<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1998
REGISTRATION NO. 333-46993
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________________________________
AMERICREDIT CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-2291093
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AMERICREDIT FINANCIAL SERVICES, INC.
DELAWARE 75-2439888
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AMERICREDIT OPERATING CO., INC.
DELAWARE 75-2313963
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
ACF INVESTMENT CORP.
DELAWARE 75-2442194
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AMERICREDIT PREMIUM FINANCE, INC.
DELAWARE 75-2447312
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
AMERICREDIT CORPORATION OF CALIFORNIA
CALIFORNIA 33-0011256
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
<PAGE>
6199
(Primary Standard Industrial
Classification Code Number)
________________________________
200 BAILEY AVENUE
FORT WORTH, TEXAS 76107
(817) 332-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
_______________________
DANIEL E. BERCE
CHIEF FINANCIAL OFFICER
AMERICREDIT CORP.
200 BAILEY AVENUE
FT. WORTH, TEXAS 76107
(817) 332-7000
(Name, address, including zip code, and telephone number,
including area code, of Agent for service)
Copies to:
L. STEVEN LESHIN
JENKENS & GILCHRIST,
A PROFESSIONAL CORPORATION
1445 ROSS AVENUE, SUITE 3200
DALLAS, TEXAS 75202
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
_____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price per Aggregate Amount of
Securities to be Registered be Registered Unit (1) Offering Price (1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Notes due 2004 $50,000,000 100% $50,000,000 $14,750(2)
- -----------------------------------------------------------------------------------------------------------------
AmeriCredit Financial Services, Inc.
AmeriCredit Operating Co., Inc.
ACF Investment Corp.
AmeriCredit Premium Finance, Inc.
Americredit Corporation of
California $50,000,000 100% $50,000,000 (4)
Guarantees (3)
==================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
(2) Paid with initial filing of the Registration Statement.
(3) Each of these subsidiaries of AmeriCredit Corp. has guaranteed the Notes
being registered pursuant hereto.
(4) Pursuant to Rule 457(n), no separate fee is payable with respect to
guarantees of the Notes being registered.
================================================================================
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 THAT 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.
2
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. 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.
SUBJECT TO COMPLETION, DATED MARCH 26, 1998
AMERICREDIT CORP.
OFFER TO EXCHANGE
ALL OUTSTANDING
9 1/4% SENIOR NOTES DUE 2004
($50,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR 9 1/4% SENIOR NOTES DUE 2004
The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on April 24, 1998 (as such date may be extended, the "Expiration
Date").
AmeriCredit Corp., a Texas corporation ("AmeriCredit" or the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal"), to exchange $1,000 in principal
amount of its 9 1/4% Senior Notes due 2004 (the "New Notes") for each $1,000 in
principal amount of its outstanding 9 1/4% Senior Notes due 2004 (the "Old
Notes") (the Old Notes and the New Notes are collectively referred to herein as
the "Notes"). An aggregate principal amount of $50,000,000 of Old Notes is
outstanding. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Notes where such Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the Expiration
Date and ending on the close of business one year after the Expiration Date, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date.
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange Offer is not conditioned upon
any minimum principal amount of the Old Notes being tendered for exchange.
However, the Exchange Offer is subject to the terms and provisions of the C/D
Exchange Registration Rights Agreement, dated as of January 29, 1998 (the
"Registration Rights Agreement"), among the Company, the Company's Guarantors
(as described in the Registration Rights Agreement) and Salomon Brothers Inc and
Credit Suisse First Boston (the "Initial Purchasers"). The Old Notes may be
tendered only in multiples of $1,000. See "The Exchange Offer."
(continued on next page)
__________________________
SEE "RISK FACTORS" BEGINNING ON PAGE 10 HEREIN FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
__________________________
THE DATE OF THIS PROSPECTUS IS MARCH 27, 1998
<PAGE>
The Old Notes were issued in a transaction (the "Prior Offering") pursuant to
which the Company issued an aggregate of $50,000,000 principal amount of the Old
Notes to the Initial Purchasers on January 29, 1998 pursuant to a Purchase
Agreement, dated January 26, 1998 (the "Purchase Agreement"), among the Company,
the Company's Guarantors and the Initial Purchasers. The Initial Purchasers
subsequently resold the Old Notes in reliance on Rule 144A under the Securities
Act. The Company and the Initial Purchasers also entered into the Registration
Rights Agreement, pursuant to which the Company granted certain registration
rights for the benefit of the holders of the Old Notes. The Exchange Offer is
intended to satisfy certain of the Company's obligations under the Registration
Rights Agreement with respect to the Old Notes. See "The Exchange Offer--Purpose
and Effect."
The Old Notes were, and the New Notes will be, issued under the Indenture,
dated as of January 29, 1998 (the "Indenture"), among the Company and Bank One,
N.A., as trustee (in such capacity, the "Trustee"). The terms of the Old Notes
were, and the New Notes will be, substantially similar to those of the Company's
9 1/4% Senior Notes due 2004 (the "Original Notes") which were issued under an
Indenture dated February 4, 1997 (the "Original Indenture"). The form and terms
of the New Notes will be identical in all material respects to the form and
terms of the Old Notes, except that (i) the New Notes have been registered under
the Securities Act and, therefore, will not bear legends restricting the
transfer thereof, (ii) holders of New Notes will not be entitled to liquidated
damages equal to $.05 per week per $1,000 principal amount of Old Notes held by
such holders (up to a maximum amount of $0.50 per week per $1,000 principal
amount) otherwise payable under the terms of the Registration Rights Agreement
in respect of the Old Notes held by such holders during any period in which a
Registration Default (as defined under "The Exchange Offer--Termination of
Certain Rights") is continuing (the "Liquidated Damages") and (iii) holders of
New Notes will not be, and upon the consummation of the Exchange Offer, holders
of Old Notes will no longer be, entitled to certain rights under the
Registration Rights Agreement intended for the holders of unregistered
securities. The Exchange Offer shall be deemed consummated upon the occurrence
of the delivery by the Company to Bank One, N.A., as registrar of the Old Notes
(in such capacity, the "Registrar") under the Indenture of New Notes in the same
aggregate principal amount as the aggregate principal amount of Old Notes that
are validly tendered by holders thereof pursuant to the Exchange Offer. See "The
Exchange Offer --Termination of Certain Rights," "--Procedures for Tendering Old
Notes" and "Description of Notes."
The New Notes will bear interest at a rate equal to 9 1/4% per annum.
Interest on the New Notes is payable semiannually, on February 1 and August 1 of
each year, commencing on August 1, 1998 (each, an "Interest Payment Date") and
shall accrue from January 29, 1998 or from the most recent Interest Payment Date
with respect to the Old Notes to which interest was paid or duly provided for.
The New Notes will mature on February 1, 2004. See "Description of Notes."
The New Notes will not be redeemable at the Company's option prior to February
1, 2001. Thereafter, the New Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after February 1, 2001 at the
redemption prices set forth herein plus accrued and unpaid interest to the date
of redemption. In addition, at the option of the Company, up to $16.7 million
in aggregate principal amount of Notes may be redeemed prior to February 1, 2000
at a redemption price of 109.25% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date with the net cash proceeds of a public offering of common stock of the
Company; provided, however, that at least $33.3 million in aggregate principal
amount of Notes remain outstanding following such redemption; and provided,
further, that such redemption shall occur within 45 days of the date of closing
of such public offering. The Indenture provides that any such optional
redemption of Notes shall be accompanied by a proportionate redemption of
Original Notes.
In the event of a Change of Control (as defined), holders of the New Notes
will have the right to require the Company to purchase their New Notes, in whole
or in part, at a price equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase.
The New Notes will be senior unsecured obligations of the Company, will rank
pari passu in right of payment with the Original Notes and all other existing
and future unsecured senior Indebtedness (as defined) of the Company and will
rank senior in right of payment to future subordinated Indebtedness of the
Company. At December 31, 1997, on an as adjusted basis after giving effect to
the Prior Offering and the application of the net proceeds therefrom, the
aggregate principal amount of senior Indebtedness of the Company and its
subsidiaries (excluding trade payables and other accrued liabilities) would have
been approximately $251.2 million, an aggregate of $57.6 million of which would
have been secured Indebtedness outstanding under the Credit Agreement (as
defined), the Warehouse Facility (as defined) and the Mortgage Subsidiary Credit
Agreement (as defined) and approximately $14.1 million of which would have been
asset-backed notes of the Company's Special Purpose Finance Subsidiaries (as
defined). All financings under the Warehouse Facility are secured by a first
priority lien on the receivables and related assets held by CP Funding Corp., a
special purpose subsidiary which is treated as a Securitization Trust (as
defined) under the Indenture. The Indenture, which is substantially similar to
the Original Indenture, permits the Company and its subsidiaries to incur
additional secured Indebtedness. The payment of principal, premium,
(i)
<PAGE>
if any, and interest and Liquidated Damages, if any, on the New Notes will be
guaranteed on a senior unsecured basis (the "Subsidiary Guarantees") by all of
the Company's current and future Restricted Subsidiaries (the "Guarantors"),
which on the date of the Indenture included all of the Company's existing
subsidiaries, except the Company's Special Purpose Finance Subsidiaries and AFS
Funding Corp and CP Funding Corp. The Subsidiary Guarantees will rank pari passu
in right of payment with the Guarantor's Guarantees of the Original Notes (the
"Original Guarantees") and all other senior unsecured Indebtedness of the
Guarantors. However, the Guarantors' obligations under the Credit Agreement and
the Mortgage Subsidiary Credit Agreement are secured by liens on certain assets
of the Guarantors and, accordingly, such Indebtedness will rank prior to the New
Notes with respect to such assets. The New Notes will effectively be
subordinated to the obligations of the Special Purpose Finance Subsidiaries with
respect to Existing Indebtedness (as defined), the obligations of AFS Funding
Corp. with respect to Credit Enhancement Agreements (as defined) and the
obligations of CP Funding Corp. with respect to the Warehouse Facility.
Based on existing interpretations of the Securities Act by the Staff of the
Securities and Exchange Commission (the "Commission") set forth in "no-action"
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer to any holder of Old Notes in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by such holder
(other than a broker-dealer who purchased Old Notes directly from the Company
for resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such holder
is not an affiliate of the Company, is acquiring the New Notes in the ordinary
course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Holders wishing to accept the Exchange Offer must represent to the
Company, as required by the Registration Rights Agreement, that such conditions
have been met. In addition, if such holder is not a broker-dealer, it must
represent that it is not engaged in, and does not intend to engage in, a
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See "The
Exchange Offer--Resales of the New Notes." This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
or other trading activities.
As of March 24, 1998, Cede & Co. ("Cede"), as nominee for The Depository Trust
Company, New York, New York ("DTC"), was the sole registered holder of the Old
Notes and held the Old Notes for 10 of its participants. The Company believes
that no such participant is an affiliate (as such term is defined in Rule 405 of
the Securities Act) of the Company. There has previously been only a limited
secondary market, and no public market, for the Old Notes. The Old Notes are
eligible for trading in the Private Offering, Resales and Trading through
Automatic Linkages ("PORTAL") market. In addition, the Initial Purchasers have
advised the Company that they currently intend to make a market in the New
Notes; however, the Initial Purchasers are not obligated to do so and any market
making activities may be discontinued by the Initial Purchasers at any time.
Therefore, there can be no assurance that an active market for the New Notes
will develop. If such a trading market develops for the New Notes, future
trading prices will depend on many factors, including, among other things,
prevailing interest rates, the Company's results of operations and the market
for similar securities. Depending on such factors, the New Notes may trade at a
discount from their face value. See "Risk Factors--Absence of Public Market;
Restrictions on Transfer."
The Company will not receive any proceeds from this Exchange Offer. Pursuant
to the Registration Rights Agreement, the Company will bear certain registration
expenses.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The Old Notes were issued originally in global form (the "Global Old Note").
The Global Old Note was deposited with, or on behalf of, DTC, as the initial
depository with respect to the Old Notes (in such capacity, the "Depository").
The Global Old Note is registered in the name of Cede & Co., as nominee of DTC,
and beneficial interests in the Global Old Note are shown on, and transfers
thereof are effected only through, records maintained by the Depository and its
participants. The use of the Global Old Note to represent the Old Notes permits
the Depository's participants, and anyone holding a beneficial interest in an
Old Note registered in the name of such a participant, to transfer interests in
the Old Notes electronically in accordance with the Depository's established
procedures without the need to transfer a physical
(ii)
<PAGE>
certificate. New Notes issued in exchange for the Global Old Note "will also be
issued initially as a note in global form (the "Global New Note," and, together
with the Global Old Note, the "Global Note") and be deposited with, or on behalf
of, the Depository. After the initial issuance of the Global New Note, New Notes
in certificated form will be issued in exchange for a holder's proportionate
interest in the Global New Note only as set forth in the Indenture.
(iii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION......................................... (v)
INFORMATION INCORPORATED BY REFERENCE......................... (v)
NOTE REGARDING FORWARD-LOOKING INFORMATION.................... (vi)
PROSPECTUS SUMMARY............................................ 1
RISK FACTORS.................................................. 10
THE EXCHANGE OFFER............................................ 18
CAPITALIZATION................................................ 25
SELECTED CONSOLIDATED FINANCIAL DATA.......................... 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................... 29
BUSINESS...................................................... 41
MANAGEMENT.................................................... 51
PRINCIPAL SHAREHOLDERS........................................ 57
DESCRIPTION OF NOTES.......................................... 59
CERTAIN FEDERAL INCOME TAX CONSEQUENCES....................... 83
DESCRIPTION OF OTHER DEBT..................................... 85
PLAN OF DISTRIBUTION.......................................... 87
LEGAL MATTERS................................................. 88
EXPERTS....................................................... 88
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................... F-1
</TABLE>
(iv)
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, is required to file periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. Such information is available for inspection at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, NW,
Washington, DC 20549, and at the regional offices of the Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511 and
Seven World Trade Center, Suite 1300, New York, NY 10048. Copies of such
information are obtainable, by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
NW, Washington, DC 20549. Such material is also available for inspection at the
library of the New York Stock Exchange (the "NYSE"), 20 Broad Street, New York,
New York 10005. The Commission maintains a web site (http://www.sec.gov) that
contains periodic reports, proxy statements and other information regarding
registrants that file documents electronically with the Commission. The Common
Stock of the Company is listed and traded on the NYSE under the symbol "ACF."
