<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ARCADIA RECEIVABLES FINANCE CORP.
(Originator of the Trusts Described Herein)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 9999 41-1743653
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization Classification Code Number) Identification No.)
</TABLE>
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)
------------------------
RICHARD A. GREENAWALT
CHIEF EXECUTIVE OFFICER
AND DIRECTOR
ARCADIA RECEIVABLES FINANCE CORP.
7825 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55439-2435
(612) 942-9880
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
CHARLES F. SAWYER, ESQ. LAURA A. DEFELICE, ESQ.
Dorsey & Whitney LLP Mayer, Brown & Platt
220 South Sixth Street 1675 Broadway
Minneapolis, Minnesota 55402 New York, New York 10019-5820
(612) 340-2600 (212) 506-2500
------------------------
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. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT (1) OFFERING PRICE (1) FEE (2)
<S> <C> <C> <C> <C>
Automobile Receivables-Backed
Securities........................... $2,500,000,000 100% $2,500,000,000 $737,500
<FN>
(1) Estimated solely for the purposes of calculating the registration fee on
the basis of the proposed maximum aggregate offering price, pursuant to
rule 457(c).
(2) The amount of Automobile Receivables-Backed Securities being carried
forward from Registration Statement No. 333-18021 pursuant to Rule 429 is
$609,588,424, and the Registrant previously paid a filing fee with respect
to such securities of $184,723.76 (calculated at the rate of 1/33 of 1% of
the amount of securities being registered, the rate in effect at the
time such Registration Statement was filed).
</TABLE>
------------------------
Pursuant to Rule 429 under the Securities Act of 1933, the
Prospectus contained in this Registration Statement also relates to
and constitutes Post-Effective Amendment No. 1 to Registration Statement
No. 333-18021, which became effective on January 13, 1997.
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.
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<PAGE>
SUBJECT TO COMPLETION DATED MARCH 17, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THIS PROSPECTUS BECOMES FINAL. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
ARCADIA AUTOMOBILE RECEIVABLES TRUSTS
AUTOMOBILE RECEIVABLES-BACKED CERTIFICATES
AUTOMOBILE RECEIVABLES-BACKED NOTES
------------------------------
ARCADIA RECEIVABLES FINANCE CORP.
(SELLER)
------------------------------
ARCADIA FINANCIAL LTD.
(SERVICER)
------------------------------
The Automobile Receivables-Backed Certificates (the "Certificates") and the
Automobile Receivables-Backed Notes (the "Notes" and, collectively with the
Certificates, the "Securities") described herein may be sold from time to time
in one or more series, in amounts, at prices and on the terms to be determined
at the time of sale and to be set forth in a supplement to this Prospectus (a
"Prospectus Supplement"). Each series of Securities may include either one or
more classes of Certificates or, if Notes are issued as part of a series, one or
more classes of Notes and/or one or more classes of Certificates, as set forth
in the related Prospectus Supplement.
The Certificates, if any, and the Notes, if any, of any series of Securities
will be issued by a trust (a "Trust") to be formed with respect to such series
by Arcadia Receivables Finance Corp. (the "Seller"), a wholly owned subsidiary
of Arcadia Financial Ltd. ("Arcadia Financial"). The assets of each Trust (the
"Trust Property") will include a pool of retail installment sales contracts and
promissory notes (the "Receivables") purchased by Arcadia Financial from motor
vehicle dealers and secured by new and used automobiles and light trucks,
certain monies paid or payable thereunder after the Cutoff Date set forth in the
related Prospectus Supplement (the "Cutoff Date"), an assignment of Arcadia
Financial's security interests in the vehicles financed thereby, and certain
other property, as more fully described herein and in the related Prospectus
Supplement. In addition, if so specified in the related Prospectus Supplement,
the Trust Property will include monies on deposit in one or more trust accounts
to be established with an Indenture Trustee, which may include a Pre-Funding
Account which would be used to purchase additional Receivables (the "Subsequent
Receivables") from the Seller from time to time during the Pre-Funding Period
specified in the related Prospectus Supplement.
Each Trust will be formed pursuant to either (i) a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") to be entered into among the
Seller, Arcadia Financial, in its individual capacity and as Servicer, and the
Owner Trustee specified in the related Prospectus Supplement (the "Owner
Trustee") or (ii) a Trust Agreement (the "Trust Agreement") to be entered into
among the Seller, the Owner Trustee and certain other parties as specified in
the related Prospectus Supplement. If the Trust is formed pursuant to a Trust
Agreement, a Sale and Servicing Agreement (the "Sale and Servicing Agreement")
will be entered into among the Seller, Arcadia Financial, in its individual
capacity and as Servicer, the Trust and the Backup Servicer (as defined herein).
In either case, the Pooling and Servicing Agreement or the Trust Agreement and
the Sale and Servicing Agreement are collectively referred to herein as the
"Trust Documents." The Notes, if any, of a series will be issued and secured
pursuant to an Indenture (the "Indenture") between the Trust and the Indenture
Trustee specified in the related Prospectus Supplement (the "Indenture
Trustee").
Except as otherwise provided in the related Prospectus Supplement, each
class of Securities of any series will represent the right to receive a
specified amount of payments of principal and interest on the related
Receivables in the manner described herein and in the related Prospectus
Supplement. The right of each class of Securities to receive payments may be
senior or subordinate to the rights of one or more of the other classes of such
series. A series may include two or more classes of Certificates or Notes which
differ as to the timing and priority of payment, interest rate or amount of
distributions in respect of principal or interest or both. A series may include
one or more classes of Certificates or Notes entitled to distributions in
respect of principal, with disproportionate, nominal or no interest
distributions, or to interest distributions, with disproportionate, nominal or
no distributions in respect of principal. Distributions on Certificates of any
series will be subordinated in priority to payments due on the related Notes, if
any, to the extent described herein and in the related Prospectus Supplement.
The Certificates will represent fractional undivided interests in the related
Trust.
Each class of Securities will represent the right to receive distributions
or payments in the amounts, at the rates, and on the dates set forth in the
related Prospectus Supplement. The rate of distributions in respect of principal
on Certificates, if any, and payment in respect of principal on Notes, if any,
of any class will depend on the priority of payment of such class and the rate
and timing of payments (including prepayments, liquidations and repurchases of
Receivables) on the related Receivables.
Unless otherwise provided in the related Prospectus Supplement, the
Certificates, if any, and the Notes, if any, of any series initially will be
represented by certificates and notes registered in the name of Cede & Co., the
nominee of The Depository Trust Company ("DTC"). The interests of beneficial
owners of the Securities will be represented by book entries on the records of
the participating members of DTC. Definitive Securities will be available only
under limited circumstances.
There currently is no secondary market for the Securities. There can be no
assurance that any such market will develop or, if it does develop, that it will
continue. The Securities will not be listed on any securities exchange.
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SECURITIES, SEE "RISK FACTORS" AT PAGE 10 HEREIN.
---------------------
THE CERTIFICATES REPRESENT INTERESTS IN AND THE NOTES REPRESENT OBLIGATIONS OF
THE RELATED TRUST AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF ARCADIA
FINANCIAL, THE SELLER OR ANY AFFILIATE OF EITHER.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is .
<PAGE>
AVAILABLE INFORMATION
The Seller, as originator of each Trust, has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (together with
all amendments and exhibits thereto, referred to herein as the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
Securities offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement which is available for
inspection without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission at
Seven World Trade Center, Suite 1300, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and copies of which may be obtained from the Commission at
prescribed rates. The Commission also maintains a Web site (http://www.sec.gov)
at which the Registration Statement and other information regarding the Seller
may be accessed.
REPORTS TO SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, unless and
until Definitive Certificates or Definitive Notes are issued, unaudited monthly
and annual reports, containing information concerning each Trust and prepared by
the Servicer, will be sent on behalf of the Trust to the Owner Trustee for the
Certificateholders, the Indenture Trustee for the Noteholders and Cede & Co., as
registered holder of the Certificates and the Notes and the nominee of DTC. See
"Certain Information Regarding the Securities-Statements to Securityholders" and
"-Book-Entry Registration." Certificateholders and Noteholders are collectively
referred to herein as the "Securityholders." Certificate Owners or Note Owners
may receive such reports, upon written request, together with a certification
that they are Certificate Owners or Note Owners and payment of any expenses
associated with the distribution of such reports, from the Owner Trustee, with
respect to Certificate Owners, or the Indenture Trustee, with respect to Note
Owners, at the addresses specified in the related Prospectus Supplement. Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Neither the Seller nor Arcadia
Financial intends to send any of its financial reports to Securityholders. The
Servicer, on behalf of each Trust, will file with the Commission periodic
reports concerning each Trust to the extent required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Servicer on behalf of each Trust pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the related
Securities shall be deemed to be incorporated by reference into this Prospectus
and the related Prospectus Supplement and to be a part hereof and thereof from
the respective dates of filing of such documents. Any statement contained herein
or in a document all or any portion of which is deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus and the related Prospectus Supplement to the extent that a
statement contained herein or in any other subsequently filed document which
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus or
the related Prospectus Supplement.
The Servicer will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than certain exhibits to such documents). Requests for such copies should be
directed to Investor Relations, Arcadia Financial Ltd., 7825 Washington Avenue
South, Minneapolis, Minnesota 55439-2435, telephone number (612) 942-9880.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND BY REFERENCE TO
THE INFORMATION WITH RESPECT TO THE SECURITIES CONTAINED IN THE RELATED
PROSPECTUS SUPPLEMENT TO BE PREPARED AND DELIVERED IN CONNECTION WITH THE
OFFERING OF EACH SERIES OF SECURITIES. CERTAIN CAPITALIZED TERMS USED IN THIS
PROSPECTUS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS AND IN THE RELATED
PROSPECTUS SUPPLEMENT. A LISTING OF THE PAGES ON WHICH SOME OF SUCH TERMS ARE
DEFINED IS FOUND IN THE "INDEX OF DEFINED TERMS."
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Issuer............................ With respect to each series of Securities, a trust (the
"Trust") will be formed by Arcadia Receivables Finance
Corp. (the "Seller") pursuant to either a Pooling and
Servicing Agreement among the Seller, Arcadia Financial,
in its individual capacity and as Servicer (in such
capacity referred to herein as the "Servicer"), and the
Owner Trustee specified in the related Prospectus
Supplement, or a Trust Agreement between the Seller, the
Owner Trustee specified in the related Prospectus
Supplement and certain other parties as specified in the
related Prospectus Supplement.
Seller............................ Arcadia Receivables Finance Corp., a wholly owned
subsidiary of Arcadia Financial. See "The Seller."
Servicer.......................... Arcadia Financial Ltd. See "Arcadia Financial Ltd."
Owner Trustee..................... The Owner Trustee specified in the related Prospectus
Supplement (the "Owner Trustee"). See "Description of
the Purchase Agreements and the Trust Documents-Servicer
Termination Events" and "-The Owner Trustee."
Backup Servicer................... Arcadia Financial may be terminated as Servicer under
certain circumstances, at which time the Backup Servicer
specified in the related Prospectus Supplement (the
"Backup Servicer") will automatically become the
Servicer. See "Description of the Purchase Agreements
and the Trust Documents-Servicer Termination Events" and
"-The Backup Servicer."
Indenture Trustee................. With respect to any Series of Securities including one
or more classes of Notes, the Indenture Trustee
specified in the related Prospectus Supplement (the
"Indenture Trustee").
The Certificates.................. Each series of Securities may include one or more
classes of Certificates which will be issued pursuant to
the related Trust Documents.
Unless otherwise specified in the related Prospectus
Supplement, Certificates will be available for purchase
in denominations of $1,000 and in integral multiples
thereof and will be available in book-entry form only.
Unless otherwise specified in the related Prospectus
Supplement, holders of Certificates
("Certificateholders") will be able to receive
Definitive Certificates only in the limited
circumstances described herein or in the related
Prospectus Supplement. See "Certain Information
Regarding the Securities-Book-Entry Registration."
Unless otherwise specified in the related Prospectus
Supplement, each class of Certificates will have a
stated
</TABLE>
3
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<TABLE>
<S> <C>
Certificate Balance (as defined in the related
Prospectus Supplement) and will accrue interest on such
Certificate Balance at a specified rate (with respect to
each class of Certificates, the "Pass-Through Rate").
Each class of Certificates may have a different
Pass-Through Rate, which may be a fixed, variable or
adjustable Pass-Through Rate, or any combination of the
foregoing. The related Prospectus Supplement will
specify the Pass-Through Rate for each class of
Certificates, or the initial Pass-Through Rate and the
method for determining subsequent changes to the
Pass-Through Rate.
A series may include two or more classes of Certificates
which differ as to timing of distributions, sequential
order, priority of payment, seniority, allocation of
loss, Pass-Through Rate or amount of distributions in
respect of principal or interest, or as to which
distributions in respect of principal or interest on any
class may or may not be made upon the occurrence of
specified events or on the basis of collections from
designated portions of the Receivables Pool. In
addition, a series may include one or more classes of
Certificates ("Strip Certificates") entitled to (i)
distributions in respect of principal with
disproportionate, nominal or no interest distributions,
or (ii) interest distributions, with disproportionate,
nominal or no distributions in respect of principal.
With respect to any series of Securities including one
or more classes of Notes, distributions in respect of
the Certificates may be subordinated in priority of
payment to payments on the Notes, to the extent
specified in the related Prospectus Supplement.
If the Seller or Servicer exercises its option to
purchase the Receivables of a Trust on the terms and
conditions described below under "Description of the
Purchase Agreements and the Trust
Documents-Termination," Certificateholders will receive
an amount in respect of the Certificates as specified in
the related Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that the property
of a Trust will include a Pre-Funding Account (as such
term is defined in the related Prospectus Supplement,
the "Pre-Funding Account"), Certificateholders will
receive a distribution in respect of principal on or
immediately following the end of the funding period
specified in the related Prospectus Supplement (the
"Pre-Funding Period") in an amount and manner specified
in the related Prospectus Supplement.
The Notes......................... With respect to any series of Securities including one
or more classes of Notes, such Notes will be issued
pursuant to an Indenture.
Unless otherwise specified in the related Prospectus
Supplement, Notes will be available for purchase in
denominations of $1,000 and integral multiples thereof,
and will be available in book-entry form only. Unless
otherwise specified in the related Prospectus
Supplement, holders of Notes
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4
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("Noteholders") will be able to receive Definitive Notes
only in the limited circumstances described herein or in
the related Prospectus Supplement. See "Certain
Information Regarding the Securities-Book-Entry
Registration."
Unless otherwise specified in the related Prospectus
Supplement, each class of Notes will have a stated
principal amount and will bear interest at a specified
rate or rates (with respect to each class of Notes, the
"Interest Rate"). Each class of Notes may have a
different Interest Rate, which may be a fixed, variable
or adjustable Interest Rate, or any combination of the
foregoing. The related Prospectus Supplement will
specify the Interest Rate and the method for determining
subsequent changes to the Interest Rate.
A series may include two or more classes of Notes which
differ as to the timing and priority of payment,
seniority, allocations of loss, Interest Rate or amount
of payments of principal or interest, or as to which
payments of principal or interest may or may not be made
upon the occurrence of specified events or on the basis
of collections from designated portions of the
Receivables Pool. In addition, a series may include one
or more classes of Notes ("Strip Notes") entitled to (i)
principal payments with disproportionate, nominal or no
interest payments or (ii) interest payments with
disproportionate, nominal or no principal payments.
If the Seller or the Servicer exercises its option to
purchase the Receivables of a Trust on the terms and
conditions described below under "Description of the
Purchase Agreements and the Trust
Documents-Termination," the outstanding Notes, if any,
of such series will be redeemed as set forth in the
related Prospectus Supplement. In addition, if the
related Prospectus Supplement provides that the property
of a Trust will include a Pre-Funding Account, the
outstanding Notes, if any, of such series will be
subject to partial redemption on or immediately
following the end of the Pre-Funding Period in an amount
and manner specified in the related Prospectus
Supplement. In the event of such partial redemption, the
Noteholders may be entitled to receive a prepayment
premium from the Trust, in the amount and to the extent
provided in the related Prospectus Supplement.
Trust Property.................... Each Certificate, if any, will represent a fractional
undivided interest in, and each Note, if any, will
represent an obligation of, the related Trust. The
assets of each Trust (the "Trust Property") will
include, among other things, a pool (the "Receivables
Pool") of retail installment sales contracts and
promissory notes (the "Receivables") purchased or to be
purchased from motor vehicle dealers ("Dealers") by
Arcadia Financial and secured by new and used
automobiles and light trucks (the "Financed Vehicles"),
certain monies paid or payable thereunder after the
Cutoff Date (as specified in the related Prospectus
Supplement), an assignment of Arcadia Financial's
security interests in the
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5
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<S> <C>
Financed Vehicles and of the right to receive proceeds
from claims on certain insurance policies covering the
Financed Vehicles or the Obligors, the assignment of
certain rights of Arcadia Financial against the Dealers
originating such Receivables, the Collection Account,
including all investments therein, all income from the
investment of funds therein and all proceeds thereof,
certain other accounts and the proceeds thereof and
certain other rights under the Trust Documents. In
addition, if so specified in the related Prospectus
Supplement, the Trust Property will include monies on
deposit in a Pre-Funding Account to be established with
the Indenture Trustee or the Owner Trustee, which will
be used to purchase Subsequent Receivables (as defined
below) from the Seller from time to time during the
Pre-Funding Period specified in the related Prospectus
Supplement, as well as any Subsequent Receivables so
purchased. See "The Trusts."
The Receivables of each Trust (except for Subsequent
Receivables) will be purchased by the Seller from
Arcadia Financial pursuant to a purchase agreement (the
"Purchase Agreement") between the Seller and Arcadia
Financial on or prior to the date of issuance of the
Securities. If and to the extent provided in the related
Prospectus Supplement, the Seller will be obligated
(subject only to the availability thereof) to purchase
from Arcadia Financial and to sell to the related Trust,
and the related Trust will be obligated to purchase from
the Seller (subject to the satisfaction of certain
conditions described in the applicable Purchase
Agreement), additional Receivables (the "Subsequent
Receivables") from time to time (as frequently as daily)
during the Pre-Funding Period specified in the related
Prospectus Supplement having an aggregate principal
balance approximately equal to the amount on deposit in
the Pre-Funding Account (the "Pre-Funded Amount") on
such Closing Date.
The Trust Property of each Trust will also include an
assignment of the Seller's rights under the related
Purchase Agreement, including rights against Arcadia
Financial upon the occurrence of certain breaches of
representations and warranties thereunder (a "Repurchase
Event"). See "Description of the Purchase Agreements and
Trust Documents-Sale and Assignment of the Receivables"
and "-Servicing Procedures."
Credit Enhancement................ If and to the extent specified in the related Prospectus
Supplement, credit enhancement with respect to a Trust
or any class of Securities may include any one or more
of the following: a financial guaranty insurance policy
(a "Policy") issued by an insurer specified in the
related Prospectus Supplement (a "Security Insurer"),
subordination of one or more other classes of
Securities, a reserve account, overcollateralization,
letters of credit, credit or liquidity facilities,
repurchase obligations, third party payments or other
support, cash deposits or other arrangements. Unless
otherwise specified in the related
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6
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<TABLE>
<S> <C>
Prospectus Supplement, any form of credit enhancement
will have certain limitations and exclusions from
coverage thereunder, which will be described in the
related Prospectus Supplement. See "Description of the
Purchase Agreements and the Trust Documents-Credit
Enhancement."
Servicing......................... The Servicer will be responsible for managing,
administering, servicing and making collections on the
Receivables held by each Trust. Unless otherwise
specified in the related Prospectus Supplement, with
respect to each series of Securities compensation to the
Servicer will include a monthly fee (the "Servicing
Fee") which will be payable from the related Trust to
the Servicer on each Distribution Date, in an amount
equal to the product of one-twelfth of 1.25% per annum
multiplied by the aggregate principal balance of the
Receivables (the "Aggregate Principal Balance") as of
the first day of the prior calendar month, plus any late
fees and other administrative fees and expenses or
similar charges collected with respect to the
Receivables during such Monthly Period. See "Description
of the Purchase Agreements and the Trust
Documents-Servicing Compensation."
Monthly Advances.................. Unless otherwise specified in the related Prospectus
Supplement, if the amount paid on a Receivable held by a
particular Trust in any Monthly Period is less than the
full amount of the interest accrued on such Receivable
for the number of calendar days in such Monthly Period,
the Servicer will advance to such Trust the amount of
such shortfall (a "Monthly Advance"); provided, however,
that the Servicer shall not be required to make a
Monthly Advance with respect to a Receivable extended
for any Monthly Period during which no Scheduled Payment
is due according to the terms of such extension; and
provided further, that the Servicer shall not be
required to make a Monthly Advance with respect to a
Receivable that is less than 31 days delinquent. The
Servicer will be entitled to reimbursement of a Monthly
Advance from subsequent payments and collections on or
with respect to the related Receivable or, if such
payments or collections are insufficient to reimburse
the Servicer, from collections on other Receivables if
that Receivable becomes a Liquidated Receivable. Unless
otherwise specified in the related Prospectus
Supplement, the Servicer will not make any Monthly
Advance with respect to the principal portion of any
Scheduled Payment. See "Description of the Purchase
Agreements and the Trust Documents-Monthly Advances."
Receivables....................... The Receivables forming part of the Trust Property of
each Trust were or will have been originated by Dealers
and sold by the Dealers to Arcadia Financial in the
ordinary course of business. The Receivables will
generally be prepayable at any time without penalty to
the purchaser or co-purchasers of the Financed Vehicle
or other person or persons who are obligated to make
payments thereunder (each, an "Obligor"). See "The
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7
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<TABLE>
<S> <C>
Receivables." Information with respect to each
Receivables Pool, including the weighted average annual
percentage rate and the weighted average remaining
maturity, will be set forth in the related Prospectus
Supplement.
Collection Account................ With respect to each series of Securities, the Servicer
will establish and maintain one or more separate
accounts (the "Collection Account") in the name of the
Owner Trustee or, in the case of any series including
one or more classes of Notes, in the name of the
Indenture Trustee for the benefit of the
Certificateholders, if any, and the Noteholders, if any.
All payments from Obligors that are received by the
Lockbox Bank (as defined below) on behalf of each Trust
will be deposited in the related Collection Account no
later than two Business Days after receipt thereof.
Unless otherwise specified in the related Prospectus
Supplement, all payments from Obligors and all proceeds
(net of reasonable expenses of collection) with respect
to Liquidated Receivables ("Liquidation Proceeds") that
are received directly by the Servicer will be deposited
in the related Collection Account no later than one
Business Day after receipt thereof. Unless otherwise
specified in the related Prospectus Supplement, the
Servicer will be permitted to use any alternative
remittance schedule acceptable to the Rating Agencies
(as defined below) and to the Security Insurer, if any
(unless the Security Insurer shall be in continuing
default on its obligations under the Policy or certain
bankruptcy events shall have occurred with respect to
the Security Insurer (an "Insurer Default")). See
"Description of the Purchase Agreements and the Trust
Documents-Collections."
Mandatory Purchase of Certain
Receivables...................... With respect to each series of Securities, Arcadia
Financial will make certain representations and
warranties relating to the Receivables held by the
related Trust to the Seller in the related Purchase
Agreement, the Seller will assign the right to enforce
such representations and warranties to the Owner Trustee
for the benefit of the related Trust and the Security
Insurer, if any, and if such series of Securities
includes one or more classes of Notes, the Owner Trustee
will assign its right to enforce such representations
and warranties to the related Indenture Trustee as
collateral for the Notes. The Owner Trustee and the
Indenture Trustee, if any, as assignees of the
obligations of Arcadia Financial to the Seller under the
Purchase Agreement, will be entitled to require that
Arcadia Financial repurchase any Receivable if the
interests of the Certificateholders, if any, the
Noteholders, if any, or the related Trust therein are
materially and adversely affected by a breach of any
such representation or warranty (a "Repurchase Event").
See "Description of the Purchase Agreements and the
Trust Documents-Sale and Assignment of the Receivables."
Optional Purchase of
Receivables...................... Unless otherwise specified in the related Prospectus
Supplement, with respect to each series of Securities,
the Seller
</TABLE>
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<TABLE>
<S> <C>
or the Servicer may purchase all the Receivables held by
the related Trust on any Distribution Date following the
first Monthly Period as of which the Aggregate Principal
Balance has declined to 10% or less (or such other
percentage as may be specified in the related Prospectus
Supplement) of the Cutoff Date Principal Balance,
subject to certain provisions in the related Trust
Documents. See "Description of the Purchase Agreements
and the Trust Documents-Termination."
Tax Status........................ The anticipated federal income tax consequences of the
purchase, ownership and disposition of Securities issued
by a Trust will be discussed in the related Prospectus
Supplement. See "Certain Federal Income Tax
Consequences" herein and in the related Prospectus
Supplement.
ERISA Considerations.............. Subject to the considerations discussed under "ERISA
Considerations" herein and in the related Prospectus
Supplement, and unless otherwise specified in the
related Prospectus Supplement, the Notes will be
eligible for purchase by employee benefit plans. The
related Prospectus Supplement will provide further
information with respect to the eligibility of a class
of Certificates for purchase by employee benefit plans.
See "ERISA Considerations" herein and in the related
Prospectus Supplement.
Rating............................ Unless otherwise provided in the related Prospectus
Supplement, as a condition of issuance, the Securities
of each series will be rated in one of the four highest
rating categories by at least one nationally recognized
rating agency (a "Rating Agency"). There is no assurance
that the ratings initially assigned to such Securities
will not be subsequently lowered or withdrawn by the
Rating Agencies. In the event the rating initially
assigned to any Securities is subsequently lowered for
any reason, no person or entity will be obligated to
provide any credit enhancement in addition to the credit
enhancement, if any, specified in the related Prospectus
Supplement.
Registration of Securities........ Unless otherwise specified in the related Prospectus
Supplement, the Certificates, if any, and the Notes, if
any, of each series will be registered in the name of
Cede & Co., as the nominee of DTC, and will be available
for purchase only in book-entry form on the records of
DTC and participating members thereof. Certificates and
Notes will be issued in definitive form only under the
limited circumstances described herein. All references
herein to "Holders" or "Certificateholders" or
"Noteholders" shall reflect the rights of beneficial
owners of Certificates (the "Certificate Owners") or of
Notes ("Note Owners"), as the case may be, as they may
indirectly exercise such rights through DTC and
participating members thereof, except as otherwise
specified herein or in the related Prospectus
Supplement. See "Description of the Purchase Agreements
and the Trust Documents-Book-Entry Registration."
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RISK FACTORS
IMPACT OF PORTFOLIO GROWTH AND PRODUCT MIX
Arcadia Financial has experienced rapid growth in its loan servicing
portfolio, although the rate of such growth has slowed in the past year.
Historically, the statistical incidence of delinquencies and defaults in
connection with automobile loans tends to vary over the age of the loan. For
example, statistically, loans that are between six and fourteen months old have
had a higher likelihood of being delinquent or defaulting than loans with
similar credit characteristics that are three months old. Accordingly, to the
extent that portfolio growth results in a servicing portfolio containing
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 future delinquency and default rates. Also, there can
be no assurance that Arcadia Financial's transition from centralized to regional
servicing and collection will not adversely affect the rate of loan
delinquencies and defaults.
In addition, to the extent Arcadia Financial offers new loan products which
involve different underwriting policies, the delinquency and default rates of
Arcadia Financial's servicing portfolio may change. Arcadia Financial has
instituted a tiered pricing system and has periodically increased the authorized
amount of loans purchased under its Classic program involving borrowers who do
not meet all of the underwriting standards in Arcadia Financial's Premier
program and are charged rates of interest higher than those under Arcadia
Financial's Premier program. Arcadia Financial increased its purchase of loans
under the Classic program from 17% of the principal amount of loans purchased in
1995 to 36% in 1996 and to 55% in 1997. As a result of the increases in Classic
loans as a proportion of Arcadia Financial's portfolio, there has been an
increase in the rates of, and reserves for, delinquencies, repossessions and
losses historically reported by Arcadia Financial. The expansion of the Classic
loan program and seasoning of Arcadia Financial's existing servicing portfolio
will likely continue to cause Arcadia Financial's loan performance statistics to
show higher delinquencies, gross charge-offs and net losses when compared with
historical performance even if such loan performance statistics are consistent
with Arcadia Financial's reserves for loan losses.
To estimate future delinquency, repossession and loss experience on its
loans, Arcadia Financial uses a combination of factors, including actual loan
performance experience for that loan program, and industry experience on loans
with similar credit characteristics. However, there can be no assurance that its
loans will perform under varying economic conditions in the manner estimated by
Arcadia Financial. Any increase in delinquency, repossession and loss rates
related to its loans above the rates estimated by Arcadia Financial could have a
material adverse effect on Arcadia Financial's business, financial condition and
results of operations, as well as its liquidity. In addition, certain of Arcadia
Financial's loan products which produce higher delinquency, repossession and
loss rates than initially expected may continue to have an impact on Arcadia
Financial's overall loan performance, even after being discontinued or modified,
until the initially generated loans mature beyond the six- to fourteen-month
period. In 1996, Arcadia Financial discontinued a Classic loan product directed
at first-time credits and modified a Classic program for financing the sale of
its repossessed inventory in retail markets, each of which had experienced
higher than expected delinquency, repossession and loss rates.
CERTAIN LEGAL ASPECTS
With respect to each series of Securities, the transfer of the Receivables
to the related Trust will be subject to the requirements of the Uniform
Commercial Code (the "UCC") as in effect in Minnesota and New York. The Seller
will take or cause to be taken such action as is required to perfect the Trust's
rights in the Receivables. Although a Custodian (as specified in the related
Prospectus Supplement) may initially hold the Receivable Files (as defined
below), the Owner Trustee may subsequently appoint Arcadia Financial, with the
consent of the Security Insurer, if any (prior to an Insurer Default) and
subject to the conditions, if any, specified in the related Prospectus
Supplement or the related Trust Documents, as
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custodian to hold the Receivable Files for the Trust. In any event, the
Receivable Files will not be stamped or otherwise marked to indicate their sale
to the Trust. Accordingly, there exists a risk that, through fraud or
negligence, a purchaser could acquire an interest in the Receivables superior to
the interest of the Trust or that the Trust's security interest in the
Receivables could be released.
