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As filed with the Securities and Exchange Commission on August ___, 1999
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ARCADIA FINANCIAL LTD.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1664848
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
7825 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55439-2435
(612) 942-9880
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
James D. Atkinson III Copy to: William B. Payne
Arcadia Financial Ltd. Dorsey & Whitney LLP
7825 Washington Avenue South Pillsbury Center South
Minneapolis, Minnesota 55439-2435 220 South Sixth Street
(612) 942-9880 Minneapolis, Minnesota 55402-1498
(612) 340-2722
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list 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(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT(1) OFFERING PRICE(1)(2) REGISTRATION FEE(3)
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<S> <C> <C> <C> <C>
Debt securities (4)(5), Preferred Stock (6), $98,500,000 100% $98,500,000 $27,383
Depositary Shares (6)(7), (3)(7)
Common Stock, par value $.01 per share (7)(8),
Securities Warrants (9) and Units (10)
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(1) Not specified as to each class of securities to be registered pursuant to
General Instruction II.D of Form S-3. Securities registered hereby may be
offered for U.S. dollars or the equivalent thereof in foreign currencies,
currency units or composite currencies. Securities registered hereby may be
sold separately, together or in units with other securities registered
hereby.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(o). The proposed maximum offering price will be determined form
time to time by the registrant in connection with the issuance by the
registrant of the securities registered in this registration statement.
(3) The amount of securities being carried forward from Registration Statement
No. 333-18027 pursuant to Rule 429 is $126,500,000, and the registrant
previously paid a filing fee with respect to such securities of $38,333
(calculated at the rate of 1/33rd of 1% of the amount of securities being
registered, the rate in effect at the time such registration statement was
filed).
(4) If any debt securities are issued at an original issue discount, then such
greater amount as may be sold for an aggregate initial offering price of up
to the proposed aggregate offering price set forth above.
(5) In addition to any debt securities that may be issued directly under this
registration statement, there is being registered hereunder such
indeterminate amount of debt securities as may be issued upon conversion or
exchange of other debt securities, preferred stock or depositary shares,
for which no consideration will be received by the registrant.
(6) Such indeterminate number of shares of preferred stock and common stock,
and such indeterminate number of depositary shares, as may be issued from
time to time at indeterminate prices. In addition to any preferred stock,
common stock and depositary shares that may be issued directly under this
registration statement, there are being registered hereunder such
indeterminate number of shares of preferred stock and common stock, and
such indeterminate number of depositary shares, as may be issued upon
conversion or exchange of debt securities, preferred stock or depositary
shares, as the case may be, for which no separate consideration will be
received by the registrant.
(7) Depositary shares will represent fractional interests in preferred stock
registered hereby.
(8) The aggregate amount of common stock registered hereunder is limited,
solely for purposes of any at the market offerings, to that which is
permissible under Rule 415(a)(4) of the Securities Act of 1933, as amended.
(9) Securities warrants will represent rights to purchase debt securities,
preferred stock or common stock registered hereby.
(10) Units may consist of two or more of the securities referred to in Notes
(1)-(9) offered and sold together.
-------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
IN ACCORDANCE WITH RULE 429 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, THE PROSPECTUS CONTAINED IN THIS REGISTRATION STATEMENT ALSO RELATES
TO THE COMPANY'S REGISTRATION STATEMENT ON FORM S-3 (NO. 333-18027) DECLARED
EFFECTIVE ON JANUARY 13, 1997. THIS REGISTRATION STATEMENT, WHICH IS A NEW
REGISTRATION STATEMENT, ALSO CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT NO. 333-18027, WHICH SHALL HEREAFTER BECOME EFFECTIVE
CONCURRENTLY WITH THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT IN
ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST ___, 1999
PROSPECTUS
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ARCADIA FINANCIAL LTD.
$225,000,000
DEBT SECURITIES, PREFERRED STOCK,
DEPOSITARY SHARES, COMMON STOCK,
SECURITIES WARRANTS AND UNITS
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We will sell the securities covered by this prospectus from time to time. We
may offer the securities independently or together in any combination, called
"units," for sale directly to purchasers or through underwriters, dealers or
agents to be designated at a future date.
We will provide the specific terms and prices of these securities in supplements
to this prospectus. You should read this prospectus and the applicable
prospectus supplement carefully before you invest.
Our common stock is traded on the New York Stock Exchange under the symbol
"AAC." On August ___, 1999, the last reported sale price of our common stock as
reported on the New York Stock Exchange was $_____ per share.
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SEE THE SECTION TITLED "RISK FACTORS" BEGINNING ON PAGE 3 TO READ ABOUT SOME
FACTORS YOU SHOULD CONSIDER BEFORE BUYING ANY OF OUR SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The date of this prospectus is August __, 1999.
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under this shelf process, we may sell our:
- debt securities;
- preferred stock;
- depositary receipts;
- common stock;
- securities warrants; and
- units consisting of any combination of these securities.
This prospectus provides you with a general description of these securities.
Each time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering of securities. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read this prospectus and the applicable prospectus
supplement together with the additional information described under the heading
"Where You Can Find More Information."
You should rely only on the information incorporated by reference or
provided in this prospectus and the accompanying prospectus supplement. We have
not authorized anyone else to provide you with information that is different.
You should not assume that the information in this prospectus or the
accompanying prospectus supplement is accurate as of any date other than the
date on the cover page of the document. If any statement in one of these
documents is inconsistent with a statement in another document having a later
date--for example, a prospectus supplement or a document incorporated by
reference in this prospectus--the statement in the document having the later
date modifies or supersedes the earlier statement.
<TABLE>
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TABLE OF CONTENTS
<S> <C>
ABOUT THIS PROSPECTUS..........................................................2
RISK FACTORS...................................................................3
ABOUT ARCADIA FINANCIAL LTD...................................................11
USE OF PROCEEDS...............................................................12
RATIOS OF EARNINGS TO FIXED CHARGES AND
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
....................................................................12
DESCRIPTION OF DEBT SECURITIES................................................13
DESCRIPTION OF PREFERRED STOCK................................................26
DESCRIPTION OF DEPOSITARY SHARES..............................................30
DESCRIPTION OF COMMON STOCK...................................................33
DESCRIPTION OF SECURITIES WARRANTS............................................35
PLAN OF DISTRIBUTION..........................................................38
EXPERTS .....................................................................39
LEGAL MATTERS.................................................................39
WHERE YOU CAN FIND MORE INFORMATION...........................................39
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RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISKS CAREFULLY BEFORE YOU DECIDE TO
BUY ANY OF OUR SECURITIES.
RISKS RELATED TO OUR LIQUIDITY AND ACCESS TO CAPITAL RESOURCES
WE MAY NEED ADDITIONAL CAPITAL TO FUND CONTINUED NEGATIVE CASH FLOWS,
BUT MAY NOT BE ABLE TO RAISE CAPITAL ON ACCEPTABLE TERMS OR AT ALL. To date, we
have operated on a negative operating cash flow basis, and we expect to continue
to do so in the near future. Our business requires substantial cash to make
payments in connection with the purchase and securitization of loans, for
operating expenses and to service our debt. We may require additional capital in
the future to satisfy our operating and debt service requirements, to fund
growth or to repay our outstanding indebtedness at maturity. We may not,
however, be able to access the capital markets in the future on terms acceptable
to us, if at all. Factors which could affect our ability to access the capital
markets or the costs of any capital raised include:
- changes in interest rates;
- general economic conditions;
- the perception of us in the capital markets; and
- the performance of our securitization trusts.
In addition, the agreements governing our existing debt securities and credit
facilities significantly restrict our ability to incur additional indebtedness
and to issue new classes of preferred stock. Any agreements governing future
debt securities or credit facilities may contain similar restrictions.
ADVERSE CHANGES IN OUR ASSET-BACKED SECURITIES PROGRAM OR IN THE
ASSET-BACKED SECURITIES MARKET FOR AUTOMOBILE RECEIVABLES IN GENERAL COULD
MATERIALLY ADVERSELY AFFECT US. Our business depends on our ability to aggregate
and sell automobile loans in the form of publicly offered asset-backed
securities. These sales generate cash proceeds that allow us to repay amounts
outstanding under our warehouse credit facilities and to purchase additional
loans. In addition, the sale of loans to a securitization trust in preparation
for securitization, which generally occurs once per quarter, gives rise to the
gain on sale that forms a significant part of our reported earnings for each
quarter. Accordingly, adverse changes in our asset-backed securities
program--such as a delay in the consummation of a planned securitization beyond
quarter end, negative market perception of us or the failure of the loans we
intend to sell to conform to insurance company and rating agency
requirements--or in the general market for automobile loan asset-backed
securities could materially adversely affect our ability to purchase and resell
loans on a timely basis and on terms reasonably satisfactory to us.
IF IN THE FUTURE WE ARE UNABLE TO OBTAIN FINANCIAL GUARANTY INSURANCE
POLICIES, OR DETERMINE THAT THEY ARE TOO EXPENSIVE, IT COULD REDUCE OUR ABILITY
TO SELL THE ASSET-BACKED SECURITIES WE SPONSOR AND ALSO REDUCE THE PRICE AT
WHICH WE ARE ABLE TO SELL THEM. All of the securitizations we have sponsored
since March 1993 and one of our current warehouse credit facilities have
utilized credit enhancement in the form of financial guaranty insurance policies
issued by Financial Security Assurance, Inc., which is known as FSA. These
financial guaranty insurance policies have resulted in those asset-backed
securities being rated AAA/Aaa. We believe that this rating has made those
securities easier to sell than securities with a lower rating and has enhanced
the price at which they have been sold. We also believe that the use of this
form of credit enhancement was cheaper than alternative forms available to us at
the time. However, FSA is not required to insure the securitizations we sponsor
and may not continue to do so. In June 1999, FSA advised us that it expects to
modify its requirements for any future securitization transaction with respect
to which it provides financial guaranty insurance. These modifications could
significantly increase the cash cost to us of using FSA as the provider of
credit enhancement for future securitizations. We are currently examining our
options in this regard, which may include issuing uninsured asset-backed
securities with other credit enhancement features. If we were to do this, some
of those securities are likely to receive a rating that is somewhat lower than
AAA/Aaa, which could reduce our ability to sell those securities at prices
comparable to those received in the past.
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EARLY TERMINATION OF OUR WAREHOUSE CREDIT FACILITIES, OR OUR
INABILITY TO ARRANGE ADDITIONAL WAREHOUSE FACILITIES OR TO EXTEND OR REPLACE
EXISTING FACILITIES WHEN THEY EXPIRE, WOULD HAVE A MATERIAL ADVERSE EFFECT ON
US. We depend on warehouse facilities with financial institutions or
institutional lenders to finance our purchase of loans on a short-term basis
pending securitization. At June 30, 1999, we had three primary warehouse
facilities with an aggregate borrowing capacity of approximately $700 million.
One of those facilities, with a capacity of $400 million, was renewed on
July 13, 1999, and will expire in July of 2000. The FSA financial guaranty
insurance policy with respect to this facility will be reduced from $400 million
to $200 million on February 15, 2000; at the same time, the capacity of the
facility itself will also be reduced to $200 million. The remaining facilities
expire in September and October of 1999, subject to earlier termination on the
occurrence of certain events and to renewal or extension at the option of the
lenders. These or similar facilities may not continue to be available on terms
reasonably satisfactory to us. Early termination of these warehouse facilities,
or our inability to arrange additional warehouse facilities or to extend or
replace existing facilities when they expire, would significantly reduce or end
our ability to purchase and securitize automobile loans.
RISKS RELATED TO THE PERFORMANCE OF LOANS IN SECURITIZATION TRUSTS THAT WE
HAVE SPONSORED
ANY MATERIAL DEFICIENCIES BETWEEN FUTURE LOAN PERFORMANCE AND
OUR CURRENT ESTIMATES OF THAT PERFORMANCE COULD HAVE A MATERIAL ADVERSE
EFFECT ON US, INCLUDING LEADING TO A REDUCTION IN THE VALUATION OF OUR MAIN
ASSET, FINANCE INCOME RECEIVABLE. When we sell loans in connection with the
creation of a securitization trust and the issuance of asset-backed
securities by that trust, we recognize a gain on sale and establish an asset
that is called finance income receivable. Finance income receivable is our
principle asset, which represents our retained interest in the loans sold.
Finance income receivable is calculated using assumptions and estimates
concerning future delinquency, default, prepayment, repossession and net loss
rates on the securitized loans that management believes are reasonable at the
time. We base these assumptions on our historical experience, externally
generated industry information, market conditions and expectations of future
performance and present value discount rates that we believe would be
requested by an unrelated purchaser of a similar asset. However, the loans
that we securitize may not perform under varying economic conditions in the
manner we currently estimate. In particular, the actual rates of defaults,
prepayments and net losses may exceed the estimates used in valuing the
finance income receivable and would adversely affect anticipated future cash
flow. We periodically review our default, prepayment and net loss assumptions
in relation to the current performance of the loans and market conditions
and, if necessary, adjust the balance of finance income receivable. We have
made two significant permanent reductions to the value of finance income
receivable, one at June 30, 1998 ($114.5 million) and one at March 31, 1997
($98.0 million). Any future permanent reductions to finance income receivable
could adversely affect the price for our securities and our ability to raise
capital as needed. In addition, we may not be able to sell our finance income
receivable at its stated value on our balance sheet.
ANY DECREASE IN OR INTERRUPTION OF EXCESS CASH FLOW FROM
SECURITIZATION TRUSTS THAT WE HAVE SPONSORED COULD MATERIALLY ADVERSELY
AFFECT US. Our future liquidity and financial condition, and our ability to
finance the growth of our business and to repay or refinance our outstanding
indebtedness, will depend to a material extent on distributions of excess
cash flow from securitization trusts that we have sponsored. The agreements
related to the financial guaranty insurance policies on asset-backed
securities issued by these securitization trusts require us to maintain
specified amounts of cash in spread accounts for each insured securitization
trust. Our obligation to establish and fund these spread accounts is
initially met by means of letters of credit, cash deposits and/or cash flows
from the related trust. Each month after the spread account has been
established, any cash received by the related securitization trust that is in
excess of the amount needed to make payments on the asset-back securities is
first used to bring the spread account for that trust up to required levels.
In addition, under our agreements with FSA, each of these spread accounts is
cross-collateralized with the other insured securitization 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 may be used
to support negative cash flow from, or to replenish the spread account
related to, another securitization trust. Only after these uses is any of
that cash distributed as excess cash flow to Arcadia Receivables Finance
Corporation, one of our subsidiaries known as ARFC, and then on to us. Thus,
if the cash flow from all insured securitization trusts is not sufficient to
replenish all spread accounts, excess cash flow may not be available to us
for that month. The timing and amount of excess cash flow varies based on a
number of factors, including but not limited to:
- rates of loan delinquencies, defaults and net losses;
- how quickly repossessed vehicles can be resold and the
price at which this is accomplished;
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- ages of the loans in the portfolio;
- levels of voluntary prepayments; and
- required spread account levels and the amount of cash in
the spread accounts relative to those required levels.
Any negative change in these factors could reduce or eliminate excess cash flows
to us. We have in the past experienced interruptions in excess cash flows and
this may occur again in the future.
LOAN PORTFOLIO DELINQUENCY, DEFAULT AND NET LOSS RATES THAT ARE POORER
THAN PORTFOLIO PERFORMANCE TESTS COULD RESULT IN A DECREASE IN OR INTERRUPTION
OF EXCESS CASH FLOW AVAILABLE TO US. Each insured securitization trust has
portfolio performance tests that relate to levels of delinquencies, defaults and
net losses on the loans in the trust. These portfolio performance tests require
that the loan portfolio of each insured 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
specified percentages, which vary based on the aging of the
loan portfolio; and
- a cumulative net loss rate not equal to or in excess of
specified percentages, which vary based on the aging of the
loan portfolio.
