<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 2-44197
ASSOCIATES FIRST CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-0876639
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 East Carpenter Freeway, Irving, Texas 75062-2729
(Address of principal executive offices)
(Zip code)
972-652-4000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes..X.. No.....
As of March 31, 1998, the registrant had 1,550,000,000 shares of Common
Stock authorized, 90,773,299 shares of Class A Common Stock issued, of
which 90,647,428 shares were outstanding, and 255,881,180 shares of Class
B Common Stock issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(In Millions, Except Per Share Amounts)
Three Months Ended
March 31
1998 1997
---- ----
REVENUE
Finance charges $2,045.0 $1,761.7
Insurance premiums 112.4 99.1
Investment and other income 73.7 65.9
------- -------
2,231.1 1,926.7
EXPENSES
Interest expense 757.3 637.4
Operating expenses 620.0 531.2
Provision for losses on finance
receivables - NOTE 7 365.0 344.5
Insurance benefits paid or provided 42.8 36.1
-------- -------
1,785.1 1,549.2
-------- -------
EARNINGS BEFORE PROVISION FOR INCOME TAXES 446.0 377.5
PROVISION FOR INCOME TAXES 165.0 139.7
-------- --------
NET EARNINGS $ 281.0 $ 237.8
======== ========
NET EARNINGS PER SHARE - NOTE 3
Basic $ 0.81 $ 0.69
======== ========
Diluted $ 0.81 $ 0.68
======== ========
See notes to consolidated financial statements.<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars In Millions)
March 31 December 31
1998 1997
-------- -----------
ASSETS
CASH AND CASH EQUIVALENTS $ 681.7 $ 433.2
INVESTMENTS IN DEBT AND EQUITY SECURITIES
- NOTE 5 1,406.9 1,242.4
FINANCE RECEIVABLES, net of unearned finance
income, allowance for credit losses and
insurance policy and claims reserves - NOTE 6 54,825.9 52,482.1
OTHER ASSETS - NOTE 8 3,653.5 3,075.0
--------- ---------
Total assets $60,568.0 $57,232.7
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE, unsecured short-term
Commercial Paper $22,904.3 $19,483.5
Bank Loans 636.6 1,487.1
ACCOUNTS PAYABLE AND ACCRUALS 2,069.8 1,765.5
LONG-TERM DEBT
Senior Notes 28,028.5 27,802.6
Subordinated and Capital Notes 425.4 425.4
--------- ---------
28,453.9 28,228.0
STOCKHOLDERS' EQUITY
Class A Common Stock, $0.01 par value,
1,150,000,000 shares authorized,
90,773,299 shares issued 0.9 0.9
Class B Common Stock, $0.01 par value,
400,000,000 shares authorized,
255,881,180 shares issued and outstanding 2.6 2.6
Paid-in Capital 4,000.4 4,004.6
Retained Earnings 2,343.6 2,097.4
Accumulated Other Comprehensive Income
- NOTE 4 169.8 172.6
Less 125,871 and 156,526 shares of
Class A Common Stock held at cost in
Treasury in 1998 and 1997, respectively (13.9) (9.5)
--------- ---------
Total stockholders' equity 6,503.4 6,268.6
--------- ---------
Total liabilities and stockholders' equity $60,568.0 $57,232.7
========= =========
See notes to consolidated financial statements.
<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
Three Months Ended
March 31
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 281.0 $ 237.8
Adjustments to reconcile net earnings to
net cash provided from operating activities:
Provision for losses on finance receivables 365.0 344.5
Depreciation and amortization 95.4 69.8
Unrealized gain on trading securities (7.0)
Purchases of trading securities (253.6)
Sales and maturities of trading securities 30.1
Increase in accounts payable and accruals 93.3 53.6
Increase in insurance policy and claims
reserves 6.9 11.8
Deferred income taxes (33.3) (13.7)
---------- ----------
Net cash provided from operating
activities 577.8 703.8
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Finance receivables originated or purchased (12,362.6) (10,891.5)
Finance receivables liquidated 10,287.6 8,704.7
Finance receivables sold 234.9 575.1
Acquisitions of other finance businesses, net (300.6)
(Increase) decrease in other assets (375.0) 26.4
Purchases of available-for-sale securities (229.2) (131.8)
Sales and maturities of available-for-sale
securities 290.4 18.6
---------- ----------
Net cash used for investing
activities (2,454.5) (1,698.5)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt 1,604.7 566.6
Retirement of long-term debt (1,667.2) (801.0)
Increase in notes payable 2,213.4 1,167.1
Cash dividends (34.7) (34.7)
Treasury stock and other (8.6) (3.2)
---------- ----------
Net cash provided from financing
activities 2,107.6 894.8
EFFECT OF FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS ON CASH 17.6 (2.6)
---------- ----------
INCREASE (DECREASE)IN CASH AND CASH EQUIVALENTS 248.5 (102.5)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 433.2 446.9
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 681.7 $ 344.4
========== ==========
CASH PAID FOR:
Interest $ 681.5 $ 594.4
========== ==========
Income taxes $ 10.3 $ 118.2
========== ==========
See notes to consolidated financial statements.<PAGE>
ASSOCIATES FIRST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Prior to April 7, 1998, Associates First Capital Corporation ("First
Capital" or the "Company"), a Delaware corporation, was a majority-owned
subsidiary of Ford FSG, Inc. and a majority indirect-owned subsidiary of
Ford Motor Company ("Ford"). On April 7, 1998, Ford completed a spin-off
of its interest in the Company in the form of a tax-free distribution of
its First Capital shares to Ford common and class B stockholders.
Effective with the distribution, First Capital is no longer a subsidiary
of Ford.
Associates Corporation of North America ("Associates") is the
principal U.S.-based operating subsidiary of First Capital. AIC
Corporation, with operations in Japan, and Associates Capital Corporation
of Canada are the principal foreign-based operating subsidiaries of First
Capital.
NOTE 2 - BASIS OF PRESENTATION AND CONSOLIDATION
The accompanying consolidated financial statements consolidate First
Capital and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Certain prior period
financial statement amounts have been reclassified to conform to the
current period presentation.
In the opinion of the management of First Capital, all adjustments
necessary to present fairly the results of operations and financial
position have been made and are of a normal recurring nature. The results
of operations for any interim period are not necessarily indicative of the
results of operations for a full year.
NOTE 3 - EARNINGS PER SHARE
Earnings per share on a basic and diluted basis for the periods
indicated is calculated as follows (in millions, except per share
amounts):
Three Months Ended
March 31
1998 1997
Basic net earnings per share:
Net earnings $281.0 $237.8
Weighted average shares outstanding 346.6 346.7
$ 0.81 $ 0.69
Diluted net earnings per share:
Net earnings $281.0 $237.8
Weighted average shares outstanding
plus assumed conversions 348.8 347.8
$ 0.81 $ 0.68
Calculation of weighted average shares
outstanding plus assumed conversions:
Weighted average shares outstanding 346.6 346.7
Effect of dilutive options 2.2 1.1
348.8 347.8
NOTE 4 - COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income", on January 1, 1998.
Pursuant to SFAS 130, accumulated other comprehensive income was reported
on the consolidated balance sheet. The components of accumulated other
comprehensive income are as follows (in millions):
March 31 December 31
1998 1997
Foreign currency translation adjustments $168.3 $168.2
Net unrealized gain on available-for-sale
securities 1.5 4.4
Accumulated other comprehensive income $169.8 $172.6
Comprehensive income for the three-month period ended March 31, 1998 and
1997 consisted of the following components (in millions):
Three Months Ended
March 31
1998 1997
Net earnings $281.0 $237.8
Foreign currency translation adjustments 0.1 (68.4)
Unrealized loss on available-for-sale
securities (2.9) (10.4)
Comprehensive income $278.2 $159.0
NOTE 5 - INVESTMENTS IN DEBT AND EQUITY SECURITIES
AVAILABLE-FOR-SALE SECURITIES
The Company invests in debt and asset-backed 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, the Company classifies its investments in these securities as
available-for-sale securities and adjusts its recorded value to market.
The estimated market value at March 31, 1998 and December 31, 1997 was
$1.0 billion and $1.1 billion, respectively. Amortized cost at March 31,
1998 and December 31, 1997 was $1.0 billion and $1.1 billion,
respectively. Realized gains or losses on sales are included in
investment and other income. Unrealized gains or losses are reported as
a component of stockholders' equity, net of tax.
TRADING SECURITIES
Trading securities, principally preferred stock, are recorded at
market value. Unrealized gains or losses on trading securities are
included in earnings. The estimated market value at March 31, 1998 and
December 31, 1997 was $361.5 million and $131.0 million, respectively.
Historical cost at March 31, 1998 and December 31, 1997 was $354.0 million
and $126.7 million, respectively.
NOTE 6- FINANCE RECEIVABLES
At March 31, 1998 and December 31, 1997, finance receivables consisted
of the following (in millions):
March 31 December 31
1998 1997
Consumer Finance
Home equity lending $19,755.0 $18,796.0
Personal lending and retail sales
finance 9,224.5 8,731.6
Credit card 7,787.7 8,211.7
Manufactured housing 2,185.0 1,669.4
38,952.2 37,408.7
Commercial Finance
Truck and truck trailer 10,043.5 9,688.9
Equipment 5,632.7 5,300.5
Fleet leasing 1,577.0 1,551.1
Recreational vehicles 483.8 444.0
Warehouse lending and other 942.1 822.4
18,679.1 17,806.9
Finance receivables, net of unearned
finance income ("net finance
receivables") 57,631.3 55,215.6
Allowance for losses on finance receivables (2,014.9) (1,949.9)
Insurance policy and claims reserves (790.5) (783.6)
Finance receivables, net of unearned
finance income, allowance for credit
losses and insurance policy and claims
reserves $54,825.9 $52,482.1
SECURITIZATION OF FINANCE RECEIVABLES
During the year ended December 31, 1997, the Company securitized and
sold approximately $800 million of manufactured housing retail finance
receivables and approximately $533 million of recreational vehicle retail
finance receivables, respectively. In addition, during the first quarter
of 1998, approximately $235 million of home equity lending receivables
were securitized and sold by the Company. No significant gains or losses
were recorded on these transactions.
The Company retains the servicing responsibilities for its securitized
receivables. At March 31, 1998 and December 31, 1997 $3.0 billion and
$2.9 billion, respectively, of receivables sold with servicing retained
were managed by the Company.
ACQUISITIONS
In February 1998, the Company acquired Beneficial Canada Holdings
Incorporated, the Canadian consumer finance subsidiary of Beneficial
Corporation. The fair market value of total assets acquired and
liabilities assumed was approximately $1.0 billion and $716 million,
respectively. The transaction was accounted for as a purchase.
In January 1998, the Company acquired CEF Limited, a United Kingdom
based equipment finance organization. The fair market value of total
assets acquired and liabilities assumed was approximately $172 million and
$164 million, respectively. The transaction was accounted for as a
purchase.
The pro forma effect of the above acquisitions was not material to the
financial statements.
NOTE 7 - ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES
Changes in the allowance for losses on finance receivables during the
periods indicated were as follows (in millions):
Three Months Ended Year Ended
March 31 December 31
1998 1997 1997
Balance at beginning of period $1,949.9 $1,563.1 $1,563.1
Provision for losses 365.0 344.5 1,378.1
Recoveries on receivables
charged off 59.0 53.0 224.9
Losses sustained (394.6) (328.2) (1,454.0)
Reserves of acquired
businesses and other 35.6 43.5 237.8
Balance at end of period $2,014.9 $1,675.9 $ 1,949.9
NOTE 8 - OTHER ASSETS
The components of other assets at March 31, 1998 and December 31, 1997
were as follows (in millions):
March 31 December 31
1998 1997
Goodwill $1,094.3 $1,104.0
Notes and other receivables 700.0 533.0
Finance receivables held for sale 421.6 268.8
Property and equipment 406.7 383.2
Other intangible assets 340.1 107.5
Collateral held for resale 251.7 225.3
Relocation client advances 112.4 140.6
Other 326.7 312.6
Total other assets $3,653.5 $3,075.0
NOTE 9 - DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments for the purpose of
hedging specific exposures as part of its risk management program. Such
instruments to date have been limited to foreign currency forward
exchange, currency swap, interest rate swap, treasury lock agreements and
treasury futures and option contracts.
Foreign currency forward exchange agreements are held for purposes
other than trading and have been designated for accounting purposes as a
hedge of the Company's yen-based net investments. Under these agreements,
the Company is obligated to deliver yen in exchange for United States
dollars at varying times over the next 5 years. The aggregate notional
amount of these agreements at March 31, 1998 and December 31, 1997 was
$1.8 billion and $921.8 million, respectively. The fair value of such
agreements at March 31, 1998 and December 31, 1997 was $144.9 million and
$97.6 million, respectively.
Foreign currency swap agreements are held for purposes other than
trading and have been designated for accounting purposes as hedges of
specific debt obligations. Under these agreements, the Company is
obligated to deliver or receive a specific foreign currency in exchange
for United States dollars at varying times over the next 5 years. The
aggregate notional amount of these agreements at both March 31, 1998 and
December 31, 1997 was $1.1 billion. The fair value of such agreements at
March 31, 1998 and December 31, 1997 was $31.8 million and $28.8 million,
respectively.
Interest rate swap and treasury lock agreements are held for purposes
other than trading and are used by the Company to hedge the effect of
interest rate movements on existing debt and anticipated debt and asset
securitization transactions. The aggregate notional amount of interest
rate swap and treasury lock agreements at March 31, 1998 and December 31,
1997 was $2.5 billion and $2.0 billion, respectively. The fair value of
such agreements at March 31, 1998 and December 31, 1997 was $(4.3) million
and $(7.3) million, respectively. Interest rate swap and treasury lock
agreements mature on varying dates over the next 4 years and 7 months,
respectively.
Treasury futures and option contracts are used to minimize income
fluctuations on preferred stock investments and are held for purposes
other than trading. The aggregate notional amount and fair value of
futures and options contracts at March 31, 1998 was $185.3 million and
$1.5 million, respectively. Such contracts mature in June 1998.
NOTE 10 - SUBSEQUENT EVENT
In April 1998, the Company acquired DIC Finance Co. Ltd., the
ninth-largest consumer finance company in Japan. The estimated market
value of the assets acquired and liabilities assumed was approximately
$1.6 billion and $1.3 billion, respectively.
In April 1998, the Company announced an agreement to purchase
substantially all of the owned and managed assets of SPS Transaction
Services, Inc. Upon closing, this acquisition will add approximately $2.3
billion in credit card receivables to the Company.
Both of the above acquisitions will be accounted for as purchases.<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net earnings for the three-month period ended March 31, 1998 were
$281.0 million, an 18% increase over the same period in the previous year.
The increase in earnings was principally due to revenue from the growth in
net finance receivables, partially offset by an increase in the provision
for losses on finance receivables.
Finance charge revenue increased for the three months ended March 31,
1998, compared to the same period in the prior year, principally as a
result of growth in average net finance receivables outstanding. Finance
charge revenue as a percentage of average net finance receivables (the
"Finance Charge Ratio") was 14.53% for the first quarter of 1998 compared
to 14.82% for the same period in 1997. The decrease in the Finance Charge
Ratio was principally due to a shift toward a higher percentage of secured
receivables as a percentage of total receivables. Secured receivables
generally have lower finance charge rates than unsecured receivables.
Interest expense increased for the first quarter of 1998 compared to
the same period in 1997, primarily due to an increase in average debt
outstanding related to the aforementioned growth in average net finance
receivables. Debt is the primary source of funding to support the
Company's growth in net finance receivables. The Company's total average
borrowing rate of 6.02% for the first quarter of 1998 declined from 6.08%
for the same period in the prior year. The decline in the average
borrowing rate was primarily caused by a decline in market rates and a
modest shift toward a higher percentage of floating rate debt as a
percentage of total debt. Floating rate debt rates were lower than long-term
debt fixed rates in each period.
As a result of the above fluctuations, the Company's net interest
margin increased to $1.3 billion for the first quarter of 1998 compared to
$1.1 billion for the prior-year period. The Company's net interest margin
expressed as a ratio to average net finance receivables declined to 9.15%
from 9.46% for the same period in the prior year.
First quarter operating expenses were higher in 1998 than in 1997
reflecting the growth in the size of the Company. Operating expenses as
a percentage of average net receivables declined slightly to 4.40% in the
first quarter of 1998, compared to 4.47% in the prior year reflecting
management's efforts to closely manage operating expense growth.
Operating expense efficiency, measured as the ratio of total operating
expenses divided by total revenue net of interest expense and insurance
benefits paid or provided was 43.3% for the first three months of 1998 and
42.4% in the same period in the prior year. The change in operating
expense efficiency was primarily driven by the aforementioned decrease in
the Finance Charge Ratio.
The Company's provision for losses increased from $344.5 million
during the first quarter of 1997 to $365.0 million for the same period in
1998. Total net credit losses as a percentage of average net receivables
(the "Loss Ratio") were 2.38% for the first quarter of 1998 compared to
2.31% for the same period in 1997, primarily due to increased losses in
the Company's unsecured portfolios. Unsecured portfolio loss increases
were primarily driven by high consumer debt levels and increased
bankruptcies.
The provision for income taxes increased for the three-month period
ended March 31, 1998 compared to the first quarter of 1997, principally as
a result of an increase in pretax earnings. The effective tax rate for
both three-month periods ended March 31, 1998 and March 31, 1997 was
37.0%.
Financial Condition
Net finance receivables managed by the Company grew $2.6 billion
(18.1% annualized) during the first quarter of 1998 compared to growth of
$1.7 billion (13.8% annualized) in the same period of 1997. The Company
had growth in substantially all of its product lines during the first
quarter of 1998. Of the total 1998 first quarter growth, approximately
56% was from internal sources, and the remaining 44% was from
acquisitions.
Composite 60+days contractual delinquency was 2.26% of gross finance
receivables at March 31, 1998, comparable to 2.23% at December 31, 1997
and 2.25% at March 31, 1997. Accordingly, the allowance for losses to
net finance receivables of 3.50% at March 31, 1998 is comparable to the
3.53% at December 31, 1997. The allowance for losses divided by net
credit losses (trailing four quarters) was 1.56 at March 31, 1998 compared
to 1.59 and 1.70 at December 31, 1997 and March 31, 1997, respectively.
Company management believes the allowance for losses at March 31, 1998 is
sufficient to provide adequate coverage against losses in its portfolios.
During the three months ended March 31, 1998, stockholders' equity
increased principally as a result of net earnings, partially offset by
dividends paid to stockholders of $34.7 million.