Due to the administrative burden and expense, the certificates of title for
the Financed Vehicles will not be amended to reflect the assignment of the
security interests in the Financed Vehicles by Arcadia Financial to the Seller,
or by the Seller to the Owner Trustee. In the absence of such an amendment, the
Owner Trustee may not have a perfected security interest in the Financed
Vehicles. Moreover, statutory liens for repairs or unpaid taxes may have
priority even over perfected security interests in the Financed Vehicles. See
"Description of the Purchase Agreements and the Trust Documents-Sale and
Assignment of the Receivables" and "Certain Legal Aspects of the Receivables."
INSOLVENCY RISKS
Arcadia Financial intends that any transfer of Receivables to the Seller
will constitute a sale, rather than a pledge of the Receivables to secure
indebtedness of Arcadia Financial. However, if Arcadia Financial were to become
a debtor under the federal bankruptcy code or similar applicable state laws
(collectively, "Insolvency Laws"), a creditor or trustee in bankruptcy of
Arcadia Financial or Arcadia Financial as debtor-in-possession might argue that
such sale of Receivables by Arcadia Financial was a pledge of the Receivables
rather than a sale. This position, if presented to or accepted by a court, could
cause, among other things, the related Trust to experience a delay in or
reduction of collections on the Receivables.
In addition, if Arcadia Financial were to become a debtor under any
Insolvency Law, a creditor or trustee in bankruptcy of Arcadia Financial or
Arcadia Financial as debtor-in-possession might argue that the assets and
liabilities of the Seller should be consolidated with the assets and liabilities
of Arcadia Financial. The Seller has taken and will take steps in structuring
the transactions contemplated hereby and by the related Prospectus Supplement
that are intended to make it unlikely that any such attempt to consolidate the
Seller and Arcadia Financial would succeed. See "The Seller." In addition, the
Seller intends that any transfer of Receivables to a Trust will constitute a
sale, rather than a pledge of the Receivables to secure indebtedness of the
Seller. Nevertheless, if these positions-that the assets and liabilities of the
Seller should be consolidated with those of Arcadia Financial, and that the
Seller's transfer of the Receivables was a pledge rather than a sale-were
presented to or accepted by a court, a Trust could experience, among other
things, a delay in or reduction of collections on the Receivables.
A case recently decided by the United States Court of Appeals for the Tenth
Circuit contains language to the effect that accounts sold by an entity that
subsequently became bankrupt remained property of the debtor's bankruptcy
estate. Although the Receivables constitute chattel paper rather than accounts
under the UCC, sales of chattel paper, like sales of accounts, are governed by
Article 9 of the UCC. If Arcadia Financial were to become a debtor under any
Insolvency Law and a court were to follow the reasoning of the Tenth Circuit
Court of Appeals and apply such reasoning to chattel paper, a Trust could
experience a delay in or reduction of collections on the Receivables.
SUBORDINATION; LIMITED ASSETS
To the extent specified in the related Prospectus Supplement, distributions
of interest and principal on the Certificates (if any) of such series may be
subordinated in priority of payment to interest and principal due on the Notes
(if any) of such series and/or to distributions of interest and principal on
other classes of Certificates of such series. In addition, holders of certain
classes of Securities of any series may have the right to take actions that are
detrimental to the interests of the holders of Securities of certain other
classes of Securities of such series. Moreover, no Trust will have any
significant assets or sources of funds other than the Receivables and, to the
extent provided in the related Prospectus Supplement, a Pre-Funding
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Account and any credit enhancement specified in the related Prospectus
Supplement. The Notes, if any, of any series will represent obligations solely
of, and the Certificates, if any, of such series will represent interests solely
in, the related Trust, and neither the Notes nor the Certificates of any such
series will be insured or guaranteed by the Seller, the Servicer, the applicable
Owner Trustee, the applicable Indenture Trustee or, except as specified in the
related Prospectus Supplement, any other person or entity. Consequently, holders
of the Securities of any series must rely for payment upon payments on the
related Receivables and, if and to the extent available, amounts on deposit in
the Pre-Funding Account, if any, and any credit enhancement, if any, as
specified in the related Prospectus Supplement.
YIELD AND PREPAYMENT CONSIDERATIONS
The weighted average life of the Securities will be reduced by full or
partial prepayments on the Receivables. The Receivables will generally be
prepayable at any time without penalty. Prepayments (or, for this purpose,
equivalent payments to the related Trust) may result from payments by Obligors,
liquidations due to default, the receipt of proceeds from physical damage or
credit insurance, repurchases by Arcadia Financial as a result of certain
uncured breaches of the warranties made by it with respect to the Receivables
("Warranty Receivables"), purchases by the Servicer as a result of certain
uncured breaches of the covenants made by it with respect to the Receivables
("Administrative Receivables") in the related Agreement, or either of the Seller
or the Servicer exercising its option to purchase all of the remaining
Receivables.
Unless otherwise specified in the related Prospectus Supplement, the amounts
paid to Securityholders in respect of principal on any Distribution Date or
Payment Date will include all prepayments on the Receivables during the
corresponding Monthly Periods. The Certificateholders and the Noteholders will
bear all reinvestment risk resulting from the timing of payments of principal on
the Securities.
LIMITED LIQUIDITY
There is currently no market for the Securities of any series. There can be
no assurance that any such market will develop or, if it does develop, that it
will provide Securityholders with liquidity of investment or will continue for
the life of the Securities. The Securities will not be listed on any securities
exchange.
Unless otherwise specified in the related Prospectus Supplement, the
Securities will be issued in book-entry, rather than physical, form and, as a
result, in certain circumstances, the liquidity of the Securities in the
secondary market and the ability of the Certificate Owners and Note Owners to
pledge them may be adversely affected. See "Plan of Distribution" and "Certain
Information Regarding the Securities-Book-Entry Registration."
THE TRUSTS
With respect to each series of Securities, the Seller will establish a Trust
pursuant to the related Trust Documents. Prior to the sale and assignment of the
related Receivables pursuant to the related Trust Documents, the Trust will have
no assets or obligations. The Trust will not engage in any business activity
other than acquiring and holding the Trust Property, issuing the Certificates,
if any, and the Notes, if any, of such series and distributing payments thereon.
Each Certificate, if any, will represent a fractional undivided interest in,
and each Note, if any, will represent an obligation of, the related Trust. The
Trust Property of each Trust will include, among other things, (i) a Receivables
Pool; (ii) all monies paid or payable thereon after the Cutoff Date (as
specified in the related Prospectus Supplement); (iii) such amounts as from time
to time may be held in the Lockbox Account (as defined herein), the Collection
Account (including all investments in the Collection Account and all income from
the investment of funds therein and all proceeds thereof) and certain other
accounts (including the proceeds thereof); (iv) an assignment of the security
interests of Arcadia Financial in the Financed Vehicles securing the related
Receivables; (v) an assignment of the right to receive proceeds
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from the exercise of rights against Dealers under agreements between Arcadia
Financial and such Dealers (the "Dealer Agreements") and the assignment of
rights in respect of each related Receivable from the applicable Dealer to
Arcadia Financial (the "Dealer Assignments"); (vi) an assignment of the right to
receive proceeds from claims on certain insurance policies covering the related
Financed Vehicles or Obligors; (vii) an assignment of the rights of the Seller
under the related Purchase Agreement, and (viii) certain other rights under the
related Trust Documents. See "The Receivables" and "Description of the Purchase
Agreements and the Trust Documents-Collections." The Trust Property will also
include, if so specified in the related Prospectus Supplement, monies on deposit
in a Pre-Funding Account to be established with the Indenture Trustee or the
Owner Trustee, which will be used to purchase Subsequent Receivables from the
Seller from time to time (and as frequently as daily) during the Pre-Funding
Period specified in the related Prospectus Supplement. Any Subsequent
Receivables so purchased will be included in the related Receivables Pool
forming part of the Trust Property, subject to the prior rights of the related
Indenture Trustee and the Noteholders therein. In addition, to the extent
specified in the related Prospectus Supplement, a financial guaranty insurance
policy or some other form of credit enhancement may be issued to or held by the
Owner Trustee or the Indenture Trustee for the benefit of holders of one or more
classes of Securities.
The Servicer will service the Receivables held by each Trust and will
receive fees for such services. See "Description of the Purchase Agreements and
the Trust Documents-Servicing Compensation." Unless otherwise specified in the
related Prospectus Supplement, Arcadia Financial, on behalf of each Trust, will
hold the original installment sales contract or promissory note as well as
copies of documents and instruments relating to each Receivable and evidencing
the security interest in the Financed Vehicle securing each Receivable (the
"Receivable Files"). In order to protect the Trust's ownership interest in the
Receivables, Arcadia Financial and the Seller will each file a UCC-1 financing
statement in Minnesota to give notice of such Trust's ownership of the related
Receivables and the related Trust Property.
THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related Prospectus
Supplement. The Owner Trustee's liability in connection with the issuance and
sale of the Securities of such series will be limited solely to the express
obligations of such Owner Trustee set forth in the related Trust Documents. An
Owner Trustee may resign at any time, in which event the General Partner, if
any, specified in the related Prospectus Supplement, or if no such General
Partner is specified, the Servicer or its successor, will be obligated to
appoint a successor trustee acceptable to the Security Insurer. The General
Partner, if any, specified in the related Prospectus Supplement, or if no such
General Partner is specified, the Servicer, with the consent of the Security
Insurer, if any (prior to an Insurer Default), may also remove the Owner Trustee
if the Owner Trustee ceases to be eligible to continue as Owner Trustee under
the related Trust Documents or if the Owner Trustee becomes insolvent. In such
circumstances, the General Partner, if any, specified in the related Prospectus
Supplement, or if no such General Partner is specified, the Servicer will be
obligated to appoint a successor trustee acceptable to the Security Insurer. Any
resignation or removal of an Owner Trustee and appointment of a successor
trustee will be subject to any conditions or approvals specified in the related
Prospectus Supplement and will not become effective until acceptance of the
appointment by the successor trustee.
THE RECEIVABLES
GENERAL
Arcadia Financial purchases retail installment sales contracts and
promissory notes secured by new and used motor vehicles from Dealers who
regularly originate and sell such contracts and notes to Arcadia Financial.
Arcadia Financial generally acquires each such contract or note (a "Loan") under
a Dealer Agreement and a Dealer Assignment which obligate the Dealer to
repurchase the Loan in the event of a breach by the Dealer of certain
representations and warranties made therein. These representations and
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warranties typically relate to the origination of the Loan and the security
interest in the related Financed Vehicle. The Dealers' representations and
warranties do not relate to the creditworthiness of the Obligor under the Loan
or the collectibility of the Loan and, accordingly, Arcadia Financial does not
have recourse to Dealers for credit losses on any Loans.
UNDERWRITING
Arcadia Financial purchases each Loan in accordance with its established
underwriting procedures. Arcadia Financial's underwriting procedures include
scoring the borrower's loan application in accordance with Arcadia Financial's
proprietary credit scoring system and comparing such credit scores to
established underwriting criteria. For borrowers with credit scores falling
outside predetermined criteria, Arcadia Financial requires additional review and
approval by supervisory personnel in order to determine whether to approve such
loans. These procedures are intended to assess the applicant's ability to repay
the amounts due on the loan and the adequacy of the financed vehicle as
collateral. Arcadia Financial's underwriting procedures do not distinguish
between new and used vehicles. Arcadia Financial maintains a tiered pricing
system, allowing it to price loans according to the borrower's credit
characteristics. Arcadia Financial markets its loan products to dealers under
two programs, designated Premier and Classic. "Premier" and "Classic" are
proprietary trademarks of Arcadia Financial. Premier borrowers generally have
stronger credit characteristics than those of Classic borrowers. At December 31,
1997, Arcadia Financial was purchasing approximately 70% of its aggregate loans
under each of the Classic and the Premier programs. Arcadia Financial may change
its loan purchase mix at any time and from time to time. Arcadia Financial
considers substantially all of the loans it purchases under both the Premier and
Classic programs to be in the "prime" or "non-prime" loan categories, but does
not consider the loans it purchases to be in the "sub-prime" loan category.
Each applicant for a loan is required to complete and sign an application
which lists the applicant's assets, liabilities, income, credit and employment
history and other personal information. Upon receipt of the completed loan
application, Arcadia Financial's administrative personnel order a credit bureau
report on the applicant to document the applicant's credit history. The
application and the credit bureau report are given to one of Arcadia Financial's
credit specialists for analysis under Arcadia Financial's proprietary credit
scoring system.
Arcadia Financial's credit scoring system evaluates the credit applicant
with an emphasis on cash flow as a principal indicator of repayment capability
and provides credit scores which are utilized by Arcadia Financial as a basis to
determine if the applicant initially falls within the parameters of Arcadia
Financial's underwriting criteria for a particular loan product. Assuming that
the applicant qualifies, Arcadia Financial will expand its credit review by
preparing an analysis of the applicant's debt-to-income and payment-to-income
ratios, and purchasing from a credit bureau an additional credit score which
attempts to assess the likelihood of borrower bankruptcies. If the applicant
meets Arcadia Financial's underwriting standards, Arcadia Financial generally
will approve the application. For Classic borrowers (and, if certain scoring
criteria are not satisfied, for Premier borrowers), this data is subject to
further investigation. This investigation typically consists of direct telephone
confirmations, when feasible, of the applicant's employment and may also include
direct credit references from banks and financial institutions noted on the
application.
Once scoring and verifications have been completed, one of Arcadia
Financial's credit specialists reviews the application to ensure that it meets
the requirements of Arcadia Financial's internal system and also reviews the
various banking and employment verifications obtained. The credit specialist
also considers the amount to be financed in relation to the purchase price and
market value of the automobile. If the vehicle is used, Arcadia Financial
determines market value based upon the Kelly Blue Book value or the National
Automobile Dealers Association's ("NADA") Guide on Retail and Wholesale Values.
Consistent with industry standards, this assessment does not include inspection
of the automobile. Arcadia Financial does not reject an applicant solely because
of the age of the automobile.
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Objective credit scoring criteria provide the factual background for lending
decisions, but such decisions frequently require the credit judgment of Arcadia
Financial's credit specialists. To the extent an applicant fails to meet one or
more of the scoring benchmarks for the proposed loan, Arcadia Financial requires
higher levels of management scrutiny before such loans are approved. In 1996, a
substantial majority of Classic loans and a substantial number of Premier loans
purchased by Arcadia Financial failed to meet at least one applicable scoring
benchmark and required additional management review before approval of these
loans.
Upon completion of the credit analysis, Arcadia Financial decides whether it
will approve, conditionally approve or deny the loan application as submitted.
Conditioning approval of the application involves amending the dealer's proposed
terms of the loan to qualify the application according to Arcadia Financial's
procedures. Typical conditions include, but are not limited to, requiring a
co-applicant, amending the length of the proposed term, requiring additional
down payment, substantiating certain credit information, or requiring proof of
resolution of certain credit deficiencies as noted on the applicant's credit
history. Approved, declined or conditioned application decisions are promptly
communicated to the dealer by phone or facsimile. Additionally, the applicant is
informed by Arcadia Financial of any credit denial or other adverse action by
mail, in compliance with applicable statutory requirements.
Arcadia Financial regularly reviews the quality of the loans it purchases
and conducts internal compliance reviews on a monthly basis.
SERVICING
Arcadia Financial, as the initial Servicer, will be responsible for
managing, administering, servicing and making collections on the Receivables
held by each Trust. In response to the rapid growth of its servicing portfolio,
continued expansion of its Classic program (which generally requires greater
collection efforts than its Premier program), and increases in delinquencies and
default rates on its servicing portfolio, Arcadia Financial substantially
increased its servicing and collection staff and, in October 1996, implemented a
strategy to regionalize its servicing and collection activities into four new
locations: Charlotte, North Carolina; Dallas, Texas; Denver, Colorado and
Minneapolis, Minnesota. At December 31, 1997, Arcadia Financial employed more
than 800 service representatives and collection associates who are responsible
for various aspects of the collection and repossession procedures, compared with
510 and 188 at December 31, 1996 and 1995, respectively. Arcadia Financial also
substantially expanded the capacity of its highly automated telephone dialing
systems (the "autodialer") in connection with its establishment of four regional
servicing and collection centers. In addition, Arcadia Financial uses a
computerized collection system to aid its service and collection associates.
Arcadia Financial regularly evaluates its servicing staffing needs based on
anticipated growth in its servicing portfolio and estimated delinquency and
repossession rates.
Arcadia Financial generally utilizes the autodialer initially to contact
delinquent obligors. Based on parameters established by Arcadia Financial for
each of its loan programs, the autodialer will phone the obligor within five to
ten days after a past due date. Once the call is answered, the autodialer will
immediately transfer the call to an available customer service representative
located in one of Arcadia Financial's four regional service and collection
centers and will automatically display the obligor's loan information on the
representative's computer screen. The autodialer will continue to follow up with
obligors at various times throughout the first 30 days after a past due date
(typically every third day) if previous efforts do not result in the account
deficiency being cured. In addition to telephone inquiries, Arcadia Financial's
computerized collection system generates past due notices which are mailed to
the obligor at various intervals during the first 30 days after a past due date.
The first such correspondence is generally sent approximately 13 days after a
past due date.
If the collection effort during the first 30 days after a past due date does
not result in a satisfactory resolution of the delinquent account, then the
account is forwarded to collection specialists. These
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collection specialists will typically send a final demand letter to the
delinquent obligor allowing the obligor a specified number of days to bring the
account current. During this period, the collection specialist generally will
make a recommendation as to whether the automobile should be repossessed or
other action, such as a contract extension, should be taken.
Arcadia Financial follows specific procedures with respect to contract
extensions. Generally, an extension requires special circumstances, is based on
a re-evaluation of the Obligor's creditworthiness, and requires approval by a
collection department manager. Under the Trust Documents, unless otherwise
specified in the related Prospectus Supplement, the Servicer will not be
permitted to extend the monthly payments of a Receivable more than a maximum of
two times in any twelve-month period, six months in the aggregate, and in no
event later than the month preceding the Final Scheduled Distribution Date (as
specified in the related Prospectus Supplement). Subject to certain limited
exceptions set forth in the Trust Documents, the Servicer cannot, without the
consent of the Security Insurer, if any (prior to an Insurer Default), unless
otherwise specified in the Trust Documents, otherwise agree to amend or modify
any Receivable. If an Insurer Default occurs, subject to certain limited
exceptions, amendments and modifications of the Receivables will not be
permitted. See "Description of the Purchase Agreements and the Trust
Documents-Servicing Procedures."
Arcadia Financial uses unaffiliated independent contractors to perform
repossessions. Once a Financed Vehicle is repossessed, a letter is sent giving
the Obligor a specified number of days to redeem the Financed Vehicle in
accordance with state law. At the expiration of the time period, Arcadia
Financial will determine the method of sale and will repair (if necessary) and
prepare the Financed Vehicle for sale. Arcadia Financial has historically sold
repossessed Financed Vehicles through wholesale auto auctions and retail
consignment lots. Although Arcadia Financial has historically liquidated a
substantial portion of its repossessed inventory through retail consignment
lots, Arcadia Financial determined in 1997 that its retail distribution channels
were not sufficient to liquidate vehicles at a satisfactory pace and therefore
decided to sell an increased proportion of repossessed vehicles through
wholesale auctions. Arcadia Financial expects to continue to control the size
and cost of its repossessed inventory by continuing to increase the use of
wholesale auctions to dispose of repossessed vehicles. Arcadia Financial has a
remarketing department responsible for the management of its repossession
inventory, which decides whether to sell each vehicle repossessed in the retail
or wholesale market, manages reconditioning and repairs when necessary, tracks
vehicles until sold and selects and monitors the retail consignment lots used by
Arcadia Financial. At December 31, 1997, Arcadia Financial had arrangements with
60 retail consignment lots compared to 60 at December 31, 1996 and 10 at
December 31, 1995. Any surplus proceeds received from the sale of the Financed
Vehicle (net of all collection, repossession and disposition expenses) over the
balance of the Loan will be remitted to the Obligor.
The present policy of Arcadia Financial is to charge off a Loan on the
earlier of the date on which (i) the Loan becomes 90 days delinquent or (ii) the
related Financed Vehicle is repossessed and sold. Notwithstanding this policy,
Arcadia Financial may elect not to charge off a Loan that is 90 days delinquent
if Arcadia Financial determines that it is likely to recover on a later date all
or a portion of the outstanding Loan balance upon repossession and sale, in
which case the Loan will be charged off when the related Financed Vehicle has
been repossessed and sold. Unless otherwise specified in the related Prospectus
Supplement, the related Trust Documents will define a "Liquidated Receivable" as
a Receivable as to which (i) the Servicer has repossessed the Financed Vehicle
and all applicable redemption periods have expired, (ii) the Servicer has
determined in good faith that all amounts it expects to recover have been
received or (iii) any scheduled payment thereon (a "Scheduled Payment") or any
portion thereof has become more than 180 days past due.
INSURANCE
Arcadia Financial requires each Obligor to obtain a physical damage
insurance policy naming Arcadia Financial as loss payee with respect to the
Financed Vehicle. If any Obligor is in default in the payment of
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a premium on such an insurance policy, Arcadia Financial may obtain a
replacement policy, paying the premium out of its own funds, and may require the
Obligor to pay such premium pursuant to an obligation separate from the contract
or note evidencing the related Loan.
DELINQUENCY, LOAN LOSS AND REPOSSESSION INFORMATION
Certain information relating to Arcadia Financial's delinquency, loan loss
and repossession experience with respect to all Loans it has purchased and
continues to service will be set forth in each Prospectus Supplement. This
information will include the experience with respect to all Loans in Arcadia
Financial's portfolio of Loans serviced, including Loans which do not meet the
criteria for selection as a Receivable for any particular Receivables Pool.
There can be no assurance that the delinquency, loan loss and repossession
experience on any Receivables Pool will be comparable to prior experience.
SELECTION CRITERIA AND CERTAIN OTHER CHARACTERISTICS
Information with respect to each Receivables Pool will be set forth in the
related Prospectus Supplement, including, to the extent appropriate, the
criteria used to select the related Receivables and the composition,
distribution by annual percentage rate ("APR") and geographic concentration of
such Receivables.
YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, the
Receivables will be simple interest retail installment sales contracts and
promissory notes. Payments on simple interest obligations are applied first to
interest accrued through the payment date, and the remainder is applied to
reduce the unpaid principal balance. Accordingly, if an Obligor pays an
installment before its due date, the portion of the payment allocable to
interest for the period will be less than if the payment had been made on the
due date, the portion of the payment applied to reduce the principal balance
will be correspondingly greater, and the principal balance will be amortized
more rapidly than scheduled. Conversely, if an Obligor pays an installment after
its due date, the portion of the payment allocable to interest will be greater
than if the payment had been made on the due date, the portion of the payment
applied to reduce the principal balance will be correspondingly less, and the
principal balance will be amortized slower than scheduled, in which case a
larger portion of the principal balance may be due on the final scheduled
payment date. Any interest shortfalls resulting from early payment or prepayment
of a Receivable will be funded by collections on other Receivables or, to the
extent collections are insufficient, by payments under the Policy, if any, or
other applicable form of credit enhancement, if any, described in the related
Prospectus Supplement.
A substantial portion of the Receivables will be prepayable, without premium
or penalty, by Obligors at any time. Prepayments (or, for this purpose,
equivalent payments to a Trust) also may result from liquidations due to
default, receipt of proceeds from insurance policies, repurchases by Arcadia
Financial of Warranty Receivables, purchases by the Servicer of Administrative
Receivables or as a result of the Seller or the Servicer exercising its option
to purchase the Receivables Pool. See "Description of the Purchase Agreements
and the Trust Documents." The rate of prepayments on the Receivables may be
influenced by a variety of economic, social and other factors. While Arcadia
Financial does not maintain specific records for this purpose, it estimates
that, based on its experience over the past four years, the monthly prepayment
rate on the outstanding principal amount of the motor vehicle installment sales
contracts it has originated and serviced, for itself and others, has been
approximately 1.5%. However, no assurance can be given that the Receivables
included in any Receivables Pool will experience this rate of prepayment or any
greater or lesser rate. No assurance can be given that prepayments on the
Receivables will conform to any estimated or actual historical experience, and
no prediction can be made as to the actual prepayment rates which will be
experienced on the Receivables. Certificateholders and Noteholders will bear all
reinvestment risk resulting from the timing of payments of principal on the
Certificates or the Notes, as the case may be.
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If so specified in the related Prospectus Supplement, certain of the
Receivables included in a Receivables Pool may provide for level monthly
payments during the scheduled term of the Receivable but a substantially larger
final payment at the scheduled maturity of the Receivable (each a "Balloon
Payment Receivable"). Although it is likely that the inclusion of such Balloon
Payment Receivables in a Receivables Pool would affect the weighted average
lives of the related Securities, no prediction can be made as to the nature or
magnitude of such effect.
POOL FACTOR
The "Certificate Pool Factor" for each class of Certificates, if any, will
be an eight-digit decimal which the Servicer will compute indicating the
Certificate Balance with respect to such Certificates as of each Distribution
Date (after giving effect to all distributions of principal made on such
Distribution Date), as a fraction of the Cutoff Date Certificate Principal
Balance. The "Note Pool Factor" for each class of Notes, if any, will be an
eight-digit decimal which the Servicer will compute indicating the remaining
outstanding principal balance with respect to such Notes as of each Payment Date
(after giving effect to all distributions of principal on such Payment Date) as
a fraction of the initial outstanding principal balance of such class of Notes.
Each Certificate Pool Factor and each Note Pool Factor will initially be
1.00000000; thereafter, the Certificate Pool Factor and the Note Pool Factor
will decline to reflect reductions in the Certificate Balance of the applicable
class of Certificates or reductions in the outstanding principal balance of the
applicable class of Notes, as the case may be. The amount of a
Certificateholder's pro rata share of the Certificate Balance for the related
class of Certificates can be determined by multiplying the original denomination
of the Certificateholder's Certificate by the then applicable Certificate Pool
Factor. The amount of a Noteholder's pro rata share of the aggregate outstanding
principal balance of the applicable class of Notes can be determined by
multiplying the original denomination of such Noteholder's Note by the then
applicable Note Pool Factor.
With respect to each Trust and pursuant to the related Trust Documents, on
each Distribution Date or Payment Date, as the case may be, the
Certificateholders and the Noteholders will receive periodic reports from the
Owner Trustee stating the Certificate Pool Factor or the Note Pool Factor, as
the case may be, and containing various other items of information. Unless and
until Definitive Certificates or Definitive Notes are issued, such reports will
be sent on behalf of the Trust to the Owner Trustee and the Indenture Trustee
and Cede & Co., as registered holder of the Certificates and the Notes and the
nominee of DTC. Certificate Owners and Note Owners may receive such reports,
upon written request, together with a certification that they are Certificate
Owners or Note Owners and payment of any expenses associated with the
distribution of such reports, from the Owner Trustee and the Indenture Trustee
at the addresses specified in the related Prospectus Supplement. See "Certain
Information Regarding the Securities-Statements to Securityholders."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds to be received by the Seller from the sale of each series of Securities
will be used to pay to Arcadia Financial the purchase price for the Receivables
and to make the deposit of the Pre-Funded Amount into the Pre-Funding Account,
if any, to repay warehouse lenders and/or to provide for other forms of credit
enhancement specified in the related Prospectus Supplement. The net proceeds to
be received by Arcadia Financial will be used to pay its warehouse loans, and
any additional proceeds will be added to Arcadia Financial's general funds and
used for its general corporate purposes. See "Arcadia Financial Ltd."
THE SELLER
The Seller, a wholly owned subsidiary of Arcadia Financial Ltd., was
incorporated in the State of Delaware on February 3, 1993. The Seller has been
organized for the limited purposes of purchasing receivables from Arcadia
Financial Ltd. and transferring such receivables to trusts such as the Trusts
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described herein and any activities incidental to and necessary or convenient
for the accomplishment of such purposes. The principal executive offices of the
Seller are located at 7825 Washington Avenue South, Suite 410, Minneapolis,
Minnesota 55439-2435, and its telephone number is (612) 942-9880.
The Seller has taken and will take steps in structuring the transactions
contemplated hereby and in the related Prospectus Supplement that are intended
to make it unlikely that a voluntary or involuntary application for relief by
Arcadia Financial under any Insolvency Law will result in consolidation of the
assets and liabilities of the Seller with those of Arcadia Financial. These
steps include the creation of the Seller as a separate, limited-purpose
subsidiary pursuant to a Certificate of Incorporation containing certain
limitations (including restrictions on the nature of the Seller's business and a
restriction on the Seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the unanimous affirmative vote of all of its
directors and the holders of at least 66 2/3% of its outstanding common stock).
The Seller's Certificate of Incorporation includes a provision that requires the
Seller to have at least one director who qualifies under the Certificate of
Incorporation as an "Independent Director." The Seller has no intention of
filing a voluntary petition under Insolvency Laws unless its own financial
affairs merit such action.
ARCADIA FINANCIAL LTD.
Arcadia Financial purchases, securitizes and services consumer automobile
loans originated primarily by new car dealers affiliated with major foreign and
domestic manufacturers. Arcadia Financial provides an alternative and
independent source of financing to automobile dealers for their customers'
purchases of new and used automobiles. Arcadia Financial attempts to meet the
needs of dealers through consistent underwriting and loan purchasing practices,
extended operating hours, competitive interest rates, a dedicated customer
service staff, fast turn-around of loan applications, promotions and systems
designed to expedite processing of loan applications.
Since Arcadia Financial's inception in March 1990, Arcadia Financial has
established 18 regional buying centers and expanded its dealer network to
include dealers in 45 states. Arcadia Financial's regional buying centers are
located in Phoenix, Arizona; Sacramento, California; San Diego, California;
Denver, Colorado; Orlando, Florida; Atlanta, Georgia; Baltimore, Maryland;
Boston, Massachusetts; Minneapolis, Minnesota; St. Louis, Missouri; Buffalo, New
York; Charlotte, North Carolina; Cincinnati, Ohio; Nashville, Tennessee; Dallas,
Texas; Houston, Texas; San Antonio, Texas; and Seattle, Washington.
Arcadia Financial purchases a Loan from a dealer only after Arcadia
Financial has reviewed and approved a customer's credit application in
accordance with Arcadia Financial's underwriting policies and procedures. See
"The Receivables-Underwriting." Arcadia Financial accumulates the automobile
loans it purchases and then sells them to a trust, which in turn sells
asset-backed securities to investors (a "securitization"). Prior to each
securitization, Arcadia Financial funds the acquisition of loans primarily
through warehouse facilities with financial institutions and institutional
lenders.
Arcadia Financial is a Minnesota corporation. Arcadia Financial's principal
executive offices are located at Arcadia Financial Center, 7825 Washington
Avenue South, Minneapolis, Minnesota 55439-2435, and its telephone number is
(612) 942-9880.
