than 50% of the outstanding voting
stock of AFCC or ceases for any reason, as determined in Ford's reasonable
discretion, to have effective control of AFCC, then this Agreement shall
terminate automatically. In the event of termination hereof other than at the
end of a calendar year, AFCC shall pay a pro rata portion of the fees provided
for in Section 2 hereof for the that portion of the calendar year during which
this Agreement was in effect. However, there will be no return of insurance
premiums for any mid-policy term cancellation. Further, AFCC will be
responsible for any future retrospective premium adjustments for the periods
AFCC participated in Ford's insurance programs.
If the provisions hereof are acceptable, please confirm your
acceptance by signing, dating and returning to us the copy of this letter
enclosed for that purpose.
Sincerely,
FORD MOTOR COMPANY
By:
-------------------------
John M. Rintamaki
Secretary
AGREED AND ACCEPTED:
ASSOCIATES FIRST CAPITAL CORPORATION
By:
-------------------------
Name:
Title:
<PAGE> 1
TRADEMARK AGREEMENT
THIS AGREEMENT, effective ____________________ is by and between
FORD Motor Company, a corporation organized and existing under the laws of the
State of Delaware, having a principal place of business at The American Road,
Dearborn, Michigan 48126 (hereinafter "FORD"), and Associates First Capital
Corporation, a corporation organized and existing under the laws of the State
of Delaware, having a principal place of business at 250 Carpenter Freeway,
Irving, Texas 75062 (hereinafter "THE ASSOCIATES").
WHEREAS:
A. FORD is the owner of the FORD trademark, whether represented
in the FORD script-in-oval style, FORD in block letter style, or otherwise
(hereinafter "Licensed Trademark");
B. THE ASSOCIATES is an indirect subsidiary of FORD;
C. THE ASSOCIATES and its subsidiaries wish to carry on in the
United States a trademark branded credit card business and through its
wholly-owned subsidiary, FORD Consumer Finance Corporation ("FCFC"), a home
equity lending business and a manufactured housing lending business (hereafter
Licensed Goods and Services") using the Licensed Trademark, and additionally
wish to use the name "FORD" (hereinafter Licensed Name) for general corporate
identification purposes (e.g., on business cards stationary, signage, etc.)
D. The parties hereto desire that the THE ASSOCIATES should be
authorized to use the Licensed Trademark in connection with the marketing of
the Licensed Goods and Services and should be authorized to use the Licensed
Name for general corporate identification purposes, in the United States, on
the following terms and conditions.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. In consideration of the promises and the undertakings
hereinafter set forth, FORD hereby grants to THE ASSOCIATES, for the term of
this Agreement, a nonexclusive license to use a) the
<PAGE> 2
Licensed Trademark in the United States on and in connection with the Licensed
Goods and Services, and b) the Licensed Name for general corporate
identification purposes.
2. THE ASSOCIATES shall not use the Licensed Trademark in
association with any goods or services other than the Licensed Goods and
Services, and shall not use the Licensed Name except for general corporate
identification purposes.
3. THE ASSOCIATES shall permit, or procure permission for, FORD
or its authorized representative, at all reasonable times, to enter the
premises of THE ASSOCIATES for the purpose of inspecting the records relating
to the Licensed Goods and Services and the use of the Licensed Name.
4. In consideration of the license granted by FORD to THE
ASSOCIATES hereby, THE ASSOCIATES agrees to pay to FORD an annual royalty for
each calendar year during the term of this Agreement. Such royalty shall be an
amount equal to (i) one basis point (0.0001) multiplied by (ii) THE ASSOCIATES'
total domestic assets at December 31 of the previous calendar year, as set
forth in or derived from THE ASSOCIATES' audited consolidated financial
statements for such prior calendar year. Such royalty shall be payable in
quarterly installments on the last business day of each calendar quarter of the
calendar year for which the royalty is being paid, beginning March 29, 1996.
By way of example, if THE ASSOCIATES' total domestic assets at December 31,
1995 were $35,000,000,000, the annual royalty due for 1996 would be $3,500,000
and the quarterly installment due on March 29, 1996 would be $875,000.
The royalty shall be reviewed by the parties at the end of each
five-year period during the term of this Agreement and shall be increased or
decreased or the basis for its calculation shall be changed if the parties
determine (based on the advice of an independent appraiser selected by the
parties) that the then existing royalty is not reflective of the market value
of the license granted hereby. Any such change in the royalty shall be set
forth in an amendment hereto in writing.
5. If the Licensed Goods and Services associated with the
Licensed Trademark supplied by THE ASSOCIATES and/or the use of the Licensed
Name by THE ASSOCIATES do not in the opinion of FORD, or its authorized
representative, conform in any respect with standards of quality set by FORD,
FORD shall so inform THE ASSOCIATES and THE ASSOCIATES shall, except as to
trademark branded credit cards which shall be replaced in accordance with
paragraph ten (10), thereafter
- 2 -
<PAGE> 3
with reasonable efforts cease its use within thirty (30) days of the Licensed
Trademark and/or Licensed Name on those non-conforming Licensed Goods and
Services so identified by FORD.
6. THE ASSOCIATES shall use and display a) the Licensed
Trademark and b) the Licensed Name only in a manner previously approved by
FORD. FORD hereby acknowledges its approval of the current use by THE
ASSOCIATES of the Licensed Trademark and the Licenses Name. THE ASSOCIATES
acknowledges that FORD shall have the right to change with prior notice the
approved manner in which the Licensed Trademark and Licensed Name may be used
and displayed. FORD shall so inform THE ASSOCIATES of the change and THE
ASSOCIATES shall, except as to trademark branded credit cards which shall be
replaced in accordance with Paragraph ten (10), make the change or cease use
within ninety (90) days.
7. THE ASSOCIATES recognizes FORD's title to the Licensed
Trademark and License Name and shall not at any time during the term of this
Agreement do or suffer to be done any act or thing that will in any way impair
the rights of FORD in and to the Licensed Trademark or Licensed Name by virtue
of the rights hereby granted to THE ASSOCIATES or through THE ASSOCIATES' use
of the Licensed Trademark and Licensed Name, it being the intention of the
parties hereto that all uses of the Licensed Trademark and License Name by THE
ASSOCIATES shall at all time inure to the benefit of FORD.
8. THE ASSOCIATES agrees to indemnify and hold FORD harmless
against all actions, claims, liabilities, costs, demands, and expenses to the
extent they arise out of or result from or are based upon FORD being threatened
or sued with respect to any controversy that arises from THE ASSOCIATES' use of
the Licensed Trademark.
9. FORD or THE ASSOCIATES may terminate this Agreement at any
time so desired, at will and without cause, by giving the other party at least
one hundred and eighty (180) days prior written notice; provided, however, if
at any time FORD ceases to own (either directly or indirectly) more than fifty
percent (50%) of the voting stock of THE ASSOCIATES or ceases for any reason,
as determined in its reasonable discretion, to have effective control of THE
ASSOCIATES, then this Agreement shall terminate automatically.
- 3 -
<PAGE> 4
10. Upon termination of this Agreement, for whatever reason, THE
ASSOCIATES shall within ninety (90) days cease all uses of the Licensed
Trademark and Licensed Name, however, THE ASSOCIATES, shall not be required to
replace trademark branded credit cards except as such replacement occurs in the
normal course of business on the normal expiration date of each such trademark
branded credit card, but in any event not beyond two (2) years from the date of
termination.
11. This Trademark Agreement supersedes all prior agreements.
AS WITNESSES the hands of the duly authorized officers of the
parties hereto as follows:
ASSOCIATES FIRST CAPITAL FORD MOTOR COMPANY
CORPORATION
By: By:
-------------------------- --------------------------------
Title: Title:
----------------------- -----------------------------
- 4 -
<PAGE> 1
FORM OF EMPLOYMENT AGREEMENT
<PAGE> 2
1
AGREEMENT, dated as of ________________ (the "Agreement"), between
ASSOCIATES CORPORATION OF NORTH AMERICA, a corporation existing under laws of
the State of Texas (the "Company"), ________________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Company and the Executive desire to enter into an agreement
relating to the employment of the Executive for a period of five years from
date of this Agreement,
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT
1.1 Effective on the date of the Agreement, the Executive hereby
agrees to serve, upon the terms and conditions herein contained, as an
executive of the Company, a wholly-owned subsidiary of Ford Motor Company. The
Executive shall have such duties as the Board of Directors of the Company may
determine.
1.2 The term of employment under this Agreement shall commence on the
date of this Agreement and, subject to the terms hereof, shall terminate on the
day prior to the fifth anniversary of such date. The full five year period is
referred to as the "Employment Term".
1.3 During the Executive's employment hereunder, the Executive shall
devote the Executive's best efforts and substantially all the Executive's
business time and services to the business and affairs of the Company.
<PAGE> 3
2
2. SALARY
2.1 During the Executive's employment hereunder, the Executive shall
be entitled to receive a base salary at the rate of $________ per annum,
payable in accordance with the Company's payroll policy from time to time in
effect.
2.2 The Company may, in its sole discretion, increase the Executive's
per annum base salary.
3. BONUSES
During the Executive's employment hereunder, the Executive shall be
eligible to receive bonuses on the terms specified in any bonus plan applicable
to executives of the Company.
4. TERMINATION
The employment of the Executive hereunder may be terminated by the
Company by fifteen (15) days' written notice given at any time, with or without
Cause. As used herein, the term "Cause" shall be limited to (a) action by the
Executive involving willful malfeasance, (b) the Executive's unreasonable
neglect or refusal to perform the executive duties assigned to the Executive
under this Agreement, (c) the Executive being convicted of a felony, or (d) the
Executive engaging in any activity that is directly or indirectly in
competition with the Company or any affiliate or in any activity that is
inimical to the best interests of the Company or any affiliate; provided that
the determination of Cause shall be made by the Company's Board of Directors.
If the Company terminates the Executive's employment for Cause, all the
Company's obligations shall thereupon cease and terminate. In the event that
the Executive's employment is terminated by the Company other than for Cause,
the Executive (or in the event of the Executive's death, the Executive's estate
or designated
<PAGE> 4
3
beneficiary, but only as to (i) below) shall be entitled to continue to receive
for the duration of the Employment Term, in lieu of any other compensation and
benefits provided for herein, (i) an amount, payable monthly, equal to the
Executive's then current monthly base salary, plus an amount payable annually
under the Company's Corporate Annual Performance Plan (CAPP) and Long-Term
Performance Plan (LTPP) that averages performance over the three most recent
performance periods, in accordance with the terms thereof in effect from time
to time, and (ii) at the Company's expense, life insurance and medical, dental
and disability benefits at least comparable to those provided by the Company to
the Executive on the date of termination of employment. In addition, the
Company shall provide the Executive with an additional benefit equal to the
difference between (x) and (y), where (x) is the amount of benefit that the
Executive would have received from the Company's pension plan (the "Plan") if
the Executive had continued to participate in the Plan until the end of the
Employment Term, and (y) the amount of benefit that the Executive shall
actually receive from the Plan. Any additional pension benefit to which the
Executive may be entitled shall be payable at the same time and in the same
manner as permitted under the terms of the Plan. The additional benefit is not
subject to sale, transfer, or assignment by the Executive. All payments of the
additional benefit shall be payable from the general assets of the Company.
Notwithstanding any other provision, the right of Executive to any
benefits provided in this Agreement shall cease if the Board of Directors of
the Company shall determine that the Executive either before or after
termination of employment has engaged in any activity that is directly or
indirectly in competition with any activity of the Company or any affiliate,
unless waived by the Board of Directors of the Company, or has engaged in any
activity that is inimical to the best interests of the Company or any
affiliate.
<PAGE> 5
4
5. PERMANENT DISABILITY OR DEATH
In the event of the Executive's permanent disability as defined in the
long-term disability plan applicable to employees of the Company on the date
hereof ("Permanent Disability") while employed hereunder during the Employment
Term, the Executive shall continue to receive compensation equal to the
Executive's then current base salary plus the bonus referred to in Section 4(i)
for a period of six months after the determination of Permanent Disability or
until the end of the Employment Term, whichever shall last occur, less any
amounts received through any disability or salary continuation plan provided
pursuant to Section 7 hereof. In the event of the Executive's death while
employed hereunder during the Employment Term, the Executive's estate or
designated beneficiaries shall continue to receive compensation equal to the
Executive's then current base salary plus the bonus referred to in Section 4(i)
until the end of the Employment Term or one year from death, whichever is
later. In the event of the Executive's Permanent Disability or death as
specified in this Section 5, the employment of the Executive and all
obligations of the Company hereunder (other than the obligation (i) for the
compensation specified in this Section 5, and (ii) to pay amounts for which the
Company is responsible under applicable benefit plans, policies and practices
in the event of death or Permanent Disability) shall terminate.
6. EXPENSES
During the Executive's employment hereunder, the Executive is authorized
to incur reasonable expenses for promoting the business of the Company,
including expenses for travel and similar items, in accordance with the
Company's policy as in effect from time to time. The Company will reimburse the
Executive for all such reasonable expenses in accordance with Company
<PAGE> 6
5
policy upon presentation by the Executive from time to time of an itemized
account of such expenditure.
7. EXECUTIVE BENEFITS
7.1 During the Executive's employment hereunder, the Executive shall
be included in any and all plans providing benefits for (a) the Company's
employees generally and (b) the Company's executives of comparable status. In
furtherance and not in limitation of the foregoing, throughout the Employment
Term, the Company shall provide to the Executive life insurance, medical,
dental, disability and other employee welfare benefits and defined benefit
pension plan benefits which, on an overall basis, shall be no less favorable to
the Executive than those in effect for employees of the Company from time to
time.
7.2 During the Executive's employment hereunder, the Executive shall
be a participant, to the extent eligible thereunder, in all incentive, profit
sharing, bonus, stock option, or other similar or comparable plans applicable
to Company executives of a similar class and station, in accordance with the
terms thereof in effect from time to time.
8. RESTRICTIVE COVENANTS
8.1 The Executive agrees to execute and deliver from time to time the
Company's standard confidentiality, conflict of interest and proprietary
information agreements.
8.2 The Executive and the Executive's agents will not, during the
12-month period following any termination of employment hereunder, or in
contemplation of termination of employment, induce, entice or solicit any
employee of the Company or its affiliates, to leave employment with the Company
or its affiliates.
<PAGE> 7
6
9. NOTICE
All notices or communications hereunder shall be in writing, addressed
as follows:
To the Company:
Associates Corporation of North America
250 East Carpenter Freeway
Irving, Texas 75062
Attention: General Counsel
To the Executive:
Any notice or communication shall be sent certified or registered mail,
return receipt requested, postage prepaid, addressed as above (or to such other
address as a party may designate in writing from time to time), and the actual
date of receipt, as shown by the receipt therefor, shall determine the time at
which notice was given.
10. SEPARABILITY
If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such provision shall be modified, to the
extent practical, consistent with intent of the parties, in order to render it
enforceable but such invalidity or unenforceability shall not affect the
remaining provisions hereof which shall remain in full force and effect.
11. ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
heirs and representatives of the Executive and the assigns and successors of
the Company. Neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Executive and any such
attempted
<PAGE> 8
7
assignment or hypothecation shall be void. This Agreement shall be assignable
by the Company in connection with any transfer of all or substantially all of
the Company's business or any transfer of a portion of the Company's business
for which the Executive has responsibility; provided, however, that the Company
shall remain responsible for all the obligations of the Company set forth
herein.
12. ENTIRE AGREEMENT; AMENDMENT
This Agreement represents the entire agreement of the parties relating
to its subject matter and shall supersede any and all previous written or oral
employment agreements between the Company or any of its affiliates and the
Executive. This Agreement may only be modified or amended by a writing signed
by both parties hereto.
13. GOVERNING LAW
This Agreement shall be construed, interpreted, and governed in
accordance with the laws of Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ASSOCIATES CORPORATION OF NORTH AMERICA
(A Texas Corporation)
By:
<PAGE> 9
GUARANTY
Associates Corporation of North America, a Delaware Corporation, hereby
irrevocably and unconditionally guarantees to ___________ (the "Executive") the
performance by Associates Corporation of North America (A Texas Corporation)
(the "Company") of all of the Company's payment obligations under the Agreement
between the Executive and the Company dated October 25, 1991. This guaranty
shall be construed, interpreted and governed in accordance with the laws of
Texas.
Dated this 25th day of October 1991.
Associates Corporation of North America
By
<PAGE> 1
EMPLOYMENT AGREEMENT
BETWEEN
THE COMPANY AND REECE A. OVERCASH, JR.
<PAGE> 2
AGREEMENT, dated as of the ___ day of ________, (the "Agreement"),
between ASSOCIATES CORPORATION OF NORTH AMERICA (A Texas Corporation), a
corporation existing under laws of the State of Texas (the "Company"), and 1~
(the "Executive").
WITNESSETH
WHEREAS, the Company and the Executive desire to enter into an agreement
relating to the employment of the Executive for a period of three years from
date of this Agreement,
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT
1.1 Effective on the date of the Agreement, the Executive hereby
agrees to serve, upon the terms and conditions herein contained, as an
executive of the Company, a wholly-owned subsidiary of Ford Motor Company. The
Executive shall have such duties as the Board of Directors of the Company may
determine.
1.2 The term of employment under this Agreement shall commence on the
date of this Agreement and, subject to the terms hereof, shall terminate on the
day prior to the third anniversary of such date. The full three-year period is
referred to as the "Employment Term."
1.3 During the Executive's employment hereunder, the Executive shall
devote the Executive's best efforts and substantially all the Executive's
business time and services to the business and affairs of the Company.
<PAGE> 3
2
2. SALARY
2.1 During the Executive's employment hereunder, the Executive shall
be entitled to receive a base salary at the rate of 2~ per annum, payable in
accordance with the Company's payroll policy from time to time in effect.
2.2 The Company may, in its sole discretion, increase the Executive's
per annum base salary.
3. BONUSES
During the Executive's employment hereunder, the Executive shall be
eligible to receive bonuses on the terms specified in any bonus plan applicable
to executives of the Company.
4. TERMINATION
The employment of the Executive hereunder may be terminated by the
Company by fifteen (15) days' written notice given at any time, with or without
Cause. As used herein, the term "Cause" shall be limited to (a) action by the
Executive involving willful malfeasance, (b) the Executive's unreasonable
neglect or refusal to perform the executive duties assigned to the Executive
under this Agreement, (c) the Executive being convicted of a felony, or (d) the
Executive engaging in any activity that is directly or indirectly in
competition with the Company or any affiliate or in any activity that is
inimical to the best interests of the Company or any affiliate; provided that
the determination of Cause shall be made by the Company's Board of Directors.
If the Company terminates the Executive's employment for Cause, all the
Company's obligations shall thereupon cease and terminate. In the event that
the Executive's employment is terminated by the
<PAGE> 4
3
Company other than for Cause, the Executive (or in the event of the Executive's
death, the Executive's estate or designated beneficiary, but only as to (i)
below) shall be entitled to continue to receive, for the duration of the
Employment Term, in lieu of any other compensation and benefits provided for
herein, (i) an amount, payable monthly, equal to the Executive's then current
monthly base salary, plus an amount payable annually under the Company's
Corporate Annual Performance Plan (CAPP) and Long-Term Performance Plan (LTPP)
that averages performance over the three performance periods immediately
preceding the annual payment, in accordance with the terms thereof in effect
from time to time and (ii) at the Company's expense, life insurance and
medical, dental and disability benefits at least comparable to those provided
by the Company to the Executive on the date of termination of employment. In
addition, the Company shall provide the Executive with an additional benefit
equal to the difference between (x) and (y), where (x) is the amount of benefit
that the Executive would have received from the Company's pension plan (the
"Plan") if the Executive had continued to participate in the Plan until the end
of the Employment Term, and (y) the amount of benefit that the Executive shall
actually receive from the Plan. Any additional pension benefit to which the
Executive may be entitled shall be payable at the same time and in the same
manner as permitted under the terms of the Plan. The additional benefit is not
subject to sale, transfer, or assignment by the Executive. All payments of the
additional benefit shall be payable from the general assets of the Company.
Notwithstanding any other provision, the right of the Executive to any
benefits provided in this Agreement shall cease if the Board of Directors of
the Company shall determine that the Executive either before or after
termination of employment has engaged in any activity that is directly or
indirectly in competition with any activity of the
<PAGE> 5
4
Company or any affiliate, unless waived by the Board of Directors of the
Company, or has engaged in any activity that is inimical to the best interests
of the Company or any affiliate.
5. PERMANENT DISABILITY OR DEATH
In the event of the Executive's permanent disability as defined in the
long-term disability plan applicable to employees of the Company on the date
hereof ("Permanent Disability") while employed hereunder during the Employment
Term, the Executive shall continue to receive compensation equal to the
Executive's then current base salary plus the bonus referred to in Section 4(i)
for a period of six months after the determination of Permanent Disability or
until the end of the Employment Term, whichever shall last occur, less any
amounts received through any disability or salary continuation plan provided
pursuant to Section 7 hereof. In the event of the Executive's death while
employed hereunder during the Employment Term, the Executive's estate or
designated beneficiaries shall continue to receive compensation equal to the
Executive's then current base salary plus the bonus referred to in Section 4(i)
until the end of the Employment Term or one year from death, whichever is
later. In the event of the Executive's Permanent Disability or death as
specified in this Section 5, the employment of the Executive and all
obligations of the Company hereunder (other than the obligation (i) for the
compensation specified in this Section 5, and (ii) to pay amounts for which the
Company is responsible under applicable benefit plans, policies and practices
in the event of death or Permanent Disability) shall terminate.
<PAGE> 6
5
6. EXPENSES
During the Executive's employment hereunder, the Executive is authorized
to incur reasonable expenses for promoting the business of the Company,
including expenses for travel and similar items, in accordance with the
Company's policy as in effect from time to time. The Company will reimburse the
Executive for all such reasonable expenses in accordance with Company policy
upon presentation by the Executive from time to time of an itemized account of
such expenditure.
7. EXECUTIVE BENEFITS
7.1 During the Executive's employment hereunder, the Executive shall
be included in any and all plans providing benefits for (a) the Company's
employees generally and (b) the Company's executives of comparable status. In
furtherance and not in limitation of the foregoing, throughout the Employment
Term, the Company shall provide to the Executive life insurance, medical,
dental, disability and other employee welfare benefits and defined benefit
pension plan benefits which, on an overall basis, shall be no less favorable to
the Executive than those in effect for employees of the Company from time to
time.
7.2 During the Executive's employment hereunder, the Executive shall
be a participant, to the extent eligible thereunder, in all incentive, profit
sharing, bonus, stock option, or other similar or comparable plans applicable
to Company executives of a similar class and station, in accordance with the
terms thereof in effect from time to time.
<PAGE> 7
6
8. RESTRICTIVE COVENANTS
8.1 The Executive agrees to execute and deliver from time to time the
Company's standard confidentiality, conflict of interest and proprietary
information agreements.
8.2 The Executive and the Executive's agents will not, during the
12-month period following any termination of employment hereunder, or in
contemplation of termination of employment, induce, entice or solicit any
employee of the Company or its affiliates, to leave employment with the Company
or its affiliates.
9. NOTICE
All notices or communications hereunder shall be in writing, addressed
as follows:
To the Company:
Associates Corporation of North America
250 East Carpenter Freeway
Irving, Texas 75062
Attention: General Counsel
To the Executive:
3~
Any notice or communication shall be sent certified or registered mail, return
receipt requested, postage prepaid, addressed as above (or to such other
address as a party may designate in writing from time to time), and the actual
date of receipt, as shown by the receipt therefore, shall determine the time at
which notice was given.
<PAGE> 8
7
10. SEPARABILITY
If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such provision shall be modified, to the
extent practical, consistent with the intent of the parties, in order to render
it enforceable, but such invalidity or unenforceability shall not affect the
remaining provisions hereof, which shall remain in full force and effect.
11. ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
heirs and representatives of the Executive and the assigns and successors of
the Company. Neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Executive, and any such
attempted assignment or hypothecation shall be void. This Agreement shall be
assignable by the Company in connection with any transfer of all or
substantially all of the Company's business or any transfer of a portion of the
Company's business for which the Executive has responsibility; provided,
however, that the Company shall remain responsible for all the obligations of
the Company set forth herein.
12. ENTIRE AGREEMENT; AMENDMENT
This Agreement represents the entire agreement of the parties relating
to its subject matter and shall supersede any and all previous written or oral
employment agreements between the Company or any of its affiliates and the
Executive. This Agreement may be modified or amended only by a writing signed
by both parties hereto.
<PAGE> 9
8
13. GOVERNING LAW
This Agreement shall be construed, interpreted, and governed in
accordance with the laws of Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
---------------------------------------
1~
ASSOCIATES CORPORATION OF NORTH AMERICA
(A Texas Corporation)
By:____________________________________
Its: Chairman of the Board
<PAGE> 1
ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT PLAN
<PAGE> 2
ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT AGREEMENT
RIGHT NO.:
EFFECTIVE DATE OF RIGHT:
NUMBER OF PHANTOM SHARES COVERED BY RIGHT:
BASE SHARE PRICE:
EXPIRATION DATE:
VESTING PERIOD: 12 MONTHS FOLLOWING THE EFFECTIVE DATE OF RIGHT
Pursuant to the Associates First Capital Corporation Phantom Stock Appreciation
Right Plan (the "Plan"), Associates First Capital Corporation (the "Company"),
hereby grants to:
NAME (the "Holder"):
ADDRESS:
the right to receive from the Company, upon exercise thereof, the amount of the
Appreciation (as hereinafter defined) on the number of phantom shares specified
above (the "Phantom Shares") of Phantom Stock (as hereinafter defined), less
required tax withholding, subject to the terms and conditions described below
(the "Right"). The term "Phantom Stock" shall mean fictional stock of the Ford
Financial Services Group ("FFSG") for purposes of and as described in the Plan.
Phantom Stock does not actually exist but is a measure of value established for
purposes of the Plan.
<PAGE> 3
-2-
1. TERM OF RIGHT
Subject to Articles 4 and 6 hereof, the Holder may exercise the Right
during any Window Period (as hereinafter defined) after the expiration of the
vesting period specified above (the "Vesting Period") and prior to the close of
business on the expiration date specified above (the "Expiration Date"). The
Right may be exercised in whole or in part only with respect to whole Phantom
Shares. If the Right is not exercised in whole prior to the Expiration Date,
adverse tax consequences to the Holder may occur.
2. HOW TO EXERCISE THE RIGHT
The Right, when vested, may be exercised by delivery of the Notice of
Exercise (attached hereto as Appendix A) to the Compensation Committee
appointed by the President of FFSG to administer the Plan (the "Committee")
stating the number of Phantom Shares with respect to which it is being
exercised. The Right may be exercised only during the period commencing on a
Notice Date (as hereinafter defined) and ending on the date thirty days
thereafter (the "Window Period") and not otherwise. For an exercise to be
effective, the Notice of Exercise must be received by the Committee at the
address specified therein prior to the expiration of the applicable Window
Period, but in no event later than the Expiration Date.
<PAGE> 4
-3-
3. DELIVERY OF APPRECIATION
As soon as practicable after receipt of the Notice of Exercise, the
Company shall deliver to the Holder by check the amount of the Appreciation,
less required tax withholding.
The term "Appreciation" shall mean the positive difference between (x)
the base share price specified above and (y) the Phantom Share Price (as
hereinafter defined) in effect immediately prior to the applicable Window
Period, multiplied by (z) the number of Phantom Shares being exercised.
The term "Phantom Share Price" shall mean the current price per
Phantom Share calculated pursuant to the provisions of the Plan. The Phantom
Share Price is dependent upon the after-tax profits of FFSG and the average
price/earnings ratio of selected comparator financial services companies. The
Phantom Share Price shall be calculated within 45 days after each quarterly
close of the books of the companies in FFSG and shall remain in effect until it
is recalculated at the end of the following quarterly close of such books. The
Committee shall cause written notice of each determination of the Phantom Share
Price to be given to the Holder promptly after each such calculation is made.
The date such notice is given is hereinafter referred to as the "Notice Date".
<PAGE> 5
-4-
4. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH
In the event the Holder transfers to Ford Motor Company ("Ford") or a
Ford Subsidiary (as hereinafter defined) or in the event of a Holder's
retirement, disability or death, the Right shall continue in effect and shall
become vested and exercisable during the applicable periods in accordance with
Articles 1 and 2 hereof. The term "Ford Subsidiary" when used herein shall mean
any corporation a majority of the voting stock of which is owned directly or
indirectly by Ford.
In the event of the Holder's death, the beneficiary designated
pursuant to Article 5 hereof, or if no such beneficiary is designated or deemed
to be designated or if none survives such Holder, the executor or administrator
of the estate of the decedent or the person or persons to whom the Right shall
have been validly transferred by the executor or the administrator pursuant to
will or the laws of descent and distribution, shall have the right to exercise
the Right, when vested, in accordance with the provisions of Articles 1 and 2
hereof.
In the event of a termination of the Holder's employment for reasons
other than disability, death, retirement, transfer to Ford or a Ford
Subsidiary, resignation or termination by the Company for cause, the Right
<PAGE> 6
-5-
shall continue in effect and shall continue to vest and become exercisable to
the extent permitted under Articles 1 and 2 hereof during the period three
months following the date of such termination, but in no event after the
Expiration Date.
In the event of the resignation of employment by the Holder or
termination of the Holder's employment by the Company for cause, the Right shall
be forfeited effective as of the date of such resignation or termination.
For purposes of the Plan, a termination by the Company for cause shall
include termination resulting from (i) acts of insubordination, (ii)
embezzlement, attempted embezzlement, theft of property or attempted theft of
property, whether or not a criminal action relating thereto is initiated by the
Company, (iii) conviction of a felony or any crime involving moral turpitude,
(iv) material breach of any employment agreement or condition of employment
with the Company or (v) violation of Company policy covering Standards of
Corporate Conduct.
Whether military or government service shall constitute termination of
employment of the Holder for purposes of this Agreement shall be determined by
the Committee in its sole discretion.
<PAGE> 7
-6-
5. NON-TRANSFERABILITY OF RIGHT - DESIGNATION OF BENEFICIARY
The Right shall, during the Holder's lifetime, be exercisable only by
the Holder, and neither it nor any right hereunder shall be transferable
otherwise than by will or the laws of descent and distribution, or be subject
to attachment, execution or other similar process. Once transferred by will or
the laws of descent and distribution, the Right shall not be further
transferable. Any transferee of the Right shall take the same subject to the
terms and conditions set forth herein. No such transfer of the Right shall be
effective to bind the Company unless the Company shall have been furnished with
written notice thereof and a copy of the will and/or such other evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions set
forth herein. No assignment or transfer of the Right or of the rights
represented thereby, other than as provided in this Article, shall vest in the
purported assignee or transferee any interest or right therein whatsoever.
Notwithstanding anything to the contrary set forth herein, the Holder
may file with the Company a written designation of a beneficiary or
beneficiaries (subject to such limitations as to the classes and number of
beneficiaries and contingent beneficiaries and such other limitations as the
Committee from time to time may prescribe) to exercise, in the event
<PAGE> 8
-7-
of the death of the Holder, the Right subject to the terms and conditions set
forth herein and to receipt by the Company of such evidence as the Committee may
deem necessary to establish the acceptance by the beneficiary or beneficiaries
of the terms and conditions set forth herein. The Holder shall be deemed to have
designated as beneficiary or beneficiaries under the Plan the person or persons
who receive the Holder's life insurance proceeds under the Company-paid Life
Insurance Plan unless the Holder shall have assigned such life insurance or
shall have filed with the Company a written designation of a different
beneficiary or beneficiaries under the Plan. The Holder may from time to time
revoke or change any such designation of beneficiary and any designation of
beneficiary under the Plan shall be controlling over any other disposition,
testamentary or otherwise; provided, however, that, if the Committee shall be in
doubt as to the right of any such beneficiary to exercise the Right, the
Committee may determine to recognize only an exercise by the legal
representative of the Holder, in which case the Company and the Committee and
the members thereof shall not be under any further liability to anyone.
If the Holder should attempt to alienate, assign, pledge, hypothecate
or otherwise dispose of the Right or of any right hereunder, except as provided
for in the Plan, or in the event of any levy or any attachment,
<PAGE> 9
-8-
execution or similar process upon the rights or interest conferred by the
Right, the Company may terminate the Right by notice to the Holder and the
Right shall thereupon become null and void.
6. EFFECT OF COMPETITIVE ACTIVITY OR INIMICAL CONDUCT
Anything contained herein to the contrary notwithstanding, the right
of the Holder to exercise the Right following termination of the Holder's
employment with the Company shall remain effective only if, during the entire
period from the date of the Holder's termination to the date of such exercise,
the Holder shall have earned out the Right by refraining from engaging in any
activity that is directly or indirectly in competition with any activity of the
Company or any subsidiary or affiliate thereof. The term "subsidiary" shall
mean any corporation a majority of the voting stock of which is owned directly
or indirectly by the Company.
In the event of the Holder's nonfulfillment of the condition set forth
in the immediately preceding paragraph, the Holder's right to exercise such
Right shall cease; provided, however, that the nonfulfillment of such condition
may at any time (whether before, at the time of or subsequent to
<PAGE> 10
-9-
termination of the Holder's employment) be waived by the Committee upon its
determination that in its sole judgment there shall not have been and will not
be any substantial adverse effect upon the Company or any subsidiary or
affiliate thereof by reason of the nonfulfillment of such condition.
Anything contained in the Plan to the contrary notwithstanding, the
right of the Holder to exercise the Right following termination of the Holder's
employment with the Company shall cease on and as of the date on which it has
been determined by the Committee that the Holder at any time (whether before or
subsequent to termination of the Holder's employment) acted in a manner
inimical to the best interests of the Company or any subsidiary or affiliate
thereof. Conduct which constitutes engaging in an activity that is directly or
indirectly in competition with any activity of the Company or any subsidiary or
affiliate thereof shall be governed by the preceding paragraphs of this Article
6 and shall not be subject to any determination under this paragraph.
7. NO RIGHT OF EMPLOYMENT
Neither the grant nor the exercise of the Right shall confer on the
Holder any right to be retained in the employ of the Company or any other Ford
Subsidiary, or to receive subsequent rights or other awards under the
<PAGE> 11
-10-
Plan. The right of the Company or any other Ford Subsidiary to terminate
(whether by dismissal, discharge, retirement or otherwise) the Holder's
employment with it at any time, with or without cause, or as otherwise provided
by any agreement between the Company or any other Ford Subsidiary and the
Holder, is specifically reserved.
8. NO RIGHTS OF SHAREHOLDER
Neither the Holder nor any beneficiary or transferee of the Right
permitted under Article 5 hereof shall have any of the rights of a shareholder.
9. VIOLATION OF LAW OR REGULATION
Notwithstanding any of the other provisions of this Agreement, the
Holder agrees not to exercise the Right, and the Company will not be obligated
to deliver any cash pursuant to this Agreement, if the exercise of the Right or
delivery of such cash would constitute a violation by the Holder or by the
Company of any provisions of any law or regulation of any governmental
authority. Any determination of the Committee in this connection shall be final
and shall be binding and conclusive for all
<PAGE> 12
-11-
purposes. The Company shall in no event be obligated to take any affirmative
action in order to cause the exercise of the Right or delivery of cash pursuant
thereto to comply with any law or any regulation of any governmental authority.
10. HOLDER
Whenever the term "Holder" is used in any provision of this Agreement
under circumstances such that the provision should logically apply to any other
person or persons designated as a beneficiary pursuant to the provisions of
Article 5 hereof, or to whom the Right may be transferred in accordance with
the provisions of Article 5 hereof, the term "Holder" shall be deemed to
include such person or persons.
11. RIGHT GOVERNED BY THIS AGREEMENT AND THE PLAN; COMMITTEE INTERPRETS
AGREEMENT
The Right is granted pursuant to the Plan, and is governed by the
terms and conditions of the Plan. The Holder agrees to be bound by the terms
and conditions of this Agreement and the Plan (a copy of which the Holder
acknowledges the Holder has received).
