<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 $695,000
<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. 333-48141 pursuant to Rule 429 is
$334,588,424, and the Registrant previously paid a filing fee with respect
to such securities of $98,703.59 (calculated by multiplying .000295 times
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. 333-48141, which became effective on April 22, 1998.
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 _____ __, ____
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 SUPPLEMENT
(TO PROSPECTUS DATED , )
$ Automobile Receivables-Backed Notes
ARCADIA AUTOMOBILE RECEIVABLES TRUST, -
Arcadia Receivables Finance Corp.
Seller
[ARCADIA FINANCIAL LTD. LOGO]
Servicer
The Trust--
- - The notes will be issued by a trust.
- - The sources for payment of the notes are a pool of auto loans held by the
issuing trust, cash held by the issuing trust [and a financial guaranty
insurance policy issued by]:
[insert logo of security insurer, if any]
The Notes--
- - There are classes of notes:
<TABLE>
<CAPTION>
Initial
Principal
Class Amount Interest Rate
- --------- -------------- -------------
<S> <C> <C>
Class A-1 $ %
Class A-2 $ %
Class A-3 $ %
Class A-4 $ %
Class A-5 $ %
</TABLE>
- - Interest and principal on the notes are scheduled to be paid monthly, on the
15th day of the month. The first scheduled distribution date is 15,
1999.
The Offering--
<TABLE>
<CAPTION>
Proceeds to
Public Underwriting Arcadia
Class Price(1) Discounts Financial(1)(2)
- --------- -------------- ------------ ------------------
<S> <C> <C> <C>
Class A-1 % % %
Class A-2 % % %
Class A-3 % % %
Class A-4 % % %
Class A-5 % % %
Total $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , .
(2) Before deducting expenses, estimated to be $ .
- --------------------------------------------------------------------------------
Consider carefully the risk factors beginning on page S- of this prospectus
supplement.
The notes are asset- backed notes issued by a trust. The notes are not interests
in or obligations of Arcadia Financial or any Arcadia Financial affiliate.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is accurate or
complete. Any representation to the contrary is a criminal offense.
[Underwriters]
The date of this Prospectus Supplement is .
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Reports to Noteholders..................................................................................... S-3
Where You Can Find More Information........................................................................ S-3
Summary of the Terms of the Notes.......................................................................... S-5
Risk Factors............................................................................................... S-11
Use of Proceeds............................................................................................ S-16
The Trust.................................................................................................. S-16
The Trust Property......................................................................................... S-17
The Receivables Pool....................................................................................... S-18
Arcadia Financial Ltd...................................................................................... S-28
[The security insurer, if any]............................................................................. S-28
Description of the Notes................................................................................... S-28
Description of the Purchase Agreements and the Trust Documents............................................. S-32
The Note Policy............................................................................................ S-39
Federal Income Tax Consequences............................................................................ S-42
ERISA Considerations....................................................................................... S-45
Underwriting............................................................................................... S-46
Legal Matters.............................................................................................. S-47
Experts.................................................................................................... S-47
PROSPECTUS
Important Notice........................................................................................... 1
The Trusts................................................................................................. 1
The Seller................................................................................................. 2
Arcadia Financial Ltd...................................................................................... 3
The Receivables............................................................................................ 4
Yield and Prepayment Considerations........................................................................ 7
Pool Factor................................................................................................ 8
Use of Proceeds............................................................................................ 8
The Certificates........................................................................................... 8
The Notes.................................................................................................. 10
Information Regarding the Securities....................................................................... 15
Description of the Purchase Agreements and the Trust Documents............................................. 20
Legal Aspects of the Receivables........................................................................... 36
Federal Income Tax Consequences............................................................................ 40
ERISA Considerations....................................................................................... 40
Where You Can Find More Information........................................................................ 41
Plan of Distribution....................................................................................... 41
Legal Matters.............................................................................................. 42
Annex I: Global Clearance, Settlement and Tax Documentation Procedures..................................... I-1
</TABLE>
S-2
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the notes in two separate documents that progressively
provide more detail: (a) the prospectus, which provides general information,
some of which may not apply to a particular series of notes, including your
series; and (b) this prospectus supplement, which describes the specific terms
of your series of notes.
If the terms of your series of notes described in this prospectus supplement
varies from the prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and in the
accompanying prospectus to captions in these materials where you can find
further related discussions. The Table of Contents in this prospectus supplement
and the Table of Contents included in the accompanying prospectus provide the
pages on which these captions are located.
Dealers will deliver this prospectus supplement and the accompanying
prospectus when acting as underwriters of the notes and with respect to their
unsold allotments or subscriptions. In addition, all dealers selling the notes
will deliver a prospectus supplement and accompanying prospectus until .
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities.
REPORTS TO NOTEHOLDERS
Until the notes are issued, unaudited monthly and annual reports, which
contain information concerning the trust prepared by Arcadia Financial Ltd.,
will be sent on behalf of the trust to Norwest Bank Minnesota, National
Association, Wilmington Trust Company and Cede & Co. You can find a more
detailed description of this in the accompanying prospectus under the heading
"Description of the Purchase Agreements and the Trust Documents--Statements to
Noteholders" and under the heading "Statements to Securityholders."
Owners of the notes may receive the reports by submitting a written request
to Norwest Bank, National Association, Norwest Center, Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust
Department. In the written request you must state that you are an owner of notes
and you must include payment for expenses associated with the distribution of
the reports. The reports do not constitute financial statements prepared in
accordance with generally accepted accounting principles. Arcadia Receivables
Finance Corp., Arcadia Financial Ltd.[and the security insurer, if any] do not
intend to send any of their financial reports to noteholders. The trust will
file with the Securities and Exchange Commission periodic reports concerning the
trust as required by law.
WHERE YOU CAN FIND MORE INFORMATION
In addition to the documents of the trust filed with the SEC described in
the accompanying prospectus under "Incorporation of Documents by Reference," the
financial statements of [the security insurer, if any] included in, or as
exhibits to, the following documents filed by [the security insurer, if any]
with the SEC are hereby incorporated by reference:
- Annual report on Form 10-K for the fiscal year ended ,
and
- Quarterly Report on Form 10-Q for the quarter ended .
All financial statements of [the security insurer, if any]included in, or as
exhibits to, documents filed by [the security insurer, if any] pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities
S-3
<PAGE>
Exchange Act of 1934 after the filing of this prospectus supplement and prior to
the termination of the offering of the notes will be incorporated by reference
into this prospectus supplement.
This prospectus supplement and the accompanying prospectuses are part of a
registration statement filed by the seller with the SEC (Registration No.
333- ). You may request a free copy of any of the above filings by writing
or calling:
Arcadia Financial Ltd.
Arcadia Financial Center
7825 Washington Avenue South
Minneapolis, MN 55439
Attention: Secretary
(612) 942-9880
The seller on behalf of the trust hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
trust's annual report and the financial statements of [the security insurer, if
any] pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement
referenced above shall be deemed to be a new registration statement relating to
the notes offered hereby, and the offering of such notes at that time shall be
deemed to be the initial bona fide offering thereof.
You should rely only on the information incorporated by reference or
provided in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus supplement or the
accompanying prospectus is accurate as of any date other than the date on the
cover page of this prospectus supplement or the accompanying prospectus.
S-4
<PAGE>
SUMMARY OF THE TERMS OF THE NOTES
This summary highlights selected information regarding the notes, and does
not contain all of the information that you need to consider in making your
investment decision. To understand the terms of the notes, you should read this
entire prospectus supplement and the accompanying prospectus.
This summary uses some capitalized terms. Some of these capitalized terms
are defined in this summary, but some of them are merely described in this
summary. If you want to see a complete definition of those capitalized terms,
look in the section of the prospectus supplement or the prospectus referred to
in this prospectus supplement.
<TABLE>
<S> <C>
Trust or the Issuer............... Arcadia Automobile Receivables Trust, - will issue the
notes and be liable for their payment. The trust's principal
asset will be a pool of automobile loans.
Seller............................ Arcadia Receivables Finance Corp. is a wholly-owned
special-purpose subsidiary of Arcadia Financial Ltd. Arcadia
Receivables Finance Corp. will sell the automobile loans to the
trust. The seller is located at Arcadia Financial Center, 7825
Washington Avenue South, Minneapolis, MN 55439, telephone
number (612) 942-9880.
Servicer.......................... Arcadia Financial Ltd. will service the automobile loans held
by the trust.
The Indenture Trustee............. Norwest Bank Minnesota, National Association, will serve as the
indenture trustee and indenture collateral agent.
The Owner Trustee................. Wilmington Trust Company.
The Backup Servicer............... Norwest Bank Minnesota, National Association. Arcadia Financial
may be terminated as servicer under some circumstances, at
which time 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" in the accompanying prospectus.
Administrator..................... Wilmington Trust Company.
The Notes......................... The trust will issue the following five classes of notes:
- % $ Class A-1 automobile receivables-backed
notes;
- % $ Class A-2 automobile receivables-backed
notes;
- % $ Class A-3 automobile receivables-backed
notes;
- % $ Class A-4 automobile receivables-backed
notes; and
- % $ Class A-5 automobile receivables-backed
notes.
The notes will be issued in minimum denominations of $1,000 and
multiples of $1,000 for amounts greater than that. You
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
may hold your notes through The Depository Trust Company in the
United States, or through Cedel Bank, societe anonyme or the
Euroclear System in Europe.
Terms of the Notes
- - Distribution Date.............. The 15th day of each month, or the next following business day,
beginning on .
- - Record Date.................... The business day just before the related distribution date.
Payments will be made to noteholders of record as of the
business day preceding the distribution date.
- - Interest....................... Interest on the notes will accrue at the applicable interest
rate from a distribution date to the day before the next
distribution date. In the case of the first distribution date,
interest begins to accrue on the day of the closing.
Interest on the notes will be based on the actual
number of days in the applicable interest period and a 360-day
year. Interest on the notes will be calculated on the
basis of a 360-day year of twelve 30-day months.
- - Principal...................... Principal will be paid on the notes on each distribution date.
The notes will be sequential pay classes, and payments of
principal on the notes will be allocated among the classes on
each distribution date as follows:
- to the Class A-1 notes until the Class A-1 notes are paid
off;
- once the Class A-1 notes are paid off, to the Class A-2
notes until they are paid off;
- once the Class A-2 notes are paid off, to the Class A-3
notes until they are paid off;
- once the Class A-3 notes are paid off, to the Class A-4
notes until they are paid off; and
- once the Class A-4 notes are paid off, to the Class A-5
notes until they are paid off.
In addition, the outstanding principal amount of any class, to
the extent not previously paid, will be payable on such class's
final scheduled distribution date.
- - Final Scheduled Distribution
Dates........................ If they have not already been paid off, the outstanding
principal amount of each class of notes will be payable on the
date specified for each class below:
- Class A-1 notes: distribution date
- Class A-2 notes: distribution date
- Class A-3 notes: distribution date
- Class A-4 notes: distribution date
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
- Class A-5 notes: distribution date
- - Optional Redemption............ The Class A-5 notes, if they are still outstanding, may be
redeemed on any distribution date on which the Seller or the
servicer exercises its clean-up call option to purchase the
automobile loans owned by the trust. This can only occur after
the pool balance declines to 10% or less of its original
balance after the funding period. The redemption price is equal
to the unpaid principal amount of the notes plus any accrued
and unpaid interest.
- - Mandatory Redemption........... IF THE PRE-FUNDING ACCOUNT IS NOT DEPLETED
The trust will have a pre-funding period. On the distribution
date on or just after the last day of the pre-funding period,
the indenture trustee will use any funds remaining in the
trust's pre-funding account to redeem the notes in the same
sequence and proportions that would apply if these funds were a
part of the principal distribution amount.
If the amount to be redeemed is $100,000 or less, the indenture
trustee will pay such amount to the notes in accordance with
their sequential pay feature and not pro rata to each class of
notes, to reduce the outstanding principal balance of the class
of notes then entitled to receive distributions of principal.
If the amount to be redeemed is greater than $100,000, the
indenture trustee will use the money to redeem each class of
notes in an amount equal to that class's pro rata share, based
on the respective current principal amount of each class of
notes, of the redemption amount. If the redemption amount is
greater than $100,000, you will also be entitled to a
redemption premium.
UPON EVENT OF DEFAULT
If an event of default under the indenture occurs, the notes
may be accelerated and subject to immediate payment at par.
Only [the security insurer, if any] can declare an event of
default, except in unusual circumstances. The note policy
issued by [the security insurer, if any] does not guarantee
payment of any amounts that become due on an accelerated basis,
unless [the security insurer, if any] elects, in its sole
discretion, to pay such amounts in whole or in part. However,
following an acceleration of the notes, the note policy will
continue to cover payments of principal and interest in
accordance with its terms. See "The Note Policy."
The Receivables................... The trust will own a pool of retail installment sales contracts
and promissory notes purchased from motor vehicle dealers by
Arcadia Financial in the ordinary course of business. These
receivables are secured by new and used automobiles and light
trucks.
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
- - Initial Receivables and
Subsequent Receivables.......... On the day of the closing, we will transfer an initial group of
automobile loans to the trust. We expect these initial
receivables to have an aggregate principal balance of
approximately $ as of . We will
also transfer one or more additional groups of subsequent
automobile loans to the trust prior to . We expect these
subsequent receivables to have an aggregate principal balance
of approximately $ .
- - Characteristics of Preliminary
Initial Receivables.......... The initial receivables and the subsequent receivables will be
selected from automobile loans in Arcadia Financial's portfolio
based on the criteria described in this prospectus supplement
under "The Receivables Pool." In this prospectus supplement, we
are giving you information about the portion of the initial
receivables that we had identified on . This group
of automobile loans is called the preliminary initial
receivables. Here is some information about the preliminary
initial receivables, as of :
- the weighted average annual percentage rate (the "APR") of
the preliminary initial receivables was approximately
%;
- the weighted average remaining maturity of the preliminary
initial receivables was approximately months; and
- the weighted average original maturity of the preliminary
initial receivables was approximately months.
Pre-Funding Account............... Contingent upon the written consent of [the security insurer,
if any] and the satisfaction of other conditions, we will sell
additional automobile loans to the trust during a period
beginning on the closing date and ending not later than
. The indenture trustee will deposit about
$ of the proceeds from the sale of the notes into
the pre-funding account. We expect to sell subsequent
receivables to the trust with an aggregate principal value
approximately equal to $ . Arcadia Financial expects
that the funds on deposit in the pre-funding account will be
reduced to less than $100,000 by the distribution
date. Any pre-funded amount remaining at the end of the funding
period will be distributed in the manner described under
"Mandatory Redemption" above. Prior to being used to purchase
subsequent receivables or paid to you, the pre-funded amount
will be invested from time to time in eligible investments.
Subsequent receivables may be originated using credit criteria
different from the criteria applied with respect to the initial
receivables and may be of a different credit quality and
seasoning. In addition, following the transfer of subsequent
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
receivables to the trust, the characteristics of the entire
pool of receivables included in the trust may vary from those
of the preliminary initial receivables. See "Risk Factors--The
Receivables and the Pre-Funding Account" and "The Receivables
Pool."
Reserve Account................... As long as there is money in the pre-funding account, funds
will be held in a reserve account. The money held in the
pre-funding account probably will generate less interest than
the amount of interest due on the same amount of notes, and the
interest paid on the automobile loans owned by the trust may
not be enough to make up the difference. As a result, the
indenture trustee will establish a reserve account, and will
use funds deposited there to cover any such shortfall.
Note Policy....................... On the day of the closing, [the security insurer, if any] will
issue a note policy, which will unconditionally and irrevocably
guarantee payments to you of timely principal and interest due
on the notes, subject to the limitations described under the
heading "The Note Policy."
Collection Account................ We will establish one or more accounts in the name of the
indenture trustee for your benefit. Payments from obligors will
be deposited in the collection account no later than two
business days after receipt.
Priority of Distributions......... On each distribution date, the indenture trustee will withdraw
the available funds from the collection account and apply the
funds in the following order of priority:
1. to the servicer, the amount the servicer is entitled to be
reimbursed for prior monthly advances,
2. to the owner trustee and the indenture trustee, unpaid
trustee fees and other similar fees,
3. to the servicer, the servicing fee for the related monthly
period and any overdue servicing fees,
4. into the note distribution account, the amount of interest
to be paid on the notes,
5. into the note distribution account, the amount of principal
to be paid on the notes,
6. to [the security insurer, if any], amounts owing and not
paid to [the security insurer, if any], and
7. the remaining balance, if any, to a collateral agent for
[the security insurer, if any], the indenture trustee and
the trustees for other trusts and warehousing facilities
established by the Seller.
See "Description of the Purchase Agreements and the Trust
Documents--Distributions."
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C>
Tax Status........................ In the opinion of counsel to Arcadia Financial, for federal
income tax purposes, the notes will be characterized as debt
and the trust will not be characterized as an association or a
publicly traded partnership taxable as a corporation. By your
acceptance of a note, you agree to treat the notes as debt.
Alternative characterizations of the trust and the notes are
possible. These characterizations could result in adverse tax
consequences to you. See "Certain Federal Income Tax
Consequences."
ERISA Considerations.............. We expect that the notes will be eligible for purchase by
employee benefit plans. See "ERISA Considerations."
Legal Investments................. The Class A-1 notes will be eligible securities for purchase by
money market funds under Rule 2a-7 under the Investment Company
Act of 1940.
Rating of the Notes............... The notes must receive at least the following ratings from
Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., and Moody's Investors Service,
Inc. in order to be issued:
</TABLE>
<TABLE>
<CAPTION>
RATING
----------------------
CLASS S&P MOODY'S
------------------------------ --------- -----------
<S> <C> <C> <C>
A-1...........................
A-2...........................
A-3...........................
A-4...........................
A-5...........................
</TABLE>
<TABLE>
<S> <C>
You must not assume that the ratings initially assigned to the
notes will not subsequently be lowered or withdrawn by the
rating agencies. See "Risk Factors--Limitations of the Ratings
on the notes."
</TABLE>
S-10
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
WE MAY NOT BE ABLE TO SELL SUFFICIENT RECEIVABLES TO SELL TO THE TRUST DURING
THE FUNDING PERIOD.
On the closing date, we will sell approximately $ of initial
receivables to the trust, and the trust will deposit approximately $
in the pre-funding account. Our ability to convey the subsequent receivables is
completely dependent upon Arcadia Financial's ability to generate additional
receivables. We cannot assure you that Arcadia Financial will continue to
generate receivables that satisfy the criteria for subsequent receivables.
If the principal amount of eligible receivables originated by Arcadia
Financial prior to is less than $ , we will not have
sufficient receivables to sell to the trust. Even if Arcadia Financial
originates enough eligible receivables, we may not be able to transfer these
loans to the trust, because each transfer must satisfy all of the following
conditions:
1. The security insurer must approve the transfer of the subsequent
receivables to the trust;
2. as of the applicable subsequent cutoff date, the receivables in the
trust, together with the subsequent receivables being transferred, must
meet the following criteria:
- the weighted average APR of the receivables cannot be lower than one
percentage point below the weighted average APR of the preliminary
initial receivables on the preliminary cutoff date,
- the weighted average remaining term of the receivables cannot be
greater than nor less than months,
- not more than % of the aggregate principal balance of the
receivables can be attributable to loans for the purchase of used
financed vehicles,
- not more than % of the aggregate principal balance of the
receivables will be attributable to receivables with an APR in excess
of %, and
- the trust, the indenture trustee, the owner trustee and the security
insurer will have received written confirmation from a firm of
independent certified public accountants as to the satisfaction of the
above criteria; and
3. the rating agencies must notify the security insurer that the Class A-1
notes will be rated by Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. ("S&P") and by Moody's Investors
Service, Inc. ("Moody's") (together, the "Rating Agencies"), and the
Class A-2 notes, the Class A-3 notes, the Class A-4 notes and the Class
A-5 notes will each be rated by S&P and by Moody's.
If we do not transfer receivables equal to the full amount in the
pre-funding account by , the remaining funds in the pre-funding
account will be paid as principal on the notes, which will shorten the weighted
average life of the notes. If you purchased your note at a premium, this
prepayment would reduce the yield on your notes.
THE WEIGHTED AVERAGE LIFE OF YOUR NOTES MAY BE REDUCED, WHICH MAY ADVERSELY
AFFECT THE YIELD ON YOUR NOTES.
The weighted average life of the notes will be reduced by full or partial
prepayments on the receivables. The receivables will generally be prepayable at
any time without penalty. Prepayments 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 uncured
breaches of the
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<PAGE>
warranties made by it about the receivables, purchases by the servicer as a
result of certain uncured breaches of the covenants made by it with respect to
the receivables in the related agreement, or if we, as seller, or the servicer
exercises its option to purchase all of the remaining receivables. The amounts
paid to noteholders of principal on any distribution date or payment date will
include all prepayments on the receivables during the corresponding monthly
periods. The noteholders will bear all reinvestment risk resulting from the
timing of payments of principal on the notes.
THE FINAL SCHEDULED DISTRIBUTION DATE FOR YOUR NOTES MAY OCCUR SIGNIFICANTLY
EARLIER THAN SCHEDULED.
The final scheduled distribution date for each class of notes, which is
specified on page of this prospectus supplement, is the date by which the
principal is required to be fully paid. The final scheduled distribution date
for each class of notes has been determined so that distributions on the
underlying receivables will be sufficient to retire each class on or before its
final scheduled distribution date without making claims on the financial
guaranty insurance policy issued by the security insurer. However, the actual
payment of any class of notes likely will occur earlier (and could occur
significantly earlier) than a class's final scheduled distribution date for the
following reasons:
- some prepayments of the receivables are likely, and
- some of the receivables have terms to maturity that are shorter than the
term to maturity assumed in calculating each class's final scheduled
distribution date.
As a result, we cannot assure you that the final distribution of principal of
any or all classes of notes will be earlier than such class's final scheduled
distribution date.