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THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of a given
series may be issued pursuant to Trust Documents to be entered into between the
Seller, Arcadia Financial and the Owner Trustee, forms of which have been filed
as exhibits to the Registration Statement of which this Prospectus forms a part.
The following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all of the material provisions of the
Trust Documents. Where particular provisions of or terms used in the Trust
Documents are referred to, the actual provisions (including definitions of
terms) are incorporated by reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Certificates will initially be represented by a single Certificate registered
in the name of the nominee of DTC (together with any successor depository
selected by the Seller, the "Depository"). See "Certain Information Regarding
the Securities-Book-Entry Registration." Unless otherwise specified in the
related Prospectus Supplement, the Certificates evidencing interests in a Trust
will be available for purchase in denominations of $1,000 initial principal
amount and integral multiples thereof, except that one Certificate evidencing an
interest in such Trust may be issued in a denomination that is less than $1,000
initial principal amount. Certificates may be transferred or exchanged without
the payment of any service charge other than any tax or governmental charge
payable in connection with such transfer or exchange. Unless otherwise specified
in the related Prospectus Supplement, the Owner Trustee will initially be
designated as the registrar for the Certificates.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL
The timing and priority of distributions, seniority, allocations of loss,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest (or, where applicable, with respect to
principal only or interest only) on the Certificates of any series will be
described in the related Prospectus Supplement. Distributions of interest on the
Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and, unless otherwise specified in the
related Prospectus Supplement, will be made prior to distributions with respect
to principal. A series may include one or more classes of Strip Certificates
entitled to (i) distributions in respect of principal with disproportionate,
nominal or no interest distribution, or (ii) interest distributions, with
disproportionate, nominal or no distributions in respect of principal. Each
class of Certificates may have a different Pass-Through Rate, which may be a
fixed, variable or adjustable Pass-Through Rate (and which may be zero for
certain classes of Strip Certificates), or any combination of the foregoing. The
related Prospectus Supplement will specify the Pass-Through Rate for each class
of Certificate, or the initial Pass-Through Rate and the method for determining
the Pass-Through Rate. Unless otherwise specified in the related Prospectus
Supplement, interest on the Certificates will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Unless otherwise specified in
the related Prospectus Supplement, distributions in respect of the Certificates
will be subordinate to payments in respect of the Notes, if any, as more fully
described in the related Prospectus Supplement. Distributions in respect of
principal of any class of Certificates will be made on a pro rata basis among
all of the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall be
as set forth in the related Prospectus Supplement.
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THE NOTES
GENERAL
A series of Securities may include one or more classes of Notes issued
pursuant to the terms of an Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Unless otherwise specified in the related Prospectus Supplement, no Notes will
be issued as a part of any series. The following summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Notes and the Indenture, and the following summary
may be supplemented or superseded in whole or in part by the related Prospectus
Supplement. Where particular provisions of or terms used in the Indenture are
referred to, the actual provisions (including definition of terms) are
incorporated by reference as part of this summary.
Unless otherwise specified in the related Prospectus Supplement, each class
of Notes will initially be represented by a single Note registered in the name
of the nominee of the Depository. See "Certain Information Regarding the
Securities-Book-Entry Registration." Unless otherwise specified in the related
Prospectus Supplement, Notes will be available for purchase in denominations of
$1,000 and integral multiples thereof. Notes may be transferred or exchanged
without the payment of any service charge other than any tax or governmental
charge payable in connection with such transfer or exchange. Unless otherwise
provided in the related Prospectus Supplement, the Indenture Trustee will
initially be designated as the registrar for the Notes.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss, Interest
Rate and amount of or method of determining payments of principal and interest
on the Notes will be described in the related Prospectus Supplement. The right
of holders of any class of Notes to receive payments of principal and interest
may be senior or subordinate to the rights of holders of any class or classes of
Notes of such series, or any class of Certificates, as described in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, payments of interest on the Notes will be made prior to payments of
principal thereon. A series may include one or more classes of Strip Notes
entitled to (i) principal payments with disproportionate, nominal or no interest
payment, or (ii) interest payments with disproportionate, nominal or no
principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes, or the initial Interest Rate and the method for determining the
Interest Rate. One or more classes of Notes of a series may be redeemable under
the circumstances specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, payments in
respect of interest to Noteholders of all classes within a series will have the
same priority. Under certain circumstances, the amount available for such
payments could be less than the amount of interest payable on the Notes on any
of the dates specified for payments in the related Prospectus Supplement (each,
a "Payment Date"), in which case each class of Noteholders will receive their
ratable share (based upon the aggregate amount of interest due to such class of
Noteholders) of the aggregate amount available to be distributed in respect of
interest on the Notes.
In the case of a series of Securities which includes two or more classes of
Notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination thereof, of each such class will be set forth in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, payments in respect of principal and interest of any class of Notes
will be made on a pro rata basis among all of the Notes of such class.
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THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Seller will provide a copy
of the applicable Indenture (without exhibits) upon request to a holder of Notes
issued thereunder.
MODIFICATION OF INDENTURE WITHOUT NOTEHOLDER CONSENT. Each Trust and
related Indenture Trustee (on behalf of such Trust) may, with the consent of the
Security Insurer, if any (prior to an Insurer Default), but without consent of
the related Noteholders, enter into one or more supplemental indentures for any
of the following purposes: (i) to correct or amplify the description of the
collateral or add additional collateral; (ii) to provide for the assumption of
the Note and the Indenture obligations by a permitted successor to the Trust;
(iii) to add additional covenants for the benefit of the related Noteholders, or
to surrender any rights or power conferred upon the Trust; (iv) to convey,
transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee; (v) to cure any ambiguity or correct or supplement any provision in the
Indenture or in any supplemental indenture; (vi) to provide for the acceptance
of the appointment of a successor Indenture Trustee or to add to or change any
of the provisions of the Indenture or in any supplemental indenture which may be
inconsistent with any other provision of the Indenture as shall be necessary and
permitted to facilitate the administration by more than one trustee; (vii) to
modify, eliminate or add to the provisions of the Indenture in order to comply
with the Trust Indenture Act of 1939, as amended; and (viii) to add any
provisions to, change in any manner, or eliminate any of the provisions of, the
Indenture or modify in any manner the rights of Noteholders under such
Indenture; provided that any action specified in this clause (viii) shall not,
as evidenced by an opinion of counsel, adversely affect in any material respect
the interests of any related Noteholder unless Noteholder consent is otherwise
obtained as described below.
MODIFICATIONS OF INDENTURE WITH NOTEHOLDER CONSENT. With respect to each
Trust, with the consent of the Security Insurer, if any (prior to an Insurer
Default), and the holders representing a majority of the principal balance of
the outstanding related Notes (a "Note Majority"), the Owner Trustee and the
Indenture Trustee may execute a supplemental indenture to add provisions to
change in any manner or eliminate any provisions of, the related Indenture, or
modify in any manner the rights of the related Noteholders.
Without the consent of the Security Insurer, if any (prior to an Insurer
Default), and the holder of each outstanding related Note affected thereby,
however, no supplemental indenture may: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the interest rate specified thereon or the redemption price with
respect thereto or change the manner of calculating any such payment or any
place of payment where the coin or currency in which any Note or any interest
thereon is payable; (ii) impair the right to institute suit for the enforcement
of certain provisions of the Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Notes the consent of the
holders of which is required for any such supplemental indenture or the consent
of the holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture; (iv) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the related
Trust, any other obligor on the Notes, the Seller or an affiliate of any of
them; (v) reduce the percentage of the aggregate outstanding amount of the Notes
the consent of the holders of which is required to direct the Indenture Trustee
to sell or liquidate the Receivables if the proceeds of such sale would be
insufficient to pay the principal amount and accrued but unpaid interest on the
outstanding Notes; (vi) decrease the percentage of the aggregate principal
amount of the Notes required to amend the sections of the Indenture which
specify the applicable percentage of aggregate principal amount of the Notes
necessary to amend the Indenture or certain other related agreements; or (vii)
permit the creation of any lien ranking prior to or on a parity with the lien of
the Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in the Indenture, terminate the lien of the
Indenture on any such collateral or deprive the holder of any Note of the
security afforded by the lien of the Indenture.
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EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to each
Trust, unless otherwise specified in the related Prospectus Supplement, "Events
of Default" under the Indenture will consist of: (i) a default for five days or
more in the payment of any interest on any Note; (ii) a default in the payment
of the principal of or any installment of the principal of any Note when the
same becomes due and payable; (iii) a default in the observance or performance
in any material respect of any covenant or agreement of the Trust made in the
Indenture, or any representation or warranty made by the Trust in the Indenture
or in any certificate delivered pursuant thereto or in connection therewith
having been incorrect as of the time made, and the continuation of any such
default or the failure to cure such breach of a representation or warranty for a
period of 30 days after notice thereof is given to the Trust by the Indenture
Trustee or to the Trust and the Indenture Trustee by the holders of at least 25%
in principal amount of the Notes then outstanding; or (iv) certain events of
bankruptcy, insolvency, receivership or liquidation of the Trust. However, the
amount of principal due and payable on any class of Notes on any Payment Date
(prior to the Final Scheduled Payment Date, if any, for such class) will
generally be determined by amounts available to be deposited in the Note
Distribution Account for such Payment Date. Therefore, unless otherwise
specified in the related Prospectus Supplement, the failure to pay principal on
a class of Notes generally will not result in the occurrence of an Event of
Default unless such class of Notes has a Final Scheduled Payment Date, and then
not until such Final Scheduled Payment Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an Event
of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or a Note Majority may declare the
principal of the Notes to be immediately due and payable. Such declaration may,
under certain circumstances, be rescinded by a Note Majority.
Unless otherwise specified in the related Prospectus Supplement, if the
Notes of any series have been declared due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may and, at the
direction of the Note Majority, shall institute proceedings to collect amounts
due or foreclose on Trust Property, exercise remedies as a secured party, sell
the related Receivables or elect to have the Trust maintain possession of such
Receivables and continue to apply collections on such Receivables as if there
had been no declaration of acceleration. Unless otherwise specified in the
related Prospectus Supplement, the Indenture Trustee, however, will be
prohibited from selling the related Receivables following an Event of Default,
unless (i) the holders of all the outstanding related Notes consent to such
sale; (ii) the proceeds of such sale are sufficient to pay in full the principal
of and the accrued interest on such outstanding Notes at the date of such sale;
or (iii) the Indenture Trustee determines that the proceeds of the Receivables
would not be sufficient on an ongoing basis to make all payments on the Notes as
such payments would have become due if such obligations had not been declared
due and payable, and the Indenture Trustee obtains the consent of the holders of
66 2/3% of the aggregate outstanding amount of the Notes. Unless otherwise
specified in the related Prospectus Supplement, following a declaration upon an
Event of Default that the Notes are immediately due and payable, (i) Noteholders
will be entitled to ratable repayment of principal on the basis of their
respective unpaid principal balances and (ii) repayment in full of the accrued
interest on and unpaid principal balances of the Notes will be made prior to any
further payment of interest or principal on the Certificates.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of such Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, a Note Majority in a series will have the right to
direct the time, method and place of conducting any proceeding or any remedy
available to the Indenture Trustee, and a Note Majority may, in certain cases,
waive any default with respect thereto, except a default in the payment of
principal or interest or a default
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in respect of a covenant or provision of the Indenture that cannot be modified
without the waiver or consent of all of the holders of such outstanding Notes.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture, unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in principal amount of
the outstanding Notes of such series have made written request of the Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee, (iii)
such holder or holders have offered and, if requested, provided to the Indenture
Trustee reasonable indemnity, (iv) the Indenture Trustee has for 60 days failed
to institute such proceeding, (v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such 60-day period by the
holders of a majority in principal amount of such outstanding Notes, and (vi) in
the case of a series of Securities with respect to which a Policy is issued, an
Insurer Default shall have occurred and be continuing.
If an Event of Default occurs and is continuing and if it is actually known
to a responsible officer of the Indenture Trustee, the Indenture Trustee will
mail to each Noteholder notice of the Event of Default within 90 days after it
occurs. Except in the case of a failure to pay principal of or interest on any
Note, the Indenture Trustee may withhold the notice if and so long as it
determines in good faith that withholding the notice is in the interests of the
Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the Seller or the related Trust any bankruptcy, reorganization
or other proceeding under any federal or state bankruptcy or similar law.
Neither the Indenture Trustee nor the Owner Trustee in its individual
capacity, nor any holder of a Certificate including, without limitation, the
Seller, nor any of their respective owners, beneficiaries, agents, officers,
directors, employees, affiliates, successors or assigns will, in the absence of
an express agreement to the contrary, be personally liable for the payment of
the related Notes or for any agreement or covenant of the related Trust
contained in the Indenture.
CERTAIN COVENANTS. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States or any state, (ii) such entity expressly assumes the
Trust's obligation to make due and punctual payments upon the Notes and the
performance or observance of every agreement and covenant of the Trust under the
Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Owner Trustee has been
advised that the then current rating of the related Notes or Certificates then
in effect would not be reduced or withdrawn by the Rating Agencies as a result
of such merger or consolidation, (v) the Security Insurer, if any (prior to an
Insurer Default), has consented to such merger or consolidation, and (vi) the
Owner Trustee has received an opinion of counsel to the effect that such
consolidation or merger would have no material adverse tax consequence to the
Trust or to any related Noteholder or Certificateholder.
Each Trust will not, among other things, (i) except as expressly permitted
by the Indenture, the Purchase Agreement, the Trust Documents or certain related
documents for such Trust (collectively, the "Related Documents"), sell,
transfer, exchange or otherwise dispose of any of the assets of the Trust, (ii)
claim any credit on or make any deduction from the principal and interest
payable in respect of the related Notes (other than amounts withheld under the
Code or applicable state law) or assert any claim against any present or former
holder of such Notes because of the payment of taxes levied or assessed upon the
Trust, (iii) dissolve or liquidate in whole or in part, (iv) permit the validity
or effectiveness of the related Indenture to be impaired or permit any person to
be released from any covenants or obligations with respect to the related Notes
under such Indenture except as may be expressly permitted thereby, or (v) except
as expressly permitted by the Related Documents, permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance to be created on
or extend to or otherwise arise upon or burden the assets of the Trust or any
part thereof, or any interest therein or proceeds thereof.
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No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust." No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture or otherwise in
accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each Trust will be required to file annually
with the related Indenture Trustee a written statement as to the fulfillment of
its obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee will be required
to mail each year to all related Noteholders a brief report relating to its
eligibility and qualification to continue as Indenture Trustee under the related
Indenture, any amounts advanced by it under the Indenture, the amount, interest
rate and maturity date of certain indebtedness owing by the Trust to the
Indenture Trustee in its individual capacity, the property and funds physically
held by the Indenture Trustee as such and any action taken by it that materially
affects the Notes and that has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. The Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with the Indenture Trustee of funds sufficient
for the payment in full of all of such Notes.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the related
Prospectus Supplement. The Indenture Trustee may resign at any time, in which
event the Seller will be obligated to appoint a successor trustee acceptable to
the Security Insurer, if any (prior to an Insurer Default). The Seller may also
remove the Indenture Trustee, with the consent of the Security Insurer, if any
(prior to an Insurer Default), if the Indenture Trustee ceases to be eligible to
continue as such under the Indenture or if the Indenture Trustee becomes
insolvent. In such circumstances, the Seller will be obligated to appoint a
successor trustee acceptable to the Security Insurer, if any (prior to an
Insurer Default). Any resignation or removal of the Indenture Trustee and
appointment of a successor trustee will be subject to any conditions or
approvals, if any, specified in the related Prospectus Supplement and will not
become effective until acceptance of the appointment by a successor trustee.
CERTAIN INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless otherwise provided in the related Prospectus Supplement, the
Securities of each series will be registered in the name of Cede & Co., the
nominee of DTC. Beneficial interests in the Securities will be represented by
book entries on the records of the participating members of DTC. Definitive
Securities will be available only under the limited circumstances described
herein. Holders of the Securities may hold through DTC (in the United States) or
Cedel or Euroclear (as defined herein) (in Europe) if they are participants of
such systems, or indirectly through organizations that are participants in such
systems.
Cedel and Euroclear will hold omnibus positions in the Securities on behalf
of the Cedel Participants (as defined below) and the Euroclear Participants (as
defined below), respectively, through customers' securities accounts in Cedel's
and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries"), which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the State
of New York, 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
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of the Exchange Act. DTC accepts securities for deposit from its participating
organizations ("Participants") and facilitates the clearance and settlement of
securities transactions between Participants in such securities through
electronic book-entry changes in accounts of Participants, thereby eliminating
the need for physical movement of certificates. Participants include securities
brokers and dealers, banks and trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("indirect participants").
Certificate Owners and Note Owners who are not Participants but desire to
purchase, sell or otherwise transfer ownership of Securities may do so only
through Participants (unless and until Definitive Certificates or Definitive
Notes, each as defined below, are issued). In addition, Certificate Owners and
Note Owners will receive all distributions of principal of, and interest on, the
Securities from the Owner Trustee or the Indenture Trustee, as applicable,
through DTC and Participants. Certificate Owners and Note Owners will not
receive or be entitled to receive certificates representing their respective
interests in the Securities, except under the limited circumstances described
below and such other circumstances, if any, as may be specified in the related
Prospectus Supplement.
Unless and until Definitive Securities are issued, it is anticipated that
the only Certificateholder of the Certificates and the only Noteholder of the
Notes, if any, will be Cede & Co., as nominee of DTC. Certificate Owners and
Note Owners will not be recognized by the Owner Trustee as Certificateholders or
by the Indenture Trustee as Noteholders as those terms are used in the related
Trust Documents or Indenture. Certificate Owners and Note Owners will be
permitted to exercise the rights of Certificateholders or Noteholders, as the
case may be, only indirectly through Participants and DTC.
With respect to any series of Securities, while the Securities are
outstanding (except under the circumstances described below), under the rules,
regulations and procedures creating and affecting DTC and its operations (the
"Rules"), DTC is required to make book-entry transfers among Participants on
whose behalf it acts with respect to the Securities and is required to receive
and transmit distributions of principal of, and interest on, the Securities.
Participants with whom Certificate Owners or Note Owners have accounts with
respect to Securities are similarly required to make book-entry transfers and
receive and transmit such distributions on behalf of their respective
Certificate Owners and Note Owners. Accordingly, although Certificate Owners and
Note Owners will not possess Securities, the Rules provide a mechanism by which
Certificate Owners and Note Owners will receive distributions and will be able
to transfer their interests.
With respect to any series of Securities, unless otherwise specified in the
related Prospectus Supplement, Certificates (if any) and Notes (if any) will be
issued in registered form to Certificate Owners and Note Owners, or their
nominees, rather than to DTC (such Certificates and Notes being referred to
herein as "Definitive Certificates" and "Definitive Notes," respectively), only
if (i) DTC, the Seller or the Servicer advises the Owner Trustee or the
Indenture Trustee, as the case may be, in writing that DTC is no longer willing
or able to discharge properly its responsibilities as nominee and depository
with respect to the Certificates or the Notes, and the Seller, the Servicer, the
Owner Trustee or the Indenture Trustee, as the case may be, is unable to locate
a qualified successor, (ii) the Seller or the Administrator (if any) at its sole
option has advised the Owner Trustee or the Indenture Trustee, as the case may
be, in writing that it elects to terminate the book-entry system through DTC and
(iii) after the occurrence of a Servicer Termination Event, the holders
representing a majority of the Certificate Balance (a "Certificate Majority") or
a Note Majority advises the Owner Trustee or the Indenture Trustee, as the case
may be, through DTC, that continuation of a book-entry system is no longer in
their best interests. Upon issuance of Definitive Certificates or Definitive
Notes to Certificate Owners or Note Owners, such Certificates or Notes will be
transferable directly (and not exclusively on a book-entry basis) and registered
holders will deal directly with the Owner Trustee or the Indenture Trustee, as
the case may be, with respect to transfers, notices and distributions.
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DTC has advised the Seller that, unless and until Definitive Certificates or
Definitive Notes are issued, DTC will take any action permitted to be taken by a
Certificateholder or a Noteholder under the related Trust Documents or Indenture
only at the direction of one or more Participants to whose DTC accounts the
Certificates or Notes are credited. DTC has advised the Seller that DTC will
take such action with respect to any fractional interest of the Certificates or
the Notes only at the direction of and on behalf of such Participants
beneficially owning a corresponding fractional interest of the Certificates or
the Notes. DTC may take actions, at the direction of the related Participants,
with respect to some Certificates or Notes which conflict with actions taken
with respect to other Certificates or Notes.
Issuance of Certificates and Notes in book-entry form rather than as
physical certificates or notes may adversely affect the liquidity of
Certificates or Notes in the secondary market and the ability of the Certificate
Owners or Note Owners to pledge them. In addition, since distributions on the
Certificates and the Notes will be made by the Owner Trustee or the Indenture
Trustee to DTC and DTC will credit such distributions to the accounts of its
Participants, with the Participants further crediting such distributions to the
accounts of indirect participants or Certificate Owners or Note Owners,
Certificate Owners and Note Owners may experience delays in the receipt of such
distributions.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants (as defined below) or Euroclear Participants (as defined below), on
the other, will be effected in DTC in accordance with DTC rules on behalf of the
relevant European international clearing systems by its Depositary; however,
such cross-market transactions will require delivery of instructions to the
relevant European international clearing system by the counterparty in such
system in accordance with its rules and procedures and within its established
deadlines (European time). The relevant European international clearing system
will, if the transaction meets its settlement requirements, deliver instructions
to its Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Cedel Participants and Euroclear Participants may not deliver instructions
directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant Cedel or
Euroclear cash account only as of the business day following settlement in DTC.
Cedel is incorporated under the laws of Luxembourg as a professional
depository ("Cedel"). Cedel holds securities for its participating organizations
("Cedel Participants") and facilitates the clearance and settlement of
securities transactions between Cedel Participants through electronic book-entry
changes in accounts of Cedel Participants, thereby eliminating the need for
physical movement of certificates. Transactions may be settled in Cedel in any
of 28 currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the Underwriters. Indirect access to Cedel is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Cedel Participant,
either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through
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simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in Euroclear in any of 32 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing, and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described in Annex I hereto. The Euroclear System is operated by Morgan Guaranty
Trust Company of New York, Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries and may include the Underwriters. Indirect access to
the Euroclear System is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either directly
or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash with the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and provide
to the Owner Trustee a statement to be delivered to the related
Certificateholders on such Distribution Date. On or prior to each Payment Date,
the Servicer will prepare and provide to the Indenture Trustee a statement to be
delivered to the related Noteholders on such Payment Date. Such statements will
be based on the information in the related Servicer's Certificate setting forth
certain information required under the Trust Documents (the "Servicer's
Certificate"). Unless otherwise specified in the related Prospectus Supplement,
each such statement to be delivered to Certificateholders will include the
following information as to the Certificates with respect to such Distribution
Date or the period since the previous Distribution Date, as applicable, and each
such statement to be delivered to Noteholders will include the following
information as to the Notes with respect to such Payment Date or the period
since the previous Payment Date, as applicable:
(i) the amount of the distribution allocable to interest on or with
respect to each class of Securities;
(ii) the amount of the distribution allocable to principal on or with
respect to each class of Securities;
(iii) the Certificate Balance and the Certificate Pool Factor for each
class of Certificates and the aggregate outstanding principal balance and
the Note Pool Factor for each class of Notes, after giving effect to all
payments reported under (ii) above on such date;
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(iv) the amount of the Servicing Fee paid to the Servicer with respect
to the related Monthly Period or Periods, as the case may be;
(v) the Pass-Through Rate or Interest Rate for the next period for any
class of Certificates or Notes with variable or adjustable rates;
(vi) the amount, if any, distributed to Certificateholders and
Noteholders applicable to payments under the related Policy or other form of
credit enhancement, if any; and
(vii) such other information as may be specified in the related
Prospectus Supplement.
Each amount set forth pursuant to subclauses (i), (ii), (iv), (vi) and (vii)
with respect to Certificates or Notes will be expressed as a dollar amount per
$1,000 of the initial Certificate Balance or the initial principal balance of
the Notes, as applicable.
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Owner Trustee, the Indenture Trustee and Cede & Co., as
registered holder of the Certificates and the Notes and the nominee of DTC.
Certificate Owners and Note Owners may receive copies of such reports upon
written request, together with a certification that they are Certificate Owners
or Note Owners, as the case may be, and payment of any expenses associated with
the distribution of such reports, from the Owner Trustee or the Indenture
Trustee, as applicable. See "Reports to Securityholders" and "-Book-Entry
Registration" above.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of a Trust, the Owner Trustee and the
Indenture Trustee, as applicable, will mail to each holder of a class of
Securities who at any time during such calendar year has been a Securityholder,
and received any payment thereon, a statement containing certain information for
the purposes of such Securityholder's preparation of federal income tax returns.
See "Certain Federal Income Tax Consequences."
LISTS OF SECURITYHOLDERS
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Certificates, at such time, if any, as Definitive Certificates
have been issued, the Owner Trustee will, upon written request by three or more
Certificateholders or one or more holders of Certificates evidencing not less
than 25% of the Certificate Balance, within five Business Days after provision
to the Owner Trustee of a statement of the applicants' desire to communicate
with other Certificateholders about their rights under the related Trust
Documents or the Certificates and a copy of the communication that the
applicants propose to transmit, afford such Certificateholders access during
business hours to the current list of Certificateholders for purposes of
communicating with other Certificateholders with respect to their rights under
the Trust Documents. Unless otherwise specified in the related Prospectus
Supplement, the Trust Documents will not provide for holding any annual or other
meetings of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Notes, if any, at such time, if any, as Definitive Notes have
been issued, the Indenture Trustee will, upon written request by three or more
Noteholders or one or more holders of Notes evidencing not less than 25% of the
aggregate principal balance of the related Notes, within five Business Days
after provision to the Indenture Trustee of a statement of the applicants'
desire to communicate with other Noteholders about their rights under the
related Indenture or the Notes and a copy of the communication that the
applicants propose to transmit, afford such Noteholders access during business
hours to the current list of Noteholders for purposes of communicating with
other Noteholders with respect to their rights under the Indenture. Unless
otherwise specified in the related Prospectus Supplement, the Indenture will not
provide for holding any annual or other meetings of Noteholders.
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DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE
TRUST DOCUMENTS
Except as otherwise specified in the related Prospectus Supplement, the
following summary describes certain terms of the Purchase Agreements (each a
"Purchase Agreement") pursuant to which the Seller will purchase Receivables
from Arcadia Financial, and certain terms of either (i) the Pooling and
Servicing Agreements or (ii) the Sale and Servicing Agreements and the Trust
Agreements (in either case collectively referred to as the "Trust Documents")
pursuant to which the Seller will sell and assign such Receivables to a Trust
and the Servicer will agree to service such Receivables on behalf of the Trust,
and pursuant to which such Trust will be created and Certificates, if any, will
be issued. Forms of the Purchase Agreement and the Trust Documents have been
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. The Seller will provide a copy of such agreements (without exhibits) upon
request to a holder of Securities described therein. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Purchase Agreement and the Trust
Documents. Where particular provisions or terms used in the Purchase Agreement
and the Trust Documents are referred to, the actual provisions (including
definitions of terms) are incorporated by reference as part of such summary.
SALE AND ASSIGNMENT OF THE RECEIVABLES
On or prior to the Closing Date with respect to a series of Securities
specified in the related Prospectus Supplement, Arcadia Financial will enter
into one or more Purchase Agreements with the Seller pursuant to which Arcadia
Financial will, on or prior to such Closing Date, sell and assign to the Seller,
without recourse, its entire interest in and to the related Receivables,
including its security interest in the Financed Vehicles securing such
Receivables and its rights to receive all payments on, or proceeds with respect
to, such Receivables to the extent paid or payable after the applicable Cutoff
Date. In connection with its warehouse financing arrangements, Arcadia Financial
may also enter into Purchase Agreements with other special-purpose subsidiaries
of Arcadia Financial ("Warehousing Subsidiaries"). These Warehousing
Subsidiaries would obtain warehouse financing for some or all of the Receivables
prior to the Closing Date for a series of Securities; on the Closing Date for
the related series of Securities, the Warehousing Subsidiary would assign to the
Seller its entire interest in the related Receivables, together with its rights
against Arcadia Financial under the related Purchase Agreement with respect to
those Receivables. Pursuant to each Purchase Agreement, Arcadia Financial will
agree that, upon the occurrence of a Repurchase Event under the related Trust
Documents with respect to any of the Receivables of a Trust, the Owner Trustee
on behalf of the Security Insurer (if any) and the Certificateholders (if any)
will be entitled to require Arcadia Financial to repurchase such Receivables
from the Trust. Such rights of the Trust under each Purchase Agreement will
constitute part of the property of the Trust and may be enforced directly by the
Owner Trustee on behalf of the Security Insurer (if any) and the
Certificateholders (if any). In addition, the Owner Trustee will pledge such
rights to the Indenture Trustee as collateral for the Notes, if any.
On the Closing Date, the Seller will sell and assign to the Owner Trustee,
without recourse, the Seller's entire interest in the related Receivables and
the proceeds thereof, including its security interests in the Financed Vehicles.
Each Receivable transferred by the Seller to the Trust will be identified in a
schedule appearing as an exhibit to the related Trust Documents (the "Schedule
of Receivables"). Concurrently with such sale and assignment, the Owner Trustee
will execute and deliver the related certificates representing the Certificates
to or upon the order of the Seller, and the Owner Trustee will execute and the
Indenture Trustee will authenticate and deliver the Notes, if any, to or upon
the order of the Seller.