<PAGE> 13
-12-
As a condition of the granting of the Right, the Holder and the
Holder's successors and assigns agree that any dispute or disagreement which
shall arise under or as a result of this Agreement shall be determined by the
Committee in its sole discretion and judgment and that any such determination
and any interpretation by the Committee of the Agreement shall be final and
shall be binding and conclusive for all purposes.
12. GOVERNING LAW
This Agreement has been made in and shall be construed in accordance
with the laws of the State of Michigan.
<PAGE> 14
-13-
13. ENTIRE AGREEMENT; AMENDMENT OR MODIFICATION
This Agreement constitutes the entire agreement between the parties
regarding the subject matter hereof and supersedes all prior communications and
understandings between the parties. This Agreement may be amended or modified
only in a writing signed by the party or parties against which the existence of
such amendment or modification is asserted.
ASSOCIATES FIRST CAPITAL CORPORATION
BY:
The foregoing Right hereby is accepted on the terms and conditions set forth
herein and in the Plan.
HOLDER: ______________
DATE: ______________
Note: The Holder will please sign and date the attached duplicate hereof and
mail the same immediately to:
Compensation Committee
c/o Mr. Harry W. Reynolds, Jr.
Associates First Capital Corporation
P.O. Box 660237
Dallas, Texas 75266-0237
<PAGE> 15
ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT PLAN
(Adopted as of January 1, 1990)
1. Purpose. This Plan, which shall be known as the "Phantom Stock
Appreciation Right Plan" and is hereinafter referred to as "the Plan", is
intended as an incentive to certain officers and other key employees of
Associates First Capital Corporation ("the Company") in order to encourage them
to remain in the employ of the Company and to increase their contribution to
the success of the Ford Financial Services Group ("FFSG"). It is intended that
this purpose be effected through grants of "phantom stock appreciation rights"
as provided herein.
The word "Company" when used in the Plan with reference to employment
shall include subsidiaries of the Company. The word "subsidiary" when used
herein shall mean any corporation a majority of the voting stock of which is
owned directly or indirectly by the Company.
2. Rights. A phantom stock appreciation right (a "Right") shall
entitle the holder thereof to receive from the Company, upon exercise thereof,
an amount of cash (less required tax withholding) equal to the amount by which
the Phantom Share Price (as hereinafter defined) of a phantom
<PAGE> 16
-2-
share of stock of FFSG ("Phantom Share") covered by such Right exceeds the Base
Share Price (as hereinafter defined) thereof multiplied by the number of
Phantom Shares with respect to which such Right was exercised, all subject to
the terms and conditions hereinafter set forth.
3. Administration. The Compensation Committee appointed by the
President of FFSG ("the Committee") shall administer the Plan and perform such
other functions as are assigned to the Committee under the Plan. The Committee
is authorized, subject to the provisions of the Plan, from time to time to
establish such rules and regulations as it may deem appropriate for the proper
administration of the Plan, and to make such determinations under, and such
interpretations of, and to take such steps in connection with, the Plan and the
Rights granted thereunder as it may deem necessary or advisable.
4. Stock. The total number of Phantom Shares is hereby
established, for purposes of the Plan, as 150,000,000 Phantom Shares.
Notwithstanding the foregoing, such number of Phantom Shares is subject to
adjustment in accordance with the provisions of Article 12 hereof. Phantom
Shares covered by Rights forfeited under the Plan shall not be available for
the grant of further Rights under the Plan.
<PAGE> 17
-3-
5 Grants of Rights. The Committee, at any time and from time to
time on or after January 1, 1990 and prior to January 1, 2000, may authorize
the granting of Rights to such officers and other key salaried employees of the
Company as it may select, and with respect to such numbers of Phantom Shares as
it shall designate, subject to the provisions of this Article and Article 4
hereof.
The date on which a Right shall be deemed to have been granted shall
be the date of the Committee's authorization of such grant or such earlier or
later date as may be determined by the Committee at the time such grant is
authorized.
Any individual may hold more than one Right. No person while a member
of the Committee shall be eligible to receive or hold a Right under the Plan.
6. Vesting. Each Right shall vest on the date twelve months
following the date as of which such Right was granted or such later date or
dates as may be determined by the Committee at or prior to granting such Right.
7. Base Share Price and Phantom Share Price. The term "Base Share
Price" shall mean the Phantom Share Price (as hereinafter defined) of a Phantom
Share on the effective date of the Right. The Base Share Price with respect to
any Rights
<PAGE> 18
-4-
granted as of a date prior to February 1, 1990 shall be $39.60 per Phantom
Share.
The term "Phantom Share Price" shall mean the amount equal to the
product of (x) the sum of the FFSG Profits (as hereinafter defined) for the
four most recent calendar quarters and (y) the Comparator P/E Ratio (as
hereinafter defined), divided by (z) the total number of Phantom Shares
established for purposes of the Plan, carried to two decimal places.
The term "FFSG Profits" for any four calendar quarter period shall be
equal to the aggregate profits after taxes of all companies included in FFSG
less the amount of any acquisition financing costs assigned to FFSG, both
determined on the basis of the Profit Center Results (as hereinafter defined).
The term "Profit Center Results" shall refer to profits (i) determined
on a profit center basis in accordance with the practices and procedures
adopted by Ford Motor Company for profit center reporting and (ii)
authenticated as having been so determined by the Finance Director of FFSG.
Profit Center Results for a particular period shall include (without
duplication) the amount of any charges made for the provision of Rights
exercised during such period under the Plan and the cost of other compensation
plans of the Company and its subsidiaries.
<PAGE> 19
-5-
After the close of each calendar quarter, and as promptly as
practicable after he shall have completed his review for such quarter of the
Profit Center Results of the companies in FFSG and shall have authenticated
such Results, the Finance Director of FFSG shall determine and report in
writing to the Committee the amount of the FFSG Profits for the most recent
four calendar quarter period.
The term "Comparator P/E Ratio" shall mean the simple average of the
after tax price/earnings ratios of the Comparator Companies. The after tax
price/earnings ratio of a Comparator Company shall be determined by dividing
(x) the average of the daily closing prices of a share of common stock of the
Comparator Company during the most recent calendar quarter by (y) the after tax
earnings per share attributable to the most recent four calendar quarters, both
as reported in "Bloomberg Financial Markets", an electronic financial
information delivery system, or, if such information is no longer reported in
"Bloomberg Financial Markets", such other information source as may be
designated by the Committee.
The term "Comparator Companies" shall mean certain major competitors
of FFSG whose stock is publicly traded, as set forth on Exhibit 1 hereto. Any
additions, deletions, substitutions or other changes in the Comparator
Companies shall be determined by the Committee, upon recommendation of the Ford
Motor Company Office of the Chief Executive ("OCE").
<PAGE> 20
-6-
The Phantom Share Price shall be calculated within 45 days after each
quarterly close of the books of the companies in FFSG and shall remain in
effect until it is recalculated after the end of the following quarterly close
of such books. The Committee shall cause written notice of each determination
of the Phantom Share Price to be given to each holder of a Right promptly after
each such calculation is made. The date such notice is given is hereinafter
referred to as the "Notice Date".
8. Exercise of Right. Each vested Right (or portion thereof not
already exercised) shall be exercisable, upon receipt by the Committee of a
written notice of exercise, during each period commencing on a Notice Date and
ending on the date thirty days thereafter or during each such other period as
shall be determined by the Committee; provided, however, that no such Right
shall be exercisable at any time after the expiration of the term of such
Right. The Committee shall determine the term of each Right which shall not be
less than five years nor more than ten years from the date of the grant of such
Right. To the extent exercised, a Right shall be terminated and of no further
force and effect. Any Right which remains unexercised after the expiration of
the term of such Right shall be forfeited. Such forfeiture may result in
adverse tax consequences to the holder.
<PAGE> 21
-7-
9 Effect of Termination of Employment or Death. In the event a
holder of a Right transfers to Ford Motor Company ("Ford") or a Ford Subsidiary
(as hereinafter defined) or in the event of a holder's retirement, disability
or death, such Right shall continue in effect and shall become vested and
exercisable during the applicable periods within the remaining term of the
Right in accordance with Articles 6 and 8 hereof. The term "Ford Subsidiary"
when used herein shall mean any corporation a majority of the voting stock of
which is owned directly or indirectly by Ford.
In the event of a holder's death, the beneficiary designated pursuant
to Article 10 hereof, or if no such beneficiary is designated or deemed to be
designated or if none survives such holder, the executor or administrator of
the estate of the decedent or the person or persons to whom the Right shall
have been validly transferred by the executor or the administrator pursuant to
will or the laws of descent and distribution, shall have the right to exercise
the Right, when vested, in accordance with the provisions of Articles 6 and 8
hereof.
In the event of a termination of a holder's employment for reasons
other than disability, death, retirement, transfer to Ford or a Ford
Subsidiary, resignation or termination by the Company for cause, such holder's
Right shall continue in
<PAGE> 22
-8-
effect and shall continue to vest and become exercisable to the extent
permitted under Articles 6 and 8 hereof during the period three months
following the date of such termination, but in no event after the expiration of
the term of the Right.
In the event of the resignation of employment by a holder or
termination of a holder's employment by the Company for cause, the Right shall
be forfeited effective as of the date of such resignation or termination.
For purposes of the Plan, a termination by the Company for cause shall
include termination resulting from (i) acts of insubordination, (ii)
embezzlement, attempted embezzlement, theft of property or attempted theft of
property, whether or not a criminal action relating thereto is initiated by the
Company, (iii) conviction of a felony or any crime involving moral turpitude,
(iv) material breach of any employment agreement or condition of employment
with the Company or (v) violation of Company policy covering Standards of
Corporate Conduct.
10. Non-transferability of Rights - Designation of Beneficiaries.
No Right shall be transferable by a holder otherwise than by will or the laws
of descent and distribution. During the lifetime of a holder the Right shall be
exercisable pursuant to the provisions of Articles 6, 8 and 9 hereof only by
such holder.
<PAGE> 23
-9-
A holder may file with the Company a written designation of a
beneficiary or beneficiaries (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries and such other limitations
as the Committee from time to time may prescribe) to exercise a vested Right in
the event of the death of the holder, subject to the provisions of Articles 8
and 9 hereof. A holder shall be deemed to have designated as beneficiary or
beneficiaries under the Plan the person or persons who receive such holder's
life insurance proceeds under the Company-paid Life Insurance Plan unless such
holder shall have assigned such life insurance or shall have filed with the
Company a written designation of a different beneficiary or beneficiaries under
the Plan. A holder may from time to time revoke or change any such designation
of beneficiary and any designation of beneficiary under the Plan shall be
controlling over any other disposition, testamentary or otherwise; provided,
however, that, if the Committee shall be in doubt as to the right of any such
beneficiary to exercise any vested Right, the Committee may determine to
recognize only an exercise by the legal representative of the holder, in which
case the Company and the Committee and the members thereof shall not be under
any further liability to anyone.
11. Effect of Competitive Activity or Inimical Conduct. Anything
contained in the Plan to the contrary notwithstanding, the right of any holder
to exercise a vested Right following
<PAGE> 24
-10-
termination of the holder's employment with the Company shall remain effective
only if, during the entire period from the date of the holder's separation to
the date of such exercise, the holder shall have earned out such Right by
refraining from engaging in any activity that is directly or indirectly in
competition with any activity of the Company or any subsidiary or affiliate
thereof.
In the event of a holder's nonfulfillment of the condition set forth
in the immediately preceding paragraph, the holder's right to exercise such
Right shall cease; provided, however, that the nonfulfillment of such condition
may at any time (whether before, at the time of or subsequent to termination of
such holder's employment) be waived by the Committee upon its determination
that in its sole judgment there shall not have been and will not be any
substantial adverse effect upon the Company or any subsidiary or affiliate
thereof by reason of the nonfulfillment of such condition.
Anything contained in the Plan to the contrary notwithstanding, the
right of any holder to exercise any Right following termination of the holder's
employment with the Company shall cease on and as of the date on which it has
been determined by the Committee that such holder at any time (whether before
or subsequent to termination of such holder's employment) acted in a manner
inimical to the best interests of
<PAGE> 25
-11-
the Company or any subsidiary or affiliate thereof. Conduct which constitutes
engaging in an activity that is directly or indirectly in competition with any
activity of the Company or any subsidiary or affiliate thereof shall be
governed by the preceding paragraphs of this Article and shall not be subject
to any determination under this paragraph.
12. Adjustments. In the event of a change in the companies
comprising FFSG or a component thereof through merger, acquisition, divestiture
or otherwise, or other event substantially affecting the Phantom Share Price,
an appropriate adjustment shall be made in the total number of Phantom Shares
established for purposes of the Plan and/or the number of Phantom Shares
covered by outstanding Rights. The foregoing adjustment shall be determined by
the Committee, upon recommendation of the OCE. Any such adjustment may provide
for the elimination of any fractional Phantom Share which might otherwise
become subject to a Right.
13. Amendment, Modification and Termination of the Plan. The Board
of Directors of the Company, upon recommendation of the Committee, at any time
may terminate, and at any time and from time to time, and in any respect, may
amend or modify, the Plan; provided, however, that (i) no substantive amendment
or modification of the Plan may be made without the prior recommendation of the
OCE and (ii) no amendment, modification or termination of the Plan shall in any
manner affect any Right
<PAGE> 26
-12-
theretofore granted to a holder under the Plan without the consent of such
holder or the transferee of such Right.
14. Indemnification and Exculpation. Each person who is or shall
have been a member of the Committee shall be indemnified and held harmless by
the Company against and from any and all loss, cost, liability or expense that
may be imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may
be or become a party or in which such person may be or become involved by
reason of any action taken or failure to act under the Plan and against and
from any and all amounts paid by such person in settlement thereof (with the
Company's written approval) or paid by such person in satisfaction of a
judgment in any such action, suit or proceeding, except a judgment in favor of
the Company based upon a finding of such person's lack of good faith; subject,
however, to the condition that, upon the institution of any claim, action, suit
or proceeding against such person, such person shall in writing give the
Company an opportunity, at its own expense, to handle and defend the same
before such person undertakes to handle and defend it on such person's behalf.
The foregoing right of indemnification shall not be exclusive of any other
right to which such person may be entitled as a matter of law or otherwise, or
any power that the Company may have to indemnify or hold such person harmless.
<PAGE> 27
-13-
Each member of the Committee shall be fully justified in relying or
acting in good faith upon any information furnished in connection with the
administration of the Plan or any appropriate person or persons other than such
person. In no event shall any person who is or shall have been a member of the
Committee be held liable for any determination made or other action taken or
any omission to act in reliance upon any such information, or for any action
(including the furnishing of information) taken or any failure to act, if in
good faith.
15. Finality of Determinations. Each determination, interpretation
or other action made or taken pursuant to the provisions of the Plan by the
Committee shall be final and shall be binding and conclusive for all purposes
and upon all persons, including, but without limitation thereto, the Company,
its stockholders, the Committee and each of the members thereof, and the
directors, officers, and employees of the Company, the holders of Rights, and
their respective successors in interest.
16. Costs. All costs involved in offering and administering the
Plan shall be borne by the Company.
17. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Michigan.
<PAGE> 28
THE ASSOCIATES
PHANTOM STOCK APPRECIATION RIGHT PLAN
Exhibit 1
Page 1 of 2
I. Purpose. The purpose of The Associates Phantom Stock
Appreciation Right Plan ("the Plan") is to further the
long-term growth in earnings of The Associates and other Ford
Financial Services Group (PSG) companies by providing a
long-term financial opportunity to certain key employees of
The Associates.
II. Administration. The Plan shall be administered by a
Compensation Committee (the "Committee") appointed by the
President, Ford Financial Services Group. No member of the
Committee shall be eligible to receive an award under the
Plan. Substantive amendments to the Plan will require the
prior recommendation of the Ford Office of the Chief Executive
(OCE).
III. Eligibility to Participate. Those eligible to participate in
the Plan will be key employees of The Associates and its
subsidiaries, initially established at approximately 230
employees.
IV. Awards of Stock Appreciation Rights. A phantom stock
appreciation right is a grant of a financial opportunity to
receive the appreciation in value, if any, in a specified
number of shares of Ford Financial Services Group phantom
stock ("FSG phantom stock"). The value of a share of FSG
phantom stock is dependent on the after-tax profit center
earnings of Ford Financial Services Group companies, as
reported to Ford management periodically throughout the year,
and the average P/E ratio of selected comparator companies.
(The cost of awards from this and other incentive compensation
plans of The Associates will be charged against The Associates
profit center earnings.) Grants will be based upon The
Associates employees' salary levels, but may very at
management's discretion.
V. Frequency of Grants. FSG phantom stock appreciation rights
will be granted at times to be determined by the Committee.
Generally, it is anticipated that grants will be made once a
year; however, grants may be made less frequently than once
per year, as determined by the Committee. Grants may be made
at any time on or after January 1, 1990 (the effective date of
this Plan) and before January 1, 2000.
VI. Vesting. The total award will vest on the first anniversary of
the grant of that award, or at such time as the Committee
shall determine at the time of the grant, but not less than
one year from the grant data.
VII. Term of Award. The term of an award shall be not less than 5
years from date of grant, not more than 10 years from date of
grant, as determined by the Committee. Upon transfer to Ford
Motor Company, or another subsidiary of Ford, or upon
disability, death or retirement, the award will continue to
vest and may be exercised within the remaining term of the
award. Upon termination without cause for reasons other than
transfer, disability, death or retirement, the award must be
exercised within three months of leaving employment with Ford,
a Ford subsidiary or Ford affiliate company. Upon resignation
or termination with cause, the award shall be canceled
immediately.
<PAGE> 29
Exhibit 1
Page 2 of 2
VIII. Determination of FSG Phantom Stock Price. The FSG phantom
stock price will be calculated within 45 days after each
quarterly close of books of the companies in the Ford
Financial Services Group. The FSG phantom stock price
determined after a close will remain in effect until it is
recalculated after the next quarterly close.
IX. Exercise of Stock Appreciation Rights. A participant may
exercise a vested stock appreciation right and receive cash by
delivering a written notice of exercise to the Committee during
a period of time ("window period") beginning on the data that
the FSG phantom stock price is announced (quarterly), and
continuing for 30 days thereafter. The amount received upon
exercise shall equal (a) the difference between (1) the FSG
phantom stock price par share established at the time of the
grant, and (2) the most recant FSG phantom stock price per
share, TIMES (b) the number of FSG phantom shares with respect
to which such right is exercised. This amount, less required
withholding as specified by applicable law, will be delivered
to the executive as soon as practicable thereafter.
X. Determination of Comparator Companies. The comparator companies
shall represent a composite of major competitors of the Ford
Financial Services Group companies as determined by the
Committee. If a comparator company is acquired by another
company, or goes private, or its stock price or earnings data
becomes unavailable through reasonable means, such a company
may be removed from the comparator list and from calculations
of the average P/E, as the Committee, upon the prior
recommendation of the Ford OCE, deems appropriate. The
Committee, upon the prior recommendation of the Ford OCE, also
shall have the option to add comparator companies or to make
other adjustments if it should decide that a comparator's P/E
is not meaningful.
XI. Changes in Ford Financial Services Group Companies. If a
company is added to the Ford Financial Services Group, or if a
Ford Financial Services Group company changes through
restructuring, merger, acquisition or divestiture of a
business unit, the Committee, upon the prior recommendation of
the Ford OCE, shall decide what adjustments, if any, will be
made to the number of shares granted or to the value of each
share. (E.g., the Committee may decide that if changes
occurred that would affect the Ford Financial Services Group
earnings substantially, an adjustment would be made to the
number of shares available for stock appreciation rights, such
that the effect would be to return the FSG phantom stock price
to the price before the change occurred.)
July 11, 1990
<PAGE> 30
METHOD OF DETERMINING THE PRICE OF
A FORD FINANCIAL SERVICES GROUP PHANTOM SHARE
The price of Ford Financial Services Group (FSG) phantom shares would be based
on a hypothetical market value for the Ford Financial Services Group companies
combined. This Ford Financial Services Group market value would be determined
by calculating the sum of the after-tax profit center earnings of the Ford
Financial Services Group companies for the four most recent quarters (less the
cost of financing acquisitions), and multiplying that by a simple average of
the P/E ratios of major comparators of the Ford Financial Services Group
companies. A comparator company's P/E ratio would be determined by dividing the
average share price during the most recent quarter by the earnings per share
from the most recent four quarters. The Ford Financial Services Group phantom
share price would be calculated by dividing the Ford Financial Services Group
market value by a fixed number of Ford Financial Services Group phantom shares
(initially 150 million shares), carried to two decimal places. This is
illustrated below:
Calculation of Base Share Price at Time of Grant
<TABLE>
<CAPTION>
Ford After-tax Average Hypothetical
Financial Profit Comparator FSG Number FSG
Services Group Center P/E Market of FSG Share
Company Earnings Ratio Value share.% Price
- -------------- -------- ----------- ------ ------- ---------
(Mils.) (Mils.) (Mils.) (rounded)
<S> <C> <C> <C> <C>
Associates $231
Ford Credit 434
First Nationwide 80
U.S. Leasing 61
Acquisition Fin. Cost (190)
----
Total: $636 X 9.34 = $5,940 divided by 150 = $39.60
</TABLE>
The FSG phantom share price at the time the stock appreciation right is granted
to the participant would serve as the "base" price for one share. Throughout
the term of the grant, the FSG phantom share price would change with the
changes in either the average P/E of the comparator companies or the earnings
of the Ford Financial Services Group companies (calculated quarterly). Upon
exercise of a phantom stock appreciation right, the executive would receive the
difference between the base price and the FSG phantom share price at the time
of exercise. The following table illustrates the FSG phantom share price at
different assumed changes in the Ford Financial Services Group earnings and
average comparator P/E ratio:
<TABLE>
<CAPTION>
Change in Ford Financial Services Group Earnings
------------------------------------------------
-20% -10% 0% +10% +20%
Change in ---- ---- -- ---- ----
Comparator P/E (Base)
- --------------
<S> <C> <C> <C> <C> <C> <C>
-20% $25.35 $28.51 $31.68 $34.85 $38.02
-10% $28.51 $32.08 $35.64 $39.21 $42.77
(Base) 0% $31.68 $35.64 $39.60 $43.56 $47.52
+10% $34.85 $39.21 $43.56 $47.92 $52.27
+20% $38.02 $42.77 $47.52 $52.27 $57.03
</TABLE>
<PAGE> 1
ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT PLAN
<PAGE> 2
ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT PLAN
(Amended as of December 10, 1993)
1. Purpose. This Plan, which shall be known as the "Phantom Stock
Appreciation Right Plan" and is hereinafter referred to as the "Plan", is
intended as an incentive to certain officers and other key employees of
Associates First Capital Corporation (the "Company") in order to encourage them
to remain in the employ of the Company and to increase their contribution to
the success of the Ford Financial Services Group ("FFSG"). It is intended that
this purpose be effected through grants of "phantom stock appreciation rights"
as provided herein.
The word "Company" when used in the Plan with reference to employment
shall include subsidiaries of the Company. The word "subsidiary" when used
herein shall mean any corporation a majority of the voting stock of which is
owned directly or indirectly by the Company.
2. Rights. A phantom stock appreciation right (a "Right") shall
entitle the holder thereof to receive from the Company, upon exercise thereof,
an amount of cash (less required tax withholding) equal to the amount by which
the Phantom Share Price (as hereinafter defined) of a phantom share of stock of
FFSG
<PAGE> 3
-2-
("Phantom Share") covered by such Right exceeds the Base Share Price (as
hereinafter defined) thereof multiplied by the number of Phantom Shares with
respect to which such Right was exercised, all subject to the terms and
conditions hereinafter set forth.
3. Administration. The Compensation Committee appointed by the
President of FFSG (the "Committee") shall administer the Plan and perform such
other functions as are assigned to the Committee under the Plan. The Committee
is authorized, subject to the provisions of the Plan, from time to time to
establish such rules and regulations as it may deem appropriate for the proper
administration of the Plan, and to make such determinations under, and such
interpretations of, and to take such steps in connection with, the Plan and the
Rights granted thereunder as it may deem necessary or advisable.
4. Stock. The total number of Phantom Shares which may be subject
to Rights granted prior to 1994 is hereby established, for purposes of the
Plan, as 150,000,000 Phantom Shares. The total number of Phanton Shares which
may be subject to Rights granted during any calendar year commencing with 1994
shall be the number determined by the Committee to be required in order to
establish a Base Share Price (as hereinafter defined) of $50.00 for such
Rights. Notwithstanding the foregoing, such numbers of Phantom Shares are
subject to adjustment in accordance with the provisions
<PAGE> 4
-3-
of Article 12 hereof. Phantom Shares covered by Rights forfeited under the Plan
shall not be available for the grant of further Rights under the Plan.
5. Grants of Rights. The Committee, at any time and from time to
time on or after January 1, 1990 and prior to January 1, 2000, may authorize
the granting of Rights to such officers and other key salaried employees of the
Company as it may select, and with respect to such numbers of Phantom Shares as
it shall designate, subject to the provisions of this Article and Article 4
hereof.
The date on which a Right shall be deemed to have been granted shall
be the date of the Committee's authorization of such grant or such earlier or
later date as may be determined by the Committee at the time such grant is
authorized.
Any individual may hold more than one Right. No person while a member
of the Committee shall be eligible to receive or hold a Right under the Plan.
6. Vesting. Each Right shall vest on the date twelve months
following the date as of which such Right was granted or such later date or
dates as may be determined by the Committee at or prior to granting such Right.
<PAGE> 5
-4-
7. Base Share Price and Phantom Share Price. The term "Base Share
Price" shall mean the Phantom Share Price (as hereinafter defined) of a Phantom
Share on the effective date of the Right. The Base Share Price with respect to
any Rights granted as of a date prior to February 1, 1990 shall be $39.60 per
Phantom Share.
The term "Phantom Share Price", when used with respect to a Right
granted prior to 1994, shall mean the amount equal to the product of (x) the
sum of the FFSG Profits (as hereinafter defined) for the four most recent
calendar quarters and (y) the Comparator P/E Ratio (as hereinafter defined),
divided by (z) the total number of Phantom Shares established under the Plan
for Rights granted prior to 1994, carried to two decimal places.
The term "Phantom Share Price", when used with respect to a Right
granted during any calendar year commencing with 1994, shall mean the amount
equal to the product of (x) the sum of the FFSG Profits for the four most
recent calendar quarters and (y) the Comparator P/E Ratio, divided by (z) the
total number of Phantom Shares established under the Plan for Rights granted
during such year, carried to two decimal places.
The term "FFSG Profits" for any four calendar quarter period shall be
equal to the aggregate profits after taxes of all companies included in FFSG
less the amount of any acquisition
<PAGE> 6
-5-
financing costs assigned to FFSG, both determined on the basis of the Profit
Center Results (as hereinafter defined).
The term "Profit Center Results" shall refer to profits (i) determined
on a profit center basis in accordance with the practices and procedures
adopted by Ford Motor Company for profit center reporting and (ii)
authenticated as having been so determined by the Finance Director of FFSG.
Profit Center Results for a particular period shall include (without
duplication) the amount of any charges made for the provision of Rights
exercised during such period under the Plan and the cost of other compensation
plans of the Company and its subsidiaries.
After the close of each calendar quarter, and as promptly as
practicable after he shall have completed his review for such quarter of the
Profit Center Results of the companies in FFSG and shall have authenticated
such Results, the Finance Director of FFSG shall determine and report in
writing to the Committee the amount of the FFSG Profits for the most recent
four calendar quarter period.
The term "Comparator P/E Ratio" shall mean the simple average of the
after tax price/earnings ratios of the Comparator Companies. The after tax
price/earnings ratio of a Comparator Company shall be determined by dividing
(x) the average of the
<PAGE> 7
-6-
daily closing prices of a share of common stock of the Comparator Company
during the most recent calendar quarter by (y) the after tax earnings per share
attributable to the most recent four calendar quarters, both as reported in
"Bloomberg Financial Markets", an electronic financial information delivery
system, or, if such information is no longer reported in "Bloomberg Financial
Markets", such other information source as may be designated by the Committee.
The term "Comparator Companies" shall mean certain major competitors
of FFSG whose stock is publicly traded, as set forth on Exhibit 1 hereto. Any
additions, deletions, substitutions or other changes in the Comparator
Companies shall be determined by the Committee, upon recommendation of the Ford
Motor Company office of the Chief Executive ("OCE").
The Phantom Share Price shall be calculated with respect to Rights
granted during each calendar year within 60 days after each quarterly close of
the books of the companies in FFSG and shall remain in effect until it is
recalculated after the end of the following quarterly close of such books. The
Committee shall cause written notice of each determination of the applicable
Phantom Share Prices to be given to each holder of a Right promptly after each
such calculation is made. The date such
<PAGE> 8
-7-
notice is given is hereinafter referred to as the "Notice Date".
8. Exercise of Right. Each vested Right (or portion thereof not
already exercised) shall be exercisable, upon receipt by the Committee of a
written notice of exercise, during each period commencing on a Notice Date and
ending on the date thirty days thereafter or during each such other period as
shall be determined by the Committee; provided, however, that no such Right
shall be exercisable at any time after the expiration of the term of such
Right. The Committee shall determine the term of each Right which shall not be
less than five years nor more than ten years from the date of the grant of such
Right. To the extent exercised, a Right shall be terminated and of no further
force and effect. Any Right which remains unexercised after the expiration of
the term of such Right shall be forfeited. Such forfeiture may result in
adverse tax consequences to the holder.
9. Effect of Termination of Employment or Death. In the event a
holder of a Right transfers to Ford Motor Company ("Ford") or a Ford Subsidiary
(as hereinafter defined) or in the event of a holder's retirement, disability
or death, such Right shall continue in effect and shall become vested and
exercisable during the applicable periods within the remaining term of the
Right in accordance with Articles 6 and 8 hereof. The term "Ford
<PAGE> 9
-8-
Subsidiary" when used herein shall mean any corporation a majority of the
voting stock of which is owned directly or indirectly by Ford.
In the event of a holder's death, the beneficiary designated pursuant
to Article 10 hereof, or if no such beneficiary is designated or deemed to be
designated or if none survives such holder, the executor or administrator of
the estate of the decedent or the person or persons to whom the Right shall
have been validly transferred by the executor or the administrator pursuant to
will or the laws of descent and distribution, shall have the right to exercise
the Right, when vested, in accordance with the provisions of Articles 6 and 8
hereof.
In the event of a termination of a holder's employment for reasons
other than disability, death, retirement, transfer to Ford or a Ford
Subsidiary, resignation or termination by the Company for cause, such holder's
Right shall continue in effect and shall continue to vest and become
exercisable to the extent permitted under Articles 6 and 8 hereof during the
period three months following the date of such termination, but in no event
after the expiration of the term of the Right.
In the event of the resignation of employment by a holder or
termination of a holder's employment by the Company for cause, the
<PAGE> 10
-9-
Right shall be forfeited effective as of the date of such resignation or
termination.
For purposes of the Plan, a termination by the Company for cause shall
include termination resulting from (i) acts of insubordination, (ii)
embezzlement, attempted embezzlement, theft of property or attempted theft of
property, whether or not a criminal action relating thereto is initiated by the
Company, (iii) conviction of a felony or any crime involving moral turpitude,
(iv) material breach of any employment agreement or condition of employment
with the Company or (v) violation of Company policy covering Standards of
Corporate Conduct.
10. Non-transferability of Rights - Designation of Beneficiaries.
No Right shall be transferable by a holder otherwise than by will or the laws
of descent and distribution. During the lifetime of a holder the Right shall be
exercisable pursuant to the provisions of Articles 6, 8 and 9 hereof only by
such holder.
A holder may file with the Company a written designation of a
beneficiary or beneficiaries (subject to such limitations as to the classes and
number of beneficiaries and contingent beneficiaries and such other limitations
as the Committee from time to time may prescribe) to exercise a vested Right in
the
<PAGE> 11
-10-
event of the death of the holder, subject to the provisions of Articles 8 and 9
hereof. A holder shall be deemed to have designated as beneficiary or
beneficiaries under the Plan the person or persons who receive such holder's
life insurance proceeds under the Company-paid Life Insurance Plan unless such
holder shall have assigned such life insurance or shall have filed with the
Company a written designation of a different beneficiary or beneficiaries under
the Plan. A holder may from time to time revoke or change any such designation
of beneficiary and any designation of beneficiary under the Plan shall be
controlling over any other disposition, testamentary or otherwise; provided,
however, that, if the Committee shall be in doubt as to the right of any such
beneficiary to exercise any vested Right, the Committee may determine to
recognize only an exercise by the legal representative of the holder, in which
case the Company and the Committee and the members thereof shall not be under
any further liability to anyone.
11. Effect of Competitive Activity or Inimical Conduct. Anything
contained in the Plan to the contrary notwithstanding, the right of any holder
to exercise a vested Right following termination of the holder's employment
with the Company shall remain effective only if, during the entire period from
the date of the holder's separation to the date of such exercise, the holder
shall have earned out such Right by refraining from
<PAGE> 12
-11-
engaging in any activity that is directly or indirectly in competition with any
activity of the Company or any subsidiary or affiliate thereof.
In the event of a holder's nonfulfillment of the condition set forth
in the immediately preceding paragraph, the holder's right to exercise such
Right shall cease; provided, however, that the nonfulfillment of such condition
may at any time (whether before, at the time of or subsequent to termination of
such holder's employment) be waived by the Committee upon its determination
that in its sole judgment there shall not have been and will not be any
substantial adverse effect upon the Company or any subsidiary or affiliate
thereof by reason of the nonfulfillment of such condition.
Anything contained in the Plan to the contrary notwithstanding, the
right of any holder to exercise any Right following termination of the holder's
employment with the Company shall cease on and as of the date on which it has
been determined by the Committee that such holder at any time (whether before
or subsequent to termination of such holder's employment) acted in a manner
inimical to the best interests of the Company or any subsidiary or affiliate
thereof. Conduct which constitutes engaging in an activity that is directly or
indirectly in competition with any activity of the Company or any subsidiary or
<PAGE> 13
-12-
affiliate thereof shall be governed by the preceding paragraphs of this Article
and shall not be subject to any determination under this paragraph.
12. Adjustments. In the event of a change in the companies
comprising FFSG or a component thereof through merger, acquisition, divestiture
or otherwise, or other event substantially affecting the Phantom Share Price,
appropriate adjustments shall be made in the total number of Phantom Shares
established under the Plan for Rights granted prior to 1994, the total number
of Phantom Shares established under the Plan for Rights granted during any
calendar year commencing with 1994, and/or the number of Phantom Shares covered
by outstanding Rights. The foregoing adjustments shall be determined by the
Committee, upon recommendation of the OCE. Any such adjustment may provide for
the elimination of any fractional Phantom Share which might otherwise become
subject to a Right.
13. Deferral of Payments. Anything contained herein to the
contrary notwithstanding, cash payments otherwise payable to individuals upon
exercise of Rights hereunder may be deferred in the form, manner and extent
determined by the Committee.
14. Amendment, Modification and Termination of the Plan. The Board
of Directors of the Company, upon recommendation of the
<PAGE> 14
-13-
Committee, at any time may terminate, and at any time and from time to time,
and in any respect, may amend or modify, the Plan; provided, however, that (i)
no substantive amendment or modification of the Plan may be made without the
prior recommendation of the OCE and (ii) no amendment, modification or
termination of the Plan shall in any manner affect any Right theretofore
granted to a holder under the Plan without the consent of such holder or the
transferee of such Right.
15. Indemnification and Exculpation. Each person who is or shall
have been a member of the Committee shall be indemnified and held harmless by
the Company against and from any and all loss, cost, liability or expense that
may be imposed upon or reasonably incurred by such person in connection with or
resulting from any claim, action, suit or proceeding to which such person may
be or become a party or in which such person may be or become involved by
reason of any action taken or failure to act under the Plan and against and
from any and all amounts paid by such person in settlement thereof (with the
Company's written approval) or paid by such person in satisfaction of a
judgment in any such action, suit or proceeding, except a judgment in favor of
the company based upon a finding of such person's lack of good faith; subject,
however, to the condition that, upon the institution of any claim, action, suit
or proceeding against such person, such person shall in writing give the
Company an opportunity, at its own expense, to
<PAGE> 15
-14-
handle and defend the same before such person undertakes to handle and defend
it on such person's behalf. The foregoing right of indemnification shall not be
exclusive of any other right to which such person may be entitled as a matter
of law or otherwise, or any power that the Company may have to indemnify or
hold such person harmless.
