<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ASSOCIATES FIRST CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6141 06-0876639
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation) Classification Code Number) Identification Number)
</TABLE>
250 EAST CARPENTER FREEWAY
IRVING, TEXAS 75062
(972) 652-4000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
CHESTER D. LONGENECKER, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
ASSOCIATES FIRST CAPITAL CORPORATION
250 EAST CARPENTER FREEWAY
IRVING, TEXAS 75062
(972) 652-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
with copies to:
<TABLE>
<S> <C>
ALAN D. SCHNITZER, ESQ. WILLIAM J. GRANT, JR., ESQ.
SIMPSON THACHER & BARTLETT WILLKIE FARR & GALLAGHER
425 LEXINGTON AVENUE 787 SEVENTH AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10019
(212) 455-2000 (212) 728-8000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
effective time of the merger of a wholly owned subsidiary of the Registrant with
and into Arcadia Financial Ltd., which shall occur as soon as practicable after
the effective date of this Registration Statement and the satisfaction of or
waiver of all conditions to the closing of such merger.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
the General Instruction G, check the following box: / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act registration statement number
of the earlier effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the effective registration statement for the
same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES TO AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
45,644,630 Residual
Residual Value Obligations................... Value Obligations $0.00 $0.00 $0.00
</TABLE>
(1) Based upon the maximum number of Residual Value Obligations which may be
issued in connection with the merger described herein to holders of Common
Stock and to holders of options to purchase Common Stock of Arcadia
Financial Ltd.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rules 457(c) and 457(f)(1) and (3) of the Securities Act of
1933, as amended, based upon the market value of the Common Stock of Arcadia
Financial Ltd. on February 28, 2000.
(3) In connection with the transactions described herein, Arcadia
Financial Ltd. paid a fee of $44,732 at the time of the filing of
preliminary proxy materials on Schedule 14A on December 23, 1999.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
ARCADIA FINANCIAL LTD.
7825 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MN 55439
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 31, 2000
We will hold a special meeting of shareholders of Arcadia Financial Ltd. at
10:00 a.m., local time, on March 31, 2000 at The Waldorf-Astoria Hotel, 301 Park
Avenue, New York, New York, for the following purpose:
1. To consider and vote upon a proposal to approve the merger agreement
among Associates First Capital Corporation, AFCC Newco, Inc., a wholly owned
subsidiary of Associates, and Arcadia, and the merger of AFCC Newco, Inc. into
Arcadia pursuant to the merger agreement, under which Arcadia will become a
wholly owned subsidiary of Associates and each outstanding share of Arcadia
common stock, except for shares owned by Associates or any wholly owned
subsidiary of Associates, shares owned by Arcadia and shares owned by
shareholders who exercise and preserve their dissenters' rights in accordance
with Minnesota law, will be converted into the right to receive $4.90 in cash,
without interest, and one residual value obligation of Associates, the terms of
which are described in the accompanying proxy statement/prospectus; and
2. To transact any other business as may properly come before the special
meeting or any adjournments of the special meeting.
Your board of directors, based in part upon the unanimous approval of a
special committee of disinterested directors, has determined that the terms of
the merger are advisable and fair to, and in the best interests of, Arcadia and
you, and unanimously recommends that you vote to approve the merger and the
merger agreement.
We describe the merger more fully in the accompanying proxy
statement/prospectus, which we urge you to read.
Completion of the merger is subject to a number of business and legal
conditions, including the receipt of required Arcadia shareholder approval. Only
Arcadia shareholders of record at the close of business on February 28, 2000 are
entitled to notice of and to vote at the special meeting or any adjournments of
the special meeting.
If the merger is completed, shareholders of Arcadia who dissent from the
merger and comply with all the requirements of Minnesota law have the right to
receive the "fair value" of their shares in cash. See "The Merger--Dissenters'
Rights" in the accompanying proxy statement/prospectus for a summary of the
rights of dissenting shareholders and a description of the procedures required
to be followed by them to obtain the "fair value" for their shares in cash. A
copy of the relevant provisions of Minnesota law are attached to this proxy
statement/prospectus as Appendix E.
<PAGE>
Your vote is important. To assure that your shares are represented at the
special meeting, we urge you to complete, date and sign the enclosed proxy card
and mail it promptly in the postage-paid envelope provided, whether or not you
plan to attend the special meeting in person. You may also vote your shares by
telephone or on the internet. If you choose to vote your shares by telephone or
on the internet, please follow the instructions on the enclosed proxy card. You
may revoke your proxy in the manner described in the accompanying proxy
statement/prospectus at any time before it has been voted at the special
meeting. You may vote in person at the special meeting even if you have returned
a proxy, provided that you first revoke your proxy.
<TABLE>
<S> <C>
By: Order of the Board of Directors
James Atkinson
SECRETARY
</TABLE>
Minneapolis, Minnesota
March 3, 2000
<PAGE>
<TABLE>
<S> <C>
ARCADIA FINANCIAL LTD. ASSOCIATES FIRST CAPITAL CORPORATION
PROXY STATEMENT PROSPECTUS
</TABLE>
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The boards of directors of Associates First Capital Corporation and Arcadia
Financial Ltd. have agreed that Associates will acquire Arcadia by means of a
merger. After the merger, Arcadia will be a wholly owned subsidiary of
Associates.
In the merger, your shares of Arcadia common stock, except for shares owned
by shareholders who exercise and preserve their dissenters' rights, will be
converted into the right to receive:
- $4.90 in cash, without interest; and
- one residual value obligation of Associates, the terms of which are
described in this proxy statement/prospectus.
IT IS UNCLEAR IF ANY PAYMENTS WILL BE MADE ON THE RESIDUAL VALUE
OBLIGATIONS; CONSEQUENTLY, THE RESIDUAL VALUE OBLIGATIONS MAY HAVE NO VALUE. SEE
"PROXY STATEMENT/PROSPECTUS SUMMARY--PAYMENTS ON THE RESIDUAL VALUE
OBLIGATIONS." THE MERGER WILL BE A TAXABLE TRANSACTION FOR ARCADIA SHAREHOLDERS
FOR U.S. FEDERAL INCOME TAX PURPOSES.
After consummation of the merger, Arcadia shareholders will no longer have
any equity interest in Arcadia and will not have an equity interest in
Associates.
Arcadia common stock is traded on the New York Stock Exchange under the
symbol "AAC". On February 28, 2000, the closing price per share of Arcadia
common stock was $4.69.
Arcadia will hold a special meeting of its shareholders to consider and vote
upon the merger proposal and other matters. The special meeting will be held on
March 31, 2000 at 10:00 a.m., local time, at The Waldorf-Astoria Hotel, 301 Park
Avenue, New York, New York. In order to complete the merger, the holders of a
majority of the outstanding shares of Arcadia common stock must approve the
merger and the merger agreement.
Your board of directors, based in part upon the unanimous approval of a
special committee of disinterested directors, has determined that the terms of
the merger are advisable and fair to, and in the best interests of, Arcadia and
you, and unanimously recommends that you approve the merger and the merger
agreement. J.P. Morgan Securities Inc., financial advisor to Arcadia, has issued
an opinion to the effect that, as of the date of the opinion and based upon and
subject to matters stated in the opinion, the consideration to be received in
the merger by you is fair to you from a financial point of view.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the residual value obligations of
Associates to be issued in the merger or determined if this proxy
statement/prospectus is accurate or adequate. Any representation to the contrary
is a criminal offense.
------------------------
proxy statement/prospectus dated March 3, 2000
and first mailed to shareholders on March 3, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... iii
PROXY STATEMENT/PROSPECTUS SUMMARY.......................... 1
MARKET PRICE INFORMATION.................................... 10
RISK FACTORS................................................ 12
Risks Relating to the Transaction......................... 12
Risks Relating to the Residual Value Obligations.......... 14
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE............. 21
THE SPECIAL MEETING......................................... 22
General................................................... 22
Date, Time and Place...................................... 22
Matters to Be Considered at the Special Meeting........... 22
Record Date............................................... 22
Voting of Proxies......................................... 22
Votes Required............................................ 22
Quorum; Abstentions and Broker Non-Votes.................. 23
Solicitation of Proxies and Expenses...................... 23
Board Recommendation...................................... 23
THE MERGER.................................................. 25
Background of the Merger.................................. 25
Reasons for the Merger; Recommendation of the Board of
Directors............................................... 29
Opinion of Financial Advisor.............................. 31
Interests of Directors and Officers in the Merger......... 35
Certain Federal Income Tax Considerations................. 36
Anticipated Accounting Treatment.......................... 38
Dissenters' Rights........................................ 39
Listing of Residual Value Obligations..................... 41
Operations Following the Merger........................... 41
DESCRIPTION OF RESIDUAL VALUE OBLIGATIONS................... 42
General................................................... 42
RVO Payments.............................................. 42
Allocations of Residual Cash Flow......................... 43
Payments on, and Exchanges and Transfers of, the Residual
Value Obligations....................................... 44
Servicing of Auto Loan Receivables Subject to the
Designated Securitization Transactions.................. 45
Amendment to Designated Securitization Transactions....... 45
Reporting Requirements.................................... 45
Paying Agent and Registrar................................ 45
Transfer and Exchange..................................... 45
Optional Redemption....................................... 46
Merger and Consolidation.................................. 46
Assignment................................................ 47
Events of Default......................................... 48
Amendments and Waivers.................................... 49
No Personal Liability of Directors, Officers, Employees
and Stockholders........................................ 50
Concerning the Trustee.................................... 50
Determinations of Associates Final........................ 50
Governing Law............................................. 50
Certain Definitions....................................... 51
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE MERGER AGREEMENT AND RELATED AGREEMENTS................. 56
The Merger................................................ 56
Effective Time............................................ 56
Directors and Officers of Arcadia After the Merger........ 56
Conversion of Arcadia Shares in the Merger................ 56
Stock Options............................................. 56
Restricted Stock.......................................... 57
Warrants.................................................. 57
The Exchange Agent........................................ 57
Transfer of Ownership; Distributions with Respect to
Unexchanged Shares...................................... 57
Representations and Warranties............................ 58
Arcadia's Conduct of the Business Pending the Merger...... 59
Regulatory Matters........................................ 62
No Solicitation of Transactions........................... 62
Director and Officer Indemnification and Insurance........ 63
Conditions to Completion of the Merger.................... 63
Termination of the Merger Agreement....................... 64
Payment of Fees and Expenses.............................. 64
Extension, Waiver and Amendment of the Merger Agreement... 66
Voting Agreement.......................................... 66
Asset Purchase Agreement.................................. 66
Servicing Agreement....................................... 67
LEGAL PROCEEDINGS........................................... 68
WHERE YOU CAN FIND MORE INFORMATION......................... 69
EXPERTS..................................................... 71
SHAREHOLDER PROPOSALS....................................... 71
LEGAL MATTERS............................................... 71
APPENDIX A -- THE MERGER AGREEMENT
APPENDIX B -- FORM OF RESIDUAL VALUE OBLIGATIONS AGREEMENT
APPENDIX C -- FAIRNESS OPINION OF J.P. MORGAN SECURITIES,
INC.
APPENDIX D -- THE VOTING AGREEMENT
APPENDIX E -- SECTIONS 302A.471 AND 302A.473 OF THE
MINNESOTA BUSINESS CORPORATION ACT
APPENDIX F -- FINANCIAL DATA RELATING TO THE RECEIVABLES
UNDERLYING THE RESIDUAL VALUE OBLIGATIONS
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the merger is completed and you do not exercise and preserve your
dissenters' rights under Minnesota law, you will receive $4.90 in cash and one
residual value obligation of Associates for each share of Arcadia common stock
you own.
Q: WHAT IS A RESIDUAL VALUE OBLIGATION?
A: A residual value obligation is a general unsecured obligation of
Associates to make payments to the holder of the residual value obligation
generally based on the performance of receivables which have been securitized by
Arcadia. There are no minimum payments on the residual value obligations, and
depending on the performance of the underlying receivables and other factors,
there may be no payments on the residual value obligations. These securities are
described in more detail under the caption "Description of Residual Value
Obligations" beginning on page 42.
Q: WHAT WILL HAPPEN TO ARCADIA AFTER THE MERGER?
A: After the merger, Arcadia will be a wholly owned subsidiary of
Associates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working to complete the merger in April of 2000. Because the
merger is subject to various conditions, however, we cannot predict the exact
timing.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After we complete the merger, Associates will send instructions to
Arcadia shareholders explaining how to exchange their shares of Arcadia common
stock for the merger consideration.
Q: HOW DO I VOTE?
A: Mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at the special shareholders
meeting. You may also vote your shares by telephone or on the internet. If you
choose to vote your shares by telephone or on the internet, please follow the
instructions on the enclosed proxy card. You may also attend the meeting in
person instead of submitting a proxy. If your shares are held in "street name"
by your broker, your broker will vote your shares only if you provide
instructions on how to vote. You should follow the directions provided by your
broker regarding how to instruct your broker to vote your shares. If you do not
return your card or vote via telephone or the internet, or if you do not
instruct your broker how to vote any shares held for you in "street name," the
effect will be a vote AGAINST the merger proposal.
Q: DOES THE BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE MERGER?
A: Yes. After careful consideration, Arcadia's board of directors
unanimously recommends that you vote to approve the merger and the merger
agreement. For a more complete description of the recommendation of the board of
directors of Arcadia, see page 29.
Q: AM I ENTITLED TO DISSENTERS' RIGHTS?
A: Yes. You are entitled to dissenters' rights in connection with the merger
by properly complying with the requirements of Minnesota law. For a more
complete description of dissenters' rights, see the information under the
caption "Dissenters' Rights" beginning on page 39. In addition, we have
iii
<PAGE>
attached to this proxy statement/prospectus the full text of the applicable
provisions of Minnesota law as Appendix E.
Q: CAN I CHANGE MY VOTE AFTER SUBMITTING MY PROXY?
A: Yes. You may change your vote by delivering a signed notice of revocation
or a later-dated, signed proxy card to the corporate secretary of Arcadia before
the vote at the special meeting. If you vote your proxy by telephone or via the
internet, following the procedures outlined on the enclosed proxy card, you may
change your vote in accordance with the above instructions or by voting again by
telephone or via the internet.
Q: WHO CAN I CALL WITH QUESTIONS?
A: If you have questions about the merger, please call MacKenzie
Partners, Inc., Arcadia's proxy solicitor, at 1-800-322-2885.
iv
<PAGE>
PROXY STATEMENT/PROSPECTUS SUMMARY
This brief summary does not contain all of the information that is important
to you. You should carefully read this entire proxy statement/prospectus,
including the appendices, and the other documents we refer to for a more
complete understanding of the merger. See "Where You Can Find More Information"
beginning on page 69.
THE MERGER (PAGE 25)
Associates and Arcadia have entered into a merger agreement that provides
for the merger of Arcadia and a newly formed subsidiary of Associates. As a
result of the merger, Arcadia will become a wholly owned subsidiary of
Associates. We expect to complete the merger in April of 2000. We urge you to
read the merger agreement, which is included as Appendix A to this proxy
statement/prospectus, carefully and in its entirety.
EACH ARCADIA SHARE WILL BE EXCHANGED FOR $4.90 IN CASH AND ONE RESIDUAL
VALUE OBLIGATION OF ASSOCIATES (PAGE 56)
Upon completion of the merger, each share of Arcadia common stock, except
for shares owned by Associates or any wholly owned subsidiary of Associates,
shares owned by Arcadia and shares owned by shareholders who properly exercise
and preserve their dissenters' rights under Minnesota law, will be converted
into the right to receive $4.90 in cash, without interest, and one residual
value obligation of Associates.
PAYMENTS ON THE RESIDUAL VALUE OBLIGATIONS (PAGE 42)
THERE ARE NO MINIMUM PAYMENTS ON THE RESIDUAL VALUE OBLIGATIONS, AND
ASSOCIATES EXPECTS THAT THERE WILL NOT BE ANY PAYMENTS ON THE RESIDUAL VALUE
OBLIGATIONS.
Arcadia believes that there may be payments on the residual value
obligations. Payments will not be made on the residual value obligations unless
cash from specified sources in excess of $512 million plus interest from
September 30, 1999 and other expenses, less other specified amounts, is released
to Associates or its subsidiaries. The specified sources of cash are:
- cash released from spread accounts established in connection with
Arcadia's existing securitizations of automobile loan receivables; and
- cash generated by receivables which were securitized by Arcadia as of
September 30, 1999 but are no longer included in the securitization trusts
on the cash release date, less specified amounts. This component is meant
to approximate the cash generated by a formerly securitized receivable
that would have been available to Associates or its subsidiaries if the
receivable had not been transferred out of the securitization trust.
Finance income receivable is an asset on Arcadia's balance sheet which
generally represents Arcadia's view of the present value of the cash it expects
to be released from these spread accounts and other loans. Arcadia expects that
the book value of the finance income receivable on its financial statements as
of December 31, 1999 will be approximately $557 million. Based on this valuation
and disregarding specified costs and other expenses which will reduce payments
on the residual value obligations, holders of residual value obligations would
receive payments with a present value of approximately $0.53 per residual value
obligation (assuming exercise of all outstanding Arcadia stock options prior to
closing).
Any amounts paid on the residual value obligations will be paid over a
period of time, and, if there are payments, it is unlikely that there would be
any payments prior to January 1, 2004. For a discussion of the matters that may
affect whether and to what extent payments are made on the residual value
obligations, see "Risk Factors--Risks Relating to the Residual Value
Obligations."
1
<PAGE>
SUMMARY EFFECTS OF THE MERGER (PAGE 56)
When we complete the merger, your shares of Arcadia common stock, except for
shares owned by shareholders who properly exercise and preserve their
dissenters' rights under Minnesota law, will be converted into the right to
receive the merger consideration of $4.90 in cash and one residual value
obligation of Associates.
Following the merger, Associates will own all of Arcadia's outstanding
shares of common stock. Associates will have complete control over the
management and conduct of Arcadia's business, all income generated by Arcadia
and any future increase in Arcadia's value. Similarly, Associates will also bear
the risk of any losses incurred in the operation of Arcadia and any decrease in
the value of Arcadia. As a result of the merger, Arcadia will be privately held
and there will be no public market for Arcadia's common stock. When we complete
the merger, Arcadia's common stock will no longer be listed on the New York
Stock Exchange and will no longer be registered under the Securities Exchange
Act of 1934, as amended.
THE RESIDUAL VALUE OBLIGATIONS, WHICH MAY HAVE NO VALUE (PAGE 42)
The residual value obligations are general unsecured obligations of
Associates to make payments to the holders generally based on the performance of
automobile loan receivables which have been securitized by Arcadia. Attached as
Appendix F to this proxy statement/prospectus is information about the
historical performance of the receivables. The securitization transactions that
will be the basis for payments on the residual value obligations are designated
on Annex I to the form of Residual Value Obligations Agreement which is attached
as Appendix B to this proxy statement/prospectus. There are no minimum payments
on the residual value obligations, and depending on the performance of the
underlying receivables and other factors, there may be no payments on the
residual value obligations.
We do not expect to list the residual value obligations on any national
securities exchange or to seek their quotation on any automated dealer quotation
system. We have been advised by J.P. Morgan Securities Inc. that following
completion of the merger, J.P. Morgan intends to make a market in the residual
value obligations. However, it is not obligated to do so and any market-making
activities with respect to the residual value obligations may be discontinued at
any time without notice.
You should refer to the detailed description of the residual value
obligations under the caption "Description of Residual Value Obligations"
beginning on page 42 as well as the risk factors relating to the residual value
obligations under the caption "Risk Factors--Risks Relating to the Residual
Value Obligations" beginning on page 14.
THE TRANSACTION WILL BE A TAXABLE EVENT FOR ARCADIA SHAREHOLDERS (PAGE 36)
The receipt of cash and residual value obligations in exchange for Arcadia
common stock pursuant to the merger will be a taxable transaction for Arcadia
shareholders for United States federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign tax laws. There
are no authorities considering the tax treatment of instruments that are
substantially the same as the residual value obligations. As a result, the tax
treatment is unclear. You will most likely be required to recognize gain or loss
equal to the difference between the amount of cash received ($4.90 per share)
and the fair market value of the residual value obligations received in the
merger and the adjusted basis in your Arcadia common stock surrendered in the
merger. The gain or loss will be a long-term capital gain or loss if you have
held the Arcadia common stock for more than one year. If you are a non-corporate
shareholder a long-term capital gain will be subject to a maximum federal tax
rate of 20%. Each residual value obligation received in exchange for your
Arcadia common stock would then have a basis equal to its fair market value at
the time of the exchange. Although there may be other possible tax treatments,
if you receive a payment on a residual value obligation, a portion of that
payment will be characterized as imputed interest and the balance as principal.
For a more detailed
2
<PAGE>
description of the federal tax consequences of the merger, you should refer to
the discussion under the caption "Certain Federal Income Tax Considerations" on
page 36.
You should consult your own tax advisors regarding all of the tax
consequences of the merger.
ARCADIA'S FINANCIAL ADVISOR BELIEVES THE TRANSACTION IS FAIR TO THE SHAREHOLDERS
OF ARCADIA (PAGE 31)
In deciding to approve the merger and the merger agreement, the Arcadia
board of directors considered, among various other factors described below in
"The Merger--Reasons for the Merger; Recommendation of the Board of Directors,"
an opinion from J.P. Morgan Securities Inc., Arcadia's financial advisor. On
November 12, 1999, J.P. Morgan delivered to the Arcadia board its oral opinion,
which opinion was subsequently confirmed in writing, to the effect that, as of
that date and based upon and subject to the matters stated in the opinion, the
consideration Arcadia shareholders will receive in the merger is fair to the
shareholders from a financial point of view. The full text of the written
opinion of J.P. Morgan Securities Inc., dated November 12, 1999, which describes
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached as Appendix C to this proxy
statement/prospectus. We urge you to read this opinion in its entirety.
In consideration for services rendered in connection with the transactions
contemplated by the merger agreement, Arcadia has paid J.P. Morgan an initial
fee of $500,000 and, commencing in July 1999, a retainer fee of $100,000 per
month. In addition, Arcadia has agreed to continue to pay J.P. Morgan the
monthly retainer fee until closing, to pay J.P. Morgan a fee of 1.0% of the
total transaction value of the merger, which fee will be reduced by a portion of
the total retainer fee, and to reimburse J.P. Morgan for its reasonable expenses
up to $100,000.
ARCADIA SHAREHOLDERS HAVE DISSENTERS' RIGHTS (PAGE 39)
You have the right to demand the "fair value" of your shares in cash and to
receive a cash amount that a court of competent jurisdiction in Hennepin County,
Minnesota decides is the "fair value" of your Arcadia shares. This amount may be
more or less than the value of the merger consideration you would receive
pursuant to the merger agreement. This right is known as your "dissenter's
right."
If you wish to exercise your dissenter's right, you must not vote in favor
of the merger and must take a series of steps which are summarized on pages
39 - 41 and set out in full in Appendix E to this proxy statement/prospectus.
Associates' obligation to effect the merger is subject to the condition that
dissenters' rights are exercised by the holders of less than 10% of Arcadia's
common stock.
THE COMPANIES
ASSOCIATES FIRST CAPITAL CORPORATION
250 East Carpenter Parkway
Irving, Texas 75062
972-652-4000
Associates is a leading, diversified finance organization providing finance,
leasing and related services to individual consumers and businesses in the
United States and internationally. Associates had 2,952 offices worldwide and
32,981 employees as of September 30, 1999. Associates' corporate headquarters
are located in Irving, Texas.
For the year ended December 31, 1998, Associates had total managed revenues
of $10.0 billion and net earnings of $1.2 billion, and for the nine months ended
September 30, 1999, Associates had total managed revenues of $9.7 billion and
net earnings of $1.1 billion. As of September 30, 1999,
3
<PAGE>
Associates had managed finance receivables of $81.7 billion, total managed
assets of $92.3 billion and stockholders' equity of $9.5 billion. Associates
believes that it is the largest publicly traded finance company in the United
States based on market capitalization.
ARCADIA FINANCIAL LTD.
7825 Washington Avenue South
Minneapolis, Minnesota 55439
612-942-9880
Arcadia purchases, securitizes and services consumer automobile loans
originated primarily by car dealers affiliated with major foreign and domestic
manufacturers. Loans are purchased through 17 regional buying centers located in
14 states, supplemented by a network of dealer development representatives which
develop and maintain relationships with car dealers operating in each regional
buying center's immediate market area or in surrounding market areas. Credit
approval and loan processing are generally performed at the regional buying
center or at Arcadia's headquarters in Minneapolis, Minnesota. Arcadia acts as
the servicer of all loans originated and securitized by it in return for a
monthly servicing fee.
THE SPECIAL MEETING (PAGE 22)
The Special Meeting will be held on March 31, 2000 at 10:00 a.m., local
time, at The Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York. At the
special meeting or any adjournment of the special meeting, you will be asked to
consider and vote upon a proposal to approve the merger and the merger
agreement.
RECORD DATE; VOTE REQUIRED (PAGE 22)
You can vote at the special meeting if you owned Arcadia common stock at the
close of business on February 28, 2000. On that date, there were 39,428,580
shares of Arcadia common stock outstanding and entitled to vote. You can cast
one vote for each share of Arcadia common stock that you owned on that date. In
order to approve the merger and the merger agreement, the holders of a majority
of the outstanding shares of Arcadia common stock must vote in favor of doing
so. Pursuant to a voting agreement in the form attached to this proxy
statement/prospectus as Appendix D, directors and executive officers of Arcadia
beneficially owning an aggregate of 2,647,637 shares of Arcadia common stock as
of November 12, 1999, not including any shares issuable upon the exercise of
options, or 6.71% of the shares of Arcadia common stock outstanding on that
date, have agreed to vote their shares of Arcadia common stock in favor of the
merger and the merger agreement.
In addition, all other directors and executive officers of Arcadia, who
beneficially own an aggregate of 3,213,135 shares of Arcadia common stock as of
February 28, 2000, not including any shares issuable upon the exercise of
options, or 8.15% of the shares of Arcadia common stock outstanding on that
date, have indicated their intention to vote their shares of Arcadia common
stock in favor of the merger and the merger agreement.
WE RECOMMEND THAT ARCADIA SHAREHOLDERS APPROVE THE MERGER (PAGE 29)
The Arcadia board of directors, based in part upon the unanimous approval of
a special committee of disinterested directors, has determined that the terms
and conditions of the merger are fair to you and in your best interests and
unanimously recommends that you vote "FOR" approval of the merger and the merger
agreement.
4
<PAGE>
OFFICERS AND DIRECTORS HAVE SOME INTERESTS IN THE MERGER THAT ARE DIFFERENT FROM
OR IN ADDITION TO THEIR INTERESTS AS SHAREHOLDERS (PAGE 35)
When considering the recommendation of the Arcadia board, you should be
aware that some directors and officers of Arcadia have interests in the merger
that are different from, or in addition to, yours. As a result, these directors
and officers may be more likely to vote to approve the merger than Arcadia
shareholders generally.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 63)
The completion of the merger depends on a number of conditions being met,
including approval of the merger and the merger agreement by Arcadia's
shareholders.
Where the law permits, a party to the merger agreement could elect to waive
a condition to its obligation to complete the merger although that condition has
not been satisfied. We cannot be certain when (or if) the conditions to the
merger will be satisfied or waived or that the merger will be completed.
WE MAY AMEND THE TERMS OF THE MERGER (PAGE 66)
We may jointly amend the terms of the merger. However, after you approve the
merger, you must approve any amendment which changes the amount or form of
consideration to be received by you.
WE MAY DECIDE NOT TO COMPLETE THE MERGER (PAGE 64)
We can agree at any time not to complete the merger, even if Arcadia's
shareholders have approved it. Also, either of us can decide, without the
consent of the other, not to complete the merger in a number of other
situations, including:
- if the merger is not completed, without the fault of the terminating
party, by May 10, 2000; or
- if the Arcadia shareholders do not approve the merger and the merger
agreement at the Arcadia special meeting.
In addition, Arcadia may terminate the merger agreement prior to the
approval of the merger and the merger agreement by its shareholders in order to
accept an unsolicited superior proposal.
Furthermore, Associates may terminate the merger agreement if any of the
following occur:
- Arcadia's board withdraws or materially changes or modifies in a manner
adverse to Associates its recommendation to approve the merger and the
merger agreement;
- Arcadia's board recommends or accepts another transaction proposal;
- following a request by Associates, Arcadia's board fails to reconfirm its
approval and recommendation of the merger and the merger agreement;
- following public announcement of an alternative transaction which contains
a proposal as to price, Arcadia's board fails to reject the proposal; or
- Associates or any of its affiliates triggers Arcadia's rights agreement.
IF THE MERGER AGREEMENT IS TERMINATED, ARCADIA HAS AGREED TO PAY ASSOCIATES A
TERMINATION FEE AND EXPENSES (PAGE 64)
Arcadia has agreed to pay Associates a termination fee of $8.0 million in
addition to reimbursing Associates for up to $1.0 million for its out-of-pocket
expenses if the merger agreement is terminated under the circumstances that are
described in the section "The Merger Agreement and Related Agreements--Payments
of Fees and Expenses."
5
<PAGE>
ASSOCIATES DOES NOT HAVE TO COMPLETE THE MERGER WITHOUT THE REQUIRED REGULATORY
APPROVALS (PAGE 63)
The obligation of Associates to consummate the merger is conditioned upon
the receipt of all requisite regulatory approvals. While we do not know of any
reason why we would not obtain the requisite regulatory approvals in a timely
manner, we cannot be certain when or if we will obtain them.
SHAREHOLDER LITIGATION RELATING TO THE MERGER (PAGE 68)
On November 16, 1999, November 24, 1999 and December 9, 1999, three lawsuits
were brought against Arcadia by shareholders of Arcadia in Minnesota state
court. On January 18, 2000, these three suits were consolidated into one action,
in Minnesota state court. The consolidated action is purportedly a class action
on behalf of all public shareholders of Arcadia and names Arcadia and its board
of directors as defendants. In the consolidated action, plaintiffs allege that
the defendants breached their fiduciary duties to Arcadia's public shareholders
in connection with the execution of the merger agreement. After an initial
review, Arcadia believes that the consolidated complaint is without merit and
intends to defend it vigorously.
6
<PAGE>
COMPARATIVE PER SHARE DATA
The comparative share data presented below should be read in conjunction
with our historical financial statements and related notes contained in the
annual and other reports that we file with the Securities and Exchange
Commission.
The following table shows on a pro forma basis unaudited data concerning the
net income, dividends and book value per share for Associates after giving
effect to the merger, assuming that the merger occurred as of the beginning of
the periods presented:
PRO FORMA BASIS:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER ENDED SEPTEMBER
31, 1998 30, 1999
---------- ---------------
<S> <C> <C>
Basic net income per share.................................. $ 1.67 $ 1.49
Diluted net income per share................................ $ 1.66 $ 1.48
Dividends declared per share................................ $ 0.205 $ 0.165
Book value per share at end of period....................... $ 11.72 $ 13.01
</TABLE>
The following tables set forth historical per share data for Associates and
Arcadia:
ASSOCIATES:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER ENDED SEPTEMBER
31, 1998 30, 1999
---------- ---------------
(UNAUDITED)
<S> <C> <C>
HISTORICAL PER SHARE DATA:
Basic net income per share.................................. $ 1.76 $ 1.49
Diluted net income per share................................ $ 1.75 $ 1.48
Dividends declared per share................................ $ 0.205 $ 0.165
Book value per share at end of period....................... $ 11.72 $ 13.01
</TABLE>
ARCADIA:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER ENDED SEPTEMBER
31, 1998 30, 1999
---------- ---------------
(UNAUDITED)
<S> <C> <C>
HISTORICAL PER SHARE DATA:
Basic net income/(loss) per common share before cumulative
effect (1)................................................ $(2.13) $0.89
Diluted net income/(loss) per common share before cumulative
effect (1)................................................ $(2.13) $0.88
Basic net income/(loss) per common share after cumulative
effect (1)................................................ $(2.13) $0.79
Diluted net income/(loss) per common share after cumulative
effect (1)................................................ $(2.13) $0.78
Dividends declared per share................................ -- --
Book value per share at end of period....................... $ 6.86 $6.33
</TABLE>
- ------------------------
(1) Effective January 1, 1999 Arcadia changed its accounting method for
recognition of sales of asset-backed securities. Previously, Arcadia
recognized sales of asset-backed securities once an irrevocable commitment
had been received, the loans to be sold had been identified and segregated
from loans held for sale, and cash proceeds had been placed in the trust by
a third party. Arcadia now records sales of asset-backed securities upon
physical settlement, which generally occurs within 5 to 10 days of the
segregation of the loans to be sold.
7
<PAGE>
SELECTED FINANCIAL DATA OF ASSOCIATES
The following is a summary of consolidated financial information regarding
Associates' financial position and operating results as of the dates and for the
periods indicated. This information is only a summary and should be read in
conjunction with the financial statements and other information Associates has
filed with the Securities and Exchange Commission. See "Where You Can Find More
Information" on page 69.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED OR AT
SEPTEMBER 30,
------------- YEAR ENDED OR AT DECEMBER 31,
(UNAUDITED) ---------------------------------------------------------
1999 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.................................. $ 8,975.0 $ 9,376.8 $ 8,278.6 $ 7,098.2 $ 6,107.2 $ 4,925.8
Earnings before provision for income taxes...... 1,730.5 1,940.5 1,640.0 1,404.6 1,198.1 1,017.4
Net earnings.................................... 1,081.7 1,223.5 1,031.7 857.0 723.1 603.3
Basic earnings per share........................ 1.49 1.76 1.49 1.24 1.04
Diluted earnings per share...................... 1.48 1.75 1.48 1.23 1.04
BALANCE SHEET DATA:
Finance receivables............................. $67,917.1 $60,939.0 $55,215.6 $46,512.9 $39,702.5 $33,685.7
Total assets.................................... 84,958.8 75,175.4 57,232.7 48,268.4 41,303.9 35,283.5
Total long-term debt............................ 42,878.7 37,596.7 28,228.0 24,029.5 21,372.6 17,306.2
Stockholders' equity............................ 9,471.9 8,526.5 6,268.6 5,437.5 4,801.1 4,436.8
SELECTED DATA AND RATIOS:
Total debt to equity............................ 6.9:1 7.4:1 7.8:1 7.5:1 7.2:1 6.6:1
Total debt to adjusted equity................... 7.6:1 8.1:1 8.8:1 8.8:1 9.0:1 8.5:1
Total debt to tangible equity................... 11.4:1 9.5:1 9.5:1 9.7:1 9.9:1 9.6:1
Ratio of earnings to fixed charges.............. 1.59 1.60 1.59 1.57 1.55 1.61
Allowance for losses to net finance
receivables................................... 3.20% 3.25% 3.53% 3.36% 3.20% 3.15%
Allowance for losses to net credit losses....... 1.63x 1.74x 1.59x 1.77x 2.03x 2.09x
</TABLE>
Due to the change in Associates' capital structure as a result of its
initial public offering, share and per share data for 1994 is not comparable to,
or meaningful in the context of, future periods. In addition, per share
information has been adjusted to give retroactive effect to Associates two for
one stock split on December 23, 1998, which was effected by a dividend of one
share of Associates common stock for each share of Associates common stock
outstanding.
For all periods, the total debt to equity ratios are net of short-term
investments. In addition, the debt to adjusted equity for all periods excludes
the push-down goodwill created by Ford Motor Company's direct acquisition of
foreign affiliates of Associates in 1989 in connection with Ford's acquisition
of Associates. In the ratio of total debt to tangible equity, for all periods,
tangible equity is defined as equity minus goodwill. In addition, the 1999 debt
to equity ratios reflect the reclassification of a $500 million debt security
from debt to equity.
The allowance for losses to net credit losses is calculated as a ratio of
the allowance for losses to related annualized or trailing net credit losses on
receivables owned at the end of the period.
8
<PAGE>
SELECTED FINANCIAL DATA OF ARCADIA
The following is a summary of consolidated financial information regarding
Arcadia's financial position and operating results as of the dates and for the
periods indicated. This information is only a summary and should be read in
conjunction with the financial statements and other information Arcadia has
filed with the Securities and Exchange Commission. See "Where You Can Find More
Information" on page 69.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED OR AT
SEPTEMBER 30, YEAR ENDED OR AT DECEMBER 31,
------------- --------------------------------------------------------------
(UNAUDITED) (RESTATED) (RESTATED) (RESTATED) (RESTATED)
1999 1998 1997 1996 1995 1994
------------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.............................. $ 205,661 $ 146,383 $ 133,570 $ 198,687 $ 101,280 $ 27,089
Operating income (loss) before extraordinary
items and cumulative effect............... 35,011 (92,476) (69,663) 81,196 41,383 4,331
Net income (loss)........................... 31,035 (83,241) (59,018) 50,987 20,990 3,006
Income (loss) per share before extraordinary
items, net of tax......................... 0.89 (2.13) (1.12) 1.61 1.28 0.07
Net income (loss) per share................. 0.79 (2.13) (1.53) 1.61 1.06 0.07
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 16,093 $ 10,827 $ 17,274 $ 16,507 $ 1,340 $ 16,617
Finance income receivable................... 629,115 587,946 602,454 481,934 240,430 78,249
Total long-term debt........................ 452,672 421,939 421,780 206,418 161,929 46,804
Total preferred shareholders' equity........ -- -- -- -- 25,379 27,279
Total common shareholders' equity........... 249,591 268,809 335,454 378,114 149,784 32,404
OPERATING DATA:
Automobile loan purchases................... $1,807,027 $2,193,380 $2,862,821 $2,750,553 $2,052,413 $743,256
Automobile loan securitizations............. 1,700,605 2,198,326 2,864,120 2,787,412 1,933,525 712,211
SERVICING DATA:
Servicing portfolio (at period end)......... $5,260,794 $5,096,222 $4,956,090 $3,791,857 $2,267,107 $837,095
Net losses as a percentage of average
servicing portfolio during the period..... 4.11% 4.62% 3.48% 0.99% 0.67% 0.66%
</TABLE>
Due to changes in the risk-free interest rate and actual expenses incurred
in the fourth quarter of 1999, Arcadia expects to reduce the amount of the
finance income receivable to approximately $557 million as of December 31, 1999.
In conjunction with the adoption of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," effective January 1, 1997, Arcadia began recognizing collection
fees and interest on collection accounts earned by Arcadia as servicer of the
loans as a component of servicing fee income. Previously, collection fees and
interest on collection accounts had been included as components of non-interest
income and net interest margin, respectively. The Statement of Operations Data
for the years ended December 31, 1994 through December 31, 1997 have been
restated for this reclassification. This reclassification had no impact on total
revenues or net income (loss).
Extraordinary items relate to prepayment fees and charge-off of capitalized
debt financing costs in connection with early extinguishment of debt
obligations.
With respect to Servicing Data, changes to Arcadia's estimated recovery rate
for repossessed inventory during 1998 and 1997 resulted in a write-down of
existing inventory and an increase in net losses during the years ended
December 31, 1998 and 1997.
Effective January 1, 1999 Arcadia changed its accounting method for
recognition of sales of asset-backed securities. Previously, Arcadia recognized
sales of asset-backed securities once an irrevocable commitment had been
received, the loans to be sold had been identified and segregated from loans
held for sale, and cash proceeds had been placed in the trust by a third party.
Arcadia now records sales of asset-backed securities upon physical settlement,
which generally occurs within 5 to 10 days of the segregation of the loans to be
sold.
9
<PAGE>
MARKET PRICE INFORMATION
ASSOCIATES MARKET PRICE DATA
Associates common stock is traded on the New York Stock Exchange under the
symbol "AFS". The following table sets forth the range of high and low sales
prices reported on the New York Stock Exchange for Associates common stock for
the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Calendar Year 1997
First Quarter............................................. $26.31 $ 21.25
Second Quarter............................................ 29.69 21.06
Third Quarter............................................. 33.13 27.63
Fourth Quarter............................................ 36.28 29.38
Calendar Year 1998
First Quarter............................................. $41.31 $ 32.88
Second Quarter............................................ 42.75 35.69
Third Quarter............................................. 43.38 28.09
Fourth Quarter............................................ 43.69 22.66
Calendar Year 1999
First Quarter............................................. $47.50 $ 36.44
Second Quarter............................................ 49.00 38.50
Third Quarter............................................. 43.88 33.69
Fourth Quarter............................................ 39.81 26.19
Calendar Year 2000
First Quarter (through February 28, 2000)................. $27.69 $ 17.06
</TABLE>
ARCADIA MARKET PRICE DATA
Arcadia common stock is traded on the New York Stock Exchange under the
symbol "AAC". The following table sets forth the high and low sales prices as
reported on the New York Stock Exchange for the Arcadia common stock for the
periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Calendar Year 1997
First Quarter............................................. $19.38 $8.88
Second Quarter............................................ 11.38 6.75
Third Quarter............................................. 11.88 8.50
Fourth Quarter............................................ 12.44 6.25
Calendar Year 1998
First Quarter............................................. $ 7.81 $5.81
Second Quarter............................................ 10.50 6.19
Third Quarter............................................. 8.25 3.31
Fourth Quarter............................................ 5.44 3.00
Calendar Year 1999
First Quarter............................................. $ 5.38 $3.38
Second Quarter............................................ 8.38 4.50
Third Quarter............................................... 9.81 4.19
Fourth Quarter............................................ 5.25 3.50
Calendar Year 2000
First Quarter (through February 28, 2000)................. $ 4.75 $4.44
</TABLE>
10
<PAGE>
RECENT CLOSING PRICES
On November 12, 1999, the last trading day before announcement of the
proposed merger, the closing prices per share of the common stock of Associates
and Arcadia on the New York Stock Exchange were as follows:
<TABLE>
<CAPTION>
ASSOCIATES ARCADIA
---------- --------
<S> <C> <C>
Closing Price Per Share..................................... $34.00 $3.75
</TABLE>
On February 28, 2000, the latest practicable trading day before the printing
of this proxy statement/prospectus, the closing prices per share of Associates
common stock and Arcadia common stock on the New York Stock Exchange were as
follows:
<TABLE>
<CAPTION>
ASSOCIATES ARCADIA
---------- --------
<S> <C> <C>
Closing Price Per Share..................................... $19.38 $4.69
</TABLE>
We urge shareholders to obtain current market quotations for Associates
common stock and Arcadia common stock. No assurance can be given as to the
future prices or markets for Associates common stock or Arcadia common stock.
11
<PAGE>
RISK FACTORS
In addition to the other information contained in this proxy
statement/prospectus, you should carefully consider the following risk factors
in deciding whether to vote for the merger.
RISKS RELATING TO THE TRANSACTION
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT ARCADIA'S STOCK PRICE
AND FUTURE BUSINESS OPERATIONS.
Several conditions must be satisfied or waived to complete the merger. The
conditions are described under "The Merger Agreement and Related
Agreements--Conditions to Completion of the Merger" and in detail in the merger
agreement, which is attached to this proxy statement/prospectus as Appendix A.
The conditions, including Arcadia shareholder approval, may not be satisfied. If
the conditions are not satisfied or waived, the merger will not occur or will be
delayed.
If the merger is not completed or is delayed for any reason including the
failure of Arcadia shareholders to approve the merger and the merger agreement,
Arcadia may be subject to a number of material risks, including the risk that
Arcadia will be unable to finance its operations on a going-forward basis. If
the merger is terminated, Arcadia would have to obtain new financing under
warehouse facilities and would have to successfully access the securitization
markets in order to provide required cash. Arcadia may not be able to obtain
sufficient financing to allow it to finance its operations on a going-forward
basis.
In addition, Arcadia may be subject to a number of other material risks,
including the following:
- Arcadia may be required under circumstances specified in the merger
agreement to pay Associates a termination fee of $8.0 million and
reimburse Associates up to $1.0 million for its out-of-pocket expenses;
- the price of Arcadia common stock may decline to the extent that the
current market price of Arcadia common stock reflects a market assumption
that the merger will be completed; and
- costs related to the merger, such as legal, accounting and financial
advisor fees, must be paid even if the merger is not completed.
In addition, dealers with whom Arcadia customarily does business, in
response to the announcement of the merger, may delay or defer decisions or
transactions concerning Arcadia. Any delay or deferral in those decisions or
transactions by these dealers could have a material adverse effect on Arcadia's
business if the merger is not completed. Similarly, current and prospective
Arcadia employees may experience uncertainty about their future roles with
Arcadia until Associates' strategies with regard to Arcadia are announced or
executed. This may adversely affect Arcadia's ability to attract and retain key
management, sales, marketing and technical personnel.
Further, if the merger is terminated and Arcadia's board of directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find a partner willing to pay an equivalent or
more attractive price than the price to be paid in the merger. In addition,
while the merger agreement is in effect and subject to very narrowly defined
exceptions, Arcadia is prohibited from soliciting, initiating, encouraging or
entering into specified extraordinary transactions, such as a merger, sale of
assets or other business combination, with any party other than Associates.
Finally, under the continuous asset purchase and sale agreement between
Associates and Arcadia described in this proxy statement/prospectus under the
caption "The Merger Agreement and Related Agreements--Asset Purchase Agreement,"
Associates has the right, but is not obligated, to purchase Arcadia's interest
in motor vehicle retail installment contracts, including retail installment
sales contracts, promissory notes and loan agreements payable to Arcadia, each
secured by a motor vehicle.
12
<PAGE>
At Associates' sole discretion, it has the right to purchase up to $75 million
of Arcadia's interests in these contracts in any semi-monthly period. The
purchase price for these contracts is less than the price typically charged by
Arcadia to a purchaser of these contracts. If the merger agreement is terminated
for any reason, Arcadia has the right to repurchase all of the unpaid motor
vehicle retail installment sales contracts purchased by Associates pursuant to
the continuous asset purchase and sale agreement, excluding those contracts
purchased by Associates on November 24, 1999. There is, however, no guarantee
that Arcadia will have the necessary funds available to repurchase these
contracts from Associates, or if these contracts are repurchased, that Arcadia
will be able to resell these contracts to another purchaser.
ARCADIA'S OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY MAKE
THEM MORE LIKELY TO SUPPORT OR APPROVE THE MERGER THAN IF THEY DID NOT HOLD
THESE INTERESTS.
The directors and officers of Arcadia participate in arrangements and have
continuing indemnification against liabilities that provide them with interests
in the merger that are different from, or in addition to, yours, including the
following:
- The executive officers and directors of Arcadia own stock options to
purchase an aggregate of 4,355,937 shares of Arcadia common stock.
Immediately prior to the effective time, all stock options will become
fully exercisable;
- The executive officers and directors of Arcadia own 286,303 shares of
restricted Arcadia common stock. Immediately prior to the effective time,
all of these shares will become fully vested;
- Upon completion of the merger, Arcadia will be obligated to pay additional
insurance premiums, up to $115,000 in the aggregate per year through 2005,
on life insurance policies owned by some executive officers of Arcadia;
and
- Associates has agreed to cause the surviving corporation in the merger to
indemnify each present and former Arcadia officer and director against
liabilities arising out of each person's services as an officer or
director. Associates will cause the surviving corporation to maintain
officers' and directors' liability insurance to cover any of these
liabilities for the next six years.
For these reasons, the directors and officers of Arcadia could be more
likely to vote to approve the merger and the merger agreement than if they did
not hold these interests. You should consider whether these interests may have
influenced these directors and officers to support or recommend the merger and
the merger agreement. Furthermore, the directors and officers that entered into
the voting agreement with Associates, attached to this proxy
statement/prospectus as Appendix D, are contractually obligated to vote to
approve the merger and the merger agreement. You should consider whether these
obligations may have influenced these directors and officers to support or
recommend the merger and the merger agreement.
THE FAIRNESS OPINION OBTAINED BY ARCADIA WILL NOT REFLECT CHANGES IN THE
RELATIVE VALUE OF ARCADIA SINCE THE MERGER AGREEMENT WAS SIGNED.
Arcadia does not intend to obtain an updated fairness opinion from J.P.
Morgan, Arcadia's financial advisor. Changes in the operations and prospects of
Arcadia, general market and economic conditions, and other factors which are
beyond the control of Arcadia, on which the opinion of J.P. Morgan is based, may
have altered the relative value of Arcadia. Therefore, the opinion of J.P.
Morgan does not address the fairness of the merger consideration at the time the
merger will be completed.
13
<PAGE>
RISKS RELATING TO THE RESIDUAL VALUE OBLIGATIONS
IF ASSOCIATES' CURRENT VALUATION OF ARCADIA'S FINANCE INCOME RECEIVABLE IS
CORRECT, THERE WILL BE NO PAYMENTS ON THE RESIDUAL VALUE OBLIGATIONS.
There are no minimum payments on the residual value obligations. Payments
will not be made on the residual value obligations unless cash from specified
sources in excess of $512 million plus interest from September 30, 1999 and
other expenses, less other specified amounts, is released to Associates or its
subsidiaries. The specified sources of cash are:
- cash released from spread accounts established in connection with
Arcadia's existing securitizations of automobile loan receivables; and
- cash generated by receivables which were securitized by Arcadia as of
September 30, 1999 but are no longer included in the securitization trusts
on the cash release date, less specified amounts. This component is meant
to approximate the cash generated by a formerly securitized receivable
that would have been available to Associates or its subsidiaries if the
receivable had not been transferred out of the securitization trust.
We expect that the majority of cash released from these sources will come
from the spread accounts, which we discuss in more detail below. Finance income
receivable is an asset on Arcadia's balance sheet which generally represents
Arcadia's view of the present value of the cash it expects to be released from
these sources. Due to changes in the risk-free interest rate and actual expenses
incurred in the fourth quarter of 1999, Arcadia expects to reduce the amount of
the finance income receivable to approximately $557 million as of December 31,
1999. Finance income receivable is calculated based on assumptions and estimates
that management believes are reasonable at the time concerning future
delinquency, default, prepayment, repossession and net loss rates on the
securitized receivables. These assumptions are based on historical experience,
externally generated industry information, market conditions and expectations of
future performance and present value discount rates. However, people may
reasonably differ on the assumptions that underlie this type of valuation.
Associates has reviewed the assumptions underlying the valuation of Arcadia's
finance income receivable and, based on what it believes to be a conservative
view, expects to reduce the balance of the finance income receivable, probably
to an amount less than $512 million. See "--Even if cash is released from the
spread accounts and from loans no longer in the securitization trusts, there may
be no payments on the residual value obligations."
THERE WILL BE NO PAYMENTS ON THE RESIDUAL VALUE OBLIGATIONS UNLESS THERE IS
SUFFICIENT CASH RELEASED FROM SPREAD ACCOUNTS AND FROM LOANS IN THE
SECURITIZATION TRUSTS.
The residual value obligations represent the right to receive payments from
Associates based, in part, on the amount of cash released from specified sources
to Associates or its subsidiaries. The specified sources of cash are:
- cash released from spread accounts established in connection with
Arcadia's existing securitizations of automobile loan receivables; and
- cash generated by receivables which were securitized by Arcadia as of
September 30, 1999 but are no longer included in the securitization trusts
on the cash release date, less specified amounts. This component is meant
to approximate the cash generated by a formerly securitized receivable
that would have been available to Associates or its subsidiaries if the
receivable had not been transferred out of the securitization trust.
We expect that the majority of cash released from these sources will come
from spread accounts established to cover possible shortfalls in payments on the
asset-backed securities issued by the securitization trusts and the payment of
expenses associated with the securitization and servicing of the receivables.
Collections from the underlying receivables will be deposited in the spread
accounts after
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the securitization trusts have used the collections from the underlying
receivables to satisfy specified obligations. These obligations include, among
others,
- the payment of interest, principal and other amounts due to the holders of
all of the asset-backed securities of the securitization trusts that own
the receivables; and
- the payment of expenses associated with the securitizations and servicing
of the receivables.
In general, no amounts will be available for release from the spread
accounts unless:
- the holders of the asset-backed securities have received all principal and
interest amounts and other amounts that are due;
- specified other expenses have been paid, including the fees of, and
indemnities payable to, one or more servicers, trustees, collateral agents
and others;
- the insurer of the asset-backed securities has been reimbursed for claims
under financial guaranty insurance policies issued with respect to the
securities and has received all premiums relating to those policies; and
- the amounts on deposit in the spread accounts exceed predetermined minimum
amounts.
The predetermined minimum amounts for the spread accounts may be increased
or decreased over time based on the performance of the related pool of
receivables. We discuss the spread accounts and the receivables performance
tests in more detail below under "--Increased delinquency, default and net loss
rates on securitized loans may delay, reduce and/or eliminate the amount of
payments on the residual value obligations."
Anything that affects the timing or amount of releases from the spread
accounts will also affect the timing and amount of payments on the residual
value obligations.
The timing and amount of cash deposited into, and available for release
from, the spread accounts varies based on a number of factors, including, among
others,
- whether the obligors on the receivables make payments on the receivables
at all or on a timely basis;
- how quickly the repossessed vehicles of defaulted borrowers can be resold
and the price at which this is accomplished;
- the terms of the receivables and the time that the receivables have been
outstanding; and
- the levels of voluntary prepayments.
If there is a negative change in any of these factors it could reduce or
eliminate the cash releases from the spread accounts and, as a result, could
delay, reduce and/or eliminate the amount of payments on the residual value
obligations. Arcadia has in the past experienced interruptions in the cash
released from spread accounts and interruptions may occur again in the future.
Historical data on the performance of the receivables underlying the residual
value obligations is included as Appendix F to this proxy statement/prospectus.
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EVEN IF CASH IS RELEASED FROM THE SPREAD ACCOUNTS AND FROM LOANS NO LONGER
IN THE SECURITIZATION TRUSTS, THERE MAY BE NO PAYMENTS ON THE RESIDUAL VALUE
OBLIGATIONS.
Payments on the residual value obligations, if any, will be less than the
amount of cash released from the spread accounts and from loans no longer in the
securitization trusts. In determining the amount and timing of payments on the
residual value obligations, if any, Associates will, on a monthly basis,
allocate the amount of cash released from spread accounts and the applicable
amount of cash generated by receivables no longer in the securitization trusts,
and will deduct from that amount specified amounts prior to allocating any
amounts to make payments on the residual value obligations. You should refer to
"Description of Residual Value Obligations" beginning on page 42 for a more
detailed discussion of these allocations.
First, specified expenses related to the issuance and administration of the
residual value obligations will be deducted from the amount of cash released.
Second, specified litigation expenses will be deducted from the amount of
cash released. In particular, litigation expenses include all damages,
judgments, settlements and other expenses paid or incurred by Associates,
Arcadia or any of their affiliates after November 12, 1999 in connection with
any litigation brought by or on behalf of shareholders of Arcadia or by or in
the right of Arcadia, net of insurance proceeds. In connection with the payment
of litigation expenses, a litigation reserve of $10 million will be established
to which amounts of cash released must be allocated before Associates will make
any payments on the residual value obligations. We describe current lawsuits
involving Arcadia and its shareholders under "Legal Proceedings" beginning on
page 68. Additional lawsuits resulting in litigation expenses may be commenced.
Third, the aggregate amount of cash released from the spread accounts and
from loans no longer in the securitization trusts after allocation of the above
amounts must exceed a specified threshold. This amount generally will equal:
- $512 million; plus
- prescribed amounts of interest on this amount; less
- the amount of cash released on and after September 30, 1999 and prior to
the effective time of the merger; less
- the amount of cash released following the effective date of the merger and
allocated to reduce the threshold amount.
If the total amount of cash released over time from spread accounts and the
applicable amount of cash generated by receivables no longer in the
securitization trusts is less than the sum of these items, no payment will be
made on the residual value obligations.
INCREASED DELINQUENCY, DEFAULT AND NET LOSS RATES ON SECURITIZED LOANS MAY
DELAY, REDUCE AND/OR ELIMINATE THE AMOUNT OF PAYMENTS ON THE RESIDUAL VALUE
OBLIGATIONS.
All of the securitization trusts Arcadia has sponsored have been
credit-enhanced through financial guaranty insurance policies issued by
Financial Security Assurance Inc. These policies insure payments of principal
and interest due on the related asset-backed securities issued by these
securitization trusts.
Each securitization trust has portfolio performance tests that relate to
levels of delinquencies, defaults and net losses on the related pool of
receivables. These portfolio performance tests require that the receivable
portfolio of each securitization trust have:
- an average delinquency ratio not equal to or in excess of a specified
percentage,
- a cumulative default rate not equal to or in excess of a specified
percentage, which varies based on the aging of the receivable portfolio,
and
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- a cumulative net loss rate not equal to or in excess of a specified
percentage, which varies based on the aging of the receivable portfolio.
If the receivables in any securitization trust perform worse than is
required by any of these tests, the amount of cash that has to be retained in
the related spread account or accounts increases significantly until the
receivable portfolio has performed at the required levels for a specified
period, generally three to five months. Some securitization transactions have
been in violation of these portfolio performance tests in the past, and some
transactions are still in violation of these tests. Financial Security Assurance
can waive, and in the past has waived, a violation of these portfolio
performance tests but is not required to do so. In the future, however,
Financial Security Assurance might not do so.
In addition, under agreements with Financial Security Assurance, each of the
spread accounts is cross-collateralized with the spread accounts of other
trusts. As a result, cash received by one securitization trust that is in excess
of the amount needed to make payments specifically related to that trust, and to
replenish that trust's spread account, may be used to support negative cash flow
from, or to replenish the spread account related to, another securitization
trust. As a result, the cash flow from the receivables must be sufficient to
replenish all spread accounts up to the prescribed minimum balances in order for
amounts to be released from any of the spread accounts.
Accordingly, the poor performance of a pool of receivables underlying one or
more securitization trusts may delay or prevent the release of cash from the
related spread account and/or the spread accounts of the other securitization
trusts. If this happens, payments on the residual value obligations could be
delayed, reduced and/or eliminated.
ARRANGEMENTS WITH FINANCIAL SECURITY ASSURANCE MAY ADVERSELY AFFECT THE CASH
FLOW FROM THE SPREAD ACCOUNTS.
The arrangements with Financial Security Assurance allow it to take actions
that may delay, reduce and/or eliminate the release of cash from the spread
accounts and, in turn, may delay, reduce and/or eliminate payments on the
residual value obligations.
Arcadia's agreements with Financial Security Assurance specify that there
will be an "insurance agreement event of default" if various events occur with
respect to any series of securities issued by an insured securitization trust.
These events include, among others:
- events of default under the indenture governing the asset-backed
securities of the related securitization trust, including events of
default relating to the failure of the securitization trust to pay amounts
due on the asset-backed securities,
- the failure of Arcadia, the securitization trust or the servicer of the
receivables to perform obligations under the related securitization
transaction, and
- receivable portfolio performance tests similar to those described above
but at higher levels.
In addition, each of the securitization transactions provides that an
insurance agreement event of default for that transaction includes an insurance
agreement event of default under any other securitization transaction. As a
result, the failure of one pool of receivables to meet portfolio performance
tests, or any other insurance agreement event of default, will cause the other
securitization transactions to be in default, even if there are no other
problems with those securitization transactions.
Following an insurance agreement event of default, Financial Security
Assurance may:
- suspend distributions of cash flow from the spread accounts related to the
securitization trusts until the amount of cash in each account reaches a
preset level, generally 25% of the balance of outstanding asset-backed
securities in the related series,
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- increase its premiums,
- replace the servicer of the receivables owned by the insured
securitization trusts, and
- foreclose on its collateral security interest in the stock of Arcadia
Receivables Finance Corp., a subsidiary of Arcadia and the entity that
receives the distributions from the spread accounts.
Some of the securitization trusts have not met the portfolio performance
thresholds in the past, but to date Financial Security Assurance has waived the
defaults. A further deterioration in the performance of the receivables might
result in one or more additional securitization trusts failing to meet
performance thresholds. If this were to occur, further waivers may not be
available.
Any action that Financial Security Assurance might take in the absence of a
waiver could have a material adverse effect on the amount and timing of cash
releases from the spread accounts and could delay, reduce and/or eliminate
payments on the residual value obligations. The securitization transactions give
Financial Security Assurance broad powers. For example, in specified
circumstances Financial Security Assurance may foreclose on its security
interest in the stock of Arcadia Receivables Finance Corp. If Financial Security
Assurance forecloses on its security interest, Associates or any of its
subsidiaries will no longer be entitled to receive any cash released from the
spread accounts and, as a result, no more payments on the residual value
obligations would occur. In addition, if the servicer is terminated, the
servicing of the receivables might be disrupted and delinquencies and losses on
the receivables may increase. This would likely have an adverse effect on the
timing and amount of releases from the spread accounts. Further, if there is an
event of default under the indenture governing the asset-backed securities of
the securitization trusts, Financial Security Assurance can control the sale of
the trust property, including the receivables, securing the asset-backed
securities. This could reduce, delay and/or eliminate payments on the residual
value obligations.
THE RATES AT WHICH THE OBLIGORS ON THE RECEIVABLES UNDERLYING THE RESIDUAL
VALUE OBLIGATIONS DEFAULT OR DELAY IN MAKING PAYMENTS, OR MAKE PREPAYMENTS, ON
THE RECEIVABLES IN THE FUTURE MAY BE DIFFERENT FROM THE HISTORICAL RATES.
We have provided historical data on the performance of the receivables
underlying the residual value obligations in Appendix F to this proxy
statement/prospectus. However, the receivables may not perform consistently with
past experience. This may make it difficult to value the residual value
obligations and, if an active trading market for the residual value obligations
develops, may result in unexpected changes in the trading price.
A DETERIORATION IN ECONOMIC CONDITIONS MAY DELAY, REDUCE AND/OR ELIMINATE
PAYMENTS ON THE RESIDUAL VALUE OBLIGATIONS.
Periods of economic slowdown or recession, whether general, regional or
industry-related, may increase the risk that the obligors on the receivables
underlying the residual value obligations may default or delay in making
payments. Any increase in defaults or delays could have a material adverse
effect on the amount and timing of cash releases from the spread accounts and
cash generated by the receivables no longer in the securitization trusts and
could delay, reduce and/or eliminate payments on the residual value obligations.
In addition, during certain fiscal periods of 1998 and 1999, Arcadia
experienced a slight increase in the percentage of obligors on the receivables
underlying the securitizations that defaulted in making payments. This increase
in defaults during a period of economic growth indicates that an increase in
default rates is not limited to periods of economic slowdown or recession.
Cash flow on receivables underlying the residual value obligations includes
the net proceeds from the sale of automobiles securing the receivables following
default by the obligor. During periods of economic slowdown or recession, there
is generally decreased consumer demand for automobiles and as a result, a
decline in the value of automobiles securing the receivables. This may lead to a
decrease in
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the net proceeds from the sales of automobiles securing receivables on which
there has been a default. This, in turn, may have an adverse effect on Arcadia's
portfolio performance and lead to a decrease in the amount or delay in the
timing of cash released from spread accounts and cash generated by the
receivables no longer in the securitization trusts. This could delay, reduce
and/or eliminate the amount of payments on the residual value obligations.
IF FOLLOWING THE MERGER, ARCADIA, AS A SUBSIDIARY OF ASSOCIATES, IS NOT AS
SUCCESSFUL AS ARCADIA HAS BEEN HISTORICALLY IN SERVICING THE RECEIVABLES
UNDERLYING THE RESIDUAL VALUE OBLIGATIONS, IT WOULD ADVERSELY AFFECT PAYMENTS ON
THE RESIDUAL VALUE OBLIGATIONS.
The amount of cash flow generated by the receivables underlying the residual
value obligations depends, in part, on Arcadia's ability, following the merger,
to maintain efficient collection and repossession procedures and attract and
retain an adequate number of qualified servicing and collection personnel.
Following the merger, Arcadia's collection and repossession procedures and its
ability to attract and retain an adequate number of qualified servicing and
collection personnel may not be as good as Arcadia's procedures and ability have
been historically. In addition, if in the future Associates consolidates
Arcadia's servicing and collection operations into its own, servicing of the
receivables may be disrupted. The ability to attract and retain qualified
personnel may also be adversely affected by low unemployment rates driven by
economic growth and the continued expansion of the consumer credit markets.
In addition, the servicing of the receivables is subject to numerous federal
and state consumer protection laws and regulations. Among other things, these
laws and regulations:
- require the servicer to obtain and maintain licenses and qualifications;
and
- define the servicer's rights to repossess and sell collateral vehicles.
Changes in existing laws or regulations, or in their interpretation, or the
promulgation of additional laws or regulations could impose significant new
restrictions on the way in which servicing can be performed. If this happens, it
could have a material adverse effect on the amount of cash released from spread
accounts and cash generated by the receivables no longer in the securitization
trusts and, as a result, could delay, reduce and/or eliminate the amount of
payments on the residual value obligations.
If, following the merger, Arcadia is terminated as the servicer of the
receivables, the servicing of the receivables may be disrupted and delinquencies
and losses on the receivables may increase. In addition, cash released from
spread accounts and cash generated by the receivables no longer in the
securitization trusts may decrease because some costs and expenses of the
securitization trusts, such as servicing fees and some indemnities, might
increase. Financial Security Assurance has the right to terminate the servicer,
to the extent discussed above under "--Arrangements with Financial Security
Assurance may adversely affect the residual cash flow from the spread accounts"
or if the servicer does not perform its servicing duties under the relevant
servicing documents. If, following the merger, Arcadia is terminated as servicer
of the receivables, this would likely have a material adverse effect on the
amount and timing of cash released from spread accounts and cash generated by
the receivables no longer in the securitization trusts and of payments on the
residual value obligations.
THE TRADING MARKET FOR THE RESIDUAL VALUE OBLIGATIONS MAY BE ILLIQUID AND/OR
VOLATILE.
Before the issuance of the residual value obligations in the merger, there
will have been no market for these securities or, to our knowledge, any similar
security. As a result, it may be difficult for you and other investors to value
the residual value obligations.
We do not expect to list the residual value obligations on any national
securities exchange or to seek their quotation on any automated dealer quotation
system. We have been advised by J.P. Morgan that following completion of the
merger, J.P. Morgan intends to make a market in the residual value
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obligations. However, it is not obligated to do so and any market-making
activities with respect to the residual value obligations may be discontinued at
any time without notice. Accordingly, there may not be an active trading market
for the residual value obligations and you may not be able to sell your residual
value obligations. Even if an active trading market does develop, the trading
price of the residual value obligations may change rapidly.
The liquidity and volatility of the trading market for the residual value
obligations may also be adversely affected by the frequency with which
information regarding the performance of the auto loan receivables underlying
the residual value obligations and the amount of money allocated to make
payments on the residual value obligations is made available. Holders of
receivables-backed securities customarily receive information about the
performance of the underlying receivables on a monthly basis. Associates
currently intends to make available information about the performance of the
receivables underlying the residual value obligations only on a quarterly basis,
when it files its annual and quarterly reports with the Securities and Exchange
Commission.
YOU WILL HAVE LIMITED REMEDIES IF THERE IS AN EVENT OF DEFAULT UNDER THE
RESIDUAL VALUE OBLIGATIONS.
You will have limited remedies if there is an event of default under the
residual value obligations, including the failure to make payments when due and
an insolvency of Associates. The residual value obligations are general
unsecured obligations of Associates. You will not have any right to the
receivables underlying the residual value obligations, to the actual cash flows
generated by the receivables, whether or not those receivables are still in the
securitization trusts, or to any amounts released from the spread accounts and
any cash generated by the receivables no longer in the securitization trusts.
In addition, the terms of the residual value obligations do not provide for
any minimum payments and, as a result, the agreement governing the residual
value obligations does not provide for the acceleration of payments following an
event of default. Accordingly, you do not have all of the rights upon an event
of default that a holder of a conventional debt instrument of Associates would
have.
YOU SHOULD CONSIDER THE TAX CONSEQUENCES OF OWNING RESIDUAL VALUE
OBLIGATIONS.
You should carefully consider the tax consequences of investing in the
residual value obligations. No statutory, judicial or administrative authority
directly addresses the characterization of the residual value obligations or
instruments similar to the residual value obligations for United States federal
income tax purposes. As a result, significant aspects of the United States
federal income tax consequences of an investment in the residual value
obligations are not certain. Arcadia does not anticipate requesting a ruling
from the Internal Revenue Service with respect to the residual value
obligations, and the Internal Revenue Service may not agree with the conclusions
expressed under the caption "Certain Federal Income Tax Considerations"
beginning on page 36.
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FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
Some of the statements contained in this proxy statement/prospectus contain
forward-looking information. These statements are found in the sections entitled
"Questions and Answers About the Merger," "The Merger--Background of the
Merger," "--Reasons for the Merger; Recommendation of the Board of Directors,"
"--Opinion of Financial Advisor," "--Certain Federal Income Tax Considerations,"
"--Anticipated Accounting Treatment," and "Legal Proceedings." They include
statements concerning:
- when the merger will be completed,
- the potential benefits of the merger to Arcadia and its shareholders,
- the tax consequences of the merger,
- the ability of Arcadia to prevail in pending legal proceedings and
- the effect of pending or threatened litigation on Arcadia's financial
condition, results of operations and liquidity.
You can identify these statements by forward-looking words such as "expect,"
"believe," "plan," "intend," and "may" or similar words. You should be aware
that these statements are subject to known and unknown risks, uncertainties and
other factors that could cause actual results to differ materially from those
suggested by the forward-looking statements, including those discussed in the
section entitled "Risk Factors."
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THE SPECIAL MEETING
GENERAL
We are furnishing this proxy statement/prospectus to holders of Arcadia
common stock in connection with the solicitation of proxies by the Arcadia board
of directors for use at the special meeting of shareholders of Arcadia to be
held on March 31, 2000, and any adjournment thereof.