As a result of the aforementioned, the Company's return on average
assets, average equity and average tangible equity for the three-month
period ended March 31, 1998 was 1.91%, 17.61% and 21.31%, respectively.
This compares to a return on average assets, average equity and average
tangible equity for the three months ended March 31, 1997 of 1.94%, 17.36%
and 22.06%, respectively.
LIQUIDITY/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 United States 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 issuance of
short- and long-term debt, asset securitizations and cash provided from
the Company's operations. Management believes that the Company has
available sufficient liquidity, from a combination of cash provided from
operations, external borrowings and asset securitizations 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 it is able to meet its obligations as they
mature. The Company's domestic operations are principally funded through
domestic and international borrowings made by Associates, asset
securitizations and, to a lesser extent, borrowings made directly by the
Company. The Company's foreign subsidiaries are principally financed
through private and public debt borrowings in the transactional currency
and, to a lesser extent, fully hedged intercompany borrowings.
At March 31, 1998, the Company had short- and long-term debt
outstanding of $23.5 billion and $28.5 billion, respectively. Short-term
debt principally consists of commercial paper issued by Associates and
represents the Company's primary source of short-term liquidity. Long-term
debt principally consists of senior unsecured long-term debt issued
publicly and privately by Associates in the United States and abroad, and
to a lesser extent, private and public borrowings made by the Company's
foreign subsidiaries. During the three months ended March 31, 1998 and
1997, the Company raised debt aggregating $1.6 billion and $566.6 million,
respectively, through public and private offerings.
Substantial additional liquidity is available to the Company's
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 March 31,
1998, these bank lines, revolving credit facilities and receivable
purchase facilities totaled $16.6 billion. These facilities provide 75%
backup coverage for Associates short-term debt of $14.5 billion and First
Capital of $1.4 billion. First Capital's foreign subsidiaries were
allocated the remaining $709 million of which $281 million was available.
The Company has access to other sources of liquidity such as the
issuance of alternative forms of capital, the issuance of common and
preferred stock and the increased use of asset securitization.
Through March 31, 1998, asset securitizations have been limited to the
manufactured housing and recreational vehicle receivable portfolios and,
beginning in the first quarter of 1998, the home equity lending receivable
portfolio.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to a variety of market risks, including the
effects of movements in interest rates and foreign currency. Interest
rate and foreign exchange rate exposures are monitored and managed by the
Company as an integral part of its overall risk management program. The
principal goal of the Company's risk management program is to reduce the
potential impact of interest rate and foreign exchange exposures on the
Company's financial position and operating performance. The Company
utilizes derivative financial instruments as part of its overall risk
management program. See NOTE 9 of the consolidated financial statements
for a further discussion of the Company's use of derivative financial
instruments. <PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None to report.
ITEM 2. CHANGES IN SECURITIES.
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None to report.
ITEM 5. OTHER INFORMATION.
The Company desires to take advantage of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995 (the "1995 Act").
The 1995 Act provides a "safe harbor" for forward-looking statements to
encourage companies to provide information without fear of litigation so
long as those statements are identified as forward-looking and are
accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those
projected. Although the Company does not anticipate that it will make
forward-looking statements as a general policy, the Company will make
forward-looking statements as required by law or regulation, and from time
to time may make such statements with respect to management's estimation
of the future operating results and business of the Company.
The Company hereby incorporates into this report by reference to its
form 10-K for the year ended December 31, 1997 the cautionary statements
found on pages 27-28 of such form 10-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3(ii) By-Laws of Associates First Capital Corporation.
10 Amended and Restated Tax Sharing Agreement dated as of
February 19, 1998 between the Registrant and Ford
Motor Company.
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the first quarter ended March 31, 1998, First Capital
filed a Current Report on Form 8-K dated January 20, 1998
(announcing financial results for the year ended December 31,
1997); February 13, 1998 (announcing the election of new
Directors and other corporate matters); March 2, 1998 and March
19, 1998 (related to the acquisitions of Beneficial Holdings
Canada Corporation and DIC Finance, respectively); and March 3,
1998 (announcing final approval of Ford's spin-off of the
Company).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 13, 1998
ASSOCIATES FIRST CAPITAL CORPORATION
(registrant)
By/s/ John F. Stillo
Senior Vice President, Comptroller and
Principal Accounting Officer
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER EXHIBIT PAGE
- -----------------------------------------------------------------------------
<S> <C> <C>
3.2 -- Bylaws as amended March 2, 1998
10 -- Amended and Restated Tax Sharing Agreement
12 -- Computation of Ratio of Earnings to Fixed Charges
27 -- Financial Data Schedule
</TABLE>
------------
<PAGE>
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
ASSOCIATES FIRST CAPITAL CORPORATION
(THE "COMPANY")
ADOPTED APRIL 30, 1996
AS AMENDED SEPTEMBER 25, 1996
AS AMENDED MARCH 2, 1998
ARTICLE I.
OFFICES
The registered office of the Company shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Company may also
have one or more offices at such other places, either inside or outside of
the State of Delaware, as the Board of Directors may from time to time
determine or as the business of the Company may require. The books and
records of the Company may be kept (subject to the provisions of the laws
of the State of Delaware) at any place, either inside or outside of the
State of Delaware, as from time to time may be determined by the Board of
Directors.
ARTICLE II.
STOCKHOLDERS
SECTION 1. PLACE OF MEETING.
Meetings of stockholders (whether annual or special) shall be held at
such place, either inside or outside of the State of Delaware, as the Board
of Directors shall from time to time determine.
SECTION 2. ANNUAL MEETING.
The annual meeting of stockholders shall be held on the last Thursday
of May of each year or at such other time as shall be determined by the
Board of Directors. Should said day be a legal holiday, such annual
meeting shall be held on the preceding regular business day. If, for any
reason, the annual meeting be not held at the time aforesaid, the directors
shall fix another date for such meeting.
SECTION 3. SPECIAL MEETINGS.
Unless otherwise prescribed by law or by the Company's Restated
Certificate of Incorporation, as amended from time to time (the "Charter"),
special meetings of stockholders may be held at any time on call of the
Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President, or, at the request in writing of a majority of
the Board of Directors, any officer. Such request shall state the purpose
or purposes of the proposed meeting.
SECTION 4. NOTICE OF MEETINGS.
Except as otherwise provided by law, at least ten (10) days' notice of
stockholders' meetings stating the time and place and the objects thereof
shall be given by the Chairman of the Board of Directors, a Vice Chairman
of the Board of Directors, the President, the Secretary or an Assistant
Secretary to each stockholder of record having voting power in respect of
the business to be transacted thereat. Subject to Section 5 of this
Article II, no business other than that stated in the notice shall be
transacted at any meeting.
SECTION 5. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors
and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to
the Company's notice of meeting delivered pursuant to Section 4 of
this Article II, (b) by or at the direction of the Board of
Directors or by any stockholder of the Company who is entitled
to vote at the meeting, who complied with the notice procedures
set forth in paragraphs (A)(2) and (A)(3) of this Section 5 and
who was a stockholder of record at the time such notice is
delivered to the Secretary of the Company.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause of
paragraph (A)(1) of this Section 5, the stockholder must have
given timely notice thereof in writing to the Secretary of the
Company and such business must be a proper subject for stockholder
action under the General Corporation Law of the State of Delaware.
To be timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the Company not
less than sixty (60) days nor more than ninety (90) days prior to
the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual
meeting is advanced by more than thirty (30) days or delayed by
more than sixty (60) days from such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than
the ninetieth day prior to such annual meeting and not later than
the close of business on the later of the sixtieth day prior to
such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made.
Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (including such person's
written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at
the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination
or proposal is made (I) the name and address of such stockholder,
as they appear on the Company's books, and of such beneficial
owner and (ii) the class and number of shares of the Company which
are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 5 to the contrary, in the event that the
number of directors to be elected to the Board of Directors is
increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased
Board of Directors made by the Company at least seventy (70) days
prior to the first anniversary of the preceding year's annual
meeting, a stockholders's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of
the Company not later than the close of business on the tenth day
following the day on which such public announcement is first made
by the Company.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Company's notice of meeting pursuant to
Section 4 of this Article II. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at
which directors are to be elected pursuant to the Company's notice of
meeting (a) by or at the direction of the Board of Directors or (b) by any
stockholder of the Company who is entitled to vote at the meeting, who
complies with the notice procedures set forth in this Section 5 and who is
a stockholder of record at the time such notice is delivered to the
Secretary of the Company. Nominations by stockholders of persons for
election to the Board of Directors may be made at such a special meeting of
stockholders if the stockholder's notice required by paragraph (A)(2) of
this Section 5 shall be delivered to the Secretary at the principal
executive offices of the Company not earlier than the ninetieth day prior
to such special meeting and not later than the close of business on the
later of the sixtieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors
to be elected at such meeting.
General.
(1) Only persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve
as directors and only such business shall be conducted at a
meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this
Section 5. Except as otherwise provided by law, the Charter or
these By-laws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance
with this Section 5 and, if any proposed nomination or business is
not in compliance with this Section 5, to declare that such
defective proposal or nomination shall be disregarded.
(2) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or
in a document publicly filed by the Company with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 5, a
stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 5. Nothing in
this Section 5 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Company's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 6. QUORUM.
At any meeting of stockholders, the number of shares the holders of
which shall be present or represented by proxy in order to constitute a
quorum for, and the votes that shall be necessary for, the transaction of
any business shall be as expressly provided in Article 4 of the Charter.
At any meeting of stockholders at which a quorum is not present, the person
serving as chairman of the meeting or the holders of shares entitled to
cast a majority of all of the votes which could be cast at such meeting by
the holders of outstanding shares of stock of the Company who are present
in person or by proxy and who are entitled to vote on every matter that is
to be voted on without regard to class at such meeting may adjourn the
meeting from time to time.
SECTION 7. ORGANIZATION AND CONDUCT OF BUSINESS.
The Chairman of the Board of Directors shall act as chairman of
meetings of the stockholders. The Board of Directors may designate any
other officer or director of the Company to act as chairman of any meeting
in the absence of the Chairman of the Board of Directors, and the Board of
Directors may further provide for determining who shall act as chairman of
any stockholders' meeting in the absence of the Chairman of the Board of
Directors and such designee. The person serving as chairman of any meeting
of stockholders shall determine the order of business and the procedure at
the meeting, including such regulation of the manner of voting and the
conduct of discussion as seem to him or her in order.
The Secretary of the Company shall act as secretary of all meetings of
the stockholders, but in the absence of the Secretary the presiding officer
may appoint any other person to act as secretary of any meeting.
SECTION 8. PROXIES AND VOTING.
At any meeting of stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure
established for the meeting. Any copy, facsimile telecommunication or
other reliable reproduction of the writing or transmission created pursuant
to this paragraph may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of
the entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be a voice vote; provided, however, that
upon demand therefor by a stockholder entitled to vote or by his or her
proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballots, each of which shall state the name of the stockholder or proxy
voting and such other information as may be required under the procedure
established for the meeting.
SECTION 9. STOCK LISTS.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number
of shares held by each of them.
SECTION 10. RATIFICATION.
Any transaction questioned in any stockholders' derivative suit, or
any other suit to enforce alleged rights of the Company or any of its
stockholders, on the ground of lack of authority, defective or irregular
execution, adverse interest of any director, officer or stockholder,
nondisclosure, miscomputation or the application of improper principles or
practices of accounting may be approved, ratified and confirmed before or
after judgment by the Board of Directors or by the holders of the Company's
Class A Common Stock, par value $.01 per share ("Class A Common Stock") and
the holders of the Company's Class B Common Stock, par value $.01 per share
("Class B Common Stock") voting as provided in paragraph (g) of Article 4
of the Charter, and, if so approved, ratified or confirmed, shall have the
same force and effect as if the questioned transaction had been originally
duly authorized, and said approval, ratification or confirmation shall be
binding upon the Company and all of its stockholders and shall constitute a
bar to any claim or execution of any judgment in respect of such questioned
transaction.
SECTION 11. INSPECTORS OF ELECTION.
The Board of Directors may, and to the extent required by law, shall,
in advance of any meeting of stockholders, appoint one or more inspectors
to act at the meeting, decide upon the qualification of voters, count the
votes, decide the results and make a written report thereof in accordance
with the General Corporation Law of the State of Delaware. The Board of
Directors may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is
able to act at a meeting of stockholders, the person presiding at the
meeting may, and to the extent required by law, shall, appoint one or more
inspectors to act at the meeting.
Each inspector, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector
with strict impartiality and according to the best of his or her ability.
Every vote taken by ballots hall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. NUMBER, TERM OF OFFICE AND ELIGIBILITY.
Subject to any rights of holders of Preferred Stock to elect
additional directors under specified circumstances, as provided in Article
5 of the Charter, the number of directors of the Company shall be fixed
from time to time exclusively by resolution of the Board of Directors
adopted by the affirmative vote of directors constituting not less than a
majority of the total number of directors that the Company would have it
there were no vacancies on the Company's Board of Directors, but shall
consist of not more than twelve (12) nor less than three (3) directors.
Each director shall be elected annually by ballot by the holders of Class A
Common Stock and the holders of Class B Common Stock voting as provided in
paragraph (g) of Article 4 of the Charter at the annual meeting of
stockholders, to serve until his or her successor shall have been elected
and shall have qualified, except as provided in this Section 1. No person
may be elected or re-elected a director of the Company if at the time of
his or her election or re-election he or she shall have attained the age of
seventy years, and the term of any director who shall have attained such
age while serving as a director shall terminate as of the time of the first
annual meeting of stockholders following his or her seventieth birthday;
provided, however, that the Board of Directors by resolution may waive such
age limitation in any year and from year to year with respect to any
director or directors. Subject to any rights of holders of Preferred
Stock, and unless the Board of Directors otherwise determines, any vacancy
occurring in the Board of Directors caused by death, resignation, increase
in number of directors or otherwise may 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, and except as
otherwise provided by law, any such vacancy may not be filled by the
stockholders of the Company, and any director so elected shall hold office
until the next election of directors and until his or her successor is duly
elected and qualified, or until his or her earlier death, resignation or
removal.
SECTION 2. MEETINGS.
Meetings of the Board of Directors may be held at such place, either
inside or outside of the State of Delaware, as may from time to time be
designated by the Chairman of the Board of Directors, a Vice Chairman of
the Board of Directors, the President or resolution of the Board of
Directors or as may be specified in the call of any meeting. In the
absence of any such designation, the meetings shall be held at the
principal office of the Company in Irving, Texas.
An annual meeting of the Board of Directors shall be held on the same
day as, and as soon as practicable following the annual meeting of
stockholders or at such other time or place as shall be determined by the
Board of Directors at its regular meeting next preceding said annual
meeting of stockholders. Regular meetings of the Board of Directors shall
be held on the last Thursday of February, May, August and November of each
year or at such other time as shall be determined by the Board of
Directors. Should said day be a legal holiday, such regular meeting shall
be held on the next Thursday that is not a legal holiday.
Special meetings of the Board of Directors may be held at any time on
the call of the Chairman of the Board of Directors, a Vice Chairman of the
Board of Directors, the President or the Board of Directors. Meetings may
be held at any time or place without notice if all the directors are
present or if those not present waive notice of the meeting in writing.
SECTION 3. NOTICE OF MEETINGS.
The Secretary or an Assistant Secretary shall give notice of the time
and place of meetings of the Board of Directors (excepting the annual
meeting of directors) by (I) mailing or sending via courier such notice not
later than during the second day preceding the day on which such meeting is
to be held, or (ii) by (a) sending a facsimile transmission or other form
of electronic communication containing such notice or (b) delivering such
notice personally or by telephone, in each case, not later than during the
first day preceding the day on which such meeting is to be held to each
director. Unless otherwise stated in the notice thereof any and all
business may be transacted at any meeting.
SECTION 4. QUORUM AND ORGANIZATION OF MEETINGS.
One-third of the total number of members of the Board of Directors as
constituted from time to time, but in no event less than three, shall
constitute a quorum for the transaction of business; but if at any meeting
of the Board of Directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time, and
the meeting may be held as adjourned without further notice or waiver.
Except as otherwise provided by law or by the Charter or these By-laws, a
majority of the directors present at any duly constituted meeting may
decide any question brought before such meeting.
Meetings shall be presided over by the Chairman of the Board of
Directors or, in his or her absence, by such other person as the Board of
Directors may designate or the members present may select.
SECTION 5. POWERS.
In addition to the powers and authorities by these By-laws expressly
conferred upon them, the Board of Directors shall have and may exercise all
such powers of the Company and do all such lawful acts and things that are
not by statute, the Charter or these By-laws directed or required to be
exercised or done by the stockholders. Without prejudice to or limitation
of such general powers and any other powers conferred by statute, the
Charter or these By- laws, the Board of Directors shall have the following
powers:
(1) To determine, subject to the requirements of law and of
paragraph (c)(2) of Article 4 of the Charter, what, if any, dividends shall
be declared and paid to the stockholders out of net profits, current or
accumulated, or out of surplus or other assets of the Company available for
dividends.
(2) To fix, and from time to time to vary, the amount of working
capital of the Company, and to set aside from time to time out of net
profits, current or accumulated, or surplus of the Company such amount or
amounts as they in their discretion may deem necessary and proper as, or as
a safeguard to the maintenance of working capital, as a reserve for
contingencies, as a reserve for repairs, maintenance, or rehabilitation, as
a reserve for revaluation of profits of the Company or for such other
proper purpose as may in the opinion of the directors be in the best
interests of the Company, and in their sole discretion to abolish or modify
any such provision for working capital or any such reserve, and to credit
the amount thereof to net profits, current or accumulated, or to the
surplus of the Company.
(3) To purchase, or otherwise acquire for the Company, any
business,
property, rights or privileges which the Company may at the time be
authorized to acquire, at such price or consideration and generally on such
terms and conditions as they think fit; and at their discretion to pay
therefor either wholly or partly in money, stock, bonds, debentures or
other securities of the Company.
(4) To create, make and issue mortgages, bonds, deeds of trust,
trust agreements or negotiable or transferable instruments or securities,
secured by mortgage or otherwise, and to do every other act and thing
necessary to effect the same.
(5) To appoint any person or corporation to accept and hold in
trust
for the Company any property belonging to the Company, or in which it is
interested, or for any other purpose, and to execute such deeds and do all
things requisite in relation to any such trust.
(6) To remove any officer of the Company with or without cause,
and
from time to time to devolve the powers and duties of any officer upon any
other person for the time being.
(7) To confer upon any officer of the Company the power to
appoint,
remove and suspend subordinate officers, agents and employees.