Each member of the Committee shall be fully justified in relying or
acting in good faith upon any information furnished in connection with the
administration of the Plan or any appropriate person or persons other than such
person. In no event shall any person who is or shall have been a member of the
Committee be held liable for any determination made or other action taken or
any omission to act in reliance upon any such information, or for any action
(including the furnishing of information) taken or any failure to act, if in
good faith.
16. Finality of Determinations. Each determination, interpretation
or other action made or taken pursuant to the provisions of the Plan by the
Committee shall be final and shall be binding and conclusive for all purposes
and upon all persons, including, but without limitation thereto, the Company,
its stockholders, the Committee and each of the members thereof, and the
directors, officers, and employees of the Company, the holders of Rights, and
their respective successors in interest.
<PAGE> 16
-15-
17. Costs. All costs involved in offering and administering the
Plan shall be borne by the Company.
18. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Michigan.
<PAGE> 17
ASSOCIATES FIRST CAPITAL CORPORATION
PHANTOM STOCK APPRECIATION RIGHT AGREEMENT
RIGHT NO.:
EFFECTIVE DATE OF RIGHT:
NUMBER OF PHANTOM SHARES COVERED BY RIGHT:
BASE SHARE PRICE: $
EXPIRATION DATE:
VESTING PERIOD: 12 MONTHS FOLLOWING THE EFFECTIVE DATE OF RIGHT
Pursuant to the Associates First Capital Corporation Phantom
Stock Appreciation Right Plan (the "Plan"), Associates First
Capital Corporation (The "Company"), hereby grants to:
NAME (the "Holder"):
ADDRESS:
the right to receive from the Company, upon exercise thereof, the amount
of the Appreciation (as hereinafter defined) on the number of phantom
shares specified above (the "Phantom Shares") of Phantom Stock (as
hereinafter defined), less required tax withholding, subject to the terms
and conditions described below (the "Right"). The term "Phantom Stock"
shall mean fictional stock of the Ford Financial Services Group ("FFSG")
for purposes of and as described in the Plan. Phantom Stock does not
actually exist but is a measure of value established for purposes of the
Plan.
<PAGE> 18
-2-
1. TERM OF RIGHT
Subject to Articles 4 and 6 hereof, the Holder may exercise the Right
during any Window Period (as hereinafter defined) after the expiration of the
vesting period specified above (the "Vesting Period") and prior to the close of
business on the expiration date specified above (the "Expiration Date"). The
Right may be exercised in whole or in part only with respect to whole Phantom
Shares. If the Right is not exercised in whole prior to the Expiration Date,
adverse tax consequences to the Holder may occur.
2. HOW TO EXERCISE THE RIGHT
The Right, when vested, may be exercised by delivery of the Notice of
Exercise (attached hereto as Appendix A) to the Compensation Committee
appointed by the President of FFSG to administer the Plan (the "Committee")
stating the number of Phantom Shares with respect to which it is being
exercised. The Right may be exercised only during the period commencing on a
Notice Date (as hereinafter defined) and ending on the date thirty days
thereafter (the "Window Period") and not otherwise. For an exercise to be
effective, the Notice of Exercise must be received by the Committee at the
address specified therein prior to the expiration of the applicable Window
Period, but in no event later than the Expiration Date.
<PAGE> 19
-3-
3. DELIVERY OF APPRECIATION
As soon as practicable after receipt of the Notice of Exercise, the
Company shall deliver to the Holder by check the amount of the Appreciation,
less required tax withholding.
The term "Appreciation" shall mean the positive difference between (x)
the base share price specified above and (y) the Phantom Share Price (as
hereinafter defined) in effect immediately prior to the applicable Window
Period, multiplied by (z) the number of Phantom Shares being exercised.
The term "Phantom Share Price" shall mean the current price per Phantom
Share calculated pursuant to the provisions of the Plan. The Phantom Share
Price is dependent upon the after-tax profits of FFSG and the average
price/earnings ratio of selected comparator financial services companies. The
Phantom Share Price shall be calculated within 60 days after each quarterly
close of the books of the companies in FFSG and shall remain in effect until it
is recalculated at the end of the following quarterly close of such books. The
Committee shall cause written notice of each determination of the Phantom Share
Price to be given to the Holder promptly after each such calculation is made.
The date such notice is given is hereinafter referred to as the "Notice Date".
<PAGE> 20
-4-
4. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH
In the event the Holder transfers to Ford Motor Company ("Ford") or a
Ford Subsidiary (as hereinafter defined) or in the event of a Holder's
retirement, disability or death, the Right shall continue in effect and shall
become vested and exercisable during the applicable periods in accordance with
Articles 1 and 2 hereof. The term "Ford Subsidiary" when used herein shall
mean any corporation a majority of the voting stock of which is owned directly
or indirectly by Ford.
In the event of the Holder's death, the beneficiary designated pursuant
to Article 5 hereof, or if no such beneficiary is designated or deemed to be
designated or if none survives such Holder, the executor or administrator of
the estate of the decedent or the person or persons to whom the Right shall
have been validly transferred by the executor or the administrator pursuant to
will or the laws of descent and distribution, shall have the right to exercise
the Right, when vested, in accordance with the provisions of Articles 1 and 2
hereof.
In the event of a termination of the Holder's employment for reasons
other than disability, death, retirement, transfer to Ford or a Ford
Subsidiary, resignation or termination by the Company for cause, the Right
<PAGE> 21
-5-
shall continue in effect and shall continue to vest and become exercisable to
the extent permitted under Articles 1 and 2 hereof during the period three
months following the date of such termination, but in no event after the
Expiration Date.
In the event of the resignation of employment by the Holder or
termination of the Holder's employment by the Company for cause, the Right
shall be forfeited effective as of the date of such resignation or termination.
For purposes of the Plan, a termination by the Company for cause shall
include termination resulting from (i) acts of insubordination, (ii)
embezzlement, attempted embezzlement, theft of property or attempted theft of
property, whether or not a criminal action relating thereto is initiated by the
Company, (iii) conviction of a felony or any crime involving moral turpitude,
(iv) material breach of any employment agreement or condition of employment
with the Company or (v) violation of Company policy covering Standards of
Corporate Conduct.
Whether military or government service shall constitute termination of
employment of the Holder for purposes of this Agreement shall be determined by
the Committee in its sole discretion.
<PAGE> 22
-6-
5. NON-TRANSFERABILITY OF RIGHT - DESIGNATION OF BENEFICIARY
The Right shall, during the Holder's lifetime, be exercisable only by the
Holder, and neither it nor any right hereunder shall be transferable otherwise
than by will or the laws of descent and distribution, or be subject to
attachment, execution or other similar process. Once transferred by will or the
laws of descent and distribution, the Right shall not be further transferable.
Any transferee of the Right shall take the same subject to the terms and
conditions set forth herein. No such transfer of the Right shall be effective
to bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of the will and/or such other evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions set
forth herein. No assignment or transfer of the Right or of the rights
represented thereby, other than as provided in this Article, shall vest in the
purported assignee or transferee any interest or right therein whatsoever.
Notwithstanding anything to the contrary set forth herein, the Holder may
file with the Company a written designation of a beneficiary or beneficiaries
(subject to such limitations as to the classes and number of beneficiaries and
contingent beneficiaries and such other limitations as the Committee from time
to time may prescribe) to exercise, in the event
<PAGE> 23
-7-
of the death of the Holder, the Right subject to the terms and conditions set
forth herein and to receipt by the Company of such evidence as the Committee
may deem necessary to establish the acceptance by the beneficiary or
beneficiaries of the terms and conditions set forth herein. The Holder shall
be deemed to have designated as beneficiary or beneficiaries under the Plan the
person or persons who receive the Holder's life insurance proceeds under the
Company-paid Life Insurance Plan unless the Holder shall have assigned such
life insurance or shall have filed with the Company a written designation of a
different beneficiary or beneficiaries under the Plan. The Holder may from to
time revoke or change any such designation of beneficiary and any designation
of beneficiary under the Plan shall be controlling over any other disposition,
testamentary or otherwise; provided, however, that, if the Committee shall be
in doubt as to the right of any such beneficiary to exercise the Right, the
Committee may determine to recognize only an exercise by the legal
representative of the Holder, in which case the Company and the Committee and
the members thereof shall not be under any further liability to anyone.
If the Holder should attempt to alienate, assign, pledge, hypothecate or
otherwise dispose of the Right or of any right hereunder, except as provided
for in the Plan, or in the event of any levy or any attachment,
<PAGE> 24
-8-
execution or similar process upon the rights or interest conferred by the
Right, the Company may terminate the Right by notice to the Holder and the
Right shall thereupon become null and void.
6. EFFECT OF COMPETITIVE ACTIVITY OR INIMICAL CONDUCT
Anything contained herein to the contrary notwithstanding, the right of
the Holder to exercise the Right following termination of the Holder's
employment with the Company shall remain effective only if, during the entire
period from the date of the Holder's termination to the date of such exercise,
the Holder shall have earned out the Right by refraining from engaging in any
activity that is directly or indirectly in competition with any activity of the
Company or any subsidiary or affiliate thereof. The term "subsidiary" shall
mean any corporation a majority of the voting stock of which is owned directly
or indirectly by the Company.
In the event of the Holder's nonfulfillment of the condition set forth
in the immediately preceding paragraph, the Holder's right to exercise such
Right shall cease; provided, however, that the nonfulfillment of such condition
may at any time (whether before, at the time of or subsequent to
<PAGE> 25
-9-
termination of the Holder's employment) be waived by the Committee upon its
determination that in its sole judgment there shall not have been and will not
be any substantial adverse effect upon the Company or any subsidiary or
affiliate thereof by reason of the nonfulfillment of such condition.
Anything contained in the Plan to the contrary notwithstanding, the right
of the Holder to exercise the Right following termination of the Holder's
employment with the Company shall cease on and as of the date on which it has
been determined by the Committee that the Holder at any time (whether before or
subsequent to termination of the Holder's employment) acted in a manner
inimical to the best interests of the Company or any subsidiary or affiliate
thereof. Conduct which constitutes engaging in an activity that is directly or
indirectly in competition with any activity of the Company or any subsidiary or
affiliate thereof shall be governed by the preceding paragraphs of this Article
6 and shall not be subject to any determination under this paragraph.
7. NO RIGHT OF EMPLOYMENT
Neither the grant nor the exercise of the Right shall confer on the
Holder any right to be retained in the employ of the Company or any other Ford
Subsidiary, or to receive subsequent rights or other awards under the
<PAGE> 26
-10-
Plan. The right of the Company or any other Ford Subsidiary to terminate
(whether by dismissal, discharge, retirement or otherwise) the Holder's
employment with it at any time, with or without cause, or as otherwise provided
by any agreement between the Company or any other Ford Subsidiary and the
Holder, is specifically reserved.
8. NO RIGHTS OF SHAREHOLDER
Neither the Holder nor any beneficiary or transferee of the Right
permitted under Article 5 hereof shall have any of the rights of a shareholder.
9. VIOLATION OF LAW OR REGULATION
Notwithstanding any of the other provisions of this Agreement, the Holder
agrees not to exercise the Right, and the Company will not be obligated to
deliver any cash pursuant to this Agreement, if the exercise of the Right or
delivery of such cash would constitute a violation by the Holder or by the
Company of any provisions of any law or regulation of any governmental
authority. Any determination of the Committee in this connection shall be
final and shall be binding and conclusive for all
<PAGE> 27
-11-
purposes. The Company shall in no event be obligated to take any affirmative
action in order to cause the exercise of the Right or delivery of cash pursuant
thereto to comply with any law or any regulation of any governmental authority.
10. HOLDER
Whenever the term "Holder" is used in any provision of this Agreement
under circumstances such that the provision should logically apply to any other
person or persons designated as a beneficiary pursuant to the provisions of
Article 5 hereof, or to whom the Right may be transferred in accordance with
the provisions of Article 5 hereof, the term "Holder" shall be deemed to
include such person or persons.
11. RIGHT GOVERNED BY THIS AGREEMENT AND THE PLAN; COMMITTEE INTERPRETS
AGREEMENT
The Right is granted pursuant to the Plan, and is governed by the
terms and conditions of the Plan. The Holder agrees to be bound by the terms
and conditions of this Agreement and the Plan, a copy of which will be provided
at the request of the Holder.
<PAGE> 28
-12-
As a condition of the granting of the Right, the Holder and the Holder's
successors and assigns agree that any dispute or disagreement which shall arise
under or as a result of this Agreement shall be determined by the Committee in
its sole discretion and judgment and that any such determination and any
interpretation by the Committee of the Agreement shall be final and shall be
binding and conclusive for all purposes.
12. GOVERNING LAW
This Agreement has been made in and shall be construed in accordance with
the laws of the State of Michigan.
<PAGE> 29
-13-
13. ENTIRE AGREEMENT; AMENDMENT OR MODIFICATION
This Agreement constitutes the entire agreement between the parties
regarding the subject matter hereof and supersedes all prior communications and
understandings between the parties. This Agreement may be amended or modified
only in a writing signed by the party or parties against which the existence of
such amendment or modification is asserted.
ASSOCIATES FIRST CAPITAL CORPORATION
By: _____________________________
Executive Vice President
The foregoing Right hereby is accepted on the terms and conditions set forth
herein-and in the Plan.
HOLDER: ______________________
DATE: _______________________
Note: The Holder will please sign and date one copy of this agreement and mail
the same immediately to:
Compensation Committee
c/o Mr. John W. Lee
Associates First Capital Corporation
P.O. Box 660237
Dallas, Texas 75266-0237
<PAGE> 30
ASSOCIATES FIRST CAPITAL CORPORATION
AGREEMENT TO DEFER PHANTOM STOCK APPRECIATION
<PAGE> 31
1. BACKGROUND AND PURPOSE
The Executive signing this Agreement to Defer Phantom Stock Appreciation
is a participant in the Associates First Capital Corporation Phantom
Stock Appreciation Rights Plan (the "Plan") and has previously entered
into one or more Phantom Stock Appreciation Rights Agreements (the
"Agreements") with the Company.
The purpose of this Agreement is to allow a select group of highly
compensated officers and key executives to agree with the Company to
defer payment of the Appreciation which would otherwise be payable to the
Executive pursuant to the Plan.
2. DEFINITIONS
"Account" shall mean the record maintained by the Company reflecting
Executive's Deferred Amounts, the earnings and losses and all other
adjustments provided for in this Agreement.
"Account Balance" shall mean at any time the total of the amounts
credited to the Executive's Account and any accrued but not credited
gains or losses in accordance with the provisions established by the
Committee.
"Board of Directors" shall mean the Board of Directors of Associates
First Capital Corporation.
"Committee" shall mean the Committee appointed by the Board of Directors
to administer this Agreement.
"Company" shall mean Associates First Capital Corporation.
"Deferred Amount" shall mean the amount by which the Appreciation which
would otherwise have been payable to the Executive is reduced as agreed
upon by the Executive and the Company and deferred in accordance with the
terms of this Agreement. The Deferred Amount may be a dollar amount or a
percentage of Appreciation payable pursuant to the exercise of specific
Phantom Stock Appreciation Rights which have been deferred pursuant to
this Agreement.
"Disability" shall mean the complete inability, due to sickness or
accidental bodily injury, to both (i) perform any and every duty
pertaining to a Participant's occupation with the Company and (ii) engage
in any and every gainful occupation for which the Participant is
reasonably fitted by education, training or experience. The
determination whether a Participant has suffered a Disability shall be
made by the Committee based upon such evidence it deems necessary or
appropriate.
2
<PAGE> 32
"Employee" shall mean any person (including an officer) actively employed
by the Company or a subsidiary on a full-time, salaried basis.
"Employed" or "Employment" shall mean performing services as an employee
on a full-time basis for Associates First Capital Corporation, Associates
Corporation of North America or their respective subsidiaries.
"Employer" shall mean any subsidiary of Associates First Capital
Corporation that has an Employee eligible to participate in the Plan or
who is participating or has participated in the Plan in the past.
"Executive" shall mean the Executive executing this Agreement.
"Hardship" shall mean a proven, unforeseen financial necessity or need of
the Executive, as determined by the Committee in its sole discretion
under its rules and policies.
"Retirement" shall mean early, normal or deferred retirement under any
defined benefit pension plan maintained by the Company and qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended.
Other capitalized terms used in this Agreement which are not otherwise
defined in this Agreement shall have the meaning set forth in the Plan
and the Agreements.
3. ADMINISTRATION
The Committee shall have full authority to interpret this Agreement, to
establish rules and regulations relating to this Agreement, to determine
the criteria for eligibility to enter into this Agreement and continued
eligibility to defer, to select Participants and to make all other
determinations and take all other actions necessary or appropriate for
the proper administration of this Agreement. The Committee's
interpretation of this Agreement, and all actions taken within the scope
of its authority, shall be final and binding on the Company, its
stockholders, Participants, Employees, former Employees and
beneficiaries.
4. ELIGIBILITY AND PARTICIPATION
Eligibility to defer under for this Agreement shall be limited to those
key Executives whom the Committee shall select, on the basis of such
Executives' being part of a select group of officers and highly
compensated employees, so that the Plan and Agreement would be exempt
from Part 2 of the Employee Retirement Income Security Act of 1974, as
Amended, and who might benefit from the deferral of amounts otherwise
constituting current compensation.
3
<PAGE> 33
5. DEFERRAL OF APPRECIATION
A Participant may, subject to the terms and conditions of this Agreement,
elect to defer payment of the Appreciation which would otherwise be
payable to the Executive pursuant to all exercises of the specific
Phantom Stock Appreciation Right granted under the Plan for which an
election is in effect and agree with the Company on the Deferred Amount
which will not be paid, by completing the form prescribed by the
Committee. Such form shall include the Deferred Amount, the period of
deferral, and the period over which payment is to be made. The form
shall constitute an agreement between the Company and the Executive as to
the Deferred Amount previously credited that shall be paid in the
following calendar year or years. The Committee may limit deferral by
the Executive for any reason it deems advisable.
(a) Election.
An election to defer Appreciation as to a specific Phantom Stock
Appreciation Right shall be made on or before the last regular
working day of the Company on or next preceding the expiration of
the vesting period applicable to the Phantom Stock Appreciation
Rights being deferred. Such election shall be irrevocable upon
delivery (or in the event the form is mailed by certified mail,
return receipt requested, on the date of mailing) of the deferral
form to the person specified in such form. Such election shall be
effective for the full remaining term of that Phantom Stock
Appreciation Right and the election made to defer Appreciation with
respect to the Phantom Stock Appreciation Right by an Executive may
not be changed by any action taken by the Executive thereafter for
the remaining term of that Phantom Stock Appreciation Rights.
Nothing in this paragraph shall be construed to limit any right an
Executive may otherwise have under this Agreement with respect to
the timing and form of the payment of Appreciation deferred by such
an election.
(b) Payment of Deferred Amounts.
The Deferred Amount, plus or minus any earnings or losses thereon
pursuant to Subsection (c) hereof, upon the death, Disability or
Retirement of the Executive will be paid to the Executive (or, in
the event of the Executive's death, the person or estate determined
under Section 6 hereof), on the date(s) and in the manner selected
by the Executive on the deferral form prescribed by the Committee.
Upon termination of employment other than on account of death,
Disability or Retirement, the Deferred Amount will ordinarily be
paid to the Executive in a lump sum within sixty (60) days of such
termination; however, the Committee may, in its sole discretion,
4
<PAGE> 34
choose to defer payment until the time previously elected by
such Executive pursuant to this Section 5. In the event of
death of the Executive, the estate of such Executive may
petition the Committee for accelerating the payments of the
Deferred Account. The Committee shall have sole discretion to
grant or deny such request.
(c) Earnings Credited on Deferred Amounts.
All Deferred Amounts will be credited with earnings and
losses in the manner prescribed by the Committee.
(d) Acceleration of Payment of Deferred Amounts.
Payment of the Deferred Amounts plus or minus any earnings or
losses may occur prior to the date(s) indicated in the
payment deferral form under the following circumstances:
(1) The Company may distribute to the Executive the Deferred
Amount at such date(s) as the Committee shall determine
if the Committee concludes, in its sole discretion, that
events such as changes in the federal tax laws or
applicable accounting principles or practices have
rendered continued deferral of the Deferred Amount
undesirable either for the Company or the Executive.
(2) At any time prior to complete payment of the Deferred
Amount, the Company may, in its sole discretion, pay to
the Executive (or, in the event of the Executive's
death, the person or estate determined under Section 6
hereof), an amount not greater than that portion of the
Deferred Amount that the Committee determines, in its
sole discretion, is necessary to meet a Hardship arising
from an emergency. The payment shall be made only in
instances of Hardship arising from causes beyond the
Executive's control, such as accident or illness,
divorce, financial reversal and such events as described
in the safe harbor hardship provisions of Treasury Reg.
Section 1.401(K)-(l)(d)(2)(ii)(B). The Executive shall
apply in writing to the Committee for any Hardship
payment under this paragraph and shall furnish to the
Committee such information as the Committee deems
necessary and appropriate to make its determination.
Any hardship distribution under this Plan or any
hardship withdrawal by an Executive from the Company's
Retirement Savings and Profit Sharing Plan shall result
in suspension of the ability to defer Appreciation for
the current year of distribution and the following
calendar year.
5
<PAGE> 35
(3) In no event may payment of the Deferred Amount, and earnings
or losses thereon, or any portion thereof, be accelerated in
any manner other than as provided above.
6. DESIGNATION OF BENEFICIARY
An Executive may designate a beneficiary or beneficiaries who, in the
event of the Executive's death prior to full payment of any Deferred
Amount hereunder, plus or minus earnings, gains and losses thereon, shall
receive payment of the Deferred Amount, plus or minus earnings, gains and
losses thereon, due under the Plan. Such designation shall be made by
the Executive on a form prescribed by the Committee. The Executive may,
at any time, change or revoke such designation. A beneficiary
designation, or revocation of a prior beneficiary designation, will be
effective only if it is made in writing on a form provided by the
Company, signed by the Executive and received by the person specified in
such form. If the Executive does not designate a beneficiary or the
beneficiary dies prior to receiving any payment of the Account Balance,
the Account Balance payable under the Plan shall be paid to the
Executive's estate. If the beneficiary dies after receiving any payment
of the Account Balance, any amounts remaining to be paid shall be paid to
the beneficiary's estate.
7. AMENDMENTS
The Company may at any time amend (in whole or in part) this Agreement.
No such amendment which adversely affects a Executive's rights to or
interest in the Account Balance credited prior to the date of the
amendment shall be effective unless the Executive shall have agreed
thereto. The Company may at any time suspend additional deferrals under
this Agreement under such terms and conditions as it may establish at
such time.
8. TERMINATION
(a) The Company may terminate this Agreement (in whole or in part) at
any time. In the case of such a termination, the following
provisions of this Section 8 shall apply notwithstanding any other
provisions of the Plan to the contrary.
(b) In the event of termination of this Agreement, the Company shall
distribute to the Executive in a lump sum all amounts credited to
the Executive's accounts under this Agreement. Such payment will
be made not later than sixty (60) days after the date of
termination.
6
<PAGE> 36
9. MISCELLANEOUS PROVISIONS
(a) This Agreement is not a contract for employment of the Executive
for a certain period of time; it is totally gratuitous on the part
of the Company and the Employer. Neither the establishment of this
Agreement, nor any action taken hereunder, shall be construed as
giving any Employee any right to be retained in the employ of an
Employer.
(b) An Executive's right and interest under this Agreement may not be
assigned or transferred, except as provided in Section 6 hereof,
and any attempted assignment or transfer shall be null and void and
shall extinguish, in the Company's sole discretion, the Company's
obligation under this Agreement to pay the Deferred Amount, plus or
minus earnings, gains or losses thereon, with respect to the
Executive.
(c) The Account Balances shall be unfunded. The Company shall not be
required to establish any special or separate fund, or to make any
other segregation of assets, to assure payment of the Account
Balance.
10. TAX WITHHOLDING AND PAYMENTS
The Company shall have the right to deduct from any amount to be paid to
any Participant or beneficiary hereunder any taxes or other amounts
required by law to be withheld. Any tax, whether FICA, Medicare, income
or otherwise, imposed upon Executive as a result of exercise of a Phantom
Stock Appreciation Right is due upon exercise. If the tax due cannot be
paid from amount paid to Executive upon exercise, the Executive must pay
any amount of tax due, as determined by the Company, upon demand of the
Company.
11. EFFECTIVE DATE
This Agreement shall be effective on and after December 31, 1993. By
executing a Deferral Election Form, the Executive shall be deemed to have
executed the Agreement.
Associates First Capital Corporation
By: ________________________________
7
<PAGE> 37
THE ASSOCIATES
PHANTOM STOCK APPRECIATION RIGHTS
DEFERRAL ELECTION FORM
FOR 1995 PSARS
________________________________________________________________________________
Participant's Name:____________________________________________________
________________________________________________________________________________
I. ELECTION FOR PAYMENT OR DEFERRAL OF APPRECIATION:
This election applies to all exercises under the Phantom Stock
Appreciation Rights ("PSAR") granted effective January 1, 1995. Your
decision to defer must be made prior to the PSARs being vested.
Therefore, THIS FORM MUST BE RECEIVED BY JOHN LEE IN HUMAN RESOURCES
BY DECEMBER 29, 1995.
I hereby agree with the Company to:
[ ] Pay the Appreciation pursuant to exercises of the 1995 PSARs.
(I do not elect to defer any part of the Appreciation from my
1995 PSAR's).
OR
[ ] Defer __% of the Appreciation which would otherwise be payable
pursuant to exercises of this PSAR
OR
[ ] Defer all amounts in excess of the first $_____________
of the total Appreciation which would otherwise be payable
pursuant to exercises of this PSAR. This amount is
cumulated for multiple exercises and does not apply separately
to each exercise.
II. DISTRIBUTION ELECTION DURING EMPLOYMENT FOR AMOUNTS DEFERRED UNDER
THIS PSAR:
This section must be completed if you have elected to defer any of the
Appreciation. Please note that the amounts deferred cannot be changed
in any manner. In other words, the amounts deferred cannot be
accelerated or further deferred.
Pay the Account Balance as follows:
[ ] No distribution of deferred Account Balance during employment
OR
(over)
<PAGE> 38
(OVER)
[ ] All on the following date ____________________
(MM/DD/YY)
OR
[ ] $____________________ or ___% on ____________________
(MM/DD/YY)
$____________________ or ___% on ____________________
(MM/DD/YY)
$____________________ or ___% on ____________________
(MM/DD/YY)
$____________________ or ___% on ____________________
(MM/DD/YY)
$____________________ or ___% on ____________________
(MM/DD/YY)
(YOU MAY ELECT ONE OR MORE INSTALLMENTS)
PLEASE NOTE: THE ABOVE MUST BE COMPLETED AND RECEIVED BY JOHN LEE BY DECEMBER
29, 1995. If this form has not been received by that date, no deferral of
Appreciation under this PSAR may be made.
The deferral is subject to and a part of the "Agreement to Defer Phantom Stock
Appreciation" effective December 31, 1993, which shall govern all the terms
hereof. Any provision of this election form may be amended, modified, or
eliminated at any time without the consent of the Executive.
Please complete the enclosed form for elections regarding death, Disability or
Retirement, and beneficiary and return it with this election form.
In addition, please be aware that FICA and Medicare tax will be due on all
deferred amounts. This will normally be deducted from your check. If you defer
100%, the tax will be due when you exercise your PSAR's.
______________ _________________________________
Date Signature of Participant
THIS FORM MUST BE RECEIVED BY JOHN LEE IN HUMAN RESOURCES IN DALLAS BY DECEMBER
29, 1995.
<PAGE> 39
ADMINISTRATION OF AMOUNTS DEFERRED
In the event that you elect to defer any part of the Appreciation for the 1995
PSARs, Associates First Capital Corporation (the "Company") shall establish
and/or continue to maintain in your name a deferred account.
Your deferred account shall be administered as follows:
i) any Appreciation deferred shall be credited to your deferred
account on the date payment of the Appreciation would have
been made;
ii) the deferred Appreciation will be credited with interest at
the prime rate from the date the Appreciation would have been
paid until a completed Quarterly Investment Election Change
Form has been received;
iii) Account Balances may be reallocated to the available
investment options on the quarterly dates designated by the
Company; and
iv) your deferred account will be credited with earnings and
losses as experienced from the elected investment options on a
quarterly basis (on the last day of March, June, September and
December).
<PAGE> 40
THE ASSOCIATES
PHANTOM STOCK APPRECIATION RIGHTS
DISTRIBUTIONS OTHER THAN DURING EMPLOYMENT
AND BENEFICIARY DESIGNATION
FOR 1995 PSARS AND ALL PRIOR YEARS
________________________________________________________________________________
Participant's Name:____________________________________________________
________________________________________________________________________________
I. DISTRIBUTION ELECTION IN THE EVENT OF DISABILITY OR RETIREMENT:
If my employment by the Company terminates due to my Disability or
Retirement, please pay my deferred account balance as follows after
the determination of my Disability or Retirement (check one):
[ ] Lump sum within thirty days.
[ ] Lump sum on or about January 31st of the next calendar year.
[ ] In _____________ annual installments (not more than 15) equal
to the undistributed balance in my deferred account divided by
the number of remaining annual installments beginning on or
about January 31st of the next calendar year.
This election supersedes my distribution elections during employment.
II. DISTRIBUTION ELECTION IN THE EVENT OF DEATH:
In the event of my death, please pay my deferred account balance as
follows to my beneficiary after the date of my death (check one):
[ ] Lump sum within thirty days.
[ ] Lump sum on or about January 31st of the next calendar year.
[ ] In _______________ annual installments (not more than 15) equal
to the undistributed balance in my deferred account divided by
the number of remaining annual installments beginning on or
about January 31st of the next calendar year.
This election supersedes my distribution elections during employment
and Disability or Retirement.
(over)
<PAGE> 41
III. DISTRIBUTION AFTER TERMINATION (OTHER THAN DEATH, DISABILITY OR
RETIREMENT):
If my employment by the Company terminates for any reason other than
death, Disability or Retirement, the Company will pay my remaining
deferred account balance in one lump sum within sixty days after (or
as soon as practicable thereafter) such termination of employment. The
Committee may, however, in its sole discretion, continue the period of
deferral and pay my account balance as elected under the distributions
during employment, death, Disability or Retirement.
I understand that the Company may, in its sole discretion, distribute
all or part of my Account Balance at an earlier date in accordance
with the terms of the Plan.
IV. BENEFICIARY DESIGNATION:
In accordance with Section 6 of the Associates First Capital Agreement
to Defer Phantom Stock Appreciation ("the Agreement") and subject to
the terms and conditions of the Agreement, I hereby designate the
following individual(s) as my beneficiary(ies):
PRIMARY:
1. Name: ___________________________ Percentage ___________%
___________________________
Relationship:____________________ SS# ___________________
Address: ________________________________________________
Street Address
________________________________________________
City State Zip Code
PRIMARY:
2. Name: ___________________________ Percentage ___________%
___________________________
Relationship:____________________ SS# ___________________
Address: ________________________________________________
Street Address
________________________________________________
City State Zip Code
<PAGE> 42
PRIMARY:
3. Name: ___________________________ Percentage ___________%
___________________________
Relationship:____________________ SS# ___________________
Address: ________________________________________________
Street Address
________________________________________________
City State Zip Code
PRIMARY:
4. Name: ___________________________ Percentage ___________%
___________________________
Relationship:____________________ SS# ___________________
Address: ________________________________________________
Street Address
________________________________________________
City State Zip Code
CONTINGENT: (receives distribution only if no primary beneficiary is
living)
1. Name: ___________________________ Percentage ___________%
___________________________
Relationship:____________________ SS# ___________________
Address: ________________________________________________
Street Address
________________________________________________
City State Zip Code
(over)
<PAGE> 43
CONTINGENT: (receives distribution only if no primary beneficiary is
living)
2. Name: ___________________________ Percentage ___________%
___________________________
Relationship:____________________ SS# ___________________
Address: ________________________________________________
Street Address
________________________________________________
City State Zip Code
I understand that in the event of my death prior to receipt of all amounts
payable to me pursuant to the Plan, any amounts not fully paid will be paid to
my above designated beneficiary(ies), or to my estate if I have not designated
a beneficiary, or all of my beneficiaries die prior to receiving full payment.
If more than one beneficiary is designated, settlement will be made in equal
shares to such of the designated beneficiaries (or beneficiary) as survive me,
unless a percentage is otherwise specified above. This Beneficiary Designation
revokes and supersedes any previous designation made by me.
I acknowledge that I have received a copy of the Plan and have read its
provisions and agree to be bound by the terms contained therein.
____________ ___________________________
Date Signature of Participant
IF YOU HAVE DESIGNATED A PRIMARY BENEFICIARY OTHER THAN YOUR SPOUSE, YOU MUST
HAVE YOUR SPOUSE SIGN THE CONSENT BELOW.
SPOUSE CONSENT
I hereby consent to the above beneficiary designation.
___________________________
Signature of Spouse
<PAGE> 44
RESOLUTION ADOPTED BY WRITTEN CONSENT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
ASSOCIATES FIRST CAPITAL CORPORATION DATED OCTOBER 16, 1995
APPROVE AMENDMENTS TO EXCESS BENEFIT PLAN
RESOLVED, the Excess Benefit Plan Associates First Capital Corporation ("the
Company") is hereby amended to clarify the intent of the Company in contracting
with the participants to refrain from certain actions after termination of
employment so that Section 5.07 thereof shall read as follows:
"5.07 Obligations of Participant
Notwithstanding anything to the contrary in this Plan, no
benefit funded by the Company shall be vested and it shall be
a continuing requirement that the benefit hereunder be earned
by compliance with the following provisions.
(a) A Participant shall not at any time engage in a crime
involving dishonesty or fraud on the part of such
Participant in his relationship with the Company, and
if convicted of such a crime, all benefits that would
otherwise be payable to him or her under the Plan
shall be terminated.
(b) A Participant who has left employment with the
Company and its affiliates shall not do any act or
engage in any occupation or employment which is in
competition with or detrimental to the business of
the Company (as determined by the Committee in its
sole discretion). If a Participant does any such act
or so engage in competition or detrimental conduct,
such Participant shall be notified by the Company
that benefits, under this Plan, if not yet paid,
shall cease and be terminated unless such competitive
and/or detrimental conduct is discontinued within a
period of time that has been prescribed by the
Company. In such case, the benefit payable from this
Plan to a Participant shall be suspended (if in pay
status) during the prescribed period and, if the
competitive and/or detrimental conduct has not ceased
prior to the expiration of such period, the
Participant shall be deemed to have elected not to
receive a benefit and his benefit payments (if in pay
status) and all rights to receive a benefit in the
future shall be terminated on a permanent basis. The
Participant agrees to be bound by all the terms
hereof by accepting the benefits of this Plan.
The foregoing conditions are a fundamental consideration for
the promises of the Company in this Plan."
RESOLVED, that participants in the Corporate Annual Performance Plan, the Long
Term Performance Plan, the Executive Deferred Salary Plan and the Phantom Stock
Appreciation Plan Deferral Agreement shall be entitled to a conversion election
with respect to their deferred accounts four times per year on the last day of
each March, June, September and December and that for 1995 only the participant
shall be entitled to the election currently provided on September 1 and the
election on the new quarterly date of September 30. Thereafter the conversion
dates shall be quarterly.
FURTHER RESOLVED, that any one of the members of the Compensation Committee is
authorized to execute and deliver such amendments, agreements or other writings
as may be necessary to carry into effect the foregoing resolutions.
<PAGE> 1
EXHIBIT 10.11
THE ASSOCIATES
CORPORATE ANNUAL PERFORMANCE PLAN
<PAGE> 2
The Associates
CORPORATE ANNUAL
PERFORMANCE PLAN
1. PURPOSE
The Purpose of the Plan is to enable the Company, through awards of annual
incentive compensation, to attract and retain executives; to motivate these
executives to promote the growth and profitability of the Company; and to
associate the interests of these executives with those of the Company's
stockholders.