If the loans in any 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 loan portfolio has performed at the
required levels for a specified period, generally three to five months. Any
violation will decrease available excess cash flow for that time period. FSA as
provider of financial guaranty insurance can waive a violation of these
portfolio performance tests. We have an arrangement with FSA under which, if
loan portfolio performance is poorer than the portfolio performance test
levels, our subsidiary ARFC may make a pledge of cash that has the effect of
preventing the violation of the portfolio performance test. Some trusts have
exceeded these portfolio performance tests in the past, and some trusts were
still in excess of these tests at June 30, 1999, but this arrangement has
prevented a violation. It has also, however, reduced the amount of cash that
would have been available to us for use if we had received a waiver of the
violation. An increase in loan delinquencies, cumulative defaults or net losses
could result in one or more additional existing securitization trusts exceeding
one or more of the portfolio performance tests unless the portfolio performance
test levels are changed. FSA is not required either to continue its arrangement
with us or to waive any future violations of portfolio performance test levels
and might not do so if additional trusts were to perform more poorly then
required.
THE OCCURRENCE OF AN INSURANCE AGREEMENT EVENT OF DEFAULT COULD HAVE
A MATERIAL ADVERSE EFFECT ON US. Our agreement with FSA specifies that there
will be an insurance agreement event of default if listed events occur with
respect to any series of insured asset-backed securities. These events include
loan portfolio performance tests similar to those described above but at
significantly higher levels. Following an insurance agreement event of default,
FSA may:
- suspend distributions of cash flow from the related
securitization trust and all other insured trusts, including
one of our warehouse credit facilities, until the amount of
cash in the affected spread account reaches a preset level
(generally 25% of the balance of outstanding asset-backed
securities in that series);
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- capture excess cash flow from performing trusts;
- increase its premiums;
- replace us as servicer with respect to all insured trusts;
and
- foreclose on its collateral security interest in the stock
of our subsidiary ARFC.
FSA may waive an insurance agreement event of default. Some of the insured
trusts have exceeded these thresholds in the past, but to date we have
obtained waivers to permit distributions of excess cash flow. A further
increase in loan delinquencies, cumulative defaults and net losses might
result in one or more additional securitization trusts exceeding one or more
of these thresholds unless the required performance levels are changed. If
this were to occur, further waivers may not be available to us. Any action
that FSA might take in the absence of a waiver could have a material adverse
effect on us, including our ability to pay our obligations. If FSA terminated
us as servicer, we would no longer receive the related servicing fees. If FSA
foreclosed on the stock that we own in ARFC, it would prevent that subsidiary
from providing cash to us.
CURRENT AND HISTORICAL DELINQUENCY AND DEFAULT RATES OF LOANS IN OUR
SERVICING PORTFOLIO MAY UNDERSTATE FUTURE DELINQUENCY AND DEFAULT RATES. The
future performance of our security portfolio may vary from current and
historical rates for a number of reasons. The incidence of delinquencies and
defaults on automobile loans tends to vary with the age of the loans. For
example, loans that are between six and 14 months old generally have a higher
likelihood of being delinquent or defaulting than loans with similar credit
characteristics that are less than six months or greater than 14 months old.
Accordingly, to the extent that our servicing portfolio grows so that it
contains disproportionately more loans originated within the prior six
months, the current and historical delinquency and default rates of loans in
the servicing portfolio may understate delinquency and default rates after
that time. In addition, to the extent we offer new loan products which
involve different underwriting policies from those we have used in the past,
the delinquency and default rates of our servicing portfolio may change.
PAST PURCHASES OF HIGHER RISK LOANS MAY CONTINUE TO NEGATIVELY
IMPACT THE PERFORMANCE OF OUR SERVICED LOAN PORTFOLIO. Through 1997, we
consistently increased our purchases of higher risk loans. These historic
increases in the proportion of higher risk loans in our serviced loan
portfolio led to an increase in the rates of delinquencies, repossessions and
losses on those loans. These higher risk loans will likely continue to
negatively impact our loan performance statistics in the near future.
INCREASES IN LOAN DELINQUENCY, DEFAULT AND LOSS RATES MAY VIOLATE TESTS
IN THE AGREEMENTS THAT GOVERN OUR WAREHOUSE CREDIT FACILITIES. The agreements
that govern our warehouse credit facilities contain tests that set limits on:
- loan delinquency rates;
- loan default rates;
- loan payment extensions;
- loan loss rates;
- interest rate yields;
- borrower bankruptcy rates;
- borrower credit scores; and
- loan-to-value ratios.
If the performance of the relevant loan portfolios exceeds these limits, lenders
under the affected warehouse facility have no further obligation to extend
credit, which would substantially reduce or eliminate our capacity to purchase
additional automobile loans. In addition, if the limits under any one agreement
are exceeded, there may be cross-defaults under other credit agreements, which
could result in our being required immediately to pay all amounts due under
those agreements.
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THERE MAY BE A FUTURE INCREASE IN THE NUMBER OF LOANS THAT WE HAVE
EXTENDED OR AMENDED, WHICH GENERALLY PRESENT SUBSTANTIALLY HIGHER DEFAULT RISKS
THAN LOANS THAT HAVE NEITHER OF THESE CHARACTERISTICS. Like others in the
industry, we give certain borrowers extensions or amendments to loan terms in
certain circumstances. Loans that have been extended or amended generally
present substantially higher default risks than loans that have neither of these
characteristics. Continued slowing of the rate of portfolio growth, which will
result in a higher percentage of loans of the age that are more likely to be
extended or amended, could contribute to an increase in these statistics. The
granting of an extension or amendment may have the effect of removing the
related loan from delinquent status.
RISKS RELATED TO GENERAL ECONOMIC CONDITIONS
ECONOMIC CONDITIONS INFLUENCE OUR LEVEL OF BUSINESS AND THE PERFORMANCE
OF THE LOANS IN THE SERVICED PORTFOLIO. Periods of economic slowdown or
recession, whether general, regional or industry-related, may increase the risk
of default on automobile loans. Any increase on defaults would have the adverse
effects noted above. These periods may also be accompanied by decreased consumer
demand for automobiles which would result in reduced demand for automobile loans
and could reduce business for us. Decreased consumer demand for automobiles also
contributes to a decline in the values of automobiles securing outstanding
loans, thereby weakening collateral coverage and increasing the possibility of
losses in the event of default.
OUR BUSINESS MAY BE AFFECTED BY PRICES FOR USED AUTOMOBILES.
Significant increases in the inventory of used automobiles during recessions
may depress the prices at which we can sell our inventory of repossessed
vehicles or delay sales. In addition, average used car prices have fluctuated
in the past, and any future softening of the used car market could cause our
recovery rate on repossessed vehicles to decline below the current level.
This, in turn, might have an adverse effect on loan loss levels, with all the
potential effects of a decline in portfolio performance, and could require
adjustments to estimated recovery rates and finance income receivable similar
to those made at June 30, 1998 and March 31, 1997, both of which included
amounts related to a reduction in the estimated recovery rates.
OUR PROFITABILITY MAY BE DIRECTLY AFFECTED BY THE LEVEL OF AND
FLUCTUATIONS IN INTEREST RATES. The level of and fluctuations in interest rates
affect the difference between the annual percentage rate paid by the borrowers
under the loans we purchase and the interest rate on the asset-back securities
we sell. This gross interest rate spread is a major source of profit for us.
We monitor the interest rate environment and employ strategies designed to
mitigate the effect of changes in interest rates on our gross interest rate
spread. However, changes in interest rates may adversely affect our
profitability.
A CONTINUATION OR INCREASE IN RECENT LEVELS OF PERSONAL BANKRUPTCY
FILINGS COULD ADVERSELY AFFECT THE PERFORMANCE OF THE LOAN PORTFOLIO WE SERVICE.
Recent media reports have suggested an increase in the number of personal
bankruptcy filings and defaults on consumer credit. During most of 1997, much
of 1998 and the first six months of 1999, we experienced a slight increase in
the proportion of our servicing portfolio representing loans to borrowers who
have filed for bankruptcy protection. A continuation or increase in this trend
could contribute to greater default and net loss rates than we have historically
experienced. In addition, this increase in consumer bankruptcy filings and
defaults on consumer credit during a period of economic growth indicates that
the impact of consumer behavior on default rates is not limited to periods of
economic slowdown or recession.
RISKS RELATED TO THE NATURE OF THE SECURITIES OFFERED BY THIS PROSPECTUS
MOST OF OUR CASH FLOW COMES FROM, AND ASSETS BELONG TO, LEGALLY
DISTINCT SUBSIDIARIES WITH NO OBLIGATIONS TO PAY AMOUNTS DUE UNDER THE
SUBORDINATED NOTES AND WHOSE CREDITORS HAVE CLAIMS ON THOSE ASSETS THAT ARE
SENIOR TO OUR CLAIMS OR THE CLAIMS OF OUR CREDITORS, INCLUDING THE HOLDERS OF
THE SUBORDINATED NOTES. A significant portion of our cash flow comes in the form
of distributions from our special-purpose subsidiaries, which have the legal
right to receive the excess cash flow from the securitization trusts we have
sponsored. These subsidiaries are separate and distinct legal entities with no
obligation to pay any amounts due under our indebtedness or to make any
funds available to us, whether by paying dividends or otherwise, so that we can
do so. As a result, if any third party were to enforce any of the restrictions
on the distribution of cash from our subsidiaries discussed above, our ability
to pay
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interest and principal on our outstanding indebtedness would be significantly
impaired. In addition, substantially all of the assets shown on our financial
statements, in particular the finance income receivable and the loans held for
sale, are legally owned by these special-purpose subsidiaries, not us. Thus,
creditors of those subsidiaries would have first claim to those assets in any
liquidation or similar event, rather than us or any of our creditors. As of
June 30, 1999, our subsidiaries had approximately $98.3 million of indebtedness.
ALL PAYMENTS ON THE SUBORDINATED DEBT WILL BE SUBORDINATED TO THE PRIOR
PAYMENT OF ALL AMOUNTS DUE ON ANY SENIOR INDEBTEDNESS. If we make a distribution
to creditor, the right of holders of any subordinated debt securities to receive
payment of any amounts due to them--whether interest or principal--will be
subordinated to the right of all holders of any senior indebtedness, as
defined in the subordinated debt indenture, to receive prior payment of all
amounts due to them. Similarly, if an event of default on any senior
indebtedness occurs, until it has been cured, we will not be able to make any
payments on account of any subordinated debt securities.
WE HAVE A LARGE AMOUNT OF OUTSTANDING DEBT, WHICH MAY MAKE IT HARDER
TO OBTAIN FINANCING, WILL INCREASE THE COST TO US OF OUR DEBT AND MAY MAGNIFY
THE RESULTS OF ANY DEFAULT UNDER ANY OF OUR OUTSTANDING INDEBTEDNESS. At June
30, 1999, we had a total of $447.6 million of debt outstanding and had a
debt-to-equity ratio of 1.96. (These amounts do not include any debt of our
subsidiaries.) The issuance of additional debt securities could increase our
debt-to-equity ratio or leverage, which may in turn make it harder for us to
obtain future financing. In addition, the issuance of any debt securities
will increase the cost of paying interest on our debt, except to the extent
that the proceeds from the sales are used to repay other outstanding
indebtedness. Although our cash flow from operations and capital raising
activities has historically been sufficient to pay amounts due on our
indebtedness, this may not continue to be the case; any additional
indebtedness may increase the risk that our cash flow is insufficient to pay
amounts due. Finally, our level of indebtedness, and in particular any
significant increase in it, may make us more vulnerable if there is a
downturn in our business.
OUR OUTSTANDING DEBT SECURITIES CONTAIN RESTRICTIVE COVENANTS THAT
MAY RESTRICT OUR ABILITY TO OBTAIN FINANCING AND NONCOMPLIANCE WITH WHICH
COULD LEAD TO A DEFAULT WITH RESPECT TO THAT AND ANY OTHER INDEBTEDNESS. We
are subject to restrictive covenants under our outstanding debt securities
and our other debt financing agreements, some of which may significantly
restrict our ability to incur additional indebtedness or to issue preferred
stock. Any future indebtedness may also contain similar restrictive
covenants. Noncompliance with any covenants under any of our outstanding
indebtedness, unless cured, modified or waived, could lead to a default not
only with respect to that indebtedness, but also under other indebtedness. If
this were to happen, we might not be able to repay or refinance all of our
debt and in particular might not be able to repay any subordinated debt
securities, since their repayment is subordinated to the prior repayment of
all senior debt outstanding at the time.
IF THE HOLDERS OF OUR SENIOR NOTES ISSUED IN MARCH AND OCTOBER OF
1997 WERE TO EXERCISE THEIR RIGHT TO REQUIRE US TO REPURCHASE THEIR NOTES, IT
MIGHT CAUSE A DEFAULT UNDER OUR OUTSTANDING INDEBTEDNESS. The holders of our
currently outstanding senior notes may require us to repurchase all or a
portion of those notes upon the occurrence of various events, including a
change of control, specified types of asset sales and specified adverse loss
experiences with respect to the securitization trusts we have sponsored. In
1996, we received an indication of interest to buy our company. At that time,
we examined our strategic alternatives, including a sale. While no definitive
offers to buy were received, a transaction like this might cause a change in
control in the future. If we were required to repurchase any of these senior
notes for this or any other reason, any funds so used would not be available
to pay principal or interest on any other indebtedness that did not have a
similar covenant, and we might not be able to access other funds to do so.
Moreover, we might not have sufficient funds available to repurchase the
senior notes. Our inability to do so could cause defaults under, and
acceleration of, both the senior notes and, under cross-default provisions,
our other indebtedness.
OUR BOARD OF DIRECTORS HAS THE POWER TO CREATE AND ISSUE A NEW CLASS OR
SERIES OF STOCK THAT COULD ADVERSELY AFFECT THE VOTING POWER, DIVIDEND,
LIQUIDATION AND OTHER RIGHTS OF HOLDERS OF OUR COMMON STOCK. Our authorized and
unissued stock includes shares that are undesignated as to rights. Under our
articles of incorporation, our board of directors has the power to create and
issue new classes or series of stock using these undesignated shares. In
connection with this, our board of directors may give the new class or series
any rights,
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preferences and privileges that the board of directors deems appropriate,
including special dividend, liquidation and voting rights. The creation and
issuance of a new class or series of stock could adversely affect the voting
power, dividend, liquidation and other rights of holders of our common stock
and, possibly, any other class or series of stock that is then in existence.
OUR CHARTER DOCUMENTS AND SHAREHOLDER RIGHTS PLAN AND MINNESOTA LAW MAY
DISCOURAGE AN ACQUISITION OF OUR COMPANY. Provisions of our articles of
incorporation and bylaws, the existence of our shareholder rights plan and the
provisions of Minnesota law could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our shareholders.
OTHER RISKS RELATING TO US
WE MAY BE UNABLE TO IMPROVE OUR SERVICING PERFORMANCE, IN PARTICULAR AS
THE RESULT OF HIGH EMPLOYEE TURNOVER OR AN INABILITY TO ATTRACT AND RETAIN
REPLACEMENT SERVICING AND COLLECTION PERSONNEL. Our ability to manage portfolio
delinquency, default and loss rates depends on the maintenance of efficient
collection and repossession procedures and on attracting and retaining an
adequate number of qualified servicing and collection personnel. We may not
succeed in the efforts we have undertaken since 1996 to improve our servicing
and collection performance. During 1997 and 1998 we experienced an increase in
employee turnover rate, especially among our collection personnel. This was due
in part to low unemployment rates driven by economic growth and the continued
expansion of the consumer credit markets and in part to our efforts to
consolidate our servicing and collection operations. This consolidation,
resulted in service centers being moved from one location to another. Similar
high turnover in the future, or an inability to attract and retain replacement
personnel, could have an adverse effect on our performance, especially our
portfolio delinquency, default and net loss rates.
WE ARE A DEFENDANT IN LEGAL PROCEEDINGS THE OUTCOME OF WHICH COULD HAVE
AN ADVERSE EFFECT ON US. We and some of our directors and officers are
defendants in a consolidated lawsuit, IN RE OLYMPIC FINANCIAL LTD. SECURITIES
LITIGATION. The plaintiffs allege that during the period from July 20, 1995
through March 3, 1997, we and our directors and officers illegally engaged in a
scheme that had the effect of artificially inflating, maintaining and otherwise
manipulating the value of our common stock. While we believe that this action is
without merit and intend to defend it vigorously, we cannot be sure of success.