This proxy statement/prospectus is first being furnished to shareholders of
Arcadia on or about March 3, 2000. This proxy statement/prospectus is also
furnished to Arcadia shareholders as a prospectus in connection with the
issuance by Associates of residual value obligations as contemplated by the
merger agreement.
DATE, TIME AND PLACE
The special meeting will be held on March 31, 2000 at 10:00 a.m., local
time, at The Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Arcadia special meeting and any adjournment of the special meeting,
Arcadia shareholders will be asked:
- to consider and vote upon the approval of the merger and the merger
agreement; and
- to transact any other business as may properly come before the special
meeting or any adjournment of the special meeting.
RECORD DATE
Arcadia's board has fixed the close of business on February 28, 2000 as the
record date for determination of Arcadia shareholders entitled to notice of and
to vote at the special meeting.
VOTING OF PROXIES
To assure that your shares are represented at the special meeting, we urge
you to complete, date and sign the enclosed proxy and promptly return it in the
enclosed envelope or otherwise mail it to Arcadia. You may also vote your shares
by telephone or on the internet. If you choose to vote your shares by telephone
or on the internet, please follow the instructions on the enclosed proxy. If
your shares are held in "street name" by your broker, your broker will vote your
shares only if you provide instructions on how to vote. Your broker will provide
directions on how to instruct the broker to vote your shares. All properly
executed proxies that Arcadia receives prior to the vote at the special meeting,
and that are not revoked, will be voted in accordance with the instructions
indicated on the proxies or, if no direction is indicated, to approve the merger
and the merger agreement. Arcadia's board does not currently intend to bring any
other business before the special meeting, and so far as Arcadia's board knows,
no other matters are to be brought before the special meeting.
Shareholders may revoke their proxies at any time prior to their use by
delivering to the Secretary of Arcadia a signed notice of revocation or a
later-dated, signed proxy. Attendance at the special meeting does not in itself
constitute the revocation of a proxy.
VOTES REQUIRED
As of the close of business on February 28, 2000, there were 39,428,580
shares of Arcadia common stock outstanding and entitled to vote. The holders of
a majority of the outstanding shares of Arcadia
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common stock entitled to vote must affirmatively approve the merger and the
merger agreement. Arcadia shareholders have one vote per share of Arcadia common
stock owned on the record date.
Pursuant to a voting agreement in the form attached to this proxy
statement/prospectus as Appendix D, directors and executive officers of Arcadia
beneficially owning an aggregate of 2,647,637 shares of Arcadia common stock as
of November 12, 1999, not including any shares issuable upon the exercise of
options, or 6.71% of the shares of Arcadia common stock outstanding on that
date, have agreed to vote their shares of Arcadia common stock in favor of the
merger and the merger agreement.
In addition, all other directors and executive officers of Arcadia, who
beneficially own an aggregate of 3,213,135 shares of Arcadia common stock as of
February 28, 2000, not including any shares issuable upon the exercise of
options, or 8.15% of the shares of Arcadia common stock outstanding on that
date, have indicated their intention to vote their shares of Arcadia common
stock in favor of the merger and the merger agreement. As of February 28, 2000,
directors and executive officers of Associates owned no shares of Arcadia common
stock. See "The Merger--Interests of Directors and Officers in the Merger."
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The required quorum for the transaction of business at the special meeting
is holders, present in person or by proxy, of a majority of the shares of
Arcadia common stock issued and outstanding on the record date. Abstentions and
broker non-votes each will be included in determining the number of shares
present and voting at the meeting for the purpose of determining the presence of
a quorum. Because approval of the merger and the merger agreement and the
completion of the merger requires the affirmative vote of a majority of the
outstanding shares of Arcadia common stock entitled to vote, abstentions and
broker non-votes will have the same effect as votes against the approval of the
merger and the merger agreement. In addition, the failure of an Arcadia
shareholder to return a proxy or vote in person will have the effect of a vote
against the approval of the merger and the merger agreement. Brokers holding
shares for beneficial owners cannot vote on the actions proposed in this proxy
statement/prospectus without the owners' specific instructions. Accordingly, we
urge you to return the enclosed proxy card marked to indicate your vote or
provide your broker with instructions on how your shares should be voted.
SOLICITATION OF PROXIES AND EXPENSES
Arcadia has retained the services of MacKenzie Partners, Inc. to assist in
the solicitation of proxies from its shareholders. The fees to be paid by
Arcadia to MacKenzie for these services are not expected to exceed $15,000 plus
reasonable out-of-pocket expenses. Arcadia will bear its own expenses in
connection with the solicitation of proxies for the special meeting of
shareholders, except that Arcadia and Associates each will pay one-half of all
filing and other fees paid to the SEC in connection with the registration
statement and this proxy statement/prospectus.
In addition to solicitation by mail, the directors, officers and employees
of Arcadia may solicit proxies from their shareholders by telephone, facsimile
or in person. Brokerage houses, nominees, fiduciaries and other custodians will
be requested to forward soliciting materials to beneficial owners and will be
reimbursed for their reasonable expenses incurred in sending proxy materials to
beneficial owners.
BOARD RECOMMENDATION
The Arcadia board has determined, based in part upon the unanimous approval
of a special committee of disinterested directors, that the merger is advisable
and fair to, and in the best interests of, Arcadia and its shareholders.
Accordingly, the board unanimously has approved the merger and the merger
agreement and unanimously recommends that shareholders vote for approval of the
merger and
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the merger agreement. In considering this recommendation, you should be aware
that some Arcadia directors and officers have interests in the merger that are
different from, or in addition to, yours. See "The Merger--Interests of
Directors and Officers in the Merger."
The matters to be considered at the special meeting are of great importance
to you as a shareholder of Arcadia. Accordingly, we urge you to read and
carefully consider the information presented in this proxy statement/prospectus,
and to complete, date, sign and promptly return the enclosed proxy in the
enclosed postage-paid envelope, or to vote your shares by telephone or on the
internet, following the instructions outlined on the enclosed proxy.
You should not send any stock certificates with your proxy card. A
transmittal form with instructions for the surrender of Arcadia common stock
certificates will be mailed to you promptly after completion of the merger.
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THE MERGER
This section of the proxy statement/prospectus describes material aspects of
the proposed merger, including the merger agreement. While we believe that the
description covers the material terms of the merger and the related
transactions, this summary may not contain all of the information that is
important to you. You should read the entire merger agreement, which is attached
to this proxy statement/prospectus as Appendix A, and the other documents we
refer to carefully and in their entirety for a more complete understanding of
the merger.
BACKGROUND OF THE MERGER
GENERAL
Arcadia's board of directors has periodically reviewed Arcadia's cash
consumption and its access to cash resources. Arcadia's securitization-based
business requires substantial cash to fund operations. The principal uses for
this cash have included:
- funding that portion of loan purchases not covered by advances from
warehouse facilities, which limit their advance rates to less than 100%;
- providing initial cash deposits into securitization-related spread
accounts at the level required by Financial Security Assurance for the
relevant transaction;
- various other expenses related to the purchase and securitization of
automobile receivables, including dealer participations, securitization
expenses such as credit enhancement and trustee fees, interest advances to
serviced securitization trusts under some circumstances and the costs of
maintaining repossessed inventory;
- interest expenses; and
- operating expenses.
Arcadia's rate of cash consumption depends on many factors, including loan
purchase volume, warehouse facility advance rates and the required level of cash
initial deposits, including the availability of any alternatives to the use of
cash. Early in 1999, following a review of projected cash flows and cash
consumption, Arcadia's management decided to explore means for conserving
Arcadia's cash position or enhancing Arcadia's access to cash. In connection
with this, at its February 23, 1999 meeting, Arcadia's board of directors
authorized the retention of J.P. Morgan Securities Inc. as Arcadia's exclusive
financial advisor to explore financial and strategic alternatives.
J.P. Morgan and Arcadia subsequently entered into an engagement letter dated
as of March 25, 1999. In this letter, Arcadia engaged J.P. Morgan to act as its
exclusive financial advisor to explore strategic and financial alternatives
available to Arcadia. Potential transactions included establishing partnership
or joint-venture structures, a sale, merger or other business combination
involving all or a portion of Arcadia's stock, assets or business, and a
financial restructuring, reorganization or recapitalization.
From March 25 to November 12, 1999, representatives of J.P. Morgan contacted
approximately 32 potential strategic investors in or acquirors of Arcadia. These
representatives also contacted approximately 125 potential purchasers of
securities to be issued by a special-purpose credit enhancement trust.
Approximately 14 of the potential strategic investors and acquirors signed
confidentiality agreements with Arcadia and received financial information and
other documents relating to Arcadia. These contacts are chronicled in greater
detail below.
From January to June 1999 and again from July to August 1999, Arcadia held
direct discussions with two parties regarding alternate credit enhancement
facilities for Arcadia-sponsored securitization trusts. These facilities would
have enabled Arcadia either to eliminate or reduce initial cash deposits
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into spread accounts or to obtain early releases of cash from spread accounts.
Both of these entities ultimately terminated their negotiations with Arcadia.
In addition, to raise cash Arcadia also consummated a sale of whole loans in
May 1999 and a sale of deficiency balances in August 1999.
By September 1999 only two entities continued to express interest in a
transaction with Arcadia. One of these was Associates. The other was an entity
interested in a strategic investment in Arcadia.
APRIL-MAY 1999
In April 1999, representatives of J.P. Morgan contacted Associates regarding
a possible change of control transaction with Arcadia. On May 3, 1999 Arcadia
and Associates executed a confidentiality agreement and Associates received
financial information and other documents relating to Arcadia. On May 19, 1999
representatives of Associates and its advisors visited Arcadia's data room in
Minneapolis, Minnesota, established to facilitate due diligence activities, and
met with members of Arcadia's senior management regarding Arcadia's operations,
financial condition and prospects.
At its May 26, 1999 meeting, Arcadia's board of directors received an update
from management regarding the status of meetings with possible funding sources
J.P. Morgan had referred to Arcadia. In addition, management presented other
potential sources of capital, including the sale of senior notes.
JUNE-JULY 1999
In early June 1999, Financial Security Assurance advised Arcadia that it
expected to be unable to continue to provide arrangements similar to those that
Arcadia had utilized during 1998 and the first quarter of 1999 to eliminate or
significantly reduce the amount of cash required for initial deposit into the
spread accounts. At the same time, Financial Security Assurance advised Arcadia
that for future securitization transactions it expected to require a higher
level of initial cash deposits into the spread accounts and higher maximum
levels for the spread accounts. Arcadia's management concluded that these
changes could significantly increase the cash cost to Arcadia of continuing to
sponsor securitizations using Financial Security Assurance as provider of credit
enhancement.
On June 8, 1999, representatives of a potential purchaser of preferred stock
of Arcadia met with members of Arcadia's senior management regarding Arcadia's
operations, financial condition and prospects.
In mid-June 1999, Associates informed J.P. Morgan that it was not interested
in pursuing a merger or other change of control transaction with Arcadia.
At the June 29, 1999 meeting of Arcadia's board of directors, J.P. Morgan
discussed various strategic alternatives available to Arcadia and recommended
that the board consider four potential transactions. Of these four, the board
instructed J.P. Morgan to pursue the following three:
- a private sale of $100 to $150 million of preferred stock;
- an issuance of senior notes by a newly-created special-purpose trust that
would supply credit enhancement to Arcadia-sponsored securitization trusts
and enable Arcadia to obtain early releases of cash from the related
spread accounts; and
- a public offering of approximately $50 million of senior notes.
On July 19, 1999, representatives of the potential purchaser of preferred
stock again met with members of Arcadia's management regarding Arcadia's
operations, financial condition and prospects.
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At its July 28, 1999 meeting, Arcadia's board of directors received an
update from management regarding the status of the three potential transactions.
The board directed management to continue to pursue these transactions.
On the same day Arcadia filed its Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999. The financial statements in this Form 10-Q included
a change to the method for estimating the present value of Arcadia's future
excess cash flows. This change reduced the value of Arcadia's main asset, its
finance income receivable, which represents Arcadia's retained interest in the
loans it has sold. This, in turn, reduced Arcadia's net worth to a level such
that Arcadia was no longer able, under the terms of its existing senior notes,
to issue additional debt securities as previously proposed.
AUGUST-SEPTEMBER 1999
On August 10, 1999, senior management of the potential purchaser of
preferred stock again met with Arcadia's senior management regarding Arcadia's
operations, financial condition and prospects.
On August 11, 1999, Standard & Poor's Ratings Services downgraded the rating
of Arcadia's senior notes from "B" to "B-". With this rating, any further
downgrade would cause a default under Arcadia's warehouse facilities.
In mid-August the potential purchaser of preferred stock informed J.P.
Morgan that it was no longer interested in pursuing that transaction.
At the August 25, 1999 meeting of Arcadia's board of directors, management:
- reported that negotiations with the potential purchaser of preferred stock
had been terminated;
- recommended, in light of Arcadia's net worth and the terms of its existing
senior notes, that Arcadia no longer pursue the issuance of additional
senior notes; and
- recommended pursuing the potential offering of credit enhancement trust
debt securities, but at an increased $100 million dollar level.
The board authorized management to pursue a transaction involving the
issuance of up to $100 million of debt securities by a special-purpose credit
enhancement trust.
During the period from mid-August 1999 until mid-September 1999,
representatives of J.P. Morgan contacted approximately 125 potential purchasers
of these debt securities. However, only the former potential purchaser of
preferred stock, which J.P. Morgan contacted in early September 1999, expressed
serious interest in purchasing them.
In late August 1999, representatives of J.P. Morgan contacted Associates
regarding the possible purchase of a loan portfolio from Arcadia. Associates and
Arcadia subsequently exchanged loan portfolio data electronically and via hard
copy. Following review of this data, Associates approached Arcadia, seeking to
expand the discussions to include the potential purchase of a greater number of
Arcadia's loans. In response, Arcadia provided Associates with additional data
relating to Arcadia's loan production. After reviewing this data, Associates
expressed the desire to investigate a broader transaction, potentially including
a change of control transaction.
At the September 28, 1999 meeting of Arcadia's board of directors,
representatives of J.P. Morgan reported on the status of the transactions it was
pursuing on Arcadia's behalf. The board directed J.P. Morgan to continue
negotiations.
SEPTEMBER-NOVEMBER 1999
From October 6 through October 8, 1999, representatives of Associates
visited Arcadia's data room in connection with Associates' consideration of both
the purchase of a loan portfolio and a potential
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<PAGE>
change of control transaction. After this, the parties resumed conversations
regarding a potential merger or other change of control transaction.
From October 14 through October 21, 1999, representatives of Associates
again visited Arcadia's data room. During this period, representatives of
Associates and its financial advisors met with Arcadia's senior management
regarding Arcadia's operations, financial condition and prospects.
Representatives of Associates also visited other Arcadia offices to conduct due
diligence. At the same time, J.P. Morgan conducted financial due diligence on
Associates by reviewing public documents.
From October 6 to November 10, 1999, there were numerous telephone
conversations between the legal advisors for the two companies regarding due
diligence, as well as conversations between the companies' financial advisors
regarding financial diligence and financial analysis of Arcadia.
On October 15, 1999, Arcadia's senior management met with representatives of
the former potential purchaser of Arcadia preferred stock and its legal advisor
in connection with the potential purchase of credit enhancement trust debt
securities and warrants to purchase shares of Arcadia's common stock.
On October 27, 1999, Associates delivered to Arcadia a preliminary
indication of interest in acquiring Arcadia.
At the October 27, 1999 meeting of Arcadia's board of directors,
representatives of J.P. Morgan reported on the status of the transactions being
pursued on Arcadia's behalf. Representatives of J.P. Morgan then made a
presentation regarding the financial terms of the proposed merger with
Associates and a summary of the methodology used by J.P. Morgan to evaluate the
proposed merger. The board directed J.P. Morgan to continue negotiations with
Associates and the potential purchaser of credit enhancement trust debt
securities and warrants.
J.P. Morgan continued to negotiate with both these entities during the
period from October 27 to November 12, 1999.
Between November 4 and November 11, 1999, Associates and Arcadia, through
their respective attorneys and financial advisors, exchanged drafts of, and
comments on, a merger agreement and related documents and engaged in discussions
and negotiations regarding the terms of a potential business combination.
On November 12, 1999, the potential purchaser of credit enhancement trust
debt securities and warrants delivered to Arcadia an indication of interest
letter which was open until 5:00 P.M. on that day. This letter proposed the
purchase, for total consideration of $150 million, of:
- $140 million of debt securities to be issued by a special-purpose credit
enhancement trust, a portion of the proceeds of which would be released to
Arcadia as immediately usable cash; and
- warrants to purchase a number of shares of Arcadia's common stock equal to
approximately 40% of its then-outstanding shares.
NOVEMBER 12-NOVEMBER 15, 1999
Following the close of trading on Friday, November 12, 1999, Arcadia's board
of directors convened a special meeting. At this meeting the board first
discussed recent events which had affected Arcadia's financial condition.
Director Warren Kantor then updated the board in general terms on the status of
negotiations with respect to the two potential transactions. Next,
representatives of J.P. Morgan reviewed in detail the terms of the two proposed
transactions, including the various advantages and disadvantages of each. This
presentation included the delivery of an oral opinion that, as of that date and
based on and subject to various stated matters, the consideration to be received
by Arcadia
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shareholders in the merger was fair from a financial point of view. This opinion
was later confirmed in writing and is attached as Appendix C to this proxy
statement/prospectus.
A representative of Willkie Farr & Gallagher, Arcadia's legal advisors, then
made a presentation to the board in which he explained the material terms of the
proposed merger agreement. He then reviewed with the board various legal issues
raised by the proposed merger and advised the board with respect to its
fiduciary duties.
The board then formed a special committee under Section 673 of the Minnesota
Business Corporation Act to approve or disapprove the proposed merger and the
related agreements for purposes of Section 673. The special committee consisted
of directors Robert J. Cresci and James L. Davis, the only directors of Arcadia
who qualified as disinterested directors under the terms of Section 673.
The committee members had participated in the March, May, June, July, August
and September board meetings, had received information and updates from
Arcadia's management and legal and financial advisors and were familiar with the
course of the merger negotiations. At their meeting, the special committee
members again reviewed with Arcadia's executive officers and legal and financial
advisors various aspects of the merger, including the material terms of the
merger agreement and the voting agreement and the status of potential
alternative transactions. After a thorough discussion and an opportunity to ask
questions of Arcadia's management and legal and financial advisors, the
committee unanimously approved the merger, the merger agreement, the voting
agreement and the transactions contemplated by them for purposes of
Section 673.
The full Arcadia board then reconvened.
Following additional discussion, including a discussion of the advantages
and potential risks of the proposed merger as described in this proxy
statement/prospectus under "--Reasons for the Merger; Recommendation of the
Board of Directors" and a discussion of the advantages and potential risks of
the proposed transaction involving trust debt securities and warrants, the board
unanimously:
- decided that the merger transaction was preferable to the proposed
transaction involving trust debt securities and warrants because, among
other things, of the relatively low amount of available cash that the
other transaction would provide;
- determined that the merger agreement, the merger and the other
transactions contemplated in connection with the merger were advisable and
fair to and in the best interests of Arcadia and its shareholders; and
- approved the merger and the merger agreement, with those changes or
additions that any officer of Arcadia might approve.
On November 12 and 13, 1999, Associates and Arcadia, in consultation with
their legal and financial advisors, finalized the terms of the merger, the
merger agreement and other related agreements. The parties subsequently executed
the merger agreement and the related transaction documents and, on the morning
of Monday, November 15, 1999 Associates and Arcadia jointly announced the
merger.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Arcadia board, based in part upon the unanimous approval of a special
committee of disinterested directors formed for purposes of Section 673 of the
Minnesota Business Corporation Act, has concluded that the merger is advisable
and fair to, and in the best interests of, Arcadia and its shareholders and has
approved the merger and the merger agreement by unanimous vote of all directors.
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The decisions by Arcadia's board were each based on a number of factors,
including the following material factors, each of which the board viewed as
indicating the potential benefits of the merger:
- the number and quality of potential merger and investment partners
contacted and the unlikelihood of realizing superior benefits through
alternative strategies;
- the cash consideration to be received by Arcadia shareholders represented
a premium of 30.67% over the closing sales price per share on the New York
Stock Exchange on November 12, 1999, the last trading day prior to the
public announcement of the merger;
- discussions with J.P. Morgan regarding the financial terms of the merger,
and J.P. Morgan's opinion described below, to the effect that the
consideration to be received by Arcadia shareholders in the merger was
fair to them from a financial point of view; and
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations, were reasonable.
The Arcadia board also identified and considered a number of potentially
negative factors in its deliberations concerning the merger, including the
following:
- the significant costs involved in connection with consummating the merger
and the substantial management time and effort required to complete the
merger;
- the risk that the merger might not be completed based upon the failure to
satisfy specified covenants or closing conditions;
- the possible effects of the provisions regarding termination fees on the
ability of a third party to make an unsolicited superior proposal; and
- the other risks described in this proxy statement/prospectus under "Risk
Factors."
Arcadia's board concluded, however, that, on balance, the merger's potential
benefits to Arcadia and its shareholders outweighed the related risks. This
discussion of the information and factors considered by Arcadia's board is not
intended to be exhaustive. In view of the variety of factors considered in
connection with the evaluation of the merger, Arcadia's board did not find it
practicable to, and did not qualify or otherwise assign relative weight to, the
specific factors considered in reaching its determination.
In reaching its determinations, Arcadia's board of directors also considered
and evaluated, among other things:
- the results and scope of the due diligence review conducted by members of
the management of Arcadia and its financial and legal advisors with
respect to the business and operations of Associates;
- information with respect to recent and historical trading prices and
trading multiples of Arcadia common stock;
- information concerning the results of operations, performance, financial
condition and prospects of Arcadia;
- the competitive and regulatory environment for Arcadia;
- the continuing availability of the securitization market for Arcadia;
- the likelihood that Arcadia will have reduced access to cash in the
immediate future;
- the terms of the merger agreement and the other agreements contemplated by
the merger agreement;
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- the structure of the merger; and
- the tax consequences of the merger.
For the reasons discussed above, Arcadia's board of directors has
unanimously approved the merger and the merger agreement and has determined that
the merger is advisable and fair to, and in the best interests of, Arcadia and
its shareholders and unanimously recommends that Arcadia shareholders vote "FOR"
approval of the merger and the merger agreement.
In considering the recommendation of Arcadia's board with respect to the
merger and the merger agreement, Arcadia shareholders should be aware that some
of the directors and officers of Arcadia have interests in the merger that are
different from, or are in addition to, yours. Please see "The Merger--Interests
of Directors and Officers in the Merger."
OPINION OF FINANCIAL ADVISOR
At the meeting of Arcadia's board of directors on November 12, 1999, J.P.
Morgan gave its oral opinion, subsequently confirmed in writing, to the board of
directors that, as of that date and based upon and subject to the various
considerations set forth in the opinion, the consideration to be paid pursuant
to the merger agreement was fair from a financial point of view to Arcadia's
shareholders. Arcadia's board of directors did not limit J.P. Morgan in any way
in the investigations it made or the procedures it followed in giving its
opinion.
We have attached as Appendix C to this proxy statement/prospectus the full
text of J.P. Morgan's written opinion. This opinion sets forth the assumptions
made, matters considered and limits on the review undertaken. We incorporate
J.P. Morgan's opinion into this document by reference and urge you to read the
opinion in its entirety. J.P. Morgan addressed its opinion to the Arcadia board.
The opinion addresses only the consideration to be paid pursuant to the merger
agreement and is not a recommendation to you as to how you should vote with
respect to the merger.
In arriving at its opinion, J.P. Morgan reviewed:
- the merger agreement;
- various publicly available information concerning the business of Arcadia
and of several other companies engaged in businesses comparable to those
of Arcadia, and the reported market prices for other companies' securities
deemed comparable;
- the terms of various transactions involving companies comparable to
Arcadia and the consideration received for these companies;
- current and historical market prices of Arcadia's common stock;
- the audited financial statements of Arcadia for the fiscal year ended
December 31, 1998;
- the unaudited financial statements of Arcadia for the period ended
September 30, 1999;
- certain agreements with respect to outstanding indebtedness or obligations
of Arcadia;
- certain internal financial analyses and forecasts prepared by Arcadia and
its management; and
- the terms of other business combinations that J.P. Morgan deemed relevant.
J.P. Morgan also held discussions with several members of the management of
Arcadia and Associates on numerous aspects of the merger, the past and current
business operations of Arcadia, the financial condition and future prospects and
operations of Arcadia, the effects of the merger on the financial condition and
future prospects of Arcadia, and other matters that J.P. Morgan believed
necessary or appropriate to its inquiry. In addition, J.P. Morgan reviewed other
financial studies and analyses and considered other information that it deemed
appropriate for the purposes of its opinion.
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J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by Arcadia. J.P. Morgan has not assumed any responsibility
or liability for this information. J.P. Morgan did not conduct any valuations or
appraisal of any assets or liabilities, and valuations or appraisals were not
provided to J.P. Morgan. J.P. Morgan was not requested to review individual
credit files or make any independent assessment as to the future performance or
non-performance of Arcadia's assets. In relying on financial analyses and
forecasts provided to it, J.P. Morgan has assumed that they were reasonably
prepared based on assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of operations and
financial conditions of Arcadia to which those analyses or forecasts relate.
J.P. Morgan also assumed that, in the course of obtaining regulatory and third
party consents for the merger and the other transactions contemplated by the
merger agreement, no restriction will be imposed that will have a material
adverse effect on the future results of operations or financial conditions of
Arcadia. J.P. Morgan also assumed that the merger will have the tax consequences
described in discussions with representatives of Arcadia and Associates. These
consequences appear in this proxy statement/prospectus under the caption
"Certain Federal Income Tax Considerations" beginning on page 36. J.P. Morgan
relied as to all legal matters relevant to rendering its opinion upon the advice
of counsel.
The projections furnished to J.P. Morgan for Arcadia were prepared by the
management of Arcadia. Arcadia does not typically publicly disclose internal
management projections of the type provided to J.P. Morgan in connection with
J.P. Morgan's analysis of the merger, and the projections were not prepared with
a view toward public disclosure. The projections were based on numerous
variables and assumptions that are inherently uncertain and may be beyond the
control of management, including, without limitation, factors related to general
economic and competitive conditions and prevailing interest rates. Accordingly,
actual results could vary significantly from those described in the projections.
As is customary in the rendering of fairness opinions, J.P. Morgan based its
opinion on economic, market and other conditions as in effect on, and the
information made available to J.P. Morgan as of, November 12, 1999. Subsequent
developments may affect the opinion, and J.P. Morgan does not have any
obligation to update, revise, or reaffirm its opinion. J.P. Morgan expressed no
opinion as to the price at which Arcadia's common stock or the residual value
obligation to be received by Arcadia's shareholders as partial consideration in
the merger will trade at any future time.
J.P. Morgan reviewed Arcadia's historical and forecasted capital structure
and financial condition and analyzed detailed projections of Arcadia's cash
flows and capital requirements. J.P. Morgan also analyzed Arcadia's business
model, its relationships with its credit providers and the potential
consequences of a failure by Arcadia to improve its liquidity position. J.P.
Morgan determined that Arcadia's existing debt levels and previous downgrades by
rating agencies of Arcadia's debt had adversely affected Arcadia's access to the
capital markets. J.P. Morgan believes that, without completion of a sale or
other capital infusion, Arcadia would likely experience additional liquidity
problems in early 2000, which problems could have a material adverse effect on
Arcadia's business, potentially including a liquidation of Arcadia. J.P. Morgan
also considered the potential value that Arcadia might realize if it attempted
to liquidate its finance income receivable. J.P. Morgan believes that, given the
lack of a secondary market for trading in residuals of sub-prime auto lender
securitizations and the limited time horizon for executing such a sale, due to
the aforementioned liquidity concerns, Arcadia would not be able to realize its
recorded book value upon such a distressed liquidation.
Over a period of several months, J.P. Morgan conducted a broad search for
potential partners and investors on Arcadia's behalf. Based on the alternatives
available to Arcadia pursuant to this process, J.P. Morgan believes that the
merger with Associates represents the only whole-company, strategic equity-based
transaction available to Arcadia.
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In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses that J.P. Morgan
utilized in providing its opinion.
OFFER VALUATION. J.P. Morgan reviewed the terms of the proposed merger,
including the historical price of Arcadia and the aggregate transaction value.
J.P. Morgan calculated that based on the cash portion of Associates' proposal,
Arcadia's common stockholders would receive a premium of 30.7% to the $3.75
closing price of Arcadia's common stock on November 11, 1999.
PUBLIC TRADING MULTIPLES. Using publicly available information, J.P. Morgan
compared selected financial data of Arcadia with similar data for selected
publicly traded companies engaged in businesses that J.P. Morgan judged to be
reasonably comparable to that of Arcadia. These companies were selected because
of their operating, organizational and overall business similarities with
Arcadia. The companies were:
- AmeriCredit Corporation
- Credit Acceptance Corporation
- Onyx Acceptance Corporation
- Ugly Duckling Corporation
- Union Acceptance Corporation
- WFS Financial, Inc.
These companies are not experiencing the same degree of liquidity pressure
and limitation on their access to capital as Arcadia. As a result, J.P. Morgan
determined that a public trading multiples analysis would not provide a
meaningful indication of value for Arcadia.
SELECTED TRANSACTION ANALYSIS. Using publicly available information, J.P.
Morgan examined a select list of specialty finance transactions, each of which
was announced since March 1, 1996. Included among the list were the following
transactions within the auto finance sector:
<TABLE>
<CAPTION>
BUYER SELLER
- --------------------------------------------- ---------------------------------------------
<S> <C>
- Ford Motor Credit Company - Triad Financial Corporation
(ContiFinancial Corporation)
- Household International, Inc. - ACC Consumer Finance Corporation
- Norwest Corporation - Fidelity Acceptance Corporation
- Search Financial Services, Inc. - MS Financial, Inc.
- Barnett Banks, Inc. - Oxford Resources Corp.
- Associates First Capital Corporation - Fleetwood Credit Receivables Corp.
- Southern National Corporation - Regional Acceptance Corporation
- Bay View Capital Corporation - CTL Credit, Inc.
</TABLE>
J.P. Morgan calculated the median premiums represented by the purchase price
paid in these acquisitions to the last 12 months' earnings per share, book value
per share and total managed assets.
These transactions did not necessarily involve sales of companies that were
experiencing financial problems. As a result, J.P. Morgan determined that the
transactions were not directly comparable to the proposed transaction involving
Arcadia and that a comparable transactions analysis would therefore not provide
a meaningful indication of value for Arcadia.
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This summary does not purport to be a complete description of the analyses
or data presented by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. J.P. Morgan believes that one must consider its opinion,
the summary and its analyses as a whole. Selecting portions of this summary and
these analyses, without considering the analyses as a whole, would create an
incomplete view of the processes underlying the analyses and opinion. In
arriving at its opinion, J.P. Morgan considered the results of all of the
analyses as a whole. No single factor or analysis was determinative of J.P.
Morgan's fairness determination. Rather, the totality of the factors considered
and analyses performed operated collectively to support its determination. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
those concerning general business and economic conditions and industry-specific
factors. This summary sets forth under the description of each analysis the
other principal assumptions upon which J.P. Morgan based that analysis. J.P.
Morgan's analyses are not necessarily indicative of actual values or actual
future results that either company or the combined company might achieve, which
values may be higher or lower than those indicated. Analyses based upon
forecasts of future results are inherently uncertain, as they are subject to
numerous factors or events beyond the control of the parties and their advisors.
Accordingly, these forecasts and analyses are not necessarily indicative of
actual future results, which may be significantly more or less favorable than
suggested by those analyses. Therefore, none of Arcadia, Associates, J.P. Morgan
or any other person assumes responsibility if future results are materially
different from those forecasted. Moreover, J.P. Morgan's analyses are not and do
not purport to be appraisals or otherwise reflective of the prices at which
businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. Arcadia selected J.P. Morgan to advise it and deliver a
fairness opinion with respect to the merger on the basis of such experience and
its familiarity with Arcadia.
On March 30, 1999 Arcadia paid J.P. Morgan an initial fee of $500,000.
Starting in July 1999, Arcadia has paid J.P. Morgan a retainer fee of $100,000
per month and is contractually obligated to do so until the closing date.
Arcadia has agreed to pay J.P. Morgan a fee of 1.0% of the total transaction
value of the merger, including total consideration received by the shareholders
of Arcadia and the amount of Arcadia term debt with maturity greater than one
year assumed by Associates, upon consummation of the merger. However, this fee
will be reduced by the amounts paid to J.P. Morgan by Arcadia in the three
months prior to closing. Arcadia also agreed to reimburse J.P. Morgan for its
reasonable expenses, including the fees and disbursements of counsel, up to
$100,000, and to indemnify J.P. Morgan against various liabilities, including
liabilities which might arise under the federal securities laws.
In the past, J.P. Morgan has participated in Arcadia's warehouse facilities
and securitizations, and, in 1997, served as an underwriter of Arcadia's senior
notes. J.P. Morgan and its affiliates have also provided financial advisory,
capital markets and credit services to Associates, for which J.P. Morgan and its
affiliates have received customary fees. In the ordinary course of their
businesses, J.P. Morgan and its affiliates may actively trade the debt and
equity securities of Arcadia or Associates for their own accounts or for the
accounts of customers and, accordingly, they may at any time hold long or short
positions in such securities.
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INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER
STOCK OPTIONS. As of the record date, executive officers and directors of
Arcadia owned stock options to purchase 4,355,937 shares of Arcadia common
stock. Under the merger agreement, immediately prior to the effective time of
the merger, each Arcadia stock option which is outstanding and unexercised,
whether or not then exercisable, will become vested and exercisable. At the
effective time, each stock option will be canceled by Arcadia, and each holder
of a canceled stock option will be entitled to receive from Arcadia in
consideration for the cancellation of the stock option:
- an amount in cash equal to the product of:
- the number of shares of Arcadia common stock subject to the stock
option; and
- the excess, if any, of $4.90 over the exercise price per share of
Arcadia common stock subject to the stock option, less any applicable
withholding taxes; and
- one residual value obligation for each share of Arcadia common stock
subject to the stock option;
provided, that a holder of a canceled stock option will not be entitled to
receive any residual value obligations in consideration for the cancellation of
the stock option if the exercise price per share of Arcadia common stock subject
to the stock option equals or exceeds $4.90.
The table below identifies:
- the number of stock options held by each executive officer and director of
Arcadia as of February 28, 2000;
- the cash payment to be received by the person, subject to tax withholding,
for the options; and
- the number of residual value obligations to be received by the person,
assuming no stock options are exercised by the person prior to the
effective time.
<TABLE>
<CAPTION>
NUMBER OF
RESIDUAL VALUE
NUMBER OF ARCADIA TOTAL CASH OBLIGATIONS
NAME STOCK OPTIONS PAYMENT TO BE RECEIVED
- ---- ------------------ ----------- --------------
<S> <C> <C> <C>
Warren Kantor.............................. 869,310 $146,250.00 162,500
Robert E. Cresci........................... 145,225 $33,750.00 37,500
James L. Davis............................. 123,400 $33,750.00 37,500
Richard A. Greenawalt...................... 1,800,001 $360,000.00 400,000
Scott A. Anderson.......................... 367,001 $122,452.90 129,501
James D. Atkinson III...................... 130,000 $22,500.00 25,000
Cortes E. DeRussy.......................... 175,000 $67,500.00 75,000
Robert A. Marshall......................... 200,000 $180,000.00 200,000
Duane E. White............................. 250,000 $67,500.00 75,000
John A. Witham............................. 296,000 $68,650.00 121,000
</TABLE>
RESTRICTED STOCK. As of the record date, executive officers and directors
of Arcadia owned 286,303 shares of restricted Arcadia common stock. Immediately
prior to the effective time, each of these shares which is outstanding will
become vested. At the effective time, each share of restricted Arcadia common
stock will be converted into the right to receive $4.90 in cash, without
interest, and one residual value obligation.
INDEMNIFICATION. The surviving corporation has agreed to indemnify present
and former officers and directors of Arcadia and its subsidiaries against all
losses, expenses, claims, damages or liabilities arising out of actions or
omissions occurring at or prior to the effective time of the merger to the
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fullest extent that Arcadia and its subsidiaries would have been permitted under
applicable law and its charter documents to indemnify these persons. The merger
agreement provides that all rights to indemnification set forth in Arcadia's
charter documents for present and former officers and directors of Arcadia will
also be included in the charter documents of the surviving corporation for a
period of six years from the effective time, subject to exceptions specified in
the merger agreement. Associates also has agreed to maintain insurance for
Arcadia's directors and officers equivalent to Arcadia's current directors' and
officers' liability insurance for six years after the effective time, subject to
limitations specified in the merger agreement.
LIFE INSURANCE PREMIUM PAYMENTS. Upon completion of the merger, under the
terms of various split dollar life insurance agreements, Arcadia is obligated to
make additional insurance premium payments, up to an aggregate amount of
$115,000 per year through 2005, for life insurance policies owned by some
executive officers of Arcadia.
As a result, these directors and executive officers may be more likely to
approve the merger and the merger agreement than Arcadia shareholders generally.
Furthermore, the directors and executive officers who entered into the voting
agreement with Associates are contractually obligated to approve the merger and
the merger agreement.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes certain federal income tax considerations
relevant to the exchange of shares of Arcadia common stock for the merger
consideration pursuant to the merger that are generally applicable to holders of
Arcadia common stock. This discussion is based on currently existing provisions
of the Internal Revenue Code, existing treasury regulations enacted pursuant the
Internal Revenue Code and current administrative rulings and court decisions,
all of which are subject to change. Any change in the above, which may or may
not be retroactive, could alter the tax consequences to Arcadia shareholders as
described in the following discussion.
Arcadia shareholders should be aware that this discussion does not deal with
all federal income tax considerations that may be relevant to particular
shareholders in light of their particular circumstances, such as shareholders
who or which:
- are dealers in securities;
- are subject to the alternative minimum tax provisions of the Internal
Revenue Code;
- are non-U.S. persons;
- do not hold their Arcadia common stock as capital assets; or
- acquired their shares in connection with stock option or stock purchase
plans or in other compensatory transactions.
In addition, the following discussion does not address the tax consequences
of the merger under foreign, state or local tax laws, the tax consequences of
transactions, if any, effectuated prior or subsequent to, or concurrently with,
the merger, whether or not these transactions are undertaken in connection with
the merger, including without limitation any transaction in which shares of
Arcadia common stock are acquired or residual value obligations are disposed of.
Accordingly, we urge you to consult your own tax advisors as to the specific tax
consequences to you of the merger, including the applicable federal, state,
local and non-U.S. tax consequences.
There are no authorities considering the tax treatment of instruments that
are substantially the same as the residual value obligations. As a result, the
tax treatment is unclear, and could differ from the treatment described in this
discussion. You should consult your own tax advisors regarding the
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federal, state, local and non-U.S. tax consequences to you of the receipt,
ownership and disposition of the residual value obligations.
CHARACTERIZATION OF THE RESIDUAL VALUE OBLIGATIONS. The receipt of cash and
the residual value obligations in exchange for Arcadia common stock pursuant to
the merger will be a taxable transaction for Arcadia shareholders for United
States federal income tax purposes. Although the tax treatment to an Arcadia
shareholder is unclear, each Arcadia shareholder most likely will recognize gain
or loss equal to the difference between the amount of cash and the fair market
value of the residual value obligations received in the merger and the
shareholder's adjusted basis in the Arcadia common stock surrendered in exchange
for the merger consideration. See "--Other Possible Tax Treatments" below. The
gain or loss will be long-term capital gain or loss if you have held the Arcadia
common stock for more than one year. Capital gain of a non-corporate holder is
generally subject to a maximum federal tax rate of 20% in respect of property
held for more than one year.
Each shareholder who receives a residual value obligation in exchange for
Arcadia common stock and applies the foregoing tax treatment will have a tax
basis in the residual value obligation equal to its fair market value at the
time of the exchange. The holding period for the residual value obligation will
begin on the day following the date of the exchange.
Given the wholly contingent nature of the residual value obligations, it is
not anticipated that the residual value obligations will be treated as debt
instruments for federal income tax purposes.
Therefore, when a payment is subsequently received on a residual value
obligation, the present value of that payment will be determined under the
principles of Section 483 of the Internal Revenue Code at the time of the
exchange using a discount rate equal to the applicable federal rate, described
below. The amount of the payment in excess of its present value will then be
characterized as imputed interest and the balance will be treated as principal
and reduce your basis in the residual value obligation. If your basis in a
residual value obligation is reduced to zero, any additional principal payments
on the residual value obligation should be treated as gain from the sale or
exchange of the residual value obligation rather than from the sale or exchange
of the Arcadia common stock. The imputed interest must be included in income by
a holder under its regular method of accounting. Therefore, a holder using the
cash method of accounting would include the imputed interest in income when
payment on a residual value obligation is received, and a holder using the
accrual method would include the imputed interest when all events have occurred
which fix the right to receive the payment.
In general, the applicable federal rate is a rate reflecting an average of
market yields on Treasury debt obligations for different ranges of maturities
that is published monthly by the Internal Revenue Service. The relevant
applicable federal rate will be the lower of the lowest applicable federal rate
in effect during the three-month period ending with November 1999 or the lowest
applicable federal rate in effect during the three-month period ending with the
month that includes the effective time. In each case, the maturity range of the
relevant applicable federal rate will correspond to the period from the
effective time to the date the amount is received or deemed received.
Upon a sale of a residual value obligation, a portion of the amount received
will be treated under the principles of Section 483 as interest income that is
ordinary income to the holder. The balance of the amount will be treated as
sales proceeds. The interest amount will equal the excess of the amount received
over its present value as of the date of the exchange, calculated using a
discount rate equal to the applicable federal rate. You will recognize gain or
loss equal to the difference between the amount treated as sales proceeds and
your adjusted tax basis in the residual value obligation. The gain or loss will
be treated as capital gain or loss which will be long-term if you have held the
residual value obligation for more than one year.
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OTHER POSSIBLE TAX TREATMENTS. The U.S. federal income tax treatment may be
different than that described above. For example:
- It is possible that residual value obligations might not be includable in
income as part of the taxable amount realized for the Arcadia common
stock. In that case, payments would be included under the principles of
Section 483 described above, and payments received would be treated as
gain from the sale or exchange of Arcadia common stock. In this event, any
loss on the exchange of Arcadia common stock for residual value
obligations generally would be deferred until final payment on the
residual value obligations is received.
- It is possible that the fair market value of the residual value
obligations received in the merger will be includable in income as part of
the taxable amount realized for the Arcadia common stock, but that any
subsequent payments received on the residual value obligation would not be
subject to the principles of Section 483 discussed above. In that event,
you will have a tax basis in the residual value obligation equal to the
fair market value at the time received, and subsequent payments on the
residual value obligation would be treated first as recovery of basis in
that residual value obligation, and any payment in excess of the basis
would be treated as gain or loss from the sale or exchange of the residual
value obligation.
- It is possible that the Internal Revenue Service might take the view that
residual value obligations represent debt instruments. In that event, the
tax treatment outlined above would differ in that:
- you would be required to include original issue discount in income each
year, irrespective of whether cash payments are received;
- inclusions of original issue discount and gain from the sale of
residual value obligations would be ordinary income; and
- adjustments would be made, generally in later periods, to reflect the
actual pattern of cash payments, if any, on the residual value
obligations.
You should consult your tax advisors regarding the alternative possible
treatments of the transaction.
LACK OF CASH RECOVERY. If an identifiable event occurs which establishes
the worthlessness of a residual value obligation, you would be entitled to
deduct as a capital loss, in the year of the identifiable event, your adjusted
tax basis in your residual value obligation.
BACK-UP WITHHOLDING AND INFORMATION REPORTING. You may be subject to a
back-up withholding tax of 31% on the receipt of the merger consideration. In
general, back-up withholding will only apply if you fail to comply with
identification requirements. Back-up withholding is not additional tax and may
be claimed as a credit against your U.S. federal income tax liability, provided
that the required information is furnished to the Internal Revenue Service. You
should consult your tax advisors regarding your qualification for exemption from
back-up withholding and the procedure for obtaining any applicable exemption. In
addition, amounts paid on the sale, exchange, redemption or satisfaction of a
residual value obligation will also be subject to information reporting unless
an exemption applies.
ANTICIPATED ACCOUNTING TREATMENT
Associates intends that the merger be accounted for under the purchase
method of accounting in accordance with generally accepted accounting
principles.
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DISSENTERS' RIGHTS
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act
entitle any shareholder of Arcadia as of February 28, 2000, in lieu of receiving
the payment to which the shareholder would otherwise be entitled pursuant to the
merger agreement, to dissent from the merger and obtain payment in cash for the
"fair value" of the shares of stock held by the shareholder. If you are
contemplating the exercise of dissenters' rights, you should review carefully
the provisions of Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act, copies of which are attached as Appendix E to this proxy
statement/prospectus, particularly the specific procedural steps required to
perfect these rights. These rights will be lost if the procedural requirements
of Section 302A.473 are not fully and precisely satisfied.
Set forth below is a brief description of the procedures relating to the
exercise of dissenters' rights. The following description does not purport to be
a complete statement of the provisions of Section 302A.473 and is qualified in
its entirety by reference to this section. Please read this description in
conjunction with the full text of Section 302A.473 appearing in Appendix E to
this proxy statement/ prospectus.
Under Section 302A.473, Subd. 3, a shareholder as of the record date of the
shareholders meeting to consider the merger who wishes to exercise dissenters'
rights must file with Arcadia, at Arcadia's address, 7825 Washington Avenue
South, Minneapolis, Minnesota 55439, Attention: James D. Atkinson, III,
Secretary, before the vote on the merger, a written notice of intent to demand
the "fair value" of Arcadia's shares owned by the shareholder. In addition, the
shareholder must not vote his or her shares in favor of the merger. A vote
against the merger will not in itself constitute written notice, and a failure
to vote will not affect the validity of a timely written notice. However, the
submission of a blank proxy will constitute a vote in favor of the merger and a
waiver of statutory dissenters' rights.
If the merger is approved by the shareholders of Arcadia, Arcadia will send
to all dissenters who filed the necessary notice of intent to demand the fair
value of their shares, and who did not vote their shares in favor of the merger,
a notice containing the information required by Section 302A.473, Subd. 4,
including without limitation:
- the address to which a dissenter must send a demand for payment and
certificates representing shares in order to obtain payment for the shares
and the date by which they must be received; and
- a form to be used to certify the date on which the dissenter, or the
beneficial owner on whose behalf the dissenter dissents, acquired the
shares of common stock (or an interest in them) and to demand payment.
In order to receive the fair value of the shares under Section 302A.473, a
dissenter must demand payment and deposit certificates representing shares
within 30 days after notice by Arcadia is given. Under Minnesota law, notice by
mail is given by Arcadia when deposited in the United States mail. A shareholder
who fails to make demand for payment and to deposit certificates as required by
Section 302A.473, Subd. 4, will not be a dissenter and will lose the right to
receive the fair value of his or her shares under that section despite the
timely filing of notice of intent to demand payment under Section 302A.473,
Subd. 3, but will be entitled to the merger consideration payable under the
merger agreement, which may be more or less than or equal to the fair value of
the shares determined under Minnesota Business Corporation Act
Section 302A.473.
Under Section 302A.471, Subd. 2, beneficial owners of shares who desire to
exercise statutory dissenters' rights themselves must obtain and submit the
registered owner's written consent at or before the time they file the notice of
intent to demand fair value. Under Section 302A.471, Subd. 2, you may not assert
dissenters' rights with respect to less than all of the shares of common stock
registered in
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your name, unless you dissent with respect to all shares beneficially owned by
another person and disclose the name and address of that other person.
Except as provided below, if demand for payment and deposit of stock
certificates is duly made by a dissenter with Arcadia as required by the notice,
then after the effective time of the merger or the receipt of the demand,
whichever is later, Arcadia will pay the dissenter an amount which Arcadia
estimates to be the fair value of the dissenter's shares of common stock, with
interest, if any. For the purpose of a dissenter's rights under Sections
302A.471 and 302A.473, "fair value" means the value of the shares of common
stock immediately before the effective date of the merger and "interest" means
interest commencing five days after the effective date of the merger until the
date of payment, calculated at the rate provided in Minnesota Statutes
Section 549.09, presently 5%. The payment must be accompanied by Arcadia's
closing balance sheet and statement of income for a fiscal year ending not more
than 16 months before the effective time, Arcadia's latest available interim
financial statements and a brief description of the method used by Arcadia to
reach such an estimate. If the dissenter believes the payment received from
Arcadia is less than the fair value of the shares of common stock, with
interest, if any, the dissenter must give written notice to Arcadia of his or
her own estimate of the fair value of the shares of common stock, with interest,
if any, within 30 days after the date of Arcadia's remittance and must demand
payment of the difference between his or her estimate and Arcadia's remittance.
If the dissenter fails to give written notice of the estimate to Arcadia within
the 30-day time period, the dissenter will be entitled only to the amount
remitted by Arcadia.
Arcadia may withhold the remittance with respect to shares of common stock
for which the dissenter demanding payment was not the registered owner or the
person on whose behalf the dissenter acts was not a beneficial owner as of
November 15, 1999. As to each dissenter who was not a beneficial owner as of
November 15, 1999 who has validly demanded payment, following the effective time
or the receipt of demand, whichever is later, Arcadia will mail its estimate of
the fair value of the dissenter's shares of common stock and offer to pay this
amount with interest, if any, to the dissenter upon receipt of the dissenter's
agreement to accept this amount in full satisfaction. If the dissenter believes
that Arcadia's offer is for less than the fair value of the shares of common
stock, with interest, if any, the dissenter must give written notice to Arcadia
of his or her own estimate of the fair value of the shares of common stock, with
interest, if any, and demand payment of this amount within 30 days after the
mailing of Arcadia's offer. If the dissenter fails to give written notice of
this estimate to Arcadia within the 30-day time period, the dissenter will be
entitled only to the amount offered by Arcadia.
If Arcadia and any dissenter who objects to Arcadia's estimate of "fair
value" cannot settle the dissenter's demand within 60 days after Arcadia
receives the dissenter's estimate of the fair value of his or her shares of
common stock, then Arcadia will file a petition in a court of competent
jurisdiction in Hennepin County, Minnesota, requesting that the court determine
the statutory fair value of common stock with interest, if any. All dissenters
whose demands are not settled within the applicable 60-day settlement period
will be made parties to this proceeding.
The court will then determine whether each dissenter in question has fully
complied with the provisions of Section 302A.473 and, for all dissenters who
have fully complied and not forfeited statutory dissenters' rights, will
determine the fair value of the shares, taking into account any and all factors
the court finds relevant, including, without limitation, the recommendation of
any appraisers which may have been appointed by the court, computed by any
method or combination of methods that the court, in its discretion, sees fit to
use, whether or not used by Arcadia or a dissenter. The fair value of the shares
as determined by the court is binding on all shareholders and may be less than,
equal to or greater than the price to be paid to shareholders who are not
dissenters or dissenting shareholders who have settled with Arcadia. Each
dissenter who is a party to the proceeding is entitled to judgment in cash for
the amount by which the fair value of the shares of common stock as determined
by the court, plus interest, exceeds the estimated payment previously remitted
by Arcadia to the dissenter. However, under the statute, dissenters are not
liable to Arcadia for the amount, if any, by which
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payments remitted by Arcadia to the dissenters exceed the fair value of the
shares determined by the court, plus interest. The costs and expenses of this
court proceeding will be assessed against Arcadia, except that the court may
assess part or all of those costs and expenses against a dissenter whose action
in demanding payment is found to be arbitrary, vexatious or not in good faith.
If the court finds that Arcadia has failed to comply substantially with
Section 302A.473, the court also may assess against Arcadia the fees and
expenses, if any, of attorneys and experts as the court deems equitable. These
fees and expenses may also be assessed against any person who has acted
arbitrarily, vexatiously or not in good faith in bringing the proceeding, and
may be awarded to a party injured by those actions.
Under Section 302A.471, Subd. 4, you have no right at law or equity to set
aside the adoption of the merger agreement or the consummation of the merger,
except if the adoption or consummation is fraudulent with respect to you or
Arcadia.
Associates' obligation to effect the merger is subject to the condition that
dissenters' rights are exercised by the holders of less than 10% of Arcadia's
common stock.
LISTING OF RESIDUAL VALUE OBLIGATIONS
We do not expect to list the residual value obligations on any national
securities exchange or to seek their quotation on any automated dealer quotation
system. We have been advised by J.P. Morgan that following completion of the
merger, J.P. Morgan intends to make a market in the residual value obligations.
However, it is not obligated to do so and any market-making activities with
respect to the residual value obligations may be discontinued at any time
without notice.
OPERATIONS FOLLOWING THE MERGER
Following the merger, Arcadia will operate as a wholly owned subsidiary of
Associates. Associates does not currently plan on assuming or guaranteeing any
of the current indebtedness of Arcadia. Upon completion of the merger, it is
anticipated that the current directors of AFCC Newco, Inc. will be the members
of Arcadia's board.
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DESCRIPTION OF RESIDUAL VALUE OBLIGATIONS
Associates will issue the residual value obligations under the Residual
Value Obligations Agreement between Associates and The Chase Manhattan Bank, as
trustee, to be dated as of the effective date of the merger. The terms of the
residual value obligations include those expressly set forth in the RVO
Agreement and those made part of the RVO Agreement by reference to the Trust
Indenture Act of 1939, as amended.
This description of residual value obligations is intended to be a useful
overview of the material provisions of the residual value obligations and the
RVO Agreement. Because this description of residual value obligations is only a
summary, you should refer to the RVO Agreement for a complete description of the
obligations of Associates and your rights as a holder of residual value
obligations. We have included a copy of the form of RVO Agreement as Appendix B
to this proxy statement/ prospectus.
The section entitled "--Certain Definitions" includes the definitions of the
capitalized terms used in this description. References to "Associates" in this
section mean only Associates First Capital Corporation and not its subsidiaries.
GENERAL
The residual value obligations:
- are general unsecured obligations of Associates;
- will be issued in a maximum amount equal to one residual value obligation
for each outstanding share of Arcadia common stock outstanding as of the
effective date of the merger plus any additional residual value
obligations issued in satisfaction of dissenters' rights following the
effective date of the merger; and
- will be issued in denominations of a whole residual value obligation and
integral multiples of whole residual value obligations.
We do not expect to list the residual value obligations on any national
securities exchange or to seek their quotation on any automated dealer quotation
system. We have been advised by J.P. Morgan that following completion of the
merger, J.P. Morgan intends to make a market in the residual value obligations.
However, it is not obligated to do so and any market-making activities with
respect to the residual value obligations may be discontinued at any time
without notice.
Investments in the residual value obligations involve a high degree of risk.
Risks associated with holding the residual value obligations are discussed under
"Risk Factors" in this proxy statement/ prospectus.
RVO PAYMENTS
There are no minimum payments on the residual value obligations, and
depending on the performance of the underlying receivables and other factors,
there may be no payments on the residual value obligations. If ultimately there
are payments on the residual value obligations, it is unlikely payments will
commence prior to January 1, 2004. Payments on the residual value obligations,
if any, will:
- be paid on the Payment Dates occurring in January, April, July and October
of each year; and
- be payable to the holders of record on the December 1, March 1, June 1 and
September 1 immediately preceding the related Payment Dates.
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On each Payment Date on which the Accrued RVO Payment Amount is greater than
zero, Associates will be required to make a payment (an "RVO Payment") with
respect to each residual value obligation in an amount equal to the quotient of:
- the then-effective Accrued RVO Payment Amount, DIVIDED BY
- the total number of residual value obligations outstanding.
If the Accrued RVO Payment Amount on a Payment Date is zero, there will be
no RVO Payment on that Payment Date.
Notwithstanding the foregoing, Associates will not, except in connection
with the payment of RVO Payments on a redemption date, be required to make
payments on any residual value obligation if the amount of the payment that
would otherwise be made on that residual value obligation would be less than
$0.05. Any amounts not paid in accordance with the foregoing and any amounts not
paid in breach of the terms of the residual value obligations will be carried
over to the next Payment Date and continue to accrue interest as provided in the
second paragraph below.
The "Accrued RVO Payment Amount" as of any date means the sum of:
- the aggregate of the amount of Residual Cash Flow allocated pursuant to
priority clause (D) under the "Initial Allocation Priorities" described in
the next sub-section, or priority clause (B) of the "Additional Allocation
Priorities" described in the next sub-section, to make payments on the
residual value obligations, and
- interest accrued on such amounts pursuant to the next paragraph, provided,
that the Accrued RVO Payment Amount will be reduced on each Payment Date
by the amount of the aggregate RVO Payments made on such Payment Date.
On the business day after each Securitization Distribution Date occurring on
or after the effective date of the merger (each, an "Allocation Date"),
Associates will be required to determine whether to increase the then-effective
Accrued RVO Payment Amount by making the allocations of Residual Cash Flow
described below. In general, amounts allocated on an Allocation Date to increase
the Accrued RVO Payment Amount pursuant to priority clause (D) of the "Initial
Allocation Priorities" and priority clause (B) of the "Additional Allocation
Priorities" described in the next sub-section will accrue interest from and
including the Allocation Date to but excluding the date the accrued amounts are
paid on the residual value obligations, at a rate equal to One-Month LIBOR.
ALLOCATIONS OF RESIDUAL CASH FLOW
INITIAL ALLOCATION OF RESIDUAL CASH FLOW. On each Allocation Date,
Associates will be required to make the following allocations of the Residual
Cash Flow, if any, as of that Allocation Date, in the following order of
priority (the "Initial Allocation Priorities"):
(A) 100% to reduce RVO Expenses incurred after the third preceding
Securitization Distribution Date and on or prior to the second preceding
Securitization Distribution Date (provided, that (i) in the case of the
initial Allocation Date, the allocation will be 100% to reduce RVO
Expenses incurred on or after November 12, 1999 and on or prior to the
second preceding Securitization Distribution Date and (ii) in the case of
the final Allocation Date, the allocation will be 100% of the remaining
Residual Cash Flow, if any, to reduce (x) RVO Expenses incurred after the
third preceding Securitization Distribution Date and on or prior to such
Allocation Date and (y) RVO Expenses which Associates reasonably expects
to incur thereafter), PLUS(except in the case of the initial Allocation
Date) any RVO Expenses incurred on or prior to the third preceding
Securitization Distribution Date and on or after November 12, 1999 which
were not previously reduced by a prior allocation of Residual Cash Flow
pursuant to this priority clause (A), until such amounts have been
reduced to zero, then
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(B) 100% of the remaining Residual Cash Flow, if any, to reduce Litigation
Expenses incurred after the third preceding Securitization Distribution
Date and on or prior to the second preceding Securitization Distribution
Date (provided that (i) in the case of the initial Allocation Date, the
allocation will be 100% of the remaining Residual Cash Flow, if any, to
reduce Litigation Expenses incurred on or after November 12, 1999 and on
or prior to the second preceding Securitization Distribution Date and
(ii) in the case of the final Allocation Date, the allocation will be
100% of the remaining Residual Cash Flow, if any, to reduce Litigation
Expenses incurred after the third preceding Securitization Distribution
Date and on or prior to such Allocation Date), PLUS(except in the case of
the initial Allocation Date) any Litigation Expenses incurred on or prior
to the third preceding Securitization Distribution Date and on or after
November 12, 1999 which were not previously reduced by a prior allocation
of Available Residual Cash Flow pursuant to this priority clause (B),
until such amounts have been reduced to zero, then
(C) 100% of remaining Residual Cash Flow, if any, to reduce the
then-effective AFCC Amount until the then-effective AFCC Amount has been
reduced to zero, then
(D) 50% of the remaining Residual Cash Flow, if any, to increase the Accrued
RVO Payment Amount.
ADDITIONAL ALLOCATION OF RESIDUAL CASH FLOW. In addition to, and after
giving effect to, the allocation of Residual Cash Flow pursuant to the Initial
Allocation Priorities, on the second Allocation Date following the final
disposition of all litigation giving rise to Damages and the final determination
of all related legal fees and expenses, an amount equal to the excess, if any,
of
- the aggregate amount of Residual Cash Flow allocated on or prior to such
Allocation Date to reduce Litigation Expenses pursuant to priority
clause (B) above OVER
- the aggregate amount of Damages (the "Excess Litigation Reserve"),
must be allocated by Associates in the following order of priority (the
"Additional Allocation Priorities"):
(A) 100% to reduce the then-effective AFCC Amount (calculated after giving
effect to the allocation of Residual Cash Flow pursuant to the Initial
Allocation Priorities on that Allocation Date) until the AFCC Amount has
been reduced to zero, then
(B) 50% of remaining Excess Litigation Reserve, if any, to increase the
Accrued RVO Payment Amount.
APPLICATION OF FUNDS PURSUANT TO ALLOCATION PROVISIONS. The allocation
provisions described under the Initial Allocation Priorities and the Additional
Allocation Priorities do not require any actual or specific use of funds by
Associates or its subsidiaries. The allocations are made solely for purposes of
determining whether, and to what extent, Associates is required to make payments
on the residual value obligations. You will not have any right to the
receivables underlying the residual value obligations or to the actual residual
cash flows generated by the receivables.
PAYMENTS ON, AND EXCHANGES AND TRANSFERS OF, THE RESIDUAL VALUE OBLIGATIONS
The residual value obligations may be exchanged or transferred at the office
or agency of Associates in the Borough of Manhattan, The City of New York (which
initially will be the corporate trust office of the trustee in New York, New
York). At the option of Associates, RVO Payments may be made by check mailed to
the address of the holders as their addresses appear in the register for the
residual value obligations. RVO Payments on residual value obligations in global
form registered in the name of or held by The Depository Trust Company ("DTC"),
the depositary for the global residual value obligations, or its nominee will be
made in immediately available funds to DTC or its nominee,
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as the case may be, as the registered holder of the global residual value
obligation. No service charge will be made for any registration of transfer or
exchange of residual value obligations, but Associates may require payment of a
sum sufficient to cover any transfer tax or other similar governmental charge
payable in connection with the transfer or exchange.
SERVICING OF AUTO LOAN RECEIVABLES
The RVO Agreement requires Associates to, or to cause its affiliates to,
service or arrange for the servicing of the receivables securitized pursuant to
the Designated Securitization Transactions (subject to the right of other
entities under the Designated Securitization Transactions to terminate the
servicer of the receivables) and any Other Transaction Receivables in accordance
with customary business practices and Associates' applicable policies and
procedures and, if Associates or any of its subsidiaries is then servicing, or
arranging for the servicing of, indirectly originated automobile loans,
consistent with that servicing.
AMENDMENT TO DESIGNATED SECURITIZATION TRANSACTIONS
Associates may not, and may not permit its subsidiaries to, amend or modify
the terms of any agreement entered into in connection with the Designated
Securitization Transactions unless such an amendment or modification is made in
accordance with reasonable business practices and with a good faith intent other
than to reduce RVO Payments. In addition, Associates may not, and may not permit
its subsidiaries to, amend or modify the terms of any agreement entered into in
connection with the Designated Securitization Transactions to increase the
servicing fees payable thereunder unless such increased servicing fees are
payable to an entity other than Associates and its subsidiaries and Associates
or its subsidiaries have been terminated as servicer by Financial Security
Assurance Inc. or any other entity in accordance with the terms of the
Designated Securitization Transactions.
REPORTING REQUIREMENTS
Unless the Securities and Exchange Commission requires Associates to
disclose different information, Associates has agreed to publicly disclose in
respect of each fiscal quarter of Associates, not later than the time it files
its Quarterly Report on Form 10-Q with the Securities and Exchange Commission in
respect of each of its first three fiscal quarters in each fiscal year and not
later than the time it files its Annual Report on Form 10-K in respect of its
fourth fiscal quarter in each fiscal year (or, in the event Associates is not
then required to make such filings with the Securities and Exchange Commission,
not later than the time it would be required to make such filings if it were so
required), information specified in the Residual Value Obligations Agreement.
PAYING AGENT AND REGISTRAR
The trustee will initially act as paying agent and registrar. Associates may
change the paying agent or registrar without prior notice to the holders of the
residual value obligations, and Associates or any of its subsidiaries may act as
paying agent or registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange residual value obligations in accordance
with the RVO Agreement. The registrar and the trustee may require a holder,
among other things, to furnish appropriate endorsements and transfer documents,
and Associates may require a holder to pay any taxes and fees required by law or
permitted by the RVO Agreement.
The registered holder of a residual value obligation will be treated as the
owner of it for all purposes.
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OPTIONAL REDEMPTION
Except as described below, Associates may not redeem the residual value
obligations.
At Associates' option, Associates may redeem the residual value obligations,
in whole but not in part, on any Payment Date when the total aggregate principal
balance of the auto loan receivables that were securitized pursuant to the
Designated Securitization Transactions as of the effective date of the merger is
less than or equal to 5% of the total aggregate principal balance of those
receivables as of the effective date of the merger. Associates may make this
redemption upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each holder's registered address. The optional redemption
price will equal the fair value (as of the date of a resolution of the Board of
Directors of Associates relating to the redemption) of the outstanding residual
value obligations, as determined in good faith by the Board of Directors of
Associates and set forth in the Board resolution. The Board of Directors of
Associates will determine the fair value of the residual value obligations
assuming the prior payment of the RVO Payment, if any, to be made on the
redemption date.
The redemption date, if any, will also be a Payment Date. Accrued RVO
Payments Amounts, if any, as of the Payment Date coinciding with the redemption
date will be paid to the person in whose name the residual value obligation is
registered at the close of business on the related record date.
After the redemption date, no further RVO Payments will be made on the
residual value obligations as long as Associates has deposited with the paying
agent funds in satisfaction of the optional redemption price, and any RVO
Payments to be made on such redemption date, pursuant to the RVO Agreement.
Holders must surrender residual value obligations to a paying agent to
collect redemption payments.
Associates is not required to make mandatory redemption payments or sinking
fund payments with respect to the residual value obligations.
MERGER AND CONSOLIDATION
Associates will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, UNLESS:
- the resulting, surviving or transferee Person (the "Successor Company") is
a corporation, partnership, trust or limited liability company organized
and existing under the laws of the United States of America, any State of
the United States or the District of Columbia and the Successor Company,
if not Associates, expressly assumes, by supplemental agreement, executed
and delivered to the trustee, in form satisfactory to the trustee, all the
obligations, duties, commitments and covenants of Associates under the
residual value obligations and the RVO Agreement;
- immediately after giving effect to the transaction, no Default or Event of
Default has occurred and is continuing; and
- Associates has delivered to the trustee an Officers' Certificate and an
Opinion of Counsel, each stating that the consolidation, merger or
transfer and such supplemental agreement, if any, comply with the RVO
Agreement and that all conditions precedent provided in the RVO Agreement
relating to the transaction have been complied with.
For purposes of this covenant, the sale, lease, conveyance, assignment,
transfer, or other disposition of all or substantially all of the properties and
assets of one or more Subsidiaries of Associates, which properties and assets,
if held by Associates instead of such Subsidiaries, would constitute all or
substantially all of the properties and assets of Associates on a consolidated
basis, will be deemed to be the transfer of all or substantially all of the
properties and assets of Associates.
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The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, Associates under the RVO Agreement.
Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, there may be a degree of uncertainty as to
whether a particular transaction would involve "all or substantially all" of the
property or assets of a Person.
Notwithstanding the preceding, Associates may, subject to only the
conditions described in the first and third bullet points above, merge with an
affiliate incorporated solely for the purpose of reincorporating Associates in
another jurisdiction to realize tax or other benefits.
Any consolidation, merger, conveyance, transfer or lease that complies with
the terms of the RVO Agreement described in this section will not be restricted
by the terms of the RVO Agreement described under "--Assignment."
ASSIGNMENT
Associates will not assign its obligations under the RVO Agreement or under
the residual value obligations to any Person, UNLESS:
- the assignee (the "Assignee Company") is a corporation, partnership, trust
or limited liability company organized and existing under the laws of the
United States of America, any State of the United States or the District
of Columbia and the Assignee Company expressly assumes, by supplemental
agreement, executed and delivered to the trustee, in form satisfactory to
the trustee, all the obligations of Associates under the residual value
obligations and the RVO Agreement;
- immediately after giving effect to the transaction, no Default or Event of
Default has occurred and is continuing;
- either (A) immediately after giving effect to such transaction, the
Assignee Company has a consolidated net worth that is not less than the
lower of (1) $1 billion or (2) the consolidated net worth of Associates at
such time or (B) Associates remains secondarily liable, by guarantee or
otherwise, for the payment obligations of the Assignee Company under the
RVO Agreement and the residual value obligations;
- Associates has delivered to the trustee an Officers' Certificate and an
Opinion of Counsel, each stating that the assignment and the supplemental
agreement comply with the RVO Agreement and that all conditions precedent
provided in the RVO Agreement relating to the transaction have been
complied with; and
- the Assignee Company or one of its affiliates is the successor to
Associates' and its subsidiaries' interest in the Residual Cash Flow and
the Designated Securitization Transactions.
The Assignee Company will succeed to, and be substituted for, and may
exercise every right and power of Associates under the RVO Agreement.
Nothing in the RVO Agreement or in the residual value obligations, other
than the foregoing provision, restricts Associates' ability to assign its rights
and/or obligations under the RVO Agreement and/or the residual value
obligations.
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EVENTS OF DEFAULT
Each of the following is an "Event of Default":
(1) default in any payment of any RVO Payment on any residual value
obligation when due, and such default continues for 30 days;
(2) default in the payment of the optional redemption price, when the same
becomes due and payable, as described above under "--Optional
Redemption";
(3) failure by Associates to comply for 60 days after notice with its other
agreements contained in the RVO Agreement; or
(4) certain events of bankruptcy, insolvency or reorganization of Associates
(the "bankruptcy provisions").