2. DEFINITIONS
"Adoption Agreement" shall mean the agreement by which an Employer adopts this
Plan.
"Award" shall mean the annual incentive award granted to a Participant for a
Performance Period under the Plan.
"Award Payment Date" shall mean, for each Performance Period, the date that the
amount of the award for that Performance Period would have been paid to the
Participant under Section 6 of the Plan, without regard to any election to
defer receipt of the Award made by the Participant under Section 8 of the Plan.
"Board of Directors" shall mean the Board of Directors of Associates First
Capital Corporation.
"Committee" shall mean the Executive Committee of the Board of Directors.
"Company" shall mean Associates First Capital Corporation.
"Disability" shall mean the complete inability, due to sickness or accidental
bodily injury, to both (i) perform any and every duty pertaining to a
Participant's occupation with the Company and (ii) engage in any and every
gainful occupation for which the Participant is reasonably fitted by education,
training or experience. The determination whether a Participant has suffered a
Disability shall be made by the Committee based upon such evidence it deems
necessary or appropriate.
"Employee" shall mean any person (including an officer) employed by the Company
on a full-time, salaried basis.
"Employer" shall mean any subsidiary of Associates First Capital Corporation
that adopts or has adopted this Plan by executing an Adoption Agreement.
"Participant" shall mean an employee selected by the Committee to participate
in the Plan for a Performance Period.
<PAGE> 3
"Performance Period" shall mean the fiscal year of the Company or any other
period designated by the Committee with respect to which an Award shall be
earned.
"Plan" shall mean this Corporate Annual Performance Plan, as from time to time
amended and in effect.
"Predecessor Plan" shall mean the prior Corporate Annual Performance
Plan maintained by Paramount Communications Inc. (formerly
Gulf+Western Industries Inc.).
"Retirement" shall mean early retirement with the prior written approval of the
Company or normal or deferred retirement under any defined benefit plan
maintained by the Company and qualified under Section 401(a) of the Internal
Revenue Code of 1954, as amended.
3. ADMINISTRATION
The Plan shall be administered by the Committee, which shall have full
authority to interpret the Plan, to establish rules and regulations relating to
the Plan, to determine the criteria for eligibility to participate in the Plan,
to select Participants in the Plan, the performance targets under the Plan and
the amount of the Awards, and to make all other determinations and take all
other actions necessary or appropriate for the proper administration of the
Plan. The Committee's interpretation of the Plan, and all actions taken within
the scope of its authority, shall be final and binding on the Company, its
stockholders, Participants, Employees, former Employees and beneficiaries.
4. ELIGIBILITY AND PARTICIPATION
Participation in the Plan for a Performance Period shall be limited to those
key Employees whom the Committee shall select, on the basis of such Employees'
significant impact on the success of the Company, to participate in the Plan
for that Performance Period.
5. ESTABLISHMENT OF GOALS; GRANT OF AWARDS
The Committee shall establish for each Performance Period the level of
performance goals which must be achieved during the Performance Period in order
for a Participant to earn an Award payable under the Plan at the end of that
Performance Period. In addition, each Participant selected by the Committee
with respect to a particular Performance Period shall be granted an Award for
that Performance Period determined by the Committee in its sole discretion. The
Committee may establish, at the time it establishes performance goals for any
Performance Period, a maximum dollar amount or amounts which may be paid with
respect to the Awards for that Performance Period.
6. PAYMENT OF AWARDS
Subject to the provisions of Section 8, each Participant shall be eligible to
receive after the close of a Performance Period an
<PAGE> 4
amount of cash equal to the amount payable under such Participant's Award for
that Performance Period.
An Award shall be paid out in a lump sum cash payment as soon as practicable
after the close of the Performance Period, unless the Participant has elected
pursuant to Section 8 hereof to defer receipt of the amount payable under the
Award.
7. LIMITATIONS ON RIGHTS TO PAYMENT OF AWARDS
(a) No Participant shall have any right to receive payment of an Award
under the Plan for a Performance Period unless the Participant remains
in the employ of the Company or any of its affiliates through the
Award Payment Date. However, in the event that, prior to the Award
Payment Date, a Participant's employment with the Company or any of
its affiliates terminates due to the Participant's death, Disability
or Retirement, the Participant (or the Participant's beneficiary)
shall remain eligible to receive a portion of the Award, on the Award
Payment Date, based on the amount of time the Participant was employed
during the Performance Period. Notwithstanding the preceding two
sentences, the Committee may, if in the reasonable opinion of the
Committee circumstances warrant such action, approve payment of an
Award to a Participant whose employment terminates prior to the Award
Payment Date for reasons other than death, Disability or Retirement.
(b) Furthermore, no Participant shall have any right to receive payment of
an Award under the Plan if, subsequent to the commencement of the
Performance Period and prior to the Award Payment Date, the
Participant either (i) engaged directly or indirectly, either
personally or as an employee, agent, partner, stockholder, officer or
director of, or consultant to, any entity or person engaged in any
business in which the Company or any of its affiliates is engaged,
and, in the opinion of the Committee, such entity or person has
engaged in competition with the Company or any of its affiliates or
(ii) at any time divulged to any person or entity other than the
Company or any of its affiliates, any of the trade secrets, methods,
processes or other proprietary or confidential information of the
Company or any of its affiliates. For the purpose of this paragraph, a
Participant shall be deemed not a stockholder of a competing entity if
the Participant's record and beneficial ownership amount to not more
than 1 percent of the outstanding capital stock of any company subject
to the periodic and other reporting requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended.
8. DEFERRAL OF PAYMENT OF AWARDS
Notwithstanding the provisions of Section 6 hereof, a Participant may, subject
to the terms and conditions of this Section 8, elect to defer payment of all or
part of any Award which the Participant might earn with respect to a
Performance Period by completing the payment deferral form prescribed by the
Committee. Such notice
<PAGE> 5
shall include the amount to be deferred, the period of deferral, and the period
over which payment is to be made.
(a) Date of Election.
An election to defer receipt of an Award shall be made prior to the
last day of the calendar year preceding the end of the fiscal year for
which the Award is to be made and shall be effective upon delivery (or
in the event the form is mailed by certified mail, return receipt
requested, on the date of mailing) of the payment deferral form to the
Senior Vice President, Human Resources. Notwithstanding the preceding
sentence, A Participant's election to defer may be made up to 60 days
after the date the individual first becomes a Participant.
(b) Payment of Deferred Amounts.
The amount deferred pursuant to the election, plus or minus any
earnings or losses thereon pursuant to Subsection (c) hereof (the
"Deferred Amount"), will be paid to the Participant (or, in the event
of the Participant's death, the person or estate determined under
Section 9 hereof), on the date(s) and in the manner selected by the
Participant on the payment deferral form prescribed by the Committee.
Upon termination of employment other than on account of death,
Disability or Retirement, the amount deferred pursuant to the election
will ordinarily be paid to the Participant in a lump sum within sixty
(60) days of such termination, however, the Committee may, in its sole
discretion, choose to defer payment until the time previously elected
by such Participant pursuant to this Section 8.
(c) Earnings Credited on Deferred Amounts.
All Deferred Amounts will be credited with earnings and losses in the
manner prescribed by the Committee.
(d) Acceleration of Payment of Deferred Amounts.
Payment of the Deferred Amounts may occur prior to the date(s)
indicated in the payment deferral form under the following
circumstances:
(1) The Company may distribute to the Participant the Deferred Amount at
such date(s) as the Committee shall determine if the Committee
concludes, in its sole discretion, that events such as changes in the
federal tax laws or applicable accounting principles or practices have
rendered continued deferral of the Deferred Amount undesirable either
for the Company or the Participant.
(2) At any time prior to complete payment of the Deferred Amount, the
Company may, in its sole discretion, pay to the Participant (or, in
the event of the Participant's death, the person or estate determined
under Section 9 hereof), an amount not greater than that portion of
the Deferred Amount that the Committee determines, in its sole
discretion, is necessary to
<PAGE> 6
meet a financial hardship arising from an emergency. The payment shall
be made only in instances of hardship arising from causes beyond the
Participant's control, such as accident or illness. The Participant
shall apply in writing to the Committee for any hardship payment under
this paragraph and shall furnish to the Committee such information as
the Committee deems necessary and appropriate to make its
determination.
9. DESIGNATION OF BENEFICIARY
A Participant may designate a beneficiary or beneficiaries who, in the event of
the Participant's death prior to full payment of any Award and the Deferred
Amount hereunder, shall receive payment of any Award and the Deferred Amount
due under the Plan. Such designation shall be made by the Participant on a form
prescribed by the Committee. The Participant may, at any time, change or revoke
such designation. A beneficiary designation, or revocation of a prior
beneficiary designation, will be effective only if it is made in writing on a
form provided by the Company, signed by the Participant and received by the
Senior Vice President, Human Resources. If the Participant does not designate a
beneficiary or the beneficiary dies prior to receiving any payment of an Award
and the Deferred Amount, Awards and the Deferred Amount payable under the Plan
shall be paid to the Participant's estate. If the beneficiary dies after
receiving any payment of an Award, any amounts remaining to be paid shall be
paid to the beneficiary's estate.
10. CORPORATE CHANGE
In the event of a corporate change (e.g. stock dividend or split, merger or
other reorganization, or sale or lease of substantially all the assets of the
Company) which substantially affects the determination of the performance
goals, the Committee may, if it determines such action is in the best interests
of the Company and obtains prior approval of the Board of Directors, equitably
adjust the Awards to be made under the Plan.
11. AMENDMENTS
The Board of Directors may at any time amend (in whole or in part) this Plan.
No such amendment which adversely affects a Participant's rights to or interest
in an Award granted prior to the date of the amendment shall be effective
unless the Participant shall have agreed thereto.
12. TERMINATION
(a) The Board of Directors may terminate this Plan (in whole or in part)
at any time. In the case of such a termination, the following
provisions of this Section 12 shall apply notwithstanding any other
provisions of the Plan to the contrary.
<PAGE> 7
(b) The Committee shall promulgate administrative rules applicable to Plan
termination, pursuant to which each affected Participant shall
receive, with respect to each Performance Period which has commenced
on or before the date that the Plan termination is effective (the
"Termination Date") and for which the Award Payment Date has not yet
occurred, the amount described in such rules.
(c) Each Award payable under Section 12 shall be payable only in cash and
shall be paid as soon as practicable, but in no event later than 30
days after the Termination Date.
(d) Payment of Deferred Amounts may be accelerated with respect to any
affected Participant in the discretion of the Board of Directors and
paid as soon as practicable.
13. MISCELLANEOUS PROVISIONS
(a) This Plan is not a contract between the Company, the Employers and
their Employees; it is totally gratuitous on the part of the Company
and the Employer. No Employee or other person shall have any claim or
right to be granted an Award under this Plan. Neither the
establishment of this Plan, nor any action taken hereunder, shall be
construed as giving any Employee any right to be retained in the
employ of an Employer. The Committee reserves the right, in its sole
discretion, prior to any applicable Award Payment Date to make any
adjustments to (or to omit payment of) an amount otherwise payable to
any Participant pursuant to an Award.
(b) A Participant's right and interest under the Plan may not be assigned
or transferred, except as provided in Section 9 hereof, and any
attempted assignment or transfer shall be null and void and shall
extinguish, in the Company's sole discretion, the Company's obligation
under the Plan to pay Awards and the Deferred Amount with respect to
the Participant.
(c) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund, or to make any other
segregation of assets, to assure payment of Awards and the Deferred
Amount.
(d) The Company shall have the right to deduct from Awards and the
Deferred Amount paid any taxes or other amounts required by law to be
withheld.
14. TRANSITION FROM PREDECESSOR PLAN
(a) Paramount Communications Inc. ("PCI") formerly the parent corporation
of the Company maintained the Predecessor Plan. Effective on the
closing date of the sale of the Company to Ford Motor Company or one
of its affiliates, this Plan shall become effective and the
Predecessor Plan shall cease to be effective with respect to all
Employees of the Company. All Employees who were participants in the
Predecessor Plan shall be Participants in this Plan and the terms and
provisions of
<PAGE> 8
this Plan shall govern all Awards not yet made under the Predecessor
Plan and the Deferred Amounts under the Predecessor Plan.
(b) All elections hereafter made under this Plan shall also relate to and
govern Deferred Amounts under the Predecessor Plan. Until changed by
elections made under this Plan, all elections previously made under
the Predecessor Plan shall remain in effect with respect to Deferred
Amounts under this Plan.
(c) All Deferred Amounts under the Predecessor Plan shall be carried over
and credited as Deferred Amounts under this Plan.
15. EFFECTIVE DATE
The Plan shall be effective for Performance Periods beginning on or after
November 1, 1989.
<PAGE> 9
THE ASSOCIATES
CORPORATE ANNUAL PERFORMANCE PLAN
1996 ELECTION FORM
________________________________________________________________________________
PARTICIPANT'S NAME: ___________________________________________
________________________________________________________________________________
These elections pertain to the Award for the Performance Period ending December
31, 1996.
I. ELECTION FOR PAYMENT OR DEFERRAL OF FISCAL 1996 CAPP AWARD:
[ ] Payment in full of 1996 CAPP Award.
OR
[ ] Deferral of 1996 CAPP Award in part or full as
follows (check one):
[ ] Defer ___% of 1996 Award.
[ ] Defer $ ___________ of 1996 Award.
[ ] Defer balance of Award in excess of
$ ___________________.
II. DISTRIBUTION ELECTION DURING EMPLOYMENT FOR AMOUNTS DEFERRED
THIS YEAR AND IN PRIOR YEARS UNDER CAPP:
The following distribution elections revoke and supersede any distribution
elections made in prior years by me with respect to distributions scheduled to
occur in 1997 or later under CAPP. However, any elections made by me on this
election form with respect to my account balance in no event can accelerate a
distribution to 1995 or 1996, nor postpone a distribution which is scheduled to
occur during 1995 or 1996.
[ ] No distribution of deferred account balance during employment.
OR
Lump Sum Distribution
[ ] A lump sum of $ __________ or __________% of my total deferred
account balance on or about the last day of _________________
(month and year of payment).
AND/OR
(over)
<PAGE> 10
Installment Distribution
[ ] In ___________________ annual installments equal to the
undistributed balance in my deferred account divided by the
number of remaining installments, beginning on or about the
last day of (month and year of first payment).
PLEASE NOTE: THE ABOVE MUST BE COMPLETED AND RECEIVED BY JOHN W. LEE - HUMAN
RESOURCES - HOME OFFICE, DALLAS BY DECEMBER 29, 1995. If this form has not been
received by that date, your Award will be paid to you on the earliest award
payment date and any prior elections regarding the distribution of your
deferred account balance will remain in effect.
This election form is intended as a brief summary of select provisions of the
Corporate Annual Performance Plan (the "Plan"). Please refer to the Plan for
more detailed information. Any provision of this election form may be
amended, modified, or eliminated at any time without the consent of the
participant.
Please complete the enclosed form for elections regarding death, Disability or
Retirement, and beneficiary and return it with this election form.
In addition, please be aware that FICA and Medicare tax will be due on all
deferred amounts. This will normally be deducted from your bonus check. If you
defer 100% of your bonus, the tax will be due on notification of your bonus
award.
_______________________ _____________________________________
Date Signature of Participant
THIS FORM MUST BE RECEIVED BY JOHN LEE IN HUMAN RESOURCES IN DALLAS
BY DECEMBER 29, 1995.
<PAGE> 11
ADMINISTRATION OF AMOUNTS DEFERRED
_______________________________________________________________________________
In the event that you elect to defer any part of your 1996 Award or have
elected to defer any part of any previous Award under the Corporate Annual
Performance Plan, Associates First Capital Corporation (the "Company") shall
establish and/or continue to maintain in your name a deferred account.
Your deferred account shall be administered as follows:
i) any Award deferred shall be credited to your deferred account on the
award payment date;
ii) such deferred Award shall be credited with interest at the prime rate,
unless you are currently participating in the plan and have opted
otherwise;
iii) Account Balances may be reallocated to the available investment
options on the quarterly dates designated by the Company; and
iv) your deferred account will be credited with earnings and losses as
experienced from the elected investment options on a quarterly basis
(on the last day of March, June, September and December).
<PAGE> 12
THE ASSOCIATES
CORPORATE ANNUAL PERFORMANCE PLAN
AND LONG-TERM PERFORMANCE PLAN
1996 ELECTION FORM
________________________________________________________________________________
PARTICIPANT'S NAME: _________________________________________________
________________________________________________________________________________
These elections pertain to the Awards for the Performance Period ending
December 31, 1996.
I. ELECTION FOR PAYMENT OR DEFERRAL OF FISCAL 1996 CAPP AWARD ONLY:
[ ] Payment in full of 1996 CAPP Award.
OR
[ ] Deferral of 1996 CAPP Award in part or full as follows (check
one):
[ ] Defer ___% of 1996 Award.
[ ] Defer $ ___________ of 1996 Award.
[ ] Defer balance of Award in excess of
$ ___________________.
II. ELECTION FOR PAYMENT OR DEFERRAL OF FISCAL 1996 LTPP AWARD ONLY:
[ ] Payment in full of 1996 LTPP Award.
OR
[ ] Deferral of 1996 LTPP Award in part or full as follows (check
one):
[ ] Defer ___% of 1996 Award.
[ ] Defer $ ___________ of 1996 Award.
[ ] Defer balance of Award in excess of
$ ___________________.
I UNDERSTAND THAT ANY AMOUNTS DEFERRED WILL BE CREDITED TO MY
ACCOUNT UNDER THE ASSOCIATES CORPORATE ANNUAL PERFORMANCE PLAN
("CAPP") AND SUBJECT TO THE DISTRIBUTION AND BENEFICIARY
ELECTIONS THEREUNDER.
(over)
<PAGE> 13
III. DISTRIBUTION ELECTION DURING EMPLOYMENT FOR AMOUNTS DEFERRED THIS YEAR
AND IN PRIOR YEARS UNDER CAPP AND LTPP:
The following distribution elections revoke and supersede any distribution
elections made in prior years by me with respect to distributions scheduled to
occur in 1997 or later under CAPP AND LTPP, other than deferred stock awards
under the LTPP. However, any elections made by me on this election form with
respect to my account balance in no event can accelerate a distribution to 1995
or 1996, nor postpone a distribution which is scheduled to occur during 1995 or
1996.
[ ] No distribution of deferred account balance during
employment.
OR
Lump sum Distribution
[ ] A lump sum of $ __________ or __________ of my total deferred
account balance on or about the last day of (month and year
of payment).
AND/OR
Installment Distribution
[ ] In ___________________ annual installments equal to the
undistributed balance in my deferred account divided
by the number of remaining installments, beginning on
or about the last day of (month and year of first
payment).
PLEASE NOTE: THIS FORM MUST BE COMPLETED AND RECEIVED BY JOHN W. LEE - HUMAN
RESOURCES - HOME OFFICE, DALLAS BY DECEMBER 29, 1995. If this form has not been
received by that date, your Awards will be paid to you on the earliest award
payment date.
This election form is intended as a brief summary of select provisions of the
Corporate Annual Performance Plan (the "Plan") and the Long-Term Performance
Plan (the "Plan"). Please refer to the Plans for more detailed information. Any
provisions of this election form may be amended, modified, or eliminated at any
time without the consent of the participant.
Please complete the enclosed form for elections regarding death, Disability or
Retirement, and beneficiary and return it with this election form.
In addition, please be aware that FICA and Medicare tax will be due on all
deferred amounts. This will normally be deducted from your bonus check. If you
defer 100% of your bonus, the tax will be due on notification of your bonus
award.
______________________ _____________________________________
Date Signature of Participant
THIS FORM MUST BE RECEIVED BY JOHN LEE IN HUMAN RESOURCES IN
DALLAS BY DECEMBER 29, 1995.
<PAGE> 14
ADMINISTRATION OF AMOUNTS DEFERRED
- --------------------------------------------------------------------------------
In the event that you elect to defer any part of your 1996 Award or have
elected to defer any part of any previous Award, Associates First Capital
Corporation (the "Company") shall establish and/or continue to maintain in your
name a deferred account.
Your deferred account shall be administered as follows:
i) any Award deferred shall be credited to your deferred account on the
award payment date;
ii) such deferred Award shall be credited with interest at the prime rate,
unless you are currently participating in the Plan and have opted
otherwise;
iii) Account Balances may be reallocated to the available investment
options on the quarterly dates designated by the Company; and
iv) your deferred account will be credited with earnings and losses as
experienced from the elected investment options on a quarterly basis
(on the last day of March, June, September and December).
<PAGE> 15
THE ASSOCIATES
CORPORATE ANNUAL PERFORMANCE PLAN
DISTRIBUTIONS OTHER THAN DURING EMPLOYMENT
AND BENEFICIARY DESIGNATION - 1996
________________________________________________________________________________
PARTICIPANT'S NAME: _________________________________________________
________________________________________________________________________________
I. DISTRIBUTION ELECTION IN THE EVENT OF DISABILITY OR RETIREMENT:
If my employment by the Company terminates due to my Disability or
Retirement, please pay my deferred account balance as follows after
the determination of my Disability or Retirement (check one):
[ ] Lump sum within thirty days.
[ ] Lump sum on or about January 31st of the next calendar year.
[ ] In _________________ annual installments (not more than 15)
equal to the undistributed balance in my deferred account
divided by the number of remaining annual installments
beginning on or about January 31st of the next calendar year.
This election supersedes my distribution elections during employment.
II. DISTRIBUTION ELECTION IN THE EVENT OF DEATH:
In the event of my death, please pay my deferred account balance as
follows to my beneficiary after the date of my death (check one):
[ ] Lump sum within thirty days.
[ ] Lump sum on or about January 31st of the next calendar year.
[ ] In _________________ annual installments (not more than 15)
equal to the undistributed balance in my deferred account
divided by the number of remaining annual installments
beginning on or about January 31st of the next calendar year.
This election supersedes my distribution elections during employment and
Disability or Retirement.
(over)
<PAGE> 16
III. DISTRIBUTION AFTER TERMINATION (OTHER THAN DEATH, DISABILITY OR
RETIREMENT):
If my employment by the Company terminates for any reason other than
death, Disability or Retirement, the Company will pay my remaining
deferred account balance in one lump sum within sixty days after (or
as soon as practicable thereafter) such termination of employment. The
Committee may, however, in its sole discretion, continue the period of
deferral and pay my account balance as elected under the distributions
during employment, death, Disability or Retirement.
I understand that the Company may, in its sole discretion, distribute
all or part of my deferred account at an earlier date in accordance
with the terms of the Plan.
IV. BENEFICIARY DESIGNATION:
In accordance with Section 9 of the Associates First Capital
Corporation Corporate Annual Performance Plan (the "Plan") and subject
to the terms and conditions of the Plan, I hereby designate the
following individuals) as my beneficiary(ies):
PRIMARY:
1. Name: Percentage %
____________________________________ _______
Relationship: SS#
____________________________ ________________
Address:
______________________________________________________
Street Address
______________________________________________________
City State Zip Code
PRIMARY:
2. Name: Percentage %
____________________________________ _______
Relationship: SS#
____________________________ ________________
Address:
______________________________________________________
Street Address
______________________________________________________
City State Zip Code
<PAGE> 17
PRIMARY:
3. Name: Percentage %
____________________________________ _______
Relationship: SS#
____________________________ ________________
Address:
______________________________________________________
Street Address
______________________________________________________
City State Zip Code
PRIMARY:
4. Name: Percentage %
____________________________________ _______
Relationship: SS#
____________________________ ________________
Address:
______________________________________________________
Street Address
______________________________________________________
City State Zip Code
CONTINGENT: (receives distribution only if no primary beneficiary is
living)
1. Name: Percentage %
____________________________________ _______
Relationship: SS#
____________________________ ________________
Address:
______________________________________________________
Street Address
______________________________________________________
City State Zip Code
(over)
<PAGE> 18
CONTINGENT: (receives distribution only if no primary beneficiary is
living)
2. Name: ____________________________________ Percentage _______ %
Relationship: ____________________________ SS# ________________
Address: ______________________________________________________
Street Address
_______________________________________________________________
City State Zip Code
I understand that in the event of my death prior to receipt of all amounts
payable to me pursuant to the Plan, any amounts not fully paid will be paid to
my above designated beneficiary(ies), or to my estate if I have not designated
a beneficiary, or all of my beneficiaries die prior to receiving full payment.
If more than one beneficiary is designated, settlement will be made in equal
shares to such of the designated beneficiaries (or beneficiary) as survive me,
unless a percentage is otherwise specified above. This Beneficiary Designation
revokes and supersedes any previous designation made by me.
I acknowledge that I have received a copy of the Plan and have read its
provisions and agree to be bound by the terms contained therein.
_________________________ ________________________________________
Date Signature of Participant
IF YOU HAVE DESIGNATED A PRIMARY BENEFICIARY OTHER THAN YOUR SPOUSE, YOU MUST
HAVE YOUR SPOUSE SIGN THE CONSENT BELOW.
SPOUSE CONSENT
I hereby consent to the above beneficiary designation.
________________________________________
Signature of Spouse
<PAGE> 19
RESOLUTIONS ADOPTED BY WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
ASSOCIATES FIRST CAPITAL CORPORATION DATED OCTOBER 16, 1995
CREATION OF COMPENSATION COMMITTEE AND DESIGNATION OF MEMBERS
RESOLVED, that, effective February 1, 1995, a Compensation Committee
consisting of four (4) persons, one of whom shall be a director, be,
and it is, hereby established.
RESOLVED, that the following persons be, and they are, hereby
designated as members of the Compensation Committee of this
Corporation, to serve in such capacity until the further action of the
Board of Directors:
Roy A. Guthrie
Keith W. Hughes
Harry W. Reynolds, Jr.
James B. Wafts
******************
AMEND CORPORATE ANNUAL PERFORMANCE PLAN COMMITTEE
AND THE LONG-TERM PERFORMANCE PLAN COMMITTEE
RESOLVED, that, effective February 1, 1995, the Corporate Annual
Performance Plan and the Long-Term Performance Plan be, and they are,
hereby amended so that the Plan Committee specified therein shall be
the Compensation Committee of the Board of Directors of this
Corporation.
<PAGE> 20
RESOLUTION ADOPTED BY WRITTEN CONSENT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
ASSOCIATES FIRST CAPITAL CORPORATION DATED OCTOBER 16, 1995
APPROVE AMENDMENTS TO EXCESS BENEFIT PLAN
RESOLVED, the Excess Benefit Plan Associates First Capital Corporation ("the
Company") is hereby amended to clarify the intent of the Company in contracting
with the participants to refrain from certain actions after termination of
employment so that Section 5.07 thereof shall read as follows:
"5.07 Obligations of Participant
Notwithstanding anything to the contrary in this Plan, no
benefit funded by the Company shall be vested and it shall be
a continuing requirement that the benefit hereunder be earned
by compliance with the following provisions.
(a) A Participant shall not at any time engage in a crime
involving dishonesty or fraud on the part of such
Participant in his relationship with the Company, and
if convicted of such a crime, all benefits that would
otherwise be payable to him or her under the Plan
shall be terminated.
(b) A Participant who has left employment with the
Company and its affiliates shall not do any act or
engage in any occupation or employment which is in
competition with or detrimental to the business of
the Company (as determined by the Committee in its
sole discretion). If a Participant does any such act
or so engage in competition or detrimental conduct,
such Participant shall be notified by the Company
that benefits, under this Plan, if not yet paid,
shall cease and be terminated unless such competitive
and/or detrimental conduct is discontinued within a
period of time that has been prescribed by the
Company. In such case, the benefit payable from this
Plan to a Participant shall be suspended (if in pay
status) during the prescribed period and, if the
competitive and/or detrimental conduct has not ceased
prior to the expiration of such period, the
Participant shall be deemed to have elected not to
receive a benefit and his benefit payments (if in pay
status) and all rights to receive a benefit in the
future shall be terminated on a permanent basis. The
Participant agrees to be bound by all the terms
hereof by accepting the benefits of this Plan.
The foregoing conditions are a fundamental consideration for
the promises of the Company in this Plan."
RESOLVED, that participants in the Corporate Annual Performance Plan, the Long
Term Performance Plan, the Executive Deferred Salary Plan and the Phantom Stock
Appreciation Plan Deferral Agreement shall be entitled to a conversion election
with respect to their deferred accounts four times per year on the last day of
each March, June, September and December and that for 1995 only the participant
shall be entitled to the election currently provided on September 1 and the
election on the new quarterly date of September 30. Thereafter the conversion
dates shall be quarterly.
FURTHER RESOLVED, that any one of the members of the Compensation Committee is
authorized to execute and deliver such amendments, agreements or other writings
as may be necessary to carry into effect the foregoing resolutions.
<PAGE> 1
EXHIBIT 10.12
THE ASSOCIATES
LONG-TERM PERFORMANCE PLAN
<PAGE> 2
The Associates
LONG-TERM
PERFORMANCE PUN
1. PURPOSE
The purpose of the plan is to enable the Company, through awards of incentive
compensation, to attract and retain executives; to motivate these executives to
promote the long-term growth and profitability of the Company; and to associate
the interests of these executives with those of the Company's stockholders.
2. DEFINITIONS
"Adoption Agreement" shall mean the agreement by which a subsidiary of
Associates First Capital Corporation adopts this Plan.
"Award" shall mean the long-term incentive award granted to a Participant for a
Performance Period under the Plan or the Predecessor Plan.
"Award Payment Date" shall mean, for each Performance Period, the date on which
the amount of the Award for that Performance Period would have been paid to the
Participant under Section 6 of the Plan, without regard to any election to
defer receipt of the Award made by the Participant under Section 8 of the Plan.
"Board of Directors" shall mean the Board of Directors of Associates First
Capital Corporation.
"Committee" shall mean the Executive Committee of the Board of Directors.
"Company" shall mean Associates First Capital Corporation.
"Disability" shall mean the complete inability, due to sickness or accidental
bodily injury, to both (i) perform any and every duty pertaining to a
Participant's occupation with the Company and (ii) engage in any and every
gainful occupation for which the Participant is reasonably fitted by education,
training or experience. The determination whether a Participant has suffered a
Disability shall be made by the Committee based upon such evidence it deems
necessary or appropriate.
"Employee" shall mean any person (including an officer) employed by an Employer
on a full-time, salaried basis.
"Employer" shall mean the Company and any subsidiary of the Company that adopts
or has adopted this Plan by executing an Adoption Agreement.
"Participant" shall mean an Employee selected by the Committee to participate
in the Plan for a Performance Period.
<PAGE> 3
"Performance Period" shall mean four consecutive fiscal years of the Company or
such other period of time designated by the Committee with respect to which an
Award shall be earned.
"Plan" shall mean the Associates First Capital Corporation Long-Term
Performance Plan, as set forth herein, as from time to time amended and in
effect.
"Predecessor Plan" shall mean the prior Long-Term Performance Plan maintained
by Paramount Communications Inc. (formerly named Gulf+Western Inc.).
"Retirement" shall mean early retirement with the prior written approval of the
Company or normal or deferred retirement under any defined benefit plan
maintained by the Company and qualified under Section 401(a) of the Internal
Revenue Code of 1954, as amended.
3. ADMINISTRATION
The Plan shall be administered by the Committee, which shall have full
authority to interpret the Plan, to establish rules and regulations relating to
the Plan, to determine the criteria for eligibility to participate in the Plan,
to select Participants in the Plan, the performance targets under the Plan and
the amount of the Awards, and to make all other determinations and take all
other actions necessary or appropriate for the proper administration of the
Plan. The Committee's interpretation of the Plan, and all actions taken within
the scope of its authority, shall be final and binding on the Company, its
stockholders, Participants, Employees, former Employees and beneficiaries.
4. ELIGIBILITY AND PARTICIPATION
Participation in the Plan shall be limited to those key Employees whom the
Committee shall select, on the basis of such Employees' significant impact on
the long-term success of the Company, to participate in the Plan for that
Performance Period.
5. ESTABLISHMENT OF GOALS; GRANT OF AWARDS
The Committee shall establish for each Performance Period the level of
performance goals which must be achieved during the Performance Period in order
for a Participant to earn an Award payable under the Plan at the end of that
Performance Period. In addition, each Participant selected by the Committee
with respect to a particular Performance Period shall be granted an Award for
that Performance Period determined by the Committee in its sole discretion. The
Committee may establish limits on the value which may be paid with respect to
the Awards for that Performance Period.
6. PAYMENT OF AWARDS
(a) Subject to the provisions of Section 8, each Participant shall be
eligible to receive after the close of a Performance Period cash equal
to the value of such Participant's Award for that Performance Period.
<PAGE> 4
(b) An Award shall be paid as soon as practicable after the close of the
Performance Period, unless the Participant has made an election under
Section 8 to defer receipt of such Award.
7. LIMITATIONS ON RIGHTS TO PAYMENT OF AWARDS
(a) No Participant shall have any right to receive payment of an Award
under the Plan for a Performance Period unless the Participant remains
in the employ of an Employer through the Award Payment Date. However,
in the event that, prior to the Award Payment Date, a Participant's
employment with an Employer terminates due to the Participant's death,
Disability or Retirement, the Participant (or, in the event of the
Participant's death, the person or estate determined under Section 10)
shall remain eligible to receive a portion of the Award based on the
amount of time the Participant was employed during the Performance
Period. Notwithstanding the preceding two sentences, the Committee
may, if in the reasonable opinion of the Committee circumstances
warrant such action, approve payment of an Award to a Participant
whose employment terminates prior to the Award Payment Date for
reasons other than death, Disability or Retirement.
(b) Furthermore, no Participant shall have any right to receive payment of
an Award under the Plan if, subsequent to the commencement of the
Performance Period and prior to the Award Payment Date, the
Participant either (i) engaged directly or indirectly, either
personally or as an employee, agent, partner, stockholder, officer or
director of, or consultant to, any entity or person engaged in any
business in which the Company or any of its affiliates is engaged,
and, in the opinion of the Committee, such entity or person has
engaged in competition with the Company or any of its affiliates or
(ii) at any time divulged to any person or entity other than the
Company or any of its affiliates, any of the trade secrets, methods,
processes or other proprietary or confidential information of the
Company or any of its affiliates. For the purpose of this paragraph, a
Participant shall be deemed not a stockholder of a competing entity if
the Participant's record and beneficial ownership amount to not more
than 1 percent of the outstanding capital stock of any company subject
to the periodic and other reporting requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended.
8. DEFERRAL OF PAYMENT OF AWARDS
(a) A Participant may, subject to the terms and conditions of this Section
8, elect to defer payment of all or a portion of any Award which the
Participant might earn with respect to a Performance Period by
completing the payment deferral form prescribed by the Committee.
(b) Payment Deferral Form.
<PAGE> 5
The payment deferral form shall include:
(i) the amount to be deferred;
(ii) the period of deferral; and
(iii) the period over which the payment is to be made.
(c) Date of Election.
An election to defer receipt of an Award shall be made prior to the
last day of the calendar year preceding the end of the fiscal for
which the Award is made and shall be effective upon delivery (or in
the event the form is mailed by certified mail, return receipt
requested, on the date of such mailing) of the payment deferral form
to the Senior Vice President - Human Resources except with respect to
the first Performance Period under the Plan, such election shall be
made prior to December 31, 1989. Notwithstanding the preceding
sentence, a Participant's election to defer may be made up to 60 days
after the date the individual first becomes a Participant.
(d) Payment of Deferred Awards.
The amount deferred, plus or minus any earnings or losses thereon
pursuant to Subsection (e) hereof (the "Deferred Amount"), will be
paid to the Participant (or, in the event of the Participant's death,
the person or estate determined under Section 9), on the date(s) and
in the manner selected by the Participant on the payment deferral form
prescribed by the Committee. If a Participant ceases to be employed by
the Company or any of its affiliates due to termination of employment
on account of death, Disability or Retirement, the Committee may, in
its sole discretion, pay the Participant's Deferred Amount in a lump
sum within 60 days of such termination.
If a Participant ceases to be employed by an Employer due to
termination of employment other than on account of death, Disability
or Retirement, the Deferred Amount will ordinarily be paid to the
Participant in a lump sum within 60 days of such termination; however,
the Committee may, in its sole discretion, choose to defer payment
until the time previously elected by such Participant pursuant to this
Section 8.