Unless otherwise specified in the related Prospectus Supplement, in each
Purchase Agreement, Arcadia Financial will warrant to the Seller and the Owner
Trustee, and in the Trust Documents, the Seller will warrant to the Owner
Trustee, among other things, that (except as otherwise specified in the related
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Prospectus Supplement): (i) each Receivable (A) has created or will create a
valid, binding and enforceable first priority security interest in favor of
Arcadia Financial in the Financed Vehicle (and, within 180 days after the
Closing Date, all title documents to the Financed Vehicles will show Arcadia
Financial as first lienholder), which security interest has been validly
assigned by Arcadia Financial to the Seller and by the Seller to the Owner
Trustee, (B) was originated by a Dealer for the retail sale of a Financed
Vehicle in the ordinary course of such Dealer's business, was fully and properly
executed by the parties thereto, was purchased by Arcadia Financial from such
Dealer under an existing Dealer Agreement with Arcadia Financial and was validly
assigned by such Dealer to Arcadia Financial, (C) contains customary and
enforceable provisions adequate to enable realization against the collateral
security and (D) except for any Balloon Payment Receivables, is a fully
amortizing simple interest receivable which provides for level monthly payments
(other than with respect to the first and the final payments) which, if made
when due, will fully amortize the amount financed over the original term; (ii)
no selection procedures adverse to the Securityholders were utilized in
selecting the Receivables from those receivables owned by Arcadia Financial
which meet the selection criteria contained in the Trust Documents; (iii) all
requirements of applicable Federal, state and local laws, and regulations
thereunder, in respect of all of the Receivables and each and every sale of the
Financed Vehicles have been complied with in all material respects; (iv) each
Receivable represents the genuine, legal, valid and binding payment obligation
of the Obligor thereon, enforceable in accordance with its terms, except as may
be limited by laws affecting creditors' rights generally or as may be modified
by the application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"); (v) (A) immediately before the conveyance of each
Receivable to the Trust, such Receivable will be secured by an enforceable and
validly perfected first priority security interest in the Financed Vehicle in
favor of the Seller as secured party, (B) immediately after the conveyance of
each Receivable to the Trust, such Receivable will be secured by an enforceable
and validly perfected first priority security interest in the Financed Vehicle
in favor of the Trust as secured party or, in each case, all necessary and
appropriate action has been commenced and will be completed within 180 days that
would result in such a security interest and (C) as of the Cutoff Date there
were no security interests, liens, charges, pledges, preferences, equities or
encumbrances of any kind, claims or rights of others or claims for taxes, work,
labor or materials affecting a Financed Vehicle (each, a "Lien") which are or
may be Liens prior or equal to the Lien of the related Receivable; (vi) there
has been no default, breach, violation or event permitting acceleration under
the terms of any Receivable (other than payment delinquencies of not more than
30 days), and there has been no waiver of any of the foregoing; and as of the
Cutoff Date, no Financed Vehicle had been repossessed; (vii) immediately prior
to the conveyance of the Receivables to the Seller, Arcadia Financial had good
and indefeasible title thereto and was the sole owner thereof, free of any Lien;
immediately prior to the conveyance of the Receivables to the Trust, the Seller
had good and indefeasible title thereto and was the sole owner thereof, free of
any Lien; and upon conveyance of the Receivables by the Seller to the Trust
pursuant to the Trust Documents, the Trust will have good and indefeasible title
to and will be the sole owner of the Receivables, free of any Lien; (viii) no
Dealer has a participation in or other right to receive proceeds of any
Receivable, and neither Arcadia Financial nor the Seller has taken any action to
convey any right to any person that would result in such person having a right
to payments received with respect to any Receivable; (ix) neither Arcadia
Financial nor the Seller has done anything to convey any right to any person
that would impair the rights of the Trust, the Certificateholders or the
Noteholders in any Receivable or the proceeds thereof; (x) each Receivable was
originated by a Dealer and was sold by the Dealer to Arcadia Financial without
any fraud or misrepresentation on the part of such Dealer; (xi) no Obligor is
the United States of America or any State or any agency, department, subdivision
or instrumentality thereof; (xii) no Receivable is assumable by another person
in a manner that would release the Obligor thereof from such Obligor's
obligations to Arcadia Financial with respect to such Receivable; (xiii) no
Receivable was originated in, or is subject to the laws of, any jurisdiction the
laws of which would make unlawful, void or voidable the sale, transfer and
assignment of such Receivable under the Purchase Agreement or the Trust
Documents or pursuant to transfers of the Securities; (xiv) all filings and
other actions required to be made, taken or performed by any person in any
jurisdiction to give the Trust a first priority perfected lien or ownership
interest in the Receivables will have been made, taken or
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performed; (xv) there exists a Receivable File pertaining to each Receivable,
and such Receivable File contains (A) the fully executed original of the
Receivable, (B) a certificate of insurance or application form for insurance
signed by the Obligor, or copies thereof, (C) the original lien certificate or
application therefor and (D) a credit application signed by the Obligor, or a
copy thereof; each of such documents required to be signed by the Obligor has
been signed by the Obligor in the appropriate spaces, all blanks have been
properly filled in and each form has otherwise been correctly prepared; and the
complete Receivable File for each Receivable is in the possession of a
custodian; (xvi) there is only one original executed copy of each Receivable;
(xvii) the Receivables constitute chattel paper within the meaning of the UCC as
in effect in the States of New York and Minnesota; (xviii) each Receivable was
entered into by an Obligor who at the Cutoff Date had not been identified on the
records of Arcadia Financial as being the subject of a current bankruptcy
proceeding; (xix) the computer tape containing information with respect to the
Receivables that was made available by the Seller to the Owner Trustee on the
Closing Date and was used to select the Receivables (the "Computer Tape") was
complete and accurate as of the Cutoff Date and includes a description of the
same Receivables that are described in the Schedule of Receivables; (xx) by the
Closing Date, the portions of the electronic master record of retail installment
sale contracts and promissory notes of Arcadia Financial (the "Electronic
Ledger") relating to the Receivables will have been clearly and unambiguously
marked to show that the Receivables constitute part of the Trust Property and
are owned by the Trust in accordance with the terms of the Trust Documents;
(xxi) the information set forth in the Schedule of Receivables was produced from
the Electronic Ledger and was true and correct in all material respects as of
the close of business on the Cutoff Date; (xxii) as of the Closing Date, each
Financed Vehicle was covered by a comprehensive and collision insurance policy
(A) in an amount at least equal to the lesser of (1) its maximum insurable value
or (2) the principal amount due from the Obligor under the related Receivable,
(B) naming Arcadia Financial as loss payee and (C) insuring against loss and
damage due to fire, theft, transportation, collision and other risks generally
covered by comprehensive and collision insurance coverage; and no Financed
Vehicle was or had previously been insured under a policy of force-placed
insurance; (xxiii) no Receivable has been satisfied, subordinated or rescinded;
the Financed Vehicle securing each Receivable has not been released from the
lien of the related Receivable in whole or in part; and no provision of a
Receivable has been waived, altered or modified in any respect, except by
instruments or documents contained in the Receivable File; (xxiv) no Receivable
is subject to any right of rescission, set-off, counterclaim or defense; (xxv)
no Receivable was more than 30 days past due as of the Cutoff Date and (xxvi)
each Receivable had a remaining principal balance as of the Cutoff Date equal to
or greater than $500.00.
The warranties of Arcadia Financial and the Seller will be made as of the
execution and delivery of each Purchase Agreement and the related Trust
Documents and will survive the sale, transfer and assignment of the related
Receivables and other Trust Property to the Trust but will speak only as of the
date made.
In the event of a breach by Arcadia Financial of any representation or
warranty made by it in a Purchase Agreement with respect to a Receivable that
materially and adversely affects the interests of the Securityholders, the
Security Insurer (if any) or the Trust in that Receivable (any such breach by
Arcadia Financial being a "Repurchase Event"), Arcadia Financial, unless it
cures the breach by the second Accounting Date after the date on which Arcadia
Financial becomes aware of or receives written notice from the Owner Trustee,
the Indenture Trustee, the Security Insurer, if any, or the Servicer of such
breach, will be obligated to repurchase the Receivable from the Trust. Any such
repurchase shall be made on the Deposit Date immediately following such second
Accounting Date at a price equal to the Purchase Amount as of such second
Accounting Date. The "Purchase Amount" of any Receivable means, with respect to
any Accounting Date, the outstanding principal balance of such Receivable as of
such Accounting Date, plus accrued and unpaid interest thereon. The "Deposit
Date" with respect to any Distribution Date is the Business Day immediately
preceding the Determination Date for such Distribution Date. An "Accounting
Date" is the last day (whether or not a Business Day) of any calendar month.
This repurchase obligation may be enforced by the Security Insurer (if any), or
by the Owner Trustee or the
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Indenture Trustee on behalf of the Certificateholders and the Noteholders,
respectively, and will constitute the sole remedy available to the
Certificateholders, the Noteholders, the Security Insurer (if any), unless
otherwise specified in the related Prospectus Supplement, the Owner Trustee or
the Indenture Trustee against Arcadia Financial or the Seller for any such
uncured breach, except that pursuant to the Trust Documents, Arcadia Financial
will indemnify the Owner Trustee, the Indenture Trustee, the Trust, the Backup
Servicer, the Collateral Agent, the Security Insurer (if any), and the
Certificateholders and Noteholders against losses, damages, liabilities and
claims which may be asserted against any of them as a result of third-party
claims arising out of the facts giving rise to such breach.
Upon the purchase by Arcadia Financial of a Warranty Receivable, the Owner
Trustee will convey such Receivable and the related Trust Property to Arcadia
Financial.
CUSTODY OF RECEIVABLE FILES
Unless otherwise specified in the related Prospectus Supplement, Arcadia
Financial initially will be appointed to act as custodian for the Receivable
Files of each Trust. Prior to any such appointment, the Trust and Arcadia
Financial or such other institution specified in the related Prospectus
Supplement, as the case may be, shall enter into a custodian agreement pursuant
to which Arcadia Financial or such other institution will agree to hold the
Receivable Files on behalf of the related Trust. Any such custodian agreement
may be terminated by the Trust and, if Arcadia Financial is custodian, by the
Security Insurer, on 30 days' notice to Arcadia Financial or such other
institution or, in the case of termination by the Security Insurer of Arcadia
Financial as custodian, immediately. If Arcadia Financial resigns or is
terminated as the Servicer, any custodian agreement with Arcadia Financial shall
terminate at the same time.
The Receivable Files, if held by Arcadia Financial as custodian, will be
stamped or otherwise marked to indicate that such Receivables have been sold to
the related Trust. The Receivable Files will also be physically segregated.
Despite these precautions, if, through inadvertence or otherwise, any of the
Receivables were sold to another party (or a security interest therein were
granted to another party) that purchased (or took such security interest in) any
of such Receivables in the ordinary course of its business and took possession
of such Receivables, the purchaser (or secured party) would acquire an interest
in the Receivables superior to the interest of the related Trust if the
purchaser (or secured party) acquired (or took a security interest in) the
Receivables for new value and without actual knowledge of such Trust's interest.
See "Certain Legal Aspects of the Receivables-Rights in the Receivables."
COLLECTIONS
With respect to each Trust, the Servicer will establish one or more
Collection Accounts in the name of the Owner Trustee or, in the case of any
series including one or more classes of Notes, in the name of the Indenture
Trustee for the benefit of the related Securityholders. If so specified in the
related Prospectus Supplement, the Owner Trustee will establish and maintain for
each series an account, in the name of the Owner Trustee on behalf of the
related Certificateholders, in which amounts released from the Collection
Account and any Pre-Funding Account and any amounts received from any source of
credit enhancement for distribution to such Certificateholders will be deposited
and from which all distributions to such Certificateholders will be made (the
"Certificate Distribution Account"). With respect to any series including one or
more classes of Notes, the Indenture Trustee will establish and maintain for
each series an account, in the name of the Indenture Trustee on behalf of the
related Noteholders, in which amounts released from the Collection Account and
any Pre-Funding Account and any amounts received from any source of credit
enhancement for payment to such Noteholders will be deposited and from which all
distributions to such Noteholders will be made (the "Note Distribution
Account"). The Collection Account, the Certificate Distribution Account (if
any), and the Note Distribution Account (if any), are referred to herein
collectively as the "Designated Accounts." Any other accounts to be established
with respect to a Trust will be described in the related Prospectus Supplement.
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Each Designated Account will be an Eligible Account maintained with the
Owner Trustee, the Indenture Trustee and/or other depository institutions. An
"Eligible Account" is (i) a segregated trust account that is maintained with the
corporate trust department of a depository institution (acceptable to the
Security Insurer, if any, unless otherwise specified in the related Prospectus
Supplement) or (ii) a segregated demand deposit account maintained with a
depository institution or trust company organized under the laws of the United
States of America, or any of the states thereof, or the District of Columbia,
that has a certificate of deposit, short-term deposit or commercial paper rating
of at least A-1+ by S&P and P-1 by Moody's (the "Required Deposit Rating"), and
that is acceptable to the Security Insurer, if any (prior to an Insurer Default,
unless otherwise specified in the related Prospectus Supplement). On the Closing
Date specified in the related Prospectus Supplement, the Servicer will cause to
be deposited in the Collection Account all payments on the Receivables received
by the Servicer after the Cutoff Date and on or prior to the second Business Day
preceding the Closing Date (plus amounts on deposit in the Lockbox Account (as
defined below) on such second Business Day).
Unless otherwise specified in the related Prospectus Supplement, Arcadia
Financial will take (or will have taken) steps to cause all payments by Obligors
on the Receivables held by any Trust to be made by check mailed to a bank
(initially Harris Trust and Savings Bank, unless otherwise provided in the
related Prospectus Supplement) acting as agent for the Owner Trustee and for
other owners of automobile receivables serviced by Arcadia Financial (the
"Lockbox Bank"). Unless otherwise specified in the related Prospectus
Supplement, the identity of the Lockbox Bank may be changed at any time by the
Security Insurer, if any (prior to an Insurer Default). Unless otherwise
specified in the related Prospectus Supplement, all payments by check on the
Receivables and all payments made by automatic deduction from Obligors' checking
accounts will be deposited in a segregated account maintained by the Lockbox
Bank (the "Lockbox Account") and will be transferred by the Lockbox Bank into
the Collection Account within two Business Days of receipt. If the Servicer
continues to receive payments from any Obligor other than to the Lockbox
Account, the Servicer will take reasonable action to cause the Obligor to make
such payments to the Lockbox Account, including sending additional instruction
letters to such Obligor.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will deposit all payments on the Receivables held by any Trust received
directly by the Servicer from Obligors and all proceeds of Receivables collected
directly by the Servicer during each Monthly Period into the Collection Account
not later than the Business Day after receipt. Notwithstanding the foregoing and
unless otherwise provided in the related Prospectus Supplement, the Servicer may
utilize an alternative remittance schedule acceptable to the Servicer and the
Security Insurer, if any (prior to an Insurer Default), if the Servicer provides
to the Owner Trustee and the Indenture Trustee written confirmation from each
Rating Agency that such alternative remittance schedule will not result in the
downgrading or withdrawal by such Rating Agency of the rating(s) then assigned
to the Securities. Arcadia Financial and the Servicer will also deposit into the
Collection Account on or before the Deposit Date the Purchase Amount of each
Warranty Receivable or Administrative Receivable to be purchased by it as of the
related Accounting Date.
For any series of Securities, funds in the Designated Accounts and any other
accounts identified in the related Prospectus Supplement will be invested, as
provided in the related Trust Documents, at the direction of the Servicer in
"Eligible Investments," consisting (unless otherwise specified in the related
Prospectus Supplement) of: interest-bearing obligations issued or guaranteed as
to principal and interest by the United States or any agency or instrumentality
of the United States, the obligations of which are backed by the full faith and
credit of the United States; interest-bearing obligations issued or guaranteed
by the Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation as long as such obligations are assigned the highest credit rating
by S&P and Moody's; demand or time deposits, certificates of deposit of and
certain other obligations of domestic depositary institutions with short-term
unsecured debt obligations assigned the highest credit rating by S&P and
Moody's; certain repurchase obligations with respect to the government
securities described above and entered into with a domestic depository
institution or trust company, the deposits of which are rated at least A-1+ by
S&P and P-1 by Moody's; certain corporate debt securities assigned the highest
credit rating by S&P and Moody's; certain
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commercial paper rated in the highest credit rating category by S&P and Moody's;
and certain other securities meeting the criteria specified in the related Trust
Documents. Eligible Investments shall mature no later than the Business Day
preceding the applicable Distribution Date or Payment Date, as the case may be,
for the Monthly Period to which such amounts relate. Investments in Eligible
Investments will be made in the name of the Owner Trustee or the Indenture
Trustee, as the case may be, and such investments will not be sold or disposed
of prior to their maturity.
Unless otherwise specified in the related Prospectus Supplement, collections
or recoveries on a Receivable (other than late fees or certain other similar
fees or charges) received during a Monthly Period and Purchase Amounts deposited
with the Owner Trustee prior to a Distribution Date will be applied first to any
outstanding Monthly Advances made by the Servicer with respect to such
Receivable, and then to interest and principal on the Receivable in accordance
with the terms of the Receivable.
As an administrative convenience and subject to certain conditions specified
in the Trust Documents, the Servicer will be permitted to make deposits of
amounts actually collected by it in a Monthly Period net of distributions to be
made to it with respect to such Monthly Period, which amounts may be netted
prior to any such remittance for the Monthly Period. The Servicer will account,
however, to the Owner Trustee, the Indenture Trustee, the Security Insurer, if
any, the Certificateholders and the Noteholders as if all such deposits and
distributions were made individually. The Servicer will be entitled to withhold,
or to be reimbursed from amounts otherwise payable into, or on deposit in, the
Collection Account with respect to a Monthly Period, amounts previously
deposited in the Collection Account but later determined to have resulted from
mistaken deposits or postings or checks returned for insufficient funds.
SERVICING PROCEDURES
The Servicer will make reasonable efforts, consistent with the customary
servicing procedures employed by the Servicer with respect to Receivables owned
or serviced by it, to collect all payments due with respect to the Receivables
held by any Trust and, in a manner consistent with the Trust Documents, will
follow its customary collection procedures with respect to motor vehicle loans
that it services for itself and others.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will covenant in the related Trust Documents that it will not extend
the monthly payments under a Receivable more than a maximum of two times in any
twelve-month period, six months in the aggregate, and that the cumulative
extensions with respect to any Receivable will not cause the term of such
Receivable to extend beyond the last day of the Monthly Period immediately
preceding the Final Scheduled Distribution Date specified in the related
Prospectus Supplement. Except for the extensions described above and except for
changes in the day of the month on which the due date of a Receivable occurs or
the reamortization of scheduled payments following a partial principal
prepayment, the Servicer cannot, without the consent of the Security Insurer, if
any (prior to an Insurer Default) and, subject to the exceptions, if any,
specified in the related Prospectus Supplement, otherwise agree to amend or
modify any Receivable. Unless otherwise specified in the related Prospectus
Supplement, the Servicer may, with the consent of the Security Insurer, if any
(prior to an Insurer Default) and subject to certain other conditions, agree to
modify a Receivable to avoid a prepayment by the Obligor, provided that such
modification may not cause the APR on such Receivable to be below a rate equal
to the highest Interest Rate or Pass-Through Rate on the related Securities plus
1.5%, nor may such modification cause the term of the modified Receivable to
extend beyond the last day of the Monthly Period immediately preceding the Final
Scheduled Distribution Date specified in the related Prospectus Supplement.
Under current Treasury Regulations, depending on the characterization of the
related Trust for federal income tax purposes, no such modification of a
Receivable may change the APR by more than .25% or, if greater, 5% of the
unmodified APR of such Receivable. The Servicer will also covenant that it will
not release a Financed Vehicle from the security interest granted by the
Receivable except when the Receivable has been paid in full or as otherwise
contemplated by the Trust Documents.
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Except as otherwise provided in the related Prospectus Supplement, upon the
discovery by any of the Servicer, the Security Insurer, if any, the Owner
Trustee or the Indenture Trustee, or receipt of written notice by the Servicer
of any breach by the Servicer of certain of its covenants that materially and
adversely affects the interests of a Trust, the Security Insurer (if any) or the
related Securityholders in a Receivable (an "Administrative Receivable"), unless
such breach shall have been cured by the second Accounting Date following the
Servicer's discovery or receipt of written notice of such breach, the Servicer
will be required to purchase the related Receivable for the Purchase Amount on
the related Deposit Date. The purchase obligation will constitute the sole
remedy available to the Security Insurer (if any), the Certificateholders, the
Owner Trustee on behalf of Certificateholders, the Noteholders or the Indenture
Trustee on behalf of Noteholders against the Servicer for any such uncured
breach, except with respect to certain indemnities of the Servicer under the
Trust Documents.
Under the Trust Documents, the Servicer will be required to use its best
efforts to repossess or otherwise comparably convert the ownership of any
Financed Vehicle securing a Receivable with respect to which the Servicer has
determined that payments thereunder are not likely to be resumed as soon as
practicable after default on such Receivable, but in no event later than the day
on which any portion of a Scheduled Payment has become 91 days delinquent. The
Servicer is authorized to follow such of its normal collection practices and
procedures as it deems necessary or advisable to realize upon any Receivable.
The Servicer may repossess and sell the Financed Vehicle securing such
Receivable at judicial sale, or take any other action permitted by applicable
law. See "Certain Legal Aspects of the Receivables." The Servicer will be
entitled to recover all reasonable expenses incurred by it in connection
therewith. The proceeds of such realization (net of such expenses) will be
deposited in the Collection Account at the time and in the manner described
above under "-Collections."
The Trust Documents will provide that the Servicer will indemnify and defend
the Owner Trustee, the Indenture Trustee, the Backup Servicer, the Trust, the
Security Insurer (if any) and the Securityholders against, among other things,
any and all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel and expenses of litigation, arising out
of or resulting from the use, ownership or operation by the Servicer or any
affiliate thereof of any Financed Vehicle or in respect of any action taken or
failed to be taken by the Servicer with respect to any portion of the Trust
Property in violation of the provisions of the Trust Documents. The Servicer's
obligations to indemnify the Owner Trustee, the Indenture Trustee, the Backup
Servicer, the Trust, the Security Insurer (if any) and the Securityholders for
the Servicer's actions or omissions will survive the removal of the Servicer but
will not apply to any action or omission of a successor Servicer.
SERVICING COMPENSATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Servicer will be entitled to receive
the Servicing Fee for each Monthly Period in an amount equal to the product of
one-twelfth of the Servicing Rate and the Aggregate Principal Balance as of the
first day of such Monthly Period. The Servicer also will be entitled to collect
and retain any late fees or other administrative fees or similar charges allowed
by the terms of the Receivables or applicable law. Unless otherwise provided in
the related Prospectus Supplement, the "Servicing Rate" will equal 1.25% per
annum calculated on the basis of a 360-day year consisting of twelve 30-day
months. The Servicing Fee and any additional servicing compensation will be paid
out of collections on or with respect to the Receivables prior to distributions
to Certificateholders and Noteholders. Unless otherwise specified in the related
Prospectus Supplement, a "Monthly Period" with respect to any Distribution Date
is the calendar month immediately preceding the month in which the Distribution
Date occurs.
Arcadia Financial, as Servicer, will be required to pay all expenses
incurred by it in connection with its servicing activities (including fees,
expenses and disbursements of the Owner Trustee, the Indenture Trustee, the
Lockbox Bank, the Custodian and independent accountants, taxes imposed on the
Servicer and expenses incurred in connection with distributions and reports to
Certificateholders and Noteholders and the Security Insurer (if any)), except
certain expenses incurred in connection with realizing upon the Receivables.
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MONTHLY ADVANCES
Unless otherwise provided in the related Prospectus Supplement, if the
amount deposited in the related Collection Account allocable to interest with
respect to any Receivable in any Monthly Period is less than the full amount of
interest accrued on such Receivable for the number of calendar days in such
Monthly Period (calculated according to the method specified in the related
retail installment sale contract or promissory note at the APR on the Principal
Balance of such Receivable as of the Accounting Date preceding such Distribution
Date), the Servicer will make a Monthly Advance equal to the amount of such
shortfall; provided, however, that the Servicer shall not be required to make a
Monthly Advance with respect to a Receivable extended for any Monthly Period
during which no Scheduled Payment is due according to the terms of such
extension; and provided further, that the Servicer shall not be required to make
a Monthly Advance with respect to a Receivable that is less than 31 days
delinquent. The Servicer will be reimbursed for any Monthly Advances from
subsequent payments or collections relating to the Receivable or from the
Purchase Amount of such Receivable, or in the case of a Liquidated Receivable,
from Liquidation Proceeds of such Receivable. If such Receivable becomes a
Liquidated Receivable and such Liquidation Proceeds are insufficient fully to
reimburse the Servicer, the Servicer will be entitled to be reimbursed from
collections on other Receivables. If, by reason of reimbursement of the Servicer
for Monthly Advances, there is a deficiency in a Scheduled Payment, the Servicer
will be obligated to advance the deficiency, subject to the limitations
described above.
DISTRIBUTIONS
With respect to each Trust, beginning on the Distribution Date or Payment
Date, as applicable, specified in the related Prospectus Supplement,
distributions of principal and interest (or, where applicable, of principal or
interest only) on each class of Securities entitled thereto will be made by the
Owner Trustee or the Indenture Trustee, as applicable, to the Certificateholders
and the Noteholders. The timing, calculation, allocation, order, source,
priorities of and requirements for all distributions to each class of
Certificateholders and all payments to each class of Noteholders will be set
forth in the related Prospectus Supplement.
CREDIT ENHANCEMENT
The amounts and types of credit enhancement arrangements and the provider
thereof, if applicable, with respect to each class of Securities will be set
forth in the related Prospectus Supplement. If and to the extent provided in the
related Prospectus Supplement, credit enhancement may be in the form of a
financial guaranty insurance policy, subordination of one or more classes of
Securities, reserve accounts, overcollateralization, letters of credit, credit
or liquidity facilities, repurchase obligations, third party payments or other
support, cash deposits or such other arrangements as may be described in the
related Prospectus Supplement or any combination of two or more of the
foregoing. If specified in the applicable Prospectus Supplement, credit
enhancement for a series of Securities may cover one or more other series of
Securities.
The presence of credit enhancement is intended to enhance the likelihood of
receipt by the Certificateholders and the Noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
Certificateholders and the Noteholders will experience losses. Unless otherwise
specified in the related Prospectus Supplement, the credit enhancement for a
class of Securities will not provide protection against all risks of loss and
will not guarantee repayment of the entire principal and interest thereon. If
losses occur which exceed the amount covered by any credit enhancement or which
are not covered by any credit enhancement, Securityholders will bear their
allocable share of deficiencies. In addition, if a form of credit enhancement
covers more than one series of Securities, Securityholders of any such series
will be subject to the risk that such credit enhancement will be exhausted by
the claims of Securityholders of other series.
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EVIDENCE AS TO COMPLIANCE
The Trust Documents will require the Servicer to cause a firm of independent
certified public accountants to furnish to the Owner Trustee and the Indenture
Trustee, the Security Insurer, if any, and each Rating Agency, on or before
March 31 of each year (or, if the Servicer's fiscal year ends on a date other
than December 31, the date 90 days after the end of the Servicer's fiscal year),
beginning on the first March 31 after the Closing Date, with respect to the
twelve months ended the immediately preceding December 31 or other fiscal
year-end (or such other period as shall have elapsed from the Closing Date to
the date of such certificate), a statement addressed to the Board of Directors
of the Servicer, to the Owner Trustee, the Indenture Trustee, the Backup
Servicer and the Security Insurer, if any, as to compliance by the Servicer
during such period with certain standards relating to the servicing of the
Receivables set forth in the Trust Documents. A copy of such statement may be
obtained by any Certificate Owner or Note Owner upon compliance with the
requirements described above. See "Certain Information Regarding the
Securities-Statements to Securityholders" above.
The Trust Documents will also provide for delivery to the Owner Trustee, the
Indenture Trustee, the Security Insurer, if any, and each Rating Agency, if any,
and the Backup Servicer, on or before March 31 (or, if the Servicer's fiscal
year ends on a date other than December 31, the date 90 days after the end of
the Servicer's fiscal year) of each year, beginning on the first March 31
following the Closing Date, of an officers' certificate signed by any two of the
president, any vice-president or assistant vice president, or the controller of
the Servicer (each, a "Servicer Responsible Officer"), dated as of December 31
of such year (or such other date on which the Servicer's fiscal year ends),
stating that (i) a review of the activities of the Servicer during the preceding
12-month period (or such other period as shall have elapsed from the Closing
Date to the date of the first such certificate) and of its performance under the
Trust Documents has been made under such officer's supervision, and (ii) to such
officer's knowledge, based on such review, the Servicer has fulfilled all its
obligations under the Trust Documents throughout such period, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof. A copy of such
certificate may be obtained by any Certificate Owner or Note Owner upon
compliance with the requirements described above. See "Certain Information
Regarding the Securities-Statements to Securityholders" above.
CERTAIN MATTERS REGARDING THE SERVICER
Unless otherwise provided in the related Prospectus Supplement, if a Policy
has been issued with respect to a series of Securities, Arcadia Financial's
appointment as Servicer under the related Trust Documents will run for
successive 90-day periods, subject to renewal by the Security Insurer, if any
(prior to an Insurer Default). It is expected that the Security Insurer (if any)
will renew Arcadia Financial's appointment as Servicer until such time, if any,
as a Servicer Termination Event shall have occurred. Unless otherwise provided
in the related Prospectus Supplement, if an Insurer Default occurs or if no
Policy is issued with respect to a series, Arcadia Financial's appointment as
Servicer under the related Trust Documents will continue until such time as it
resigns, is terminated as Servicer, or until such time, if any, as a Servicer
Termination Event shall have occurred under the related Trust Documents. The
related Trust Documents will provide that the Servicer may not resign from its
obligations and duties as Servicer thereunder, except upon a determination (as
evidenced by an opinion of independent counsel, delivered and acceptable to the
Owner Trustee, the Indenture Trustee and the Security Insurer, if any (prior to
an Insurer Default)), that by reason of a change in legal requirements its
performance of such duties would cause it to be in violation of such legal
requirements in a manner which would result in a material adverse effect on the
Servicer. No such resignation will become effective until the Backup Servicer or
other successor Servicer has assumed the servicing obligations and duties under
the related Trust Documents.
Unless otherwise provided in the related Prospectus Supplement, any
corporation or other entity into which the Servicer may be merged or
consolidated, resulting from any merger or consolidation to which the Servicer
is a party, which acquires by conveyance, transfer or lease substantially all of
the assets of the
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Servicer or succeeding to all or substantially all the business of the Servicer,
where the Servicer is not the surviving entity, which corporation or other
entity assumes every obligation of the Servicer under each Trust Document, will
be the successor to the Servicer under the related Trust Documents; provided,
however, that (i) such entity is an Eligible Servicer, (ii) immediately after
giving effect to such transaction, no Servicer Termination Event, no event of
default under the agreement (if any), providing for the issuance of the Policy
(the "Insurance Agreement") (prior to an Insurer Default) and no event which,
after notice or lapse of time, or both, would become a Servicer Termination
Event or an event of default under the related Insurance Agreement, if any
(prior to an Insurer Default), shall have occurred and be continuing, (iii) the
Servicer shall have delivered to the Owner Trustee, the Indenture Trustee and
the Security Insurer (if any) an officers' certificate and an opinion of counsel
each stating that such consolidation, merger or succession and such agreement of
assumption comply with the related Trust Documents and that all conditions
precedent provided for in the Trust Documents relating to such transaction have
been complied with, and (iv) the Servicer shall have delivered an opinion of
counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interests of the
Owner Trustee and the Indenture Trustee in the Receivables and the other Trust
Property and reciting the details of such filings, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest.