However, a default under clause (3) of this paragraph will not constitute an
Event of Default until the trustee or the holders of 50% of the outstanding
residual value obligations notify Associates of the default and Associates does
not cure such default within the time specified in clause (3) of this paragraph
after receipt of such notice.
Subject to the provisions of the RVO Agreement relating to the duties of the
trustee, if an Event of Default occurs and is continuing, the trustee will be
under no obligation to exercise any of the rights or powers under the RVO
Agreement at the request or direction of any of the holders unless those holders
have offered to the trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payments on the
residual value obligations, no holder may pursue any remedy with respect to the
RVO Agreement or the residual value obligations UNLESS:
(1) the holder has previously given the trustee notice that an Event of
Default is continuing;
(2) the holders of at least 25% of the outstanding residual value
obligations have requested the trustee to pursue the remedy;
(3) the holders have offered the trustee reasonable security or indemnity
against any loss, liability or expense;
(4) the trustee has not complied with the request within 60 days after the
receipt of the request and the offer of security or indemnity; and
(5) the holders of a majority of the outstanding residual value obligations
have not given the trustee a direction that, in the opinion of the
trustee, is inconsistent with the request within the 60-day period.
Subject to restrictions specified in the RVO Agreement, the holders of a
majority of the outstanding residual value obligations are given the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or of exercising any trust or power conferred on the
trustee. The RVO Agreement provides that in the event that an Event of Default
has occurred and is continuing, the trustee will be required in the exercise of
its powers to use the degree of care that a prudent person would use in the
conduct of its own affairs. The trustee, however, may refuse to follow any
direction that conflicts with law or the RVO Agreement or that the trustee
determines is unduly prejudicial to the rights of any other holder or that would
involve the trustee in personal liability. Prior to taking any action under the
RVO Agreement, the trustee will be entitled to indemnification satisfactory to
it in its sole discretion against all losses and expenses caused by taking or
not taking such action.
The RVO Agreement does not provide for the acceleration of any payment as a
remedy upon an Event of Default.
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The holders of a majority of the outstanding residual value obligations may
waive an existing Default or Event of Default and its consequences, except with
respect to
- nonpayment of amounts due on the residual value obligations, or
- a Default or Event of Default with respect to a provision that may only be
amended with the consent of each holder affected.
The RVO Agreement provides that if a Default occurs and is continuing and is
known to the trustee, the trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of amounts due on any residual value obligation, the trustee may withhold notice
if and so long as a committee of trust officers of the trustee in good faith
determines that withholding notice is in the interests of the holders. In
addition, Associates is required to deliver to the trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
of the certificate know of any Default that occurred during the previous year.
Associates also is required to deliver to the trustee, within 5 days after
Associates becomes aware of the occurrence of any Event of Default or an event
which, with notice or the lapse of time or both, would constitute an Event of
Default, an Officers' Certificate setting forth the details of such Event of
Default or Default and the action which Associates proposes to take.
AMENDMENTS AND WAIVERS
Subject to exceptions specified in the RVO Agreement, the RVO Agreement or
the residual value obligations may be amended with the consent of the holders of
a majority of the outstanding residual value obligations, including consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, residual value obligations, and, subject to exceptions specified in the RVO
Agreement, any past default or compliance with any provisions may be waived with
the consent of the holders of a majority of the residual value obligations then
outstanding, including consents obtained in connection with a purchase of, or
tender offer or exchange offer for, residual value obligations. However, without
the consent of each holder of an outstanding residual value obligation affected,
no amendment may, among other things:
(1) reduce the percentage of residual value obligations whose holders must
consent to an amendment;
(2) reduce the amount of an RVO Payment or extend the stated time for
payment of an RVO Payment;
(3) reduce the amount payable upon the redemption of any residual value
obligation or change the time at which any residual value obligation may
be redeemed as described above under "--Optional Redemption", whether
through an amendment or waiver of provisions in the covenants,
definitions or otherwise;
(4) make any residual value obligation payable in money other than that
stated in the residual value obligation;
(5) impair the right of any holder to receive payment on his or her residual
value obligations on or after the due dates or to institute suit for the
enforcement of any payment on or with respect to his or her residual
value obligations; or
(6) make any change in the amendment or waiver provisions which require each
holder's consent.
Without the consent of any holder, Associates and the trustee may amend the
RVO Agreement or the residual value obligations to:
(1) cure any ambiguity, omission, defect or inconsistency;
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(2) provide for the assumption by a successor corporation, partnership,
trust or limited liability company, or an Assignee Company, of the
obligations of Associates under the RVO Agreement;
(3) provide for uncertificated residual value obligations in addition to or
in place of certificated residual value obligations;
(4) add guarantees with respect to the residual value obligations,
including, without limitation, as contemplated by "--Assignment" above;
(5) secure the residual value obligations;
(6) add to the covenants of Associates for the benefit of the holders or
surrender any right or power conferred upon Associates;
(7) make any change that does not adversely affect the rights of any holder;
or
(8) comply with any requirement of the Securities and Exchange Commission in
connection with the qualification of the RVO Agreement under the Trust
Indenture Act.
The consent of the holders is not necessary under the RVO Agreement to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment. After an amendment
under the RVO Agreement becomes effective, Associates is required to mail to the
holders a notice briefly describing the amendment. However, the failure to give
this notice to all the holders, or any defect in the notice, will not impair or
affect the validity of the amendment.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Associates,
as such, will have any liability for any obligations of Associates under the
residual value obligations or the RVO Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder by
accepting a residual value obligation waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the
residual value obligations. This waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Securities and Exchange Commission that such a waiver is against public policy.
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is the trustee under the RVO Agreement and has been
appointed by Associates as registrar and paying agent with regard to the
residual value obligations.
DETERMINATIONS OF ASSOCIATES FINAL
The residual value obligations provide that, in general, Associates'
calculations and determinations of all amounts and other matters in connection
with the residual value obligations will be final and conclusive in the absence
of manifest error. However, Associates will be required to engage its
independent auditors to review the calculations and determinations made by
Associates under the residual value obligations and under the RVO Agreement
substantially to the same extent as Associates engages its independent auditors
to perform a similar function with respect to securitization transactions
effected by or for the benefit of Associates and its subsidiaries.
GOVERNING LAW
The RVO Agreement provides that it and the residual value obligations will
be governed by, and construed in accordance with, the laws of the State of New
York.
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CERTAIN DEFINITIONS
"AFCC Amount" means an amount equal to (A) $512 million PLUS (B) interest at
1.25% per month on $512 million (calculated on the basis of a 360-day year of
twelve 30-day months) from September 30, 1999 up to but excluding the effective
date of the merger less (C) the amount of Residual Cash Flow generated on and
after September 30, 1999 and prior to the effective date of the merger;
provided, that this amount will be (i) INCREASED on each Securitization
Distribution Date following the effective date by the amount of AFCC Amount
Interest for the period ending on and including the day prior to such
Securitization Distribution Date and beginning on and including the immediately
preceding Securitization Distribution Date (or in the case of the initial
Securitization Distribution Date occurring after the effective date, beginning
on and including the effective date) and (ii) DECREASED on each Allocation Date
by the amount of Residual Cash Flow allocated on such date pursuant to priority
clause (C) under the Initial Allocation Priorities, or priority clause (A) under
the Additional Allocation Priorities, to the reduction of the AFCC Amount.
"AFCC Amount Interest", for any period, means interest accrued during such
period at the rate of 1.25% per month on the average daily AFCC Amount during
such period (after giving effect to any increase in the AFCC Amount on the first
day of such period). AFCC Amount Interest will be required to be calculated on
the basis of a 360-day year of twelve 30-day months.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law to close
in New York City; provided, that with respect to the determinations in
connection with the definition of One-Month LIBOR, such day is also a day for
trading by and between banks in U.S. dollar deposits in the interbank eurodollar
market.
"Damages" has the meaning set forth in the definition of "Litigation
Expenses."
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Securitization Transactions" means the auto loan securitization
transactions specified on Annex I to the form of RVO Agreement attached as
Appendix B to this proxy statement/prospectus.
"Designated Spread Accounts" means the spread accounts established pursuant
to each of the Designated Securitization Transactions.
"Liquidated Other Transaction Receivables" means each Other Transaction
Receivable as to which (i) 91 days have elapsed since the servicer (or
Associates or any of its subsidiaries, if there is no servicer of the Other
Transaction Receivable) repossessed the related financed vehicle, (ii) the
servicer (or Associates, if there is no servicer of the Other Transaction
Receivable) has determined in good faith that all amounts it expects to recover
have been received or (iii) all or any portion of a scheduled payment shall have
become more than 180 days past due.
"Litigation Expenses" means the sum of (i) $10,000,000 (which amount will be
deemed to have been incurred, for purposes of priority clause (B) under the
Initial Allocation Priorities, on November 12, 1999) and (ii) the amount of all
damages, judgments, settlements, defense costs and other expenses paid or
incurred by Arcadia, Associates or any of their affiliates after November 12,
1999 in connection with any litigation brought by or on behalf of shareholders
of Arcadia or by or in the right of Arcadia, net of related insurance proceeds,
if any (the amount referred to in this clause (ii) being referred to herein as
"Damages"); PROVIDED, that the aggregate amount of Damages will be deemed to be
INCREASED on each Securitization Distribution Date following the effective date
by the amount of Litigation Interest for the period ending on and including the
day prior to such Securitization Distribution Date and beginning on and
including the immediately preceding Securitization Distribution Date (or, in the
case of the initial Securitization Distribution Date occurring after the
effective date, beginning on and including November 12, 1999).
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"Litigation Interest", for any period, means interest accrued during such
period on the average daily amount of aggregate Damages during such period
(regardless of whether incurred prior to or during such period and after giving
effect to any increase in Damages on the first day of such period) at One-Month
LIBOR; PROVIDED, that solely for the purpose of calculating Litigation Interest,
the aggregate amount of Damages will be DECREASED on each Allocation Date by the
amount of Residual Cash Flow allocated on such date pursuant to priority
clause (B) of the Initial Allocation Priorities to the reduction of Litigation
Expenses; and, PROVIDED, further, that the aggregate amount of Damages will not
be so decreased on any Allocation Date as contemplated by the immediately
preceding proviso unless, as of such date, the aggregate amount of Residual Cash
Flow allocated to reduce Litigation Expenses pursuant to priority clause (B) of
the Initial Allocation Priorities equals or exceeds $10,000,000.
"Litigation Reserve Interest", for any period, means interest accrued during
such period on the excess, if any, of
- the aggregate amount of Residual Cash Flow, if any, allocated to reduce
Litigation Expenses pursuant to priority clause (B) under the Initial
Allocation Priorities, over
- the aggregate amount of Damages (such excess being calculated as of the
day after the Allocation Date during such period) at One-Month LIBOR.
"Officers' Certificate" means a certificate signed by the Chairman or a Vice
Chairman of the Board of Directors, the President or a Vice President (however
designated), and by the Treasurer, an Assistant Treasurer, the Comptroller, an
Assistant Comptroller, the Secretary or an Assistant Secretary, of Associates.
"One-Month LIBOR", for any period, means the rate per annum determined on
the basis of the rate for deposits in U.S. dollars for a 30-day period
commencing on the first day of such period appearing on Page 3750 of the Dow
Jones Markets screen of 11:00 A.M., London time, two Business Days prior to the
beginning of such period. In the event that such rate does not appear on Page
3750 of the Dow Jones Markets screen (or otherwise on such screen), One-Month
LIBOR will be determined by reference to such other comparable publicly
available service for displaying eurodollar rates as may be selected by
Associates or, in the absence of such availability, by reference to the rate at
which the trustee is offered U.S. dollar deposits at or about 11:00 A.M., New
York City time, two Business Days prior to the beginning of such period in the
interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such period for the number of days comprised therein. All amounts calculated
based on One-Month LIBOR will be calculated on the basis of the actual number of
days elapsed and a 360-day year.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the trustee. The counsel may be an employee of or counsel to
Associates or the trustee.
"Other Transaction Receivable" has the meaning set forth in the definition
of "Residual Cash Flow."
"Other Transaction Receivables Collected Funds" means, with respect to any
period and without duplication, the amount of funds received by the Company or
any of its Subsidiaries representing collections on the Other Transaction
Receivables during such period, including, but not limited to, payments by or on
behalf of the obligor, bankruptcy trustee payments, dealer payments, dealer
refunds for life and/or disability insurance and other soft adds funded under
the Other Transaction Receivables, GAP Insurance or waiver proceeds from
whatever source, comprehensive and physical damage proceeds, sales tax refunds,
legal proceeding recoveries, vendor single interest self-insurance proceeds,
blanket vendor single interest insurance proceeds, warranty refunds and all
Other Transaction Receivable Liquidation Proceeds.
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"Other Transaction Receivable Liquidation Proceeds" means all amounts
realized by Associates or any of its Subsidiaries with respect to a Liquidated
Other Transaction Receivable net of (i) reasonable expenses paid or reimbursed
by Associates or any of its Subsidiaries to an auction house in connection with
the repossession and disposition of the financed vehicle and (ii) amounts that
are required to be refunded to the obligor on such Other Transaction Receivable.
The Other Transaction Receivable Liquidation Proceeds with respect to any Other
Transaction Receivable shall in no event be less than zero.
"Other Transaction Receivables Residual Cash Flow" means, with respect to
any period and without duplication,
- the SUM of (i) any Other Transaction Receivables Collected Funds received
by Associates or any of its Subsidiaries during such period with respect
to the Other Transaction Receivables (other than amounts which constitute
Collected Funds as defined in the Sale and Servicing Agreements or Pooling
and Servicing Agreements, as the case may be, entered into in connection
with the Designated Securitization Transactions), and (ii) any proceeds
received by Associates or any of its Subsidiaries during such period from
the sale of any Other Transaction Receivable to an entity other than
Associates or any of its Subsidiaries,
- MINUS, without duplication,
(v) all amounts received by Associates or any of its Subsidiaries during
such period with respect to such Other Transaction Receivables that are
allocable to principal in accordance with the terms of the Other Transaction
Receivables;
(w) for each Other Transaction Receivable that has become a Liquidated
Other Transaction Receivable during such period, the principal balance
outstanding on the date it became a Liquidated Other Transaction Receivable;
(x) an amount to cover estimated servicing expenses and funding costs
(including, without limitation, interest, credit enhancement insurance
premiums and indenture and owner trustees', and other agents', fees) that
would have been payable with respect to such Other Transaction Receivables
for such period, assuming that each such Other Transaction Receivable
continued to be subject to its related Designated Securitization
Transaction, which estimates, in the case of the credit enhancement
insurance premiums and other fees, shall be based on the contractual rate as
in effect on the date such Receivable became an Other Transaction Receivable
and, in the case of other funding costs, shall be based on the contractual
rate that would have been in effect on the date of determination assuming
the Other Transaction Receivable continued to be subject to its related
Designated Securitization Transaction;
(y) if such period is the period in which a Receivable becomes an Other
Transaction Receivable, any amount other than the principal balance of such
Receivable that was paid to the related Designated Securitization
Transaction in connection with its purchase from that Designated
Securitization Transaction (determined at the time of such purchase in
accordance with the Sale and Servicing Agreement or Pooling and Servicing
Agreement, as the case may be, entered into in connection with the related
Designated Securitization Transaction); and
(z) if such period is the period in which Associates or any of its
Subsidiaries sells such Other Transaction Receivable to an entity other than
Associates or any of its Subsidiaries, an amount equal to (I) the principal
balance of such Other Transaction Receivable on the date sold, PLUS (II) if
the Other Transaction Receivable was not purchased from a Designated
Securitization Transaction at the option of Associates, an amount equal to
the reasonable costs incurred by Associates or any of its Subsidiaries in
connection with the sale of such Other Transaction Receivable by Associates
or its Subsidiaries; PROVIDED that (A) amounts shall be deducted pursuant to
this clause (z) only if such sale is in accordance with reasonable business
practices and with a
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good faith intent other than to reduce RVO Payments, (B) no amounts shall be
deducted pursuant to this clause (z) if the principal balance of such Other
Transaction Receivable has already been deducted pursuant to clause (w)
above and (C) the amount deducted pursuant to this clause (z) with respect
to any Other Transaction Receivable that had been purchased from a
Designated Securitization Transaction at the option of Associates shall in
no event exceed the gross amount realized by the seller upon the sale of
such Other Transaction Receivable.
"Payment Date" means the second Business Day after the Securitization
Distribution Dates in April, July, October and January, commencing on the first
such day following the effective date of the merger (or, if the effective date
is after the record date in respect of such first Payment Date, then on the next
succeeding Payment Date).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, government, agency or political subdivision thereof or other
entity.
"Receivable" shall have the meaning ascribed thereto in the Spread Account
Agreement.
"Residual Cash Flow", as of any Allocation Date, means, without duplication,
the sum of the following:
(a) the sum of (i) all cash actually released to Associates or its
Subsidiaries on the immediately preceding Securitization Distribution Date
from the Designated Spread Accounts pursuant to the section of the Spread
Account Agreement (as supplemented, in the case of each Designated Spread
Account, by the related Spread Account Agreement Supplement) which permits
the release of such amounts to Associates or its Subsidiaries, (ii) other
than amounts included in clause (i) of this definition on a prior Allocation
Date, all cash actually released to Associates or its Subsidiaries from the
Designated Spread Accounts during the calendar month preceding the month in
which such Allocation Date occurs (PROVIDED, that (x) the foregoing shall
exclude any cash so released prior to the effective date of the merger and
(y) in the case of the final Allocation Date, the period covered by this
clause (ii) will begin on the first day of the calendar month preceding the
month in which the final Allocation Date occurs and will continue to and
include such final Allocation Date) and (iii) all cash actually released to
Associates or its Subsidiaries from a Program Spread Account or a Tag
Account (each as defined in the Spread Account Agreement) during the
calendar month preceding the month in which such Allocation Date occurs
(PROVIDED, that (x) the foregoing shall exclude any cash so released prior
to the effective date of the merger and (y) in the case of the final
Allocation Date, the period covered by this clause (iii) will begin on the
first day of the calendar month preceding the month in which the final
Allocation Date occurs and will continue to and include such final
Allocation Date), but only to the extent such cash would have been included
as Residual Cash Flow but for clause (C) of the following proviso; PROVIDED,
that Residual Cash Flow will not include any of the foregoing amounts to the
extent that (A) such amounts are contractually required, pursuant to one or
more agreements entered into in connection with the Designated
Securitization Transactions, to be applied other than as provided under the
Initial Allocation Priorities and the Additional Allocation Priorities,
(B) such amounts are released to one of Associates' Subsidiaries and such
Subsidiary is not permitted, pursuant to one or more agreements entered into
in connection with the Designated Securitization Transactions, to dividend
such amounts to its parent free from any liens or encumbrances or other
contractual restrictions or (C) such amounts have been transferred to a
Program Spread Account or Tag Account (as defined in the Spread Account
Agreement) established in connection with the Designated Securitization
Transactions;
(b) any Other Transaction Receivables Residual Cash Flow for the
calendar month preceding the month in which such Allocation Date occurs
(PROVIDED, that (x) the foregoing will exclude any Other Transaction
Receivable Residual Cash Flow received prior to the effective time of the
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merger and (y) in the case of the final Allocation Date, the period covered
by this clause (b) will begin on the first day of the calendar month
preceding the month in which the final Allocation Date occurs and will
continue to and include such final Allocation Date) with respect to all
receivables which were securitized as of September 30, 1999 pursuant to the
Designated Securitization Transactions but are no longer included, as of the
end of such preceding calendar month, in the Designated Securitization
Transactions for any reason ("Other Transaction Receivables"); and
(c) the amount of Litigation Reserve Interest, if any, for the period
ending on and including the day prior to the Securitization Distribution
Date immediately preceding such Allocation Date and beginning on and
including the second Securitization Distribution Date immediately preceding
such Allocation Date (it being understood that the amount of Litigation
Reserve Interest as of the initial Allocation Date will be zero).
"RVO Expenses" means the sum of the following:
(a) the reasonable out-of-pocket fees and expenses paid or incurred
directly or indirectly by Associates or its Subsidiaries relating to the
issuance and administration of the residual value obligations (including,
without limitation, fees and expenses of printing certificates representing
the residual value obligations; fees and expenses of the trustee, the
registrar and the paying agent for the residual value obligations and any
other agents engaged in accordance with the RVO Agreement; and related legal
expenses), but excluding accounting fees and expenses, audit fees, if any,
the fees and expenses relating to the listing of the residual value
obligations on a national securities exchange and legal expenses relating to
the negotiating of the terms of the residual value obligations and the
drafting of the RVO Agreement; and
(b) the reasonable actual or reasonably imputed cost to Associates or
its Subsidiaries of providing alternative credit support in connection with
the early release of cash to Associates or its Subsidiaries from the
Designated Spread Accounts; PROVIDED, that such costs shall only be included
as RVO Expenses to the extent that, in Associates' good faith judgment, such
costs do not exceed the benefits of such release, and PROVIDED, FURTHER,that
the costs referenced in this clause (b) will be included as RVO Expenses as
such costs are incurred (or deemed to be incurred if imputed) or, at
Associates' election, in a lump sum calculated on a present value basis
(discounted at the rate of 1.25% per month) at the time of the related
release of cash.
"Securitization Distribution Date" shall mean the 15th day of each calendar
month, or if such 15th day is not a Business Day, the next succeeding Business
Day.
"Spread Account Agreement" means the Spread Account Agreement, dated as of
March 25, 1993, as amended and restated as of September 22, 1999, among Arcadia
Financial Ltd., Arcadia Receivables Finance Corp., Financial Security
Assurance Inc., The Chase Manhattan Bank and Norwest Bank Minnesota, National
Association, as such agreement may be amended from time to time.
"Spread Account Agreement Supplements" means the Series Supplements to the
Spread Account Agreement entered into in connection with each of the Designated
Securitization Transactions, as in effect from time to time.
"Subsidiary" of any Person means any corporation, association, partnership,
joint venture, limited liability company or other business entity of which more
than 50% of the total voting power of shares of capital stock or other interests
(including partnership and joint venture interests) entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by (1) such Person, (2) such Person and one or more Subsidiaries of
such Person or (3) one or more Subsidiaries of such Person. Unless otherwise
specified herein, each reference to a Subsidiary will refer to a Subsidiary of
Associates.
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THE MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is attached as Appendix A to this proxy
statement/prospectus and incorporated by reference into this proxy
statement/prospectus. We urge you to read the merger agreement in its entirety
for a more complete description of the merger. In the event of any discrepancy
between the terms of the merger agreement or other agreements and the following
summary, the agreement will control.
THE MERGER
AFCC Newco, Inc., a Minnesota corporation and a wholly owned subsidiary of
Associates, will merge with and into Arcadia following:
- the approval of the merger and the merger agreement by the Arcadia
shareholders; and
- the satisfaction or waiver of the other conditions to the merger.
Arcadia will be the surviving corporation and become a wholly owned
subsidiary of Associates following the merger.
EFFECTIVE TIME
At the closing of the merger, the parties will cause the merger to become
effective by filing articles of merger with the Secretary of State of the State
of Minnesota. Associates and Arcadia are working toward completing the merger as
soon as possible and hope to complete the merger during April of 2000. Because
the merger is subject to a number of conditions, however, we cannot predict the
exact timing.
DIRECTORS AND OFFICERS OF ARCADIA AFTER THE MERGER
Unless otherwise agreed by Associates and Arcadia prior to the effective
time, the directors and officers of AFCC Newco, Inc. will become the new
directors and officers, respectively, of Arcadia at the effective time. The
directors of AFCC Newco, Inc. currently are Matthew L. Hollingsworth, Frederic
C. Liskow and Patrick Gray. The officers of AFCC Newco, Inc. currently are
Matthew L. Hollingsworth, John F. Hughes, Roy A. Guthrie, Chester D.
Longenecker, Judy K. Winkel, Frederic C. Liskow, Patrick J. Greene, Patrick C.
Smith and Karen L. Robb.
CONVERSION OF ARCADIA SHARES IN THE MERGER
Upon completion of the merger, each outstanding share of Arcadia common
stock, except for shares owned by Associates or any wholly owned subsidiary of
Associates, shares owned by Arcadia and shares owned by shareholders who
exercise and preserve their dissenters' rights in accordance with Minnesota law,
will automatically be converted into the right to receive $4.90 in cash, without
interest, and one residual value obligation of Associates.
STOCK OPTIONS
All of the outstanding and unexercised Arcadia stock options will become
vested and exercisable immediately prior to the effective time, regardless of
whether the stock options are currently exercisable, except that there will be
no cashless exercises of stock options with an exercise price per share
exceeding $4.90. At the effective time, each of your Arcadia stock options will
be canceled by
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Arcadia. In consideration for the cancellation of each of your stock options you
will be entitled to receive:
- an amount in cash equal to the product of:
- the number of shares of Arcadia common stock subject to the stock
option; and
- the excess, if any, of $4.90 over the exercise price per share of
Arcadia common stock subject to the stock option, less any applicable
withholding taxes; and
- one residual value obligation for each share of Arcadia common stock
subject to the stock option.
If the exercise price per share of Arcadia common stock subject to your stock
options exceeds $4.90, you will not receive any residual value obligations in
consideration for the cancellation of your stock options.
If the exercise price per share of any of your stock options exceeds $4.90
and you wish to receive $4.90 in cash, without interest, and one residual value
obligation for each share of Arcadia common stock that is subject to these stock
options, you must exercise these stock options prior to the effective time. As
described above, all Arcadia stock options will become vested and exercisable
immediately prior to the effective time.
RESTRICTED STOCK
Immediately prior to the effective time, each share of restricted Arcadia
common stock held by an employee, consultant or director of Arcadia or its
subsidiaries which is outstanding will become vested. At the effective time,
each of these shares of restricted Arcadia common stock will be converted into
the right to receive $4.90 in cash, without interest, and one residual value
obligation.
WARRANTS
After the effective time, any warrants to purchase shares of Arcadia common
stock that were outstanding will no longer be exercisable, upon payment of the
exercise price, for shares of Arcadia common stock. Instead, as of the effective
time, each outstanding warrant to purchase shares of Arcadia common stock will
become exercisable, upon payment of the exercise price, for the amount of cash
and residual value obligations which the holder of the warrant would have owned
immediately after the effective time if the holder had exercised the warrant
immediately prior to the effective time.
THE EXCHANGE AGENT
At or prior to the effective time, Associates is required to deposit with a
bank or trust company cash and certificates representing the residual value
obligations to be exchanged for shares of Arcadia common stock. Promptly after
the effective time, the exchange agent will mail you a letter of transmittal and
instructions for surrendering your Arcadia stock certificates in exchange for
the merger consideration.
YOU SHOULD NOT SUBMIT YOUR STOCK CERTIFICATES FOR EXCHANGE UNTIL YOU HAVE
RECEIVED THE LETTER OF TRANSMITTAL AND INSTRUCTIONS REFERRED TO ABOVE.
TRANSFER OF OWNERSHIP; DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES
Associates will issue a residual value obligation in a name other than the
name registered for the surrendered Arcadia stock certificate only if the
exchange agent is given all documents required:
- to show and effect the unrecorded transfer of ownership; and
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- to show that any applicable stock transfer taxes have been paid.
You are not entitled to receive any payments on residual value obligations
with a record date after the merger is completed until you have surrendered your
Arcadia stock certificates in exchange for the merger consideration.
If there are any payments on residual value obligations with a record date
after the merger, you will receive, only following surrender of your Arcadia
stock certificates, the payments payable with respect to the residual value
obligations issued in exchange for your Arcadia stock certificates.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations and warranties with
respect to Arcadia and its subsidiaries relating to, among other things:
- their organization, qualification to business and good standing;
- the validity of their organizational documents;
- their capitalization;
- the authorization, execution and enforceability of the merger agreement;
- the effect of the merger and the merger agreement on obligations;
- governmental consents and approvals in connection with the merger;
- their possession of and compliance with permits and licenses required to
conduct their business;
- their compliance with applicable laws, rules and regulations of
governmental entities;
- their filings and reports with the SEC;
- brokers' fees and expenses;
- changes in their business operations since September 30, 1999;
- legal proceedings;
- taxes;
- labor matters;
- financial statements;
- material contracts and obligations;
- regulatory matters;
- investment securities;
- interest rate risk management instruments;
- liabilities;
- environmental matters;
- insurance;
- Year 2000 compliance of software and equipment;
- intellectual property;
- inapplicability of state anti-takeover statutes to the merger; and
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- receivables.
Associates and AFCC Newco made representations and warranties about the
following topics:
- their organization, qualification to do business and good standing;
- validity of their organizational documents;
- the authorization, execution and enforceability of the merger agreement;
- the effect of the merger and the merger agreement on obligations;
- governmental consents and approvals in connection with the merger;
- brokers' fees and expenses; and
- Associates' availability of funds in connection with the merger.
The representations and warranties in the merger agreement are complicated
and not easily summarized. We urge you to read carefully the sections in the
merger agreement entitled "Representations and Warranties of Company" and
"Representations and Warranties of Parent and Sub."
ARCADIA'S CONDUCT OF THE BUSINESS PENDING THE MERGER
Arcadia has agreed that, until the completion of the merger or unless
Associates consents in writing, Arcadia and its subsidiaries will:
- conduct their businesses in the usual, regular and ordinary course of
business consistent with past practices and in compliance with all
applicable laws;
- use reasonable efforts to maintain and preserve intact its business
organization, employees and business relationships and retain the services
of its key officers and key employees; and
- take no action which would adversely affect or delay in any respect the
ability of either Associates or Arcadia to obtain any necessary approvals
of any regulatory agency or other governmental entity required for the
transactions contemplated under the merger agreement or to perform its
covenants and agreements under the merger agreement.
Except as permitted or required under the merger agreement, Arcadia has also
agreed that until the completion of the merger, without the prior written
consent of Associates, it will not, nor will it permit its subsidiaries to:
- incur any indebtedness other than to refinance existing short-term
indebtedness, pursuant to credit facilities existing on the date of the
merger agreement and additional indebtedness not in excess of
$20 million;
- make or commit to make capital expenditures in excess of $50,000 or, in
the aggregate, $500,000;
- reclassify or modify any of its capital stock;
- declare, set aside or pay dividends or other distributions, except
distributions from Arcadia's subsidiaries to Arcadia or other subsidiaries
paid in the ordinary course of business;
- issue, sell, pledge or encumber shares of Arcadia capital stock or
securities exchangeable for Arcadia capital stock, other than the issuance
of Arcadia common stock pursuant to the exercise of outstanding stock
options or warrants as of the date of the merger agreement;
- grant any third party any right to acquire any shares of Arcadia capital
stock or any similar rights;
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- enter into any agreement, understanding or arrangement with respect to the
sale or voting of its capital stock;
- sell, transfer, encumber or dispose of any of its property or assets to
any third party other than a wholly owned subsidiary;
- cancel, release or assign indebtedness to any third party except in the
ordinary course of business consistent with past business or pursuant to
contractual requirements existing as of the date of the merger agreement;
- securitize or dispose of receivables owned by Arcadia or its subsidiaries,
subject to exceptions described under "The Merger Agreement and Related
Agreements--Related Agreements;"
- make any material investment in any other entity, other than a wholly
owned subsidiary;
- acquire any interests in any other entity;
- commence any new line of business;
- enter into any contract, arrangement or understanding which limits
Arcadia's or its subsidiaries' ability to compete in any line of business
or in any geographic region;
- enter into any contract, arrangement or understanding the benefits of
which will be paid or increased, or the vesting of the benefits of which
will be accelerated, by the delivery of the merger agreement;
- enter into any contract, arrangement or understanding which would prohibit
or materially delay the consummation of the transactions contemplated by
the merger agreement;
- modify or terminate any existing material contract;
- enter into any contract, arrangement or understanding involving payment or
receipts by Arcadia or any of its subsidiaries in excess of $100,000;
- increase or accelerate compensation payable to directors, officers,
employees, consultants or independent contractors of Arcadia or its
subsidiaries, subject to exceptions set forth in the merger agreement;
- grant any severance or termination pay to any director, officer, employee,
consultant or independent contractor of Arcadia or its subsidiaries,
subject to exceptions set forth in the merger agreement;
- loan or advance any money or other property to any director, officer,
employee, consultant or independent contractor of Arcadia or its
subsidiaries;
- establish, adopt, enter into, amend or terminate any employee benefit
plan;
- amend any Arcadia stock option, except in accordance with the merger
agreement;
- pay, discharge or satisfy any obligations other than current obligations
in the ordinary course of business and consistent with past practice and
liabilities disclosed pursuant to the merger agreement;
- settle any litigation, other than settlements where the payment does not
exceed $50,000 and does not include additional non-monetary obligations on
Arcadia or its subsidiaries;
- modify its accounting policies and procedures;
- materially change its underwriting, servicing or collection policies and
procedures;
- change any material tax elections or settlements or compromise any
material tax liability;
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- amend any of Arcadia's articles of incorporation, bylaws or any other
organizational documents;
- enter into any plan of consolidation, reorganization or merger with any
person other than a wholly owned subsidiary;
- materially restructure or change its investment portfolio, hedging
strategy or gap position;
- adopt a plan of complete or partial liquidation, dissolution,
reorganization or recapitalization;
- authorize or take any action that is intended or could reasonably be
expected to result in any of Arcadia's representations and warranties
being or becoming untrue in any material respect, any of the conditions of
the merger agreement not being satisfied, or any provision of the merger
agreement being violated; or
- agree to, or make any commitment to, take or authorize any of the
foregoing actions.
Arcadia has also agreed, among other things:
- to consult with Associates on strategic and operational matters and to
provide Associates reasonable access to its facilities, records, officers,
employees, accountants, counsel and other representatives; and
- to use its reasonable best efforts to make available to the officers,
employees, accountants, counsel and other representatives of Associates,
upon reasonable notice, representatives of Financial Security Assurance,
the guarantor under Arcadia's securitization transactions.
Associates has agreed, among other things:
- to pay all transfer taxes imposed on either Arcadia or Associates in
connection with the merger;
- for one year following the effective time, to provide employees of Arcadia
and its subsidiaries who continue their employment with the surviving
corporation with employee benefits which, in the aggregate, are no less
favorable than the benefits provided to such employees by Arcadia
immediately prior to the effective time;
- to use all reasonable efforts to have the residual value obligations
approved for quotation on a national securities exchange; and
- to engage Ernst & Young to conduct procedures on the books and records of
Arcadia relating to testing of customer account information and testing of
the ability of Arcadia's system to accurately age, recompute the interest
amortization of and the reduction of principal on customer accounts, and
to render a report to Associates with respect to its findings.
Each of Associates and Arcadia has also agreed, among other things:
- to use their reasonable best efforts to take, or cause to be taken, all
actions necessary, proper and advisable to comply with all legal
requirements which may be imposed on Associates and Arcadia with respect
to the merger and to consummate the transactions contemplated by the
merger agreement; and
- to use their reasonable best efforts to promptly make all necessary
filings and obtain any permits, consents, approvals and authorizations as
may be required in connection with the merger and the merger agreement.
The agreements related to the conduct of Arcadia's business in the merger
agreement are complicated and not easily summarized. We urge shareholders to
carefully read the sections in the merger agreement entitled "Covenants Relating
to Conduct of Business" and "Additional Agreements."
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REGULATORY MATTERS
The merger agreement provides that the obligation of Associates and Arcadia
to complete the merger is conditioned upon expiration of the applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. In addition, the obligation of Associates to complete the merger is
conditioned upon the receipt of all other requisite regulatory approvals. We
cannot assure you that all governmental agencies will approve or take the other
required actions with respect to the merger.
NO SOLICITATION OF TRANSACTIONS
Until the merger is completed or the merger agreement is terminated, Arcadia
has agreed not to directly or indirectly:
- solicit, initiate, encourage, accept, agree to, approve or endorse the
submission of any inquiries, proposals or offers that constitute or may be
reasonably expected to lead to a transaction proposal by a third party; or
- participate in any discussions regarding a transaction proposal or
otherwise cooperate in any way in connection with the making of a
transaction proposal.
A "transaction proposal" as it relates to Arcadia, includes:
- any acquisition or purchase of any assets or equity securities of Arcadia
or its subsidiaries;
- any tender offer or exchange offer;
- any merger, consolidation, business combination, reorganization,
recapitalization, liquidation, dissolution or similar transaction
involving Arcadia or any of its material subsidiaries; and
- any other transaction the consummation of which would or would reasonably
be expected to impede, interfere with, prevent or materially delay the
merger.
Arcadia may, however, in response and with respect to a bona fide
unsolicited written proposal from a third party submitted after the date of the
merger agreement which constitutes a "superior proposal", enter into or
participate in discussions or negotiations with such third party, provided that,
among other things, based on the advice of Arcadia's outside counsel, Arcadia's
board of directors determines in good faith that failure to take such action in
response to such a proposal would constitute a breach by the board of directors
of its fiduciary duties under applicable law.
A "superior proposal," as it relates to Arcadia, is a bona fide written
transaction proposal for at least a majority of the outstanding fully diluted
shares of Arcadia's common stock or for all or substantially all of the
consolidated assets of Arcadia, made by a third party after the date of the
merger agreement, for which all necessary financing is committed in full and
which, if accepted, is reasonably likely to be consummated and is financially
superior to the holders of Arcadia's common stock as compared to the merger.
If Arcadia receives a transaction proposal or a request for nonpublic
information by any third party considering making or who has made a transaction
proposal, it shall immediately inform Associates of the terms and conditions of
any such proposal and the identity of the party making it, and will keep
Associates informed of the status and details of any such transaction proposal
or request.
Nothing in the merger agreement prohibits Arcadia's board of directors from
taking and disclosing to their shareholders a position with respect to a
transaction proposal by a third party to the extent required under the Exchange
Act, including Rules 14e-2 and 14d-9 thereunder, or from making such disclosure
to Arcadia's shareholders which, based on advice of outside counsel, the board
determines in good faith is required under applicable law.
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DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
The surviving corporation has agreed to indemnify present and former
officers and directors of Arcadia and its subsidiaries against all losses,
expenses, claims, damages or liabilities arising out of actions or omissions
occurring on or prior to the effective time of the merger to the fullest extent
that Arcadia and its subsidiaries would have been permitted under applicable law
and its charter documents to indemnify such persons. The merger agreement
provides that all rights to indemnification set forth in Arcadia's charter
documents for present and former officers and directors of Arcadia shall also be
included in the charter documents of the surviving corporation for a period of
six years from the effective time, subject to exceptions specified in the merger
agreement. Associates also has agreed to maintain insurance for Arcadia's
directors and officers equivalent to Arcadia's current directors' and officers'
liability insurance for six years after the effective time, subject to
limitations specified in the merger agreement.
CONDITIONS TO COMPLETION OF THE MERGER
The completion of the merger depends on a number of conditions being met,
including approval of the merger and the merger agreement by Arcadia's
shareholders, as well as the prior satisfaction or waiver of each of the
following conditions before completion of the merger:
- the registration statement relating to the issuance of the residual value
obligations as contemplated by the merger agreement has been declared
effective by the SEC;
- no court of competent jurisdiction or governmental entity has enacted,
issued or entered any statute, rule, regulation, order, injunction or
decree that prohibits, prevents, materially restricts or makes illegal its
completion;
- our respective representations and warranties in the merger agreement must
have been materially true and correct at the date the merger agreement was
executed and must remain materially true and correct as of the effective
time;
- we have performed and complied in all material respects with our
respective obligations required by the merger agreement to be performed or
complied with on or prior to the effective time; and
- any waiting period under the antitrust laws that applies to the
consummation of the merger has expired or been terminated.
Associates' obligations to complete the merger are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the merger:
- all consents or approvals of or filings with any third party which are
necessary to consummate the transactions contemplated by the merger
agreement must be obtained by Arcadia, except where a failure to obtain
any such consent or approval or make any such filing could not reasonably
be expected to have a material adverse effect on Arcadia;
- all regulatory approvals or consents required to consummate the
transactions contemplated by the merger agreement must be obtained;
- dissenters' rights may not be exercised by the holders of 10% or more of
Arcadia's common stock;
- Arcadia's rights agreement must not be triggered in connection with the
merger and the transactions contemplated thereby; and
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- any consent required of, or notice or other document required to be
delivered to, Financial Security Assurance Inc. in connection with the
merger or the transactions contemplated thereby shall have been obtained
or given.
TERMINATION OF THE MERGER AGREEMENT
Either of us may terminate the merger agreement at any time, even after the
Arcadia shareholders vote to approve it, under the following circumstances:
- if prior to the effective time the other party fails to perform in any
material respect any of its obligations under the merger agreement to be
performed at or prior to such date of termination, and the failure to
perform is not cured within ten days after receipt of written notice;
- if prior to the effective time any representation or warranty of the other
party is not true and correct, except for failures to be true and correct
which are not reasonably likely to have a material adverse effect on the
other party's ability to complete the merger;
- if the merger is not completed, without the fault of the terminating
party, by May 10, 2000;
- if any required regulatory approval is denied and the denial is not
appealable;
- if any governmental entity has taken any action prohibiting the merger and
the action is not appealable; or
- if the Arcadia shareholders do not approve the merger and the merger
agreement at the Arcadia special meeting.
In addition, Arcadia may terminate the merger agreement prior to the
approval of the merger and the merger agreement by its shareholders in order to
accept an unsolicited superior proposal.
Furthermore, Associates may terminate the merger agreement if any of the
following occur:
- Arcadia's board withdraws or materially changes or modifies in a manner
adverse to Associates its recommendation as to the merger and the merger
agreement;
- Arcadia's board recommends or accepts another transaction proposal;
- following a request by Associates, Arcadia's board fails to reconfirm its
approval and recommendation of the merger and the merger agreement;
- following public announcement of a transaction proposal which contains a
proposal as to price, Arcadia's board fails to reject the proposal within
10 business days after announcement; or
- Associates or any of its affiliates triggers Arcadia's rights agreement.
PAYMENT OF FEES AND EXPENSES
Except as set forth below, whether or not the merger is consummated, all
costs and expenses incurred in connection with the merger and the merger
agreement will be paid by the party incurring the expense, except that
Associates and Arcadia will share equally all expenses of printing and mailing
the registration statement and the proxy statement/prospectus and all filing and
other fees paid to the SEC in connection with the merger.
Arcadia has agreed to pay Associates a cash termination fee of $8.0 million
in addition to reimbursing Associates up to $1.0 million for its out-of-pocket
expenses in the following circumstances:
- Arcadia terminates the merger agreement in order to accept an unsolicited
superior proposal;
- Associates terminates the merger agreement because Arcadia's board has
failed to reconfirm its recommendation of the merger following a request
by Associates;
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- Associates terminates the merger agreement because Arcadia's board has
withdrawn or modified its recommendation of the merger and the merger
agreement in a manner adverse to Associates;
- Associates terminates the merger agreement because Arcadia's board has
recommended or accepted another transaction proposal;
- Associates terminates the merger agreement because Arcadia's board has
failed to reject a transaction proposal within 10 business days after its
public announcement, which transaction proposal contains a proposal as to
price; or
- Associates terminates the merger agreement because of a triggering of
Arcadia's rights agreement resulting from the transactions contemplated by
the merger agreement.
Arcadia has agreed to pay Associates a cash termination fee of $8.0 million
if:
- a transaction proposal relating to more than 15% of the outstanding fully
diluted common stock, or any other class of the capital stock of Arcadia,
or more than 15% of the consolidated assets of Arcadia, is commenced,
publicly disclosed or otherwise communicated to Arcadia at any time on or
after the date of the merger agreement and prior to the termination of the
merger agreement;
- within 12 months following termination of the merger agreement, Arcadia
enters into a definitive agreement with respect to, or consummates, any
transaction proposal relating to more than 15% of its outstanding fully
diluted common stock, or any other class of its capital stock, or more
than 15% of its consolidated assets; and
- the merger agreement is terminated in any one of the following
circumstances:
- the merger is not completed, without the fault of the terminating party,
within 180 days after the execution of the merger agreement and the
Arcadia special meeting has not been held;
- the Arcadia shareholders do not approve the merger and the merger
agreement at the Arcadia special meeting; or
- Associates terminates the merger agreement as a result of:
- a breach of the terms of the merger agreement described under the
caption "No Solicitation of Transactions;"
- a willful failure of Arcadia to perform any other obligation under the
merger agreement; or
- a willful act or omission by Arcadia which causes a representation or
warranty not to be true.
In addition, Associates has agreed to reimburse Arcadia for any prepayment
penalty, totaling $2,427,980, paid by Arcadia resulting from a failure to
deliver receivables to the prefunded Securitization Trust 1999-C if the merger
agreement is terminated for any of the following reasons, provided that no
amount shall be payable by Associates if Arcadia is obligated to pay Associates
any termination fee:
- pursuant to a failure by a party to perform in any material respect any of
its obligations under the merger agreement to be performed at or prior to
the date of termination, and the failure to perform is not cured within
ten days after receipt of written notice;
- pursuant to a failure of any representation or warranty of a party to be
true and correct, except for such failures to be true and correct which
are not reasonably likely to materially adversely affect the party's
ability to complete the merger;
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- if the merger is not completed, without the fault of the terminating
party, within 180 days after the execution of the merger agreement;
- if any governmental entity whose approval is a condition to consummation
of the merger has denied that approval and the denial is not appealable;
- if any governmental entity has taken any action prohibiting the merger and
the action is not appealable; or
- if the Arcadia shareholders do not approve the merger and the merger
agreement at the Arcadia special meeting.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Associates and Arcadia may amend the merger agreement before completion of
the merger; provided, however, after the Arcadia shareholders approve the merger
and the merger agreement, no change may be made which changes the amount or form
of consideration to be delivered to holders of Arcadia common stock under the
merger agreement.
Either Associates or Arcadia may, in writing, extend the other's time for or
waive compliance with the performance of any of the obligations or other acts
under the merger agreement, waive any inaccuracies in the other's
representations and warranties and waive compliance by the other with any of the
agreements or conditions contained in the merger agreement.
VOTING AGREEMENT
In connection with the merger, four directors and officers of Arcadia have
entered into a voting agreement with Associates. The terms of the voting
agreement provide that these directors and officers will vote all shares of
Arcadia common stock beneficially owned by them, or any new shares of Associates
or Arcadia stock they may acquire, in favor of the approval of the merger and
the merger agreement and the transactions contemplated by the merger agreement.
In connection with the voting agreement, each of the directors and officers has
executed an irrevocable proxy to vote their shares in favor of the approval of
the merger and the merger agreement. As of November 12, 1999, the Arcadia
directors and officers who entered into the voting agreement collectively held
2,647,637 shares of Arcadia common stock, not including any shares issuable upon
the exercise of options, which represented 6.71% of the outstanding Arcadia
common stock. None of the directors and officers who are parties to the voting
agreement was paid additional consideration in connection with the execution of
the voting agreement.
ASSET PURCHASE AGREEMENT
Associates and Arcadia entered into a continuous asset purchase and sale
agreement, dated as of November 12, 1999. Under this agreement, on November 24,
1999, Associates purchased motor vehicle retail installment sales contracts from
Arcadia totaling approximately $300 million in outstanding, unpaid balances.
Additionally, Arcadia has agreed to sell and, Associates, in its sole
discretion, has the option to purchase, up to $75 million of retail installment
sales contracts in any semi-monthly period. The purchase price paid by
Associates for these contracts is 104.5% of the aggregate unpaid balances of the
contracts on the applicable purchase date, plus any accrued, unpaid interest and
fees, not to exceed 59 days' interest.
To date, Associates has purchased substantially all of the retail
installment sales contracts originated by Arcadia since October 1, 1999.
Associates and Arcadia expect that Associates will continue to purchase
substantially all of the contracts originated by Arcadia until the merger is
consummated or the merger agreement is terminated. However, there can be no
assurance that Associates will do so.
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If Arcadia is not in material default of its obligations under the
continuous asset purchase and sale agreement and Associates does not purchase
the full $75 million per semi-monthly period of these contracts from Arcadia,
Arcadia has the right to securitize any receivables owned by or loans owed to it
or any of its subsidiaries, in the amount of the principal amount of the
unpurchased contracts, up to a maximum amount of $150 million per month. In
addition, if Associates is in material default of its obligations under the
continuous asset purchase and sale agreement, Arcadia may securitize up to a
maximum of $150 million a month in amount of receivables owned by or loans owed
to it or any of its subsidiaries.
If the merger agreement is terminated for any reason, Arcadia has the right
to repurchase all of the unpaid motor vehicle retail installment sales contracts
purchased by Associates pursuant to the continuous asset purchase and sale
agreement, excluding those contracts purchased by Associates on November 24,
1999. Also, Associates must pay to Arcadia an additional 1.5% of the original
unpaid balance of all contracts not repurchased by Arcadia including the initial
$300 million purchase. The additional 1.5% payment is subject to downward
adjustment if the weighted average annual percentage rate of all contracts
retained by Associates is not at least 17.5%.
SERVICING AGREEMENT
Associates and Arcadia entered into a servicing agreement dated as of
November 12, 1999. Under the terms of the servicing agreement, Arcadia acts as
the custodian of and servicer for any and all motor vehicle retail installment
sales contracts purchased by Associates from Arcadia pursuant to the continuous
asset purchase and sale agreement. Arcadia, as custodian and servicer, is
responsible for maintaining any and all records and documentation relating to
such contracts. In addition, Arcadia, as Associates' agent, manages, services,
administers and makes collections on such contracts and perform various other
functions as required under the servicing agreement. In return for these
services, Associates pays to Arcadia a monthly amount equal to one-twelfth of
1.25% of the aggregate principal balance represented by these contracts.
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LEGAL PROCEEDINGS
SHAREHOLDER LITIGATION RELATING TO THE MERGER. On November 16, 1999, a
lawsuit was commenced against Arcadia by a shareholder of Arcadia in Minnesota
state court (RICHARD RUOHONEN AND ALL OTHERS SIMILARLY SITUATED VS. ARCADIA
FINANCIAL LTD. ET AL.). A similar lawsuit was filed on November 24, 1999 in
Minnesota state court (MICHELLE LEMIRE AND ALL OTHERS SIMILARLY SITUATED VS.
ARCADIA FINANCIAL LTD. ET AL.). An additional lawsuit was filed on December 9,
1999 in Minnesota state court (JOHN A. HALPERN AND ALL OTHER SIMILARLY SITUATED
VS. ARCADIA FINANCIAL LTD. ET AL.). On January 18, 2000, these three suits were
consolidated into one action, IN RE ARCADIA FINANCIAL LTD. SHAREHOLDER
LITIGATION, in Minnesota state court. The consolidated action is purportedly a
class action on behalf of all public shareholders of Arcadia and names Arcadia
and its board of directors as defendants. In the consolidated action, plaintiffs
allege that the defendants breached their fiduciary duties to the Arcadia's
public shareholders in connection with the execution of the merger agreement.
Plaintiffs seek to enjoin the merger and to obtain an unspecified amount of
compensatory damages. Arcadia has begun to review the consolidated complaint and
believes that the claims are without merit and intends to defend them
vigorously. There can, however, be no assurance that Arcadia will prevail in its
defense.
OTHER SHAREHOLDER LITIGATION. On March 4, 1997, a shareholder commenced an
action against Arcadia and named directors and officers of Arcadia entitled
TARAN V. OLYMPIC FINANCIAL LTD. ET AL. in the United States District Court for
the District of Minnesota. Four similar lawsuits, three of them in the United
States District Court for the District of Minnesota (FRANK DIBELLA, ON BEHALF OF
HIMSELF AND ALL OTHERS SIMILARLY SITUATED VS. OLYMPIC FINANCIAL LTD. ET AL.,
MICHAEL DIEMER VS. OLYMPIC FINANCIAL LTD. ET AL. AND HOWARD PISNOY VS. OLYMPIC
FINANCIAL LTD. ET AL.) and one in the United States District Court for the
Eastern District of New York (NORTH RIVER TRADING, LLC, AND ALLAN FARKAS, AND
ALL OTHERS SIMILARLY SITUATED VS. OLYMPIC FINANCIAL LTD. ET AL.) were filed
after that time. These suits have been consolidated in one suit, IN RE OLYMPIC
FINANCIAL LTD. SECURITIES LITIGATION,in the United States District Court for the
District of Minnesota. Plaintiffs in the consolidated action allege that during
the period from July 20, 1995 through March 3, 1997 the defendants, in violation
of federal securities laws, engaged in a scheme that had the effect of
artificially inflating, maintaining and otherwise manipulating the value of
Arcadia's common stock by, among other things, making baseless, false and
misleading statements about the current state and future prospects of Arcadia,
particularly with respect to Arcadia's classic program and the refinancing of
repossessed automobiles. Plaintiffs allege that this scheme included making
false and misleading statements and/or concealing material adverse facts. The
parties have begun discovery. Arcadia has reviewed the complaint in the
consolidated action and believes that the consolidated action is without merit
and intends to defend it vigorously. There can, however, be no assurance that
Arcadia will prevail in its defense or that any order, judgment, settlement or
decree arising out of this litigation will not have a material adverse effect on
Arcadia's financial condition, results of operations or liquidity.
POTENTIAL EFFECT ON PAYMENTS UNDER THE RESIDUAL VALUE OBLIGATION. Any costs
and expenses incurred by Arcadia in connection with the litigation described
above and costs and expenses incurred in connection with any other shareholder
litigation may reduce, delay and/or eliminate payments on the residual value
obligations. For a more detailed description of the effect of litigation
expenses on payments under the residual value obligations, you should refer to
"Risk Factors--Risks Relating to the Residual Value Obligations" beginning on
page 14 and "Description of Residual Value Obligations" beginning on page 42.
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WHERE YOU CAN FIND MORE INFORMATION
Associates and Arcadia are each subject to the informational requirements of
the Exchange Act and, accordingly, file reports, proxy statements and other
information with the SEC. These reports, proxy statements and other information
filed by Associates and Arcadia can be inspected and copied at the public
reference facilities of the SEC located at:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, NY 10048
Washington, DC 20549 Chicago, IL 60661
</TABLE>
Copies of these materials can also be obtained from the SEC Public Reference
Section at the address noted above at prescribed rates. Information regarding
the operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC. The address of the internet site is
http://www.sec.gov.
Associates' and Arcadia's common stock is each quoted for trading on the New
York Stock Exchange and, accordingly, reports, proxy statements and other
information concerning Associates or Arcadia, as the case may be, may be
inspected at:
New York Stock Exchange
120 Broad Street
New York, New York 10005
Associates has filed with the SEC a registration statement on Form S-4 under
the Securities Act with respect to the residual value obligations offered by
this proxy statement/prospectus. This proxy statement/prospectus does not
contain all of the information set forth in the registration statement and the
exhibits to the registration statement. For further information with respect to
Associates, reference is made to the registration statement and the exhibits
filed with the registration statement. Statements contained in this prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete, and in each instance reference is made to the copy of the
contract or other document filed as an exhibit to the registration statement,
each statement being qualified in all respects by this reference. A copy of the
registration statement may be inspected without charge at the offices of the SEC
Public Reference Room at the address noted above. This proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of Associates in addition to being a proxy statement of Arcadia for
use at its special meeting.
Associates has supplied all information contained in this proxy
statement/prospectus relating to Associates, and Arcadia has supplied all
information contained in this proxy statement/prospectus relating to Arcadia.
Neither Associates nor Arcadia warrants the accuracy or completeness of
information relating to the other.
The SEC allows Associates and Arcadia to incorporate by reference
information into this proxy statement/prospectus, which means that Associates
and Arcadia can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this proxy statement/prospectus, except for
any information superseded by information contained directly in this proxy
statement/prospectus or in later filed documents incorporated by reference in
this proxy statement/prospectus.
The following documents previously filed by Associates with the SEC pursuant
to the Exchange Act (file number 2-44197) are incorporated into this proxy
statement/prospectus by this reference:
1. Associates' Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
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2. Associates' Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999;
3. Associates' Current Reports on Form 8-K filed January 6, 1999,
January 7, 1999, January 19, 1999, March 10, 1999, March 15, 1999,
March 16, 1999, April 13, 1999, April 27, 1999, May 21, 1999, May 28,
1999, June 14, 1999, July 13, 1999, October 12, 1999, November 15, 1999,
December 16, 199, January 27, 2000, January 27, 2000 and February 15,
2000; and
4. Associates' Current Report on Form 8-K/A filed January 6, 1999.
All documents filed by Associates pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this proxy
statement/prospectus and prior to the date the offering of residual value
obligations by Associates pursuant to this proxy statement/prospectus is
terminated shall be deemed to be incorporated by reference in this proxy
statement/prospectus and to be a part of this proxy statement/prospectus from
the date any such document is filed.
The following documents previously filed by Arcadia with the SEC pursuant to
the Exchange Act (file number 0-20526) are incorporated into this proxy
statement/prospectus by this reference:
1. Arcadia's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
2. Arcadia's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999;
3. Arcadia's Quarterly Reports on Form 10-Q/A for the fiscal quarter ended
March 31, 1999; and
4. Arcadia's Current Reports on Form 8-K filed March 3, 1999; March 8,
1999, May 21, 1999, June 16, 1999, October 20, 1999, October 20, 1999,
October 20, 1999 and November 16, 1999.
All documents filed by Arcadia pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this proxy
statement/prospectus and prior to the date of the special meeting shall be
deemed to be incorporated by reference into this proxy statement/prospectus and
to be a part of this proxy statement/prospectus from the date any such document
is filed.
You may have received some of the documents incorporated by reference, but
you can obtain any of them through Associates, Arcadia or the SEC or the SEC's
internet site described above. Documents incorporated by reference are available
from Associates and Arcadia without charge, excluding all exhibits unless
specifically incorporated by reference as exhibits in this proxy statement/
prospectus. You may obtain documents incorporated by reference in this proxy
statement/prospectus, without charge, by requesting them in writing from the
appropriate party at the following address:
Associates First Capital Corporation
250 East Carpenter Parkway
Irving, Texas 75062
Attention: Secretary
Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, Minnesota 55439
Attention: Secretary
If you would like to request documents from Associates or Arcadia, please do
so by March 23, 2000 to receive them before the special meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote your shares at the special
meeting. Neither Associates nor Arcadia has
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authorized anyone to provide you with information that is different from what is
contained in this proxy statement/prospectus. This proxy statement/prospectus is
dated March 3, 2000. You should not assume the information contained in this
proxy statement/prospectus is accurate as of any date other than that date, or
any other date as this proxy statement/prospectus indicates. Neither the mailing
of this proxy statement/prospectus to you nor the issuance of residual value
obligations in the merger creates any implication to the contrary.
EXPERTS
The consolidated financial statements of Associates at December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998,
included in the Annual Report on Form 10-K of Associates for the year ended
December 31, 1998, have been audited by PricewaterhouseCoopers LLP, independent
auditors, as set forth in their report incorporated by reference in this proxy
statement/prospectus, and are incorporated in this proxy statement/prospectus in
reliance upon this report given on the authority of PricewaterhouseCoopers LLP
as experts in accounting and auditing.
The consolidated financial statements of Arcadia at December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998,
included in the Annual Report on Form 10-K of Arcadia for the year ended
December 31, 1998, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report to these financial statements incorporated by
reference in this proxy statement/prospectus, and are incorporated in this proxy
statement/prospectus in reliance upon this report given on the authority of
Ernst & Young LLP as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
Proposals submitted by shareholders of Arcadia for presentation at the 2000
annual meeting of shareholders, to be held if the merger has not been
consummated prior thereto, must have been received by the Secretary of Arcadia
no later than December 15, 1999 for inclusion in the proxy statement and form of
proxy relating to the 2000 annual meeting of shareholders.
LEGAL MATTERS
The validity of the residual value obligations offered by this proxy
statement/prospectus will be passed upon for Associates by Simpson Thacher &
Bartlett, New York, New York.
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APPENDIX A
THE MERGER AGREEMENT
<PAGE>
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ASSOCIATES FIRST CAPITAL CORPORATION,
AFCC NEWCO, INC.
AND
ARCADIA FINANCIAL LTD.
DATED AS OF NOVEMBER 12, 1999
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
1.1 The Merger.................................................. 1
1.2 Closing..................................................... 1
1.3 Effective Time.............................................. 1
1.4 Effects of the Merger....................................... 2
1.5 Conversion of Company Common Stock.......................... 2
1.6 Options and Restricted Stock................................ 3
1.7 Articles of Incorporation................................... 3
1.8 Bylaws...................................................... 3
1.9 Directors and Officers of Surviving Corporation............. 4
ARTICLE II
EXCHANGE OF SHARES
2.1 Establishment of Exchange Fund.............................. 4
2.2 Exchange of Shares.......................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
3.1 Corporate Organization...................................... 5
3.2 Capitalization.............................................. 7
3.3 Authority; No Violation..................................... 8
3.4 Consents and Approvals...................................... 9
3.5 Regulatory Reports.......................................... 10
3.6 Broker's Fees; Opinion of Company Financial Advisor......... 10
3.7 Absence of Certain Changes or Events........................ 10
3.8 Legal Proceedings........................................... 10
3.9 Taxes and Tax Returns....................................... 10
3.10 Employees................................................... 12
3.11 SEC Reports................................................. 14
3.12 Financial Statements........................................ 14
3.13 Licenses; Compliance with Applicable Law.................... 14
3.14 Certain Contracts........................................... 15
3.15 Agreements with Regulatory Agencies......................... 16
3.16 Investment Securities....................................... 16
3.17 Interest Rate Risk Management Instruments................... 16
3.18 Undisclosed Liabilities..................................... 16
3.19 Environmental Liability..................................... 16
3.20 Information Supplied........................................ 17
3.21 Insurance................................................... 17
3.22 Year 2000 Compliance........................................ 17
3.23 Intellectual Property....................................... 17
3.24 Rights Agreement............................................ 18
3.25 State Anti-Takeover Statutes................................ 18
3.26 Properties.................................................. 18
3.27 Receivables................................................. 18
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
4.1 Corporate Organization...................................... 19
4.2 Authority; No Violation..................................... 19
4.3 Consents and Approvals...................................... 20
4.4 Broker's Fees............................................... 20
4.5 Funds....................................................... 21
4.6 Information Supplied........................................ 21
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Company Businesses Prior to the Effective Time... 21
5.2 Forbearances of Company..................................... 21
5.3 Transition.................................................. 24
5.4 Notification of Tax Proceedings............................. 25
5.5 Transfer Taxes.............................................. 25
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Company Shareholders Meeting; Preparation of Proxy 25
Statement...................................................
6.2 Reasonable Best Efforts..................................... 26
6.3 Access to Information....................................... 27
6.4 Employee Benefits........................................... 27
6.5 Indemnification; Directors' and Officers' Insurance......... 28
6.6 Additional Agreements....................................... 29
6.7 Advice of Changes........................................... 29
6.8 No Solicitation............................................. 29
6.9 Publicity................................................... 30
6.10 Stockholder Litigation...................................... 31
6.11 Anti-Takeover Provisions.................................... 31
6.12 Stop Transfer............................................... 31
6.13 [Intentionally Omitted]..................................... 31
6.14 Agreed Upon Procedures...................................... 31
6.15 [Intentionally Omitted]..................................... 31
6.16 Tax Schedules............................................... 31
6.17 Listing..................................................... 31
6.18 Employee Retention.......................................... 31
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the 32
Merger......................................................
7.2 Conditions to Company's Obligations to Effect the Merger.... 32
7.3 Conditions to Parent's and Sub's Obligations to Effect the 32
Merger......................................................
</TABLE>
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination................................................. 33
8.2 Effect of Termination....................................... 34
8.3 Amendment................................................... 36
8.4 Extension; Waiver........................................... 36
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Agreements... 36
9.2 Expenses.................................................... 36
9.3 Notices..................................................... 36
9.4 Interpretation.............................................. 37
9.5 Counterparts; Facsimile..................................... 37
9.6 Entire Agreement............................................ 38
9.7 Governing Law............................................... 38
9.8 Severability................................................ 38
9.9 Assignment; Third Party Beneficiaries....................... 38
9.10 Enforcement................................................. 38
9.11 Schedules................................................... 38
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 12, 1999 (this
"AGREEMENT"), by and among ASSOCIATES FIRST CAPITAL CORPORATION, a Delaware
corporation ("PARENT"), AFCC NEWCO, INC., a Minnesota corporation and a
wholly-owned subsidiary of Parent ("SUB"), and ARCADIA FINANCIAL LTD., a
Minnesota corporation ("COMPANY").
WHEREAS, the respective Boards of Directors of Parent, Sub and Company have
determined that the merger of Sub with and into Company (the "MERGER"), with
Company as the surviving corporation of the Merger (the "SURVIVING
CORPORATION"), each upon the terms and subject to the conditions set forth in
this Agreement, are advisable and fair to and in the best interests of their
respective stockholders;
WHEREAS, as an inducement and condition to Parent and Sub entering into this
Agreement, and concurrently with the execution of this Agreement, certain
affiliates of Company are executing and delivering to Parent a Voting Agreement
(the "SUPPORT AGREEMENT") dated as of the date hereof; and
WHEREAS, simultaneously with the execution of this Agreement, an affiliate
of Parent and Company entered into a Continuous Asset Purchase Agreement (the
"PURCHASE AGREEMENT") and a Master Servicing Agreement (together with the
Purchase Agreement, the "RECEIVABLES AGREEMENTS");
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions therefor.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement and
in accordance with the Minnesota Business Corporation Act (the "MBCA"), at the
Effective Time (as defined in Section 1.3), Sub shall merge with and into
Company. Company shall be the Surviving Corporation in the Merger and shall
continue its corporate existence under the laws of the State of Minnesota. Upon
consummation of the Merger, the separate corporate existence of Sub shall
terminate.
1.2 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, the closing of the Merger (the "CLOSING") shall take place at 10:00
a.m., New York City time, on the second business day after satisfaction or
waiver of the conditions (excluding conditions that, by their terms, cannot be
satisfied until the Closing Date (as defined in this Section 1.2), but subject
to satisfaction or waiver of such conditions on the Closing Date) set forth in
Article VII (the "CLOSING DATE"), at the offices of Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York 10017, unless another date, time or
place is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. Upon the Closing, the parties shall file articles of
merger (the "ARTICLES OF MERGER") with the Secretary of State of the State of
Minnesota and shall make all other filings or recordings required under the
MBCA. The Merger shall become effective at such time as the Articles of Merger
shall have been duly filed with the Secretary of State of the State of
Minnesota, or at such later time as is agreed by Parent and Company and
specified in the Articles of Merger (the time the Merger becomes effective being
the "EFFECTIVE TIME").
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1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Section 302A.641 of the MBCA.
1.5 CONVERSION OF COMPANY COMMON STOCK. At the Effective Time by virtue of
the Merger and without any action on the part of Parent, Sub, Company or the
holder of any of the following securities:
(a) Each share of common stock, par value $0.01 per share, of Company (the
"COMPANY COMMON STOCK"), together with the associated preferred stock purchase
rights (the "COMPANY RIGHTS") under the Company Rights Agreement (as defined in
Section 3.24) issued and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock canceled pursuant to Section 1.5(c)
and Dissenting Shares (as defined in Section 1.5(d))) shall be converted into
the right to receive (i) $4.90 in cash payable to the holder thereof, without
interest thereon (the "CASH CONSIDERATION") and (ii) one residual value
obligation (each, a "RVO") having the principal terms described in Exhibit A
hereto (the "RVO CONSIDERATION", and, together with the Cash Consideration, the
"MERGER CONSIDERATION").
(b) All of the shares of Company Common Stock and Company Rights issued and
outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be canceled and shall cease to exist as of
the Effective Time, and each certificate (each a "COMMON CERTIFICATE")
previously representing any such shares of Company Common Stock and Company
Rights (other than shares canceled pursuant to Section 1.5(c) and Dissenting
Shares) shall thereafter represent solely the right to receive the Merger
Consideration into which the shares of Company Common Stock and Company Rights
represented by such Common Certificate have been converted pursuant to this
Section 1.5.
(c) At the Effective Time, all shares of Company Common Stock that are held
by Company as treasury stock, if any, or by Parent or any of Parent's
wholly-owned Subsidiaries (as defined in Section 3.1) shall automatically be
canceled and shall cease to exist, and no cash, stock of Parent or other
consideration shall be delivered in exchange therefor.
(d) Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time held by holders (if any) who have not voted in favor of this Agreement or
consented thereto in writing and who have demanded dissenters' rights with
respect thereto in accordance with Sections 302A.471 and 302A.473 of the MBCA
and, as of the Effective Time, have not failed to perfect or have not
effectively withdrawn or lost their dissenters' rights under Sections 302A.471
and 302A.473 of the MBCA ("DISSENTING SHARES") shall not be converted into the
right to receive the Merger Consideration as described in Section 1.5(a), but
holders of such shares shall be entitled to receive payment of the fair value of
such Dissenting Shares in accordance with the provisions of Sections 302A.471
and 302A.473 of the MBCA (but only after the amount thereof shall be agreed upon
or finally determined pursuant to the provisions of the MBCA), except that any
Dissenting Shares held by a holder who shall have failed to perfect or shall
have effectively withdrawn or lost its dissenter's rights under Sections
302A.471 and 302A.473 of the MBCA shall thereupon be deemed to have been
converted into the right to receive the Merger Consideration and shall no longer
be considered Dissenting Shares. Company shall give Parent (i) prompt notice of
any written demands for dissenter's rights, attempted withdrawals of such
demands and any other instruments served pursuant to the MBCA received by
Company relating to dissenting shareholders' rights and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for fair value
under the MBCA. Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for fair value
for capital stock of Company, offer to settle or settle any such demands or
approve any withdrawal of any such demands.