(e) Earnings Credited on Deferred Amounts.
The Deferred Amount will be credited with earnings and losses in the
manner prescribed by the Committee.
(f) Acceleration of Payment of Deferred Amount.
Payment of the Deferred Amount plus or minus any earnings or losses
may occur prior to the date(s) indicated in the payment deferral form
under the following circumstances.
<PAGE> 6
(i) The Company may distribute to the Participant the Deferred
Amount plus or minus any earnings or losses at such date(s) as
the Committee shall determine if the Committee concludes, in
its sole discretion, that events such as changes in the
federal tax laws or applicable accounting principles or
practices have rendered continued deferral of the Deferred
Amount undesirable either for the Company or the Participant.
(ii) At any time prior to complete payment of the Deferred Amount
plus or minus any earnings or losses, the Company may, in its
sole discretion, pay to the Participant (or, in the event of
the Participant's death, the person or estate determined under
Section 9), an amount not greater than that portion of the
Deferred Amount plus or minus any earnings or losses that the
Committee determines, in its sole discretion, is necessary to
meet a financial hardship arising from an emergency. The
payment shall be made only in instances of hardship arising
from causes beyond the Participant's control, such as accident
or illness. The Participant shall apply in writing to the
Committee for any hardship payment under this subsection (ii)
and shall furnish the Committee such information as the
Committee deems necessary and appropriate to make its
determination.
9. DESIGNATION OF BENEFICIARY
A Participant may designate a beneficiary or beneficiaries who, in the event of
the Participant's death prior to full payment of any Award hereunder or
Deferred Amounts, shall receive payment of any Award or Deferred Amounts due
under the Plan. Such designation shall be made by the Participant on a form
prescribed by the Committee. The Participant may, at any time, change or revoke
such designation. A beneficiary designation, or revocation of a prior
beneficiary designation, will be effective only if it is made in writing on a
form provided by the Company, signed by the Participant and received by the
Senior Vice President of Human Resources. If the Participant does not designate
a beneficiary or the beneficiary dies prior to receiving any payment of an
Award or Deferred Amounts, Awards or Deferred Amounts payable under the Plan
shall be paid to the Participant's estate. If the beneficiary dies after
receiving any payment of an Award or Deferred Amounts, any amounts remaining to
be paid shall be paid to the beneficiary's estate.
10. CORPORATE CHANGE
In the event of a corporate change (e.g. stock dividend or split, merger or
other reorganization, or sale or lease of substantially all the assets of the
Company or an Employer) which substantially affects the determination of the
performance goals or the Performance Awards, the Committee may, if it
determines such action is in the best interests of the Company, equitably
adjust the Awards to be made under the Plan.
11. AMENDMENTS
The Board of Directors may at any time amend (in whole or in part) this Plan.
No such amendment which adversely affects a
<PAGE> 7
Participant's rights to or interest in an Award granted prior to the date of
the amendment shall be effective unless the Participant shall have agreed
thereto.
12. TERMINATION
(a) The Board of Directors may terminate this Plan (in whole or in part)
at any time. In the case of such a termination, the following
provisions of this Section 12 shall apply notwithstanding any other
provisions of the Plan to the contrary.
(b) The Committee shall promulgate administrative rules applicable to Plan
termination, pursuant to which each affected Participant shall
receive, with respect to each Performance Period which has commenced
on or before the date that the Plan termination is effective (the
"Termination Date") and for which the Award Payment Date has not yet
occurred, the amount described in such rules.
(c) Each Award payable under Section 12(b) shall be payable only in cash
and shall be paid as soon as practicable, but in no event later than
30 days after the Termination Date.
(d) Payment of Deferred Amounts may be accelerated, with respect to any
affected Participant, in the sole discretion of the Committee and paid
as soon as practicable.
13. MISCELLANEOUS PROVISIONS
(a) This Plan is not a contract between the Company, the Employers and
their Employees; it is totally gratuitous on the part of the Company
and the Employer. No Employee or other person shall have any claim or
right to be granted an Award under this Plan. Neither the
establishment of this Plan, nor any action taken hereunder, shall be
construed as giving any Employee any right to be retained in the
employ of the Company. The Committee reserves the right, in its sole
discretion, prior to any applicable Award Payment Date to make any
adjustments to (or to omit payment of) an amount otherwise payable to
any Participant pursuant to an Award.
(b) A Participant's right and interest under the Plan may not be assigned
or transferred, except as provided in Section 9 hereof, and any
attempted assignment or transfer shall be null and void and shall
extinguish, in the Company's sole discretion, the Company's obligation
under the Plan to pay Awards and the Deferred Amount with respect to
the Participant.
(c) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund, or to make any other
segregation of assets, to assure payment of Awards and the Deferred
Amount.
(d) The Company shall have the right to deduct from Awards or Deferred
Amounts paid any taxes or other amounts required by law to be
withheld.
<PAGE> 8
14. TRANSITION FROM PREDECESSOR PLAN
(a) Paramount Communications Inc. ("PCI") formerly the parent corporation
of the Company maintained the Predecessor Plan. Effective on the
closing date of the sale of the Company to Ford Motor Company or one
of its affiliates, this Plan shall become effective and the
Predecessor Plan shall cease to be effective with respect to all
Employees of the Company. All Employees who were participants in the
Predecessor Plan shall be Participants in this Plan and the terms and
provisions of this Plan shall govern all Awards not yet made under the
Predecessor Plan and Deferred Amounts under the Predecessor Plan.
(b) All elections hereafter made under this Plan shall also relate to and
govern Deferred Amounts under the Predecessor Plan. Until changed by
elections made under this Plan, all elections previously made under
the Predecessor Plan shall remain in effect with respect to Deferred
Amounts under this Plan.
(c) All Deferred Amounts under the Predecessor Plan shall be carried over
and credited as Deferred Amounts under this Plan.
15. EFFECTIVE DATE
The Plan shall be effective as of November 1, 1989.
<PAGE> 9
THE ASSOCIATES
CORPORATE ANNUAL PERFORMANCE PLAN
AND LONG-TERM PERFORMANCE PLAN
1996 ELECTION FORM
________________________________________________________________________________
PARTICIPANT'S NAME:____________________________________________________
________________________________________________________________________________
These elections pertain to the Awards for the Performance Period ending
December 31, 1996.
1. ELECTION FOR PAYMENT OR DEFERRAL OF FISCAL 1996 CAPP AWARD ONLY:
[ ] Payment in full of 1996 CAPP Award.
OR
[ ] Deferral of 1996 CAPP Award in part or full as follows (check
one):
[ ] Defer _____ % of 1996 Award.
[ ] Defer $_______ of 1996 Award.
[ ] Defer balance of Award in excess of $__________
11. ELECTION FOR PAYMENT OR DEFERRAL OF FISCAL 1996 LTPP AWARD ONLY:
[ ] Payment in full of 1996 LTPP Award.
OR
[ ] Deferral of 1996 LTPP Award in part or full as follows
(check one):
[ ] Defer _____________ % of 1996 Award.
[ ] Defer $___________ of 1996 Award.
[ ] Defer balance of Award in excess of $___________.
I UNDERSTAND THAT ANY AMOUNTS DEFERRED WILL BE CREDITED TO
MY ACCOUNT UNDER THE ASSOCIATES CORPORATE ANNUAL PERFORMANCE
PLAN ("CAPP") AND SUBJECT TO THE DISTRIBUTION AND BENEFICIARY
ELECTIONS THEREUNDER.
(over)
<PAGE> 10
III. DISTRIBUTION ELECTION DURING EMPLOYMENT FOR AMOUNTS DEFERRED THIS YEAR
AND IN PRIOR YEARS UNDER CAPP AND LTPP:
The following distribution elections revoke and supersede any distribution
elections made in prior years by me with respect to distributions scheduled to
occur in 1997 or later under CAPP AND LTPP, other than deferred stock awards
under the LTPP. However, any elections made by me on this election form with
respect to my account balance in no event can accelerate a distribution to 1995
or 1996, nor postpone a distribution which is scheduled to occur during 1995 or
1996.
[ ] No distribution of deferred account balance during employment.
OR
Lump Sum Distribution
[ ] A lump sum of $ __________ or _____ % of my total deferred
account balance on or about the last day of ______________
(month and year of payment).
AND/OR
Installment Distribution
[ ] In _________________ annual installments equal to the
undistributed balance in my deferred account divided by the
number of remaining installments, beginning on or about the
last day of __________ (month and year of first payment).
PLEASE NOTE: THIS FORM MUST BE COMPLETED AND RECEIVED BY JOHN W. LEE - HUMAN
RESOURCES - HOME OFFICE, DALLAS BY DECEMBER 29, 1995. If this form has not been
received by that date, your Awards will be paid to you on the earliest award
payment date.
This election form is intended as a brief summary of select provisions of the
Corporate Annual Performance Plan (the "Plan") and the Long-Term Performance
Plan (the "Plan"). Please refer to the Plans for more detailed information. Any
provisions of this election form may be amended, modified, or eliminated at any
time without the consent of the participant.
Please complete the enclosed form for elections regarding death, Disability or
Retirement, and beneficiary and return it with this election form.
In addition, please be aware that FICA and Medicare tax will be due on all
deferred amounts. This will normally be deducted from your bonus check. If you
defer 100% of your bonus, the tax will be due on notification of your bonus
award.
__________ _______________________________
Date Signature of Participant
THIS FORM MUST BE RECEIVED BY JOHN LEE IN HUMAN RESOURCES IN DALLAS
BY DECEMBER 29, 1995.
<PAGE> 11
ADMINISTRATION OF AMOUNTS DEFERRED
In the event that you elect to defer any part of your 1996 Award or have
elected to defer any part of any previous Award, Associates First Capital
Corporation (the "Company") shall establish and/or continue to maintain in your
name a deferred account.
Your deferred account shall be administered as follows:
i) any Award deferred shall be credited to your deferred account
on the award payment date;
ii) such deferred Award shall be credited with interest at the
prime rate, unless you are currently participating in the Plan
and have opted otherwise;
iii) Account Balances may be reallocated to the available
investment options on the quarterly dates designated by the
Company; and
iv) your deferred account will be credited with earnings and
losses as experienced from the elected investment options on a
quarterly basis (on the last day of March, June, September and
December).
<PAGE> 12
THE ASSOCIATES
CORPORATE ANNUAL PERFORMANCE PLAN
DISTRIBUTIONS OTHER THAN DURING EMPLOYMENT
AND BENEFICIARY DESIGNATION - 1996
________________________________________________________________________________
Participant's Name:____________________________________________________
________________________________________________________________________________
I. DISTRIBUTION ELECTION IN THE EVENT OF DISABILITY OR RETIREMENT:
If my employment by the Company terminates due to my Disability or
Retirement, please pay my deferred account balance as follows after
the determination of my Disability or Retirement (check one):
[ ] Lump sum within thirty days.
[ ] Lump sum on or about January 31st of the next calendar year.
[ ] In __________ annual installments (not more than 15) equal to
the undistributed balance in my deferred account divided by
the number of remaining annual installments beginning on or
about January 31st of the next calendar year.
This election supersedes my distribution elections during employment.
II. DISTRIBUTION ELECTION IN THE EVENT OF DEATH:
In the event of my death, please pay my deferred account balance as
follows to my beneficiary after the date of my death (check one):
[ ] Lump sum within thirty days.
[ ] Lump sum on or about January 31st of the next calendar year.
[ ] In ______________ annual installments (not more than 15) equal
to the undistributed balance in my deferred account divided by
the number of remaining annual installments beginning on or
about January 31st of the next calendar year.
This election supersedes my distribution elections during employment
and Disability or Retirement.
(over)
<PAGE> 13
III. DISTRIBUTION AFTER TERMINATION (OTHER THAN DEATH, DISABILITY OR
RETIREMENT):
If my employment by the Company terminates for any reason other than
death, Disability or Retirement, the Company will pay my remaining
deferred account balance in one lump sum within sixty days after (or
as soon as practicable thereafter) such termination of employment. The
Committee may, however, in its sole discretion, continue the period of
deferral and pay my account balance as elected under the distributions
during employment, death, Disability or Retirement.
I understand that the Company may, in its sole discretion, distribute
all or part of my deferred account at an earlier date in accordance
with the terms of the Plan.
IV. BENEFICIARY DESIGNATION:
In accordance with Section 9 of the Associates First Capital
Corporation Corporate Annual Performance Plan (the "Plan") and subject
to the terms and conditions of the Plan, I hereby designate the
following individual(s) as my beneficiary(ies):
PRIMARY:
1. Name: _________________________________________ Percentage _____%
_________________________________________
Relationship: _________________________________ SS# _____________
Address:__________________________________________________________
Street Address
__________________________________________________________________
City State Zip Code
PRIMARY:
2. Name: _________________________________________ Percentage _____%
_________________________________________
Relationship: _________________________________ SS# _____________
Address:__________________________________________________________
Street Address
__________________________________________________________________
City State Zip Code
<PAGE> 14
PRIMARY:
3. Name: _________________________________________ Percentage _____%
_________________________________________
Relationship: _________________________________ SS# _____________
Address:__________________________________________________________
Street Address
__________________________________________________________
City State Zip Code
PRIMARY:
4. Name: _________________________________________ Percentage _____%
_________________________________________
Relationship: _________________________________ SS# _____________
Address:__________________________________________________________
Street Address
_________________________________________________________
City State Zip Code
CONTINGENT: (receives distribution only if no primary beneficiary is
living)
1. Name: _________________________________________ Percentage _____%
_________________________________________
Relationship: _________________________________ SS# _____________
Address:__________________________________________________________
Street Address
__________________________________________________________
City State Zip Code
(over)
<PAGE> 15
CONTINGENT: (receives distribution only if no primary beneficiary is
living)
2. Name: _________________________________________ Percentage _____%
_________________________________________
Relationship: _________________________________ SS# _____________
Address:__________________________________________________________
Street Address
__________________________________________________________
City State Zip Code
I understand that in the event of my death prior to receipt of all amounts
payable to me pursuant to the Plan, any amounts not fully paid will be paid to
my above designated beneficiary(ies), or to my estate if I have not designated
a beneficiary, or all of my beneficiaries die prior to receiving full payment.
If more than one beneficiary is designated, settlement will be made in equal
shares to such of the designated beneficiaries (or beneficiary) as survive me,
unless a percentage is otherwise specified above. This Beneficiary Designation
revokes and supersedes any previous designation made by me.
I acknowledge that I have received a copy of the Plan and have read its
provisions and agree to be bound by the terms contained therein.
____________ ____________________________
Date Signature of Participant
IF YOU HAVE DESIGNATED A PRIMARY BENEFICIARY OTHER THAN YOUR SPOUSE, YOU MUST
HAVE YOUR SPOUSE SIGN THE CONSENT BELOW.
SPOUSE CONSENT
I hereby consent to the above beneficiary designation.
________________________
Signature of Spouse
<PAGE> 16
RESOLUTIONS ADOPTED BY WRITTEN CONSENT
OF THE BOARD OF DIRECTORS OF
ASSOCIATES FIRST CAPITAL CORPORATION DATED OCTOBER 16, 1995
CREATION OF COMPENSATION COMMITTEE AND DESIGNATION OF MEMBERS
RESOLVED, that, effective February 1, 1995, a Compensation Committee
consisting of four (4) persons, one of whom shall be a director, be,
and it is, hereby established.
RESOLVED, that the following persons be, and they are, hereby
designated as members of the Compensation Committee of this
Corporation, to serve in such capacity until the further action of the
Board of Directors:
Roy A. Guthrie
Keith W. Hughes
Harry W. Reynolds, Jr.
James B. Watts
* * * * * * * * * *
AMEND CORPORATE ANNUAL PERFORMANCE PLAN COMMITTEE
AND THE LONG-TERM PERFORMANCE PLAN COMMITTEE
RESOLVED, that, effective February 1, 1995, the Corporate Annual
Performance Plan and the Long-Term Performance Plan be, and they are,
hereby amended so that the Plan Committee specified therein shall be
the Compensation Committee of the Board of Directors of this
Corporation.
<PAGE> 17
RESOLUTION ADOPTED BY WRITTEN CONSENT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
ASSOCIATES FIRST CAPITAL CORPORATION DATED OCTOBER 16, 1995
APPROVE AMENDMENTS TO EXCESS BENEFIT PLAN
RESOLVED, the Excess Benefit Plan Associates First Capital Corporation ("the
Company") is hereby amended to clarify the intent of the Company in contracting
with the participants to refrain from certain actions after termination of
employment so that Section 5.07 thereof shall read as follows:
"5.07 Obligations of Participant
Notwithstanding anything to the contrary in this Plan, no
benefit funded by the Company shall be vested and it shall be
a continuing requirement that the benefit hereunder be earned
by compliance with the following provisions.
(a) A Participant shall not at any time engage in a crime
involving dishonesty or fraud on the part of such
Participant in his relationship with the Company, and
if convicted of such a crime, all benefits that would
otherwise be payable to him or her under the Plan
shall be terminated.
(b) A Participant who has left employment with the
Company and its affiliates shall not do any act or
engage in any occupation or employment which is in
competition with or detrimental to the business of
the Company (as determined by the Committee in its
sole discretion). If a Participant does any such act
or so engage in competition or detrimental conduct,
such Participant shall be notified by the Company
that benefits, under this Plan, if not yet paid,
shall cease and be terminated unless such competitive
and/or detrimental conduct is discontinued within a
period of time that has been prescribed by the
Company. In such case, the benefit payable from this
Plan to a Participant shall be suspended (if in pay
status) during the prescribed period and, if the
competitive and/or detrimental conduct has not ceased
prior to the expiration of such period, the
Participant shall be deemed to have elected not to
receive a benefit and his benefit payments (if in pay
status) and all rights to receive a benefit in the
future shall be terminated on a permanent basis. The
Participant agrees to be bound by all the terms
hereof by accepting the benefits of this Plan.
The foregoing conditions are a fundamental consideration for
the promises of the Company in this Plan."
RESOLVED, that participants in the Corporate Annual Performance Plan, the Long
Term Performance Plan, the Executive Deferred Salary Plan and the Phantom Stock
Appreciation Plan Deferral Agreement shall be entitled to a conversion election
with respect to their deferred accounts four times per year on the last day of
each March, June, September and December and that for 1995 only the participant
shall be entitled to the election currently provided on September 1 and the
election on the new quarterly date of September 30. Thereafter the conversion
dates shall be quarterly.
FURTHER RESOLVED, that any one of the members of the Compensation Committee is
authorized to execute and deliver such amendments, agreements or other writings
as may be necessary to carry into effect the foregoing resolutions.
<PAGE> 18
EXHIBIT 10.12
ASSOCIATES FIRST CAPITAL CORPORATION
EXECUTIVE DEFERRED SALARY PLAN
<PAGE> 1
ASSOCIATES FIRST CAPITAL CORPORATION
EXECUTIVE DEFERRED SALARY PLAN
Effective August 1, 1991
<PAGE> 2
The Associates
EXECUTIVE DEFERRED SALARY PLAN
1. PURPOSE
The purpose of the Plan is to attract competent officers and key
executives by offering flexible compensation opportunities; to
motivate these executives to promote the growth and profitability of
the Company; and to associate the interests of these executives with
those of the Company.
2. DEFINITIONS
"Account" shall mean the record maintained by the Company reflecting
Executive's Deferred Amounts, the earnings and losses and all other
adjustments provided for in this Plan.
"Account Balance" shall mean at any time the total of the amounts
credited to the Executive's Account and any accrued but not credited
gains or losses in accordance with the provisions established by the
Committee.
"Board of Directors" shall mean the Board of Directors of Associates
First Capital Corporation.
"Committee" shall mean the Committee appointed by the Board of
Directors.
"Company" shall mean Associates First Capital Corporation.
"Current Salary" shall mean the Salary reduced by the agreed upon
Deferred Amount pursuant to this Plan.
"Deferred Amount" shall mean the amount by which the Salary is reduced
from time to time as agreed upon by the Executive and the Company and
deferred in accordance with the terms of the Plan. The Deferred Amount
may be a dollar amount or a percentage of Salary.
"Disability" shall mean the complete inability, due to sickness or
accidental bodily injury, to both (i) perform any and every duty
pertaining to a Participant's occupation with the Company and (ii)
engage in any and every gainful occupation for which the Participant
is reasonably fitted by education, training or experience. The
determination whether a Participant has suffered a Disability shall be
made by the Committee based upon such evidence it deems necessary or
appropriate.
"Employee" shall mean any person (including an officer) actively
employed by the Company or a subsidiary on a full-time, salaried basis.
2
<PAGE> 3
"Employed" or "Employment" shall mean performing services as an
employee on a full time basis for Associates First Capital
Corporation, Associates Corporation of North America or their
respective subsidiaries.
"Employer" shall mean any subsidiary of Associates First Capital
Corporation that has an Employee eligible to participate or who is
participating or has participated in the past. All subsidiaries listed
on Attachment A are Employers hereunder.
"Executive" shall mean an Employee who is an officer or key executive
of the Company or a subsidiary Employed in a high-ranking executive or
managerial capacity.
"Hardship" shall mean a proven, unforeseen financial necessity or need
of the Executive, as determined by the Committee in its sole
discretion under its rules and policies.
"Participant" shall mean an Executive selected by the Committee and
whose participation in the Plan for a calendar year has been approved.
"Plan" shall mean this Executive Deferred Salary Plan, as from time to
time amended and in effect.
"Retirement" shall mean early retirement with the prior written
approval of the Company or normal or deferred retirement under any
defined benefit pension plan maintained by the Company and qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended.
"Salary" shall mean, at any time, the gross amount of base
compensation being paid to Executive for Employment before giving
effect to any agreements as to compensation hereunder.
3. ADMINISTRATION
The Plan shall be administered by the Committee, which shall have full
authority to interpret the Plan, to establish rules and regulations
relating to the Plan, to determine the criteria for eligibility to
participate in the Plan, to select Participants in the Plan, and to
make all other determinations and take all other actions necessary or
appropriate for the proper administration of the Plan. The Committee's
interpretation of the Plan, and all actions taken within the scope of
its authority, shall be final and binding on the Company, its
stockholders, Participants, Employees, former Employees and
beneficiaries.
4. ELIGIBILITY AND PARTICIPATION
Participation in the Plan for a calendar year shall be limited to
those key Executives whom the Committee shall select, on
3
<PAGE> 4
the basis of such Executives' impact on the long-term success of the
Company, and who might benefit from the deferral of amounts otherwise
constituting current compensation.
5. DEFERRAL OF SALARY
A Participant may, subject to the terms and conditions of this Plan,
elect to defer payment of a maximum of 35% of Salary annually under
this Plan and agree with the Company on the amount of Current Salary
to be paid to the Participant for the following calendar year and the
Deferred Amount which will not be paid, by completing the form
prescribed by the Committee. Such form shall include the Current
Salary, Deferred Amount, the period of deferral, and the period over
which payment is to be made. The form shall constitute an agreement
between the Company and the Employee as to the amount of Current
Salary and as to the Deferred Amount previously credited that shall be
paid in the following calendar year or years. The Committee may
further limit deferral by individual Participants, for any reason it
deems advisable.
(a) Election.
An election to defer Salary shall be made on or before the
last regular working day of the Company of the calendar year
preceding the calendar year for which the Salary agreement is
to be made and shall be effective upon delivery (or in the
event the form is mailed by certified mail, return receipt
requested, on the date of mailing) of the deferral form to the
Senior Vice President, Human Resources. Notwithstanding the
preceding sentence, in the calendar year in which this Plan is
initially adopted and in the case of an individual who becomes
an Executive during a calendar year, a Participant's election
to defer Salary that would otherwise be payable after the date
of the election may be made up to 60 days after the date the
Plan is adopted or the individual becomes an Executive and
eligible to participate herein, whichever is applicable. The
election made to reduce Salary by a Participant must remain in
effect for an entire calendar year (or, in the case of the
calendar year in which this Plan is adopted or the calendar
year in which an individual becomes an Executive, the
remaining portion of such calendar year to which the deferral
election relates) and may not be changed by any action taken
by the Participant thereafter. Nothing in this paragraph shall
be construed to limit any right a Participant may otherwise
have under this Plan with respect to the timing and form of
the payment of Salary deferred by such an election.
4
<PAGE> 5
(b) Payment of Deferred Amounts.
The Deferred Amount, plus or minus any earnings or losses thereon
pursuant to Subsection (c) hereof, upon the death, Disability or
Retirement of the Participant will be paid to the Participant (or, in
the event of the Participant's death, the person or estate determined
under Section 6 hereof), on the date(s) and in the manner selected by
the Participant on the deferral form prescribed by the Committee. Upon
termination of employment other than on account of death, Disability
or Retirement, the Deferred Amount will ordinarily be paid to the
Participant in a lump sum within sixty (60) days of such termination;
however, the Committee may, in its sole discretion, choose to defer
payment until the time previously elected by such Participant pursuant
to this Section 5.
(c) Earnings Credited on Deferred Amounts.
All Deferred Amounts will be credited with earnings and losses in the
manner prescribed by the Committee.
(d) Acceleration of Payment of Deferred Amounts.
Payment of the Deferred Amounts plus or minus any earnings or losses
may occur prior to the date(s) indicated in the payment deferral form
under the following circumstances:
(1) The Company may distribute to the Participant the Deferred
Amount at such date(s) as the Committee shall determine if the
Committee concludes, in its sole discretion, that events such
as changes in the federal tax laws or applicable accounting
principles or practices have rendered continued deferral of
the Deferred Amount undesirable either for the Company or the
Participant.
(2) At any time prior to complete payment of the Deferred Amount,
the Company may, in its sole discretion, pay to the
Participant (or, in the event of the Participant's death, the
person or estate determined under Section 6 hereof), an amount
not greater than that portion of the Deferred Amount that the
Committee determines, in its sole discretion, is necessary to
meet a Hardship arising from an emergency. The payment shall
be made only in instances of Hardship arising from causes
beyond the Participant's control, such as accident or illness,
divorce, financial reversal and such events as described in
the safe harbor hardship provisions of Treasury Reg.
Section l.401(K)-(1)(d)(2)(ii)(B). The Participant shall
apply in
5
<PAGE> 6
writing to the Committee for any Hardship payment under this
paragraph and shall furnish to the committee such information
as the Committee deems necessary and appropriate to make its
determination. Any hardship distribution under this Plan or
any hardship withdrawal by a Participant from the Company's
Retirement Savings and Profit Sharing Plan shall result in
suspension of the ability to defer Salary for the current year
of distribution and the following calendar year.
(3) In no event may payment of Deferred Amount, and earnings or
losses thereon, or any portion thereof, be accelerated in any
manner other than as provided above.
6. DESIGNATION OF BENEFICIARY
A Participant may designate a beneficiary or beneficiaries who, in the
event of the Participant's death prior to full payment of any Deferred
Amount hereunder, plus or minus earnings and losses therein, shall
receive payment of the Deferred Amount, plus or minus earnings and
losses thereon, due under the Plan. Such designation shall be made by
the Participant on a form prescribed by the Committee. The
Participant may, at any time, change or revoke such designation. A
beneficiary designation, or revocation of a prior beneficiary
designation, will be effective only if it is made in writing on a form
provided by the Company, signed by the Participant and received by the
Senior Vice President, Human Resources. If the Participant does not
designate a beneficiary or the beneficiary dies prior to receiving any
payment of the Account Balance, the Account Balance payable under the
Plan shall be paid to the Participant's estate. If the beneficiary
dies after receiving any payment of the Account Balance, any amounts
remaining to be paid shall be paid to the beneficiary's estate.
7. AMENDMENTS
The Board of Directors may at any time amend (in whole or in part)
this Plan. No such amendment which adversely affects a Participant's
rights to or interest in the Account Balance credited prior to the
date of the amendment shall be effective unless the Participant shall
have agreed thereto.
8. TERMINATION
(a) The Board of Directors may terminate this Plan (in whole or in
part) at any time. In the case of such a termination, the
following provisions of this Section 8 shall apply
notwithstanding any other provisions of the Plan to the
contrary.
6
<PAGE> 7
(b) In the event of termination of the Plan, the Company shall
distribute to the Participant in a lump sum all amounts
credited to the Participant's accounts under the Plan. Such
payment will be made not later than sixty (60) days after the
date of termination.
9. MISCELLANEOUS PROVISIONS
(a) This Plan is not a contract for employment of the Employee for
a certain period of time; it is totally gratuitous on the part
of the Company and the Employer. Neither the establishment of
this Plan, nor any action taken hereunder, shall be construed
as giving any Employee any right to be retained in the employ
of an Employer.
(b) A Participant's right and interest under the Plan may not be
assigned or transferred, except as provided in Section 6
hereof, and any attempted assignment or transfer shall be null
and void and shall extinguish, in the Company's sole
discretion, the Company's obligation under the Plan to pay the
Deferred Amount, plus or minus earnings or losses thereon,
with respect to the Participant.
(c) The Plan shall be unfunded. The Company shall not be required
to establish any special or separate fund, or to make any
other segregation of assets, to assure payment of the Account
Balance.
10. WITHHOLDING AND PAYMENTS
The Company shall have the right to deduct from any amount to be paid
to any Participant or beneficiary hereunder any taxes or other amounts
required by law to be withheld.
11. EFFECTIVE DATE
The Plan shall be effective on and after January 1, 1991.
7
<PAGE> 8
THE ASSOCIATES
EXECUTIVE DEFERRED SALARY PLAN
1996 SALARY AGREEMENT
________________________________________________________________________________
PARTICIPANT'S NAME: _________________________________________
________________________________________________________________________________
I. ELECTION FOR PAYMENT OR DEFERRAL OF CALENDAR YEAR 1996 SALARY:
I hereby agree with the Company to:
[ ] Pay my salary in full. (I do not want to defer any of my
salary in 1996).
OR
[ ] Defer $ _____________ of my Salary (base salary before
deductions) resulting in a Current Salary of
$ ___________________.
OR
[ ] Defer _____% of my Salary (base salary before deductions)
resulting in a Current Salary of ______% of Salary.
NOTE: YOU MAY ONLY DEFER UP TO 35% OF YOUR BASE SALARY.
II. DISTRIBUTION ELECTION DURING EMPLOYMENT FOR AMOUNTS DEFERRED IN 1996
AND PRIOR YEARS:
The following distribution election revokes and supersedes any prior
elections made.
Note: Amounts deferred cannot be accelerated from a later year to an
earlier year, but can be further deferred to a later year if the
election is made prior to the end of the year preceding the year in
which the Deferred Amount was to be paid. The Deferred Amount to be
distributed in any year will be reduced pro rata by the amount of net
losses, if any, credited to the Account Balance.
(over)
<PAGE> 9
Pay the Account Balance as follows:
[ ] All on the following date: ________________________________
(MM/DD/YY)
OR
[ ] $ __________ or _____% on ________________________________
(MM/DD/YY)
$ __________ or _____% on ________________________________
(MM/DD/YY)
$ __________ or _____% on ________________________________
(MM/DD/YY)
$ __________ or _____% on ________________________________
(MM/DD/YY)
$ __________ or _____% on ________________________________
(MM/DD/YY)
(YOU MAY ELECT ONE OR MORE INSTALLMENTS)
PLEASE NOTE: THIS FORM MUST BE COMPLETED AND RECEIVED BY JOHN W. LEE - HUMAN
RESOURCES - HOME OFFICE, DALLAS BY DECEMBER 29, 1995. If this form has not been
received by that date, no deferral of your 1996 salary may be made and any
prior elections regarding the distribution of your deferred account balance
will remain in effect.
This election form is intended as a brief summary of select provisions of the
Executive Deferred Salary Plan (the "Plan"). Please refer to the Plan for more
detailed information. Any provision of this election form may be amended,
modified, or eliminated at any time without the consent of the Participant.
Please complete the enclosed form for elections regarding death, Disability or
Retirement, and beneficiary and return it with this election form.
In addition, please be aware that FICA and Medicare tax will be due on all
deferred amounts. This will be deducted from your regular paycheck.
__________________ ________________________________________
Date Signature of Participant
THIS FORM MUST BE RECEIVED BY JOHN LEE IN HUMAN RESOURCES IN
DALLAS BY DECEMBER 29, 1995
<PAGE> 10
ADMINISTRATION OF AMOUNTS DEFERRED
In the event that you elect to defer any part of your 1996 Salary, Associates
First Capital Corporation (the "Company") shall establish and/or continue to
maintain in your name a deferred account.
Your deferred account shall be administered as follows:
i) any Salary deferred shall be credited to your
deferred account with interest at the prime rate,
unless you are currently participating in the plan
and have opted otherwise OR you have elected to
participate in 1996 and have completed a Quarterly
Investment Election Change Form;
ii) Account Balances may be reallocated to the available
investment options on the quarterly dates designated
by the Company; and
iii) your deferred account will be credited with earnings
and losses as experienced from the elected investment
options on a quarterly basis (on the last day of
March, June, September and December).
<PAGE> 11
THE ASSOCIATES
EXECUTIVE DEFERRED SALARY PLAN
DISTRIBUTIONS OTHER THAN DURING EMPLOYMENT
AND BENEFICIARY DESIGNATION - 1996
________________________________________________________________________________
PARTICIPANT'S NAME: _________________________________________
________________________________________________________________________________
I. DISTRIBUTION ELECTION IN THE EVENT OF DISABILITY OR RETIREMENT
If my employment BY the Company terminates due to my Disability or
Retirement, please PAY MY Account Balance as follows after the
determination OF my Disability or Retirement (check one):
[ ] Lump sum within thirty days.
[ ] Lump sum on or about January 31st of the next calendar year.
[ ] In ___________________ annual installments (not more than 15)
equal to the undistributed balance in my deferred account
divided by the number of remaining annual installments
beginning on or about January 31st of the next calendar year.
This election supersedes my distribution elections during employment.
II. DISTRIBUTION ELECTION IN THE EVENT OF DEATH
In the event of my death, please pay my Account Balance as follows to
my beneficiary after the date of my death (check one):
[ ] Lump sum within thirty days.
[ ] Lump sum on or about January 31st of the next calendar year.
[ ] In __________________ annual installments (not more than 15)
equal to the undistributed balance in my deferred account
divided by the number of remaining annual installments
beginning on or about January 31st of the next calendar year.
This election supersedes my distribution elections during employment
and Disability or Retirement.
(over)
<PAGE> 12
III. DISTRIBUTION AFTER TERMINATION (OTHER THAN DEATH, DISABILITY OR
RETIREMENT)
If my employment by the Company terminates for any reason other than
death, Disability or Retirement, the Company will pay my remaining
Account Balance in one lump sum within sixty days after (or as soon as
practicable thereafter) such termination of employment. The Committee
may, however, in its sole discretion, continue the period of deferral
and pay my account balance as elected under the distributions during
employment, death, Disability or Retirement.
I understand that the Company may, in its sole discretion, distribute
all or part of my Account Balance at an earlier date in accordance
with the terms of the Plan.
IV. BENEFICIARY DESIGNATION
In accordance with Section 6 of the Associates First Capital
Corporation Executive Deferred Salary Plan (the "Plan") and subject to
the terms and conditions of the Plan, I hereby designate the following
individual(s) as my beneficiary(ies):
NOTE: If any primary or contingent beneficiary is a trustee,
executor or guardian, indicate the title, the type of
instrument and date. For example - John Smith, Trustee under
agreement dated September 1, 1991.