The Company has agreed that, whether or not it is required to do so by the
rules and regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of Notes and submit to the
Commission (unless the Commission will not accept such materials) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's independent
accountants, and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available to any prospective purchaser of Notes in connection
with any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act.
INFORMATION INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS
THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO
AMERICREDIT CORP., 200 BAILEY AVENUE, FORT WORTH, TEXAS 76107, ATTENTION: DANIEL
E. BERCE, (817) 332-7000.
The following AmeriCredit documents are incorporated by reference herein:
(1) AmeriCredit's Annual Report on Form 10-K for the year ended June
30, 1997, filed with the Commission;
(2) AmeriCredit's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, filed with the Commission;
(3) AmeriCredit's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997, filed with the Commission;
(4) AmeriCredit's Reports on Form 8-K, dated August 28, 1997, January
22, 1998, and January 29, 1998, all as filed with the Commission; and
(5) AmeriCredit's Form 8-A, as filed with the Commission on September
5, 1997.
All documents filed with the Commission by AmeriCredit pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
effectiveness of the Registration Statement of which this Prospectus forms a
part are incorporated herein by reference and such documents will be deemed to
be a part hereof from the date of filing of such documents. Any statement
contained in this Prospectus or in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement
(v)
<PAGE>
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
NOTE REGARDING FORWARD-LOOKING INFORMATION
INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH
AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE
NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE
STATEMENTS IN "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS CONSTITUTE
CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND
UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS.
(vi)
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
data, including the Consolidated Financial Statements and related notes thereto,
appearing elsewhere in this Prospectus. This Prospectus contains certain
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements as a result of, among other factors,
the factors set forth under "Risk Factors" below. In addition to other
information in this Prospectus, the factors set forth under "Risk Factors" below
should be considered carefully in evaluating an investment in the Notes offered
hereby. Unless the context indicates otherwise, all references herein to
"AmeriCredit" or the "Company" refer to AmeriCredit Corp. and its subsidiaries.
The Company's fiscal year ends on June 30. References to a particular fiscal
year are to the twelve-month period ending on June 30 of that year.
THE COMPANY
The Company is a consumer finance company specializing in purchasing,
securitizing and servicing retail automobile installment sales contracts
originated by franchised and select independent dealers in connection with the
sale of late model used and to a lesser extent new automobiles. The Company
targets borrowers with limited credit histories, modest incomes or those who
have experienced prior credit difficulties ("Sub-Prime Borrowers"). With the use
of proprietary credit scoring models, the Company underwrites contracts on a
decentralized basis through a nationwide branch office network. These credit
scoring models, combined with experienced underwriting personnel, enable the
Company to implement a risk-based pricing approach to structuring and
underwriting individual contracts. The Company's centralized risk management
department monitors these underwriting strategies and portfolio performance to
balance credit quality and profitability objectives. The loan portfolio is
serviced by the Company at centralized facilities located in Fort Worth, Texas,
Tempe, Arizona and Charlotte, North Carolina using automated loan servicing and
collection systems.
The Company had 108 branch offices as of December 31, 1997. As a result of the
Company's expansion strategy, the Company has been able to increase its
aggregate volume of automobile installment sales contracts purchased to $906.8
million in fiscal 1997 from $18.3 million in fiscal 1993. The Company has
continued this growth during the first six months of fiscal 1998, with purchases
aggregating $696.3 million, compared to $359.4 million during the same period in
fiscal 1997. The Company purchases contracts originated by dealers at prices
ranging from par to a discount of up to 10%. The average discount as a
percentage of the contracts purchased by the Company was approximately 3.4% in
fiscal 1997. For fiscal 1997, the average principal amount financed and weighted
average APR of contracts purchased by the Company were $11,874 and 19.7%,
respectively.
The Company generates earnings and cash flow primarily through the
purchase, retention, securitization and servicing of automobile receivables. In
each securitization, the Company sells automobile receivables to a trust or
special purpose finance subsidiary that, in turn, sells asset-backed securities
to investors. The Company recognizes a gain on the sale of the receivables to
the trust and receives monthly excess cash flow distributions from the trust
resulting from the difference between the interest received from the obligors on
the receivables and the interest on the asset-backed securities paid to
investors, net of losses and expenses. The Company typically begins to receive
excess cash flow distributions approximately seven to nine months after the
receivables are securitized, although these time periods may be shorter or
longer depending upon the structure of the securitization. The Company received
excess cash flow of $24.0 million from securitization trusts and special purpose
finance subsidiaries in fiscal 1997. Due to the time delay associated with
distributions of excess cash flow from securitizations, the Company expects to
receive increased cash flow distributions in fiscal 1998 from trusts created as
a result of securitization transactions occurring in fiscal 1997. Prior to such
time as the Company begins to receive excess cash flow, all excess cash flow is
utilized to fund credit enhancement requirements to secure financial guaranty
insurance policies issued by a monoline insurance company to protect investors
in the asset-backed securities from losses. Once predetermined credit
enhancement requirements are reached and maintained, excess cash flow is
distributed to the Company. In addition to excess cash flow, the Company earns
servicing fees of between 2.25% and 2.50% per annum of the outstanding principal
balance of receivables securitized. Over the four quarters ended December 31,
1997 the Company completed four securitization transactions totaling $1.2
billion.
According to CNW Marketing/Research, an independent automobile finance market
research firm, the automobile finance industry is the second largest consumer
finance industry in the United States with over $427 billion of loan and
1
<PAGE>
lease originations during 1996. The industry is generally segmented according to
the type of car sold (new vs. used) and the credit characteristics of the
borrower (prime vs. sub-prime). The sub-prime segment of the market accounted
for approximately $75 billion of these originations.
The Company's principal objective is to continue to build upon its position as
a leading indirect lender to Sub-Prime Borrowers. To achieve this objective, the
Company employs the following key strategies:
Continued Expansion of the Automobile Finance Branch Network. The Company
opened five branch offices in fiscal 1993, 13 in fiscal 1994, 13 in fiscal 1995,
20 in fiscal 1996, 34 in fiscal 1997 and 23 in fiscal 1998 through December 31,
1997, bringing its branch office network to 108 offices located in 32 states as
of December 31, 1997. Branch office personnel are responsible for the
development and maintenance of dealer relationships. As part of its goal of
increasing the number of dealers from whom it is purchasing automobile finance
contracts, the Company plans to open approximately 17 additional branch offices
during the remainder of fiscal 1998.
Use of Proprietary Credit Scoring Models for Risk-based Pricing. The Company
has developed and implemented a credit scoring system across its branch office
network to support the branch level credit approval process. The Company's
proprietary credit scoring models are designed to enable AmeriCredit to tailor
each loan's pricing and structure to a statistical assessment of the underlying
credit risk.
Sophisticated Risk Management Techniques. The Company's centralized risk
management department is responsible for monitoring the origination process,
supporting management's supervision of each branch office, tracking collateral
values of the Company's receivables portfolio and monitoring portfolio returns.
This risk management department uses proprietary databases to identify
concentrations of risk, to price for the risk associated with selected market
segments and to endeavor to enhance the credit quality and profitability of the
contracts purchased.
High Investment in Technology to Support Operating Efficiency and Growth.
The use of leading-edge technology in both loan origination and servicing has
enabled AmeriCredit to become a low-cost provider in the sub-prime automobile
finance market. AmeriCredit's annualized ratio of operating expenses to average
managed receivables was 10.0% for fiscal 1995, 7.2% for fiscal 1996, 6.6% for
fiscal 1997 and 6.0% for the six months ended December 31, 1997.
Leveraging Sub-Prime Lending Expertise. In November 1996, AmeriCredit acquired
a small residential mortgage lender which was later renamed Americredit
Corporation of California and which conducts business under the name AmeriCredit
Mortgage Services ("AMS"). AMS specializes in originating and purchasing home
equity mortgage loans made to Sub-Prime Borrowers from a network of mortgage
brokers. AMS has originated $105.4 million of mortgage loans from its date of
acquisition through December 31, 1997. The Company believes that over time it
can leverage its national presence, risk management techniques and state-of-the-
art technology to broaden its indirect lending to Sub-Prime Borrowers. AMS's
corporate office is located in Orange, California. AMS has historically sold its
home equity loans and the related servicing rights to third party investors.
Funding and Liquidity Through Securitizations. The Company sells automobile
receivables in securitization transactions in order to obtain a cost-effective
source of funds for the purchase of additional automobile finance contracts, to
reduce the risk of interest rate fluctuations and to utilize capital
efficiently. Since the Company's first securitization transaction in December
1994, the Company has securitized approximately $2.0 billion of automobile
receivables in private and public offerings of asset-backed securities.
AmeriCredit was incorporated in Texas in 1988 and succeeded to the business,
assets and liabilities of a predecessor corporation formed under the laws of
Texas in 1986. The Company's common stock, $.01 par value per share (the "Common
Stock"), is traded on the NYSE under the symbol "ACF." The Company's principal
executive offices are located at 200 Bailey Avenue, Fort Worth, Texas 76107 and
its telephone number is 817-332-7000.
2
<PAGE>
THE PRIOR OFFERING
The outstanding $50.0 million principal amount of Old Notes were sold by
the Company to the Initial Purchasers on January 29, 1998, pursuant to the
Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes in
reliance on Rule 144A under the Securities Act. The Company and the Initial
Purchasers also entered into the Registration Rights Agreement pursuant to which
the Company granted certain registration rights for the benefit of the holders
of the Old Notes. The Exchange Offer is intended to satisfy certain of the
Company's obligations under the Registration Rights Agreement with respect to
the Old Notes. See "The Exchange Offer--Purpose and Effect."
THE EXCHANGE OFFER
The Exchange Offer............. The Company is offering upon the terms
and subject to the conditions set forth
herein and in the Letter of Transmittal
to exchange the New Notes for the
outstanding Old Notes. As of the date of
this Prospectus, $50.0 million in
aggregate principal amount of the Old
Notes is outstanding, the maximum amount
authorized by the Indenture for all
Notes. As of March 24, 1998, there was
one registered holder of the Old Notes,
Cede & Co., which held the Old Notes for
10 of its participants. See "The
Exchange Offer--Terms of the Exchange
Offer."
Expiration Date................ 5:00 p.m., New York City time, on April
24, 1998 as the same may be extended.
See "The Exchange Offer--Expiration
Date; Extensions; Amendments."
Conditions of the
Exchange Offer............... The Exchange Offer is not conditioned
upon any minimum principal amount of Old
Notes being tendered for exchange. The
only condition to the Exchange Offer is
the declaration by the Commission of the
effectiveness of the Registration
Statement of which this Prospectus
constitutes a part (the "Exchange Offer
Registration Statement"). See "The
Exchange Offer--Conditions of the
Exchange Offer."
Termination of Certain
Rights....................... Pursuant to the Registration Rights
Agreement and the Old Notes, holders of
Old Notes (i) have rights to receive
Liquidated Damages and (ii) have certain
rights intended for the holders of
unregistered securities. "Liquidated
Damages" means damages of $0.05 per week
per $1,000 principal amount of Old Notes
(up to a maximum of $0.50 per week per
$1,000 principal amount) during the
period in which a Registration Default
is continuing pursuant to the terms of
the Registration Rights Agreement.
Holders of New Notes will not be and,
upon consummation of the Exchange Offer,
holders of Old Notes will no longer be,
entitled to (i) the right to receive the
Liquidated Damages or (ii) certain other
rights under the Registration Rights
Agreement intended for holders of
unregistered securities. See "The
Exchange Offer--Termination of Certain
Rights" and "Procedures for Tendering
Old Notes."
Accrued Interest............... The New Notes will bear interest at a
rate equal to 9 1/4% per annum. Interest
shall accrue from January 29, 1998 or
from the most recent Interest Payment
Date with respect to the Old Notes to
which interest was paid or duly provided
for. See "Description of Notes--
Principal, Maturity and Interest."
3
<PAGE>
Procedures for Tendering
Old Notes.................... Each holder desiring to accept the
Exchange Offer must complete and sign
the Letter of Transmittal, have the
signature thereon guaranteed if required
by the Letter of Transmittal, and mail
or deliver the Letter of Transmittal,
together with the Old Notes or a Notice
of Guaranteed Delivery (as defined in
the Letter of Transmittal) and any other
required documents (such as evidence of
authority to act, if the Letter of
Transmittal is signed by someone acting
in a fiduciary or representative
capacity), to the Exchange Agent (as
defined under "The Exchange Offer--The
Exchange Agent; Assistance") at the
address set forth on the back cover page
of this Prospectus prior to 5:00 p.m.,
New York City time, on the Expiration
Date. Any Beneficial Owner (as defined
under "The Exchange Offer--Procedures
for Tendering Old Notes") of the Old
Notes whose Old Notes are registered in
the name of a nominee, such as a broker,
dealer, commercial bank or trust company
and who wishes to tender Old Notes in
the Exchange Offer, should instruct such
entity or person to promptly tender on
such Beneficial Owner's behalf. See "The
Exchange Offer--Procedures for Tendering
Old Notes."
Guaranteed Delivery
Procedures................... Holders of Old Notes who wish to tender
their Old Notes and (i) whose Old Notes
are not immediately available or (ii)
who cannot deliver their Old Notes or
any other documents required by the
Letter of Transmittal to the Exchange
Agent prior to the Expiration Date, may
tender their Old Notes according to the
guaranteed delivery procedures set forth
in the Letter of Transmittal. See "The
Exchange Offer--Guaranteed Delivery
Procedures."
Acceptance of Old Notes and
Delivery of New Notes........ Upon effectiveness of the Exchange Offer
Registration Statement of which this
Prospectus constitutes a part and
consummation of the Exchange Offer, the
Company will accept any and all Old
Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date.
The New Notes issued pursuant to the
Exchange Offer will be delivered
promptly after acceptance of the Old
Notes. See "The Exchange Offer--
Acceptance of Old Notes for Exchange;
Delivery of New Notes."
Withdrawal Rights.............. Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York
City time, on the Expiration Date. See
"The Exchange Offer--Withdrawal Rights."