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(e) Each share of capital stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one identical share of the
capital stock of the Surviving Corporation and shall constitute the only issued
and outstanding capital stock of the Surviving Corporation following the
Effective Time.
1.6 OPTIONS AND RESTRICTED STOCK. (a) Immediately prior to the Effective
Time, each employee, consultant and director stock option to purchase shares of
Company Common Stock (each, a "COMPANY OPTION") which is then outstanding and
unexercised, whether or not then exercisable, shall be (or, if not previously
vested and exercisable, shall become) vested and exercisable (provided that any
exercise of a Company Option as to which the per share exercise price exceeds
the Cash Consideration shall be for cash) and such Company Options immediately
thereafter shall be canceled by Company pursuant to this Section 1.6, and each
holder of a canceled Company Option shall be entitled to receive at the
Effective Time or as soon as practicable thereafter from Company in
consideration for the cancellation of such Company Option (i) an amount in cash
equal to the product of (A) the number of shares of Company Common Stock
previously subject to such Company Option and (B) the excess, if any, of the
Cash Consideration over the exercise price per share of Company Common Stock
previously subject to such Company Option, less any applicable withholding taxes
and (ii) one RVO for each share of Company Common Stock previously subject to
such Company Option; provided, that a holder of a cancelled Company Option shall
not be entitled to receive any RVO in respect of the cancellation thereof if the
exercise price per share of Company Common Stock previously subject to such
Company Option exceeds the Cash Consideration.
(b) Immediately prior to the Effective Time, each share of restricted
Company Common Stock held by an employee, consultant or director of the Company
or its Subsidiaries ("COMPANY RESTRICTED STOCK"), which is then outstanding and
restricted, shall become vested and such Company Restricted Stock immediately
thereafter shall be converted into the right to receive Merger Consideration.
(c) Company shall (i) take all actions necessary and appropriate so that all
stock or other equity based plans maintained with respect to Company Common
Stock (the "COMPANY STOCK PLANS"), including, without limitation, the plans
listed in Section 3.10(a) of the Company Disclosure Schedule, shall terminate as
of the Effective Time and that any other Employee Plan (as hereinafter defined
in Section 3.10) (including the Company's employee stock purchase plan)
providing for the issuance, transfer or grant of any capital stock of Company or
any interest in respect of any capital stock of Company shall be amended to
provide that no further issuances, transfer or grants shall be permitted as of
the Effective Time and (ii) provide that, following the Effective Time, no
holder of a Company Option or Company Restricted Stock or any participant in any
Company Stock Plan shall have any right thereunder to acquire or receive any
capital stock of Company, Parent or the Surviving Corporation (except as
otherwise set forth in Sections 1.5 or 1.6(a) or (b) above). Prior to the
Effective Time, Company shall (x) obtain all necessary consents from, and
provide (in a form reasonably acceptable to Parent) any required notices to,
holders of Company Options and Company Restricted Stock and (y) amend the terms
of the applicable Company Stock Option, Company Restricted Stock, Company Stock
Plan and the Company's employee stock purchase plan, in each case, as is
necessary to give effect to the provisions of this Section 1.6.
1.7 ARTICLES OF INCORPORATION. Subject to the terms and conditions of this
Agreement, at the Effective Time, the articles of incorporation of Company, as
in effect immediately prior to the Effective Time, shall be the articles of
incorporation of the Surviving Corporation until thereafter amended as provided
therein and by the MBCA.
1.8 BYLAWS. Subject to the terms and conditions of this Agreement, at the
Effective Time, the bylaws of Company, as in effect immediately prior to the
Effective Time, shall, subject to the provisions
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of Section 6.5, be the bylaws of the Surviving Corporation until thereafter
amended as provided therein and by the MBCA.
1.9 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. At the Effective
Time, the directors and officers of Sub immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving Corporation
following the Merger, to hold office in accordance with the Surviving
Corporation's bylaws and applicable law.
ARTICLE II
EXCHANGE OF SHARES
2.1 ESTABLISHMENT OF EXCHANGE FUND. Prior to the Effective Time, Parent
shall designate First Chicago Trust Company of New York or such other bank or
trust company reasonably acceptable to Company, to act as exchange agent (the
"EXCHANGE AGENT") for the payment of the Merger Consideration. At or prior to
the Effective Time, Parent shall deposit, or shall cause to be deposited, with
the Exchange Agent, for the benefit of the holders of Common Certificates, for
exchange in accordance with this Article II, cash and certificates representing
the RVOs (such cash and certificates being hereinafter referred to as the
"EXCHANGE FUND") to be paid pursuant to Section 2.2(a) in exchange for
outstanding shares of Company Common Stock.
2.2 EXCHANGE OF SHARES. (a) As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record as of the Effective
Time of one or more Common Certificates (other than with respect to shares of
Company Common Stock canceled pursuant to Section 1.5(c)) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Common Certificates shall pass, only upon delivery of the
Common Certificates to the Exchange Agent) and instructions for use in effecting
the surrender of the Common Certificates in exchange for the Merger
Consideration. Upon proper surrender of a Common Certificate for exchange and
cancellation to the Exchange Agent, together with such properly completed letter
of transmittal, duly executed, covering such Common Certificate, the holder of
such Common Certificate shall be entitled to receive in exchange therefor a
check representing the amount of the Cash Consideration and a certificate
representing the RVO Consideration, and the Common Certificate so surrendered
shall forthwith be canceled. No interest will be paid or accrued on the Merger
Consideration payable to holders of Common Certificates.
(b) If the payment of the Merger Consideration is to be made to a person
other than the registered holder of the Common Certificate surrendered in
exchange therefor, it shall be a condition to the payment thereof that the
Common Certificate so surrendered shall be properly endorsed (or accompanied by
an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance,
delivery or payment of such Merger Consideration to any person other than the
registered holder of the Common Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Common Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be canceled and exchanged for the
applicable Merger Consideration as provided in this Article II.
(d) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Company for 6 months after the Effective Time shall be paid to
Parent. Any shareholders of Company who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of the
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Merger Consideration, without any interest thereon. Notwithstanding the
foregoing, none of the Surviving Corporation, Parent, the Exchange Agent or any
other person shall be liable to any former holder of shares of Company Common
Stock for any Merger Consideration delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(e) In the event any Common Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Common Certificate to be lost, stolen or destroyed and, if reasonably
required by Parent, the posting by such person of a bond in such amount as
Parent may determine is reasonably necessary as indemnity against any claim that
may be made against it with respect to such Common Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Common
Certificate the Merger Consideration.
(f) All cash and RVOs paid upon the surrender of the Common Certificates in
accordance with the terms of Articles I and II shall be deemed to have been paid
in full satisfaction of all rights pertaining to the shares of the Company
Common Stock and Company Rights theretofore represented by such Common
Certificates; SUBJECT, HOWEVER, to the Surviving Corporation's obligation, with
respect to shares of Company Common Stock outstanding immediately prior to the
Effective Time, to pay any dividends or make any other distributions with a
record date prior to the Effective Time which may have been declared or made by
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement or prior to the date of this Agreement and which remain unpaid at
the Effective Time.
(g) The Exchange Agent shall invest any funds in the Exchange Fund as
directed by Parent. Any interest and other income resulting from such
investments shall be paid to Parent.
(h) No distributions or other payments declared or made with respect to RVOs
after the Effective Time shall be paid to the holder of any unsurrendered Common
Certificate with respect to the RVOs that such holder would be entitled to
receive upon surrender of such Common Certificate until such holder shall
surrender such Common Certificate in accordance with Section 2.2(a). Subject to
the effect of applicable laws, following surrender of any such Common
Certificate, there shall be paid to such holder of RVOs issuable in exchange
therefor, without interest, (i) the amount of distributions or other payments
declared after the Effective Time theretofore paid with respect to such RVOs and
(ii) at the appropriate payment date, the amount of distributions or other
payments declared but not paid or with a record date after the Effective Time
but prior to such surrender with a payment date subsequent to such surrender
payable with respect to such RVOs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Sub as follows:
3.1 CORPORATE ORGANIZATION. (a) Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota.
Company has all requisite corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business and in good standing
in each jurisdiction (whether federal, state, local or foreign) in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary other than in such jurisdictions where the failure so to
qualify would not have, individually or in the aggregate, a Material Adverse
Effect on the Company. As used in this Agreement, (i) the term "MATERIAL ADVERSE
EFFECT" means, with respect to Company, a material adverse effect on the
business, assets (tangible or intangible), liabilities, operations, condition
(financial or otherwise) or results of operations of Company and its
Subsidiaries either individually or taken as a whole, or on the ability of
Company to perform its obligations under
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and to consummate the transactions contemplated by this Agreement on a timely
basis, excluding any material adverse effect that arises from or is attributable
to (A) general economic conditions, (B) conditions (political, economic,
regulatory, competitive or otherwise) that adversely affect the industry in
which Company operates, (C) actions taken by lenders, rating agencies or others
as a direct result of the announcement of the execution of this agreement (but
not excluding the effect of such actions on the business, assets (tangible or
intangible), liabilities, operations, condition (financial or otherwise),
results of operations or prospects of Company and its Subsidiaries either
individually or taken as a whole, or on the ability of Company to perform its
obligations under and to consummate the transactions contemplated by this
Agreement on a timely basis) or (D) impairment of Company's ability to finance
its operations, including as a result of a lowering of Company's credit ratings,
a reduction or elimination of a warehouse line of credit or actions taken by
lenders or guarantors (but not excluding the effect of any such impairment on
the business, assets (tangible or intangible), liabilities, operations,
condition (financial or otherwise), results of operations or prospects of
Company and its Subsidiaries either individually or taken as a whole, or on the
ability of Company to perform its obligations under and to consummate the
transactions contemplated by this Agreement on a timely basis); and (ii) the
term "SUBSIDIARY" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, (x) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership), or (y) a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a majority of the
board of directors or other body performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries and (iii) the term "KNOWLEDGE" means,
when used with respect to Company, the actual knowledge, after due inquiry, of
any executive officer listed on Section 3.1(a) of the Company Disclosure
Schedule (as defined below). Section 3.1(a) of the Company disclosure schedule
delivered to Parent concurrently herewith (the "COMPANY DISCLOSURE SCHEDULE")
contains true and complete copies of the articles of incorporation and bylaws of
Company, as in effect as of the date of this Agreement. Such organizational
documents are in full force and effect and no other organizational documents are
applicable to or binding upon Company. Company is not in violation of any of the
provisions of its articles of incorporation or bylaws.
(b) Part I of Section 3.1(b) of the Company Disclosure Schedule sets forth a
complete and correct list of all of Company's Subsidiaries (each a "COMPANY
SUBSIDIARY" and collectively the "COMPANY SUBSIDIARIES") and indicates, as to
each such Subsidiary, the number and type of outstanding shares of capital stock
or other equity securities of each such Subsidiary, any issued and outstanding
options, warrants, stock appreciation rights, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, shares of any capital stock or other equity securities
of such Subsidiary, and any contracts, commitments, understandings or
arrangements by which such Subsidiary may become bound to issue additional
shares of its capital stock or other equity securities, or options, warrants,
scrip on rights to purchase, acquire, subscribe to, calls on or commitments for
any shares of its capital stock or other equity securities and the identity of
the parties to any such agreements or arrangements. All of the outstanding
shares of capital stock or other securities evidencing ownership of the Company
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable with no personal liability attaching to the ownership thereof and
such shares or other securities are owned by Company or its wholly-owned
Subsidiaries free and, except as set forth on Section 3.1(b) of the Company
Disclosure Schedule, clear of any lien, claim, charge, option, encumbrance,
mortgage, pledge or security interest (a "LIEN") with respect thereto. Each
Company Subsidiary (i) is a duly organized and validly existing corporation,
partnership or limited liability company or other legal entity under the laws of
its jurisdiction of organization, (ii) is duly licensed or qualified to do
business and in good standing in all jurisdictions
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(whether federal, state, local or foreign) where its ownership or leasing of
property or the conduct of its business requires it to be so qualified other
than in such jurisdictions where the failure so to qualify would not have,
individually or in the aggregate, a Material Adverse Effect on the Company and
(iii) has all requisite corporate power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted. Except for
(i) the ownership interests set forth in Part II of Section 3.1(b) of the
Company Disclosure Schedule and (ii) the ownership interests in its Subsidiaries
disclosed in Part I of Section 3.1(b) of the Company Disclosure Schedule,
Company does not own, directly or indirectly, any capital stock or other
ownership interest, and does not have any option or similar right to acquire any
equity or other ownership interest. Part III of Section 3.1(b) of the Company
Disclosure Schedule provides a complete and accurate description of all
partnership, joint venture and similar investments held by Company or any
Company Subsidiary, including, without limitation, all such investments in which
any Company employee or affiliate serves as a director. Company has provided or
made available to Parent a complete and accurate copy of all such partnership,
joint venture or similar agreements to which Company or any Company Subsidiary
is a party. Except as set forth on Section 3.1(b) of the Company Disclosure
Schedule, neither Company nor any Company Subsidiary is subject to any
obligation or requirement to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any entity.
(c) Company has made available to Parent the minute books of Company, which
accurately reflect in all material respects all corporate meetings and actions
held or taken since January 1, 1996 by its shareholders and Board of Directors
(including committees of the Board of Directors of Company).
3.2 CAPITALIZATION. The authorized capital stock of Company consists of
55,000,000 shares of Company Common Stock, 90,000 shares of Class A Preferred
Stock, par value $0.01 per share ("CLASS A PREFERRED STOCK"), and 44,010,000
undesignated shares, par value $0.01 per share ("UNDESIGNATED STOCK"). As of
September 30, 1999, (i) 39,443,693 shares of Company Common Stock were issued
and outstanding, (ii) no shares of Company Common Stock were held in treasury,
(iii) no shares of Class A Preferred were issued or outstanding, (iv) 90,000
shares of Class A Preferred Stock were reserved for issuance upon the exercise
of the Company Rights and (v) 2,052,000 shares of Company Common Stock were
reserved for issuance upon the exercise of warrants to purchase 2,052,000 shares
of Company Common Stock ("COMPANY WARRANTS"). All of the issued and outstanding
shares of Company Common Stock have been duly authorized and validly issued and
are fully paid, non-assessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. The shares of Company Common Stock
which are issuable upon exercise of Company Options or Company Warrants have
been duly authorized and reserved for issuance and, if and when issued pursuant
to the terms thereof, will be validly issued, fully paid and non-assessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. As of the Effective Time, each Company Warrant shall become exercisable
for the amount of cash and number of RVOs which the holder of such Company
Warrant would have owned immediately after the Effective Time if such holder had
exercised such Company Warrant immediately prior to the Effective Time. Part I
of Section 3.2 of the Company Disclosure Schedule sets forth, in each case as of
September 30, 1999, (i) the number of shares of Company Common Stock that were
reserved for issuance upon the exercise of authorized but unissued stock options
pursuant to the Company Stock Plans, (ii) the number of shares of Company Common
Stock issuable upon the exercise of outstanding Company Options pursuant to the
Company Stock Plans and (iii) the number of shares of Company Common Stock that
were reserved for issuance under Company's restricted stock election plans and
Employee Stock Purchase Plan or otherwise. Part III of Section 3.2 of the
Company Disclosure Schedule sets forth a list, as of September 30, 1999, of the
holders of record of the Company Warrants the number of shares subject to each
such Company Warrant, the expiration date of each such Company Warrant and the
price at which each such Company Warrant may be exercised. Except as set forth
above in this Section 3.2 or in Part I or Part II of Section 3.2 of the Company
Disclosure Schedule, no other shares of Company Common Stock, capital stock or
other equity or voting securities of Company were
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outstanding or reserved for issuance. Part II of Section 3.2 of the Company
Disclosure Schedule sets forth a list, as of September 30, 1999, of the holders
of Company Options, the date of grant of each Company Option granted and
outstanding, the number of shares subject to each such option, the expiration
date of each such option, the vesting schedule of each such option and the price
at which each such option may be exercised under the applicable Company Stock
Plan or otherwise. Except as set forth in Part IV of Section 3.2 of the Company
Disclosure Schedule, since September 30, 1999, Company has not (i) issued any
shares of its capital stock or other equity or voting securities or any
securities convertible into or exercisable or exchangeable for any shares of its
capital stock or other equity or voting securities, other than shares of Company
Common Stock issued upon the exercise or conversion of Company Options
outstanding as of September 30, 1999 as described in the immediately preceding
sentence or (ii) taken any action which would cause an antidilution adjustment
under any outstanding options or warrants. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities (other than the
Company Options and the Company Warrants) of Company having the right to vote
(or convertible into, or exchangeable or exercisable for, securities having the
right to vote) on any matters on which shareholders of Company may vote. Except
as set forth above in this Section 3.2 and as set forth in Section 3.2 of the
Company's Disclosure Schedule, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which Company or any of its Subsidiaries is a party or by which
any of them is bound obligating Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity or voting securities of Company or of any of its
Subsidiaries or obligating Company or any of its Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations, commitments, understandings or arrangements of Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Company or any of its Subsidiaries. Except as set forth in
Part VI of Section 3.2 of the Company's Disclosure Schedule, there are no
agreements or arrangements pursuant to which Company is or could be required to
register shares of Company Common Stock or other securities under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), or other agreements or
arrangements with or among any securityholders of Company with respect to
securities of Company. Except as set forth in Part VII of Section 3.2 of the
Company Disclosure Schedule, there are no voting, sale, transfer or other
similar agreements to which Company or any of its Subsidiaries is a party with
respect to the capital stock of Company or its Subsidiaries or any other
securities of Company or its Subsidiaries which are convertible or exchangeable
into or exercisable for shares of the capital stock of Company or its
Subsidiaries. None of the shares of Company Common Stock are held, directly or
indirectly, by any of the Company Subsidiaries.
3.3 AUTHORITY; NO VIOLATION. (a) Company has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of Company, at a
meeting duly called and held, has unanimously (i) determined that this Agreement
and the transactions contemplated hereby, including the Merger, are advisable
and fair to and in the best interests of the holders of shares of Company Common
Stock, (ii) duly approved and adopted a resolution containing this Agreement and
approved the execution and delivery of this Agreement and the transactions
contemplated hereby, including the Merger, and approved the execution and
performance of the Support Agreement and the Receivables Agreements and
(iii) resolved to recommend that the holders of shares of Company Common Stock
vote to approve and adopt this Agreement (the "COMPANY BOARD RECOMMENDATION"). A
committee of the Board of Directors of Company consisting of all of Company's
disinterested (as such term is defined in Subdivision 1(d)(3) of Section
302A.673 of the MBCA) directors of Company, formed in accordance with
Subdivision 1(d) of Section 302A.673 of the MBCA, duly approved the execution
and performance of this Agreement, the Support Agreement and the Receivables
Agreements and the transactions contemplated hereby and thereby. The Board of
Directors of Company has directed that this
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Agreement be submitted to Company's shareholders for approval at a meeting of
such shareholders and, except for the adoption of this Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote thereon in connection with the Merger (the
"COMPANY SHAREHOLDER APPROVAL"), no other corporate proceedings on the part of
Company or the Board of Directors of the Company and no other votes or consents
of any holders of Company securities are necessary to approve this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Company and (assuming due authorization,
execution and delivery by Parent and Sub) constitutes the valid and binding
obligation of Company, enforceable against Company in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
(b) Except as set forth in Section 3.3(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement or the
Receivables Agreements by Company nor the consummation by Company of the
transactions contemplated hereby or thereby, nor compliance by Company with any
of the terms or provisions hereof or thereof, will (i) violate any provision of
the articles of incorporation or bylaws (or other constituent documents) of
Company or any Company Subsidiary or (ii) assuming that the consents and
approvals referred to in Section 3.4 are duly obtained, violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Company or any of its Subsidiaries or any of their respective
properties or assets, or violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by or rights or obligations under, or result
in the creation of any Lien upon any of the respective properties or assets of
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, permit,
concession, franchise, license, lease, agreement, contract, pooling and
servicing agreement or other Securitization Agreement (as defined in Section
3.14) or other instrument or obligation to which Company or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets are bound, except as to (ii), for any such violations, conflicts,
breaches, losses, terminations, cancellations, accelerations or Liens that could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
3.4 CONSENTS AND APPROVALS. Except for (i) the filing of any required
applications or notices with governmental agencies or authorities as set forth
in Schedule 3.4 of the Company Disclosure Schedule and approval of such
applications and notices (the "REGULATORY APPROVALS"), (ii) the filing with the
SEC of the Form S-4 (as defined in Section 6.1(a)) containing the Proxy
Statement/Prospectus (as defined in Section 6.1(a)), (iii) the filing of the
Articles of Merger with the Secretary of State of the State of Minnesota
pursuant to the MBCA, (iv) the expiration of any applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (v) the Company Shareholder Approval, (vi) the filing with the SEC of
such reports under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as may be required in connection with the execution and
delivery of this Agreement and the transactions contemplated hereby and (vii)
such other consents, approvals, filings and registrations the failure to obtain
which would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on Company, no consents or approvals of or
filings or registrations with any court, administrative agency or commission or
other governmental or regulatory authority or instrumentality (each a
"GOVERNMENTAL ENTITY"), are necessary in connection with the execution and
delivery by Company of this Agreement or the Receivables Agreements or the
consummation by Company of the transactions contemplated hereby or thereby.
Company has no reason to believe that any regulatory approvals or consents
required to consummate the transactions contemplated by this Agreement (the
"REQUISITE REGULATORY APPROVALS") will not be obtained on a timely basis.
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3.5 REGULATORY REPORTS. Company and each of its Subsidiaries have timely
filed all regulatory reports, schedules, forms, registrations and other
documents, together with any amendments required to be made with respect
thereto, that they were required to file since January 1, 1996 with (i) the
Securities and Exchange Commission (the "SEC"), (ii) any domestic or foreign
industry self-regulatory organization ("SRO") and (iii) any other federal, state
or foreign governmental or regulatory agency or authority (collectively with the
SEC and all SROs, "REGULATORY AGENCIES"), and have timely paid all taxes, fees
and assessments due and payable in connection therewith, except as to (ii) and
(iii), for such filings and payments that the failure to make, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on Company. Except as disclosed in Section 3.5 of the Company Disclosure
Schedule and for normal examinations conducted by a Regulatory Agency in the
regular course of the business of Company and its Subsidiaries, no Regulatory
Agency has initiated any proceeding or, to the knowledge of Company,
investigation into the business or operations of Company or any of its
Subsidiaries since January 1, 1996. Except as set forth in Section 3.5 of the
Company Disclosure Schedule, there is no material unresolved violation or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of Company or any of its Subsidiaries.
3.6 BROKER'S FEES; OPINION OF COMPANY FINANCIAL ADVISOR. (a) No broker,
finder or investment banker (other than J.P. Morgan & Co. (the "COMPANY
FINANCIAL ADVISOR")) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement.
Company has attached as Section 3.6 of the Company Disclosure Schedule a
complete and correct copy of all agreements between Company and the Company
Financial Advisor pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated hereby.
(b) Company has received the oral opinion of the Company Financial Advisor
as of the date of this Agreement, to the effect that the Merger Consideration is
fair to the holders of the Company Common Stock from a financial point of view,
a signed copy of which opinion will be delivered to Parent.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Except as set forth on
Section 3.7 of the Company Disclosure Schedule, since September 30, 1999, no
event, change or circumstance has occurred which has had, or would reasonably be
expected to result in, individually or in the aggregate, a Material Adverse
Effect on Company.
(b) Except as set forth on Section 3.7 of the Company Disclosure Schedule,
since September 30, 1999, Company and its Subsidiaries have, in all material
respects, carried on their respective businesses only in the ordinary and usual
course consistent with their past practices.
(c) Except as disclosed in Section 3.7(c) of the Company Disclosure
Schedule, since September 30, 1999, there has not occurred any event which, if
it had taken place following the execution of this Agreement, would not have
been permitted by Section 5.2 without the prior consent of Parent.
3.8 LEGAL PROCEEDINGS. Except as set forth in Section 3.8 of the Company
Disclosure Schedule, there are no suits, actions, counterclaims, proceedings
(whether judicial, arbitral, administrative or other) or governmental, or
regulatory investigations pending or, to the knowledge of Company, threatened
against or affecting Company or any of its Subsidiaries that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company. There is not any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Company or any of its
Subsidiaries having, or which individually or in the aggregate would reasonably
be expected to have, a Material Adverse Effect on Company.
3.9 TAXES AND TAX RETURNS. Except as set forth in Section 3.9 of the
Company Disclosure Schedule:
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(a) Company and each of its Subsidiaries, and any consolidated, combined,
unitary or aggregate group for tax purposes of which Company or any of its
Subsidiaries is or has been a member, has filed or will file all material Tax
Returns (as defined below) required to be filed by it in the manner provided by
law. If not yet filed, such Tax Returns will be filed within the time prescribed
by law (including extensions of time permitted by the appropriate Taxing
Authority, as defined below). All such Tax Returns are true, correct and
complete in all material respects. Company and each of its Subsidiaries has paid
or will pay on a timely basis all material Taxes (as defined below) whether or
not shown thereon to be due other than Taxes which (i) are being contested in
good faith, (ii) have not been finally determined and (iii) for which an
adequate reserve has been provided in accordance with GAAP. None of Company or
any of its Subsidiaries is aware of any investigation pending or threatened by
any Taxing Authority for any jurisdiction where the Company and its Subsidiaries
do not file Tax Returns with respect to a given Tax that may lead to an
assertion by such Taxing Authority that Company or any Subsidiary is or may be
subject to such Tax in such jurisdiction.
(b) There are no examinations, audits, actions, proceedings, investigations
or disputes pending, or claims asserted, for material Taxes upon Company or any
of its Subsidiaries. No closing agreements, private letter rulings, technical
advice memoranda or similar agreements or rulings have been entered into or
issued by any Taxing Authority with respect to Company or any of its
Subsidiaries that have an impact on any material Taxes for any taxable period
ending after the Closing Date.
(c) Proper and accurate amounts for all material Taxes have been withheld by
Company and its Subsidiaries in connection with amounts paid or owing to any
employee, officer, creditor, shareholder, independent contractor or other person
in compliance with the Tax withholding provisions of applicable federal, state
and local laws and have either been paid, remitted or deposited to or with the
appropriate Taxing Authorities, or, if not yet due, set aside in accounts for
such purposes and accrued on the books of Company or any Subsidiary as
applicable.
(d) There are no Tax liens upon any property or assets of Company or any of
its Subsidiaries except liens for Taxes not yet due and payable.
(e) None of Company and its Subsidiaries has filed a consent under section
341(f) of the Code (as defined below) concerning collapsible corporations. None
of Company and its Subsidiaries (i) has received approval to make or agreed to a
change in accounting method that would materially affect any taxable period of
Company or any of its Subsidiaries ending after the Closing Date, or (ii) has
any application pending with any Taxing Authority requesting permission for any
change in accounting method. None of Company and its Subsidiaries has been
required to include in income any adjustment pursuant to section 481 of the Code
(or any similar provision of state, local or foreign tax law) by reason of a
voluntary change in accounting method initiated by Company or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method.
(f) Neither Company nor any of its Subsidiaries (i) has been a member of an
affiliated group filing consolidated federal income tax return (other than a
group the common parent of which was Company), (ii) is a party to a Tax
allocation or Tax sharing agreement (other than an agreement solely among
members of a group the common parent of which is Company), or (iii) has any
liability for the Taxes of any person (other than any of Company or its
Subsidiaries) under Treasury Regulation section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(g) For the 1998 Tax year, the Company and its Subsidiaries reported a net
operating loss of $200, 162,111 on its U.S. federal income Tax Return. As of the
date hereof, and subject to matters raised as of the date hereof in any audits
disclosed in Section 3.9 of the Company Disclosure Schedule, the net operating
losses of the Company and its subsidiaries for U.S. federal income tax purposes
are not less than $180 million. Except as set forth in Section 3.9 of the
Company Disclosure Schedule, prior to the Closing Date, there has not been, and
there will not be, any change of ownership of Company or any
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of its Subsidiaries within the meaning of Section 382 of the Code and the
Treasury Regulations thereunder or any limitation on the utilization of such net
operating losses under Treasury Regulation 1.1502-21 or Temporary Treasury
Regulation 1.1502-21T. To the extent such a change of ownership or such
limitation on the utilization of such net operating losses has or will occur
prior to the Closing Date, Section 3.9 of the Company Disclosure Schedule
accurately describes in reasonable detail the event(s) constituting such change
in ownership and such limitation on the utilization of such net operating
losses. As of September 30, 1999 the net deferred tax liability of Company and
the Subsidiaries (excluding any net operating loss carryforwards) was not
greater than $200,000,000.
For purposes of this Agreement, "CODE" shall mean the U.S. Internal Revenue
Code of 1986, as amended, or any successor law. For purposes of this Agreement,
"TAX" or "TAXES" shall mean any taxes of any kind, including but not limited to
those on or measured by or referred to as income, gross receipts, capital,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. For purposes of this Agreement, "TAXING AUTHORITY" shall
mean, with respect to any Tax, the government entity or political subdivision
thereof that imposes such Tax and the agency (if any) charged with the
collection of such Tax for such entity or subdivision. For purposes of this
Agreement, "TAX RETURN" shall mean any return, report or statement required to
be filed with any governmental authority with respect to Taxes, including any
schedule or attachment thereto or amendment thereof. For purposes of this
Agreement, "TREASURY REGULATIONS" shall mean the Treasury Regulations
promulgated under the Code.
3.10 EMPLOYEES. (a) Section 3.10(a) of the Company Disclosure Schedule
identifies each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder ("ERISA")) and each employment, severance or
similar contract or arrangement (whether or not written) and each plan, policy,
fund, program, contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock options, other stock related rights,
other forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits, or post-employment or retirement benefits (i) for or
pursuant to which the Company, any of its Subsidiaries, or any entity which,
together with Company or any of its Subsidiaries, would be treated as a single
employer under Section 414 of the Code (each such entity, an "ERISA AFFILIATE")
has any current or contingent liability and (ii) that covers any current or
former employee, consultant, independent contractor or director of or with
respect to Company or any of its Subsidiaries (each, an "EMPLOYEE PLAN").
Company has furnished or made available to Parent accurate and complete copies
of the Employee Plans (or, to the extent no copy exists, an accurate description
thereof) (and, if applicable, related trust agreements), all amendments thereto,
all written interpretations thereof, as well as, with respect to each Employee
Plan (if applicable), (i) the two most recent annual reports (Form 5500 and
attached schedules), (ii) audited financial statements for the two most recent
years, (iii) actuarial valuation reports for the two most recent years,
(iv) nondiscrimination testing results for the two most recent years,
(v) contracts with third party administrators, and (vi) any summary plan
description and other written communications (or a description of any material
oral communications) by Company or its Subsidiaries to their employees
concerning the extent of the benefits provided under an Employee Plan.
(b) None of Company, any of its Subsidiaries or any ERISA Affiliate has at
any time (i) maintained or contributed to any plan subject to Title IV of ERISA
or Section 412 of the Code, (ii) been required to contribute to any
multi-employer plan (as defined in Section 3(37) of ERISA), or (iii) incurred
any current or projected liability or made promises or guarantees in respect of
the
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payment or funding of post-employment or post-retirement health, medical or life
insurance benefits for current, former or retired employees of Company or any of
its Subsidiaries, except, in the case of this clause (iii), (x) as required to
avoid an excise tax under Section 4980B of the Code, (y) except as required by
any other applicable federal state or local law or (z) as set forth in Section
3.10(b) of the Company Disclosure Schedule.
(c) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to be so
qualified; each trust created under any such Employee Plan has been determined
by the Internal Revenue Service to be exempt from tax under Section 501(a) of
the Code and no event has occurred, either by reason of any action or failure to
act, which could reasonably be expected to adversely affect the qualified status
of any such Employee Plan or trust. Company has provided Parent with the most
recent determination letter or application for determination letter from the
Internal Revenue Service relating to each such Employee Plan. Each Employee Plan
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code and has been
maintained in good standing with applicable regulatory authorities. No event has
occurred and no condition exists that would subject the Company or its
Subsidiaries, either directly or by reason of their affiliation with an ERISA
Affiliate, to any material tax, fine, lien, penalty or other liability imposed
by ERISA, the Code or other applicable laws, rules and regulations. No
"prohibited transaction" (as such term is defined in ERISA section 406 and Code
section 4975) has occurred with respect to any Employee Plan. The Company and
its Subsidiaries have timely made all contributions and timely paid all premiums
with respect to each Employee Plan as required by such Employee Plan, applicable
law, collective bargaining agreement or any other binding obligation.
(d) Except as set forth in Section 3.10(d) of the Company Disclosure
Schedule, there has been no amendment to, written interpretation of or
announcement (whether or not written) by Company or any of its Subsidiaries or
ERISA Affiliates relating to, or any change in employee participation or
coverage under, any Employee Plan that would increase materially the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year ended prior to the date hereof.
(e) Except as set forth in Section 3.10(e) of the Company Disclosure
Schedule, there is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of Company or any of its Subsidiaries
that, individually or collectively, obligates Company to make a payment of any
amount or provision of any benefit that would not be deductible pursuant to the
terms of Section 162 or 280G of the Code.
(f) No Employee Plan is maintained outside the jurisdiction of the United
States, or covers any employee residing or working outside the United States.
(g) Section 3.10(g) of the Company Disclosure Schedule specifies, on a plan
by plan basis, the unfunded liabilities, (for the purposes of GAAP) as of the
date of this Agreement, of each of the Employee Plans providing deferred
compensation.
(h) Neither Company nor any of its Subsidiaries is a party to any collective
bargaining or other labor union contracts or is the subject of any proceeding
asserting that it or any subsidiary has committed an unfair labor practice.
There is no pending or, to the knowledge of Company, threatened labor dispute
(other than an individual employee grievance), strike or work stoppage against
Company or any of its Subsidiaries which would interfere with the respective
business activities of Company or its Subsidiaries. There is no action, suit,
complaint, charge, arbitration, inquiry, proceeding, grievance or investigation
by or before any court, government agency, administrative agency or commission
brought by or on behalf of any employee, prospective employee, former employee,
retiree or other representative of Company's employees pending or, to the
knowledge of Company, threatened against Company or any of its Subsidiaries
other than any which would not, individually or in the aggregate,
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have a Material Adverse Effect on Company. Neither Company nor any of its
Subsidiaries is a party to or otherwise bound by, any consent, decree, or
citation by any government entity relating to employees or employment practices.
(i) Company and its Subsidiaries are in compliance with their obligations
pursuant to the Worker Adjustment and Retraining Notification Act of 1988 (the
"WARN ACT"). Except as set forth in Section 3.10(i) of the Company Disclosure
Schedule, the Subsidiaries have not effectuated a "mass layoff" or "plant
closing" (as defined under the WARN Act) affecting in whole or in part any site
of employment, facility, operating unit or employees of either Company or any of
its Subsidiaries.
3.11 SEC REPORTS. Company has made available to Parent an accurate and
complete copy of each (a) final registration statement, prospectus, report,
schedule, form and definitive proxy statement filed since January 1, 1996 by
Company with the SEC pursuant to the Securities Act or the Exchange Act
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "COMPANY REPORTS") and
(b) communication mailed by Company to its shareholders since January 1, 1996.
As of their respective dates of filing or mailing, as the case may be, each
Company Report and each such communication complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Company Report or communication, and as of such dates no such Company
Report or communication (including any and all financial statements included
therein) contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances in which they were made,
not misleading. Section 3.11 of the Company Disclosure Schedule sets forth true
and correct copies of all communications (excluding Company Reports) between
Company, or any person on behalf of Company, on the one hand, and the SEC on the
other hand, in each case since January 1, 1996.
3.12 FINANCIAL STATEMENTS. Each of the consolidated financial statements
(including the notes thereto) included in the Company Reports complied as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles ("GAAP"), including, without
limitation, SFAS No. 125 (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC), applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Company
and its Subsidiaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended, except as otherwise
noted therein (subject, in the case of unaudited statements, to normal and
recurring immaterial year-end adjustments). The books and records of Company and
its Subsidiaries have been, and are being, maintained in all material respects
in accordance with GAAP and any other applicable legal and accounting
requirements. Company has made available to Parent true and correct copies of,
or excerpts from, the books and records of the Company from which the amount of
finance income receivable, and the cash flows related thereto, as set forth in
the Company Reports was calculated.
3.13 LICENSES; COMPLIANCE WITH APPLICABLE LAW. (a) Except as set forth in
Section 3.13 of the Company Disclosure Schedule, Company and its Subsidiaries
hold, and are in compliance with, all permits, licenses, variances, exemptions,
authorizations, orders and approvals ("PERMITS") of all Governmental Entities
necessary for the operation of their respective businesses, except to the extent
that the failure to so hold or comply with such Permits would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Company, and there are no proceedings pending or, to the knowledge of Company,
threatened or contemplated by any Governmental Entity seeking to terminate,
revoke or materially limit any such permit, license, exemption, order or
approval. To the extent Company or any of its Subsidiaries has not been in
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compliance with all Permits of all Governmental Entities necessary for the
operation of its business, such failure to be in compliance, alone or together
with all such other failures, could not reasonably be expected to have a
Material Adverse Affect on Company.
(b) Neither Company nor any of its Subsidiaries nor the conduct of any of
their respective businesses is in conflict with, or in default or violation of,
any statutes, laws, regulations, ordinances, Permits, rules, judgments, decrees
or arbitration awards of any Governmental Entity applicable to Company or any of
its Subsidiaries or by which its or any of their respective properties are bound
or affected, except for such conflicts, defaults or violations that could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on Company.
3.14 CERTAIN CONTRACTS. Section 3.14 of the Company Disclosure Schedule
includes a list of each (i) contract, arrangement, commitment or understanding
with respect to the employment of any directors, executive officers or key
employees, or with any consultants (for purposes of this clause (i), other than
consultants for computer and information systems) involving the payment of
$100,000 or more per annum, (ii) contract, arrangement, commitment or
understanding which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) that has not been filed as an exhibit
to a Company Report, (iii) contract, arrangement, commitment or understanding
which limits in any way the ability of Company or any of its Subsidiaries to
compete in any line of business, in any geographic area or with any person, or
which requires referrals of any business, (iv) contract, arrangement, commitment
or understanding with or to a labor union or guild (including any collective
bargaining agreement), (v) contract, arrangement, commitment or understanding
(including, without limitation, any Company Employee Plan but excluding options,
warrants and other securities identified in Section 3.2 or in Section 3.2 of the
Company Disclosure Schedule) any of the benefits of which will be paid or
increased, or the vesting of the benefits of which will be accelerated, by the
delivery of this Agreement or the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement, (vi) contract, arrangement, commitment or understanding which would
prohibit or materially delay the consummation of any of the transactions
contemplated by this Agreement, (vii) loan agreement, indenture, mortgage,
pledge, conditional sale or title retention agreement, security agreement,
guaranty, standby letter of credit (to which Company or any of its Subsidiaries
is the responsible party), material equipment lease or lease purchase agreement
to which the Company or any of its Subsidiaries is a party or by which any of
them is bound, (viii) contract, arrangement, commitment or understanding to
which Company or any of its Subsidiaries is a party or by which any of them or
any of their respective properties or assets are bound or effected entered into
in connection with the securitization by Company or any of its Subsidiaries of
receivables (including, without limitation, (A) contracts, arrangements,
commitments or understandings regarding credit support provided by Financial
Security Assurance Inc. ("FSA") and any modification agreement, waiver or
consent related thereto and (B) sale and servicing agreements) ("SECURITIZATION
AGREEMENTS"), (ix) contract, agreement, arrangement or understanding between any
affiliate of Company (other than any wholly-owned Subsidiary of Company), on the
one hand, and Company or any Subsidiary of Company, on the other hand, and (x)
any other contract, arrangement, commitment or understanding that is material to
the business, assets, liabilities, financial condition or results of operations
of Company and its Subsidiaries, taken as a whole (PROVIDED, that for purposes
of this clause (ix) any contract, arrangement, commitment or understanding
involving payments or receipts by Company or any of its Subsidiaries in excess
of $250,000 over the term thereof shall be deemed to be material). Company has
previously made available to Parent complete and accurate copies of all Company
Contracts (as defined below). Each contract, arrangement, commitment or
understanding of the type described in this Section 3.14, whether or not set
forth in Section 3.14 of the Company Disclosure Schedule, is referred to herein
as a "COMPANY CONTRACT". None of Company or any of its Subsidiaries is in
material breach of or default in the performance of its obligations under any
Company Contract, and no material breach or default, alleged breach or default
or event which would
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(with the passage of time, notice or both) constitute a material breach or
default thereunder by Company or any of its Subsidiaries (or, to the knowledge
of Company, any other party or obligor with respect thereto) has occurred, or as
a result of its performance will occur. To the extent that Company or any of its
Subsidiaries has been, since January 1, 1996, in material breach of or default
in performance of its obligations under any Company Contract, such breach or
default, together with all such other breaches or defaults, could not reasonably
be expected to have a Material Adverse Effect on Company. To the knowledge of
Company, each Company Contract is in full force and effect.
3.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither Company nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive issued by, or is a
recipient of any supervisory letter from or has adopted any board resolutions at
the request of, any Regulatory Agency or other Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business (each,
whether or not set forth in the Company Disclosure Schedule, a "COMPANY
REGULATORY AGREEMENT"), nor has Company or any of its Subsidiaries been advised
since January 1, 1996 by any Regulatory Agency or other Governmental Entity that
it is considering issuing or requesting any such Company Regulatory Agreement.
3.16 INVESTMENT SECURITIES. Each of Company and its Subsidiaries has good
and marketable title to all investment securities held by it, free and clear of
any Lien, except to the extent such securities are pledged in the ordinary
course of business to secure obligations of Company or any of its Subsidiaries.
Such investment securities are valued on the books of Company in accordance with
GAAP.
3.17 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. Section 3.17 of the
Company Disclosure Schedule sets forth the notional amount and fair value of
each interest rate swap, cap, floor and option agreement and other interest rate
risk management arrangement, and such instruments, whether entered into for the
account of Company or one of its Subsidiaries, were entered into in the ordinary
course of business and with counterparties reasonably believed by Company to be
financially responsible at the time and are legal, valid and binding obligations
of Company or one of its Subsidiaries enforceable in accordance with their terms
(except as may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the rights of creditors generally and the availability
of equitable remedies), and are in full force and effect. Company and each of
its Subsidiaries have duly performed in all material respects all of their
material obligations thereunder to the extent that such obligations to perform
have accrued, and, to Company's knowledge, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
3.18 UNDISCLOSED LIABILITIES. Except for (i) those liabilities that are
fully reflected or reserved for in the consolidated balance sheet of Company
included in its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, as filed with the SEC, (ii) liabilities disclosed in Section
3.18 of the Company Disclosure Schedule and (iii) liabilities incurred (A) in
the ordinary course of business consistent with past practice, and (B) outside
the ordinary course not in excess, in the aggregate, of $50,000, at
September 30, 1999, neither Company nor any of its Subsidiaries had, and since
such date none of them has incurred, any liabilities or obligations of any
nature whatsoever (whether accrued, absolute, contingent or otherwise and
whether or not required to be reflected in Company's financial statements in
accordance with GAAP).
3.19 ENVIRONMENTAL LIABILITY. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably result in the imposition, on
Company or any of its Subsidiaries of any material liability or obligation
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arising under common law or under any local, state or federal environmental
statute, regulation or ordinance relating to the protection of the environment
or human health including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("Environmental
Laws"), pending or, to Company's knowledge, threatened against Company or any of
its Subsidiaries. To the knowledge of Company, there is no reasonable basis for
any such proceeding, claim, action or governmental investigation that would
impose any material liability or obligation. Company is, and has been, in
compliance with applicable Environmental Laws in all material respects. Wastes
or other materials regulated under, or that could result in material liability
under, Environmental Laws, including without limitation petroleum and petroleum
products, asbestos, and polychlorinated biphenyls, have not been generated,
transported, treated, stored, disposed of, arranged to be disposed of, released
or threatened to be released at, on, from or under any of the properties or
facilities currently or formerly owned, leased or otherwise used by the Company
in violation of, or in a manner or to a location that could reasonably be
expected to give rise to material liability to Company under or relating to, any
Environmental Laws.
3.20 INFORMATION SUPPLIED. None of the information supplied by Company for
inclusion or incorporation by reference in the Form S-4, containing the Proxy
Statement/Prospectus to be sent to the shareholders of Company in connection
with the Company Shareholders Meeting (as defined in Section 6.1(a)), will, at
the date it is first mailed to Company's shareholders or at the time of the
Company Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading except that no representation is made by Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub in writing for inclusion in such document.
The Form S-4 and Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder. Company shall promptly
inform Parent of the discovery of any information which should be set forth in a
supplement to the Form S-4, containing the Proxy Statement/Prospectus.
3.21 INSURANCE. Company and its Subsidiaries maintain insurance policies
and performance bonds on their respective properties and assets, and with
respect to their employees and operations, with reputable insurance carriers,
and such insurance policies and bonds are identified in Section 3.21 of the
Company Disclosure Schedule. Company and its Subsidiaries are not in material
default under any of their insurance policies and have paid all premiums owed
thereunder, and no material claims for coverage thereunder have been denied.
3.22 YEAR 2000 COMPLIANCE. Except as would not, individually or the
aggregate, have a Material Adverse Effect on Company, all computer hardware,
software, databases, systems and other computer equipment (collectively,
"SOFTWARE") owned, held and/or used by Company or any Company Subsidiary can be
used prior to, during and after the calendar year 2000, and will operate during
each such time period, either on a stand-alone basis, or by interacting or
interoperating with year 2000 compliant third-party Software without error
relating to the processing, calculating, comparing, sequencing or other use of
correctly inputted data.
3.23 INTELLECTUAL PROPERTY. Company and its Subsidiaries own or have a
valid license to use all trademarks, trade names, service marks, copyrights,
patents, trade secrets and other intellectual property (collectively,
"INTELLECTUAL PROPERTY") that are material to the conduct of their business. All
applications, registrations and patents for such Intellectual Property owned,
used or licensed by the Company are identified in Section 3.23 of the Company
Disclosure Schedule. Except as set forth in Section 3.23 of the Company
Disclosure Schedule, neither Company nor any of its Subsidiaries is bound by or
subject to any license or other agreement with respect to any such Intellectual
Property (including, without limitation, the rights to the name "Arcadia" and
any variations thereof). Neither Company nor any of its Subsidiaries has
received any notice or other communication alleging that its usage of such
Intellectual Property violates the intellectual property rights of any other
person.
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3.24 RIGHTS AGREEMENT. The Board of Directors of Company has approved an
amendment to the Rights Agreement, dated as of November 1, 1996, as amended (the
"COMPANY RIGHTS AGREEMENT"), between Company and Norwest Bank Minnesota, N.A.,
to the effect that neither Parent, Sub nor any of their affiliates shall become
an "Acquiring Person", that no "Stock Acquisition Date", "Distribution Date", or
"Triggering Event" (as such terms are defined in the Company Rights Agreement)
will occur pursuant to the Company Rights Agreement by reason of, and the Rights
Agreement shall not be applicable to, the approval, execution or delivery of
this Agreement or the consummation of the transactions contemplated hereby, and
will cause the trustee under the Company Rights Agreement to execute such
amendment as of the date hereof.
3.25 STATE ANTI-TAKEOVER STATUTES. The restrictions contained in Sections
302A.671, 302A.673 and 302A.675 of the MBCA are inapplicable to this Agreement,
the Support Agreement, the Receivables Agreements and the transactions
contemplated hereby and thereby. No provision of Company's articles of
incorporation, bylaws or other governing instruments of Company or any of its
Subsidiaries would restrict or impair the ability of Parent to vote, or
otherwise exercise the rights of a shareholder with respect to, shares of
Company or any of its Subsidiaries.
3.26 PROPERTIES. (a) (i) None of Company or its Subsidiaries owns any real
property.
(b) Pursuant to the leases and subleases (the "REAL PROPERTY LEASES") of
Company and its Subsidiaries with respect to all material real property which is
leased or subleased by Company or its Subsidiaries (the "LEASED REAL PROPERTY"),
Company and its Subsidiaries hold good and valid leasehold title to the Leased
Real Property, in each case in accordance with the provisions of the applicable
Real Property Lease and free of all Liens, in each case except, individually or
in the aggregate, as would not have a Material Adverse Effect on Company. Each
of the Real Property Leases is enforceable against Company or its Subsidiary, as
the case may be, and, to the knowledge of Company, against the other party
thereto, in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law) and except
for such failures to be enforceable as would not, individually or in the
aggregate, have a Material Adverse Effect on Company.
3.27 RECEIVABLES. Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Company, (a) Company or any trust to which
Company has transferred title of any Receivables has good title and original
documents evidencing the Receivables, free and clear of any Liens; no person,
firm, corporation or association has any claim whatsoever to any such
Receivables. For purposes of this Section 3.27, "RECEIVABLE" means any
receivable owned by Company or any of its Subsidiaries or securitized pursuant
to any securitization transaction entered into by, or for the benefit of,
Company or any of its Subsidiaries.
(b) There exists a file pertaining to each Receivable, and such file
contains (i) a fully executed original of the Receivable, (ii) a certificate of
insurance, application form for insurance signed by the obligor under such
Receivable (the "OBLIGOR"), or a signed representation letter from the Obligor
named in the Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related financial vehicle, or copies thereof,
(iii) the original certificate of title, lien card or application therefor and
(iv) a credit application signed by the Obligor, or a copy thereof. The records
of Company maintained in electronic format and provided to Parent relating to
the Receivables of Company as of September 30, 1999 accurately reflect the
information purported to be reflected therein.
(c) Company is not a party to and there is no pending or, to Company's
knowledge, threatened litigation, legal or administrative proceeding, or
otherwise.
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(d) Each Receivable is genuine, valid and complete in all respects and is
enforceable in accordance with its terms, except as its enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
rights of creditors.
(e) As of the closing date of each securitization transaction entered into
by, or for the benefit of, Company or any of its Subsidiaries, each motor
vehicle that is security for a Receivable was covered by a comprehensive and
collision insurance policy (i) in an amount at least equal to the lesser of
(A) its maximum insurable value or (B) the principal amount due from the Obligor
under the related Receivable, (ii) naming Company as loss payee and
(iii) insuring against loss and damage due to fire, transportation, collision
and other risks generally covered by comprehensive and collision coverage. Each
Receivable requires the Obligor to maintain physical loss and damage insurance
naming Company and its successors and assigns as additional insured parties, and
each Receivable permits the holder thereof to obtain physical loss and damage
insurance at the expense of the Obligor if the Obligor fails to do so. No such
motor vehicle was or had previously been insured under a policy of force-placed
insurance on any such closing date.
(f) The collateral for each of the Receivables that is secured is the
collateral described in the applicable security agreement or other security
document. Each security interest in titled personal property collateral
constitutes a valid, enforceable and perfected purchase money first lien on the
collateral described in the Receivable file.
(g) Each Receivable was originated, has been serviced and currently complies
in all material respects with all applicable state, federal and local laws and
regulations, including but not limited to all consumer protection and insurance
laws, the Truth-In-Lending Act, ECOA, RESPA and the FCRA.
(h) Company has paid or caused to be paid any and all licenses, franchise,
business privilege use, intangible stamp or other Taxes or fees due and owing,
if any, arising from the acquisition, origination, collection or holding of each
Receivable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and, with respect to Sections 4.1 and 4.2, Sub hereby represent and
warrant to Company as follows:
4.1 CORPORATE ORGANIZATION. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Minnesota. Each of Parent and Sub has all requisite
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business and in good standing in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
(individually or in the aggregate) would not reasonably be expected to have a
material adverse effect on the ability of Parent or Sub to perform its
obligations under and to consummate the transactions contemplated by this
Agreement on a timely basis.
4.2 AUTHORITY; NO VIOLATION. (a) Each of Parent and Sub has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of each of
Parent and Sub and by Parent in its capacity as sole shareholder of Sub. No
other corporate proceedings on the part of Parent or Sub and no other votes or
consents of any holders of Parent
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securities are necessary on the part of Parent or Sub to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Parent and Sub and (assuming
due authorization, execution and delivery by Company) constitutes the valid and
binding obligations of Parent and Sub, enforceable against each of them in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by Parent or Sub
nor the consummation by Parent or Sub of the transactions contemplated hereby,
nor compliance by Parent or Sub with any of the terms or provisions hereof, nor
the execution and delivery of the Receivables Agreements by the affiliate of
Company party thereto, nor the consummation by such affiliate of the
transactions contemplated thereby, nor compliance by such affiliate with any of
the terms or provisions thereof, will (i) violate any provision of the
certificate or articles of incorporation or bylaws of Parent or Sub, as
applicable, or (ii) assuming that the consents and approvals referred to in
Section 4.3 are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Parent or
any of its material Subsidiaries or any of their respective properties or
assets, or violate, conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by or rights or obligations under, or result in the
creation of any Lien upon any of the respective properties or assets of Parent
or any of its material Subsidiaries under, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, deed of trust,
permit, concession, franchise, license, lease, agreement, contract, or other
instrument or obligation to which Parent or any of its material Subsidiaries is
a party, or by which they or any of their respective properties, assets or
business activities may be bound or affected, except (in the case of clause
(ii) above) for such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, would not reasonably be expected to result in
a material adverse effect on the ability of Parent or Sub to perform its
obligations under and to consummate the transactions contemplated by this
Agreement on a timely basis.
4.3 CONSENTS AND APPROVALS. Except for (i) the Regulatory Approvals,
(ii) the filing with the SEC of the Form S-4 containing the Proxy
Statement/Prospectus, (iii) the filing of the Articles of Merger with the
Secretary of State of the State of Minnesota pursuant to the MBCA, (iv) the
expiration of any applicable waiting period under the HSR Act, (v) the Company
Shareholder Approval, (vi) the filing with the SEC of such reports under the
Exchange Act as may be required in connection with the execution and delivery of
this Agreement and the transactions contemplated hereby and (vii) such other
consents, approvals and registrations the failure to obtain which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of Parent or Sub to perform its obligations under
and to consummate the transactions contemplated by this Agreement on a timely
basis, no consents or approvals of or filings or registrations with any
Governmental Entity, or of or with any third party, are necessary in connection
with the execution and delivery by Parent of this Agreement or the consummation
by Parent of the transactions contemplated by this Agreement or in connection
with the execution and delivery by the affiliate of Parent party thereto of the
Receivables Agreements or the consummation by such affiliate of the transactions
contemplated thereby. Parent has no reason to believe that any Requisite
Regulatory Approvals will not be obtained on a timely basis.
4.4 BROKER'S FEES. Parent has not engaged any broker, finder or investment
banker (other than Goldman, Sachs & Co., whose fee shall be paid by Parent) that
would be entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement.
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4.5 FUNDS. Either Parent or Sub has, or will have prior to the
consummation of the Merger, sufficient funds available to satisfy the obligation
to pay the Cash Consideration in the Merger.
4.6 INFORMATION SUPPLIED. None of the information supplied by Parent for
inclusion or incorporation by reference in the Form S-4 containing the Proxy
Statement/Prospectus to be sent to the shareholders of Company in connection
with the Company Shareholders Meeting, will not, at the date it is first mailed
to Company's shareholders or at the time of the Company Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
except that no representation is made by Parent with respect to statements made
or incorporated by reference therein based on information supplied by Company
for inclusion or incorporation by reference in such document. The Form S-4 and
the Proxy Statement/ Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and the
rules and regulations of the SEC thereunder.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 CONDUCT OF COMPANY BUSINESSES PRIOR TO THE EFFECTIVE TIME. During the
period from the date of this Agreement to the Effective Time, except as
expressly required or permitted by this Agreement, Company shall, and shall
cause each of its Subsidiaries to, (a) conduct its business in the usual,
regular and ordinary course consistent with past practice and in compliance in
all respects with applicable laws, (b) use reasonable efforts to maintain and
preserve intact its business organization, employees and business relationships
and retain the services of its key officers and key employees and (c) take no
action which would adversely affect or delay in any respect the ability of
either Parent or Company to obtain any necessary approvals of any Regulatory
Agency or other Governmental Entity required for the transactions contemplated
hereby or to perform its covenants and agreements under this Agreement.
5.2 FORBEARANCES OF COMPANY. During the period from the date of this
Agreement to the Effective Time, except as set forth in Section 5.2 of the
Company Disclosure Schedule and except as expressly required or permitted by
this Agreement, Company shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Parent (which consent, in the case of
clause (h) below, shall not be unreasonably withheld):
(a) (i) incur any indebtedness for borrowed money (other than
(A) short-term indebtedness incurred (x) to refinance existing short-term
indebtedness or (y) pursuant to lines of credit and credit facilities existing
on the date of this agreement and (B) indebtedness of Company or any of its
Subsidiaries owed to Company or any of its other wholly-owned Subsidiaries and
(C) indebtedness in the aggregate not in excess of $20,000,000 incurred pursuant
to that Indenture, dated as of July 1, 1994, as amended and restated by a First
Amendment and Restatement, dated as of April 28, 1995, between Company and
Norwest Bank Minnesota, N.A., as trustee, as amended, provided that any
indebtedness incurred pursuant to this clause (C) shall be prepayable without
premium on at least 30 but not more than 60 days' notice to the holders
thereof), assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or other
entity, or make any loan, advance or capital contribution (other than to Company
or any of its wholly-owned Subsidiaries) or (ii) make or commit to make any
capital expenditures in excess of $50,000 for any single or related group of
capital expenditures, or $500,000 in the aggregate for all capital expenditures;
(b) (i) adjust, split, combine or reclassify any of its capital stock;
(ii) make, declare, set aside or pay any dividend (except for dividends paid in
the ordinary course of business by any wholly-owned Subsidiaries of Company to
Company or to any other of its wholly-owned Subsidiaries) or make any
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other distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock;
(iii) grant any individual, corporation or other entity any right to acquire any
shares of its capital stock or any stock appreciation or similar rights except
as permitted by Section 5.2(i); (iv) issue or authorize the issuance of,
deliver, sell, transfer, pledge or otherwise encumber any additional shares of
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock, other than the issuance of Company Common
Stock pursuant to the exercise of stock options or warrants disclosed in
Section 3.2 of the Company Disclosure Schedule as being outstanding on the date
of this Agreement and granted pursuant to the Company Stock Plans; or (v) enter
into any agreement, understanding or arrangement with respect to the sale or
voting of its capital stock;
(c) (i) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets, including, without limitation, capital stock in any
Company Subsidiary, to any individual, corporation or other entity other than a
direct or indirect wholly-owned Subsidiary, or cancel, release or assign any
indebtedness to any such person or any claims held by any such person, except in
the ordinary course of business consistent with past practice or pursuant to
contractual requirements under contracts existing on the date of this Agreement
and identified in Section 3.14 of the Company Disclosure Schedule; or
(ii) securitize or otherwise dispose of any receivables owned by, or loans owed
to, Company or any of its Subsidiaries, except for sales or other dispositions
of receivables or any such loans to Parent or any of its Subsidiaries; provided,
however, that Company may securitize receivables owned by, or loans owed to,
Company or any of its Subsidiaries under the following conditions: (i) if Parent
is in material default of its obligations under the Receivables Agreements,
Company may securitize up to a maximum of $150 million a month in amount (as
reflected on the books and records of the Company) of receivables owned by, or
loans owed to, Company or any of its Subsidiaries and (ii) for so long as
Company is not in default under the Purchase Agreement in any material respect,
Company may securitize or otherwise dispose of receivables owned by, or loans
owed to, Company or any of its Subsidiaries in the amount of the principal
amount of Retail Installment Sales Contracts (as defined in the Purchase
Agreement) which Seller has available for sale, and which Buyer has the right to
purchase, under the Purchase Agreement and which up to a maximum of
$150 million a month in amount (as reflected on the books and records of the
Company) of Buyer has elected not to purchase.
(d) make any material investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other individual, corporation, limited partnership or other
entity, other than an investment in a wholly-owned Subsidiary of Company;
(e) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof;
(f) acquire or agree to acquire voting or non-voting equity securities or
similar ownership interests in any person (other than a Subsidiary);
(g) commence, undertake or engage in any new line of business;
(h) enter into any contract, arrangement, commitment or understanding of the
types described in clause (iii), (v) or (vi) of Section 3.14; make any change in
or terminate any of its existing contracts, arrangements, commitments or
understandings disclosed pursuant to Section 3.14; or enter into any contract,
agreement, arrangement or understanding involving payments or receipts by
Company or any of its Subsidiaries in excess of $100,000 over the term thereof;
(i) (i) increase or accelerate the compensation or benefits of any present
or former director, officer, consultant, independent contractor or employee of
Company or its Subsidiaries (except for increases in salary or wages in the
ordinary course of business consistent with past practice for persons other than
those subject to an employment agreement with Company); provided, however, that
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(A) Company may accelerate the vesting of previously granted restricted shares
attributable to fiscal 1999 to Company officers and employees pursuant to
Company's 1998-2000 Restricted Stock Election Plan as in effect on the date of
this Agreement; (B) Company may commit to pay cash bonuses to the persons and in
the amounts set forth in Part I of Section 5.2(i) of the Company Disclosure
Schedule, provided, in the case of any such person, such person (x) is employed
by Company on the 60th day following the Effective Time, (y) is, following the
Effective Time and prior to such 60th day, terminated without cause (as defined
below) or (z) following the Effective Time and prior to such 60th day terminates
his or her employment for good reason (as defined below); (C) Company may pay
the bonuses to the persons and in the amounts set forth in Part II of Section
5.2(i) of the Company Disclosure and (D) Company may pay bonuses to persons
other than those identified in Part II of Section 5.2(i) of the Company
Disclosure Schedule in an aggregate amount not to exceed $7 million pursuant to
Company's bonus and incentive policies in effect on the date hereof, (ii) grant
any severance or termination pay to any present or former director, officer,
consultant, independent contractor or employee of Company or its Subsidiaries
other than as provided under an Employee Plan in existence as of the date of
this Agreement and identified in Section 3.10(a) or 3.14, as the case may be, of
the Company Disclosure Schedule, (iii) loan or advance any money or other
property to any present or former director, officer, consultant, independent
contractor or employee of Company or its Subsidiaries (iv) establish, adopt,
enter into, amend or terminate any Employee Plan or any plan, agreement,
program, policy, trust, fund or other arrangement that would be an Employee Plan
if it were in existence as of the date of this Agreement or (v) amend any term
of a Company Option, except in accordance with Section 1.6 hereof. For purposes
of Section 5.2(i)(A)(Y), a person may be terminated for "CAUSE" upon his or her
(i) substantial failure to perform duties, which failure is not cured within 10
business days following written notice, (ii) commission of a (x) felony or (y)
crime involving moral turpitude, (iii) malfeasance or misconduct which is
injurious to the Surviving Corporation or (iv) breach of the material terms of
his or her employment, including without limitation any non-compete,
non-solicitation or confidentiality obligations; PROVIDED, HOWEVER, that if such
person is subject to an employment agreement with the Company, and such
agreement includes a definition of cause, such definition will supercede the
foregoing definition. For purposes of Section 5.2(i)(A)(Z), a person may
terminate employment for "GOOD REASON" upon (i) a failure of Parent to pay
compensation or benefits when due to such person, (ii) a reduction of such
person's base salary or a failure of Parent to provide employee benefits in
accordance with Section 6.4 hereof, (iii) a relocation of such person's
principal place of employment by more that 35 miles from his or her current
principal place of employment or (iv) a substantial change in such person's
duties, other than as a result of poor job performance; PROVIDED, HOWEVER, that
it shall only be good reason if, in each case, Parent does not cure such good
reason within 10 business days following the Parent's receipt of written notice
from such person of the acts or omissions alleged to be good reason; PROVIDED,
FURTHER, that if such person is subject to an employment agreement with the
Company, and such agreement includes a definition of good reason, such
definition will supercede the foregoing definition.
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except for
the payment, discharge or satisfaction of (i) current liabilities or
obligations, in accordance with their terms, in the ordinary course of business
consistent with past practice and (ii) liabilities disclosed pursuant to this
agreement and the schedules hereto, to the extent required by their terms, or
waive, release, grant, or transfer any rights of value or modify or change any
existing license, lease, contract or other document in any manner that would be
material to Company and its Subsidiaries;
(k) settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement), other than settlements or compromises of litigation
where the amount paid does not exceed $50,000 for any single litigation matter
or related group of litigation matters (provided such settlement or compromise
agreements do not involve any non-monetary obligations on the part of Company or
any of its Subsidiaries);
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(l) (i) change any accounting principle used by it (including, without
limitation, any assumptions used for purposes of computing finance income
receivable), except for such changes as may be required to be implemented
following the date of this Agreement pursuant to generally accepted accounting
principles or rules and regulations of the SEC promulgated following the date
hereof, as concurred in by Company's independent auditors; or (ii) materially
change or amend Company's underwriting, servicing or collection policies,
procedures or standards;
(m) change any material Tax election, change any annual Tax accounting
period, change any material method of Tax accounting, file any amended Tax
Return, enter into any closing agreement relating to any material Tax, settle
any material Tax claim or assessment, surrender any right to claim a material
Tax refund or consent to any extension or waiver of the limitations period
applicable to any material Tax claim or assessment;
(n) adopt or implement any amendment to its articles of incorporation or
bylaws or other comparable organizational documents, or enter into any plan of
consolidation, merger or reorganization with any person other than a
wholly-owned Subsidiary of Company;
(o) materially restructure or materially change its investment securities
portfolio, its hedging strategy or its gap position, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or reported or
materially alter the credit or risk concentrations associated with its
businesses; or repurchase any receivables disposed of by Company or any of its
Subsidiaries in connection with any Securitization Transaction;
(p) adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing such a liquidation or a dissolution, restructuring,
recapitalization or reorganization;
(q) take any action that is intended or may reasonably be expected to result
in any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect, or in any of the conditions to the
Merger set forth in Article VIII not being satisfied or in a violation of any
provision of this Agreement, except, in each case, as may be required by
applicable law; or
(r) agree to, or make any commitment to, take, or authorize, any of the
actions prohibited by this Section 5.2.
5.3 TRANSITION. In order to facilitate an orderly transition of the
management of the business of Company and its Subsidiaries to Parent and in
order to facilitate the integration of the operations of Company and Parent and
their Subsidiaries and to permit the coordination of their related operations on
a timely basis, and in an effort to accelerate to the earliest time possible
following the Effective Time the realization of synergies, operating
efficiencies and other benefits expected to be realized by Parent and Company as
a result of the Merger, on and after the earlier of (i) the 45th day after the
date of this Agreement and (ii) the day, if any, on which Parent waives its
right to terminate this Agreement pursuant to Section 8.1(d)(vi) (the date of
the earlier of such days, the "ACCESS DATE"), Company shall and shall cause its
Subsidiaries to consult with Parent on all strategic and operational matters to
the extent such consultation is not in violation of applicable laws, including
laws regarding the exchange of information and other laws regarding competition.
Without in any way limiting the provisions of Section 6.3, Parent, its
Subsidiaries, officers, employees, counsel, financial advisors and other
representatives shall on and after the Access Date, upon reasonable notice to
Company and subject to applicable laws relating to the exchange of information,
be entitled to review the operations and visit the facilities of Company and its
Subsidiaries at all times as may be deemed reasonably necessary by Parent in
order to accomplish the foregoing arrangements (provided such access does not,
in Company's reasonable opinion, unreasonably interfere with Company's business
options). Notwithstanding the foregoing, nothing contained in this Agreement
shall give Parent, directly or indirectly, the right to control or direct
Company's operations prior to the Effective Time. Prior to the
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Effective Time, each of Company and Parent shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision over
its and its Subsidiaries' respective operations.
5.4 NOTIFICATION OF TAX PROCEEDINGS. From the date of this Agreement to
the Effective Time, to the extent Company or any Subsidiary becomes aware of the
commencement or scheduling of any Tax audit, the assessment of any material Tax,
the issuance of any notice of material Tax due or any bill for collection of any
material Tax due or any material lien for Taxes, or the commencement or
scheduling of any other administrative or judicial proceeding with respect to
the determination, assessment, or collection of any material Tax on Company or
any Subsidiary, Company shall provide prompt notice to Parent of such matter
setting forth information (to the extent known) describing any asserted Tax
liability in reasonable detail and including copies of any notice or other
documentation received from the applicable Tax Authority with respect of the
matter.
5.5 TRANSFER TAXES. All Transfer Taxes imposed on Company or Parent or any
of their affiliates in connection with this Agreement shall be paid by Parent.
For this purpose, "Transfer Taxes" means any Stock transfer taxes, real property
transfer, transfer gains or similar taxes (including without limitation, any New
York State Real Estate Transfer Tax) payable in connection with this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 COMPANY SHAREHOLDERS MEETING; PREPARATION OF PROXY STATEMENT. Company
shall cause a meeting of its shareholders (the "COMPANY SHAREHOLDERS MEETING")
to be duly called and held as soon as practicable after the date hereof for the
purpose of approving the adoption of this Agreement. As promptly as practicable
following the date hereof, Parent and Company shall prepare and file with the
SEC preliminary proxy materials which shall constitute the Proxy
Statement/Prospectus (such proxy statement/prospectus, and any amendments
thereto, the "PROXY STATEMENT/PROSPECTUS") and Parent shall prepare and file
with the SEC a registration statement on Form S-4 with respect to the issuance
of the RVOs in the Merger (the "FORM S-4"). The Proxy Statement/Prospectus will
be included in the Form S-4 as Parent's prospectus. The Form S-4 and the Proxy
Statement/Prospectus shall comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and the
rules and regulations of the SEC thereunder. Each of Parent and Company shall
use its reasonable best efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after filing with the SEC and to
keep the Form S-4 effective as long as is necessary to consummate the Merger.