In addition, in the course of our business, we are routinely a party or subject
to other items of pending or threatened litigation. This includes actions
against borrowers to collect amounts on loans or to repossess vehicles and
litigation challenging the terms of loans we have purchased. The ultimate
outcome of these matters cannot be predicted and we may not prevail in all of
these lawsuits. Any order, judgment, settlement or decree that was adverse to us
could have a material adverse effect on us.
THE FAILURE OF YEAR 2000 NON-COMPLIANT SYSTEMS, EITHER OUR OWN OR THOSE
OF OUR SIGNIFICANT THIRD PARTY PROVIDERS, MAY MAKE US UNABLE TO PERFORM KEY
OPERATING ACTIVITIES AND COULD ALSO SUBJECT US TO LITIGATION. We have reviewed
our automated information systems, including our loan accounting system,
business support systems and facility operating systems and have initiated the
replacement, modification or reprogramming of Year 2000 non- compliant hardware
and software. In addition, we have developed and are implementing a plan to
contact parties which provide services critical to the successful operation of
our business to learn how they are addressing the issue and to evaluate any
likely impact on us. However, we have not yet completed all necessary processes
of our Year 2000 plan. Nor do we have contingency plans in place in case we do
not complete all phases of our Year 2000 program. If we do not complete our Year
2000 program successfully, we may be unable to perform our key operating
activities and could also be subject to litigation regarding the results of
systems failures, such as improper application of repayments and resulting
incorrect credit reporting to credit bureaus.
OUR ABILITY TO COMPETE IN THE HIGHLY COMPETITIVE AUTOMOBILE FINANCING
MARKET MAY BE LIMITED BY OUR COMPETITORS' GREATER RESOURCES AND BECAUSE WE DO
NOT OFFER DEALERS ALL THE PROGRAMS THAT SOME COMPETITORS DO. Many of our
existing and potential competitors, which include well-established financial
institutions, such as banks, other automobile finance companies, small loan
companies, thrifts and leasing companies and captive finance companies owned by
automobile manufacturers, such as General Motors Acceptance Corporation,
Chrysler Credit Corp. and Ford Motor Credit Company, have greater financial,
technical and marketing resources than we have. From time to time these
competitors offer special buyer incentives in the form of below-market interest
rates on
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certain classes of vehicles which we are unable to match. Many of these
competitors also have longstanding relationships with automobile dealers, making
it difficult for us to develop relationships with those dealers. In addition,
some of the major entities that compete with us provide other forms of financing
to automobile dealers, including dealer floor plan financing and leasing, which
we do not provide. All of this may have the effect of making us less
competitive.
VIOLATIONS OF OR CHANGES IN THE LAWS AND REGULATIONS THAT GOVERN OUR
BUSINESS COULD HAVE A MATERIAL ADVERSE EFFECT ON US. Our business is subject to
numerous federal and state consumer protection laws and regulations. Among other
things, these laws and regulations:
- require us to obtain and maintain licenses and qualifications;
- limit interest rates, fees and other charges;
- limit or prescribe various other terms of our automobile loan
contracts;
- require specific disclosures; and
- define our rights to repossess and sell collateral vehicles.
If we were to violate these laws and regulations, even unintentionally, we could
be subject to government enforcement action or to consumer or securityholder
lawsuits seeking to recover for damages alleged to have resulted from the
violations. Changes in existing laws or regulations, or in their interpretation,
or the promulgation of additional laws or regulations could, among other things,
impose significant new restrictions on the way in which we do business or result
in significantly increased compliance costs. If any of this happened, it could
have a material adverse effect on us.
---------------
THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS
PROSPECTUS CONTAIN FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT EXPECTATIONS,
ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT OURSELVES AND OUR INDUSTRY.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF LANGUAGE SUCH AS
"MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE," "SHOULD" OR "CONTINUE," AND
SIMILAR LANGUAGE. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISK AND UNCERTAINTY.
OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD- LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, WHICH ARE DESCRIBED IN
THIS SECTION AND ELSEWHERE. WE UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY ANY
FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES
AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.
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ABOUT ARCADIA FINANCIAL LTD.
We purchase, securitize and service consumer automobile loans
originated primarily by car dealers affiliated with major foreign and
domestic manufacturers. We purchase our consumer automobile loans through 18
regional buying centers located in 15 states. These buying centers are
supplemented by a network of dealer development representatives who develop
and maintain relationships with car dealers operating within each 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 our headquarters in Minneapolis, Minnesota.
Our lending programs are designed to serve consumers who have limited
access to traditional automobile financing, typically because they have prior
credit difficulties or limited credit histories. Because we serve consumers who
are unable to meet the credit standards imposed by most traditional automobile
financing sources, we generally charge interest at rates higher than those
charged by traditional sources. We also expect to sustain a higher level of
credit losses than traditional sources because we provide financing to
relatively high-risk borrowers.
We employ a risk-based pricing strategy for determining which loans
to purchase and the terms of the loans we purchase. We compare the terms the
borrower wishes to obtain with the results of an evaluation of his or her
credit characteristics on the basis of our underwriting and credit scoring
criteria. Our underwriting procedures focus on a borrower's credit
characteristics and collateral value and do not distinguish between new and
used vehicles, which represented approximately 13% and 87%, respectively, of
our loan purchases in 1998. In the past, we marketed our loan products using
two programs. However, in 1998, we determined that it was more appropriate to
make underwriting decisions based on a multi-tiered risk-based pricing
matrix. We believe that this tiering provides us with a higher level of
precision in estimating future default rates and loan profitability. We base
our analysis of loan loss reserves in part on the credit performance we
expect from each risk tier and on the proportion of loan portfolio in each of
the tiers. Our goal is to maximize the difference between the borrowers'
interest rates and the level of net losses we expect on the loans we purchase.
We fund our initial purchases of loans primarily with money borrowed
under warehouse facilities, which are arrangements that allow us to borrow
cash secured by the loans we purchase with the cash. We then securitize the
loans we have purchased, generally on a quarterly or more frequent basis. To
securitize loans, we transfer them through one of our special purpose
subsidiaries to a securitization trust that has been newly created for the
transaction. The securitization trust issues one or more classes of debt
securities called asset-backed securities and sells them to investors. When the
sale of the securities is completed (which may be some time after the sale of
the asset-backed securities), we recognize an accounting gain on the sale of the
loans and use the proceeds primarily to repay amounts outstanding under our
warehouse facilities.
Each month, collections of principal and interest on the loans in
each securitization trust are used by the trustee of that trust to pay
amounts due to the holders of the trust's asset-backed securities, to
establish and maintain spread accounts as a source of cash to cover possible
shortfalls in collections on the loans in the trust and to pay expenses
associated with the securitization and the servicing of the loans. Any funds
that remain are generally distributed to us, subject to our agreements with
Financial Security Assurance Inc., our provider of financial guaranty
insurance policies.
We also act as servicer for the loans included in securitization
trusts. In return, we receive servicing fees based on the outstanding
principal balance on the loans and also receive collection fees, such as late
payment fees and insufficient fund charges, and interest on collection
accounts. To perform our servicing responsibilities, we operate a national
customer service center in Minneapolis, Minnesota, and four regional
collection centers located in Charlotte, North Carolina; Dallas, Texas;
Denver, Colorado; and Minneapolis, Minnesota.
Arcadia Financial is a Minnesota corporation that was incorporated on
March 8, 1990. Our principal executive offices are located at 7825 Washington
Avenue South, Minneapolis, Minnesota 55439-2435, and our telephone number is
(612) 942-9880.
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USE OF PROCEEDS
Unless otherwise specified in an applicable prospectus supplement,
we intend to add the net proceeds we receive from the sale of any of the
securities offered by this prospectus to our general funds, in which case
they will be available for working capital and other general corporate
purposes. These uses may include funding loan purchases, repaying maturing
obligations and redeeming outstanding indebtedness. Pending those uses, we
may temporarily invest the net proceeds in short-term investments or use them
to reduce short-term indebtedness, including indebtedness under our warehouse
facilities.
RATIOS OF EARNINGS TO FIXED CHARGES AND
TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following are the consolidated ratios of earnings to fixed charges
and to combined fixed charges and preferred stock dividends for the periods
presented.
<TABLE>
<CAPTION>
Years Ended SIX MONTHS
December 31, ENDED JUNE 30,
-------------------------------------------- ---------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Ratio of earnings to fixed charges....................... 1.76x 3.33x 4.08x - - - 1.95x
Deficiency in earnings to fixed charges.................. - - - 69,633 92,476 105,748 -
Ratio of earnings to combined fixed charges and
preferred stock dividends............................. 1.12x 2.76x 3.81x - - - 1.95x
Deficiency in earnings to combined fixed charges and
preferred stock dividends............................. - - - 69,633 92,476 105,748 -
</TABLE>
For purposes of calculating the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends, earnings are
defined as income (loss) before income taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of debt discount and the interest
factor in rental charges. Combined fixed charges and preferred stock dividends
consist of the fixed charges described above plus the pre-tax income necessary
to pay dividends on our previously outstanding 8% Cumulative Convertible
Exchangeable Preferred Stock, all of which was converted or redeemed on or
before December 2, 1996.
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DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debt
securities that may be offered by this prospectus. A prospectus supplement will
describe the specific terms of the series of debt securities offered under that
prospectus supplement and any general terms outlined in this section that will
not apply to those debt securities. This prospectus provides only a summary
description of the debt securities and related indentures. Because this is only
a summary, it does not contain all of the details found in the full text of the
indentures and debt securities. If you would like additional information, you
should read the forms of indentures and the forms of debt securities, which will
be filed or incorporated by reference as exhibits to the registration statement
to which this prospectus relates.
The amount of debt securities offered by this prospectus will be
limited to the amount of securities described on the cover of this prospectus
that we have not already issued or reserved for issuance. The indentures will
not limit the total principal amount of debt securities that we may issue under
the indentures.
GENERAL
We may issue senior debt securities and subordinated debt securities.
The senior debt securities will be issued under an indenture dated as of March
12, 1997, between Arcadia Financial and Norwest Bank Minnesota, National
Association, as trustee. The subordinated debt securities will be issued under
the subordinated indenture, which will be between Arcadia Financial and the
trustee named in the prospectus supplement. The indentures will be filed as
exhibits to the registration statement of which this prospectus is a part. The
debt securities may be issued either separately, together with, upon conversion
of or in exchange for other securities.
The senior debt securities will rank equally with our other unsecured,
unsubordinated indebtedness, except to the extent that they are secured by any
collateral. The subordinated debt securities will be unsecured and will be
subordinated in right of payment to the prior payment in full of our senior
debt, as described under "Description of Subordinated Debt
Securities--Subordination of Subordinated Debt Securities."
The debt securities may be issued from time to time in one or more
series. The terms of each series, including any restrictive covenants with
respect to each series, will be established by or pursuant to a resolution of
our board of directors and set forth or determined in the manner provided in an
officers' certificate or by a supplemental indenture. Under the indentures we
may, without the consent of the holders, of any debt securities, reopen a
previous series and issue additional securities in that series or establish
additional terms for that series.
The prospectus supplement will indicate the form, registered or bearer,
and denominations in which debt securities of any series may be issued. Debt
securities also may be issued in the form of one or more global securities, as
described below under "Global Securities." The debt securities, other than those
issued in the form of a global security, may be exchanged or transferred without
charge, but we may require payment of a sum sufficient to cover any required
taxes or other governmental charges. We also may require the holders to furnish
appropriate endorsements and transfer documents before exchanging or
transferring the debt securities.
Debt securities may be issued as original issue discount securities to
be sold at a substantial discount below their principal amount. If a debt
security is an original issue discount security, that means that an amount less
than the principal amount of the debt security will be due and payable upon a
declaration of acceleration of the maturity of the debt security pursuant to the
indentures. The prospectus supplement will describe the federal income tax
consequences and other special factors that should be considered prior to
purchasing any original issue discount securities.
The principal and any premium and interest on the debt securities will
be paid, and the transfer of the debt securities may be registered, at the
corporate trust office of the trustee in the case of subordinated debt
securities, and at the office or agency maintained for this purpose in the case
of the senior debt securities. Any interest payable on a debt security will be
paid to the person in whose name that debt security is registered in the
relevant security register. In the case of subordinated debt securities, we also
may pay interest by check mailed to the address of the person entitled to
payment as the address appears on the relevant security register.
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A prospectus supplement relating to a particular series of debt
securities will contain the specific terms relating to the offering of those
securities. The terms will include some or all of the following:
- the title and type of debt securities;
- any limit on the total principal amount of the debt
securities;
- the person to whom any interest on the debt securities will be
paid, if other than the person in whose name the debt
securities are registered on the regular record date for the
interest;
- the date or dates on which the principal and any premium on
the debt securities will be paid;
- the interest rate or rates on the debt securities, the date
from which interest will accrue, the record and interest
payment dates, any circumstances under which we may defer
interest payments, and the basis for calculating interest if
other than a 360-day year of twelve 30-day months;
- the place or places where the principal, premium, if any, and
interest on the debt securities will be paid and where the
debt securities may be surrendered for registration of
transfer or exchange;
- any applicable redemption provisions that would permit us to
redeem the debt securities prior to their final maturity;
- whether a sinking fund will be established, which means that
monies will be deposited on a regular basis in a separate
custodial account that we would use to redeem the debt
securities prior to their final maturity;
- whether the debt securities may be converted into or exchanged
for shares of common stock and/or for other securities, and if
so, the terms and conditions upon which the debt securities
will be converted or exchanged;
- the identity of each security registrar and paying agent, if
other than or in addition to the trustee;
- if the amount of principal or any premium or interest on the
debt securities may be determined by reference to an index or
pursuant to a formula, the manner in which those amounts will
be determined;
- any changes to or additional definitions, covenants or events
of default under the indentures and any change in the right of
the trustee or the holders to declare the principal or any
premium or interest on the debt securities due and payable;
- the denominations in which the debt securities will be issued;
- if the principal and any premium and interest on the debt
securities will be paid in a currency other than U.S. dollars,
the manner of determining the U.S. dollar equivalent of the
principal amount outstanding, and, if any payment on the debt
securities may be paid, at either our or your election, in one
or more other currencies other than those named in the initial
debt securities, the specifics of any payment in those other
currencies;
- any federal income tax consequences and other special factors
applicable to debt securities denominated in a currency other
than U.S. dollars;
- if less than the principal amount, the portion of the
principal payable upon acceleration of the debt securities
following an event of default;
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- whether the debt securities are to be issued, in whole or in
part, in the form of one or more global securities, together
with relevant information about the depositary for the global
securities and their transfer;
- whether the provisions described under the heading
"Defeasance" apply to the debt securities;
- whether any series of senior debt securities will be secured,
and the type, amount and other terms of the collateral to be
provided as the security; and
- any other terms of the debt securities not inconsistent with
the provisions of the applicable indenture.
GLOBAL SECURITIES
This section summarizes the terms and provisions of series of debt
securities issued, in whole or in part, in the form of global securities
deposited with, or on behalf of, The Depository Trust Company ("DTC"). DTC is
a limited-purpose trust company organized under the New York Banking Law that
is a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
exists to hold securities that its participants deposit with DTC and to
facilitate the settlement among participants of transactions in deposited
securities through electronic computerized book-entry changes in participants'
accounts. This computerized process eliminates the need for physical movement of
securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and other organizations.
These entities are considered to be "direct participants" of DTC. DTC is owned
by a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system also is available to others, known as
"indirect participants," such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with direct
participants, either directly or indirectly. The rules applicable to DTC
and its participants are on file with the SEC.
DTC may act as securities depositary for the debt securities offered
under this prospectus. Each debt security represented by a global security is
referred to as a book-entry security. Upon initial issuance, all book-entry
securities of the same series, bearing interest, if any, at the same rate or
pursuant to the same formula, and having the same date of issuance, redemption
provisions, repayment provisions, stated maturity and other terms, will be
represented by a single global security. Each global security representing
book-entry securities will be deposited with or on behalf of DTC and will be
registered in the name of DTC or a nominee of DTC. Unless otherwise specified in
the applicable prospectus supplement, all book-entry securities will be
denominated in U.S. dollars.