INDEMNIFICATION AND LIMITS ON LIABILITY
Unless otherwise specified in the related Prospectus Supplement, the Trust
Documents will provide that the Servicer will be liable only to the extent of
the obligations specifically undertaken by it under the Trust Documents and will
have no other obligations or liabilities thereunder. The Trust Documents will
further provide that neither the Servicer nor any of its directors, officers,
employees and agents will have any liability to the Trust, the
Certificateholders or the Noteholders or the Security Insurer, if any, except as
provided in the Trust Documents, for any action taken or for refraining from
taking any action pursuant to the Trust Documents, other than any liability that
would otherwise be imposed by reason of the Servicer's breach of the Trust
Documents or willful misfeasance, bad faith or negligence (including errors in
judgment) in the performance of its duties, or by reason of reckless disregard
of obligations and duties under the Trust Documents or any violation of law.
The Servicer may, with the prior consent of the Security Insurer, if any
(prior to an Insurer Default), the Owner Trustee, the Indenture Trustee, if any,
and the Backup Servicer, delegate duties under the related Trust Documents to
any of its affiliates. In addition, the Servicer may at any time perform the
specific duty of repossessing Financed Vehicles through subcontractors who are
in the business of servicing automotive receivables. The Servicer may also
perform other specific duties through subcontractors, with the prior consent of
the Security Insurer, if any (prior to an Insurer Default); provided, however,
that no such delegation of such duties by the Servicer shall relieve the
Servicer of its responsibility with respect thereto.
SERVICER TERMINATION EVENTS
Unless otherwise provided in the related Prospectus Supplement, "Servicer
Termination Events" under the Trust Documents will consist of (i) any failure by
the Servicer to deliver to the Owner Trustee for distribution to
Certificateholders or the Indenture Trustee for distribution to Noteholders any
proceeds or payment required to be so delivered under the terms of the
Certificates, the Trust Documents, the Notes or the Indenture (or, for so long
as Arcadia Financial is the Servicer, the Purchase Agreement) that continues
unremedied for a period of two Business Days after written notice is received by
the Servicer from the Owner Trustee, the Indenture Trustee or the Security
Insurer (if any), or after discovery of such failure by a responsible officer of
the Servicer; (ii) any failure by the Servicer to deliver to the Owner Trustee
and the Indenture Trustee and the Security Insurer, if any (prior to an Insurer
Default), certain reports required by
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the Trust Documents by the fourth Business Day prior to the related Distribution
Date; (iii) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer set forth
in the Certificates, the Trust Documents, the Notes or the Indenture (or, for so
long as Arcadia Financial is the Servicer, the Purchase Agreement), which
failure (A) materially and adversely affects the rights of Securityholders
(determined without regard to the availability of funds under any Policy) or of
the Security Insurer, if any (prior to an Insurer Default), and (B) continues
unremedied for a period of 30 days after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to the
Servicer by the Owner Trustee, the Indenture Trustee or the Security Insurer, if
any (or, if an Insurer Default shall have occurred and be continuing, any
Securityholder); (iv)(A) the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another present or
future federal or state bankruptcy, insolvency or similar law (the "Bankruptcy
Laws"), and such case is not dismissed within 60 days; or (B) the entry of a
decree or order for relief by a court or regulatory authority having
jurisdiction in respect of the Servicer or the Seller under the Bankruptcy Laws,
or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Servicer or the Seller or of any substantial
part of their respective properties or ordering the winding up or liquidation of
the affairs of the Servicer or the Seller; (v) the commencement by the Servicer
or the Seller of a voluntary case under any Bankruptcy Law, or the consent by
the Servicer or the Seller to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer or the Seller or of any substantial part of the
Servicer's or the Seller's property or the making by the Servicer or the Seller
of an assignment for the benefit of creditors or the failure by the Servicer or
the Seller generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer or the Seller in furtherance of any of the
foregoing; (vi) any representation, warranty or statement of the Servicer made
in the Trust Documents or any certificate, report or other writing delivered
pursuant thereto shall prove to be incorrect in any material respect as of the
time when the same shall have been made, and the incorrectness of such
representation, warranty or statement has a material adverse effect (determined
without regard to the availability of funds under any Policy) on the Trust and,
within 30 days after written notice thereof shall have been given to the
Servicer by the Owner Trustee, the Indenture Trustee or the Security Insurer, if
any (or, if an Insurer Default shall have occurred and be continuing, any
Securityholder), the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured; or (vii) if applicable, unless an Insurer Default
shall have occurred and be continuing, the occurrence of an event of default
under the Insurance Agreement.
Unless otherwise specified in the related Prospectus Supplement, if a
Servicer Termination Event occurs and is continuing, the Security Insurer, if
any (or, if no Policy was issued with respect to such series or an Insurer
Default shall have occurred and be continuing, the Owner Trustee, the Indenture
Trustee (if any), or a Certificate Majority or a Note Majority), by notice then
given in writing to the Servicer (and to the Owner Trustee and the Indenture
Trustee if given by the Security Insurer or the Securityholders) may terminate
all of the rights and obligations of the Servicer under the Trust Documents.
Immediately upon the giving of such notice, and, in the case of a successor
Servicer other than the Backup Servicer, the acceptance by such successor
Servicer of its appointment, all authority of the Servicer will pass to the
Backup Servicer or other successor Servicer. In addition to any other amounts
that are then payable to the outgoing Servicer under the related Trust
Documents, the Servicer shall then be entitled to receive reimbursements for any
outstanding Monthly Advances. The Owner Trustee, the Indenture Trustee and the
successor Servicer may set off and deduct any amounts owed by the Servicer from
any amounts payable to the outgoing Servicer.
On and after the time the Servicer receives a notice of termination, the
Backup Servicer or other successor Servicer will be the successor in all
respects to the Servicer and will be subject to all the responsibilities,
restrictions, duties and liabilities of the Servicer under the related Trust
Documents; provided, however, that the successor Servicer shall have no
liability with respect to any obligation which was required to be performed by
the prior Servicer prior to the date that the successor Servicer becomes
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the Servicer or any claim of a third party (including a Securityholder) based on
any alleged action or inaction of the prior Servicer. Unless otherwise specified
in the related Prospectus Supplement, if a Policy has been issued with respect
to the series, the Security Insurer may (prior to an Insurer Default) exercise
at any time its right to appoint as Backup Servicer or as successor to the
Servicer a person other than the Backup Servicer named in the related Prospectus
Supplement. Notwithstanding the above, if the Backup Servicer shall be legally
unable or shall be unwilling to act as Servicer, and if an Insurer Default shall
have occurred or if no Policy was issued with respect to such series, the Owner
Trustee, the Indenture Trustee, a Certificate Majority or a Note Majority may
petition a court of competent jurisdiction to appoint any Eligible Servicer as
the successor to the Servicer. Pending any such appointment, the Backup Servicer
shall act as successor Servicer unless it is legally unable to do so, in which
event the outgoing Servicer shall continue to act as Servicer until a successor
has been appointed and accepted such appointment. "Eligible Servicer" means a
person which, at the time of its appointment as Servicer, (A) is servicing a
portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (B) is legally qualified and has the capacity to
service the Receivables, (C) has demonstrated the ability to service
professionally and competently a portfolio of motor vehicle retail installment
sales contracts and/or motor vehicle installment loans similar to the
Receivables in accordance with high standards of skill and care, and (D) is
qualified and entitled to use, pursuant to a license or other written agreement,
and agrees to maintain the confidentiality of, the software which the Servicer
uses in connection with performing its duties and responsibilities under the
related Trust Documents or otherwise has available software which is adequate to
perform its duties and responsibilities under such Trust Documents.
Any successor Servicer shall be entitled to such compensation payable out of
the Collection Account as the outgoing Servicer would have been entitled to
under the Trust Documents if the outgoing Servicer had not resigned or been
terminated, except as otherwise provided in the Trust Documents.
Upon any termination of, or appointment of a successor to, the Servicer, the
Owner Trustee and the Indenture Trustee (if any) will each give prompt written
notice thereof to Certificateholders and Noteholders, respectively, at their
respective addresses appearing in the Certificate Register or the Note Register,
to the Security Insurer, if any (prior to an Insurer Default) and to each Rating
Agency.
Unless otherwise specified in the related Prospectus Supplement, if a Policy
has been issued with respect to a series, the Security Insurer (or, if an
Insurer Default shall have occurred and be continuing, a Certificate Majority or
Note Majority) may waive any Servicer Termination Event.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, the Trust
Documents may be amended by the Seller, the Servicer, the Owner Trustee and the
Indenture Trustee, if any, with the prior written consent of the Security
Insurer, if any (prior to an Insurer Default), but without the consent of any of
the Securityholders, to cure any ambiguity or to correct or supplement any
provision therein, provided that such action will not, in the opinion of counsel
(which may be internal counsel to the Seller, Arcadia Financial or the Servicer)
reasonably satisfactory to the Owner Trustee and the Indenture Trustee,
materially and adversely affect the interests of the Securityholders. The Trust
Documents may also be amended by the Seller, the Servicer and the Owner Trustee
and the Indenture Trustee (if any), with the prior written consent of the
Security Insurer, if any (prior to an Insurer Default), and a Certificate
Majority and a Note Majority (if applicable), for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Trust Documents or of modifying, in any manner, the rights of the
Certificateholders or the Noteholders. No such amendment may (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related Receivables or distributions that are
required to be made on any related Certificate or Note or the related
Pass-Through Rate or Interest Rate or (ii) reduce the percentage of the
Certificate Balance evidenced by Certificates or of the aggregate principal
amount of Notes then outstanding required to consent to any such amendment,
without the consent of the holders of all Certificates or all Notes, as the case
may be, then outstanding.
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TERMINATION
Unless otherwise provided in the related Prospectus Supplement, with respect
to each Trust, the Trust and the respective obligations of the Seller, the
Servicer, the Security Insurer (if any), the Owner Trustee and the Indenture
Trustee pursuant to the related Trust Documents will terminate upon the later of
(i) the Distribution Date or Payment Date, as the case may be, immediately
following the maturity or other liquidation of the last Receivable (including
the Seller's or Servicer's purchase of the Receivables, as described below) or
(ii) payment to Certificateholders and Noteholders of all amounts required to be
paid to them pursuant to the related Trust Documents and the related Indenture
and the payment to the Security Insurer, if any, of all amounts payable or
reimbursable to it pursuant to the related Insurance Agreement, if any, and in
either case there shall be delivered to the Owner Trustee and the Indenture
Trustee an opinion of counsel that all applicable preference periods under
federal, state and local bankruptcy, insolvency and similar laws have expired
with respect to the payments made pursuant to clause (i) or (ii) above.
Unless otherwise provided in the related Prospectus Supplement, with respect
to each series of Securities, in order to avoid excessive administrative
expense, the Seller and Servicer each will be permitted, at its option (with the
consent of the Security Insurer, if any (prior to an Insurer Default), if such
purchase would result in a claim on the Policy or in an amount owing to the
Security Insurer under the Insurance Agreement remaining unpaid), to purchase
from the Trust, on any Distribution Date immediately following an Accounting
Date as of which the Aggregate Principal Balance is equal to or less than 10%
(or such other percentage as may be specified in the related Prospectus
Supplement) of the Cutoff Date Principal Balance, all remaining Receivables in
the related Trust and the other remaining Trust Property at a price equal to the
aggregate of the Purchase Amounts therefor and the appraised value of any other
remaining Trust Property. The exercise of this right will effect an early
retirement of the related Certificates and Notes.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each series of Securities, the Owner Trustee will give written notice
of the final distribution with respect to the Certificates (if any) to each
Certificateholder of record and the Indenture Trustee will give written notice
of the final payment with respect to the Notes (if any), to each Noteholder of
record. The final distribution to any Certificateholder and the final payment to
any Noteholder will be made only upon surrender and cancellation of such
holder's Certificate or Note at the office or agency of the Owner Trustee, with
respect to Certificates, or of the Indenture Trustee, with respect to Notes,
specified in the notice of termination. Any funds remaining in the Trust, after
the Owner Trustee or the Indenture Trustee has taken certain measures to locate
a Certificateholder or Noteholder, as the case may be, and such measures have
failed, will be distributed to The United Way, and the Certificateholders and
Noteholders, by acceptance of their Certificates and Notes, will waive any
rights with respect to such funds.
THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related Prospectus
Supplement. The Owner Trustee, in its individual capacity or otherwise, and any
of its affiliates may hold Certificates or Notes in their own names or as
pledgee. In addition, for the purpose of meeting the legal requirements of
certain jurisdictions, the Owner Trustee, with the consent of the Servicer and
the Security Insurer, if any (so long as an Insurer Default shall not have
occurred and be continuing), shall have the power to appoint co-trustees or
separate trustees of all or any part of the related Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee by the related Trust Documents will be conferred or
imposed upon the Owner Trustee and such separate trustee or co-trustee jointly,
or, in any jurisdiction where the Owner Trustee is incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Owner Trustee.
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The Owner Trustee of any Trust may resign at any time, in which event the
General Partner, if any, specified in the related Prospectus Supplement or, if
no such General Partner is specified, the Servicer or its successor will be
obligated to appoint a successor trustee, acceptable to the Security Insurer, if
any (prior to an Insurer Default). The General Partner, if any, specified in the
related Prospectus Supplement or, if no such General Partner is specified, the
Servicer may also remove the Owner Trustee, with the consent of the Security
Insurer, if any (prior to an Insurer Default), if the Owner Trustee ceases to be
eligible to serve, becomes legally unable to act, is adjudged insolvent or is
placed in receivership or similar proceedings. In such circumstances, the
General Partner, if any, specified in the related Prospectus Supplement or, if
no such General Partner is specified, the Servicer will be obligated to appoint
a successor trustee, acceptable to the Security Insurer, if any (prior to an
Insurer Default). Any resignation or removal of the Owner Trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
DUTIES OF THE OWNER TRUSTEE
The Owner Trustee will make no representation as to the validity or
sufficiency of any Trust Document, the Certificates or the Notes (other than its
execution of the Certificates and the Notes), the Receivables, the Policy, if
any, or any related documents, and will not be accountable for the use or
application by the Servicer of any funds paid to the Servicer in respect of the
Certificates, the Notes or the Receivables prior to deposit in the related
Collection Account.
The Owner Trustee will be required to perform only those duties specifically
required of it under the Trust Documents. Generally, those duties will be
limited to the receipt of the various certificates, reports or other instruments
required to be furnished by the Servicer to the Owner Trustee under the Trust
Documents, in which case it will only be required to examine such certificates,
reports or instruments to determine whether they conform substantially to the
requirements of the Trust Documents.
The Owner Trustee will be under no obligation to exercise any of the rights
or powers vested in it by the Trust Documents or to institute, conduct, or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders or Noteholders, unless such
Certificateholders or Noteholders have offered the Owner Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby. No Certificateholder nor any Noteholder will have
any right under the Trust Documents to institute any proceeding with respect to
such Trust Documents, unless such holder has given the Owner Trustee written
notice of default and unless the holders of Certificates evidencing not less
than 25% of the Certificate Balance or the holders of Notes evidencing not less
than 25% of the aggregate principal balance of the Notes then outstanding, as
the case may be, have made written request to the Owner Trustee to institute
such proceeding in its own name as Trustee thereunder and have offered to the
Owner Trustee reasonable indemnity, and the Owner Trustee for 30 days after the
receipt of such notice, request and offer to indemnify has neglected or refused
to institute any such proceedings. Certificateholders and Noteholders will not
have the right to make a claim directly under any Policy issued with respect to
such series, but in the event that the Owner Trustee or the Indenture Trustee
fails to make such a claim, Certificateholders and Noteholders may compel the
Owner Trustee or the Indenture Trustee, as applicable, to do so.
THE BACKUP SERVICER
The Backup Servicer for each Trust will be specified in the related
Prospectus Supplement, although the Security Insurer, if any (prior to an
Insurer Default), may exercise its right at any time to appoint another Backup
Servicer. While Arcadia Financial is the Servicer, the Backup Servicer will not
be liable or responsible for any obligation of the Servicer, and the
Certificateholders and Noteholders may look only to Arcadia Financial to perform
such obligations. The Backup Servicer will be required to verify the monthly
Servicer's Certificate each month, to reconcile any discrepancies with the
Servicer, to notify the Certificateholders (if any), the Noteholders and the
Security Insurer (if any) of any unreconciled item that appears
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substantially out of the ordinary, and to seek a written explanation of any such
unreconciled item from the Servicer; however, neither the Owner Trustee nor the
Backup Servicer will be required to otherwise monitor the Servicer. Upon the
Servicer's receipt of a termination notice after the occurrence of a Servicer
Termination Event, the Backup Servicer will automatically become the Servicer,
unless the Security Insurer, if any (prior to an Insurer Default), shall have
appointed a different Backup Servicer or successor Servicer. To facilitate the
transfer of servicing responsibility, the Servicer will deliver to the Owner
Trustee and the Backup Servicer each month a computer tape containing
information with respect to the Receivables.
ADMINISTRATOR
If an Administrator is specified in the related Prospectus Supplement, such
Administrator will enter into an agreement (the "Administration Agreement")
pursuant to which such Administrator will agree, to the extent provided in such
Administration Agreement, to provide the notices and to perform other
administrative obligations required by the related Indenture and the Trust
Agreement.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The Receivables are "chattel paper" as defined in the UCC as in effect in
the States of Minnesota and New York. Pursuant to the UCC, an ownership interest
in chattel paper may be perfected by possession or by filing a UCC-1 financing
statement in the state where the seller's principal executive office is located.
Accordingly, financing statements covering the Receivables will be filed by
Arcadia Financial and the Seller in Minnesota. In addition, the documents
evidencing the Receivables initially will be held by the Custodian specified in
the related Prospectus Supplement on behalf of the related Trust.
The Servicer will be obligated from time to time to take such actions as are
necessary to continue the perfection of each Trust's interest in the related
Receivables and the proceeds thereof. Arcadia Financial will warrant in each
Purchase Agreement with respect to the Receivables held by the related Trust,
and in the related Trust Document the Seller will assign the right to enforce
such warranties to the Owner Trustee on behalf of such Trust and the Owner
Trustee will pledge such right to the Indenture Trustee as collateral for the
Notes, if any, that, as of the Closing Date, such Receivables have not been
sold, pledged or assigned by Arcadia Financial or the Seller to any other
person, and that it has good and indefeasible title thereto and is the sole
owner thereof free of any Liens and that, immediately upon the transfer of the
Receivables to such Trust pursuant to the related Trust Document, the Trust will
have good and indefeasible title to and will be the sole owner of the
Receivables, free of any Liens. In the event of an uncured breach of any of such
warranties in a Purchase Agreement that materially and adversely affects the
related Trust's, Certificateholders' or Noteholders' interest in any Receivable
(a "Repurchase Event"), Arcadia Financial will be obligated to repurchase such
Receivable.
Unless otherwise provided in the related Prospectus Supplement, Arcadia
Financial will hold the Receivable Files on behalf of each Trust under a
custodian agreement with the Trust. The Receivable Files, if held by Arcadia
Financial as custodian, will be stamped or otherwise marked to indicate that
such Receivables have been sold to the related Trust. The Receivable Files will
also be physically segregated. Despite these precautions, if, through
inadvertence or otherwise, any of the Receivables were sold to another party (or
a security interest therein were granted to another party) that purchased (or
took such security interest in) any of such Receivables in the ordinary course
of its business and took possession of such Receivables, the purchaser (or
secured party) would acquire an interest in the Receivables superior to the
interest of the related Trust if the purchaser (or secured party) acquired (or
took a security interest in) the Receivables for new value and without actual
knowledge of such Trust's interest. See "Description of the Purchase Agreements
and the Trust Documents-Custody of Receivable Files."
SECURITY INTERESTS IN THE FINANCED VEHICLES
Security interests in the Financed Vehicles must be perfected by notation of
the secured party's lien on the certificate of title or by such notation on or
actual possession of the certificate of title, depending on the law of the state
wherein the purchaser resides. The practice of Arcadia Financial is to take such
action as is required to perfect its security interest under the laws of the
state in which the Financed Vehicle is registered. In the event of clerical
errors, administrative delays or otherwise, such actions may not have been taken
with respect to a Financed Vehicle and such security interest may be subordinate
to the interests of, among others, subsequent purchasers of the Financed
Vehicles, holders of perfected security interests in the Financed Vehicle, and
the trustee in bankruptcy of the Obligor. However, such failure would give rise
to a Repurchase Event and obligate Arcadia Financial to repurchase the affected
Receivable if the interests of the related Certificateholders, Noteholders or
Trust were materially and adversely affected.
Pursuant to the related Trust Document, the Seller will assign the security
interests in the Financed Vehicles assigned to it by Arcadia Financial under the
related Purchase Agreement to the Owner Trustee on behalf of the related Trust.
However, because of the administrative burden and expense that would be
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entailed in doing so, none of Arcadia Financial, the Seller, the Owner Trustee
or the Servicer will be required, except to the extent provided below, to amend
the certificates of title (or other lien certificates) to identify the Owner
Trustee (or the Seller) as the new secured party and, accordingly, Arcadia
Financial will continue to be named as the secured party on the certificates of
title (or other lien certificate) relating to the Financed Vehicles. Further,
the Servicer will be required to note the interest of the related Trust on the
certificates of title for the Financed Vehicles only upon a Servicer Termination
Event, or in an event of default under the Insurance Agreement, if any (prior to
an Insurer Default), or (under certain circumstances and unless an Insurer
Default shall have occurred and be continuing) at the request of the Security
Insurer, if any. In most states, an assignment such as that under the related
Trust Documents should be an effective transfer of a security interest without
amendment of any lien noted on the related certificate of title, and the
assignee should succeed to the assignor's status as the secured party. In the
absence of fraud or forgery by the Obligor or administrative error by state
recording officials, the notation of the lien of Arcadia Financial on the
certificate of title should be sufficient to protect the related Trust against
the rights of subsequent purchasers of a vehicle or subsequent lenders who take
a security interest in the related Financed Vehicle. However, in the absence of
such an amendment, the security interest of the related Trust in the related
Financed Vehicles might be defeated by, among others, the trustee in bankruptcy
of Arcadia Financial or the Obligor. However, such failure would give rise to a
Repurchase Event and obligate Arcadia Financial to repurchase the affected
Receivable if the interests of the related Certificateholders, Noteholders or
Trust were materially and adversely affected.
In most states, a perfected security interest in a motor vehicle continues
for four months after the vehicle is moved to a different state and thereafter
until the owner re-registers the motor vehicle in the new state, but in no event
beyond the surrender of the certificate of title. A majority of states require
surrender of a certificate of title to re-register a motor vehicle. Accordingly,
the secured party must surrender possession if it holds the certificate of title
to such vehicle. In the case of motor vehicles registered in states which
provide for notation of a lien but not possession of the certificate of title by
the holder of the security interest in the related motor vehicle, the secured
party should receive notice of surrender if the security interest in the vehicle
is noted on the certificate of title. Accordingly, the secured party should have
the opportunity to re-perfect its security interest in the vehicle in the state
of relocation. In states that do not require a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection.
In the ordinary course of servicing its receivables portfolio, it is the
practice of Arcadia Financial to effect such re-perfection upon receipt of
notice of re-registration or information from the Obligor as to relocation.
Similarly, when an Obligor sells a Financed Vehicle, Arcadia Financial must
surrender possession of the certificate of title or receive notice as a result
of its lien noted thereon and accordingly should have an opportunity to require
satisfaction of the related Receivable before release of the lien. Under the
related Trust Document, the Servicer will be obligated to take such steps, at
the Servicer's expense, as are necessary to maintain perfection of security
interest in such Financed Vehicle, and the failure to take such steps would
obligate the Servicer to purchase the related Receivable if such failure
materially and adversely affects the interests of the related
Certificateholders, Noteholders and Trust in such Receivables.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a motor vehicle. The Seller in the related Trust Document (and
Arcadia Financial in the related Purchase Agreement) will represent that,
immediately prior to the sale, assignment and transfer thereof to the related
Trust, each Receivable held by such Trust was secured by a valid, subsisting and
enforceable first priority perfected security interest in favor of the Seller
(or Arcadia Financial), as secured party. However, liens for taxes, judicial
liens or liens arising by operation of law could arise at any time during the
term of a Receivable. In addition, the laws of certain states and federal law
permit the confiscation of motor vehicles by governmental authorities under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected
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security interest in the confiscated motor vehicle. No notice will be given to
the Owner Trustee, Indenture Trustee, Certificateholders or Noteholders in the
event such a lien or confiscation arises, and if such lien arises or
confiscation occurs after the date of issuance of any series of Certificates and
Notes, neither Arcadia Financial nor the Servicer will be required to repurchase
or purchase the related Receivable.
REPOSSESSION
In the event of default by an Obligor, the owner of a retail installment
sales contract or installment loan has all the remedies of a secured party under
the UCC, except where specifically limited by other state laws. The remedies of
a secured party under the UCC include the right to repossession by self-help
means, unless such means would constitute a breach of the peace. Self-help
repossession is the method employed by Arcadia Financial in most cases and is
accomplished simply by taking possession of the motor vehicle. In the event of
default by the Obligor, some jurisdictions require that the Obligor be notified
of the default and be given a time period within which he may cure the default
prior to repossession. In cases where the Obligor objects or raises a defense to
repossession, or if otherwise required by applicable state law, a court order
must be obtained from the appropriate state court, and the vehicle must then be
repossessed in accordance with that order. Other jurisdictions permit
repossession without notice, but only if the repossession can be accomplished
peacefully. If a breach of the peace cannot be avoided, judicial action is
required. A secured party may be held responsible for damages caused by a
wrongful repossession of a vehicle, including, in Florida, a wrongful
repossession conducted by an agent of the secured party. The Servicer will be
required to indemnify the related Trust for any liability imposed upon such
Trust as a result of a wrongful repossession. In Texas and many other states, a
vehicle may be repossessed without notice to the Obligor, but only if the
repossession can be accomplished without a breach of the peace.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and various other state laws require a secured party who has
repossessed the collateral securing an obligation to provide an obligor with
reasonable notice of the date, time and place of any public sale and/or the date
after which any private sale of the collateral may be held. The obligor has the
right to redeem the collateral prior to actual sale by paying the secured party
the entire unpaid time balance of the obligation (less any unaccrued finance
charges) plus accrued default charges, reasonable expenses for repossessing,
holding and preparing the collateral for disposition and arranging for its sale,
plus, to the extent provided in the financing documents, reasonable attorneys'
fees, or in some states, by payment of delinquent installments or the unpaid
principal balance of the related obligation.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of Financed Vehicles generally will be applied first
to the expenses of repossession and resale and then to the satisfaction of the
related Receivables. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the indebtedness, a deficiency judgment can be sought in other states
that do not prohibit or limit such judgments, subject to satisfaction of
statutory procedural requirements by the holder of the obligation. However, any
deficiency judgment would be a personal judgment against the Obligor for the
shortfall, and a defaulting Obligor can be expected to have very little capital
or sources of income available following repossession. Therefore, in many cases,
it may not be useful to seek a deficiency judgment or, if one is obtained, it
may be settled at a significant discount or not paid at all. Arcadia Financial
generally seeks to recover any deficiency existing after repossession and sale
of a Financed Vehicle.
Occasionally, after resale of a repossessed motor vehicle, and payment of
all expenses and indebtedness, there is a surplus of funds. In that case, the
law of most states requires the secured party to remit the surplus to any holder
of another lien with respect to the vehicle, if proper notification of demand
for proceeds is received prior to distribution, or, if no such lienholder
exists, to remit the surplus to the former owner of the motor vehicle.
47
<PAGE>
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
The Relief Act imposes certain limitations upon the actions of creditors
with respect to persons serving in the Armed Forces of the United States and, to
a more limited extent, their dependents and guarantors and sureties of debt
incurred by such persons. An obligation incurred by a person prior to entering
military service cannot bear interest at a rate in excess of 6% during the
person's term of military service, unless the obligee petitions a court which
determines that the person's military service does not impair his or her ability
to pay interest at a higher rate. Further, a secured party may not repossess
during a person's military service a motor vehicle subject to an installment
sales contract or a promissory note entered into prior to the person's entering
military service, for a loan default which occurred prior to or during such
service, without court action. The Relief Act imposes penalties for knowingly
repossessing property in contravention of its provisions. Additionally,
dependents of military personnel are entitled to the protection of the Relief
Act, upon application to a court, if such court determines the obligation of
such dependent has been materially impaired by reason of the military service.
To the extent an obligation is unenforceable against the person in military
service or a dependent, any guarantor or surety of such obligation will not be
liable for performance.
CONSUMER PROTECTION LAWS
Numerous Federal and state consumer protection laws and related regulations
impose substantive and disclosure requirements upon lenders and servicers
involved in consumer finance. Some of the Federal laws and regulations include
the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, the Motor Vehicle Information and Cost Savings Act (the "Odometer
Act"), the Magnuson-Moss Warranty Act, and the Federal Reserve Board's
Regulations B and Z.
In addition to Federal law, state consumer protection statutes regulate,
among other things, the terms and conditions of the motor vehicle retail
installment contracts and promissory notes pursuant to which purchasers finance
the acquisition of motor vehicles. These laws place finance charge ceilings on
the amount that a creditor may charge in connection with financing the purchase
of an automobile. These laws also impose other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. These requirements impose specific statutory liabilities upon
creditors who fail to comply. In some cases, this liability could affect the
ability of an assignee, such as the Trustee, to enforce consumer finance
contracts such as the Receivables. The "Credit Practices" Rule of the Federal
Trade Commission (the "FTC") imposes additional restrictions on contract
provisions and credit practices.
The FTC's so-called holder-in-due-course rule has the effect of subjecting
persons that finance consumer credit transactions (and certain related lenders
and their assignees) to all claims and defenses which the purchaser could assert
against the seller of the goods and services. An assignee's affirmative
liability to pay money to such aggrieved purchaser in the event of a successful
claim is limited to amounts paid by the purchaser under the consumer credit
contract. However, the assignee's ability to collect any balance remaining due
thereunder is subject to these claims and defenses. Accordingly, each Trust, as
assignee of the related Receivables, will be subject to claims or defenses, if
any, that the purchaser of the related Financed Vehicle may assert against the
seller of such vehicle. Under the motor vehicle dealer licensing laws of most
states, sellers of motor vehicles are required to be licensed to sell motor
vehicles at retail.