Parent and Company shall, as promptly as possible after receipt thereof, provide
copies of any written comments received from the SEC with respect to the Proxy
Statement/Prospectus to the other party and advise the other party of any oral
comments with respect to the Proxy Statement/Prospectus received from the SEC.
Company shall use its reasonable best efforts to cause the Proxy
Statement/Prospectus to be mailed to Company's shareholders as promptly as
practicable after the FormS-4 is declared effective under the Securities Act.
Each of Company and Parent will inform the other party, promptly after it
receives notice thereof, of any request by the SEC for an amendment to the
Form S-4 or the Proxy Statement/ Prospectus, as the case may be, or requests for
additional information. No amendment or supplement to the Form S-4 or the Proxy
Statement/Prospectus shall be filed without the approval of both parties, which
approvals shall not be unreasonably withheld or delayed. The Board of Directors
of Company shall (i) include in the Proxy Statement/Prospectus (x) the Company
Board Recommendation unless based on the advice of Company's outside counsel,
the Board of Directors of Company determines in good faith that inclusion of
such recommendation would constitute a breach by the Board of Directors of
Company of its fiduciary duties under applicable law and (y) the opinion of the
Company Financial Advisor referred to in Section 3.6(b) and (ii) use its
reasonable best efforts to obtain the necessary vote in favor of the adoption of
this Agreement by its shareholders. The Board of Directors of Company
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shall not withdraw, amend, modify or materially qualify in a manner adverse to
Parent the Company Board Recommendation (or announce publicly its intention to
do so) unless based on the advice of Company's outside counsel, the Board of
Directors of Company determines in good faith that failure to do so would
constitute a breach by Board of Directors of Company of its fiduciary duties
under applicable law. Subject to its right to terminate this Agreement in
accordance with the terms hereof, Company shall be required to satisfy all its
obligations under this Agreement, including, without limitation, its obligations
under this Section 6.1(a), whether or not the Board of Directors of Company
shall have withdrawn, amended, modified or qualified in a manner adverse to
Parent the Company Board Recommendation or announced publicly its intention to
do so.
6.2 REASONABLE BEST EFFORTS. (a) Each of Parent and Company shall, and
shall cause their respective Subsidiaries to, use their reasonable best efforts
to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or any of its Subsidiaries with respect to the Merger and, subject to the
conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this Agreement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
identify and obtain as promptly as practicable all permits, consents, approvals
and authorizations of all Governmental Entities and any other third parties
which are necessary or advisable to consummate the transactions contemplated by
this Agreement (including, without limitation, the Merger), and to comply fully
with the terms and conditions of all such permits, consents, approvals and
authorizations of all such Governmental Entities. Without limiting the
generality of the foregoing, within 20 days of the date of this Agreement,
Company shall deliver to Parent a schedule setting forth in reasonable detail
those third party consents, approvals and filings which are necessary to
consummate the transactions contemplated by this Agreement. Parent and Company
shall have the right to review in advance, and, to the extent practicable, each
will consult with the other on, in each case subject to applicable laws relating
to the exchange of information, all the information relating to Company or
Parent, as the case may be, and any of their respective Subsidiaries, which
appear in any filing made with, or written materials submitted to, any
Governmental Entity or any other third party in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all
Governmental Entities and other third parties necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other apprised of the status of matters relating to completion of the
transactions contemplated hereby. Without limiting the generality of the
foregoing, Parent and Company agree that if all of the conditions to Closing set
forth in Article VII have been satisfied or waived other than the condition set
forth in Section 7.3(c) and if, and to the extent that, it would result in the
condition set forth in Section 7.3(c) being satisfied, Parent and Company shall
use reasonable efforts to effect the sale by Company or one or more of its
Subsidiaries to Parent or one or more of its Subsidiaries of receivables owned
by Company or its Subsidiaries at a purchase price of 100% of the amount of the
receivables as reflected on the books and records of Parent or the applicable
Subsidiary of Parent. In the event that the actions contemplated by the
immediately preceding sentence would require more than reasonable efforts or
would not result in the satisfaction of the condition set forth in
Section 7.3(c), Parent and Company shall cooperate in good faith and use
reasonable efforts to cause the condition set forth in Section 7.3(c) to be
satisfied.
(c) Parent and Company shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Form S-4 and the Proxy Statement/Prospectus
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or any other statement, filing, notice or application made by or on behalf of
Parent, Company or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement.
6.3 ACCESS TO INFORMATION. (a) On and after the Access Date, upon
reasonable notice and subject to applicable laws relating to the exchange of
information, Company shall, and shall cause its Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of Parent,
reasonable access, during normal business hours during the period prior to the
Effective Time, to all its personnel, properties, books, contracts, commitments
and records (provided that such access does not, in the Company's reasonable
opinion, unreasonably interfere with the Company's business operations and that
such access is coordinated through Company's senior management) and, during such
period, Company shall, and shall cause its Subsidiaries to, make available to
Parent and such other parties (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws or other federal or state laws
(other than reports or documents which Company is not permitted to disclose
under applicable law) and (ii) all other information concerning its business,
properties and personnel as Parent may reasonably request, in all cases so that
Parent may have full opportunity to make such reasonable investigations as it
desires of the affairs and assets of Company. Neither Company nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize the attorney-client privilege of Company or any of its
Subsidiaries or contravene any law, rule, regulation, order, judgment, decree,
or binding agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) Company shall use its reasonable efforts to make available to the
officers, employees, accountants, counsel and other representatives of Parent,
during normal business hours during the period prior to the Effective Time,
representatives of Financial Security Assurance Inc. ("FSA") for the purpose of
discussing the impact of the transactions contemplated hereby on the
securitization transactions effected by Company and its Subsidiaries and such
other matters as shall be reasonably raised by Parent, provided, that such
access shall be coordinated through Company's senior management and that
representatives of Company shall be permitted to attend all meetings and
participate in all phone calls with representatives of FSA.
(c) Parent shall, and shall cause its representatives to, hold all
information furnished by or on behalf of Company or any of Company's
Subsidiaries or representatives pursuant to Section 6.3(a) in confidence to the
extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated April 30, 1999 between Parent and Company (the
"CONFIDENTIALITY AGREEMENT").
(d) No investigation by Parent or its representatives shall affect the
representations and warranties of Company set forth herein.
6.4 EMPLOYEE BENEFITS. (a) For one year following the Effective Time,
employees of Company and its Subsidiaries who continue their employment with the
Surviving Corporation, Parent or any of their respective Subsidiaries
("CONTINUED EMPLOYEES") will be provided employee benefits which, in the
aggregate, are no less favorable than the benefits provided under Company's
Employee Plans to the Continued Employees immediately prior to the Effective
Time; PROVIDED, HOWEVER, that nothing contained herein shall constitute a
commitment or obligation on the part of Parent, the Surviving Corporation or any
of their respective subsidiaries to adopt or continue any individual benefit
arrangement or term thereof and that nothing herein shall interfere with the
Surviving Corporation's right to take any action or refrain from taking any
action which Company or any of its Subsidiaries could take or refrain from
taking prior to the Effective Time.
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(b) To the extent that Continuing Employees are eligible participate in
employee benefit plans of Parent, such Continuing Employee shall be given credit
for service with Company and its Subsidiaries, to the same extent as such
service was credited for such purpose by Company under comparable Company
Employee Plans, for purposes of eligibility and vesting. If Continuing Employees
become eligible to participate in a medical, dental or health plan of Parent or
its subsidiaries, Parent shall cause such plan to (i) waive any preexisting
condition limitations for conditions covered under the comparable medical,
health or dental plans which are Company Employee Plans and (ii) honor any
deductible and out of pocket expenses incurred and paid by the Continuing
Employees under the comparable medical, health or dental plans which are Company
Employee Plans during the portion of the calendar year prior to such
participation. Notwithstanding the foregoing, in no event shall any Continuing
Employee be entitled to any credit for service, deductibles or out of pocket
expenses to the extent that it would result in a duplication of benefits with
respect to the same period of service, deductible or out of pocket expenses.
6.5 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) The articles
of incorporation and bylaws of the Surviving Corporation shall contain, to the
extent permitted by law, the provisions with respect to indemnification set
forth in the articles of incorporation and bylaws of Company on the date hereof,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of the persons who at any time prior to the
Effective Time were entitled to such indemnification under the articles of
incorporation or bylaws of Company in respect of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated hereby), unless such modification is required by law;
PROVIDED, that the articles of incorporation and bylaws of the Surviving
Corporation shall not be required to contain such provisions if Parent otherwise
provides the same level of indemnification for such individuals as contained in
the articles of incorporation and bylaws of the Surviving Corporation.
(b) The Surviving Corporation shall indemnify, defend and hold harmless the
present and former officers and directors of Company or any of Company's
Subsidiaries in their capacities as such (each an "INDEMNIFIED PARTY") after the
Effective Time against all losses, expenses, claims, damages or liabilities
arising out of actions or omissions occurring on or prior to the Effective Time
to the fullest extent that Company and its Subsidiaries would have been
permitted under Minnesota law and their respective articles of incorporation or
bylaws, to indemnify such Indemnified Parties.
(c) Parent shall use its reasonable best efforts to cause the persons
serving as officers and directors of Company immediately prior to the Effective
Time to be covered for a period of six years from the Effective Time by the
directors' and officers' liability insurance policy maintained by Company
(provided that Parent may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to acts or omissions occurring prior
to the Effective Time which were committed by such officers and directors in
their capacity as such; PROVIDED, HOWEVER, that in no event shall Parent be
required to expend more than 200% of the current amount expended by Company (the
"INSURANCE AMOUNT") to maintain or procure insurance coverage pursuant hereto
and further PROVIDED, that if Parent is unable to maintain or obtain the
insurance called for by this Section 6.5(c), Parent shall use its reasonable
best efforts to obtain as much comparable insurance as available for the
Insurance Amount.
(d) In the event Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case, to
the extent necessary, proper provision shall be made so that the successors and
assigns of Parent or the Surviving Corporation, as the case may be, assume the
obligations set forth in this section. From and after the Effective Time,
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Parent shall unconditionally guarantee the timely payment of any funds owing by,
and the timely performance of all other obligations of, the Surviving
Corporation under this Section 6.5.
(e) The provisions of this Section 6.5 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
6.6 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any other merger between a Subsidiary
of Company and a Subsidiary of Parent) or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by Parent.
6.7 ADVICE OF CHANGES. Parent and Company shall promptly advise the other
party of any change or event that could reasonably be expected to have a
Material Adverse Effect on it or to delay or impede the ability of Parent, Sub
or Company, respectively, to perform their respective obligations pursuant to
this Agreement and to effect the consummation of the transactions contemplated
hereby; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 6.7 shall not limit or otherwise affect the remedies available hereunder
to any party receiving such notice.
6.8 NO SOLICITATION. (a) Neither Company nor any of its Subsidiaries shall
(whether directly or indirectly through advisors, agents or other
intermediaries), nor shall Company or any of its Subsidiaries authorize or
permit any of its or their officers, directors, agents, representatives or
advisors to, (a) solicit, initiate, encourage (including by way of furnishing
information) or take any action knowingly to facilitate the submission of any
inquiries, proposals or offers (whether or not in writing) from any person other
than Parent that constitutes or may reasonably be expected to lead to, (i) any
acquisition or purchase of any assets of Company or any of its Subsidiaries
(including through the formation of a joint venture) or of any equity securities
of Company or any of its Subsidiaries (except in the case of a transaction
permitted by Section 5.2(c)(i)), (ii) any tender offer or exchange offer
(including a self-tender offer) for any class of equity securities of Company or
any of its material Subsidiaries, (iii) any merger, consolidation, business
combination, reorganization, recapitalization, liquidation, dissolution or
similar transaction involving Company or any of its material Subsidiaries or
(iv) any other transaction the consummation of which would or would reasonably
be expected to impede, interfere with, prevent or materially delay the Merger
(any of the foregoing, a "TRANSACTION PROPOSAL"), or accept, agree to, approve
or endorse any Transaction Proposal or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or otherwise
cooperate in any way with, or knowingly assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing; PROVIDED, that Company may, in response and with respect to a bona
fide unsolicited written proposal from a third party submitted after the date of
this Agreement which constitutes a Superior Proposal (as defined below), engage
in the activities specified in clause (b), if (i) based on the advice of
Company's outside counsel, the Board of Directors of Company determines in good
faith that failure to take such action in response to such a proposal would
constitute a breach by the Board of Directors of Company of its fiduciary duties
under applicable law, (ii) Company has received from such third party an
executed confidentiality agreement with terms not materially less favorable to
Company than those contained in the Confidentiality Agreement and (iii) Company
has complied in all material respects with this Section 6.8. If Company receives
a Transaction Proposal, or a request for nonpublic information relating to
Company or any of its Subsidiaries or for access to the properties, books or
records of Company or any of its Subsidiaries by any Person who is considering
making or has made a Transaction Proposal, it shall immediately inform Parent
orally and shall as promptly as practicable (and in any event within one day)
inform Parent in writing of the terms and conditions of such proposal and the
identity of the person making it, forwarding a copy of any written
communications relating thereto. Company will keep Parent
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informed on as prompt a basis as is practicable of the status and details of any
such Transaction Proposal or request and any related discussions or
negotiations, including by forwarding copies of any material written
communications relating thereto. Company will immediately cease and cause its
Subsidiaries, and its and their officers, directors, agents, representatives and
advisors, to cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing, and
shall use its reasonable efforts to cause any such parties in possession of
confidential information about Company or its Subsidiaries that was furnished by
or on behalf of Company or its Subsidiaries in connection with any of the
foregoing to return or destroy all such information in the possession of any
such party or in the possession of any agent or advisor of any such party.
Company agrees not to release any third party from, or waive any provisions of,
any confidentiality or standstill agreement to which it or its Subsidiaries is a
party. Company shall ensure that the officers, directors and employees of
Company and its Subsidiaries and any investment banker or other advisor or
representative retained by such party are aware of and instructed to comply with
the restrictions described in this Section 6.8. Nothing in this Section 6.8
shall prohibit Company or its Board of Directors from taking and disclosing to
Company's shareholders a position with respect to a Transaction Proposal by a
third party to the extent required under the Exchange Act, including
Rules 14e-2 and 14d-9 thereunder, or from making such disclosure to Company's
shareholders which, based on the advice of Company's outside counsel, the Board
of Directors of Company determines in good faith, is required under applicable
law; PROVIDED, that nothing in this sentence shall affect the obligations of
Company and its Board of Directors under any other provision of this Agreement.
For purposes of this Agreement, a "SUPERIOR PROPOSAL" means a bona fide written
Transaction Proposal for at least a majority of the outstanding fully-diluted
shares of Company Common Stock or for all or substantially all of the
consolidated assets of Company made by a Third Party after the date hereof for
which all necessary financing is committed in full and which, if accepted, is
reasonably likely to be consummated and taking into account all legal, financial
and regulatory aspects of the proposal and the person making such proposal,
including the relative expected consummation date, is financially superior to
the holders of Company Common Stock as compared to the Merger.
(b) Unless this Agreement shall have been terminated in accordance with
Section 8.1 Company shall not amend, modify or waive any provision of the
Company Rights Agreement, and shall not take any action to redeem the Company
Rights or render the Company Rights inapplicable to any transaction other than
the transactions to be effected pursuant to this Agreement, which is reasonably
likely to reduce the likelihood of or delay the consummation of the Merger, or
result in any increase in the costs or decrease in the benefits to Parent of the
Merger, or affect the capitalization of Parent or any of its affiliates after
the Merger.
6.9 PUBLICITY. Company, on the one hand, and Parent and Sub, on the other
hand, will consult with each other before holding any press conferences, analyst
calls or other meetings or discussions and before issuing any press releases or
other public announcements or statements regarding the transactions contemplated
hereby or by the Support Agreement or the Receivables Agreements. The parties
will provide each other the opportunity to review and comment upon any press
release or other public announcement or statement with respect to the
transactions contemplated by this Agreement, the Support Agreement or the
Receivables Agreements, including the Merger, and shall not issue any such press
release or other public announcement or statement prior to such consultation,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange. The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof. In addition, Company shall, and shall
cause its Subsidiaries to, (a) consult with Parent regarding communications with
shareholders and employees relating to the transactions contemplated hereby,
(b) provide Parent with shareholder lists of Company and (c) allow and
facilitate Parent contact with shareholders of Company.
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6.10 STOCKHOLDER LITIGATION. The parties to this Agreement shall cooperate
and consult with one another, to the fullest extent possible, in connection with
any stockholder litigation against any of them or any of their respective
directors or officers with respect to the transactions contemplated by this
Agreement, the Support Agreement or the Receivables Agreements. In furtherance
of and without in any way limiting the foregoing, each of the parties shall use
its respective reasonable best efforts to prevail in such litigation so as to
permit the consummation of the transactions contemplated by this Agreement in
the manner contemplated by this Agreement. Notwithstanding the foregoing,
Company agrees that it will not compromise or settle any litigation commenced
against it or its directors or officers relating to this Agreement, the Support
Agreement or the Receivables Agreements or the transactions contemplated hereby
or thereby (including the Merger) without Parent's prior written consent, which
shall not be unreasonably withheld.
6.11 ANTI-TAKEOVER PROVISIONS. (a) Each party will take all steps
necessary to exempt (or continue the exemption of) the Merger and the other
transactions contemplated hereby and by the Support Agreement and the
Receivables Agreements from, and challenge the validity of the MBCA (including
Sections 302A.671, 302A.673 and 302A.675 thereof), as now or hereafter in
effect.
(b) The Board of Directors of Company shall take all further action (in
addition to that referred to in Section 3.24), if any, necessary in order to
render the Company Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement.
6.12 STOP TRANSFER. Company acknowledges and agrees to be bound by and
comply with the provisions of Section 3(c) of the Support Agreement as if a
party thereto with respect to transfers of record ownership of shares of Company
Common Stock and agrees to notify the transfer agent for any such shares and
provide such documentation and do such other things as may be necessary to
effectuate the provisions of such agreement.
6.13 [Intentionally Omitted]
6.14 AGREED UPON PROCEDURES. Immediately after the date of this Agreement,
Parent shall engage Ernst & Young LLP ("E&Y"), at Parent's expense, to conduct
the procedures set forth in Exhibit B hereto and to render to Parent in writing
(with a copy to Company) a report with respect thereto. Parent shall instruct
E&Y to complete its report as promptly as practicable, but in any event within
40 days of the date of this Agreement.
6.15 [Intentionally Omitted]
6.16 TAX SCHEDULES. Prior to the Closing Date, Company shall use
reasonable best efforts to cooperate with Parent and assist Parent in preparing
schedules reasonably acceptable to Parent that accurately set forth as of the
Effective Time (i) the tax basis of the assets held by Company and its
Subsidiaries; (ii) the amount of each item of deferred tax liability and
deferred tax assets included on Company's audited financial statements for
fiscal 1998; and (iii) details of any accrual for contingent tax liabilities of
Company and its Subsidiaries. Parent shall engage, at Parent's expense, Ernst &
Young LLP or another accounting firm reasonably acceptable to Company to prepare
the Schedules described in this Section 6.16.
6.17 LISTING. Prior to the Effective Time, Parent shall file a listing
application with a national securities exchange with respect to the RVOs issued
or issuable in connection with the Merger and shall use all reasonable efforts
to have such RVOs approved for quotation on such national securities exchange.
6.18 EMPLOYEE RETENTION. Prior to the Effective Time, at Parent's request
Company shall establish a key employee retention program upon terms reasonably
satisfactory to Parent and Company. Company shall establish a liability in
accordance with GAAP on its books and records in connection with any such
retention program.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) COMPANY SHAREHOLDER APPROVAL. The Company Shareholder Approval shall
have been obtained in accordance with applicable law.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated,
issued or enforced by any court of competent jurisdiction or Governmental Entity
which prohibits, prevents, materially restricts or makes illegal the
consummation of the Merger or the Receivables Agreements, which has not been
vacated, dismissed or withdrawn prior to the Effective Time. Parent and Company
shall use their reasonable best efforts to have any of the foregoing, vacated,
dismissed or withdrawn by the Effective Time.
(c) HSR ACT. The applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) EFFECTIVENESS OF THE FORM S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated by the SEC and not
concluded or withdrawn.
7.2 CONDITIONS TO COMPANY'S OBLIGATIONS TO EFFECT THE MERGER. The
obligations of Company to effect the Merger are subject to the satisfaction at
or prior to the Effective Time of the following additional conditions:
(a) The representations of Parent and Sub contained in this Agreement,
shall have been true and correct (in all material respects, in the case of
representations and warranties not already qualified as to materiality by their
terms) when made and shall be true and correct (in all material respects, in the
case of representations and warranties not already qualified as to materiality
by their terms) at and as of the Effective Time as though made on and as of such
date (except (i) for changes specifically permitted by this Agreement and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date), and Company
shall have received a certificate of the Chief Executive Officer or the
President and Chief Operating Officer of Parent to the foregoing effect.
(b) Parent and Sub shall have performed and complied with in all material
respects their obligations under this Agreement to be performed or complied with
on or prior to the Effective Time, and Company shall have received a certificate
of the Chief Executive Officer or the President and Chief Operating Officer of
Parent to the foregoing effect.
7.3 CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) The representations of Company contained in this Agreement shall have
been true and correct when made and shall be true and correct (in all material
respects, in the case of representations and warranties not already qualified as
to materiality by their terms) at and as of the Effective Time as though made on
and as of such date (except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date), and Parent shall have received a certificate of the Chief
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Executive Officer, the Senior Executive Vice President and Chief Financial
Officer or the Executive Vice President, Controller and Chief Accounting Officer
of Company to the foregoing effect.
(b) Company shall have performed and complied with in all material respects
its obligations under this Agreement to be performed or complied with on or
prior to the Effective Time, and Parent shall have received a certificate of the
Chief Executive Officer, the Senior Executive Vice President and Chief Financial
Officer or the Executive Vice President, Controller and Chief Accounting Officer
of Company to the foregoing effect.
(c) All Requisite Regulatory Approvals shall have been obtained and be in
effect at the Effective Time.
(d) Neither Parent, Sub nor any of their affiliates shall have become an
"Acquiring Person", and no "Stock Acquisition Date", "Distribution Date", or
"Triggering Event" (as such terms are defined in the Company Rights Agreement)
shall have occurred pursuant to the Company Rights Agreement.
(e) The number of Dissenting Shares as of the Effective Time shall be less
than 10% of the number of shares of Company Common Stock outstanding at the
Effective Time.
(f) Any consent required of, or notice or other document required to be
delivered to, FSA in connection with the transactions contemplated hereby or by
the Receivables Agreements pursuant to the Securitization Agreements shall have
been obtained or given and be in effect at the Effective Time.
(g) All consents or approvals of or filings with any third party which are
necessary to consummate the transactions contemplated by this Agreement shall
have been obtained and shall be in full force and effect, other than such
consents, approvals or filings the failure of which to have been obtained or
made could not, individually or in the aggregate, be reasonably expected to have
a Material Adverse Effect on Company or the Surviving Corporation.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the shareholders of Company
of the matters presented in connection with the Merger:
(a) by mutual consent of Parent and Company;
(b) by either Parent or the Board of Directors of Company if (i) any
Governmental Entity of competent jurisdiction which must grant a Requisite
Regulatory Approval the receipt of which is a condition to the Obligations of
Parent and Sub pursuant to Section 7.3(c) has denied such approval and such
denial has become final and nonappealable or any Governmental Entity of
competent jurisdiction shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable, PROVIDED, HOWEVER, that
the right to terminate this Agreement under this Section 8.1(b)(i) shall not be
available to any party whose failure to comply with Section 6.2 or any other
provision of this Agreement has been the cause of such action, (ii) the Company
Shareholder Approval shall not have been received at the Company Shareholders
Meeting duly called and held or (iii) the Effective Time shall not have occurred
on or before 180 days after the execution by all parties of this Agreement (the
"TERMINATION DATE"), PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 8.1(b)(iii) shall not be available to any party
whose failure to fulfill any obligations under this Agreement has been the
primary cause of the failure of the Effective Time to occur on or before the
Termination Date until ten business days after such failure has been cured.
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(c) by the Board of Directors of Company, if, prior to Effective Time,
(i) Parent or Sub shall have failed to perform in any material respect any of
their obligations under this Agreement to be performed at or prior to such date
of termination, which failure to perform is not cured or is incapable of being
cured within 10 days after the receipt by Parent of written notice of such
failure, (ii) any representation or warranty of Parent or Sub contained in this
Agreement shall not be true and correct (except for changes permitted by this
Agreement and those representations which address matters only as of a
particular date shall remain true and correct as of such date), except, in any
case, such failures to be true and correct which are not reasonably likely to
materially adversely affect Parents's or Sub's ability to complete the Merger,
PROVIDED, that such failure to be true and correct is not cured or is incapable
of being cured within 10 days after the receipt by Parent of written notice of
such failure or (iii) prior to the Company Shareholder Approval, upon five
business days' prior irrevocable written notice to Parent, in order to accept an
unsolicited Superior Proposal; PROVIDED, HOWEVER, that (A) such notice shall
include a copy of any proposed or definitive documentation relating to such
Superior Proposal (including all financing documentation), and shall otherwise
specify all material terms, conditions and other information with respect
thereto and (B) prior to any such termination, Company shall, if requested by
Parent in connection with any revised proposal Parent might make, negotiate in
good faith for such five business day period with Parent, and such third party
proposal remains a Superior Proposal after taking into account any revised
proposal during such five business day period; and PROVIDED, FURTHER, that it
shall be a condition to termination pursuant to this Section 8.1(c)(iii) that
Company shall have made the payment of the fee to Parent required by Section
8.2(c) and the payment in respect of Parent Expenses required by Section 8.2(b);
(d) by Parent, if, prior to Effective Time, (i) Company shall have failed
to perform in any material respect any of its obligations under this Agreement
to be performed at or prior to such date of termination, which failure to
perform is not cured or is incapable of being cured within 10 days after the
receipt by Company of written notice of such failure, (ii) any representation or
warranty of Company contained in this Agreement shall not be true and correct
(except for changes permitted by this Agreement and those representations which
address matters only as of a particular date shall remain true and correct as of
such date), except, in any case, such failures to be true and correct which are
not reasonably likely to materially adversely affect Company's ability to
complete the Merger, PROVIDED, that such failure to be true and correct is not
cured or is incapable of being cured within ten days after the receipt by
Company of written notice of such failure, (iii) the Board of Directors of
Company withdraws or materially modifies or changes its recommendation of this
Agreement and/or transactions contemplated hereby (including the Merger) in a
manner adverse to Parent or Sub or approves, accepts or recommends another
Transaction Proposal or fails to reconfirm such recommendation if so requested
by Parent, within 10 business days following such request; (iv) (A) if a
Transaction Proposal that is publicly disclosed shall have been commenced,
publicly proposed or communicated to Company which contains a proposal as to
price (without regard to the specificity of such price proposal) and
(B) Company shall not have rejected such Acquisition Proposal within 10 business
days after the date its existence first becomes publicly disclosed; (v) Parent,
Sub or any of their affiliates shall have become an "Acquiring Person", or a
"Stock Acquisition Date", "Distribution Date", or "Triggering Event" (as such
terms are defined in the Company Rights Agreement) shall have occurred pursuant
to the Company Rights Agreement; or (vi) the conclusions of E&Y set forth in its
report rendered to Parent pursuant to Section 6.14 hereof shall not be
reasonably consistent with information previously provided E&Y or Parent by
Company; PROVIDED, HOWEVER, that any termination by Parent pursuant to Section
8.1(d) (vi) must occur within 45 days after the date of this Agreement.
8.2 EFFECT OF TERMINATION. (a) In the event of termination of this
Agreement by either Parent or Company as provided in Section 8.1, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, and this Agreement
shall forthwith become void and have no effect, and none of Parent, Company, any
of
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their respective affiliates or any of the officers or directors of any of them
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except that (i) Section 6.3(c), this
Section 8.2 and Article IX shall survive any termination of this Agreement,
(ii) notwithstanding anything to the contrary contained in this Agreement,
neither Parent nor Company shall be relieved or released from any liabilities or
damages arising out of its breach of any provision of this Agreement and
(iii) Company shall pay to Parent the Termination Fee (as defined below) and
Parent Expenses (as defined below), if applicable, in accordance with this
Section 8.2.
(b) In addition to any other amounts which may be payable to Parent
pursuant to any other paragraph of this Section 8.2, Company shall, following
the termination of this Agreement pursuant to Section 8.1(c)(iii) or pursuant to
Section 8.1(d)(iii), (iv) or (v) promptly, but in no event later than one
business day following written notice thereof, together with reasonable
supporting documentation, reimburse Parent, in an aggregate amount of up to $1
million, for all out-of-pocket expenses and fees (including reasonable fees
payable to all counsel, accountants, financial advisors, financial printers,
experts and consultants), whether incurred prior to, concurrently with or after
the execution of this Agreement (up to the date of termination), in connection
with the preparation, negotiation and execution of this Agreement and the other
agreements contemplated hereby and the consummation of the transactions
contemplated by this Agreement (collectively, the "PARENT EXPENSES").
(c) In the event that this Agreement is terminated by Parent pursuant to
clause (d)(iii), (d)(iv) or (d)(v) of Section 8.1 or by Company pursuant to
Section 8.1(c)(iii), Company shall pay to Parent by wire transfer of immediately
available funds to an account designated by Parent on the next business day
following such termination an amount equal to $8 million (the "TERMINATION
FEE").
(d) If a Transaction Proposal relating to more than 15% of the outstanding
fully diluted Company Common Stock or any other class of equity securities or
more than 15% of the consolidated assets of Company is commenced, publicly
disclosed, publicly proposed or otherwise communicated or made known to Company
at any time on or after the date of this Agreement and prior to the termination
hereof, and this Agreement is terminated pursuant to clause (b)(ii) or (b)(iii)
(but, in the case of clause (b)(iii), only if the Company Shareholders Meeting
has not been duly held) of Section 8.1; clause (d)(i) of Section 8.1 based on a
breach of Section 6.8 or a willful failure to perform any other obligation
hereunder; or clause (d)(ii) of Section 8.1 based on a willful act or omission
causing a representation or warranty not to be true, and within 12 months of the
date of such termination, Company enters into a definitive agreement with
respect to, or consummates, any Transaction Proposal relating to more than 15%
of the outstanding fully diluted Company Common Stock or any other class of
equity securities or more than 15% of the consolidated assets of Company, then
Company shall pay to Parent an amount equal to the Termination Fee, plus any
amount paid by Parent pursuant to Section 8.2(d), concurrently with the earlier
of the execution of such definitive agreement or the consummation of such
Transaction Proposal.
(e) In the event that this Agreement is terminated pursuant to clause
(b)(i), (b)(ii), (b)(iii), (c)(i), (c)(ii), (d)(i), (d)(ii) or (d)(vi) of
Section 8.1 and Company paid a prepayment penalty resulting from a failure to
deliver receivables to the prefunded Securitization Trust 1999-C originated by
Company, Parent shall pay to Company the amount of such penalty paid by Company
(but not in excess of $3,759,560), provided, that no amount shall be payable
pursuant to this Section 8.2(e) in the event that Company is obligated to pay
the Termination Fee.
(f) If Company or Parent fails to pay any amounts due under this Section
8.2 within the time periods specified herein, such party shall pay to the other
all costs and expenses (including legal fees and expenses) incurred by the other
party in connection with any action or proceeding (including the filing of any
lawsuit) taken by it to collect such unpaid amounts, together with interest on
such unpaid amounts at the publicly announced prime or base lending rate of The
Chase Manhattan Bank from the date such amounts were required to be paid until
the date actually received by Parent.
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8.3 AMENDMENT. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the shareholders of Company;
PROVIDED, HOWEVER, that after any approval of the transactions contemplated by
this Agreement by the shareholders of Company, there may not be, without further
approval of such shareholders, any amendment of this Agreement which changes the
amount or the form of the consideration to be delivered to the holders of
Company Common Stock hereunder other than as contemplated by this Agreement.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) waive compliance with
any of the agreements or conditions contained herein; PROVIDED, HOWEVER, that
after any approval of the transactions contemplated by this Agreement by the
shareholders of Company, there may not be, without further approval of such
shareholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the holders of Company Common Stock hereunder other than as
contemplated by this Agreement. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than pursuant to the
Support Agreement and the Receivables Agreements, which shall terminate in
accordance with their respective terms) shall survive the Effective Time, except
for those covenants and agreements contained herein and therein which by their
terms apply in whole or in part after the Effective Time.
9.2 EXPENSES. Subject to Section 8.2(b), all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense; PROVIDED, HOWEVER, that the costs
and expenses of printing and mailing the Form S-4 and the Proxy
Statement/Prospectus, and all filing and other fees paid to the SEC in
connection with the Merger, shall be borne equally by Company and Parent.
9.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given (i) when delivered personally to the
recipient, (ii) when sent to the recipient by telecopy (receipt electronically
confirmed by sender's telecopy machine) if during normal business hours of the
recipient, otherwise on the next business day, (iii) one business day after the
date when sent to the recipient by reputable express courier service (charges
prepaid), or (iv) seven business days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
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prepaid. Such notices and other communications shall be sent to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent, to:
Associates First Capital Corporation
250 Carpenter Freeway
Irving, TX 75062
Attention: General Counsel
Fax: (972) 652-5798
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: David J. Sorkin, Esq.
Fax: (212) 455-2502
and
(b) if to Company, to:
Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: General Counsel
Fax: (612) 996-0671
with copies to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: William J. Grant, Jr., Esq.
Fax: (212) 728-8111
and
Dorsey & Whitney LLP
220 South Sixth Street
20th Floor
Minneapolis, MN 55402-1498
Attention: William B. Payne, Esq.
Fax: (612) 340-2868
9.4 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require
Company, Parent or any of their respective Subsidiaries or affiliates to take
any action which would violate any applicable law, rule or regulation.
9.5. COUNTERPARTS; FACSIMILE. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts
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have been signed by each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same counterpart. This
Agreement may be executed by facsimile signatures of the parties hereto.
9.6 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the Support
Agreement, the Confidentiality Agreement and the Receivables Agreements (each of
which is enforceable in accordance with the specific terms of the respective
agreement).
9.7 GOVERNING LAW. Except to the extent that the laws of the State of
Minnesota are mandatorily applicable to the Merger, this Agreement shall be
governed and construed in accordance with the laws of the State of New York,
without regard to any applicable principles of conflicts of law.
9.8 SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.9 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
specifically provided in Section 6.5, this Agreement (including the documents
and instruments referred to herein) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
9.10 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court or New York
State court sitting in the Borough of Manhattan, City of New York, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.11 SCHEDULES. The disclosure of any item in a Disclosure Schedule to
this Agreement shall be deemed to be a disclosure for all purposes of this
Agreement on any other Schedule on which it is specifically referenced or
identified, but shall expressly not be deemed to constitute an admission by
either party, or to otherwise imply or concede that any item is material or
would (or would be reasonably likely to) have a Material Adverse Effect for
purposes of this Agreement.
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IN WITNESS WHEREOF, Parent, Sub and Company have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
<TABLE>
<S> <C> <C>
ASSOCIATES FIRST CAPITAL CORPORATION
By: /s/ ROY GUTHRIE
-----------------------------------------
Name: Roy Guthrie
Title: Senior Executive Vice President and
Chief Financial Officer
AFCC NEWCO, INC.
By: /s/ ROY GUTHRIE
-----------------------------------------
Name: Roy Guthrie
Title: Senior Executive Vice President and
Chief Financial Officer
ARCADIA FINANCIAL LTD.
By: /s/ RICHARD GREENAWALT
-----------------------------------------
Name: Richard Greenawalt
Title: Chief Executive Officer
</TABLE>
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<PAGE>
EXHIBIT A
TERMS OF RESIDUAL VALUE OBLIGATION
<TABLE>
<S> <C>
PAYMENT RIGHT: Each RVO shall represent the right to receive an
amount in cash equal to a PRO RATA share of 50% of
the Residual Cash Flow remaining after application
of the Residual Cash Flow to the AFCC Amount, RVO
Expenses and Litigation Expenses, calculated
pursuant to, and subject to, the terms below.
PAYMENT DATES: Amounts allocated for payment on the RVOs as
provided below under "Application of Residual Cash
Flow", if any, will be paid on the second business
day after the Distribution Dates in April, July,
October and January to holders of record on the
immediately preceding March 1, June 1, September 1
or December 1, respectively, commencing with the
first payment date following the Effective Time
(or, if the Effective Time is after the record date
in respect of such first payment date, then on the
next succeeding payment date).
APPLICATION OF RESIDUAL CASH FLOW: On the business day after each Distribution Date
occurring after the Effective Time (each such day,
an "ALLOCATION DATE"), the Residual Cash Flow
received on such Distribution Date (including as a
result of the addition of Litigation Reserve
Interest) shall be allocated as follows:
1. 100% to reduce RVO Expenses incurred after the
third preceding Distribution Date and on or prior
to the second preceding Distribution Date
(provided, that, in the case of the first
allocation date occurring after the Effective Time,
the allocation shall be 100% to reduce RVO Expenses
incurred on or after November 12, 1999 and on or
prior to the second preceding Distribution Date),
PLUS any RVO Expenses incurred on or prior to the
third preceding Distribution Date which were not
previously reduced by a prior allocation of
Residual Cash Flow, until such amounts have been
reduced to zero, then
2. 100% of the remaining Residual Cash Flow, if
any, to reduce Litigation Expenses incurred after
the third preceding Distribution Date and on or
prior to the second preceding Distribution Date
(provided, that, in the case of the first
allocation date occurring after the Effective Time,
the allocation shall be 100% to reduce Litigation
Expenses incurred on or after November 12, 1999 and
on or prior to the second preceding Distribution
Date), PLUS any Litigation Expenses incurred on or
prior to the third preceding Distribution Date
which were not previously reduced by a prior
allocation of Residual Cash Flow, until such
amounts have been reduced to zero, then
</TABLE>
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<TABLE>
<S> <C>
3. 100% of remaining Residual Cash Flow, if any, to
reduce the AFCC Amount until the AFCC Amount has
been reduced to zero, then
4. 50% of remaining Residual Cash Flow, if any, to
make payments on the RVOs.
In addition to, and after giving effect to, the
allocation of Residual Cash Flow described above,
on the second allocation date following the final
disposition of all litigation giving rise to
Damages and the final determination of all legal
fees and expenses related thereto, an amount equal
to the excess, if any, of (i) the aggregate amount
of Residual Cash Flow allocated to reduce
Litigation Expenses pursuant to clause 2 above
(calculated after giving effect to the allocation
of Residual Cash Flow described above on such
allocation date) over (ii) the aggregate amount of
Damages, shall be allocated as follows:
1. 100% to reduce the AFCC Amount (calculated after
giving effect to the allocation of Residual Cash
Flow described above on such allocation date) until
the AFCC Amount has been reduced to zero, then
2. 50% of remaining Residual Cash Flow, if any, to
make payments on the RVOs.
Amounts allocated on an Allocation Date to make
payments on the RVOs shall accrue interest from and
including such Allocation Date through and
including the day prior to the payment of such
amounts at 30-day LIBOR as in effect at the end of
the day on such Allocation Date.
Notwithstanding the foregoing, Parent shall not be
required to make payments on the RVOs on any
payment date if the amount of the payment that
would otherwise be made on each RVO would be less
than $0.05. Any amounts not paid in accordance with
this paragraph shall (i) be carried over to the
next payment date, (ii) continue to accrue interest
as provided in the immediately preceding paragraph
and (iii) subject to the immediately preceding
sentence, be allocated 100% to make payments on the
RVOs.
RESIDUAL CASH FLOW: "RESIDUAL CASH FLOW" means the cash actually
released from the "spread accounts" established in
connection with the securitization transactions
listed on Annex 1 to this Exhibit A on or after
September 30, 1999 and the cash flow (net of
losses, servicing expenses and funding costs
pursuant to the terms of the related securitization
transactions) from any receivables which were
securitized as of September 30, 1999 in connection
</TABLE>
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<TABLE>
<S> <C>
with such securitization transactions but are no
longer securitized for any reason; PROVIDED, that
Residual Cash Flow shall be INCREASED on each
Distribution Date after the Effective Time by the
amount of Litigation Reserve Interest, if any, for
the period ending on the day prior to such
Distribution Date and beginning on the immediately
preceding Distribution Date; and, PROVIDED,
FURTHER, that Residual Cash Flow shall be decreased
on each Distribution Date after September 30, 1999
by all cash actually released from the "spread
accounts" established in connection with the
securitization transactions listed on Annex 1 to
this Exhibit A during the period ending on the day
prior to such Distribution Date and beginning on
the immediately preceding Distribution Date which
cash is contractually required to be applied other
than as provided above under "Application of
Residual Cash Flow". In calculating Residual Cash
Flow, GAP insurance will be included and
repossession expenses (other than repossession
expenses paid to an auction house) will be
excluded.
"LITIGATION RESERVE INTEREST", for any period,
means interest accrued during such period on the
excess, if any, of (i) the aggregate amount of
Residual Cash Flow allocated to reduce Litigation
Expenses over (ii) the aggregate amount of Damages
(such excess being calculated as of the day after
the allocation date during such period) at 30-day
LIBOR as of the end of the first day of such
period.
AFCC AMOUNT; AFCC AMOUNT INTEREST: "AFCC AMOUNT" means $512 million; PROVIDED, that
such amount shall be (i) DECREASED on the Closing
Date by the amount of the Residual Cash Flow
generated on and after September 30, 1999 and prior
to the Closing Date, (ii) INCREASED on each
Distribution Date by the amount of AFCC Amount
Interest for the period ending on the day prior to
such Distribution Date and beginning on the
immediately preceding Distribution Date and (iii)
DECREASED (but without duplication of any decrease
pursuant to clause (i) above) on each allocation
date by the amount of Residual Cash Flow allocated
to the reduction of the AFCC Amount on such date as
provided above under "Application of Residual Cash
Flow".
"AFCC AMOUNT INTEREST", for any period, means
interest accrued during such period at the rate of
1.25% per month on the AFCC Amount as of the first
day of such period (after giving effect to any
increase in the AFCC Amount on such date). AFCC
Amount Interest shall be calculated on a 30/360 day
basis.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
LISTING: Parent shall use reasonable efforts to arrange for
the listing of the RVOs on a national securities
exchange.
NUMBER OF RVOS TO BE ISSUED: In accordance with the Agreement to which this
Exhibit A is attached. The RVOs shall be issued
pursuant to a RVO agreement between Parent and a
trustee (or person acting in a similar capacity)
reasonably acceptable to Company.
MINIMUM PAYMENT: None.
DETERMINATIONS: Parent's determination of all amounts and other
matters shall be final and conclusive in the
absence of manifest error; PROVIDED, that Parent
shall engage its independent auditors to review the
calculations and determinations made by Parent to
the same extent as Parent engages its independent
auditors to perform a similar function with respect
to securitization transactions effected by or for
the benefit of Parent and its Subsidiaries.
All interest amounts other than AFCC Amount
Interest shall be calculated on the basis of the
actual number of days elapsed and a 360-day year.
SERVICING: Parent shall, or shall cause its affiliates to,
service or arrange for the servicing of the
receivables giving rise to Residual Cash Flow in
accordance with customary business practices and
Parent's applicable policies and procedures and, if
Parent or any of its Subsidiaries is then
servicing, or arranging for the servicing of,
indirectly originated automobile loans, consistent
with such servicing.
CLEAN-UP CALL: Parent shall have an option to purchase for fair
value (as determined in good faith by Parent) all
outstanding RVOs at any time when the amount of the
receivables remaining in the securitization trusts
listed in Annex 1 to this Exhibit A is less than or
equal to 5% of the amount of the receivables
remaining in the securitization Trusts listed in
Annex 1 to this Exhibit A as of the Closing Date.
DEFINITIONS:
TERMS NOT DEFINED: Capitalized terms used in this Exhibit A without
definition shall have the definitions assigned
thereto in the Agreement to which this Exhibit A is
attached.
DISTRIBUTION DATE: Each "distribution date" in connection with the
securitization transactions listed on Annex 1 to
this Exhibit A.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
RVO EXPENSES: "RVO EXPENSES" means the sum of (i) the out-of-
pocket fees and expenses paid or incurred directly
or indirectly by Parent relating to the issuance
and administration of the RVOs (including, without
limitation, fees and expenses of printing
certificates representing the RVOs; fees and
expenses of the transfer agent and
registrar/trustee for the RVOs; and related legal
expenses), but excluding accounting fees and
expenses, audit fees, if any, and the fees and
expenses relating to the listing of the RVOs on a
national securities exchange and (ii) the
reasonable actual or reasonably imputed cost to
Parent of providing alternative credit support in
connection with the early release of cash from the
"spread accounts" established in connection with
the securitization transactions listed on Annex 1
to this Exhibit A; PROVIDED, that the costs
referenced in this clause (ii) shall be included as
RVO Expenses as such costs are incurred (or deemed
to be incurred if imputed) or, at Parent's
election, in a lump sum calculated on a present
value basis (discounted at the rate of 1.25% per
month) at the time of the related release of cash.
LITIGATION EXPENSES; LITIGATION INTEREST: "LITIGATION EXPENSES" means the sum of (i)
$10,000,000 and (ii) the, amount of all damages,
judgments, settlements, defense costs and other
expenses paid or incurred by Company, Parent or any
of their Affiliates after the date of the Agreement
to which this Exhibit A is attached in connection
with any litigation brought by or on behalf of
shareholders of Company or by or in the right of
Company, net of insurance proceeds, if any (the
amount referred to in this clause (ii) being
referred to herein as, "DAMAGES"); PROVIDED, that
the aggregate amount of the Damages shall be deemed
to be INCREASED on each Distribution Date by the
amount of Litigation Interest for the period ending
on the day prior to such Distribution Date and
beginning on the immediately preceding Distribution
Date.
"LITIGATION INTEREST", for any period, means
interest accrued during such period on the amount
of Damages as of the first day of such period
(after giving effect to any increase in Damages on
such date) at 30-day LIBOR as of the end of the
first day of such period.
</TABLE>
A-1-5
<PAGE>
<TABLE>
<S> <C>
ANNEX 1
Olympic Automobile Receivables Trust, 1994-B
Olympic Automobile Receivables Trust, 1995-A
Olympic Automobile Receivables Trust, 1995-B
Olympic Automobile Receivables Trust, 1995-C
Olympic Automobile Receivables Trust, 1995-D
Olympic Automobile Receivables Trust, 1995-E
Olympic Automobile Receivables Trust, 1996-A
Olympic Automobile Receivables Trust, 1996-B
Olympic Automobile Receivables Trust, 1996-C
Olympic Automobile Receivables Trust, 1996-D
Olympic Automobile Receivables Trust, 1997-A
Arcadia Automobile Receivables Trust, 1997-B
Arcadia Automobile Receivables Trust, 1997-C
Arcadia Automobile Receivables Trust, 1997-D
Arcadia Automobile Receivables Trust, 1998-A
Arcadia Automobile Receivables Trust, 1998-B
Arcadia Automobile Receivables Trust, 1998-C
Arcadia Automobile Receivables Trust, 1998-D
Arcadia Automobile Receivables Trust, 1998-E
Arcadia Automobile Receivables Trust, 1999-A
Arcadia Automobile Receivables Trust, 1999-B
Arcadia Automobile Receivables Trust, 1999-C
</TABLE>
A-1-6
<PAGE>
APPENDIX B
FORM OF RESIDUAL VALUE OBLIGATIONS AGREEMENT
<PAGE>
APPENDIX B
FORM OF RESIDUAL VALUE OBLIGATIONS AGREEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSOCIATES FIRST CAPITAL CORPORATION
AND
THE CHASE MANHATTAN BANK,
AS TRUSTEE
---------------------
RESIDUAL VALUE OBLIGATIONS AGREEMENT
DATED AS OF [ ], 2000
------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I
Definitions and Incorporation by Reference.................. 1
SECTION 1.1. Definitions.................................. 1
SECTION 1.2. Other Definitions............................ 3
SECTION 1.3. Incorporation by Reference of Trust Indenture
Act..................................................... 3
SECTION 1.4. Rules of Construction........................ 4
ARTICLE II
The RVOs.................................................... 4
SECTION 2.1. Form, Dating................................. 5
SECTION 2.2. Execution and Authentication................. 6
SECTION 2.3. Registrar and Paying Agent................... 6
SECTION 2.4. Paying Agent To Hold Money in Trust.......... 6
SECTION 2.5. Lists of Holders............................. 6
SECTION 2.6. Transfer and Exchange........................ 6
SECTION 2.7. Mutilated, Destroyed, Lost or Stolen RVOs.... 7
SECTION 2.8. Outstanding RVOs............................. 8
SECTION 2.9. Cancellation................................. 8
SECTION 2.10. RVO Payments................................ 8
SECTION 2.11. CUSIP Numbers............................... 9
ARTICLE III
Covenants................................................... 9
SECTION 3.1. Payment of RVOs.............................. 9
SECTION 3.2. Maintenance of Office or Agency.............. 9
SECTION 3.3. Corporate Existence.......................... 9
SECTION 3.4. Compliance Certificate....................... 10
SECTION 3.5. Further Instruments and Acts................. 10
SECTION 3.6. Statement by Officers as to Default.......... 10
SECTION 3.7. Servicing of Receivables..................... 10
SECTION 3.8. Amendment to Designated Securitization
Transactions............................................ 10
SECTION 3.9. Use of Program Spread Account and Tag
Accounts................................................ 10
SECTION 3.10. Disclosure.................................. 11
ARTICLE IV
Successor Company........................................... 11
SECTION 4.1. Merger and Consolidation..................... 11
SECTION 4.2. Assignment................................... 11
ARTICLE V
Redemption of RVOs.......................................... 12
SECTION 5.1. Optional Redemption.......................... 12
SECTION 5.2. Election to Redeem........................... 12
SECTION 5.3. Notice of Redemption......................... 12
SECTION 5.4. Deposit of Redemption Price.................. 13
SECTION 5.5. RVOs Payable on Redemption Date.............. 13
ARTICLE VI
Defaults and Remedies....................................... 13
SECTION 6.1. Events of Default............................ 13
SECTION 6.2. Other Remedies............................... 14
SECTION 6.3. Waiver of Past Defaults...................... 14
SECTION 6.4. Control by Majority.......................... 14
SECTION 6.5. Limitation on Suits.......................... 14
</TABLE>
i
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<TABLE>
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PAGE
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<S> <C>
SECTION 6.6. Rights of Holders to Receive Payment......... 15
SECTION 6.7. Collection Suit by Trustee................... 15
SECTION 6.8. Trustee May File Proofs of Claim............. 15
SECTION 6.9. Priorities................................... 15
SECTION 6.10. Undertaking for Costs....................... 15
ARTICLE VII
Trustee..................................................... 16
SECTION 7.1. Duties of Trustee............................ 16
SECTION 7.2. Rights of Trustee............................ 16
SECTION 7.3. Individual Rights of Trustee................. 17
SECTION 7.4. Trustee's Disclaimer......................... 17
SECTION 7.5. Notice of Defaults........................... 17
SECTION 7.6. Reports by Trustee to Holders................ 17
SECTION 7.7. Compensation and Indemnity................... 17
SECTION 7.8. Replacement of Trustee....................... 18
SECTION 7.9. Successor Trustee by Merger.................. 19
SECTION 7.10. Eligibility; Disqualification............... 19
SECTION 7.11. Trustee's Application for Instruction from
the Company............................................. 19
ARTICLE VIII
Amendments.................................................. 19
SECTION 8.1. Without Consent of Holders................... 19
SECTION 8.2. With Consent of Holders...................... 20
SECTION 8.3. Compliance with Trust Indenture Act.......... 20
SECTION 8.4. Revocation and Effect of Consents and
Waivers................................................. 20
SECTION 8.5. Notation on or Exchange of RVOs.............. 21
SECTION 8.6. Trustee To Sign Amendments................... 21
SECTION 8.7. Payment for Consents......................... 21
ARTICLE IX
Miscellaneous............................................... 21
SECTION 9.1. Trust Indenture Act Controls................. 21
SECTION 9.2. Notices...................................... 21
SECTION 9.3. Communication by Holders with other
Holders................................................. 22
SECTION 9.4. Certificate and Opinion as to Conditions
Precedent............................................... 22
SECTION 9.5. Statements Required in Certificate or
Opinion................................................. 22
SECTION 9.6. When RVOs Disregarded........................ 22
SECTION 9.7. Rules by Trustee, Paying Agent and
Registrar............................................... 23
SECTION 9.8. Legal Holidays............................... 23
SECTION 9.9. GOVERNING LAW................................ 23
SECTION 9.10. No Recourse Against Others.................. 23
SECTION 9.11. Successors.................................. 23
SECTION 9.12. Multiple Originals.......................... 23
SECTION 9.13. Variable Provisions......................... 23
SECTION 9.14. Qualification of Agreement.................. 23
SECTION 9.15 Security for Purposes of Uniform Commercial
Code.................................................... 23
SECTION 9.16. Table of Contents; Headings................. 23
EXHIBIT A Form of Residual Value Obligation
ANNEX I Designated Securitization Transactions
</TABLE>
ii
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
INDENTURE
TIA SECTION SECTION
- ----------- ----------
<S> <C>
310(a)(1)................................................... 7.10
(a)(2)................................................... 7.10
(a)(3)................................................... N.A.
(a)(4)................................................... N.A.
(b)...................................................... 7.8; 7.10
(c)...................................................... N.A.
311(a)...................................................... 7.11
(b)...................................................... 7.11
(c)...................................................... N.A.
312(a)...................................................... 2.5
(b)...................................................... 9.3
(c)...................................................... 9.3
313(a)...................................................... 7.6
(b)(1)................................................... N.A.
(b)(2)................................................... 7.6
(c)...................................................... 7.6
(d)...................................................... 7.6
314(a)...................................................... 3.2; 9.2
(b)...................................................... N.A.
(c)(1)................................................... 9.4
(c)(2)................................................... 9.4
(c)(3)................................................... N.A.
(d)...................................................... N.A.
(e)...................................................... 9.5
315(a)...................................................... 7.1
(b)...................................................... 7.5; 9.2
(c)...................................................... 7.1
(d)...................................................... 7.1
(e)...................................................... 6.10
316(a)(last sentence)....................................... 9.6
(a)(1)(A)................................................ 6.4
(a)(1)(B)................................................ 6.3
(a)(2)................................................... N.A.
(b)...................................................... 6.6
317(a)(1)................................................... 6.7
(a)(2)................................................... 6.8
(b)...................................................... 2.4
318(a)...................................................... 9.1
</TABLE>
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N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Agreement.
iii
<PAGE>
RESIDUAL VALUE OBLIGATIONS AGREEMENT, dated as of [ ], 2000, between
ASSOCIATES FIRST CAPITAL CORPORATION, a Delaware corporation (the "COMPANY"),
and The Chase Manhattan Bank, a New York banking corporation (the "TRUSTEE"), as
Trustee.
The Company has duly authorized the creation of an issue of residual value
obligations (hereinafter called "RVOS"), of substantially the tenor and amount
hereinafter set forth (including in the form of RVO attached hereto as
Exhibit A), and to provide therefor the Company has duly authorized the
execution and delivery of this Agreement.
Pursuant to the Agreement and Plan of Merger, by and among the Company, AFCC
Newco, Inc. and Arcadia Financial Ltd., dated as of November 12, 1999 (the
"MERGER AGREEMENT"), the Company proposes to issue and deliver RVOs to holders
of common stock of Arcadia Financial Ltd. as part of the Merger Consideration
(as defined in the Merger Agreement) payable pursuant to the terms and
conditions of the Merger Agreement.
Each party hereto agrees as follows for the benefit of the other party
hereto and for the equal and ratable benefit of the Holders (as defined below).
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"Accrued RVO Payment Amount" shall have the meaning specified in the form of
RVO attached as Exhibit A.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Agreement as amended or supplemented from time to
time.
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions are authorized or required by law to close
in New York City; PROVIDED, that with respect to the determinations in
connection with the definition of One-Month LIBOR, such day is also a day for
trading by and between banks in U.S. dollar deposits in the interbank eurodollar
market.
"Closing Date" means the date on which the closing takes place under the
Merger Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Associates First Capital Corporation or a successor.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Securitization Transactions" shall have the meaning specified in
the form of RVO attached as Exhibit A.
"DTC" means The Depository Trust Company, its nominees and their respective
successors and assigns, or such other depository institution hereinafter
appointed by the Company.
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<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excess Litigation Reserve" shall have the meaning specified in
Section 2(a)(ii) of the form of RVO attached as Exhibit A.
"Fiscal Year" means the fiscal year of the Company ending on December 31 of
each year.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of this Agreement, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Holder" means the Person in whose name a RVO is registered in the RVO
Register.
"Legal Holiday" has the meaning ascribed to it in SECTION 9.8.
"Merger Agreement" shall have the meaning specified in the preamble hereto.
"Officer" means the Chairman of the Board, the President, any Vice President
(however designated), the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by the Chairman or a Vice
Chairman of the Board of Directors, the President or a Vice President (however
designated), and by the Treasurer, an Assistant Treasurer, the Comptroller, an
Assistant Comptroller, the Secretary or an Assistant Secretary, of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal counsel,
who may be an employee of or counsel to the Company.
"Optional Redemption Price" shall have the meaning specified in the form of
RVO attached as Exhibit A.
"Payment Date" shall have the meaning specified in the form of RVO attached
as Exhibit A.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, government, agency or political subdivision thereof or other
entity.
"Redemption Date" means, with respect to the redemption of RVOs pursuant to
ARTICLE V, the date of redemption with respect thereto, which date must be a
Payment Date.
"Residual Cash Flow" shall have the meaning specified in the form of RVO
attached as Exhibit A.
"RVO" shall have the meaning specified in the preamble hereto.
"RVO Payments" shall have the meaning specified in the form of RVO attached
as Exhibit A.
"RVO Register" means the register of RVOs, maintained by the Trustee,
pursuant to SECTION 2.3.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Distribution Date" shall mean the 15(th) day of each
calendar month, or if such 15(th) day is not a Business Day, the next succeeding
Business Day.
"Subsidiary" of any Person means any corporation, association, partnership,
joint venture, limited liability company or other business entity of which more
than 50% of the total voting power of shares of capital stock or other interests
(including partnership and joint venture interests) entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees
B-2
<PAGE>
thereof is at the time owned or controlled, directly or indirectly, by (1) such
Person, (2) such Person and one or more Subsidiaries of such Person or (3) one
or more Subsidiaries of such Person. Unless otherwise specified herein, each
reference to a Subsidiary will refer to a Subsidiary of the Company.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939 (15
U.S.C. SectionSection77aaa-77bbbb), as amended and as in effect on the date of
this Agreement.
"Trustee" means the party named as such in this Agreement until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" shall mean, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this
Agreement.
SECTION 1.2. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
TERM DEFINED IN
- ---- ----------
<S> <C>
"Agent Member".............................................. Section2.1
"Assignee Company".......................................... Section4.2
"Authenticating Agent"...................................... Section2.2
"Bankruptcy Custodian"...................................... Section6.1
"Bankruptcy Law"............................................ Section6.1
"Company Order"............................................. Section2.2
"Corporate Trust Office".................................... Section3.2
"Event of Default".......................................... Section6.1
"Global RVOs"............................................... Section2.1
"Paying Agent".............................................. Section2.3
"Registrar"................................................. Section2.3
"Spread Account Agreement".................................. Exhibit A
"Successor Company"......................................... Section4.1
</TABLE>
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. This
Agreement is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Agreement. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the RVOs.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Agreement.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Agreement that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
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<PAGE>
SECTION 1.4. RULES OF CONSTRUCTION. Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(3) "including" means including without limitation; and
(4) words in the singular include the plural and words in the plural include
the singular.
ARTICLE II
THE RVOS
SECTION 2.1. FORM, DATING AND TERMS. (a) The RVOs shall be issued
substantially in the form of EXHIBIT A (which is hereby incorporated by
reference and made a part of this Agreement), including appropriate legends as
set forth in SECTION 2.1(C).
Payments on the RVOs shall be payable, at the option of the Company, by
(i) check mailed to addresses of the Persons entitled thereto as such addresses
shall appear on the RVO Register or (ii) wire transfer to an account located in
the United States maintained by the payee. Payments in respect of RVOs
represented by a global RVO certificate registered in the name of DTC (the
"GLOBAL RVOS") will be made by wire transfer of immediately available funds to
the accounts specified by DTC.
The RVO certificates may have notations, legends or endorsements required by
law, stock exchange rule or usage, in addition to those set forth on EXHIBIT A
and in SECTION 2.1(C). The Company and the Trustee shall approve the forms of
the RVO certificates and any notation, endorsement or legend on them. Each RVO
certificate shall be dated the date of its authentication. The terms of the RVOs
set forth in EXHIBIT A are part of the terms of this Agreement and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Agreement, expressly agree to be bound by such terms.
(b) DENOMINATIONS. The RVOs shall be issuable only in fully registered form
and only in denominations of a whole RVO and any integral multiple thereof.
(c) DTC LEGEND. If requested or required by or on behalf of DTC, the Global
RVOs shall bear the following legend on the face thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN."
(d) BOOK-ENTRY PROVISIONS. (i) This SECTION 2.1(D) shall apply only to
Global RVOs deposited with the Trustee, as custodian for DTC.
(ii) Each Global RVO initially shall (x) be registered in the name of DTC or
the nominee of DTC, (y) be delivered to the Trustee as custodian for DTC and
(z) bear the legend set forth in SECTION 2.1(C).
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<PAGE>
(iii) Members of, or participants in, DTC ("AGENT MEMBERS") shall have no
rights under this Agreement with respect to any Global RVO held on their behalf
by DTC or by the Trustee as the custodian of DTC or under such Global RVO, and
DTC may be treated by the Company, the Trustee and any agent of the Company or
the Trustee as the absolute owner of such Global RVO for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
DTC or impair, as between DTC and its Agent Members, the operation of customary
practices of DTC governing the exercise of the rights of a Holder of a
beneficial interest in any Global RVO.
(iv) The registered Holder of a Global RVO may grant proxies and otherwise
authorize any person, including Agent Members and persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Agreement or the RVOs.
(e) DEFINITIVE RVOS. In connection with the exchange of a portion of an RVO
in certificated form (a "DEFINITIVE RVO") for a beneficial interest in a Global
RVO, the Trustee shall cancel such Definitive RVO, and the Company shall
execute, and the Trustee shall authenticate and deliver, to the transferring
Holder a new Definitive RVO representing the amount of RVOs not so transferred.
SECTION 2.2. EXECUTION AND AUTHENTICATION. One Officer shall sign the
certificates representing the RVOs for the Company by manual or facsimile
signature. If an Officer whose signature is on a RVO certificate no longer holds
that office at the time the Trustee authenticates the RVO certificate, the RVO
certificate shall be valid nevertheless.
A RVO certificate shall not be valid until an authorized signatory of the
Trustee manually authenticates the RVO certificate. The signature of the Trustee
on a RVO certificate shall be conclusive evidence that such RVO has been duly
and validly authenticated and issued under this Agreement.
On the Closing Date and on each date thereafter as necessary, in connection
with satisfying the rights of persons holding Dissenting Shares (as defined in
the Merger Agreement), the Trustee shall authenticate and make available for
delivery RVOs for original issue, upon a written order of the Company signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company (the "COMPANY ORDER"). Such Company Order shall specify
the number of RVOs to be authenticated and the date on which the original issue
of RVOs is to be authenticated. The aggregate number of RVOs which may be
authenticated and delivered under this Agreement is limited to the number of
RVOs specified in such Company Order or Orders, except for RVOs authenticated
and delivered upon registration or transfer of, or in exchange for, or in lieu
of, other RVOs pursuant to SECTION 2.1, SECTION 2.2, SECTION 2.6, SECTION 2.7 OR
SECTION 8.5. Notwithstanding anything to the contrary contained in this
Agreement, all RVOs issued under this Agreement shall vote and consent together
on all matters as one class.
The Trustee may appoint an agent (the "AUTHENTICATING AGENT") reasonably
acceptable to the Company to authenticate the RVOs. Unless limited by the terms
of such appointment, any such Authenticating Agent may authenticate RVOs
whenever the Trustee may do so. Each reference in this Agreement to
authentication by the Trustee includes authentication by the Authenticating
Agent.
In case the Company, pursuant to ARTICLE IV, shall be consolidated or merged
with or into any other Person or shall convey, transfer, lease or otherwise
dispose of its properties and assets substantially as an entirety to any Person
or shall assign its rights hereunder or under the RVOs to any Person, and the
successor Person resulting from such consolidation, or surviving such merger, or
into which the Company shall have been merged, or the Person which shall have
received a conveyance, transfer, lease or other disposition as aforesaid or the
Assignee Company, as the case may be, shall have executed a supplement hereto
with the Trustee pursuant to ARTICLE IV, any of the RVOs authenticated or
delivered prior to such consolidation, merger, conveyance, transfer, lease or
other
B-5
<PAGE>
disposition may, from time to time, at the request of the successor Person
(including an Assignee Company), be exchanged for other RVOs executed in the
name of the successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the RVOs surrendered
for such exchange and representing a like amount of RVOs; and the Trustee, upon
Company Order of the successor Person, shall authenticate and deliver RVOs as
specified in such order for the purpose of such exchange. If RVOs shall at any
time be authenticated and delivered in any new name of a successor Person
pursuant to this SECTION 2.2 in exchange or substitution for or upon
registration of transfer of any RVOs, such successor Person, at the option of
the Holders but without expense to them, shall provide for the exchange of all
RVOs at the time outstanding for RVOs authenticated and delivered in such new
name.
SECTION 2.3. REGISTRAR AND PAYING AGENT. The Company shall maintain an
office or agency where RVOs may be presented for registration of transfer or for
exchange (the "REGISTRAR") and an office or agency where RVOs may be presented
for payment (the "PAYING AGENT"). The Company shall cause each of the Registrar
and the Paying Agent to maintain an office or agency in the Borough of
Manhattan, The City of New York. The Registrar shall keep a register of the RVOs
and of their transfer and exchange (the "RVO REGISTER"). The Company may have
one or more co-registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Agreement, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Agreement that relate to such agent. The Company shall notify
the Trustee of the name and address of each such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to SECTION 7.7. The
Company or any of its Subsidiaries may act as Paying Agent, Registrar,
co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying Agent for
the RVOs.
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST. By no later than 10:00
a.m (New York City time) on the date on which any payment on any RVO is due and
payable, the Company shall deposit with the Paying Agent a sum sufficient to
make such payment when due. The Company shall require each Paying Agent (other
than the Trustee) to agree in writing that such Paying Agent shall hold in trust
for the benefit of Holders of RVOs or the Trustee all money held by such Paying
Agent for payments on the RVOs and shall notify the Trustee in writing of any
default by the Company in making any such payment. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate the money held by it as
Paying Agent and hold it as a separate trust fund. The Company at any time may
require a Paying Agent (if other than the Trustee) to pay all money held by it
to the Trustee and to account for any funds disbursed by such Paying Agent. Upon
complying with this Section, the Paying Agent (if other than the Trustee, the
Company or a Subsidiary) shall have no further liability for the money delivered
to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with
respect to the Company, the Trustee shall serve as Paying Agent for the RVOs.
SECTION 2.5. LISTS OF HOLDERS. The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders. If the Trustee is not the Registrar, or to the
extent otherwise required under the TIA, the Company shall furnish to the
Trustee, in writing at least seven Business Days before each Payment Date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Holders.
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF RVOS.
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(i) When RVOs are presented to the Registrar with a request to register a
transfer or to exchange them for RVOs representing an equal number of RVOs in
other denominations, the Registrar, subject to the other terms and conditions of
this ARTICLE II, shall register the transfer or make the exchange if its or the
Company's reasonable requirements for such transfer or exchange are met. To
permit registrations of transfers and exchanges, the Company shall, subject to
the other terms and conditions of this ARTICLE II, execute and the Trustee shall
authenticate RVOs at the Registrar's or co-registrar's request.
(ii) No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessments or similar
governmental charges payable upon exchange or transfer pursuant to
SECTION 8.5).
(iii) Prior to the due presentation for registration of transfer of any RVO,
the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar
may deem and treat the person in whose name a RVO is registered as the absolute
owner of such RVO for the purpose of receiving payments on such RVO and for all
other purposes whatsoever and none of the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar shall be affected by notice to the
contrary.
(iv) All RVOs issued upon any transfer or exchange pursuant to the terms of
this Agreement shall evidence the same obligations and shall be entitled to the
same benefits under this Agreement as the RVOs surrendered upon such transfer or
exchange.
(b) NO OBLIGATION OF THE TRUSTEE. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global RVO, any member
of, or any participant in, DTC or any other Person with respect to the accuracy
of the records of DTC or its nominee or of any participant or member thereof,
with respect to any ownership interest in the RVOs or with respect to the
delivery to any participant, member, beneficial owner or other Person (other
than DTC) of any notice (including any notice of redemption) or the payment of
any amount or delivery of any RVOs (or other security or property) under or with
respect to such RVOs. All notices and communications to be given to the Holders
and all payments to be made to Holders in respect of the RVOs shall be given or
made only to or upon the order of the registered Holders (which shall be DTC or
its nominee in the case of a Global RVO). The rights of beneficial owners in any
Global RVO shall be exercised only through DTC subject to the applicable rules
and procedures of DTC. The Trustee may rely and shall be fully protected in
relying upon information furnished by DTC with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Agreement or under applicable law with respect to any transfer of any interest
in any RVO (including any transfers between or among DTC participants, members
or beneficial owners in any Global RVO) other than to require delivery of such
certificates and other documentation or evidence as are expressly required by,
and to do so if and when expressly required by, the terms of this Agreement, and
to examine the same to determine substantial compliance as to form with the
express requirements hereof.