Certain Federal Income
Tax Considerations........... There will not be any U.S. Federal
income tax consequences to holders
exchanging Old Notes for New Notes
pursuant to the Exchange Offer. See
"Certain Federal Income Tax
Consequences."
The Exchange Agent............. Bank One, N.A. is the exchange Agent (in
such capacity, the "Exchange Agent").
The address and telephone number of the
Exchange Agent are set forth in "The
Exchange Offer--The Exchange Agent;
Assistance."
4
<PAGE>
Fees and Expenses.............. All expenses incident to the Company's
consummation of the Exchange Offer and
compliance with the Registration Rights
Agreement will be borne by the Company.
The Company will also pay certain
transfer taxes applicable to the
Exchange Offer. See "The Exchange Offer
-- Fees and Expenses."
Resales of the New
Notes........................ Based on existing interpretations by the
Staff of the Commission set forth in
"no-action" letters issued to third
parties, the Company believes that New
Notes issued pursuant to the Exchange
Offer to a holder in exchange for Old
Notes may be offered for resale, resold
and otherwise transferred by a holder
(other than (i) a broker-dealer who
purchased the Old Notes directly from
the Company for resale pursuant to Rule
144A under the Securities Act or any
other available exemption under the
Securities Act or (ii) a person that is
an affiliate of the Company within the
meaning of Rule 405 under the Securities
Act) without compliance with the
registration and prospectus delivery
provisions of the Securities Act,
provided that such holder is acquiring
the New Notes in the ordinary course of
business and is not participating, and
has no arrangement or understanding with
any person to participate, in a
distribution of the New Notes. Each
broker-dealer that receives New Notes
for its own account in exchange for Old
Notes, where such Old Notes were
acquired by such broker as a result of
market-making or other trading
activities, must acknowledge that it
will deliver a prospectus in connection
with any resale of such New Notes. See
"The Exchange Offer--Resales of the New
Notes" and "Plan of Distribution."
Effect of Not Tendering
Old Notes for Exchange....... Old Notes that are not tendered or that
are not properly tendered will,
following the expiration of the Exchange
Offer, continue to be subject to the
existing restrictions upon transfer
thereof. The Company will have no
further obligations to provide for the
registration under the Securities Act of
such Old Notes and such Old Notes will,
following the expiration of the Exchange
Offer, bear interest at the same rate as
the New Notes.
DESCRIPTION OF NEW NOTES
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the New Notes
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, (ii) holders of the New Notes will not
be entitled to Liquidated Damages and (iii) holders of the New Notes will not
be, and upon consummation of the Exchange Offer, holders of the Old Notes will
no longer be, entitled to certain rights under the Registration Rights Agreement
intended for the holders of unregistered securities, except in limited
circumstances. See "The Exchange Offer--Termination of Certain Rights." The
Exchange Offer shall be deemed consummated upon the occurrence of the delivery
by the Company to the Registrar under the Indenture of the New Notes in the same
aggregate principal amount as the aggregate principal amount of Old Notes that
are tendered by holders thereof pursuant to the Exchange Offer. See "The
Exchange Offer--Termination of Certain Rights," "-- Procedures for Tendering Old
Notes" and "Description of Notes."
Securities Offered............. $50 million in aggregate principal
amount of 9 1/4% Senior Notes due
2004.
Maturity....................... February 1, 2004.
Interest....................... The Notes will bear interest at the
rate of 9 1/4% per annum, payable
semiannually on February 1 and August
1, commencing August 1, 1998.
5
<PAGE>
Ranking........................ The Notes will be general unsecured
obligations of the Company. The Notes
will rank pari passu in right of payment
with the Original Notes (as defined) and
all other existing and future senior
unsecured Indebtedness of the Company
and senior in right of payment to all
future subordinated Indebtedness of the
Company. However, the Company and
certain of the Company's subsidiaries
are parties to the Credit Agreement and
the Mortgage Subsidiary Credit Agreement
and all borrowings under the these
agreements are secured by first priority
liens on certain assets of the Company
and certain of the Company's
subsidiaries, including the Guarantors.
In addition, in October 1997 the Company
established a Warehouse Facility. All
financings under the Warehouse Facility
are secured by a first priority lien on
the receivables and related assets held
by CP Funding Corp., a special purpose
subsidiary which is treated as a
Securitization Trust under the
Indenture. At December 31, 1997, on an
as adjusted basis after giving effect to
the Prior Offering and the application
of the net proceeds therefrom, the
aggregate principal amount of senior
Indebtedness of the Company and its
subsidiaries (excluding trade payables
and other accrued liabilities) would
have been approximately $251.2 million,
an aggregate of $57.6 million of which
would have been secured Indebtedness
outstanding under the Credit Agreement,
the Warehouse Facility and the Mortgage
Subsidiary Credit Agreement and
approximately $14.1 million of which
would have been asset-backed notes
outstanding of the Company's Special
Purpose Finance Subsidiaries. The Notes
will be effectively subordinated to the
obligations of the Special Purpose
Finance Subsidiaries with respect to
Existing Indebtedness (as defined) and
to the obligations of AFS Funding Corp.
with respect to Credit Enhancement
Agreements (as defined) and to the
obligations of CP Funding Corp. with
respect to the Warehouse Facility. See
"Risk Factors--Holding Company
Structure; Effective Subordination," "--
Leverage" and "Description of Other
Debt."
Subsidiary Guarantees.......... Pursuant to the Subsidiary Guarantees,
the Notes will be guaranteed by each
existing and future Restricted
Subsidiary (as defined) of the Company,
except the Company's Special Purpose
Finance Subsidiaries, AFS Funding Corp.
and CP Funding Corp. The Subsidiary
Guarantees will rank pari passu in right
of payment with the Guarantor's
Guarantees of the Original Notes
("Original Guarantees") and all other
existing and future senior unsecured
Indebtedness of the Guarantors. The
Company's and the Guarantors'
obligations under the Credit Agreement
and Mortgage Subsidiary Credit Agreement
are secured by liens on certain of their
assets and, accordingly, such
Indebtedness will effectively rank prior
to the Notes with respect to such
assets. See "Risk Factors--Holding
Company Structure; Effective
Subordination."
6
<PAGE>
Optional Redemption............ The Notes may be redeemed at the
option of the Company, in whole or in
part, on or after February 1, 2001 at
a premium declining to par in 2003,
plus accrued and unpaid interest and
Liquidated Damages, if any, through
the redemption date. Notwithstanding
the foregoing, at any time prior to
February 1, 2000, the Company may on
any one or more occasions redeem up
to an aggregate of $16.7 million in
principal amount of Notes at a
redemption price of 109.25% of the
principal amount thereof, plus
accrued and unpaid interest and
Liquidated Damages thereon, if any,
to the redemption date, with the net
cash proceeds of a public offering of
common stock of the Company; provided
that at least $33.3 million in
aggregate principal amount of Notes
remain outstanding immediately after
the occurrence of such redemption; and
provided, further, that such redemption
shall occur within 45 days of the date
of the closing of such public offering.
The Indenture provides that any such
optional redemption of Notes shall be
accompanied by a proportionate
redemption of Original Notes. See
"Description of the Notes--Optional
Redemption."
Change of Control.............. In the event of a Change of Control, the
holders of the Notes will have the right
to require the Company to purchase their
Notes at a price equal to 101% of the
aggregate principal amount thereof, plus
accrued and unpaid interest and
Liquidated Damages, if any, to the date
of purchase.
Covenants...................... The indenture, pursuant to which the
Notes will be issued (the "Indenture"),
will be substantially similar to the
Original Indenture and will contain
certain covenants that, among other
things, limit the ability of the Company
and its subsidiaries to incur additional
Indebtedness and issue preferred stock,
pay dividends or make other
distributions, repurchase Equity
Interests (as defined) or subordinated
Indebtedness, create certain liens,
enter into certain transactions with
affiliates, sell assets of the Company
or its subsidiaries, issue or sell
Equity Interests of the Company's
subsidiaries or enter into certain
mergers and consolidations. In addition,
under certain circumstances, the Company
will be required to offer to purchase
Notes at a price equal to 100% of the
principal amount thereof, plus accrued
and unpaid interest and Liquidated
Damages, if any, to the date of
purchase, with the proceeds of certain
Asset Sales (as defined). See
"Description of the Notes" and
"Description of Other Debt--Original
Notes."
Absence of a Public Market
for the New Notes............ The New Notes are a new issue of
securities with no established market.
Accordingly, there can be no assurance
as to the development or liquidity of
any market for the New Notes. The
Initial Purchasers have advised the
Company that they currently intend to
make a market in the New Notes. However,
the Initial Purchasers are not obligated
to do so, and any market making with
respect to the New Notes may be
discontinued at any time without notice.
The Company does not intend to apply for
listing of the New Notes on a securities
exchange.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be considered
in evaluating the Exchange Offer.
7
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1993(2) 1994 1995(3) 1996 1997
---------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Finance charge income...................... $ 1,125 $ 7,820 $ 29,039 $ 51,679 $ 44,910
Gain on sale of receivables................ -- -- -- 22,873 67,256
Servicing fee income....................... -- -- -- 3,712 21,024
Investment income.......................... 2,052 2,550 1,284 1,075 2,909
Other income............................... 21,704 5,512 2,761 1,639 1,648
----------- ----------- ----------- ----------- -----------
Total revenue........................... 24,881 15,882 33,084 80,978 137,747
Costs and expenses............................ 44,247 10,817 23,066 46,722 74,822
----------- ----------- ----------- ----------- -----------
Income (loss) before taxes.................... (19,366) 5,065 10,018 34,256 62,925
Provision (credit) for taxes.................. -- -- (18,875) 12,665 24,226
----------- ----------- ----------- ----------- -----------
Net income (loss).......................... $ (19,366) $ 5,065 $ 28,893 $ 21,591 $ 38,699
Basic earnings (loss) per share(1)......... $ (.66) $ .17 $ 1.01 $ .75 $ 1.34
Diluted earnings (loss) per share(1)....... $ (.66) $ .16 $ .95 $ .71 $ 1.26
Weighted average shares outstanding........ 29,267,419 29,067,323 28,730,151 28,824,572 28,887,362
Weighted average shares and assumed
incremental shares....................... 29,267,419 31,818,083 30,380,749 30,203,298 30,782,471
CASH FLOW DATA:
(Used in) Provided by operating activities.... $ 17,332 $ 3,900 $ 14,637 $ 34,897 $ 66,132
(Used in) Provided by investing activities.... (8,121) (12,174) (144,512) (63,116) (123,076)
(Used in) Provided by financing activities.... (5,705) (9,238) 132,433 12,050 60,826
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................. $ 3,506 $ (17,512) $ 2,558 $ (16,169) $ 3,882
OTHER DATA:
Auto receivable originations(2).............. $ 18,317 $ 65,929 $ 230,176 $ 432,442 $ 906,794
Managed auto receivables(2).................. $ 15,964 $ 67,636 $ 240,491 $ 523,981 $ 1,138,255
Average managed auto receivables(2).......... $ 6,880 $ 37,507 $ 141,526 $ 357,966 $ 792,155
Auto loans securitized....................... $ -- $ -- $ 150,170 $ 270,351 $ 817,500
Number of branches........................... 5 18 31 51 85
Average principal amount per managed
auto receivable(2).......................... $ 6,878 $ 7,215 $ 7,773 $ 8,746 $ 10,087
Effective yield on owned auto
receivables (5)............................. 21.7% 20.9% 20.5% 19.7% 19.9%
RATIOS:
Ratio of earnings to fixed charges(4)........ (86.6) 31.2 3.5 3.6 4.9
Percentage of total indebtedness to total
capitalization.............................. 1.0% 0.3% 47.9% 48.6% 50.9%
Return on average common equity(5)........... (14.7)% 4.1% 23.1% 14.3% 20.8%
Operating expenses as a percentage of
average managed auto receivables(5)......... 18.2% 15.0% 10.0% 7.2% 6.6%
Percentage of senior unsecured debt to
total equity................................ 0.% 0.% 0.% 0.% 57.7%
ASSET QUALITY DATA:
Managed auto receivables greater than 60
days delinquent(2).......................... $ 137 $ 1,269 $ 4,907 $ 16,207 $ 36,421
Delinquencies as a percentage of
managed auto receivables(2)................. 0.9% 1.9% 2.0% 3.1% 3.2%
Net charge-offs.............................. $ 49 $ 1,432 $ 6,409 $ 19,974 $ 43,231
Net charge-offs as a percentage of
average managed auto
receivables(2)(5)........................... 0.7% 3.8% 4.5% 5.6% 5.5%
<CAPTION>
SIX MONTHS ENDED
-----------------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
---------------- -----------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Finance charge income................................ $ 21,503 $ 26,190
Gain on sale of receivables.......................... 28,151 53,775
Servicing fee income................................. 8,242 19,191
Investment income.................................... 1,152 2,570
Other income......................................... 622 502
----------- -----------
Total revenue..................................... 59,670 102,228
Costs and expenses...................................... 31,590 57,716
----------- -----------
Income (loss) before taxes.............................. 28,080 44,512
Provision (credit) for taxes............................ 10,810 17,137
----------- -----------
Net income (loss).................................... $ 17,270 $ 27,375
Basic earnings (loss) per share(1)................... $ .61 $ .92
Diluted earnings (loss) per share(1)................. $ .57 $ .85
Weighted average shares outstanding.................. 28,513,145 29,684,960
Weighted average shares and assumed
incremental shares................................. 30,398,569 32,199,267
CASH FLOW DATA:
(Used in) Provided by operating activities.............. $ 23,414 $ 8,950
(Used in) Provided by investing activities.............. (20,820) (42,948)
(Used in) Provided by financing activities.............. 352 30,238
----------- -----------
Net increase (decrease) in cash and cash
equivalents............................................ $ 2,946 $ (3,760)
OTHER DATA:
Auto receivable originations(2)........................ $ 359,407 $ 696,252
Managed auto receivables(2)............................ $ 761,716 $ 1,599,273
Average managed auto receivables(2).................... $ 641,522 $ 1,375,614
Auto loans securitized................................. $ 345,570 $ 682,499
Number of branches..................................... 66 108
Average principal amount per managed
auto receivable(2).................................... $ 9,481 $ 10,456
Effective yield on owned auto
receivables (5)....................................... 19.6% 20.7%
RATIOS:
Ratio of earnings to fixed charges(4).................. 5.2 4.7
Percentage of total indebtedness to total
capitalization........................................ 46.2% 49.4%
Return on average common equity(5)..................... 20.0% 22.9%
Operating expenses as a percentage of
average managed auto receivables(5)................... 6.7% 6.0%
Percentage of senior unsecured debt to
total equity.......................................... 0.% 49.0%
ASSET QUALITY DATA:
Managed auto receivables greater than 60
days delinquent(2).................................... $ 28,251 $ 57,186
Delinquencies as a percentage of
managed auto receivables(2)........................... 3.7% 3.6%
Net charge-offs........................................ $ 17,749 $ 38,073
Net charge-offs as a percentage of
average managed auto
receivables(2)(5)..................................... 5.5% 5.5%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------
JUNE 30, JUNE 30, AS
1996 1997 ACTUAL ADJUSTED(6)
----------- ----------- --------------- ----------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 2,145 $ 6,027 $ 2,267 $ 2,267
Excess servicing receivable........................ 33,093 114,376 179,788 179,788
Owned auto receivables............................. 264,086 275,249 261,333 261,333
Total assets....................................... 330,159 493,453 562,295 564,533
Credit Agreement................................... 86,000 71,700 2,100 --
Warehouse Facility................................. -- -- 95,989 50,327
Mortgage Subsidiary Credit Agreement (7)........... -- 345 7,281 7,281
Automobile receivable-backed notes................. 67,847 23,689 14,138 14,138
9 1/4 Senior Notes due 2004 (8).................... -- 125,000 125,000 175,000
Notes payable (9).................................. 418 3,517 4,458 4,458
Total debt......................................... 154,265 224,251 248,966 251,204
Shareholders' equity............................... 163,225 216,536 254,946 254,946
</TABLE>
_______________
(1) The Company has adopted the requirements of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128
establishes new standards for computing and presenting earnings per share,
replacing existing accounting standards. All earnings per share and related
weighted average share amounts for the periods presented in the above table
have been restated to conform to the requirements of SFAS 128.