Purchases of debt securities within the DTC system must be made by or
through direct participants, which will receive a credit for the debt securities
on DTC's records. The ownership interest of each actual purchaser, whom we refer
to as a "beneficial owner," is in turn recorded on the direct and indirect
participants' records. DTC has no knowledge of the identity of the actual
beneficial owners of the debt securities; its records reflect only the identity
of the direct participants to whose accounts the debt securities are credited,
which may or may not be the beneficial owners. The participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Beneficial owners will not receive certificates representing their ownership
interests in book-entry securities, unless use of the book-entry system is
discontinued for the relevant securities. Beneficial owners will not receive
written confirmation from DTC of their purchases, but are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the direct or indirect participants through
which the beneficial owners purchased the debt securities. Transfers of
ownership interests in the debt securities will be accomplished by entries on
the books of participants acting on behalf of beneficial owners.
Payments of principal, any premium and interest on book-entry
securities will be made directly to DTC or its nominee, as the case may be, as
the sole registered holder of the book-entry securities. We understand that
DTC's practice is to credit direct participants' accounts on the relevant
payment date in accordance with their
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respective holdings shown on DTC's records, unless DTC has reason to believe
that it will not receive payments on the payment date. Payments by participants
to beneficial owners will be governed by standing instructions and customary
practices. Neither we nor the trustee or any paying or other agent of either of
us will be responsible or liable for:
- any aspect of DTC's records relating to, or payments made on
account of, its participants;
- maintaining, supervising or reviewing any of DTC's records
relating to the interests of its participants; or
- any other aspect of the relationship between DTC and its
participants, or the relationship between DTC's participants
and the beneficial owners.
Beneficial owners will not be considered the registered holders of the
debt securities for any purpose under the applicable indenture. Accordingly,
each beneficial owner must rely on the procedures of DTC or, if the beneficial
owner is not a participant, on the procedures of the participant through which
the beneficial owner owns its interest, to exercise any rights of a registered
holder under the applicable indenture. The laws of some jurisdictions require
that some purchasers of securities take physical delivery of the securities in
certificated form. These limits and laws may impair the ability to transfer
beneficial interests in a global security.
As the registered holder of each global security, DTC may appoint
agents and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action that a
registered holder is entitled to give or take under the applicable indenture. It
is our understanding that under existing industry practices, if we request that
the registered holders take any action, or if a beneficial owner desires to give
or take any action that a registered holder is entitled to give or take, then
DTC would authorize the participants holding the relevant beneficial interests
to give or take such action, and the participants would authorize beneficial
owners owning through them to give or take the action or would otherwise act
upon the instructions of the beneficial owners.
No global security representing book-entry securities may be exchanged
or transferred, except as a whole by a nominee of DTC to DTC or another of its
nominees, or by DTC or its nominees to a successor of DTC or a nominee of the
successor.
We may, at our option, decide to discontinue use of the system of
book-entry transfers. DTC may discontinue providing its services as securities
depositary with respect to any of the debt securities at any time by giving
reasonable notice to us and the relevant trustee. After an event of default, the
system of book-entry transfers may be terminated. In each case, if a successor
securities depositary is not obtained, certificates representing the debt
securities will be printed and delivered as DTC's participants direct.
DESCRIPTION OF SENIOR DEBT SECURITIES
This section summarizes the material terms and provisions of the senior
debt securities and the senior indenture. Because this is a summary, it does not
contain all of the details found in the full text of the senior indenture and
the senior debt securities. If you would like additional information, you should
read the form of senior indenture and the form of senior debt securities, which
will be filed as an exhibit to the registration statement to which this
prospectus relates.
REDEMPTION
The prospectus supplement for any series of senior debt securities will
specify any provisions for their redemption, including any sinking fund. Except
as described in the prospectus supplement, we are not required to
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make redemption or sinking fund payments. The senior indenture provides that in
satisfaction of all or any part of any required sinking fund payment with
respect to the senior debt securities, we may:
- deliver outstanding senior debt securities, with similar
terms, other than any previously called for redemption; and
- apply as a credit senior debt securities, with similar terms,
of a series that have been redeemed either (a) at our election
pursuant to the terms of the senior debt securities, or (b)
through the application of permitted optional sinking fund
payments pursuant to the terms of the senior debt securities.
The senior indenture also provides that if less than all of the senior debt
securities of any series are to be redeemed at any time, selection of the senior
debt securities for redemption will be made by the trustee:
- on a pro rata basis, and in a manner that complies with
applicable legal and stock exchange requirements, if any; or
- by any other method the trustee considers fair and
appropriate.
Portions of the senior debt securities selected for redemption will be in
amounts of $1,000 or whole multiples of $1,000, except that if all of a holder's
senior debt securities are to be redeemed, the entire outstanding amount will be
redeemed. Either we or the trustee will mail notices of redemption by first
class mail between 30 and 60 days before the redemption date to each holder of
senior debt securities to be redeemed at the holder's registered address. If any
senior debt security is to be redeemed in part only, the notice will state the
portion of the principal amount to be redeemed. A new senior debt security, in
principal amount equal to the unredeemed portion of the original senior debt
security, will be issued in the name of the holder upon cancellation of the
original senior debt security. On and after the redemption date, interest will
no longer accrue on senior debt securities or the portions of senior debt
securities called for redemption.
REPURCHASE AT THE OPTION OF HOLDERS
Unless otherwise set forth in the prospectus supplement for any series
of senior debt securities, the senior indenture does not require us to
repurchase or redeem the senior debt securities at the option of the holders. In
particular, the senior indenture does not have any repurchase or other covenants
designed to protect the holders in the event of a highly leveraged transaction,
a sale of assets, a takeover, a recapitalization or any other restructuring. The
senior indenture provides that if repurchase rights are provided for in a
prospectus supplement and amounts deposited in connection with all the
repurchase rights are insufficient to pay the repurchase price of all senior
debt securities having repurchase rights, then the trustee will select senior
debt securities to be repurchased on a pro rata basis from the holders of the
series who have repurchase rights and who elect to exercise the repurchase
rights.
CERTAIN COVENANTS IN THE SENIOR INDENTURE
MERGER, CONSOLIDATION OR SALE OF ASSETS. We may not consolidate or
merge with another person, or sell or lease all of our property to another
person, unless:
- in the case of a consolidation or merger, we are the surviving
corporation, or the successor or corporation is a domestic
corporation;
- the successor corporation or the person to which the sale or
lease is made assumes all our obligations under the senior
debt securities and the senior indenture in a supplemental
indenture;
- immediately after the transaction, we, or our successor, are
not in default in the performance of a covenant or condition
in the senior indenture;
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- we, or our successor, will have consolidated net worth
immediately after the transaction equal to or greater than our
consolidated net worth immediately preceding the transaction;
and
- the applicable rating agencies have reaffirmed or raised their
ratings for asset-back securities that have been rated in
whole or in part on the basis of our credit.
REPORTS. As long as any senior debt securities are outstanding, we will
file with the trustee and furnish to the holders of senior debt securities all
reports on Forms 8-K, 10-Q and 10-K and all proxy statements that we file with
the SEC, including (a) Management's Discussion and Analysis of Financial
Condition and Results of Operations, and (b) for the annual information only, a
report by our certified independent accountants.
If we are no longer subject to Section 13 or 15(d) of the Exchange Act,
we nevertheless will continue to file this information and these reports with
the SEC and the trustee and will continue to make the information available to
securities analysts and prospective investors upon request.
EVENTS OF DEFAULT UNDER THE SENIOR INDENTURE
Each of the following constitutes an event of default under the senior
indenture:
- failure to pay interest on any senior debt security of that
series for 30 days after the payment is due;
- failure to pay the principal or any premium on any senior debt
security of that series when due;
- failure to deposit any sinking fund payment, when due, for the
senior debt securities of that series;
- failure to comply with the provisions described above under
"Certain Covenants in the Senior Indenture--Merger,
Consolidation or Sale of Assets";
- failure to comply with any of our other agreements in the
senior indenture or the senior debt securities for 60 days
after notice from the trustee or holders of at least 25% of
the principal amount of the outstanding senior debt securities
of that series;
- a default by us or any of our subsidiaries under any mortgage,
indenture or instrument of indebtedness that:
(a) is caused by a failure to pay the principal, premium,
if any, or interest on the indebtedness before the
expiration of its grace period, or
(b) results in the acceleration of the indebtedness
before its express maturity,
and, in each case, the principal amount of the indebtedness,
together with the principal amount of any other indebtedness
under which there has been a payment failure or acceleration,
totals $5.0 million or more;
- failure by us or any of our subsidiaries to pay more than $5.0
million of final judgments, which are not paid, discharged or
stayed for a period of 60 days;
- certain events of bankruptcy or insolvency with respect to us
or any of our subsidiaries; and
- any other event of default that may be provided for the senior
debt securities of that series.
If an event of default under the senior indenture occurs and is
continuing, the trustee or holders of at least 25% of the total principal amount
of that series may declare the principal amount (or, if any of the senior debt
securities of that series are original issue discount senior debt securities,
the lesser portion of the principal,
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premium, if any, and interest on the senior debt securities of that series),
premium, if any, and accrued and unpaid interest to be due and payable
immediately.
In the case of an event of default arising from certain events of
bankruptcy or insolvency, all principal, premium, if any, and interest on the
outstanding senior debt securities will become due and payable without further
action or notice.
Holders of the senior debt securities may not enforce the senior
indenture or the senior debt securities except as provided in the senior
indenture. Subject to some limitations, holders of a majority (in principal
amount) of the outstanding senior debt securities of a series may direct the
trustee in its exercise of any trust or power for that series of senior debt
securities. Except in the case of a default in payment, the trustee may withhold
notice of a default if it determines that doing so is in the interest of the
holders.
If an event of default occurs as a result of the willful action (or
inaction) of us or any of our subsidiaries, the primary purpose of which was
avoiding the payment of any premium that we would have had to pay upon
redemption of those senior debt securities, then an equivalent premium also will
become immediately due and payable if the senior debt securities are repaid.
The holders of a majority in principal amount of the outstanding senior
debt securities of any series may waive an existing or past default or event of
default and their consequences. The holders must waive the rights in a written
notice to the trustee. This does not apply, however, to defaults in payment or
to covenants and other provisions that can only be modified or amended with the
consent of each holder in that series, as described below under "Modifications
and Amendments."
The holders of a majority in principal amount of the outstanding senior
debt securities of any series may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, subject to
some exceptions. If an event of default has occurred and is continuing, the
trustee is required, when exercising its power, to use the degree of care of a
prudent person in the conduct of his or her own affairs. Subject to these
provisions, the trustee is not required to exercise any of its rights or powers
under the senior indenture unless the trustee receives indemnity satisfactory to
it against any loss, liability or expense.
We are required to deliver to the trustee annually a statement
regarding our compliance with the senior indenture. If we become aware of any
event of default with respect to the senior debt securities or any mortgage,
indenture or instrument, we are required to notify the trustee of the event of
default and any action we have taken or plan to take in response to the event of
default.
MODIFICATIONS AND AMENDMENTS
Under the senior indenture, our rights and obligations and the rights
of the holders of senior debt securities may be changed. Certain changes require
the consent of the holders of not less than a majority in total principal amount
of the outstanding senior debt securities of all series affected by the
modification or amendment. Other changes, including the following, may not be
made without the consent of each holder of the outstanding senior debt
securities:
- changes to the stated maturity of the principal or any
installment of interest or principal;
- reductions in the principal, premium or interest due;
- reductions in the amount of principal of an original issue
discount senior debt security that will be due on acceleration
of maturity;
- changes to the place or currency for payments;
- impairment of the right to institute suit for the enforcement
of payment;
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- reduction of the percentage of holders necessary to modify the
senior indenture or waive our compliance with some of its
provisions; or
- modifications to any of these requirements.
DEFEASANCE
The senior indenture includes provisions that allow us to defease the
senior debt securities. This means that we may discharge our entire indebtedness
under any series of senior debt securities if we perform specific acts.
However, under the senior indenture, we are not allowed to discharge:
- the rights of holders of the senior debt securities to receive
payments for the principal, premium, if any, and interest on
the senior debt securities when the payments are due;
- our obligations with respect to:
(a) the issuance of temporary senior debt securities;
(b) the registration of senior debt securities;
(c) the replacement of mutilated, destroyed, lost or
stolen senior debt securities;
(d) the maintenance of an office or agency for payment;
and
(e) money for security payments that is held in trust;
- the rights, powers, trusts, duties and immunities of the
trustee, and our related obligations; and
- the defeasance provisions of the senior indenture.
We also may discharge our obligations to comply with some of the
covenants under the senior indenture. If we do this, our failure to perform as
required by those covenants, will no longer constitute an event of default with
respect to the senior debt securities of the series. Likewise, some of the other
events that would be events of default will no longer have that effect. However,
nonpayment, bankruptcy, receivership, rehabilitation and insolvency events will
continue to constitute events of default notwithstanding defeasance as to any of
the other covenants in the senior indenture.
To defease any series of senior debt securities under the senior
indenture:
- we must deposit with the trustee, in trust, sufficient cash in
U.S. dollars or government securities, or a combination of the
two, to make all payments on the series of senior debt
securities when due;
- we must have delivered to the trustee an opinion of counsel
confirming that holders of senior debt securities (a) will not
recognize income, gain or loss for federal income tax purposes
as a result of the defeasance and (b) will be subject to
federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if the
defeasance had not occurred;
- we must have delivered to the trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the
deposited funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar
laws;
- no event of default has occurred on the date of the deposit
or, in the case of events of default from bankruptcy or
insolvency events, at any time in the period ending on the
91st day after the date of deposit;
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- the defeasance will not result in a breach or violation of, or
constitute a default under, the senior indenture or any
material agreement or instrument to which we or any of our
subsidiaries is a party or by which we or any of our
subsidiaries is bound;
- we must deliver to the trustee an officers' certificate
stating that the deposit was not made with the intent of
preferring the holders of the senior debt securities over our
other creditors; and
- we must deliver to the trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent
applicable to the defeasance have been complied with.
ABOUT THE TRUSTEE
If an event of default occurs and is continuing, the trustee is
required to exercise its rights and powers under the senior indenture, including
its right to accelerate any series of senior debt securities or pursue other
remedies to collect principal and interest. In exercising its rights and powers,
the trustee is required to use the same degree of care and skill as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs. As noted above, the holders of a majority in principal amount
of the then outstanding senior debt securities of any series issued under the
indenture have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee. The trustee will
be under no obligation to exercise any of its rights or powers under the
indenture at the request of any of the holders unless they have offered the
trustee security and indemnity satisfactory to it.
The senior indenture contains a number of limitations on the right of
the trustee, if it becomes our creditor, to obtain payment of claims in various
types of cases, or to realize on listed types of property that it claims as
security or otherwise. The trustee will be permitted to engage in other
transactions. If it acquires any conflicting interest and if the senior debt
securities are in default, it must eliminate the conflict or resign. The trustee
may resign or be removed, effective upon the appointment of a successor trustee.
DESCRIPTION OF SUBORDINATED DEBT SECURITIES
This section summarizes the material terms and provisions of the
subordinated debt securities and provisions of the subordinated indenture.
Because this is only a summary, it does not contain all of the details found in
the full text of the subordinated debt securities and the subordinated
indenture. If you would like additional information, you should read the form of
subordinated indenture and the form of subordinated debt securities, which will
be filed or incorporated by reference as an exhibit to the registration
statement to which this prospectus relates.
The prospectus supplement relating to each series of subordinated debt
securities will specify any restrictive covenants applicable to that series.
Unless otherwise specified in the prospectus supplement, the subordinated debt
securities will not impose any financial or leverage restrictions on us and will
not require us to repurchase or redeem the subordinated debt securities in the
event of a takeover, recapitalization or similar restructuring.