SECTION 2.7. MUTILATED, DESTROYED, LOST OR STOLEN RVOS. If a mutilated RVO
is surrendered to the Registrar or if the Holder of a RVO claims that the RVO
has been lost, destroyed or wrongfully taken, the Company shall, if the
requirements of Section 8-405 of the Uniform Commercial Code are met, issue and
the Trustee shall authenticate a replacement RVO so long as the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a RVO is replaced, and, in the absence of notice to the Company or
the Trustee that such RVO has been acquired by a bona fide purchaser, the
Company shall execute and upon
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Company Order the Trustee shall authenticate and make available for delivery, in
exchange for any such mutilated RVO or in lieu of any such destroyed, lost or
stolen RVO, a new RVO of like tenor and amount of RVOs, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen RVO has become or is
about to become due and payable pursuant to ARTICLE V, the Company in its
discretion may, instead of issuing a new RVO, pay such RVO.
Upon the issuance of any new RVO under this Section, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee) in connection therewith.
Every new RVO issued pursuant to this Section in lieu of any mutilated,
destroyed, lost or stolen RVO shall constitute an original additional
contractual obligation of the Company and any other obligor upon the RVOs,
whether or not the mutilated, destroyed, lost or stolen RVO shall be at any time
enforceable by anyone, and shall be entitled to all benefits of this Agreement
equally and proportionately with any and all other RVOs duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen RVOs.
SECTION 2.8. OUTSTANDING RVOS. RVOs outstanding at any time are all RVOs
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation and those described in this Section as not outstanding. A
RVO shall not cease to be outstanding in the event the Company or a Subsidiary
of the Company holds the RVO, PROVIDED, HOWEVER, that (i) for purposes of
determining which are outstanding for consent or voting purposes hereunder, RVOs
shall cease to be outstanding in the event the Company or an Affiliate of the
Company holds the RVO and (ii) in determining whether the Trustee shall be
protected in making a determination whether the Holders of the requisite number
of outstanding RVOs are present at a meeting of Holders of RVOs for quorum
purposes or have consented to or voted in favor of any request, demand,
authorization, direction, notice, consent, waiver, amendment or modification
hereunder, or relying upon any such quorum, consent or vote, only RVOs which a
Trust Officer of the Trustee actually knows to be held by the Company or an
Affiliate of the Company shall not be considered outstanding.
If a RVO is replaced pursuant to SECTION 2.7, it ceases to be outstanding
unless the Trustee and the Company receive proof satisfactory to them that the
replaced RVO is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with this
Agreement on a redemption date, money sufficient to pay all amounts payable on
that date with respect to the RVOs to be redeemed and the Paying Agent is not
prohibited from paying such money to the Holders on that date pursuant to the
terms of this Agreement, then on and after that date such RVOs cease to be
outstanding and no additional RVO Payments shall be made.
SECTION 2.9. CANCELLATION. The Company at any time may deliver RVOs to the
Trustee for cancellation. The Registrar and the Paying Agent shall forward to
the Trustee any RVOs surrendered to them for registration of transfer, exchange
or payment. The Trustee and no one else shall cancel all RVOs surrendered for
registration of transfer, exchange, payment or cancellation and dispose of such
RVOs in accordance with its internal policies. The Trustee shall provide
evidence of destruction to the Company upon request. The Company may not issue
new RVOs to replace RVOs it has paid or delivered to the Trustee for
cancellation for any reason other than in connection with a transfer or
exchange.
SECTION 2.10. RVO PAYMENTS. RVO Payments on any RVO which are payable, and
are punctually paid or duly provided for, on any Payment Date shall be paid to
the Person in whose name
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such RVO (or one or more predecessor RVOs) is registered at the close of
business on the regular record date for such RVO Payments.
SECTION 2.11. CUSIP NUMBERS. The Company in issuing the RVOs may use
"CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use
"CUSIP" numbers in notices as a convenience to Holders; PROVIDED, HOWEVER, that
any such notice may state that no representation is made as to the correctness
of such numbers either as printed on the RVOs or as contained in any notice and
that reliance may be placed only on the other identification numbers printed on
the RVOs, and any such notice or action shall not be affected by any defect in
or omission of such CUSIP numbers. The Company shall promptly notify the Trustee
of any change in the CUSIP numbers.
ARTICLE III
COVENANTS
SECTION 3.1. PAYMENT OF RVOS. The Company shall promptly pay the amounts
payable, if any, on the RVOs on the dates and in the manner provided in the RVOs
and in this Agreement. Amounts payable on the RVOs shall be considered paid on
the date due if on such date the Trustee or the Paying Agent holds in accordance
with this Agreement money sufficient to pay all such amounts then due and the
Trustee or the Paying Agent, as the case may be, is not prohibited from paying
such money to the Holders of the RVOs on that date pursuant to the terms of this
Agreement.
Notwithstanding anything to the contrary contained in this Agreement, the
Company may, to the extent it is required to do so by law, deduct or withhold
income or other similar taxes or charges imposed by the United States of America
from amounts payable hereunder or under the RVOs.
SECTION 3.2. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain
in The City of New York, an office or agency where the RVOs may be presented or
surrendered for payment, where, if applicable, the RVOs may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the RVOs and this Agreement may be served. The office
or agency maintained by the Trustee in The City of New York (the "CORPORATE
TRUST OFFICE"), shall be such office or agency of the Company, unless the
Company shall designate and maintain some other office or agency for one or more
of such purposes. The Company shall give prompt written notice to the Trustee of
any change in the location of any such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as its agent to receive all
such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies (in or outside of The City of New York) where the RVOs may be
presented or surrendered for any or all such purposes and may from time to time
rescind any such designation; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and any change in the location of any such other office or agency.
SECTION 3.3. CORPORATE EXISTENCE. Subject to ARTICLE IV, the Company will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence and the material corporate rights (charter
and statutory) licenses and franchises of the Company; PROVIDED, HOWEVER, that
the Company shall not be required to preserve any such right, license or
franchise if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not, and will not be, disadvantageous
in any material respect to the Holders, and provided, further, the Company may
merge in accordance with SECTION 4.1.
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SECTION 3.4. COMPLIANCE CERTIFICATE. The Company shall deliver to the
Trustee within 120 days after the end of each Fiscal Year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default or Event of Default and whether or not the signers know
of any Default or Event of Default that occurred during such period. If one
exists, the certificate shall describe the Default or Event of Default, its
status and what action the Company is taking or proposes to take with respect
thereto. The Company also shall comply with TIA Section 314(a)(4).
SECTION 3.5. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Agreement.
SECTION 3.6. STATEMENT BY OFFICERS AS TO DEFAULT. The Company shall
deliver to the Trustee, as soon as possible and in any event within five days
after the Company becomes aware of the occurrence of any Event of Default or an
event which, with notice or the lapse of time or both, would constitute an Event
of Default, an Officers' Certificate setting forth the details of such Event of
Default or Default and the action which the Company proposes to take with
respect thereto.
SECTION 3.7. SERVICING OF RECEIVABLES. The Company shall, or shall cause
its Affiliates to, service or arrange for the servicing of the receivables
securitized pursuant to the Designated Securitization Transactions (subject to
the right of Financial Security Assurance Inc. or any other Person under the
Designated Securitization Transactions to terminate the servicer of the
receivables) and any Other Transaction Receivables in accordance with customary
business practices and the Company's applicable policies and procedures and, if
the Company or any of its Subsidiaries is then servicing, or arranging for the
servicing of, indirectly originated motor vehicle retail installment sales
contracts, consistent in all material respects with such servicing.
SECTION 3.8. AMENDMENT TO DESIGNATED SECURITIZATION TRANSACTIONS. The
Company shall not, and shall not permit its Subsidiaries to, amend or modify the
terms of any agreement entered into in connection with the Designated
Securitization Transactions unless such an amendment or modification is made in
accordance with reasonable business practices and with a good faith intent other
than to reduce RVO Payments; PROVIDED, that the Company shall not, and shall not
permit its Subsidiaries to, amend or modify the terms of any agreement entered
into in connection with the Designated Securitization Transactions to increase
the servicing fees payable thereunder unless such increased servicing fees are
payable to a Person other than the Company and its Subsidiaries and the Company
or its Subsidiaries have been terminated as servicer by Financial Security
Assurance Inc. or any other Person in accordance with the terms of the
Designated Securitization Transactions.
SECTION 3.9. USE OF PROGRAM SPREAD ACCOUNT AND TAG ACCOUNTS. The Company
and its subsidiaries on any day may not:
(i) transfer from the Program Spread Account (as defined in the Spread
Account Agreement) to any and all Tag Accounts (as defined in the Spread
Account Agreement) amounts in excess of those required by the agreements
entered into in connection with the Designated Securitization
Transactions or specified in Section 2.09 of the Spread Account
Agreement (provided that such amounts may be rounded up to the nearest
thousand dollars); provided, that the Company and its Subsidiaries may
transfer from the Program Spread Account to any and all Tag Accounts
amounts consistent with the practices of Arcadia Financial Ltd. and its
subsidiaries prior to the date of this Agreement, or
(ii) keep on deposit in the Program Spread Account amounts in excess of
those that may be necessary or advisable in the reasonable judgment of
the Company for the transactions described in clause (i) above;
provided, that the Company and its subsidiaries may keep on
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deposit in the Program Spread Accounts amounts consistent with the
practices of Arcadia Financial Ltd. and its subsidiaries prior to the
date of this Agreement.
SECTION 3.10. DISCLOSURE. Unless the SEC shall require differently by
rule, regulation, order or interpretation or otherwise, the Company shall
publicly disclose in respect of each fiscal quarter of the Company, not later
than the time it files its Quarterly Report on Form 10-Q with the SEC in respect
of each of its first three fiscal quarters in each fiscal year and not later
than the time it files its Annual Report on Form 10-K in respect of its fourth
fiscal quarter in each fiscal year (or, in the event the Company is not then
required to make such filings with the SEC, not later than the time it would be
required to make such filings if it were so required), the information
contemplated to be disclosed by the form of certificate attached hereto as
Exhibit B, such disclosure to be substantially in the form of such certificate.
ARTICLE IV
SUCCESSOR COMPANY
SECTION 4.1. MERGER AND CONSOLIDATION. The Company shall not consolidate
with or merge with or into, or convey, transfer or lease all or substantially
all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "SUCCESSOR
COMPANY") shall be a corporation, partnership, trust or limited liability
company organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor
Company (if not the Company) shall expressly assume, by supplemental
agreement, executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations, duties, commitments and covenants of the
Company under the RVOs and this Agreement;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
(iii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental agreement, if any, comply with this
Agreement and that all conditions precedent herein provided relating to such
transaction have been complied with.
For purposes of this SECTION 4.1, the sale, lease, conveyance, assignment,
transfer, or other disposition of all or substantially all of the properties and
assets of one or more Subsidiaries of the Company, which properties and assets,
if held by the Company instead of such Subsidiaries, would constitute all or
substantially all of the properties and assets of the Company on a consolidated
basis, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Agreement.
Notwithstanding anything in this SECTION 4.1 to the contrary, the Company
may subject only to clauses (i) and (iii) above, merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction to realize tax or other benefits.
Any consolidation, merger, conveyance, transfer or lease in compliance with
this SECTION 4.1 shall not be restricted by SECTION 4.2.
SECTION 4.2. ASSIGNMENT. The Company shall not assign its obligations
hereunder or under the RVOs to any Person, unless:
(i) the assignee (the "ASSIGNEE COMPANY") shall be a corporation,
partnership, trust or limited liability company organized and existing under
the laws of the United States of America, any State
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thereof or the District of Columbia and the Assignee Company shall expressly
assume, by supplemental agreement, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under
the RVOs and this Agreement;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(iii) either (A) immediately after giving effect to such transaction,
the Assignee Company shall have a consolidated net worth that is not less
than the lower of (1) $1 billion or (2) the consolidated net worth of the
Company at such time or (B) the Company shall remain secondarily liable, by
guarantee or otherwise, for the payment obligations of the Assignee Company
under this Agreement and the RVOs;
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such assignment and
such supplemental agreement comply with this Agreement and that all
conditions precedent herein provided relating to such transaction have been
complied with; and
(v) the Assignee Company or one of its Affiliates shall be the successor
to the Company's and its Subsidiaries' interest in the Residual Cash Flow
and the Designated Securitization Transactions.
The Assignee Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Agreement.
Nothing in this Agreement or in the RVOs other than this SECTION 4.2 shall
restrict the Company's ability to assign its rights and/or obligations under
this Agreement and/or the RVOs.
ARTICLE V
REDEMPTION OF RVOS
SECTION 5.1. OPTIONAL REDEMPTION. The RVOs may be redeemed on any Payment
Date, in whole but not in part, at the option of the Company and subject to and
in accordance with the terms and conditions set forth in this ARTICLE V and in
SECTION 6 of the form of RVOs attached as EXHIBIT A hereto, which are hereby
incorporated by reference and made a part of this Agreement.
SECTION 5.2. ELECTION TO REDEEM. The election of the Company to redeem the
RVOs pursuant to SECTION 5.1 shall be evidenced by a Board Resolution.
SECTION 5.3. NOTICE OF REDEMPTION. Notice of redemption shall be given in
the manner provided for in SECTION 9.2 not less than 30 nor more than 60 days
prior to the Redemption Date, to each Holder. The Trustee shall give notice of
redemption in the Company's name and at the Company's expense; PROVIDED,
HOWEVER, that the Company shall deliver to the Trustee, at least 45 days prior
to the Redemption Date, an Officers' Certificate notifying the Trustee of the
Redemption Date, requesting that the Trustee give such notice of redemption to
each Holder and setting forth the information to be stated in such notice.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Optional Redemption Price,
(3) that on the Redemption Date the Optional Redemption Price will
become due and payable and, unless the Company defaults in making the
redemption payment and any RVO Payment due and payable on the Redemption
Date, that, following the Redemption Date, no further RVO Payments shall be
made,
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(4) the place or places where the RVOs are to be surrendered for payment
of the Optional Redemption Price, if any,
(5) the name and address of the Paying Agent,
(6) that RVOs must be surrendered to the Paying Agent to collect the
Optional Redemption Price, and
(7) the CUSIP number of the RVOs, and that no representation is made as
to the accuracy or correctness of the CUSIP number, if any, listed in such
notice or printed on the RVOs.
SECTION 5.4. DEPOSIT OF REDEMPTION PRICE. Prior to the Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in SECTION 2.4) an amount of money sufficient to pay the Optional
Redemption Price.
SECTION 5.5. RVOS PAYABLE ON REDEMPTION DATE. Notice of redemption having
been given as aforesaid, the RVOs shall, on the Redemption Date, become due and
payable at the Optional Redemption Price and from and after such date (unless
the Company shall default in the payment of the Optional Redemption Price and
any RVO Payments due on and payable on such date) no further RVO Payments shall
be made. Upon surrender of any such RVO for redemption in accordance with said
notice, such RVO shall be paid by the Company at the Optional Redemption Price.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" occurs if:
(1) the Company defaults in the payment of any RVO Payment on any RVO
when the same becomes due and payable, and such default continues for a
period of 30 days;
(2) the Company defaults in the payment of the Optional Redemption Price
on any RVO when the same becomes due and payable pursuant to ARTICLE V of
this Agreement and SECTION 6 of the RVO;
(3) the Company fails to comply with any of its other covenants or
agreements in the RVOs or this Agreement and such failure continues for
60 days after the notice specified below (with such notice only given after
the expiry of the periods permitted to perform an obligation);
(4) by the order of a court of competent jurisdiction a Bankruptcy
Custodian (as defined below) of the Company or of any of the property of the
Company shall be appointed and such Bankruptcy Custodian shall not have been
discharged within a period of 60 days, or, by decree of such a court, the
Company shall be adjudicated bankrupt or insolvent or any substantial part
of the property of the Company shall have been sequestered and such decree
shall have continued undischarged and unstayed for a period of 60 days after
the entry thereof, or a petition to declare bankrupt or to reorganize the
Company pursuant to any of the provisions of the Bankruptcy Law (as defined
below), as it now exists, or as it may hereafter be amended, or pursuant to
any other similar statute applicable to the Company, as now or hereafter in
effect, shall be filed against the Company (and, in the case of any such
petition filed pursuant to any provision of a statute which requires the
approval of such petition by a court, shall be approved by such a court) and
shall not be dismissed within 60 days after such filing; or
(5) the Company shall file a petition in voluntary bankruptcy under any
provision of any bankruptcy law or shall consent to the filing of any
bankruptcy or reorganization petition against it under any similar law, or
(without limitation of the generality of the foregoing) the Company shall
file a petition or answer or consent seeking relief or assisting in seeking
relief for the Company in
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a proceeding under any of the provisions of the Bankruptcy Law, as it now
exists or as it may hereafter be amended, or pursuant to any other similar
statute applicable to the Company, as now or hereafter in effect, or an
answer admitting the material allegations of a petition filed against it in
such a proceeding, or the Company or its directors or stockholders shall
take action looking to the dissolution or liquidation of the Company (except
in connection with a consolidation, merger, sale or conveyance pursuant to
ARTICLE IV hereof), or shall admit in writing its inability to pay its debts
generally as they become due, or shall consent to the appointment of a
Bankruptcy Custodian of it or of all or any part of its property.
The term "BANKRUPTCY LAW" means Title 11, UNITED STATES CODE, or any similar
Federal law for the relief of debtors. The term "BANKRUPTCY CUSTODIAN" means any
receiver, trustee, liquidator or similar official under any Bankruptcy Law.
Notwithstanding the foregoing, a Default under clause (3) of this
SECTION 6.1 will not constitute an Event of Default until the Trustee or the
Holders of at least 50% of the then outstanding RVOs notify the Company of the
Default and the Company does not cure such Default within the time specified in
said clause (3) after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state that such notice is a "Notice of
Default".
SECTION 6.2. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payments
payable on the RVOs or to enforce the performance of any provision of the RVOs
or this Agreement.
The Trustee may maintain a proceeding even if it does not possess any of the
RVOs or does not produce any of them in the proceeding. A delay or omission by
the Trustee or any Holder in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver of
or acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
SECTION 6.3. WAIVER OF PAST DEFAULTS. The Holders of a majority of the
outstanding RVOs by notice to the Trustee may waive, by their consent
(including, without limitation consents obtained in connection with a purchase
of, or tender offer or exchange offer for, RVOs), an existing Default or Event
of Default and its consequences except (i) a Default or Event of Default in the
payment of amounts payable on a RVO or (ii) a Default or Event of Default in
respect of a provision that under SECTION 8.2 cannot be amended without the
consent of each Holder affected. When a Default or Event of Default is waived,
it is deemed cured, but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any consequent right.
SECTION 6.4. CONTROL BY MAJORITY. The Holders of a majority of the
outstanding RVOs may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or this Agreement or, subject to SECTIONS 7.1
AND 7.2, that the Trustee determines is unduly prejudicial to the rights of
other Holders or would involve the Trustee in personal liability; PROVIDED,
HOWEVER, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to reasonable indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.5. LIMITATION ON SUITS. Subject to SECTION 6.6, a Holder may not
pursue any remedy with respect to this Agreement or the RVOs unless:
(1) the Holder gives to the Trustee written notice stating that an Event
of Default is continuing;
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(2) the Holders of at least 25% of the outstanding RVOs make a request
to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority of the outstanding RVOs do not give the
Trustee a direction that, in the opinion of the Trustee, is inconsistent
with such request during such 60-day period.
A Holder may not use this Agreement to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 6.6. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Agreement (including, without limitation, SECTION 6.5),
the right of any Holder to receive payments on the RVOs held by such Holder, on
or after the respective due dates expressed in the RVOs, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.
SECTION 6.7. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified
in SECTION 6.1(1) OR (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount then due and owing and the amounts provided for in
SECTION 7.7.
SECTION 6.8. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the Holders allowed in any
judicial proceedings relative to the Company, its Subsidiaries or its or their
respective creditors or properties and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Bankruptcy
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under SECTION 7.7.
SECTION 6.9. PRIORITIES. If the Trustee collects any money or property
pursuant to this ARTICLE VI, it shall pay out the money or property in the
following order:
FIRST: to the Trustee for amounts due under SECTION 7.7;
SECOND: to Holders for amounts due and unpaid on the RVOs, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the RVOs; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section. At least 15 days before such record date, the
Company shall mail to each Holder and the Trustee a notice that states the
record date, the payment date and amount to be paid.
SECTION 6.10. UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Agreement or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by the Company, a suit by a Holder pursuant to SECTION 6.6 or a
suit by Holders of more than 10% of the outstanding RVOs.
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<PAGE>
ARTICLE VII
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Agreement and use the same degree of care and skill in their exercise as
a prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Agreement and no implied covenants or
obligations shall be read into this Agreement against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement. However,
in the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the Trustee
shall examine such certificates and opinions to determine whether or not
they conform on their face to the requirements of this Agreement (but need
not confirm or investigate the accuracy of mathematical calculations or
other facts stated therein).
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to SECTION 6.4.
(d) Every provision of this Agreement that in any way relates to the Trustee
is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) No provision of this Agreement shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(h) Every provision of this Agreement relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.
(i) Unless otherwise specifically provided in this Agreement, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
SECTION 7.2. RIGHTS OF TRUSTEE. Subject to SECTION 7.1, (a) The Trustee
may conclusively rely on any document (whether in its original or facsimile
form) reasonably believed by it to be genuine and to
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<PAGE>
have been signed or presented by the proper party or parties. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on an
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to take
in good faith which it believes to be authorized or within its rights or powers,
unless the Trustee's conduct constitutes wilful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the advice or
opinion of counsel with respect to legal matters relating to this Agreement and
the RVOs shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual
or any other capacity may become the owner or pledgee of RVOs and may otherwise
deal with the Company or its Affiliates with the same rights it would have if it
were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent
may do the same with like rights. However, the Trustee must comply with SECTIONS
7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this Agreement
or the RVOs, it shall not be accountable for the Company's use of the proceeds
from the RVOs, and it shall not be responsible for any statement of the Company
in this Agreement or in any document issued in connection with the sale of the
RVOs or in the RVOs other than the Trustee's certificate of authentication.
SECTION 7.5. NOTICE OF DEFAULTS. If a Default or Event of Default occurs
and is continuing and if a Trust Officer has actual knowledge thereof, the
Trustee shall mail to each Holder notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment of amounts payable on any RVO (including payments pursuant to
the optional redemption provisions of such RVO), the Trustee may withhold the
notice if and so long as its board of directors, a committee of its board of
directors or a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Holders of RVOs.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each
May 15, beginning with the May 15 following the date of this Agreement, the
Trustee shall mail to each Holder of RVOs a brief report dated as of such
May 15 in accordance with, and to the extent required under Section 313 of the
TIA.
The Company agrees to notify promptly the Trustee whenever the RVOs become
listed on any stock exchange and of any delisting thereof.
SECTION 7.7. COMPENSATION AND INDEMNITY. The Company shall pay to the
Trustee from time to time reasonable compensation for its acceptance of this
Agreement and services hereunder as the Company and the Trustee shall from time
to time agree in writing. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, costs of preparing and
reviewing reports, certificates and other documents, costs of preparation and
mailing of notices to Holders and reasonable costs and expenses of counsel
retained by the Trustee, in addition to the compensation for its services. Such
expenses shall include the
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reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts.
The Company shall indemnify the Trustee for and hold it harmless against any
and all loss, liability, damages, claims or expense (including reasonable
attorneys' fees and expenses) incurred by it without negligence or wilful
misconduct on its part in connection with the acceptance and administration of
this trust and the performance of its duties hereunder, including the costs and
expenses of enforcing this Agreement (including this SECTION 7.7) and of
defending itself against any claims (whether asserted by any Holder, the Company
or otherwise). The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct or
negligence.
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the RVOs on all money or property held or collected
by the Trustee other than money or property held in trust to make payments on
particular RVOs.
The Company's payment obligations pursuant to this Section shall survive the
discharge of this Agreement. When the Trustee incurs expenses after the
occurrence of a Default specified in SECTION 6.1(4) or (5) with respect to the
Company, the expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE. The Trustee may resign at any time by
so notifying the Company. The Holders of a majority of the outstanding RVOs may
remove the Trustee by so notifying the Trustee and may appoint a successor
Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with SECTION 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or its
property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the Holders of a
majority of the outstanding RVOs and such Holders do not reasonably promptly
appoint a successor Trustee, or if a vacancy exists in the office of the Trustee
for any reason (the Trustee in such event being referred to herein as the
retiring Trustee), the Company shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to
the retiring Trustee and to the Company. Thereupon the resignation or removal of
the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Agreement. The
successor Trustee shall mail a notice of its succession to Holders of RVOs. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided for in SECTION 7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% of the outstanding RVOs may petition, at the Company's expense, any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with SECTION 7.10, any Holder of RVOs may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section, the
Company's obligations under SECTION 7.7 shall continue for the benefit of the
retiring Trustee.
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SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another Person, the resulting, surviving
or transferee Person without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Agreement, any of the RVOs shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such RVOs so authenticated; and in case at that
time any of the RVOs shall not have been authenticated, any successor to the
Trustee may authenticate such RVOs either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the RVOs or
in this Agreement provided that the certificate of the Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all
times satisfy the requirements of TIA Section310(a). The Trustee shall have a
combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with
TIA Section310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section310(b)(1) are met.
SECTION 7.11. TRUSTEE'S APPLICATION FOR INSTRUCTION FROM THE COMPANY. Any
application by the Trustee for written instructions from the Company may, at the
option of the Trustee, set forth in writing any action proposed to be taken or
omitted by the Trustee under this Agreement and the date on and/or after which
such action shall be taken or such omission shall be effective. The Trustee
shall not be liable for any action taken or suffered by, or omission of, the
Trustee in accordance with a proposal included in such application on or after
the date specified in such application (which date shall not be less than three
Business Days after the date any Officer actually receives such application,
unless any such Officer shall have consented in writing to any earlier date)
unless prior to taking any such action (or the effective date in the case of an
omission), the Trustee shall have received written instructions in response to
such application specifying the action to be taken, suffered or omitted.
ARTICLE VIII
AMENDMENTS
SECTION 8.1. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee may
amend this Agreement or the RVOs without notice to or consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with ARTICLE IV in respect of the assumption by a
Successor Company or an Assignee Company of an obligation of the Company
under this Agreement;
(3) to provide for uncertificated RVOs in addition to or in place of
certificated RVOs; PROVIDED, HOWEVER, that the uncertificated RVOs are
issued in registered form for purposes of Section 163(f) of the Code or in a
manner such that the uncertificated RVOs are described in
Section 163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the RVOs or to secure the RVOs,
including without limitation, as contemplated by SECTION 4.2;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
B-19
<PAGE>
(6) to comply with any requirements of the SEC in connection with
qualifying this Agreement under the TIA; or
(7) to make any change that does not adversely affect the rights of any
Holder.
After an amendment under this Section becomes effective, the Company shall
mail to Holders a notice briefly describing such amendment. The failure to give
such notice to all Holders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section.
SECTION 8.2. WITH CONSENT OF HOLDERS. The Company and the Trustee may
amend this Agreement or the RVOs without notice to any Holder but with the
written consent of the Holders of at least a majority of the RVOs then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, RVOs). However, without
the consent of each Holder affected, an amendment may not:
(1) reduce the percentage of outstanding RVOs whose Holders must consent
to an amendment;
(2) reduce the amount of an RVO Payment or extend the stated time for
payment of an RVO Payment;
(3) reduce the amount payable upon the redemption of any RVO or change
the time at which any RVO may or shall be redeemed as described above under
ARTICLE V or any similar provision, whether through an amendment to or
waiver of ARTICLE V, a definition or otherwise;
(4) make any RVO payable in money other than that stated in the RVO;
(5) impair the right of any Holder to receive any payment on such
Holder's RVOs on or after the due dates therefor or to institute suit for
the enforcement of any payment on or with respect to such Holder's RVOs; or
(6) make any change to the amendment or waiver provisions which require
each Holder's consent.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company shall
mail to Holders a notice briefly describing such amendment. The failure to give
such notice to all Holders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section.
SECTION 8.3. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to this
Agreement or the RVOs shall comply with the TIA as then in effect.
SECTION 8.4. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A consent to
an amendment or a waiver by a Holder shall bind the Holder and every subsequent
Holder of that RVO or portion of the RVO that evidences the same debt as the
consenting Holder's RVO, even if notation of the consent or waiver is not made
on the RVO. However, any such Holder or subsequent Holder may revoke the consent
or waiver as to such Holder's RVO or portion of the RVO if the Trustee receives
the notice of revocation before the date the amendment or waiver becomes
effective. After an amendment or waiver becomes effective, it shall bind every
Holder. An amendment or waiver shall become effective upon the execution of such
amendment or waiver by the Trustee.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to give their consent or take any
other action described above or required or permitted to be taken pursuant to
this Agreement. If a record date is fixed, then notwithstanding the immediately
preceding paragraph, those Persons who were Holders at such record date (or
their duly
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designated proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any such action,
whether or not such Persons continue to be Holders after such record date. No
such consent shall become valid or effective more than 120 days after such
record date.
SECTION 8.5. NOTATION ON OR EXCHANGE OF RVOS. If an amendment changes the
terms of a RVO, the Trustee may require the Holder of the RVO to deliver it to
the Trustee. The Trustee may place an appropriate notation on the RVO regarding
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the RVO shall issue and
the Trustee shall authenticate a new RVO that reflects the changed terms.
Failure to make the appropriate notation or to issue a new RVO shall not affect
the validity of such amendment.
SECTION 8.6. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this ARTICLE VIII if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to SECTIONS 7.1 AND 7.2) shall be fully authorized,
protected and incur no liability in relying upon, an Officers' Certificate and
an Opinion of Counsel stating that such amendment is authorized or permitted by
this Agreement.
SECTION 8.7. PAYMENT FOR CONSENTS. Neither the Company nor any Affiliate
of the Company shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Agreement or the RVOs unless such consideration is offered to
be paid to all Holders that so consent, waive or agree to amend (and, if
appropriate, tender their RVOs) in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. TRUST INDENTURE ACT CONTROLS. If any provision of this
Agreement limits, qualifies or conflicts with another provision which is
required or deemed to be included in this Agreement by the TIA, the provision
required or deemed by the TIA shall control.
SECTION 9.2. NOTICES. Any notice or communication shall be in writing and
delivered in person or mailed by first-class mail addressed as follows:
<TABLE>
<S> <C>
if to the Company:
Associates First Capital Corporation
250 Carpenter Freeway
Irving, TX 75062
Attention: General Counsel
Fax: (972) 652-5798
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attn: Alan D. Schnitzer, Esq.
Fax: (212) 455-2502
if to the Trustee:
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
The Chase Manhattan Bank
Capital Markets Fiduciary Services
450 W. 33(rd) Street
New York, NY 10001
Attn: Andrew M. Deck
Fax: (212) 946-8162
</TABLE>
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a registered Holder shall be mailed to
the Holder at the Holder's address as it appears on the registration books of
the Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 9.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may
communicate pursuant to TIA Section 312(b) with other Holders with respect to
their rights under this Agreement or the RVOs. The Company, the Trustee, the
Registrar and anyone else shall have the protection of TIA Section 312(c).
SECTION 9.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any
request or application by the Company to the Trustee to take or refrain from
taking any action under this Agreement, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 9.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Agreement shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such individual,
such covenant or condition has been complied with.
In giving such Opinion of Counsel, counsel may rely as to factual matters on
an Officers' Certificate or on certificates of public officials.
SECTION 9.6. WHEN RVOS DISREGARDED. In determining whether the Holders of
the required number of RVOs have concurred in any direction, waiver or consent,
RVOs owned by the Company or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company shall
be disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver
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or consent, only RVOs which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only RVOs outstanding at the time
shall be considered in any such determination.
SECTION 9.7. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The Trustee may
make reasonable rules for action by, or a meeting of, Holders. The Registrar and
the Paying Agent may make reasonable rules for their functions.
SECTION 9.8. LEGAL HOLIDAYS. A "LEGAL HOLIDAY" is a Saturday, a Sunday or
other day on which commercial banking institutions are authorized or required to
be closed in New York City. If a payment date is a Legal Holiday, payment shall
be made on the next succeeding day that is not a Legal Holiday, and no amounts
shall accrue pursuant to Section 2(b)(i) of each RVO for the intervening period.
If a record date is a Legal Holiday, the record date shall not be affected.
SECTION 9.9. GOVERNING LAW. THIS AGREEMENT AND THE SECURITIES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 9.10. NO RECOURSE AGAINST OTHERS. Except to the extent otherwise
required by applicable law an incorporator, director, officer, employee,
stockholder or controlling person, as such, of the Company shall not have any
liability for any obligations of the Company under the RVOs, this Agreement or
for any claim based on, in respect of or by reason of such obligations or their
creation. By accepting an RVO, each Holder of an RVO shall waive and release all
such liability. The waiver and release shall be part of the consideration for
the issue of the RVOs.
SECTION 9.11. SUCCESSORS. All agreements of the Company in this Agreement
and the RVOs shall bind their respective successors. All agreements of the
Trustee in this Agreement shall bind its successors.
SECTION 9.12. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.
SECTION 9.13. VARIABLE PROVISIONS. The Company initially appoints the
Trustee as Paying Agent and Registrar for the RVOs and as custodian with respect
to any Global RVOs.
SECTION 9.14. QUALIFICATION OF AGREEMENT. The Company shall qualify this
Agreement under the TIA and shall pay all reasonable costs and expenses
(including attorneys' fees and expenses for the Company, the Trustee and the
Holders) incurred in connection therewith, including, but not limited to, costs
and expenses of qualification of this Agreement and the RVOs and printing this
Agreement and the RVOs. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Agreement under the TIA.
SECTION 9.15. SECURITY FOR PURPOSES OF UNIFORM COMMERCIAL CODE. The
parties agree that the RVOs are securities governed by Article 8 of the Uniform
Commercial Code in effect in the State of New York.
SECTION 9.16. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
<TABLE>
<S> <C> <C>
ASSOCIATES FIRST CAPITAL CORPORATION
By:
------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Trustee
By:
------------------------------------
Name:
Title:
</TABLE>
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<PAGE>
EXHIBIT A
[FORM OF FACE OF RESIDUAL VALUE OBLIGATION]
[Depository Legend, if applicable]
No. [ ] Number of RVOs:
CUSIP NO. _________
RESIDUAL VALUE OBLIGATIONS
Associates First Capital Corporation, a Delaware corporation (the
"Company"), promises to pay to [ ], or registered assigns, any
amounts payable on ______ of the Company's Residual Value Obligations ("RVOs")
on each Payment Date, in accordance with the terms and conditions specified on
the reverse hereof.
Additional provisions of the RVOs are set forth on the other side of this
RVO certificate.
ASSOCIATES FIRST CAPITAL CORPORATION
By:
- --------------------------------------------------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
The Chase Manhattan Bank as Trustee, certifies that this is one of the RVO
certificates referred to in the Residual Value Obligations Agreement.
By ____________________________
Authorized Signatory Date:
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[FORM OF REVERSE SIDE OF RESIDUAL VALUE OBLIGATION]
RESIDUAL VALUE OBLIGATION
1. DEFINITIONS.
(a) Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Residual Value Obligations Agreement, dated as
of ______, 2000, between the Company and The Chase Manhattan Bank, as Trustee,
as the same may be amended, modified or supplemented from time to time (the "RVO
AGREEMENT").
(b) As used in this RVO certificate, the following terms shall have the
following meanings:
"Accrued RVO Payment Amount" means the sum of (i) the aggregate of the
amounts allocated pursuant to priority clause (D) of Section 2(a)(i) of this RVO
certificate or priority clause (B) of Section 2(a)(ii) of this RVO certificate
to make payments on the RVOs and (ii) interest accrued on such amounts pursuant
to Section 2(b)(i) of this RVO certificate, PROVIDED, that the Accrued RVO
Payment Amount shall be reduced on each Payment Date by the amount of the
aggregate RVO Payments made on such Payment Date.
"AFCC Amount" means $______ million [$512 million plus interest at 1.25% per
month on $512 million (calculated on the basis of a 360-day year of twelve
30-day months) from September 30, 1999 up to but excluding the Closing Date,
less the amount of Residual Cash Flow generated on and after September 30, 1999
and prior to the Closing Date]; PROVIDED, that such amount shall be
(i) INCREASED on each Securitization Distribution Date following the Closing
Date by the amount of AFCC Amount Interest for the period ending on and
including the day prior to such Securitization Distribution Date and beginning
on and including the immediately preceding Securitization Distribution Date (or
in the case of the initial Securitization Distribution Date occurring after the
Closing Date, beginning on and including the Closing Date) and (ii) decreased on
each Allocation Date by the amount of Residual Cash Flow allocated on such date
pursuant to priority clause (C) of Section 2(a)(i) of this RVO certificate or
priority clause (A) of Section 2(a)(ii) of this RVO certificate to the reduction
of the AFCC Amount.
"AFCC Amount Interest", for any period, means interest accrued during such
period at the rate of 1.25% per month on the average daily AFCC Amount during
such period (after giving effect to any increase in the AFCC Amount on the first
day of such period). AFCC Amount Interest shall be calculated on the basis of a
360-day year of twelve 30-day months.
"Damages" shall have the meaning set forth in the definition of "Litigation
Expenses."
"Designated Securitization Transactions" means each of the securitization
transactions specified on Annex I to the RVO Agreement, including the
transactions specified in the related Sale and Servicing Agreement or Pooling
and Servicing Agreement, as the case may be, and the Related Documents (as
defined in such Sale and Servicing Agreement or the Pooling and Servicing
Agreement, as the case may be).
"Designated Spread Accounts" means the Spread Accounts (as defined in the
Spread Account Agreement) established in connection with the Designated
Securitization Transactions.
"Liquidated Other Transaction Receivables" means each Other Transaction
Receivable as to which (i) 91 days have elapsed since the servicer (or the
Company or any of its Subsidiaries, if there is no servicer of the Other
Transaction Receivable) repossessed the related financed vehicle, (ii) the
servicer (or the Company, if there is no servicer of the Other Transaction
Receivable) has determined in good faith that all amounts it expects to recover
have been received or (iii) all or any portion of a scheduled payment shall have
become more than 180 days past due.
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"Litigation Expenses" means the sum of (i) $10,000,000 (which amount shall
be deemed to have been incurred, for purposes of Section 2(a)(i)(B) of this RVO
certificate, on November 12, 1999) and (ii) the amount of all damages,
judgments, settlements, defense costs and other expenses paid or incurred by
Arcadia Financial Ltd, the Company or any of their Affiliates after
November 12, 1999 in connection with any litigation brought by or on behalf of
shareholders of Arcadia Financial Ltd. or by or in the right of Arcadia
Financial Ltd., net of related insurance proceeds, if any (the amount referred
to in this clause (ii) being referred to herein as "DAMAGES"); PROVIDED, that
the aggregate amount of Damages shall be deemed to be INCREASED on each
Securitization Distribution Date following the Closing Date by the amount of
Litigation Interest for the period ending on and including the day prior to such
Securitization Distribution Date and beginning on and including the immediately
preceding Securitization Distribution Date (or, in the case of the initial
Securitization Distribution Date occurring after the Closing Date, beginning on
and including November 12, 1999).
"Litigation Interest", for any period, means interest accrued during such
period on the average daily amount of aggregate Damages during such period
(regardless of whether incurred prior to or during such period and after giving
effect to any increase in Damages on the first day of such period) at One-Month
LIBOR; PROVIDED, that solely for the purpose of calculating Litigation Interest,
the aggregate amount of Damages shall be DECREASED on each Allocation Date by
the amount of Residual Cash Flow allocated on such date pursuant to priority
clause (B) of Section 2(a)(i) of this RVO certificate to the reduction of
Litigation Expenses; and, PROVIDED, FURTHER, that the aggregate amount of
Damages shall not be so decreased on any Allocation Date as contemplated by the
immediately preceding proviso unless, as of such date, the aggregate amount of
Residual Cash Flow allocated to reduce Litigation Expenses pursuant to priority
clause (B) of Section 2(a)(i) of this RVO certificate equals or exceeds
$10,000,000.
"Litigation Reserve Interest", for any period, means interest accrued during
such period on the excess, if any, of (i) the aggregate amount of Residual Cash
Flow, if any, allocated to reduce Litigation Expenses pursuant to priority
clause (B) of Section 2(a)(i) of this RVO certificate over (ii) the aggregate
amount of Damages (such excess being calculated as of the day after the
Allocation Date during such period) at One-Month LIBOR.
"Optional Redemption Price" shall have the meaning set forth in Section 6 of
this RVO certificate.
"One-Month LIBOR", for any period, means the rate per annum determined on
the basis of the rate for deposits in U.S. dollars for a 30-day period
commencing on the first day of such period appearing on Page 3750 of the Dow
Jones Markets screen of 11:00 A.M., London time, two Business Days prior to the
beginning of such period. In the event that such rate does not appear on Page
3750 of the Dow Jones Markets screen (or otherwise on such screen), One-Month
LIBOR shall be determined by reference to such other comparable publicly
available service for displaying eurodollar rates as may be selected by the
Company or, in the absence of such availability, by reference to the rate at
which the Trustee is offered U.S. dollar deposits at or about 11:00 A.M., New
York City time, two Business Days prior to the beginning of such period in the
interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such period for the number of days comprised therein. All amounts calculated
based on One-Month LIBOR shall be calculated on the basis of the actual number
of days elapsed and a 360-day year.
"Other Transaction Receivable" shall have the meaning set forth in the
definition of "Residual Cash Flow."
"Other Transaction Receivables Collected Funds" means, with respect to any
period and without duplication, the amount of funds received by the Company or
any of its Subsidiaries representing collections on the Other Transaction
Receivables during such period, including, but not limited to, payments by or on
behalf of the obligor, bankruptcy trustee payments, dealer payments, dealer
refunds
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for life and/or disability insurance and other soft adds funded under the Other
Transaction Receivables, GAP insurance or waiver proceeds from whatever source,
comprehensive and physical damage insurance proceeds, sales tax refunds, legal
proceeding recoveries, vendor single interest self-insurance proceeds, blanket
vendor single interest insurance proceeds, warranty refunds and all Other
Transaction Receivable Liquidation Proceeds.
"Other Transaction Receivable Liquidation Proceeds" means all amounts
realized by the Company or any of its Subsidiaries with respect to a Liquidated
Other Transaction Receivable net of (i) reasonable expenses paid or reimbursed
by the Company or any of its Subsidiaries to an auction house in connection with
the repossession and disposition of the financed vehicle and (ii) amounts that
are required to be refunded to the obligor on such Other Transaction Receivable;
PROVIDED, HOWEVER, that the Other Transaction Receivable Liquidation Proceeds
with respect to any Other Transaction Receivable shall in no event be less than
zero.
"Other Transaction Receivables Residual Cash Flow" means, with respect to
any period and without duplication, the sum of (i) any Other Transaction
Receivables Collected Funds received by the Company or any of its Subsidiaries
during such period with respect to the Other Transaction Receivables (other than
amounts which constitute Collected Funds as defined in the Sale and Servicing
Agreements or Pooling and Servicing Agreements, as the case may be, entered into
in connection with the Designated Securitization Transactions) and (ii) any
proceeds received by the Company or any of its Subsidiaries during such period
from the sale of any Other Transaction Receivable to a Person other than the
Company or any of its Subsidiaries MINUS, without duplication,
(v) all amounts received by the Company or any of its Subsidiaries during
such period with respect to such Other Transaction Receivables that are
allocable to principal in accordance with the terms of the Other Transaction
Receivables;
(w) for each Other Transaction Receivable that has become a Liquidated Other
Transaction Receivable during such period, the Principal Balance outstanding on
the date it became a Liquidated Other Transaction Receivable;
(x) an amount to cover estimated servicing expenses and funding costs
(including, without limitation, interest, credit enhancement insurance premiums
and indenture and owner trustees', and other agents', fees) that would have been
payable with respect to such Other Transaction Receivables for such period,
assuming that each such Other Transaction Receivable continued to be subject to
its related Designated Securitization Transaction, which estimates, in the case
of the credit enhancement insurance premiums and other fees, shall be based on
the contractual rate as in effect on the date such Receivable became an Other
Transaction Receivable and, in the case of other funding costs, shall be based
on the contractual rate that would have been in effect during such period
assuming the Other Transaction Receivable continued to be subject to its related
Designated Securitization Transaction;
(y) if such period is the period in which a Receivable becomes an Other
Transaction Receivable, any amount other than the Principal Balance of such
Receivable that was paid to the related Designated Securitization Transaction in
connection with its purchase from that Designated Securitization Transaction
(determined at the time of such purchase in accordance with the Sale and
Servicing Agreement or Pooling and Servicing Agreement, as the case may be,
entered into in connection with the related Designated Securitization
Transaction); and
(z) if such period is the period in which the Company or any of its
Subsidiaries sells such Other Transaction Receivable to a Person other than the
Company or any of its Subsidiaries, an amount equal to (I) the Principal Balance
of such Other Transaction Receivable on the date sold, PLUS (II) if the Other
Transaction Receivable was not purchased from a Designated Securitization
Transaction at the option of the Company, an amount equal to the reasonable
costs incurred by the Company or any of its Subsidiaries in connection with the
sale of such Other Transaction Receivable by the Company or its Subsidiaries;
PROVIDED that (A) amounts shall be deducted pursuant to this clause (z) only if
such sale is
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in accordance with reasonable business practices and with a good faith intent
other than to reduce RVO Payments, (B) no amounts shall be deducted pursuant to
this clause (z) if the Principal Balance of such Other Transaction Receivable
has already been deducted pursuant to clause (w) above and (C) the amount
deducted pursuant to this clause (z) with respect to any Other Transaction
Receivable that had been purchased from a Designated Securitization Transaction
at the option of the Company shall in no event exceed the gross amount realized
by the seller upon the sale of such Other Transaction Receivable.
"Payment Date" means the second Business Day after the Securitization
Distribution Dates in April, July, October and January, commencing [Insert the
first such day following the Effective Time (or, if the Effective Time is after
the record date in respect of such first Payment Date, then on the next
succeeding Payment Date)].
"Principal Balance" means, with respect to any Other Transaction Receivable,
as of any date of determination (i) the aggregate amount advanced under such
Other Transaction Receivable (whether before or after such Receivable became an
other Transaction Receivable) toward the purchase price of the financed vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes and related costs (provided that the foregoing shall not include any
Insurance Add-On Amounts, as defined in the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as the case may be, entered into in connection
with the related Designated Securitization Transaction) MINUS (ii) (A) the
portion of all amounts received on or prior to such date (whether before or
after such Receivable became an Other Transaction Receivable) and allocable to
principal in accordance with the terms of the Other Transaction Receivable and
(B) any Cram Down Loss (as defined in the Sale and Servicing Agreement or
Pooling and Servicing Agreement, as the case may be, entered into in connection
with the related Designated Securitization Transaction) in respect of such Other
Transaction Receivable (whether before or after such Receivable became an Other
Transaction Receivable).
"Receivable" shall have the meaning ascribed thereto in the Spread Account
Agreement.
"Residual Cash Flow", as of any Allocation Date, means, without duplication,
the sum of the following:
(a) the sum of (i) all cash actually released to the Company or its Subsidiaries
on the immediately preceding Securitization Distribution Date from the
Designated Spread Accounts pursuant to priority EIGHTH, clause SECOND of
Section 3.03(b) of the Spread Account Agreement (as supplemented, in the
case of each Designated Spread Account, by the related Spread Account
Agreement Supplement), (ii) other than amounts included in clause (i) of
this definition on a prior Allocation Date, all cash actually released to
the Company or its Subsidiaries from the Designated Spread Accounts during
the calendar month preceding the month in which such Allocation Date occurs
(PROVIDED, that (x) the foregoing shall exclude any cash so released prior
to the Closing Date and (y) in the case of the final Allocation Date, the
period covered by this clause (ii) shall begin on the first day of the
calendar month preceding the month in which the final Allocation Date occurs
and shall continue to and include such final Allocation Date) and (iii) all
cash actually released to the Company or its Subsidiaries from a Program
Spread Account or a Tag Account (as defined in the Spread Account Agreement)
during the calendar month preceding the month in which such Allocation Date
occurs (PROVIDED, that (x) the foregoing shall exclude any cash so released
prior to the Closing Date and (y) in the case of the final Allocation Date,
the period covered by this clause (iii) shall begin on the first day of the
calendar month preceding the month in which the final Allocation Date occurs
and shall continue to and include such final Allocation Date), but only to
the extent such cash would have been included as Residual Cash Flow but for
clause (C) of the following proviso; PROVIDED, that Residual Cash Flow shall
not include any of the foregoing amounts to the extent that (A) such amounts
are contractually required, pursuant to one
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or more agreements entered into in connection with the Designated
Securitization Transactions, to be applied other than as provided pursuant
to Sections 2(a)(i) and 2(a)(ii) of this RVO certificate, (B) such amounts
are released to one of the Company's Subsidiaries and such Subsidiary is not
permitted, pursuant to one or more agreements entered into in connection
with the Designated Securitization Transactions, to dividend such amounts to
its parent free from any liens or encumbrances or other contractual
restrictions or (C) such amounts have been transferred to a Program Spread
Account or Tag Account (as defined in the Spread Account Agreement)
established in connection with the Designated Securitization Transactions;
(b) any Other Transaction Receivables Residual Cash Flow for the calendar month
preceding the month in which such Allocation Date occurs (PROVIDED, that
(x) the foregoing shall exclude any Other Transaction Receivable Residual
Cash Flow received prior to the Closing Date and (y) in the case of the
final Allocation Date, the period covered by this clause (b) shall begin on
the first day of the calendar month preceding the month in which the final
Allocation Date occurs and shall continue to and include such final
Allocation Date) with respect to all Receivables which were securitized as
of September 30, 1999 pursuant to the Designated Securitization Transactions
but are no longer included, as of the end of such preceding calendar month,
in the Designated Securitization Transactions for any reason ("Other
Transaction Receivables"); and
(c) the amount of Litigation Reserve Interest, if any, for the period ending on
and including the day prior to the Securitization Distribution Date
immediately preceding such Allocation Date and beginning on and including
the second Securitization Distribution Date immediately preceding such
Allocation Date (it being understood that the amount of Litigation Reserve
Interest as of the initial Allocation Date shall be zero).
"RVO Expenses" means the sum of the following:
(a) the reasonable out-of-pocket fees and expenses paid or incurred directly or
indirectly by the Company or its Subsidiaries relating to the issuance and
administration of the RVOs (including, without limitation, fees and expenses
of printing certificates representing the RVOs; fees and expenses of the
Trustee, the Registrar and the Paying Agent for the RVOs and any other
agents engaged in accordance with the RVO Agreement; and related legal
expenses), but excluding accounting fees and expenses, audit fees, if any,
the fees and expenses relating to the listing of the RVOs on a national
securities exchange and legal expenses relating to the negotiating of the
terms of the RVOs and the drafting of the RVO Agreement; and
(b) the reasonable actual or reasonably imputed cost to the Company or its
Subsidiaries of providing alternative credit support in connection with the
early release of cash to the Company or its Subsidiaries from the Designated
Spread Accounts; PROVIDED, that such costs shall only be included as RVO
Expenses to the extent that, in the Company's good faith judgment, such
costs do not exceed the benefits of such release, and PROVIDED, FURTHER,
that the costs referenced in this clause (b) shall be included as RVO
Expenses as such costs are incurred (or deemed to be incurred if imputed)
or, at the Company's election, in a lump sum calculated on a present value
basis (discounted at the rate of 1.25% per month) at the time of the related
release of cash.
"RVO Payments" means the payments of Accrued RVO Payment Amounts pursuant to
Section 2(b) of this RVO certificate.
"Spread Account Agreement" means the Spread Account Agreement, dated as of
March 25, 1993, as amended and restated as of September 22, 1999, among Arcadia
Financial Ltd., Arcadia Receivables Finance Corp., Financial Security
Assurance Inc., The Chase Manhattan Bank and Norwest Bank Minnesota, National
Association, as such agreement may be amended from time to time.
"Spread Account Agreement Supplements" means the Series Supplements to the
Spread Account Agreement entered into in connection with each of the Designated
Securitization Transactions, as in effect from time to time.
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2. RVO PAYMENTS
(a) ALLOCATIONS OF RESIDUAL CASH FLOW; DETERMINATION OF ACCRUED RVO PAYMENT
AMOUNTS.
(i) On the Business Day after each Securitization Distribution Date
occurring on or after the Closing Date (each such day, an "ALLOCATION
DATE"), the Company shall make the following allocations of the Residual
Cash Flow as of such Allocation Date, if any, in the following order of
priority:
(A) 100% to reduce RVO Expenses incurred after the third preceding
Securitization Distribution Date and on or prior to the second
preceding Securitization Distribution Date (PROVIDED, that (i) in the
case of the initial Allocation Date, the allocation shall be 100% to
reduce RVO Expenses incurred on or after November 12, 1999 and on or
prior to the second preceding Securitization Distribution Date and
(ii) in the case of the final Allocation Date, the allocation shall
be 100% of the remaining Residual Cash Flow, if any, to reduce
(x) RVO Expenses incurred after the third preceding Securitization
Distribution Date and on or prior to such Allocation Date and
(y) RVO Expenses which the Company reasonably expects to incur
thereafter), PLUS (except in the case of the initial Allocation Date)
any RVO Expenses incurred on or prior to the third preceding
Securitization Distribution Date and on or after November 12, 1999
which were not previously reduced by a prior allocation of Residual
Cash Flow pursuant to this priority clause (A), until such amounts
have been reduced to zero, then
(B) 100% of the remaining Residual Cash Flow, if any, to reduce
Litigation Expenses incurred after the third preceding Securitization
Distribution Date and on or prior to the second preceding
Securitization Distribution Date (PROVIDED that (i) in the case of
the initial Allocation Date, the allocation shall be 100% of the
remaining Residual Cash Flow, if any, to reduce Litigation Expenses
incurred on or after November 12, 1999 and on or prior to the second
preceding Securitization Distribution Date and (ii) in the case of
the final Allocation Date, the allocation shall be 100% of the
remaining Residual Cash Flow, if any, to reduce Litigation Expenses
incurred after the third preceding Securitization Distribution Date
and on or prior to such Allocation Date), PLUS (except in the case of
the initial Allocation Date) any Litigation Expenses incurred on or
prior to the third preceding Securitization Distribution Date and on
or after November 12, 1999 which were not previously reduced by a
prior allocation of Residual Cash Flow pursuant to this priority
clause (B), until such amounts have been reduced to zero, then
(C) 100% of remaining Residual Cash Flow, if any, to reduce the
then-effective AFCC Amount until the then-effective AFCC Amount has
been reduced to zero, then
(D) 50% of the remaining Residual Cash Flow, if any, to increase the
Accrued RVO Payment Amount.
(ii) In addition to, and after giving effect to, the allocation of
Residual Cash Flow pursuant to Section 2(a)(i) of this RVO certificate, on
the second Allocation Date following the final disposition of all litigation
giving rise to Damages and the final determination of all legal fees and
expenses related thereto, an amount equal to the excess, if any, of (i) the
aggregate amount of Residual Cash Flow allocated on or prior to such
Allocation Date to reduce Litigation Expenses pursuant to priority
clause (B) above OVER (ii) the aggregate amount of Damages (the "EXCESS
LITIGATION RESERVE"), shall be allocated by the Company, in the following
order of priority:
(A) 100% to reduce the then-effective AFCC Amount (calculated after
giving effect to the allocation of Residual Cash Flow pursuant to
Section 2(a)(i) of this RVO certificate on such Allocation Date)
until the AFCC Amount has been reduced to zero, then
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(B) 50% of remaining Excess Litigation Reserve, if any, to increase the
Accrued RVO Payment Amount.
(b) PAYMENTS ON PAYMENT DATES.
(i) Except as provided in Section 9.8 of the RVO Agreement, amounts
allocated on an Allocation Date pursuant to priority clause (D) of
Section 2(a)(i) of this RVO certificate or priority clause (B) of
Section 2(a)(ii) of this RVO certificate to increase the Accrued RVO Payment
Amount shall accrue interest from and including such Allocation Date to but
excluding the date such amounts are paid pursuant to Section 2(b)(ii) of
this RVO certificate at a rate equal to One-Month LIBOR.
(ii) On each Payment Date (including the Redemption Date, if any), the
Company shall make a payment with respect to the RVOs represented hereby in
an amount equal to the product of (A) the then-effective Accrued RVO Payment
Amount and (B) the quotient of (i) the number of RVOs represented hereby
divided by (2) the total number of RVOs outstanding. There shall be no
minimum payment on the RVOs.
(iii) Notwithstanding the foregoing, the Company shall not, except in
connection with the payment of RVO Payments on a Redemption Date, be
required to make payments on this RVO certificate if the amount of the
payment that would otherwise be made on this RVO certificate would be less
than $0.05 per RVO represented hereby. Any amounts not paid in accordance
with this clause (iii) and any amounts not paid in breach of the terms
hereof shall (A) be carried over to the next Payment Date and (B) continue
to accrue interest as provided in Section 2(b)(i).
(c) APPLICATION OF FUNDS PURSUANT TO ALLOCATION PROVISIONS
It is understood and agreed that the allocation provisions contained in
Section 2(a) of this RVO certificate do not require any actual or specific use
of funds by the Company.
3. METHOD OF PAYMENT
No later than 10:00 a.m. (New York City time) on the date on which an RVO
Payment on this RVO certificate is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such RVO Payment. The Company will pay RVO Payments to the Persons who are
registered Holders of RVOs at the close of business on the March 1, June 1,
September 1, or December 1, respectively, next preceding each Payment Date even
if RVOs are registered for transfer, cancelled, repurchased or redeemed after
the record date and on or before the Payment Date. The Company will pay RVO
Payments in money of the United States that at the time of payment is legal
tender for payment of public and private debts and otherwise in accordance with
the RVO Agreement.
4. PAYING AGENT AND REGISTRAR
Initially, The Chase Manhattan Bank (the "TRUSTEE") will act as Trustee,
Paying Agent and Registrar. The Company may appoint and change any Paying Agent,
Registrar or co-registrar without notice to any Holder. The Company or any of
its Subsidiaries may act as Paying Agent, Registrar or co-registrar.
5. RVO AGREEMENT
The Company has issued this RVO certificate under the RVO Agreement. The
terms of the RVOs include those stated in the RVO Agreement and those made part
of the RVO Agreement by reference to the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection 77aaa-77bbbb), as amended and as in effect on the date of the RVO
Agreement (the "ACT"). The RVOs are subject to all such terms, and Holders are
referred to the RVO Agreement and the Act for a statement of those terms.
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The RVOs are general unsecured obligations of the Company payable in the
amounts determined hereunder.
6. OPTIONAL REDEMPTION
Except as set forth below, the RVOs will not be redeemable at the option of
the Company.
At the Company's option, the outstanding RVOs will be redeemable, in whole
but not in part, on any Payment Date when the total Aggregate Principal Balance
(as defined in the Designated Securitization Transactions) of the Receivables
that were securitized pursuant to the Designated Securitization Transactions as
of the Closing Date is less than or equal to 5% of the total Aggregate Principal
Balance of such Receivables as of the Closing Date, upon not less than 30 nor
more than 60 days prior notice mailed by first-class mail to each Holder's
registered address, at a redemption price equal to the fair value of the
outstanding RVOs as of the date of the Board Resolution passed pursuant to
Section 5.2 of the RVO Agreement (which fair value shall be determined assuming
the prior payment of the RVO Payment, if any, to be made on the Redemption
Date), as determined in good faith by the Board of Directors of the Company and
set forth in the Board Resolution passed pursuant to Section 5.2 of the RVO
Agreement (the "OPTIONAL REDEMPTION PRICE").
After the redemption date, no further RVO Payments shall be made on the RVOs
as long as the Company has satisfied its obligations under Section 5.4 of the
RVO Agreement. If the Company shall not have satisfied its obligations under
Section 5.4 of the RVO Agreement, (i) the RVOs shall continue to be outstanding
and RVO Payments shall continue to accrue thereon as provided in this RVO
certificate and (ii) any RVO Payments payable on such redemption date that are
not so paid shall be carried over to the next Payment Date and shall continue to
accrue interest as provided in Section 2(b)(i) of this RVO certificate.
Holders must surrender the certificates representing the RVOs to a Paying
Agent to collect redemption payments.
7. DENOMINATIONS; TRANSFER; EXCHANGE
The RVO certificates are in registered form without coupons in denominations
of whole RVOs and integral multiples thereof. A Holder may transfer or exchange
RVOs in accordance with the RVO Agreement. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements or transfer documents
and to pay any taxes and fees required by law or permitted by the RVO Agreement.
8. PERSONS DEEMED OWNERS
The registered Holder of this RVO may be treated as the owner of it for all
purposes.
9. UNCLAIMED MONEY
If money for the payment of an RVO Payment or the Optional Redemption Price
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Company at its written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the money
must look only to the Company and not to the Trustee or Paying Agent for
payment.
10. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the RVO Agreement, (i) the RVO
Agreement or the RVOs may be amended with the written consent of the Holders of
at least a majority of the then outstanding RVOs and (ii) any Default (other
than with respect to nonpayment or in respect of a provision that cannot be
amended without the written consent of each Holder affected) or
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noncompliance with any provision may be waived with the written consent of the
Holders of a majority of the then outstanding RVOs. Subject to certain
exceptions set forth in the RVO Agreement, without the consent of any Holder,
the Company and the Trustee may amend the RVO Agreement or the RVOs to cure any
ambiguity, omission, defect or inconsistency, or to comply with ARTICLE IV of
the RVO Agreement, or to provide for uncertificated RVOs in addition to or in
place of certificated RVOs, or to add guarantees with respect to the RVOs or to
secure the RVOs, or to add additional covenants of the Company, or surrender
rights and powers conferred on the Company, or to comply with any request of the
SEC in connection with qualifying the RVO Agreement under the Act, or to make
any change that does not adversely affect the rights of any Holder.
11. DEFAULTS AND REMEDIES
Under the RVO Agreement, Events of Default include (i) default for 30 days
in payment of RVO Payments when due on the RVOs; (ii) default in payment of the
Optional Redemption Price upon optional redemption pursuant to Article V of the
RVO Agreement and paragraph 6 of the RVOs; (iii) the failure by the Company to
comply for 60 days after notice with its other agreements contained in the RVO
Agreement or under the RVOs (other than those referred to in (i) or
(ii) above); or (iv) certain events of bankruptcy, insolvency or reorganization
of the Company. However, a default under clause (iii) will not constitute an
Event of Default until the Trustee or the Holders of at least 50% of the
outstanding RVOs notify the Company of the default and the Company does not cure
such default within the time specified in clause (iii) hereof after receipt of
such notice.
Holders may not enforce the RVO Agreement or the RVOs except as provided in
the RVO Agreement. The Trustee may refuse to enforce the RVO Agreement or the
RVOs unless it receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority of the outstanding RVOs may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing Default or Event of Default (except a Default
or Event of Default with respect to payments on the RVOs) if it determines that
withholding notice is in the Holders' interest.
12. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations set forth in the RVO Agreement, the Trustee
under the RVO Agreement, in its individual or any other capacity, may become the
owner or pledgee of RVOs and may otherwise deal with and collect obligations
owed to it by the Company or its Affiliates and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee.
13. RESTRICTIVE COVENANTS.
The RVO Agreement imposes certain limitations on the ability of the Company
to, among other things, consolidate with or merge or into any Person or transfer
all or substantially all of its properties and assets to another Person In
addition, the RVO Agreement imposes (i) certain limitations on the ability of
the Company to assign its obligations under the RVO Agreement or under the RVOs
to another Person and (ii) certain obligations on the Company to arrange for the
servicing of the receivables securitized pursuant to the Designated
Securitization Transactions.
14. DETERMINATIONS.
(a) The Company agrees that, in computing Collected Funds for purposes of
the Designated Securitization Transactions or in computing Other Transaction
Receivables Collected Funds, it shall include the proceeds paid to the Company
or any of its Subsidiaries under the blanket GAP insurance policy maintained by
Arcadia Financial Ltd., and it shall deduct the premiums on, and the costs to
enforce, such policy. In addition, to the extent relevant in calculating
Liquidation Proceeds for purposes
B-1-10
<PAGE>
of the Designated Securitization Transactions, the Company agrees that it shall
not deduct repossession expenses, except for repossession expenses paid or
reimbursed to an auction house.
(b) Except to the extent that this RVO certificate or the RVO Agreement
expressly provides to the contrary and except to the extent otherwise required
by applicable law, the Company's calculations and determinations of all amounts
and other matters in connection with the RVOs shall be final and conclusive in
the absence of manifest error and the Trustee shall be fully authorized and
protected and incur no liability in reliance thereon; PROVIDED, that the Company
shall engage its independent auditors to review the calculations and
determinations made by the Company hereunder and under the RVO Agreement
substantially to the same extent as the Company engages its independent auditors
to perform a similar function with respect to securitization transactions
effected by or for the benefit of the Company and its Subsidiaries.
15. NO RECOURSE AGAINST OTHERS
Except to the extent otherwise required by applicable law, an incorporator,
director, officer, employee, stockholder or controlling person, as such, of the
Company shall not have any liability for any obligations of the Company under
the RVOs or the RVO Agreement or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a RVO, each Holder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the RVOs.
16. AUTHENTICATION
This RVO certificate shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this RVO certificate.
17. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder or an assignee,
such as TEN COM (=tenants in common), TEN ENT (=tenants by the entirety), JT TEN
(=joint tenants with rights of survivorship and not as tenants in common), CUST
(=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
18. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the RVO certificates and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the RVO
certificates or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
19. GOVERNING LAW
This RVO certificate shall be governed by, and construed in accordance with,
the laws of the State of New York.
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<PAGE>
ASSIGNMENT FORM
To assign this RVO certificate, fill in the form below:
I or we assign and transfer this RVO certificate to
------------------------
(Print or type assignee's name, address and zip code)
------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this RVO certificate on the books of
the Company. The agent may substitute another to act for him.
Date:____________________________________ Your
Signature:____________________________________
Signature Guarantee:________________________________________________________
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this RVO certificate.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
B-1-12
<PAGE>
[TO BE ATTACHED TO GLOBAL RVOs]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL RVO
The following increases or decreases in this Global RVO have been made:
<TABLE>
<CAPTION>
RVOS REPRESENTED BY
AMOUNT OF DECREASE AMOUNT OF INCREASE THIS GLOBAL RVO SIGNATURE OF AUTHORIZED
IN RVOS REPRESENTED IN RVOS REPRESENTED FOLLOWING SIGNATORY OF TRUSTEE
DATE OF EXCHANGE BY THIS GLOBAL RVO BY THIS GLOBAL RVO SUCH DECREASE OR INCREASE OR CUSTODIAN
- ---------------- ------------------- ------------------- ------------------------- -----------------------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE>
Annex I
Olympic Automobile Receivables Trust, 1994-B
Olympic Automobile Receivables Trust, 1995-A
Olympic Automobile Receivables Trust, 1995-B
Olympic Automobile Receivables Trust, 1995-C
Olympic Automobile Receivables Trust, 1995-D
Olympic Automobile Receivables Trust, 1995-E
Olympic Automobile Receivables Trust, 1996-A
Olympic Automobile Receivables Trust, 1996-B
Olympic Automobile Receivables Trust, 1996-C
Olympic Automobile Receivables Trust, 1996-D
Olympic Automobile Receivables Trust, 1997-A
Arcadia Automobile Receivables Trust, 1997-B
Arcadia Automobile Receivables Trust, 1997-C
Arcadia Automobile Receivables Trust, 1997-D
Arcadia Automobile Receivables Trust, 1998-A
Arcadia Automobile Receivables Trust, 1998-B
Arcadia Automobile Receivables Trust, 1998-C
Arcadia Automobile Receivables Trust, 1998-D
Arcadia Automobile Receivables Trust, 1998-E
Arcadia Automobile Receivables Trust, 1999-A
Arcadia Automobile Receivables Trust, 1999-B
B-1-14
<PAGE>
APPENDIX C
FAIRNESS OPINION OF J.P. MORGAN SECURITIES, INC.
<PAGE>
November 12, 1999
Board of Directors
Arcadia Financial Ltd.
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Warren Kantor
Chairman of the Board
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of Arcadia Financial Ltd. (the "Company") of the
consideration proposed to be paid to them in connection with the proposed merger
(the "Merger") of the Company with AFCC Newco Inc. ("Sub"), a wholly-owned
subsidiary of Associates First Capital Corporation (the "Buyer"). Pursuant to
the Agreement and Plan of Merger, dated as of November 12, 1999 (the
"Agreement"), by and among the Company, the Buyer and Sub, Sub will merge with
and into the Company, the Company will be the surviving corporation in the
Merger, and each share of common stock, par value $0.01 per share, of the
Company issued and outstanding immediately prior to the effective time of the
Merger (other than certain shares to be canceled pursuant to the Agreement and
other than dissenting shares) will be converted into the right to receive $4.90
in cash and one residual value obligation (the "RVO") having the principal terms
described in Exhibit A to the Agreement.