(2) The Company engaged in the retail used car sales and finance business until
December 31, 1992; effective as of such date, the Company exited the retail
used car sales side of its business. For purposes of this summary, revenues
from vehicle sales and finance charge income relating to the financing of
the sales of vehicles from the Company's former used car sales business are
classified as other income. Receivables generated from the former used car
sales business are classified as other receivables and not included in
managed receivables.
(3) As further described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company recognized an income tax
benefit in fiscal 1995 equal to the expected future tax savings from using
its net operating loss carry forward and other future tax benefits.
(4) Represents the ratio of the sum of income before income taxes plus interest
expense for the period to interest expense.
(5) Data for the six-month periods ended December 31, 1996 and 1997 have been
annualized.
(6) The as adjusted balance sheet data have been calculated giving effect to the
Prior Offering and the application of the net proceeds therefrom as if
each occurred on December 31, 1997.
(7) Fully guaranteed by the Company and certain of its Subsidiaries.
(8) The Notes and the Original Notes have substantially similar terms but were
issued under separate Indentures. See "Description of the Notes" and
"Description of Other Debt - Original Notes."
(9) Consists of certain capitalized equipment leases.
9
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the specific factors set forth
below, as well as the other information included in this Prospectus, in
evaluating the Exchange Offer.
DEPENDENCE ON FUNDING SOURCES
Dependence on Credit Facilities and Warehouse Facilities. The Company depends
on credit facilities and warehouse facilities with financial institutions to
finance its purchase of contracts pending securitization. At the date of this
Prospectus, the Company has two credit facilities with various banks providing
for revolving credit borrowings of up to a total of $385 million, subject to
defined borrowing bases. The Company's main credit Agreement (the "Credit
Agreement"), which provides for up to $310 million of revolving borrowings
(subject to a borrowing base), matures in October 1998. The Company's mortgage
subsidiary credit Agreement (the "Mortgage Subsidiary Credit Agreement"), which
provides for up to $75 million of revolving borrowings (subject to a borrowing
base), matures in February 1999. In addition, the Company has a $245 million
warehouse facility (the "Warehouse Facility") which expires in October 1998. All
financings under the Warehouse Facility are secured by a first priority lien on
the receivables and related assets held by CP Funding Corp., a special purpose
subsidiary which is treated as a Securitization Trust under the Indenture.
Financings under the Warehouse Facility are available pursuant to an advance
formula which is subject to downward adjustment upon certain defined financial
performance "Trigger Events." See "Description of Other Debt." There can be no
assurance that such financing resources will continue to be available to the
Company on reasonable terms or at all. To the extent that the Company is unable
to extend or replace any of the these facilities and arrange new credit or
warehouse facilities, the Company would have to curtail its contract purchasing
activities, which would have a material adverse effect on the Company's
financial position, liquidity and results of operations.
The Company's Credit Agreement, Warehouse Facility and Mortgage Subsidiary
Credit Agreement contain more extensive restrictions and covenants than the
Indenture and require the Company to maintain specified financial ratios and
satisfy certain financial tests. A breach of any of these covenants could result
in an event of default under these agreements. Upon the occurrence of an event
of default under these agreements, the lenders thereunder could elect to declare
all amounts outstanding under these agreements, including accrued interest or
other obligations, to be immediately due and payable and/or restrict the
Company's ability to obtain additional borrowings under these agreements. The
Company's ability to meet those financial ratios and tests can be affected by
events beyond its control, and there can be no assurance that the Company will
meet those financial ratios and tests.
Dependence on Securitization Program. Since December 1994, the Company has
relied upon its ability to aggregate and sell receivables in the asset-backed
securities market to generate cash proceeds for repayment of credit facilities
and to purchase additional contracts from automobile dealers. Further, gains on
sales generated by the Company's securitizations represent a significant portion
of the Company's revenues. The Company endeavors to effect securitizations of
its receivables on at least a quarterly basis. Accordingly, adverse changes in
the Company's asset-backed securities program or in the asset-backed securities
market for automobile receivables generally could materially adversely affect
the Company's ability to purchase and resell loans on a timely basis and upon
terms reasonably favorable to the Company. Any delay in the sale of receivables
beyond a quarter-end would eliminate the gain on sale in the given quarter and
adversely affect the Company's reported earnings for such quarter. Any such
adverse changes or delays would have a material adverse effect on the Company's
financial position, liquidity and results of operations.
Dependence on Credit Enhancement. To date, all of the Company's
securitizations have utilized credit enhancement in the form of financial
guaranty insurance policies issued by Financial Security Assurance Inc. ("FSA")
in order to achieve "AAA/Aaa" ratings, which reduces the costs of
securitizations relative to alternative forms of credit enhancement available to
the Company. FSA is not required to insure Company-sponsored securitizations and
there can be no assurance that it will continue to do so or that future Company-
sponsored securitizations will be similarly rated. Likewise, the Company is not
required to utilize financial guaranty insurance policies issued by FSA or any
other form of credit enhancement in connection with its securitizations. A
downgrading of FSA's credit rating or FSA's withdrawal of credit enhancement
could result in higher interest costs for future Company-sponsored
securitizations. Such events could have a material adverse effect on the
Company's financial position, liquidity and results of operations.
10
<PAGE>
ABILITY TO SERVICE DEBT; LIQUIDITY AND CAPITAL NEEDS
Although the Company believes that cash available from operating, investing
and financing activities will be sufficient to enable it to make required
interest payments on the Notes, its other debt obligations and other required
payments for the foreseeable future, there can be no assurance in this regard.
The Company may encounter liquidity problems which could affect its ability to
meet such obligations while attempting to withstand competitive pressures or
adverse economic conditions. In such circumstances, the value of the Notes could
be materially adversely affected.
The Company requires substantial amounts of cash to fund its contract purchase
and securitization activities. Although the Company recognizes a gain on the
sale of receivables upon the closing of a securitization, it typically receives
the cash representing such gain over the actual life of the receivables
securitized. The Company also incurs significant transaction costs in connection
with a securitization and incurs both current and deferred tax liabilities as a
result of the gains on sale. Accordingly, the Company's strategy of securitizing
substantially all of its newly purchased receivables and increasing the number
of contracts purchased will require substantial amounts of cash.
The Company expects to continue to require substantial amounts of cash as the
volume of the Company's contract purchases increases and its securitization
program grows. The Company's primary cash requirements include the funding of:
(i) contract purchases pending their securitization and sale; (ii) credit
enhancement requirements in connection with the securitization and sale of the
receivables; (iii) interest and principal payments under the Credit Agreement,
the Mortgage Subsidiary Credit Agreement, the Warehouse Facility and the
Original Notes and other indebtedness; (iv) fees and expenses incurred in
connection with the securitization of receivables and the servicing of such
receivables; (v) ongoing operating expenses; and (vi) tax payments due on
receipt of excess cash flows from securitization trusts.
The Company's primary sources of liquidity in the future are expected to be
existing cash, financings under the Credit Agreement, the Mortgage Subsidiary
Credit Agreement and the Warehouse Facility, sales of automobile receivables
through securitizations, excess cash flow received from securitization trusts
and, subject to capital market conditions, further issuances of debt or equity
securities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
The Company's primary sources of liquidity as described in the paragraph above
are expected to be sufficient to fund the Company's liquidity requirements for
the next 12 months if the Company's future operations are consistent with
management's current growth expectations. However, because the Company expects
to continue to require substantial amounts of cash for the foreseeable future,
it anticipates that it will need to effect debt or equity financings regularly,
in addition to quarterly securitizations. The type, timing and terms of
financing selected by the Company will be dependent upon the Company's cash
needs, the availability of other financing sources and the prevailing conditions
in the financial markets. There can be no assurance that any such sources will
be available to the Company at any given time or as to the favorableness of the
terms on which such sources may be available.
LEVERAGE
The Company currently has substantial outstanding Indebtedness (as defined in
the Indenture) and the Company is significantly leveraged. Although the
covenants under the Indenture will restrict the incurrence of Indebtedness by
the Company and its Restricted Subsidiaries (as defined in the Indenture), the
Indenture does not limit the amount of Indebtedness under Warehouse Facilities,
such as the existing Warehouse Facility, that qualify as "Permitted Warehouse
Debt" (as defined). Permitted Warehouse Debt will be defined as Indebtedness
used exclusively to finance the purchase of automobile and other consumer loans
or home mortgage loans by the Company or a Restricted Subsidiary, up to the face
amount of the loans financed thereby. All Permitted Warehouse Debt will be
secured by the receivables financed thereby. In addition, the Indenture will
permit substantial additional secured borrowings under the Credit Agreement, the
Mortgage Subsidiary Credit Agreement and other Credit Facilities (as defined in
the Indenture), subject to a borrowing base formula. See "Description of the
Notes--Certain Definitions."
At December 31, 1997, on an as adjusted basis after giving effect to the Prior
Offering and the application of the net proceeds therefrom, the aggregate
principal amount of senior Indebtedness of the Company and its subsidiaries
(excluding trade payables and other accrued liabilities) would have been
approximately $251.2 million, an aggregate of $57.6 million of which would have
been secured Indebtedness outstanding under the Credit Agreement, the Warehouse
11
<PAGE>
Facility and the Mortgage Subsidiary Credit Agreement and approximately $14.1
million of which would have been asset-backed notes outstanding of the Company's
Special Purpose Finance Subsidiaries. After giving effect to the Prior Offering
and the application of the net proceeds therefrom, as of December 31, 1997, the
Company would have had up to $125.3 million available for additional borrowing
under the Credit Agreement, pursuant to the borrowing base requirements of such
Agreement. All financings under the Warehouse Facility are secured by a first
priority lien on the receivables and related assets held by CP Funding Corp., a
special purpose subsidiary which is treated as a Securitization Trust under the
Indenture. See "--Holding Company Structure; Effective Subordination" and
"Description of Other Debt."
The Company's ability to make payments of principal or interest on, or to
refinance its Indebtedness (including the Notes) will depend on its future
operating performance, and its ability to effect additional securitizations and
debt and/or equity financings, which to a certain extent is subject to economic,
financial, competitive and other factors beyond its control. If the Company is
unable to generate sufficient cash flow in the future to service its debt, it
may be required to refinance all or a portion of its existing debt, including
the Notes, or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any additional financing could be
obtained. The inability to obtain additional financing could have a material
adverse effect on the Company.
The degree to which the Company is leveraged could have important consequences
to the holders of the Notes, including: (i) the Company may be more vulnerable
to adverse general economic and industry conditions; (ii) the Company may find
it more difficult to obtain additional financing for future working capital,
capital expenditures, acquisitions, general corporate purposes or other
purposes; and (iii) the Company will have to dedicate a substantial portion of
the Company's cash resources to the payment of principal and interest on
indebtedness outstanding under the Credit Agreement, the Mortgage Subsidiary
Credit Agreement, the Warehouse Facility (all of which become due prior to the
maturity of the Notes) and the Original Notes, thereby reducing the funds
available for operations and future business opportunities. In addition, the
Indenture contains certain covenants which could limit the Company's operating
and financial flexibility. See "Description of the Notes--Certain Covenants."
DEFAULT AND PREPAYMENT RISKS
The Company's results of operations, financial condition and liquidity depend,
to a material extent, on the performance of contracts purchased and held by the
Company prior to their sale in a securitization transaction as well as the
subsequent performance of receivables sold to securitization trusts. A portion
of the loans acquired by the Company may default or prepay during the period
prior to their sale in a securitization transaction or if they remain owned by
the Company. The Company bears the full risk of losses resulting from payment
defaults during such period. In the event of a payment default, the collateral
value of the financed vehicle may not cover the outstanding loan balance and
costs of recovery. The Company maintains an allowance for losses on loans held
by the Company, which reflects management's estimates of anticipated losses for
such loans. If the allowance is inadequate, then the Company would recognize as
an expense the losses in excess of such allowance and results of operations
could be adversely affected. In addition, under the terms of the Credit
Agreement, the Company is not able to borrow against defaulted loans and loans
greater than 30 days delinquent held by the Company. Similarly, payment
defaults can cause the amount of financings available under the Warehouse
Facility to be reduced or terminated.