In addition, with respect to used vehicles, the FTC's Rule on Sale of Used
Vehicles requires that all sellers of used vehicles prepare, complete, and
display a "Buyer's Guide" which explains the warranty coverage for such
vehicles. Federal regulations promulgated under the Odometer Act require that
all sellers of used vehicles furnish a written statement signed by the seller
certifying the accuracy of the odometer readings. If a seller is not properly
licensed or if either a Buyer's Guide or odometer disclosure
48
<PAGE>
statement was not provided to the purchaser of a Financed Vehicle, the purchaser
may be able to assert a defense as to a retail installment sales contract or
promissory note against the seller of the motor vehicle.
Under the Texas Credit Code ("TCC") non-bank retail installment sellers and
their assignees are required to register with the Office of Consumer Credit
Commissioner of Texas. The TCC, like the UCCC, imposes disclosure and
substantive requirements on the sellers and any subsequent holder of such
contracts and imposes monetary penalties for violations thereof.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an Obligor from some or all of the
legal consequences of a default.
The Seller will warrant in the related Trust Document (and Arcadia Financial
will warrant in the related Purchase Agreement) that as of the date of
origination each Receivable held by the related Trust complied with all
requirements of applicable law in all material respects. Accordingly, if such
Trust's interest in a Receivable were materially and adversely affected by a
violation of any such law, such violation would constitute a Repurchase Event
and would obligate Arcadia Financial to repurchase the Receivable unless the
breach were cured. Under each Purchase Agreement, Arcadia Financial will be
required to indemnify the related Trust for any liability resulting from the
failure of a Receivable to be in compliance with all requirements of law. See
"Description of the Purchase Agreements and the Trust Documents-Sale and
Assignment of the Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
proceeding under Chapter 13 of the U.S. Bankruptcy Code of 1978, as amended, a
court may prevent a lender from repossessing a motor vehicle, and, as part of
the rehabilitation plan, reduce the amount of the secured indebtedness to the
market value of the motor vehicle at the time of bankruptcy (as determined by
the court), leaving the party providing financing as a general unsecured
creditor for the remainder of the indebtedness. A bankruptcy court may also
reduce the monthly payments due under a contract, change the rate of interest
and time of repayment of the indebtedness or substitute collateral securing such
indebtedness.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The anticipated federal income tax consequences of the purchase, ownership
and disposition of each series of Securities will be discussed in the related
Prospectus Supplement. Such discussion will not deal with federal income tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. Investors should consult their own tax advisors in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the Securities.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan from engaging in certain transactions
involving "plan assets" with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to the plan. ERISA also
imposes certain duties and certain prohibitions on persons who are fiduciaries
of plans subject to ERISA. Under ERISA, generally any person who exercises any
authority or control with respect to the management or disposition of the assets
of a plan is considered to be a fiduciary of such plan. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons.
49
<PAGE>
Certain transactions involving the related Trust might be deemed to
constitute prohibited transactions
under ERISA and the Code with respect to a Benefit Plan that purchased
Securities if assets of the related Trust were deemed to be assets of the
Benefit Plan. Under a regulation issued by the United States Department of Labor
(the "Plan Assets Regulation"), the assets of a Trust would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquired an "equity interest" in the Trust and none of the
exceptions contained in the Plan Assets Regulation was applicable. An equity
interest is defined under the Plan Assets Regulation as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. The likely treatment of Notes and
Certificates will be discussed in the related Prospectus Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A plan fiduciary considering the purchase of Securities should consult its
tax and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets, the possibility of exemptive relief from the prohibited
transaction rules and other issues and their potential consequences.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the Seller will agree to
sell to each of the underwriters named therein and in the related Prospectus
Supplement, and each of such underwriters will severally agree to purchase from
the Seller, the principal amount of each class of Securities of the related
series set forth therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the Securities
described therein which are offered hereby and by the related Prospectus
Supplement if any of such Securities are purchased. In the event of a default by
any such underwriter, each Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting underwriters may be
increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which each
class of Securities being offered thereby will be offered to the public and any
concessions that may be offered to certain dealers participating in the offering
of such Securities or (ii) specify that the related Securities are to be resold
by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that Arcadia Financial and the
Seller will indemnify the underwriters against certain liabilities, including
liabilities under the Securities Act.
The Indenture Trustee, if any, may, from time to time, invest the funds in
the Designated Accounts in Eligible Investments acquired from the underwriters.
Under each Underwriting Agreement, the closing of the sale of any class of
Securities subject thereto will be conditioned on the closing of the sale of all
other such classes.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
Certain matters with respect to the validity of the Certificates and the
Notes will be passed upon for the Seller by Dorsey & Whitney LLP, Minneapolis,
Minnesota. The validity of the Certificates and the Notes will be passed upon
for the underwriters named in the related Prospectus Supplement by Mayer, Brown
& Platt, New York, New York.
50
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------- ------------
<S> <C>
Accounting Date........................ 32
Administration Agreement............... 44
Administrative Receivables............. 12, 36
Aggregate Principal Balance............ 7
APR.................................... 17
Arcadia Financial...................... 1
Backup Servicer........................ 3
Balloon Payment Receivable............. 18
Bankruptcy Laws........................ 40
Cedel.................................. 27
Cedel Participants..................... 27
Certificateholders..................... 3
Certificate Distribution Account....... 33
Certificate Majority................... 26
Certificate Owners..................... 9
Certificate Pool Factor................ 18
Certificates........................... 1
Collection Account..................... 8
Commission............................. 2
Computer Tape.......................... 32
Cooperative............................ 28
Cutoff Date............................ 1
Dealer Agreements...................... 12
Dealer Assignments..................... 12
Dealers................................ 5
Deposit Date........................... 32
Depositaries........................... 25
Depository............................. 20
Definitive Certificates................ 26
Definitive Notes....................... 26
Designated Accounts.................... 33
Distribution Date...................... 20
DTC.................................... 1
Eligible Account....................... 33
Eligible Investments................... 34
Electronic Ledger...................... 32
Eligible Servicer...................... 41
Euroclear.............................. 28
Euroclear Operator..................... 28
Euroclear Participants................. 27
Events of Default...................... 22
Exchange Act........................... 2
ERISA.................................. 49
Financed Vehicles...................... 5
FTC.................................... 48
Indenture.............................. 1
Indenture Trustee...................... 1, 3
Indirect participants.................. 26
Insolvency Laws........................ 11
Insurance Agreement.................... 39
Insurer Default........................ 8
Interest Rate.......................... 5
Lien................................... 31
Liquidated Receivable.................. 16
Liquidation Proceeds................... 8
Loan................................... 13
Lockbox Account........................ 34
Lockbox Bank........................... 34
Monthly Advance........................ 7
Monthly Period......................... 36
<CAPTION>
TERM PAGE
- --------------------------------------- ------------
<S> <C>
NADA................................... 14
Note Distribution Account.............. 33
Note Majority.......................... 22
Note Owners............................ 9
Note Pool Factor....................... 18
Noteholders............................ 4
Notes.................................. 1
Obligor................................ 7
Odometer Act........................... 48
Owner Trustee.......................... 1, 3
Participants........................... 26
Pass-Through Rate...................... 4
Payment Date........................... 21
Plan Assets Regulation................. 50
Policy................................. 6
Pooling and Servicing Agreement........ 1
Pre-Funded Amount...................... 6
Pre-Funding Account.................... 4
Pre-Funding Period..................... 4
Prospectus Supplement.................. 1
Purchase Agreement..................... 6, 30
Purchase Amount........................ 32
Rating Agency.......................... 9
Receivable Files....................... 13
Receivables............................ 1, 5
Receivables Pool....................... 5
Registration Statement................. 2
Related Documents...................... 24
Relief Act............................. 31
Repurchase Event....................... 6, 8, 32, 45
Required Deposit Rating................ 33
Rules.................................. 26
Sale and Servicing Agreement........... 1
Scheduled Payment...................... 16
Schedule of Receivables................ 30
Securities............................. 1
Securitization......................... 19
Security Insurer....................... 6
Securityholders........................ 2
Seller................................. 1, 3
Servicer............................... 3
Servicer Responsible Officer........... 38
Servicer's Certificate................. 28
Servicer Termination Events............ 39
Servicing Fee.......................... 7
Servicing Rate......................... 36
Strip Certificates..................... 4
Strip Notes............................ 5
Subsequent Receivables................. 1, 6
TCC.................................... 49
Terms and Conditions................... 28
Trust.................................. 1, 3
Trust Agreement........................ 1
Trust Documents........................ 1, 30
Trust Property......................... 1, 5
UCC.................................... 10
Underwriting Agreement................. 50
Warehousing Subsidiaries............... 30
Warranty Receivables................... 12
</TABLE>
51
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the Securities will be available
only in book-entry form (the "Global Securities"). Investors in the Global
Securities may hold such Global Securities through any of The Depository Trust
Company ("DTC"), Cedel Bank, societe anonyme ("Cedel") or the Euroclear System
("Euroclear"). The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Global Securities will be effected on a
delivery-against-payment basis through the respective Depositaries of Cedel and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
TRADING BETWEEN DTC SELLER AND CEDEL OR EUROCLEAR PURCHASER. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear
A-1
<PAGE>
Participant, the purchaser will send instructions to Cedel or Euroclear through
a Cedel Participant or Euroclear Participant at least one business day prior to
settlement. Cedel or Euroclear will instruct the respective Depositary, as the
case may be, to receive the Global Securities against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date. Payment will then be
made by the respective Depositary to the DTC Participant's account against
delivery of the Global Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedel
Participant's or Euroclear Participant's account. The securities credit will
appear the next day (European time) and the cash debit will be back-valued to,
and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Cedel or Euroclear cash debit will be valued instead as of the actual
settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash or hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them. Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon to finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR SELLER AND DTC PURCHASER. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. The payment will then be reflected in the
account of the Cedel Participant or Euroclear Participant the following day, and
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debt in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date.
Finally, day traders that us Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades
A-2
<PAGE>
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
than one day prior to settlement, which would give the Global Notes
sufficient time to be reflected in their Cedel or Euroclear account in order
to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payment of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). Non-U.S. Persons that are beneficial owners of Global Securities
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the beneficial
owners of Global Securities or its agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The beneficial owner of a
Global Security or in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
A-3
<PAGE>
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof, (iii) an estate the income of which
is includible in gross income for United States tax purposes, regardless of its
source or (iv) a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust. This summary does not deal with all aspects of U.S. Federal income
tax withholding that may be relevant to foreign holders of the Global
Securities. Investors are advised to consult their own tax advisers for specific
tax advice concerning their holding and disposing of the Global Securities.
A-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be incurred in
connection with the offering of the Automobile Receivables-Backed
Securities, other than underwriting discounts and commissions, described
in this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 737,500
Printing and Engraving...................................... 937,500*
Legal Fees and Expenses..................................... 1,875,000*
Blue Sky Filing and Counsel Fees............................ 375,000*
Accounting Fees and Expenses................................ 312,500*
Trustee Fees and Expenses................................... 750,000*
Rating Agencies' Fees....................................... 1,250,000*
Miscellaneous Expenses...................................... 12,500*
-------------------
Total....................................................... $ 6,250,000*
-------------------
-------------------
<FN>
- ------------------------
* All fees and expenses, other than the Securities and Exchange Commission
Registration Fee, are estimated.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Arcadia Receivables Finance Corp. is incorporated under the laws
of Delaware. Section 145 of the Delaware General Corporation Law provides
that a Delaware corporation may indemnify any persons, including
officers and directors, who are, or are threatened to be made, parties to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of such corporation, by reason of the fact that
such person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or
enterprise). The indemnity may include expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit
or proceedings, provided such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's
best interests and, for criminal proceedings, had no reasonable cause to
believe that his conduct was illegal. A Delaware corporation may indentify
officers and directors in an action by or in the right of the corporation
under the same conditions, except that no indemnification is permitted
without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above,
the corporation must indemnify him against the expenses which such officer
or director actually and reasonably incurred.
The Certificate of Incorporation and Bylaws of Arcadia Receivables
Finance Corp. provide, in effect, that, subject to certain limited
exceptions, such corporation will indemnify its officers and directors to the
extent permitted by the Delaware General Corporation Law.
ITEM 16. EXHIBITS.
The Exhibits filed as part of this Registration Statement are:
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Seller (incorporated by reference to
Exhibit 3.1 to the registrant's Quarterly Report on Form 10-Q, for the
quarter ended June 30, 1997).
3.2 -- ByLaws of the Seller (incorporated by reference to Exhibit 3.2 to the
registrant's Quarterly Report on Form 10-Q, for the quarter ended June 30,
1997).
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <C> <S>
4.1 -- Form of Pooling and Servicing Agreement among the Seller, the Servicer
and the Owner Trustee, including OFL Grantor Trusts Standard Terms and
Conditions of Agreement Effective January 31, 1995 (incorporated by
reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K
dated January 31, 1995).
4.2 -- Form of Sale and Servicing Agreement relating to Trusts including
Pre-Funding Accounts or issuing Notes (incorporated by reference to
Exhibit 4.3 to the registrant's Current Report on Form 8-K, dated
January 21, 1998).
4.3 -- Form of Trust Agreement relating to Trusts including Pre-Funding Accounts
or issuing Notes (incorporated by reference to Exhibit 4.1 to the
registrant's Current Report on Form 8-K, dated January 21, 1998).
4.4 -- Form of Indenture between the Trust and the Indenture Trustee, including
form of Note (incorporated by reference to Exhibit 4.2 to the
registrant's Current Report on Form 8-K, dated January 21, 1998).
5.1 -- Opinion and consent of Dorsey & Whitney LLP with respect to
legality.
8.1 -- Opinion and consent of Dorsey & Whitney LLP with respect to tax
matters (to be filed by amendment).
10.1 -- Form of Purchase Agreement between the Seller and Arcadia Financial Ltd.
(incorporated by reference to Exhibit 4.4 to the registrant's
current report on Form 8-K, dated January 21, 1998).
23.1 -- Consent of Dorsey & Whitney LLP (included as part of Exhibit 5.1).
23.2 -- Consent of Dorsey & Whitney LLP (included as part of Exhibit 8.1).
25.1 -- Form of T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of the Indenture Trustee (incorporated by reference to Form 305B2,
dated March 16, 1998).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant on behalf of the Trust hereby undertakes
that, for purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 and, where
applicable, each filing of the employee benefit plan's annual report pursuant
to section 15(d) of the Securities Exchange Act of 1934) 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 of 1933 may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the 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:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon
II-2
<PAGE>
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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 of 1933;
(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
aggregate, represent a fundamental change to such information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securites 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
Commission 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.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in the information set forth in the registration
statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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 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 in accordance with
the rules and regulations prescribed by the Commission under section
305(b)(2) of the Trust Indenture Act.
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<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
the 16th day of March, 1998.
ARCADIA RECEIVABLES FINANCE CORP.
By /s/ Richard A. Greenawalt
----------------------------------
Richard A. Greenawalt
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities
indicated on March 16, 1998. Each person whose signature to this
Registration Statement appears below hereby constitutes and appoints Richard
A. Greenawalt or John A. Witham as his true and lawful attorney-in-fact and
agent, with full power of substitution, to sign on his behalf individually and
in the capacity stated below and to perform any acts necessary to be done in
order to file all amendments and post-effective amendments to this
Registration Statement, and any and all instruments or documents filed as
part of or in connection with this Registration Statement or the amendments
thereto and each of the undersigned does hereby ratify and confirm all that
said attorney-in-fact and agent, or his substitutes, shall do or cause to be
done by virtue hereof.
SIGNATURE TITLE
- -------------------------------------------------- ----------------------------
/s/ Richard A. Greenawalt
------------------------------------------- Chief Executive
Richard A. Greenawalt Officer and Director
(principal financial
officer)
Senior Vice President, Chief
/s/ John A. Witham Financial Officer and
------------------------------------------- Director (principal
John A. Witham financial officer)
/s/ Scott A. Anderson Vice President and
------------------------------------------- Director
Scott A. Anderson
Vice President, Assistant
/s/ Brian S. Anderson Secretary and Director
------------------------------------------- (principal accounting
Brian S. Anderson officer)
/s/ Mark Payne
------------------------------------------- Director
Mark Payne
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- ----------- -------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
5.1 Opinion and consent of Dorsey & Whitney LLP with respect to legality.
</TABLE>
<PAGE>
ARCADIA FINANCIAL LTD.
ARCADIA RECEIVABLES FINANCE CORP.
ARCADIA AUTOMOBILE RECEIVABLES TRUSTS
UNDERWRITING AGREEMENT
STANDARD PROVISIONS FOR AUTOMOBILE
RECEIVABLES-BACKED CERTIFICATES AND
AUTOMOBILE RECEIVABLES-BACKED NOTES
(March 1998)
_____________________________
From time to time, Arcadia Receivables Finance Corp., a Delaware
corporation (the "Company"), and Arcadia Financial Ltd., a Minnesota corporation
("Arcadia Financial"), may enter into one or more pricing agreements that
provide for the sale by an Arcadia Automobile Receivables Trust to be created by
the Company of automobile receivables-backed certificates (the "Certificates")
and automobile receivables-backed notes (the "Notes") (the Certificates and the
Notes sometimes collectively referred to herein as the "Securities") to the
several underwriters named therein (each, a "Pricing Agreement" and, including
the provisions hereof incorporated therein by reference, an "Underwriting
Agreement").
The terms and rights of any particular issuance of Certificates (the
"Designated Certificates") or Notes (the "Designated Notes") (the Designated
Certificates and the Designated Notes sometimes collectively referred to herein
as the "Designated Securities") shall be as specified in the Pricing Agreement
relating thereto. Particular sales of Designated Securities may be made from
time to time by the Arcadia Automobile Receivables Trust designated in the
Pricing Agreement relating to such Designated Securities (the "Trust") to the
several underwriters named in such Pricing Agreement (the "Underwriters"), for
whom the firms designated as representatives of the Underwriters of such
Designated Securities in the Pricing Agreement relating thereto will act as
representatives (the "Representatives"). The term Representatives also refers
to a single firm acting as sole representative of the Underwriters and to
Underwriters or a single firm acting as sole Underwriter acting without any firm
being designated as their representative. These standard provisions shall not
be construed as an obligation of the Company to sell any Designated Securities
or as an obligation of any Underwriter to purchase any Designated Securities.
The obligation of the
<PAGE>
Company to issue and sell any Designated Securities shall be evidenced by the
Pricing Agreement relating thereto with respect to the Designated Securities
named therein. Each Pricing Agreement shall specify, among other things, the
Trust that will issue such Designated Securities, the aggregate principal amount
(or notional principal amount) of such Designated Securities, the names of the
Underwriters and the Representatives, the purchase price to the Underwriters of
such Designated Securities, the principal amount of such Designated Securities
to be purchased by each Underwriter and the date, time and manner of delivery of
such Designated Securities and payment therefor.
1. DESCRIPTION OF SECURITIES. The Company, a wholly-owned subsidiary
of Arcadia Financial, proposes to cause the Trust designated in the related
Pricing Agreement to be created pursuant to a trust agreement (the "Trust
Agreement") among the Company, as seller, the trustee specified in the related
Pricing Agreement (the "Owner Trustee") and any such other parties as shall be
specified in the related Pricing Agreement and to cause the Trust to issue and
sell to the several Underwriters the Designated Certificates to be issued under
such Trust Agreement and/or the Designated Notes to be issued under an Indenture
(the "Indenture") between the Trust, the trustee specified in the related
Pricing Agreement (the "Indenture Trustee") and any such other parties as shall
be specified in the related Pricing Agreement. The Designated Notes will be
collateralized by the Trust Property (as defined below), and each Certificate
will represent a fractional undivided interest in the related Trust. The assets
of each Trust (the "Trust Property") will include, among other things, a pool of
simple interest retail installment sales contracts and promissory notes (the
"Receivables") purchased or to be purchased from motor vehicle dealers
("Dealers") by Arcadia Financial and secured by new and used automobiles and
light trucks (the "Financed Vehicles"), certain monies paid or payable thereon
after the Cutoff Date (the "Cutoff Date") specified in the related Pricing
Agreement (excluding certain insurance premiums), any financial guaranty
insurance policies issued by an insurer in respect of the Designated Securities
(the "Security Insurer") pursuant to an insurance and indemnity agreement among
the Trust, the Company, Arcadia Financial and the Security Insurer and any other
parties specified in the related Pricing Agreement (an "Insurance Agreement") or
other form of credit enhancement specified in the related Pricing Agreement,
such amounts as from time to time may be held in a lockbox account (established
pursuant to a counterpart to an agency agreement and retail lockbox agreement
between Arcadia Financial, the Owner Trustee, the lockbox bank (the "Lockbox
Bank") specified in the related Pricing Agreement (the "Lockbox Agreement") and
the Security Insurer) and the Collection Account (including all investments in
the Collection Account and all income from the investment of funds therein and
proceeds thereof), an assignment of Arcadia Financial's security interests in
the Financed Vehicles, an assignment of the right to receive proceeds from the
exercise of rights against Dealers under agreements between Arcadia Financial
and such Dealers and the assignment of rights in respect of each Receivable from
the applicable Dealer to Arcadia Financial, an assignment of the right to
receive the proceeds from claims on certain insurance policies covering the
Financed Vehicles or the Obligors, an assignment of the rights of the Company
under the Receivables Purchase Agreement (as defined below) and the other
property and the
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<PAGE>
proceeds thereof to be conveyed to the Trust pursuant to the sale and servicing
agreement (the "Sale and Servicing Agreement") among the Trust, as issuer, the
Company, as seller, Arcadia Financial, in its individual capacity and as
servicer, and the backup servicer specified in the related Pricing Agreement
(the "Backup Servicer"), and any other parties specified in and as more fully
described in the related Pricing Agreement or the Sale and Servicing Agreement.
In addition, if so specified in the related Pricing Agreement, the Trust
Property will include monies on deposit in a pre-funding account (the
"Pre-Funding Account") which will be used to purchase Receivables from Arcadia
Financial originated subsequent to the Cutoff Date.
Unless otherwise specified in the related Pricing Agreement, the
Receivables and the related Trust Property will be conveyed to the Company by
Arcadia Financial pursuant to a Receivables Purchase Agreement and Assignment
between the Company and Arcadia Financial (a "Receivables Purchase Agreement")
and will be conveyed to the related Trust by the Company pursuant to the Sale
and Servicing Agreement. Concurrently with the issuance of the Designated
Securities, unless otherwise specified in the related Pricing Agreement, (i)
with respect to the Designated Certificates, if any, the Security Insurer will
issue a Policy to the Owner Trustee pursuant to which the Security Insurer will
unconditionally and irrevocably guarantee to the holders of the Designated
Certificates payment of the Guaranteed Distributions with respect to each
Distribution Date and certain other amounts, as set forth in such Policy (the
"Certificate Policy"), (ii) with respect to the Designated Notes, if any, the
Security Insurer will issue a Policy to the Indenture Trustee pursuant to which
the Security Insurer will unconditionally and irrevocably guarantee to the
holders of the Designated Notes payment of the Guaranteed Distributions with
respect to each Distribution Date and certain other amounts, as set forth in
such Policy (the "Note Policy" and, together with the Certificate Policy, the
"Policies"), (iii) Arcadia Financial, the Company, the Security Insurer, the
trustee and the collateral agent specified in the related Pricing Agreement (the
"Collateral Agent") will enter into a Spread Account Agreement or series
supplement thereto (the "Spread Account Agreement") regarding certain rights of
the Security Insurer in consideration of the issuance of the Policies, (iv) the
Trust, the Indenture Trustee, the Security Insurer and Arcadia Financial or the
other custodian specified in the related Pricing Agreement (the "Custodian")
will enter into a custodian agreement (the "Custodian Agreement") pursuant to
which the Custodian will hold the original installment sales contract or
promissory note as well as copies of documents and instruments relating to each
Receivable and evidencing the security interest in the Financed Vehicle securing
each Receivable (the "Receivable Files"), and (v) the Trust and the parties
specified in the related Pricing Agreement will enter into an administration
agreement (the "Administration Agreement") pursuant to which the administrator
specified in such Pricing Agreement (the "Administrator"), will perform certain
administrative tasks of the Owner Trustee and the Indenture Trustee imposed
under the Trust Agreement, the Indenture and certain other agreements. Unless
specified in the related Pricing Agreement with respect to a Pre-Funding
Account, the Designated Securities will be issued in an aggregate principal
amount which is equal to the sum of aggregate principal balance of the
Receivables as of the Cutoff Date and
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<PAGE>
the amount, if any, deposited in the Pre-Funding Account on the Closing Date (as
hereinafter defined).
At the Closing Date for the sale of Designated Securities specified in
each Pricing Agreement, the Security Insurer and the Underwriters will also
enter into an Indemnification Agreement (the "Indemnification Agreement")
regarding indemnification for certain information included in the Registration
Statement and Prospectus, referred to below.
Capitalized terms used but not defined herein when used in connection
with any Pricing Agreement, have the meanings assigned in the related Sale and
Servicing Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ARCADIA
FINANCIAL. In addition to any representations and warranties specified in the
related Pricing Agreement, by their execution of a Pricing Agreement, the
Company and Arcadia Financial, jointly and severally, shall represent and
warrant to, and agree with, each Underwriter that:
(a) A registration statement on Form S-3 (File No. 333- ) with
respect to the Securities, including a prospectus, has been prepared by the
Company in conformity with the requirements of the Securities Act of 1933
("Act") and the rules and regulations ("Rules and Regulations") of the
Securities and Exchange Commission ("Commission") thereunder and filed with
the Commission and has become effective. Such registration statement and
prospectus may have been amended or supplemented prior to the date of the
date hereof; any such amendment or supplement was so prepared and filed,
and any such amendment filed after the effective date of such registration
statement has become effective. No stop order suspending the effectiveness
of the registration statement has been issued, and no proceeding for that
purpose has been instituted or threatened by the Commission. A prospectus
supplement ("Prospectus Supplement") setting forth the terms of the
Designated Securities and of their sale and distribution has been or will
be so prepared and will be filed pursuant to Rule 424(b) of the Rules and
Regulations on or before the second business day after the date hereof (or
such earlier time as may be required by the Rules and Regulations). Copies
of such registration statement and prospectus, any such amendment or
supplement and all documents incorporated by reference therein that were
filed with the Commission on or prior to the date it is first used in
connection with the offering of the Designated Securities (including one
fully executed copy of the registration statement and of each amendment
thereto for each of the Underwriters and for counsel for the Underwriters)
have been delivered to the Representatives. Such registration statement,
as it may have heretofore been amended, is referred to herein as the
"Registration Statement," and the final form of prospectus included in the
Registration Statement, as supplemented by the Prospectus Supplement, is
referred to herein as the "Prospectus." Each form of Prospectus, or
Prospectus and Prospectus Supplement, if any, heretofore made available for
use in offering the
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<PAGE>
Securities is referred to herein as a "Preliminary Prospectus." Any
reference herein to the Registration Statement, the Prospectus, any
amendment or supplement thereto or any Preliminary Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein, and any reference herein to the terms "amend," "amendment" or
"supplement" with respect to the Registration Statement or Prospectus shall
be deemed to refer to and include the filing after the execution hereof of
any document with the Commission deemed to be incorporated by reference
therein.
(b) Each part of the Registration Statement, when such part
became or becomes effective, each Preliminary Prospectus (if any) on
the date of filing thereof with the Commission, and the Prospectus and
any amendment or supplement thereto, on the date of filing thereof
with the Commission and at the Closing Date, conformed or will conform
in all material respects with the requirements of the Act and the
Rules and Regulations; each part of the Registration Statement, when
such part became or becomes effective, did not or will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; each Preliminary Prospectus (if any), on the
date of filing thereof with the Commission, and the Prospectus and any
amendment or supplement thereto, on the date of filing thereof with
the Commission and at the Closing Date, did not or will not include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that
the foregoing shall not apply to statements in or omissions from any
such document in reliance upon, and in conformity with, written
information furnished to the Company by the Representatives, or by any
Underwriter through the Representatives, specifically for use in the
preparation thereof.
(c) The documents incorporated by reference in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
Preliminary Prospectus, when they became or become effective under the
Act or were or are filed with the Commission under the Securities
Exchange Act of 1934 ("Exchange Act"), as the case may be, conformed
or will conform in all material respects with the requirements of the
Act or the Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder.
(d) Each of Arcadia Financial and the Company has been duly
incorporated and is an existing corporation in good standing under the
laws of its jurisdiction of incorporation and is duly qualified to do
business, is in good standing and has obtained all necessary licenses
and approvals in each jurisdiction in which the failure to so qualify
or to obtain such license or
-5-
<PAGE>
approval would materially and adversely affect the enforceability of any
Receivable or any other part of the Trust Property or the ability of
Arcadia Financial or the Company to perform their respective obligations
under, or adversely affect the validity or enforceability of, the Pricing
Agreement, the Sale and Servicing Agreement, the Trust Agreement, the
Indenture, the Receivables Purchase Agreement, the Insurance Agreement, the
Spread Account Agreement, the Lockbox Agreement, the Designated Securities
or the Administration Agreement; and all of the outstanding shares of
capital stock of the Company have been duly authorized and validly issued,
are fully paid and non-assessable and are owned beneficially and of record
by the Company subject to no security interest, other encumbrance or
adverse claim other than the security interest of Financial Security
Assurance Inc. ("Financial Security") pursuant to the Stock Pledge
Agreement, dated as of March 25, 1993, as amended, by and among Arcadia
Financial, the Company and Financial Security (the "Stock Pledge
Agreement").
(e) Arcadia Financial has full power and authority (corporate
and other) to conduct its business as described in the Registration
Statement and Prospectus, and to execute, deliver and perform the
obligations to be performed by it, under the Pricing Agreement, the
Sale and Servicing Agreement, the Receivables Purchase Agreement, the
Insurance Agreement, the Spread Account Agreement and the Lockbox
Agreement and, if applicable, the Administration Agreement, and had at
all relevant times, and on the Closing Date will have, full power,
authority and legal right to acquire, own, sell and assign the
Receivables and the related Trust Property to the Company and to
service the Receivables as contemplated by the Sale and Servicing
Agreement.