THE TRUST'S LIMITED ASSETS MAY RESTRICT THE SOURCE OF FUNDS AVAILABLE FOR
PAYMENTS ON YOUR NOTES.
The trust's primary assets or sources of funds are the receivables, the
pre-funding account, the reserve account and the note policy. For repayment, you
must rely upon payments on the receivables and amounts on deposit in the
pre-funding account and the reserve account and payments of claims under the
note policy. The pre-funding account and reserve account will only be maintained
until the first distribution date after the funding period. The money held in
the pre-funded account will be used only to purchase subsequent receivables and
is not available to cover losses on the receivables. The reserve account covers
obligations of the trust relating to the portion of the trust's assets not
invested in receivables and is not designed to provide protection against losses
on the receivables. Similarly, although the note policy will be available to
cover shortfalls in distributions each month, if the security insurer defaults
in its obligations under the note policy, the trust will depend on current
distributions on the receivables to make payments on the notes. See "The
Security Insurer" and "The Note Policy."
CURRENT AND HISTORICAL DELINQUENCY AND DEFAULT RATES OF LOANS IN ARCADIA
FINANCIAL'S SERVICING PORTFOLIO MAY UNDERSTATE FUTURE DELINQUENCY AND DEFAULT
RATES.
The incidence of delinquencies and defaults on automobile loans tends to
vary with the age of the loan. For example, loans that are between six and 14
months old have a higher likelihood of being delinquent or defaulting than loans
with similar credit characteristics that are three months old. Accordingly, to
the extent that Arcadia Financial's historical portfolio growth has resulted in
a servicing portfolio that contains disproportionately more loans originated
within the prior six months, the current and historical delinquency and default
rates of loans in the servicing portfolio may understate future delinquency and
default rates. 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. Over time,
Arcadia Financial has consistently increased its purchases of higher risk loans.
As a result of the increases in the proportion of higher risk loans in Arcadia
Financial's receivables portfolio, there has been an increase in the rates of,
and reserves for, delinquencies, repossessions and losses historically reported
by Arcadia Financial. The continuation of
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<PAGE>
purchases of higher risk loans and the 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 these loan performance
statistics are consistent with Arcadia Financial's reserves for loan losses.
THIS PROSPECTUS SUPPLEMENT PROVIDES INFORMATION REGARDING ONLY A PORTION OF THE
RECEIVABLES, AND ADDITIONAL RECEIVABLES ADDED TO THE RECEIVABLES POOL COULD
HAVE DIFFERENT CHARACTERISTICS.
This prospectus supplement describes only the characteristics of the
preliminary initial receivables. The other initial receivables, and any
subsequent receivables transferred to the trust during the funding period, will
have characteristics that differ somewhat from the characteristics of the
preliminary initial receivables described in this prospectus supplement. Each
subsequent receivable must satisfy the eligibility criteria specified in the
sale and servicing agreement. However, you should be aware that subsequent
receivables may have been originated using credit criteria different from the
criteria applied to the initial receivables and may be of a different credit
quality and seasoning. If you purchase a note, you must not assume that the
characteristics of the receivables pool will be identical to the characteristics
of the preliminary initial receivables disclosed in this prospectus supplement.
You should also consider that the ratings of the notes may depend on factors
other than the characteristics of the subsequent receivables, including the
delinquency, repossession and net loss experience of the receivables in the
receivables pool.
THE RATINGS ON YOUR NOTES COULD CHANGE, WHICH MAY ADVERSELY AFFECT THE LIQUIDITY
AND MARKET PRICE OF YOUR NOTES.
The trust cannot issue the notes unless the Class A-1 notes are rated by
S&P and by Moody's, and the Class A-2 notes, Class A-3 notes, Class A-4 notes
and Class A-5 notes are rated by S&P, and by Moody's. You should be aware
that a rating is not a recommendation to purchase, hold or sell the notes.
Instead, the ratings address the likelihood of the payment of principal and
interest. The rating agencies do not evaluate the likelihood that the note
prepayment amounts or the note prepayment premiums will be paid.
The rating agencies can lower or entirely withdraw a rating. If a rating
agency lowers a rating initially assigned to the notes, nothing obligates any
person or entity to provide additional credit enhancement for the notes. Any
reduction or withdrawal of a rating may have an adverse effect on the liquidity
and market price of the notes.
NOTEHOLDERS MAY NOT DECLARE EVENTS OF DEFAULT UNDER THE INDENTURE OR DECIDE THE
CONSEQUENCES OF AN EVENT OF DEFAULT.
An event of default can occur only if the security insurer delivers to the
indenture trustee a notice of the occurrence of certain events of default under
the insurance agreement. If there is an event of default under the indenture,
the security insurer will have the right to cause the liquidation of the trust
property and cause the redemption of the notes. Following an event of default,
the indenture trustee and the owner trustee will continue to submit claims under
the note policy to enable the trust to make payment of your distributable amount
each month. However, following an event of default, the security insurer may
elect to pay all or any portion of the outstanding notes, plus accrued interest.
THE SALE OF THE RECEIVABLES TO THE TRUST WILL NOT BE NOTED ON THE RECEIVABLES
FILES, WHICH IN SOME CASES COULD MAKE OUR SECURITY INTEREST INEFFECTIVE.
The transfer of the receivables to the related trust will be subject to the
requirements of the Uniform Commercial Code as in effect in Minnesota and New
York. As seller, we will take or cause to be taken any action as is required to
perfect the trust's rights in the receivables. The receivable files
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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 us or by us
to the owner trustee. In the absence of this kind of 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.
A SECONDARY MARKET FOR THE SECURITIES MAY NOT DEVELOP, WHICH MEANS YOU MAY HAVE
TROUBLE SELLING YOUR SECURITIES.
There is currently no market for the securities of any series. We cannot
assure you that any market will develop or, if it does develop, that it will
provide you with liquidity of investment or will continue for the life of the
notes. The notes will not be listed on any securities exchange.
The notes will be issued in book-entry, rather than physical, form and, as a
result, in some circumstances, the liquidity of the securities in the secondary
market and the ability of the note owners to pledge them may be adversely
affected.
THE NOTES COULD BE TREATED AS EQUITY RATHER THAN DEBT FOR FEDERAL INCOME TAX
PURPOSES, WHICH COULD AFFECT THE TAXES YOU PAY.
If, contrary to the opinion of Dorsey & Whitney LLP, the Internal Revenue
Service successfully asserted that the notes did not represent debt for federal
income tax purposes, the notes might be treated as equity interests in the
trust. If so treated, the trust might be taxable as a corporation with the
adverse consequences described in "Certain Federal Income Tax Consequences" (and
the taxable corporation would not be able to reduce its taxable income by
deductions for interest expense on notes recharacterized as equity).
Alternatively, and most likely in the view of Dorsey & Whitney LLP, the trust
might be treated as a publicly traded partnership that would not be taxable as a
corporation because it would meet certain qualifying income tests. Nonetheless,
treatment of the notes as equity interests in this kind of partnership could
have adverse tax consequences to some holders. For example, income to foreign
holders generally would be subject to federal tax and federal tax return filing
and withholding requirements, which withholding requirements are not covered by
the note policy, and individual holders might be subject to certain limitations
on their ability to deduct their share of trust expenses. The servicer has
indemnified the trust for any liability asserted against the trust for such
withholding or other tax liability.
BANKRUPTCY PROCEEDINGS INVOLVING US AS SELLER OR ARCADIA FINANCIAL COULD DELAY
DISTRIBUTIONS ON YOUR NOTES
Arcadia Financial intends that any transfer of receivables to us, as 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, a
creditor or trustee in bankruptcy of Arcadia Financial or Arcadia Financial as
debtor-in-possession might argue that the 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 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 our assets and
liabilities should be consolidated with the assets and liabilities of Arcadia
Financial. We have taken and will take steps in structuring this transaction
that are intended to make it unlikely
S-14
<PAGE>
that any attempt to consolidate us and Arcadia Financial would succeed. In
addition, we intend that any transfer of receivables to a trust will constitute
a sale, rather than a pledge of the receivables to secure indebtedness of us.
Nevertheless, if these positions--that our assets and liabilities should be
consolidated with those of Arcadia Financial, and that we transfer the
receivables that were pledged rather than a sold--were presented to or accepted
by a court, the trust could experience, among other things, a delay in or
reduction of collections on the receivables.
A case 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 this reasoning to chattel paper, a trust could
experience a delay in or reduction of collections on the receivables.
S-15
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the notes
will be used to pay to Arcadia Financial Ltd. ("Arcadia Financial") or a
warehouse facility the purchase price for the receivables (as defined herein),
to make the deposits of the pre-funded amount into the pre-funding account and
to make the deposit of the requisite reserve amount (as defined herein) into the
reserve account (as defined herein). The net proceeds to be received by Arcadia
Financial will be used to pay certain 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." in the accompanying
prospectus.
THE TRUST
The following information supplements the information contained in the
accompanying prospectus. You should consider, in addition to the information
below, the information under "The Trusts" in the accompanying prospectus.
GENERAL
Arcadia Automobile Receivables Trust, - is a business trust formed
under the laws of the State of Delaware under a trust agreement, dated as of
, , for the transactions described in this prospectus supplement.
After its formation, the trust will not engage in any activity other than:
(1) acquiring, holding and managing the pool of retail installment sales
contracts and promissory notes and the other assets of the trust and
proceeds;
(2) issuing the notes;
(3) making payments on the notes; and
(4) engaging in other activities that are necessary, suitable or convenient
to accomplish the above or are incidental or connected to them.
The proceeds of the initial sale of the notes will be used by the trust to
purchase the initial receivables from us under the sale and servicing agreement
and to fund the deposits in the pre-funding account and the reserve account
described under "Description of the Purchase Agreements and the Trust
Documents--Accounts" in this prospectus supplement.
The trust's principal offices are in Wilmington, Delaware, in care of
Wilmington Trust Company, as owner trustee, at the address listed below under
"--The Owner Trustee."
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of the
initial cutoff date, as if the issuance and sale of the notes had taken place on
that date:
<TABLE>
<S> <C>
Class A-1 notes......................... $
Class A-2 notes......................... $
Class A-3 notes......................... $
Class A-4 notes......................... $
Class A-5 notes......................... $
------------
Total............................... $
------------
------------
</TABLE>
S-16
<PAGE>
THE OWNER TRUSTEE
Wilmington Trust Company is the owner trustee under the trust agreement.
Wilmington Trust Company's principal offices are located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001. We or our affiliates
may maintain commercial banking relations with the owner trustee and its
affiliates. The owner trustee will perform limited administrative functions
under the trust agreement. The owner trustee's liability in connection with the
issuance and sale of the notes is limited solely to the express obligations of
the owner trustee outlined in the trust agreement and the sale and servicing
agreement.
THE TRUST PROPERTY
The trust's property will include, among other things:
(1) a pool of receivables consisting of the initial receivables and the
subsequent receivables;
(2) all monies paid or payable under the initial receivables after
, and under the subsequent receivables after the respective
dates designated by us as subsequent cutoff dates;
(3) capital that from time to time may be held in the lockbox account, the
collection account and other accounts established and maintained by the
servicer under the sale and servicing agreement dated as of , ,
as described below (including all investments in the collection account
and other accounts and all income from the investment of funds in those
accounts and all subsequent proceeds);
(4) monies on deposit in the pre-funding account and the reserve account,
including all investments in these accounts and all income from the
investment of the funds and all subsequent proceeds;
(5) an assignment of the security interests of Arcadia Financial in the new
and used automobiles and light trucks securing retail installment
contracts and promissory notes purchased from motor vehicle dealers by
Arcadia Financial in the ordinary course of business;
(6) an assignment of the right to receive proceeds from the exercise of
rights against dealers under agreements between Arcadia Financial and
dealers and the assignment of rights to each receivable from the
applicable dealer to Arcadia Financial;
(7) an assignment of the right to receive proceeds from claims on insurance
policies covering the financed vehicles or persons who are obligated to
make payments under those policies;
(8) an assignment of rights as seller under one or more purchase agreements
between us and Arcadia Financial on or before the date of issuance of the
notes and any one or more purchase agreements between us and Arcadia
Financial on or before the dates specified as subsequent transfer dates,
including rights against Arcadia Financial upon a breach of
representations and warranties under those agreements; and
(9) other rights under the trust documents.
See "The Receivables" and "Description of the Purchase Agreements and the Trust
Documents-- Collections" in the accompanying prospectus.
Under the indenture, the trust will grant a security interest in the trust
property in favor of Norwest Bank Minnesota, National Association, as indenture
collateral agent for the benefit of the indenture trustee on behalf of holders
of record of the notes and for the benefit of [the security insurer, if any] in
support of the obligations owing to it under an insurance and indemnity
agreement, among [the security insurer, if any], the trust, the seller and
Arcadia Financial. Any proceeds of such security interest in the trust property
would be distributed according to the indenture, as described
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<PAGE>
below under "Description of the Purchase Agreements and the Trust
Documents--Distributions." [The security insurer, if any]would be entitled to
these distributions only after payment of amounts owing to, among others,
holders of the notes.
Arcadia Financial, as 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. In order to protect the trust's ownership
interest in the receivables, Arcadia Financial and we, as the seller, will each
file a UCC-1 financing statement in Minnesota to give notice of the trust's
ownership of the receivables and the related trust property.
THE RECEIVABLES POOL
GENERAL
The receivables pool will include the initial receivables and all amounts
due after the initial cutoff date, and any subsequent receivables and all
amounts due after the applicable subsequent cutoff date. Information about the
receivables is set forth under the heading "The Receivables" in the accompanying
prospectus.
All of the receivables are or will be retail installment sales contracts or
promissory notes purchased in the ordinary course of business by Arcadia
Financial from dealers who regularly originate and sell these contracts or notes
to Arcadia Financial. In the prospectus supplement, retail installment sales
contracts and promissory notes are referred to individually as a loan or
collectively as loans. The initial receivables and the subsequent receivables
were or will be selected from Arcadia Financial's portfolio for inclusion in the
receivables pool in compliance with several criteria, some of which are
described below under "--Selection Criteria." No selection procedures believed
by Arcadia Financial or by us to be adverse to noteholders were used or will be
used in selecting the receivables.
The obligation of the trust to purchase the subsequent receivables on the
dates specified by us will be subject to the receivables in the trust, together
with the subsequent receivables to be conveyed to the trust on a subsequent
transfer agreement, meeting the following criteria, computed based on the
characteristics of the initial receivables on the initial cutoff date and any
subsequent receivables as of the related subsequent cutoff date:
(1) the weighted average APR of receivables will not be lower than one
percentage point below the weighted average APR of the preliminary
initial receivables on , ;
(2) the weighted average remaining term of receivables will not be greater
than months nor less than months;
(3) not more than % of the aggregate principal balance of receivables will
be attributable to loans for the purchase of used financed vehicles; and
(4) not more than % of the aggregate principal balance of receivables will
be attributable to receivables with an APR in excess of %.
No receivable will have a scheduled maturity later than .
The aggregate principal balance of the receivables as of any determination
date means the aggregate principal balance of the receivables at the end of the
preceding calendar month, except for:
(1) any receivable that became a liquidated receivable during a monthly
period; and
(2) any receivable that we, Arcadia Financial or the servicer has
repurchased with respect to the next distribution date after giving
effect to all payments received from obligors for a monthly period.
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<PAGE>
The aggregate principal balance of the initial receivables is expected to
equal approximately 70% of the aggregate initial principal balance of the notes.
However, except for the criteria described in the preceding paragraphs, there
will be no required characteristics of the subsequent receivables and the
receivables included in the initial receivables originated after the preliminary
cutoff date. Therefore, following the transfer of subsequent receivables to the
trust, the aggregate characteristics of the entire receivables pool, including
the composition of the receivables, the distribution by APR, the geographic
distribution and the distribution by original maturity and remaining maturity
described in the following tables, may vary from those of the preliminary
initial receivables.
DELINQUENCY, CREDIT LOSS AND REPOSSESSION INFORMATION
The following tables set forth information relating to Arcadia Financial's
delinquency, credit loss and repossession experience for each period indicated
with respect to all loans it has purchased and continues to service. This
information includes the experience with all loans in Arcadia Financial's
portfolio of loans serviced during each period, including loans which do not
meet the criteria for selection as a receivable.
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------------------
1996 1997 1998
---------------------- ---------------------- ----------------------
NUMBER NUMBER NUMBER
OF OF OF
LOANS BALANCES LOANS BALANCES LOANS BALANCES
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Servicing Portfolio at End of
Period...................... 302,450 $3,791,857 411,429 $4,956,090 450,635 $5,096,222
Delinquencies:
31-60 days.................. 3,884 $ 47,225 8,297 $ 100,161 12,176 $ 135,633
61-90 days.................. 1,255 15,877 3,635 45,485 4,161 47,599
61-90 days.................. 2,911 37,019 3,019 34,047 5,165 60,591
--------- ---------- --------- ---------- --------- ----------
Total Automobile Loans
Delinquent 31 or More
Days........................ 8,050 $ 100,121 14,951 $ 179,693 21,502 $ 243,823
Delinquencies as a Percentage
of Number of Loans and
Amount Outstanding at end of
Period (2).................. 2.66% 2.64% 3.63% 3.63% 4.77% 4.78%
Amount in Repossession (3).... 4,651 $ 64,929 6,083 $ 55,300 5,686 $ 32,676
--------- ---------- --------- ---------- --------- ----------
Total Delinquencies and Amount
in Repossession (2)......... 12,701 $ 165,050 21,034 $ 234,993 27,188 $ 276,499
--------- ---------- --------- ---------- --------- ----------
--------- ---------- --------- ---------- --------- ----------
<CAPTION>
AT JUNE 30,
1999
----------------------
NUMBER
OF
LOANS BALANCES
--------- ----------
<S> <C> <C>
Servicing Portfolio at End of
Period...................... $
Delinquencies:
31-60 days.................. $
61-90 days..................
61-90 days..................
--------- ----------
Total Automobile Loans
Delinquent 31 or More
Days........................ $
Delinquencies as a Percentage
of Number of Loans and
Amount Outstanding at end of
Period (2).................. % %
Amount in Repossession (3)....
--------- ----------
Total Delinquencies and Amount
in Repossession (2)......... $
--------- ----------
--------- ----------
</TABLE>
- ------------
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each loan. The information in the table includes previously sold
loans which Arcadia Financial continues to service.
(2) Amounts shown do not include loans which are less than 31 days delinquent.
(3) Amount in Repossession represents financed vehicles which have been
repossessed but not yet liquidated.
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<PAGE>
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------ JUNE 30,
1996 1997 1998 1999(4)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Average Servicing Portfolio
Outstanding During the
Period...................... $ 3,015,411 $ 4,458,977 $ 5,071,996 $
Average Number of Loans
Outstanding During the
Period...................... 242,419 362,626 435,712
Number of Charge-Offs......... 14,403 24,616 33,441
Gross Charge-Offs (2)......... $ 35,642 $ 165,233 $ 255,853 $
Recoveries (3)................ 5,653 9,855 21,614
------------ ------------ ------------ ------------
Net Losses.................... $ 29,989 $ 155,378 $ 234,239 $
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Gross Charge-Offs as a
Percentage of Average
Servicing Portfolio......... 1.18% 3.71% 5.04% %
Net Loses as a Percentage of
Average Servicing
Portfolio................... 0.99% 3.48% 4.62% %
</TABLE>
- ------------
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each loan. The information in the table includes previously sold
loans which Arcadia Financial continues to service.
(2) Gross charge-offs represent principal amounts which management estimated to
be uncollectible after the consideration of anticipated proceeds from the
disposition of repossessed assets and selling expenses.
(3) Includes post-disposition amounts received on previously charged off loans.
(4) Percentage calculations for the six months ended June 30, 1999 are
annualized.
As illustrated in the tables above, Arcadia Financial has experienced an
increase in delinquency, gross charge-off and net loss rates during each of the
three years in the period ended December 31, 1998. Management believes that
these increases are primarily due to changes in Arcadia Financial's portfolio
mix to the extent that it included a larger proportion of loans with higher
credit risk characteristics, as well as the continued seasoning of Arcadia
Financial's existing servicing portfolio to include a greater proportion of
loans in the period of highest probability for delinquencies and defaults
(generally six to 14 months from the date of origination). Arcadia Financial
took the following measures to compensate for the expected increases in credit
statistics resulting from the rise in the proportion of loans with higher credit
risk characteristics:
- implemented a risk-based pricing strategy during 1997 to improve the rate
of return on loan originations;
- increased its allowance for credit losses to 8.15% at December 31, 1998
from 4.75% and 2.51% at December 31, 1997 and 1996, respectively;
- tightened its credit and underwriting standards; and
- expanded its use of computerized credit scoring and behavioral analytics
to better service its portfolio and identify improvements when necessary.
As a result of these analytic enhancements, management has discontinued the
purchase of loans which score within certain risk tiers as the rate of return
historically realized on these loans has not been commensurate with the related
risk. Loans included in these discontinued tiers represented approximately 16%
of Arcadia Financial's servicing portfolio at December 31, 1998 and
approximately % for the six months ended June 30, 1999 and accounted for
approximately 26% of the delinquent loans outstanding at December 31, 1998 and
approximately % of the delinquent loans outstanding for the six months
ended June 30, 1999 and 34% of net losses incurred during 1998.
Arcadia Financial's delinquency rate at June 30, 1999 has declined compared
to December 31, 1998, in part because of a recovery from the normal seasonal
pressure on collection efforts which is generally highest in the fourth quarter
of the year. Arcadia Financial also believes that the decrease in the
delinquency rate reflects improvements in its collections and servicing
functions implemented during 1998 and the first quarter of 1999.