The Company also retains a substantial portion of the default and prepayment
risk associated with the receivables that it sells pursuant to Company-sponsored
securitizations. A large component of the gain recognized on such sales and the
corresponding asset recorded on the Company's balance sheet is excess servicing
receivable which is based on the present value of estimated future excess cash
flows from the securitized receivables which will be received by the Company.
Accordingly, excess servicing receivable is calculated on the basis of
management's assumptions concerning, among other things, defaults and
prepayments. Actual defaults and prepayments may vary from management's
assumptions, possibly to a material degree. In addition, the Company is required
to deposit substantial amounts of the cash flows generated by its interests in
Company-sponsored securitizations ("restricted cash") into spread accounts which
are pledged to FSA as security for the Company's obligation to reimburse FSA for
any amounts which may be paid out on financial guarantee insurance policies.
The Company regularly measures its default, prepayment and other assumptions
against the actual performance of securitized receivables. If the Company were
to determine, as a result of such regular review or otherwise, that it
underestimated defaults and/or prepayments, or that any other material
assumptions were inaccurate, the Company would
12
<PAGE>
be required to adjust the carrying value of its excess servicing receivable by
making a charge to income and writing down the carrying value of excess
servicing receivable on its balance sheet. Future cash flows from securitization
trusts may also be less than expected and the Company's results of operations
and liquidity would be adversely affected, possibly to a material degree. In
addition, an increase in prepayments and defaults would reduce the size of the
Company's servicing portfolio which would reduce the Company's servicing fee
income further adversely affecting results of operations and cash flow. A
material write-down in excess servicing receivable and the corresponding
decreases in earnings and cash flow could limit the Company's ability to service
debt (including the Notes) and to affect future securitizations and other
financings. To date, no material write downs have been required. Although the
Company believes that it has made reasonable assumptions as to the future cash
flows of the various pools of receivables that have been sold in securitization
transactions, actual rates of default or prepayment may differ from those
assumed and other assumptions may be required to be revised upon future events.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
As of December 31, 1997, restricted cash and excess servicing receivable were
approximately $76.2 million and $179.8 million, respectively. Depending on the
Company's growth, restricted cash and excess servicing receivable may become a
larger share of the Company's overall assets.
PORTFOLIO PERFORMANCE; NEGATIVE IMPACT ON CASH FLOW; RIGHT TO TERMINATE NORMAL
SERVICING
Generally, the form of credit enhancement agreement entered into in connection
with securitization transactions contains specified limits on the delinquency,
default and loss rates on the receivables included in each trust. If, at any
measuring date, the delinquency, default or loss rate with respect to any trust
were to exceed the specified limits, provisions of the credit enhancement
agreement would automatically increase the level of credit enhancement
requirements for that trust. During the period in which the specified
delinquency, default and loss rates were exceeded, excess cash flow, if any,
from the trust would be used to fund the increased credit enhancement levels
instead of being distributed to the Company, which would have an adverse effect
on the Company's cash flow. Further, the credit enhancement requirements for
each securitization trust are cross-collateralized to the credit enhancement
requirements established in connection with each of the Company's other
securitization trusts, such that excess cash flow from a performing
securitization trust insured by FSA may be used to support increased credit
enhancement requirements for a nonperforming securitization trust insured by
FSA, thereby further restricting excess cash flow available to the Company. As
of the date of this Prospectus, the Company has on occasion exceeded these
specified limits, however, FSA waived each of these occurrences. There can be no
assurance that FSA would waive any such future occurrence.
The credit enhancement agreements entered into in connection with
securitization transactions contain additional specified limits on the
delinquency, default and loss rates on the receivables included in each trust
which are higher than the limits referred to in the preceding paragraph. If, at
any measuring date, the delinquency, default or loss rate with respect to any
trust were to exceed these additional specified limits applicable to such trust,
provisions of the credit enhancement agreements permit FSA to terminate the
Company's servicing rights to the receivables sold to that trust. In addition,
the servicing agreements are cross-defaulted so that a default under one
servicing agreement would allow FSA to terminate the Company's servicing rights
under all of its servicing agreements. Although the Company has never exceeded
such delinquency, default or loss rates, there can be no assurance that the
Company's servicing rights with respect to the automobile receivables in such
trusts, or any other trust which exceeds the specified limits in future periods,
will not be terminated. FSA has other rights to terminate the Company as
servicer if (i) the Company were to breach its obligations under the servicing
agreements, (ii) FSA was required to make payments under its policy or (iii)
certain bankruptcy or insolvency events were to occur. As of the date of this
Prospectus, no such termination events have occurred with respect to any of the
trusts formed by the Company.
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION
The Company derives substantially all of its revenues from its subsidiaries
and from its interests in securitization trusts. Holders of any secured
indebtedness of the Company or its subsidiaries or such securitization trusts
will have claims that are prior to the claims of the holders of the Notes with
respect to the assets securing most of the Company's other indebtedness.
Notably, the Company and certain of its subsidiaries (including the Guarantors)
are parties to the Credit Agreement and the Mortgage Subsidiary Credit Agreement
which are secured by liens on all of the receivables
13
<PAGE>
financed thereby and certain of the Company's and its subsidiaries' other
assets. All financings under the Warehouse Facility are secured by a first
priority lien on the receivables and related assets held by CP Funding Corp., a
special purpose subsidiary which is treated as a Securitization Trust under the
Indenture. The Notes will be effectively subordinated to all such secured
indebtedness. As of December 31, 1997, on an as adjusted basis after giving
effect to the Prior Offering and the application of the net proceeds therefrom,
the aggregate amount of secured indebtedness of the Company and its subsidiaries
(including borrowings under the Credit Agreement, the Warehouse Facility and the
Mortgage Subsidiary Credit Agreement) would have been approximately $251.2
million and approximately $125.3 million would have been available for
additional borrowing under the Credit Agreement, pursuant to the borrowing base
requirements of such agreement. If the Company defaulted under its obligations
under the Credit Agreement, the Warehouse Facility and the Mortgage Subsidiary
Credit Agreement, such lenders could proceed against the collateral granted to
them to secure that indebtedness. If any senior Indebtedness were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full that indebtedness and the other indebtedness of the
Company, including the Notes. See "Description of Other Debt."
In addition, although a substantial portion of the Company's business is
conducted through AFS Funding Corp. and CP Funding Corp., wholly-owned
subsidiaries, AFS Funding Corp. and CP Funding Corp. will not be Guarantors with
respect to the Notes. AFS Funding Corp. is a limited purpose corporation
established by the Company to facilitate Company-sponsored securitizations and
its ability to pay dividends is dependent on the performance of the receivables
underlying those securitizations and is subject to substantial contractual
restrictions pertaining to the Company-sponsored securitizations. CP Funding
Corp. is also a limited purpose corporation established by the Company to
facilitate financings under the Warehouse Facility and is subject to substantial
contractual restrictions under the Warehouse Facility. Because AFS Funding
Corp. and CP Funding Corp. are not Guarantors, the Notes will be effectively
subordinated to all indebtedness and other obligations of AFS Funding Corp. and
CP Funding Corp.
AFS Funding Corp. is also subject to certain contingent claims by FSA relating
to the financial guarantee insurance policies issued by FSA in connection with
the Company-sponsored securitizations. The Company has agreed to reimburse FSA,
on a limited recourse basis, for amounts paid by FSA under these financial
guarantee insurance policies. In order to secure such reimbursement obligations,
the Company has granted to FSA a lien on the capital stock of, and certain
assets of, AFS Funding Corp., most notably the spread accounts and the
restricted cash required to be deposited therein. FSA will have claims that are
prior to the claims of the holders of the Notes with respect to these assets and
the Notes will be effectively subordinated to all such reimbursement rights.
Substantially all of AFS Funding Corp.'s other assets are excess servicing
receivable consisting of subordinated interests in Company-sponsored
securitizations that are effectively subordinated to the asset-backed securities
issued in such securitizations. As of December 31, 1997, restricted cash and
excess servicing receivable were approximately $76.2 million and $179.8 million,
respectively. There can be no assurance that the Company's operations,
independent of AFS Funding Corp., will generate sufficient cash flow to support
payment of interest or principal on the Notes, or that dividend distributions
will be available from AFS Funding Corp. to fund such payments. See "Description
of Other Debt--Financial Guarantee Insurance Policies."
IMPLEMENTATION OF BUSINESS STRATEGY
The Company's financial position and results of operations depend on its
ability to execute its business strategy. The Company's ability to execute its
business strategy depends on its ability to obtain substantial additional
financing, to expand its automobile finance branch network, to attract and
retain skilled employees and on the ability of its officers and key employees to
manage growth successfully. The failure or inability of the Company to execute
its business strategy could materially adversely affect its financial position,
liquidity and results of operations.
The Company's business strategy also includes leveraging its expertise to
broaden its indirect lending to Sub-Prime Borrowers through the 1996 purchase of
AMS, the Company's mortgage subsidiary. While not currently representing a
material portion of the Company's assets or revenues, management intends over
time to devote substantial resources to pursue growth of AMS's business of
originating and purchasing home equity loans made to Sub-Prime Borrowers. The
conduct of a mortgage finance business requires a substantial amount of cash.
Prior to the purchase of AMS, the Company had no prior experience in the
residential mortgage business. Further, AMS's business will require substantial
additional resources to fund its growth. There can be no assurance that the
Company will be able to successfully implement its sub-prime residential
mortgage loan business strategy. The failure to effectively implement such
strategy or to obtain adequate
14
<PAGE>
resources to fund AMS's growth will have material adverse effects on the
Company's financial position, liquidity and results of operations.
CREDIT-IMPAIRED BORROWERS
The Company specializes in purchasing, securitizing and servicing sub-prime
receivables. Sub-Prime Borrowers are associated with higher-than-average
delinquency and default rates. While the Company believes that it effectively
manages such risks with its proprietary credit scoring models, risk-based loan
pricing and other underwriting policies and collection methods, no assurance can
be given that such criteria or methods will be effective in the future. In the
event that the Company underestimates the default risk or under-prices contracts
that it purchases, the Company's financial position, liquidity and results of
operations would be adversely affected, possibly to a material degree.
ECONOMIC CONDITIONS
General. Delinquencies, defaults, repossessions and losses generally
increase during periods of economic recession. Such periods also may be
accompanied by decreased consumer demand for automobiles and declining values of
automobiles securing outstanding loans, thereby weakening collateral coverage
and increasing the possibility of a loss in the event of default. Significant
increases in the inventory of used automobiles during periods of economic
recession may also depress the prices at which repossessed automobiles may be
sold or delay the timing of such sales. Because the Company focuses on Sub-Prime
Borrowers, the actual rates of delinquencies, defaults, repossessions and losses
on such loans could be higher than those experienced in the general automobile
finance industry and could be more dramatically affected by a general economic
downturn. In addition, during an economic slowdown or recession, the Company's
servicing costs may increase without a corresponding increase in its servicing
fee income. While the Company believes that the underwriting criteria and
collection methods it employs enable it to manage the higher risks inherent in
loans made to Sub-Prime Borrowers, no assurance can be given that such criteria
or methods will afford adequate protection against such risks. Any sustained
period of increased delinquencies, defaults, repossessions or losses or
increased servicing costs could also adversely affect the Company's ability to
effect future securitizations and correspondingly, its financial position,
liquidity and results of operations. See "--Dependence on Funding Sources."
Interest Rates. The Company's profitability may be directly affected by the
level of and fluctuations in interest rates, which affect the Company's ability
to earn a gross interest rate spread. As the level of interest rates increases,
the Company's gross interest rate spread will generally decline since the rates
charged on the contracts it purchases from dealers are generally at or near the
statutory maximums, affording the Company little opportunity to pass on any
increased interest costs. Furthermore, the Company's future gains recognized
upon the securitization of automobile receivables will also be affected by
interest rates. The Company recognizes a gain in connection with its
securitizations based upon the estimated present value of projected future
excess cash flows from the securitization trusts, which is largely dependent
upon the gross interest rate spread. The Company believes that its profitability
and liquidity would be adversely affected during any period of higher interest
rates, possibly to a material degree. The Company monitors the interest rate
environment and employs pre-funding or other hedging strategies designed to
mitigate the impact of changes in interest rates. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Hedging and Pre-
funding Strategy." There can be no assurance, however, that pre-funding or other
hedging strategies will mitigate the impact of changes in interest rates.
COMPETITION
Competition in the field of sub-prime automobile finance is intense. The
automobile finance market is highly fragmented and is served by a variety of
financial entities including the captive finance affiliates of major automotive
manufacturers, banks, thrifts, credit unions and independent finance companies.
Many of these competitors have substantially greater financial resources and
lower costs of funds than the Company. Many of these competitors also have long
standing relationships with automobile dealerships and may offer dealerships or
their customers other forms of financing, including dealer floor plan financing
and leasing, which are not provided by the Company. Providers of automobile
financing have traditionally competed on the bases of interest rate charged, the
quality of credit accepted, the flexibility of loan terms offered and the
quality of service provided to dealers and customers. In seeking to establish
itself
15
<PAGE>
as one of the principal financing sources of the dealers it serves, the Company
competes predominately on the basis of its high level of dealer service and
strong dealer relationships and by offering flexible loan terms. There can be no
assurance that the Company will be able to compete successfully in this market
or against such competitors. See "Business--Competition."
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable provisions
of state fraudulent transfer law, if, among other things, the Company or any
Guarantor, at the time it incurred the indebtedness evidenced by the Notes or
its Subsidiary Guarantee, (i) (a) was or is insolvent or rendered insolvent by
reason of such occurrence or (b) was or is engaged in a business or transaction
for which the assets remaining with the Company or such Guarantor constituted
unreasonably small capital or (c) intended or intends to incur, or believed or
believes that it would incur, debts beyond its ability to pay such debts as they
mature, and (ii) the Company or such Guarantor received or receives less than
reasonably equivalent value or fair consideration for the incurrence of such
indebtedness, the Notes and the Subsidiary Guarantees, and any pledge or other
security interest securing such indebtedness, could be voided, or claims in
respect of the Notes or the Subsidiary Guarantees could be subordinated to all
other debts of the Company or such Guarantor, as the case may be. The voiding or
subordination of any such indebtedness could result in an Event of Default (as
defined in the Indenture) with respect to such indebtedness, which could result
in acceleration thereof. In addition, the payment of interest and principal by
the Company pursuant to the Notes or the payment of amounts by a Guarantor
pursuant to a Subsidiary Guarantee could be voided and required to be returned
to the person making such payment, or to a fund for the benefit of the creditors
of the Company or such Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of all of its assets at a fair valuation or
if the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
On the basis of their historical financial information, recent operating
history as discussed in "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other factors, the Company and each Guarantor believes that, after giving effect
to the indebtedness incurred in connection with the Prior Offering, it (i) will
not be insolvent, will not have unreasonably small capital for the businesses in
which it is engaged and will not incur debts beyond its ability to pay such
debts as they mature and (ii) will have sufficient assets to satisfy any
probable money judgment against it in any pending action. There can be no
assurance, however, as to what standard a court would apply in making such
determinations.