(8) To determine who shall be authorized on the Company's behalf,
either generally or specifically, to make and sign bills, notes,
acceptances, endorsements, checks, releases, receipts, contracts,
conveyances, and all other written instruments executed on behalf of the
Company.
(9) To make and change regulations, not inconsistent with these
By-laws, for the management of the Company's business and affairs.
(10) To adopt and, unless otherwise provided therein, to amend and
repeal, from time to time, bonus and supplemental compensation plans for
employees (including employees who are officers or directors) of the
Company or any subsidiary. Power to construe, interpret, administer,
modify or suspend any such plan shall be vested in the Board of directors
or a committee thereof.
(11) To adopt a retirement plan, or plans, for the purpose of
making retirement payments to employees (including employees who are
officers or directors) of the Company or of any subsidiary thereof; and to
adopt a group insurance plan, or plans, for the purpose of enabling employees
(including employees who are officers or directors) of the Company or of
any subsidiary thereof to acquire insurance protection; any such retirement
plan or insurance plan, unless otherwise provided therein, shall be subject
to amendment or revocation by the Board of Directors.
(12) To delegate any of the powers of the Board of Directors in the
course of the business of the Company to any officer, employee or agent,
and to appoint any person the agent of the Company, with such powers
(including the power to subdelegate) and upon such terms as the Board of
Directors may think fit.
SECTION 6. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the Board
of Directors and each officer, in the performance of his or her duties,
shall be fully protected in relying in good faith upon such information,
opinions, reports or statements presented to the Company by any of its
officers or employees, or by committees of the Board of Directors, or by
any other person, as to matters such director, member or officer, as the
case may be, reasonably believes are within such person's professional or
expert competence and who has been selected with reasonable care by the
Board of Directors or by any such committee, or in relying in good faith
upon other records of the Company.
SECTION 7. COMPENSATION OF DIRECTORS.
Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as
directors, including, without limitation, services as members of committees
of the Board of Directors; provided, however, that nothing herein contained
shall be construed to preclude any director from serving the Company in any
other capacity and receiving compensation therefor.
SECTION 8. MEETINGS BY MEANS OF CONFERENCE TELEPHONE.
Unless otherwise provided by the Charter or these By-laws, members of
the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other, and participation in a meeting pursuant to this Section 8
shall constitute presence in person at such meeting.
ARTICLE IV.
COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.
There are hereby established as committees of the Board of Directors
an Audit Committee, a Compensation Committee and a Nominating Committee,
each of which shall have the powers and functions set forth in Sections 2,
3 and 4 hereof, respectively, and such additional powers as may be
delegated to it by the Board of Directors. The Board of Directors may from
time to time establish additional standing committees or special committees
of the Board of Directors, each of which shall have such powers and
functions as may be delegated to it by the Board of Directors. The Board
of Directors may abolish any committee established by or pursuant to this
Section 1 as it may deem advisable. Each such committee shall consist of
two or more directors, the exact number being determined from time to time
by the Board of Directors. Designations of the chairman and members of
each such committee, and, if desired, a vice chairman and alternates for
members, shall be made by the Board of Directors. In the absence or
disqualification of any member of any committee and any alternate member in
his or her place, the member or members of the committee present at the
meeting and not disqualified from voting whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the
Board of Directors to act at the meeting in the place of the absent or
disqualified member. Each committee shall have a secretary who shall be
designated by its chairman. A vice chairman of a committee shall act as
the chairman of the committee in the absence or disability of the chairman.
SECTION 2. AUDIT COMMITTEE.
The Audit Committee shall select and engage, on behalf of the
Company, independent public accountants to (1) audit the books of account
and other corporate records of the Company and (2) perform such other
duties as the Audit Committee may from time to time prescribe. The Audit
Committee shall transmit financial statements certified by such independent
public accountants to the Board of Directors after the close of each fiscal
year. The selection of independent public accountants for each fiscal year
shall be made in advance of the annual meeting of stockholders in such
fiscal year and shall be submitted for ratification or rejection at such
meeting. The Audit Committee shall confer with such accountants and review
and approve the scope of the audit of the books of account and other
corporate records of the Company. The Audit Committee shall have the power
to confer with and direct the officers of the Company to the extent
necessary to review the internal controls, accounting practices, financial
structure and financial reporting of the Company. From time to time the
Audit Committee shall report to and advise the Board of Directors
concerning the results of its consultation and review and such other
matters relating to the internal controls, accounting practices, financial
structure and financial reporting of the Company as the Audit Committee
believes merit review by the Board of Directors. The Audit Committee also
shall perform such other functions and exercise such other powers as may be
delegated to it from time to time by the Board of Directors.
SECTION 3. COMPENSATION COMMITTEE.
The Compensation Committee shall fix from time to time the
compensation of members of the Board of Directors who are officers or
employees of the Company and of all members of the Management Committee of
the Company who are officers or employees of the Company. The Compensation
Committee shall also perform such functions as may be delegated to it under
the provisions of any bonus, supplemental compensation, special
compensation or stock option plan of the Company.
SECTION 4. NOMINATING COMMITTEE.
The Nominating Committee from time to time shall consider and make
recommendations to the Board of Directors with respect to nominations or
elections of directors and officers of the Company and the appointments of
such other employees of the Company as shall be referred to the Nominating
Committee.
The Nominating Committee from time to time shall consider the size
and composition of the Board of Directors and make recommendations to the
Board of Directors with respect to such matters. Prior to the annual
meeting of stockholders each year, and prior to any special meeting of
stockholders at which a director is to be elected, the Nominating Committee
shall recommend to the Board of Directors persons proposed to constitute
the nominees whose election at such meeting will be recommended by the
Board of Directors.
The authority vested in the Nominating Committee by this Section 4
shall not derogate from the power of individual members of the Board of
Directors to recommend or place in nomination persons other than those
recommended by the Nominating Committee.
The Nominating Committee also shall perform such other functions and
exercise such other powers as may be delegated to it from time to time by
the Board of Directors.
SECTION 5. OTHER COMMITTEES.
The Board of Directors, or any committee, officer or employee of the
Company may establish additional standing committees or special committees
to serve in an advisory capacity or in such other capacities as may be
permitted by law, the Charter and these By-laws. The members of any such
committee need not be members of the Board of Directors. Any committee
established pursuant to this Section 5 may be abolished by the Board of
Directors or by the person or body by whom it was established as he, she or
it may deem advisable. Each such committee shall consist of two or more
members, the exact number being determined from time to time by such person
or body. Designations of members of each such committee and, if desired,
alternates for members, shall be made by such person or body, at whose will
all such members and alternates shall serve. The chairman of each such
committee shall be designated by such person or body. Each such committee
shall have a secretary who shall be designated by the chairman.
SECTION 6. RULES AND PROCEDURES.
Each committee may fix its own rules and procedures and shall meet at
such times and places as may be provided by such rules, by resolution of
the committee or by call of the chairman or vice chairman. Notice of
meeting of each committee, other than of regular meetings provided for by
its rules or resolutions, shall be given to committee members. The
presence of one-third of its members, but not less than two, shall
constitute a quorum of any committee, and all questions shall be decided by
a majority vote of the members present at the meeting. All action taken at
each committee meeting shall be recorded in minutes of the meeting.
SECTION 7. APPLICATION OF ARTICLE.
Whenever any provision of any other document relating to any
committee of the Company named therein shall be in conflict with any
provision of this Article IV, the provisions of this Article IV shall
govern, except that if such other document shall have been approved by the
stockholders, voting as provided in the Charter, or by the Board of
Directors, the provisions of such other document shall govern.
ARTICLE V.
OFFICERS
SECTION 1. OFFICERS.
The Officers of the Company shall include a Chairman of the Board of
Directors and may include one or more Vice Chairmen of the Board of
Directors, each of whom shall be chosen from among the directors, a
President and a Secretary, each of whom shall be elected by the Board of
Directors to hold office until his or her successor shall have been chosen
and shall have qualified. The Chairman of the Board of Directors or the
President may elect or appoint one or more Senior Executive Vice
Presidents, one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more Vice Presidents, a Treasurer, a Comptroller, a
General Counsel, one or more Assistant Vice Presidents, one or more
Assistant Treasurers, one or more Assistant Comptrollers, one or more
Assistant General Counsels, one or more Assistant Secretaries, and the
Chairman of the Board of Directors or President may elect or appoint such
other officers as such officer may deem necessary, or desirable, each of
whom shall have such authority, shall perform such duties and shall hold
office for such term as may be prescribed by the Board of Directors from
time to time. Any person may hold at one time more than one office,
excepting that the duties of the President and Secretary shall not be
performed by one person.
SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors shall be the Chief Executive
Officer of the Company. Subject to the provisions of these By-laws and to
the direction of the Board of Directors, he or she shall have ultimate
authority for decisions relating to the general management and control of
the affairs and business of the Company and shall perform all other duties
and exercise all other powers commonly incident to the position of Chief
Executive Officer or which are or from time to time may be delegated to him
or her by the Board of Directors, or which are or may at any time be
authorized or required by law. He or she shall preside at all meetings of
the Board of Directors. He or she may redelegate from time to time and to
the full extent permitted by law, in writing, to officers or employees of
the Company any or all of such duties and powers, and any such redelegation
may be either general or specific. Whenever he or she so shall delegate any
of his or her authority, he or she shall file a copy of the redelegation
with the Secretary of the Company.
SECTION 3. VICE CHAIRMEN OF THE BOARD OF DIRECTORS.
Subject to the provisions of these By-laws and to the direction of
the Board of Directors and of the Chief Executive Officer, the Vice
Chairmen of the Board of Directors shall have such powers and shall perform
such duties as from time to time may be delegated to them by the Board of
Directors or by the Chief Executive Officer, or which are or may at any
time be authorized or required by law.
SECTION 4. PRESIDENT.
Subject to the provisions of these By-laws and to the direction of
the Board of Directors and of the Chief Executive Officer, the President
shall have such powers and shall perform such duties as from time to time
may be delegated to him or her by the Board of Directors or by the Chief
Executive Officer, or which are or may at any time be authorized or
required by law.
SECTION 5. SENIOR EXECUTIVE VICE PRESIDENTS, EXECUTIVE
VICE PRESIDENTS, SENIOR VICE PRESIDENTS AND VICE PRESIDENTS.
Each of the Senior Executive Vice Presidents, each of the Executive
Vice Presidents, each of the Senior Vice Presidents and each of the other
Vice Presidents shall have such powers and shall perform such duties as may
be delegated to him or her by the Board of Directors, the Chairman of the
Board of Directors, the President or such other officer or officers to whom
he or she is directly responsible.
SECTION 6. TREASURER AND ASSISTANT TREASURER.
The Treasurer, subject to the direction of the Board of Directors,
shall have the care and custody of all funds and securities of the Company
which may come into his or her hands. When necessary or proper he or she
shall endorse on behalf of the Company, for collection, checks, notes and
other obligations, and shall deposit all funds of the Company in such banks
or other depositaries as may be designated by the Board of Directors or by
such officers or employees as may be authorized by the Board of Directors
so to designate. He or she shall perform all acts incident to the office of
Treasurer, subject to the control of the Board of Directors and such other
officer or officers to whom he or she is directly responsible. He or she
may be required to give a bond for the faithful discharge of his or her
duties, in such sum and upon such conditions as the Board of Directors may
require.
At the request and direction of the Treasurer or, in the case of his
or her absence or inability to act, any Assistant Treasurer may act in his
or her place. In the case of the death of the Treasurer, or in the case of
his or her absence or inability to act without having designated an
Assistant Treasurer to act temporarily in his or her place, the Assistant
Treasurer so to perform the duties of the Treasurer shall be designated by
the Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President or an Executive Vice President.
SECTION 7. SECRETARY AND ASSISTANT SECRETARY.
The Secretary shall keep full and accurate minutes of the meetings of
the stockholders and of the Board of Directors in the proper record book of
the Company provided therefor, and, when required, the minutes of meetings
of the committees, and shall be responsible for the custody of all such
minutes. Subject to the direction of the Board of Directors, the Secretary
shall have custody of the stock ledgers and documents of the Company. He
or she shall have custody of the corporate seal of the Company and shall
affix and attest such seal to any instrument whose execution under seal
shall have been duly authorized. He or she shall give due notice of
meetings and, subject to the direction of the Board of Directors, shall
perform all other duties commonly incident to his or her office or as
properly required of him or her by the Chairman of the Board of Directors
and such other officer or officers to whom he or she is directly
responsible and shall enjoy all other powers commonly incident to his or
her office.
At the request and direction of the Secretary or, in the case of his
or her absence or inability to act, any Assistant Secretary may act in his
or her place. In the case of the death of the Secretary, or in the case of
his or her absence or inability to act without having designated an
Assistant Secretary to act temporarily in his or her place, the Assistant
Secretary or other person so to perform the duties of the Secretary shall
be designated by the Chairman of the Board of Directors, a Vice Chairman of
the Board of Directors, the President or an Executive Vice President.
SECTION 8. ASSISTANT VICE PRESIDENTS AND OTHER OFFICERS.
Each assistant vice president and other officers shall perform such
duties commonly incident to his or her office or as properly required of
him or her by the Chairman of the Board of Directors and such other officer
or officers to whom he or she is directly responsible.
SECTION 9. GENERAL COUNSEL.
The General Counsel shall have general supervision of all matters of
a legal nature concerning the Company. He or she shall perform all such
duties commonly incident to his or her office or as properly required of
him or her by the Chairman of the Board of Directors and such other officer
or officers to whom he or she is directly responsible.
SECTION 10. COMPTROLLER.
The Comptroller shall keep and maintain the books of account of the
Company in such manner that they fairly present the financial condition of
the Company and its subsidiaries. The Comptroller shall have such powers
and shall perform such duties as may be delegated to him or her by the
Board of Directors, the Chairman of the Board of Directors, the President
or the appropriate Executive Vice President, Senior Vice President or Vice
President or such other officer or officers to whom he or she is directly
responsible.
SECTION 11. SALARIES.
Salaries of officers, agents or employees shall be fixed from time to
time by the Board of Directors or by such committee or committees, or
person or persons, if any, to whom such power shall have been delegated by
the Board of Directors. An employment contract, whether with an officer,
agent or employee, if expressly approved or specifically authorized by the
Board of Directors, may fix a term of employment thereunder; and such
contract, if so approved or authorized, shall be valid and binding upon the
Company in accordance with the terms thereof, provided that this provision
shall not limit or restrict in any way the right of the Company at any time
to remove from office, discharge or terminate the employment of any such
officer, agent or employee prior to the expiration of the term of
employment under any such contract.
SECTION 12. VACANCIES.
A vacancy in any office filled by election of the Board of Directors
may be filled by the Board of Directors by the election of a new officer
who shall hold office, subject to the provisions of this Article V, until
the regular meeting of the directors following the next annual meeting of
the stockholders and until his or her successor is elected.
SECTION 13. REMOVAL OR DISCHARGE.
Any officer may be removed or discharged by the Chairman of the Board
of Directors at any time excepting an officer who is also a director. Any
officer who also is a director may be discharged at any time by the Board
of Directors.
ARTICLE VI.
RESIGNATIONS
Any director, officer or agent of the Company, or any member of any
committee, may resign at any time by giving written notice to the Board of
Directors, the Chairman of the Board of Directors, a Vice Chairman of the
Board of Directors, the President or the Secretary of the Company. Any
such resignation shall take effect at the time specified therein, or if the
time be not specified therein, then upon receipt thereof. The acceptance of
such resignation shall not be necessary to make it effective.
ARTICLE VII.
CAPITAL STOCK - DIVIDENDS - SEAL
SECTION 1. CERTIFICATES OF SHARES.
The certificates for shares of the capital stock of the Company shall
be in such form, not inconsistent with the Charter, as shall be approved by
the Board of Directors. The certificates shall be numbered and signed by
the Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors, the President, an Executive Vice President, a Senior Vice
President or a Vice President, and also by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary. Any and all
signatures may be facsimiles.
All certificates shall bear the name of the persons owning the shares
represented thereby, shall state the number of shares represented by such
certificate and the date of issue; and such information shall be entered in
the Company's original stock ledger.
SECTION 2. ADDRESSES OF STOCKHOLDERS.
It shall be the duty of every stockholder to notify the Company of
his or her post office address and of any change therein. The latest
address furnished by each stockholder shall be entered on the original
stock ledger of the Company and the latest address appearing on such
original stock ledger shall be deemed conclusively to be the post office
address and the last-known post office address of such stockholder. If any
stockholder shall fail to notify the Company of his or her post office
address, it shall be sufficient to send corporate notices to such
stockholder at the address, if any, understood by the Secretary to be his
or her post office address, or in the absence of such address, to such
stockholder, at the General Post Office in the City of Wilmington, State of
Delaware.
SECTION 3. LOST, DESTROYED OR STOLEN CERTIFICATE.
Any person claiming a stock certificate in lieu of one lost,
destroyed or stolen, shall give the Company an affidavit as to his, her or
its ownership of the certificate and of the facts which go to prove that it
has been lost, destroyed or stolen. If required by the Board of Directors,
he, she or it also shall give the Company a bond, in such form as may be
approved by the Board of Directors, sufficient to indemnify the Company
against any claim that may be made against it on account of the alleged
loss of the certificate or the issuance of a new certificate. A new
certificate shall be issued upon receipt of such an affidavit and, if
required, upon the giving of such a bond.
SECTION 4. RECORD OF HOLDER OF SHARES.
The Company shall be entitled to treat the holder of record of any
share or shares as the holder in fact thereof, and accordingly shall not be
bound to recognize any equitable or other claims to or interest in such
shares on the part of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the General
Corporation Law of the State of Delaware. The Company shall be entitled to
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner.
SECTION 5. RECORD DATE.
In order that the Company may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment
of any dividend or other distribution or allotment of any rights or to
exercise any rights in respect of any change, conversion or exchange of
stock (other than conversions or exchanges pursuant to Article 4 of the
Charter) or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the
date on which the resolution fixing the record date is adopted and which
record date shall not be more than sixty (60) nor less than ten (10) days
before the date of any meeting of stockholders, nor more than sixty (60)
days prior to the time for such other action as hereinbefore described;
provided, however, that if no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held, and, for determining stockholders
entitled to receive payment of any dividend or other distribution or
allotment of rights or to exercise any rights of change, conversion or
exchange of stock (other than conversions or exchanges pursuant to Article
4 of the Charter) or for any other purpose, the record date shall be at the
close of business on the day on which the Board of Directors adopts a
resolution relating thereto.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
If stockholders are entitled to consent to corporate action in
writing without a meeting in accordance with the General Corporation Law of
the State of Delaware and the Charter, in order that the Company may
determine the stockholders entitled to so consent, the Board of Directors
may fix a record date, which shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall be not more than ten (10) days after the date upon
which the resolution fixing the record date is adopted and no record date
has been fixed by the Board of Directors and if no prior action by the
Board of Directors is required by the General Corporation Law of the State
of Delaware, the record date shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Company in the manner prescribed by Article 12 of the
Charter. If stockholders are entitled to consent to corporate action in
writing without a meeting in accordance with the General Corporation Law of
the State of Delaware and the Charter, and no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is
required by the General Corporation Law of the State of Delaware with
respect to the proposed action by written consent of the stockholders, the
record date for determining stockholders entitled to consent to corporate
action in writing shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
SECTION 6. REGULATIONS.