Net losses were also affected during 1997, 1998 and the half of 1999 by
changes in Arcadia Financial's repossession disposition strategy. Beginning in
March 1997, Arcadia Financial modified its
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strategy to increase the utilization of wholesale disposition channels and made
further modifications in June 1998 to discontinue its retail remarketing
operations in its entirety. As a result, the percentage of repossessed vehicles
liquidated through wholesale liquidation channels increased from 30% in 1996 to
54% in 1997 to 81% in 1998 to 100% in the six months ended June 30, 1999.
Although recovery rates on the sale of vehicles through wholesale channels is
generally lower than those realized through retail distribution channels,
Arcadia Financial believes that its decision to discontinue its retail
remarketing operations has enabled it to better manage its level of repossessed
inventory and improve the timing of excess cash flows released to Arcadia
Financial from securitization trusts as a result of an increase in the speed at
which repossessed vehicles can be liquidated. At June 30, 1999, the average days
that vehicles were held in inventory had fallen to approximately days
compared to 46 days at December 31, 1998, 105 days at December 31, 1997 and 119
days at December 31, 1996. The change in the number and net realizable value of
repossessed vehicles at March 31, 1999, reflects the improvement in the average
number of days in inventory and the lower anticipated recovery rates resulting
from the change in Arcadia Financial's liquidation strategy.
Annualized gross charge-offs and net losses during 1997, 1998 and the six
months ended June 30, 1999, include non-recurring charges of 0.57%, 0.42% and
0.00%, respectively, primarily due to the impact of write-downs of repossessed
inventory due to revisions to Arcadia Financial's inventory valuation policy.
The loans in Arcadia Financial's servicing portfolio include loans other
than the receivables, including loans which do not meet the criteria for
selection as a receivable. We cannot assure you that the delinquency, loan loss
or repossession experience of the trust with respect to the receivables will be
better than, worse than or comparable to the experience described above.
SELECTION CRITERIA
The preliminary initial receivables represent substantially all loans in
Arcadia Financial's portfolio, owned and not serviced for others, that:
(1) were not more than 30 days past due as of the preliminary cutoff date;
(2) did not have a remaining principal balance as of the preliminary cutoff
date less than $500.00;
(3) did not have a final scheduled payment date before , ; and
(4) were otherwise eligible under criteria established by Arcadia Financial
and [the security insurer, if any].
OTHER CHARACTERISTICS
The preliminary initial receivables:
(1) had a remaining maturity, as of the preliminary cutoff date, of at least
months, but not more than months;
(2) had an original maturity of at least months, but not more than
months;
(3) had an original principal balance of at least $ and not more than
$ ;
(4) had a remaining principal balance, as of the preliminary cutoff date, of
at least $ and not more than $ ; and
(5) had an APR of at least % and not more than %.
As of the preliminary cutoff date, approximately % of the aggregate
principal balance of the preliminary initial receivables was attributable to
loans for the purchase of new financed vehicles, and approximately % of
the aggregate principal balance was attributable to loans for the purchase of
S-21
<PAGE>
used financed vehicles. The preliminary initial receivables were purchased from
more than 4,400 dealers. Not more than % of the aggregate principal
balance of the preliminary initial receivables as of the preliminary cutoff date
was originated by any single dealer. The ten most significant dealers,
collectively, originated approximately % of the aggregate principal
balance as of the preliminary cutoff date, each of whom individually accounted
for at least % of the aggregate principal balance as of the preliminary
cutoff date. Approximately % of the preliminary initial receivables, by
principal balance, are simple interest obligations, and interest on the
remaining % of the preliminary initial receivables is computed on an
actuarial basis, with prepayment rebates computed according to the Rule of 78's.
Neither we, as seller, Arcadia Financial nor the servicer may substitute other
loans for the receivables at any time during the term of the sale and servicing
agreement.
The composition and distribution by APR, the geographic concentration and
the distribution by original maturity and remaining maturity of the receivables
pool as of the preliminary cutoff date are set forth in the following tables:
COMPOSITION OF THE PRELIMINARY INITIAL RECEIVABLES
AS OF THE PRELIMINARY CUTOFF DATE
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE AGGREGATE NUMBER OF AVERAGE WEIGHTED AVERAGE
APR OF PRINCIPAL RECEIVABLES IN PRINCIPAL WEIGHTED AVERAGE ORIGINAL
RECEIVABLES BALANCE POOL BALANCE REMAINING TERM(1) SCHEDULED TERM(1)
- ----------- ------------------- -------------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$ $
</TABLE>
- ------------
(1) Based on scheduled payments due after the preliminary cutoff date (in the
case of the weighted average remaining term) and assuming no prepayments on
the preliminary initial receivables.
DISTRIBUTION BY APR OF THE PRELIMINARY INITIAL RECEIVABLES
AS OF THE PRELIMINARY CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
APR RANGE (%) RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- ---------------------------------------- ----------- ----------------- --------------------
<S> <C> <C> <C>
7.00 to 7.999......................... $ %
8.00 to 8.999......................... %
9.00 to 9.999......................... %
10.00 to 10.999......................... %
11.00 to 11.999......................... %
12.00 to 12.999......................... %
13.00 to 13.999......................... %
14.00 to 14.999......................... %
15.00 to 15.999......................... %
16.00 to 16.999......................... %
17.00 to 17.999......................... %
18.00 to 18.999......................... %
19.00 to 19.999......................... %
20.00 to 20.999......................... %
21.00 to 21.999......................... %
22.00 to 23.999......................... %
----------- ----------------- ------
%
----------- ----------------- ------
----------- ----------------- ------
</TABLE>
- ------------
(1) The sum of the individual aggregate principal balance percentages may not
total 100.00% due to rounding.
S-22
<PAGE>
GEOGRAPHIC CONCENTRATION OF THE PRELIMINARY INITIAL RECEIVABLES
AS OF THE PRELIMINARY CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF AGGREGATE
NUMBER OF AGGREGATE PRINCIPAL
STATE RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- ---------------------------------------- ----------- ----------------- --------------------
<S> <C> <C> <C>
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
----------- ----------------- ------
$ 100.00%
----------- ----------------- ------
----------- ----------------- ------
</TABLE>
- ------------
(1) The sum of the individual aggregate principal balance percentages may not
total 100.00% due to rounding.
(2) No other state comprised more than 1.00% of the total aggregate principal
balance.
DISTRIBUTION OF THE PRELIMINARY INITIAL RECEIVABLES BY ORIGINAL MATURITY
AS OF THE PRELIMINARY CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
ORIGINAL MATURITY NUMBER OF AGGREGATE PRINCIPAL
(IN MONTHS) RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- ------------------------------------------------------------- ----------- ----------------- -------------------
<S> <C> <C> <C>
13-24.................................................... $ %
25-36.................................................... %
37-48.................................................... %
49-60.................................................... %
61-72.................................................... %
73-84.................................................... %
----------- ----------------- ------
Totals................................................... $ 100.00%
----------- ----------------- ------
----------- ----------------- ------
</TABLE>
- ------------
(1) Sum may not equal 100% due to rounding.
S-23
<PAGE>
DISTRIBUTION OF THE PRELIMINARY INITIAL RECEIVABLES BY REMAINING MATURITY
AS OF THE PRELIMINARY CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE
REMAINING MATURITY NUMBER OF AGGREGATE PRINCIPAL
(IN MONTHS) RECEIVABLES PRINCIPAL BALANCE BALANCE(1)
- ------------------------------------------------------------- ----------- ----------------- -------------------
<S> <C> <C> <C>
13-24.................................................... $ %
25-36.................................................... %
37-48.................................................... %
49-60.................................................... %
61-72.................................................... %
73-84.................................................... %
----------- ----------------- ------
Totals................................................... $ 100.00%
----------- ----------------- ------
----------- ----------------- ------
</TABLE>
- ------------
(1) Sum may not equal 100% due to rounding.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayment on automotive receivables can be measured relative to a
prepayment standard or model. The model used in this prospectus supplement, the
Absolute Prepayment Model ("ABS"), represents an assumed rate of prepayment each
month relative to the original number of receivables in a pool of receivables.
ABS further assumes that all the receivables are the same size and amortize at
the same rate and that each receivable in each month of its life will either be
paid as scheduled or be prepaid in full. For example, in a pool of receivables
originally containing 10,000 receivables, a 1% ABS rate means that 100
receivables prepay in full each month. ABS does not purport to be an historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of any pool of receivables, including the receivables owned by the
trust.
As the rate of payment of principal of each class of notes will depend on
the rate of payment, including prepayments, of the principal balance of the
receivables, final payment of any class of notes could occur significantly
earlier than the respective final scheduled distribution dates. Reinvestment
risk associated with early payment of the notes will be born exclusively by the
noteholders.
The table captioned "Percent of Initial Note Principal Amount at Various ABS
Percentages" has been prepared on the basis of the assumed characteristics of
the receivables as described below. The ABS Table assumes that:
(1) the receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses, delinquencies or repurchases;
(2) each scheduled monthly payment on the receivables is made on the last
day of each month and each month has 30 days;
(3) prepayments are received on the last day of the month and include 30
days of interest;
(4) payments on the notes are made on each distribution date and each of
these dates is assumed to be the fifteenth day of each applicable month;
and
(5) the servicer does not exercise its option to purchase the receivables.
The ABS table indicates the projected weighted average life of each class of
notes and shows the percent of the initial principal amount of each class of
notes that is projected to be outstanding after each of the distribution dates
shown at various constant ABS percentages. The ABS table also indicates the
month in which the servicer can exercise its optional clean-up call and the
associated weighted average life.
S-24
<PAGE>
The ABS table also assumes that the receivables have been aggregated into
hypothetical pools with all of the receivables within each pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools, which is based on its aggregate principal balance, APR, original
term to maturity and remaining term to maturity as of the cutoff date, will be
such that each pool will be fully amortized by the end of its remaining term to
maturity. Pool 1 has been modeled with a cutoff date of , , and
Pool 2 is assumed to be delivered one month later.
<TABLE>
<CAPTION>
ORIGINAL TERM REMAINING TERM
AGGREGATE TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
- -------------------------------- ----------------- --------- ----------------- ---------------------
<S> <C> <C> <C> <C>
1............................... $
2............................... $
</TABLE>
The actual characteristics and performance of the receivables will differ
from the assumptions used in constructing the ABS Table. The assumptions used
are hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is unlikely that the receivables will prepay at a constant level of
ABS until maturity or that all of the receivables will prepay at the same level
of ABS. Moreover, the diverse terms of receivables within each of the
hypothetical pools could produce slower or faster principal distributions than
indicated in the ABS table at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the receivables are as
assumed. Any difference between such assumptions and the actual characteristics
and performance of the receivables, or actual prepayment experience, will affect
the percentages of initial amounts outstanding over time and the weighted
average lives of each class of notes.
S-25
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-1 NOTES CLASS A-2 NOTES
------------------------------ ------------------------------
DISTRIBUTION DATE 0.00% 1.20% 1.60% 2.00% 0.00% 1.20% 1.60% 2.00%
- ----------------------------------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
- ------------
(1) The weighted average life of a note is determined by
(1) multiplying the amount of each principal payment on a note by the number
of years from the date of the issuance of the note to the related
distribution date;
(2) adding the results; and
(3) dividing the sum by the related initial principal amount of the note.
THIS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCES)
AND SHOULD BE READ IN CONJUNCTION WITH THOSE ASSUMPTIONS.
S-26
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
CLASS A-3 NOTES CLASS A-4 NOTES CLASS A-5 NOTES
------------------------------ ------------------------------ ------------------------------
DISTRIBUTION DATE 0.00% 1.20% 1.60% 2.00% 0.00% 1.20% 1.60% 2.00% 0.00% 1.20% 1.60% 2.00%
- ------------------------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
- ------------
(1) The weighted average life of a note is determined by
(1) multiplying the amount of each principal payment on a note by the number
of years from the date of the issuance of the note to the related
distribution date;
(2) adding the results; and
(3) dividing the sum by the related initial principal amount of the note.
For purposes of the weighted average life calculation for the Class A-5
notes, it is assumed that the servicer exercises its right to purchase
the receivables on the first distribution date on which it is entitled to
repurchase the receivables.
THE ABS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF THE
RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND PERFORMANCES)
AND SHOULD BE READ IN CONJUNCTION WITH THOSE ASSUMPTIONS.
S-27
<PAGE>
ARCADIA FINANCIAL LTD.
Arcadia Financial acquired loans totaling approximately $743.3 million,
$2,052.4 million, $2,750.6 million, $2,862.8 million and $2,193.4 million for
the calendar years ended December 31, 1994, 1995, 1996, 1997, and 1998,
respectively, and $ million for the six months ended June 30, 1999, and
maintained, as of June 30, 1999, a servicing portfolio of approximately $
million, consisting of approximately $ million of loans owned and held for
sale and approximately $ million of loans serviced in connection with
securitization transactions. As of June 30, 1999, approximately % of
Arcadia Financial's servicing portfolio consisted of loans secured by used
vehicles, of which approximately % were current model year at the time of
origination. As of June 30, 1999, Arcadia Financial had total assets of
approximately $ million and shareholders' equity of approximately $
million.
RECENT DEVELOPMENTS
[Add any recent developments]
[DESCRIPTION OF THE SECURITY INSURER, IF ANY, TO BE ADDED IF NECESSARY]
DESCRIPTION OF THE NOTES
GENERAL
The trust will issue:
- $ aggregate principal amount of Class A-1 automobile
receivables-backed notes,
- $ aggregate principal amount of Class A-2 automobile
receivables-backed notes,
- $ aggregate principal amount of Class A-3 automobile
receivables-backed notes,
- $ aggregate principal amount of Class A-4 automobile
receivables-backed notes and
- $ aggregate principal amount of Class A-5 automobile
receivables-backed notes
under the terms of an indenture, a form of which has been filed as an exhibit to
the registration statement on Form S-3, filed by us with the SEC on
, . A copy of the indenture will be filed with the SEC following
the issuance of the notes. The following summary describes various terms of the
notes and the indenture. The summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the notes and the indenture. The following summary supplements the
description of the general terms and provisions of the notes of any given series
and the related indenture set forth in the accompanying prospectus. Norwest Bank
Minnesota, National Association, a national banking association headquartered in
Minneapolis, Minnesota, will be the indenture trustee.
PAYMENTS OF INTEREST
Interest on the principal balance of each class of notes will accrue at the
following rates:
- % per year for the Class A-1 notes,
- % per year for the Class A-2 notes,
S-28
<PAGE>
- % per year for the Class A-3 notes,
- % per year for the Class A-4 notes and
- % per year for the Class A-5 notes.
Interest will be payable to the noteholders on the fifteenth day of each month
or, if the fifteenth day is not a business day, on the next following business
day, commencing , . Interest will accrue from and including
, to but excluding (in the case of the first
distribution date) or from and including the most recent distribution date on
which interest has been paid to but excluding the following distribution date.
Interest on the Class A-1 notes and Class A-2 notes will be calculated on the
basis of the actual number of days elapsed during the applicable interest period
divided by 360. Interest on the Class A-3 notes, Class A-4 notes and Class A-5
notes for each interest period will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest accrued as of any distribution date
but not paid on a distribution date will be due on the next distribution date,
together with interest on the amount at the applicable interest rate to the
extent lawful. Interest payments on the notes will be made from available funds
after reimbursement of the servicer for any amounts that the servicer is
required to advance on any receivables under the terms of the sale and servicing
agreement, payment of accrued and unpaid trustees' fees and other administrative
fees of the trust and payment of the fees payable to the servicer for services
rendered during prior monthly periods. See "Description of the Purchase
Agreements and the Trust Documents--Distributions" described in this prospectus
supplement.
PAYMENTS OF PRINCIPAL
Principal payments will be made to the noteholders on each distribution date
in an amount equal to the sum of the following amounts for the related monthly
period:
(1) that portion of all collections on receivables (other than liquidated
receivables and purchased receivables) allocable to principal, including
full and partial principal prepayments, received during the monthly
period;
(2) the principal balance of each receivable that became a liquidated
receivable during the monthly period;
(3) the principal balance of each receivable that was repurchased by Arcadia
Financial or the servicer as of the last day of the monthly period, and,
at the option of [the security insurer, if any], the principal balance of
each receivable that was required to be, but was not repurchased;
(4) the aggregate amount of any reduction of the principal balance of a
receivable as a result of a court order in an insolvency proceeding; and
(5) any unpaid portion of the amounts included in clauses (1), (2), (3) and
(4) above with respect to a prior distribution date.
Principal payments on the notes will be made from available funds after
reimbursement of the servicer for prior monthly advances, payment of accrued and
unpaid trustees' fees and other administrative fees of the trust, payment of the
servicing fee and after distribution of the noteholders' interest distributable
amount. See "Description of the Purchase Agreements and the Trust
Documents--Distributions" described in this prospectus supplement.
The notes will be sequential pay classes, and principal payments on the
notes will be applied on each distribution date as follows:
- first, to the principal balance of the Class A-1 notes until the principal
balance is reduced to zero,
S-29
<PAGE>
- then to the Class A-2 notes until the principal balance is reduced to
zero,
- then to the Class A-3 notes until such principal balance is reduced to
zero,
- then to the Class A-4 notes until the principal balance is reduced to zero
and
- then to the Class A-5 notes until the principal balance is reduced to
zero.
The principal balance of the Class A-1 notes, to the extent not previously paid,
will be due on , the principal balance of the Class A-2 notes, to
the extent not previously paid, will be due on , the principal
balance of the Class A-3 notes, to the extent not previously paid, will be due
on , the principal balance of the Class A-4 notes, to the extent not
previously paid, will be due on , and the principal balance of the
Class A-5 notes, to the extent not previously paid, will be due on .
The actual date on which the aggregate outstanding principal amount of any class
of notes is paid may be earlier than the final scheduled distribution date for a
class, depending on a variety of factors.
MANDATORY REDEMPTION
Each class of notes will be redeemed in part on the distribution date on or
immediately following the last day of the funding period in the event that any
portion of the pre-funded amount remains on deposit in the pre-funding account
after giving effect to the purchase of all subsequent receivables, including a
purchase on a distribution date. If the amount to be redeemed is greater than
$100,000, the aggregate principal amount of each class of notes to be redeemed
will be an amount equal to a class's pro rata share, based on the current
principal balance of each class of notes, of the remaining pre-funded amount on
a distribution date.
A limited recourse mandatory prepayment premium will be payable by the trust
to the noteholders of each class if the pre-funded amount at the end of the
funding period exceeds $100,000. The note prepayment premium for a class of
notes will equal the excess, if any, discounted as described below, of:
(1) the amount of interest that would have accrued on a class's note
prepayment amount at the interest rate borne by a class of notes during
the period commencing on and including the distribution date on which a
class's note prepayment amount is required to be distributed to the
noteholders of such class to but excluding in the case of the
Class A-1 notes, in the case of the Class A-2 notes,
in the case of the Class A-3 notes, in the case
of the Class A-4 notes and in the case of the Class A-5
notes, over
(2) the amount of interest that would have accrued on a class's note
prepayment amount over the same period at an annual rate of interest
equal to the bond equivalent yield to maturity on the determination date
preceding a distribution date at year Eurodollar Synthetic Forward
("EDSF"), in the case of the Class A-1 notes, at 12 month EDSF, in the
case of the Class A-2 notes, on the 6.625% United States Treasury note
due , , in the case of the Class A-3 notes, on the %
United States Treasury note due in the case of the Class A-4 notes
and on the % United States Treasury note due , in the
case of the Class A-5 notes.
This excess will be discounted to present value to such distribution date at the
applicable yield described in clause (2) above. The trust's obligation to pay
the note prepayment premiums shall be limited to funds which are received from
us, as seller, under the sale and servicing date as liquidated damages for the
failure to deliver subsequent receivables. No other assets of the trust will be
available for the purpose of making this payment. The note policy does not
guarantee payment of the note prepayment premiums or the note prepayment amount,
although the note policy does guarantee
S-30
<PAGE>
payment of the noteholders' interest distributable amount and the noteholders'
principal distributable amount for each class of notes on its respective final
scheduled distribution date. In addition, the ratings assigned to the notes by
the rating agencies do not address the likelihood that the note prepayment
amount or the note prepayment premiums will be paid.
OPTIONAL REDEMPTION
The Class A-5 notes, if still outstanding, may be redeemed in whole, but not
in part, on any distribution date on which we or the servicer exercises its
option to purchase the receivables. We or the servicer may purchase the
receivables when the aggregate principal balance has declined to 10% or less of
the original pool balance, as more fully described in the accompanying
prospectus under "Description of the Purchase Agreements and the Trust
Documents--Termination." The original pool balance will equal the sum of:
(1) the aggregate principal balance as of the initial cutoff date; plus
(2) the aggregate principal balances of all subsequent receivables added to
the trust as of their respective subsequent cutoff dates.
Any optional redemption will effect early retirement of the Class A-5 notes. The
redemption price will be equal to the unpaid principal amount of the Class A-5
notes, plus accrued and unpaid interest.
EVENTS OF DEFAULT
Unless [the security insurer, if any] shall be in continuing default on its
obligations under the note policy or certain bankruptcy events shall have
occurred with respect to [the security insurer, if any], events of default under
the indenture will consist of those events defined in the insurance agreement as
insurance agreement indenture cross defaults, and will constitute an event of
default under the indenture only if [the security insurer, if any] shall have
delivered to the trust and the indenture trustee, and not rescinded, a written
notice specifying that any insurance agreement indenture cross default
constitutes an event of default under the indenture. "Insurance agreement
indenture cross defaults" consist of:
(1) a demand for payment being made under the note policy;
(2) events of bankruptcy, insolvency, receivership or liquidation of the
trust;
(3) the trust becoming taxable as an association, or publicly traded
partnership, taxable as a corporation for federal or state income tax
purposes;
(4) on any distribution date, the sum of the available funds with respect to
the distribution date plus the amount, if any, on deposit in the reserve
account and some funds held by the collateral agent being less than the
sum of the amounts described in clauses 1-6 under "Description of the
Purchase Agreements and the Trust Documents--Distributions" in this
prospectus supplement; and
(5) any failure to observe or perform in any material respect any other
covenants or agreements in the indenture, or any representation or
warranty of the trust made in the indenture or in any certificate or
other writing delivered under or in connection with the indenture proving
to have been incorrect in any material respect when made, and the failure
continuing or not being cured, or the circumstance or condition in
respect of which the misrepresentation or warranty was incorrect not
having been eliminated or otherwise cured, for 30 days after the giving
of written notice of the failure or incorrect representation or warranty
to the trust and the indenture trustee by [the security insurer, if any].