REGULATION
The Company's business is subject to numerous federal and state consumer
protection laws and regulations which, among other things: (i) require the
Company to obtain and maintain certain licenses and qualifications; (ii) limit
the interest rates, fees and other charges the Company is allowed to charge;
(iii) limit or prescribe certain other terms of the Company's automobile
installment sales contracts; (iv) require specific disclosures; and (v) define
the Company's rights to repossess and sell collateral. The Company believes it
is in substantial compliance with all such laws and regulations, and that such
laws and regulations have had no material effect on the Company's ability to
operate its business. Changes in existing laws or regulations, or in the
interpretation thereof, or the promulgation of any additional laws or
regulations, could have a material adverse effect on the Company's business. In
addition, the Company retains some of the regulatory risk on receivables sold in
securitizations as a result of representations and warranties made by the
Company in such transactions. See "Business--Regulation."
As a result of the consumer-oriented nature of the industry in which the
Company operates and uncertainties with respect to the application of various
laws and regulations in certain circumstances, industry participants are named
from time to time as defendants in litigation involving alleged violations of
federal and state consumer lending or other similar laws and regulations. A
significant judgment against the Company in connection with any litigation could
have a material
16
<PAGE>
adverse affect on the Company's financial condition and results of operations.
In addition, if it were determined that a material number of loans purchased by
the Company involved violations of applicable lending laws by automobile
dealers, the Company's financial condition and results of operations could be
materially adversely affected. See "Business--Regulation."
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control, the Company will be required to offer to repurchase
all outstanding Notes and Original Notes at 101% of the principal amount thereof
plus accrued and unpaid interest to the date of repurchase and Liquidated
Damages, if any. However, there can be no assurance that sufficient funds will
be available at the time of any Change of Control to make any required
repurchases of Notes or Original Notes tendered, or that restrictions in the
Credit Agreement or the Mortgage Subsidiary Credit Agreement will allow the
Company to make such required repurchases. Notwithstanding these provisions, the
Company could enter into certain transactions, including certain
recapitalizations, that would not constitute a Change of Control but would
increase the amount of debt outstanding at such time. See "Description of the
Notes--Repurchase at the Option of Holders."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The New Notes are a new issue of securities, have no established trading
market and may not be widely distributed. The Company does not intend to list
the New Notes on any national securities exchange or to seek the admission
thereof to trading in the National Association of Securities Dealers Automated
Quotation System. The Company has been advised by the Initial Purchasers that
they presently intend to make a market in the New Notes. However, the Initial
Purchasers are not obligated to do so and any market making activities with
respect to the New Notes may be discontinued at any time without notice. In
addition, such market making activity will be subject to the limitations imposed
by the Exchange Act and may be limited during the Exchange Offer and at certain
other times. No assurance can be given that an active public or other market
will develop for the New Notes or as to the liquidity of or the trading market
for the New Notes. If a trading market does not develop or is not maintained,
holders of the New Notes may experience difficulty in reselling the New Notes or
may be unable to sell them at all. If a market for the New Notes develops, any
such market may be discontinued at any time. If a public trading market
develops for the New Notes, future trading prices of the New Notes will depend
on many factors, including, among other things, prevailing interest rates, the
Company's results of operations and the market for similar securities.
Depending on prevailing interest rates, the market for similar securities and
other facts, including the financial condition of the Company, the New Notes may
trade at a discount from their principal amount.
17
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company to the Initial Purchasers on January
29, 1998, pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes in reliance on Rule 144A under the Securities
Act. The Company, the Guarantors and the Initial Purchasers also entered into
the Registration Rights Agreement, pursuant to which the Company agreed, with
respect to the Old Notes and subject to the Company's determination that the
Exchange Offer is permitted under applicable law, to (i) cause to be filed, on
or prior to February 28, 1998, a registration statement with the Commission
under the Securities Act concerning the Exchange Offer, (ii) use its best
efforts (a) to cause such registration statement to be declared effective by the
Commission on or prior to April 29, 1998, and (b) to cause the Exchange Offer to
be consummated on or prior to 30 business days after the date such registration
statement is declared effective by the Commission. The Company will keep the
Exchange Offer open for a period of not less than 20 business days and not more
than 30 business days. This Exchange Offer is intended to satisfy the Company's
exchange offer obligations under the Registration Rights Agreement.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Following the expiration of the Exchange Offer, holders of Old Notes not
tendered, or not properly tendered, will not have any further registration
rights and such Old Notes will continue to be subject to the existing
restrictions on transfer thereof. Accordingly, the liquidity of the market for
a holder's Old Notes could be adversely affected upon expiration of the Exchange
Offer if such holder elects to not participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange $1,000
in principal amount of the New Notes for each $1,000 in principal amount of the
outstanding Old Notes. The Company will accept for exchange any and all Old
Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on
the Expiration Date. Tenders of the Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to the terms and
provisions of the Registration Rights Agreement. See "--Conditions of the
Exchange Offer."
Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, holders of Old Notes may tender less than the aggregate principal
amount represented by the Old Notes held by them, provided that they
appropriately indicate this fact on the Letter of Transmittal accompanying the
tendered Old Notes.
As of the date of this Prospectus, $50.0 million in aggregate principal amount
of the Old Notes is outstanding, the maximum amount authorized by the Indenture
for all Notes. As of March 24, 1998, there was one registered holder of the Old
Notes, Cede & Co., which held the Old Notes for 10 of its participants. Solely
for reasons of administration, the Company has fixed the close of business on
March 23, 1998, as the record date (the "Record Date") for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially. Only a holder of the Old Notes (or such holder's legal
representative or attorney-in-fact) may participate in the Exchange Offer. There
will be no fixed record date for determining holders of the Old Notes entitled
to participate in the Exchange Offer. The Company believes that, as of the date
of this Prospectus, no such holder is an affiliate (as defined in Rule 405 under
the Securities Act) of the Company .
The Company shall be deemed to have accepted validly tendered Old Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of Old
Notes and for the purposes of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
18
<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date shall be April 24, 1998, at 5:00 p.m., New York City time,
unless the Company, in its sole discretion, extends the Exchange Offer, in which
case the Expiration Date shall be the latest date and time to which the Exchange
Offer is extended, but shall not be later than May 8, 1998.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay accepting
any Old Notes, (ii) to extend the Exchange Offer, (iii) if any of the conditions
set forth below under "--Conditions of the Exchange Offer" shall not have been
satisfied, to terminate the Exchange Offer, by giving oral or written notice of
such delay, extension, or termination to the Exchange Agent, and (iv) to amend
the terms of the Exchange Offer in any manner. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendments by means of a prospectus
supplement that will be distributed to the registered holders of the Old Notes.
Modification of the Exchange Offer, including, but not limited to, (i) extension
of the period during which the Exchange Offer is open and (ii) satisfaction of
the conditions set forth below under "--Conditions of the Exchange Offer" may
require that at least five (5) business days remain in the Exchange Offer.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is not conditioned upon any minimum principal amount of the
Old Notes being tendered for exchange. However, the Exchange Offer is
conditioned upon the declaration by the Commission of the effectiveness of the
Exchange Offer Registration Statement of which this Prospectus constitutes a
part.
TERMINATION OF CERTAIN RIGHTS
The Registration Rights Agreement provides that, subject to certain
exceptions, in the event of a Registration Default, holders of Old Notes are
entitled to receive Liquidated Damages of $0.05 per week per $1,000 principal
amount of Old Notes held by such holders (up to a maximum of $0.50 per week per
$1,000 principal amount of Old Notes). A "Registration Default" with respect to
the Exchange Offer shall occur if: (i) the Exchange Offer Registration
Statement has not been filed with the Commission on or prior to February 28,
1998; (ii) the Exchange Offer Registration Statement is not declared effective
on or prior to April 29, 1998 (the "Effectiveness Target Date"), (iii) the
Company fails to consummate the Exchange Offer within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective during the period specified in
the Registration Rights Agreement. Holders of New Notes will not be and, upon
consummation of the Exchange Offer, holders of Old Notes will no longer be,
entitled to (i) the right to receive the Liquidated Damages or (ii) certain
other rights under the Registration Rights Agreement intended for holders of Old
Notes. The Exchange Offer shall be deemed consummated upon the occurrence of
the delivery by the Company to the Registrar under the Indenture of New Notes in
the same aggregate principal amount as the aggregate principal amount of Old
Notes that are tendered by holders thereof pursuant to the Exchange Offer.
ACCRUED INTEREST
The New Notes will bear interest at a rate equal to 9 1/4% per annum, which
interest shall accrue from January 29, 1998 or from the most recent Interest
Payment Date with respect to the Old Notes to which interest was paid or duly
provided for. See "Description of Notes--Principal, Maturity and Interest."
19
<PAGE>
PROCEDURES FOR TENDERING OLD NOTES
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by the Company will constitute a binding agreement between the tendering
holder and the Company upon the terms and subject to the conditions set forth in
this Prospectus and in the accompanying Letter of Transmittal. Except as set
forth below, a holder who wishes to tender Old Notes for exchange pursuant to
the Exchange Offer must transmit such Old Notes, together with a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to the Exchange Agent at the address set
forth on the back cover page of this Prospectus prior to 5:00 p.m., New York
City time, on the Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal, or (ii)
by an Eligible Institution (as defined under "The Exchange Offer--Procedures for
Tendering Old Notes"). In the event that a signature on a Letter of Transmittal
or a notice of withdrawal, as the case may be, is required to be guaranteed,
such guarantee must be by a firm which is a member of a registered national
securities exchange or the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or otherwise be an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If
the Letter of Transmittal is signed by a person other than the registered holder
of the Old Notes, the Old Notes surrendered for exchange must either (i) be
endorsed by the registered holder, with the signature thereon guaranteed by an
Eligible Institution, or (ii) be accompanied by a bond power, in satisfactory
form as determined by the Company in its sole discretion, duly executed by the
registered holder, with the signature thereon guaranteed by an Eligible
Institution. The term "registered holder" as used herein with respect to the
Old Notes means any person in whose name the Old Notes are registered on the
books of the Registrar.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered and to reject any Old Notes the Company's
acceptance of which might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Company shall determine. The Company
will use reasonable efforts to give notification of defects or irregularities
with respect to tenders of Old Notes for exchange but shall not incur any
liability for failure to give such notification. Tenders of the Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company, in its sole discretion, of
such person's authority to so act must be submitted.
Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old Notes
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender Old Notes in the Exchange Offer should
contact such registered holder promptly and instruct such registered holder to
tender on such Beneficial Owner's behalf. If such Beneficial Owner wishes to
tender directly, such Beneficial Owner must, prior to completing and executing
the Letter of Transmittal and tendering Old Notes, make appropriate arrangements
to register ownership of the Old Notes in such Beneficial Owner's name.
Beneficial Owners should be aware that the transfer of registered ownership may
take considerable time.
20
<PAGE>
By tendering, each registered holder will represent to the Company that, among
other things (i) the New Notes to be acquired in connection with the Exchange
Offer by the holder and each Beneficial Owner of the Old Notes are being
acquired by the holder and each Beneficial Owner in the ordinary course of
business of the holder and each Beneficial Owner, (ii) the holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) the holder and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer for
the purpose of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the Staff of the Commission set forth in "no-action"
letters that are discussed herein under "--Resales of the New Notes," (iv) that
if the holder is a broker-dealer that acquired Old Notes as a result of market
making or other trading activities, it will deliver a prospectus in connection
with any resale of New Notes acquired in the Exchange Offer, (v) the holder and
each Beneficial Owner understand that a secondary resale transaction described
in clause (iii) above should be covered by an effective registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K of the Securities Act, and (vi) neither the holder nor any
Beneficial Owner is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company except as otherwise disclosed to the Company in writing.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Letter of Transmittal. Pursuant to such
procedures: (i) such tender must be made by or through an Eligible Institution
and a Notice of Guaranteed Delivery (as defined in the Letter of Transmittal)
must be signed by such holder, (ii) on or prior to the Expiration Date, the
Exchange Agent must have received from the holder and the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder, the certificate number or numbers of the tendered Old Notes, and the
principal amount of tendered Old Notes, stating that the tender is being made
thereby and guaranteeing that, within five (5) business days after the date of
delivery of the Notice of Guaranteed Delivery, the tendered Old Notes, a duly
executed Letter of Transmittal and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) such
properly completed and executed documents required by the Letter of Transmittal
and the tendered Old Notes in proper form for transfer must be received by the
Exchange Agent within five (5) business days after the Expiration Date. Any
Holder who wishes to tender Old Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery and Letter of Transmittal relating to such Old
Notes prior to 5:00 p.m., New York City time, on the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the Exchange Offer, the
Company will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered promptly
after acceptance of the Old Notes. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted validly tendered Old Notes, when, as,
and if the Company has given oral or written notice thereof to the Exchange
Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents; provided, however, that
the Company reserves the absolute right to waive any defects or irregularities
in the tender or conditions of the Exchange Offer. If any tendered Old Notes
are not accepted for any reason, such unaccepted Old Notes will be returned
without expense to the tendering holder thereof as promptly as practicable after
the expiration or termination of the Exchange Offer.