DEFINITIONS USED IN THE SUBORDINATED INDENTURE
Set forth below are summaries of some of the defined terms used in the
subordinated indenture. Please refer to the subordinated indenture for full
definitions of these and other terms.
"JUNIOR SUBORDINATED DEBT" means our indebtedness under our
subordinated extendible notes and subordinated fixed-term notes issued pursuant
to an indenture dated July 1, 1994, as subsequently amended and restated by and
between us and Marine Midland Bank, as trustee.
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"SECURITIZATION TRANSACTION" means a public or private transfer of
installment sales contracts, loans, leases or other receivables by which we
directly or indirectly securitize a pool of specified installment sales
contracts, loans, leases or other receivables.
"SENIOR DEBT" means all our indebtedness, other than indebtedness
created or evidenced by an instrument that expressly provides that the
indebtedness is subordinated in right of payment to any of our other
indebtedness. Senior debt includes, without limitation, our guarantee of
indebtedness of any other person, including subordinated indebtedness of another
person, unless the guarantee is expressly subordinated to any of our other
indebtedness. Senior debt will not include our indebtedness under the
subordinated debt securities or the junior subordinated debt.
Senior debt also will not include:
- our indebtedness to any of our subsidiaries or other
affiliates; or
- indebtedness we incurred to purchase goods or services in the
ordinary course of business, except for goods or services
purchased with the proceeds of revolving credit borrowings
permitted by the subordinated indenture.
SUBORDINATION
The subordinated debt securities will be subordinate and subject in
right of payment, in the manner and to the extent described in the
subordinated indenture, to the prior payment in full of all senior debt. If
we make a distribution to our creditors, then the holders of senior debt will
first be entitled to receive payment in full in cash of all obligations due
on or to become due on or in respect of all senior debt, before the holders
of subordinated debt securities are entitled to receive any payment or
distribution. This will not apply to:
- securities of us or another corporation provided for by a plan
of reorganization or readjustment that are subordinated in
right of payment to the senior debt to substantially the same
extent as, or to a greater extent than, the subordinated debt
securities; and
- payments of assets from any defeasance trust that have been on
deposit for 90 consecutive days without the occurrence of
blocked payment on the related series of subordinated debt
securities.
Until the senior debt is paid in full, any payment to which the holders of
subordinated debt securities would be entitled will be paid or delivered by us,
or any other person making the payment or distribution, directly to the holders
of senior debt or someone acting on their behalf. We may not make any payments
on the account of the subordinated debt securities, or on account of the
purchase or redemption or other acquisition of the subordinated debt securities,
if there has occurred and is continuing any default in payment on any senior
debt.
If the trustee receives any payment prohibited by the subordination
provisions of the subordinated indenture, the payment will be held by the
trustee in trust for the benefit of, and will immediately be paid over upon
written request to, the holders of senior debt or someone acting on their behalf
for application to the payment of senior debt. This subordination will not
prevent the occurrence of any event of default in respect of the subordinated
debt securities.
Because of the subordination of the subordinated debt securities, if we
become insolvent, holders of senior debt may receive more, ratably, and holders
of the subordinated debt securities may receive less, ratably, than our other
creditors. There also may be an interruption of scheduled interest and principal
payments resulting from events of default on senior debt.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The subordinated indenture provides that we may, without the consent of
the holders of the subordinated debt securities, consolidate or merge with or
sell or lease all of our property to a corporation, partnership or trust
organized and validly existing under the laws of any domestic jurisdiction,
provided that:
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- any successor entity assumes by supplemental indenture our
obligations on the subordinated debt securities and under the
subordinated indenture; and
- after giving effect to the transaction, no event of default,
and no event which, after the passage of time, would become an
event of default, will have occurred and be continuing under
the subordinated indenture.
EVENTS OF DEFAULT UNDER THE SUBORDINATED INDENTURE
The following are events of default under the subordinated indenture:
- failure that continues for 30 days to pay interest when due;
- failure to pay the principal or any premium when due;
- failure to deposit any sinking fund payment when due;
- failure to perform, or breach of, any other covenant or
warranty (with some exceptions) in the subordinated indenture
or the subordinated debt securities continued for 60 days
after written notice;
- an event of default under any indenture or instrument under
which we or our subsidiaries have outstanding indebtedness of
$5.0 million or more, other than as part of a securitization
transaction, the maturity of which has been accelerated and
the acceleration has not been rescinded or annulled within 60
days;
- certain events of bankruptcy, insolvency or reorganization;
- the entry against us or any subsidiary of a final judgment,
judicial decree or order for the payment of money in excess of
$5.0 million that remains unpaid, unvacated, unbounded or
unstayed for a period of 60 days; or
- any other event of default that may be provided for the
subordinated debt securities of that series.
If an event of default occurs and is continuing, then the trustee or
the holders of at least 25% of the principal amount of the outstanding
subordinated debt securities of that series may declare the principal amount
(or, if any of the subordinated debt securities of that series are original
issue discount subordinated debt securities, the lesser portion of the principal
amount specified in the terms of that series) specified in the terms of that
series of all the subordinated debt securities of that series to be due and
payable immediately. To do this, the trustee or holders must give written notice
as provided in the subordinated indenture. However, in the case of certain
events of bankruptcy, insolvency or reorganization, the principal amount (or
specified portion) of the subordinated debt securities will become due and
payable immediately, without notice.
After a declaration of acceleration has been made, but before a
judgment or decree for payment of money has been obtained by the trustee, the
holders of a majority of the total principal amount of the outstanding
subordinated debt securities of that series may, under some circumstances,
rescind and annul the acceleration.
Subject to the duty of the trustee during default to act with the
required standard of care, the trustee will be under no obligation to exercise
any of its rights or powers under the subordinated indenture at the request or
direction of any of the holders of subordinated debt securities, unless the
holders have offered the trustee reasonable security or indemnity. Subject to
the provisions for the indemnification of the trustee and certain other
limitations, the holders of a majority of the total principal amount of the
outstanding subordinated debt securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee, or exercising any trust or power conferred on the
trustee with respect to the subordinated debt securities of that series.
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We are required to furnish to the trustee annually a statement
regarding our compliance with all the conditions and covenants under the
subordinated indenture.
MODIFICATION AND WAIVER
Under the subordinated indenture, our rights and obligations and the
rights of the holders of subordinated debt securities may be changed. Certain
changes require the consent of the holders of not less than a majority in total
principal amount of the outstanding subordinated debt securities of all series
affected by the modification or amendment. Other changes, including the
following changes, may not be made without the consent of each holder of the
outstanding subordinated debt securities affected:
- changes to the stated maturity of the principal or any
installment of interest or principal;
- reductions in the principal, premium or interest due;
- reductions in the amount of principal of an original issue
discount subordinated debt security due upon acceleration of
maturity;
- changes in the place or currency for payments;
- impairment of the right to institute suit for the enforcement
of payment;
- reduction in the percentage of holders necessary to modify or
waive compliance with some provisions of the subordinated
indenture; or
- modifications to any of these provisions, or to any of the
provisions relating to waivers of past defaults and defeasance
of certain obligations, except for some stated modifications.
The holders of not less than a majority in total principal amount of
the outstanding subordinated debt securities of each series may, on behalf of
the holders of all subordinated debt securities of that series, waive our
compliance with some of the restrictive provisions of the subordinated
indenture. The holders of not less than a majority in total principal amount of
the outstanding subordinated debt securities of each series may, on behalf of
the holders of all subordinated debt securities of that series, waive any past
default under the subordinated indenture for subordinated debt securities of
that series, except for a default:
- in payments, other than amounts due and payable solely upon
acceleration; or
- for a covenant or provision of the subordinated indenture that
cannot be modified or amended without the consent of the
holder of each outstanding subordinated debt security of the
series affected.
Additionally, the definition of "senior debt" in the subordinated indenture may
not be amended or modified in a manner adverse to the holders of the senior debt
without the consent of the holders of all senior debt affected.
DEFEASANCE
We may be discharged from all of our obligations with respect to the
subordinated debt securities of any series, other than our obligations:
- to register the transfer or exchange of the subordinated debt
securities;
- to replace destroyed, stolen, lost or mutilated subordinated
debt securities; and
- to maintain paying agencies and hold money for payment in
trust.
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This will occur on the 91st day after the date of deposit with the trustee of
money or U.S. government obligations, or a combination of the two, in an amount
sufficient to make all payments the subordinated debt securities when due.
Any discharge of our indebtedness under the subordinated debt
securities is also subject to other conditions, including the limitation that
the discharge may only occur if:
- the discharge will not cause the holders of the subordinated
debt securities to recognize income, gain or loss for federal
income tax purposes;
- the holders will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have
been the case had the deposit, defeasance and discharge not
occurred; and
- the discharge will not cause any of our outstanding
subordinated debt securities then listed on the New York Stock
Exchange or other securities exchange to be de-listed.
We may elect not to comply with any term, provision or condition of a
particular covenant relating to the subordinated debt securities of a series. To
do this, we must deposit with the trustee money, U.S. government obligations, or
a combination of the two, in an amount sufficient to make all payments on the
subordinated debt securities when due. This "covenant" defeasance is also
subject to other conditions, including:
- the delivery to the trustee of an opinion of counsel to the
effect that the deposit and related covenant defeasance will
not cause the holders of the subordinated debt securities to
recognize income, gain or loss for federal income tax
purposes; and
- that the holders will be subject to federal income tax on the
same amount, in the same manner and at the same times as would
have been the case had the deposit and defeasance not
occurred.
If we elect not to comply with some of the covenants under the
subordinated indenture and the stated maturity of the subordinated debt
securities is accelerated because of an event of default, then even though the
amount of money and U.S. government obligations on deposit with the trustee will
be sufficient to pay amounts due at the time of stated maturity, the amount may
not be sufficient to pay amounts due at the time of the acceleration.
In that case, we will remain liable for all the payments required.
ABOUT THE TRUSTEE
If an event of default occurs and is continuing, the trustee is
required to exercise its rights and powers under the subordinated indenture,
including its right to accelerate any series of subordinated debt securities or
pursue other remedies to collect principal and interest. In exercising its
rights and powers, the trustee is required to use the same degree of care and
skill as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs. As noted above, the holders of a majority in
principal amount of the then outstanding subordinated debt securities of any
series issued under the indenture have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
trustee. The trustee will be under no obligation to exercise any of its rights
or powers under the indenture at the request of any of the holders unless they
have offered the trustee security and indemnity satisfactory to it.
The subordinated indenture contains a number of limitations on the
right of the trustee, if it becomes our creditor, to obtain payment of claims in
various types of cases, or to realize on listed types of property that it claims
as security or otherwise. The trustee will be permitted to engage in other
transactions. If it acquires any conflicting interest and if the subordinated
debt securities are in default, it must eliminate the conflict or resign. The
trustee may resign or be removed, effective upon the appointment of a successor
trustee.
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DESCRIPTION OF PREFERRED STOCK
This section summarizes the general terms and provisions of the
preferred stock that may be offered by this prospectus. The prospectus
supplement will describe the specific terms of any series of preferred stock
offered under that prospectus supplement and any general terms outlined in this
section that will not apply to that series of preferred stock.
Because this is only a summary, it does not contain all of the details
found in the full text of the certificate of designation containing the rights
and preferences of the preferred stock. The certificate of designation will be
filed or incorporated by reference as an exhibit to the registration statement
to which this prospectus relates. For additional information, please read the
full text of the certificate of designation.
GENERAL
Under our articles of incorporation, as amended, we are authorized
without further shareholder action to issue shares of preferred stock, $.01 par
value, in one or more series. For shares of any series of preferred stock, our
board of directors may determine:
- the number of shares and their designation or title;
- rights as to dividends;
- whether and upon what terms the shares will be redeemable;
- the rights of holders upon the dissolution or distribution of
our assets;
- whether and upon what terms a sinking fund will be used to
purchase or redeem the shares;
- whether and upon what terms the shares may be converted;
- the voting rights, if any, that will apply; and
- any other preferences and relative, participating, optional or
other special rights, and qualifications, limitations or
restrictions of the series.
The preferred stock will, when issued, be fully paid and nonassessable.
It will not provide the holders with preemptive rights to subscribe for any
additional securities we may issue. The transfer agent and registrar for the
preferred stock will be specified in the prospectus supplement.
The preferred stock will have the dividend, liquidation, redemption,
voting and conversion rights described in this section unless the prospectus
supplement provides otherwise. You should read the prospectus supplement
relating to the particular series of the preferred stock being offered for
specific terms of that series, including:
- the title, stated value and liquidation preference of the
preferred stock and the number of shares offered;
- the initial public offering price of the preferred stock;
- the dividend rate or rates (or method of calculation), the
dividend periods, the dates on which dividends will be payable
and whether the dividends will be cumulative or noncumulative
and, if cumulative, the dates from which dividends will start
to cumulate;
- any redemption or sinking fund provisions;
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- whether, under what circumstances and in what manner the
preferred stock may be converted; and
- any additional dividend, liquidation, redemption, sinking fund
and other rights, preferences, privileges, limitations and
restrictions.
We may elect to offer depositary shares evidenced by depositary
receipts, each representing a fractional interest in a share of the particular
series of the preferred stock issued and deposited with a depositary.
DIVIDENDS
Subject to the preferential rights as to dividends of holders of other
series of our capital stock ranking prior to any series of the preferred stock,
the holders of each series of preferred stock will be entitled to receive cash
dividends, if declared by our board of directors or its duly authorized
committee, out of funds that we legally may use to pay dividends. The prospectus
supplement relating to a particular series of preferred stock will set forth the
dividend rates and dates. The rates may be fixed or variable or both. If
variable, the prospectus supplement will describe the formula used for
determining the dividend rate for each dividend period. We will pay dividends to
the holders of record as they appear on our stock books on the record dates
fixed by our board of directors or its duly authorized committee.
The prospectus supplement also will state whether the dividends on any
series of the preferred stock will be cumulative or noncumulative. If our board
of directors does not declare a dividend payable on a dividend payment date on
any noncumulative series of the preferred stock, then the holders of that series
will not be entitled to receive a dividend for that dividend period, and we will
not be obligated to pay the dividend for that dividend period, whether or not
the board of directors declares a dividend on that series on any subsequent
date.
Our board of directors will not declare or pay a dividend on any of our
stock ranking, as to dividends, equal with or junior to the preferred stock
unless full dividends on all series of preferred stock have been declared and
paid (or declared and sufficient money is set aside for payment). Until full
dividends have been paid (or declared and payment is set aside) on any of our
capital stock ranking equal with the preferred stock as to dividends:
- we will declare any dividends pro rata among the preferred
stock of each series offered under this prospectus and any
other preferred stock ranking equal with the preferred stock
offered under this prospectus (i.e., the dividends we declare
per share on each series of preferred stock will bear the same
relationship to each other that the full accrued dividends per
share on each series of the preferred stock bear to each
other);
- other than these pro rata dividends, we will not declare or
pay any dividends or make any distributions upon any security
ranking junior to or equal with the preferred stock offered
under this prospectus as to dividends or upon liquidation
(except dividends or distributions paid for with securities
ranking junior to the preferred stock as to dividends and upon
liquidation); and
- we will not redeem, purchase or otherwise acquire (or set
aside money for a sinking fund for) any securities ranking
junior to or equal with the preferred stock as to dividends or
upon liquidation (except by conversion into or exchange for
stock ranking junior to the preferred stock as to dividends
and upon liquidation).
We will not pay any interest or sum of money in lieu of interest with
respect to any dividend payment or payments on any series of the preferred stock
which have not been made when due.
REDEMPTION AND REPURCHASE
A series of the preferred stock may be redeemable, in whole or in part,
at our option, and may be subject to mandatory redemption pursuant to a sinking
fund or otherwise, or may be subject to repurchase at the option of the
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holders, as described in the prospectus supplement. Preferred stock that we
redeem will again become authorized but unissued shares of preferred stock that
we may issue in the future.