In arriving at our opinion, we have reviewed (i) the Agreement;
(ii) certain publicly available information concerning the business of the
Company and of certain other companies engaged in businesses comparable to those
of the Company, and the reported market prices for certain other companies'
securities deemed comparable; (iii) publicly available terms of certain
transactions involving companies comparable to the Company and the consideration
received for such companies; (iv) current and historical market prices of the
common stock of the Company; (v) the audited financial statements of the Company
for the fiscal year ended December 31, 1998, and the unaudited financial
statements of the Company for the period ended September 30, 1999; (vi) certain
agreements with respect to outstanding indebtedness or obligations of the
Company; (vii) certain internal financial analyses and forecasts prepared by the
Company and its management; and (viii) the terms of other business combinations
that we deemed relevant.
In addition, we have held discussions with certain members of the management
of the Company and the Buyer with respect to certain aspects of the Merger, the
past and current business operations of the Company, the financial condition and
future prospects and operations of the Company, the effects of the Merger on the
financial condition and future prospects of the Company, and certain other
matters we believed necessary or appropriate to our inquiry. We have reviewed
such other financial studies and analyses and considered such other information
as we deemed appropriate for the purposes of this opinion. In giving our
opinion, we have relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or was
furnished to us by the Company or otherwise reviewed by us, and we have not
assumed any responsibility or liability therefor. We have not conducted any
valuation or appraisal of any assets or liabilities, nor have any such
valuations or appraisals been provided to us. In relying on financial analyses
and forecasts provided to us, we have assumed that they have been reasonably
prepared based on assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of operations and
financial condition of the Company to which such analyses or forecasts relate.
We have relied as to all legal matters relevant to rendering our opinion upon
the advice of counsel.
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<PAGE>
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We are expressing no opinion herein as to the price at which the RVO will trade
at any future time.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services. We
will also receive an additional fee if the proposed Merger is consummated. In
the past, J.P. Morgan has participated in the Company's conduit financing and
securitizations, and has been an underwriter of the Company's bonds. As you are
aware, in the past we and our affiliates have also provided financial advisory,
capital markets and credit services to the Buyer, for which we and our
affiliates have received customary fees. In the ordinary course of their
businesses, J.P. Morgan Securities Inc. and its affiliates may actively trade
the debt and equity securities of the Company or the Buyer for their own account
or for the accounts of customers and, accordingly, they may at any time hold
long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be paid to the Company's stockholders in
the proposed Merger is fair, from a financial point of view, to such
stockholders.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any stockholder of the Company
as to how such stockholder should vote with respect to the Merger. This opinion
may be reproduced in full in any proxy or information statement mailed to
stockholders of the Company.
Very truly yours,
<TABLE>
<S> <C> <C>
J.P. MORGAN SECURITIES INC.
/s/ JOHN P. MULLEN
-----------------------------------------
Name: John P. Mullen
Title: Managing Director
By:
</TABLE>
C-2
<PAGE>
APPENDIX D
THE VOTING AGREEMENT
<PAGE>
VOTING AGREEMENT
This AGREEMENT, dated as of November 12, 1999, among ASSOCIATES FIRST
CAPITAL CORPORATION, a Delaware corporation ("PARENT"), AFCC NEWCO, INC., a
Minnesota corporation ("SUB"), on the one hand, and the other parties signatory
hereto (each a "SHAREHOLDER", and collectively, the "SHAREHOLDERS"), on the
other hand.
WHEREAS Parent, Sub and ARCADIA FINANCIAL LTD., a Minnesota corporation
("COMPANY"), propose to enter into an Agreement and Plan of Merger, dated as of
the date hereof (the "MERGER AGREEMENT"; capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement) providing for
a merger of Sub with and into Company, upon the terms and subject to the
conditions set forth in the Merger Agreement; and
WHEREAS each Shareholder beneficially owns the number of shares of Company
Common Stock set forth opposite such Shareholder's name on the signature page of
this Agreement (such shares of Company Common Stock, together with any other
shares of Company Common Stock that such Shareholder acquires beneficial
ownership of after the date hereof and during the term of this Agreement,
whether upon the exercise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by means of purchase,
dividend, distribution or otherwise, being collectively referred to herein as
the "SUBJECT SHARES"); and
WHEREAS, as a condition to the willingness of Parent and Sub to enter into
the Merger Agreement, Parent and Sub have requested that the Shareholders enter
into this Agreement.
NOW, THEREFORE, to induce Parent and Sub to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each Shareholder
hereby, severally and not jointly, represents and warrants to Parent and Sub as
of the date hereof as follows:
(a) AUTHORITY; NO CONFLICTS. Such Shareholder has full right, power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
authorized, executed and delivered by such Shareholder, and (assuming due
authorization, execution and delivery by Parent and Sub) constitutes the
valid and binding obligation of such Shareholder enforceable against such
Shareholder in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally,
and general equitable principles (whether considered in a proceeding in
equity or at law). No filing with, and no permit, authorization, consent or
approval of, any Governmental Entity or any other person is necessary for
the execution of this Agreement by such Shareholder and the consummation by
such Shareholder of the transactions contemplated hereby, except where the
failure to make such filing or to obtain such permit, authorization, consent
or approval would not prevent or delay the performance by the Shareholder of
its obligations under this Agreement. None of the execution and delivery of
this Agreement by such Shareholder, the consummation of the transactions
contemplated hereby and compliance with the terms hereof by such Shareholder
will conflict with, result in any violation of, or default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by or rights or
obligations under, or result in the creation of any Lien upon any of the
properties or assets of such Shareholder under, any of the terms, conditions
or provision of any trust agreement, loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, notice, decree, statute,
law, ordinance, rule or regulation applicable to such Shareholder or to such
Shareholder's property or assets, except for any such conflicts, violations,
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<PAGE>
defaults or other occurrences that would not prevent or delay the
performance by the Shareholder of its obligations under this Agreement. If
such Shareholder is married and such Shareholder's Subject Shares constitute
community property or otherwise need spousal or other approval for this
Agreement to be legal, valid and binding upon such Subject Shares, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, such Shareholder's spouse,
enforceable against such spouse in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, and general equitable principles (whether considered in a
proceeding in equity or at law). No trust of which such Shareholder is a
trustee requires the consent of any beneficiary to the execution and
delivery of this Agreement or to the consummation of the transactions
contemplated hereby.
(b) THE SUBJECT SHARES. Such Shareholder is the beneficial owner of
the Subject Shares. Such Shareholder does not beneficially own any shares of
capital stock of Company or securities convertible or exchangeable for
shares of capital stock of Company, other than the Subject Shares. Except to
the extent such shares are pledged as of the date hereof, such Shareholder
has the sole right and power to vote and dispose of the Subject Shares, and
none of such Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting or transfer
of any of the Subject Shares, except as contemplated by this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Each of Parent and
Sub hereby represents and warrants to the Shareholders that it is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized,
executed and delivered by each of Parent and Sub and (assuming due
authorization, execution and delivery by the Shareholders) constitutes the valid
and binding obligations of Parent and Sub, enforceable against each of them in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law). No filing
with, and no permit, authorization, consent or approval of, any Governmental
Entity or any other person is necessary for the execution of this Agreement by
Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby, except where the failure to make such filing or to obtain
such permit, authorization, consent or approval would not prevent or delay the
performance by Parent of its obligations under this Agreement. None of the
execution and delivery of this Agreement by Parent and Sub, the consummation of
the transactions contemplated hereby nor the compliance with the terms hereof by
Parent and Sub will conflict with, or result in any violation of, or default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by or rights or
obligations under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Sub under, any of the terms, conditions or
provision of, the certificate or articles of incorporation or bylaws of Parent
or Sub, as applicable, any trust agreement, loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Sub or to Parent's or
Sub's property or assets, except for any such conflicts, violations, defaults or
other occurrences that would not prevent or delay the performance by Parent of
its obligations under this Agreement.
3. COVENANTS OF THE SHAREHOLDERS. Until the termination of this Agreement
in accordance with Section 7, each Shareholder, severally and not jointly,
agrees as follows:
(a) VOTING OF SUBJECT SHARES. At any meeting of shareholders of
Company called to vote upon the Merger and/or the Merger Agreement or at any
adjournment thereof or in any other
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<PAGE>
circumstances upon which a vote or other approval with respect to the Merger
and/or the Merger Agreement is sought, such Shareholder shall vote the
Subject Shares in favor of the Merger, the adoption by Company of the Merger
Agreement and the approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement. The agreements set forth
in the immediately preceding sentence shall equally apply if such approvals
were to be sought by the solicitation of written consents.
At any meeting of shareholders of Company or at any adjournment thereof
or in any other circumstances upon which such Shareholder's vote, consent or
other approval is sought, such Shareholder shall vote the Subject Shares
against (i) any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation or agreement of Company under the Merger Agreement and (ii),
except with the prior written consent of Parent, any action or agreement
that would adversely effect or delay the Merger in any respect including,
but not limited to: (A) any Transaction Proposal; (B) any amendment of
Company's articles of incorporation or by-laws or other proposal or
transaction involving Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent
or nullify the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement or change in any manner the voting
rights of any class of Company's capital stock; (C) any material change in
the present capitalization or dividend policy of Company; or (D) any other
material change in Company's corporate structure or business. Such
Shareholder further agrees not to commit or agree to take any action
inconsistent with the foregoing.
(b) PROXIES. Such Shareholder hereby grants to Parent, and to any
officer of Parent designated by Parent, a proxy to vote the Subject Shares
as indicated in Section 3(a) above. Such Shareholder agrees that this proxy
shall be irrevocable and coupled with an interest and will take such further
action or execute such other instruments as may be necessary to effectuate
the intent of this proxy and hereby revoke any proxy previously granted by
such Shareholder with respect to the Subject Shares.
(c) TRANSFER RESTRICTIONS. Such Shareholder agrees not to (i) sell,
transfer, pledge (except to the extent that such Subject Shares are pledged
as of the date hereof), encumber, assign or otherwise dispose of (including
by gift) (collectively, "TRANSFER"), or enter into any contract, option or
other arrangement or understanding (including any profit sharing
arrangement) with respect to the Transfer of, any of the Subject Shares to
any person other than pursuant to the Merger Agreement, (ii) enter into any
voting arrangement or understanding, whether by proxy, voting agreement or
otherwise or (iii) take any action that would make any of its
representations or warranties contained herein untrue or incorrect or have
the effect of preventing or disabling such Shareholder from performing its
obligations under this Agreement.
(d) APPRAISAL RIGHTS. Such Shareholder hereby irrevocably waives any
rights of appraisal with respect to the Merger or rights to dissent from the
Merger that such Shareholder may have.
(e) NO SOLICITATION. Such Shareholder shall not (whether directly or
indirectly through advisors, agents or other intermediaries), nor shall such
Shareholder authorize or permit any of such Shareholder's agents,
representatives or advisors to, (x) solicit, initiate, encourage (including
by way of furnishing information) or take any action knowingly to facilitate
the submission of any inquiries, proposals or offers (whether or not in
writing) from any person other than Parent relating to a Transaction
Proposal, or agree to, approve or endorse any Transaction Proposal or
(y) enter into or participate in any discussions or negotiations regarding
any of the foregoing, or otherwise cooperate in any way with, or knowingly
assist or participate in, facilitate or encourage, any effort or attempt by
any other person to do or seek any of the foregoing; PROVIDED, that such
Shareholder may act as a representative of Company in connection with any
activity the Company
D-3
<PAGE>
is permitted to undertake pursuant to Section 6.8 of the Merger Agreement.
If such Shareholder receives or becomes aware of a Transaction Proposal, or
a request for nonpublic information relating to Company or any of its
Subsidiaries or for access to the properties, books or records of Company or
any of its Subsidiaries by any Person who is considering making or has made
a Transaction Proposal, it shall immediately inform Parent orally and shall
as promptly as practicable (and in any event within one day) inform Parent
in writing of the terms and conditions of such proposal and the identity of
the person making it, forwarding a copy of any written communications
relating thereto. Such Shareholder will keep Parent informed on as prompt a
basis as is practicable of the status and details of any such Transaction
Proposal or request and any related discussions or negotiations, including
by forwarding copies of any material written communications relating
thereto. Such Shareholder will immediately cease and cause its agents,
representatives and advisors, to cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing. If such Shareholder is a member of the
Board of Directors of Company, nothing in this Section 3(e) shall prohibit
such Shareholder, acting in such capacity, from taking and disclosing to
Company's shareholders a position with respect to a Transaction Proposal by
a third party to the extent required under the Exchange Act, including
Rules 14e-2 and 14d-9 thereunder, or from making such disclosure to
Company's shareholders which Company's Board of Directors determines is
required under applicable law pursuant to Section 6.8 of the Merger
Agreement; PROVIDED, that nothing in this sentence shall affect the
obligations of such Shareholder under any other provision of this Agreement.
4. FURTHER ASSURANCES. Each of the Shareholders, severally and not
jointly, agrees to, from time to time, execute and deliver, or cause to be
executed and delivered, such additional or further consents, documents and other
instruments as Parent may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement.
5. STOP TRANSFER ORDER. Each of the Shareholders hereby authorizes
Company's counsel to notify Company's transfer agent that there is a stop
transfer order with respect to all of the Subject Shares (and that this
Agreement places limits on the voting of the Subject Shares).
6. ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. This Agreement
(including the documents and instruments referred to herein) is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
7. TERMINATION. This Agreement shall terminate, and no party shall have
any rights or obligations hereunder and this Agreement shall become null and
void and have no further effect upon the first to occur of (a) the Effective
Time and (b) the termination of the Merger Agreement pursuant to Section 8.1 of
the Merger Agreement. Nothing in this Section 7 shall relieve any party of
liability for breach of this Agreement.
8. GENERAL PROVISIONS.
(a) AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to Parent
and Sub in accordance with Section 9.3 of the Merger Agreement and to each
Shareholder
D-4
<PAGE>
at the address set forth under such Shareholder's name on the signature page
of this Agreement (or at such other address for a party as shall be
specified by like notice).
(c) INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". No provision of this Agreement
shall be construed to require Parent, Sub or any of their respective
Subsidiaries or affiliates, or any Shareholder to take any action which
would violate any applicable law, rule or regulation.
(d) COUNTERPARTS; FACSIMILE. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. This Agreement may be executed
by facsimile signatures of the parties hereto.
(e) GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
(f) SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of
this Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
9. ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal court
or New York State court sitting in the Borough of Manhattan, City of New
York, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (i) consents to
submit such party to the personal jurisdiction of any Federal court located
in the State of New York or any New York state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court, (iii) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other
than a Federal court sitting in the state of New York or a New York state
court and (iv) waives any right to trial by jury with respect to any claim
or proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
D-5
<PAGE>
IN WITNESS WHEREOF, Parent, Sub, and each Shareholder has caused this
Agreement to be executed on its behalf as of the date first written above.
<TABLE>
<S> <C> <C> <C>
ASSOCIATES FIRST CAPITAL CORPORATION
By: /s/ ROY GUTHRIE
-----------------------------------------
Name: Roy Guthrie
Title: Senior Executive Vice President and
Chief Financial Officer
AFCC NEWCO, INC.
By: /s/ ROY GUTHRIE
-----------------------------------------
Name: Roy Guthrie
Title: Senior Executive Vice President and
Chief Financial Officer
Number of Subject Shares:
430,282
/s/ WARREN KANTOR
---------------------------------------------
Warren Kantor
7825 Washington Avenue South
Minneapolis, MN 55439
Number of Subject Shares:
799,387
/s/ ROBERT J. CRESCI
---------------------------------------------
Robert J. Cresci
7825 Washington Avenue South
Minneapolis, MN 55439
Number of Subject Shares:
838,519
/s/ JAMES L. DAVIS
---------------------------------------------
James L. Davis
7825 Washington Avenue South
Minneapolis, MN 55439
Number of Subject Shares:
579,449
/s/ RICH A. GREENAWALT
---------------------------------------------
Rich A. Greenawalt
7825 Washington Avenue South
Minneapolis, MN 55439
</TABLE>
D-6
<PAGE>
APPENDIX E
SECTIONS 302A.471 AND 302A.473 OF THE MINNESOTA BUSINESS CORPORATION ACT
<PAGE>
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.--Subdivision 1.
Actions creating rights. A shareholder of a corporation may dissent from,
and obtain payment for the fair value of the shareholder's shares in the event
of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption
of the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares
to acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter,
or to cumulate votes, except as the right may be excluded or limited through
the authorization or issuance of securities of an existing or new class or
series with similar or different voting rights; except that an amendment to
the articles of an issuing public corporation that provides that
section 302A.671 does not apply to a control share acquisition does not give
rise to the right to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a (1)CONSTITUENT ORGANIZATION, except as provided in
subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B, to
which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert dissenters'
rights as to less than all of the shares registered in the name of the
shareholder, unless the shareholder dissents with respect to all the shares that
are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
Subd. 3. Rights not to apply. (a) Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder
E-1
<PAGE>
of the surviving corporation in a merger, if the shares of the shareholder are
not entitled to be voted on the merger.
(b) If a date is fixed according to section 302A.445, subdivision 1, for the
determination of shareholders entitled to receive notice of and to vote on an
action described in sub division 1, only shareholders as of the date fixed, and
beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
Subd. 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation. (Last amended by Ch. 85, L. '99,
eff. 4-23-99.)
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.--Subdivision 1.
Definitions. (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1 up to and
including the date of payment, calculated at the rate provided in
section 549.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder meeting at
which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If the proposed action must be approved by the
shareholders, a shareholder WHO IS ENTITLED TO DISSENT UNDER SECTION 302A.471
AND who wishes to exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of intent to demand the
fair value of the shares owned by the shareholder and must not vote the shares
in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain a payment and the date
by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.
E-2
<PAGE>
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice was given, but the dissenter retains all other rights of a shareholder
until the proposed action takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each dissenting shareholder who has
complied with subdivision 3 and 4 the amount the corporation estimates to be the
fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income for
a fiscal year ending not more than 16 months before the effective date of
the corporate action, together with the latest available interim financial
statements;
(2) an estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivision 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
rules of civil procedure. Nonresidents of this state may be served by registered
or certified mail or by publication as provided by law. Except a otherwise
provided, the rules of civil procedure apply to this
E-3
<PAGE>
proceeding. The jurisdiction of the court is plenary and exclusive. The court
may appoint appraisers, with powers and authorities the court deems proper, to
receive evidence on and recommend the amount of the fair value of the shares.
The court shall determine whether the shareholder or shareholders in question
have fully complied with the requirements of this section, and shall determine
the fair value of the shares, taking into account any and all factors the court
finds relevant, computed by any method or combination of methods that the court,
in its discretion, sees fit to use, whether or not used by the corporation or by
a dissenter. The fair value of the shares as determined by the court is binding
on all shareholders, wherever located. A dissenter is entitled to judgment in
cash for the amount by which the fair value of the shares as determined by the
court, plus interest, exceeds the amount, if any, remitted under subdivision 5,
but shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an attorney
for the dissenters out of the amount awarded to the dissenters, if any. (Last
amended by Chd. 10, L. '97, eff. 8-1-97.)
E-4
<PAGE>
APPENDIX F
FINANCIAL DATA RELATING TO THE RECEIVABLES UNDERLYING THE
RESIDUAL VALUE OBLIGATIONS
<PAGE>
DESCRIPTIONS OF TABLES IN APPENDIX F
1) CUMULATIVE DEFAULT RATES: This table shows each securitization trust's
cumulative defaults divided by the original principal balance of each pool on a
monthly basis.
2) CUMULATIVE LOSS RATES: This table shows each securitization trust's
cumulative losses divided by the original principal balance of each pool on a
monthly basis.
3) NOTEHOLDERS BALANCE BY MONTH/POOL: This table shows each securitization
trust's pool balance, which is the sum of the principal balance of the
receivables and the cash on deposit in prefunding accounts, on a monthly basis.
The amount of cash in the prefunding account for each securitization trust is at
any time equal to the proceeds from the sale of securities sold by the trust
less principal balances of the receivables delivered to the trust on or prior to
such date.
4) POOL FACTOR: This table shows each securitization trust's outstanding
pool balance divided by the original pool balance, at the beginning of the
transaction, of each pool on a monthly basis.
5) ABS PREPAYMENT LIFE-TO-DATE (%): This table shows each securitization
trust's Life-to-Date ABS Prepayment Speeds on a monthly basis. On a monthly
basis, ABS Prepayment Speed represents the number of contracts which prepaid
that month as a percentage of the original number of contracts in the pool as of
the origination of the contracts; ABS Prepayment Speed may also be equivalently
calculated from the dollar amount of prepayments using the average amortized
contract balance to impute the number of contracts which prepaid. Life-to-Date
ABS Prepayment Speeds are calculated by solving for the average monthly ABS
Prepayment Speed at which the pool would have had to prepay since inception in
order to reach the current number of surviving contracts.
6) SELECTED FINANCIAL DATA: This table shows the listed data for each pool
as of September 30, 1999. The Life-to-Date Cumulative Loss Rate is the dollar
amount of total losses for each pool divided by the original amount securitized.
The Life-to-Date Cumulative Default Rate is the dollar amount of total defaulted
loans for each pool divided by the original amount securitized.
7) SPREAD ACCOUNT INFORMATION:
a) SPREAD ACCOUNT BALANCE ($): is the balance of the spread account as
of the end of each monthly period. During 1998, Arcadia and its provider of
asset-backed securities insurance entered into two separate agreements
whereby Arcadia was allowed to receive an aggregate of $60 million of cash
from certain spread accounts sooner than it would have absent such
arrangement.
b) SPREAD ACCOUNT DISTRIBUTION ($): is the amount of cash released
from the spread account as of the end of each monthly period.
c) SPREAD ACCOUNT DEPOSIT/(DRAW) ($): is the amount actually deposited
into (or, if negative, withdrawn from) each of the spread accounts as of the
end of each monthly period.
8) PROGRAM SPREAD TAG ACCOUNT INFORMATION:
Pursuant to an arrangement between Arcadia and its provider of asset-backed
securities insurance, if any insured securitization trust exceeds a specified
portfolio performance test as defined within the trust agreement, Arcadia may,
in lieu of retaining excess cash from that securitization trust in the related
spread accounts, pledge an equivalent amount of cash, which has the effect of
preventing the violation of the portfolio performance test. Restrictions on such
pledged amounts may be lifted if the portfolio performance for the related
securitization trusts tests are met and maintained as defined in the
arrangement, the violations are waived, or the loans within the securitization
trust are repurchased by Arcadia at the end of the securitization term.
a) PROGRAM SPREAD TAG ACCOUNT BALANCE ($): is the balance of the
program spread tag account as of the end of each monthly period.
b) PROGRAM SPREAD TAG ACCOUNT ACTIVITY ($): is the amount actually
deposited into (or, if negative, withdrawn from) each of the program spread
tag accounts as of the end of each monthly period.
<PAGE>
SECURITIZATION TRUSTS
CUMULATIVE DEFAULT RATES
<TABLE>
<CAPTION>
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C 1996-D
- ----- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.......... 0.00% 0.01% 0.00% 0.00% 0.01% 0.08% 0.02% 0.01% 0.00% 0.00%
2.......... 0.01% 0.03% 0.01% 0.03% 0.11% 0.38% 0.16% 0.04% 0.05% 0.04%
3.......... 0.05% 0.09% 0.03% 0.13% 0.29% 0.71% 0.55% 0.21% 0.15% 0.13%
4.......... 0.08% 0.22% 0.17% 0.37% 0.83% 1.20% 0.88% 0.56% 0.47% 0.52%
5.......... 0.17% 0.72% 0.53% 0.72% 1.40% 1.79% 1.31% 1.05% 0.91% 0.81%
6.......... 0.30% 1.09% 1.03% 1.25% 1.73% 2.17% 1.83% 1.59% 1.36% 1.39%
7.......... 0.49% 1.50% 1.53% 2.08% 2.31% 2.94% 2.42% 2.20% 1.92% 1.98%
8.......... 0.78% 2.03% 2.20% 2.71% 2.81% 3.51% 3.03% 2.71% 2.57% 2.24%
9.......... 1.08% 2.68% 2.93% 3.11% 3.29% 4.17% 3.69% 3.26% 3.13% 2.55%
10......... 1.47% 3.32% 4.03% 3.53% 3.82% 4.73% 4.24% 3.78% 3.69% 3.25%
11......... 1.79% 4.19% 4.22% 3.92% 4.26% 5.30% 4.74% 4.30% 4.02% 3.83%
12......... 2.25% 4.41% 4.64% 4.39% 4.79% 5.85% 5.27% 4.92% 4.43% 4.42%
13......... 2.59% 5.23% 5.38% 4.91% 5.33% 6.37% 5.72% 5.55% 4.99% 5.18%
14......... 3.02% 5.57% 5.86% 5.45% 5.88% 6.89% 6.28% 5.97% 5.54% 5.86%
15......... 3.47% 5.99% 6.36% 5.83% 6.41% 7.36% 6.89% 6.30% 6.13% 6.58%
16......... 4.15% 6.38% 6.87% 6.30% 6.91% 7.85% 7.39% 6.87% 6.69% 7.26%
17......... 4.56% 6.78% 7.84% 6.75% 7.25% 8.43% 7.92% 7.43% 7.27% 7.99%
18......... 4.88% 7.11% 7.98% 7.19% 7.69% 8.92% 8.29% 7.94% 7.85% 8.58%
19......... 5.13% 7.42% 8.27% 7.60% 8.11% 9.42% 8.80% 8.50% 8.50% 9.20%
20......... 5.42% 7.82% 8.68% 8.06% 8.55% 9.79% 9.20% 9.09% 9.18% 9.75%
21......... 5.67% 8.07% 9.03% 8.43% 8.94% 10.07% 9.63% 9.57% 9.74% 10.50%
22......... 5.89% 8.34% 9.36% 8.73% 9.40% 10.48% 10.04% 10.07% 10.27% 11.05%
23......... 6.11% 8.63% 9.87% 9.11% 9.78% 10.93% 10.50% 10.61% 10.81% 11.71%
24......... 6.42% 9.07% 9.99% 9.49% 10.01% 11.33% 10.98% 11.06% 11.38% 12.13%
25......... 6.70% 9.36% 10.12% 9.86% 10.40% 11.71% 11.45% 11.58% 11.88% 12.41%
26......... 6.92% 9.67% 10.45% 10.20% 10.73% 12.13% 11.88% 11.96% 12.40% 12.91%
27......... 7.17% 9.92% 10.75% 10.42% 11.00% 12.55% 12.28% 12.45% 12.84% 13.30%
28......... 7.36% 10.32% 11.07% 10.70% 11.33% 12.93% 12.67% 12.83% 13.14% 13.66%
29......... 7.55% 10.59% 11.29% 11.00% 11.69% 13.27% 13.00% 13.31% 13.60% 14.11%
30......... 7.80% 10.81% 11.47% 11.33% 12.05% 13.58% 13.42% 13.67% 13.94% 14.59%
31......... 8.06% 11.01% 11.73% 11.64% 12.38% 13.92% 13.72% 14.03% 14.24% 14.92%
32......... 8.31% 11.19% 12.02% 11.89% 12.68% 14.21% 14.11% 14.43% 14.54% 15.26%
33......... 8.53% 11.40% 12.27% 12.14% 12.99% 14.48% 14.35% 14.65% 14.89% 15.57%
34......... 8.75% 11.62% 12.53% 12.39% 13.23% 14.79% 14.57% 14.86% 15.15% 15.91%
35......... 8.91% 11.88% 12.71% 12.68% 13.46% 15.09% 14.84% 15.12% 15.44% 16.14%
36......... 9.03% 12.04% 12.96% 12.96% 13.76% 15.33% 15.01% 15.42% 15.75% 16.41%
37......... 9.19% 12.29% 13.21% 13.21% 14.00% 15.46% 15.20% 15.61% 16.04%
38......... 9.35% 12.53% 13.45% 13.43% 14.26% 15.80% 15.40% 15.83% 16.26%
39......... 9.52% 12.75% 13.74% 13.63% 14.45% 15.96% 15.66% 16.05% 16.49%
40......... 9.71% 12.92% 13.95% 13.87% 14.57% 16.08% 15.82% 16.26%
41......... 9.85% 13.07% 14.13% 14.21% 14.80% 16.22% 16.00% 16.41%
42......... 10.02% 13.26% 14.33% 14.30% 14.97% 16.42% 16.18% 16.57%
43......... 10.20% 13.45% 14.51% 14.62% 15.07% 16.58% 16.35%
44......... 10.36% 13.64% 14.68% 14.86% 15.19% 16.74% 16.50%
45......... 10.50% 13.84% 15.00% 14.86% 15.36% 16.90% 16.64%
46......... 10.63% 14.01% 15.14% 14.89% 15.48% 17.05%
47......... 10.77% 14.08% 15.36% 14.92% 15.61% 17.12%
48......... 10.87% 14.18% 15.42% 15.08% 15.75% 17.24%
49......... 10.98% 14.27% 15.41% 15.16% 15.86%
50......... 11.12% 14.38% 15.45% 15.27% 15.93%
51......... 11.29% 14.50% 15.54% 15.36% 16.01%
52......... 11.43% 14.66% 15.63% 15.44%
53......... 11.53% 14.72% 15.72% 15.60%
54......... 11.57% 14.80% 15.82% 15.65%
55......... 11.57% 14.89% 15.97%
56......... 11.58% 14.96% 16.07%
57......... 11.66% 15.10% 16.09%
58......... 11.72% 15.14%
59......... 11.78%
60......... 11.83%
61......... 11.86%
62......... 11.91%
63......... 11.97%
<CAPTION>
MONTH 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B 1998-C 1998-D 1998-E 1999-A
- ----- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.......... 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2.......... 0.03% 0.00% 0.01% 0.00% 0.00% 0.01% 0.01% 0.00% 0.00% 0.00%
3.......... 0.09% 0.03% 0.03% 0.04% 0.05% 0.11% 0.10% 0.01% 0.02% 0.03%
4.......... 0.39% 0.21% 0.10% 0.13% 0.16% 0.28% 0.19% 0.12% 0.07% 0.18%
5.......... 0.49% 0.43% 0.27% 0.36% 0.41% 0.66% 0.47% 0.29% 0.25% 0.43%
6.......... 0.70% 0.81% 0.67% 0.77% 0.92% 1.08% 0.86% 0.62% 0.56% 0.87%
7.......... 1.20% 1.36% 1.24% 1.33% 1.65% 1.44% 1.33% 1.11% 1.00% 1.45%
8.......... 1.72% 2.08% 1.83% 1.89% 2.36% 2.07% 1.85% 1.58% 1.61% 1.87%
9.......... 2.34% 2.82% 2.43% 2.75% 3.01% 2.64% 2.37% 2.06% 2.21% 2.40%
10......... 3.06% 3.59% 3.00% 3.58% 3.51% 3.15% 2.87% 2.67% 2.91%
11......... 3.65% 4.41% 3.62% 4.38% 4.12% 3.71% 3.43% 3.27% 3.43%
12......... 4.33% 5.14% 4.38% 5.01% 4.62% 4.25% 3.93% 3.68% 4.07%
13......... 5.08% 5.75% 5.20% 5.40% 5.16% 4.70% 4.45% 4.05%
14......... 5.79% 6.34% 5.84% 5.99% 5.68% 5.10% 4.91%
15......... 6.50% 7.11% 6.39% 6.51% 6.25% 5.59% 5.48%
16......... 7.16% 7.86% 6.80% 7.05% 6.68% 6.04%
17......... 7.78% 8.64% 7.38% 7.59% 7.22% 6.48%
18......... 8.53% 9.30% 7.84% 8.22% 7.80% 7.00%
19......... 9.20% 9.70% 8.28% 8.65% 8.31%
20......... 9.87% 10.30% 8.83% 9.12% 8.71%
21......... 10.38% 10.80% 9.36% 9.68% 9.18%
22......... 10.75% 11.30% 9.76% 10.18%
23......... 11.26% 11.82% 10.15% 10.60%
24......... 11.68% 12.33% 10.65% 11.07%
25......... 12.14% 12.75% 11.14%
26......... 12.62% 13.18% 11.75%
27......... 13.11% 13.62% 11.98%
28......... 13.50% 14.08%
29......... 13.95% 14.42%
30......... 14.24% 14.80%
31......... 14.62%
32......... 15.03%
33......... 15.26%
34.........
35.........
36.........
37.........
38.........
39.........
40.........
41.........
42.........
43.........
44.........
45.........
46.........
47.........
48.........
49.........
50.........
51.........
52.........
53.........
54.........
55.........
56.........
57.........
58.........
59.........
60.........
61.........
62.........
63.........
<CAPTION>
MONTH 1999-B 1999-C
- ----- -------- --------
<S> <C> <C>
1.......... 0.00% 0.00%
2.......... 0.02% 0.01%
3.......... 0.09% 0.08%
4.......... 0.30%
5.......... 0.59%
6.......... 1.01%
7..........
8..........
9..........
10.........
11.........
12.........
13.........
14.........
15.........
16.........
17.........
18.........
19.........
20.........
21.........
22.........
23.........
24.........
25.........
26.........
27.........
28.........
29.........
30.........
31.........
32.........
33.........
34.........
35.........
36.........
37.........
38.........
39.........
40.........
41.........
42.........
43.........
44.........
45.........
46.........
47.........
48.........
49.........
50.........
51.........
52.........
53.........
54.........
55.........
56.........
57.........
58.........
59.........
60.........
61.........
62.........
63.........
</TABLE>
F-1
<PAGE>
SECURITIZATION TRUSTS
<TABLE>
<CAPTION>
CUMULATIVE LOSS RATES
-----------------------------------------------------------------------------------------------------------
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C 1996-D
- --------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.00% 0.00% 0.01% 0.08% 0.01% 0.01% 0.00% 0.00%
2 0.01% 0.01% 0.00% 0.02% 0.08% 0.35% 0.12% 0.03% 0.05% 0.03%
3 0.05% 0.06% 0.01% 0.09% 0.20% 0.50% 0.44% 0.17% 0.12% 0.11%
4 0.05% 0.13% 0.09% 0.24% 0.55% 0.81% 0.65% 0.44% 0.39% 0.44%
5 0.10% 0.49% 0.31% 0.35% 0.94% 1.02% 0.90% 0.77% 0.73% 0.62%
6 0.14% 0.48% 0.59% 0.61% 0.90% 1.00% 1.27% 1.15% 1.03% 1.04%
7 0.18% 0.70% 0.67% 1.05% 1.15% 1.39% 1.57% 1.53% 1.37% 1.40%
8 0.33% 0.75% 0.85% 1.24% 1.24% 1.68% 1.90% 1.85% 1.72% 1.41%
9 0.45% 0.95% 1.23% 1.20% 1.37% 2.01% 2.35% 2.13% 2.00% 1.44%
10 0.63% 1.19% 1.77% 1.34% 1.53% 2.24% 2.57% 2.32% 2.26% 1.64%
11 0.71% 1.58% 1.49% 1.33% 1.67% 2.41% 2.78% 2.59% 2.27% 1.90%
12 0.94% 1.37% 1.41% 1.45% 1.85% 2.74% 2.95% 2.84% 2.38% 2.23%
13 0.91% 1.66% 1.80% 1.63% 2.05% 2.92% 3.05% 3.07% 2.47% 2.75%
14 0.98% 1.66% 1.78% 1.89% 2.21% 3.12% 3.33% 3.10% 2.68% 3.18%
15 1.22% 1.67% 1.87% 1.99% 2.50% 3.21% 3.61% 3.06% 2.99% 3.49%
16 1.55% 1.83% 2.03% 2.06% 2.66% 3.35% 3.74% 3.13% 3.31% 3.80%
17 1.65% 1.88% 2.72% 2.20% 2.71% 3.60% 3.88% 3.35% 3.63% 4.06%
18 1.67% 1.99% 2.56% 2.43% 2.84% 3.74% 3.86% 3.59% 3.87% 4.29%
19 1.67% 2.10% 2.55% 2.61% 2.92% 3.84% 3.92% 3.91% 4.15% 4.49%
20 1.63% 2.25% 2.71% 2.87% 3.10% 3.86% 4.04% 4.26% 4.42% 4.65%
21 1.68% 2.27% 2.86% 2.99% 3.20% 3.85% 4.18% 4.36% 4.64% 4.97%
22 1.71% 2.38% 2.95% 2.94% 3.30% 3.90% 4.37% 4.53% 4.86% 5.12%
23 1.76% 2.43% 3.24% 3.09% 3.44% 4.10% 4.64% 4.72% 5.06% 5.46%
24 1.92% 2.72% 3.11% 3.23% 3.45% 4.26% 4.80% 4.95% 5.32% 5.62%
25 1.98% 2.68% 2.93% 3.33% 3.50% 4.44% 4.96% 5.15% 5.49% 5.76%
26 2.03% 2.74% 3.02% 3.38% 3.58% 4.65% 5.10% 5.27% 5.76% 6.04%
27 2.17% 2.82% 3.15% 3.39% 3.69% 4.81% 5.29% 5.47% 5.93% 6.22%
28 2.22% 2.99% 3.28% 3.39% 3.86% 4.94% 5.43% 5.62% 6.08% 6.39%
29 2.29% 3.08% 3.26% 3.48% 4.07% 5.05% 5.56% 5.88% 6.32% 6.63%
30 2.41% 3.14% 3.28% 3.61% 4.25% 5.17% 5.75% 6.02% 6.50% 6.89%
31 2.48% 3.17% 3.33% 3.78% 4.36% 5.30% 5.85% 6.27% 6.65% 7.06%
32 2.56% 3.14% 3.47% 3.89% 4.46% 5.40% 6.07% 6.50% 6.80% 7.23%
33 2.63% 3.25% 3.57% 3.99% 4.57% 5.55% 6.17% 6.58% 7.00% 7.29%
34 2.69% 3.37% 3.72% 4.07% 4.64% 5.69% 6.30% 6.66% 7.13% 7.51%
35 2.72% 3.54% 3.78% 4.19% 4.73% 5.85% 6.45% 6.79% 7.29% 7.67%
36 2.71% 3.59% 3.89% 4.31% 4.88% 5.96% 6.51% 6.95% 7.36% 7.81%
37 2.75% 3.69% 3.97% 4.39% 4.99% 6.00% 6.60% 7.05% 7.55%
38 2.78% 3.77% 4.06% 4.49% 5.12% 6.24% 6.72% 7.17% 7.69%
39 2.86% 3.85% 4.21% 4.58% 5.19% 6.31% 6.88% 7.19% 7.83%
40 2.94% 3.91% 4.29% 4.69% 5.25% 6.35% 6.97% 7.33%
41 3.01% 3.94% 4.39% 4.94% 5.39% 6.41% 7.06% 7.43%
42 3.07% 4.05% 4.48% 4.93% 5.49% 6.52% 7.06% 7.52%
43 3.14% 4.16% 4.55% 5.20% 5.51% 6.59% 7.18%
44 3.22% 4.21% 4.64% 5.37% 5.58% 6.70% 7.27%
45 3.29% 4.34% 4.90% 5.29% 5.68% 6.69% 7.35%
46 3.35% 4.43% 4.97% 5.27% 5.74% 6.79%
47 3.42% 4.46% 5.12% 5.26% 5.81% 6.84%
48 3.46% 4.50% 5.13% 5.34% 5.79% 6.91%
49 3.51% 4.55% 5.06% 5.37% 5.87%
50 3.58% 4.60% 5.08% 5.42% 5.91%
51 3.71% 4.69% 5.11% 5.37% 5.95%
52 3.80% 4.77% 5.15% 5.42%
53 3.87% 4.79% 5.21% 5.57%
54 3.86% 4.83% 5.18% 5.57%
55 3.82% 4.81% 5.30%
56 3.82% 4.85% 5.37%
57 3.86% 4.95% 5.36%
58 3.88% 4.96%
59 3.91%
60 3.86%
61 3.89%
62 3.93%
63 3.97%
<CAPTION>
CUMULATIVE LOSS RATES
-----------------------------------------------------------------------------------------------------------
MONTH 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B 1998-C 1998-D 1998-E 1999-A
- --------------------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.02% 0.00% 0.00% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00%
3 0.06% 0.01% 0.01% 0.02% 0.02% 0.04% 0.04% 0.01% 0.01% 0.01%
4 0.31% 0.09% 0.04% 0.06% 0.07% 0.11% 0.07% 0.06% 0.03% 0.06%
5 0.30% 0.20% 0.14% 0.17% 0.21% 0.27% 0.19% 0.11% 0.09% 0.15%
6 0.37% 0.43% 0.38% 0.43% 0.43% 0.44% 0.36% 0.24% 0.21% 0.32%
7 0.57% 0.82% 0.76% 0.78% 0.76% 0.63% 0.55% 0.46% 0.41% 0.57%
8 0.90% 1.31% 1.11% 1.07% 1.08% 0.95% 0.77% 0.65% 0.65% 0.76%
9 1.27% 1.73% 1.48% 1.50% 1.37% 1.17% 1.00% 0.85% 0.92% 1.00%
10 1.77% 2.17% 1.77% 1.83% 1.64% 1.39% 1.23% 1.14% 1.22%
11 2.13% 2.58% 2.02% 2.16% 1.93% 1.65% 1.47% 1.45% 1.50%
12 2.47% 2.95% 2.27% 2.42% 2.13% 1.89% 1.69% 1.66% 1.77%
13 2.82% 3.14% 2.54% 2.58% 2.37% 2.08% 1.92% 1.78%
14 3.10% 3.29% 2.81% 2.83% 2.59% 2.26% 2.18%
15 3.45% 3.54% 3.01% 3.03% 2.85% 2.44% 2.43%
16 3.64% 3.76% 3.18% 3.28% 3.03% 2.68%
17 3.83% 4.11% 3.48% 3.55% 3.31% 2.92%
18 4.12% 4.35% 3.67% 3.88% 3.55% 3.17%
19 4.34% 4.52% 3.88% 4.07% 3.82%
20 4.63% 4.83% 4.14% 4.31% 4.06%
21 4.85% 5.05% 4.44% 4.52% 4.29%
22 5.02% 5.31% 4.64% 4.80%
23 5.30% 5.57% 4.84% 5.06%
24 5.47% 5.82% 5.02% 5.30%
25 5.71% 6.03% 5.31%
26 5.96% 6.26% 5.76%
27 6.23% 6.40% 5.79%
28 6.44% 6.68%
29 6.66% 6.92%
30 6.71% 7.10%
31 6.94%
32 7.24%
33 7.32%
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
<CAPTION>
CUMULATIVE LOSS RATES
-------------------
MONTH 1999-B 1999-C
- --------------------- -------- --------
<S> <C> <C>
1 0.00% 0.00%
2 0.01% 0.00%
3 0.02% 0.03%
4 0.10%
5 0.22%
6 0.40%
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
</TABLE>
F-2
<PAGE>
ARCADIA FINANCIAL LTD
NOTEHOLDERS BALANCES BY MONTH/POOL
AS OF NOVEMBER 30, 1999
SECURITIZATION TRUSTS
<TABLE>
<CAPTION>
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sep-94............... 375,148,268
Oct-94............... 369,909,316
Nov-94............... 362,030,669
Dec-94............... 352,655,114
Jan-95............... 341,725,120
Feb-95............... 330,145,153 158,408,371 300,000,000
Mar-95............... 316,597,687 153,807,411 295,117,684
Apr-95............... 305,631,109 149,033,083 286,195,483
May-95............... 294,581,696 144,310,883 277,249,555
Jun-95............... 284,809,195 139,483,091 268,587,376 470,000,000
Jul-95............... 275,779,582 134,966,019 260,408,419 463,374,585
Aug-95............... 265,243,252 130,712,959 250,824,472 450,179,726 525,000,000
Sep-95............... 256,375,874 126,097,125 242,819,671 434,914,503 517,467,986
Oct-95............... 246,521,545 121,768,601 232,874,435 422,175,193 501,875,871
Nov-95............... 237,258,894 117,244,803 224,023,619 407,043,569 488,940,216 599,999,888
Dec-95............... 228,275,793 112,738,238 215,325,582 393,459,570 475,129,727 588,666,333
Jan-96............... 219,320,878 108,631,935 208,457,193 379,528,859 459,642,011 572,140,906
Feb-96............... 211,559,822 105,143,186 201,172,476 366,584,267 445,206,808 555,129,664 600,000,000
Mar-96............... 203,194,372 100,502,513 192,603,432 354,546,055 429,205,237 537,365,371 589,436,548
Apr-96............... 194,792,603 96,694,018 184,562,501 341,424,639 413,606,902 517,980,347 570,399,655
May-96............... 187,155,223 92,942,991 177,386,313 328,277,034 399,144,290 501,018,410 552,529,496
Jun-96............... 180,174,488 89,373,224 170,365,724 315,982,566 385,292,938 483,413,206 536,424,816
Jul-96............... 172,825,033 86,005,519 162,014,059 304,508,582 371,065,147 466,532,322 519,026,351
Aug-96............... 165,722,288 82,676,591 156,241,059 292,039,920 357,338,951 450,090,975 501,295,707
Sep-96............... 158,986,658 79,719,249 150,857,656 281,494,966 344,506,655 434,913,057 485,417,259
Oct-96............... 152,553,655 76,707,925 144,699,982 271,280,758 330,886,396 418,666,488 468,748,995
Nov-96............... 146,880,937 73,966,383 139,144,270 260,637,181 319,253,738 404,059,801 452,653,437
Dec-96............... 141,300,082 71,511,446 134,341,041 251,650,787 307,926,086 389,884,546 437,667,137
Jan-97............... 135,794,069 68,650,165 129,058,023 242,987,062 297,783,249 376,507,213 423,440,882
Feb-97............... 130,079,980 65,882,083 123,359,713 234,049,204 287,179,351 363,163,575 409,327,369
Mar-97............... 123,802,198 63,454,184 118,119,859 224,988,446 274,600,725 348,491,921 393,449,383
Apr-97............... 117,629,217 60,808,075 112,330,723 215,514,217 261,871,989 331,607,276 376,499,263
May-97............... 112,215,332 58,065,715 106,990,956 205,409,933 250,654,203 317,164,065 361,839,918
Jun-97............... 106,782,426 55,239,158 101,915,402 196,171,695 238,602,865 303,396,949 347,651,552
Jul-97............... 101,640,081 52,703,042 97,637,309 187,281,413 228,372,690 291,789,650 333,566,747
Aug-97............... 97,069,417 50,511,759 93,962,646 179,229,541 219,916,747 281,461,248 322,263,672
Sep-97............... 92,403,078 48,479,224 89,869,281 172,327,308 210,568,772 270,137,721 309,872,183
Oct-97............... 87,783,733 46,418,113 85,738,990 165,148,558 201,436,939 258,777,510 298,380,078
Nov-97............... 83,816,329 44,177,430 82,218,206 157,728,372 193,944,296 249,130,886 288,228,608
Dec-97............... 79,468,023 42,313,790 78,284,356 151,213,191 185,513,128 238,681,443 276,938,084
Jan-98............... 75,730,447 40,352,476 75,018,129 144,447,245 177,141,924 228,446,383 266,774,091
Feb-98............... 71,956,883 38,571,182 71,246,325 138,408,537 168,945,459 218,756,120 256,025,813
Mar-98............... 67,631,542 36,752,359 67,350,785 132,355,498 160,505,714 207,925,611 243,860,596
Apr-98............... 63,784,873 34,733,788 64,195,304 125,871,366 153,151,480 198,749,352 233,297,497
May-98............... 60,485,752 33,084,116 60,929,904 119,612,965 145,941,947 190,170,147 223,200,105
Jun-98............... 56,791,208 31,417,501 57,725,083 113,784,767 138,554,339 180,934,231 212,822,288
Jul-98............... 53,326,112 29,731,521 54,793,123 107,635,380 131,564,361 172,387,483 203,270,300
Aug-98............... 50,304,226 28,095,308 51,959,561 102,150,706 124,891,323 164,124,438 193,940,612
Sep-98............... 47,280,388 26,624,963 49,291,836 97,027,195 119,030,886 156,212,369 185,612,395
Oct-98............... 44,292,554 25,057,273 46,693,329 92,203,765 112,879,115 148,531,710 176,459,246
Nov-98............... 41,282,970 23,455,237 43,768,245 86,841,839 107,220,395 141,486,233 168,485,879
Dec-98............... 38,647,256 22,093,535 41,373,437 82,804,012 102,390,075 135,316,550 161,129,513
Jan-99............... 36,105,103 20,941,112 38,866,079 77,858,867 97,304,647 128,502,723 154,093,142
Feb-99............... 33,856,609 19,808,284 36,782,187 73,434,292 92,054,200 122,183,933 147,117,232
Mar-99............... 31,467,030 18,665,868 34,557,432 70,048,487 86,753,826 115,328,269 139,095,325
Apr-99............... 29,335,844 17,426,788 32,516,095 65,778,309 81,806,618 109,354,322 132,119,031
May-99............... 27,285,434 16,295,412 30,696,448 62,053,929 77,107,713 103,868,157 125,290,099
Jun-99............... 25,148,282 15,124,406 28,501,057 58,386,346 72,384,465 97,629,435 118,392,738
Jul-99............... 23,183,180 14,086,033 26,635,587 54,736,000 68,005,399 92,208,394 112,295,199
Aug-99............... 21,304,136 13,156,170 24,767,400 51,290,882 63,521,384 86,294,267 105,581,677
Sep-99............... 19,675,855 12,216,699 22,925,437 47,904,238 59,748,775 81,199,602 99,875,569
Oct-99............... 18,106,850 11,428,391 21,263,713 45,033,978 56,428,343 76,785,761 94,718,131
Nov-99............... 16,390,753 10,509,811 19,816,451 41,942,295 52,642,314 72,087,035 89,265,741
<CAPTION>
MONTH 1996-B 1996-C 1996-D 1997-A 1997-B 1997-C 1997-D
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sep-94...............
Oct-94...............
Nov-94...............
Dec-94...............
Jan-95...............
Feb-95...............
Mar-95...............
Apr-95...............
May-95...............
Jun-95...............
Jul-95...............
Aug-95...............
Sep-95...............
Oct-95...............
Nov-95...............
Dec-95...............
Jan-96...............
Feb-96...............
Mar-96...............
Apr-96...............
May-96............... 650,000,000
Jun-96............... 641,444,110
Jul-96............... 623,699,024
Aug-96............... 608,055,110 725,000,000
Sep-96............... 591,612,401 715,190,190
Oct-96............... 574,237,446 696,312,376
Nov-96............... 557,419,989 681,029,833 730,000,000
Dec-96............... 540,368,203 664,248,274 720,779,497
Jan-97............... 525,213,267 646,780,269 705,824,218
Feb-97............... 509,227,503 629,864,236 689,430,675 775,000,000
Mar-97............... 492,328,123 610,546,937 670,652,126 766,436,096
Apr-97............... 473,999,126 590,112,803 653,442,306 748,515,203
May-97............... 456,834,088 570,743,443 635,095,000 731,800,782 775,000,000
Jun-97............... 440,912,220 552,588,666 616,532,000 714,052,540 768,180,163
Jul-97............... 426,375,052 536,378,124 600,489,048 697,854,296 751,565,008
Aug-97............... 413,928,279 521,043,678 585,345,620 681,729,711 736,614,181 775,000,000
Sep-97............... 399,417,725 504,654,883 566,024,118 662,645,576 719,814,271 767,125,507
Oct-97............... 385,094,525 488,016,973 548,957,611 643,157,005 703,310,718 752,048,946
Nov-97............... 373,226,004 473,356,984 533,109,398 626,341,571 687,210,651 738,893,463 600,000,000
Dec-97............... 360,058,861 457,525,938 515,067,063 607,279,421 668,706,582 723,878,312 595,524,778
Jan-98............... 347,289,207 442,169,899 498,865,610 590,083,261 650,674,948 709,178,428 586,323,214
Feb-98............... 334,816,585 427,517,428 482,455,171 571,698,656 631,038,037 692,578,616 574,865,429
Mar-98............... 320,737,667 410,131,040 463,427,414 549,961,271 609,378,344 672,054,685 561,232,238
Apr-98............... 307,718,640 394,546,300 446,377,390 530,746,449 588,976,342 653,455,269 548,744,938
May-98............... 295,641,344 380,132,228 431,523,123 512,944,595 569,514,588 635,326,536 535,458,329
Jun-98............... 282,912,361 364,754,177 414,575,127 493,921,276 550,413,617 615,837,631 520,290,697
Jul-98............... 270,912,765 350,264,617 399,046,295 476,620,635 532,164,024 596,393,161 504,800,025
Aug-98............... 258,901,509 336,294,771 382,938,158 459,012,466 513,126,609 577,158,362 488,035,683
Sep-98............... 248,055,436 323,256,380 368,823,000 442,500,525 495,303,121 557,479,129 473,084,186
Oct-98............... 237,058,257 309,625,469 353,569,924 426,104,459 477,006,793 539,943,237 457,426,725
Nov-98............... 227,034,641 297,165,518 340,262,000 411,057,654 459,636,826 522,464,911 442,915,747
Dec-98............... 217,884,310 286,829,427 328,895,000 397,812,515 445,803,771 507,399,543 430,127,645
Jan-99............... 208,418,417 275,126,324 316,598,000 384,009,195 430,558,741 492,039,927 417,101,656
Feb-99............... 199,663,518 263,846,978 304,358,000 369,886,723 415,302,255 476,366,369 402,995,543
Mar-99............... 189,909,351 251,476,932 290,565,000 353,829,407 398,264,747 458,149,789 387,418,093
Apr-99............... 180,592,842 240,245,775 277,530,000 338,627,926 381,939,215 441,111,404 374,016,246
May-99............... 172,022,742 229,724,091 265,496,315 325,337,258 367,204,339 425,685,292 361,053,478
Jun-99............... 163,172,105 218,383,387 253,532,842 310,509,382 351,834,698 409,429,544 347,723,829
Jul-99............... 155,268,947 208,045,387 242,824,605 297,255,680 337,877,991 394,367,668 335,699,105
Aug-99............... 147,062,427 196,887,721 231,587,743 284,406,058 323,258,966 377,837,851 322,074,141
Sep-99............... 140,081,444 187,841,292 221,236,044 272,501,914 310,216,037 363,744,936 310,849,914
Oct-99............... 133,595,041 179,626,274 212,023,088 260,636,475 298,409,641 348,604,172 300,128,904
Nov-99............... 126,535,446 170,700,598 203,300,595 249,680,233 285,968,995 335,863,541 288,273,262
<CAPTION>
MONTH 1998-A 1998-B 1998-C 1998-D 1998-E 1999-A 1999-B 1999-C
- ----- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94...............
Oct-94...............
Nov-94...............
Dec-94...............
Jan-95...............
Feb-95...............
Mar-95...............
Apr-95...............
May-95...............
Jun-95...............
Jul-95...............
Aug-95...............
Sep-95...............
Oct-95...............
Nov-95...............
Dec-95...............
Jan-96...............
Feb-96...............
Mar-96...............
Apr-96...............
May-96...............
Jun-96...............
Jul-96...............
Aug-96...............
Sep-96...............
Oct-96...............
Nov-96...............
Dec-96...............
Jan-97...............
Feb-97...............
Mar-97...............
Apr-97...............
May-97...............
Jun-97...............
Jul-97...............
Aug-97...............
Sep-97...............
Oct-97...............
Nov-97...............
Dec-97...............
Jan-98...............
Feb-98............... 525,000,000
Mar-98............... 519,983,579
Apr-98............... 511,151,521
May-98............... 502,217,530 550,000,000
Jun-98............... 492,303,091 545,643,591
Jul-98............... 481,271,208 535,166,847
Aug-98............... 468,667,065 524,667,471 600,000,000
Sep-98............... 455,259,264 514,691,052 595,338,532
Oct-98............... 442,084,425 502,892,850 585,237,110 200,000,000
Nov-98............... 429,678,573 491,366,829 573,800,728 197,229,142 225,000,000
Dec-98............... 417,962,333 480,400,108 563,417,083 193,023,729 224,034,320
Jan-99............... 406,684,527 468,406,411 552,043,610 189,318,699 220,524,802
Feb-99............... 394,075,653 455,584,810 538,816,661 185,157,145 216,955,989 550,000,000
Mar-99............... 380,102,890 440,908,271 522,669,277 180,033,782 211,983,207 543,763,773
Apr-99............... 367,490,998 427,820,992 507,742,155 174,767,763 207,272,110 533,067,708
May-99............... 355,344,303 415,057,192 494,185,890 169,756,123 202,448,371 523,553,253 650,000,000
Jun-99............... 342,747,497 402,061,965 479,108,563 164,343,462 196,754,243 511,885,856 642,073,694
Jul-99............... 330,966,269 389,831,837 464,709,657 159,282,185 191,274,011 500,849,584 631,106,727
Aug-99............... 318,515,438 376,704,121 449,719,423 153,767,922 185,377,967 487,504,203 618,544,212 438,524,038
Sep-99............... 307,749,137 364,911,611 436,381,417 149,014,923 179,889,390 474,172,544 606,522,143 432,835,598
Oct-99............... 298,076,889 353,551,114 423,265,742 144,430,145 174,941,404 462,174,875 593,352,165 425,797,463
Nov-99............... 287,545,506 340,838,034 409,071,176 139,410,037 169,470,169 449,221,725 578,470,197 418,080,269
</TABLE>
F-3
<PAGE>
ARCADIA FINANCIAL LTD
POOL FACTORS
AS OF NOVEMBER 30, 1999
SECURITIZATION TRUSTS
<TABLE>
<CAPTION>
430,000,000 158,400,000 300,000,000 470,000,000 525,000,000 600,000,000 600,000,000
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sep-94............... 87.2%
Oct-94............... 86.0%
Nov-94............... 84.2%
Dec-94............... 82.0%
Jan-95............... 79.5%
Feb-95............... 76.8% 100.0% 100.0%
Mar-95............... 73.6% 97.1% 98.4%
Apr-95............... 71.1% 94.1% 95.4%
May-95............... 68.5% 91.1% 92.4%
Jun-95............... 66.2% 88.1% 89.5% 100.0%
Jul-95............... 64.1% 85.2% 86.8% 98.6%
Aug-95............... 61.7% 82.5% 83.6% 95.8% 100.0%
Sep-95............... 59.6% 79.6% 80.9% 92.5% 98.6%
Oct-95............... 57.3% 76.9% 77.6% 89.8% 95.6%
Nov-95............... 55.2% 74.0% 74.7% 86.6% 93.1% 100.0%
Dec-95............... 53.1% 71.2% 71.8% 83.7% 90.5% 98.1%
Jan-96............... 51.0% 68.6% 69.5% 80.8% 87.6% 95.4%
Feb-96............... 49.2% 66.4% 67.1% 78.0% 84.8% 92.5% 100.0%
Mar-96............... 47.3% 63.4% 64.2% 75.4% 81.8% 89.6% 98.2%
Apr-96............... 45.3% 61.0% 61.5% 72.6% 78.8% 86.3% 95.1%
May-96............... 43.5% 58.7% 59.1% 69.8% 76.0% 83.5% 92.1%
Jun-96............... 41.9% 56.4% 56.8% 67.2% 73.4% 80.6% 89.4%
Jul-96............... 40.2% 54.3% 54.0% 64.8% 70.7% 77.8% 86.5%
Aug-96............... 38.5% 52.2% 52.1% 62.1% 68.1% 75.0% 83.5%
Sep-96............... 37.0% 50.3% 50.3% 59.9% 65.6% 72.5% 80.9%
Oct-96............... 35.5% 48.4% 48.2% 57.7% 63.0% 69.8% 78.1%
Nov-96............... 34.2% 46.7% 46.4% 55.5% 60.8% 67.3% 75.4%
Dec-96............... 32.9% 45.1% 44.8% 53.5% 58.7% 65.0% 72.9%
Jan-97............... 31.6% 43.3% 43.0% 51.7% 56.7% 62.8% 70.6%
Feb-97............... 30.3% 41.6% 41.1% 49.8% 54.7% 60.5% 68.2%
Mar-97............... 28.8% 40.1% 39.4% 47.9% 52.3% 58.1% 65.6%
Apr-97............... 27.4% 38.4% 37.4% 45.9% 49.9% 55.3% 62.7%
May-97............... 26.1% 36.7% 35.7% 43.7% 47.7% 52.9% 60.3%
Jun-97............... 24.8% 34.9% 34.0% 41.7% 45.4% 50.6% 57.9%
Jul-97............... 23.6% 33.3% 32.5% 39.8% 43.5% 48.6% 55.6%
Aug-97............... 22.6% 31.9% 31.3% 38.1% 41.9% 46.9% 53.7%
Sep-97............... 21.5% 30.6% 30.0% 36.7% 40.1% 45.0% 51.6%
Oct-97............... 20.4% 29.3% 28.6% 35.1% 38.4% 43.1% 49.7%
Nov-97............... 19.5% 27.9% 27.4% 33.6% 36.9% 41.5% 48.0%
Dec-97............... 18.5% 26.7% 26.1% 32.2% 35.3% 39.8% 46.2%
Jan-98............... 17.6% 25.5% 25.0% 30.7% 33.7% 38.1% 44.5%
Feb-98............... 16.7% 24.4% 23.7% 29.4% 32.2% 36.5% 42.7%
Mar-98............... 15.7% 23.2% 22.5% 28.2% 30.6% 34.7% 40.6%
Apr-98............... 14.8% 21.9% 21.4% 26.8% 29.2% 33.1% 38.9%
May-98............... 14.1% 20.9% 20.3% 25.4% 27.8% 31.7% 37.2%
Jun-98............... 13.2% 19.8% 19.2% 24.2% 26.4% 30.2% 35.5%
Jul-98............... 12.4% 18.8% 18.3% 22.9% 25.1% 28.7% 33.9%
Aug-98............... 11.7% 17.7% 17.3% 21.7% 23.8% 27.4% 32.3%
Sep-98............... 11.0% 16.8% 16.4% 20.6% 22.7% 26.0% 30.9%
Oct-98............... 10.3% 15.8% 15.6% 19.6% 21.5% 24.8% 29.4%
Nov-98............... 9.6% 14.8% 14.6% 18.5% 20.4% 23.6% 28.1%
Dec-98............... 9.0% 13.9% 13.8% 17.6% 19.5% 22.6% 26.9%
Jan-99............... 8.4% 13.2% 13.0% 16.6% 18.5% 21.4% 25.7%
Feb-99............... 7.9% 12.5% 12.3% 15.6% 17.5% 20.4% 24.5%
Mar-99............... 7.3% 11.8% 11.5% 14.9% 16.5% 19.2% 23.2%
Apr-99............... 6.8% 11.0% 10.8% 14.0% 15.6% 18.2% 22.0%
May-99............... 6.3% 10.3% 10.2% 13.2% 14.7% 17.3% 20.9%
Jun-99............... 5.8% 9.5% 9.5% 12.4% 13.8% 16.3% 19.7%
Jul-99............... 5.4% 8.9% 8.9% 11.6% 13.0% 15.4% 18.7%
Aug-99............... 5.0% 8.3% 8.3% 10.9% 12.1% 14.4% 17.6%
Sep-99............... 4.6% 7.7% 7.6% 10.2% 11.4% 13.5% 16.6%
Oct-99............... 4.2% 7.2% 7.1% 9.6% 10.7% 12.8% 15.8%
Nov-99............... 3.8% 6.6% 6.6% 8.9% 10.0% 12.0% 14.9%
<CAPTION>
650,000,000 725,000,000 730,000,000 775,000,000 775,000,000 775,000,000 600,000,000
MONTH 1996-B 1996-C 1996-D 1997-A 1997-B 1997-C 1997-D
- ----- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sep-94...............
Oct-94...............
Nov-94...............
Dec-94...............
Jan-95...............
Feb-95...............
Mar-95...............
Apr-95...............
May-95...............
Jun-95...............
Jul-95...............
Aug-95...............
Sep-95...............
Oct-95...............
Nov-95...............
Dec-95...............
Jan-96...............
Feb-96...............
Mar-96...............
Apr-96...............
May-96............... 100.0%
Jun-96............... 98.7%
Jul-96............... 96.0%
Aug-96............... 93.5% 100.0%
Sep-96............... 91.0% 98.6%
Oct-96............... 88.3% 96.0%
Nov-96............... 85.8% 93.9% 100.0%
Dec-96............... 83.1% 91.6% 98.7%
Jan-97............... 80.8% 89.2% 96.7%
Feb-97............... 78.3% 86.9% 94.4% 100.0%
Mar-97............... 75.7% 84.2% 91.9% 98.9%
Apr-97............... 72.9% 81.4% 89.5% 96.6%
May-97............... 70.3% 78.7% 87.0% 94.4% 100.0%
Jun-97............... 67.8% 76.2% 84.5% 92.1% 99.1%
Jul-97............... 65.6% 74.0% 82.3% 90.0% 97.0%
Aug-97............... 63.7% 71.9% 80.2% 88.0% 95.0% 100.0%
Sep-97............... 61.4% 69.6% 77.5% 85.5% 92.9% 99.0%
Oct-97............... 59.2% 67.3% 75.2% 83.0% 90.7% 97.0%
Nov-97............... 57.4% 65.3% 73.0% 80.8% 88.7% 95.3% 100.0%
Dec-97............... 55.4% 63.1% 70.6% 78.4% 86.3% 93.4% 99.3%
Jan-98............... 53.4% 61.0% 68.3% 76.1% 84.0% 91.5% 97.7%
Feb-98............... 51.5% 59.0% 66.1% 73.8% 81.4% 89.4% 95.8%
Mar-98............... 49.3% 56.6% 63.5% 71.0% 78.6% 86.7% 93.5%
Apr-98............... 47.3% 54.4% 61.1% 68.5% 76.0% 84.3% 91.5%
May-98............... 45.5% 52.4% 59.1% 66.2% 73.5% 82.0% 89.2%
Jun-98............... 43.5% 50.3% 56.8% 63.7% 71.0% 79.5% 86.7%
Jul-98............... 41.7% 48.3% 54.7% 61.5% 68.7% 77.0% 84.1%
Aug-98............... 39.8% 46.4% 52.5% 59.2% 66.2% 74.5% 81.3%
Sep-98............... 38.2% 44.6% 50.5% 57.1% 63.9% 71.9% 78.8%
Oct-98............... 36.5% 42.7% 48.4% 55.0% 61.5% 69.7% 76.2%
Nov-98............... 34.9% 41.0% 46.6% 53.0% 59.3% 67.4% 73.8%
Dec-98............... 33.5% 39.6% 45.1% 51.3% 57.5% 65.5% 71.7%
Jan-99............... 32.1% 37.9% 43.4% 49.5% 55.6% 63.5% 69.5%
Feb-99............... 30.7% 36.4% 41.7% 47.7% 53.6% 61.5% 67.2%
Mar-99............... 29.2% 34.7% 39.8% 45.7% 51.4% 59.1% 64.6%
Apr-99............... 27.8% 33.1% 38.0% 43.7% 49.3% 56.9% 62.3%
May-99............... 26.5% 31.7% 36.4% 42.0% 47.4% 54.9% 60.2%
Jun-99............... 25.1% 30.1% 34.7% 40.1% 45.4% 52.8% 58.0%
Jul-99............... 23.9% 28.7% 33.3% 38.4% 43.6% 50.9% 55.9%
Aug-99............... 22.6% 27.2% 31.7% 36.7% 41.7% 48.8% 53.7%
Sep-99............... 21.6% 25.9% 30.3% 35.2% 40.0% 46.9% 51.8%
Oct-99............... 20.6% 24.8% 29.0% 33.6% 38.5% 45.0% 50.0%
Nov-99............... 19.5% 23.5% 27.8% 32.2% 36.9% 43.3% 48.0%
<CAPTION>
525,000,000 550,000,000 600,000,000 199,999,999 224,999,999 549,999,998 650,000,000 600,000,000
MONTH 1998-A 1998-B 1998-C 1998-D 1998-E 1999-A 1999-B 1999-C
- ----- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94...............
Oct-94...............
Nov-94...............
Dec-94...............
Jan-95...............
Feb-95...............
Mar-95...............
Apr-95...............
May-95...............
Jun-95...............
Jul-95...............
Aug-95...............
Sep-95...............
Oct-95...............
Nov-95...............
Dec-95...............
Jan-96...............
Feb-96...............
Mar-96...............
Apr-96...............
May-96...............
Jun-96...............
Jul-96...............
Aug-96...............
Sep-96...............
Oct-96...............
Nov-96...............
Dec-96...............
Jan-97...............
Feb-97...............
Mar-97...............
Apr-97...............
May-97...............
Jun-97...............
Jul-97...............
Aug-97...............
Sep-97...............
Oct-97...............
Nov-97...............
Dec-97...............
Jan-98...............