21
<PAGE>
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a written notice to
the Exchange Agent, at its address set forth on the back cover page of this
Prospectus, at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes, as applicable), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by a bond power in the name of the
person withdrawing the tender, in satisfactory form as determined by the Company
in its sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an Eligible Institution together with the other
documents required upon transfer by the Indenture, and (iv) specify the name in
which such Old Notes are to be re-registered, if different from the Depositor,
pursuant to such documents of transfer. Any questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Company, in its sole discretion. The Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for exchange but which
are withdrawn will be returned to the holder thereof without cost to such holder
as soon as practicable after withdrawal. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "The Exchange
Offer--Procedures for Tendering Old Notes" at any time on or prior to the
Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
Bank One, N.A. is the Exchange Agent. All tendered Old Notes, executed
Letters of Transmittal and other related documents should be directed to the
Exchange Agent. Questions and requests for assistance and requests for
additional copies of this Prospectus, the Letter of Transmittal and other
related documents should be addressed to the Exchange Agent as follows:
BY REGISTERED OR CERTIFIED MAIL:
Bank One, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
Bank One, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor, Window 2
New York, New York 10005
BY HAND OR OVERNIGHT COURIER:
Bank One, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
22
<PAGE>
Bank One, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor, Window 2
New York, New York 10005
BY FACSIMILE:
(614) 248-9987 (OH)
or
(212) 240-8941 (NY)
Confirm by Telephone: (212) 240-8938 (NY)
1-800-346-5153
FEES AND EXPENSES
All expenses incident to the Company's consummation of the Exchange Offer and
compliance with the Registration Rights Agreement will be borne by the Company,
including, without limitation: (i) all registration and filing fees (including
fees and expenses of compliance with state securities or Blue Sky laws), (ii)
printing expenses (including expenses of printing certificates for the New Notes
in a form eligible for deposit with DTC and of printing prospectuses), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) fees and disbursements of independent certified
public accountants, (vi) rating agency fees, (vii) internal expenses of the
Company (including all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), and (viii) fees and expenses, if
any, incurred in connection with the listing of the New Notes on a securities
exchange.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The Company will pay all transfer taxes, if any, applicable to the exchange of
Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes, as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Company for accounting
purposes. The expenses of the Exchange Offer will be amortized over the term of
the New Notes.
RESALES OF THE NEW NOTES
Based on an interpretation by the Staff of the Commission set forth in "no-
action" letters issued to third parties, the Company believes that the New Notes
issued pursuant to the Exchange Offer to a holder in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by such holder (other
than (i) a broker-dealer who purchased Old Notes directly from the Company for
resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act, or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities
23
<PAGE>
Act, provided that such holder is acquiring the New Notes in the ordinary course
of business and is not participating, and has no arrangement or understanding
with any person to participate, in the distribution of the New Notes. The
Company has not requested or obtained an interpretive letter from the Staff of
the Commission with respect to this Exchange Offer, and the Company and the
holders are not entitled to rely on interpretive advice provided by the Staff to
other persons, which advice was based on the facts and conditions represented in
such letters. However, the Exchange Offer is being conducted in a manner
intended to be consistent with the facts and conditions represented in such
letters. If any holder acquires New Notes in the Exchange Offer for the purpose
of distributing or participating in a distribution of the New Notes, such holder
cannot rely on the position of the Staff of the Commission enunciated in Morgan
Stanley & Co., Incorporated (available June 5, 1991) and Exxon Capital Holdings
Corporation (available April 13, 1989), or interpreted in the Commission's
letter to Shearman & Sterling (available July 2, 1993), or similar "no-action"
or interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution."
It is expected that the New Notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph. Sales of New Notes acquired in the Exchange Offer by
holders who are "affiliates" of the Company within the meaning of the Securities
Act will be subject to certain limitations on resale under Rule 144 of the
Securities Act. Such persons will only be entitled to sell New Notes in
compliance with the volume limitations set forth in Rule 144, and sales of New
Notes by affiliates will be subject to certain Rule 144 requirements as to the
manner of sale, notice and the availability of current public information
regarding the Company. The foregoing is a summary only of Rule 144 as it may
apply to affiliates of the Company. Any such persons must consult their own
legal counsel for advice as to any restrictions that might apply to the resale
of their Notes.
24
<PAGE>
CAPITALIZATION
The following table sets forth certain information regarding the Company's
debt and capitalization as of December 31, 1997, and as adjusted to give effect
to the sale by the Company of the Old Notes and the application of the net
proceeds therefrom. This table should be read in conjunction with the
Consolidated Financial Statements and related notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Credit Agreement (1)............................................................ $ 2,100 $ -
Warehouse Facility.............................................................. 95,989 50,327
Mortgage Subsidiary Credit Agreement............................................ 7,281 7,281
Automobile receivables--backed notes(2)......................................... 14,138 14,138
9 1/4% Senior Notes (3)......................................................... 125,000 175,000
Notes payable (4)............................................................... 4,458 4,458
-------- --------
Total debt................................................................. 248,966 251,204
-------- --------
Shareholders' equity:
Preferred stock, $.01 par value per share, 20,000,000 shares authorized;
none issued................................................................... __ __
Common stock, $.01 par value per share; 120,000,000 shares authorized;
33,841,815 shares issued...................................................... 338 338
Additional paid-in capital...................................................... 213,890 213,890
Unrealized gain on excess servicing receivable, net of income taxes............. 3,410 3,410
Retained earnings............................................................... 60,841 60,841
Treasury stock, at cost (3,921,028 shares)...................................... (23,533) (23,533)
-------- --------
Total shareholders' equity................................................... 254,946 254,946
-------- --------
Total capitalization...................................................... $503,912 $506,150
======== ========
</TABLE>
______________
(1) As of December 31, 1997, on an as adjusted basis after giving effect to the
Prior Offering, approximately $125.3 million was available for borrowing
under the Credit Agreement, pursuant to the borrowing base requirements of
such Agreement. See "Description of Other Debt."
(2) These secured notes were issued in the Company's second securitization
transaction. See "Description of Other Debt--Asset-Backed Securities."
(3) The Notes and the Original Notes have substantially similar terms but were
issued under separate Indentures. See "Description of the Notes" and
"Description of Other Debt--Original Notes."
(4) Consists of certain capitalized equipment leases.
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected unaudited consolidated data for the
Company. The historical consolidated financial information under the captions
"Statement of Income" and "Balance Sheet Data" for each of the years in the
five-year period ended June 30, 1997 have been derived from the Company's
consolidated financial statements, which financial statements have been audited
by Coopers & Lybrand L.L.P., independent accountants. The consolidated financial
statements as of June 30, 1996 and June 30, 1997 and for each of the years in
the three-year period ended June 30, 1997, and the report thereon, are included
elsewhere herein. The historical consolidated financial information under the
captions "Statement of Income" and "Balance Sheet Data" as of December 31, 1996
and December 31, 1997 and for the six months then ended have been derived from
the unaudited consolidated financial statements which, except for the
consolidated balance sheet as of December 31, 1996, are included elsewhere
herein; however, in the opinion of the Company, such information reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of operations for such periods. The results of
operations for the six-months ended December 31, 1997 are not necessarily
indicative of the results to be expected for the entire year. The selected
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Description of Other Debt" and the Company's Consolidated Financial Statements
(including related notes thereto) included elsewhere in this Prospectus.
26
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1993(2) 1994 1995(3) 1996 1997
---------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Finance charge income........................... $ 1,125 $ 7,820 $ 29,039 $ 51,679 $ 44,910
Gain on sale of receivables..................... -- -- -- 22,873 67,256
Servicing fee income............................ -- -- -- 3,712 21,024
Investment income............................... 2,052 2,550 1,284 1,075 2,909
Other income.................................... 21,704 5,512 2,761 1,639 1,648
----------- ------------ ------------ ------------ ------------
Total revenue................................ 24,881 15,882 33,084 80,978 137,747
Costs and expenses................................. 44,247 10,817 23,066 46,722 74,822
----------- ------------ ------------ ------------ ------------
Income (loss) before taxes......................... (19,366) 5,065 10,018 34,256 62,925
Provision (credit) for taxes....................... -- -- (18,875) 12,665 24,226
----------- ------------ ------------ ------------ ------------
Net income (loss)............................... $ (19,366) $ 5,065 $ 28,893 $ 21,591 $ 38,699
Basic earnings (loss) per share................. $ (.66) $ .17 $ 1.01 $ .75 $ 1.34
Diluted earnings (loss) per share(1)............ $ (.66) $ .16 $ .95 $ .71 $ 1.26
Weighted average shares outstanding............. 29,267,419 29,067,323 28,730,151 28,824,572 28,887,362
Weighted average shares and assumed
incremental shares............................ 29,267,419 31,818,083 30,380,749 30,203,298 30,782,471
CASH FLOW DATA:
(Used in) Provided by operating activities......... $ 17,332 $ 3,900 $ 14,637 $ 34,897 $ 66,132
(Used in) Provided by investing activities......... (8,121) (12,174) (144,512) (63,116) (123,076)
(Used in) Provided by financing activities......... (5,705) (9,238) 132,433 12,050 60,826
----------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents....................................... $ 3,506 $ (17,512) $ 2,558 $ (16,169) $ 3,882
OTHER DATA:
Auto receivable originations(2)................... $ 18,317 $ 65,929 $ 230,176 $ 432,442 $ 906,794
Managed auto receivables(2)....................... $ 15,964 $ 67,636 $ 240,491 $ 523,981 $ 1,138,255
Average managed auto receivables(2)............... $ 6,880 $ 37,507 $ 141,526 $ 357,966 $ 792,155
Auto loans securitized............................ $ -- $ -- $ 150,170 $ 270,351 $ 817,500
Number of branches................................ 5 18 31 51 85
Average principal amount per managed
auto receivable(2)............................... $ 6,878 $ 7,215 $ 7,773 $ 8,746 $ 10,087
Effective yield on owned auto
receivables (5)................................ 21.7% 20.9% 20.5% 19.7% 19.9%
RATIOS:
Ratio of earnings to fixed charges(4)............. (86.6) 31.2 3.5 3.6 4.9
Percentage of total indebtedness to total
capitalization................................... 1.0% 0.3% 47.9% 48.6% 50.9%
Return on average common equity(5)................ (14.7)% 4.1% 23.1% 14.3% 20.8%
Operating expenses as a percentage of
average managed auto receivables(5).............. 18.2% 15.0% 10.0% 7.2% 6.6%
Percentage of senior unsecured debt to
total equity.................................... 0.% 0.% 0.% 0.% 57.7%
ASSET QUALITY DATA:
Managed auto receivables greater than 60
days delinquent(2)............................... $ 137 $ 1,269 $ 4,907 $ 16,207 $ 36,421
Delinquencies as a percentage of
managed auto receivables(2)...................... 0.9% 1.9% 2.0% 3.1% 3.2%
Net charge-offs................................... $ 49 $ 1,432 $ 6,409 $ 19,974 $ 43,231
Net charge-offs as a percentage of
average managed auto receivables(2)(5)........... 0.7% 3.8% 4.5% 5.6% 5.5%
<CAPTION>
SIX MONTHS ENDED
---------------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
---------------- --------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Revenue:
Finance charge income........................... $ 21,503 $ 26,190
Gain on sale of receivables..................... 28,151 53,775
Servicing fee income............................ 8,242 19,191
Investment income............................... 1,152 2,570
Other income.................................... 622 502
----------- ------------
Total revenue................................ 59,670 102,228
Costs and expenses................................. 31,590 57,716
----------- ------------
Income (loss) before taxes......................... 28,080 44,512
Provision (credit) for taxes....................... 10,810 17,137
----------- ------------
Net income (loss)............................... $ 17,270 $ 27,375
Basic earnings (loss) per share................. $ .61 $ .92
Diluted earnings (loss) per share(1)............ $ .57 $ .85
Weighted average shares outstanding............. 28,513,145 29,684,960
Weighted average shares and assumed
incremental shares............................ 30,398,569 32,199,267
CASH FLOW DATA:
(Used in) Provided by operating activities......... $ 23,414 $ 8,950
(Used in) Provided by investing activities......... (20,820) (42,948)
(Used in) Provided by financing activities......... 352 30,238
----------- ------------
Net increase (decrease) in cash and cash
equivalents....................................... $ 2,946 $ (3,760)
OTHER DATA:
Auto receivable originations(2)................... $ 359,407 $ 696,252
Managed auto receivables(2)....................... $ 761,716 $ 1,599,273
Average managed auto receivables(2)............... $ 641,522 $ 1,375,614
Auto loans securitized............................ $ 345,570 $ 682,499
Number of branches................................ 66 108
Average principal amount per managed
auto receivable(2)............................... $ 9,481 $ 10,456
Effective yield on owned auto
receivables (5)................................ 19.6% 20.7%
RATIOS:
Ratio of earnings to fixed charges(4)............. 5.2 4.7
Percentage of total indebtedness to total
capitalization................................... 46.2% 49.4%
Return on average common equity(5)................ 20.0% 22.9%
Operating expenses as a percentage of
average managed auto receivables(5).............. 6.7% 6.0%
Percentage of senior unsecured debt to
total equity.................................... 0.% 49.0%
ASSET QUALITY DATA:
Managed auto receivables greater than 60
days delinquent(2)............................... $ 28,251 $ 57,186
Delinquencies as a percentage of
managed auto receivables(2)...................... 3.7% 3.6%
Net charge-offs................................... $ 17,749 $ 38,073
Net charge-offs as a percentage of
average managed auto receivables(2)(5)........... 5.5% 5.5%
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1993(2) 1994 1995(3) 1996 1997
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 33,268 $ 15,756 $ 18,314 $ 2,145 $ 6,027
Excess servicing receivable.............. -- -- -- 33,093 114,376
Owned auto receivables................... 15,964 67,636 240,491 264,086 275,249
Total assets............................. 131,127 122,215 285,725 330,159 493,453
Credit Agreement......................... -- -- -- 86,000 71,700
Warehouse Facility....................... -- -- -- -- --
Mortgage Subsidiary Credit Agreement(6).. -- -- -- -- 345
Automobile receivable-backed notes....... -- -- 134,520 67,847 23,689
9 1/4% Senior Notes due 2004 (7)......... -- -- -- -- 125,000
Notes payable (8)........................ 1,278 388 716 418 3,517
Total debt............................... 1,278 388 135,236 154,265 224,251
Shareholders' equity..................... 122,784 119,501 147,226 163,225 216,536
<CAPTION>
SIX MONTHS ENDED
--------------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
---------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 5,091 $ 2,267
Excess servicing receivable.................. 59,780 179,788
Owned auto receivables....................... 233,792 261,333
Total assets................................. 369,882 562,295
Credit Agreement............................. 114,900 2,100
Warehouse Facility........................... -- 95,989
Mortgage Subsidiary Credit Agreement(6)...... 3,573 7,281
Automobile receivable-backed notes........... 40,543 14,138
9 1/4% Senior Notes due 2004 (7)............. -- 125,000
Notes payable (8)............................ 1,520 4,458
Total debt................................... 160,536 248,966
Shareholders' equity......................... 187,282 254,946
</TABLE>
________________
(1) The Company has adopted the requirements of SFAS 128. SFAS 128 establishes
new standards for computing and presenting earnings per share, replacing
existing accounting standards. All earnings per share and related weighted
average share amounts for the periods presented in the above table have been
restated to conform to the requirements of SFAS 128.