PRIMARY:
1. Name: ___________________________________ Percentage ________%
___________________________________
Relationship: ___________________________ SS# ________________
Address: ______________________________________________________
Street Address
______________________________________________________
City State Zip Code
PRIMARY:
2. Name: ___________________________________ Percentage ________%
___________________________________
Relationship: ___________________________ SS# ________________
Address: ______________________________________________________
Street Address
______________________________________________________
City State Zip Code
<PAGE> 13
PRIMARY:
3. Name: ___________________________________ Percentage ________%
___________________________________
Relationship: ___________________________ SS# ________________
Address: ______________________________________________________
Street Address
______________________________________________________
City State Zip Code
PRIMARY:
4. Name: ___________________________________ Percentage ________%
___________________________________
Relationship: ___________________________ SS# ________________
Address: ______________________________________________________
Street Address
______________________________________________________
City State Zip Code
CONTINGENT: (receives distribution only if no primary beneficiary is
living)
1. Name: ___________________________________ Percentage ________%
___________________________________
Relationship: ___________________________ SS# ________________
Address: ______________________________________________________
Street Address
______________________________________________________
City State Zip Code
(over)
<PAGE> 14
CONTINGENT: (receives distribution only if no primary beneficiary is
living)
2. Name: ___________________________________ Percentage ________%
___________________________________
Relationship: ___________________________ SS# ________________
Address: ______________________________________________________
Street Address
______________________________________________________
City State Zip Code
I understand that in the event of my death prior to receipt of all amounts
payable to me pursuant to the Plan, any amounts not fully paid will be paid to
my above designated beneficiary(ies), or to my estate if I have not designated
a beneficiary, or all of my beneficiaries die prior to receiving full payment.
If more than one beneficiary is designated, settlement will be made in equal
shares to such of the designated beneficiaries (or beneficiary) as survive me,
unless a percentage is otherwise specified above. This Beneficiary Designation
revokes and supersedes any previous designation made by me.
I acknowledge that I have received a copy of the Plan and have read its
provisions and agree to be bound by the terms contained therein.
__________________ ________________________________________
Date Signature of Participant
IF YOU HAVE DESIGNATED A PRIMARY BENEFICIARY OTHER THAN YOUR SPOUSE, YOU MUST
HAVE YOUR SPOUSE SIGN THE CONSENT BELOW.
SPOUSE CONSENT
I hereby consent to the above beneficiary designation.
________________________________________
Signature of Spouse
<PAGE> 15
RESOLUTION ADOPTED BY WRITTEN CONSENT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
ASSOCIATES FIRST CAPITAL CORPORATION DATED OCTOBER 16, 1995
APPROVE AMENDMENTS TO EXCESS BENEFIT PLAN
RESOLVED, the Excess Benefit Plan Associates First Capital Corporation ("the
Company") is hereby amended to clarity the intent of the Company in contracting
with the participants to refrain from certain actions after termination of
employment so that Section 5.07 thereof shall read as follows:
"5.07 Obligations of Participant
Notwithstanding anything to the contrary in this Plan, no
benefit funded by the Company shall be vested and it shall be
a continuing requirement that the benefit hereunder be earned
by compliance with the following provisions.
(a) A Participant shall not at any time engage in a crime
involving dishonesty or fraud on the part of such
Participant in his relationship with the Company, and
if convicted of such a crime, all benefits that would
otherwise be payable to him or her under the Plan
shall be terminated.
(b) A Participant who has left employment with the
Company and its affiliates shall not do any act or
engage in any occupation or employment which is in
competition with or detrimental to the business of
the Company (as determined by the Committee in its
sole discretion). If a Participant does any such act
or so engage in competition or detrimental conduct,
such Participant shall be notified by the Company
that benefits, under this Plan, if not yet paid,
shall cease and be terminated unless such competitive
and/or detrimental conduct is discontinued within a
period of time that has been prescribed by the
Company. In such case, the benefit payable from this
Plan to a Participant shall be suspended (if in pay
status) during the prescribed period and, if the
competitive and/or detrimental conduct has not ceased
prior to the expiration of such period, the
Participant shall be deemed to have elected not to
receive a benefit and his benefit payments (if in pay
status) and all rights to receive a benefit in the
future shall be terminated on a permanent basis. The
Participant agrees to be bound by all the terms
hereof by accepting the benefits of this Plan.
The foregoing conditions are a fundamental consideration for
the promises of the Company in this Plan."
RESOLVED, that participants in the Corporate Annual Performance Plan, the Long
Term Performance Plan, the Executive Deferred Salary Plan and the Phantom Stock
Appreciation Plan Deferral Agreement shall be entitled to a conversion election
with respect to their deferred accounts four times per year on the last day of
each March, June, September and December and that for 1995 only the participant
shall be entitled to the election currently provided on September 1 and the
election on the new quarterly date of September 30. Thereafter the conversion
dates shall be quarterly.
FURTHER RESOLVED, that any one of the members of the Compensation Committee is
authorized to execute and deliver such amendments, agreements or other writings
as may be necessary to carry into effect the foregoing resolutions.
<PAGE> 16
RESOLUTION ADOPTED BY WRITTEN CONSENT OF THE
BOARD OF DIRECTORS OF ASSOCIATES FIRST CAPITAL CORPORATION
DATED DECEMBER 29, 1995
DESIGNATION OF EXECUTIVE DEFERRED SALARY PLAN COMMITTEE
RESOLVED, that the Executive Deferred Salary Plan Committee shall be the
Compensation Committee of the Board of Directors of this Corporation, until the
further action of this Board of Directors.
<PAGE> 1
EXHIBIT 10.14
ASSOCIATES CORPORATION OF NORTH AMERICA
DEFERRED COMPENSATION UNIT PLAN AGREEMENT
<PAGE> 2
ASSOCIATES CORPORATION OF NORTH AMERICA
DEFERRED COMPENSATION UNIT PLAN AGREEMENT
THIS AGREEMENT, in duplicate original, is entered into on this _____
day of __________ , 19__, by and between Associates Corporation of North America
("Company") and _____________________ ("Executive").
I
Effective Date
If Executive has entered into prior DUP agreements, this agreement
shall be effective as of October 1, 1980 and the terms hereof shall govern and
supersede all prior agreements entered into between Executive and Company for
Executive's Account Balance as of such Effective Date and for Executive's
participation on and after the Effective Date. If Executive has not entered
into prior DUP agreements, this agreement shall be effective on the date
executed by Executive and Company.
II
Definitions
2.1 For purposes of this agreement the following capitalized terms
shall have the meaning set forth herein:
(a) "Account" shall mean the record maintained by the Company
reflecting Executive's Deferred Amounts, Stock Units, Cash Account and interest
and all other adjustments provided for in this Plan.
1
<PAGE> 3
(b) "Account Balance" shall mean at any time the amount credited
to the Executive's Cash Account, the value of the Stock Units and such
securities upon which the value of a unit established under this Plan is based
and accrued interest on the Cash Account and such other units but not credited
at such time.
(c) "Cash Account" shall mean amounts credited to Executive's
Account in U. S. Dollar value. The balance in the Cash Account shall bear
interest on a daily basis computed on a 365 or 366 day year as the case may be
at Prime Rate in effect from time to time.
(d) "Committee" shall mean the Compensation Committee of the
Board of Directors of Associates Corporation of North America.
(e) "Deferred Amount" shall mean the amount by which the Current
Salary is reduced from time to time as agreed upon by the Executive and the
Company and deferred in accordance with the terms of the Plan.
(f) "Current Salary" shall mean, at any time, the gross amount
being paid to Executive for Employment before giving effect to any agreements
as to compensation hereunder.
(g) "Employed" or "Employment" shall mean performing services as
an employee on a full time basis for Associates First Capital Corporation,
Associates Corporation of North America and their respective subsidiaries.
(h) "Executive" shall mean the employee employed in a managerial
or executive capacity with the Company whose
2
<PAGE> 4
participation in the Plan has been approved by the Compensation Committee.
(i) "Notification Date" shall mean the 30th day prior to the
first day of each calendar quarter.
(j) "Price" shall mean whichever of the following prices is
applicable to a share of Common Stock or such other security upon which the
value of a unit is based:
(i) closing price of such securities on the New York
Stock Exchange or if a closing price is not quoted on the New York
Stock Exchange at the time of valuation, then (ii) the closing sales
price on such other principal national securities exchange on which
such security is admitted to trading, or if a closing price is not
quoted on such other national securities exchange, then (iii) the
closing bid and asked per unit price of the security on the over the
counter market as quoted by the National Association of Securities
Dealer Automated Quotation System ("NASDAQ") or if such security is
not quoted on NASDAQ, then (iv) the closing bid and asked per unit
prices for the security as reported by the National Quotation Bureau
Incorporated, or if none of the foregoing methods make reported price
information available, then (v) by such per unit price as the
Committee determines approximate fair market value based on
information available at the time.
3
<PAGE> 5
(k) "Plan" shall mean this Deferred Compensation Unit Plan
Agreement, effective October 1, 1980, and as it may be hereafter be amended
from time to time.
(l) "Prime Rate" shall mean the per annum rate of interest as
announced by Manufacturers Hanover Trust Company of New York for unsecured
short term loans to its most credit worthy borrowers and commonly known or
announced as "prime rate".
(m) "Salary" shall mean the Current Salary reduced by the agreed
upon Deferred Amount pursuant to Article IV.
(n) "Stock Unit" shall mean the equivalent of a share of Common
Stock of Gulf + Western Industries, Inc. ("Common Stock").
III
Participation
3.1 The Committee shall in its sole discretion approve the
Executive for participation in the Plan. Participation shall be evidenced by
the execution of this Plan by Executive and approval by the Committee.
3.2 Participation hereunder will continue until termination of
Executive's participation. Notwithstanding any termination of participation the
Executive's Account Balance shall not become payable but shall remain subject
to the provisions of Article VI.
3.3 (a) Active participation hereunder shall terminate upon the
earlier of:
4
<PAGE> 6
(i) decision of the Committee and notification to
Executive,
(ii) termination of Employment, or
(iii) written election of Executive submitted to the
officer of the Company designated by the Committee.
(b) In the event the Executive is transferred to any
affiliate of Associates First Capital Corporation and its subsidiaries, the
Committee shall determine whether such transfer constitutes termination of
employment for purposes of this Agreement. "Affiliate" of the Company as used
herein shall mean any corporation controlling, or under common control with,
Associates First Capital Corporation.
3.4 Upon termination of participation Executive shall not be
entitled to make any further elections as to Deferred Amounts and, if Executive
has not terminated Employment, the Executive's Salary shall revert to the
Executive's then Current Salary on the first payday of the calendar quarter
which immediately follows such termination of participation.
IV
Deferred Compensation
4.1 Subject to the terms hereof, from time to time Executive and
the Company may agree as to the Salary which will be paid to Executive for
services which may be performed by Executive subsequent to such agreement and
the Deferred Amount which will not be paid to Executive except in accordance
with Article VI.
<PAGE> 7
Such Salary may be any amount less than Executive's Current Salary.
4.2 The agreement as to Salary shall be evidenced by a written
request submitted by the Executive and accepted by the Committee or its
representative. The written request must specify Executive's Current Salary,
Deferred Amount, Salary and the Amounts to be credited to the Cash Account or
as Stock Units or combination thereof. The written requests must be received
and approved on or before the Notification Date preceding the calendar quarter
for which such Salary agreement is to be effective. Beginning with the first
payday in the calendar quarter for which the Salary agreement is to be
effective, the amount of Salary agreed upon will be paid to Executive on each
regular payday and the Deferred Amount will be credited to the Executive's
Account on each regular payday until the earlier of (i) the date specified in
Section 3.4 or (ii) the beginning of a subsequent calendar quarter for which a
subsequent Salary agreement has been entered into in accordance with the
foregoing provisions.
V
Executive's Account
5.1 Deferred Amounts shall be credited either to the Cash Account
or as Stock Units. The number of Stock Units to be credited shall be determined
by dividing the designated amount by the unit Price for the Common Stock on the
date credited.
6
<PAGE> 8
During Employment interest accrued on the Cash Account shall be
credited to the Cash Account at the end of each calendar quarter.
5.2 The amount of the Deferred Amount which is not translated
into Stock Units shall be credited to the Executive's Cash Account. No
fractional Stock Units shall be credited to the Account. Any amount remaining
after determining the number of whole Stock Units to be credited to the Account
shall be credited to the Cash Account.
5.3 If Executive's Account has credited to it Stock Units or
other units, for each Stock Unit or other unit there shall be credited to the
Executive's Account, as appropriate, amounts equal to any dividends declared
and paid on a share of Common Stock, or interest on such other security upon
which a unit is based, such amounts to be credited as of the dividend or
interest payment date and in such manner that Executive's account with the
Company hereunder shall accrete to the same extent as though Executive held the
amount of Common Stock or other security represented by the units credited to
his Account and had purchased such Stock or other securities on the date the
units are credited to his Account. Any such accretions shall be converted into
additional whole units based upon the Price of the Common Stock or other
securities on the payment date for any such dividend or interest payment, or,
if such record date shall not be a market trading day, upon the preceding
market trading day. Stock Units shall be adjusted to reflect stock dividends,
stock splits, stock
7
<PAGE> 9
combinations or any other change in the Common Stock, all in such manner that
the Stock Units credited to Executive's Account shall reflect such changes to
the same extent as though Executive held the amount of Common Stock represented
by the Stock Units.
5.4 Company shall have no obligation to set aside, earmark, or
entrust any fund, property, or shares of Common Stock, or other securities with
which to make payment or distribution in fulfillment of its obligations
hereunder. Executive and any successor in interest to him, in respect of all
payments or distributions to be made hereunder, shall be and remain simply a
creditor of Company in the same manner as any other creditor having a general
claim for unpaid compensation as, if and when his rights or the rights of his
successors in interest to receive the same shall mature or become payable and
distributable.
5.5 During Employment or if an Executive has taken retirement in
accordance with the Company's then existing policy, so long as any Account
Balance remains, Executive may elect, with the approval of the Committee, that
all or any portion credited to the Account, as of July 31 of any year, be
converted from or into Stock Units or to Cash Account or from other units and
in the case of conversion from or to Stock Units or from other units or such
securities upon which other units are based the conversion will be based upon
the Price of the Common Stock averaged over the fifteen market trading days
immediately preceding such July 31. Any election in accordance with this
section 5.5 must be delivered in
8
<PAGE> 10
writing to the Company not later than thirty (30) days prior to such July 31.
VI
Payment of Account Balances
6.1 No amounts may be paid from the Account Balance except after
termination of Employment and in accordance with this Article VI. Upon
termination of Employment of Executive for any reason, including death, the
Account Balance as of the date of such termination shall be determined and paid
and distributed to him or to his beneficiary in accordance with the terms of
this Article VI.
6.2 For purposes of determining the Account Balance, the "value"
of the Stock Units and such other units as may have been established pursuant
to this Plan shall be determined by multiplying the units in the account by the
average of the Prices for the applicable security on which the unit is based
over the calendar month preceding the date of termination.
6.3 The Account Balance shall, in accordance with the provisions
of this Article VI, be paid in one of the forms set forth below. The manner and
time of distribution of Account Balances shall be as determined by the
Committee in its sole discretion. In exercising its discretion the Committee
shall be entitled to consider as one factor a request of the Executive
submitted thirty days prior to termination, or in the case of death, submitted
by the designated beneficiary within thirty days of Executive's death, as to a
particular form of payment delivered
9
<PAGE> 11
to the officer of the Company designated from time to time by the Committee.
(a) In the case of death, the Account Balance shall be paid to the
Executive's beneficiary or beneficiaries, designated under Section 6.5 hereof,
in a lump sum in cash, or the entire Account Balance determined as of the
termination date credited to the Cash Account and paid in periodic cash
payments over a period not to exceed ten years, as determined by the Committee.
Accrued Interest on the Cash Account in the case of periodic distributions
shall be paid currently with each distribution.
(b) In the event Employment is terminated for any reason other
than death, the Account Balance shall be paid in cash either in lump sum, or in
such intervals over such a period as may be determined by the Committee. The
Committee may elect to allow the undistributed Account Balance to remain in
units. Under this 6.3 (b) Accrued Interest on amounts in the Cash Account shall
be credited quarterly or paid currently with distributions, if such
distributions are more frequent. If the Account Balance remains as units, the
units shall continue to accrete and be adjusted as provided in Article V on the
unpaid balance from time to time as provided in 5.3 above and the Account
Balance will be revalued at the time of each distribution, based on the average
of the Prices over the calendar month preceding each such distribution.
6.4 If Executive receives the distribution attributable to Stock
Units in one lump sum in cash, and if that former Executive
10
<PAGE> 12
desires to purchase for his own account in the open market, Common Stock with
the proceeds of the distribution attributable to the Stock Units, then the
following provision will apply. The Company will reimburse to the former
Executive the net amount necessary to reimburse the cost of brokerage fees
incurred by such former Executive in market trades during the ten trading days
on the securities exchange on which such securities are traded, subsequent to
the date of the distribution from the Plan for the purchase of Common Stock in
a dollar amount not exceeding the dollar amount of the distribution
attributable to Stock Units. Such reimbursement shall be made upon evidence of
such brokerage fees satisfactory to the Committee.
6.5 Executive, within thirty (30) days after becoming a
participant under this Plan, shall file with the officer of the Company
designated from time to time by the Committee a notice in writing designating
one or more beneficiaries to whom payments otherwise due the participant shall
be made in the event of his death. The beneficiary or beneficiaries so
designated shall be one or more persons or entities (including a trust) other
than his creditors, or the creditors of his estate, or an entity in which any
of the foregoing may have an interest. Executive shall have the right to change
the beneficiary or beneficiaries from time to time; provided, however, that any
change shall not become effective until it is received in writing by the
officer of the Company designated from time to time by the Committee. If no
such designation is on file with the Company, or to the extent that any
<PAGE> 13
such designation is ineffective, the beneficiary shall be the estate of
Executive.
VII
Reduction or Change in Outstanding Securities
In the event the face amount of the outstanding securities upon which
a unit is based shall be reduced to less than 40% of the total face amount of
the securities originally issued, the securities, shall, as of a date
determined by the Committee, cease to be used for determining either the number
or the value of units in a participant's account, and the Committee shall
designate a revised method for unit determination purposes. In the event of a
recapitalization, conversion, call, tender or modification of a security upon
which a unit is based or other similar transaction affecting the status of such
security, which in the opinion of the Committee substantially alters or changes
the advisability of using such security as basis for units under this Plan,
then the Committee as of a date determined by it may cease using such security
for determining the number and value of such units and designate a revised
method or alternative security upon which to base or value such units.
VIII
Administration of Plan
8.1 The administration of this Plan and the construction and
interpretation of any provisions hereof shall be the responsibility of the
Committee and any construction,
12
<PAGE> 14
interpretation or decision by the Committee shall be final and conclusive and
shall be binding upon the Company and upon Executive. The Committee may
establish and promulgate such rules and regulations of general application
relating to this Plan as it may determine are desirable and appropriate.
8.2 The entries made to Accounts and determinations of the value
of Account Balances shall be made by the Committee or by the Company, as
appropriate, and the determinations so made shall be conclusive and binding as
to Executive, beneficiaries and the Company and each Executive accepting the
benefits hereof shall be conclusively presumed to accept the same on the
condition that he will not dispute or contest such determinations.
8.3 The Committee may amend or terminate this Plan at any time
provided, however, no such amendment or termination shall, as of the date it
becomes effective, retroactively adversely affect the rights of Executive with
respect to any units or amounts credited prior to the effective date of such
amendment.
IX
General
9.1 It is expressly agreed that Executive will not assign, set
over or otherwise dispose of or attempt to dispose of any interest hereunder,
and any interest of Executive hereunder shall not be the subject of levy by any
creditor of Executive.
9.2 The present agreement shall not constitute a contract or
guarantee or employment for any given interval of time or of a
13
<PAGE> 15
guarantee or agreement as to any amount of Current Salary for any given
interval of time.
9.3 This Plan shall be binding upon, and shall be assumed in all
respects by, any successors or assigns of the Company.
DATED: _____________________
EXECUTIVE ASSOCIATES CORPORATION OF
NORTH AMERICA
____________________________ ____________________________
14
<PAGE> 16
WRITTEN CONSENT TO RESOLUTIONS
OF THE EXECUTIVE COMMITTEE
OF THE BOARD OF DIRECTORS OF
ASSOCIATES CORPORATION OF NORTH AMERICA
(DELAWARE)
The undersigned, being all the members of the Executive Committee of the Board
of Directors of Associates Corporation of North America, a Delaware corporation
(hereinafter referred to as the "Corporation"), hereby consent to the following
action to be taken by the Corporation without a meeting of the Executive
Committee:
SALE OF FOREIGN SUBSIDIARIES TO
PARAMOUNT COMMUNICATIONS INC.
RESOLVED, that the officers and employees of this Corporation
be, and each of them is, hereby authorized to sell, effective October
30, 1989, to Paramount Communications Inc. for a total consideration
of $1,020,000,000 all of the stock of the following subsidiaries for
the considerations shown:
<TABLE>
<CAPTION>
COMPANY STOCK CONSIDERATION
------- ----- -------------
<S> <C> <C>
Associates Capital Corporation Common and Series 1
of Canada First Preferred $ 20,000,000
ACONA BV Preference and
Ordinary Shares $200,000,000
AIC Corporation Share Capital $750,000,000
Associates Financial Services
Company of Puerto Rico, Inc. Common $ 20,000,000
Associates Diverisifed
Investments Ltd. Common $ 30,000,000
</TABLE>
and such officers and employees are further authorized to prepare,
execute and deliver such documents and take all such action as may be
required to carry out the intent of this resolution.
* * * * *
AMEND DEFERRED COMPENSATION UNIT
PLAN AND EXECUTIVE INCENTIVE PLAN
RESOLVED, that, effective October 31, 1989, the Deferred
Compensation Unit Plan and the Executive Incentive Plan of this
Corporation be, and each of them is, hereby amended by deleting the
"Stock Unit"
<PAGE> 17
as defined in such plan which is based on a share of common stock of
Paramount Communications Inc. and by establishing a new unit based
upon the Magellan Fund, an open-end diversified mutual fund managed by
Fidelity Investment Management Inc.
FURTHER RESOLVED, that the officers of this Corporation be and
each of them hereby is authorized to prepare and execute such
amendments, documents, and agreement and to obtain such elections and
consents from the participants in such plan as may be advisable to
carry into effect the foregoing amendments.
* * * * *
RESOLVED, That this consent shall be in lieu of a meeting of
the Executive Committee of the Board of Directors of this Corporation
and shall be filed in the minute book of this Corporation in place of
the minutes of a meeting.
DATED this 25th day of October, 1989.
/s/ MARTIN S. DAVIS /s/ MICHAEL S. HOPE
---------------------- ----------------------
Martin S. Davis Michael S. Hope
/s/ RONALD J. KRAUSE /s/ DONALD ORESMAN
------------------------ ----------------------
Ronald J. Krause Donald Oresman
/s/ REECE A. OVERCASH, JR.
---------------------------
Reece A. Overcash, Jr.
<PAGE> 18
RESOLUTIONS ADOPTED BY WRITTEN CONSENT
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF ASSOCIATES CORPORATION OF NORTH AMERICA DATED OCTOBER 3, 1995
APPROVE AMENDMENTS TO THE DEFERRED COMPENSATION UNIT PLAN AND EXECUTIVE
INCENTIVE PLAN
RESOLVED, the Deferred Compensation Unit Plan and the Executive Incentive Plan
of Associates of Corporation of North America ("the Company") are hereby
amended to provide for the conversion of account balances by participants 4
times per year on the last day of each March, June, September and December.
FURTHER RESOLVED, that any one of the members of the Compensation Committee is
authorized to execute and deliver an amendment to the Deferred Compensation
Unit Plan and the Executive Incentive Plan carrying into effect the foregoing
resolution.
<PAGE> 19
AMENDMENT TO DEFERRED COMPENSATION UNIT PLAN AGREEMENT
OF ASSOCIATES CORPORATION OF NORTH AMERICA
The Deferred Compensation Unit Plan Agreement of Associates Corporation of
North America which is effective on the later of October 1, 1980 or the date
executed by Executive and the Company, is hereby amended in the following
respects:
1. The defined term Stock Unit in Section 2.1(n) is hereby amended to
read in its entirety as follows: "Stock Unit shall mean the equivalent
of 1 share of the Magellan Fund, an open end diversified mutual fund
sponsored and managed by Fidelity Management and Research Company."
This amendment will be effective as of October 31, 1989.
2. Section 5.5 is hereby amended to read in its entirety as follows:
"During Employment or if an Executive has taken retirement in
accordance with the Company's then existing policy, so long as any
Account Balance remains, Executive may elect, with the approval of the
Committee, that all or any portion credited to the Account, as of the
last day of each March, June, September and December ("Conversion
Dates") of any year, be converted from or into Stock Units or to Cash
Account or from other units and in the case of conversion from or to
Stock Units or from other units or such securities upon which other
units are based, the conversion will be based upon the Price of the
Magellan Fund on each such Conversion Date. Any election in accordance
with this section 5.5 must be delivered in writing to the Company on
or before the applicable Conversion Date." This amendment shall be
effective with the election occurring on the last day of December,
1995.
Executed this 11th day of October, 1995.
By: /s/ JAMES B. WATTS
--------------------------------------------
James B. Watts
Executive Vice President and Member
of the Compensation Committee
<PAGE> 1
EXHIBIT 10.15
ASSOCIATES CORPORATION OF NORTH AMERICA
EXECUTIVE INCENTIVE PLAN
<PAGE> 2
ASSOCIATES CORPORATION OF NORTH AMERICA
EXECUTIVE INCENTIVE PLAN
(Restated 7-31-80)
(Revised 3/15/83)
ARTICLE I
DEFINITIONS
1.1 The following capitalized terms used in this Plan shall have
the respective meanings set forth in this section:
(a) "Account Balance" shall mean at any time the amount credited
to a participant's Cash Account, the value of the Stock Units and other units
representing securities upon which the value of such units may be established
credited to an Executive's Deferred Account and interest on the Cash Account
accrued but not credited at such time.
(b) "Cash Account" shall mean that portion of an Executive's
Deferred Account reflecting amounts credited to the participant in U.S. Dollar
amounts. The balance in the Cash Account shall bear interest on a daily basis
computed on a 365 or 366 day year, as the case may be, at the Prime Rate.
(c) "Committee" shall mean the Compensation Committee of the Board
of Directors of Associates Corporation of North America.
(d) "Company" shall mean Associates First Capital Corporation and
Associates Corporation of North America and their subsidiaries.
<PAGE> 3
(e) "Deferred Account" shall mean the record maintained by the
Company reflecting a participant's Cash Account and Stock Units.
(f) "Deferred Amount" shall mean that amount of any award
hereunder which a participant has elected to defer under the provisions of 6.1.
(g) "Plan" shall mean this Executive Incentive Plan, as amended
and restated, effective August 1, 1980.
(h) "Price" shall mean for Common Stock and such other security
upon which the value of such other unit established under this Plan is based
(i) the closing price per unit of such securities on the New York Stock
Exchange or if no price is quoted on the New York Stock Exchange, then (ii) the
closing per unit sales price on such other principal national securities
exchange on which such security is quoted, or if no closing price is quoted on
such other national securities exchange, then (iii) the average of the closing
bid and asked per unit price of the security on the over the counter market as
quoted by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or if such security is not quoted on NASDAQ, then (iv) the
average of the closing bid and asked per unit price for the security as
reported by the National Quotation Bureau Incorporated, or if none of the
foregoing methods make reported price information available, then (v) by such
per unit price as the Committee determines approximates fair market value based
on information available at the time.
2
<PAGE> 4
(i) "Prime Rate" shall mean the per annum rate of interest charged
by Manufacturers Hanover Trust Company for short term unsecured loans to its
most creditworthy borrowers as announced from time to time.
(j) "Prior Plan" shall mean the Executive Incentive Plan as in
effect from time to time prior to August 1, 1980.
(k) "Stock Unit" shall mean the equivalent of a share of Common
Stock par value $1 per share of Gulf + Western Industries, Inc. ("Common
Stock").
ARTICLE II
ANNUAL PLAN
The Prior Plan became effective January 1, 1964, and has continued in
effect since such date as amended and restated from time to time until August
1, 1980. The Prior Plan shall govern participation and incentive amounts
through the fiscal year ended July 31, 1980. The Plan, as amended and restated
herein, shall continue in full force and effect and shall apply for each fiscal
year beginning August 1, 1980 and each fiscal year thereafter for all purposes
as to Account Balances on and after such date and participation for such years
unless on or before June 15 of any fiscal year the Board of Directors shall
elect to discontinue the Plan. All computations for the purpose of determining
incentive amounts under the Plan shall be made on the basis of a fiscal year
beginning on August 1 and ending on July 31.
3
<PAGE> 5
ARTICLE III
ELIGIBILITY FOR PARTICIPATION
All employees of the Company shall be eligible to participate in the
Plan (hereinafter referred to as the "Eligible Executives").
ARTICLE IV
DESIGNATION OF PARTICIPANTS
On or before July 15, 1980 and on or before July 15 of each fiscal
year thereafter, the Committee shall designate those Eligible Executives who
shall participate hereunder for the succeeding fiscal year. Each such
participant shall be notified on or before July 15 of each fiscal year that he
has been designated as a participant for the following fiscal period. However,
the Committee may designate participants after July 15 for participation in the
following fiscal period but such designation shall be made not later than 30
days prior to the termination of the fiscal year in which the designee is to be
a participant.
ARTICLE V
AMOUNT AND DISTRIBUTION OF INCENTIVE FUND
Annually, the Committee shall determine, in its discretion, for each
fiscal year the amount of an incentive fund, if any, available to be
distributed among the participants in the Plan and the basis for the
distribution of such fund among such participants.
4
<PAGE> 6
ARTICLE VI
ELECTION BY PARTICIPANTS
6.1. Each participant may elect that a portion or all of the
incentive fund, if any, awarded to him for any fiscal year be paid currently in
cash or deferred by designating the amounts to be paid in cash and the Deferred
Amount and designate that part of the Deferred Amount to be credited to his
Deferred Account as Stock Units or to the Cash Account. The election of the
Deferred Amount for any fiscal year must be irrevocably made in writing and
delivered prior to the commencement of the fiscal year (or in the case of a
designated participant selected subsequent to the beginning of a fiscal year,
within 15 days following receipt of notice of selection as a participant) to
the officer of the Company designated from time to time by the Committee. The
election as to portions of the Deferred Amount to be credited to the Cash
Account or as Stock Units shall be made at the same time as the election as to
Deferred Amounts. In the absence of any election by the designated participant
within the times provided, the participant's share, if any, of the incentive
fund for that fiscal year shall be paid currently in cash to the participant.
6.2. (a) Amounts elected to be payable in cash shall be paid to
the participant on or before the November 1 following each fiscal year.
(b) Deferred Amounts shall be credited to the Deferred
Account of each participant on or before the November 1 following the end of
each fiscal year.
<PAGE> 7
(c) The number of whole Stock Units to be credited to the
Deferred Account shall be determined by dividing the applicable part of a
participant's Deferred Amount by the Price for a share of Common Stock on the
last trading day of the fiscal year for which the award was made. Only the
number of whole Stock Units so determined shall be credited to the Deferred
Account of the participant and any part of the Deferred Amount remaining shall
be credited to the Cash Account.
(d) The Deferred Amount which a participant has not
elected to be translated into Stock Units or any Deferred Amount remaining
after determining the number of whole units to which the participant is
entitled, or, the entire amount of the participant's award, in the absence of a
timely election as set forth in Section 6.1 above, shall be credited to the
Cash Account. Any amount credited to the Cash Account shall bear interest from
the date credited. Interest earned during each fiscal quarter shall be
credited at the end of such quarter.
ARTICLE VII
ACCOUNT BALANCE OF PARTICIPANTS
7.1. The Company shall maintain a Deferred Account for each
participant in the Plan.
7.2. (a) There shall be credited to the Deferred Account for
each Stock Unit amounts equal to any dividends paid on a share of Common Stock
and for such other security upon which the value of a unit established hereunder
may be based, dividends or interest as the case may be, such amounts to be
credited as of the dividend or interest payment date and in such manner that the
<PAGE> 8
participant's Deferred Account shall accrete to the same extent as though the
participant held the number of shares Of Common Stock or such other securities
represented by the units credited to his account from and after the date so
credited. Any such accretions shall be converted into additional whole Common
Stock or such other securities, to the extent possible with the funds
available, based upon the Price of a share of Common Stock or such other
security, respectively, on the record dates for such dividend or interest
payments, or, if such record dates shall not be a market trading date, upon the
next preceding market trading day. Stock Units shall be adjusted to reflect
stock dividends, stock splits, stock combinations or any other change in the
Common Stock, all in such manner that the Stock Units credited to the
participant shall reflect such changes to the same extent as though the
participant held the number of shares of Common Stock represented by the Stock
Units. Any amount remaining after crediting the whole units as provided above
shall be credited to the participant's Cash Account.
(b) If an offer is made generally to holders of a
security upon which the value of a unit under this plan is based to exchange or
convert such security for or into a security of another issue or class, then
the Committee may in its discretion
7
<PAGE> 9
establish an additional unit under this plan based on the security being
offered and may by notice to participants grant the same terms of conversion or
exchange to the participants in this plan as if such participants had been the
holders of such security upon which units credited to their accounts are based
and an addenda shall be attached to the Plan setting forth the terms of the
option granted by the Committee and other applicable terms and conditions.
7.3. During employment (including the year ended July 31, 1980 in
the case of participant taking retirement in that year) or if the participant
has taken retirement in accordance with Company policy at the election of the
participant, and with the approval of the Committee, any amount or portion
thereof credited to the participant's Deferred Account may be converted as of
any July 31 ("Conversion Date") (i) from or into Stock Units or Cash Account as
selected by the participant and (ii) from, but not into, other units which may
have been established pursuant to 7.2(b). In the case of conversion from or to
Stock Units or such other units, the conversion shall be based upon the average
closing Price of the Common Stock, or such security as the other unit may be
based, as appropriate, over the fifteen market trading days immediately
preceding such Conversion Date. Any election of the participants in accordance
with this Section 7.3 must be delivered in writing to the Committee not later
than thirty (30) days prior to such Conversion Date.
8
<PAGE> 10
7.4. The Company shall have no obligation to set aside, earmark, or
entrust any fund, assets, property, shares of Common Stock or other securities
with which to fund, or to make payment or distribution in fulfillment of, its
obligations hereunder. The participant and any successor in interest to him, in
respect of all payments or distributions to be made hereunder, shall be and
remain simply a creditor of the Company in the same manner as any other
creditor having a general claim for unpaid compensation as, if and when his
rights or the rights of his successors in interest to receive the same shall
mature or become payable and distributable.
ARTICLE VIII
NON-VESTING OF BENEFITS
No right or benefit under this Plan for any fiscal year shall vest in
any participant by reason of his designation as a participant hereunder and no
right, benefit or payment under this Plan shall be subject at any time to
anticipation, sale, assignment, pledge, encumbrance or charge and any attempt
to anticipate, sell, assign, pledge, encumber or charge the same shall be void.
No right, benefit or payment hereunder shall in any manner be available for or
subject to the debts, contracts, liabilities or torts of the person entitled to
such benefits.
9
<PAGE> 11
Any person by reason of being designated as a participant in the Plan
shall have no right, title or interest in or to the incentive fund for such
fiscal year except to the extent of a specific amount actually awarded by the
Committee to the participant for the fiscal year in question.
ARTICLE IX
DETERMINATION OF AND PAYMENT OF ACCOUNT BALANCES
9.1. No payments from the Account Balance of a participant shall be
made prior to termination of employment. Upon termination of the employment of
a participant for any reason, including death, the participant's Account
Balance as of the date of such termination shall be determined and paid in
accordance with the terms of this Article IX.
9.2. For purposes of determining the Account Balance, the value of
the units shall be determined by multiplying Stock Units and such other units
as may have been established pursuant to this Plan credited to the Account
Balance by the average of the Prices over the thirty days preceding termination
of employment.
9.3. Except as otherwise provided herein, the manner and time of
payment of the Account Balance shall be at the sole discretion of the
Committee. In exercising its discretion the Committee shall be entitled to
consider as one factor a request in writing from a participant, or in the case
of death the beneficiary or beneficiaries designated pursuant to 9.4, as to a
particular form of payment delivered to the officer of the Company
10
<PAGE> 12
designated from time to time by the Committee 30 days prior to termination of
employment, or, in the case of death within 30 days after such death.