Feb-98............... 100.0%
Mar-98............... 99.0%
Apr-98............... 97.4%
May-98............... 95.7% 100.0%
Jun-98............... 93.8% 99.2%
Jul-98............... 91.7% 97.3%
Aug-98............... 89.3% 95.4% 100.0%
Sep-98............... 86.7% 93.6% 99.2%
Oct-98............... 84.2% 91.4% 97.5% 100.0%
Nov-98............... 81.8% 89.3% 95.6% 98.6% 100.0%
Dec-98............... 79.6% 87.3% 93.9% 96.5% 99.6%
Jan-99............... 77.5% 85.2% 92.0% 94.7% 98.0%
Feb-99............... 75.1% 82.8% 89.8% 92.6% 96.4% 100.0%
Mar-99............... 72.4% 80.2% 87.1% 90.0% 94.2% 98.9%
Apr-99............... 70.0% 77.8% 84.6% 87.4% 92.1% 96.9%
May-99............... 67.7% 75.5% 82.4% 84.9% 90.0% 95.2% 100.0%
Jun-99............... 65.3% 73.1% 79.9% 82.2% 87.4% 93.1% 98.8%
Jul-99............... 63.0% 70.9% 77.5% 79.6% 85.0% 91.1% 97.1%
Aug-99............... 60.7% 68.5% 75.0% 76.9% 82.4% 88.6% 95.2% 73.1%
Sep-99............... 58.6% 66.3% 72.7% 74.5% 80.0% 86.2% 93.3% 72.1%
Oct-99............... 56.8% 64.3% 70.5% 72.2% 77.8% 84.0% 91.3% 71.0%
Nov-99............... 54.8% 62.0% 68.2% 69.7% 75.3% 81.7% 89.0% 69.7%
</TABLE>
F-4
<PAGE>
ABS PREPAYMENT LIFE-TO-DATE
SECURITIZATION TRUSTS
<TABLE>
<CAPTION>
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C 1996-D
----- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
3 0.00% 2.04% 2.04% 2.27% 1.47% 1.87% 2.02% 1.45% 1.16% 1.30%
4 0.00% 2.09% 2.01% 2.03% 1.58% 1.95% 1.90% 1.53% 1.28% 1.48%
5 0.00% 2.05% 1.96% 2.13% 1.73% 2.08% 1.94% 1.61% 1.36% 1.47%
6 1.71% 2.00% 2.06% 2.11% 1.76% 2.05% 1.99% 1.64% 1.38% 1.52%
7 1.95% 2.03% 2.03% 2.12% 1.85% 2.07% 1.96% 1.67% 1.47% 1.56%
8 1.89% 2.02% 2.12% 2.10% 1.91% 2.07% 1.97% 1.65% 1.56% 1.53%
9 1.94% 2.04% 2.15% 2.06% 1.92% 2.06% 1.97% 1.65% 1.62% 1.49%
10 1.92% 2.06% 2.17% 2.06% 1.93% 2.03% 1.95% 1.68% 1.64% 1.53%
11 1.88% 2.05% 2.11% 2.08% 1.94% 2.04% 1.93% 1.73% 1.62% 1.55%
12 1.88% 2.00% 2.08% 2.07% 1.94% 2.02% 1.91% 1.76% 1.60% 1.54%
13 1.89% 2.05% 2.11% 2.06% 1.94% 2.00% 1.93% 1.77% 1.60% 1.57%
14 1.91% 2.03% 2.12% 2.06% 1.95% 1.97% 1.97% 1.76% 1.61% 1.57%
15 1.91% 2.02% 2.11% 2.04% 1.93% 1.95% 1.97% 1.72% 1.60% 1.58%
16 1.91% 2.01% 2.10% 2.01% 1.91% 1.95% 1.97% 1.72% 1.60% 1.62%
17 1.94% 1.99% 2.13% 2.00% 1.88% 1.99% 1.97% 1.72% 1.60% 1.63%
18 1.88% 1.97% 2.09% 1.97% 1.86% 2.00% 1.93% 1.70% 1.59% 1.63%
19 1.88% 1.94% 2.05% 1.94% 1.87% 2.00% 1.92% 1.69% 1.62% 1.64%
20 1.87% 1.92% 2.04% 1.92% 1.89% 1.97% 1.90% 1.68% 1.62% 1.65%
21 1.90% 1.90% 2.02% 1.90% 1.89% 1.94% 1.87% 1.67% 1.62% 1.66%
22 1.84% 1.86% 1.98% 1.90% 1.90% 1.93% 1.86% 1.68% 1.63% 1.65%
23 1.83% 1.85% 1.96% 1.90% 1.89% 1.91% 1.84% 1.68% 1.63% 1.66%
24 1.85% 1.84% 1.95% 1.90% 1.87% 1.89% 1.83% 1.68% 1.63% 1.65%
25 1.84% 1.81% 1.93% 1.89% 1.87% 1.87% 1.83% 1.68% 1.63% 1.63%
26 1.82% 1.80% 1.94% 1.88% 1.84% 1.86% 1.82% 1.68% 1.63% 1.62%
27 1.76% 1.79% 1.93% 1.85% 1.82% 1.84% 1.81% 1.68% 1.62% 1.62%
28 1.77% 1.79% 1.92% 1.84% 1.81% 1.84% 1.80% 1.67% 1.61% 1.62%
29 1.75% 1.79% 1.90% 1.82% 1.79% 1.82% 1.79% 1.67% 1.60% 1.62%
30 1.73% 1.77% 1.87% 1.81% 1.79% 1.80% 1.78% 1.66% 1.59% 1.62%
31 1.73% 1.75% 1.85% 1.79% 1.78% 1.79% 1.77% 1.65% 1.59% 1.61%
32 1.73% 1.73% 1.84% 1.77% 1.76% 1.78% 1.76% 1.64% 1.59% 1.61%
33 1.72% 1.72% 1.82% 1.75% 1.75% 1.77% 1.75% 1.62% 1.58% 1.60%
34 1.71% 1.71% 1.80% 1.74% 1.74% 1.76% 1.73% 1.62% 1.58% 1.59%
35 1.70% 1.69% 1.78% 1.73% 1.73% 1.74% 1.71% 1.61% 1.58% 1.58%
36 1.69% 1.68% 1.77% 1.72% 1.72% 1.73% 1.70% 1.61% 1.58% 1.57%
37 1.68% 1.66% 1.76% 1.71% 1.71% 1.71% 1.69% 1.60% 1.56%
38 1.67% 1.66% 1.74% 1.70% 1.69% 1.69% 1.68% 1.59% 1.56%
39 1.66% 1.64% 1.73% 1.69% 1.68% 1.68% 1.67% 1.59% 1.55%
40 1.65% 1.63% 1.71% 1.67% 1.66% 1.67% 1.66% 1.58%
41 1.63% 1.62% 1.70% 1.67% 1.65% 1.65% 1.65% 1.56%
42 1.62% 1.61% 1.69% 1.65% 1.63% 1.64% 1.64% 1.55%
43 1.61% 1.60% 1.67% 1.64% 1.62% 1.63% 1.62%
44 1.61% 1.59% 1.66% 1.63% 1.61% 1.61% 1.62%
45 1.59% 1.59% 1.65% 1.61% 1.60% 1.61% 1.61%
46 1.59% 1.58% 1.63% 1.60% 1.59% 1.59%
47 1.58% 1.57% 1.62% 1.59% 1.58% 1.58%
48 1.57% 1.56% 1.61% 1.58% 1.58% 1.57%
49 1.56% 1.54% 1.60% 1.57% 1.55%
50 1.56% 1.54% 1.58% 1.56% 1.55%
51 1.55% 1.53% 1.57% 1.55% 1.54%
52 1.54% 1.52% 1.57% 1.53%
53 1.53% 1.51% 1.56% 1.52%
54 1.52% 1.50% 1.55% 1.52%
55 1.51% 1.50% 1.53%
56 1.50% 1.48% 1.53%
57 1.50% 1.48% 1.52%
58 1.49% 1.48%
59 1.49%
60 1.48%
61 1.47%
62 1.47%
63 1.47%
<CAPTION>
MONTH 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B 1998-C 1998-D 1998-E 1999-A
----- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
3 1.21% 0.98% 0.77% 0.97% 0.79% 1.00% 0.79% 0.90% 0.71% 0.84%
4 1.29% 1.11% 0.90% 1.15% 0.89% 0.96% 0.89% 1.02% 1.02% 1.05%
5 1.26% 1.14% 0.93% 1.16% 1.00% 1.06% 1.00% 1.23% 1.10% 1.08%
6 1.24% 1.15% 1.01% 1.20% 1.13% 1.10% 1.13% 1.36% 1.15% 1.21%
7 1.32% 1.23% 1.17% 1.29% 1.25% 1.11% 1.25% 1.42% 1.26% 1.28%
8 1.38% 1.27% 1.24% 1.37% 1.33% 1.15% 1.33% 1.49% 1.33% 1.30%
9 1.38% 1.34% 1.28% 1.46% 1.36% 1.21% 1.36% 1.53% 1.41% 1.34%
10 1.42% 1.42% 1.34% 1.49% 1.38% 1.29% 1.38% 1.60% 1.44%
11 1.43% 1.48% 1.39% 1.54% 1.38% 1.33% 1.38% 1.59% 1.45%
12 1.45% 1.51% 1.43% 1.55% 1.41% 1.36% 1.41% 1.61% 1.48%
13 1.52% 1.54% 1.47% 1.55% 1.47% 1.39% 1.47% 1.63%
14 1.55% 1.55% 1.48% 1.54% 1.49% 1.40% 1.49%
15 1.57% 1.58% 1.49% 1.56% 1.51% 1.43% 1.51%
16 1.59% 1.59% 1.48% 1.59% 1.53% 1.43%
17 1.60% 1.61% 1.48% 1.60% 1.54% 1.44%
18 1.61% 1.62% 1.47% 1.60% 1.56% 1.46%
19 1.62% 1.60% 1.50% 1.61% 1.55%
20 1.62% 1.59% 1.51% 1.61% 1.55%
21 1.62% 1.59% 1.51% 1.62% 1.55%
22 1.60% 1.60% 1.52% 1.60%
23 1.59% 1.61% 1.52% 1.60%
24 1.59% 1.61% 1.54% 1.60%
25 1.59% 1.61% 1.52%
26 1.60% 1.61% 1.54%
27 1.60% 1.61% 1.53%
28 1.60% 1.59%
29 1.60% 1.59%
30 1.60% 1.59%
31 1.58%
32 1.58%
33 1.58%
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
<CAPTION>
MONTH 1999-B 1999-C
----- -------- --------
<S> <C> <C>
1 0.00% 0.00%
2 0.00% 0.00%
3 1.04% 0.87%
4 1.00%
5 1.05%
6 1.15%
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
</TABLE>
F-5
<PAGE>
ARCADIA FINANCIAL LTD.
SELECTED FINANCIAL DATA
AS OF SEPT. 30, 1999
<TABLE>
<CAPTION>
LIFE-TO-DATE LIFE-TO-DATE
SECURITIZATION ORIGINAL REMAINING MTHS SINCE CUMULATIVE CUMULATIVE
TRUST POOL BALANCE POOL BALANCE INCEPTION LOSS RATES DEFAULT RATES
- -------------- ------------ ------------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
1994-B 430,000,000 23,024,937 61 3.89% 11.86%
1995-A 158,400,000 11,428,391 56 4.85% 14.96%
1995-B 300,000,000 22,925,431 55 5.30% 15.97%
1995-C 470,000,000 45,033,978 52 5.42% 15.44%
1995-D 525,000,000 59,748,726 49 5.87% 15.86%
1995-E 600,000,000 81,199,490 46 6.79% 17.05%
1996-A 600,000,000 99,861,708 43 7.18% 16.35%
1996-B 650,000,000 140,081,410 40 7.33% 16.26%
1996-C 725,000,000 187,841,283 37 7.55% 16.04%
1996-D 730,000,000 221,229,611 34 7.51% 15.91%
1997-A 775,000,000 272,501,908 31 6.94% 14.62%
1997-B 775,000,000 310,216,034 28 6.68% 14.08%
1997-C 775,000,000 363,744,934 25 5.31% 11.14%
1997-D 600,000,000 310,849,912 22 4.80% 10.18%
1998-A 525,000,000 307,749,137 19 3.82% 8.31%
1998-B 550,000,000 364,911,601 16 2.68% 6.04%
1998-C 600,000,000 436,366,999 13 1.92% 4.45%
1998-D 200,000,000 149,014,883 11 1.45% 3.27%
1998-E 225,000,000 179,889,389 10 1.22% 2.91%
1999-A 550,000,000 474,172,544 7 0.57% 1.45%
1999-B 650,000,000 606,522,143 4 0.10% 0.30%
1999-C (1) 600,000,000 432,835,598 1 0.00% 0.00%
</TABLE>
- ------------------------
(1) At Sept. 30, 1999, $438.52 million of automobile loans had been delivered to
the trust and the remaining prefunded portion will be delivered in the 4th
quarter of 1999.
F-6
<PAGE>
ARCADIA FINANCIAL LTD.
SPREAD ACCOUNT BALANCE
SECURITIZATION TRUSTS
<TABLE>
<CAPTION>
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B
- --------------------- ---------- --------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94
Oct-94
Nov-94 986,231
Dec-94 2,229,459
Jan-95 4,755,156
Feb-95 5,902,119 561,747
Mar-95 6,969,021 1,204,243 441,323
Apr-95 7,553,263 1,831,403 2,584,204
May-95 8,203,028 2,379,086 4,090,212
Jun-95 8,699,088 2,515,157 5,578,902 1,571,995
Jul-95 9,456,976 3,125,026 6,382,926 4,384,750
Aug-95 9,515,710 3,367,388 6,976,721 6,724,547
Sep-95 10,770,263 3,876,778 8,157,181 8,807,255 2,247,696
Oct-95 11,407,621 4,050,881 8,857,134 10,774,798 5,239,026
Nov-95 11,455,618 4,174,800 8,906,041 12,030,582 7,360,261
Dec-95 11,274,768 4,193,059 8,695,065 12,103,706 8,046,727 2,325,713
Jan-96 11,759,127 5,032,355 10,739,466 13,486,568 8,576,825 5,252,197
Feb-96 12,560,336 5,054,380 12,073,831 15,894,440 11,357,933 7,726,781
Mar-96 13,233,594 5,395,738 12,121,164 17,170,376 12,086,187 8,861,910 2,598,782
Apr-96 14,218,437 5,776,083 12,919,375 19,250,006 13,861,998 10,750,973 6,119,651
May-96 14,783,513 5,952,228 12,417,042 18,958,954 15,480,790 14,061,066 7,472,032
Jun-96 14,758,974 6,020,386 11,925,601 18,270,515 16,521,080 14,370,318 9,418,582 2,102,950
Jul-96 14,156,944 5,787,361 11,340,984 17,522,395 17,883,030 15,490,598 11,208,929 6,769,370
Aug-96 13,575,124 5,580,347 10,936,874 16,889,698 18,898,178 16,162,068 12,165,480 9,632,620
Sep-96 13,023,375 5,369,555 10,560,036 16,276,846 19,613,419 17,274,336 13,083,170 11,333,778
Oct-96 12,496,416 5,177,647 10,128,999 15,638,231 19,853,181 18,719,456 13,941,501 12,892,970
Nov-96 12,031,736 5,005,801 9,740,099 15,099,047 19,155,233 19,038,762 14,005,891 13,741,706
Dec-96 11,574,581 4,805,512 9,403,873 14,579,224 18,475,562 19,430,525 14,421,265 13,792,679
Jan-97 11,123,557 4,611,746 9,034,062 14,042,952 17,866,992 20,366,710 15,645,297 14,773,897
Feb-97 10,655,488 4,441,793 8,635,180 13,499,307 17,230,758 21,613,723 16,557,902 15,452,970
Mar-97 10,141,244 4,256,565 8,268,390 12,930,853 16,476,041 20,909,509 18,122,991 16,967,559
Apr-97 9,635,585 4,064,600 7,863,151 12,324,596 15,712,316 19,896,430 18,336,509 17,633,030
May-97 9,192,107 3,866,741 7,489,367 11,770,302 15,039,249 19,029,837 18,507,226 18,374,372
Jun-97 8,747,071 3,689,213 7,134,078 11,236,885 14,316,169 18,203,810 19,782,112 19,420,031
Jul-97 8,325,836 3,535,823 6,834,612 10,753,772 13,702,359 17,507,372 20,013,173 21,762,262
Aug-97 7,951,431 3,393,546 6,577,385 10,339,638 13,195,002 16,887,668 19,334,989 24,083,838
Sep-97 7,569,188 3,249,268 6,290,850 9,908,913 12,634,123 16,208,257 18,591,499 23,965,062
Oct-97 7,190,795 3,092,420 6,001,729 9,463,702 12,086,213 15,526,644 17,901,973 23,105,669
Nov-97 6,865,806 2,961,965 5,755,274 9,072,791 11,636,655 14,947,846 17,292,885 22,393,558
Dec-97 6,509,615 2,824,673 5,479,905 8,666,835 11,130,785 14,320,880 16,615,453 21,603,530
Jan-98 6,203,452 2,699,983 5,251,269 8,304,512 10,628,513 13,706,776 16,005,614 20,837,350
Feb-98 5,894,340 2,572,665 4,987,243 7,941,330 10,136,725 13,125,360 15,360,717 20,088,993
Mar-98 5,540,031 2,431,365 4,714,555 7,552,282 9,630,340 12,475,530 14,630,804 19,244,258
Apr-98 5,224,931 2,315,888 4,493,671 7,176,778 9,189,086 11,924,954 13,997,018 18,463,116
May-98 4,954,684 2,199,225 4,265,093 6,827,086 8,756,514 11,410,202 13,391,175 17,738,479
Jun-98 4,652,046 2,081,207 4,040,756 6,458,123 8,313,257 10,856,047 12,768,506 16,974,740
Jul-98 4,368,203 1,966,672 3,835,519 6,129,042 7,893,859 10,343,242 12,195,386 16,254,764
Aug-98 4,300,000 1,863,747 3,637,169 5,821,632 7,493,476 9,847,460 11,635,605 15,534,089
Sep-98 4,300,000 1,754,009 3,450,429 5,532,226 7,141,850 9,372,735 11,135,912 14,883,324
Oct-98 4,300,000 1,641,867 3,268,533 5,210,510 6,772,744 8,911,896 10,586,723 14,223,493
Nov-98 4,300,000 1,584,084 3,063,774 4,968,241 6,433,221 8,489,167 10,108,321 13,622,076
Dec-98 4,300,000 1,584,084 3,000,000 4,671,532 6,143,402 8,118,986 9,666,939 13,073,057
Jan-99 4,300,000 1,584,084 3,000,000 4,700,000 5,838,276 7,710,156 9,244,757 12,505,103
Feb-99 4,300,000 1,584,084 3,000,000 4,700,000 5,523,249 7,331,029 8,826,202 11,979,809
Mar-99 4,300,000 1,584,083 3,000,000 4,700,000 5,250,000 6,919,689 8,344,888 11,394,559
Apr-99 4,300,000 1,584,084 3,000,000 4,700,000 5,250,000 6,561,253 7,926,310 10,835,569
May-99 4,300,000 1,584,084 3,000,000 4,700,000 5,975,844 8,049,774 9,504,649 10,321,362
Jun-99 4,300,000 1,584,084 3,000,000 4,700,000 5,609,792 7,566,272 9,174,363 9,790,324
Jul-99 4,300,000 1,584,084 3,000,000 4,700,000 5,270,415 7,146,142 8,701,804 12,033,341
Aug-99 4,300,000 1,584,084 3,000,000 4,700,000 5,250,000 6,687,797 8,181,506 11,397,336
Sep-99 4,300,000 1,584,084 3,000,000 4,700,000 5,249,999 6,292,960 7,739,282 10,856,309
Oct-99 4,300,000 1,584,084 3,000,000 4,700,000 5,250,000 5,999,999 7,339,581 10,353,613
Nov-99 4,300,000 1,584,084 3,000,000 4,700,000 5,250,000 5,999,999 6,917,021 9,806,494
<CAPTION>
MONTH 1996-C 1996-D 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B
- --------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
Apr-95
May-95
Jun-95
Jul-95
Aug-95
Sep-95
Oct-95
Nov-95
Dec-95
Jan-96
Feb-96
Mar-96
Apr-96
May-96
Jun-96
Jul-96
Aug-96
Sep-96 9,641,904
Oct-96 14,597,889
Nov-96 18,194,743
Dec-96 19,227,449 8,101,126
Jan-97 20,836,140 14,202,019
Feb-97 22,084,634 18,953,861
Mar-97 23,098,110 21,523,578 7,899,536
Apr-97 23,722,399 24,494,033 13,148,603
May-97 24,848,403 25,496,574 18,534,113
Jun-97 26,324,285 27,132,959 21,906,393 11,961,863
Jul-97 29,649,235 31,477,489 27,174,901 18,057,977
Aug-97 31,654,233 34,916,042 30,850,625 23,505,328
Sep-97 34,202,296 37,639,441 34,198,379 28,922,358 1,163,323
Oct-97 34,161,188 38,427,031 36,135,467 33,266,135 7,132,165
Nov-97 33,134,988 37,317,656 36,820,132 35,712,130 12,295,619
Dec-97 32,026,815 36,054,692 37,107,775 37,559,721 18,277,858 243,321
Jan-98 30,951,892 34,920,593 38,639,037 38,719,845 23,334,135 4,851,082
Feb-98 29,926,219 33,771,862 39,552,836 39,511,622 26,194,545 9,670,167 0
Mar-98 28,709,172 32,439,919 38,497,289 40,633,029 28,561,870 14,373,994 1,314,142
Apr-98 27,618,240 31,246,417 37,152,251 41,145,137 30,113,820 17,667,939 5,773,472
May-98 26,609,255 22,206,619 26,906,121 31,866,021 31,638,459 20,106,266 10,205,455
Jun-98 25,532,792 21,020,259 25,574,489 30,528,953 34,270,549 22,630,975 14,726,578 1,080,861
Jul-98 24,518,523 19,933,241 24,363,444 29,251,481 36,924,097 24,946,607 18,301,766 6,267,824
Aug-98 23,540,633 18,805,671 23,130,872 27,918,862 39,055,963 25,905,264 21,014,093 10,809,668
Sep-98 22,627,946 17,817,626 21,975,036 26,671,218 39,023,539 27,515,091 23,183,874 15,179,400
Oct-98 21,673,782 16,749,895 20,827,312 25,390,475 27,796,026 16,474,996 12,518,633 18,494,050
Nov-98 20,801,586 15,818,306 19,774,035 24,174,578 26,572,544 18,437,037 14,746,163 21,962,128
Dec-98 20,078,059 15,022,630 18,846,876 23,206,264 25,517,968 17,608,935 16,312,625 24,496,498
Jan-99 19,258,842 14,161,806 17,880,643 22,139,112 24,442,795 16,697,116 15,967,917 26,956,973
Feb-99 18,469,288 13,305,048 16,892,070 21,071,158 23,345,646 15,709,688 15,085,296 29,226,483
Mar-99 17,603,385 12,339,559 15,768,058 19,878,532 22,070,485 14,619,266 14,107,202 31,980,010
Apr-99 16,817,204 12,427,091 15,703,954 19,735,745 20,877,798 13,681,137 13,224,370 33,947,295
May-99 16,080,686 12,584,270 15,773,608 19,704,303 19,797,970 12,773,743 12,374,101 33,204,575
Jun-99 15,286,837 12,746,792 15,735,656 19,628,429 18,660,068 11,840,668 11,492,325 32,164,956
Jul-99 18,203,971 17,246,617 15,807,897 19,651,459 17,605,737 10,998,937 10,667,639 31,186,546
Aug-99 17,227,675 17,263,377 15,908,424 19,628,127 16,448,649 10,045,190 9,796,081 30,136,329
Sep-99 16,436,112 17,357,591 16,075,133 19,715,122 15,462,145 9,259,494 9,042,440 29,192,928
Oct-99 15,717,298 17,551,485 16,244,552 19,888,675 15,402,292 9,009,023 8,865,382 28,284,088
Nov-99 14,936,302 17,692,124 20,847,020 25,022,287 15,510,448 9,179,128 9,128,185 27,267,042
<CAPTION>
MONTH 1998-C 1998-D 1998-E 1999-A 1999-B 1999-C
- --------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sep-94
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
Apr-95
May-95
Jun-95
Jul-95
Aug-95
Sep-95
Oct-95
Nov-95
Dec-95
Jan-96
Feb-96
Mar-96
Apr-96
May-96
Jun-96
Jul-96
Aug-96
Sep-96
Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98
Apr-98
May-98
Jun-98
Jul-98
Aug-98
Sep-98 1,462,661
Oct-98 6,413,476
Nov-98 12,051,054 1,924,323
Dec-98 16,311,428 3,798,957 1,687,500
Jan-99 20,889,195 5,790,838 3,978,145
Feb-99 24,101,421 7,223,198 6,107,351
Mar-99 27,652,261 8,812,416 8,202,693 1,995,485
Apr-99 30,394,801 10,008,310 9,829,945 7,593,582
May-99 32,707,891 10,875,784 11,209,694 12,072,977
Jun-99 35,913,043 12,048,520 12,728,531 17,115,423 2,523,601
Jul-99 38,250,922 12,947,696 13,758,522 20,940,420 8,462,489
Aug-99 40,474,748 13,759,076 14,836,103 24,478,147 14,353,020
Sep-99 39,274,328 13,411,343 15,660,931 27,075,786 18,935,209 25,850,901
Oct-99 38,093,917 12,998,713 15,744,726 29,857,073 22,952,034 29,285,478
Nov-99 36,816,406 12,546,903 15,252,315 32,763,194 27,158,766 32,423,344
</TABLE>
F-7
<PAGE>
ARCADIA FINANCIAL LTD.
SPREAD ACCOUNT DISTRIBUTIONS
SECURITIZATION TRUSTS
<TABLE>
<CAPTION>
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C
----- --------- -------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
Apr-95
May-95
Jun-95
Jul-95
Aug-95
Sep-95
Oct-95
Nov-95
Dec-95
Jan-96
Feb-96
Mar-96
Apr-96 0 0 243,223 0
May-96 0 0 1,233,122 1,723,683
Jun-96 612,710 208,336 840,094 1,581,669
Jul-96 1,113,122 440,666 0 1,351,555
Aug-96 607,340 411,719 1,790,892 1,931,625
Sep-96 898,896 280,103 1,169,646 1,870,350 0 0
Oct-96 971,613 503,116 729,081 1,537,688 688,528 0
Nov-96 453,204 324,277 665,590 937,311 829,100 0
Dec-96 490,960 289,161 468,773 651,088 832,761 0
Jan-97 751,798 18,966 131,083 693,524 1,979,827 0
Feb-97 376,087 454,947 1,268,895 1,105,094 1,177,919 0
Mar-97 661,893 334,860 1,520,766 2,004,923 1,701,881 1,794,526
Apr-97 583,408 287,945 652,173 1,023,558 1,011,506 1,177,132
May-97 521,143 123,167 491,782 966,690 1,359,519 1,740,464
Jun-97 661,038 273,374 515,980 1,161,921 1,481,454 2,029,745 0 0
Jul-97 748,730 285,193 839,471 1,333,537 1,126,973 2,267,161 945,405 0
Aug-97 826,794 285,965 642,280 1,281,446 1,535,428 2,179,326 2,436,223 0
Sep-97 616,559 405,125 611,079 1,470,422 1,454,713 2,045,435 2,237,546 2,083,656
Oct-97 647,920 184,009 348,398 1,569,548 1,175,550 955,967 1,517,451 1,592,866
Nov-97 538,088 91,737 272,082 559,392 751,836 831,187 1,113,553 914,510
Dec-97 359,360 55,984 271,726 467,399 643,885 952,406 1,189,921 909,275
Jan-98 395,538 216,008 437,726 731,989 403,526 702,246 592,186 486,564 0
Feb-98 307,045 108,850 290,407 599,791 354,366 764,135 970,180 1,802,782 0
Mar-98 357,619 168,286 391,422 818,827 819,034 1,127,134 1,267,496 1,669,258 1,681,031
Apr-98 242,611 102,587 240,189 465,971 689,409 986,419 962,891 1,089,840 1,164,600
May-98 220,273 151,133 71,208 373,851 568,766 832,358 696,077 806,464 1,484,561
Jun-98 343,692 204,335 290,401 712,711 881,992 906,573 1,072,499 1,146,674 1,798,832
Jul-98 267,401 63,622 189,611 470,203 689,258 927,729 990,355 1,505,679 1,669,789
Aug-98 141,533 42,319 211,509 469,359 307,526 583,890 517,906 810,741 926,580
Sep-98 12,836 133,848 239,944 297,516 407,717 546,000 947,955 1,086,914 1,576,810
Oct-98 0 (0) 144,302 (0) 299,341 344,886 195,099 254,070 799,284
Nov-98 2,887 0 0 792,532 583,596 574,107 842,171 956,518 1,367,256
Dec-98 0 46,659 47,642 0 464,033 856,869 475,848 0 1,103,408
Jan-99 0 30,598 0 0 183,197 0 477,428 243,325 842,758
Feb-99 217,317 (0) 157,885 749,845 289,253 641,301 853,227 1,011,928 884,610
Mar-99 350,165 0 391,984 525,710 633,757 869,684 700,353 1,170,034 1,311,319
Apr-99 165,875 0 128,238 399,154 78,651 557,990 397,332 644,506 950,143
May-99 0 0 3,888 0 0 225,989 0 234,863 445,239
Jun-99 73,712 38,504 54,712 247,465 530,789 668,639 565,263 943,856 1,279,844
Jul-99 25,259 0 (0) 75,156 361,575 333,754 512,914 517,517 713,672
Aug-99 306,217 89,265 226,199 554,277 499,970 1,000,212 1,153,260 1,365,051 1,651,397
Sep-99 32,921 0 0 91,028 0 318,811 358,295 475,232 545,827
Oct-99 0 0 0 0 73,058 414,957 304,492 509,323 659,000
Nov-99 0 27,030 141,888 238,049 137,426 1,732 508,085 655,076 796,657
<CAPTION>
MONTH 1996-D 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B 1998-C 1998-D
----- ---------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
Apr-95
May-95
Jun-95
Jul-95
Aug-95
Sep-95
Oct-95
Nov-95
Dec-95
Jan-96
Feb-96
Mar-96
Apr-96
May-96
Jun-96
Jul-96
Aug-96
Sep-96
Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98 0
Feb-98 123,381
Mar-98 2,335,057
Apr-98 2,036,213
May-98 10,159,996
Jun-98 2,685,217 2,077,389 0
Jul-98 2,684,913 2,984,654 0
Aug-98 1,245,434 1,892,215 1,453,935 0 0 0
Sep-98 2,459,589 2,477,931 2,958,724 2,061,923 0 0
Oct-98 931,223 1,590,132 1,830,613 3,065,332
Nov-98 2,066,581 2,103,188 2,592,709 3,699,392 0 0
Dec-98 1,757,781 1,950,093 2,426,763 3,025,605 2,787,952 0
Jan-99 1,102,500 1,544,354 1,845,623 2,660,028 2,556,044 2,527,370
Feb-99 1,439,152 1,905,091 1,961,865 2,744,199 2,676,822 2,891,027
Mar-99 1,729,514 1,615,858 2,117,263 3,358,963 2,764,475 3,115,517
Apr-99 0 189,643 596,358 2,106,949 2,043,214 2,616,740 0
May-99 0 0 268,243 1,458,939 1,284,226 2,077,320 2,510,958
Jun-99 459,616 724,626 1,180,514 2,964,581 2,789,048 3,180,349 3,923,972
Jul-99 56,840 9,457 425,033 2,262,720 1,921,247 2,036,961 3,157,025
Aug-99 1,174,902 1,511,478 1,256,859 2,512,944 2,181,552 2,357,584 3,444,186 507,833 0
Sep-99 0 0 (0) 1,264,650 1,383,307 1,820,391 2,652,316 3,435,614 0
Oct-99 169,330 0 123,535 0 838,582 1,169,405 2,143,645 2,715,037 495,956
Nov-99 156,436 737,522 0 2,170,168 638,827 921,414 2,649,158 3,392,998 1,535,437
<CAPTION>
MONTH 1998-E 1999-A 1999-B 1999-C
----- --------- --------- -------- --------
<S> <C> <C> <C> <C>
Sep-94
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
Apr-95
May-95
Jun-95
Jul-95
Aug-95
Sep-95
Oct-95
Nov-95
Dec-95
Jan-96
Feb-96
Mar-96
Apr-96
May-96
Jun-96
Jul-96
Aug-96
Sep-96
Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98
Apr-98
May-98
Jun-98
Jul-98
Aug-98
Sep-98
Oct-98
Nov-98
Dec-98
Jan-99
Feb-99
Mar-99
Apr-99
May-99
Jun-99
Jul-99
Aug-99 0 0 0 0
Sep-99 0 0 0 0
Oct-99 0 0 0 0
Nov-99 444,725 0 0 0
</TABLE>
F-8
<PAGE>
SECURITIZATION TRUSTS
ARCADIA FINANCIAL LTD.
SPREAD ACCOUNT DEPOSIT/(DRAW)
<TABLE>
<CAPTION>
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B 1996-C
- --------------------- --------- -------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94 (0)
Oct-94 (0)
Nov-94 986,231
Dec-94 1,243,228
Jan-95 2,525,697
Feb-95 1,146,963 561,747
Mar-95 1,066,901 642,496 441,323
Apr-95 584,242 627,160 2,142,881
May-95 649,765 547,683 1,506,007
Jun-95 496,061 136,071 1,488,690 1,571,995
Jul-95 757,888 609,869 804,024 2,812,755
Aug-95 58,734 242,362 593,796 2,339,797
Sep-95 1,254,553 509,390 1,180,459 2,082,709 2,247,696
Oct-95 637,358 174,103 699,953 1,967,542 2,991,330
Nov-95 47,997 123,919 48,907 1,255,784 2,121,235
Dec-95 (180,850) 18,259 (210,975) 73,124 686,466 2,325,713
Jan-96 484,359 839,297 2,044,400 1,382,861 530,098 2,926,483
Feb-96 801,209 22,025 1,334,366 2,407,873 2,781,108 2,474,584
Mar-96 673,258 341,357 47,333 1,275,936 728,254 1,135,129 2,598,782
Apr-96 984,843 380,346 1,041,433 2,079,630 1,775,811 1,889,064 3,520,869
May-96 565,076 176,145 730,789 1,432,631 1,618,792 3,310,093 1,352,381
Jun-96 588,171 276,494 348,653 893,230 1,040,291 309,252 1,946,550 2,102,950
Jul-96 511,092 207,641 (584,616) 605,436 1,361,950 1,120,280 1,790,348 4,666,420
Aug-96 25,520 204,705 1,386,782 1,298,927 1,015,148 671,470 956,551 2,863,250
Sep-96 347,148 69,310 792,808 1,257,498 715,241 1,112,268 917,690 1,701,157 2,391,904
Oct-96 444,654 311,208 298,044 899,073 928,290 1,445,120 858,331 1,559,192 4,955,985
Nov-96 (11,477) 152,431 276,691 398,127 131,152 319,306 64,389 848,736 3,596,854
Dec-96 33,805 88,872 132,547 131,265 153,090 391,762 415,374 50,973 1,032,706
Jan-97 300,774 (174,800) (238,728) 157,252 1,371,256 936,186 1,224,032 981,217 1,608,691
Feb-97 (91,982) 284,994 870,014 561,448 541,685 1,247,012 912,605 679,073 1,248,494
Mar-97 147,649 149,633 1,153,976 1,436,469 947,164 1,090,311 1,565,089 1,514,590 1,013,476
Apr-97 77,748 95,980 246,934 417,301 247,782 164,054 213,518 665,471 624,288
May-97 77,665 (74,692) 117,999 412,396 686,452 873,872 170,717 741,342 1,126,004
Jun-97 216,002 95,846 160,691 628,505 758,374 1,203,718 1,274,886 1,045,659 1,475,882
Jul-97 327,496 131,803 540,004 850,425 513,163 1,570,724 1,176,466 2,342,231 3,324,950
Aug-97 452,388 143,687 385,054 867,312 1,028,071 1,559,622 1,758,038 2,321,576 2,004,998
Sep-97 234,316 260,848 324,543 1,039,697 893,835 1,366,023 1,494,056 1,964,880 2,548,062
Oct-97 269,527 27,161 59,278 1,124,337 627,640 274,354 827,925 733,474 1,300,143
Nov-97 213,099 (38,718) 25,627 168,481 302,277 252,390 504,465 202,399 67,880
Dec-97 3,169 (81,308) (3,644) 61,442 138,014 325,440 512,489 119,247 538,350
Jan-98 89,375 91,317 209,090 369,667 (98,746) 88,143 (17,654) (279,616) 518,691
Feb-98 (2,066) (18,468) 26,381 236,608 (137,422) 182,719 325,284 1,054,425 503,111
Mar-98 3,309 26,986 118,734 429,779 312,650 477,303 537,583 824,523 509,732
Apr-98 (72,488) (12,890) 19,306 90,467 248,155 435,844 329,105 308,699 73,668
May-98 (49,974) 34,470 (157,370) 24,159 136,194 317,605 90,233 81,826 475,576
Jun-98 41,054 86,317 66,063 343,748 438,736 352,418 449,830 382,935 722,368
Jul-98 (16,442) (50,913) (15,626) 141,123 269,859 414,924 417,236 785,703 655,520
Aug-98 73,330 (60,605) 13,159 161,948 (92,856) 88,107 (41,875) 90,066 (51,309)
Sep-98 12,836 24,110 53,203 8,111 56,091 71,276 448,261 436,149 664,123
Oct-98 0 (112,142) (37,594) (321,716) (69,765) (115,953) (354,089) (405,760) (154,880)
Nov-98 2,887 (57,783) (204,759) 550,262 244,073 151,378 363,769 355,101 495,059
Dec-98 0 46,659 (16,132) (296,709) 174,214 486,688 34,466 (549,020) 379,882
Jan-99 0 30,598 (0) 28,468 (121,929) (408,830) 55,246 (324,629) 23,541
Feb-99 217,317 (0) 157,885 749,845 (25,774) 262,174 434,672 486,634 95,055
Mar-99 350,165 (1) 391,984 525,710 360,507 458,344 219,039 584,784 445,416
Apr-99 165,875 0 128,238 399,154 78,651 199,553 (21,246) 85,515 163,962
May-99 0 (0) 3,888 (0) 725,844 1,714,510 1,578,338 (279,343) (291,279)
Jun-99 73,712 38,505 54,712 247,465 164,738 185,138 234,977 412,818 485,995
Jul-99 25,259 0 (0) 75,156 22,198 (86,377) 40,355 2,760,533 3,630,806
Aug-99 306,217 89,265 226,199 554,277 479,555 541,867 632,962 729,045 675,101
Sep-99 32,921 0 (0) 91,028 (0) (76,025) (83,929) (65,795) (245,736)
Oct-99 0 (0) (0) (0) 73,058 121,996 (95,210) 6,627 (59,814)
Nov-99 0 27,030 141,888 238,049 137,426 1,732 85,525 107,957 15,660
<CAPTION>
MONTH 1996-D 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B 1998-C 1998-D
- --------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-94
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
Apr-95
May-95
Jun-95
Jul-95
Aug-95
Sep-95
Oct-95
Nov-95
Dec-95
Jan-96
Feb-96
Mar-96
Apr-96
May-96
Jun-96
Jul-96
Aug-96
Sep-96
Oct-96
Nov-96
Dec-96 801,126
Jan-97 6,100,894
Feb-97 4,751,842
Mar-97 2,569,717 149,536
Apr-97 2,970,455 5,249,066
May-97 1,002,541 5,385,510
Jun-97 1,636,384 3,372,280 336,863
Jul-97 4,344,531 5,268,508 6,096,115
Aug-97 3,438,552 3,675,723 5,447,351
Sep-97 2,723,399 3,347,754 5,417,030 1,163,323
Oct-97 1,846,454 1,937,088 4,343,777 5,968,843
Nov-97 681,985 684,665 2,445,995 5,163,453
Dec-97 (128,048) 287,643 1,847,591 5,982,240 243,321
Jan-98 390,148 1,531,262 1,160,124 5,056,277 4,607,760
Feb-98 765,263 913,800 791,777 2,860,409 4,819,085
Mar-98 1,003,114 1,115,791 1,121,408 2,367,325 4,703,827 1,314,142
Apr-98 842,711 1,062,813 512,107 1,551,950 3,293,945 4,459,330
May-98 1,120,197 581,387 976,038 1,524,639 2,438,327 4,431,983
Jun-98 1,498,858 2,089,050 2,683,703 2,632,090 2,524,709 4,521,124 1,080,861
Jul-98 1,597,895 1,773,609 2,768,399 2,653,549 2,315,632 3,575,188 5,186,962
Aug-98 117,864 659,643 1,424,521 2,131,865 958,657 2,712,326 4,541,844
Sep-98 1,471,543 1,322,095 1,711,080 2,029,499 1,609,827 2,169,782 4,369,732 1,462,661
Oct-98 (136,508) 442,407 549,870 1,837,820 1,459,908 1,834,759 3,314,650 4,950,815
Nov-98 1,134,992 1,049,912 1,376,811 2,475,909 1,962,041 2,227,530 3,468,078 5,637,578 424,323
Dec-98 962,105 1,022,933 1,458,449 1,971,029 1,959,850 1,566,462 2,534,370 4,260,374 1,874,634
Jan-99 241,676 578,122 778,471 1,584,855 1,644,225 2,182,662 2,460,476 4,577,767 1,991,881
Feb-99 582,393 916,517 893,911 1,647,050 1,689,394 2,008,405 2,269,509 3,212,226 1,432,359
Mar-99 764,025 491,846 924,637 2,083,802 1,674,053 2,137,423 2,753,527 3,550,841 1,589,219
Apr-99 87,532 125,539 453,571 914,262 1,105,085 1,733,908 1,967,285 2,742,539 1,195,894
May-99 157,179 69,653 236,801 379,111 376,832 1,227,051 1,768,238 2,313,090 867,474
Jun-99 622,138 686,675 1,104,639 1,826,678 1,855,973 2,298,572 2,884,354 3,205,152 1,172,736
Jul-99 4,556,664 81,698 448,063 1,208,388 1,079,516 1,212,275 2,178,615 2,337,879 899,176
Aug-99 1,191,662 1,612,005 1,233,527 1,355,856 1,227,805 1,486,026 2,393,969 2,731,659 811,380
Sep-99 94,214 166,709 86,995 278,146 597,611 1,066,750 1,708,915 2,235,194 627,736
Oct-99 363,224 169,419 297,087 (59,853) 588,112 992,348 1,234,805 1,534,626 607,857
Nov-99 297,075 5,339,989 5,133,613 2,278,324 808,932 1,184,217 1,632,111 2,115,487 1,083,627
<CAPTION>
MONTH 1998-E 1999-A 1999-B 1999-C
- --------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sep-94
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
Apr-95
May-95
Jun-95
Jul-95
Aug-95
Sep-95
Oct-95
Nov-95
Dec-95
Jan-96
Feb-96
Mar-96
Apr-96
May-96
Jun-96
Jul-96
Aug-96
Sep-96
Oct-96
Nov-96
Dec-96
Jan-97
Feb-97
Mar-97
Apr-97
May-97
Jun-97
Jul-97
Aug-97
Sep-97
Oct-97
Nov-97
Dec-97
Jan-98
Feb-98
Mar-98
Apr-98
May-98
Jun-98
Jul-98
Aug-98
Sep-98
Oct-98
Nov-98
Dec-98
Jan-99 2,290,645
Feb-99 2,129,206
Mar-99 2,095,342 1,995,485
Apr-99 1,627,252 5,598,097
May-99 1,379,749 4,479,395
Jun-99 1,518,837 5,042,446 2,523,601
Jul-99 1,029,991 3,824,998 5,938,889
Aug-99 1,077,581 3,537,727 5,890,530
Sep-99 824,828 2,597,638 4,582,189 2,117,320
Oct-99 738,241 2,781,288 4,016,825 3,434,577
Nov-99 985,368 2,906,120 4,206,732 3,316,645
</TABLE>
F-9
<PAGE>
PROGRAM SPREAD BALANCES
INCEPTION TO MONTH END NOV. 1999
SECURITIZATION TRUSTS
<TABLE>
<CAPTION>
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A
- ----- -------- -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec-97................................... 0 0 271,726 0 0 0 0
Jan-98................................... 0 0 709,451 731,989 403,526 702,246 0
Feb-98................................... 0 0 998,067 1,328,080 755,707 1,461,668 0
Mar-98................................... 0 0 1,387,815 2,143,404 1,571,238 2,583,981 0
Apr-98................................... 0 0 1,628,005 2,609,375 2,260,647 3,570,136 0
May-98................................... 0 0 1,699,212 2,983,226 0 0 0
Jun-98................................... 0 0 1,731,752 3,695,937 0 0 0
Jul-98................................... 0 0 1,643,794 0 0 0 0
Aug-98................................... 0 0 (0) 0 0 583,890 0
Sep-98................................... 0 133,848 (0) 297,516 0 1,129,891 0
Oct-98................................... 0 133,848 137,850 297,516 0 1,459,350 0
Nov-98................................... 0 133,848 137,850 1,054,715 557,578 2,007,862 0
Dec-98................................... 0 176,851 181,762 0 985,253 2,797,592 0
Jan-99................................... 0 205,594 181,762 0 1,157,339 2,797,592 0
Feb-99................................... 0 205,594 339,541 749,340 1,446,397 3,438,463 852,653
Mar-99................................... 0 205,594 731,405 1,274,886 2,079,956 4,307,876 1,552,787
Apr-99................................... 0 45,541 251,609 1,505,392 2,157,223 4,374,168 1,943,129
May-99................................... 0 0 (0) 0 0 0 0
Jun-99................................... 0 0 (0) 0 0 0 0
Jul-99................................... 0 0 (0) 0 0 0 0
Aug-99................................... 0 0 (0) 0 0 0 0
Sep-99................................... 0 0 (0) 0 0 0 0
Oct-99................................... 0 0 (0) 0 0 0 0
Nov-99................................... 0 0 (0) 0 14,227 0 0
<CAPTION>
MONTH 1996-B 1996-C 1996-D 1997-A 1997-B 1997-C 1997-D
- ----- --------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec-97................................... 0 0 0 0 0 0 0
Jan-98................................... 0 0 0 0 0 0 0
Feb-98................................... 0 0 0 0 0 0 0
Mar-98................................... 0 0 0 0 0 0 0
Apr-98................................... 0 0 0 0 0 0 0
May-98................................... 0 0 0 0 2,255,150 0 0
Jun-98................................... 0 0 0 0 6,275,921 0 0
Jul-98................................... 0 0 0 0 10,321,792 0 0
Aug-98................................... 0 0 0 0 (0) 0 0
Sep-98................................... 0 0 0 0 (0) 0 0
Oct-98................................... 0 0 0 0 (0) 0 0
Nov-98................................... 0 0 0 0 (0) 0 0
Dec-98................................... 0 0 0 0 (0) 0 0
Jan-99................................... 0 0 0 0 (0) 0 0
Feb-99................................... 0 884,015 1,438,184 0 (0) 0 0
Mar-99................................... 0 2,194,924 3,167,157 0 (0) 0 0
Apr-99................................... 0 3,128,352 4,052,842 0 (0) 0 0
May-99................................... 198,725 3,505,083 4,453,821 0 (0) 0 0
Jun-99................................... 1,142,581 4,784,928 5,913,438 0 (0) 0 0
Jul-99................................... 0 0 0 1,009,457 (0) 0 0
Aug-99................................... 0 0 0 3,520,935 2,256,859 0 0
Sep-99................................... 0 0 0 4,308,828 3,115,878 0 0
Oct-99................................... 0 0 0 4,624,011 4,265,505 0 0
Nov-99................................... 0 784,970 0 0 (0) 3,138,332 1,629,456
<CAPTION>
MONTH TOTAL
- ----- ----------
<S> <C>
Dec-97................................... 271,726
Jan-98................................... 2,547,213
Feb-98................................... 4,543,523
Mar-98................................... 7,686,438
Apr-98................................... 10,068,162
May-98................................... 6,937,588
Jun-98................................... 11,703,611
Jul-98................................... 11,965,586
Aug-98................................... 583,890
Sep-98................................... 1,561,255
Oct-98................................... 2,028,564
Nov-98................................... 3,891,854
Dec-98................................... 4,141,458
Jan-99................................... 4,342,287
Feb-99................................... 9,354,186
Mar-99................................... 15,514,585
Apr-99................................... 17,458,257
May-99................................... 8,157,629
Jun-99................................... 11,840,947
Jul-99................................... 1,009,457
Aug-99................................... 5,777,794
Sep-99................................... 7,424,706
Oct-99................................... 8,889,516
Nov-99................................... 5,566,985
</TABLE>
F-10
<PAGE>
PROGRAM SPREAD ACTIVITY
INCEPTION TO MONTH END NOV. 1999
SECURITIZATION TRUSTS
<TABLE>
<CAPTION>
MONTH 1994-B 1995-A 1995-B 1995-C 1995-D 1995-E 1996-A 1996-B
- ----- ---------- -------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dec-97............... 271,726
Jan-98............... 437,726 731,989 403,526 702,246
Feb-98............... 288,616 596,091 352,180 759,422
Mar-98............... 389,748 815,324 815,531 1,122,313
Apr-98............... 240,189 465,971 689,409 986,155
May-98............... 71,208 373,851 (2,260,647) (3,570,136)
Jun-98............... 32,540 712,711
Jul-98............... (87,959) (3,695,937)
Aug-98............... (1,643,794) 583,890
Sep-98............... 133,848 297,516 546,000
Oct-98............... -- 137,850 -- 329,459
Nov-98............... -- -- 757,199 557,578 548,512
Dec-98............... 43,003 43,912 (1,054,715) 427,674 789,730
Jan-99............... 28,743 -- -- 172,086 --
Feb-99............... -- 157,779 749,340 289,059 640,871 852,653
Mar-99............... -- 391,865 525,546 633,558 869,413 700,134 --
Apr-99............... (160,052) (479,796) 230,505 77,267 66,292 390,342 --
May-99............... (45,541) (251,609) (1,505,392) (2,157,223) (4,374,168) (1,943,129) 198,725
Jun-99............... 943,856
Jul-99............... (1,142,581)
Aug-99...............
Sep-99...............
Oct-99...............
Nov-99............... 14,227
<CAPTION>
MONTH 1996-C 1996-D 1997-A 1997-B 1997-C 1997-D TOTAL
- ----- ---------- ---------- ---------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Dec-97............... 271,726
Jan-98............... 2,275,488
Feb-98............... 1,996,309
Mar-98............... 3,142,915
Apr-98............... 2,381,724
May-98............... 2,255,150 (3,130,574)
Jun-98............... 4,020,771 4,766,022
Jul-98............... 4,045,871 261,975
Aug-98............... (10,321,792) (11,381,696)
Sep-98............... 977,365
Oct-98............... 467,309
Nov-98............... 1,863,290
Dec-98............... 249,604
Jan-99............... 200,829
Feb-99............... 884,015 1,438,184 5,011,900
Mar-99............... 1,310,909 1,728,973 6,160,399
Apr-99............... 933,429 885,685 1,943,671
May-99............... 376,731 400,980 (9,300,627)
Jun-99............... 1,279,844 1,459,617 3,683,317
Jul-99............... (4,784,928) (5,913,438) 1,009,457 (10,831,490)
Aug-99............... 2,511,478 2,256,859 4,768,337
Sep-99............... 787,892 859,020 1,646,912
Oct-99............... 315,183 1,149,627 1,464,810
Nov-99............... 784,970 (4,624,011) (4,265,505) 3,138,332 1,629,456 (3,322,531)
</TABLE>
F-11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his or her conduct was illegal.
A Delaware corporation may indemnify officers and directors against expenses
(including attorneys' fees) in connection with the defense or settlement of an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such officer or director actually and reasonably incurred.
In accordance with the Delaware Law, the Restated Certificate of
Incorporation of Associates contains a provision to limit the personal liability
of the directors of Associates for violations of their fiduciary duty. This
provision eliminates each director's liability to Associates for violations of
their fiduciary duty. This provision eliminates each director's liability to
Associates or its stockholders for monetary damages except (i) for any breach of
the director's duty of loyalty to Associates or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law (iii) under Section 174 of the Delaware Law providing
for liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions, or (iv) for any transaction from which a director
derived an improper personal benefit. The effect of this provision is to
eliminate the personal liability of directors for monetary damages for actions
involving a breach of their fiduciary duty of care, including any such actions
involving gross negligence.
The directors and officers of Associates are covered by directors' and
officers' insurance policies relating to Associates and its subsidiaries.
The Restated Certificate of Incorporation of Associates provides for
indemnification of the officers and directors of Associates to the full extent
permitted by applicable law.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
2.1 -- Agreement and Plan of Merger, dated as of November 12,
1999, by and among Associates First Capital Corporation,
AFCC Newco, Inc. and Arcadia Financial Ltd. (included as
Appendix A to the proxy statement/prospectus contained in
this registration statement).
2.2 -- Voting Agreement, dated as of November 12, 1999, by and
among Associates First Capital Corporation and certain
affiliated shareholders of Arcadia Financial Ltd.
(included as Appendix D to the proxy statement/prospectus
contained in this registration statement).
4 -- Form of Residual Value Obligations Agreement between
Associates First Capital Corporation and The Chase Manhattan
Bank, as Trustee (included as Appendix B to the proxy
statement/prospectus contained in this registration
statement).
5 -- Opinion of Simpson Thacher & Bartlett as to the legality
of the securities being registered.
12 -- Statement regarding computation of ratio of earnings to
fixed charges.
23.1 -- Consent of PricewaterhouseCoopers LLP, Independent
Auditors.
23.2 -- Consent of Ernst & Young LLP, Independent Auditors.
23.3 -- Consent of Simpson Thacher & Bartlett (included in
Exhibit 5).
24 -- Power of Attorney.
25 -- Statement on Form T-1 of eligibility of Trustee.
27 -- Financial Data Schedule.
99.1 -- Opinion of J.P. Morgan Securities Inc. (included as
Appendix C to the proxy statement/ prospectus contained in
this registration statement).
99.2 -- Consent of J.P. Morgan Securities Inc.
99.3 -- Form of Proxy Card of Arcadia Financial Ltd.
</TABLE>
(b) Schedules
All schedules are omitted as the required information is presented in the
Registrant's consolidated financial statements or related notes or such
schedules are not applicable.
(c) See Exhibit 99.1 in Item 21(a) above.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as
amended that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and
II-2
<PAGE>
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(2) that, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act, such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form;
(3) that every prospectus: (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(4) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of this Registration Statement through the date of
responding to the request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 20 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK ON MARCH 1, 2000.
<TABLE>
<S> <C> <C>
ASSOCIATES FIRST CAPITAL CORPORATION
By: /s/ JOHN F. STILLO
-----------------------------------------
Name: John F. Stillo
Title: Senior Vice President, Comptroller
and Principal Accounting Officer
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
- -------------------------------
Keith W. Hughes
Chairman of the Board, Principal March 1, 2000
Executive Officer and Director
- ------------------------------- Director March 1, 2000
J. Carter Bacot
- ------------------------------- Director March 1, 2000
Eric S. Dobkin
- ------------------------------- Director March 1, 2000
William M. Issac
- ------------------------------- Director March 1, 2000
Judy Jolley Mohraz
- ------------------------------- Director March 1, 2000
H. James Toffey, Jr.
- ------------------------------- Director March 1, 2000
Kenneth Whipple
- -------------------------------
Roy A. Guthrie
Director, Senior Executive Vice March 1, 2000
President and Principal Financial
Officer
- -------------------------------
John F. Stillo
Senior Vice President, Comptroller and March 1, 2000
Principal Accounting Officer
* by signing his name hereto, Chester D. Longenecker signs this document on behalf of each of the
persons indicated above pursuant to powers of attorney duly executed by such persons.
</TABLE>
<TABLE>
<S> <C> <C> <C>
By: /s/ CHESTER D. LONGENECKER
---------------------------------------
(ATTORNEY-IN-FACT)
</TABLE>
II-4
<PAGE>
Exhibit 5
March 1, 2000
Associates First Capital Corporation
250 East Carpenter Freeway
Irving, Texas 75065
Ladies and Gentlemen:
We have acted as counsel to Associates First Capital Corporation, a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended, relating to the issuance by the Company of up to
45,644,630 Residual Value Obligations (the "Securities"). The Securities will be
issued pursuant to the Agreement and Plan of Merger, dated as of November 12,
1999 (the "Merger Agreement") by and among Associates First Capital Corporation,
AFCC Newco, Inc. and Arcadia Financial Ltd. and under an indenture (the
"Indenture") between the Company and The Chase Manhattan Bank, as Trustee.
We have examined the Registration Statement and the form of the
Indenture, which has been filed with the Commission as an exhibit to the
Registration Statement. We also have examined the originals, or duplicates or
certified or conformed copies, of such records, agreements, instruments and
other documents and have made such other and further
<PAGE>
Associates First Capital Corporation -2- March 1, 2000
investigations as we have deemed relevant and necessary in connection with the
opinions expressed herein. As to questions of fact material to this opinion, we
have relied upon certificates of public officials and of officers and
representatives of the Company.
In rendering the opinion set forth below, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as duplicates or certified
or conformed copies, and the authenticity of the originals of such latter
documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that assuming (a) the taking
of all necessary corporate action to approve the issuance and terms of the
Securities, the terms of the offering thereof and related matters by the
Board of Directors of the Company, a duly constituted and acting committee of
such Board or duly authorized officers of the Company (such Board of
Directors, committee or authorized officers being hereinafter referred to as
the "Board") and (b) the due execution, authentication, issuance and delivery
of the Securities in accordance with the provisions of the Indenture and the
Merger Agreement, the Securities will constitute valid and legally binding
obligations of the Company enforceable against the Company in accordance with
their terms.
Our opinion set forth above is subject to the effects of (i)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting
<PAGE>
Associates First Capital Corporation -3- March 1, 2000
creditors' rights generally, (ii) general equitable principles (whether
considered in a proceeding in equity or at law) and (iii) an implied covenant of
good faith and fair dealing.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the Delaware General Corporation Law.
We hereby consent to the filing of this opinion letter as Exhibit 5 to
the Registration Statement and to the use of our name under the caption "Legal
Matters" in the Proxy Statement/Prospectus included in the Registration
Statement.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 12
ASSOCIATES FIRST CAPITAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Millions)
<TABLE>
<CAPTION>
Year Ended December 31
Nine Months Ended --------------------------------------------------------------------
September 30,1999 1998 1997 1996 1995 1994
----------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges (a)
Interest Expense $ 2,917.8 $ 3,196.7 $ 2,775.2 $ 2,456.0 $ 2,177.9 $ 1,657.3
Implicit interest in rent 26.5 22.9 20.3 17.1 13.8 11.7
----------------- ------------ ------------ ------------ ------------ ------------
Total fixed charges $ 2,944.3 $ 3,219.6 $ 2,795.5 $ 2,473.1 $ 2,191.7 $ 1,669.0
================= ============ ============ ============ ============ ============
Earnings (b) $ 1,730.5 $ 1,940.5 $ 1,640.0 $ 1,404.6 $ 1,198.1 $ 1,017.4
Fixed charges 2,944.3 3,219.6 2,795.5 2,473.1 2,191.7 1,669.0
----------------- ------------ ------------ ------------ ------------ ------------
Earnings, as defined $ 4,674.8 $ 5,160.1 $ 4,435.5 $ 3,877.7 $ 3,389.8 $ 2,686.4
================= ============ ============ ============ ============ ============
Ratio of Earnings to Fixed Charges 1.59 1.60 1.59 1.57 1.55 1.61
================= ============ ============ ============ ============ ============
</TABLE>
(a) For purposes of such computation, the term "fixed charges" represents
interest expense and a portion of rentals representative of an implicit
interest factor for such rentals.
(b) For purposes of such computation, the term "earnings" represents earnings
before provision for income taxes, plus fixed charges.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Associates First Capital Corporation of our report
dated January 19, 1999 relating to the financial statements and financial
statement schedule, which appears in Associates First Capital Corporation's
Annual Report on Form 10-K, for the years ended December 31, 1998 and 1997 and
for each of the three years in the period ended December 31, 1998. We also
consent to the references to us under the headings "Experts" in such
Registration Statement.
PricewaterhouseCoopers LLP
Dallas, Texas
February 28, 2000
<PAGE>
Exhibit 23.2
REPORT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 25, 1999, included in the Proxy Statement
of Arcadia Financial Ltd. that is made a part of the Registration Statement
Form S-4 and Prospectus of Arcadia Financial Ltd. and Associates First
Capital Corporation for the registration of 45,644,630 residual value
obligations of Associates First Capital Corporation.
Ernst & Young LLP
Minneapolis, Minnesota
February 29, 2000
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Chester D. Longenecker and Frederic C. Liskow, and each of them, as their
attorneys-in-fact, with full power of substitution and resubstitution, for such
person and in such person's name, place and stead, in any and all capacities, to
execute one or more amendments (including post-effective amendments) to this
Registration Statement and to file any such amendment, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KEITH W. HUGHES
- -------------------------------
Keith W. Hughes
Chairman of the Board, Principal Executive March 1, 2000
Officer and Director
/s/ J. CARTER BACOT
- ------------------------------- Director March 1, 2000
J. Carter Bacot
/s/ ERIC S. DOBKIN
- ------------------------------- Director March 1, 2000
Eric S. Dobkin
/s/ WILLIAM M. ISSAC
- ------------------------------- Director March 1, 2000
William M. Issac
/s/ JUDY JOLLEY MOHRAZ
- ------------------------------- Director March 1, 2000
Judy Jolley Mohraz
/s/ H. JAMES TOFFEY, JR.
- ------------------------------- Director March 1, 2000
H. James Toffey, Jr.
/s/ KENNETH WHIPPLE
- ------------------------------- Director March 1, 2000
Kenneth Whipple
/s/ ROY A. GUTHRIE
- -------------------------------
Roy A. Guthrie
Director, Senior Executive Vice President March 1, 2000
and Principal Financial Officer
/s/ JOHN F. STILLO
- -------------------------------
John F. Stillo
Senior Vice President, Comptroller and March 1, 2000
Principal Accounting Officer
</TABLE>
<PAGE>
EXHIBIT 25
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
ASSOCIATES FIRST CAPITAL CORPORATION
(Exact name of obligor 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)
--------------------------------------------
RESIDUAL VALUE OBLIGATIONS
(Title of the indenture securities)
<PAGE>
GENERAL
Item 1.General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New
York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 20th day of January, 2000.
THE CHASE MANHATTAN BANK
By /S/ ANDREW M. DECK
-------------------------------------
/S/ ANDREW M. DECK
VICE PRESIDENT
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business September 30, 1999,
in accordance with a call made by the Federal Reserve
Bank of this District pursuant to the provisions of
the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .............................................. $ 13,497
Interest-bearing balances ...................................... 6,388
Securities: ........................................................
Held to maturity securities.......................................... 798
Available for sale securities........................................ 48,655
Federal funds sold and securities purchased under
agreements to resell ........................................... 30,373
Loans and lease financing receivables:
Loans and leases, net of unearned income $132,392
Less: Allowance for loan and lease losses 2,463
Less: Allocated transfer risk reserve ..... 0
Loans and leases, net of unearned income,
allowance, and reserve ......................................... 129,929
Trading Assets ...................................................... 47,413
Premises and fixed assets (including capitalized
leases)......................................................... 3,287
Other real estate owned ............................................. 26
Investments in unconsolidated subsidiaries and
associated companies............................................ 185
Customers' liability to this bank on acceptances
outstanding .................................................... 716
Intangible assets ................................................... 2,693
Other assets ........................................................ 15,430
---------
TOTAL ASSETS ........................................................ $299,390
=========
</TABLE>
-4-
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
Deposits
In domestic offices ............................................ $100,324
Noninterest-bearing ........ $ 41,601
Interest-bearing ........... 58,723
In foreign offices, Edge and Agreement
subsidiaries and IBF's ......................................... 88,064
Noninterest-bearing ........ $ 6,363
Interest-bearing ........... 81,701
Federal funds purchased and securities sold under agree-
ments to repurchase ................................................ 35,773
Demand notes issued to the U.S. Treasury ........................... 892
Trading liabilities ................................................ 33,565
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less ................ 4,434
With a remaining maturity of more than one year
through three years............................................ 14
With a remaining maturity of more than three years............ 97
Bank's liability on acceptances executed and outstanding........... 716
Subordinated notes and debentures ................................. 5,429
Other liabilities ................................................. 11,457
TOTAL LIABILITIES ................................................. 280,765
-------
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock ...................................................... 1,211
Surplus (exclude all surplus related to preferred stock).......... 11,016
Undivided profits and capital reserves ............................ 7,333
Net unrealized holding gains (losses)
on available-for-sale securities .................................. (951)
Accumulated net gains (losses) on cash flow hedges................. 0
Cumulative foreign currency translation adjustments ............... 16
TOTAL EQUITY CAPITAL .............................................. 18,625
--------
TOTAL LIABILITIES AND EQUITY CAPITAL .............................. $299,390
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
WILLIAM B. HARRISON, JR.) DIRECTORS
SUSAN V. BERRESFORD )
-5-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
O MEANS NOT APPLICABLE OR NOT SEPARATELY DISCLOSED. This schedule contains
summary financial information extracted from Associates First Capital
Corporation's unaudited consolidated financial statements as of September
30, 1999 and the nine months then ended and is qualified in its entirety by
reference to such consolidated financial statements.
</LEGEND>
<CIK> 0000007974
<NAME> ASSOCIATES FIRST CAPTIAL CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 768
<SECURITIES> 7,822
<RECEIVABLES> 67,917
<ALLOWANCES> 2,171
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,959
<CURRENT-LIABILITIES> 0
<BONDS> 70,435
0
0
<COMMON> 7
<OTHER-SE> 9,465
<TOTAL-LIABILITY-AND-EQUITY> 84,959
<SALES> 8,975
<TOTAL-REVENUES> 8,975
<CGS> 0
<TOTAL-COSTS> 7,244
<OTHER-EXPENSES> 3,230
<LOSS-PROVISION> 1,096
<INTEREST-EXPENSE> 2,918
<INCOME-PRETAX> 1,731
<INCOME-TAX> 649
<INCOME-CONTINUING> 1,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,082
<EPS-BASIC> 1.49
<EPS-DILUTED> 1.48
</TABLE>
<PAGE>
EXHIBIT 99.2
CONSENT OF J.P. MORGAN SECURITIES INC.
We hereby consent to (i) the use of our opinion letter dated
November 12, 1999 to the Board of Directors of Arcadia Financial Ltd. (the
"Company") included as Appendix C to the Joint Proxy Statement/Prospectus of
the Company and Associates First Capital Corporation relating to the proposed
merger of the Company and Associates First Capital Corporation, and (ii) the
references to J.P. Morgan and such opinion in such Joint Proxy
Statement/Prospectus which forms a part of this Registration Statement on
Form S-4. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we hereby admit that we
are experts with respect to any part of such Registration Statement within
the meaning of the term "experts" as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
J.P. MORGAN SECURITIES INC.
By: /s/ John P. Mullen
-------------------------
Name: John P. Mullen
Title: Managing Director
February 28, 2000
<PAGE>
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY
CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
o Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days
a week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
o Follow the simple instructions the Voice provides you.
VOTE BY INTERNET -- http://www.eproxy.com/company symbol/ -- QUICK *** EASY
*** IMMEDIATE
o Use the Internet to vote your proxy 24 hours a day, 7 days a week.
o You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to Arcadia Financial Ltd., c/o
Shareowner Services,SM P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
PLEASE DETACH HERE
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
THE UNDERSIGNED SHAREHOLDER(S) OF ARCADIA FINANCIAL LTD. (THE
"COMPANY") HEREBY APPOINT(S) JAMES D. ATKINSON, III AND JOHN A. WITHAM
(COLLECTIVELY, THE "PROXIES"), AND EACH OR EITHER OF THEM, THE TRUE AND
LAWFUL AGENTS AND ATTORNEYS-IN-FACT FOR THE UNDERSIGNED, WITH POWER OF
SUBSTITUTION AND TO VOTE ALL OF THE SHARES OF STOCK IN THE COMPANY THAT THE
UNDERSIGNED IS ENTITLED TO VOTE AT THE SPECIAL MEETING OF SHAREHOLDERS TO BE
HELD AT THE WALDORF-ASTORIA HOTEL, 301 PARK AVENUE, NEW YORK, NEW YORK ON
MARCH 31, 2000 AT 10:00 A.M. LOCAL TIME, AND AT ANY ADJOURNMENTS THEREOF, AS
INSTRUCTED BELOW:
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
1. TO APPROVE THE AGREEMENT AND PLAN OF MERGER, DATED AS OF NOVEMBER 12,
1999 (THE "MERGER AGREEMENT"), AMONG ASSOCIATES FIRST CAPITAL CORPORATION
("ASSOCIATES"), AFCC NEWCO, INC., A WHOLLY OWNED SUBSIDIARY OF
ASSOCIATES, AND THE COMPANY, AND THE MERGER OF AFCC NEWCO, INC. INTO THE
COMPANY PURSUANT TO THE MERGER AGREEMENT.
/ / For / / Against / / Abstain
2. IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE SPECIAL MEETING OR ANY ADJOURNMENTS THEREOF.
/ / For / / Against / / Abstain
WHEN PROPERLY EXECUTED, THE PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN BELOW. YOU NEED NOT MARK ANY BOXES. IF NO
SPECIFICATION IS MADE, THE PROXIES INTEND TO VOTE "FOR" PROPOSAL 1 AND IN THEIR
DISCRETION FOR ANY OTHER MATTERS COMING BEFORE THE MEETING. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 1.
Date________________________________________
Signature___________________________________
Please date and sign exactly as your name
appears on the envelope in which this was
mailed. If shares are held jointly, each
shareholder should sign. When signing as
attorney, executor, trustee or guardian, please
give full title as such. If the shareholder is
a corporation, please sign the full corporate
name by an authorized officer. If the
shareholder is a partnership, please sign full
partnership name by an authorized person.
<PAGE>
ARCADIA FINANCIAL LTD.
PROXY SOLICITED BY THE BOARD OF
DIRECTORS FOR THE SPECIAL MEETING
OF SHAREHOLDERS
MARCH 31, 2000
ARCADIA FINANCIAL LTD.
7825 WASHINGTON AVENUE SOUTH, MINNEAPOLIS, MN 55439-2444 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
SHAREHOLDERS, MARCH 31, 2000.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1, AND 2.
See reverse for voting instructions.