The Board of Directors shall have power and authority to make all
such rules and regulations not inconsistent with any of the provisions of
Article 4 of the Charter, as it may deem expedient, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Company.
SECTION 7. CORPORATE SEAL.
The corporate seal shall be in such form as shall from time to time
be approved by the Board of Directors. If and when so authorized by the
Board of Directors, a duplicate of the seal may be kept and used by the
Secretary or Treasurer or by any Assistant Secretary or Assistant
Treasurer.
ARTICLE VIII.
EXECUTIVE OF CONTRACTS AND OTHER DOCUMENTS
SECTION 1. CONTRACTS, ETC.
Except as otherwise prescribed in these By-laws, such officers,
employees or agents of the Company as shall be specified by the Board of
Directors shall sign, in the name and on behalf of the Company, all deeds,
bonds, contracts, mortgages and other instruments or documents, the
execution of which shall be authorized by the Board of Directors; and such
authority may be general or confined to specific instances. Except as so
authorized by the Board of Directors, no officer, agent or employee of the
Company shall have power or authority to bind the Company by any contract
or engagement or to pledge, mortgage, sell or otherwise dispose of its
credit or any of its property or to render it pecuniarily liable for any
purpose or in any amount.
SECTION 2. CHECKS, DRAFTS, ETC.
Except as otherwise provided in these By-laws, all checks, drafts,
notes, bonds, bills of exchange or other orders, instruments or obligations
for the payment of money shall be signed by such officer or officers,
employee or employees, or agent or agents, as the Board of Directors shall
by resolution direct. The Board of Directors may, in its discretion, also
provide by resolution for the countersignature or registration of any or
all such orders, instruments or obligations for the payment of money.
ARTICLE IX.
FISCAL YEAR
The fiscal year of the Company shall begin the first day of January
in each year.
ARTICLE X.
MISCELLANEOUS
SECTION 1. ORIGINAL STOCK LEDGER.
As used in these By-laws and in the Charter, the words "original
stock ledger" shall mean the record maintained by the Secretary of the
Company of the name and address of each of the holders of shares of any
class of stock of the Company, and the number of shares and the numbers of
the certificates for such shares held by each of them, taking into account
transfers at the time made by and recorded on the transfer sheets of each
of the Transfer Agents of the Company although such transfers may not have
been posted in the record maintained by the Secretary.
SECTION 2. NOTICES AND WAIVERS THEREOF.
Whenever any notice whatever is required by these By-laws, the
Charter or any of the laws of the State of Delaware to be given to any
stockholder, director or officer, such notice, except as otherwise provided
by the laws of the State of Delaware, may be given personally or by
telephone or be given by facsimile transmission or other form of electronic
communication, addressed to such stockholder at the address set forth as
provided in Section 2 of Article VII of these By-laws, or to such director
or officer at his or her Company location, if any, or at such address as
appears on the books of the Company, or the notice may be given in writing
by depositing the same in a post office, or in a regularly maintained
letter box, or by sending it via courier in a postpaid, sealed wrapper
addressed to such stockholder at the address set forth in Section 2 of
Article VII of these By-laws, or to such director or officer at his or her
Company location, if any, or such address as appears on the books of the
Company.
Any notice given by facsimile transmission or other form of
electronic communication shall be deemed to have been given when it shall
have been transmitted. Any notice given by mail or courier shall be deemed
to have been given when it shall have been mailed or delivered to the
courier.
A waiver of any such notice in writing, including by facsimile
transmission, signed or dispatched by the person entitled to such notice or
by his or her duly authorized attorney, whether before or after the time
stated therein, shall be deemed equivalent to the notice required to be
given, and the presence at any meeting of any person entitled to notice
thereof shall be deemed a waiver of such notice as to such person.
SECTION 3. VOTING UPON STOCKS.
The Board of Directors (whose authorization in this connection shall
be necessary in all cases) may from time to time appoint an attorney or
attorneys or agent or agents of the Company, or may at any time or from
time to time authorize the Chairman of the Board of Directors, any Vice
Chairman of the Board of Directors, the President, any Senior Executive
Vice President, any Executive Vice President, any Senior Vice President,
any Vice President, the Treasurer or the Secretary to appoint an attorney
or attorneys or agent or agents of the Company, in the name and on behalf
of the Company, to cast the votes which the Company may be entitled to cast
as a stockholder or otherwise in any other corporation or association, any
of the stock or securities of which may be held by the Company, at meetings
of the holders of the stock or other securities of such other corporation
or association, or to consent in writing to any action by any such other
corporation or association and the Board of Directors or any aforesaid
officer so authorized may instruct the person or persons so appointed as to
the manner of casting such votes or giving such consent, and the Board of
Directors or any aforesaid officer so authorized may from time to time
authorize the execution and delivery, on behalf of the Company and under
its corporate seal, or otherwise, of such written proxies, consents,
waivers or other instruments as may be deemed necessary or proper in the
premises.
ARTICLE XI.
AMENDMENTS
These By-laws may be altered, amended or repealed at any meeting of
the Board of Directors or of the stockholders, provided that notice of such
alteration, amendment or repeal be contained in the notice of such meeting
of the Board of Directors or stockholders (subject, in the case of meetings
of stockholders, to the provisions of Article II of these By-laws), as the
case may be. All such amendments must be approved by the affirmative vote
of the holders of at least 75% of the total voting power of all classes of
outstanding capital stock, voting together as a single class (if effected
by action of the stockholders), or by the affirmative vote of directors
constituting not less than 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 (if effected by action of the Board of Directors).
<PAGE>
<PAGE>
EXHIBIT 10
AMENDED AND RESTATED
TAX SHARING AGREEMENT
BY AND AMONG
FORD MOTOR COMPANY
AND ITS AFFILIATES
AND
ASSOCIATES FIRST CAPITAL CORPORATION
AND ITS AFFILIATES
<PAGE>
Dated February 19, 1998
AMENDED AND RESTATED TAX SHARING AGREEMENT
THIS AMENDED AND RESTATED TAX SHARING AGREEMENT (this
"Agreement") dated as of February 19, 1998, by and among Ford Motor
Company ("Ford"), a Delaware corporation and each Ford Affiliate (as
defined below), and Associates First Capital Corporation ("Associates"),
a Delaware corporation and currently an indirect, controlled subsidiary
of Ford, and each Associates Affiliate (as defined below) is entered
into in connection with the Spinoff (as defined below).
RECITALS
WHEREAS, the Ford Board of Directors has determined that it
is appropriate and desirable to distribute, subject to certain
conditions, to its common shareholders all of Ford's interest in
Associates' common stock on the Spinoff Date, as defined below (the
"Public Distribution"); and
WHEREAS, in order to consummate the Public Distribution, it
is necessary and desirable for Ford FSG, Inc. ("FFSG"), a Delaware
corporation and currently the direct parent of Associates, to make a non
pro rata distribution of all of its interest in Associates' common stock
to Ford in exchange for a portion of the FFSG stock held by Ford having
an equivalent value (the "Internal Distribution"); and
WHEREAS, the Public Distribution and the Internal
Distribution are intended to qualify as tax free distributions under
Section 355 of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, it is appropriate and desirable to set forth the
principles and responsibilities of the parties to this Agreement
regarding the allocation of Tax (as defined below) and other related
liabilities and adjustments with respect to Taxes, Tax contests and
other related Tax matters; and
WHEREAS, to that end, the parties to this Agreement wish to
amend and restate the Tax Sharing Agreement, dated May 6, 1996, between
Ford and Associates and their practices with respect to Tax matters
prior to January 1, 1996.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
Section 1. Definitions
"After Tax Amount" means any additional amount necessary to
reflect the hypothetical Tax consequences of the receipt or accrual of
any payment required to be made under this Agreement (including payment
of an additional amount or amounts hereunder and the effect of the
deductions available for interest paid or accrued and for Taxes such as
state and local income Taxes), determined by using the highest marginal
corporate Tax rate (or rates, in the case of an item that affects more
than one Tax) for the relevant taxable period (or portion thereof).
"Associates Affiliate" means any corporation or other entity
directly or indirectly controlled by Associates.
"Associates Group" means the affiliated group of
corporations as defined in Section 1504(a) of the Code, or similar group
of entities as defined under corresponding provisions of the laws of
other jurisdictions, of which Associates would be the common parent if
it were not a subsidiary of Ford, and any corporation or other entity
which may be, may have been or may become a member of such group from
time to time.
"Associates Group Combined Tax Liability" means, with
respect to any taxable period, the Associates Group's liability for
Non-Federal Combined Taxes as determined under Section 3.4 of this
Agreement.
"Associates Group Federal Income Tax Liability" means, with
respect to any taxable period, the Associates Group's liability for
Federal Income Taxes as determined under Section 3.3 of this Agreement.
"Audit" includes any audit, assessment of Taxes, other
examination by any Tax Authority, proceeding, or appeal of such a
proceeding relating to Taxes, whether administrative or judicial.
"Carryback Period" has the meaning set forth in Section 5.2
of this Agreement.
"Combined Group" means a group of corporations or other
entities that files a Combined Return.
"Combined Return" means any Tax Return with respect to
Non-Federal Taxes filed on a consolidated, combined (including nexus
combination, worldwide combination, domestic combination, line of
business combination or any other form of combination) or unitary basis
wherein Associates or one or more Associates Affiliates join in the
filing of such Tax Return (for any taxable period or portion thereof)
with Ford or one or more Ford Affiliates.
"Consolidated Group" means an affiliated group of
corporations within the meaning of Section 1504(a) of the Code that
files a Consolidated Return.
"Consolidated Return" means any Tax Return with respect to
Federal Income Taxes filed on a consolidated basis wherein Associates or
one or more Associates Affiliates join in the filing of such Tax Return
(for any taxable period or portion thereof) with Ford or one or more
Ford Affiliates.
"Consolidated Return Year" means any taxable year for which
a Consolidated Return is filed.
"Creditable Foreign Tax" means any foreign Tax paid, accrued
or deemed paid by members of the Associates Group that could be
allowable as a credit under Section 901 of the Code.
"Determination" has the meaning set forth in Section 8.5(a)
of this Agreement.
"Disputed Item" has the meaning set forth in Section 8.1(a)
of this Agreement.
"Estimated Tax Installment Date" means the installments due
dates prescribed in Section 6655 of the Code (presently April 15, June
15, September 15 and December 15).
"Federal Income Tax" means any Tax imposed under Subtitle A
of the Code (including the Taxes imposed by Sections 11, 55, 59A, and
1201(a) of the Code), and any interest, additions to Tax or penalties
applicable or related thereto, and any other income-based United States
federal Tax which is hereinafter imposed upon corporations.
"Federal Tax" means any Tax imposed or required to be
withheld by any Tax Authority of the United States.
"Final Determination" means any of (a) the final resolution
of any Tax (or other matter) for a taxable period, including related
interest or penalties, that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise,
including (1) by the expiration of a statute of limitations or a period
for the filing of claims for refunds, amending Tax Returns, appealing
from adverse determinations, or recovering any refund (including by
offset), (2) by a decision, judgment, decree, or other order by a court
of competent jurisdiction, which has become final and unappealable, (3)
by a closing agreement or an accepted offer in compromise under Section
7121 or 7122 of the Code, or comparable agreements under laws of other
jurisdictions, (4) by execution of an Internal Revenue Service Form 870
or 870AD, or by a comparable form under the laws of other jurisdictions
(excluding, however, with respect to a particular Tax Item for a
particular taxable period any such form that reserves (whether by its
terms or by operation of law) the right of the taxpayer to file a claim
for refund and/or the right of the Tax Authority to assert a further
deficiency with respect to such Tax Item for such period), or (5) by any
allowance of a refund or credit, but only after the expiration of all
periods during which such refund or credit may be recovered (including
by way of offset), or (b) the payment of Tax by any member of the
Consolidated Group or Combined Group with respect to any Tax Item
disallowed or adjusted by a Tax Authority provided that Ford determines
that no action should be taken to recoup such payment.
"Final Notice of Disagreement" has the meaning set forth in
Section 8.3(a) of this Agreement.
"Ford Affiliate" means any corporation or other entity
directly or indirectly controlled by Ford, but excluding Associates or
any Associates Affiliate.
"Ford Group" means the affiliated group of corporations as
defined in Section 1504(a) of the Code, or similar group of entities as
defined under corresponding provisions of the laws of other
jurisdictions, of which Ford is the common parent, and any corporation
or other entity which may be, may have been or may become a member of
such group from time to time, but excluding any member of the Associates
Group.
"Foreign Tax Amount" has the meaning set forth in Section
3.5(a) of this Agreement.
"Income Taxes" means (a) any Tax based upon, measured by, or
calculated with respect to (1) net income or profits (including any
capital gains Tax, minimum Tax and any Tax on items of Tax preference
and the Michigan Single Business Tax, but not including sales, use, real
or personal property, gross or net receipts, transfer or similar Taxes)
or (2) multiple bases if one or more of the bases upon which such Tax
may be based, measured by, or calculated with respect to, is described
in clause (1) above, or (b) any U.S. state or local franchise Tax.
"Indemnifying Party" has the meaning set forth in Section
8.1(a) of this Agreement.
"Indemnified Party" has the meaning set forth in Section
8.1(b) of this Agreement.
"Independent Third Party" means a nationally recognized tax
attorney that is a member of a nationally recognized law firm which firm
is independent of both parties.
"Initial Notice of Disagreement" has the meaning set forth
in Section 8.1(b) of this Agreement.
"Initial Private Letter Ruling" means the private letter
ruling issued to Ford in response to the request filed with the Service
on October 24, 1997.
"Interest Accrual Period" has the meaning set forth in
Section 6.4 of this Agreement.
"Non-Federal Combined Tax" means any Non-Federal Tax with
respect to which a Combined Return is filed.
"Non-Federal Separate Tax" means any Non-Federal Tax other
than a Non-Federal Combined Tax.
"Non-Federal Tax" means any Tax other than a Federal Tax.
"Payment Period" has the meaning set forth in Section 6.4 of
this Agreement.
"Post-Spinoff Period" means a taxable period beginning after
the Spinoff Date.
"Pre-Spinoff Period" means a taxable period beginning on or
before the Spinoff Date.
"Privilege" means any privilege that may be asserted under
applicable law including, any privilege arising under or relating to the
attorney-client relationship (including the attorney-client and work
product privileges), the accountant-client privilege, and any privilege
relating to internal evaluation processes.
"Pro Forma Associates Group Combined Return" means a pro
forma Non-Federal Combined Tax return or other schedule prepared
pursuant to Section 3.4(b) of this Agreement.
"Pro Forma Associates Group Consolidated Return" means a pro
forma consolidated Federal Income Tax return or other schedule prepared
pursuant to Section 3.3 of this Agreement.
"Redetermination Amount" means, with respect to any Tax for
any taxable period, the amount determined under Section 4.8 of this
Agreement.
"Restructuring Tax" means any Tax imposed upon Ford or a
Ford Affiliate and reasonable professional fees that are attributable
to, or result from, the failure of the Spinoff to qualify under Section
355 of the Code (including any Tax attributable to the application of
Section 355(e) or Section 355(f) of the Code to the Spinoff) or
corresponding provisions of the laws of other jurisdictions. Each Tax
referred to in the preceding sentence shall be determined using the
highest marginal corporate Tax rate for the relevant taxable period (or
any portion thereof). For the avoidance of doubt, Restructuring Tax
does not include an amount described in this paragraph that is imposed
upon a shareholder of Ford in its capacity as a shareholder of Ford.
"Ruling Documents" means (a) the request for a ruling under
Section 355 and various other sections of the Code, filed with the
Service on October 24, 1997, together with any supplemental filings or
ruling requests or other materials subsequently submitted on behalf of
Ford, its subsidiaries and shareholders to the Service, the appendices
and exhibits thereto, and any rulings issued by the Service to Ford (or
any Ford Affiliate) in connection with the Spinoff or (b) any similar
filings submitted to, or rulings issued by, any other Tax Authority in
connection with the Spinoff.
"Separate Return" means any Tax Return with respect to
Non-Federal Separate Taxes filed by Ford, Associates, or any of their
respective affiliates.
"Service" means the Internal Revenue Service.
"Spinoff" means the Internal Distribution and/or the Public
Distribution.
"Spinoff Date" means the close of business on the date on
which the Public Distribution is effected.
"Straddle Period" means a Pre-Spinoff Period ending after
the Spinoff Date.
"Supplemental Ruling" means (a) any ruling issued by the
Service in connection with the Spinoff other than the Initial Private
Letter Ruling or (b) any similar ruling issued by any other Tax
Authority after the Spinoff Date addressing the application of a
provision of the laws of another jurisdiction to the Internal
Distribution or the Public Distribution.
"Supplemental Ruling Documents" has the meaning set forth in
Section 5.1(d) of this Agreement.
"Tax" means any charges, fees, levies, imposts, duties, or
other assessments of a similar nature, including income, alternative or
add-on minimum, gross receipts, profits, lease, service, service use,
wage, wage withholding, employment, workers compensation, business
occupation, occupation, premiums, environmental, estimated, excise,
employment, sales, use, transfer, license, payroll, franchise,
severance, stamp, occupation, windfall profits, withholding, social
security, unemployment, disability, ad valorem, estimated, highway use,
commercial rent, capital stock, paid up capital, recording,
registration, property, real property gains, value added, business
license, custom duties, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by any Tax Authority
including any interest, additions to tax, or penalties applicable or
related thereto.
"Tax Asset" means any Tax Item that could reduce a Tax,
including a net operating loss, net capital loss, investment tax credit,
foreign tax credit, charitable deduction or credit related to
alternative minimum tax.
"Tax Authority" means governmental authority or any
subdivision, agency, commission or authority thereof or any
quasi-governmental or private body having jurisdiction over the assessment,
determination, collection or imposition of any Tax (including the
Service).