(a) In the case of death of a participant, the Account
Balance of the participant shall be paid to the participant's beneficiary or
beneficiaries, designated under Section 9.4 hereof, in a lump sum in cash, or
in periodic cash payments in such intervals over such period of time, all as
determined by the Committee, plus interest on the unpaid amount at the Prime
Rate paid currently with each such periodic payment or credited to the Account
Balance quarterly if such payments are less frequent than quarterly. The amount
of the participant's incentive credit for the fiscal year in which death occurs
shall be determined on or before November 1 following such fiscal year and
shall be paid to his beneficiaries in cash in the manner determined by the
Committee.
(b) In the event the employment of a participant is
terminated for any reason other than death, the participant's Account Balance
shall be paid in cash either in lump sum, or in such intervals over such a
period as may be determined by the Committee. The Committee may elect to allow
all or part of the Account Balance to remain in units or in the Cash Account in
accordance with the participant's last election prior to termination. Deferred
units shall accrete and be adjusted as
11
<PAGE> 13
provided in Article VII and the Cash Account shall bear interest at the Prime
Rate credited quarterly or paid currently with each distribution if such
distributions are more frequent. If the Account Balance remains as units, the
Account Balance will be revalued as set forth in Section 9.2 above, at the time
of each distribution, except that the Prices shall be averaged over the
calendar month preceding each such distribution.
9.4. Each person, within thirty (30) days after becoming a
participant under this Plan, shall file with the officer of the Company
designated from time to time by the Committee a notice in writing designating
one or more beneficiaries to whom payments otherwise due the participant shall
be made in the event of the participant's death. The beneficiary or
beneficiaries so designated shall be one or more persons or entities (including
a trust) other than his creditors, or the creditors of his estate, or an entity
in which any of the foregoing may have an interest. The participant shall have
the right to change the beneficiary or beneficiaries from time to time;
provided, however, that any change shall not become effective until it is
received in writing by the officer of the Company designated from time to time
by the Committee. If no such designation is on file with the Company, or to the
extent that any such designation is ineffective, the beneficiary shall be the
estate of such participant.
9.5. If the participant receives the Account Balance in one lump
sum payment in cash, and the former participant desires to purchase for his own
account in the open market Common Stock with
12
<PAGE> 14
the proceeds of the distribution attributable to the Stock Units, then the
following provision will apply. The Company will reimburse the former
participant an amount equal to the brokerage fees incurred by such former
participant in market trades during the ten trading days on the securities
exchange on which such securities are traded, subsequent to the date of the
distribution from the Plan for the purchase of Common Stock in a dollar amount
not exceeding the dollar amount of the Account Balance attributable to Stock
Units. Reimbursement shall be against written substantiation of satisfaction of
the above requirements satisfactory to the Committee submitted by the
terminated participant.
ARTICLE X
TERMINATION OF EMPLOYMENT
The Committee shall determine, with respect to any participant who
transfers to any affiliate of the Company, whether such transfer constitutes
termination of employment for purposes of this Plan. "Affiliate" of the Company
as used herein shall mean any corporation controlling, or under common control
with, the Company. "Control" as used herein means the ownership, either
directly or indirectly, of 50% or more of the outstanding stock having ordinary
voting power.
ARTICLE XI
REDUCTION OR CHANGE IN OUTSTANDING SECURITIES
In the event the face amount of the outstanding debt securities upon
which the value of a unit is based shall be
13
<PAGE> 15
reduced to less than 40% of the total face amount of such securities originally
issued, the securities, shall, as of a date determined by the Committee, cease
to be used for determining either the number or the value of units in
participant accounts, and the Committee shall designate a revised method for
unit determination purposes. In the event of a recapitalization, conversion,
call, tender or modification of a security upon which a unit is based or other
similar transaction affecting the status of such security, which in the opinion
of the Committee substantially alters or changes the advisability of using such
security as basis for units under this Plan, then the Committee as of a date
determined by it may cease using such security for determining the number and
value of such units and designate a revised method or alternative security upon
which to base or value such units.
ARTICLE XII
ADMINISTRATION OF PLAN
The administration of this Plan and the construction and
interpretation of any provisions hereof shall be the responsibility of the
Committee and any construction, interpretation or decision by the Committee
shall be final and conclusive and shall be binding upon the Company and upon
all participants. The Committee may establish and promulgate such rules and
regulations of general application relating to this Plan as it may determine
are desirable and appropriate.
14
<PAGE> 16
ARTICLE XIII
BOOKS AND RECORDS OF THE COMPANY
The amount established hereunder as the incentive fund for each year,
all payments thereof to each participant, the credits made to participant
accounts and determinations of Account Values shall be determined by the
Committee or by the Company, as appropriate, and the determinations so made
shall be conclusive and binding as to all participants, their beneficiaries,
the Company, and each participant accepting the benefits hereof shall be
conclusively presumed to accept the same on the condition that he will not
dispute or contest such determinations.
ARTICLE XIV
AMENDMENT AND TERMINATION
The Committee may amend or terminate this Plan at any time provided,
however, no such amendment or termination shall, as of the date it becomes
effective, adversely affect the rights of any participant with respect to any
units or amounts credited or to be credited for any year prior to the effective
date of such amendment.
ARTICLE XV
SUCCESSORS AND ASSIGNS
This Plan shall be binding upon, and shall be assumed in all respects
by, any successors or assigns of the Company.
15
<PAGE> 17
EXECUTIVE INCENTIVE PLAN
DRAFT EXECUTIVE COMMITTEE RESOLUTION
RESOLVED, that the Corporation is authorized to enter into amendment agreements
with participants of the Deferred Compensation Unit Plan, ("Plan"), to make
available for payment all amounts credited to such participants' accounts,
provided, that the deferred accounts of those participants who decline to enter
into amendment agreements shall continue to be deferred in accordance with the
terms of the Plan.
FURTHER RESOLVED, that the amendment agreements shall be in such form as may be
approved or authorized by the Executive Committee of the Board of Directors of
this Corporation.
<PAGE> 18
DUP
DRAFT EXECUTIVE COMMITTEE RESOLUTION
RESOLVED, that the Corporation is authorized to enter into amendment agreements
with participants of the Deferred Compensation Unit Plan, ("Plan"), to make
available for payment all amounts credited to such participants' accounts,
provided, that the deferred accounts of those participants who decline to enter
into amendment agreements shall continue to be deferred in accordance with the
terms of the Plan.
FURTHER RESOLVED, that the amendment agreements shall be in such form as may be
approved or authorized by the Executive Committee of the Board of Directors of
this Corporation.
<PAGE> 19
Amendment to Executive Incentive Plan of Associates Corporation
of North America as restated on July 31, 1980
and as revised on March 15, 1983
The Executive Incentive Plan of Associates Corporation of North America is
hereby amended in the following respects.
1. Section 1.1(k) Stock Unit is hereby amended to read in its entirety
as follows: "Stock Unit" shall mean the equivalent of a share the
Magellan Fund, an open end mutual fund sponsored and managed by
Fidelity Management and Research Company." This amendment will be
effective as of October 31, 1989.
2. Section 7.3 is hereby amended to read in its entirety as follows:
"During employment (including the year ended July 31, 1980 in the case
of participant taking retirement in that year) or if the participant
has taken retirement in accordance with Company policy at the election
of the participant, and with the approval of the Committee, any amount
or portion thereof credited to the participant's Deferred Account may
be converted as of the last [business] day of any March, June,
September and December ("Conversion Date") (i) from or into Stock
Units or Cash Account as selected by the participant and (ii) from,
but not into, other units which may have been established pursuant to
7.2(b). In the case of conversion from or to Stock Units or such other
units, the conversion shall be based upon the closing Price of the
Magellan Fund, or such security as the other unit may be based, as
appropriate, on such Conversion Date. Any election of the participants
in accordance with this Section 7.3 must be delivered in writing to
the Committee on or before such Conversion Date." This amendment shall
be effective with the election on the last day of December, 1995.
Executed this 11th day of October, 1995.
By: /s/ JAMES B. WATTS
------------------------
James B. Watts
Vice President and Member
of the Compensation Committee
<PAGE> 20
RESOLUTIONS ADOPTED BY WRITTEN CONSENT
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF ASSOCIATES CORPORATION OF NORTH AMERICA DATED OCTOBER 3, 1995
APPROVE AMENDMENTS TO THE DEFERRED COMPENSATION UNIT PLAN AND EXECUTIVE
INCENTIVE PLAN
RESOLVED, the Deferred Compensation Unit Plan and the Executive Incentive Plan
of Associates of Corporation of North America ("the Company") are hereby
amended to provide for the conversion of account balances by participants 4
times per year on the last day of each March, June, September and December.
FURTHER RESOLVED, that any one of the members of the Compensation Committee is
authorized to execute and deliver an amendment to the Deferred Compensation
Unit Plan and the Executive Incentive Plan carrying into effect the foregoing
resolution.
<PAGE> 1
EXHIBIT 10.16
ASSOCIATES CORPORATION OF NORTH AMERICA
SUPPLEMENTAL RETIREMENT INCOME PLAN
<PAGE> 2
ASSOCIATES CORPORATION OF NORTH AMERICA
SUPPLEMENTAL RETIREMENT INCOME PLAN
EFFECTIVE: JANUARY 1, 1979
AS AMENDED AND RESTATED DECEMBER 15, 1981
AS AMENDED JANUARY 1, 1984
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I - Purpose I-1
ARTICLE II - Definitions and Construction
2.1 Definitions II-1
Actuarial Equivalent II-1
Average Monthly Compensation II-1
Benefit II-1
Board of Directors II-1
Committee II-1
Company II-1
Compensation II-1
Disability II-2
Effective Date II-2
Employers II-2
Normal Retirement Date II-2
Participant II-2
Pension Equivalent II-2
Plan II-2
Plan Administrator II-2
Plan Year II-2
Primary Social Security Benefit II-2
Qualified Plan II-3
Qualified Plan Benefit II-3
Retirement II-3
Service II-3
2.2 Construction II-4
ARTICLE III - Eligibility and Participation
3.1 Employees Eligible to Participate III-1
3.2 Action by Compensation Committee III-1
3.3 Selection of Participants III-2
ARTICLE IV - Provisions for Benefits
4.1 Amounts Provided by Employers IV-1
4.2 Payment of Benefit IV-1
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE V - Requirements for Retirement Benefits
5.1 Normal Retirement V-1
5.2 Deferred Vested Benefit V-1
ARTICLE VI - Amount of Retirement Benefits
6.1 Normal Retirement Benefit VI-1
6.2 Deferred Vested Benefit VI-1
ARTICLE VII - Other Forms of Payment
7.1 Optional Joint and Survivor Options VII-1
7.2 Other Benefits Cancelled by Option VII-2
7.3 Survivorship Benefit VII-2
ARTICLE VIII - Administration
8.1 Appointment of Committee VIII-1
8.2 Committee Procedures VIII-1
8.3 Committee Powers and Duties VIII-1
8.4 Unclaimed Benefits VIII-3
8.5 Competitive Employment VIII-3
ARTICLE IX - Adoption by Other Organizations
9.1 Procedure for Adoption IX-1
9.2 Right of Company to Terminate Adoption
by Subsidiary IX-2
ARTICLE X - Miscellaneous Provisions
10.1 Amendment, Termination, Etc. X-1
10.2 Nonguarantee of Employment X-1
10.3 Nonalienation of Benefits X-1
10.4 Liability X-2
</TABLE>
<PAGE> 5
ARTICLE I
Purpose
The purpose of this Plan is to retain key executives by providing
retirement income an a supplement to compensation and employee benefits
otherwise payable to selected executive employees of Associates Corporation of
North America and its subsidiaries who are expected to contribute materially to
the success of the Company's business by their ability, ingenuity, and
industry.
The Plan was adopted effective January 1, 1979 and as amended and restated
herein shall continue in effect in accordance with the terms hereof with all
the provisions hereof being effective as of the date first adopted.
I-1
<PAGE> 6
ARTICLE II
Definitions and Construction
2.1 Definitions: Where the following words and phrases appear in
this Plan, they shall have the respective meanings set forth below, unless
their context clearly indicates to the contrary:
(a) Actuarial Equivalent: Equality in value of the
aggregate amounts expected to be received under different forms of
payment, based upon actuarial assumptions, mortality tables and
interest rates as adopted by the Committee from time to time for such
purposes.
(b) Average Monthly Compensation: The result obtained by
dividing the total Compensation paid to a Participant during the five
(5) Plan Years within the last ten (10) completed Plan Years as a
Participant which yield the highest Average Compensation by 60, or, in
the event the Participant had fewer than five (5) Plan Years of
Service credited, by the actual number of months during such Plan
Years as a Participant in which Compensation was paid.
(c) Benefit: A series of monthly amounts which are
payable to a person who is entitled to receive payments under the
Plan.
(d) Board of Directors: The duly elected and serving
Board of Directors of the Company or any duly authorized Executive
Committee of that Board.
(e) Committee: The persons appointed in accordance with
Article VIII to administer the Plan.
(f) Company: Associates Corporation of North America, a
corporation organized and existing under the laws of the State of
Delaware, or its successor or successors.
(g) Compensation: The total remuneration paid to, or
contingently or irrevocably credited or set aside for, a Participant
for a calendar year by an Employer for personal services rendered,
including base salaries and bonuses, paid sick days and paid vacation
days taken, but excluding moving expenses, severance pay, accrued
vacation paid upon terminating employment, payments under
II-1
<PAGE> 7
long term disability insurance and the value of any fringe benefits
such as life, medical, disability, or hospitalization insurance
premiums and Employer contributions allocated to a Participant under
any pension or profit sharing plan of an Employer which qualifies
under Section 401(a) of the Internal Revenue Code.
(h) Disability: A physical or mental condition which, in
the judgment of the Committee, based on medical evidence satisfactory
to the Committee, prevents a Participant from performing the functions
of the job held by such Participant immediately preceding the onset of
such condition.
(i) Effective Date: January 1, 1979.
(j) Employers: The Company, Associates First Capital
Corporation and each of the respective subsidiaries of either of them
which have adopted the Plan in accordance with Article IX hereof.
(k) Normal Retirement Date: The sixty-second (62nd)
birthday of a Participant.
(l) Participant: An eligible executive employee of an
Employer who has been selected to participate and is participating in
the Plan in accordance with the provisions of Article III hereof.
(m) Pension Equivalent: The monthly amount of retirement
benefits payable from any other plan intended to be qualified under
Section 401(a) of the Internal Revenue Code, other than one sponsored
by the Employers, computed as if such amount were payable in the form
of a single life pension commencing at age 62, regardless of whether
such benefits have been applied for.
(n) Plan: The Associates Corporation of North America
Supplemental Retirement Income Plan set forth herein, as amended from
time to time.
(o) Plan Administrator: Such person or persons as
designated by the Committee, which shall be the Committee unless and
until it designates such other person or persons.
(p) Plan Year: The twelve (12) month period beginning on
January 1st and ending on December 31st.
(q) Primary Social Security Benefit: The monthly amount
available to the Participant at age sixty-five (65), or if Social
Security payments are commenced
II-2
<PAGE> 8
earlier at Retirement, then such amount available at Retirement, under
the provisions of Title II of the Social Security Act at the time of
his termination of employment (or age sixty-two (62), if earlier),
without regard to any increases in the wage base or benefit levels
that take effect after the date of termination of employment; provided
that (1) if a Participant terminates employment prior to age sixty-two
(62), his Primary Social Security Benefit shall be estimated by
assuming continuation of his Compensation until age sixty-two (62) at
the same rate as in effect at termination of employment, or (2), if a
Participant terminates employment because of disability and qualifies
for a Disability Insurance Benefit under the Social Security Act, his
Primary Social Security Benefit shall be the monthly amount payable as
a Disability Insurance Benefit.
(r) Qualified Plan: Any employees' pension or profit
sharing plan of Associates Corporation of North America, as amended
from time to time, which plan is intended to be qualified within the
meaning of Section 401 of the Internal Revenue Code of 1954, as
amended from time to time.
(s) Qualified Plan Benefit: The monthly amount payable in
the form of a single life annuity under any Qualified Plan on the
basis of the accrued benefit (which shall have the meaning prescribed
in the Employee Retirement Income Security Act of 1974, except that
for a defined contribution plan only the aggregate employer
contribution shall be used) as of the date the payment of Benefits
commenced hereunder computed either: (i) if the Participant did not
commence the payment under such Qualified Plan at Retirement, as if
the Qualified Plan Benefit commenced at the normal retirement date
provided under each such Qualified Plan without reduction for early
commencement or other options provided under such Qualified Plan or
(ii) it the Participant commences payment under such Qualified Plan at
Retirement hereunder, then the amount payable at such Retirement
without giving effect to any options (except the early commencement,
it any).
(t) Retirement: Termination of employment for reasons
other than death with all Employers on or after Normal Retirement
Date.
(u) Service: A period of continuous employment of a
Participant with an Employer commencing on the effective date of such
Participant's last period of participation in the Plan and ending on
the last day of such Participant's participation in the Plan.
Provided,
II-3
<PAGE> 9
however, Participants who were employed by an Employer on, and whose
participation was designated to commence on, the Effective Date will
receive credit for Service as follows:
(i) Such Participants who were under age 52 on
the Effective Date, from the Effective Date and
(ii) Such Participants who were age 52 or over on
the Effective Date to Normal Retirement Date, plus those
number of years of continuous employment prior to the
Effective Date commencing with the last date of employment
with an Employer not exceeding an aggregate for the total of
ten years.
Service for periods of time after the commencement of Participation
during which the Participant, as long as the person is a Participant,
is Disabled shall be credited under rules established by the
Committee.
2.2 Construction: The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine gender; the singular may include
the plural; and vice versa, unless the context clearly indicates to the
contrary.
The Article and Section headings contained herein are for convenience
only and shall not affect the construction hereof.
II-4
<PAGE> 10
ARTICLE III
Eligibility and Participation
3.1 Employees Eligible to Participate: Only officers and other
executive employees of an Employer who are engaged in performing executive or
other important managerial functions during all or part of any Plan Year shall
be eligible to participate in the Plan for such Plan Year. A director of an
Employer shall be eligible to be a Participant if he is also an officer or
other executive employee of an Employer. The Committee shall be the sole judge
in determining who shall be eligible to be a Participant for any Plan Year. An
officer or other executive employee who is selected to be a Participant shall
continue to be a Participant until the first to occur of the following: (a) his
employment with all Employers terminates; (b) he becomes disabled; (c) he dies;
(d) the Plan is terminated with respect to his Employer or the Company; or (e)
the Committee terminates his participation.
3.2 Action by Compensation Committee: When any action or
determination of the Committee is to be made with respect to any aspect of
participation on the part of a member of the Committee, the member whose rights
are being affected shall not participate in the decision. In the event that the
decision affects the right of all members of the Committee, the decision shall
be made by the regular Compensation Committee of the Board of Directors of the
Company.
III-1
<PAGE> 11
3.3 Selection of Participants: The Committee shall determine from
time to time, after consultation with such of the members of the Board of
Directors or with such executive employees of the Employers as it May deem
desirable (a) which, if any, eligible officers or other executives it shall
designate as Participants and the effective date of participation of each such
officer or other executive, which date may be the date of designation or
earlier or later date that is on or after January 1, 1979, provided that the
designated person must be an officer or other executive of an Employer on the
date of designation and on the effective date of participation and, in the case
of an effective date of participation that is prior to the date of designation,
must have been an officer or other executive of an Employer at all times during
the period from and including the effective date of participation to and
including the date of designation, and (b) which, if any, Participants shall be
terminated as Participants and the effective date of termination of each such
Participant, which date may be the date of determination to terminate such
Participant's participation or any later date. Former Participants who have
been terminated may, if otherwise eligible, be again designated as
Participants. Participants who are again designated as Participants may be
granted service for past periods of participation, as determined by the
Committee.
In making its determinations under this Section 3.3, the Committee
shall consider the relative contribution of each
III-2
<PAGE> 12
eligible officer or other executive employee to the operation and profits of
the Company and its subsidiaries and such other factors as the Committee may
deem material. The Committee shall notify a Participant of his designation as a
Participant and of his termination as a Participant and the effective date
thereof. The decision of the Committee in selecting an officer or other
executive employee to be a Participant or in terminating participation of any
Participant shall be final and conclusive. Nothing herein shall be deemed to
give any officer or other executive employee any right to be or continue to be
a Participant.
III-3
<PAGE> 13
ARTICLE IV
Provisions for Benefits
4.1 Amounts Provided by Employers: Benefits under the Plan shall
constitute general obligations of the Company or the respective Employer in
accordance with the terms of the Plan. No amounts in respect of such Benefits
shall be segregated, set aside or held in trust or any other fund or pools of
assets, and no recipient of any Benefit shall have any right to have his
Benefit paid out of any particular assets of an Employer or the Company.
4.2 Payment of Benefit: If a Benefit hereunder becomes payable to
a Participant who was employed by more than one Employer while a Participant,
such Benefit shall be paid by the Employer by which such Participant was last
employed while a Participant, and such Employer shall be entitled to
reimbursement from all other Employers by which such Participant was employed
while a Participant to the extent of each such other Employer's ratable
liability for such benefit, determined on the basis of the relative amounts of
Compensation paid to or accrued for the benefit of such Participant by all
Employers for periods during which such Participant was a Participant. Such
reimbursement shall be paid within such time after the end of each fiscal year
of the Company as the Committee directs.
IV-1
<PAGE> 14
Article V
Requirements for Retirement Benefits
5.1 Normal Retirement: A Participant shall be eligible to receive
a Normal Retirement Benefit at Retirement. Payment of a Normal Retirement
Benefit shall commence as of the first day of the month coinciding with or next
following the Participant's date of Retirement. The last payment shall be made
as of the first day of the month in which the death of the retired Participant
occurs.
5.2 Deferred Vested Benefit: A Participant whose employment is
terminated prior to his Normal Retirement Date shall be eligible for a Deferred
Vested Retirement Benefit if employment with the Employers is terminated on or
after the completion of ten (10) or more years of service. Such former
Participant is hereafter referred to as a Deferred Vested Participant. Payment
of a Deferred Vested Retirement Benefit shall commence as of the first day of
the month coinciding with or next following the Participant's Normal Retirement
Date, if he is then living. The last payment shall be made as of the first day
of the month in which the death of the Deferred Vested Participant occurs.
V-1
<PAGE> 15
ARTICLE VI
Amount of Retirement Benefits
6.1 Normal Retirement Benefit: A Participant who meets the
requirements for a Normal Retirement Benefit shall receive a Benefit determined
as follows:
(a) Fifty percent (50%) of his Average Monthly
Compensation, minus
(b) The sum of his Qualified Plan Benefits, 50% of his
Primary Social Security Benefit, and the Pension Equivalent.
Provided, however, that as to any Participant who has not completed
ten (10) years of service at Retirement, such monthly amount shall be reduced
by multiplying said amount by a fraction, the numerator of which is the
Participant's actual number of years of Service (including any fractional part
of a year) and the denominator of which is ten (10).
6.2 Deferred Vested Benefit: A Deferred Vested Participant shall
receive a Benefit computed in accordance with the provisions of (a) and (b) in
Section 6.1 above.
VI-1
<PAGE> 16
ARTICLE VII
Other Forms of Payment
7.1 Optional Joint and Survivor Options: (a) By timely filing an
application with the Committee, a Participant or Deferred Vested Participant
may designate his spouse or other dependent as his contingent pensioner and
elect to receive a Benefit payable in accordance with one (1) of the following
options, in lieu of the Benefit to which he may otherwise become entitled:
(i) Option 1: Such Participant shall receive a reduced
Benefit payable for life, and payments in the same reduced amount
shall, after such Participant's death, be continued to the contingent
pensioner during the contingent pensioner's lifetime.
(ii) Option 2: Such Participant shall receive a reduced
Benefit payable for life, and payments in the amount of fifty percent
(50%) of such reduced benefit shall, after such Participant's death,
be continued to the contingent pensioner during the contingent
pensioner's lifetime.
(b) The aggregate of the Benefit payments expected to be paid to
such a Participant and his contingent pensioner under any of the above options
shall be the Actuarial Equivalent of the single life Benefit computed for such
Participant under Article VI.
(c) In addition to the joint and survivor options described above,
the Participant may receive his benefit in any other form that is agreed to by
the Committee.
(d) A Participant may elect, change, or revoke an option without
the approval of the Committee if his election, change, or revocation is filed
in writing with the Committee not later
VII-1
<PAGE> 17
than his Retirement date or the Normal Retirement Date in the case of a
Deferred Vested Participant. An election is automatically revoked by the death
of the contingent pensioner prior to the commencement of the payment of the
Benefit.
7.2 Other Benefits Canceled by Option: Any Benefit or other option
or form of payment that would otherwise have become payable under this Plan,
shall be cancelled and superseded only by a later option, or other form of
payment, last elected in writing under this Article VII and on file with the
committee.
7.3 Survivorship Benefit: If a Participant continues in the
Employer's employ, or is or continues on Disability for which the Participant
is receiving disability income payments from his Employer or its insurance
carrier and is receiving credit for Service under Section 2.1(t), after Normal
Retirement Date, no Benefit payments shall be made during such period of
continued employment or Disability. In the event of the death of the
Participant during such period before his Benefit hereunder commences (a) the
survivorship Benefit provided under an effective option under Section 7.1 shall
commence as of the first day of the month next following the Participant's
death in the amount which would have been payable under the applicable section
or option had the Participant retired immediately prior to his death or (b) if
no option is in effect under this Article VII a survivorship Benefit shall
nevertheless be payable to the Participant's "Eligible Spouse" commencing as of
the first day of the month next following the
VII-2
<PAGE> 18
Participant's death in the same amount as if such Participant had effectively
elected the optional form of Benefit provided in Section 7.1(a)(ii) and had
retired immediately prior to his death. "Eligible Spouse" for purposes of this
Plan shall have the same meaning as defined in Section 7.1(a)(i) of the
Employees' Pension Plan of Associates Corporation of North America, as Amended
and Restated effective January 1, 1976.
VII-3
<PAGE> 19
ARTICLE VIII
Administration
8.1 Appointment of Committee: The Plan shall be administered by a
Committee, which, unless otherwise determined by the Board of Directors, shall
consist of the Chairman of the Board of Directors and the President of the
Company. The membership of the Committee may be reduced, changed, or increased
from time to time in the absolute discretion of the Board of Directors. Subject
to Article III, members of the Committee may be Participants.
8.2 Committee Procedures: The Committee shall select one of its
members as chairman and shall designate a secretary who may, but need not, be a
member of the Committee. The Secretary of the Committee shall keep a record of
all meetings and of any actions taken by the Committee. The decision of a
majority of the members of the Committee at any meeting thereof shall be the
act of the Committee. The Committee shall meet at such time and place as the
Chairman or, in his absence, any member, shall designate. The Committee may
also act by unanimous written consent of its members without a meeting. The
members of the Committee shall not receive compensation with respect to their
services for the Committee, except that they shall be entitled to such fees, if
any, as shall be approved by the Board of Directors and to reimbursement of
expenses incurred in connection with attending any meeting.
8.3 Committee Powers and Duties: The Committee shall have such
powers as may be necessary to discharge its duties hereunder, including, but
not by way of limitation, the following powers and duties:
VIII-1
<PAGE> 20
(a) to receive from each Participant as soon as such
Participant becomes eligible for a benefit under the Plan either (a) a
history of such Participant's prior earnings from the records of the
Social Security Administration, or (b) an authorization from such
Participant enabling the Committee to request the history of said
participant's prior earnings from the Social Security Administration;
provided however, that if such Participant fails or refuses to provide
the Committee with said history of earnings or an authorization to
enable the committee to request such a history of earnings, the
committee shall have the right to assume that such Participant's prior
earnings shall have been the maximum Social Security taxable wages in
determining the amount of any benefit to which said Participant shall
be entitled under the federal Social Security Act, and the amount of
his "Primary Social Security Benefit" as defined in this Plan;
(b) to construe and interpret the Plan, decide all
questions of eligibility and determine the amount, manner, and time of
payment of any benefits hereunder;
(c) to prescribe procedures to be followed by
distributees in obtaining benefits;
(d) to make a determination as to the right of any person
to a benefit hereunder;
(e) to receive from the Employers and from Participants
such information as shall be necessary for the proper administration
of the Plan;
(f) to delegate to one or more of the members of the
committee the right to act in its behalf in all matters connected with
the administration of the Plan;
(g) to remedy possible ambiguities, inconsistencies, and
omissions; and
(h) to appoint or employ for the Plan any agents it deems
advisable, including, but not limited to, legal counsel.
VIII-2
<PAGE> 21
Any rule or decision which is not inconsistent with the provisions of
the plan shall be conclusive and binding upon all persons affected by it, and
there shall be no appeal from any ruling by the Committee which is within its
authority.
When making a determination or calculation, the Committee shall be
entitled to rely upon information furnished by the Company or Employer or the
legal counsel of the Company.
8.4 Unclaimed Benefits: During the time when a benefit hereunder
is payable to any distributee (or beneficiary), the committee, at is own
instance, shall mail by registered or certified mail to such distributes (or
beneficiary), at his last known address, a written demand for his then address,
or for satisfactory evidence of his continued life, or both. If such
information is not furnished to the Committee Within three (3) months from the
mailing of such demand, then the Committee may, in its sole discretion,
determine that such distributee (or beneficiary) has forfeited his right to
benefit, and may declare such benefit, or any unpaid portion thereof,
terminated as if the death of the distributee (with no surviving beneficiary)
had occurred on the date of the last payment made thereon or the date such
distributee (or beneficiary) first became entitled to receive benefit payments,
whichever is later.
8.5 Competitive Employment: If a Retired or Deferred Vested
Participant does any act or engages in any occupation or employment which is in
competition with or detrimental to the business of the Company, (as determined
by the Committee in its sole discretion), the Retired or Defected Vested
Participant
VIII-3
<PAGE> 22
shall be notified by the Company that his Benefit shall be terminated and
forfeited unless such competitive and/or detrimental conduct is discontinued
within a period of time that has been prescribed by the Company. In such a
case, the Benefit payable from this Plan to a Retired or Deferred Vested
Participant shall be suspended (if in pay status) during the prescribed period
and, if the competitive and/or detrimental conduct has not ceased prior to the
expiration of such period, the Retired or Deferred Vested Participant shall be
deemed to have forfeited his right to a Benefit and his Benefit payments (if in
pay status) shall be terminated on a permanent basis.
VIII-4
<PAGE> 23
ARTICLE IX
Adoption by Other Organizations
9.1 Procedure for Adoption: Any other organization with employees,
now in existence Of hereafter formed of acquired, which is not already an
Employer under this Plan may, in the future, with the consent and approval of
the Company, by formal resolution of its own board of governing authority,
adopt the Plan hereby created for its executive employees, such resolution
shall state that such organization adopts the Plan, consents to its executive
employees becoming Participants in the Plan, agrees to pay all benefits
provided under the Plan to Participants employed by it (or to their
beneficiaries) and otherwise agrees to be bound by the terms of the Plan. Such
adoption shall be effectuated by and evidenced by a formal designation
resolution of the adopting organization consenting to by the Company. The sole,
exclusive right of any amendment of whatever kind or extent, to the Plan is
reserved by the Company. The adoption resolution shall become, as to such
adopting organization and its employees, a part of this Plan as then amended.
It shall not be necessary for the adopting organization to sign or execute the
original or the amended Plan document. The effective date of the Plan for any
such adopting organization (not earlier than January 1, 1979) shall be that
stated in the resolution of adoption, and from and after such date such
adopting organization shall assume all the rights, obligations and liabilities
of an individual Employer entity hereunder. The administrative powers and
control of the Plan vested in the Board of Directors, the regular Compensation
IX-1
<PAGE> 24
Committee of the Board of Directors, and the Committee by the plan shall not be
diminished by reason of the participation of any such adopting organization in
the Plan.
9.2 Right of Company to Terminate Adoption by Subsidiary: The
Board of Directors of the Company may, by resolution, in its absolute
discretion, terminate an adopting Employer's participation in the Plan at any
time. In the event of such termination, such Employer shall, effective on the
date determined by the Board of Directors, cease to be an Employer; provided,
however, that no such termination may prevent the payment to any Participant,
Retired Participant or Deferred Vested Participant (or beneficiary) of any
Benefit to which they had become entitled under the Plan, prior to the
effective date of such termination; and provided, further, that such Employer
shall remain liable to other Employers for all benefits accrued under the Plan
for Participants (and beneficiaries) employed by it for Plan Years during all or
any portion of which it was an Employer under Section 9.1. Any such termination
shall become effective on the date specified in the resolution, and except as
expressly limited under this Section 9.2, shall terminate all rights hereunder
of Participants (and beneficiaries) of such terminated Employer.
IX-2
<PAGE> 25
ARTICLE X
Miscellaneous Provisions
10.1 Amendment, Termination, Etc.: The Board of Directors may, by
resolution, in its absolute discretion, from time to time, amend, suspend, or
terminate in whole or in part, and if terminated reinstate, any or all of the
provisions of the Plan, except that no amendment, suspension, or termination
may apply so as to decrease, terminate or prevent the payment to any
Participant, Retired Participant or Deferred Vested Participant (or
beneficiary) of any Benefit to which they had become entitled under the Plan,
prior to the effective date of such amendment, suspension, or termination. Any
such amendment, suspension, or termination shall become effective on such date
as shall be specified in such resolution and, except as expressly limited in
this Section 10.1, include such provisions and have such effect as the Board of
Directors, in its absolute discretion, deems desirable.
10.2 Nonguarantee of Employment: Nothing contained in this Plan
shall be construed as a contract of employment between an Employer and any
employee, or as a right of any employee to be continued in the employment of an
Employer, or as a limitation of the right of an Employer to discharge any of
its employees, with or without cause.
10.3 Nonalienation of Benefits: To the extent permitted by law,
benefits payable under this Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge, garnishment, execution, or levy of any kind, either voluntary or
X-1
<PAGE> 26
involuntary. Any attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, charge or otherwise dispose of any right to benefits payable
hereunder shall be void. No part of the assets of an Employer shall be subject
to seizure by legal process resulting from any attempt by creditors of or
claimants against any participant (or beneficiary), or any person claiming
under or through the foregoing, to attach his interest under the Plan.
10.4 Liability: No member of the Board of Directors, of the regular
Compensation Committee of the Board of Directors, or of the Committee shall be
liable for any act or action, whether of commission or Omission, taken by any
other member, or by any officer, agent, or employees of an Employer or of any
such body, nor, except in circumstances involving his bad faith, for anything
done or omitted to be done by himself.
Executed this 12th day of June, 1984.
/s/ ILLEGIBLE
----------------------------------------
President
X-2
<PAGE> 27
RESOLUTIONS ADOPTED BY WRITTEN CONSENT
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF ASSOCIATES CORPORATION OF NORTH AMERICA DATED NOVEMBER 13, 1995
APPROVED PROCEDURES FOR THE SUPPLEMENTAL RETIREMENT INCOME PLAN
RESOLVED, that the attached appeal procedures, which formalize past
practices for handling appeals, be, and they are, hereby formally
adopted as the Appeal Procedures for the Supplemental Retirement
Income Plan of the Corporation.
FURTHER RESOLVED, that any one of the members of the Compensation
Committee is authorized to take any action necessary to carry this
resolution into effect.
<PAGE> 28
Attachment to Written Consent dated November 13, 1995
of the Compensation Committee of
Associates Corporation of North America (Delaware)
APPEAL PROCEDURES FOR SUPPLEMENTAL RETIREMENT INCOME PLAN
If a Pension is to be denied the Committee shall provide
notice in writing to the affected Participant. Such notice shall be made
within 90 days of the receipt by the Committee of the Participant's claim or,
if special circumstances require, and the Participant is so notified in
writing, within 180 days of the receipt by the Committee of the Participant's
claim. The notice shall be written in a manner calculated to be understood by
the Participant and shall:
(1) set forth the specific reasons for the denial of
benefits;
(2) contain specific references to Plan provisions
relative to the denial;
(3) describe any material information, if any, necessary
for the claim for benefits to be allowed,
which had been requested, but not received by the
Committee; and
(4) advise the Participant that any appeal of the
Committee's adverse determination must be made in
writing to the Committee, within 60 days after
receipt of the initial denial notification, setting
forth the facts upon which the appeal is based.