(f) The Company has full power and authority (corporate and
other) to conduct its business as described in the Registration
Statement and Prospectus and to execute and deliver and perform the
obligations to be performed by it, under the Pricing Agreement, the
Trust Agreement, the Sale and Servicing Agreement, the Receivables
Purchase Agreement, the Insurance Agreement, the Spread Account
Agreement and the Lockbox Agreement and had at all relevant times, and
on the Closing Date will have, full power, authority and legal right
to acquire, own, sell and assign the Receivables and the other Trust
Property.
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<PAGE>
(g) The Trust has been duly formed and is validly existing as a
business trust under the laws of the State of Delaware, 12 Del. C. Section
3801, ET SEQ.; and has the power and authority to execute, deliver and
perform its obligations under the Sale and Servicing Agreement, the
Indenture, the Administration Agreement, the Designated Notes and the
Designated Certificates.
(h) The Trust Agreement, the Sale and Servicing Agreement, the
Receivables Purchase Agreement, the Insurance Agreement, the Spread
Account Agreement, the Lockbox Agreement and the Pricing Agreement
have been duly authorized and when duly executed and delivered by the
parties thereto will constitute valid and legally binding obligations
of the Company, enforceable in accordance with their terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles, provided that no
representation is made with respect to the enforceability of Section 6
hereof insofar as such provisions relate to indemnification for
liabilities arising under applicable securities laws.
(i) The Sale and Servicing Agreement, the Receivables Purchase
Agreement, the Insurance Agreement, the Spread Account Agreement, the
Custodian Agreement, the Lockbox Agreement and the Pricing Agreement
and, if applicable, the Administration Agreement, have been duly
authorized and when duly executed and delivered by the parties thereto
will constitute valid and legally binding obligations of Arcadia
Financial, enforceable in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights
and to general equity principles, provided that no representation is
made with respect to the enforceability of Section 6 hereof insofar as
such provisions relate to indemnification for liabilities arising
under applicable securities laws.
(j) The Sale and Servicing Agreement, the Indenture, the Insurance
Agreement, the Custodian Agreement and the Administration Agreement have
been duly authorized and, when duly executed and delivered by the parties
thereto, each will constitute a valid and legally binding obligation of the
Trust, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles. The Trust's assignment of the Collateral to the
Collateral Agent pursuant to the Indenture will vest in the Collateral
Agent, for the benefit of the Certificateholders and the Noteholders, a
first priority perfected security interest therein, subject to no prior
lien, mortgage, security interest, pledge, adverse claim, charge or other
encumbrance.
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<PAGE>
(k) The Designated Certificates, if any, have been duly
authorized and, when duly executed, issued and delivered as
contemplated hereby and by the Trust Agreement, will constitute valid
and legally binding obligations, enforceable in accordance with their
terms and entitled to the benefits and security afforded by the Trust
Agreement, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(l) The Designated Notes, if any, have been duly authorized and, when
duly executed, issued and delivered as contemplated hereby and by the
Indenture, will constitute valid and legally binding obligations,
enforceable in accordance with their terms and entitled to the benefits and
security afford by the Indenture, subject as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
(m) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, none of Arcadia Financial, the Company
or the Trust has incurred any liabilities or obligations, direct or
contingent, or entered into any transactions, not in the ordinary
course of business, that are material to Arcadia Financial, the
Company or the Trust, and there has not been any material change, on a
consolidated basis, in the capital stock, short-term debt or long-term
debt of Arcadia Financial, the Company or the Trust, or any material
adverse change, or any development involving a prospective material
adverse change, in the condition (financial or other), business,
prospects, net worth or results of operations of Arcadia Financial,
the Company or the Trust.
(n) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of Arcadia Financial or the Company, threatened
any action, suit or proceeding to which Arcadia Financial, the
Company, the Trust or any subsidiaries of Arcadia Financial (other
than the Company) is a party, before or by any court or governmental
agency or body, that might result in any material adverse change in
the condition (financial or other), business, prospects, net worth or
results of operations of Arcadia Financial, the Company or the Trust,
or might materially and adversely affect the properties or assets
thereof.
(o) There are no contracts or documents that are required to be
filed as exhibits to the Registration Statement that have not been so
filed.
(p) The execution, delivery and performance of the Pricing
Agreement, the Trust Agreement, the Sale and Servicing Agreement, the
Indenture, the Receivables Purchase Agreement, the Insurance
Agreement, the
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Spread Account Agreement, the Lockbox Agreement, the Custodian Agreement,
the Administration Agreement and the Designated Securities and the
consummation of the transactions therein contemplated will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, any agreement or instrument to which Arcadia
Financial, the Company or the Trust is a party or by which it is bound or
to which any of the property of Arcadia Financial, the Company or the Trust
is subject, the articles of incorporation or by-laws of Arcadia Financial,
the certificate of incorporation or by-laws of the Company, or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over Arcadia Financial, the Company or the Trust or any of
their properties; and no consent, approval, authorization or order of, or
filing with, any court, governmental, regulatory or administrative
authority, agency, body or official is required for the consummation of the
transactions contemplated by the Pricing Agreement the Trust Agreement, the
Sale and Servicing Agreement, the Indenture, the Receivables Purchase
Agreement, the Insurance Agreement, the Spread Account Agreement, the
Lockbox Agreement, the Custodian Agreement, the Administration Agreement
and the Designated Securities, except such as have been obtained under the
Act and such as may be required under state securities laws in connection
with the purchase and distribution of the Designated Securities by the
Underwriters; and the Company has full power and authority to sell the
Designated Securities as contemplated by the Pricing Agreement.
(q) None of the Company, Arcadia Financial, the Trust or any of the
other subsidiaries of Arcadia Financial is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(r) Arcadia Financial and the other subsidiaries of Arcadia Financial
possess all franchises, certificates, licenses, permits and other
authorizations from governmental bodies or regulatory authorities that are
necessary for the conduct of their respective businesses or the ownership,
maintenance and operation of their respective properties and assets,
including without limiting the foregoing, licenses necessary to act as a
sales finance company in each state in which the Company, Arcadia Financial
and the other subsidiaries of Arcadia Financial conduct their respective
businesses, and none of the Trust, the Company, Arcadia Financial, or any
of the other subsidiaries of Arcadia Financial is in violation of any
franchise, certificate, license, permit or other authorization, except
where such failure would not result in any material adverse change in the
condition (financial or other), business, prospects, net worth or results
of operations of Arcadia Financial, the Company or the Trust, or any of
such other subsidiaries, or might materially and adversely affect the
properties or assets of Arcadia Financial, the Company or the Trust.
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(s) The Company, Arcadia Financial, the Trust and the other
subsidiaries of Arcadia Financial are in compliance with, and no violation
exists under, any and all applicable rules, regulations and orders,
including without limiting the foregoing, the motor vehicle retail
installment sales acts of each state in which the Company, Arcadia
Financial, the Trust and the other subsidiaries of Arcadia Financial
conduct their respective businesses, and all applicable federal statutes
and regulations, except where the failure so to comply or a violation
thereunder would not result in any material adverse change in the condition
(financial or other), business, prospects, net worth or results of
operations of Arcadia Financial, the Company, the Trust or any such other
subsidiaries, or might materially and adversely affect the properties or
assets of Arcadia Financial, the Company or the Trust.
(t) The Company, Arcadia Financial, and the Trust have the right to
use all tradenames, service marks, trademarks and other intangible property
rights used in their business and such use by the Company and Arcadia
Financial does not infringe on the rights of any other person or entity.
(u) As of the Closing Date, the representations and warranties of
Arcadia Financial and the Company in the Trust Agreement, the Sale and
Servicing Agreement, the Indenture, the Receivables Purchase Agreement, the
Administration Agreement, the Spread Account Agreement and the Insurance
Agreement, as applicable, will be true and correct.
3. PURCHASE, SALE AND DELIVERY OF DESIGNATED SECURITIES. On the
basis of the representations, warranties and agreements contained in the related
Pricing Agreement, but subject to the terms and conditions therein set forth,
the Company agrees to cause the Trust designated in the related Pricing
Agreement to issue and sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, (i) at the purchase
price specified in the related Pricing Agreement the aggregate principal amount
(or notional principal amount) of Designated Certificates set forth in such
Pricing Agreement and (ii) at the purchase price specified in the related
Pricing Agreement the aggregate principal amount of the Designated Notes set
forth in such Pricing Agreement.
[Unless otherwise specified in the Pricing Agreement, the Designated
Securities will be delivered by the Company to the Representatives for the
accounts of the several Underwriters against payment of the purchase price
therefor by wire transfer of immediately available funds to an account
designated by the Company not later than two business days prior to the
Closing Date at the time and place specified in the related Pricing
Agreement, or at such other time not later than eight full business days
after the date of the Pricing Agreement as the Representatives and the
Company determine, such time being herein referred to as the "Closing Date."]
The Designated Securities so to be delivered will be represented by one or
more definitive certificates having an aggregate initial principal amount
specified in the Pricing Agreement registered in such name or names as the
Underwriters
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may request. The Company shall make such definitive certificates available for
inspection by the Underwriters at least one business day prior to the Closing
Date.
It is understood that the Representatives, acting individually and not
in a representative capacity, may (but shall not be obligated to) make payment
to the Company on behalf of any other Underwriter for the Designated Securities
to be purchased by such Underwriter. Any such payment by the Representatives
shall not relieve any such Underwriter of any of its obligations under any
Pricing Agreement.
4. COVENANTS. In addition to any covenants specified in the related
Pricing Agreement, by their execution of a Pricing Agreement, the Company and
Arcadia Financial, jointly and severally, covenant and agree with each
Underwriter that:
(a) The Company will cause the Prospectus to be filed as required by
Section 2(a) hereof (but only if the Representatives have not reasonably
objected thereto by notice to the Company after having been furnished a
copy a reasonable time prior to filing) and will notify the Representatives
promptly of such filing. During the period in which a prospectus relating
to the Designated Securities is required to be delivered under the Act, the
Company will notify the Representatives promptly of the time when any
subsequent amendment to the Registration Statement has become effective or
any subsequent supplement to the Prospectus has been filed and of any
request by the Commission for any amendment or supplement to the
Registration Statement or Prospectus or for additional information; it will
prepare and file with the Commission, promptly upon the request of the
Representatives, any amendments or supplements to the Registration
Statement or Prospectus that, in the opinion of the Representatives, may be
necessary or advisable in connection with the distribution of the
Designated Securities by the Underwriters; it will file no amendment or
supplement to the Registration Statement or Prospectus (other than any
prospectus supplement relating to the offering of other securities
registered under the Registration Statement or any document required to be
filed under the Exchange Act that upon filing is deemed to be incorporated
by reference therein) to which the Representatives shall reasonably object
by notice to the Company after having been furnished a copy a reasonable
time prior to the filing; and it will furnish to the Representatives at or
prior to the filing thereof a copy of any such prospectus supplement or any
document that upon filing is deemed to be incorporated by reference in the
Registration Statement or Prospectus.
(b) The Company will advise the Representatives, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement, of the suspension of the qualification of
the Designated Securities for offering or sale in any jurisdiction, or
of the initiation or threatening of any proceeding for any such
purpose; and it will promptly use its best efforts
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to prevent the issuance of any stop order or suspension or to obtain its
withdrawal if such a stop order or suspension should be issued.
(c) Within the time during which a prospectus relating to the
Designated Securities is required to be delivered under the Act, the
Company will comply as far as it is able with all requirements imposed
upon it by the Act and by the Rules and Regulations, as from time to
time in force, so far as necessary to permit the continuance of sales
of or dealings in the Designated Securities as contemplated by the
provisions hereof and the Prospectus. If during such period any event
occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in the light of the circumstances then existing, not
misleading, or if during such period it is necessary to amend or
supplement the Registration Statement or Prospectus to comply with the
Act, the Company will promptly notify the Representatives and will
amend or supplement the Registration Statement or Prospectus (at the
expense of the Company and Arcadia Financial) so as to correct such
statement or omission or effect such compliance.
(d) The Company will use its best efforts to qualify the Designated
Securities for sale under the securities laws of such jurisdictions as the
Representatives reasonably designate and to continue such qualifications in
effect so long as required for the distribution of the Designated
Securities, except that the Company shall not be required in connection
therewith to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction. The Company will also
arrange for the determination of the eligibility for investment of the
Designated Securities under the laws of such jurisdictions as the
Representatives reasonably request.
(e) The Company will furnish to the Underwriters copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus
(including all documents incorporated by reference therein) and all
amendments and supplements to such documents, in each case as soon as
available and in such quantities as the Representatives may from time
to time reasonably request.
(f) As soon as practicable, but not later than the Availability Date
(as defined below), the Company will cause the Trust to make generally
available to Certificateholders and Noteholders an earnings statement
(which need not be audited), as provided in Rule 158 under the Act or
otherwise, covering a period of at least 12 months beginning after the date
of the Agreement that shall satisfy the provisions of Section 11(a) of the
Act. For the purpose of the preceding sentence, (i) "Availability Date"
means the 45th day after the end of the fourth fiscal quarter of the Trust
following the fiscal quarter of the Trust that includes the date of the
Pricing
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Agreement, except that, if such fourth fiscal quarter is the last quarter
of the Trust's fiscal year, "Availability Date" means the 90th day after
the end of such fourth fiscal quarter and (ii) an "earnings statement"
shall be sufficient if (a) there is included the information required for
statements of income contained either in Item 8 of Form 10-K, in Part I,
Item 1 of Form 10-Q or in Rule 14a-3(b) under the Exchange Act and (b) the
information is contained in one report or any combination of reports either
on Form 10-K, Form 10-Q, Form 8-K or the annual report to securityholders
pursuant to Rule 14a-3 under the Exchange Act. [For purposes hereof, a
Trust's fiscal year shall end on each June 30.]
(g) The Company or Arcadia Financial, on behalf of the Trust, will
file all reports on Form SR, pursuant to Rule 463 under the Act, and all
reports required to be filed with the Commission on behalf of the Trust
pursuant to the Exchange Act, any order of the Commission thereunder or
pursuant to a "no-action" letter (or similar form of exemptive relief) from
the staff of the Commission and will furnish, or cause to be furnished,
copies of all such reports to the Underwriters.
(h) For a period from the date of the Pricing Agreement to the first
date on which none of the Designated Securities are outstanding, the
Company will deliver, or cause to be delivered, to the Underwriters (i) by
first-class mail and as soon as is practicable, copies of (x) each
certificate, annual statement of compliance and accountants' report
delivered to the Indenture Trustee pursuant to Article III of the Sale and
Servicing Agreement or to the Security Insurer pursuant to Section 2.02 of
the Insurance Agreement and (y) each amendment or supplement to the Trust
Agreement, the Sale and Servicing Agreement, the Indenture, the Receivables
Purchase Agreement, the Insurance Agreement, the Spread Account Agreement,
the Lockbox Agreement, the Custodian Agreement or the Administration
Agreement and (ii) on each Determination Date, or as soon thereafter as is
practicable, but in any event not later than the second business day
immediately succeeding such Determination Date, a copy of the Servicer's
Certificate for the related Collection Period.
(i) So long as any of the Designated Securities are outstanding, the
Company or Arcadia Financial, as applicable, will furnish to the
Underwriters, by first-class mail, as soon as practicable, (i) all
documents required to be distributed to Certificateholders and Noteholders
and (ii) from time to time, such other information concerning the Company,
Arcadia Financial or the Trust, as the Underwriters may reasonably request.
(j) Arcadia Financial and the Company, whether or not the
transactions contemplated under any Pricing Agreement are consummated
or the Pricing Agreement is terminated, will pay (i) all expenses
incident to the performance of their obligations under the Pricing
Agreement and under the Trust
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Agreement, the Sale and Servicing Agreement, the Indenture, the Receivables
Purchase Agreement, the Insurance Agreement, the Spread Account Agreement,
the Custodian Agreement, the Lockbox Agreement, the Administration
Agreement and the Designated Securities, (ii) will pay the expenses of
printing all documents relating to the offering, and (iii) will reimburse
the Underwriters for (a) any expenses (including fees and disbursements of
counsel) incurred by them in connection with the matters referred to in
Section 4(d) hereof and the preparation of memoranda relating thereto, (b)
the fees and disbursements of counsel to the Underwriters, reasonably
incurred in connection with the registration, purchase, sale and delivery
of the Designated Securities and (c) any fees charged by investment rating
agencies for rating the Designated Securities. If the sale of the
Designated Securities provided for in the Pricing Agreement is not
consummated by reason of any failure, refusal or inability on the part of
the Company or Arcadia Financial to perform any agreement on its part to be
performed, or because any other condition of the Underwriters' obligations
under the Pricing Agreement required to be fulfilled by the Company or
Arcadia Financial is not fulfilled, the Company and Arcadia Financial will
reimburse the several Underwriters for all reasonable out-of-pocket
disbursements (including fees and disbursements of counsel) incurred by the
Underwriters in connection with their investigation, preparing to market
and marketing the Designated Securities or in contemplation of performing
their obligations under the Pricing Agreement. The Company and Arcadia
Financial shall not in any event be liable to any of the Underwriters for
loss of anticipated profits from the transactions covered by the Pricing
Agreement.
(k) The Company and Arcadia Financial will apply the net
proceeds from the sale of the Designated Securities as set forth in
the Prospectus.
(l) To the extent, if any, that any rating to be provided with
respect to the Designated Securities, as set forth in Section 6(n) hereof,
is conditional upon the furnishing of documents or information or the
taking of any other actions by Arcadia Financial or the Company, Arcadia
Financial and/or the Company, as the case may be, shall furnish such
documents or information and take any such other actions.
(m) During the period ending 20 business days after the date of the
Pricing Agreement, the Company and Arcadia Financial will not, directly or
indirectly, offer or sell, or determine to offer or sell, (i) any notes
collateralized by, or certificates evidencing an ownership interest in,
receivables generated pursuant to retail automobile or light-duty truck
installment sale contracts or (ii) any debt securities that are
substantially similar to the Designated Securities of the Company or
Arcadia Financial or of an issuer for which Arcadia Financial or the
Company is a sponsor or
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which has been formed or is beneficially owned by the Company or Arcadia
Financial, in either case without the Underwriters' prior written consent.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Designated Securities as
provided in the Pricing Agreement shall be subject to the accuracy, as of the
date of such Pricing Agreement and the Closing Date (as if made at the Closing
Date), of the representations and warranties of the Company and Arcadia
Financial in the Pricing Agreement, to the performance by the Company and
Arcadia Financial of their respective obligations under the Pricing Agreement
and to the following additional conditions:
(a) The Prospectus shall have been filed as required by
Section 2(a) hereof; and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceeding
for that purpose shall have been instituted or, to the knowledge of
the Company, Arcadia Financial or any Underwriter, threatened by the
Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the
satisfaction of the Representatives.
(b) No Underwriter shall have advised the Company or Arcadia
Financial that the Registration Statement or Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact
that in the opinion of the Representatives is material, or omits to
state a fact that in the opinion of the Representatives is material
and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which such information is given in the
Registration Statement and the Prospectus, there shall not have been
any change, on a consolidated basis, in the capital stock, short-term
debt (other than in the ordinary course of Arcadia Financial's
business of purchasing Receivables) or long-term debt of the Security
Insurer, Arcadia Financial, the Company or the other subsidiaries of
Arcadia Financial, or any adverse change, or any development involving
a prospective adverse change, in the condition (financial or other),
business, prospects, net worth or results of operations of the
Security Insurer, Arcadia Financial, the Company or the other
subsidiaries of Arcadia Financial or any change in the rating assigned
to the claims-paying ability of the Security Insurer or any securities
of Arcadia Financial or the Company or any public announcement that
any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act) has under
surveillance or review its rating assigned to the claims-paying
ability of the Security Insurer or any securities of Arcadia Financial
or
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the Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating), that, in the judgment of the Representatives, makes it impractical
or inadvisable to offer or deliver the Designated Securities on the terms
and in the manner contemplated in the Prospectus.
(d) Unless otherwise specified in the Pricing Agreement, the
Representatives shall have received the opinion of Dorsey & Whitney LLP
(or, if so specified in the Pricing Agreement, such other counsel as
is reasonably satisfactory to the Representatives), counsel for
Arcadia Financial and the Company, dated the Closing Date, to the
effect that:
(i) Each of Arcadia Financial and the Company has been duly
incorporated and is an existing corporation in good standing
under the laws of its jurisdiction of incorporation; and all of
the outstanding shares of capital stock of the Company have been
duly authorized and validly issued, are fully paid and
non-assessable and are owned beneficially and of record by
Arcadia Financial subject to no security interest, other
encumbrance or adverse claim other than the security interest of
the Security Insurer pursuant to the Stock Pledge Agreement;
(ii) No qualification to do business as a foreign corporation in
the State of Minnesota is necessary for the Company to purchase the
Receivables from Arcadia Financial and assign the Receivables to the
Trust and to perform its other obligations under the Sale and
Servicing Agreement;
(iii) No qualification to do business as a foreign corporation in
the State of Minnesota is necessary for the Owner Trustee or the Trust
to own the Receivables or to conduct the other transactions
contemplated by the Trust Agreement, the Sale and Servicing Agreement
and the Indenture;
(iv) Arcadia Financial has corporate power and authority to conduct
its business as described in the Registration Statement and
Prospectus, and to execute, deliver and perform the obligations to be
performed by it, under the Pricing Agreement, the Sale and Servicing
Agreement, the Receivables Purchase Agreement, the Insurance
Agreement, the Spread Account Agreement, the Lockbox Agreement, the
Custodian Agreement and the Designated Securities and, if applicable,
the Administration Agreement, and had at all relevant times, and on
the Closing Date has, full power and authority to acquire, own, sell
and assign the Receivables and the related Trust Property to the
Company and to service the Receivables as contemplated by the Sale and
Servicing Agreement;
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<PAGE>
(v) The Company has corporate power and authority to conduct its
business as described in the Registration Statement and Prospectus and
to execute and deliver and perform the obligations to be performed by
it under the Pricing Agreement, the Trust Agreement, the Sale and
Servicing Agreement, the Receivables Purchase Agreement, the Insurance
Agreement, the Spread Account Agreement, the Lockbox Agreement, the
Designated Securities and had at all relevant times, and on the
Closing Date has, full power and authority to acquire, own, sell and
assign the Receivables and the other Trust Property;
(vi) The direction by the Company to authenticate the
Designated Certificates has been duly authorized by the Company
and, when the Designated Certificates have been duly executed,
authenticated and delivered by the Owner Trustee in accordance
with the Trust Agreement and delivered and paid for pursuant to
the relevant Pricing Agreement, will constitute valid and legally
binding obligations, enforceable in accordance with their terms
and entitled to the benefits and security afforded by the Trust
Agreement, subject as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity
principles.
(vii) The direction by the Company to the Indenture Trustee to
authenticate the Designated Notes has been duly authorized by the
Company and, when the Designated Notes have been duly executed
and delivered by the Owner Trustee and, when authenticated by the
Indenture Trustee in accordance with the Indenture and delivered
and paid for pursuant to the relevant Pricing Agreement, will
constitute valid and legally binding obligations, enforceable in
accordance with their terms and entitled to the benefits and
security afforded by the Indenture, subject as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles;
(viii) The Registration Statement has become effective under the
Act; the Prospectus has been filed as required by Section 2(a)
hereof; and no stop order suspending the effectiveness of the
Registration Statement has been issued and to the best knowledge
of such counsel no proceeding for that purpose has been
instituted or threatened by the Commission;
(ix) Each part of the Registration Statement, when such part
became effective, and the Prospectus and any amendment or
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supplement thereto, on the date of filing thereof with the Commission
and at the Closing Date, complied as to form in all material respects
with the requirements of the Act and the Rules and Regulations; such
counsel have no reason to believe that either any part of the
Registration Statement, when such part became effective, contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus and any amendment or
supplement thereto, on the date of filing thereof with the Commission
or at the Closing Date, included an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; it being understood that such counsel
need express no opinion as to the financial statements or other
financial data included in any of the documents mentioned in this
clause;
(x) The descriptions in the Registration Statement and
Prospectus of statutes, legal and governmental proceedings,
contracts and other documents are accurate and fairly present the
information required to be shown; and such counsel do not know of
any statutes or legal or governmental proceedings required to be
described in the Prospectus that are not described as required,
or of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus (or
required to be filed under the Exchange Act if upon such filing
they would be incorporated by reference therein) or to be filed
as exhibits to the Registration Statement that are not described
and filed as required;
(xi) The Trust Agreement, the Sale and Servicing Agreement, the
Receivables Purchase Agreement, the Insurance Agreement, the Spread
Account Agreement, the Lockbox Agreement have each been duly
authorized, executed and delivered by the Company; and each
constitutes a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(xii) The Sale and Servicing Agreement, the Receivables Purchase
Agreement, the Insurance Agreement, the Spread Account Agreement, the
Custodian Agreement and the Lockbox Agreement and, if applicable, the
Administration Agreement, have each been duly authorized, executed and
delivered by Arcadia Financial and each constitutes a valid and
legally binding obligation of Arcadia Financial, enforceable against
Arcadia Financial in
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accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(xiii) The Sale and Servicing Agreement, the Indenture, the Custodian
Agreement and the Administration Agreement each constitutes a valid
and legally binding obligation of the Trust, enforceable against the
Trust in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles;
(xiv) There are no actions, proceedings or investigations pending,
or to the knowledge of such counsel, threatened before any court,
governmental, regulatory or administrative authority, agency, body or
official or other tribunal (w) asserting the invalidity of the Pricing
Agreement, the Trust Agreement, the Sale and Servicing Agreement, the
Indenture, the Receivables Purchase Agreement, the Insurance
Agreement, the Spread Account Agreement, the Lockbox Agreement, the
Custodian Agreement, the Designated Securities or the Administration
Agreement, (x) seeking to prevent the issuance of the Designated
Securities or the consummation of any of the transactions contemplated
by the Pricing Agreement, the Trust Agreement, the Sale and Servicing
Agreement, the Indenture, the Receivables Purchase Agreement, the
Insurance Agreement, the Spread Account Agreement, the Lockbox
Agreement, the Custodian Agreement, the Designated Securities or the
Administration Agreement, (y) that would, if determined adversely to
Arcadia Financial, the Company or the Trust, materially and adversely
affect the ability of Arcadia Financial, the Company or the Trust to
perform their respective obligations under, or the validity or
enforceability of, the Pricing Agreement, the Trust Agreement, the
Sale and Servicing Agreement, the Indenture, the Receivables Purchase
Agreement, the Insurance Agreement, the Spread Account Agreement, the
Lockbox Agreement, the Designated Securities, the Custodian Agreement
or the Administration Agreement, or (z) that would affect adversely
the Federal income tax attributes of the Designated Certificates, as
described in the Prospectus under the heading "Certain Federal Income
Tax Consequences";
(xiv) The Pricing Agreement has been duly authorized, executed
and delivered by Arcadia Financial and the Company;
(xv) Neither the transfer of the Receivables and the related Trust
Property to the Company pursuant to the Receivables Purchase Agreement
nor the transfer of the Receivables and the other Trust Property to
the Owner Trustee acting on behalf of the Trust, the grant of the
security interest in the Collateral
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to the Collateral Agent pursuant to the Indenture, the issuance, sale
or delivery of the Designated Securities, the execution, delivery and
performance by Arcadia Financial, the Company or the Trust, as
applicable, of the Pricing Agreement, the Trust Agreement, the Sale
and Servicing Agreement, the Indenture, the Receivables Purchase
Agreement, the Insurance Agreement, the Spread Account Agreement, the
Lockbox Agreement, the Custodian Agreement, the Designated Securities
or the Administration Agreement nor the consummation of any of the
transactions contemplated herein or therein, nor the fulfillment of
the terms hereof or thereof by Arcadia Financial, the Company or the
Trust will result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, agreement
or instrument known to such counsel to which Arcadia Financial, the
Company, or the Trust is a party or by which it is bound or to which
any of the property of Arcadia Financial, the Company or the Trust is
subject, the articles of incorporation or by-laws of Arcadia
Financial, the certificate of incorporation or by-laws of the Company,
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over Arcadia
Financial, the Company or the Trust or any of their properties; and no
consent, approval, authorization or order of, or filing with, any
court, governmental, regulatory or administrative authority, agency,
body or official is required for the consummation of the transactions
contemplated by the Pricing Agreement, the Trust Agreement, the Sale
and Servicing Agreement, the Indenture, the Receivables Purchase
Agreement, the Insurance Agreement, the Spread Account Agreement, the
Lockbox Agreement, the Custodian Agreement, the Designated Securities
or the Administration Agreement, or in connection with the issuance or
sale of the Designated Securities by the Company, except such as have
been obtained under the Act and such as may be required under state
securities laws in connection with the purchase and distribution of
the Designated Securities by the Underwriters;
(xvi) The Trust's assignment of the Collateral to the Collateral
Agent pursuant to the Indenture will vest in the Collateral Agent, for
the benefit of the Certificateholders and the Noteholders, a first
priority perfected security interest therein, subject to no prior lien
mortgage, security interest, pledge, adverse claim, charge or other
incumbrance.
(xvii) The statements in the Registration Statement and the
Prospectus under the headings "Risk Factors--Certain Legal
Aspects," "Certain Legal Aspects of the Receivables," "Certain
Federal Income Tax Consequences," and "ERISA Considerations," to
the extent that they describe matters of law or legal conclusions
with respect thereto, have been prepared or reviewed by such
counsel and are correct in all material respects;
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(xviii) The Designated Securities, the Trust Agreement, the Insurance
Agreement, the Sale and Servicing Agreement, the Indenture, the
Receivables Purchase Agreement, the Lockbox Agreement, the Pricing
Agreement, the Custodian Agreement, the Policies and the
Administration Agreement conform in all material respects with the
descriptions thereof contained in the Registration Statement and the
Prospectus;
(xix) Neither the Trust Agreement nor the Sale and Servicing
Agreement is required to be qualified under the Trust Indenture Act of
1939, as amended, and neither the Company nor the Trust is required to
register as an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act of 1940, as
amended;
(xx) The Indenture has been duly qualified under the Trust
Indenture Act; and
(xxi) The trust fund created by the Trust Agreement will not, for
New York or Minnesota income tax purposes, be classified as an
association taxable as a corporation, and Certificateholders and
Noteholders who are not residents of or otherwise subject to tax in
New York or Minnesota will not, by reason of their acquisition of an
interest in the Designated Securities, be subject to New York or
Minnesota income, franchise, excise or similar taxes with respect to
interest on the Designated Securities or with respect to any of the
other Trust Property.