"Tax Item" means any item of income, gain, loss, deduction
or credit, or other attribute that may have the effect of increasing or
decreasing any Tax.
"Tax Return" means any return, report, certificate, form or
similar statement or document (including, any related or supporting
information or schedule attached thereto and any information return,
amended tax return, claim for refund or declaration of estimated tax)
required to be supplied to, or filed with, a Tax Authority in connection
with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements
relating to any Tax.
Section 2. Preparation and Filing of Tax Returns
2.1 In General. (a) Ford shall have the sole and
exclusive responsibility for the preparation and filing of the following
Tax Returns for any Pre-Spinoff Period: (1) all Consolidated Returns
and (2) all Combined Returns.
(b) Except as provided in Section 2.1(a) of this
Agreement, Associates shall have the sole and exclusive responsibility
for the preparation and filing of all Tax Returns for Associates and any
Associates Affiliate (or which relate to their businesses, assets or
activities) which are required to be filed for any Pre-Spinoff Period
and any Post-Spinoff Period.
2.2 Manner of Filing Tax Returns. (a) All Tax Returns
filed after the date of this Agreement by Ford, any Ford Affiliate,
Associates or any Associates Affiliate shall be (1) prepared in a manner
that is consistent with (I) the Ruling Documents and (ii) Sections 5.3
and 5.6 of this Agreement, and (2) filed on a timely basis (including
extensions) by the party responsible for such filing under Section 2.1
of this Agreement.
(b) Ford and Associates, for itself and the
Associates Affiliates, agree to file all Tax Returns for any Pre-Spinoff
Period, and to take all other actions in a manner consistent with the
position that Associates and the Associates Affiliates are part of any
Consolidated Group and any Combined Group for all days through and
including the Spinoff Date.
Except as otherwise provided in this Section 2.2,
Ford shall have the exclusive right, in its sole discretion, with
respect to any Tax Return described in Section 2.1(a) of this Agreement
to determine (1) the manner in which such Tax Return shall be prepared
and filed, including the elections, methods of accounting, positions,
conventions and principles of taxation to be used and the manner in
which any Tax Item shall be reported, (2) whether any extensions may be
requested, (3) the elections that will be made by Ford, any Ford
Affiliate, Associates, and Associates Affiliate in such Tax Return, (4)
whether any amended Tax Returns shall be filed, (5) whether any claims
for refund shall be made, (6) whether any refunds shall be paid by way
of refund or credited against any liability for the related Tax, and (7)
whether to retain outside specialists to prepare such Tax Return, whom
to retain for such purpose and the scope of any such retainer. Nothing
in this Section 2.2 shall limit the rights of Associates under Section
7.6 of this Agreement.
(d) In the event that a Tax Item is includable in a
Tax Return described in Section 2.1(a) of this Agreement and also in a
Tax Return described in Section 2.1(b) of this Agreement that is filed
after the date of this Agreement, Associates or the Associates Affiliate
preparing, or causing the preparation of, such Tax Return under Section
2.1(b) of this Agreement shall conform the treatment of such Tax Item in
such Tax Return described in Section 2.1(b) of this Agreement to the
treatment of such Tax Item in the applicable Tax Return described in
Section 2.1(a) of this Agreement.
(e) Any Tax Return described in (1) Section 2.1(a) of
this Agreement (but only with respect to Tax Items of Associates or an
Associates Affiliate) or (2) Section 2.1(b) of this Agreement, in either
case which Tax Return is filed after the date of this Agreement, shall
be prepared on a basis consistent with the elections, methods of
accounting, positions, conventions and principles of taxation and the
manner in which any Tax Item or other information is reported as
reflected on the most recently filed Tax Returns involving similar
matters. The preceding sentence shall not apply (1) to the extent
otherwise required by Section 2.2(a)(1) of this Agreement or (2) if (I)
Associates obtains Ford's prior written consent (which consent shall not
be unreasonably withheld), (ii) there has been a controlling change in
law or circumstances, or (iii) the failure to be consistent will not
result in an increased Tax liability to, or reduction in a Tax Asset of,
Ford or any Ford Affiliate with respect to a Pre-Spinoff Period, not
fully compensated by Associates. For purposes of this Section 2.2(e), a
controlling change in law or circumstances includes, with respect to
Post-Spinoff Periods (but not Pre-Spinoff Periods), permission to change
a method of accounting granted by the relevant Tax Authority.
(f) (1) Ford shall provide Associates a draft copy
of the portion of the Consolidated Return for the Consolidated Return
Year ending on December 31, 1997 and on December 31, 1998 to the extent
that it relates to Associates or any Associates Affiliate, together with
all related Tax accounting work papers, not later than ten (10) days
before the date Ford intends to file such Consolidated Return with the
Service.
(2) Beginning on May 1, 1998, Ford shall make
available to Associates a draft schedule for each member of the
Associates Group reflecting the computation of such member's taxable
income that will be used in preparing the Consolidated Return for the
Consolidated Return Year ending on December 31, 1997, together with all
related Tax accounting work papers, as soon as practicable after each
such draft schedule is prepared. Beginning on May 1, 1999, Ford shall
make available to Associates a draft schedule for each member of the
Associates Group reflecting the computation of such member's taxable
income that will be used in preparing the Consolidated Return for the
Consolidated Return Year ending on December 31, 1998, together with all
related Tax accounting work papers, as soon as practicable after each
such draft schedule is prepared.
(3) Ford shall consider, in its sole discretion,
all reasonable suggestions made by Associates to Ford regarding the
draft provided under Section 2.2(f)(1) of this Agreement not later than
five (5) days before the date Ford intends to file the applicable
Consolidated Return with the Service.
(g) Ford shall make its employees reasonably
available, to the extent consistent with Ford's process for preparing a
Consolidated Return or a Combined Return, at mutually convenient times
during normal business hours to discuss information pertinent to
Associates or any Associates Affiliate contained in such Consolidated
Return or Combined Return prior to the date on which Ford intends to
file such Consolidated Return or Combined Return.
2.3 Agent. Associates hereby irrevocably designates, and
agrees to cause each Associates Affiliate to so designate, Ford as its
sole and exclusive agent and attorney-in-fact to take such action
(including execution of documents) as Ford, in its sole discretion, may
deem appropriate in any and all matters (including Audits) relating to
any Tax Return described in Section 2.1(a) of this Agreement. Nothing
in this Section 2.3 shall limit the rights of Associates elsewhere under
this Agreement.
2.4 Provision of Tax Return Information. (a)
Associates shall provide Ford all documents and information, and
make available employees and officers of Associates as Ford
reasonably requests to prepare any Tax Return described in Section
2.1(a) of this Agreement. Without limiting the foregoing, in this
regard, Associates agrees to provide (1) the information set forth
in Appendix A to this Agreement, on or before the dates set forth
therein, with respect to the Consolidated Return for 1997, (2) the
information set forth in Appendix B to this Agreement, on or before
the dates set forth therein, with respect to Combined Returns for
1997, (3) information substantially identical to that set forth in
Appendix A to this Agreement with respect to the Consolidated Return
for 1998, on or before the date that is 90 days after the Spinoff
Date, and (4) information substantially identical to the information
set forth in Appendix B to this Agreement with respect to Combined
Returns for 1998, on or before the date that is 150 days after the
Spinoff Date.
(b) In the case of any Tax Return for a Pre-Spinoff Period
described in Section 2.1(a) of this Agreement that is
filed after the date of this Agreement, Ford shall provide
Associates access to and allow Associates to copy that portion of
each such Tax Return to the extent it relates to Associates or any
Associates Affiliate, together with all related Tax accounting work
papers, not later than thirty (30) days after the date of filing of
such Tax Return.
In the case of any Tax Return in Ford's
possession that was filed before the date of this Agreement,
including those relating to periods ending before January 1, 1990,
Ford shall use reasonable efforts to provide Associates access to
and allow Associates to copy that portion of each such Tax Return to
the extent that it relates to Associates or any Associates
Affiliate, together with all related Tax accounting work papers, as
soon as reasonably practicable after the date of this Agreement, but
in no event later than the later of fifteen (15) days after the
Spinoff Date or June 30, 1998.
(d) After the date of this Agreement, Ford shall
afford Associates access to employees of Ford on a mutually
convenient basis during normal business hours to the extent such
access may reasonably be required by Associates to prepare any Tax
Return described in Section 2.1(b) of this Agreement or to contest
any Audit of any such Tax Return.
(e) Notwithstanding any other provision of this
Agreement, no member of the Ford Group shall be required to provide
Associates or any Associates Affiliate access to or copies of (1)
any information that relates to any member of the Ford Group, (2)
any information as to which any member of the Ford Group is entitled
to assert the protection of any Privilege, or (3) any information as
to which any member of the Ford Group is subject to an obligation to
maintain the confidentiality of such information. Ford shall use
reasonable efforts to separate any such information from any other
information to which Associates is entitled to access or to which
Associates is entitled to copy under this Agreement, to the extent
consistent with preserving its rights under this Section 2.4(e).
Section 3. Tax Sharing
3.1 Associates Liability for Federal Income Taxes and
Non-Federal Combined Taxes. For each Pre-Spinoff Period, Associates
shall be liable for and pay to Ford an amount equal to the sum of
the Associates Group Federal Income Tax Liability and the Associates
Group Combined Tax Liability for such taxable period. With respect
to taxable periods ending on or before December 31, 1996, the
parties hereby acknowledge and agree that the only amounts that
remain to be paid, if any, are Redetermination Amounts under Section
4.8 of this Agreement.
3.2 Ford Liability for Foreign Tax Amount. For each
Pre-Spinoff Period beginning after December 31, 1995, Ford shall be
liable for and pay to Associates an amount equal to the Foreign Tax
Amount for such taxable period.
3.3 Associates Group Federal Income Tax Liability.
With respect to each Pre-Spinoff Period beginning after December 31,
1995, the Associates Group Federal Income Tax Liability shall be the
Associates Group's liability for Federal Income Taxes for such
taxable period, as determined on a Pro Forma Associates Group
Consolidated Return prepared:
(a) on the basis of the Consolidated Return for
such period, determined by including only Tax Items of members of
the Associates Group which are included in the Consolidated Return;
(b) excluding Creditable Foreign Taxes; and
applying the highest marginal corporate Tax rate
in effect for such taxable period (or any portion thereof).
3.4 Associates Group Combined Tax Liability. (a) In
General. With respect to any Pre-Spinoff Period beginning after
December 31, 1995, the Associates Group Combined Tax Liability shall
be the sum for such taxable period of the Associates Group's
liability for each Non-Federal Combined Tax as determined on a Pro
Forma Associates Group Combined Return.
(b) Pro Forma Associates Group Combined Return.
For each Pre-Spinoff Period, Ford shall prepare or cause to be
prepared a Pro Forma Associates Group Combined Return for each Non-Federal
Combined Tax by reference to:
(1) the taxable income (or loss) of those
members of the Associates Group which are included in the Combined
Return for such Tax for such taxable period determined:
(I) in the case of those members of
the Associates Group which are included in the Consolidated Return
for such taxable period, from the Pro Forma Associates Group
Consolidated Return for such taxable period; or
(ii) in the case of those members of
the Associates Group which are not included in the Consolidated
Return for such taxable period, in a manner consistent with Section
3.3(a) of this Agreement;
(2) net operating loss carryforwards (but
not carry backs) of such entities;
(3) material adjustments of such entities
necessary to reflect the laws of the applicable jurisdiction (e.g.,
if applicable, to exclude "Subpart F income" and "gross-up");
(4) apportionment factors determined by
taking into account only such entities; and
(5) the highest marginal corporate Tax rate
in effect for such Tax for such taxable period (or portion thereof).
Additional Operating Rules. The following
additional provisions shall apply in determining the Associates
Group Combined Tax Liability:
(1) Ford shall not pay Associates for, and
Associates Group Combined Tax Liability shall not be reduced by
reason of, any Tax Asset relating to any Non-Federal Combined Tax,
including any net operating loss carrybacks or carryovers, not
otherwise taken into account under Section 3.4(b) of this Agreement;
and
(2) the liability of Associates and the
Associates Affiliates with respect to unemployment and similar Taxes
for which a Combined Return is filed shall be the lesser of (I) the
liability for such Taxes of Associates and the Associates Affiliates
which are included in the Combined Return determined utilizing the
Tax rate applicable to the Combined Return and (ii) the liability
for such Taxes of Associates and the Associates Affiliates which are
included in the Combined Return determined as if such entities were
not and never were part of the Combined Group, but rather were a
separate group filing a combined unemployment Tax Return.
3.5 Computation of Foreign Tax Amounts. (a) In
General. With respect to each Pre-Spinoff Period beginning after
December 31, 1995, the Foreign Tax Amount shall be the amount of
actual Tax savings (adjusted to reflect cumulative savings), if any,
realized for such taxable period by the Consolidated Group (taking
into account carrybacks and carryforwards to and from such taxable
period) with respect to Creditable Foreign Taxes. Determinations
under this Section 3.5 shall be made without regard to the
alternative minimum tax.
(b) Amount. (1) General Rule. The amount of any
such Tax savings for a taxable period shall be determined either (I)
by comparing (A) the Consolidated Group's foreign tax credit
computed by taking into account the Associates Group to (B) the
Consolidated Group's foreign tax credit computed without taking into
account the Associates Group, or (ii) if a deduction is claimed for
Creditable Foreign Taxes, by comparing (A) the Consolidated Group's
liability for Federal Income Taxes computed by taking into account
such Creditable Foreign Taxes to (B) the Consolidated Group's
liability for Federal Income Taxes computed without taking into
account such Creditable Foreign Taxes.
(2) Limitations. In no event shall the
amount determined under Section 3.5(b)(l)(I) of this Agreement for a
taxable period exceed the amount of Creditable Foreign Taxes taken
into account during such period. In addition, the amount of
Creditable Foreign Taxes taken into account during a taxable period
shall be reduced, as Ford determines may be appropriate, to the
extent such Creditable Foreign Taxes have been reflected in Ford's
consolidated financial statements for periods prior to May 6, 1996.
3.6 Cooperation. Ford shall make its employees
reasonably available to Associates to explain each Pro Forma
Associates Group Consolidated Return prepared after the date of this
Agreement pursuant to Section 3.3 of this Agreement and each Pro
Forma Associates Group Combined Return prepared after the date of
this Agreement pursuant to Section 3.4 of this Agreement, and Ford
shall consider, in its sole discretion, all reasonable suggestions
made by Associates to Ford regarding such Pro Forma Associates Group
Consolidated Returns and Pro Forma Associates Group Combined
Returns.
Section 4. Payment of Taxes and Tax Sharing Amounts
4.1 Federal Income Taxes. Ford shall pay to the
Service all Federal Income Taxes, if any, of any Consolidated Group
due and payable for all Pre-Spinoff Periods.
4.2 Non-Federal Combined Taxes. Ford shall pay to
the appropriate Tax Authorities all Non-Federal Combined Taxes, if
any, of any Combined Group due and payable for all Pre-Spinoff
Periods.
4.3 Non-Federal Separate Taxes. Associates shall pay
(or cause to be paid) to the appropriate Tax Authorities all Non-Federal
Separate Taxes, if any, that relate to the Associates Group
and any Associates Affiliate.
4.4 Other Federal Taxes. The parties shall each pay
or cause to be paid to the appropriate Tax Authorities all of their
respective Federal Taxes (excluding Federal Income Taxes for Pre-Spinoff
Periods, which are governed by Section 4.1 of this
Agreement), if any.
4.5 Tax Sharing Installment Payments. (a) Federal
Income Taxes. Not later than five (5) business days prior to each
Estimated Tax Installment Date with respect to any Pre-Spinoff
Period, the parties shall, consistent with past practices, determine
under the principles of Section 6655 of the Code the estimated
amount of the related installment of the Associates Group Federal
Income Tax Liability. Associates shall pay to Ford not later than
such Estimated Tax Installment Date the amount thus determined.
(b) Non-Federal Combined Taxes. Not later than
November 15 of the calendar year following any Pre-Spinoff Period,
Ford shall deliver to Associates an estimate of the Associates Group
Combined Tax Liability for such period determined by using the
previous taxable period's apportionment factors. Associates shall
pay to Ford, not later than ten (10) business days after the date of
delivery of such estimate, the amount thus determined.
4.6 Tax Sharing True-up Payments. (a) Federal
Income Taxes. Not later than thirty (30) business days after a
Consolidated Return is filed with respect to any Pre-Spinoff Period,
Ford shall deliver to Associates a Pro Forma Associates Group
Consolidated Return reflecting the Associates Group Federal Income
Tax Liability. Not later than five (5) business days after the date
of delivery, Associates shall pay to Ford, or Ford shall pay to
Associates, as appropriate, an amount equal to the difference, if
any, between the Associates Group Federal Income Tax Liability for
the taxable Pre-Spinoff Period and the aggregate amount paid by
Associates with respect to such period under Section 4.5(a) of this
Agreement.
(b) Non-Federal Combined Taxes. Not later than
November 15 of the calendar year following any Pre-Spinoff Period,
Ford shall deliver to Associates a schedule based upon the Pro Forma
Associates Group Combined Returns for such Pre-Spinoff Period
reflecting the Associates Group Combined Tax Liability for such
Pre-Spinoff Period. Not later than ten (10) business days after the
date of delivery, Associates shall pay to Ford, or Ford shall pay to
Associates, as appropriate, an amount equal to the difference, if
any, between the Associates Group Combined Tax Liability for the
Pre-Spinoff Period and the amount paid by Associates with respect to
such period under Section 4.5(b) of this Agreement.
4.7 Payments of Foreign Tax Amounts. Not later than
thirty (30) business days after the Consolidated Return is filed for
the Consolidated Return Year ending December 31, 1998, Ford shall
deliver to Associates a schedule setting forth the Foreign Tax
Amount for such taxable period. Not later than five (5) business
days after the date the schedule is delivered, Ford shall pay
Associates such Foreign Tax Amount.
4.8 Redetermination Amounts. (a) In General. (1)
In the event of a redetermination of any Tax Item of any member of a
Consolidated Group or Combined Group, as a result of a Final
Determination or any settlement or compromise with any Tax
Authority, Associates shall pay Ford or Ford shall pay Associates,
as the case may be, a Redetermination Amount for each Tax and
taxable period affected by such redetermination.