(b) If notice of the denial of a claim is not
furnished within the time periods set forth
above, the claim shall be deemed denied and
the Participant shall be permitted to proceed
to the review procedures set forth below. In
the case of a suspension or termination of
benefits under Section 8.5 of the Plan, the
Participant shall have 90 days after the
effective date of the termination to appeal
such termination. If the Participant fails to
appeal the Committee's denial of benefits in
writing and within 90 days after receipt by
the Participant of written notification of
denial of the claim (or within 90 days after
a deemed denial of the claim) or, in the case
a termination of benefits under Section 8.5
of the Plan, within 90 days after the
effective date of such termination, the
Committee's determination shall become final
and conclusive.
(c) If the Participant appeals the Committee's
denial of benefits in a timely fashion, the
Committee shall re-examine all issues
relevant to the original denial of benefits.
Any such Participant, or his or her duly
authorized representative may review any
pertinent documents, as determined by the
Committee, and submit in writing any issues
or comments to be addressed on appeal.
(d) The Committee shall advise the Participant
and such individual's representative in
writing of its decision, which shall be
written in a manner calculated to be
understood by the Participant, and include
specific references to the pertinent Plan
provisions on which the decision is based.
Such response shall be made within 60 days of
receipt of the written appeal, unless special
circumstances require an extension of such 60
day period for not more than an additional 60
days. Where such extension is necessary, the
Participant shall be given written notice of
the delay. If the decision on review is not
furnished within the time applicable times
set forth above, the claim shall be deemed
denied on review.
<PAGE> 1
EXHIBIT 10.17
EXCESS BENEFIT PLAN
OF
ASSOCIATES FIRST CAPITAL CORPORATION
<PAGE> 2
EXCESS BENEFIT PLAN
OF
ASSOCIATES FIRST CAPITAL CORPORATION
INTRODUCTION
This Excess Benefit Plan has been authorized by the Board of Directors and is
effective as of November 1, 1989 and is amended and restated effective January
1, 1994. The Plan is designed to restore benefits and/or contributions which
were or will be limited (i) by application of the limitations imposed on
qualified plans by Section 415 and by Sections 401(a)(17) and 414(s) of the
Internal Revenue Code of 1986, as amended, or any successor or substitute
provisions and (ii) because of deferral of compensation pursuant to the
Company's deferred compensation plans.
All benefits payable under this Plan shall be paid out of the general assets of
the Company. The Company may establish and fund a trust in order to aid it in
providing benefits due under the Plan which shall be a general asset of the
Company available to all creditors.
The Plan is intended to constitute both an "excess benefit plan" as such term
is defined in Section 3(36) of the Employee Retirement Income Security Act of
1974 ("ERISA") and an unfunded deferred compensation arrangement in each case
for a select group of management or highly compensated employees and therefore
exempt from the requirements of Sections 201, 301, and 401 of ERISA.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
ARTICLE 2. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
ARTICLE 3. AMOUNT AND PAYMENT OF ADDITIONAL RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . -4-
ARTICLE 4. AMOUNT AND PAYMENT OF SUPPLEMENTAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . -7-
ARTICLE 5. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
ARTICLE 6. AMENDMENT OR TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
</TABLE>
<PAGE> 4
ARTICLE 1. DEFINITIONS
1.01 "Account" shall mean the account maintained pursuant to Section
4.03 which reflects all amounts credited to a Participant under
Section 4.01 gains, losses and earnings thereon.
1.02 "Additional Retirement Benefit" shall mean the annual payments
payable under Article 3 of this Plan.
1.03 "Board of Directors" shall mean the Board of Directors of
Associates First Capital Corporation.
1.04 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.05 "Committee" shall mean the administrative committee described in
Article 5 of the Plan.
1.06 "Company" shall mean Associates First Capital Corporation, or any
successor by merger, purchase or otherwise, with respect to its
employees; or any other affiliated company authorized by the Board
of Directors to participate in the Plan.
1.07 "Deferred Compensation" shall mean compensation which has been
earned by an Employee, but the actual payment of which has been
deferred to a date beyond the year in which it was earned.
<PAGE> 5
1.08 "Effective Date" shall mean November 1, 1989, except where a
different effective date specified with respect to particular
provisions.
1.09 "Employee" shall mean any employee of an Employer who occupies a
position of senior management with an Employer who has been
selected by the Board of Directors, who is participating in the
Pension Plan and/or the Savings Plan and whose benefit under the
Pension Plan and/or whose contributions (by the employee and by the
employer) under the Savings Plan are or have been reduced or
limited as the result of (i) the application of Section 415, (ii)
the application of Sections 401(a)(17) and 414(s), of the Code or
(iii) Deferred Compensation.
1.10 "Employer" shall have the meaning as prescribed in the Pension Plan
and the Savings Plan.
1.11 "Normal Retirement Date" shall mean the Normal Retirement Date as
defined in the Savings Plan and Pension Plan.
1.12 "Participant" shall mean any person included in the Plan as
provided in Article 2.
1.13 "Pension Plan" shall mean the Associates First Capital Corporation
Pension Plan.
-2-
<PAGE> 6
1.14 "Plan" shall mean the Excess Benefit Plan of Associates First
Capital Corporation, as described herein or as hereafter amended.
1.15 "Savings Plan" shall mean Associates First Capital Corporation
Retirement Savings and Profit Sharing Plan, as amended from time to
time or any successor plan.
1.16 "Supplemental Contributions" shall mean the contributions credited
under Article 4 of this Plan.
1.17 "Valuation Date" shall mean the date or dates so defined under the
Savings Plan.
ARTICLE 2. PARTICIPATION
2.01 Eligibility
(a) Every Employee in the employ of the Company on November 1, 1989
shall become a Participant of the Plan on the Effective Date.
(b) Every other Employee of the Company shall become a Participant of
the Plan on the first day of the calendar month coincident with or
next following the date he or she becomes an Employee.
-3-
<PAGE> 7
(c) Each newly eligible Employee will, as a condition for accruing a
benefit under this Plan, complete and file with the Committee such
form or forms as may be prescribed by the Committee and furnish any
other information or documents required by the Committee within 3O
days of becoming eligible to participate in the Plan.
2.02 Termination of Participation
A Participant's participation in the Plan shall terminate upon the
Participant's death or termination of employment with the Company
unless a benefit is payable with respect to the Participant, his
surviving spouse or his beneficiary under the Pension Plan and/or
the Savings Plan and (a) the benefit payable would be reduced or
limited as a result of (i) the application of Section 415 of the
Code, and (ii) the application of Sections 401(a)(17) and 414(s)
of the Code and/or (b) the Employee has Deferred Compensation in
the years determining the average compensation for purposes of the
Pension Plan.
ARTICLE 3. AMOUNT AND PAYMENT OF ADDITIONAL RETIREMENT BENEFITS
3.01 Amount of Benefit
The annual amount of Additional Retirement Benefit payable with
respect to a Participant under this Plan who is a participant in
the Pension Plan shall be:
-4-
<PAGE> 8
(a) The monthly retirement benefit that would be payable
under the Pension Plan under the applicable election in
effect or form of benefit provided thereunder if the
limitations of Section 415 of the Code were not applicable
and, using compensation without reference to any limitations
imposed by Sections 401(a)(17) and 414(s) of the Code and
with such compensation computed including for such purposes
Deferred Compensation in the periods the compensation was
earned without regard to when such Deferred Compensation is
paid, less
(b) the sum of the monthly benefit that is actually payable
to the Participant under the Pension Plan under the election
in effect or form of benefit provided thereunder, the
monthly benefit, if any, that is payable to the Participant
under the Supplemental Retirement Income Plan of Associates
Corporation of North America and any other contractual
retirement benefit payable to the Participant by an Employer
not resulting from Deferred Compensation of the Participant.
The monthly benefit referred to in the preceding sentence is
not intended to include amounts payable from any qualified
or non-qualified savings or profit sharing plan, ESOP, stock
plan, deferred bonus or salary plan, phantom stock or stock
appreciation plan.
-5-
<PAGE> 9
3.02 Payment of the Additional Retirement Benefit Amount
Payment of the Additional Retirement Benefit shall begin and be
made at such time and in such amounts as may be determined in the
sole and absolute discretion of the Committee. The Additional
Retirement Benefit amount shall be adjusted to reflect the actual
form of payment chosen under the Pension Plan and shall be the
difference between the hypothetical amount determined under 3.01(a)
for the option or manner in which the benefit is payable and the
amount which is actually payable as provided in 3.01(b) on an
equivalent basis.
3.03 Commencement of Benefit Before Normal Retirement
If a Participant or beneficiary commences his retirement benefit
under the Pension Plan prior to his Normal Retirement Date and the
Committee determines to commence the Additional Retirement Benefit
on the date payments under the Pension Plan commence, the amount of
Additional Retirement Benefit under this Plan shall be reduced in
the same manner and to the same extent as the monthly benefit under
the Pension Plan to reflect early commencement.
-6-
<PAGE> 10
3.04 Restoration to Service
If a Participant who retired or otherwise terminated employment
with the Company is restored to service, payment of his Additional
Retirement Benefit shall cease. Upon his subsequent retirement or
termination, his Additional Retirement Benefit shall be recomputed
in accordance with the provisions of this Article 3 and shall be
reduced by the actuarial equivalent (determined in the same manner
as and using the actuarial assumptions and interest rate provided
under the Pension Plan) of the Additional Retirement Benefit
Payments received, if any.
ARTICLE 4. AMOUNT AND PAYMENT OF SUPPLEMENTAL CONTRIBUTIONS
4.01 Supplemental Contributions
(a) There shall be credited to an account maintained pursuant
to Section 4.03 on behalf of a Participant who is a
Participant in the Savings Plan, during each calendar year
beginning on or after the Effective Date as to which a
Participant has complied with the requirements of Section
4.02, an amount of Supplemental Contributions equal to the
Employer contributions that were not made by the Company on
behalf of the Participant under Sections 4.5(a) and 4.5(b)
of the Savings Plan because of (i) the limitations of
Section 415 of the Code and, (ii) the limitations of
Sections 401(a)(17) and 414(s) of the Code
-7-
<PAGE> 11
and/or because of Deferred Compensation, but in the case of
Employer matching contributions under Section 4.5(a) of the
Savings Plan, only to the extent the Employee contributions
to be matched (i) have been instead credited under this
Plan pursuant to Section 4.01(b and (ii) do not exceed 6
percent of a Participant's Compensation for the calendar
year. Compensation for this purpose means covered
compensation of such Employee as defined in the Savings
Plan, but without regard to any limits contained in the
Code.
(b) There shall be credited to an account maintained pursuant
to Section 4.03 on behalf of a Participant described in (a)
above the amount of Employee contributions that would have
been made by the Employee but for (i) the limitations of
Section 415 of the Code, (ii) the limitations of Sections
401(a)(17) and 414(s) of the Code and (iii) the deferral of
compensation by the Participant, with such compensation
being included in the period earned, regardless of when
paid. The Employee's salary shall be reduced by the amount
of such contributions credited hereunder.
(c) All contributions under (a) and (b) above shall be credited
under this Plan at the same time as the corresponding
contribution would have been credited under the Savings
Plan.
-8-
<PAGE> 12
4.02 Salary Reduction
This Section 4.02 shall be effective as of January 1, 1994. No
change in the Employee contribution percentage under the Savings
Plan subsequent to the beginning of the calendar year for which
contributions are to be credited hereunder will be effective under
this Plan until the following calendar year. If a Participant
changes the Employee contribution percentage under the Savings Plan
subsequent to the beginning of the calendar year for which
contributions are to be credited hereunder, the Employee
contribution percentage in effect under the Savings Plan at the end
of the previous calendar year will remain in effect under this
Plan. Any Hardship Withdrawal under Section 7.2 of the Savings Plan
will cause a Participant to stop receiving credit for contributions
under Section 4.01 of this Plan until such time as the Participant
is again permitted to make contributions under the Savings Plan.
Each Participant receiving a contribution credited to his or her
account under Section 4.01 for any calendar year shall be deemed to
have agreed irrevocably to a salary for that calendar year reduced
by the amount of the contribution to be credited under Section
4.01(b).
4.03 Valuation and Investment of Accounts
(a) The Committee shall maintain, or cause to be maintained, records
showing the individual balances of each Participant's Account.
However, maintenance of those records and such Accounts shall not
require any segregation of the funds or assets of the Company. All
-9-
<PAGE> 13
amounts credited under this Plan shall constitute a general,
unsecured obligation of the Company.
(b) Until June 26, 1994 on each Valuation Date there shall be credited
(or debited) to each Participant's Account as of that date the
amount of earnings, gains (or losses) which would have been
credited (or debited) had the Participant's Account been invested
in the investment funds available under the Savings Plan in
accordance with his or her investment elections from time to time
thereunder. On and after June 27, 1994 on each Valuation Date there
shall be credited (or debited) to each Participant's Account as of
that date the amount of gains, earnings (or losses) which would
have been credited (or debited) had the Participant's Account been
invested in the investment funds elected by the Participant
pursuant to his investment elections made under this Plan. A
Participant may elect for purposes of valuation under this Plan
investment elections from the investment options available under
the Savings Plan and the election for purposes of valuation under
this Plan need not be the same as election under the Savings Plan.
Provided, however, if a Participant does not have a right to elect
investments as provided in Section 8.2(e) of the Savings Plan, the
valuation under this Plan will be the amount of earnings, gains (or
losses) that would have been credited (or debited) had the
Participant's Account been invested in the Money Market Fund when
and as provided in the Savings Plan. Changes in the election shall
be made in the same manner as the Savings Plan, i.e., by calling
the record keeper, currently Fidelity Investment Management, at the
same number provided for the Savings Plan.
-10-
<PAGE> 14
4.04 Vesting
A Participant shall be vested in any Supplemental Contributions
(and earnings thereon) credited to his Account under 4.01(a) of
this Plan at the same rate that (or at the same time as) such
contributions would have been vested under the Savings Plan, had
they been credited or made under such Plan.
4.05 Payment of Supplemental Contributions
(a) Upon a Participant's termination of employment with an Employer,
the Company shall pay to the Participant in one lump sum the amount
of the Participant's Account, and such payment shall be a complete
discharge of the Company's obligation under the Plan with respect
to that Participant, unless the Committee shall decide, in its
absolute discretion, to pay benefits in some other form and/or at
some other time.
(b) Upon the death of a Participant while employed by the Company or
following separation from employment but before payment has been
completed, the Company shall pay in one lump sum the amount of the
Participant's Account to the Participant's beneficiary designated
under the Savings Plan, and such payment shall be a complete
discharge of the Company's obligation under the Plan with respect
to that Participant. Payment shall be made as soon as
administratively feasible, unless the Committee shall decide, in
its
-11-
<PAGE> 15
absolute discretion, to pay benefits in some other form and/or at
the some other time, in accordance with such uniform rules as the
Committee shall establish.
ARTICLE 5. GENERAL PROVISIONS
5.01 Administration
The administration of this Plan, including but not limited to the
exclusive power to interpret and carry out its provisions, is the
responsibility of the Committee operating under the Pension Plan,
and the provisions of Article 10 of the Pension Plan and Article 10
of the Savings Plan are hereby incorporated by reference.
5.02 Funding
(a) The investment options provided are for valuation purposes only and
do not create an actual investment in a mutual fund or a security.
However, the balance or value of an Employee's Account shall
increase or decrease with earnings, gains or losses to the same
extent as if funds as elected by the Participant had been placed in
the corresponding investment option in the Savings Plan. All
amounts payable in accordance with this Plan shall constitute a
general unsecured obligation of the Company. Such amounts, as well
as any administrative costs relating to the Plan, shall be paid out
of the general assets of the Company, unless the provisions of
paragraph (b) below are applicable.
-12-
<PAGE> 16
(b) The Board of Directors may, for administrative reasons, establish a
grantor trust for the benefit of Participants participating in the
Plan. The assets of said trust will be held separate and apart from
other Company funds and shall be used exclusively for the purposes
set forth in the Plan and the applicable trust agreement, subject
to the following conditions:
(i) The creation of said trust shall not cause the Plan
to be other than "unfunded" for purposes of Title I
of ERISA;
(ii) the Company shall be treated as the "grantor" of said
trust for purposes of Sections 671 and 677 of the
Code;
(iii) said trust agreement shall provide that its assets
may be used to satisfy claims of the Company's
general creditors in the event of a bankruptcy or
insolvency of the Company, provided that the rights
of such general creditors are enforceable under
federal and state law; and
(iv) the trust shall be approved in a ruling obtained from
the Internal Revenue Service.
-13-
<PAGE> 17
5.03 No Contract of Employment
The establishment of the Plan shall not be construed as conferring
any legal rights upon any person for a continuation of employment,
nor shall it interfere with the rights of the Company to discharge
any employee and to treat him or her without regard to the effect
which such treatment might have upon him or her as a Participant of
the Plan.
5.04 Facility of Payment
In the event that the Committee shall find that a Participant is
unable to care for his or her affairs because of illness or
accident, the Committee may direct that any benefit payment due him
or her, unless claim shall have been made therefor by a duly
appointed legal representative, be paid to his spouse, a child, a
parent or other blood relative, or to a person with whom he or she
resides, and any such payment shall be a complete discharge of the
liabilities of the Plan therefor.
5.05 Withholding Taxes
The Company shall have the right to deduct from each payment to be
made under the Plan, or any other amounts owed to or payments made
to the Participant, any required withholding taxes, FICA, FUTA or
other taxes at the time and in the manner determined by the Company
necessary or advisable to comply with its obligation under the
Code.
-14-
<PAGE> 18
5.06 Nonalienation
Subject to any applicable law, no benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt so to do
shall be void, nor shall any such benefit be in any manner liable
for or subject to garnishment, attachment, execution or levy, or
liable for or subject to the debts, contracts, liabilities,
engagements or torts of the Participant.
5.07 Forfeiture for Cause
(a) In the event that a Participant shall at any time be
convicted of a crime involving dishonesty or fraud on the
part of such Participant in his relationship with the
Company, all benefits that would otherwise be payable to
him or her under the Plan shall be forfeited.
(b) If a Participant who has left employment with the Company
and its affiliates does any act or engages in any
occupation or employment which is in competition with or
detrimental to the business of the Company, (as determined
by the Committee in its sole discretion), such Participant
shall be notified by the Company that benefits, under this
Plan, if not yet paid, shall be terminated and forfeited
unless such competitive and/or detrimental conduct is
discontinued within a period of time that has been
prescribed by the
-15-
<PAGE> 19
Company. In such a case, (i) the benefit payable from this
Plan to a Participant shall be suspended (if in pay status)
during the prescribed period and, if the competitive and/or
detrimental conduct has not ceased prior to the expiration
of such period, the Participant shall be deemed to have
forfeited his right to a benefit and his benefit payments
(if in pay status) shall be terminated on a permanent
basis, or (ii) if no further benefits under this Plan
remain to be paid, the Company shall be entitled to
injunctive and other equitable relief to enforce its rights
hereunder. It is understood and agreed that the Company
will have no adequate remedy at law. The Participant agrees
to be bound by all the terms hereof by accepting the
benefits of this Plan.
5.08 Construction
(a) All rights hereunder shall be governed by and construed in
accordance with the laws of the State of Texas.
(b) The masculine pronoun shall mean the feminine wherever appropriate.
-16-
<PAGE> 20
5.09 Benefit Discretionary
Notwithstanding anything to the contrary contained in any other
provision of this Plan, the distribution and payment of benefits,
including the timing and manner thereof, under this Plan shall be
at the discretion of the Committee.
ARTICLE 6. AMENDMENT OR TERMINATION
The Board of Directors reserves the right to modify or amend, in whole or in
part, or to terminate this Plan at any time. However, no modification,
amendment or termination of the Plan shall adversely affect the right of any
Participant, his surviving spouse or his beneficiary to receive the benefits
granted under the Plan by the Company in respect of such Participant as of the
date of modification, amendment or termination.
Approved and adopted with the further changes contained herein pursuant to
authority granted on April 14, 1994.
Associates First Capital Corporation
By /s/ J.B. WATTS
---------------------------------
Executive Vice President
-17-
<PAGE> 21
RESOLUTION ADOPTED BY WRITTEN CONSENT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
ASSOCIATES FIRST CAPITAL CORPORATION DATED OCTOBER 16, 1995
APPROVE AMENDMENTS TO EXCESS BENEFIT PLAN
RESOLVED, the Excess Benefit Plan Associates First Capital Corporation ("the
Company") is hereby amended to clarify the intent of the Company in contracting
with the participants to refrain from certain actions after termination of
employment so that Section 5.07 thereof shall read as follows:
"5.07 Obligations of Participant
Notwithstanding anything to the contrary in this Plan, no benefit
funded by the Company shall be vested and it shall be a continuing
requirement that the benefit hereunder be earned by compliance with
the following provisions.
(a) A Participant shall not at any time engage in a crime
involving dishonesty or fraud on the part of such
Participant in his relationship with the Company, and if
convicted of such a crime, all benefits that would
otherwise be payable to him or her under the Plan shall be
terminated.
(b) A Participant who has left employment with the Company and
its affiliates shall not do any act or engage in any
occupation or employment which is in competition with or
detrimental to the business of the Company (as determined
by the Committee in its sole discretion). If a Participant
does any such act or so engage in competition or
detrimental conduct, such Participant shall be notified by
the Company that benefits, under this Plan, if not yet
paid, shall cease and be terminated unless such competitive
and/or detrimental conduct is discontinued within a period
of time that has been prescribed by the Company. In such
case, the benefit payable from this Plan to a Participant
shall be suspended (if in pay status) during the prescribed
period and, if the competitive and/or detrimental conduct
has not ceased prior to the expiration of such period, the
Participant shall be deemed to have elected not to receive
a benefit and his benefit payments (if in pay status) and
all rights to receive a benefit in the future shall be
terminated on a permanent basis. The Participant agrees to
be bound by all the terms hereof by accepting the benefits
of this Plan.
The foregoing conditions are a fundamental consideration for the
promises of the Company in this Plan."
RESOLVED, that participants in the Corporate Annual Performance Plan, the Long
Term Performance Plan, the Executive Deferred Salary Plan and the Phantom Stock
Appreciation Plan Deferral Agreement shall be entitled to a conversion election
with respect to their deferred accounts four times per year on the last day of
each March, June, September and December and that for 1995 only the participant
shall be entitled to the election currently provided on September 1 and the
election on the new quarterly date of September 30. Thereafter the conversion
dates shall be quarterly.
FURTHER RESOLVED, that any one of the members of the Compensation Committee is
authorized to execute and deliver such amendments, agreements or other writings
as may be necessary to carry into effect the foregoing resolutions.
<PAGE> 1
EXHIBIT 12
ASSOCIATES FIRST CAPITAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fixed Charges (a)
Interest expense........................ $2,177.9 $1,657.3 $1,421.7 $1,352.1 $1,452.8
Implicit interest in rent............... 13.8 11.7 10.8 10.2 9.8
-------- -------- -------- -------- --------
Total fixed charges............. $2,191.7 $1,669.0 $1,432.5 $1,362.3 $1,462.6
======== ======== ======== ======== ========
Earnings (b).............................. $1,198.1 $1,017.4 $ 821.3 $ 664.6 $ 537.1
Fixed Charges............................. 2,191.7 1,669.0 1,432.5 1,362.3 1,462.6
-------- -------- -------- -------- --------
Earnings, as defined.................... $3,389.8 $2,686.4 $2,253.8 $2,026.9 $1,999.7
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges........ 1.55x 1.61x 1.57x 1.49x 1.37x
======== ======== ======== ======== ========
</TABLE>
- ---------------
(a) For purposes of such computation, the term "Fixed Charges" represents
interest expense and a portion of rentals representative of an implicit
interest factor for such rentals.
(b) For purposes of such computation, the term "Earnings" represents earnings
before provision for income taxes and cumulative effect of changes in
accounting principles, plus fixed charges.
<PAGE> 1
<TABLE>
<CAPTION>
STATE OR PLACE
NAME OF CORPORATION OF INCORPORATION
- ------------------- ----------------
<S> <C> <C>
A. Associates National Bank (Delaware) National Association
A. Associates World Capital Corporation Delaware
A. Associates Corporation of North America Delaware
B. Associates Corporation of North America (A Texas Corporation) Texas
B. AFC Securities Inc. Delaware
B. Associates Investment Corporation Utah
B. Associates Insurance Group, Inc. Delaware
B. Associates Life Insurance Group, Inc. Delaware
B. Associates Financial Life Insurance Company Tennessee
C. Associates Insurance Company Indiana
D. Commercial Guaranty Insurance Company Delaware
C. Associates Financial Life Insurance Company of Texas Texas
B. Associates National Mortgage Corporation Delaware
B. Associates Investment Company Delaware
SUBSIDIARIES
------------
C. Associates Diversified Services, Inc. Delaware
C. Associates Financial Services Company, Inc. Delaware
(The names of 103 subsidiaries of AFSCI operating in the
United States in the consumer finance business are omitted
pursuant to Rule 601(b)(21)(ii))
B. Associates Commercial Corporation Delaware
(The name of 10 subsidiaries of ACC operating in the United States in the
commercial finance business are omitted purusant to Rule 601(b)(21)(ii))
</TABLE>
- ----------------------
The following corporations are expected to be contributed to the Company as
part of the Foreign Subsidiary Recontribution, as described more fully in the
Registration Statement:
<TABLE>
<S> <C> <C>
A. Associates Capital Corporation of Canada Canada
A. AIC Japan
</TABLE>
The names of 35 additional corporations operating outside the United States
in the consumer and commercial finance business would not, in the
aggregate, constitute a significant subsidiary and, therefore, are omitted
pursuant to Rule 601(b)(21)(ii).
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. 33- ) of our report dated January 26, 1996, except for Note 18, as
to which the date is February 8, 1996, on our audits of the supplemental
combined financial statements of Associates First Capital Corporation and
Subsidiaries. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 8, 1996
<PAGE> 1
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TEL: (212) 455-2000
FAX: (212) 455-2502
February 8, 1996
Associates First Capital Corporation
250 E. Carpenter Freeway
Irving, Texas 75062-2729
Dear Sirs:
We hereby consent to the filing of the form of the opinion of this firm as
Exhibit 5.1 to the Registration Statement on Form S-1 relating to the proposed
sale by you of shares of your Class A Common Stock, par value $.01 per share
(the "Registration Statement"), and to the reference to this firm under the
heading "Legal Matters" in the Registration Statement.
Very truly yours,
/s/ SIMPSON THACHER & BARTLETT
------------------------------------
SIMPSON THACHER & BARTLETT
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
being an officer or director, or both, of ASSOCIATES FIRST CAPITAL CORPORATION,
a Delaware corporation (the "Company"), do hereby make, constitute and appoint
James E. Jack, Roy A. Guthrie and Chester D. Longenecker, and each of them,
attorneys-in-fact and agents of the undersigned with full power and authority
of substitution and resubstitution, in any and all capacities, to execute for
and on behalf of the undersigned the Registration Statement on Form S-1
relating to the shares of Class A Common Stock of the Company, and any and all
pre-effective and post-effective amendments or supplements to the foregoing
Registration Statement and any other documents and instruments incidental
thereto, and to deliver and file the same, with all exhibits thereto, and all
documents and instruments in connection therewith, with the Securities and
Exchange Commission, and with each exchange on which any class of securities of
the Company is registered, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing that said attorneys-in-fact and agents, and each of them, deem advisable
or necessary to enable the Company to effectuate the intents and purposes
hereof, and the undersigned hereby fully ratify and confirm all that said
attorneys-in-fact and agents, or any of them, or their respective substitutes,
if any, shall do or cause to be done by virtue hereof.
<PAGE> 2
2
IN WITNESS HEREOF, each of the undersigned has subscribed his or her
name, this 5th day of February ,1996.
/s/ KEITH W. HUGHES
- -----------------------------
Name: Keith W. Hughes
Title: Chairman of the Board, Principal
Executive Officer and Director
- -----------------------------
Name: Roy A. Guthrie
Title: Executive Vice President, Comptroller,
and Principal Accounting Officer and Director
- -----------------------------
Name: James E. Jack
Title: Senior Executive Vice President,
Principal Financial Officer and Director
- -----------------------------
Name: Harold D. Marshall
Title: DirectOr
- -----------------------------
Name: Joseph M. McQuillan
Title Director
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
being an officer or director, or both, of ASSOCIATES FIRST CAPITAL CORPORATION,
a Delaware corporation (the "Company"), do hereby make, constitute and appoint
James E. Jack, Roy A. Guthrie and Chester D. Longenecker, and each of them,
attorneys-in-fact and agents of the undersigned with full power and authority
of substitution and resubstitution, in any and all capacities, to execute for
and on behalf of the undersigned the Registration Statement on Form S-1
relating to the shares of Class A Common Stock of the Company, and any and all
pre-effective and post-effective amendments or supplements to the foregoing
Registration Statement and any other documents and instruments incidental
thereto, and to deliver and file the same, with all exhibits thereto, and all
documents and instruments in connection therewith, with the Securities and
Exchange Commission, and with each exchange on which any class of securities of
the Company is registered, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing that said attorneys-in-fact and agents, and each of them, deem advisable
or necessary to enable the Company to effectuate the intents and purposes
hereof, and the undersigned hereby fully ratify and confirm all that said
attorneys-in-fact and agents, or any of them, or their respective substitutes,
if any, shall do or cause to be done by virtue hereof.
<PAGE> 4
2
IN WITNESS HEREOF, each of the undersigned has subscribed his or her
name, this 5th day of February ,1996.
- -----------------------------
Name: Keith W. Hughes
Title: Chairman of the Board, Principal
Executive Officer and Director
/s/ ROY A. GUTHRIE
- -----------------------------
Name: Roy A. Guthrie
Title: Executive Vice President, Comptroller,
and Principal Accounting Officer and Director
- -----------------------------
Name: James E. Jack
Title: Senior Executive Vice President,
Principal Financial Officer and Director
- -----------------------------
Name: Harold D. Marshall
Title: DirectOr
- -----------------------------
Name: Joseph M. McQuillan
Title Director
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
being an officer or director, or both, of ASSOCIATES FIRST CAPITAL CORPORATION,
a Delaware corporation (the "Company"), do hereby make, constitute and appoint
James E. Jack, Roy A. Guthrie and Chester D. Longenecker, and each of them,
attorneys-in-fact and agents of the undersigned with full power and authority
of substitution and resubstitution, in any and all capacities, to execute for
and on behalf of the undersigned the Registration Statement on Form S-1
relating to the shares of Class A Common Stock of the Company, and any and all
pre-effective and post-effective amendments or supplements to the foregoing
Registration Statement and any other documents and instruments incidental
thereto, and to deliver and file the same, with all exhibits thereto, and all
documents and instruments in connection therewith, with the Securities and
Exchange Commission, and with each exchange on which any class of securities of
the Company is registered, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing that said attorneys-in-fact and agents, and each of them, deem advisable
or necessary to enable the Company to effectuate the intents and purposes
hereof, and the undersigned hereby fully ratify and confirm all that said
attorneys-in-fact and agents, or any of them, or their respective substitutes,
if any, shall do or cause to be done by virtue hereof.
<PAGE> 6
2
IN WITNESS HEREOF, each of the undersigned has subscribed his or her
name, this 5th day of February ,1996.
- -----------------------------
Name: Keith W. Hughes
Title: Chairman of the Board, Principal
Executive Officer and Director
- -----------------------------
Name: Roy A. Guthrie
Title: Executive Vice President, Comptroller,
and Principal Accounting Officer and Director
/s/ JAMES E. JACK
- -----------------------------
Name: James E. Jack
Title: Senior Executive Vice President,
Principal Financial Officer and Director
- -----------------------------
Name: Harold D. Marshall
Title: DirectOr
- -----------------------------
Name: Joseph M. McQuillan
Title Director
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
being an officer or director, or both, of ASSOCIATES FIRST CAPITAL CORPORATION,
a Delaware corporation (the "Company"), do hereby make, constitute and appoint
James E. Jack, Roy A. Guthrie and Chester D. Longenecker, and each of them,
attorneys-in-fact and agents of the undersigned with full power and authority
of substitution and resubstitution, in any and all capacities, to execute for
and on behalf of the undersigned the Registration Statement on Form S-1
relating to the shares of Class A Common Stock of the Company, and any and all
pre-effective and post-effective amendments or supplements to the foregoing
Registration Statement and any other documents and instruments incidental
thereto, and to deliver and file the same, with all exhibits thereto, and all
documents and instruments in connection therewith, with the Securities and
Exchange Commission, and with each exchange on which any class of securities of
the Company is registered, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing that said attorneys-in-fact and agents, and each of them, deem advisable
or necessary to enable the Company to effectuate the intents and purposes
hereof, and the undersigned hereby fully ratify and confirm all that said
attorneys-in-fact and agents, or any of them, or their respective substitutes,
if any, shall do or cause to be done by virtue hereof.
<PAGE> 8
2
IN WITNESS HEREOF, each of the undersigned has subscribed his or her
name, this 5th day of February ,1996.
- -----------------------------
Name: Keith W. Hughes
Title: Chairman of the Board, Principal
Executive Officer and Director
- -----------------------------
Name: Roy A. Guthrie
Title: Executive Vice President, Comptroller,
and Principal Accounting Officer and Director
- -----------------------------
Name: James E. Jack
Title: Senior Executive Vice President,
Principal Financial Officer and Director
/s/ HAROLD D. MARSHALL
- -----------------------------
Name: Harold D. Marshall
Title: DirectOr
- -----------------------------
Name: Joseph M. McQuillan
Title Director
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
being an officer or director, or both, of ASSOCIATES FIRST CAPITAL CORPORATION,
a Delaware corporation (the "Company"), do hereby make, constitute and appoint
James E. Jack, Roy A. Guthrie and Chester D. Longenecker, and each of them,
attorneys-in-fact and agents of the undersigned with full power and authority
of substitution and resubstitution, in any and all capacities, to execute for
and on behalf of the undersigned the Registration Statement on Form S-1
relating to the shares of Class A Common Stock of the Company, and any and all
pre-effective and post-effective amendments or supplements to the foregoing
Registration Statement and any other documents and instruments incidental
thereto, and to deliver and file the same, with all exhibits thereto, and all
documents and instruments in connection therewith, with the Securities and
Exchange Commission, and with each exchange on which any class of securities of
the Company is registered, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing that said attorneys-in-fact and agents, and each of them, deem advisable
or necessary to enable the Company to effectuate the intents and purposes
hereof, and the undersigned hereby fully ratify and confirm all that said
attorneys-in-fact and agents, or any of them, or their respective substitutes,
if any, shall do or cause to be done by virtue hereof.
<PAGE> 10
2
IN WITNESS HEREOF, each of the undersigned has subscribed his or her
name, this 5th day of February ,1996.
- -----------------------------
Name: Keith W. Hughes
Title: Chairman of the Board, Principal
Executive Officer and Director
- -----------------------------
Name: Roy A. Guthrie
Title: Executive Vice President, Comptroller,
and Principal Accounting Officer and Director
- -----------------------------
Name: James E. Jack
Title: Senior Executive Vice President,
Principal Financial Officer and Director
- -----------------------------
Name: Harold D. Marshall
Title: DirectOr
/s/ JOSEPH M. MCQUILLAN
- -----------------------------
Name: Joseph M. McQuillan
Title Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
0 MEANS NOT APPLICABLE OR NOT SEPARATELY DISCLOSED. THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S AUDITED SUPPLEMENTAL
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1995 AND THE YEAR THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SUPPLEMENTAL COMBINED
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 532
<SECURITIES> 881
<RECEIVABLES> 39,703
<ALLOWANCES> 1,269
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 41,304
<CURRENT-LIABILITIES> 0
<BONDS> 35,120
<COMMON> 47
0
0
<OTHER-SE> 4,754
<TOTAL-LIABILITY-AND-EQUITY> 41,304
<SALES> 6,107
<TOTAL-REVENUES> 6,107
<CGS> 0
<TOTAL-COSTS> 4,909
<OTHER-EXPENSES> 1,897
<LOSS-PROVISION> 834
<INTEREST-EXPENSE> 2,178
<INCOME-PRETAX> 1,198
<INCOME-TAX> 475
<INCOME-CONTINUING> 723
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 723
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