S-31
<PAGE>
Upon the occurrence of an event of default, so long as an insurer default
shall not have occurred and be continuing, [the security insurer, if any] shall
have the right, but not the obligation, to cause the indenture collateral agent
to liquidate the trust property in whole or in part, on any date or dates
following the acceleration of the notes due to the event of default as [the
security insurer, if any], in its sole discretion, shall elect, and to deliver
the proceeds of the liquidation to the indenture trustee for distribution in
accordance with the terms of the indenture. [the security insurer, if any] may
not, however, cause the indenture collateral agent to liquidate the trust
property in whole or in part if the proceeds of the liquidation would not be
sufficient to pay all outstanding principal of and accrued interest on the
notes, unless the event of default arose from a claim being made on the note
policy or from various events of bankruptcy, insolvency, receivership or
liquidation of the trust. Following the occurrence of any event of default, the
indenture trustee and the owner trustee will continue to submit claims under the
note policy for any shortfalls in the scheduled payments on the notes. Following
any event of default under the indenture, [the security insurer, if any] may
elect to pay all or any portion of the outstanding amount of the notes, plus
accrued interest. See "The Note Policy" described in this prospectus supplement.
If an insurer default has occurred and is continuing, events of default
under the indenture will consist of the events of default described in the
accompanying prospectus under "The Notes--The Indenture," and the indenture
trustee and the noteholders will have the rights under the indenture described
therein.
DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE TRUST DOCUMENTS
The following summary describes various terms of the purchase agreements and
any subsequent purchase agreement, and the sale and servicing agreement, any
subsequent transfer agreement and the trust agreement. Forms of the purchase
agreements and the trust documents have been filed as exhibits to the
registration statement. A copy of the purchase agreements and the trust
documents will be filed with the SEC following the issuance of the notes. The
summary is not complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the purchase agreements and the trust
documents. The following summary supplements the description of the general
terms and provisions of the purchase agreements and the trust documents
described in the accompanying prospectus.
The sale and servicing agreement will not permit modifications of
receivables to avoid prepayments by obligors. See "Description of the Purchase
Agreements and the Trust Documents--Servicing Procedures" in the accompanying
prospectus.
SALE AND ASSIGNMENT OF RECEIVABLES; SUBSEQUENT RECEIVABLES
Some of the information about the sale of the initial receivables by Arcadia
Financial to us, as the seller, under the purchase agreements and the conveyance
of the initial receivables from the us to the trust on the closing date under
the sale and servicing agreement is described under "Description of the Purchase
Agreements and the Trust Documents--Sale and Assignment of Receivables" in the
accompanying prospectus. In addition, during the funding period, under the sale
and servicing agreement, we will be obligated to sell to the trust subsequent
receivables having an aggregate principal balance equal to approximately
$ , this amount being equal to the initial pre-funded amount, to the
extent that subsequent receivables are available.
During the funding period, on each subsequent transfer agreement, subject to
the conditions described below, we will sell and assign to the trust, without
recourse, our entire interest in the subsequent receivables designated by us as
of the related subsequent cutoff date and identified in a
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schedule attached to an agreement relating to such subsequent receivables
executed on that date by us. Upon the conveyance of subsequent receivables to
the trust on a subsequent transfer agreement:
(1) the aggregate principal balance will increase in an amount equal to the
aggregate principal balances of the subsequent receivables;
(2) the Class A-1 holdback amount (described under "--Accounts" below), if
any, for subsequent transfer date will be withdrawn from the pre-funding
account and deposited in the Class A-1 holdback subaccount (described
under "--Accounts" below); and
(3) an amount equal to the aggregate principal balances of subsequent
receivables less the Class A-1 holdback amount will be withdrawn from the
pre-funding account and will be paid either to us or upon our order.
The funding period is the period from and including the closing date until the
earliest of
(1) the determination date on which (a) the pre-funded amount is less than
$100,000, (b) an event of default has occurred under the sale and
servicing agreement, or (c) certain events of insolvency have occurred
with respect to us or the servicer or
(2) the close of business on the distribution agreement.
Any conveyance of subsequent receivables is subject to the satisfaction, on
or before the related subsequent transfer agreement, of the following
conditions, among others:
(1) each such subsequent receivable satisfies the eligibility criteria
specified in the sale and servicing agreement;
(2) [The security insurer, if any] (so long as no insurer default shall have
occurred and be continuing) shall in its absolute and sole discretion
have approved the transfer of subsequent receivables to the trust;
(3) as of each applicable subsequent cutoff date, the receivables in the
trust together with the subsequent receivables to be conveyed by us as of
the subsequent cutoff date, meet the following criteria (computed based
on the characteristics of the initial receivables on the initial cutoff
date and any subsequent receivables on the related subsequent cutoff
date):
- (a) the weighted average APR of the receivables will not be lower than
one percentage point below the weighted average APR of the preliminary
initial receivables on the preliminary cutoff date,
- (b) the weighted average remaining term of the receivables will not be
greater than months nor less than months,
- (c) not more than % of the aggregate principal balance of the
receivables will be attributable to loans for the purchase of used
financed vehicles, and
- (d) not more than % of the aggregate principal balance of the
receivables will be attributable to receivables with an APR in excess
of %, and the trust, the indenture trustee, the owner trustee and
[the security insurer, if any] shall have received written confirmation
from a firm of independent certified public accountants as to the
satisfaction of the criteria in clauses (a) through (d) above;
(4) we shall have executed and delivered to the trust, with a copy to the
indenture trustee, a subsequent transfer agreement conveying the
subsequent receivables to the trust, including a schedule identifying the
subsequent receivables;
(5) the Class A-1 holdback amount, if any, shall have been deposited in the
Class A-1 holdback subaccount;
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(6) We shall have delivered opinions of counsel to the indenture trustee,
the owner trustee, [the security insurer, if any] and the rating agencies
about the validity of the conveyance of the subsequent receivables; and
(7) the Rating Agencies shall have each notified [the security insurer, if
any] that, following the addition of all the subsequent receivables, the
Class A-1 notes will be rated A-1+ by S&P and P-1 by Moody's, and the
Class A-2 notes, Class A-3 notes, Class A-4 notes and Class A-5 notes
will each be rated AAA by S&P and Aaa by Moody's.
Subsequent receivables may have been originated by Arcadia Financial at a
later date using credit criteria different from the criteria applied with
respect to the initial receivables. See "Risk Factors-- The Receivables and the
Pre-Funding Account" and "The Receivables Pool" in this prospectus supplement.
ACCOUNTS
The servicer will establish and maintain one or more accounts, in the name
of the indenture trustee on behalf of the noteholders, into which all payments
made on or with respect to the receivables will be deposited. The servicer will
also establish and maintain an account, in the name of the indenture trustee on
behalf of the noteholders, in which amounts released from the collection account
for distribution to noteholders will be deposited and from which all
distributions to noteholders will be made. The collection account and the note
distribution account are collectively referred to in this prospectus supplement
as the designated accounts. See "Description of the Purchase Agreements and the
Trust Documents--Collections" in the accompanying prospectus.
In addition to the designated accounts, the servicer will also establish and
will maintain the pre-funding account in the name of the indenture trustee on
behalf of the noteholders.
The servicer will also establish and maintain an account in the name of the
indenture trustee on behalf of the noteholders. On the closing date, we will
deposit an amount equal to the requisite reserve amount as of the closing date
in the reserve account. On each draw agreement during the funding period, if the
available funds are insufficient to distribute the amounts described in clauses
1-6 under "--Distributions" below, the indenture trustee will withdraw from the
reserve account the amount of this shortfall (but in no event more than the
difference between
(1) the amount on deposit in the reserve account; and
(2) the requisite reserve amount for the related distribution date), and
deposit this amount in the collection account.
On each subsequent transfer agreement, the servicer will recalculate the
requisite reserve amount, and any funds in the reserve account in excess of this
amount will be distributed to us. If the amount in the reserve account on the
subsequent transfer agreement is less than the requisite reserve amount, this
amount will be transferred to the reserve account from the funds that would
otherwise be paid to us from the pre-funding account.
The requisite reserve amount as of any date during the funding period will
equal the product of
(1) the difference between (A) the weighted average of the interest rates
for each class of notes (based on the outstanding principal amount of
each class of notes on that date) and (B) the assumed yield (2.5% per
year) of investments of funds in the pre-funding account, divided by 360;
(2) the pre-funded amount on such date; and
(3) the number of days remaining until the distribution date in .
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In addition, on any subsequent transfer agreement a Class A-1 holdback
amount determined by the amount, if any, by which the actual principal balance
of subsequent receivables transferred to the trust on or prior to such date is
less than the amount set forth in a schedule of assumed amounts, if any, will be
withheld from funds in the pre-funding account that would otherwise be paid to
us on that subsequent transfer agreement and will be deposited into a subaccount
of the reserve account. The Class A-1 holdback subaccount is intended to ensure
that, notwithstanding a slower than expected delivery of subsequent receivables
by us during the funding period, sufficient funds will be available to retire
the Class A-1 notes on the Class A-1 final scheduled distribution date. Any
funds in the Class A-1 holdback subaccount, less the amount, if any, required to
be applied to reduce the principal balance of the Class A-1 notes to zero on the
Class A-1 final scheduled distribution date, will be released to us on the
distribution date on which the Class A-1 notes are paid in full, and funds in
the Class A-1 holdback subaccount will not be available for any other purpose.
Funds in the designated accounts, the pre-funding account and the reserve
account will be invested in eligible investments, and investment earnings will
be added to available funds on each distribution date.
DISTRIBUTIONS
On or before the sixth business day prior to each distribution date, the
servicer will deliver to the indenture trustee, the owner trustee, [the security
insurer, if any] and each rating agency a certificate setting forth, among other
things, the following amounts with respect to the preceding monthly period and
the related distribution date:
(1) the amount of funds in the collection account allocable to collections
on the receivables in the preceding monthly period, excluding any monthly
advances and any purchase amounts;
(2) the purchase amount of all receivables repurchased by Arcadia Financial
or the servicer as of the related deposit date;
(3) the monthly advances made by the servicer and the amounts which the
servicer is entitled to be reimbursed for prior monthly advances;
(4) the amount of available funds;
(5) the noteholders' interest distributable amount;
(6) the noteholders' principal distributable amount; and
(7) the servicing fee.
On each distribution date, the servicer shall instruct the indenture trustee
to distribute the available funds in the following order of priority:
(1) To the servicer, the amount the servicer is entitled to be reimbursed
for prior monthly advances.
(2) To the indenture trustee and the owner trustee, any accrued and unpaid
trustees' fees and any accrued and unpaid fees of the separate lockbox
bank, custodian, backup servicer, indenture collateral agent,
administrator or collateral agent (in each case, to the extent fees have
not been previously paid by the servicer or Arcadia Financial).
(3) To the servicer, the servicing fee for the related monthly period.
(4) To the note distribution account, the noteholders' interest
distributable amount.
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(5) To the note distribution account, the noteholders' principal
distributable amount, to be distributed:
- first to the Class A-1 noteholders in reduction of principal until the
principal balance of the Class A-1 notes has been reduced to zero,
- then to the Class A-2 noteholders in reduction of principal until the
principal balance of the Class A-2 notes has been reduced to zero,
- then to the Class A-3 noteholders in reduction of principal until the
principal balance of the Class A-3 notes has been reduced to zero,
- then to the Class A-4 noteholders in reduction of principal until the
principal balance of the Class A-4 notes has been reduced to zero and
- then to the Class A-5 noteholders in reduction of principal until the
principal balance of the Class A-5 notes has been reduced to zero.
(6) To [the security insurer, if any], any amounts owing to [the security
insurer, if any] under the insurance agreement and not paid.
(7) Any available funds remaining in the collection account after
distributing the amounts described above will be payable to us as
compensation for obtaining the note policy, paying the premiums and
maintaining all necessary related arrangements for the benefit of [the
security insurer, if any] (this compensation, including amounts paid to
[the security insurer, if any] described above, will be referred to as
the credit enhancement fee), but shall be transferred to a financial
institution acting as collateral agent on behalf of [the security
insurer, if any], the indenture trustee and the owner trustee and the
trustees for other trusts and warehousing facilities established and to
be established by us. Unless an insurer default has occurred and is
continuing, [the security insurer, if any] will control the disposition
of any funds held by the collateral agent.
If the notes are accelerated following an event of default under the
indenture, amounts collected will be distributed in the order described above.
The following sets forth an example of the application of the foregoing to a
hypothetical monthly distribution:
<TABLE>
<S> <C>
June 1--June 30............... MONTHLY PERIOD. Scheduled payments and any
prepayments and other collections on the
receivables are received and deposited into
the collection account.
July 6........................ DEPOSIT DATE. On or before this date,
Arcadia Financial and the servicer will make
required payments of purchase amounts to the
collection account.
July 7........................ DETERMINATION DATE. On or before this date
the servicer will deposit all monthly
advances and notify the indenture trustee of,
among other things, the amounts available in
the collection account and the amounts
required to be distributed on the
distribution date.
July 12....................... DRAW DATE. On this date, the indenture
trustee will withdraw funds, if necessary,
from the reserve account (during the funding
period and subject to the limitation
described under "--Accounts") and deposit
these funds in the collection account. In
addition, the indenture trustee will make any
required claims under the note policy if the
funds in the note distribution account (plus
any
</TABLE>
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<TABLE>
<S> <C>
amounts deposited therein by the collateral
agent) are insufficient to pay in full the
noteholders' distributable amount.
July 14....................... RECORD DATE. Distributions on the
distribution date will be made to noteholders
of record at the close of business on this
date.
July 15....................... DISTRIBUTION DATE. The indenture trustee
will reimburse the servicer for prior monthly
advances, pay all accrued and unpaid
trustees' fees and other administrative fees
of the trust, pay the servicing fee and
distribute to noteholders all amounts in the
note distribution account. The indenture
trustee will pay any amounts owing to [the
security insurer, if any] and will transfer
the credit enhancement fee to the collateral
agent.
</TABLE>
For the purposes outlined above, the following terms shall have the
following meanings:
"AVAILABLE FUNDS" means, with respect to any distribution date, the sum of
the collected funds, any purchase amounts, all monthly advances and all earnings
from the investment of funds in the collection account, the pre-funding account
and the reserve account during the monthly period.
"LIQUIDATED RECEIVABLE" means a receivable as to which:
(1) 91 days have elapsed since the servicer repossessed the related financed
vehicle;
(2) the servicer has determined in good faith that all amounts it expects to
recover have been received; or
(3) all or some portion of a scheduled payment has become more than 180 days
past due.
"NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any distribution
date, the sum of the noteholders' principal distributable amount and the
noteholders' interest distributable amount.
"NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to any
distribution date and a class of notes, the excess of the noteholders' Interest
distributable amount for that class for the preceding distribution date, over
the amount in respect of interest that was actually deposited in the note
distribution account with respect to that class on the preceding distribution
date, plus interest on the amount of interest due but not paid to noteholders of
the class on the preceding distribution date, to the extent permitted by law, at
the interest rate borne by that class of notes from the preceding distribution
date to but excluding the current distribution date.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
distribution date, the sum of the noteholders' monthly interest distributable
amount for each class of notes for that distribution date and the noteholders'
interest carryover shortfall for each class of notes for that distribution date.
"NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any distribution date, the sum of the interest amounts payable on each class of
notes. The interest amounts payable with respect to the Class A-1 notes and the
Class A-2 notes shall equal the product of the outstanding principal balance of
the class and the interest rate on the class multiplied by a fraction whose
numerator is the actual number of days in the interest period and whose
denominator is 360. The interest amounts payable with respect to the Class A-3
notes, the Class A-4 notes and the Class A-5 notes shall equal the product of
the outstanding principal balance of such class and the interest rate on the
class multiplied by a fraction whose numerator is the number of days in the
interest period (assuming each month is composed of 30 days) and whose
denominator is 360. The outstanding principal balance for each interest period
is measured as of the preceding distribution date (after giving effect to all
payments of principal to the noteholders on or prior to such distribution date)
or, in the case of the initial interest period, as of the closing date.
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"NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any distribution date, 100% of the principal distribution amount.
"NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of any
distribution date, the excess of the noteholders' principal distributable amount
for the preceding distribution date over the amount in respect of principal that
was actually deposited in the note distribution account on such distribution
date.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
distribution date (other than the final scheduled distribution date for any
class of notes), the sum of the noteholders' monthly principal distributable
amount for such distribution date and the noteholders' principal carryover
shortfall as of the close of the preceding distribution date. The noteholders'
principal distributable amount on the final scheduled distribution date for any
class of notes will equal the sum of
(1) the noteholders' monthly principal distributable amount for such
distribution date;
(2) the noteholders' principal carryover shortfall as of the close of the
preceding distribution date; and
(3) the excess of the outstanding principal balance of such class of notes,
if any, over the amounts described in clauses (1) and (2).
"PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any distribution
date, the amount equal to the sum of the following amounts with respect to the
related monthly period:
(1) that portion of all collections on receivables (other than liquidated
receivables and purchased receivables) allocable to principal, including
all full and partial prepayments received during such monthly period;
(2) the aggregate unpaid principal balance of all receivables (other than
the purchased receivables) that became liquidated receivables during the
monthly period;
(3) the aggregate principal balances of all receivables that became
purchased receivables as of the last day of the prior monthly period,
and, at the option of [the security insurer, if any], the principal
balance of each receivable that was required to be, but was not, so
repurchased; and
(4) the aggregate amount of any reductions in the principal balance of
receivables as a result of a court order in an insolvency proceeding.
"PURCHASED RECEIVABLE" means a receivable:
(1) (A)that Arcadia Financial or the seller has become obligated to
repurchase (or, under certain circumstances, has elected to repurchase)
as a result of an uncured breach by Arcadia Financial or us of a
representation or warranty made by Arcadia Financial or us with respect
to such receivable or (B) that the servicer has become obligated to
repurchase (or, under certain circumstances, has elected to repurchase)
as a result of an uncured breach of the covenants made by it with respect
to such receivable; and
(2) as to which the related purchase amount has been deposited in the
collection account by Arcadia Financial, us or the servicer, as the case
may be, on or before the related deposit date.
STATEMENTS TO NOTEHOLDERS
On or prior to each distribution date, the servicer will prepare and provide
to the indenture trustee a statement to be delivered to the noteholders on the
distribution date. This statement will be based on the information in the
related servicer's certificate setting forth certain information required under
the trust Documents. Each statement to be delivered to noteholders will include
the following
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information as to the notes, with respect to the distribution date or the period
since the previous distribution date, as applicable:
(1) the amount of the distribution allocable to interest on or with respect
to the notes;
(2) the amount of the distribution allocable to principal on or with respect
to the notes;
(3) the amount of the distribution payable pursuant to a claim on the note
policy or out of amounts on deposit with the collateral agent;
(4) the aggregate outstanding principal balance and the note pool factor for
each class of notes after giving effect to all payments reported under
(2) above on the distribution date;
(5) the noteholders' interest carryover shortfall and the noteholders'
principal carryover shortfall, if any, and the change in these amounts
from the preceding statement;
(6) the amount of the servicing fee paid to the servicer with respect to the
related monthly period or periods, as the case may be;
(7) for each distribution date during the funding period, the remaining
pre-funded amount, the amount in the pre-funding account and the amount
remaining in the reserve account (including funds in the Class A-1
holdback subaccount, if any), and all investment earnings on such funds;
and
(8) for the first distribution date that is on or immediately following the
end of the funding period, the amount of any remaining pre-funded amount
that has not been used to fund the purchase of subsequent receivables and
is being passed through as payments of principal on the notes.
Each amount set forth pursuant to subclauses (1) through (6) with respect to
the notes will be expressed as a dollar amount per $1,000 of the initial
principal amount of the notes.
Unless and until definitive notes are issued, these reports will be sent on
behalf of the trust to Cede & Co., as registered holder of the notes and the
nominee of The Depository Trust Company ("DTC"). Note owners may receive copies
of these reports upon written request, together with a certification that they
are note owners and payment of any expenses associated with the distribution of
these reports, from the indenture trustee. See "Reports to Noteholders" in this
prospectus supplement and "Reports to Securityholders" and "Certain Information
Regarding the Securities" in the accompanying prospectus.
Within the required period of time after the end of each calendar year, the
indenture trustee will furnish to each person who at any time during the
calendar year was a noteholder, a statement as to the aggregate amounts of
interest and principal paid to the noteholder, information regarding the amount
of servicing compensation received by the servicer and other information as we
deem necessary to enable the noteholder to prepare its tax returns. See "Certain
Federal Income Tax Consequences" in this prospectus supplement.
THE NOTE POLICY
The following paragraphs summarize the material terms of the financial
guaranty insurance policy issued by [the security insurer, if any]. This summary
is qualified by reference to the provisions of the note policy, a form of which
has been filed as an exhibit to the registration statement of which this
prospectus supplement is a part.
Simultaneously with the issuance of the notes, [the security insurer, if
any] will deliver the note policy to the indenture trustee for the benefit of
each noteholder. Under the note policy, [the security
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<PAGE>
insurer, if any] will unconditionally and irrevocably guarantee to the indenture
trustee for the benefit of each noteholder the full and complete payment of
(1) scheduled payments on the notes; and
(2) the amount of any scheduled payment which subsequently is avoided in
whole or in part as a preference payment under applicable law.