If a series of the preferred stock is subject to mandatory redemption,
the prospectus supplement will specify the number of shares that we will redeem
each year and the redemption price. If shares of preferred stock are redeemed,
we will pay all accrued and unpaid dividends on those shares to the redemption
date. The prospectus supplement also will specify whether the redemption price
will be payable in cash or other property. If the redemption price is payable
only from the net proceeds of the issuance of our capital stock, the terms of
the series of preferred stock may provide that if no capital stock has been
issued or if the net proceeds from any issuance are insufficient to pay the full
redemption price, then the applicable shares of the preferred stock
automatically and mandatorily will be converted into shares of another series of
capital stock pursuant to conversion provisions specified in the prospectus
supplement.
If fewer than all of the outstanding shares of any series of the
preferred stock are to be redeemed, our board of directors will determine the
number of shares to be redeemed. We will redeem the shares pro rata from the
holders of record in proportion to the number of shares held by them (with
adjustments to avoid redemption of fractional shares).
Even though the terms of a series of preferred stock may permit
redemption of the preferred stock in whole or in part, if any dividends,
including accumulated dividends, on that series are past due, we will not redeem
less than all of the shares of that series of preferred stock until all
dividends past due have been paid. However, we may purchase or acquire preferred
stock of the series pursuant to a purchase or exchange offer, so long as the
offer is made on the same terms to all holders of the series of preferred stock.
We will give notice of a redemption by mail to each record holder of
the shares to be redeemed between 30 and 60 days prior to the date fixed for
redemption. We will mail the notices to the holders' addresses as they appear on
our stock register. Each notice will state:
- the redemption date;
- the number of shares and series of the preferred stock to be
redeemed;
- the redemption price;
- the place or places where holders can surrender their
preferred stock certificates for payment of the redemption
price;
- that dividends on the shares to be redeemed will cease to
accrue on the redemption date; and
- the date upon which any conversion rights as to the shares, if
any, will terminate.
If we redeem fewer than all shares of any series of the preferred stock held by
any holder, we also will specify in the notice the number of shares to be
redeemed from the holder.
If we have given notice of the redemption and have provided the funds
for the payment of the redemption price, then beginning on the redemption date:
- the dividends on the shares of preferred stock called for
redemption will no longer accrue;
- those shares will no longer be considered outstanding; and
- the holders will no longer have any rights as shareholders
with respect to those shares except the right to receive the
redemption price.
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When the holder properly surrenders the redeemed shares, the redemption price
will be paid out of the funds we provided. If we redeem fewer than all of the
shares represented by any certificate, we will issue a new certificate
representing the unredeemed shares without cost to the holder.
CONVERSION OR EXCHANGE
If any series of preferred stock may be converted or exchanged into
shares of common stock, another series of preferred stock or debt securities,
the prospectus supplement will state the terms on which shares of that series
may be converted or exchanged.
RIGHTS UPON LIQUIDATION
Unless the prospectus supplement states otherwise, if we voluntarily or
involuntarily liquidate, dissolve or wind up our business, the holders of shares
of each series of the preferred stock, and any other preferred stock ranking
equal with that series of preferred stock under these circumstances, will be
entitled to receive out of our assets that are available for distribution:
- liquidation distributions in the amount stated in the
prospectus supplement; and
- all accrued and unpaid dividends (whether or not earned or
declared) for the current dividend period and, if the series
of preferred stock is cumulative, for all prior dividend
periods
before any distribution is made to holders of any securities ranking junior to
the series of preferred stock. However, this right will be subject to any
preferential rights of holders of our capital stock ranking prior to the series
of preferred stock under these circumstances.
Unless otherwise provided in the applicable prospectus supplement,
neither the sale of all of our assets nor our merger or consolidation with any
other corporation will be deemed to be a dissolution, liquidation or winding up
of our business. If, upon any voluntary or involuntary liquidation, dissolution
or winding up of our business, our assets that are available for distribution
are insufficient to pay in full all amounts due to the holders of securities
ranking equal with the series of the preferred stock, then we will make a pro
rata distribution to holders of our securities ranking equal with the preferred
stock of that series. After we pay the full amount of the liquidation
distribution to which holders of the series of preferred stock are entitled, the
holders will have no right or claim to any of our remaining assets.
VOTING RIGHTS
Unless otherwise provided in the prospectus supplement, the holders of
preferred stock will not be entitled to vote except as set forth below or as
otherwise required by the Minnesota Business Corporation Act.
If we issue shares of a series of preferred stock, each share will be
entitled to one vote on matters on which holders of the series are entitled to
vote. On matters on which holders of the series and holders of any other series
of preferred stock are entitled to vote as a single class, voting power of the
series will depend on the number of shares in the series, not the total stated
value, liquidation preference or initial offering price of the shares of the
series.
A series of the preferred stock also may have other voting rights, such
as upon the occurrence of some events or relative to the taking of some actions.
The prospectus supplement will describe any special voting rights relating to
the series of preferred stock.
As more fully described under "Description of Depositary Shares" below,
if we elect to provide for the issuance of depositary shares representing
fractional interests in a share of preferred stock, the holders of each
depositary share will be entitled to a fraction of a vote.
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DESCRIPTION OF DEPOSITARY SHARES
This section summarizes the general provisions of the depositary shares
represented by depositary receipts that may be offered by this prospectus,
including the related deposit agreement. The prospectus supplement will describe
the specific terms of the depositary shares offered under that prospectus
supplement and any general terms outlined in this section that will not apply to
those depositary shares. Because this is only a summary, it does not contain all
of the details found in the full text of the depositary receipts and the deposit
agreement. If you would like additional information, you should read the
applicable forms of depositary receipt and deposit agreement, which will be
filed or incorporated by reference as exhibits to the registration statement to
which this prospectus relates.
GENERAL
We may offer fractional interests in preferred stock, rather than full
shares of preferred stock. If we do so, we will provide for the issuance to the
public by a depositary of depositary receipts evidencing depositary shares. Each
depositary share will represent a fractional interest in a share of a particular
series of preferred stock.
The shares of any series of preferred stock underlying the depositary
shares will be deposited under a separate deposit agreement between us and a
bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50 million. The prospectus
supplement will set forth the name and address of the depositary. Subject to the
terms of the deposit agreement, each owner of a depositary share will have a
fractional interest in all the rights and preferences of the preferred stock
underlying the depositary share. Those rights include any dividend, voting,
redemption, conversion and liquidation rights.
While the final depositary receipts are being prepared, we may order
the depositary to issue temporary depositary receipts substantially identical to
the final depositary receipts, although not in final form. The holders of
temporary depositary receipts will be entitled to the same rights as if they
held the depositary receipts in final form. Holders of temporary depositary
receipts can exchange them for final depositary receipts at our expense.
WITHDRAWAL OF PREFERRED STOCK
If you surrender depositary receipts at the principal office of the
depositary you will be entitled to receive at that office the number of shares
of preferred stock and any money or other property then represented by the
depositary shares, unless the depositary shares have been called for redemption.
We will not, however, issue any fractional shares of preferred stock.
Accordingly, if you deliver depositary receipts for a number of depositary
shares that, when added together, represents more than a whole number of shares
of preferred stock, the depositary will issue to you a new depositary receipt
evidencing the excess number of depositary shares at the same time as you
receive your preferred stock. You will no longer be entitled to deposit the
shares of preferred stock you have withdrawn under the deposit agreement or to
receive depositary shares in exchange for those shares of preferred stock. There
may be no market for the withdrawn shares of preferred stock.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions received with respect to the preferred stock, less any taxes
required to be withheld, to the record holders of the depositary receipts in
proportion to the number of the depositary shares owned by each holder on the
relevant date. The depositary will distribute only the amount that can be
distributed without attributing to any holder a fraction of one cent. Any
balance will be added to the next sum to be distributed to holders of depositary
receipts.
If there is a distribution other than in cash, the depositary will
distribute property to the holders of depositary shares, unless the depositary
determines that it is not practical to make the distribution. If this occurs,
the depositary may, with our approval, sell the property and distribute the net
proceeds from the sale to the holders.
The deposit agreement will contain provisions relating to how any
subscription or similar rights offered by us to holders of the preferred stock
will be made available to the holders of depositary shares.
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REDEMPTION AND REPURCHASE OF DEPOSITED PREFERRED STOCK
If any series of preferred stock underlying the depositary shares is
subject to redemption, the depositary shares will be redeemed from the
redemption proceeds, in whole or in part, of the series of preferred stock held
by the depositary. The depositary will mail a notice of redemption between 30
and 60 days prior to the date fixed for redemption to the record holders of the
depositary receipts to be redeemed at their addresses appearing in the
depositary's records. The redemption price per depositary share will bear the
same relationship to the redemption price per share of preferred stock that the
depositary share bears to the underlying preferred stock. Whenever we redeem
preferred stock held by the depositary, the depositary will redeem, as of the
same redemption date, the number of depositary shares representing the preferred
stock redeemed. If less than all of the depositary shares are to be redeemed,
the depositary shares to be redeemed will be selected by lot or pro rata as we
may determine.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be outstanding. When the depositary shares are no
longer outstanding, the holders will have no rights other than the right to
receive money or other property that they were entitled to receive upon
redemption. The payments will be made when holders surrender their depositary
receipts to the depositary.
Depositary shares are not subject to repurchase at the option of the
holders. However, if shares of preferred stock underlying the depositary shares
become subject to repurchase at the option of the holders, the holders may
surrender their depositary receipts to the depositary and direct the depositary
to instruct us to repurchase the deposited preferred stock at the price
specified in the prospectus supplement. If we have sufficient funds available,
we will, upon receipt of the instructions, repurchase the requisite whole number
of shares of preferred stock from the depositary, which will, in turn,
repurchase the depositary receipts. However, holders of depositary receipts will
only be entitled to request the repurchase of a number of depositary shares that
represents in total one or more whole shares of the underlying preferred stock.
The repurchase price per depositary share will equal the repurchase price per
share of the underlying preferred stock multiplied by the fraction of that share
represented by one depositary share. If the depositary shares evidenced by any
depositary receipt are repurchased in part only, the depositary will issue one
or more new depositary receipts representing the depositary shares not
repurchased.
VOTING OF DEPOSITED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the
preferred stock are entitled to vote, the depositary will mail information about
the meeting to the record holders of the related depositary shares. Each record
holder of depositary shares on the record date (which will be the same date as
the record date for the holders of the related preferred stock) will be entitled
to instruct the depositary as to how the preferred stock underlying the holder's
depositary shares should be voted. The depositary will try, if practicable, to
vote the number of shares of preferred stock underlying the depositary shares
according to the instructions it receives. We will agree to take all action
requested and considered necessary by the depositary to enable it to vote the
preferred stock in that manner. The depositary will not vote any preferred stock
for which it does not receive specific instructions from the holders of the
depositary shares.
CONVERSION AND EXCHANGE OF DEPOSITED PREFERRED STOCK
If we provide for the exchange of the preferred stock underlying the
depositary shares, the depositary will exchange, as of the same exchange date,
that number of depositary shares representing the preferred stock to be
exchanged, so long as we have issued and deposited with the depositary the
securities for which the preferred stock is to be exchanged. The exchange rate
per depositary share will equal the exchange rate per share of the underlying
preferred stock multiplied by the fraction of that share represented by one
depositary share. If less than all of the depositary shares are exchanged, the
depositary shares to be exchanged will be selected by the depositary by lot or
pro rata or other equitable method, as we determine. If the depositary shares
evidenced by a depositary receipt are exchanged in part only, the depositary
will issue one or more new depositary receipts representing the depositary
shares not exchanged.
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Depositary shares may not be converted or exchanged for other
securities or property at the option of the holders. However, if shares if
preferred stock underlying the depositary shares are converted into or exchanged
for other securities at the option of the holders, the holders may surrender
their depositary receipts to the depositary and direct the depositary to
instruct us to convert or exchange the deposited preferred stock into the whole
number or principal amount of securities specified in the applicable prospectus
supplement. Upon receipt of instructions, we will cause the conversion or
exchange and deliver to the holders the whole number or principal amount of our
securities and cash in lieu of any fractional security. The exchange or
conversion rate per depositary share will equal the exchange or conversion rate
per share of the underlying preferred stock multiplied by the fraction of that
preferred share represented by one depositary share. If we convert or exchange
only some of the depositary shares evidenced by a depositary receipt, we will
issue a new depositary receipt evidencing any depositary shares not converted or
exchanged.
TAXATION
Owners of depositary shares will be treated for federal income tax
purposes as if they were owners of the preferred stock underlying the depositary
shares. Accordingly, for U.S. federal income tax purposes, they will have the
income and deductions to which they would be entitled if they were holders of
the preferred stock. In addition:
- no gain or loss will be recognized for U.S. federal income tax
purposes upon the withdrawal of preferred stock in exchange
for depositary shares;
- the tax basis of each preferred share to an exchanging owner
of depositary shares will, upon the exchange, be the same as
the total tax basis of the depositary shares exchanged for the
preferred stock; and
- the holding period for the preferred stock, in the hands of an
exchanging owner of depositary shares who held the depositary
shares as a capital asset at the time of the exchange, will
include the period during which the owner held the depositary
shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended by agreement between us and
the depositary. However, any amendment that materially and adversely alters the
rights of the existing holders of depositary shares will not be effective unless
the amendment has been approved by the record holders of at least a majority of
the depositary shares. A deposit agreement may be terminated only if all related
outstanding depositary shares have been redeemed or there has been a final
distribution on the underlying preferred stock in connection with our
liquidation, dissolution or winding up, and the distribution has been
distributed to the holders of the related depositary shares.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. We will pay
charges of the depositary for the initial deposit of the preferred stock and any
redemption of the preferred stock. Holders of depositary receipts will pay
transfer and other taxes and governmental charges and any other charges that are
stated in the deposit agreement to be their responsibility.
MISCELLANEOUS
The depositary will forward to the holders of depositary shares all
reports and communications from us that are delivered to the depositary and that
we are required to furnish to the holders of the underlying preferred stock.
Neither we nor the depositary will be liable if the depositary is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the deposit agreement. Our obligations and the
depositary's obligations under the deposit agreement will be limited to the
performance in good faith of our respective duties under the deposit agreement.
Neither we nor the depositary will be obligated to prosecute or
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defend any legal proceeding connected with any depositary shares or preferred
stock unless satisfactory indemnity is furnished. We and the depositary may rely
upon written advice of counsel or accountants, or upon information provided by
persons presenting preferred stock for deposit, holders of depositary shares or
other persons believed to be competent, and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering notice to us. We
also may at any time remove the depositary. Resignations or removals will take
effect upon the appointment of a successor depositary and its acceptance of the
appointment. The successor depositary must be appointed within 60 days after
delivery to us of notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50 million.
DESCRIPTION OF COMMON STOCK
GENERAL
As of June 30, 1999, 39,260,938 shares of our common stock were
outstanding. 50,835,688 undesignated shares, $.01 par value, remain
authorized and unissued. We may issue these undesignated shares as common
stock or as another class (including preferred stock) or series and with
whatever rights and preferences may be determined by our board of directors.
As of June 30, 1999, 9,903,374 of the authorized, unissued shares had been
reserved for issuance as common stock upon the exercise of stock options,
warrants or other rights granted.
Subject to the prior rights of any class or series of preferred stock
then outstanding, holders of common stock are entitled to receive dividends
declared by our board of directors out of funds legally available for the
payment of dividends. Subject to any rights of any outstanding preferred stock,
all voting rights are vested in the holders of common stock. Each share of
common stock is entitled to one vote. Subject to the prior rights of any class
or series of preferred stock then outstanding, in the event of our liquidation,
dissolution or winding up, holders of shares of common stock are entitled to
receive pro rata any assets we may distribute to stockholders. Holders of common
stock do not have any preemptive right to subscribe for additional securities
that we issue. The outstanding shares of common stock are fully paid and
nonassessable. The transfer agent and registrar for the common stock is Norwest
Bank Minnesota, National Association, South St. Paul, Minnesota.