(2) Provided that Associates complies with
the covenant described in this Section 4.8(a)(2), the Foreign Tax
Amount for a Consolidated Return Year ending December 31, 1996 or
December 31, 1997 shall be adjusted only by reason of a
redetermination reducing the amount of available Creditable Foreign
Taxes (e.g., based upon the non-existence of, or failure to
substantiate, such Creditable Foreign Taxes, or because the foreign
Tax is not of a type allowable as a credit under the Code). In such
case, the Redetermination Amount attributable to such
redetermination shall equal the amount of such reduction in
Creditable Foreign Taxes plus interest thereon under Section
4.8(b)(3)(I). Associates hereby agrees that it shall use its best
efforts to provide Ford with such information and documentation as
Ford may reasonably request for the purpose of meeting any
applicable burden of proof as to the availability and amount of
Creditable Foreign Taxes for the Consolidated Return Years ending
December 31, 1996 and December 31, 1997.
(3) In no event shall a Redetermination
Amount be based upon a redetermination of Creditable Foreign Taxes
or Foreign Tax Amount for taxable periods beginning on or before
December 31, 1995.
(b) Computation. A Redetermination Amount for a
Tax for a taxable period shall be the sum of:
(1) for taxable periods beginning after
December 31, 1995, the difference, if any, between:
(I) the net amount of all amounts
previously determined under Section 3 of this Agreement for such Tax
for such taxable period; and
(ii) the net amount of all amounts
that would have been determined under Section 3 of this Agreement
for such Tax for such taxable period taking such redetermination
into account; and
(2) for taxable periods beginning on or
before December 31, 1995, the sum of the net amounts of (I) the
amount obtained by applying the highest marginal corporate Tax rate
(taking into account the effect of deductions for state and local
taxes) for such Tax for such taxable period to the adjustments of
income, gain, loss or deduction of members of the Associates Group
for such Tax for such taxable period; and (ii) an amount equal to
any increase or decrease in credits of members of the Associates
Group, absorbed for such taxable period by members of the Associates
Group; and
(3) interest on the amount determined under
Section 4.8(b)(1) or 4.8(b)(2) of this Agreement (as the case may
be), compounded daily,
(I) in the case of a payment by
Associates, from the last date prescribed for payment (without
interest or penalty) of such Tax (under the principles of Section
6601 of the Code or corresponding provisions of the laws of the
relevant jurisdiction) for such taxable period until the date that
is five (5) days after the day that Ford delivers the schedule
described in Section 4.8 of this Agreement, calculated, for a
redetermination affecting Federal Income Taxes, at the rate
determined under Section 6621(a)(2) of the Code (and under Section
6621 of the Code to the extent applied to the Consolidated Return
for such taxable period) and, for a redetermination affecting other
Taxes, at the applicable rate, if any, under corresponding
provisions of the laws of the relevant jurisdiction, and
(ii) in the case of a payment by Ford,
from the point at which interest would begin to accrue under the
principles of Section 6611 of the Code (or corresponding provisions
of the laws of the relevant jurisdiction) until the date that is
five (5) days after the day that Ford delivers the schedule
described in Section 4.8 of this Agreement, calculated, for a
redetermination affecting Federal Income Taxes, at the rate
determined under Section 6621(a)(1) of the Code, and, for a
redetermination affecting other Taxes, at the applicable rate, if
any, under corresponding provisions of the laws of the relevant
jurisdiction.
(1) Payment. Ford shall deliver to Associates a
schedule reflecting the computation of any Redetermination Amount.
The inclusion in such schedule of any interest under Section 6621
of the Code shall be deemed to be a representation by Ford that
interest at such rate applied to the Consolidated Return for the
relevant taxable period. Not later than five (5) days after the
date such schedule is delivered, Associates shall pay Ford, or Ford
shall pay Associates, as the case may be, such Redetermination
Amount.
(2) Cash Deposits. Associates, in its sole
discretion, may make a cash deposit to Ford with respect to a
particular Tax for a particular taxable period that is the subject
of an Audit if (I) Associates contemporaneously specifies in writing
to Ford (A) that such cash is a cash deposit described in this
Section 4.8(c)(2), (B) the Tax and taxable period to which such cash
deposit relates, and (ii) the relevant Tax Authority has established
a procedure under which interest on a portion of an underpayment may
cease to accrue if the taxpayer makes a cash deposit equal to the
amount of such portion. If Associates makes a cash deposit under
this Section 4.8(c)(2), interest under Section 4.8(b)(3)(I) of this
Agreement shall accrue through the later of (I) the date that Ford
receives such cash deposit and (ii) the earliest subsequent date as
of which, under the procedures established by the relevant Tax
Authority, Ford could cause interest to cease to accrue on the
underlying deficiency (or portion thereof) by depositing an amount
equal to such cash deposit. Interest under Section 4.8(b)(3)(I) of
this Agreement shall accrue after such date only upon the excess, if
any, of (I) the sum of the amount determined under Section 4.8(b)(1)
or 4.8(b)(2) of this Agreement (as the case may be) plus the amount
of interest determined under the preceding sentence, over (ii) such
cash deposit. Associates hereby acknowledges that nothing in this
Agreement shall limit Ford's ability to disclose the existence of a
cash deposit to the relevant Tax Authority if Ford elects to make a
corresponding deposit with the relevant Tax Authority. Associates
shall not be entitled to a return of a cash deposit prior to a Final
Determination of the Tax with respect to which it made such deposit.
To the extent that the cash deposit exceeds the Redetermination
Amount for the applicable Tax and taxable period as reflected in the
schedule delivered by Ford under Section 4.8(c)(1) of this
Agreement, which schedule shall take account of such cash deposit,
Ford shall deliver such excess to Associates not later than five (5)
days after the date such schedule is delivered.
4.9 Payment of Taxes for Post-Spinoff Periods.
Except as otherwise provided in this Agreement, Ford shall pay or
cause to be paid all Taxes and shall be entitled to receive and
retain all refunds of Taxes with respect to Tax Returns relating to
Post-Spinoff Periods for which Ford has filing responsibility under
this Agreement. Except as otherwise provided in this Agreement,
Associates shall pay or cause to be paid all Taxes and shall be
entitled to receive and retain all refunds of Taxes with respect to
Tax Returns relating to Post-Spinoff Periods for which Associates
has filing responsibility under this Agreement.
Section 5. Deconsolidation
5.1 Spinoff Related Items. (a) Restrictions on
Certain Post-Distribution Actions. (1) Associates Restrictions.
Associates agrees that it will not take or fail to take, or permit
any Associates Affiliate to take or fail to take, any action where
such action or failure to act would be inconsistent with any
information or representation in the Ruling Documents.
(2) Ford Restrictions. Ford agrees that it
will not take or fail to take, or permit any Ford Affiliate to take
or fail to take, any action where such action or failure to act
would be inconsistent with any information or representation in the
Ruling Documents.
(b) Liability for Undertaking Certain Actions.
(1) Associates Liability. Associates and each Associates Affiliate
shall be responsible for one hundred percent (100%) of any
Restructuring Taxes that are attributable to, or result from, any
act or failure to act described in Section 5.1(a)(1) of this
Agreement by Associates or any Associates Affiliate. Associates and
each Associates Affiliate shall jointly and severally indemnify
Ford, each Ford Affiliate and their directors, officers and
employees and hold them harmless from and against any such
Restructuring Taxes.
(2) Ford Liability. Ford and each Ford
Affiliate shall be responsible for one hundred percent (100%) of any
Restructuring Taxes that are attributable to, or result from, any
act or failure to act described in Section 5.1(a)(2) of this
Agreement by Ford or any Ford Affiliate. Ford and each Ford
Affiliate shall jointly and severally indemnify Associates, each
Associates Affiliate and their directors, officers and employees and
hold them harmless from and against any such Restructuring Tax.
Information. Ford has provided Associates with
copies of the Ruling Documents submitted on or prior to the date
hereof, and shall provide Associates with copies of any additional
Ruling Documents prepared after the date hereof prior to the
submission of such Ruling Documents to a Tax Authority, provided,
however, that Ford shall not be required to provide any information
to Associates concerning Class B stockholders of Ford as Ford shall
reasonably determine.
(d) Supplemental Rulings. (1) In General. Ford
agrees that at the reasonable request of Associates, Ford shall
cooperate with Associates and use its reasonable best efforts to
seek to obtain, as expeditiously as possible, a Supplemental Ruling
or other guidance from the Service or any other Tax Authority for
the purpose of confirming (I) the continuing validity of (A) the
Initial Private Letter Ruling, (B) any similar ruling issued by any
Tax Authority addressing the application of a provision of the laws
of another jurisdiction to the Internal Distribution or the Public
Distribution and/or any Supplemental Rulings issued previously,
and (ii) compliance on the part of Associates or an Associates
Affiliate with its obligations under Section 5.1(a)(1) of this
Agreement. However, Ford shall not be obligated to seek a
Supplemental Ruling unless it reasonably believes that the Service
or other Tax Authority would issue such a ruling. Further, in no
event shall Ford file any Supplemental Ruling unless Associates
represents that (1) it has read the request for the Supplemental
Ruling and any materials, appendices and exhibits submitted or filed
therewith (the "Supplemental Ruling Documents") and (2) all
information (other than information which is provided by and
external expert) and representations, if any, relating to Associates
and any Associates Affiliate contained in the Supplemental Ruling
Documents are true, correct and complete in all material respects.
Associates shall reimburse Ford for all reasonable costs and
expenses incurred by Ford in obtaining a Supplemental Ruling
requested by Associates. Associates hereby agrees that Ford shall
have sole and exclusive control over the process of obtaining a
Supplemental Ruling, and that only Ford shall apply for a
Supplemental Ruling. Associates further agrees that it shall not
seek any guidance from the Service or any other Tax Authority
concerning the Spinoff except as set forth in this Section 5.1(d).
(2) Participation Rights. If Ford
determines to obtain a Supplemental Ruling or other guidance after
the date of this Agreement: (I) Ford shall keep Associates informed
in a timely manner of all material actions taken or proposed to be
taken by Ford in connection therewith; (ii) Ford shall (A)
reasonably in advance of the submission of any such Supplemental
Ruling Documents, provide Associates with a draft copy thereof, (B)
reasonably consider Associates' comments on such draft copy, and
provide Associates with a final copy (in each case, omitting only
information concerning Class B stockholders of Ford as Ford shall
reasonably determine); and (iii) Ford shall provide Associates with
notice reasonably in advance of, and Associates shall have the right
to attend, any formally scheduled meetings with the Tax Authority
(subject to the approval of the Tax Authority) that relate to such
Supplemental Ruling.
(e) Liability of Associates for Certain
Acquisitions. Associates and each Associates Affiliate shall be
responsible for one hundred percent (100%) of any Restructuring
Taxes that are attributable to, or result from, the acquisition of
stock or assets of Associates or an Associates Affiliate by any
person or persons. Associates and each Associates Affiliate shall
jointly and severally indemnify Ford, each Ford Affiliate and their
directors, officers and employees and hold them harmless from and
against any such Restructuring Taxes.
(f) Liability for Breach of Representation. Each
of Ford and Associates hereby represents that (1) it has read the
Ruling Documents submitted on or prior to the date hereof, (2) all
information contained in such Ruling Documents that concerns or
relates to such party or any affiliate of such party, other than
information which is provided by an external expert, is true,
correct and complete in all material respects, and (3) except to the
extent that such party shall have notified the other party in
writing to the contrary and with reasonable specificity prior to the
Spinoff Date, all such information that concerns or relates to such
party or any affiliate of such party, other than information which
is provided by an external expert, is and will be true, correct and
complete in all material respects as of the Spinoff Date.
Associates acknowledges that Ford shall require, prior to the
Spinoff, an executed addendum to this Agreement in which Associates
will agree that the term "Ruling Documents," whenever used in this
Agreement, includes all filings or ruling requests or other
materials, appendices and exhibits submitted after the date hereof
to the Service or any Tax Authority in connection with the Spinoff
and provided by Ford to Associates under Section 5.1 of this
Agreement. If any Tax Authority withdraws any portion of a ruling
or Supplemental Ruling issued to Ford in connection with the Spinoff
because of a breach by Associates or any Associates Affiliate of a
representation made in this Section 5.1, Associates and each
Associates Affiliate shall be responsible for one hundred percent
(100%) of any Restructuring Taxes. In such event, Associates and
each Associates Affiliate shall jointly and severally indemnify
Ford, each Ford Affiliate and their directors, officers and
employees and hold them harmless from and against any Restructuring
Taxes. If any Tax Authority withdraws any portion of a ruling or
Supplemental Ruling issued to Ford in connection with the Spinoff
because of a breach by Ford or any Ford Affiliate of a
representation made in this Section 5.1, Ford and each Ford
Affiliate shall be responsible for one hundred percent (100%) of any
Restructuring Taxes. In such event, Ford and each Ford Affiliate
shall jointly and severally indemnify Associates, each Associates
Affiliate and their directors, officers and employees and hold them
harmless from and against any Restructuring Taxes.
(g) Payment. Associates shall make or cause to be
made all payments for which it or any Associates Affiliate may be
liable under this Section 5.1. Such payments shall be made to Ford
or to the appropriate Tax Authority as specified by Ford no later
than five (5) days after delivery by Ford to Associates of written
notice of a payment by or liability of Ford (or a Ford Affiliate or
a director, officer or employee) based on a Final Determination,
together with a computation of the amounts due.
5.2 Carrybacks. Ford agrees to pay to Associates the
actual Federal Income Tax benefit received by the Ford Group from
the use in any Pre-Spinoff Period (the "Carryback Period") of a
carryback of any Tax Asset of the Associates Group from a Post-Spinoff
Period. The Federal Income Tax benefit of a carryback of a
Tax Asset shall be considered equal to the lesser of: (a) either
(1) the increase in the amount Ford would have paid Associates or
(2) the decrease in the amount Associates would have paid Ford had
the amount of such Tax Asset applied to the Carryback Period arisen
in such Carryback Period, whichever is greater, or (b) the amount
of the reduction in Federal Income Taxes imposed on the Consolidated
Group for the Carryback Period resulting solely from the carryback
of such Tax Asset. Ford shall pay Associates such Federal Income
Tax benefit not later than sixty (60) days after Ford realizes the
economic benefit of the carryback, including interest calculated
pursuant to the principles of Section 4.8(b)(3)(ii) of this
Agreement, of such Tax Asset of the Associates Group. If subsequent
to the payment by Ford to Associates of the Federal Income Tax
benefit of a carryback of a Tax Asset of the Associates Group, there
shall be a Final Determination which results (a) in a disallowance
or a reduction of the Tax Asset so carried back or (b) a reduction
in the amount of such Federal Income Tax benefit, Associates shall
repay to Ford, not later than sixty (60) days after such event any
amount which would not have been payable to Associates pursuant to
this Section 5.2 had the amount of the benefit been determined in
light of these events. Associates shall indemnify Ford and hold it
harmless from and against any interest, addition to Tax or penalty
payable by any member of the Ford Group as a result of any such
event. Any such amount shall be paid by Associates to Ford not
later than sixty (60) days after the payment by Ford or any member
of the Consolidated Group of any such interest, addition to Tax, or
penalty. Nothing in this Section 5.2 shall require Ford to file an
amended Tax Return or claim for refund of Federal Income Taxes.
Nothing in this Agreement is intended to limit the ability of
Associates and the Associates Affiliates to implement Tax planning
strategies designed to reduce or eliminate any carryback of any Tax
Assets of the Associates Group from any Post-Spinoff Period to any
Pre-Spinoff Period.
5.3 Allocation of Tax Items. All Tax computations
for (a) any Pre-Spinoff Periods ending on the Spinoff Date, (b) the
immediately following taxable period of Associates or an Associates
Affiliate and any Straddle Period, shall be made pursuant to the
principles of Section 1.1502-76(b) of the Treasury regulations or of
a corresponding provision under the laws of other jurisdictions, as
determined by Ford and taking into account such elections thereunder
as Ford, in its sole discretion, shall make.
5.4 Information for Shareholders. Ford shall provide
each shareholder that receives stock of Associates pursuant to the
Public Distribution with the information necessary for such
shareholder to comply with the requirements of Section 355 of the
Code and the Treasury regulations thereunder with respect to
statements that such shareholders must file with their Federal
Income Tax Returns demonstrating the applicability of Section 355 of
the Code to the Public Distribution.
5.5 Continuing Covenants. Ford and Associates agree
(a) not to take, or to cause their respective affiliates to take,
any action reasonably expected to result in an increased Tax
liability to the other, a reduction in a Tax Asset of the other or
an increased liability to the other under this Agreement and (b) to
take (or cause their respective affiliates to take) any action
reasonably requested by the other that would reasonably be expected
to result in a Tax benefit or avoid a Tax cost to the other,
provided that such action does not result in any additional cost not
fully compensated for by the requesting party. The parties hereby
acknowledge that the preceding sentence is not intended to limit,
and therefore shall not apply to, the rights of the parties with
respect to matters otherwise covered by this Agreement.
5.6 Allocation of Tax Assets. (a) In General.
Ford, exercising reasonable judgment, shall determine the allocation
of any Tax Assets among Ford, each Ford Affiliate, Associates and
each Associates Affiliate that is occasioned by the Spinoff. The
parties hereby agree that in the absence of controlling legal
authority, Tax Assets shall be allocated to the entity that, in
Ford's reasonable judgment, incurred the cost or burden associated
with the creation of such Tax Asset. The parties hereby acknowledge
that Ford and the Ford Affiliates have incurred the entire cost or
burden associated with the creation of all federal and state minimum
tax credits and research tax credits, and that all such credits
shall be allocated to Ford and the Ford Affiliates. The parties
further acknowledge that with the payments pursuant to Section 9 of
this Agreement, Ford will have fully reimbursed Associates for all
Creditable Foreign Taxes and, accordingly, that no foreign tax
credits shall be allocated to Associates or any Associates
Affiliate.
(b) Reimbursement. If a minimum tax credit,
foreign tax credit or research tax credit is allocated under law
(including an allocation resulting from a Final Determination) to
Associates or any Associates Affiliate, Associates shall pay to Ford
the amount of such minimum tax credit, foreign tax credit or
research tax credit.
Information and Payment. Ford shall deliver to
Associates a schedule that sets forth any minimum tax credits,
foreign tax credits or research tax credits for which Associates is
required to reimburse Ford pursuant to Section 5.6(b) of this
Agreement. Associates hereby agrees to pay Ford an amount equal to
the amount of such credits within five (5) days after delivery of
such schedule.