In the event the indenture trustee fails to make a claim under the note policy,
noteholders do not have the right to make a claim directly under the note
policy, but may sue to compel the indenture trustee to do so.
Scheduled payments means payments which are scheduled to be made on the
notes during the term of the note policy in accordance with the original terms
of the notes when issued and without regard to any subsequent amendment or
modification of the notes or the indenture that has not been consented to by
[the security insurer, if any], which payments are
(1) the noteholders' interest distributable amount; and
(2) the noteholders' principal distributable amount; scheduled payments do
not include payments which become due on an accelerated basis as a result
of (a) a default by the Issuer, (b) an election by the issuer to pay
principal on an accelerated basis, (c) the occurrence of an event of
default under the indenture or (d) any other cause, unless [the security
insurer, if any] elects, in its sole discretion, to pay in whole or in
part the principal due upon acceleration, together with any accrued
interest to the date of acceleration.
In the event [the security insurer, if any] does not so elect, the note policy
will continue to guarantee scheduled payments due on the notes in accordance
with their original terms. Scheduled payments shall not include (a) any portion
of a noteholders' interest distributable amount due to noteholders because the
appropriate notice and certificate for payment in proper form was not timely
received by [the security insurer, if any], (b) any portion of a noteholders'
interest distributable amount due to noteholders representing interest on any
noteholders' interest carryover shortfall accrued from and including the date of
payment of the amount a noteholders' interest carryover shortfall pursuant to
the note policy, or (c) any note prepayment amounts or any note prepayment
Premium, unless, in each case, [the security insurer, if any] elects, in its
sole discretion, to pay the amount in whole or in part. Scheduled payments shall
not include any amounts due in respect of the notes attributable to any increase
in interest rates, penalties or other sums payable by the trust by reason of a
default or event of default in respect of the notes, or by reason of a
deterioration of the creditworthiness of the trust, nor shall scheduled payments
include, nor shall coverage be provided under the note policy in respect of, any
taxes, withholding or other charges with respect to any noteholder imposed by
any governmental authority due in connection with the payment of any scheduled
payments to a noteholder.
Payment of claims on the note policy made in respect of scheduled payments
will be made by [the security insurer, if any] following receipt by [the
security insurer, if any] of the appropriate notice for payment on the later to
occur of:
(1) 12:00 noon, New York City time, on the third business day following
receipt of such notice for payment; and
(2) 12:00 noon, New York City time, on the date on which payment was due on
the notes.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the note policy, [the security insurer, if any] shall cause payment to be made
no earlier than the first to occur of
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(1) the fourth business day following receipt by [the security insurer, if
any] from the indenture trustee of:
(a) a certified copy of the order of the court or other governmental body
which exercised jurisdiction to the effect that the noteholder is
required to return principal or interest paid on the notes during the
term of the note policy because payments were avoidable as preference
payments under applicable bankruptcy law;
(b) a certificate of the noteholder that the order has been entered and
is not subject to any stay; and
(c) an assignment duly executed and delivered by the noteholder, in a
form as is reasonably required by [the security insurer, if any] and
provided to the noteholder by [the security insurer, if any],
irrevocably assigning to [the security insurer, if any] all rights
and claims of the noteholder relating to or arising under the notes
against the trust or otherwise with respect to a preference payment;
or
(2) the date of receipt by [the security insurer, if any] from the indenture
trustee of the items referred to in clauses (a), (b) and (c) above if, at
least four business days before the date of receipt, [the security
insurer, if any] shall have received written notice from the indenture
trustee that these items were to be delivered on that date and that date
was specified in that notice.
This payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the order and not to the
indenture trustee or any noteholder directly, unless a noteholder has previously
paid this amount to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy named in the order, in which case the payment shall be disbursed
to the indenture trustee for distribution to the noteholder upon proof of such
payment reasonably satisfactory to [the security insurer, if any]. In connection
with this, [the security insurer, if any] shall have the rights provided in the
indenture.
OTHER PROVISIONS OF THE NOTE POLICY
The terms receipt and received, with respect to the note policy, shall mean
actual delivery to [the security insurer, if any] and to its fiscal agent, if
any, before 12:00 noon, New York City time, on a business day; delivery either
on a day that is not a business day or after 12:00 noon, New York City time,
shall be deemed to be received on the next succeeding business day. If any
notice or certificate given under the note policy by the indenture trustee or
the owner trustee, as the case may be, is not in proper form or is not properly
completed, executed or delivered, it shall be deemed not to have been received,
and [the security insurer, if any] or its fiscal agent shall promptly so advise
the indenture trustee or the owner trustee and the indenture trustee or the
owner trustee may submit an amended notice.
Under the note policy, business day means any day other than a Saturday,
Sunday, legal holiday or other day on which commercial banking institutions in
the city of New York or Minneapolis, Minnesota or any other location of any
successor servicer, successor owner trustee or successor collateral agent are
authorized or obligated by law, executive order or governmental decree to be
closed.
[The security insurer, if any]'s obligations under the note policy in
respect of scheduled payments shall be discharged to the extent funds are
transferred to the indenture trustee as provided in the note policy whether or
not funds are properly applied by the indenture trustee or the owner trustee.
[The security insurer, if any] shall be subrogated to the rights of each
noteholder to receive payments of principal and interest to the extent of any
payment by [the security insurer, if any] under the note policy.
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Claims under the note policy constitute direct, unsecured and unsubordinated
obligations of [the security insurer, if any] ranking not less than on par with
other unsecured and unsubordinated indebtedness of [the security insurer, if
any] for borrowed money. Claims against [the security insurer, if any] under
each other financial guaranty insurance policy ranking on par with claims
against the general assets of [the security insurer, if any]. The terms of the
note policy cannot be modified or altered by any other agreement or instrument,
or by the merger, consolidation or dissolution of the trust. The note policy may
not be canceled or revoked prior to distribution in full of all scheduled
payments. The note policy is not covered by the property/casualty insurance
security fund specified in Article 76 of the New York Insurance Law. The note
policy is governed by the laws of the State of New York.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal income tax
consequences relating to the purchase, ownership, and disposition of the notes.
The discussion is based upon the current provisions of the Internal Revenue
Code, the treasury regulations promulgated under the Internal Revenue Code and
judicial or ruling authority, all of which are subject to change, which under
the Internal Revenue Code may be retroactive. The discussion does not purport to
deal with federal income tax consequences applicable to all categories of
investors, some of which may be subject to special rules. Moreover, there are no
cases or Internal Revenue service rulings on similar transactions involving a
trust issuing debt with terms similar to those of the notes. As a result, the
service may disagree with all or a part of the discussion below. Investors
should consult their own tax advisors to determine the federal, state, local,
and any other tax consequences of the purchase, ownership, and disposition of
the notes.
The trust will be provided with an opinion of Dorsey & Whitney LLP, our
counsel, regarding certain federal income tax matters discussed below. Such an
opinion, however, is not binding on the service or the courts. No ruling on any
of the issues discussed below will be sought from the service.
TAX CHARACTERIZATION OF THE TRUST
Dorsey & Whitney LLP will deliver its opinion that the trust will not be an
association, or publicly traded partnership, taxable as a corporation for
federal income tax purposes, with the result that the trust itself will not be
subject to federal income tax. This opinion will be based on the assumption that
the terms of the trust agreement and related documents will be complied with,
and on counsel's conclusions that the nature of the income of the trust will
exempt it from the rule that certain publicly traded partnerships are taxable as
corporations.
If the trust were taxable as a corporation for federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the receivables, possibly
reduced by its interest expense on the notes. This sort of corporate income tax
could materially reduce cash available to make payments on the notes.
TAX CONSEQUENCES TO NOTEHOLDERS
TREATMENT OF THE NOTES AS INDEBTEDNESS. The owner trustee, on behalf of the
trust, will agree, and the noteholders will agree by their purchase of notes, to
treat the notes as debt for federal income tax purposes. Dorsey & Whitney LLP
will deliver its opinion that the notes will be classified as debt for federal
income tax purposes. The discussion below assumes this characterization of the
notes is correct.
INTEREST INCOME ON THE NOTES. As a general rule, interest paid or accrued
on the notes, as well as market discount and original issue discount, if any,
will be treated as ordinary income to the noteholders. A noteholder using the
accrual method of accounting for federal income tax purposes is required to
include interest paid or accrued on the notes in ordinary income as this
interest accrues,
S-42
<PAGE>
while a noteholder using the cash receipts and disbursements method of
accounting for federal income tax purposes must include this interest in
ordinary income when payments are received, or made available for receipt, by
the noteholder. It is anticipated that the notes will not be issued with
original issue discount within the meaning of section 1273 of the Internal
Revenue Code, and that the trust will not take any original issue discount
deduction with respect to the notes.
MARKET DISCOUNT. The notes, whether or not issued with original issue
discount, will be subject to the market discount rules of section 1276 of the
Internal Revenue Code. In general, these rules provide that if a noteholder
purchases the note at a market discount, such as a discount from its original
issue price plus any accrued original issue discount, that exceeds a de minimis
amount specified in the Internal Revenue Code, and after that recognizes gain
upon a disposition, the lesser of such gain; or the accrued market discount will
be taxed as ordinary interest income.
Generally, the accrued market discount will be the total market discount on
the note multiplied by a fraction, the numerator of which is the number of days
the noteholder held the note and the denominator of which is the number of days
after the date the noteholder acquired the note until and including its maturity
date. The noteholder may elect, however, to determine accrued market discount
under the constant-yield method, which election shall not be revoked without the
consent of the service.
Limitations imposed by the Internal Revenue Code which are intended to match
deductions with the taxation of income may defer deductions for interest on
indebtedness incurred or continued, or short-sale expenses incurred, to purchase
or carry a note with accrued market discount. A noteholder may elect to include
market discount in gross income as it accrues and, if the noteholder makes this
an election, is exempt from this rule. The adjusted basis of a note subject to
this election will be increased to reflect market discount included in gross
income, thereby reducing any gain or increasing any loss on a sale or taxable
disposition. Any such election to include market discount in gross income as it
accrues shall apply to all debt instruments held by the noteholder at the
beginning of the first taxable year to which the election applies or thereafter
acquired and is irrevocable without the consent of the service.
AMORTIZABLE BOND PREMIUM. In general, if a noteholder purchases a note at a
premium, for example, an amount in excess of the amount payable upon the
maturity, the noteholder will be considered to have purchased the note with
amortizable bond premium equal to the excess amount. The noteholder may elect to
deduct the amortizable bond premium as it accrues under a constant-yield method
over the remaining term of the note. The noteholder's tax basis in the note will
be reduced by the amount of the amortizable bond premium deducted. Any of
this kind of election shall apply to all debt instruments, other than
instruments the interest on which is excludible from gross income, held by the
noteholder at the beginning of the first taxable year to which the election
applies or after that acquired and is irrevocable without the consent of the
service. Bond premium on a note held by a noteholder who does not elect to
deduct the premium will decrease the gain or increase the loss otherwise
recognized on the disposition of the note.
SALE OR OTHER DISPOSITION. If a noteholder sells a note, the noteholder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the noteholder's adjusted tax basis in the note.
The adjusted tax basis of a note to a particular noteholder generally will equal
the noteholder's cost for the note, increased by any market discount, original
issue discount and gain previously included by the noteholder in income with
respect to the note and decreased by principal payments previously received by
the noteholder and the amount of bond premium previously amortized with respect
to the note. Any such gain or loss will be capital gain or loss if the note was
held as a capital asset, except for gain representing accrued interest and
accrued market discount not previously included in income. Any such capital gain
would be taxed at long-term rates if the note is held for more than 12 months
and at short-term rates if held for not more than 12 months. Capital losses
generally may be used only to offset capital gains.
S-43
<PAGE>
FOREIGN HOLDERS. Generally, interest paid to a noteholder who is a
nonresident alien individual or a foreign corporation and who does not hold the
note in connection with a United States trade or business will be treated as
portfolio interest and therefore will be exempt from the 30% withholding tax.
This noteholder will be entitled to receive interest payments on the notes free
of United States federal income tax provided that the noteholder periodically
provides the indenture trustee, or other person who would otherwise be required
to withhold tax, with a statement certifying under penalty of perjury that the
noteholder is not a United States person and providing the name and address of
the noteholder and will not be subject to federal income tax on gain from the
disposition of a note unless the noteholder is an individual who is present in
the United States for 183 days or more during the taxable year in which the
disposition takes place and certain other requirements are met.
TAX ADMINISTRATION AND REPORTING. The indenture trustee will furnish to
each noteholder with each distribution a statement setting forth the amount of
the distribution allocable to principal and to interest. Reports will be made
annually to the service and to holders of record that are not excepted from the
reporting requirements regarding the information as may be required with respect
to interest and original issue discount, if any, with respect to the notes.
BACKUP WITHHOLDING. Under certain circumstances, a noteholder may be
subject to backup withholding at a 31% rate. Backup withholding may apply to a
noteholder who is a United States person if the holder, among other
circumstances, fails to furnish his social security number or other taxpayer
identification number to the indenture trustee. Backup withholding may apply,
under some circumstances, to a noteholder who is a foreign person if the
noteholder fails to provide the indenture trustee or the noteholder's securities
broker with the statement necessary to establish the exemption from federal
income and withholding tax on interest on the note. Backup withholding, however,
does not apply to payments on a note made to certain exempt recipients, such as
corporations and tax-exempt organizations, and to certain foreign persons. You
should consult your tax advisors for additional information concerning the
potential application of backup withholding to payments received by you on a
note.
POSSIBLE ALTERNATIVE TREATMENT OF THE NOTES. If, contrary to the opinion of
Dorsey & Whitney LLP, the IRS successfully asserted that the notes did not
represent debt for federal income tax purposes, the notes might be treated as
equity interests in the trust. If so treated, the trust might be taxable as a
corporation with the adverse consequences described above, and the taxable
corporation would not be able to reduce its taxable income by deductions for
interest expense on notes recharacterized as equity. Alternatively, and most
likely in the view of Dorsey & Whitney LLP, the trust might be treated as a
publicly traded partnership that would not be taxable as a corporation because
it would meet certain qualifying income tests. Nonetheless, treatment of the
notes as equity interests in such a partnership could have adverse tax
consequences to some holders. For example, income to foreign holders generally
would be subject to federal tax and federal tax return filing and withholding
requirements, and individual holders might be subject to certain limitations on
their ability to deduct their share of trust expenses. The servicer has
indemnified the trust for any liability asserted against the trust for such
withholding or other tax liability.
The federal tax discussion above is included for general information only
and may not be applicable depending upon your particular tax situation.
Prospective purchasers should consult their tax advisors about the tax
consequences to them of the purchase, ownership and disposition of notes,
including the tax consequences under state, local, foreign, and other tax laws
and the possible effects of changes in federal or other tax laws.
S-44
<PAGE>
ERISA CONSIDERATIONS
Section 406 of ERISA, and/or Section 4975 of the Internal Revenue Code,
prohibits a pension, profit-sharing or other employee benefit plan, as well as
individual retirement accounts and some types of Keogh plans from engaging in
some transactions with persons that are parties in interest under ERISA or
disqualified persons under the Internal Revenue Code with respect to a benefit
plan. A violation of these prohibited transaction rules may result in an excise
tax or other penalties and liabilities under ERISA and the Internal Revenue Code
for these persons. Title I of ERISA also requires that fiduciaries of a benefit
plan subject to ERISA make investments that are prudent, diversified, except if
prudent not to do so, and in accordance with governing plan documents.
Some transactions involving the purchase, holding or transfer of the
securities might be deemed to constitute prohibited transactions under ERISA and
the Internal Revenue Code if assets of the trust were deemed to be assets of a
benefit plan. Under a regulation issued by the United States Department of
Labor, the assets of the trust would be treated as plan assets of a benefit plan
for the purposes of ERISA and the Internal Revenue Code only if the benefit plan
acquires an equity interest in the trust and none of the exceptions contained in
the plan assets regulation is 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. Although there is little guidance on the subject, we believe
that, at the time of their issuance, the notes should be treated as indebtedness
without substantial equity features for purposes of the plan assets regulation.
This determination is based in part upon the traditional debt features of the
notes, including the reasonable expectation of purchasers of notes that the
notes will be repaid when due, as well as the absence of conversion rights,
warrants and other typical equity features. The debt treatment of the notes for
ERISA purposes could change if the trust incurred losses. However, without
regard to whether the notes are treated as an equity interest for these
purposes, the acquisition or holding of notes by or on behalf of a benefit plan
could be considered to give rise to a prohibited transaction if the trust, the
owner trustee or the indenture trustee, the owner of collateral, or any of their
respective affiliates is or becomes a party in interest or a disqualified person
with respect to a benefit plan. In this case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a note.
Included among these exemptions are:
- prohibited transaction class exemption 90-1, regarding investments by
insurance company pooled separate accounts;
- prohibited transaction class exemption 95-60 regarding investments by
insurance company general accounts;
- prohibited transaction class exemption 91-38 regarding investments by bank
collective investment funds;
- prohibited transaction class exemption 84-14, regarding transactions
effected by qualified professional asset managers; and
- prohibited transaction class exemption 96-23 regarding transactions
effected by in-house asset managers.
Employee benefit plans that are governmental plans and some church plans are
not subject to ERISA requirements; however, these plans may be subject to
comparable state law restrictions.
If you are a plan fiduciary considering the purchase of notes, you should
consult your 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.
S-45
<PAGE>
UNDERWRITING
The underwriters named below have agreed, severally and not jointly, and
subject to the terms and conditions in the underwriting agreement to purchase
from the trust the respective principal amounts of the notes shown opposite
their names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF CLASS A-1 OF CLASS A-2 OF CLASS A-3 OF CLASS A-4 OF CLASS A-5
NOTES NOTES NOTES NOTES NOTES
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
$ $ $ $ $
$ $ $ $ $
$ $ $ $ $
----------------- ----------------- ----------------- ----------------- -----------------
Total................ $ $ $ $ $
----------------- ----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>
The underwriters have advised us, as seller, that the underwriters propose
to offer the notes to the public initially at the public offering prices shown
on the cover page of this prospectus supplement and to some dealers at those
prices less a concession not in excess of:
- % per Class A-1 note,
- % per Class A-2 note,
- % per Class A-3 note,
- % per Class A-4 note, and
- % per Class A-5 note,
The underwriters may allow, and those dealers may reallow, a discount not in
excess of:
- % per Class A-1 note,
- % per Class A-2 note,
- % per Class A-3 note,
- % per Class A-4 note, and
- % per Class A-5 note to other dealers.
After the initial public offering, the public offering prices of the notes and
concessions and discounts may be changed by the underwriters.
The underwriting agreement provides that the obligations of the underwriters
are subject to various conditions precedent and that the underwriters will be
obligated to purchase all of the notes, if any are purchased. The underwriting
agreement provides that, in the event of a default by an underwriter, in some
circumstances the purchase commitments of the non-defaulting underwriter may be
increased or the underwriting agreement may be terminated.
Each of the underwriters severally represents and agrees that:
(1) it has not offered or sold and before the date six months after the date
of issue of the notes will not offer or sell any notes to persons in the
United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments, as principal
or agent, for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the public offers
of securities regulations 1995;
(2) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the notes in, from or otherwise involving the United Kingdom;
and
S-46
<PAGE>
(3) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue
of the notes to a person who is of a kind described in Article 11(3) of
the Financial services Act 1986 order 1996 or is a person to whom the
document may otherwise lawfully be issued or passed on.
The notes are a new issue of securities with no established trading market.
The underwriters have advised us that they intend to act as market makers for
the notes. However, the underwriters are not obligated to do so and may
discontinue any market making at any time without notice. We cannot assure you
as to the liquidity of the trading market for the notes.
Together with Arcadia Financial, we have agreed to indemnify the
underwriters against certain liabilities, including civil liabilities under the
Securities Act, or to contribute to payments which the underwriters may be
required to make with respect to those liabilities.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act of 1934. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the notes originally sold by the syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the notes to be higher than it would
otherwise be in the absence of these transactions. These transactions, if
commenced, may be discontinued at any time.
Banc of America Securities LLC or its affiliates, Chase Securities Inc. or
its affiliates, Credit Suisse First Boston Corporation or its affiliates and
J.P. Morgan Securities Inc. or its affiliates provide warehousing facilities or
provide liquidity for warehouse facilities to Arcadia Financial and an affiliate
of Chase Securities Inc. acts as indenture trustee under some of Arcadia
Financial's other securitization transactions. Each underwriter may perform
other customary investment banking services for Arcadia Financial.
LEGAL MATTERS
There are some matters concerning the validity of the notes and about the
federal income tax matters discussed under "Federal Income Tax Consequences" in
this prospectus supplement that will be passed upon for us by Dorsey & Whitney
LLP, Minneapolis, Minnesota. The validity of the notes will be passed upon for
the underwriters by Mayer, Brown & Platt, New York, New York. Some legal matters
relating to the note policy will be passed upon for [the security insurer, if
any] by the office of its general counsel, [the security insurer, if any]. [The
security insurer, if any] is represented by Dewey Ballantine LLP, New York, New
York.
EXPERTS
The consolidated balance sheets of [the security insurer, if any] as of
and and the related consolidated statements of income,
changes in shareholder's equity and cash flows for each of the three years in
the period ended , incorporated by reference in this prospectus
supplement, have been incorporated in reliance on the report of [accountants of
the security insurer, if any], independent accountants, given on the authority
of that firm as experts in accounting and auditing.
S-47
<PAGE>
PROSPECTUS
ARCADIA AUTOMOBILE RECEIVABLES TRUSTS
AUTOMOBILE RECEIVABLES-BACKED CERTIFICATES
AUTOMOBILE RECEIVABLES-BACKED NOTES
------------------------
ARCADIA RECEIVABLES FINANCE CORP.
(SELLER)
------------------------
ARCADIA FINANCIAL LTD.