In rendering their opinion as aforesaid, such counsel may rely (a) as
to matters involving the application of laws of any jurisdiction other than
the States of Minnesota and New York or the United States, to the extent
they deem proper and specify in such opinion, upon the opinion of other
counsel who are reasonably satisfactory to counsel to the Underwriters and
(b) as to matters of fact, to the extent they deem proper, upon
certificates of responsible officers of Arcadia Financial and the Company
and public officials; provided that such counsel shall state that they
believe that they and the Representatives are justified in relying upon
such opinions and certificates.
(e) The Representatives shall have received from Mayer, Brown &
Platt, counsel for the Underwriters (or, if so specified in the
Pricing Agreement, such other counsel as is reasonably satisfactory to
the Representatives), such opinion or opinions, dated the Closing
Date, with respect to the incorporation of Arcadia Financial and the
Company, the validity of the Designated Securities, the Registration
Statement, the Prospectus and other related matters as the
Representatives reasonably may
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request, and such counsel shall have received such papers and information
as they request to enable them to pass upon such matters.
(f) At or prior to the time of execution of the Pricing
Agreement and at the Closing Date, the Representatives shall have
received a letter from Ernst & Young LLP, dated the date of delivery
thereof, confirming that they are independent public accountants with
respect to the Company and Arcadia Financial within the meaning of the
Act and the applicable published Rules and Regulations thereunder,
substantially in the form of the draft to which the Representatives
have previously agreed and otherwise in form and substance
satisfactory to the Representatives.
(g) The Representatives shall have received from the Company a
certificate, signed by the Chairman of the Board, the President or a
Vice President and by the principal financial or accounting officer of
the each of Arcadia Financial and the Company, dated the Closing Date,
to the effect that, to the best of their knowledge based upon
reasonable investigation:
(i) The representations and warranties of Arcadia Financial
or the Company, as the case may be, in the Pricing Agreement are
true and correct, as if made at and as of the Closing Date, and
Arcadia Financial or the Company, as the case may be, has
complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for
that purpose has been instituted or is threatened by the
Commission; and
(iii) Since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an
amendment or supplement to the Registration Statement or
Prospectus that has not been so set forth, and there has been no
document required to be filed under the Exchange Act and the
rules and regulations of the Commission thereunder that upon such
filing would be deemed to be incorporated by reference in the
Prospectus that has not been so filed.
(h) The Representatives shall have received the opinion of Dorsey &
Whitney LLP (or such other counsel as is reasonably satisfactory to the
Representatives), counsel to Arcadia Financial and the Company, dated the
Closing Date, and also delivered to and satisfactory to the Rating
Agencies, substantially to the effect that (A) the transfer of the
Receivables by Arcadia Financial to the Company would be characterized as a
sale, (B) the transfer of the Receivables and the related Trust Property by
the
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Company to the Trust would be characterized as either a sale or the grant
of a security interest and (C) in the event of an involuntary or voluntary
case under the United States Bankruptcy Code, the separate corporate
existence of Arcadia Financial and the Company would not properly be
disregarded so as to substantively consolidate their assets and
liabilities.
(i) The Representatives shall have received the opinion of Dorsey &
Whitney LLP (or such other counsel as is reasonably satisfactory to the
Representatives), counsel to Arcadia Financial and the Company, dated the
Closing Date, and also delivered to and satisfactory to the Rating
Agencies, with respect to the perfection and priority of the security
interest (as defined in Section 1-201(37) of the Uniform Commercial Code)
of the Trust in the Receivables, the other Trust Property and the proceeds
thereof.
(j) The Representatives shall have received the opinion of special
Minnesota counsel for Arcadia Financial and the Company as is reasonably
satisfactory to the Representatives, dated the Closing Date, to the effect
that:
(i) Arcadia Financial holds all franchises, certificates,
consents, licenses, permits and other governmental or regulatory
approvals or authorizations necessary to originate and service the
Receivables in the State of Minnesota and to perform its other
obligations under the Sale and Servicing Agreement, the Custodian
Agreement and the Administration Agreement;
(ii) No franchises, certificates, consents, licenses, permits or
other governmental or regulatory approvals or authorizations are
necessary in the State of Minnesota for the Company to purchase the
Receivables from Arcadia Financial and assign the Receivables to the
Trust and to perform its other obligations under the Trust Agreement
and the Sale and Servicing Agreement;
(iii) No franchises, certificates, consents, licenses, permits or
other governmental or regulatory approvals or authorizations are
necessary in the State of Minnesota for the Owner Trustee or the Trust
to own the Receivables or to conduct the other transactions
contemplated the Trust Agreement and the Sale and Servicing Agreement;
and
(iv) The form of contract or note used by Arcadia Financial in the
State of Minnesota, attached to such opinion, (A) assuming the valid
execution and delivery of such form by each of the parties thereto, is
enforceable in accordance with its terms under the laws of the State
of Minnesota and (B) complies with applicable state and local laws
relating to consumer sales and lending transactions, consumer credit
laws, equal credit opportunity and disclosure laws.
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(k) Unless otherwise specified in the Pricing Agreement, the
Representatives shall have received opinions of special counsel for Arcadia
Financial and the Company in certain of the states where the Receivables
were originated, as specified in the Pricing Agreement, dated the Closing
Date, to the effect that:
(i) Arcadia Financial is duly qualified to do business as a
foreign corporation and is in good standing in the such state;
(ii) No qualification to do business as a foreign corporation in
such state is necessary for the Company to purchase the Receivables
from Arcadia Financial and assign the Receivables to the Trust and to
perform its other obligations under the Trust Agreement and the Sale
and Servicing Agreement;
(iii) No qualification to do business as a foreign corporation in
such state is necessary for the Owner Trustee or the Trust to own the
Receivables or to conduct the other transactions contemplated by the
Trust Agreement and the Sale and Servicing Agreement;
(iv) Arcadia Financial holds all franchises, certificates,
consents, licenses, permits and other governmental or regulatory
approvals or authorizations necessary to originate and service the
Receivables in such state and to perform its other obligations under
the Sale and Servicing Agreement and, if applicable, the Custodian
Agreement and the Administration Agreement;
(v) No franchises, certificates, consents, licenses, permits or
other governmental or regulatory approvals or authorizations are
necessary in such state for the Company to purchase the Receivables
from Arcadia Financial and assign the Receivables to the Trust and to
perform its other obligations under the Trust Agreement and the Sale
and Servicing Agreement;
(vi) No franchises, certificates, consents, licenses, permits or
other governmental or regulatory approvals or authorizations are
necessary in such state for the Owner Trustee or the Trust to own the
Receivables or conduct the other transactions contemplated by the
Trust Agreement and the Sale and Servicing Agreement;
(vii) The form of contract or note used by Arcadia Financial in such
state, attached to such opinion, (A) assuming the valid execution and
delivery of such form by each of the parties thereto, is enforceable
in accordance with its terms under the laws of such state and
(B) complies with applicable state and local laws relating to consumer
sales and lending transactions, consumer credit laws, equal credit
opportunity and disclosure laws;
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(viii) Assuming Arcadia Financial is shown as secured party on the
related title certificate, prior to the consummation of the
transactions contemplated by the Receivables Purchase Agreement,
Arcadia Financial has a valid and perfected first priority security
interest in Financed Vehicles securing Receivables that are registered
in such state;
(ix) Following the sale of the Receivables by Arcadia Financial to
the Company pursuant to the Receivables Purchase Agreement, the
Company will have a valid and perfected first priority security
interest in Financed Vehicles securing Receivables that are registered
in such state, notwithstanding the fact that the certificates of title
to such Financed Vehicles have not been marked, amended or otherwise
noted to reflect the Company's security interest;
(x) Following the assignment of the Receivables by the Company to
the Trust pursuant to the Sale and Servicing Agreement, the Trust will
have a valid and perfected first priority security interest Financed
Vehicles securing Receivables that are registered in such state,
notwithstanding the fact that the certificates of title to such
Financed Vehicles have not been marked, amended or otherwise noted to
reflect the Trust's security interest;
(xi) The Trust's assignment of the Collateral to the Collateral
Agent pursuant to the Indenture will vest in the Collateral Agent, for
the benefit of the Certificateholders and the Noteholders, a first
priority perfected security interest therein, subject to no prior
lien, mortgage, security interest, pledge, adverse claim, charge or
other encumbrance;
(xii) The transfers of the Receivables from Arcadia Financial to the
Company, from the Company to the Trust and from the Trust to the
Indenture Trustee, and the consummation of the other transactions
contemplated by the Trust Agreement and the Sale and Servicing
Agreement and the Administration Agreement will not conflict with any
law or order of such state applicable to Arcadia Financial or the
Company currently in effect;
(xiii) Under the law of such state, the perfection of the transfers
of the Receivables by Arcadia Financial to the Company, by the Company
to the Trust and by the Trust to the Collateral Agent would be
governed by the law of the state (a) where the chief executive offices
of Arcadia Financial or the Company, as applicable, are located or (b)
where the Receivable Files are located;
(xiv) The trust fund created by the Trust Agreement will not, for
the income tax purposes of such state, be classified as an association
taxable as a corporation, and Certificateholders and Noteholders who
are not residents of
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or otherwise subject to tax in such state will not, by reason of their
acquisition of an interest in the Designated Securities, be subject to
income, franchise, excise or similar taxes in such state with respect
to interest on the Designated Securities or with respect to any of the
other Trust Property;
(xv) The statements in the Registration Statement and the
Prospectus under the headings "Certain Legal Aspects of the
Receivables" to the extent that they describe matters of the law of
such state or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and are correct in all material
respects.
(l) The Representatives shall have received the opinion of Richards,
Layton & Finger (or, if so specified in the Pricing Agreement, such other
counsel as is reasonably satisfactory to the Representatives), counsel to
the Owner Trustee, dated the Closing Date, to the effect that:
(i) The Owner Trustee has been duly incorporated and is validly
existing as a banking corporation under the laws of the State of
Delaware and has the power and authority to enter into, and to take
all action required of it under the Trust Agreement and, on behalf of
the Trust, under the Indenture, the Sale and Servicing Agreement, the
Administration Agreement and the Custodian Agreement;
(ii) The Designated Certificates have been duly executed,
delivered and authenticated by the Owner Trustee;
(iii) The Designated Notes have been duly executed and delivered by
the Owner Trustee;
(iv) The execution and delivery of the Trust Agreement and, on
behalf of the Trust, the Indenture, the Sale and Servicing Agreement,
the Administration Agreement and the Custodian Agreement by the Owner
Trustee and the performance by the Owner Trustee of their terms do not
conflict with or result in a violation of (A) any law or regulation of
the United States of America or the State of Minnesota governing the
banking or trust powers of the Owner Trustee, or (B) the by-laws of
the Owner Trustee; and
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(v) No approval, authorization or other action by, or filing with,
any governmental authority of the United States of America or the
State of Minnesota having jurisdiction over the banking or trust
powers of the Owner Trustee is required in connection with the
execution and delivery by the Owner Trustee of the Trust Agreement,
and on behalf of the Trust, the Indenture, the Sale and Servicing
Agreement, the Administration Agreement or the Custodian Agreement or
the performance by the Owner Trustee and the of the respective terms
thereof.
(m) Unless otherwise specified in the Pricing Agreement, the
Representatives shall have received the opinion of Richards, Layton &
Finger (or if so specified in the Pricing Agreement, such other counsel
as is reasonably satisfactory to the Representatives) special counsel for
the Owner Trustee, dated the Closing Date, to the effect that:
(i) The Trust has been duly formed and is validly existing as a
business trust under the laws of the State of Delaware, 12 Del. C.
Section 3801, ET SEQ.;
(ii) The Trust has the power and authority to execute, deliver and
perform its obligations under the Sale and Servicing Agreement, the
Indenture, the Administration Agreement, the Designated Notes and the
Designated Certificates;
(iii) To the extent that Article 9 of the Uniform Commercial Code
as in effect in the State of Delaware (the "UCC") is applicable
(without regard to conflicts of law principles), and assuming that the
security interest created by the Indenture in the Receivables, the
other Trust Property and the proceeds thereof has been duly created
and has attached, upon the filing of the Financing Statement with the
Secretary of State of the State of Delaware the Indenture Trustee will
have a perfected security interest in such Receivables, other Trust
Property and the proceeds thereof, and such security interest will be
prior to any other security interest that is perfected solely by the
filing of financing statements under the UCC, excluding purchase money
security interests under Section 9-312(4) of the UCC and temporarily
perfected security interests in proceeds under Section 9-306(3) of the
UCC; and
(iv) No re-filing or other action is necessary under the UCC in
the State of Delaware in order to maintain the perfection of such
security interest except for the filing of continuation statements at
five year intervals.
(n) The Representatives shall have received the opinion of Chapman
and Cutler (or, if so specified in the Pricing Agreement, such other
counsel as is reasonably satisfactory to the Representatives), counsel to
the Indenture Trustee and
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the Collateral Agent specified in the Pricing Agreement, dated the Closing
Date, to the effect that:
(i) The Indenture Trustee and Collateral Agent is a banking
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation and is duly authorized and empowered
to exercise trust powers under applicable law;
(ii) The Indenture Trustee and Collateral Agent has corporate
power, authority and legal right to execute, deliver and perform its
obligations under the Indenture, the Sale and Servicing Agreement and
the Spread Account Agreement and has taken all necessary action to
authorize the execution, delivery and performance by it of the
Indenture, the Spread Account Agreement and the Sale and Servicing
Agreement;
(iii) The execution and delivery of the Indenture, the Sale and
Servicing Agreement and the Spread Account Agreement and the
performance by the Indenture Trustee of their terms (including as a
Backup Servicer under the Sale and Servicing Agreement) do not
conflict with or result in a violation of (A) any law or regulation of
the United States of America of the State of Minnesota governing the
banking or trust powers of the Indenture Trustee, or (B) the by-laws
of the Indenture Trustee; and
(iv) Each of the Indenture, the Sale and Servicing Agreement and
the Spread Account Agreement has been duly executed and delivered by
the Indenture Trustee and constitutes a legal, valid and binding
obligation of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its respective terms, except that certain
of such obligations may be enforceable solely against the Trust
Property and except that such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, liquidation, or
other similar laws applicable to banking corporations affecting the
enforcement of creditors' rights generally, and by general principles
of equity.
(o) The Representatives shall have received the opinion of counsel to
the Custodian (which counsel shall be reasonably satisfactory to the
Representatives), dated the Closing Date, to the effect that:
(i) The Custodian has been duly incorporated and is validly
existing and has the power and authority to enter into, and to take
all action required of it under the Custodian Agreement;
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(ii) The execution and delivery of the Custodian Agreement by the
Custodian and the performance by the Custodian of its terms do not
conflict with or result in a violation of (A) any law or regulation of
the United States of America or the State of Minnesota governing the
powers of the Custodian, or (B) the By-Laws of the Custodian; and
(iii) No approval, authorization or other action by, or filing
with, any governmental authority of the United States of America or
the State of Minnesota having jurisdiction over the powers of the
Custodian is required in connection with the execution and delivery by
the Custodian of the Custodian Agreement or the performance by the
Custodian of the terms of the Custodian Agreement.
(p) The Representatives shall have received the opinion of counsel to
the Security Insurer as is reasonably satisfactory to the Representatives,
dated the Closing Date, to the effect that:
(i) The Security Insurer is a stock insurance company duly
organized, validly existing and authorized to transact financial
guaranty insurance business under the laws of its state of
organization;
(ii) The Policies, the Insurance Agreement, the Spread Account
Agreement, the Custodian Agreement and the Indemnification Agreement
and, if applicable, the Indenture and the Sale and Servicing
Agreement, have been duly authorized, executed and delivered by the
Security Insurer;
(iii) The Policies, the Insurance Agreement, the Spread Account
Agreement, the Custodian Agreement and Indemnification Agreement and,
if applicable, the Indenture and the Sale and Servicing Agreement,
constitute legal, valid and binding obligations of the Security
Insurer, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the
enforceability of creditors' rights generally applicable in the event
of the bankruptcy or insolvency of the Security Insurer and to the
application of general principles of equity and subject, in the case
of the Indemnification Agreement, to the principles of public policy
limiting the right to enforce the indemnification provisions contained
therein insofar as they relate to indemnification for liabilities
arising under applicable securities laws;
(iv) The Policies are exempt from registration under the Act;
(v) Neither the execution or delivery of the Policies, the
Insurance Agreement, the Spread Account Agreement, the Custodian
Agreement and the
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Indemnification Agreement and, if applicable, the Indenture and the
Sale and Servicing Agreement, by the Security Insurer, nor the
performance by the Security Insurer of its obligations thereunder,
will conflict with or result in a violation of the Security of
Incorporation or By-Laws of the Security Insurer, or result in a
breach of, or constitute a default under, any agreement or other
instrument to which the Security Insurer is a party or by which any of
its properties are bound, or violate any judgment, order or decree
applicable to the Security Insurer of any governmental or regulatory
body, administrative agency, court or arbitrator having jurisdiction
over the Security Insurer (except that in the published opinion of the
Securities and Exchange Commission the indemnification provisions of
the Indemnification Agreement, insofar as they relate to
indemnification for liabilities arising under the Act, are against
public policy as expressed in the Act and are therefore
unenforceable); and
(vi) With respect to the information regarding the Security
Insurer contained in the Registration Statement and the Prospectus and
any amendment or supplement thereto, such counsel has no reason to
believe that any such information contains any untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light if the
circumstances in which they were made, not misleading.
(q) The Representatives shall have received the opinion of Chapman
and Cutler (or, if so specified in the Pricing Agreement, other counsel as
is reasonably satisfactory to the Representatives), counsel to the Lockbox
Bank, dated the Closing Date, to the effect that:
(i) The Lockbox Bank has been duly incorporated and is validly
existing as a national banking association and has the power and
authority to enter into, and to take all action required of it under
the Lockbox Agreement;
(ii) The Lockbox Agreement has been duly executed and delivered by
the Lockbox Bank and constitutes a legal, valid and binding obligation
of the Lockbox Bank, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(iii) The execution and delivery of the Lockbox Agreement by the
Lockbox Bank and the performance by the Lockbox Bank of its terms do
not conflict with or result in a violation of (A) any law or
regulation of the United States of America or the State of Illinois
governing the banking powers of the Lockbox Bank, or (B) the By-Laws
of the Lockbox Bank; and
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(iv) No approval, authorization or other action by, or filing
with, any governmental authority of the United States of America or
the State of Illinois having jurisdiction over the banking powers of
the Lockbox Bank is required in connection with the execution and
delivery by the Lockbox Bank of the Lockbox Agreement or the
performance by the Lockbox Bank of the terms of the Lockbox Agreement.
(r) The Representatives shall have received evidence that, on or
before the Closing Date, UCC-1 financing statements have been filed in the
offices of the Secretaries of State of the States of Minnesota and
Delaware, reflecting the transfer of the Receivable Files and the related
Trust Property by Arcadia Financial to the Company, by the Company to the
Owner Trustee and by the Owner Trustee to the Indenture Trustee.
(s) The Designated Securities shall have been rated "AAA" by
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. and "Aaa" by Moody's Investors Service, Inc. (the
"Rating Agencies") and neither of the Rating Agencies shall have placed
the rating of the Designated Securities under review with possible
negative implications.
(t) The Company and Arcadia Financial shall have furnished to
the Representatives such further certificates and documents as the
Representatives shall have reasonably requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Representatives. The Company will furnish the Representatives
with such conformed copies of such opinions, certificates, letters and other
documents as the Representatives shall reasonably request.
6. INDEMNIFICATION AND CONTRIBUTION. (a) Arcadia Financial and the
Company will, jointly and severally, indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any part of the Registration
Statement when such part became effective, or in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that Arcadia Financial and the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or
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alleged omission made therein in reliance upon and in conformity with written
information furnished to Arcadia Financial or the Company by the
Representatives, or by any Underwriter through the Representatives, specifically
for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any part of the Registration Statement when such part became
effective, or in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to the
Company by the Representatives, or by such Underwriter through the
Representatives, specifically for use therein; and will reimburse the Company
for any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending against any such loss, claim, damage, liability
or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability that it may have to
any indemnified party under such subsection to the extent the indemnifying party
was not materially prejudiced by such omission or otherwise than under such
subsection. In case any such action shall be brought against any indemnified
party, and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or
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(b) above, (i) in such proportion as is appropriate to reflect the relative
benefits received by Arcadia Financial and the Company on the one hand and the
Underwriters on the other from the offering of the Designated Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
Arcadia Financial and the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by Arcadia Financial and the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus Supplement. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Arcadia
Financial or the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. Arcadia Financial and the Company on the one hand
and the Underwriters on the other agree that it would not be just and equitable
if contributions pursuant to this subsection (d) were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the first sentence of this
subsection (d). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating, preparing
to defend or defending against any action or claim that is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Designated Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of Arcadia Financial and the Company under
this Section 6 shall be in addition to any liability that Arcadia Financial
and the Company may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this
Section 6 shall be in addition to any liability that the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to
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each director of the Company (including any person who, with his consent, is
named in the Registration Statement as about to become a director of the
Company), to each officer of the Company who has signed the Registration
Statement and to each person, if any, who controls the Company within the
meaning of the Act.
7. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements of Arcadia Financial and the Company
herein or in the Pricing Agreement or in certificates delivered pursuant hereto
or pursuant to the Pricing Agreement, and the agreements of the several
Underwriters contained in Section 6 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling persons, or Arcadia Financial and the Company or
any of their officers, directors or any controlling persons, and shall survive
delivery of and payment for the Designated Securities under the Pricing
Agreement.
8. SUBSTITUTION OF UNDERWRITERS. (a) If any Underwriter or
Underwriters shall fail to take up and pay for the amount of Designated
Securities agreed by such Underwriter or Underwriters to be purchased under a
Pricing Agreement, upon tender of such Designated Securities in accordance with
the terms such Pricing Agreement, and the amount of Designated Securities not
purchased does not aggregate more than 10% of the total amount of Designated
Securities that the Underwriters are obligated to purchase under the Pricing
Agreement at the Closing Date, the remaining Underwriters shall be obligated to
take up and pay for (in proportion to their respective underwriting obligations
under the Pricing Agreement except as may otherwise be determined by the
Representatives) the Designated Securities that the withdrawing or defaulting
Underwriter or Underwriters agreed but failed to purchase.
(b) If any Underwriter or Underwriters shall fail to take up and pay
for the amount of Designated Securities agreed by such Underwriter or
Underwriters to be purchased under a Pricing Agreement, upon tender of such
Designated Securities in accordance with the terms hereof, and the amount of
Designated Securities not purchased aggregates more than 10% of the total amount
of Designated Securities that the Underwriters are obligated to purchase under
the Pricing Agreement at the Closing Date, and arrangements satisfactory to the
Representatives and the Company and Arcadia Financial for the purchase of such
Designated Securities by other persons are not made within 36 hours thereafter,
the Pricing Agreement shall terminate. In the event of any such termination the
Company shall not be under any liability to any Underwriter with respect to
Designated Securities not purchased by reason of such termination (except to the
extent provided in Section 4(j) and Section 6 hereof) nor shall any Underwriter
(other than an Underwriter who shall have failed, otherwise than for some reason
permitted under the Pricing Agreement, to purchase the amount of Designated
Securities agreed by such Underwriter to be purchased under the Pricing
Agreement) be under any liability to the Company with respect to such Designated
Securities (except to the extent provided in Section 6 hereof).
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<PAGE>
9. TERMINATION. Unless otherwise specified in the Pricing Agreement,
the Representatives shall have the right by giving notice as hereinafter
specified at any time at or prior to the Closing Date, to terminate the Pricing
Agreement if (i) Arcadia Financial or the Company shall have failed, refused or
been unable, at or prior to the Closing Date, to perform any agreement on its
part to be performed under the Pricing Agreement, (ii) any other condition of
the Underwriters' obligations under the Pricing Agreement is not fulfilled,
(iii) trading on the New York Stock Exchange or the American Stock Exchange
shall have been wholly suspended, (iv) minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been required, on the New York Stock Exchange or the American Stock Exchange, by
such exchange or by order of the Commission or any other governmental authority
having jurisdiction, (v) a banking moratorium shall have been declared by
Federal or New York authorities, or (vi) an outbreak or escalation of major
hostilities in which the United States is involved, a declaration of war by
Congress, any other substantial national or international calamity or any other
event or occurrence of a similar character shall have occurred since the
execution of the Pricing Agreement that, in the judgment of the Representatives,
makes it impractical or inadvisable to proceed with the completion of the sale
of and payment for the Designated Securities. Any such termination shall be
without liability of any party to any other party with respect to Designated
Securities not purchased by reason of such termination except that the
provisions of Section 4(j) and Section 6 hereof shall at all times be effective.
If the Representatives elect to terminate the Pricing Agreement as provided in
this Section, the Company and Arcadia Financial shall be notified promptly by
the Representatives by telephone, telex or telecopy, confirmed by letter.
10. NOTICES. All notices or communications under the Pricing Agreement
shall be in writing and if sent to the Representatives shall be mailed,
delivered, telexed or telecopied and confirmed to the Representatives at the
addresses specified in the related Pricing Agreement, if sent to Arcadia
Financial, shall be mailed, delivered, telexed or telecopied and confirmed to
Arcadia Financial at 7825 Washington Avenue South, Minneapolis, Minnesota
55439-2435, Attention: Secretary, or if sent to the Company, shall be mailed,
delivered, telexed or telecopied and confirmed to the Company 7825 Washington
Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435 Attention:
Secretary. Notice to any Underwriter pursuant to Section 6 hereof shall be
mailed, delivered, telexed or telecopied and confirmed to such Underwriter's
address as it appears in such Underwriter's questionnaire or other notice
furnished to the Company in writing for the purpose of communications under the
Pricing Agreement. Any party to the Pricing Agreement may change such address
for notices by sending to the parties to the Pricing Agreement written notice of
a new address for such purpose.
11. PARTIES. The Pricing Agreement shall inure to the benefit of and
be binding upon Arcadia Financial and the Company on the one hand and the
Underwriters on the other and their respective successors and the controlling
persons, officers and directors referred to
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in Section 6 hereof, and no other person will have any right or obligation under
the Pricing Agreement.
In all dealings with Arcadia Financial and the Company under the
Pricing Agreement, the Representatives shall act on behalf of each of the
several Underwriters, and any action under the Pricing Agreement taken by the
Representatives will be binding upon all the Underwriters.
12. APPLICABLE LAW. The Pricing Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
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[DORSEY & WHITNEY LLP LETTERHEAD]
EXHIBIT 5.1
Arcadia Receivables Finance Corp.
7825 Washington Avenue South, Suite 410
Minneapolis, Minnesota 55439-2435
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Arcadia Receivables Finance Corp., a
Delaware corporation (the "Seller"), in connection with the preparation of a
Registration Statement on Form S-3 filed by the Seller with the Securities
and Exchange Commission on March 17, 1998 (the "Registration Statement"),
relating to the registration by the Seller of $2,500,000,000 of Automobile
Receivables-Backed Certificates (the "Certificates") and Automobile
Receivables-Backed Notes (the "Notes"). The Certificate may be issued from
time to time by trusts (each a "Trust") to be established by the Seller
pursuant to either (a) a Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), substantially in the form filed as an exhibit to the
Registration Statement, to be entered into among the Seller, Arcadia
Financial Ltd., in its individual capacity and as servicer ("Arcadia
Financial"), and the Owner Trustee (the "Owner Trustee") for any such Trust
specified in a prospectus supplement to the prospectus forming part of the
Registration Statement; or (b) a Trust Agreement (the "Trust Agreement"),
substantially in the form filed as an exhibit to the Registration statement,
to be entered into among the Seller, the Security Insurer and the Owner
Trustee for any such Trust, each as specified in a prospectus supplement to
the prospectus forming part of the Registration Statement. The Notes may be
issued from time to time by one or more of the Trusts and secured pursuant to
an Indenture (the "Indenture"), substantially in the form filed as an exhibit
to the Registration Statement, to be entered into between the related Trust
and the Indenture Trustee for any such series specified in a prospectus
supplement to the prospectus forming part of the Registration Statement.
We have examined the resolutions of the Board of Directors of the
Seller adopted by written action dated March 16, 1998, the Registration
Statement
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Arcadia Receivables Finance Corp.
March 17, 1998
Page 2
and such other documents, and have reviewed such questions of law, as we have
considered necessary and appropriate for the purposes of this opinion. Based
on the foregoing, we are of the opinion that:
1. Each Pooling and Servicing Agreement, Trust Agreement and
Indenture, when it has been duly authorized by the Seller and duly executed
and delivered by the Seller and the other respective parties thereto, will
constitute the valid and binding obligation of the Seller.
2. The Certificates, when duly executed and delivered in accordance
with the terms of the related Pooling and Servicing Agreement or Trust
Agreement, will be legally issued, fully paid and non-assessable, and the
holders of such Certificates will be entitled to the benefits of the related
Pooling and Servicing Agreement or the Trust Agreement, as the case may be.
3. The Notes, when duly executed and delivered in accordance with
the terms of the related Indenture, will be legally issued and will
constitute valid and binding obligations of the Trust, and the holders of
such Notes will be entitled to the benefits of the Indenture.
The opinions set forth above are subject to the following
qualifications and exceptions:
(a) Our opinions in paragraphs 1, 2 and 3 above are subject to the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or other similar law of general application affecting creditors' rights.
(b) Our opinions in paragraphs 1, 2 and 3 above are subject to the
effect of general principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and fair dealing, and
other similar doctrines affecting the enforceability of agreements
generally (regardless of whether considered in a proceeding in equity or at
law).
(c) Minnesota Statutes Section 290.371, Subd. 4, provides that any
corporation required to file a Notice of Business Activities Report does
not have a cause of action upon which it may bring suit under Minnesota law
unless the corporation has filed a Notice of Business Activities Report and
provides that the use of the courts of the State of Minnesota for all
contracts executed and all causes of action that arose before the end of
any period for
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Arcadia Receivables Finance Corp.
March 17, 1998
Page 3
which a corporation failed to file a required report is precluded.
Insofar as our opinion may relate to the valid, binding and enforceable
character of any agreement under Minnesota law or in a Minnesota court, we
have assumed that any party seeking to enforce such an agreement has at all
times been, and will continue at all times to be, exempt from the
requirement of filing a Notice of Business Activities Report, or, if not
exempt, has duly filed, and will continue to duly file, all Notice of
Business Activities Reports.
Our opinions expressed above are limited to the laws of the States
of Minnesota and New York and the Delaware Business Trust Act.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters" in the prospectus comprising part of the Registration Statement.
Dated: March 17, 1998
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