SHAREHOLDER RIGHTS PLAN ("POISON PILL")
Each share of our common stock has one preferred stock purchase right
attached to it. Each whole purchase right entitles the holder to buy one
one-hundredth of a share of our Class A preferred stock at an initial per share
price of $90, subject to adjustment. Subject to some exceptions, the purchase
rights become exercisable 10 days after a person or group (a) acquires
beneficial ownership of 20% or more of our outstanding common stock, or (b)
announces a tender or exchange offer for 20% or more of our common stock. If the
purchase rights become exercisable, a holder generally will be entitled to
acquire common stock having a value equal to twice the exercise price of the
purchase right. If we are acquired in a merger or other business combination
transaction, or if 50% or more of our assets or earning power is sold, mortgaged
or transferred, each purchase right will entitle its holder to purchase, at the
purchase right's exercise price, that number of shares of the acquiring
company's common stock having a market value of twice the purchase right's
exercise price. Until a purchase right is exercised, the holder will not have
any rights as a shareholder, including the right to vote or receive dividends.
At any time after the purchase rights become exercisable, our board of
directors may exchange them, in whole or in part, at an exchange ratio of one
share of common stock per purchase right, subject to adjustment. In addition,
after the acquisition by a person of 20% or more of our outstanding common stock
but before the tenth day following the acquisition, our board of directors will
be entitled to redeem the purchase rights, at $.01 per right, upon approval of a
majority of the "continuing directors," as defined. The purchase rights will
expire at the close of business on October 28, 2006, if not previously redeemed
or exercised.
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The purchase rights may have an anti-takeover effect. They will cause
substantial dilution to any person or group that attempts to acquire us unless
the offer is conditional on a substantial number of purchase rights being
acquired. However, the purchase rights should not affect any prospective offeror
willing to make an offer that our board of directors determines is at an
equitable price and is otherwise in our and our shareholders' best interests.
The purchase rights also should not interfere with any merger or other business
combination approved by our board of directors because the board of directors
may redeem the rights at any time before the tenth day following an acquisition
by a person or group of 20% or more of our outstanding common stock.
This summary of some terms of the purchase rights is not complete. If
you would like additional information, you should read the full text of the
related rights agreement, which has been incorporated by reference as an exhibit
to the registration statement to which this prospectus relates.
MINNESOTA ANTI-TAKEOVER LAWS
We are governed by the provisions of Sections 302A.671, 302A.673 and
302A.675 of the Minnesota Business Corporation Act These provisions may
discourage a negotiated acquisition or unsolicited takeover of us and deprive
our shareholders of an opportunity to sell their shares at a premium over the
market price.
In general, Section 302A.671 provides that a corporation's shares
acquired in a control share acquisition have no voting rights unless voting
rights are approved in a prescribed manner. A "control share acquisition" is a
direct or indirect acquisition of beneficial ownership of shares that would,
when added to all other shares beneficially owned by the acquiring person,
entitle the acquiring person to have voting power of 20% or more in the election
of directors.
In general, Section 302A.673 prohibits a public Minnesota corporation
from engaging in a business combination with an interested shareholder for a
period of four years after the date of the transaction in which the person
became an interested shareholder, unless the business combination is approved in
a prescribed manner. The term "business combination" includes mergers, asset
sales and other transactions resulting in a financial benefit to the interested
shareholder. An "interested shareholder" is a person who is the beneficial
owner, directly or indirectly, of 10% or more of a corporation's voting stock,
or who is an affiliate or associate of the corporation, and who, at any time
within four years before the date in question, was the beneficial owner,
directly or indirectly, of 10% or more of the corporation's voting stock.
Section 302A.673 does not apply if a committee of our board of directors
consisting of all of our disinterested directors (excluding our current and
former officers) approves the proposed transaction or the interested
shareholder's acquisition of shares before the interested shareholder becomes an
interested shareholder.
If a tender offer is made for our stock, Section 302A.675 of the
Minnesota Business Corporation Act precludes the offeror from acquiring
additional shares of stock (including in acquisitions pursuant to mergers,
consolidations or statutory share exchanges) within two years following the
completion of the tender offer, unless shareholders selling their shares in the
later acquisition are given the opportunity to sell their shares on terms that
are substantially the same as those contained in the earlier tender offer.
Section 302A.675 does not apply if a committee of our board of directors
consisting of all of our disinterested directors (excluding our current and
former officers) approves the proposed acquisition before any shares are
acquired pursuant to the earlier tender offer.
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DESCRIPTION OF SECURITIES WARRANTS
We may issue warrants for the purchase of debt securities, preferred
stock or common stock. This section summarizes the general terms and provisions
of the securities warrants, warrant agreements and warrant certificates. Because
this is only a summary, it does not contain all of the details found in the full
text of the warrant agreements and the warrant certificates. If you would like
additional information, you should read the applicable form of warrant agreement
and form of warrant certificate, which will be filed or incorporated by
reference as exhibits to the registration statement to which this prospectus
relates.
We may issue securities warrants alone or together with other
securities offered by the prospectus supplement. Securities warrants may be
attached to or separate from those securities. Each series of securities
warrants will be issued under a separate warrant agreement between us and a bank
or trust company, as warrant agent, as described in the prospectus supplement.
The warrant agent will act solely as our agent in connection with the securities
warrants and will not act as an agent or trustee for any holders or beneficial
owners of the securities warrants.
GENERAL
If we offer securities warrants, the applicable prospectus supplement
will describe the terms of the warrants. If securities warrants for the purchase
of debt securities are offered, the prospectus supplement will describe the
terms of those securities warrants, including the following, if applicable:
- the offering price;
- the currencies in which the securities warrants will be
offered;
- the designation, total principal amount, currencies,
denominations and terms of the series of debt securities that
may be purchased upon exercise of the securities warrants;
- the designation and terms of any series of securities with
which the securities warrants are being offered, and the
number of securities warrants offered with each security;
- the date on and after which the holder of the securities
warrants can transfer them separately from the related series
of securities;
- the principal amount of the series of debt securities that may
be purchased if a holder exercises the securities warrants and
the price at which and currencies in which the principal
amount may be purchased upon exercise;
- the date on which the right to exercise the securities
warrants begins and expires;
- whether the securities warrants will be issued in registered
or bearer form;
- a discussion of material U.S. federal income tax consequences;
and
- any other terms of the securities warrants.
If we offer securities warrants for the purchase of preferred stock or
common stock, the prospectus supplement will set forth the specific terms and
provisions of those securities warrants, including the following if applicable:
- the offering price;
- the total number of shares that may be purchased if all of the
holders exercise the securities warrants and, in the case of
securities warrants for preferred stock, the designation,
total number
35
<PAGE>
and terms of the series of preferred stock that can be
purchased upon exercise of the securities warrants;
- the designation and terms of the series of securities with
which the securities warrants are being offered, and the
number of securities warrants being offered with each
security;
- the date on and after which the holder of the securities
warrants can transfer them separately from the related series
of securities;
- the number of shares of preferred stock or common stock that
may be purchased if a holder exercises any one securities
warrant and the price at which the preferred stock or common
stock may be purchased upon exercise;
- the date on which the right to exercise the securities
warrants begins and expires;
- a discussion of any material U.S. federal income tax
consequences; and
- any other terms of the securities warrants.
Securities warrants for the purchase of preferred stock or common stock will be
offered and exercisable for U.S. dollars only and will be in registered form
only.
A holder of warrant certificates may:
- exchange them for new warrant certificates of different
denominations;
- present them for registration of transfer, if they are in
registered form; and
- exercise them at the corporate trust office of the warrant
agent or any other office indicated in the prospectus
supplement.
Until any securities warrants to purchase debt securities are exercised, holders
of the securities warrants will not have any of the rights of holders of debt
securities, including any right to receive payments of principal, premium or
interest on the underlying debt securities or to enforce covenants in the
applicable indenture. Until any securities warrants to purchase preferred stock
or common stock are exercised, holders of the securities warrants will not have
any rights of holders of the underlying preferred stock or common stock,
including any right to receive payments of dividends or to exercise any voting
rights.
EXERCISE OF SECURITIES WARRANTS
Each holder of a securities warrant is entitled to purchase the
principal amount of debt securities or number of shares of preferred stock or
common stock, as the case may be, at the exercise price described in the
prospectus supplement. After the close of business on the day when the right to
exercise terminates (or a later date if we extend the time for exercise),
unexercised securities warrants will become void.
Holders of securities warrants may exercise them by:
- delivering to the warrant agent the payment required to
purchase the underlying securities, as stated in the
applicable prospectus supplement;
- properly completing and signing the reverse side of their
warrant certificate(s); and
- delivering their warrant certificate(s) to the warrant agent
within the time specified by the prospectus supplement.
36
<PAGE>
If you comply with the procedures described above, your securities warrants will
be considered to have been exercised when we receive payment of the exercise
price. As soon as practicable after you have completed these procedures, we will
issue and deliver to you the debt securities, preferred stock or common stock,
as the case may be, that you purchased upon exercise. If you exercise fewer than
all of the securities warrants represented by a warrant certificate we will
issue to you a new warrant certificate for the unexercised amount of securities
warrants.
AMENDMENTS AND SUPPLEMENTS TO WARRANT AGREEMENTS
We may amend or supplement a warrant agreement without the consent of
the holders of the securities warrants if the changes are not inconsistent with
the provisions of the securities warrants and do not adversely affect the
interests of the holders.
COMMON STOCK WARRANT ADJUSTMENTS
The exercise price of, and the number of shares of common stock covered
by, a common stock warrant will be adjusted in the manner set forth in the
applicable prospectus supplement if certain events occur, including:
- if we issue capital stock as a dividend or distribution on the
common stock;
- if we subdivide or combine the common stock;
- if we issue rights or warrants to all holders of common stock
entitling them (within the period expiring 45 days after the
record date for determining the stockholders entitled to
receive the rights or warrants) to subscribe for or purchase
common stock at less than the current market price, as defined
in the warrant agreement; or
- if we distribute to all holders of common stock evidences of
our indebtedness or our assets (excluding some cash dividends
and distributions described below) or rights or warrants
(excluding those referred to above).
If we distribute any rights or warrants to acquire capital stock, as described
above, pursuant to which separate certificates representing the rights will be
distributed after the initial distribution of the rights, the subsequent
distribution will be considered to be the actual distribution. However, instead
of adjusting the exercise price of and the number of shares of common stock
covered by a common stock warrant upon a distribution of separate certificates
representing the right to acquire capital stock, we may make arrangements so
that:
- each holder of a common stock warrant who exercises the
warrant, or any portion of it, before the record date for the
distribution of separate certificates will be entitled to
receive shares of common stock issued with the rights; and
- each holder of a common stock warrant who exercises the
warrant, or any portion of it, after the record date but
before the date the rights expire or are redeemed or
terminated will be entitled to receive, in addition to the
shares of common stock underlying the warrant, the same number
of rights as would the holder of the number of shares of
common stock to which the warrant holder would have been
entitled if he or she exercised the warrant immediately before
the record date for the distribution.
Common stock owned by or held on our account or that of any majority-owned
subsidiary will not be considered to be outstanding for the purpose of any
adjustment.
The exercise price and number of shares of common stock underlying a
common stock warrant will not be adjusted if cash dividends or distributions are
made regularly or paid from retained earnings. An adjustment will not be
required unless it results in a change of 1% or more of the exercise price. Any
required adjustment that is not made will be carried forward and taken into
account in any subsequent adjustment. Moreover, any adjustment that is not made
at the time of the event requiring the adjustment must be made no later than
three years after the
37
<PAGE>
occurrence of the event. Except as stated above, the exercise price and number
of shares of common stock underlying a common stock warrant will not be adjusted
for the issuance of common stock or securities convertible into or exchangeable
for common stock, or securities carrying the right to purchase any of the
foregoing.
If one of the following occurs:
- a reclassification or change of the common stock, other than
changes in par value;
- a consolidation or merger involving us except where we are the
continuing corporation and reclassification or change of the
common stock is involved; or
- a sale or conveyance to another corporation of all or
substantially all of our property and assets;
then the holders of the common stock warrants will be entitled to convert their
common stock warrants into the kind and amount of securities or property that
they would have received upon the reclassification, change, consolidation,
merger, sale or conveyance, had the common stock warrants been exercised
immediately before the reclassification, change, consolidation, merger, sale or
conveyance.
PLAN OF DISTRIBUTION
We may offer and sell the securities offered by this prospectus in any
of three ways:
- through agents;
- through underwriters or dealers; or
- directly to one or more purchasers.
The securities may be distributed from time to time in one or more transactions
at negotiated prices, at a fixed price (that is subject to change), at market
prices prevailing at the time of sale or at prices related to the prevailing
market prices.
The applicable prospectus supplement will set forth the specific terms
of the offering of securities, including:
- the securities offered;
- the price of the securities;
- the proceeds to us from the sale of the securities;
- the names of the securities exchanges, if any, on which the
securities are listed;
- the name of underwriters or agents;
- any underwriting discounts, agency fees or other compensation
to underwriters or agents; and
- any discounts or concessions allowed or paid to dealers.
We may authorize underwriters, dealers and agents to solicit offers
from specified institutions to purchase the securities from us at the public
offering price listed in the applicable prospectus supplement. These sales may
be made under "delayed delivery contracts" that provide for payment and delivery
on a specified future date. Any contracts like this will be subject to the
conditions listed in the prospectus supplement. The prospectus supplement also
will state the commission to be paid to underwriters, dealers and agents who
solicit these contracts.
38
<PAGE>
Any underwriter, dealer or agent who participates in the distribution
of an offering of securities may be considered by the SEC to be an underwriter
under the Securities Act. Any discounts or commissions received by an
underwriter, dealer or agent on the sale or resale of securities may be
considered by the SEC to be underwriting discounts and commissions under the
Securities Act. Under agreements with us, underwriters, dealers and agents may
be entitled to indemnification by us against some civil liabilities, including
liabilities under the Securities Act. Underwriters, dealers and agents also may
be entitled to contributions for any payments the underwriters, dealers or
agents are required to make with respect to some civil liabilities, including
liabilities under the Securities Act. Underwriters and agents and their
affiliates are permitted to be customers of, engage in transactions with, or
perform services for us and our affiliates in the ordinary course of business.
Unless otherwise indicated in the applicable prospectus supplement, all
securities offered by this prospectus, other than the common stock, will be new
issues of securities with no established trading market. Any underwriters to
whom we sell securities for public offering and sale may make a market in the
securities. However, these underwriters will not be obligated to make a market
in the securities and may discontinue any market-making at any time without
notice. We cannot assure you that the trading market for any of the securities
will be or remain liquid at any time.
EXPERTS
Our consolidated financial statements for the year ended December 31,
1998, have been audited by Ernst & Young LLP, independent auditors, as stated in
their report appearing with the financial statements in our Annual Report on
Form 10-K for the year ended December 31, 1998. The financial statements, and
the report of Ernst & Young, are incorporated in this prospectus by reference to
our Annual Report on Form 10-K for the year ended December 31, 1998, in reliance
upon the report given upon the authority of Ernst & Young as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the securities will be passed upon for us by Dorsey &
Whitney LLP, Minneapolis, Minnesota.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain information with
the SEC, including annual, quarterly and special reports, proxy statements and
other information. You can read and copy these documents at the public reference
facility maintained by the SEC at Judiciary Plaza, 450 Fifth Street, NW, Room
1024, Washington, DC 20549. You can also copy and inspect such reports, proxy
statements and other information at the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. SEC filings are also available to the public on the
SEC's web site at http://www.sec.gov. Our SEC filings are also available at the
offices of the New York Stock Exchange. For further information on obtaining
copies of our public filings at the NYSE, you should call 1-212-656-5060.
This prospectus and the accompanying prospectus supplements are part
of a registration statement we filed with the SEC (Registration No. 333- ).
The registration statement and the exhibits filed with it contain additional
information about us and the securities offered under this prospectus. The
registration statement and the exhibits filed with it are also available
at the SEC locations listed above and on the SEC's web site.
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information that we
39
<PAGE>
incorporate by reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and supersede
the information in this prospectus and any accompanying prospectus supplement.