(SERVICER)
------------------------
We are offering automobile receivables-backed certificates and automobile
receivables-backed notes under this prospectus and a prospectus supplement. We,
Arcadia Receivables Finance Corp., a wholly owned subsidiary of Arcadia
Financial Ltd., will form a new trust to issue each new series of securities,
and each trust will issue the securities of that series. The securities of any
series may be comprised of several different classes.
The assets of each trust will include a pool of retail installment sales
contracts and promissory notes purchased by Arcadia Financial from motor vehicle
dealers. The trust property will be secured by new and used automobiles and
light trucks, monies paid or payable after a cutoff date, an assignment of
Arcadia Financial's security interests in the financed vehicles, and other
property, as more fully described in this prospectus and in the prospectus
supplement. The trust property will also include monies in accounts to be
established with an indenture trustee or an owner trustee. Arcadia Financial
will use these monies to purchase subsequent receivables from time to time
during a pre-funding period specified in the prospectus supplement.
Each class of securities of any series will represent the right to payments
in the amounts and at the times described in the prospectus supplement. The
right of each class of securities to receive payments may be senior or
subordinate to the rights of one or more other classes in that series. Payments
on certificates will be subordinated in priority to payments on notes as
described in this prospectus and in the prospectus supplement.
------------------------
THE SECURITIES WILL REPRESENT OBLIGATIONS OF THE RELATED TRUST AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF ARCADIA RECEIVABLES FINANCE CORP.,
ARCADIA FINANCIAL OR ANY AFFILIATE OF EITHER ENTITY.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED
OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL
OR COMPLETE.
ANY REPRESENTATIONS TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of the securities unless accompanied by a Prospectus
Supplement.
------------------------
The date of this Prospectus is , 1999.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the securities in two separate document that progressively
provide more detail:
(1) this prospectus, which provides general information, some of which many
not apply to a particular series of securities, including your series;
and
(2) the prospectus supplement for the particular terms of your series of
securities.
You should rely only on the information contained in this document or
information to which we have referred you. We have not authorized anyone to
provide you with information that is different. This document may only be used
where it is legal to sell these securities.
THE TRUSTS
For each series of securities, we will establish a trust under the related
trust documents. Before the sale and assignment of the receivables under 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 and the notes of a series and
distributing payments.
Each certificate will represent a fractional undivided interest in, and each
note will represent an obligation of, the related trust. The trust property of
each trust will include, among other things,
(1) a receivables pool,
(2) all monies paid or payable after the cutoff date (as specified in the
prospectus supplement),
(3) any amounts as from time to time may be held in the lockbox account, the
collection account (including all investments in the collection account
and all income from the investment of funds and all proceeds) and certain
other accounts (including all proceeds)
(4) an assignment of the security interests of Arcadia Financial in the
financed vehicles securing the related receivables,
(5) an assignment of the right to receive proceeds from the exercise of
rights against dealers under dealer agreements between Arcadia Financial
and various dealers and the assignment of rights in respect of each
related receivable from the applicable dealer to Arcadia Financial,
(6) an assignment of the right to receive proceeds from claims on some
insurance policies covering the related financed vehicles or obligors,
(7) an assignment of our rights, as the seller, under the related purchase
agreement, and
(8) other rights as specified under related trust documents. See "The
Receivables" and "Description of the Purchase Agreements and the Trust
Documents--Collections" in this prospectus.
The trust property will also include, if so specified in the prospectus
supplement, monies on deposit in a pre-funding account to be established with
the indenture trustee or the owner trustee, which Arcadia Financial will use to
purchase subsequent receivables from us from time to time during the pre-funding
period specified in the 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
noteholders. In addition, to the extent specified in the 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.
Arcadia Financial, as the servicer, will service the receivables held by
each trust and will receive fees for their services. See "Description of the
Purchase Agreements and the Trust Documents--Servicing Compensation" in this
prospectus. Unless otherwise specified in the 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. In order to protect the trust's ownership
interest
<PAGE>
in the receivables, Arcadia Financial and the seller, will each file a UCC-1
financing statement in Minnesota to give notice of the 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 prospectus
supplement. The owner trustee's liability in connection with the issuance and
sale of the securities of a series will be limited solely to the express
obligations of the 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 prospectus supplement, or if no 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 or 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 those circumstances, the general partner
or 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 prospectus supplement and will not become effective
until acceptance of the appointment by the successor trustee.
THE SELLER
We, Arcadia Receivables Financial Corp., are a wholly owned subsidiary of
Arcadia Financial Ltd., incorporated in the State of Delaware on February 3,
1993. We have been organized for the limited purposes of purchasing receivables
from Arcadia Financial and transferring the receivables to trusts. Our principal
executive offices are located at 7825 Washington Avenue South, Suite 410,
Minneapolis, Minnesota 55439-2435, and our telephone number is (612) 942-9880.
We have taken and will take steps in structuring the transactions to make it
unlikely that a voluntary or involuntary application for relief by Arcadia
Financial under any insolvency law will result in consolidation of our assets
and liabilities with those of Arcadia Financial. First, we are a separate,
limited-purpose subsidiary pursuant to a certificate of incorporation containing
limitations (including restrictions on the nature of our business and a
restriction on our ability to commence a voluntary case or proceeding under any
insolvency law without the unanimous affirmative vote of all of our directors
and the holders of at least 66 2/3% of our outstanding common stock). Our
certificate of incorporation requires that we have at least one director who is
considered an independent director. We have no intention of filing a voluntary
petition under insolvency laws unless our financial affairs merit such action.
2
<PAGE>
ARCADIA FINANCIAL LTD.
Arcadia Financial purchases, securitizes and services consumer automobile
loans originated primarily by car dealers affiliated with major foreign and
domestic manufacturers. It purchases consumer automobile loans through 18
regional buying centers located in 15 states. These buying centers are
supplemented by a network of dealer development representatives who develop and
maintain relationships with car dealers operating within each buying center's
immediate market area or in surrounding market areas. Credit approval and loan
processing are generally performed at the regional buying center or at the
company's headquarters in Minneapolis, Minnesota. Arcadia Financial acts as the
servicer of all loans it has originated and securitized in return for a monthly
servicing fee. To perform its servicing responsibilities, Arcadia Financial
operates a national customer service center in Minneapolis, Minnesota, and four
regional collection centers located in Charlotte, North Carolina; Dallas, Texas;
Denver, Colorado; and Minneapolis, Minnesota.
Arcadia Financial's lending programs are designed to serve consumers who
have limited access to traditional automobile financing, and its typical
borrower has prior credit difficulties or a limited credit history. Because it
serves consumers who are unable to meet the credit standards imposed by most
traditional automobile financing sources, it generally charges interest at rates
higher than those charged by traditional sources. Arcadia Financial also expects
to sustain a higher level of credit losses than traditional sources because it
provides financing to relatively high-risk borrowers. However, it considers
substantially all of the loans it purchases to be in the "prime" or "non-prime"
loan categories, not the "sub-prime" category.
Arcadia Financial employs a risk-based pricing strategy for determining
which loans to purchase. Its goal is to maximize the difference between the
borrowers' interest rates and the level of net losses expected on the loans
purchased. This strategy is based on comparing the terms the borrower wishes to
obtain with the results of an evaluation of that borrower's credit
characteristics according to underwriting and credit scoring criteria.
Underwriting procedures focus on a borrower's credit characteristics and
collateral value and do not distinguish between new and used vehicles. In the
past, its products were marketed using two programs called Premier and Classic.
However, in connection with enhancements to pricing strategy during 1998,
Arcadia Financial determined that it was more appropriate to segregate loans
into a multi-tiered risk-based pricing matrix. Arcadia Financial believes that
this additional segmentation provides a higher level of precision in estimating
future default rates and loan profitability. Analysis of loan loss reserves is
based in part on the credit performance expect ed from each risk tier and on the
proportion of loan portfolio in each of the tiers.
Arcadia Financial funds initial purchases of loans primarily with money
borrowed under "warehouse" facilities, which are arrangements that allow Arcadia
Financial to borrow cash secured by the loans purchased with the cash. Arcadia
Financial then "securitizes" the purchased loans, generally on a quarterly or
more frequent basis. To "securitize" loans, Arcadia Financial transfers them
through a special purpose subsidiary to a "securitization trust" that has been
newly created for the transaction. The securitization trust issues one or more
classes of debt securities called "asset-backed" securities and sells them to
investors. When the sale of the securities is completed, Arcadia Financial
recognizes an accounting gain on the sale of the loans.
Each month, collections of principal and interest on the loans in each
securitization trust are used by the trustee of that trust to pay the holders of
the trust's asset-backed securities, to establish and maintain "spread accounts"
as a source of cash to cover possible shortfalls in collections on the loans in
the trust and to pay expenses associated with the securitization and the
servicing of the loans. Any funds that remain are generally distributed to
Arcadia Financial s, subject to agreements with the security insurer for the
securitization trusts.
Arcadia Financial is a Minnesota corporation that was incorporated on March
8, 1990. Its principal executive offices are located at 7825 Washington Avenue
South, Minneapolis, Minnesota 55439-2435, and its telephone number is (612)
942-9880.
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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 these kinds of contracts and notes. Arcadia
Financial generally acquires these contracts or notes under dealer agreements
and dealer assignments which obligate the dealer to repurchase the contract or
note in the event of a breach by the dealer of its representations and
warranties. These representations and warranties typically relate to the
origination of a 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 as a result, Arcadia Financial does not have recourse to dealers for credit
losses on any loans.
UNDERWRITING
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 as well as other personal information. Upon receipt of the completed
loan application, Arcadia Financial's administrative personnel enter pertinent
information into Arcadia Financial's application processing system and a minimum
of one credit bureau report is ordered. The credit bureau also provides Arcadia
Financial with a credit score for each application, which is then utilized to
determine in which risk tier the loan should be placed. In connection with
Arcadia Financial's efforts to enhance its loan pricing process and risk
management capabilities, management has engaged a nationally recognized credit
source consulting company to assist in the development and implementation of a
new proprietary credit scoring system which Arcadia Financial expects to begin
using during 1999. During the development of the new scoring system, management
has elected to outsource credit scoring to alleviate the need for system
maintenance and allow its information systems personnel more time to assist in
the score card development. Prior to 1998, Arcadia Financial utilized its own
internally-developed credit scoring system.
The credit scoring process assesses the quality of credit applicant profiles
resulting in a statistical assessment of performance characteristics. Factors
considered in the scoring process include the applicant's residential and
employment stability, financial history, current financial capacity and
historical record of meeting financial obligations, as well as terms of the loan
being requested and other credit bureau information. Credit scoring is utilized
by Arcadia Financial to differentiate credit applicants by credit risk in terms
of expected default rates, thereby enabling Arcadia Financial to decide if the
risk is acceptable and to determine the appropriate loan pricing and structure
to compensate for the risk. Credit scoring further improves credit decision
efficiencies since applications with high credit scores can generally be
processed rapidly and credit decisions quickly communicated back to the dealer,
while applications with credit scores below standards established by Arcadia
Financial can be rejected without further processing and review by Arcadia
Financial's personnel. This prioritization of applications allows for a more
effective allocation of resources to applications which require more in-depth
investigation.
Arcadia Financial's underwriting and collateral guidelines as well as its
credit scoring parameters provide the basis for lending decisions. However,
qualitative judgement by Arcadia Financial's personnel with respect to an
applicant's credit quality is a significant factor in the final credit decision.
Approval of loans outside Arcadia Financial's credit scoring standard or with
terms inconsistent with the risk-based pricing guidelines are generally subject
to additional management review before approval. Arcadia Financial conducts
internal compliance reviews on a monthly basis and also reviews the quality of
the loans it purchases on a monthly basis with an eye to validating its credit
strategies by comparing actual versus forecasted performance by risk tier.
Upon completion of the underwriting process, Arcadia Financial decides
whether it will approve, conditionally approve or deny the loan application as
submitted. Conditioning approval of the application
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involves amending the dealer's proposed terms of the loan to qualify the
application within acceptable risk parameters established by Arcadia Financial.
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
and increase in the proportion of loans with higher risk characteristics
included in the 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, 1998, Arcadia Financial employed over 844 service
representatives and collection associates who are responsible for various
aspects of the collection and repossession procedures, compared with 800 and 510
at December 31, 1997 and 1996, 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 and continues to use a computerized collection
system to aid its service and collection employees. 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 risk tiers, the autodialer will phone the obligor within five to ten
days after the scheduled 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 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 scheduled 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
typically mailed to the obligor at various intervals during the first 30 days
after a past due date. The first correspondence is generally sent approximately
13 days after a past due date.
If the collection effort during the first 20 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 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 whether 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. When an extension is granted, the maturity date
of the receivable does not change and the interest for the delinquent period is
added to the receivable balance. Under the trust documents, unless otherwise
specified in the 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
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the final scheduled distribution date (as specified in the prospectus
supplement). Subject to certain limited exceptions set forth in the trust
documents, the servicer cannot, without the consent of any security insurer
(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 reinstate or 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. In 1998, Arcadia Financial
discontinued its use of retail disposition channels. As a result, Arcadia
Financial currently disposes of repossessed vehicles solely through wholesale
auctions. Proceeds from the sale of the repossessed vehicle and other recoveries
are usually not sufficient to cover the outstanding balance of the receivables,
and the resulting deficiency is charged-off. Arcadia Financial may pursue
collections of deficiencies when it deems these efforts to be appropriate.
The present policy of Arcadia Financial is to charge off a Loan on the
earlier of the date on which
(1) the loan becomes 90 days delinquent, or
(2) 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 prospectus supplement, the related trust
documents will define a "Liquidated Receivable" as a receivable as to which
(1) the servicer has repossessed the financed vehicle and all applicable
redemption periods have expired,
(2) the servicer has determined in good faith that all amounts it expects to
recover have been received, or
(3) 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 a premium on
its insurance policy, Arcadia Financial may obtain a replacement policy, paying
the premium out of its own funds, and may require the obligor to pay the premium
under an obligation separate from the contract or note evidencing the related
loan.
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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
prospectus supplement, including the criteria used to select the receivables,
the composition of the receivables, the distribution of the receivables by
annual percentage rate ("APR"), and the geographic concentration of the
receivables in the pool.
YIELD AND PREPAYMENT CONSIDERATIONS
Unless otherwise specified in the 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 issued by any security issuer or any other
applicable form of credit enhancement described in the prospectus supplement.
A substantial portion of the receivables will be prepayable, without premium
or penalty, by obligors at any time. Prepayments also may result from
liquidations due to default, receipt of proceeds from insurance policies,
repurchases by Arcadia Financial of receivables, purchases by the servicer of
receivables as a result of uncured breaches of covenants or as a result of us or
the servicer exercising an 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.
If specified in the prospectus supplement, some 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
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it is likely that the inclusion of 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 this effect.
POOL FACTOR
The certificate pool factor for each class of certificates will be an
eight-digit decimal which the servicer will compute indicating the certificate
balance with respect to certificates on each distribution date, after giving
effect to all distributions of principal made on the 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 the notes on 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; after that, 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. 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 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 the note by the then applicable note
pool factor.
For each trust and under the related trust documents the certificateholders
and the noteholders will receive periodic reports from the owner trustee on each
distribution date or payment date specifying the certificate pool factor or the
note pool factor and containing various other items of information. Unless and
until definitive certificates or definitive notes are issued, these 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 The Depository Trust Company ("DTC"). Certificateholders and
noteholders may receive reports, upon written request, together with a
certification that they are certificateholders or noteholders, and payment of
any expenses associated with the distribution of the reports, from the owner
trustee and the indenture trustee at the addresses specified in the prospectus
supplement. See "Certain Information Regarding the Securities--Statements to
Securityholders" in this prospectus.
USE OF PROCEEDS
Unless we specify otherwise in the prospectus supplement, the net proceeds
to be received by us 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 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" in this prospectus.
THE CERTIFICATES
GENERAL
A series of securities may include one or more classes of certificates
issued under trust documents to be entered into between us, as seller, Arcadia
Financial, as servicer, 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 claim 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 or terms
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used in the trust documents are referred to, the actual provisions are
incorporated by reference as part of this summary.
If the certificates of a series are issued in more than one class, the
certificates of all or less than all of those classes may be sold under this
prospectus, and there may be separate prospectus supplements relating to one or
more of the classes sold. Any reference in this prospectus to the prospectus
supplement relating to a series composed of more than one class should be
understood as a reference to each of the prospectus supplements relating to the
classes sold under this prospectus. Any reference in this prospectus to the
certificates of a class should be understood to refer to the certificates of a
class within a series or all of the certificates of a single-class series, as
the context may require. For convenience of description, any reference in this
prospectus to a "class" of certificates includes a reference to any subclasses
of that class.
Unless we specify otherwise in the prospectus supplement, each class of
certificates will initially be represented by a single certificate 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, the certificates evidencing interests in a trust
will be available for purchase in denominations of $1,000 and integral multiples
of $1000, except that one certificate evidencing an interest in the 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 on the certificates of any series will be
described in the prospectus supplement. Distributions of interest on the
certificates will be made on the dates specified in the prospectus supplement
(each, a "distribution date") and, unless otherwise specified in the prospectus
supplement, will be made prior to distributions on principal. A series may
include one or more classes of strip certificates entitled to
(1) principal distributions with disproportionate, nominal or no interest
distributions, or
(2) 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 fixed, variable or adjustable (and which may be zero for certain classes of
strip certificates). The 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
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 prospectus supplement, distributions on the certificates will
be subordinate to payments on the notes, if any, as more fully described in the
prospectus supplement. Distributions on any class of certificates will be made
on a pro rata basis among all of the certificateholders of a 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
principal distributions on each class shall be as set forth in the prospectus
supplement.
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THE NOTES
GENERAL
For each series of securities, one or more classes of notes will be issued
under 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 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 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 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 "Information regarding the Securities--Book-Entry
Registration." Unless otherwise specified in the prospectus supplement, notes
will be available for purchase in denominations of $1,000 and in integral
multiples of $1,000. Notes may be transferred or exchanged without the payment
of any service charge other than any tax or governmental charge payable in
connection with the transfer or exchange. Unless otherwise provided in the
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 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 the series, or any class of certificates, as described in the
prospectus supplement. Unless otherwise provided in the 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
(1) principal payments with disproportionate, nominal or no interest
payment; or
(2) interest payments with disproportionate, nominal or no principal
payments.
Each class of notes may have a different interest rate, which may be fixed,
variable or adjustable (and which may be zero for certain classes of strip
notes). The 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 prospectus supplement.
Unless otherwise specified in the prospectus supplement, payments of
interest to noteholders of all classes within a series will have the same
priority. Under some circumstances, the amount available for payments could be
less than the amount of interest payable on the notes on any of the dates
specified for payments in the 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 the class of noteholders) of the
aggregate amount of interest available to be distributed 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 of principal and interest of
each class will be set forth in the prospectus supplement. Unless otherwise
specified in the prospectus supplement, payments of principal and interest of
any class of notes will be made on a pro rata basis among all of the notes of a
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. We 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 the trust) may, with the consent of any
security insurer (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:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the note and the indenture obligations
by a permitted successor to the trust;
(3) to add additional covenants for the benefit of the related noteholders,
or to surrender any rights or power conferred upon the trust;
(4) to convey, transfer, assign, mortgage or pledge any property to or with
the indenture trustee;
(5) to cure any ambiguity or correct or supplement any provision in the
indenture or in any supplemental indenture;
(6) 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;
(7) 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
(8) 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 the indenture; provided that any action 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 any security insurer (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 any security insurer (prior to an insurer default),
and the holder of each outstanding related note affected, however, no
supplemental indenture may:
(1) 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 payment or any place of payment where the
coin or currency in which any note or any interest thereon is payable;
(2) impair the right to institute suit for the enforcement of certain
provisions of the indenture regarding payment;
(3) 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
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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;
(4) modify or alter the provisions of the indenture regarding the voting of
notes held by the related trust, any other obligor on the notes, us, as
the seller, or an affiliate of any of them;
(5) 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 the sale
would be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding notes;
(6) 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
(7) 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.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. With respect to each
trust, unless otherwise specified in the prospectus supplement, "events of
default" under the indenture will consist of:
(1) a default for five days or more in the payment of any interest on any
note;
(2) 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;
(3) 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
(4) 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 before the final scheduled payment date, if any, for that class
will generally be determined by amounts available to be deposited in the note
distribution account for a payment date. As a result, unless otherwise specified
in the 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 the
class of notes has a final scheduled payment date, and then not until the final
scheduled payment date for the class of notes.
Unless we otherwise specify in the 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. This declaration may, under certain
circumstances, be rescinded by a note majority.
Unless we otherwise specify in the prospectus supplement, if the notes of
any series have been declared due and payable following an event of default, 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 the receivables and continue to apply
collections on the receivables as if there had been no declaration of
acceleration. Unless otherwise specified in the prospectus supplement, the
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indenture trustee, however, will be prohibited from selling the related
receivables following an event of default, unless:
(1) the holders of all the outstanding related notes consent to the sale;
(2) the proceeds of the sale are sufficient to pay in full the principal of
and the accrued interest on the outstanding notes at the date of the
sale; or
(3) 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 those payments would have become due if those 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 prospectus supplement, following a declaration
upon an event of default that the notes are immediately due and payable,
(1) noteholders will be entitled to ratable repayment of principal on the
basis of their respective unpaid principal balances; and
(2) 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 the 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 the
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 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 the 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:
(1) the holder previously has given to the indenture trustee written notice
of a continuing event of default;
(2) the holders of not less than 25% in principal amount of the outstanding
notes of the series have made written request of the indenture trustee to
institute the proceeding in its own name as indenture trustee;
(3) the holder or holders have offered and, if requested, provided to the
indenture trustee reasonable indemnity;
(4) the indenture trustee has for 60 days failed to institute the
proceeding;
(5) no direction inconsistent with the written request has been given to the
indenture trustee during the 60-day period by the holders of a majority
in principal amount of the outstanding notes; and
(6) 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
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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 us 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, we, nor
any of our 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:
(1) the entity formed by or surviving the consolidation or merger is
organized under the laws of the United States or any state;
(2) the 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;
(3) no event of default shall have occurred and be continuing immediately
after the merger or consolidation;
(4) the owner trustee has been advised that the current rating of the
related notes or certificates in effect would not be reduced or withdrawn
by the rating agencies as a result of the merger or consolidation;
(5) the security insurer, if any (prior to an insurer default), has
consented to the merger or consolidation; and
(6) the owner trustee has received an opinion of counsel to the effect that
the 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,
(1) sell, transfer, exchange or otherwise dispose of any of the assets of
the trust except as expressly permitted by the indenture, the purchase
agreement, the trust documents or the related documents for the trust;
(2) 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 Internal Revenue Code or applicable state law, or
assert any claim against any present or former holder of the notes
because of the payment of taxes levied or assessed upon the trust;
(3) dissolve or liquidate in whole or in part;
(4) 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 the indenture except
as may be expressly permitted thereby; or
(5) 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 prospectus supplement entitled "The Trust." No trust will incur,
assume or guarantee any indebtedness other than indebtedness incurred under 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 notes or, with certain
limitations, upon deposit with the indenture trustee of funds sufficient for the
payment in full of all of the notes.