Section 6. Additional Obligations
6.1 Provision of Information. Associates, shall, and
shall cause each Associates Affiliate to, (a) furnish to Ford in a
timely manner such information and documents as Ford may reasonably
request for purposes of (1) preparing any Tax Return for which Ford
has filing responsibility under this Agreement, (2) contesting or
defending any Audit, and (3) making any determination or computation
necessary or appropriate under this Agreement, (b) make its
employees available to provide explanations of documents and other
materials and such other information as Ford may reasonably request
in connection with any of the foregoing, cooperate in any Audit of
any Consolidated Return or Combined Return, (d) retain and provide
on demand books, records, documentation or other information
relating to any Tax Return until the later of (1) the expiration of
the applicable statute of limitations (giving effect to any
extension, waiver, or mitigation thereof) and (2) in the event any
claim is made under this Agreement for which such information is
relevant, until a Final Determination with respect to such claim,
and (e) take such action as Ford may reasonably deem appropriate in
connection therewith. Without limiting the generality of the
foregoing, Associates hereby agrees that it shall use its reasonable
best efforts to provide Ford with such information and documentation
as Ford may reasonably request for the purpose of meeting any
applicable burden of proof as to the availability and amount of
Creditable Foreign Taxes for Pre-Spinoff Periods ending on or before
December 31, 1995.
6.2 Indemnification. (a) Failure to Pay. Ford and
each Ford Affiliate shall jointly and severally indemnify
Associates, each Associates Affiliate and their respective
directors, officers and employees, and hold them harmless from and
against any loss, cost, damage or expense, including reasonable
attorneys' fees and costs, that is attributable to, or results from
the failure of Ford, any Ford Affiliate or any director, officer or
employee to make any payment required to be made under this
Agreement. Associates and each Associates Affiliate shall jointly
and severally indemnify Ford, each Ford Affiliate and their
respective directors, officers and employees, and hold them harmless
from and against any loss, cost, damage or expense, including
reasonable attorneys' fees and costs, that is attributable to, or
results from, the failure of Associates, any Associates Affiliate or
any director, officer or employee to make any payment required to be
made under this Agreement.
(b) Inaccurate or Incomplete Information. Ford
and each Ford Affiliate shall jointly and severally indemnify
Associates, each Associates Affiliate and their respective
directors, officers and employees, and hold them harmless from and
against any cost, fine, penalty, or other expense of any kind
attributable to the negligence of Ford or any Ford Affiliate in
supplying Associates or any Associates Affiliate with inaccurate or
incomplete information, in connection with the preparation of any
Tax Return. Associates and each Associates Affiliate shall jointly
and severally indemnify Ford, each Ford Affiliate and their
respective directors, officers and employees, and hold them harmless
from and against any cost, fine, penalty, or other expenses of any
kind attributable to the negligence of Associates or any Associates
Affiliate in supplying Ford or any Ford Affiliate with inaccurate or
incomplete information, in connection with the preparation of any
Tax Return.
6.3 Treatment of Payments; After Tax Amounts. For
Tax purposes, the parties agree to treat any payments (other than
payments of interest pursuant to Section 6.4 of this Agreement and
After Tax Amounts) pursuant to this Agreement as relating back to
the last taxable period beginning on or before the Spinoff and,
accordingly, as not includable in income. If pursuant to a Final
Determination it is determined that the receipt or accrual of any
payment made under this Agreement (other than payments of interest
pursuant to Section 6.4 of this Agreement) is subject to any Tax,
the party making such payment shall be liable for (a) the After Tax
Amount with respect to such payment and (b) interest at the rate
described in Section 6.4 of this Agreement on the amount of such Tax
from the date such Tax accrues through the date of payment of such
After Tax Amount. A party making a demand for a payment pursuant to
this Agreement and for a payment of an After Tax Amount with respect
to such payment shall separately specify and compute such After Tax
Amount. However, a party may choose not to specify an After Tax
Amount in a demand for payment pursuant to this Agreement without
thereby being deemed to have waived its right subsequently to demand
an After Tax Amount with respect to such payment.
6.4 Interest. Payments pursuant to this Agreement
that are not made within the period prescribed in this Agreement or,
if no period is prescribed, within thirty (30) days after demand for
payment is made (the "Payment Period") shall bear interest for the
period from and including the date immediately following the last
date of the Payment Period through and including the date of payment
(the "Interest Accrual Period") at a per annum rate equal to
Associates' weighted average interest rate for debt capital for each
year, or part thereof, included in the Interest Accrual Period plus
50 basis points. Such interest will be payable at the same time as
the payment to which it relates and shall be calculated on the basis
of a year of 365 days and the actual number of days for which due.
Section 7. Audits
7.1 In General. (a) Ford shall have the exclusive
right, in its sole discretion, to control, contest, and represent
the interests of Ford, any Ford Affiliate, Associates or any
Associates Affiliate in any Audit relating to any Tax Return
described in Section 2.1(a) of this Agreement and to resolve, settle
or agree to any deficiency, claim or adjustment proposed, asserted
or assessed in connection with or as a result of any such Audit.
Ford's rights shall extend to any matter pertaining to the
management and control of an Audit, including execution of waivers,
choice of forum, scheduling of conferences and the resolution of any
Tax Item. Without limiting the generality of the foregoing, Ford
shall contest, in accordance with the remaining provisions of this
Section 7, any deficiency, claim or adjustment that, if sustained,
would result in (1) a Redetermination Amount resulting solely from a
redetermination of a Tax Item of a member of the Associates Group or
(2) Restructuring Taxes for which Associates could be responsible
under this Agreement.
(b) Associates shall have the exclusive right, in
its sole discretion, to control, contest, and represent the
interests of Associates or any Associates Affiliate in any Audit
relating to any Tax Return described in Section 2.1(b) of this
Agreement and to resolve, settle, or agree to any deficiency, claim
or adjustment proposed, asserted or assessed in connection with or
as a result of any such Audit.
After the Spinoff Date, Ford and Associates
shall cooperate in order to transfer to Associates the exclusive
right to control, contest and represent the interests of Associates
or any Associates Affiliate in any Audit and to resolve, settle, or
agree to any deficiency, claim or adjustment proposed, asserted or
assessed in connection with or as a result of any such Audit in each
case relating to (1) all Tax Returns of Associates and the
Associates Affiliates relating to U.S. state and local Income Tax
and capital Tax (excluding any Combined Return), (2) all Tax Returns
of the Associates Affiliates listed in Appendix C to this Agreement
relating to Canadian federal income Tax, large corporations Tax, and
GST and to Canadian provincial income Tax, capital Tax, retail sales
Tax, property Tax and business Tax, and (3) all Tax Returns of the
Associates Affiliates listed in Appendix D to this Agreement
relating to Puerto Rican income Tax.
7.2 Notice. If after the Spinoff Date Ford or any
member of the Ford Group receives written notice of, or relating to,
an Audit from a Tax Authority that asserts, proposes or recommends a
deficiency, claim or adjustment that, if sustained, would result in
(1) a Redetermination Amount resulting solely from a redetermination
of a Tax Item of a member of the Associates Group or (2) any
Restructuring Taxes for which Associates could be responsible under
this Agreement, Ford shall notify Associates in writing of such
deficiency, claim or adjustment within ten (10) days of its receipt.
If Associates or any member of the Associates Group receives written
notice of or relating to an Audit from a Tax Authority with respect
to a Tax Return described in Section 2.1(a) of this Agreement,
Associates shall provide a copy of such notice to Ford within ten
(10) days of receiving such notice of such Audit, but in no case
later than thirty (30) days before a response is required to be
provided to the relevant Tax Authority.
7.3 Participation Rights. (a) If a Tax Authority
asserts, proposes or recommends a deficiency, claim or adjustment
that, if sustained, would result in (1) a Redetermination Amount
resulting solely from a redetermination of a Tax Item of a member of
the Associates Group or (2) Restructuring Taxes for which Associates
could be responsible under this Agreement:
(l) Ford shall keep Associates informed in a
timely manner of all material actions taken or proposed to be taken
by Ford in connection with such deficiency, claim or adjustment;
(2) in the case of any material
correspondence or filing submitted to the Tax Authority or any
judicial authority that relates to the merits of such deficiency,
claim or adjustment, Ford shall (I) reasonably in advance of such
submission, but subject to applicable time constraints imposed by
such Tax Authority or judicial authority, provide Associates with a
draft copy of the portion of such correspondence or filing that
relates solely to such deficiency, claim or adjustment, (ii)
reasonably consider, subject to applicable time constraints imposed
by such Tax Authority or judicial authority, Associates' comments on
such draft copy of such correspondence or filing, and (iii) provide
Associates with a final copy of the portion of such correspondence
or filing that relates solely to such deficiency, claim or
adjustment; and
(3) Ford shall provide Associates with
notice reasonably in advance of, and Associates shall have the right
to attend, any meetings with the Tax Authority (including meetings
with examiners) scheduled at least 24 hours in advance or hearings
or proceedings before any judicial authority to the extent they
relate to such deficiency, claim or adjustment.
(b) If Ford is reasonably satisfied that it will
not adversely affect the exercise of any of Ford's rights described
in Section 7.1(a) of this Agreement, Ford shall accept any
suggestions made by Associates with respect to the resolution or
settlement of, or agreement to, any deficiency, claim or adjustment
proposed, asserted or assessed in connection with or as a result of
any Audit that, if sustained, would result in (1) a Redetermination
Amount resulting solely from a redetermination of a Tax Item of a
member of the Associates Group or (2) any Restructuring Taxes (to
which Section 7.8 of this Agreement does not apply) for which
Associates could be responsible under this Agreement.
At Ford's reasonable request, Associates shall
assume responsibility for (1) presenting the merits with respect to
(I) any deficiency, claim or adjustment that, if sustained, would
result in a Redetermination Amount resulting from a redetermination
of a Tax Item of a member of the Associates Group, or (ii) subject
to Section 7.6 of this Agreement, any affirmative claim relating to
a Tax Item of a member of the Associates Group, or (2) resolving,
settling or agreeing to any such deficiency, claim or adjustment.
Any such request by Ford shall be subject to Associates' continued
compliance with the conditions of Section 7.4 of this Agreement and
to such other conditions as Ford reasonably determines to be
appropriate to preserve Ford's rights described in Section 7.1(a) of
this Agreement.
7.4 Limitations. (a) In General. Ford shall have
no obligation to contest, or to continue to contest, any deficiency,
claim or adjustment and Associates shall have no rights to
participate under Section 7.3 of this Agreement unless:
(1) within thirty (30) days of a reasonable
request by Ford, Associates shall deliver to Ford a written opinion
from a law firm, which opinion and law firm are reasonably
satisfactory to Ford, to the effect that there is a reasonable basis
(within the meaning of ABA Opinion No. 85-352) for contesting such
deficiency, claim or adjustment;
(2) Associates shall have agreed to be bound
by a Final Determination of such deficiency, claim or adjustment;
(3) Associates shall have agreed to pay, and
shall be currently paying, all reasonable out of pocket costs and
expenses incurred by Ford and any Ford Affiliate to contest such
deficiency, claim or assessment including reasonable outside
attorney's, accountants' and investigatory fees and disbursements;
(4) Associates shall have advanced to Ford,
on an interest-free basis (and with no additional net after-tax cost
to Ford), the amount of Tax in controversy (but not in excess of the
amounts actually expended by Ford) to the extent necessary for the
contest to proceed in the forum selected by Ford, in its sole
discretion;
(5) Associates shall have provided to Ford
all documents and information, and to have made available employees
and officers of Associates, as may be necessary, useful or
reasonably required by Ford in contesting such deficiency, claim or
adjustment; and
(6) the contest of such deficiency, claim or
adjustment shall involve no material danger of the sale, forfeiture
or loss of, or the creation of any lien on, any asset of Ford or any
Ford Affiliate (except if Associates shall have adequately bonded
such lien or otherwise made provision to protect the interests of
Ford or such Ford Affiliate in a manner reasonably satisfactory to
Ford).
(b) Settlement. Ford may, in its sole discretion,
resolve, settle or agree to any deficiency, claim or adjustment
proposed, asserted or assessed in connection with any Audit of any
Tax Return described in Section 2.1(a) of this Agreement
notwithstanding that such resolution, settlement or agreement would
result in (1) a Redetermination Amount resulting solely from a
redetermination of a Tax Item of a member of the Associates Group or
(2) any Restructuring Taxes (to which Section 7.8 of this Agreement
does not apply) for which Associates could be responsible under this
Agreement:
(1) provided Associates has been afforded a
reasonable opportunity to have the merits of such deficiency, claim
or adjustment presented to the relevant Tax Authority and provided
further, that Ford shall contest, or continue to contest such
deficiency, claim or adjustment to the highest administrative level
to which Ford is otherwise pursuing a contest with respect to
another deficiency, claim or adjustment relating to such Tax for
such taxable period; and
(2) unless, within thirty (30) days of a
reasonable request by Ford, Associates shall deliver to Ford a
written opinion from a law firm, which opinion and law firm are
reasonably acceptable to Ford, to the effect that Associates'
position with respect to such deficiency, claim or adjustment is
supported by substantial authority.
Appeals. Ford shall have no obligation to
appeal a determination of any Tax Authority that, if sustained,
would result in (1) a Redetermination Amount resulting solely from
a redetermination of a Tax Item of a member of the Associates Group
or (2) any Restructuring Taxes (to which Section 7.8 of this
Agreement does not apply) for which Associates could be responsible
under this Agreement, in any judicial forum unless within sixty (60)
days of a request by Ford, Associates shall deliver to Ford a
written opinion from a law firm, which opinion and law firm are
reasonably satisfactory to Ford, to the effect that it is more
likely than not that such determination will be reversed or
substantially modified upon appeal in a manner favorable to
Associates. In no event shall Ford have any obligation to appeal to
or seek review by the Supreme Court of the United States.
(d) Waiver. Notwithstanding any other provision
of this Section 7.4, Ford may resolve, settle, or agree to any
deficiency, claim or adjustment for any taxable period that, if
sustained, would result in (1) a Redetermination Amount resulting
solely from a redetermination of a Tax Item of a member of the
Associates Group or (2) any Restructuring Taxes for which Associates
could be responsible under this Agreement if Ford notifies
Associates in writing that it waives the payment by Associates for
such taxable period of any amount that would not be payable by
Associates under this Agreement but for such deficiency, claim or
adjustment (but not including amounts described in Section 7.4(a)(3)
of this Agreement that relate to the conduct to date of the
contest). In such event, Ford shall promptly reimburse Associates
for all amounts previously advanced by Associates to Ford in
connection with such deficiency, claim or adjustment under Section
7.4(a)(4) of this Agreement. No waiver by Ford under this Section
7.4(d) with respect to any deficiency, claim or adjustment relating
to any single Tax Item, position, issue or transaction or relating
to any single Tax for any one taxable period shall operate as a
waiver with respect to any other deficiency, claim or adjustment.
7.5 Failure to Notify, Etc. The failure of Ford
promptly to notify Associates of any matter relating to a particular
Tax for a taxable period or to take any action specified in Section
7.3 of this Agreement shall not relieve Associates of any liability
and/or obligation which it may have to Ford or any Ford Affiliate
under this Agreement with respect to such Tax for such taxable
period except to the extent that Associates' rights hereunder are
materially prejudiced by such failure and in no event shall such
failure relieve Associates of any other liability and/or obligation
which it may have to Ford or any Ford Affiliate.
7.6 Affirmative Claims. (a) In General. Subject to
the principles of Sections 6.1, 7.3 and 7.4 of this Agreement, Ford
shall assert any affirmative claim relating to a Tax Item of a
member of the Associates Group to the relevant Tax Authority
provided that (1) Associates agrees in advance to provide full
compensation to Ford for any cost or detriment to Ford or a Ford
Affiliate that would result from successfully asserting such claim,
and (2) Associates reasonably requests that such claim be asserted
within the applicable time period set forth in Section 7.6(b) or
7.6 of this Agreement. Ford may, in its sole discretion, assert
any affirmative claim that does not satisfy the foregoing conditions
or that is not described in Section 7.6(b) or 7.6 of this
Agreement.
(b) Consolidated Return Years. Associates shall
request that Ford assert any affirmative claims for Consolidated
Return Years ending on or after December 31, 1989 and ending on or
before December 31, 1994 no later than June 30, 1998, but in no
event shall Associates be required to provide such claims earlier
than ninety (90) days after the date Associates shall have been
provided access to the Consolidated Returns for such Consolidated
Return Years. Associates shall request that Ford assert any
affirmative claims for subsequent Consolidated Return Years no later
than the date that is one hundred eighty (180) days after the date
on which Ford delivers written notice to Associates that an
examination of the Consolidated Return for the applicable
Consolidated Return Year is to begin.
Combined Returns. Associates shall request that
Ford assert any affirmative claims for a Pre-Spinoff Period for
which a Combined Return has been filed no later than the date that
is one hundred eighty (180) days (but subject to applicable time
constraints imposed by the Tax Authority) after the date on which
Ford delivers written notice to Associates (which notice shall be
provided as soon as is reasonably practicable after the Spinoff
Date) that an examination of the Combined Return for the applicable
Pre-Spinoff Period has begun or is to begin, provided that either
(I) such examination has begun no earlier than January 1, 1998 or
(ii) in the case of a Combined Return for which an examination began
earlier than January 1, 1998, provided Ford is reasonably satisfied
that such assertion will not adversely affect the exercise of any of
Ford's rights described in Section 7.1(a) of this Agreement.
7.7 Remedies. Associates hereby agrees that
Associate's sole and exclusive remedy for a breach by Ford of Ford's
obligations to Associates with respect to a deficiency, claim or
adjustment relating to the redetermination of a Tax Item of a member
of the Associates Group for a taxable period shall be a reduction in
the amount that would otherwise be payable by Associates for such
taxable period or an increase in amount that would otherwise be
payable by Ford for such taxable period, in either case because of
the breach. Associates further agrees that no claim against Ford
and no defense to Associates' liabilities to Ford under this
Agreement shall arise from the resolution by Ford of any deficiency,
claim or adjustment relating to the redetermination of any Tax Item
of Ford or a Ford Affiliate.
7.8 Restructuring Taxes. Notwithstanding Sections
7.1(a), 7.3 and 7.4 of this Agreement, if (a) a Tax Authority
asserts, proposes or recommends a deficiency, claim or adjustment
that, if sustained, would result in Restructuring Taxes for which
Associates could be responsible under this Agreement, and (b)
Associates acknowledges in writing to Ford that, as between
Associates and Ford, Associates and each Associates Affiliate shall
be responsible for one hundred percent (100%) of any such
Restructuring Taxes that are determined pursuant to a Final
Determination, then (1) Ford shall take all actions requested by
Associates to contest such deficiency, claim or adjustment,
including administrative and judicial proceedings; (2) Associates
shall have the right to fully participate with respect to such
deficiency, claim or adjustment and related proceedings and Ford
shall accept all reasonable suggestions by Associates in connection
with the management and substance of such proceedings, and (3) in no
event shall Ford settle or compromise any such deficiency, claim or
adjustment without the written consent of Associates.