We incorporate by reference the documents listed below and any future filings
made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 prior to the termination of the offering of the
securities offered under this registration statement.
a. Annual Report on Form 10-K for the year ended December 31,
1998, filed March 24, 1999;
b. Current Report on Form 8-K dated March 5, 1999, filed March 8,
1999;
c. Quarterly Report on Form 10-Q for the quarter ended March 31,
1999, filed May 14, 1999;
d. Current Report on Form 8-K dated May 21, 1999, filed May 21,
1999;
e. Amendment to Quarterly Report on Form 10-Q/A-1 for the
quarter ended March 31, 1999, filed July 28, 1999;
f. Quarterly Report on Form 10-Q for the quarter ended June 30,
1999, filed July 28, 1999;
g. the description of our common stock contained in our
registration statement on Form 8-A filed March 22, 1996; and
h. the description of our Rights Agreement contained on our
registration statement on Form 8-A filed on November 7, 1996,
as amended by those amendments to our registration statement
on Form 8-A filed January 20, 1998, and October 8, 1998.
You may request a free copy of any of the above filings by writing or
calling:
Arcadia Financial Ltd.
Arcadia Financial Center
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Secretary
(612) 942-9880
40
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The table below sets forth expenses in connection with the issuance and
distribution of the securities registered by this prospectus. All fees and
expenses other than the SEC registration fee are estimated. The expenses listed
will be paid by Arcadia Financial.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 26,708
Accounting Fees and Expenses...................................... 10,000
Legal Fees and Expenses........................................... 10,000
Printing Expenses................................................. 20,000
Blue Sky and legal investment fees and related expenses 2,000
Miscellaneous (including listing fees, if applicable) 1,292
--------
Total.................................................... $ 70,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Business Corporation Act requires
corporations to indemnify any person who is made or threatened to be made a
party to any proceeding, by reason of the person's former or present official
capacity, against judgments, penalties, fines, settlements and reasonable
expenses, including attorneys' fees and disbursements, incurred by the person in
connection with the proceeding if certain statutory standards are met.
"Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
this right of indemnification, and reference is made to Section 302A.521 for a
complete statement of indemnification rights. The general effect of Minnesota
Statutes Section 302A.521 is to require Arcadia Financial to reimburse (or pay
on behalf of) our directors and officers with respect to any personal liability
that may be imposed on them for certain acts performed in their capacity as our
directors and officers, except where they have not acted in good faith.
Article 6 of our restated bylaws, as amended, provides that our
directors, officers, employees and agents, past or present, and persons serving
as directors, officers, employees and agents of another corporation or entity at
Arcadia Financial's request, shall be indemnified by Arcadia Financial for such
expenses and liabilities, in such manner, under such circumstances, and to such
extent as permitted under Minnesota Statutes Section 302A.521.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
1.1 Underwriting Agreement (to be filed subsequently by Form 8-K).
3.1 Restated Articles of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998).
3.2 Restated Bylaws of the Registrant, as amended (incorporated by
reference to Exhibit 3.2 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998).
4.1 Rights Agreement dated as of November 1, 1996, between the
Registrant and Norwest Bank Minnesota, National Association,
as Rights Agent (incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A filed November
7, 1996).
41
<PAGE>
4.2 Amendment No. 1 to Rights Agreement, dated January 16, 1998,
to Rights Agreement, dated as of November 1, 1996 between
Arcadia Financial Ltd. and Norwest Bank Minnesota, N.A.
(incorporated by reference to Exhibit 4.1 to the Registrant's
Current Report on Form 8-K dated January 8, 1998 and filed
January 20, 1998).
4.3 Amendment No. 2 to Rights Agreement, dated October 5, 1998, to
Right Agreement, dated as of November 1, 1996 between the
Registrant and Norwest Bank Minnesota, National Association,
as Rights Agent (incorporated by reference to Exhibit 4.1 to
the Registrant's Current Report on Form 8-K dated September
30, 1998 and filed October 8, 1998).
4.4 Indenture dated as of March 12, 1997, between the Registrant
and Norwest Bank Minnesota, National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to the Registrant's
Current Report on Form 8-K dated March 12, 1997 and filed
March 18, 1997).
4.5 Form of Indenture relating to Subordinated Debt Securities (to
be filed by amendment).
4.6 Form of Common Stock Warrant Agreement (to be filed by
amendment).
4.7 Form of Preferred Stock Warrant Agreement (to be filed by
amendment).
4.8 Form of Debt Securities Warrant Agreement (to be filed by
amendment).
4.9 Form of Deposit Agreement (to be filed by amendment).
5.1 Opinion and consent of Dorsey & Whitney LLP regarding the
legality of the securities (to be filed by amendment).
12.1 Computation of Ratio of Earnings to Fixed Charges (filed
herewith).
12.2 Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends (filed herewith).
23.1 Consent of Dorsey & Whitney LLP (to be filed by amendment).
23.2 Consent of Ernst & Young LLP (filed herewith).
24.1 Power of Attorney (filed herewith).
25.1 Statement of Eligibility of Norwest Bank Minnesota, National
Association, with respect to the Senior Debt Securities (filed
herewith).
25.2 Statement of Eligibility of trustee with respect to the
Subordinated Debt Securities (to be filed subsequently by Form
8-K).
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the
42
<PAGE>
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
SEC by the registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in the registration statement.
(2) That, for the purpose 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) 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 the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance on Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and
(2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
43
<PAGE>
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act of 1939, as amended, in
accordance with the rules and regulations prescribed by the SEC under section
305(b)(2) thereof.
44
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis, State of Minnesota, on August ___, 1999.
ARCADIA FINANCIAL LTD.
/s/ Richard A. Greenawalt
-----------------------------
Richard A. Greenawalt
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
------ ------- ------
<S> <C> <C>
/s/ Richard A. Greenawalt Chief Executive Officer and Director August ___, 1999
- -------------------------------------- (Principal Executive Officer)
Richard A. Greenawalt
/s/ Robert A. Marshall President, Chief Operating Officer August ___, 1999
- -------------------------------------- and Director
Robert A. Marshall
/s/ John A. Witham Executive Vice President and August ___, 1999
- -------------------------------------- Chief Financial Officer
John A. Witham (Principal Financial Officer)
/s/ Brian S. Anderson Senior Vice President, August ___, 1999
- -------------------------------------- Corporate Controller and
Brian S. Anderson Assistant Secretary
(Principal Accounting Officer)
* Chairman of the Board August ___, 1999
- --------------------------------------
Warren Kantor
* Director August ___, 1999
- --------------------------------------
Scott H. Anderson
* Director August ___, 1999
- --------------------------------------
Robert J. Cresci
* Director August ___, 1999
- --------------------------------------
James L. Davis
*By: /s/ Richard A. Greenawalt August ___, 1999
----------------------------------
</TABLE>
Attorney-in-fact**
- ---------------
** Executed on behalf of the indicated persons by Richard A. Greenawalt,
pursuant to the Power of Attorney included as Exhibit 24.1 to this
registration statement.
45
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- --------------
<S> <C>
1.1 Underwriting Agreement (to be filed subsequently by Form 8-K).
3.1 Restated Articles of Incorporation of the Registrant, as
amended (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998).
3.2 Restated Bylaws of the Registrant, as amended (incorporated by
reference to Exhibit 3.2 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998).
4.1 Rights Agreement dated as of November 1, 1996, between the
Registrant and Norwest Bank Minnesota, National Association,
as Rights Agent (incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A filed November
7, 1996).
4.2 Amendment No. 1 to Rights Agreement, dated January 16, 1998,
to Rights Agreement, dated as of November 1, 1996 between
Arcadia Financial Ltd. and Norwest Bank Minnesota, N.A.
(incorporated by reference to Exhibit 4.1 to the Registrant's
Current Report on Form 8-K dated January 8, 1998 and filed
January 20, 1998).
4.3 Amendment No. 2 to Rights Agreement, dated October 5, 1998, to
Right Agreement, dated as of November 1, 1996 between the
Registrant and Norwest Bank Minnesota, National Association,
as Rights Agent (incorporated by reference to Exhibit 4.1 to
the Registrant's Current Report on Form 8-K dated September
30, 1998 and filed October 8, 1998).
4.4 Indenture dated as of March 12, 1997, between the Registrant
and Norwest Bank Minnesota, National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to the Registrant's
Current Report on Form 8-K dated March 12, 1997 and filed
March 18, 1997).
4.5 Form of Indenture relating to Subordinated Debt Securities (to
be filed by amendment).
4.6 Form of Common Stock Warrant Agreement (to be filed by
amendment).
4.7 Form of Preferred Stock Warrant Agreement (to be filed by
amendment).
4.8 Form of Debt Securities Warrant Agreement (to be filed by
amendment).
4.9 Form of Deposit Agreement (to be filed by amendment).
5.1 Opinion and consent of Dorsey & Whitney LLP regarding the
legality of the securities (to be filed by amendment).
12.1 Computation of Ratio of Earnings to Fixed Charges (filed
herewith).
12.2 Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends (filed herewith).
23.1 Consent of Dorsey & Whitney LLP (to be filed by amendment).
23.2 Consent of Ernst & Young LLP (filed herewith).
24.1 Power of Attorney (filed herewith).
46
<PAGE>
25.1 Statement of Eligibility of Norwest Bank Minnesota, National
Association, with respect to the Senior Debt Securities (filed
herewith).
25.2 Statement of Eligibility of trustee with respect to the
Subordinated Debt Securities (to be filed subsequently by Form
8-K).
</TABLE>
47
<PAGE>
EXHIBIT 12.1
ARCADIA FINANCIAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1998 1997 1996 1995 1994
---------- ----------- ----------------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTATION OF INCOME:
Income (loss) before income taxes
and extraordinary item.................. $ 26,731 $(105,748) $(92,476) $ (69,663) $ 81,196 $ 41,383 $ 4,331
Capitalized interest..................... -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- --------- --------
Income before income taxes and
capitalized interest.................... 26,731 (105,748) (92,476) (69,663) 81,196 41,383 4,331
Fixed charges............................ 28,115 26,807 53,898 43,535 26,366 17,784 5,700
---------- ---------- ---------- ---------- ---------- --------- --------
Total income (loss) for computation...... $ 54,846 $ (78,941) $(38,578) $ (26,128) $ 107,562 $ 59,167 $ 10,031
---------- ---------- ---------- ---------- ---------- --------- --------
---------- ---------- ---------- ---------- ---------- --------- --------
COMPUTATION OF FIXED CHARGES:
Portion of rentals deemed representative
of interest (a)......................... $ 992 $ 1,114 $ 2,226 $ 2,319 $ 1,173 $ 614 $ 284
INTEREST:
Interest on long-term debt............... 23,081 23,081 46,163 33,281 21,153 15,529 4,885
Interest other than funding of purchase
of auto loans........................... 2,829 1,399 3,083 2,968 2,836 945 116
Amortization of debt placement........... 1,213 1,213 2,426 4,967 1,204 696 415
Capitalized interest..................... -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- --------- --------
Total fixed charges...................... $ 28,115 $ 26,807 53,898 $ 43,535 $ 26,366 $ 17,784 $ 5,700
---------- ---------- ---------- ---------- ---------- --------- --------
---------- ---------- ---------- ---------- ---------- --------- --------
Ratio of earnings to fixed charges....... 1.95x -- -- -- 4.08x 3.33x 1.76x
Deficiency in earnings to fixed charges.. -- 105,748 92,476 69,633 -- -- --
ADDITIONAL INFORMATION:
Net rental expense....................... $ 2,976 $ 3,341 6,678 $ 6,957 $ 3,520 $ 1,842 $ 861
---------- ---------- ---------- ---------- ---------- --------- --------
---------- ---------- ---------- ---------- ---------- --------- --------
</TABLE>
- -----------
(a) Portion of rental deemed representative of interest equals one third of
rental expense.
<PAGE>
EXHIBIT 12.2
ARCADIA FINANCIAL LTD.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------
(Dollars in thousands) 1999 1998 1998 1997 1996 1995 1994
---------- ---------- ----------------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTATION OF INCOME:
Income (loss) before income taxes
and extraordinary item.................. $ 26,731 $(105,748) $(92,476) $ (69,663) $ 81,196 $ 41,383 $ 4,331
Capitalized interest..................... -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- --------- --------
Income before income taxes and
capitalized interest.................... 26,731 (105,748) (92,476) (69,663) 81,196 41,383 4,331
Fixed charges............................ 28,115 26,807 53,898 43,535 26,366 17,784 5,700
---------- ---------- ---------- ---------- ---------- --------- --------
Total income (loss) for computation...... $ 54,846 $ (78,941) $(38,578) $ (26,128) $ 107,562 $ 59,167 $ 10,031
---------- ---------- ---------- ---------- ---------- --------- --------
---------- ---------- ---------- ---------- ---------- --------- --------
COMPUTATION OF FIXED CHARGES:
Portion of rentals deemed representative
of interest (a)......................... $ 992 $ 1,114 $ 2,226 $ 2,319 $ 1,173 $ 614 $ 284
INTEREST:
Interest on long-term debt............... 23,081 23,081 46,163 33,281 21,153 15,529 4,885
Interest other than funding of purchase
of auto loans........................... 2,829 1,399 3,083 2,968 2,836 945 116
Amortization of debt placement........... 1,213 1,213 2,426 4,967 1,204 696 415
Capitalized interest..................... -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- --------- --------
Total fixed charges...................... $ 28,115 $ 26,807 53,898 43,535 26,366 17,784 5,700
Preferred Stock dividends on a
pre-tax basis........................... -- -- -- -- 1,829 3,688 3,286
---------- ---------- ---------- ---------- ---------- --------- --------
Total combined fixed charges and
preferred stock dividends............... $ 28,115 $ 26,807 $ 53,898 $ 43,535 $ 28,195 $ 21,472 $ 8,986
---------- ---------- ---------- ---------- ---------- --------- --------
---------- ---------- ---------- ---------- ---------- --------- --------
Ratio of earnings to combined fixed
charges and preferred stock dividends... 1.95x -- -- -- 3.81x 2.76x 1.12x
Deficiency in earnings to combined fixed
charges and preferred stock dividends... -- 105,748 92,476 69,633 -- -- --
ADDITIONAL INFORMATION:
Net rental expense ...................... $ 2,976 $ 3,341 $ 6,678 $ 6,957 $ 3,520 $ 1,842 $ 861
---------- ---------- ---------- ---------- ---------- --------- --------
---------- ---------- ---------- ---------- ---------- --------- --------
</TABLE>
- ----------
(a) Portion of rental deemed representative of interest equals one third of
rental expense.
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Arcadia Financial Ltd. on Form S-3 relating of our report, dated
_____ ___, 1998, appearing in the Annual Report on Form 10-K of Arcadia
Financial Ltd. for the year ended December 31, 1998, and to the reference to us
under the heading "Experts" in the Prospectus, which is a part of this
Registration Statement.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
August ___, 1999
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Richard A. Greenawalt and
John A. Witham, or either of them (with full power to act alone), as the
undersigned's true and lawful attorneys-in-fact and agents, with full powers
of substitution and resubstitution, for the undersigned and in his or her
name, place and stead, in any and all capacities, to sign the Registration
Statement on Form S-3 of Arcadia Financial Ltd. ("Arcadia"), and any or all
amendments (including post-effective amendments) thereto, and to file the
same, 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 or necessary to be done in and about the
premises, as fully to all intents and purposes as he 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.
Dated August __, 1999
/s/ Warren Kantor
---------------------------------
Warren Kantor
/s/ Scott H. Anderson
---------------------------------
Scott H. Anderson
/s/ Robert J. Cresci
---------------------------------
Robert J. Cresci
/s/ James L. Davis
---------------------------------
James L. Davis
<PAGE>
================================================================================
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)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
ARCADIA FINANCIAL LTD.
(Exact name of obligor as specified in its charter)
MINNESOTA 41-1664848
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7825 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55439-2435
(Address of principal executive offices) (Zip code)
-----------------------------
DEBT SECURITIES
(Title of the indenture securities)
===============================================================================
<PAGE>
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.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued June
28, 1872, by the Comptroller of the Currency
to The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
<PAGE>
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 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.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-83117
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 2nd day of August, 1999.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Timothy P. Mowdy
-----------------------
Timothy P. Mowdy
Corporate Trust Officer
<PAGE>
EXHIBIT 6
August 2, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Timothy P. Mowdy
------------------------
Timothy P. Mowdy
Corporate Trust Officer