THE INDENTURE TRUSTEE
The indenture trustee for a series of notes will be specified in the
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
any security insurer (prior to an insurer default). We may also remove the
indenture trustee, with the consent of any security insurer (prior to an insurer
default), if the indenture trustee is no longer eligible to continue as
indenture trustee under the indenture or if the indenture trustee becomes
insolvent. In any of those circumstances, we will be obligated to appoint a
successor trustee acceptable to any security insurer (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, specified in
the prospectus supplement and will not become effective until acceptance of the
appointment by a successor trustee.
INFORMATION REGARDING THE SECURITIES
BOOK-ENTRY REGISTRATION
Unless we provide otherwise in the 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 limited circumstances. Holders of the securities may hold
through DTC (in the United States) or Cedel or Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations that are
participants in those systems.
Cedel and Euroclear will hold omnibus positions in the securities on behalf
of the Cedel participants and the Euroclear participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the books of
their respective depositories, which in turn will hold such positions in
customers' securities accounts in Cedel's or Euroclear's 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 of the Exchange Act.
DTC accepts securities for deposit from its participating organizations and
facilitates the clearance and settlement of securities transactions between
participants in the securities through
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electronic book-entry changes in accounts of participants, eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks and trust companies and clearing corporations and may include
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.
Certificate owners and note owners who are not participants but want to
purchase, sell or otherwise transfer ownership of securities may do so only
through participants unless definitive certificates or definitive notes 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 other circumstances as may
be specified in the 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 DTC participants and DTC.
For 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, 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.
For any series of securities, unless otherwise specified in the 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, only if:
(1) 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;
(2) 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
(3) After the occurrence of a servicer termination event, the holders
representing a majority of the certificate balance or a note majority
advises the owner trustee or the indenture trustee 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, the 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 with respect to
transfers, notices and distributions.
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DTC has advised us 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 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 us that DTC will take that action for any
fractional interest of the certificates or the notes only at the direction of
and on behalf of participants beneficially owning a corresponding fractional
interest of the certificates or the notes. DTC may take actions, at the
direction of the participants, for some certificates or notes which conflict
with actions taken for 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 those distributions to the accounts of its
participants, with the participants further crediting those 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
distributions.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
participants or Euroclear participants, on the other, will be effected through
DTC in accordance with DTC rules on behalf of the relevant European
international clearing systems by its depository; 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
depository 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 depositories.
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 credits or any transactions in those
securities settled during such processing will be reported to the relevant Cedel
participant or Euroclear participant on that 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 holds securities for its participating organizations 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 other organizations and may include the underwriters
of this offering. 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.
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Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, which
eliminates the need for physical movement of certificates and any risk from lack
of simultaneous transfers of securities and cash. Transactions may be settled in
Euroclear in any of 32 currencies, including United States dollars. Euroclear
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. Euroclear
is operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium
office, under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation. 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 Belgian cooperative. The
cooperative establishes policy for Euroclear 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 of the offering described in the prospectus
supplement. Indirect access to Euroclear 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 Euroclear and applicable Belgian law. The Terms
and Conditions govern transfers of securities and cash with Euroclear,
withdrawal of securities and cash from Euroclear, and receipts of payments with
respect to securities in Euroclear. All securities in Euroclear 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 before each payment date, the servicer will prepare and provide to the
owner trustee a statement to be delivered to the related certificateholders on
that payment date. On or before each payment date, the servicer will prepare and
provide to the indenture trustee a statement to be delivered to the noteholders
on that payment date. Those statements will be based on the information in a
servicer's certificate setting forth certain information required under the
trust documents. Unless we specify otherwise in the prospectus supplement, each
statement to be delivered to certificateholders will include the following
information as to the certificates for such payment date or the period since the
previous payment date, as applicable, and each statement to be delivered to
noteholders will include the following information as to the notes that payment
date or the period since the previous payment date, as applicable:
(1) the amount of the distribution allocable to interest on or for each
class of securities;
(2) the amount of the distribution allocable to principal on or for each
class of securities;
(3) 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 (2) above on such date;
(4) the amount of the servicing fee paid to the servicer for the related
monthly period or periods, as the case may be;
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(5) the pass-through rate or interest rate for the next period for any class
of certificates or notes with variable or adjustable rates;
(6) the amount, if any, distributed to certificateholders and noteholders
applicable to payments under any financial guaranty insurance policy or
other form of credit enhancement; and
(7) other information as may be specified in the prospectus supplement.
Each amount described above in subclauses (1), (2), (4), (6) and (7) will be
expressed as a dollar amount per $1,000 of the initial certificate balance or
the initial principal balance of the notes.
Unless and until definitive certificates or definitive notes are issued, the
reports with respect to a series of securities will be sent on behalf of the
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 the reports, from the owner trustee or the indenture trustee, as applicable.
See "Reports to Securityholders" and "--Book-Entry Registration" in this
prospectus.
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 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, a statement containing information for the purposes of securityholder's
preparation of federal income tax returns. See "Certain Federal Income Tax
Consequences" in this prospectus.
LISTS OF SECURITYHOLDERS
Unless we provide otherwise in the prospectus supplement, for 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 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 prospectus supplement, the trust documents
will not provide for holding any annual or other meetings of certificateholders.
Unless we provide otherwise in the prospectus supplement, for each series of
notes 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 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 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 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 we specify otherwise in the prospectus supplement, the following
summary describes terms of the purchase agreements pursuant to which we will
purchase receivables from Arcadia Financial, and terms of either (1) the pooling
and servicing agreements or (2) the sale and servicing agreements and the trust
agreements, pursuant to which we will sell and assign receivables to a trust and
the servicer will agree to service those receivables on behalf of the trust, and
pursuant to which the trust will be created and any certificates 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. We
will provide a copy of those agreements (without exhibits) upon request to a
holder of securities. 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 this summary.
SALE AND ASSIGNMENT OF THE RECEIVABLES
On the closing date with respect to a series of securities specified in the
prospectus supplement, Arcadia Financial will enter into one or more purchase
agreements with us pursuant to which Arcadia Financial will sell and assign to
us, without recourse, its entire interest in and to the receivables, including
its security interest in the financed vehicles securing the receivables and its
rights to receive all payments or proceeds on 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. 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 series of securities, the warehousing subsidiary would assign to us
its entire interest in the receivables, together with its rights against Arcadia
Financial under the 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 trust documents for 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. Those 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 those rights to the indenture trustee as collateral
for any notes.
On the closing date, we will sell and assign to the owner trustee, without
recourse, our entire interest in the receivables, including all principal and
interest, and also including our security interests in the financed vehicles.
Each receivable that we transfer to the trust will be identified in a schedule
appearing as an exhibit to the trust documents. Concurrently with the sale and
assignment, the owner trustee will execute and deliver the certificates
representing the certificates to or upon our order, and the owner trustee will
execute and the indenture trustee will authenticate and deliver the notes, if
any, to or upon our order.
Except as we specify otherwise in the prospectus supplement, in each
purchase agreement, Arcadia Financial will warrant to us and the owner trustee,
and in the trust documents, we will warrant to the owner trustee, among other
things, that (except as otherwise specified in the prospectus supplement):
(1) each receivable 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 us and by us to the owner
trustee;
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(2) each receivable 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;
(3) each receivable contains customary and enforceable provisions adequate
to enable realization against the collateral security;
(4) except for any balloon payment receivables, each receivable 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;
(5) 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;
(6) all requirements of applicable federal, state and local laws and
regulations, in respect of all of the receivables and each and every
sale of the financed vehicles have been complied with in all material
respects;
(7) each receivable represents the genuine, legal, valid and binding
payment obligation of the obligor, 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;
(8)
(A) immediately before the conveyance of each receivable to the trust,
that 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,
that 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 which are or may be liens
prior or equal to the lien of the receivable;
(9) 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;
(10) immediately prior to the conveyance of the receivables to us, Arcadia
Financial had good and indefeasible title to and was the sole owner of
the receivables, free of any lien; immediately prior to the conveyance
of the receivables to the trust, we had good and indefeasible title to
and were the sole owner of the receivables, free of any lien; and upon
conveyance of the receivables by us 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;
(11) no dealer has a participation in or other right to receive proceeds of
any receivable, and neither Arcadia Financial nor we has taken any
action to convey any right to any person that would result in such
person having a right to payments received for any receivable;
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(12) neither Arcadia Financial nor we have 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;
(13) 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 the dealer;
(14) no obligor is the United States of America or any state or any agency,
department, subdivision or instrumentality thereof;
(15) no receivable is assumable by another person in a manner that would
release the obligor from the obligor's obligations to Arcadia Financial
with respect to that receivable;
(16) 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 that receivable under the purchase
agreement or the trust documents or pursuant to transfers of the
securities;
(17) 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 performed;
(18) there exists a receivable file pertaining to each receivable, and such
receivable file contains
(A) the fully executed original of the receivable,
(B) the original or a copy of a certificate of insurance or application
form for insurance signed by the obligor,
(C) the original lien certificate or application and
(D) the original or a copy of a credit application signed by the obligor,
and each of these 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;
(19) there is only one original executed copy of each receivable;
(20) the receivables constitute chattel paper within the meaning of the UCC
as in effect in the States of New York and Minnesota;
(21) 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;
(22) 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 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;
(23) 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;
(24) 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;
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(25) 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 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;
(26) no receivable has been satisfied, subordinated or rescinded; the
financed vehicle securing each receivable has not been released from
the lien of the 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;
(27) no receivable is subject to any right of rescission, set-off,
counterclaim or defense;
(28) no receivable was more than 30 days past due as of the cutoff date and
(29) each receivable had a remaining principal balance as of the cutoff date
equal to or greater than $500.00.
Our warranties and Arcadia Financial's warranties will be made as of the
execution and delivery of each purchase agreement and the trust documents and
will survive the sale, transfer and assignment of the receivables and other
trust property to the trust but will speak only as of the date made.
Upon a breach by Arcadia Financial of any representation or warranty made 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, Arcadia Financial will be obligated to repurchase
the receivable from the trust 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 that breach. Any repurchase shall
be made on the deposit date immediately following that second accounting date at
a price equal to the purchase amount as of the second accounting date. The
purchase amount of any receivable means, for any accounting date, the
outstanding principal balance of the receivable as of that accounting date, plus
accrued and unpaid interest thereon. The deposit date for any payment date is
the business day immediately preceding the determination date for that payment
date. An accounting date is the last day (whether or not a business day) of any
calendar month.
The repurchase obligation described above may be enforced by the security
insurer, if any, or by the owner trustee or the indenture trustee on behalf of
the certificateholders and the noteholders, respectively, and will constitute
the sole remedy available to the certificateholders, the noteholders, any
security insurer unless otherwise specified in the prospectus supplement, the
owner trustee or the indenture trustee against Arcadia Financial or us 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 the breach.
Upon the purchase by Arcadia Financial of a receivable due to a breach of a
representation or warranty, the owner trustee will convey that receivable and
the trust property to Arcadia Financial.
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CUSTODY OF RECEIVABLE FILES
Unless otherwise specified in the prospectus supplement, Arcadia Financial
initially will be appointed to act as custodian for the receivable files of each
trust. Prior to any appointment, the trust and Arcadia Financial or other
institution specified in the prospectus supplement shall enter into a custodian
agreement pursuant to which Arcadia Financial or another institution will agree
to hold the receivable files on behalf of the trust. The 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 the 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 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 a security interest in any of the
receivables in the ordinary course of its business and took possession of the
receivables, the purchaser or secured party would acquire an interest in the
receivables superior to the interest of the trust if the purchaser or secured
party acquired or took a security interest in the receivables for new value and
without actual knowledge of the applicable trust's interest. See "Certain Legal
Aspects of the Receivables--Rights in the Receivables" in this prospectus.
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 securityholders. If so specified in the
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
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 the certificateholders will be deposited and
from which all distributions to the certificateholders will be made. For 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 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 the noteholders will be deposited
and from which all distributions to such noteholders will be made. 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 prospectus supplement.
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:
(1) a segregated trust account that is maintained with the corporate trust
department of a depository institution that is acceptable to the security
insurer, if any, unless otherwise specified in the prospectus supplement
or
(2) 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, and
that is acceptable to the security insurer, if any (prior to an insurer
default, unless otherwise specified in the prospectus supplement).
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On the closing date specified in the 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 described below on the second business day).
Unless we specify otherwise in the 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 prospectus
supplement) acting as agent for the owner trustee and for other owners of
automobile receivables serviced by Arcadia Financial. Unless otherwise specified
in the 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
we specify otherwise in the 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 called a 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
those payments to the lockbox account, including sending additional instruction
letters to the obligor.
Unless we specify otherwise in the 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. Alternatively, if we say so in the
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 any 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 receivable that Arcadia
Financial is repurchasing as of the accounting date due to any uncured breaches
of warranties or covenants.
For any series of securities, funds in the designated accounts and any other
accounts identified in the prospectus supplement will be invested, as provided
in the trust documents, at the direction of the servicer in eligible
investments, consisting (unless otherwise specified in the prospectus
supplement) of:
(1) 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;
(2) 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;
(3) demand or time deposits, certificates of deposit of and certain other
obligations of domestic depository institutions with short-term unsecured
debt obligations assigned the highest credit rating by S&P and Moody's;
(4) 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;
(5) corporate debt securities assigned the highest credit rating by S&P and
Moody's;
(6) commercial paper rated in the highest rating category by S&P and
Moody's; and
(7) other securities meeting the criteria specified in the related trust
documents.
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Investments in the above eligible investments will be made in the name of the
owner trustee or the indenture trustee and these investments will not be sold or
disposed of prior to their maturity.
Unless we specify otherwise in the 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 payment date will be applied first to any
outstanding monthly advances made by the servicer with respect to the recovered
receivable, and then to interest and principal on the recovered receivable in
accordance with the terms of the recovered receivable.
As an administrative convenience and subject to conditions we specify 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, and those amounts may be netted prior to
any 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 we specify otherwise in the prospectus supplement, the servicer will
covenant in the 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 that receivable to extend beyond the
last day of the monthly period immediately preceding the final scheduled payment
date that we specify in the 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 agree to amend or
modify any receivable unless it has the consent of the security insurer, if any
(prior to an insurer default) and, subject to any exceptions specified in the
prospectus supplement. Unless we specify otherwise in the 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, but only if that modification
does not cause the APR on that receivable to be below a rate equal to the
highest interest rate or pass-through rate on the securities plus 1.5%. Also,
this type of modification may not cause the term of the modified receivable to
extend beyond the last day of the monthly period immediately preceding the final
scheduled payment date specified in the prospectus supplement. Under current
Treasury Department Regulations, depending on the characterization of the 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 that
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.
Unless we specify otherwise in the prospectus supplement, upon the discovery
by any of the servicer, the security insurer, if any, the owner trustee or the
indenture trustee, or upon receipt of written notice by the servicer of any
breach by the servicer of certain of its covenants that materially and adversely
affects
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the interests of a trust, the security insurer, if any, or the securityholders
in a receivable will be required to purchase the receivable for the purchase
amount on the deposit date. Unless this breach shall have been cured by the
second accounting date following the servicer's discovery or receipt of written
notice of the breach, the servicer. The purchase obligation will constitute the
only 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 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 convert the ownership of any financed vehicle
securing a receivable if the servicer has determined there is a low likelihood
of payment for the vehicle being resumed after any default on a receivable.
Repossession or other action is required no later than the day any scheduled
payment has become 91 days delinquent. The servicer is authorized to follow its
normal collection practices and procedures to realize upon any receivable. The
servicer may repossess and sell the financed vehicle securing any receivable at
judicial sale, or take any other action permitted by applicable law. For further
information, see "Legal Aspects of the Receivables" in this prospectus. The
servicer will be entitled to recover all reasonable expenses incurred by it in
connection with any repossession or sale. The proceeds will be deposited in the
collection account at the time and in the manner described above under
"--Collections" in this prospectus.
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 for 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 we specify otherwise in the prospectus supplement, for 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 the 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 prospectus
supplement, the servicing rate will equal 1.25% per year 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 we specify otherwise in the prospectus supplement, a monthly
period for any payment date is the calendar month immediately preceding the
month in which the payment 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
some expenses incurred in connection with realizing upon the receivables.
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MONTHLY ADVANCES
Unless otherwise provided in the prospectus supplement, if the amount
deposited in the collection account allocable to interest for any receivable in
any monthly period is less than the full amount of interest accrued on the
receivable for the number of calendar days in the monthly period (calculated
according to the method specified in the retail installment sale contract or
promissory note at the APR on the principal balance of the receivable as of the
accounting date preceding the payment date), the servicer will make a monthly
advance equal to the amount of the 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 the 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 the receivable, or in the case of a
liquidated receivable, from liquidation proceeds of the receivable. If the
receivable becomes a liquidated receivable and the 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 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 prospectus
supplement.
CREDIT ENHANCEMENT
The amounts and types of credit enhancement arrangements and the provider of
these arrangements, if applicable, for each class of securities will be set
forth in the prospectus supplement. If and to the extent provided in the
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 other arrangements as may be described in the 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 and to decrease the likelihood that the
certificateholders and the noteholders will experience losses. Unless we specify
otherwise in the 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. 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 that series will be subject to the risk
that credit enhancement will be exhausted by the claims of securityholders of
other series.
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
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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, for the twelve months ended the immediately preceding December 31 or other
fiscal year-end (or any other period as shall have elapsed from the closing date
to the date of the 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 the period with certain standards relating to the servicing of the
receivables set forth in the trust documents. A copy of the statement may be
obtained by any certificate owner or note owner upon compliance with the
requirements described above. See "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, dated as of December 31 of that year (or any other date on which
the servicer's fiscal year ends), stating that:
(1) a review of the activities of the servicer during the preceding 12-month
period (or any other period as shall have elapsed from the closing date
to the date of the first certificate) and of its performance under the
trust documents has been made under the officer's supervision, and
(2) to the officer's knowledge, based on a review, the servicer has
fulfilled all its obligations under the trust documents throughout the
period, or, if there has been a default in the fulfillment of any
obligation, specifying each default known to the officer and the nature
and status of each default.
A copy of the certificate may be obtained by any certificate owner or note owner
upon compliance with the requirements described above. See "Information
Regarding the Securities--Statements to Securityholders" above.
MATTERS REGARDING THE SERVICER
Unless otherwise provided in the prospectus supplement, if a financial
guaranty insurance policy has been issued with respect to a series of
securities, Arcadia Financial's appointment as servicer under the 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 the time, if any, as a servicer termination event shall have occurred.
Unless otherwise provided in the prospectus supplement, if an insurer default
occurs or if no financial guaranty insurance policy is issued with respect to a
series, Arcadia Financial's appointment as servicer under the trust documents
will continue until the time it resigns, is terminated as servicer, or until the
time, if any, as a servicer termination event shall have occurred under the
trust documents. The trust documents will provide that the servicer may not
resign from its obligations and duties, 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 these 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 trust documents.
Unless otherwise provided in the 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
servicer or succeeding to all or substantially all the business of the servicer,
where the servicer is not the
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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 trust documents; provided, however, that:
(1) the entity is an eligible servicer,
(2) 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 a financial guaranty insurance policy
(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 insurance agreement, if any (prior to an insurer
default), shall have occurred and be continuing,
(3) 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 the consolidation, merger or
succession and the agreement of assumption comply with the trust
documents and that all conditions precedent provided for in the trust
documents relating to the transaction have been complied with, and
(4) the servicer shall have delivered an opinion of counsel either:
(A) stating that, in the opinion of the counsel, all financing
statements, continuation statements and amendments 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
these filings, or
(B) stating that, in the opinion of such counsel, no action shall be
necessary to preserve and protect this interest.
INDEMNIFICATION AND LIMITS ON LIABILITY
Unless we specify otherwise in the 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 under them. 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
(before an insurer default), the owner trustee, the indenture trustee, if any,
and the backup servicer, delegate duties under the 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 (before an insurer default); provided, however, that the
delegation of these duties by the servicer shall not relieve the servicer of its
responsibility with respect to them.