7.9 Effective Date. Except as otherwise provided in
this Section 7, the provisions of this Section 7 (other than the
first two sentences of Section 7.1(a) of this Agreement and Section
7.1(b) of this Agreement) shall not apply (a) in the case of Audits
relating to a Consolidated Return, before the Spinoff Date, and (b)
in the case of Audits relating to a Combined Return, before the date
that is sixty (60) days after the Spinoff Date.
Section 8. Dispute Resolution
8.1 Initial Notice of Disagreement. (a) The party
(the "Indemnifying Party") receiving a schedule or other notice
regarding a payment required pursuant to this Agreement (such as a
Redetermination Amount, or After Tax Amount) shall have thirty (30)
days from the delivery of such schedule or other notice to register
its disagreement with all or a portion of such payment (each such
disagreement a "Disputed Item").
(b) The Indemnifying Party shall register its
disagreement by delivering to the other party (the "Indemnified
Party") within such thirty (30) day period a written notice (an
"Initial Notice of Disagreement") that (1) specifically enumerates
each Disputed Item, (2) describes the grounds for the Indemnifying
Party's disagreement with each Disputed Item, and (3) states the
amount in dispute (or a good faith estimate thereof) with respect to
each Disputed Item.
The failure of the Indemnifying Party within the
thirty (30) day period described in Section 8.1(b) to deliver an
Initial Notice of Disagreement, that satisfies the requirements of
Section 8.1(b), with respect to all or a portion of the payment
described in Section 8.1(a) shall be deemed to constitute (1) an
acceptance and acknowledgment by such party of its liability for
such payment or portion thereof and (2) a waiver by such party of
its right to a Determination by an Independent Third Party pursuant
to Section 8.5 of this Agreement with respect to such payment or
portion thereof.
8.2 Negotiation. During the sixty (60) day period
immediately following delivery of an Initial Notice of Disagreement,
the Indemnifying Party and the Indemnified Party shall in good faith
attempt to resolve their disagreements over each Disputed Item
enumerated in the Initial Notice of Disagreement.
8.3 Final Notice of Disagreement. (a) The
Indemnifying Party shall have seventy (70) days from the delivery of
an Initial Notice of Disagreement to register its continued
disagreement with any Disputed Item and to elect to seek a
Determination by an Independent Third Party with respect to such
Disputed Item pursuant to Section 8.5 of this Agreement. The
Indemnifying Party shall do so by delivering to the Indemnified
Party within such seventy (70) day period a written notice (a "Final
Notice of Disagreement") that (1) specifically enumerates each
Disputed Item with respect to which it elects to seek a
Determination by an Independent Third Party, (2) describes the
grounds for the Indemnifying Party's continued disagreement with
each such Disputed Item, and (3) states the amount in dispute (or a
good faith estimate thereof) with respect to each such Disputed
Item.
(b) The failure of the Indemnifying Party within
the seventy (70) day period described in Section 8.3(a) to deliver a
Final Notice of Disagreement, that satisfies the requirements of
Section 8.3(a), with respect to all or a portion of the payment
described in Section 8.1 shall be deemed to constitute (1) an
acceptance and acknowledgment by such party of its liability for
such payment or portion thereof and (2) a waiver by such party of
its right to a Determination by an Independent Third Party pursuant
to Section 8.5 of this Agreement with respect to such Disputed Item.
Any dispute, controversy, or claim relating to
or arising out of a Disputed Item contained in a Notice of Final
Disagreement shall be finally settled by arbitration before an
Independent Third Party pursuant to the provisions of this Section
8.
8.4 Selection of Independent Third Party. If the
Indemnifying Party delivers a Final Notice of Disagreement to the
Indemnified Party, the parties shall, within ten (10) days after
such delivery, jointly select an Independent Third Party to make a
Determination with respect to each Disputed Item enumerated in the
Final Notice of Disagreement. If the parties cannot jointly agree
on an Independent Third Party to make such Determination within such
ten (10) day period, either party may apply to the American
Arbitration Association ("AAA") for the sole purpose of having the
AAA select an Independent Third Party from a list of no fewer than
two (2) and no more than five (5) potential Independent Third
Parties which list is acceptable to Skadden, Arps, Slate, Meagher &
Flom LLP (on behalf of Ford) and Simpson Thacher & Bartlett (on
behalf of Associates). If the two firms fail to approve a list
within fifteen (15) days of the application of either party to the
AAA, the Independent Third Party shall be selected by the AAA.
8.5 Determination by Independent Third Party. (a)
The Independent Third Party shall determine the appropriate outcome
based upon this Agreement (the "Determination") with respect to each
Disputed Item. The Independent Third Party shall have ninety (90)
days from the date that he or she is selected pursuant to Section
8.4 of this Agreement in which to make such Determinations, unless
the Indemnifying Party and the Indemnified Party mutually agree upon
an extension of such period or the Independent Third Party, in its
discretion, determines that an extension of such period is warranted
by exceptional circumstances. The Indemnifying Party and the
Indemnified Party shall provide the Independent Third Party with
such information or documentation as the Independent Third Party
deems in its discretion to be necessary for it to make the
Determinations requested of it. Any Determination by the
Independent Third Party (as well as any allocation of costs and
expenses pursuant to Section 8.5(b) of this Agreement) shall be in
writing, shall be delivered to the Indemnifying Party and the
Indemnified Party, and shall be final and binding upon them and
enforced as an arbitration award under the United States Arbitration
Act, 9 U.S.C. Sections 1-16. The parties explicitly waive any right to
seek any judicial review of the substance of the Determination of
the Independent Third Party. The Independent Third Party shall be
entitled to use, at the sole cost and expense of the Indemnifying
Party and the Indemnified Party, whatever resources it deems
necessary, including accounting and technical services. Any
proceedings relating to the Determination shall take place in New
York City.
(b) The Indemnifying Party and the Indemnified
Party shall be jointly and severally liable to the Independent Third
Party for all costs and expenses associated with retaining the
Independent Third Party. As between themselves, except as otherwise
provided in this Section 8.5(b), the Indemnifying Party and the
Indemnified Party shall share equally the costs and expenses
associated with retaining an Independent Third Party. Where a
Determination with respect to a Disputed Item is not less than
eighty percent (80%) of the amount claimed to be due from the
Indemnifying Party, the Independent Third Party may, in its
discretion, allocate to the Indemnifying Party more than fifty
percent (50%) of the costs and expenses associated with such
Determination. Where a Determination with respect to a Disputed
Item is less than fifty percent (50%) of the amount claimed to be
due from the Indemnifying Party, the Independent Third Party may, in
its discretion, allocate to the Indemnified Party more than fifty
percent (50%) of the costs and expenses associated with such
Determination.
Section 9. Pre-Spinoff Payments
9.1 Pre-Spinoff Payments. (a) Associates shall pay
Ford $80 million on or before the day immediately preceding the
Spinoff Date in full settlement of all claims for the amounts
arising under the last sentence of Section 3.5(b)(2) of this
Agreement. In consideration for such payment, Ford irrevocably
waives any remaining claims that it may have against Associates or
any Associates Affiliate with respect to the subject matter of the
foregoing provision (i.e., any deferred tax item), without regard to
whether the claim arises under the express provisions of any
agreement or otherwise under law or equity.
(b) Ford shall pay Associates $57.6 million on or
before the day immediately preceding the Spinoff Date in full
settlement of all claims with respect to the Foreign Tax Amounts for
the 1996 and 1997 taxable periods. In consideration for such
payment, except as provided in Section 4.8 of this Agreement, each
of Ford and Associates irrevocably waive any remaining rights that
it may have against the other with respect to any Foreign Tax Amount
for the 1996 or 1997 taxable period, without regard to whether such
claim arises under the express provisions of any agreement or
otherwise under law or equity. Nothing in this Section 9.1(b) shall
limit Ford's obligation under Section 5.2 of this Agreement to pay
Associates with respect to a carryback of any Tax Asset of the
Associates Group from a Post-Spinoff Period. Nothing in this
Section 9.1(b) shall limit Associates' obligation under Section 5.6
of this Agreement to pay Ford with respect to any foreign tax
credits allocated to Associates or any Associates Affiliate.
The payment obligations of Ford and Associates
under this Section 9.1 shall be satisfied by Associates making a net
payment to Ford in the amount of $22.4 million on or before the day
immediately preceding the Spinoff Date.
Section 10. Miscellaneous
10.1 Effectiveness. This Agreement shall become
effective upon execution by both parties hereto.
10.2 Notices. Any notice, request, instruction or
other document to be given or delivered under this Agreement by any
party to another party shall be in writing and shall be deemed to
have been duly given or delivered when (1) delivered in person, (2)
sent by facsimile, (3) deposited in the United States mail, postage
prepaid and sent certified mail, return receipt requested, or (4)
delivered to Federal Express or similar service for overnight
delivery to the address of the party set forth below.
If to Ford or any Ford Affiliate, to:
Ford Motor Company
Henry Ford II World Center
The American Road
Dearborn, Michigan 48121
Facsimile: (313) 248-7450
Attention: Dennis E. Ross
Vice President-Chief Tax Officer
If to Associates or any Associates Affiliate to:
Associates First Capital Corporation
250 Carpenter Freeway
Irving, Texas 75062
Mailing Address:
P.O. Box 660237
Dallas, Texas 75266-0237
Facsimile: (972) 652-4111
Attention: General Counsel
A copy of any notice, request, instruction or other document to be
given to Ford shall also be (1) delivered in person, (2) sent by
facsimile, (3) deposited in the United States mail, postage prepaid
and sent certified mail, return receipt requested, or (4) delivered
to Federal Express or similar service for overnight delivery to the
persons set forth below:
Matthew A. Rosen
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2001
Clifford R. Gross
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Facsimile: (202) 393-5760
A copy of any notice, request, instruction or other document to be
given to Associates shall also be (1) delivered in person, (2) sent
by facsimile, (3) deposited in the United States mail, postage
prepaid and sent certified mail, return receipt requested, or (4)
delivered to Federal Express or similar service for overnight
delivery to the person set forth below:
Steven C. Todrys
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Facsimile: (212) 455-2502
Any party may, by written notice to the other parties, change the
address or the party to which any notice, request, instruction or
other document (or any copy thereof) is to be delivered.
10.3 Changes in Law. Any reference to a provision of
the Code or a law of another jurisdiction shall include a reference
to any applicable successor provision or law.
10.4 Confidentiality. Each party shall hold and
cause its directors, officers, employees, advisors and consultants
to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information (other than
any such information relating solely to the business or affairs of
such party) concerning the other parties hereto furnished it by such
other party or its representatives pursuant to this Agreement
(except to the extent that such information can be shown to have
been (1) previously known by the party to which it was furnished,
(2) in the public domain through no fault of such party, or (3)
later lawfully acquired from other sources not under a duty of
confidentiality by the party to which it was furnished), and each
party shall not release or disclose such information to any other
person, except its directors, officers, employees, auditors,
attorneys, financial advisors, bankers and other consultants who
shall be advised of and agree to be bound by the provisions of this
Section 10.4. Each party shall be deemed to have satisfied its
obligation to hold confidential information concerning or supplied
by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar information.
10.5 Successors. This Agreement shall be binding on
and inure to the benefit of any successor, by merger, acquisition of
assets or otherwise, to any of the parties hereto, to the same
extent as if such successor had been an original party.
10.6 Affiliates. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all
actions, agreements and obligations set forth herein to be performed
by any of such party's affiliates; provided, however, that (a) if an
Associates Affiliate ceases to be an Associates Affiliate as a
result of a transfer of its stock or other ownership interests to a
third party in exchange for consideration in an amount approximately
equal to the fair market value of the stock or other ownership
interests transferred and such consideration is not distributed
outside of the Associates Group to the shareholders of Associates
then Ford shall, upon request, execute a release of such Associates
Affiliate from its obligations under this Agreement upon such
transfer provided that such Associates Affiliate shall have executed
a release of any rights it may have against Ford or any Ford
Affiliate by reason of this Agreement, and (b) if a Ford Affiliate
ceases to be a Ford Affiliate as a result of a transfer of its stock
or other ownership interests to a third party in exchange for
consideration in an amount approximately equal to the fair market
value of the stock or other ownership interests transferred and such
consideration is not distributed outside of the Ford Group to the
shareholders of Ford then Associates shall, upon request, execute a
release of such Ford Affiliate from its obligations under this
Agreement upon such transfer provided that such Ford Affiliate shall
have executed a release of any rights it may have against Associates
or any Associates Affiliate by reason of this Agreement.
10.7 Authorization, Etc. Each of the parties hereto
hereby represents and warrants that it has the power and authority
to execute, deliver and perform this Agreement, that this Agreement
has been duly authorized by all necessary corporate action on the
part of such party, that this Agreement constitutes a legal, valid
and binding obligation of each such party and that the execution,
delivery and performance of this Agreement by such party does not
contravene or conflict with any provision of law or of its charter
or bylaws or any agreement, instrument or order binding on such
party.
10.8 Entire Agreement. This Agreement contains the
entire agreement among the parties hereto with respect to the
subject matter hereof and amends and restates all prior Tax sharing
agreements between Ford or any Ford Affiliate and Associates and
such prior tax sharing agreements shall have no further force and
effect.
10.9 Section Captions. Section captions used in this
Agreement are for convenience and reference only and shall not
affect the construction of this Agreement.
10.10 Governing Law. This Agreement shall be
governed by and construed in accordance with laws of the State of
New York without giving effect to laws and principles relating to
conflicts of law.
10.11 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same Agreement.
10.12 Severability. If any term, provision,
covenant, or restriction of this Agreement is held by a court of
competent jurisdiction (or an arbitrator or arbitration panel) to be
invalid, void, or unenforceable, the remainder of the terms,
provisions, covenants, and restrictions set forth herein shall
remain in full force and effect, and shall in no way be affected,
impaired, or invalidated. It is hereby stipulated and declared to
be the intention of the parties that they would have executed the
remaining terms, provisions, covenants, and restrictions without
including any of such which may be hereafter declared invalid, void,
or unenforceable. In the event that any such term, provision,
covenant or restriction is held to be invalid, void or
unenforceable, the parties hereto shall use their best efforts to
find and employ an alternate means to achieve the same or
substantially the same result as that contemplated by such terms,
provisions, covenant, or restriction.
10.13 No Third Party Beneficiaries. This Agreement
is solely for the benefit of Ford, the Ford Affiliates, Associates
and the Associates Affiliates. This Agreement should not be deemed
to confer upon third parties any remedy, claim, liability,
reimbursement, cause of action or other rights in excess of those
existing without this Agreement.
10.14 Waivers, Etc. No failure or delay on the part
of the parties in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any
other or further exercise thereof or the exercise of any other right
or power. No modification or waiver of any provision of this
Agreement nor consent to any departure by the parties therefrom
shall in any event be effective unless the same shall be in writing,
and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
10.15 Setoff. All payments to be made by any party
under this Agreement shall be made without setoff, counterclaim, or
withholding, all of which are expressly waived.
10.16 Change of Law. If, due to any change in
applicable law or regulations or their interpretation by any court
of law or other governing body having jurisdiction subsequent to the
date of this Agreement, performance of any provision of this
Agreement or any transaction contemplated thereby shall become
impracticable or impossible, the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such provision.
10.17 Agreement as to Jurisdiction. Each of the
parties hereto irrevocably agrees that the United States District
Court for the Southern District of New York has exclusive and sole
jurisdiction of any suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby, and consents
to the same. In the event that the United States District Court for
the Southern District of New York determines an absence of Federal
jurisdiction, each of the parties hereto irrevocably agrees that the
Supreme Court of the State of New York, County of New York has
exclusive and sole jurisdiction of any suit, action or other
proceeding arising out of this Agreement or any transaction
contemplated hereby, and consents to the same. Each of the parties
separately agree not to commence any action, suit or proceeding
relating thereto except in such courts. With respect to any matters
to which it has submitted to jurisdiction as set forth in the
preceding sentences, each of the parties further agrees to waive
all objections to such proceedings they may have based on inadequate
service of process providing that service of any process, summons,
notice or document is hand delivered or sent by U.S. registered mail
to such party's respective address set forth in Section 10.2 of this
Agreement. Each of the parties irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the United States District Court for the
Southern District of New York or (b) the Supreme Court of the State
of New York, County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum. Notwithstanding
anything else to the contrary contained in this Section 10.17, any
dispute, controversy, or claim relating to or arising out of a
Disputed Item shall be settled by the Independent Third Party
pursuant to the provisions of Section 8 of this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer as of the date
first above written.
FORD MOTOR COMPANY
on behalf of itself and its affiliates
By
Name: Dennis E. Ross
Title: Vice President - Chief Tax Officer
ASSOCIATES FIRST CAPITAL CORPORATION
on behalf of itself and its affiliates
By
Name: Roy A. Guthrie
Title: Senior Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT 12
ASSOCIATES FIRST CAPITAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
Three Months Ended
March 31
1998 1997
Fixed Charges (a)
Interest expense $ 757.3 $ 637.4
Implicit interest in rent 6.5 6.0
Total fixed charges $ 763.8 $ 643.4
Earnings (b)
Earnings before provision for income
taxes $ 446.0 $ 377.5
Fixed charges 763.8 643.4
Earnings, as defined $1,209.8 $1,020.9
Ratio of Earnings to Fixed Charges 1.58 1.59
(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, plus
fixed charges.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
0 MEANS NOT APPLICABLE OR NOT SEPARATELY DISCLOSED. This schedule
contains summary financial information extracted from the Company's
unaudited consolidated financial statements as of March 31, 1998 and
the three months then ended and is qualified in its entirety by
reference to such consolidated financial statements.
</LEGEND>
<CIK> 0000007974
<NAME> ASSOCIATES FIRST CAPITAL CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 682
<SECURITIES> 1,407
<RECEIVABLES> 57,631
<ALLOWANCES> 2,015
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,568
<CURRENT-LIABILITIES> 0
<BONDS> 51,995
<COMMON> 4
0
0
<OTHER-SE> 6,499
<TOTAL-LIABILITY-AND-EQUITY> 60,568
<SALES> 2,231
<TOTAL-REVENUES> 2,231
<CGS> 0
<TOTAL-COSTS> 1,785
<OTHER-EXPENSES> 663
<LOSS-PROVISION> 365
<INTEREST-EXPENSE> 757
<INCOME-PRETAX> 446
<INCOME-TAX> 165
<INCOME-CONTINUING> 281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.81
</TABLE>