SERVICER TERMINATION EVENTS
Unless otherwise provided in the prospectus supplement, servicer termination
events under the trust documents will consist of:
(1) 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,
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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 any such
failure by a responsible officer of the servicer;
(2) any failure by the servicer to deliver to the owner trustee and the
indenture trustee and the security insurer, if any (before an insurer
default), certain reports required by the trust documents by the fourth
business day before the payment date;
(3) 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
financial guaranty insurance policy) or of the security insurer, if
any (before an insurer default), and
(B) continues unremedied for a period of 30 days after the date on which
written notice of such a 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);
(4)(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 and the 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 us under
the bankruptcy laws, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the
servicer or us or of any substantial part of their respective
properties or ordering the winding up or liquidation of the affairs
of the servicer or us;
(5) the commencement by the servicer or us of a voluntary case under any
bankruptcy law, or the consent by the servicer or us to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the servicer or us
or of any substantial part of the servicer's or our property or the
making by the servicer or us of an assignment for the benefit of
creditors or the failure by the servicer or us generally to pay debts
they become due or the taking of corporate action by the servicer or us
in furtherance of any of the foregoing;
(6) any representation, warranty or statement of the servicer made in the
trust documents or any certificate, report or other writing delivered
pursuant to them shall prove to be incorrect in any material respect as
of the time when the same shall have been made, and the incorrectness of
the representation, warranty or statement has a material adverse effect
(determined without regard to the availability of funds under any
financial guaranty insurance 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 the
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured; or
(7) if applicable, unless an insurer default shall have occurred and be
continuing, the occurrence of an event of default under the insurance
agreement.
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Unless we specify otherwise in the prospectus supplement, if a servicer
termination event occurs and is continuing, the security insurer, if any (or, if
no financial guaranty insurance policy was issued with respect to the 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 this notice, and, in the case of a
successor servicer other than the backup servicer, the acceptance by the
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 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 trust documents;
provided, however, that the successor servicer shall have no liability for any
obligation which was required to be performed by the prior servicer before the
date that the successor servicer becomes the servicer or any claim of a third
party (including a securityholder) based on any alleged action or inaction of
the prior servicer. Unless we specify otherwise in the prospectus supplement, if
a financial guaranty insurance policy has been issued with respect to the
series, the security insurer may (before 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 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 financial guaranty insurance 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 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 appointment. Eligible servicer
means a person which, at the time of its appointment as servicer:
(1) is servicing a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans,
(2) is legally qualified and has the capacity to service the receivables,
(3) 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
(4) 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 trust documents or otherwise has available
software which is adequate to perform its duties and responsibilities
under the trust documents.
Any successor servicer shall be entitled to the 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 (before an insurer default) and to each rating
agency.
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Unless we specify otherwise in the prospectus supplement, if a financial
guaranty insurance 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 prospectus supplement, the trust documents
may be amended by us, the servicer, the owner trustee and the indenture trustee,
if any, with the prior written consent of the security insurer, if any (before
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 the action will not, in the opinion of counsel (which may be internal
counsel to us, 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 us,
the servicer and the owner trustee and the indenture trustee, if any, with the
prior written consent of the security insurer, if any (before 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. None of these amendments
may:
(1) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the receivables or
distributions that are required to be made on any certificate or note or
the pass-through rate or interest rate or
(2) reduce the percentage of the certificate balance evidenced by
certificates or of the aggregate principal amount of notes then
outstanding required to consent to an amendment, without the consent of
the holders of all certificates or all notes, as the case may be, then
outstanding.
TERMINATION
Unless otherwise provided in the prospectus supplement, for each trust, the
trust and the respective obligations of us, the servicer, the security insurer,
if any, the owner trustee and the indenture trustee pursuant to the trust
documents will terminate upon the later of:
(1) the payment date or payment date, as the case may be, immediately
following the maturity or other liquidation of the last receivable
(including our or the servicer's purchase of the receivables, as
described below) or
(2) payment to certificateholders and noteholders of all amounts required to
be paid to them pursuant to the trust documents and the indenture and the
payment to the security insurer, if any, of all amounts payable or
reimbursable to it under the 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 (1) or (2) above.
Unless otherwise provided in the prospectus supplement, for each series of
securities, in order to avoid excessive administrative expense, we and the
servicer will each be permitted, at our option (with the consent of the security
insurer, if any (before an insurer default), if the purchase would result in a
claim on the financial guaranty insurance policy or in an amount owing to the
security insurer under the insurance agreement remaining unpaid), to purchase
from the trust, on any payment date immediately following an accounting date as
of which the aggregate principal balance is equal to or less than 10% (or any
other percentage as may be specified in the prospectus supplement) of the cutoff
date principal balance, all remaining receivables in the trust and the other
remaining trust property at a price equal to the aggregate
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of their purchase amounts and the appraised value of any other remaining trust
property. The exercise of this right will effect an early retirement of the
certificates and notes.
Unless we specify otherwise in the prospectus supplement, for 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 the holder's certificate or
note at the office or agency of the owner trustee, for certificates, or of the
indenture trustee, for notes, specified in the notice of termination. Any funds
remaining in the trust, after the owner trustee or the indenture trustee has
taken measures to locate a certificateholder or noteholder, as the case may be,
and these 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 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 trust. In the event of appointment,
all rights, powers, duties and obligations conferred or imposed upon the owner
trustee by the trust documents will be conferred or imposed upon the owner
trustee and the separate trustee or co-trustee jointly, or, in any jurisdiction
where the owner trustee is incompetent or unqualified to perform certain acts,
singly upon the separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction of the owner
trustee.
The owner trustee of any trust may resign at any time, in which event the
general partner, if any, specified in the prospectus supplement or, if no
general partner is specified, the servicer or its successor will be obligated to
appoint a successor trustee acceptable to the security insurer, if any (before
an insurer default). The general partner, if any, specified in the prospectus
supplement or, if no general partner is specified, the servicer may also remove
the owner trustee, with the consent of the security insurer, if any (before 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 these circumstances, the general partner, if any,
specified in the prospectus supplement or, if no general partner is specified,
the servicer will be obligated to appoint a successor trustee, acceptable to the
security insurer, if any (before 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, any financial
guaranty insurance policy or any 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
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 the certificates,
reports or instruments to determine whether they conform substantially to the
requirements of the trust documents.
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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 under them or in relation to them at the request, order or
direction of any of the certificateholders or noteholders, unless the
certificateholders or noteholders have offered the owner trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred. No certificateholder nor any noteholders will have any right under the
trust documents to institute any proceeding with respect to the trust documents,
unless the 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 a proceeding in its
own name as trustee and have offered to the owner trustee reasonable indemnity,
and the owner trustee for 30 days after the receipt of a notice, request and
offer to indemnify has neglected or refused to institute any proceedings.
Certificateholders and noteholders will not have the right to make a claim
directly under any financial guaranty insurance policy issued with respect to a
series, but in the event that the owner trustee or the indenture trustee fails
to make 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 prospectus
supplement, although the security insurer, if any (before 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 those 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 substantially out of the ordinary, and to
seek a written explanation of any 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 (before
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 prospectus supplement, such
administrator will enter into an agreement pursuant to which the administrator
will agree, to the extent provided in the administration agreement, to provide
the notices and to perform other administrative obligations required by the
indenture and the trust agreement.
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LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The receivables are chattel paper as defined in the UCC in effect in the
States of Minnesota and New York. Pursuant to the UCC, an ownership interest in
chattel paper is perfected by possession or by filing a UCC-1 financing
statement in the state where our principal executive office is located. We, as
seller, and Arcadia Financial will file financing statements covering the
receivables in Minnesota. In addition, the documents evidencing the receivables
initially will be held by the custodian specified in the prospectus supplement
for the trust.
The servicer will be obligated to take those actions as are necessary to
continue the perfection of each trust's interest in the receivables and the
proceeds. The servicer will warrant in each purchase agreement for the
receivables held by the trust, and in the trust documents we, as seller, will
assign the right to enforce those warranties to the owner trustee on behalf of
the trust and the owner trustee will pledge that right to the indenture trustee
as collateral for any notes that, as of the closing date:
(1) the receivables have not been sold, pledged or assigned by Arcadia
Financial or us to any other person;
(2) that it has good and indefeasible title and is the sole owner free of
any liens and;
(3) immediately upon the transfer of the receivables to that trust under the
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 warranties in a purchase agreement that
materially and adversely affects the trust's, certificateholders' or
noteholders' interest in any receivable, Arcadia Financial will be obligated to
repurchase that receivable.
Unless we provide otherwise in the prospectus supplement, Arcadia Financial
will hold the receivable files for 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 the receivables have been sold
to the trust. The receivable files will also be physically segregated. Despite
these precautions, if any of the receivables were sold to another party, or a
security interest were granted to another party, that purchased, or took a
security interest in, any of those receivables in the ordinary course of its
business and took possession of those receivables, the purchaser or secured
party would acquire an interest in the receivables superior to the interest of
the trust if the purchaser or secured party acquired, or took a security
interest in, the receivables for new value and without actual knowledge of that
trust's interest.
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 notation on or actual
possession of the certificate of title, depending on the law of the state where
the purchaser resides. The practice of Arcadia Financial is to take whatever
action is required in each state to perfect a security interest for a financed
vehicle in that state. Due to clerical errors, administrative delays or other
mistakes, the correct actions may not have been taken to perfect an interest in
a financed vehicle in which case our security interest in the financed vehicle
would be subordinate to the interests of others such as:
(1) subsequent purchasers of the financed vehicle;
(2) holders of perfected security interests in the financed vehicle; and
(3) the trustee in bankruptcy of the obligor.
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That failure would give rise to a repurchase event and obligate Arcadia
Financial to repurchase the affected receivable if the interests of the
certificateholders, noteholders or trust were materially and adversely affected.
Under the trust document, we will assign the security interests in the
financed vehicles assigned to the seller by Arcadia Financial under the purchase
agreement to the owner trustee on behalf of the trust. Because of the
administrative burden and expense that would be entailed in doing so, none of
Arcadia Financial, us, 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 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 some
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 under the trust documents should be an effective transfer of a
security interest without amendment of any lien noted on the 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 trust against the
rights of subsequent purchasers of a vehicle or subsequent lenders who take a
security interest in the financed vehicle. However, in the absence of an
amendment, the security interest of the trust in the financed vehicles might be
defeated by, among others, the trustee in bankruptcy of Arcadia Financial or the
obligor. However, that failure would give rise to a repurchase event and
obligate Arcadia Financial to repurchase the affected receivable if the
interests of the 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 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 the 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 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 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
and accordingly should have an opportunity to require satisfaction of the
receivable before release of the lien. Under the trust documents, the servicer
will be obligated to take steps, at the servicer's expense, as are necessary to
maintain perfection of security interest in the financed vehicle, and the
failure to take those steps would obligate the servicer to purchase the
receivable if that failure materially and adversely affects the interests of the
certificateholders, noteholders and trust in the 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. We, as the seller in the sale and servicing
agreement and trust agreement, and Arcadia Financial in the purchase agreement,
will represent that, immediately before the sale, assignment and transfer to the
trust, each receivable held by that trust was secured by a valid, subsisting and
enforceable first priority perfected security interest in favor of us as the
seller, or Arcadia Financial, as secured party. However, liens for taxes,
judicial liens or liens
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arising by operation of law could arise at any time during the term of a
receivable. In addition, the laws of some states and federal law permit the
confiscation of motor vehicles by governmental authorities under some
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in the confiscated motor vehicle. No
notice will be given to the owner trustee, indenture trustee, certificateholders
or noteholders in the event that a lien or confiscation arises, and if that 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 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 those 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 the obligor may cure the
default before 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 could 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 trust for any liability imposed upon the 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 before 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 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
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 these 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
38
<PAGE>
surplus to any holder of another lien on the vehicle, if certain conditions have
been met. If no new lienholder exists, we would generally remit the surplus to
the former owner of the vehicle.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
The Soldiers' and Sailors' Civil Relief Act of 1940 imposes some 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 before 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
before the person's entering military service, for a loan default which occurred
before or during such service, without court action. The Soldiers' and Sailors'
Civil 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 Soldiers' and Sailors' Civil 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 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
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 under 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 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 some 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 the 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
is subject to these claims and defenses. Accordingly, each trust, as assignee of
the receivables, will be subject to claims or defenses that the purchaser of the
financed vehicle may assert against the seller of the 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, for 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 those vehicles. Federal
regulations promulgated under the Odometer Act require that all sellers of used
vehicles
39
<PAGE>
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 statement was not provided to the purchaser of a
financed vehicle, the purchaser might 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, non-bank retail installment sellers and their
assignees are required to register with the Office of Consumer Credit
Commissioner of Texas. The Texas Credit Code imposes disclosure and substantive
requirements on the sellers and any subsequent holder of the contracts and
imposes monetary penalties for violations.
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.
We will warrant in the trust document, and Arcadia Financial will warrant in
the purchase agreement, that as of the date of origination each receivable held
by the trust complied with all requirements of applicable law in all material
respects. Accordingly, if the trust's interest in a receivable were materially
and adversely affected by a violation of any law, that 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 trust for any liability
resulting from the failure of a receivable to be in compliance with all
requirements of law.
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.
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 prospectus
supplement. The discussion will not deal with federal income tax consequences
applicable to all categories of investors, some of which are 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 Internal Revenue Code prohibit a
pension, profit sharing or other employee benefit plan from engaging in some
transactions involving plan assets with persons that are parties in interest
under ERISA or disqualified persons under the Internal Revenue Code with respect
to the plan. ERISA also imposes some duties and some 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 the plan. A violation
of these prohibited transaction rules may generate excise tax and other
liabilities under ERISA and the Internal Revenue Code for those persons.
40
<PAGE>
Some transactions involving the trust might be deemed to constitute
prohibited transactions under ERISA and the Internal Revenue Code with respect
to a benefit plan that purchased securities if assets of the trust were deemed
to be assets of the benefit plan. Under a regulation issued by the United States
Department of Labor, the assets of a trust would be treated as plan assets of a
benefit plan for the purposes of ERISA and the Internal Revenue 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 prospectus supplement.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA, and some 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.
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to incorporate by reference some of the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this prospectus, and later information
that we file with the SEC will automatically update and supersede this
information.
You can read and copy these documents at the public reference facility
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. You can also read and copy these reports and other
information at the following regional offices of the SEC:
<TABLE>
<S> <C>
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 100048 Chicago, IL 60661
</TABLE>
Please call the SEC at 1-800-SEC-0330 for more information about the public
reference rooms or visit the SEC's web site at http://www.sec.gov to access
available filings.
All documents of a trust formed by the seller for purposes of an offering
under this prospectus filed with the SEC under to Section 13(a), 13(c), 15 or
15(d) of the Securities Exchange Act of 1934, after the date of this prospectus
and prior to the termination of the offering of the certificates or notes issued
by that trust, will be incorporated by reference into this prospectus.
We will provide you, upon your written or oral request, a copy of any or all
of the documents incorporated by reference in this prospectus, exhibits to those
documents. Please direct your requests for copies to Arcadia Receivables Finance
Corp., 7825 Washington Avenue South, Minneapolis, Minnesota 55439-2435,
telephone number 612/942-9880.
PLAN OF DISTRIBUTION
Under the terms and conditions of an underwriting agreement for each trust,
we will agree to sell to each of the underwriters named under each trust's
prospectus supplement and the underwriters will severally agree to purchase the
principal amount of each class of securities of the series described in the
prospectus supplement.
In each underwriting agreement, the several underwriters will agree, subject
to the terms and conditions described in the underwriting agreement, to purchase
all of the securities which are offered
41
<PAGE>
under this prospectus and the prospectus supplement if any of the securities are
purchased. In the event of a default by any underwriter, each underwriting
agreement will provide that, in certain circumstances, the nondefaulting
underwriters may have to buy larger amounts of securities, or it may provide
that the underwriting agreement may be terminated.
Each prospectus supplement will either:
(1) describe the price at which each class of securities being offered will
be offered to the public and any concessions offered to some dealers
participating in the offering of securities; or
(2) specify that the securities are to be resold by the underwriters in
negotiated transactions at varying prices to be determined at the time of
sale.
After the initial public offering of any securities, the public offering price
and concession amount may be changed.
Each underwriting agreement will provide that Arcadia Financial and we, as
seller, will indemnify the underwriters against some liabilities, including
liabilities under the Securities Act of 1933.
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 will be conditioned on the closing of the sale of all other classes
of securities in that offering.
The place and time of delivery for the securities for which this prospectus
is delivered will be explained in the prospectus supplement.
LEGAL MATTERS
Some matters about 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 prospectus supplement by Mayer, Brown & Platt, New
York, New York.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in some limited circumstances, the securities will be available only
in book-entry form. Investors in the global securities may hold these 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, that is, 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 of global securities will be subject to U.S. withholding
taxes unless the holders meet special 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 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.
I-1
<PAGE>
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 participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel participant or Euroclear
participant at least one business day before settlement. Cedel or Euroclear will
instruct the respective depository 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 depository 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, that is, 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 on 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. In many
cases the investment income on the global securities earned during that one-day
period may substantially reduce or offset the amount of the 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 depository 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 depository, 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 before settlement. In these cases, Cedel or Euroclear
will instruct the respective depository, 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, such as if 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.
I-2
<PAGE>
Finally, day traders that use Cedel or Euroclear and that purchase global
securities from DTC participants for delivery to Cedel participants or Euroclear
participants should note that these trades 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 before 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 before the value date for the sale to the Cedel participant or
Euroclear participant.
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:
(a) 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 a beneficial owner and the U.S.
entity required to withhold tax complies with applicable certification
requirements; and
(b) the 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 the 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
I-3
<PAGE>
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.
The term U.S. person means:
(1) a citizen or resident of the United States;
(2) a corporation or partnership organized in or under the laws of the
United States or any political subdivision;
(3) an estate the income of which is includible in gross income for United
States tax purposes, regardless of its source; or
(4) 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 relevant to foreign holders of the global securities. Investors are
advised to consult their own tax advisers for specific tax advice about holding
and disposing of the global securities.
I-4
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You should rely on the information contained in this document or that we
have referred you to. We have not authorized any person to provide you with
information that is different. The information is this document speaks only as
of its date, and may not be accurate at any time after its date. This document
is not an offer to sell these securities, and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---
<S> <C>
Prospectus Supplement
Reports to Noteholders........................ S-3
Where You Can Find More Information........... S-3
Summary of the Terms of the Notes............. S-5
Risk Factors.................................. S-11
Use of Proceeds............................... S-16
The Trust..................................... S-16
The Trust Property............................ S-17
The Receivables Pool.......................... S-18
Arcadia Financial Ltd......................... S-28
[The security insurer, if any]................ S-28
Description of the Notes...................... S-28
Description of the Purchase Agreements and the
Trust Documents............................. S-32
The Note Policy............................... S-39
Federal Income Tax Consequences............... S-42
ERISA Considerations.......................... S-45
Underwriting.................................. S-46
Legal Matters................................. S-47
Experts....................................... S-47
Prospectus
Important Notice.............................. 1
The Trusts.................................... 1
The Seller.................................... 2
Arcadia Financial Ltd......................... 3
The Receivables............................... 4
Yield and Prepayment Considerations........... 7
Pool Factor................................... 8
Use of Proceeds............................... 8
The Certificates.............................. 8
The Notes..................................... 10
Information Regarding the Securities.......... 15
Description of the Purchase Agreements and the
Trust Documents............................. 20
Legal Aspects of the Receivables.............. 36
Federal Income Tax Consequences............... 40
ERISA Considerations.......................... 40
Where You Can Find More Information........... 41
Plan of Distribution.......................... 41
Legal Matters................................. 42
Annex I: Global Clearance, Settlement and Tax
Documentation Procedures.................... I-1
</TABLE>
------------------------------
Until (90 days after the date of this prospectus supplement) all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus
supplement and the prospectus to which it relates. This is in addition to the
dealers' obligation to deliver a prospectus supplement and the related
prospectus when acting as underwriters and with respect to their unsold
allotment or subscriptions.
Arcadia Automobile Receivables Trust, -
$
Automobile Receivables-Backed Notes
$
% Class A-1
Automobile Receivables-Backed Notes
$
% Class A-2
Automobile Receivables-Backed Notes
$
% Class A-3
Automobile Receivables-Backed Notes
$
% Class A-4
Automobile Receivables-Backed Notes
$
% Class A-5
Automobile Receivables-Backed Notes
Arcadia Receivables Finance Corp.
(Seller)
[ARCADIA FINANCIAL LTD. LOGO]
(Servicer)
Full and timely payment of the Noteholders' Distributable Amount on each
Distribution Date is unconditionally and irrevocably guaranteed pursuant to a
Financial Guaranty Insurance Policy issued by
[logo of security insurer, if any]
----------------
PROSPECTUS
SUPPLEMENT
,
----------------
[UNDERWRITERS]
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<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......... $ 695,000
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....................................................... $ 6,207,500*
-------------------
-------------------
<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 Pricing Agreement (incorporated by reference to Exhibit 1.1
to the Registrant's Current Report on Form 8-K dated March 17, 1999).
1.2 -- Form of Underwriting Agreement (incorporated by reference to Exhibit
1.2 to the Registrant's Current Report on Form 8-K dated March 17,
1999).
3.1 -- Certificate of Incorporation of the Registrant (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 Registrant (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>
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<PAGE>
<TABLE>
<C> <C> <S>
4.1 -- Form of Pooling and Servicing Agreement among the Registrant, 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
March 17, 1999).
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 March 17, 1999).
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 March 17, 1999).
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 Registrant and Arcadia
Financial Ltd. (incorporated by reference to Exhibit 4.4 to the
Registrant's Current Report on Form 8-K, dated March 17, 1999).
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 June 7, 1999).
</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, as amended (the "Securities Act"), each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, where applicable,
each filing of the employee benefit plan's annual report pursuant to section
15(d) of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and
Exchange Commission (the "Commission"), such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 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, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon
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<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, 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;
(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
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
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, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act of 1939 in
accordance with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Trust Indenture Act of 1939.
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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 2nd day of July, 1999.
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 July 2, 1999. 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
------------------------------------------- President
Richard A. Greenawalt and Director (principal
executive 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>
[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 July 2, 1999 (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 July 1, 1999, the Registration
Statement
<PAGE>
Arcadia Receivables Finance Corp.
July 2, 1999
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' or
secured 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
<PAGE>
Arcadia Receivables Finance Corp.
July 2, 1999
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: July 2, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
CFS