(2) The Company engaged in the retail used car sales and finance business until
December 31, 1992; effective as of such date, the Company exited the retail
used car sales side of its business. For purposes of this summary, revenues
from vehicle sales and finance charge income relating to the financing of
the sales of vehicles from the Company's former used car sales business are
classified as other income. Receivables generated from the former used car
sales business are classified as other receivables and not included in
managed receivables.
(3) As further described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company recognized an income tax
benefit in fiscal 1995 equal to the expected future tax savings from using
its net operating loss carry forward and other future tax benefits.
(4) Represents the ratio of the sum of income before income taxes plus interest
expense for the period to interest expense.
(5) Data for the six-month periods ended December 31, 1996 and 1997 have been
annualized.
(6) Fully guaranteed by the Company and certain of its Subsidiaries.
(7) The Notes and the Original Notes have substantially similar terms but were
issued under separate Indentures. See "Description of the Notes" and
"Description of Other Debt - Original Notes."
(8) Consists of certain capitalized equipment leases.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company generates earnings and cash flow primarily through the purchase,
securitization and servicing of auto receivables. The Company purchases auto
finance contracts from franchised and select independent automobile dealerships.
To fund the acquisition of receivables prior to securitization, the Company
utilizes borrowings under the Credit Agreement and the Warehouse Facility. The
Company generates finance charge income on its receivables pending
securitization ("owned receivables") and pays interest expense on borrowings
under the Credit Agreement and the Warehouse Facility.
The Company sells receivables to securitization trusts ("Trusts") or special
purpose finance subsidiaries that, in turn sell asset-backed securities to
investors. By securitizing its receivables, the Company is able to lock in the
gross interest rate spread between the yield on such receivables and the
interest rate payable on the asset-backed securities. The Company recognizes a
gain on the sale of receivables to the Trusts which represents the difference
between the sale proceeds to the Company, net of transaction costs, and the
Company's net carrying value of the receivables, plus the present value of the
estimated future excess cash flows to be received by the Company over the life
of the securitization. Excess cash flows result from the difference between the
interest received from the obligors on the receivables and the interest paid to
investors in the asset-backed securities, net of credit losses and expenses.
The Company typically begins to receive excess cash flow distributions
approximately seven to nine months after the receivables are securitized,
although these time periods may be shorter or longer depending upon the
structure of the securitization. Prior to such time as the Company begins to
receive excess cash flow, excess cash flow is utilized to fund credit
enhancement requirements to secure financial guaranty insurance policies issued
by an insurance company to protect investors in the asset-backed securities from
losses. Once predetermined credit enhancement requirements are reached and
maintained, excess cash flow is distributed to the Company. In addition to
excess cash flow, the Company earns monthly servicing fee income of between
2.25% and 2.50% per annum of the outstanding principal balance of receivables
securitized ("serviced receivables").
In November 1996, the Company acquired AMS, which originates and sells home
equity loans. The acquisition was accounted for as a purchase and the results
of operations for AMS have been included in the consolidated financial
statements since the acquisition date. Receivables originated in this business
are referred to as mortgage receivables. Such receivables are generally packaged
and sold for cash on a servicing released, whole-loan basis. The Company
recognizes a gain at the time of sale.
29
<PAGE>
RESULTS OF OPERATIONS
Six Months Ended December 31, 1996 as compared to Six Months Ended December 31,
1997
REVENUE
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
---------------------
1996 1997
--------- ----------
<S> <C> <C>
Auto:
Owned.......................... $217,156 $ 245,296
Serviced....................... 424,366 1,130,318
-------- ----------
641,522 1,375,614
Mortgage......................... 4,753 11,534
-------- ----------
$646,275 $1,387,148
======== ==========
</TABLE>
Average managed receivables outstanding increased by 115% as a result of
higher loan purchase volume. The Company purchased $359.4 million of auto loans
during the six months ended December 31, 1996, compared to purchases of $696.3
million during the six months ended December 31, 1997. This growth resulted
from loan production at branches open during both periods as well as expansion
of the Company's loan production capacity. The Company operated 66 auto lending
branch offices as of December 31, 1996, compared to 108 as of December 31, 1997.
The Company purchased $51.6 million of mortgage loans during the six months
ended December 31, 1997 as compared to $7.7 million from the date of acquisition
of AMS through December 31, 1996.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Auto............................. $21,472 $25,645
Mortgage......................... 31 545
------- -------
$21,503 $26,190
======= =======
</TABLE>
The increase in finance charge income is due primarily to an increase of 13%
in average owned auto receivables outstanding for the six months ended December
31, 1997 versus the six months ended December 31, 1996.
The Company's effective yield on its owned auto receivables increased from
19.6% for the six months ended December 31, 1996 to 20.7% for the six months
ended December 31, 1997.
The gain on sale of receivables consists of the following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Auto............................. $27,851 $51,531
Mortgage......................... 300 2,244
------- -------
$28,151 $53,775
======= =======
</TABLE>
The increase in gain on sale of auto receivables resulted from the sale of
$345.6 million of receivables in the six months ended December 31, 1996 as
compared to $682.5 million of receivables sold in the six months ended
30
<PAGE>
December 31, 1997. The gains amounted to 8.1% and 7.6% of the sales proceeds for
the six months ended December 31, 1996 and 1997, respectively.
The gain on sale of mortgage receivables resulted from the sale of $48.1
million of mortgage receivables in the six months ended December 31, 1997 as
compared to $4.8 million of mortgage receivables sold from the date of
acquisition of AMS through December 31, 1996.
Servicing fee income increased from $8.2 million, or 3.9% of average serviced
auto receivables, for the six months ended December 31, 1996, to $19.2 million,
or 3.4% of average serviced auto receivables, for the six months ended December
31, 1997. Servicing fee income represents accretion of the present value
discount on estimated future excess cash flows from the Trusts, base servicing
fees and other fees earned by the Company as servicer of the auto receivables
sold to the Trusts. The growth in servicing fee income is primarily due to the
increase in average serviced auto receivables outstanding for the six months
ended December 31, 1997 compared to the six months ended December 31, 1996.
Investment income increased from $1.2 million for the six months ended
December 31, 1996 to $2.6 million for the six months ended December 31, 1997
primarily as a result of higher restricted cash balances. Restricted cash is
used as credit enhancement for the Trusts and generally increases as greater
amounts of receivables are sold to the Trusts.
COSTS AND EXPENSES
Operating expenses as an annualized percentage of average managed receivables
outstanding decreased from 6.7% (6.6% excluding operating expenses of $.4
million related to the mortgage business) for the six months ended December 31,
1996 to 6.0% (5.7% excluding operating expenses of $2.6 million related to the
mortgage business) for the six months ended December 31, 1997. The ratio
improved as a result of economies of scale realized from a growing receivables
portfolio and automation of loan origination, processing and servicing
functions. The dollar amount of operating expenses increased by $20.2 million,
or 93%, primarily due to the addition of auto lending branch offices and
management, auto loan processing and servicing staff and the recently acquired
mortgage business.
The provision for losses increased from $3.2 million for the six months ended
December 31, 1996 to $3.8 million for the six months ended December 31, 1997 due
to higher average owned auto receivables outstanding.
Interest expense increased from $6.6 million for the six months ended December
31, 1996 to $12.0 million for the six months ended December 31, 1997 due to
higher debt levels and effective interest rates. Average debt outstanding was
$165.7 million and $257.6 million for the six months ended December 31, 1996 and
1997, respectively. The Company's effective rate of interest paid on its debt
increased from 7.9% to 9.3% as a result of the issuance of the Original Notes in
February 1997.
The Company's effective income tax rate was 38.5% for the six months ended
December 31, 1996 and 1997, respectively.
31
<PAGE>
Year Ended June 30, 1996 as compared to Year Ended June 30, 1997
REVENUE
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Auto
Owned.......................... $261,776 $223,351
Serviced....................... 96,190 568,804
-------- --------
357,966 792,155
Mortgage......................... 8,187
Other............................ 443
-------- --------
$358,409 $800,342
======== ========
</TABLE>
Average managed receivables outstanding increased by 123% as a result of
higher loan purchase volume. The Company purchased $432.4 million of auto loans
during fiscal 1996, compared to purchases of $906.8 million during fiscal 1997.
This growth resulted from loan production at branches open during both periods
as well as expansion of the Company's loan production capacity. The Company
operated 51 auto lending branch offices as of June 30, 1996, compared to 85 as
of June 30, 1997.
The Company purchased $53.8 million of mortgage loans from the date of
acquisition of AMS through June 30, 1997.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997
--------- --------
<S> <C> <C>
Auto............................. $51,679 $44,417
Mortgage......................... 493
Other............................ 27
------- -------
$51,706 $44,910
======= =======
</TABLE>
The decrease in finance charge income is due to a reduction of 15% in average
owned auto receivables outstanding for fiscal 1997 versus fiscal 1996. Prior to
December 1995, all of the auto finance contracts purchased by the Company were
held as owned auto receivables on the Company's consolidated balance sheets.
The Company began selling auto receivables to the Trusts in December 1995,
reducing average owned receivables with corresponding increases in average
serviced receivables.
The Company's effective yield on its owned auto receivables increased from
19.7% for fiscal 1996 to 19.9% for fiscal 1997.
The gain on sale of receivables consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1997
--------- --------
<S> <C> <C>
Auto............................. $22,873 $64,338
Mortgage......................... 2,918
------- -------
$22,873 $67,256
======= =======
</TABLE>
32
<PAGE>
The increase in gain on sale of auto receivables resulted from the sale of
$270.4 million of receivables in fiscal 1996 as compared to $817.5 million of
receivables sold in fiscal 1997. The gains amounted to 8.5% and 7.9% of the
sales proceeds for fiscal 1996 and 1997, respectively.
The gain on sale of mortgage receivables resulted from the sale of $52.5
million of mortgage receivables.
Servicing fee income increased from $3.7 million, or 3.9% of average serviced
auto receivables, for fiscal 1996, to $21.0 million, or 3.7% of average serviced
auto receivables, for fiscal 1997. Servicing fee income represents accretion of
the present value discount on estimated future excess cash flows from the
Trusts, base servicing fees and other fees earned by the Company as servicer of
the receivables sold to the Trusts. The growth in servicing fee income is
primarily due to the increase in average serviced auto receivables outstanding
for fiscal 1997 compared to fiscal 1996.
Investment income rose from $1.1 million for fiscal 1996 to $2.9 million for
fiscal 1997 primarily as a result of higher restricted cash balances.
Restricted cash is used as credit enhancement for the Trusts and increases as
greater amounts of receivables are sold to the Trusts.
COSTS AND EXPENSES
Operating expenses as a percentage of average managed receivables outstanding
decreased from 7.2% for fiscal 1996 to 6.6% (6.2% excluding operating expenses
of $2.6 million related to the mortgage business) for fiscal 1997. The ratio
improved as a result of economies of scale realized from a growing receivables
portfolio and automation of loan origination, processing and servicing
functions. The dollar amount of operating expenses increased by $26.2 million,
or 102%, primarily due to the addition of auto lending branch offices and
management, auto loan processing and servicing staff and the recently acquired
mortgage business.
The provision for losses decreased from $7.9 million for fiscal 1996 to $6.6
million for fiscal 1997 due to lower average owned auto receivables outstanding.
Interest expense increased from $13.1 million for fiscal 1996 to $16.3 million
for fiscal 1997 due to higher debt levels and effective interest rates. Average
debt outstanding was $156.4 million and $187.6 million for fiscal 1996 and 1997,
respectively. The Company's effective rate of interest paid on its debt
increased from 8.4% to 8.7% as a result of the issuance of the Original Notes in
February 1997.
The Company's effective income tax rate increased from 37.0% for fiscal 1996
to 38.5% for fiscal 1997 due to a larger portion of the Company's income being
generated in states which have higher tax rates.
Year Ended June 30, 1995 as compared to Year Ended June 30, 1996
REVENUE
The Company's average managed receivables outstanding consisted of the
following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Auto:
Owned....................... $141,526 $261,776
Serviced.................... 96,190
-------- --------
141,526 357,966
Other............................ 6,918 443
-------- --------
$148,444 $358,409
======== ========
</TABLE>
Average managed receivables outstanding increased by 141% as a result of
higher loan purchase volume. The Company purchased $230.2 million of auto loans
during fiscal 1995, compared to purchases of $432.4 million during
33
<PAGE>
fiscal 1996. This growth resulted from loan production at branches open during
both periods as well as expansion of the Company's loan production capacity. The
Company operated 31 branch offices as of June 30, 1995, compared to 51 as of
June 30, 1996.
Finance charge income consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1995 1996
--------- --------
<S> <C> <C>
Auto............................. $29,039 $51,679
Other............................ 1,210 27
------- -------
$30,249 $51,706
======= =======
</TABLE>
The rise in finance charge income is due to an increase of 85% in average
owned auto receivables outstanding for fiscal 1996 versus fiscal 1995. The
Company's effective yield on its owned auto receivables decreased from 20.5% to
19.7%.
The gain on sale of receivables of $22.9 million in fiscal 1996 resulted from
the sale of $270.4 million of receivables to the Trusts. The gain amounted to
8.5% of the sales proceeds. The Company's asset-backed securities transactions
in fiscal 1995 were structured as debt issuances by subsidiaries of the Company
and thus were accounted for as borrowings on the Company's consolidated balance
sheets rather than as sales of receivables.
Servicing fee income of $3.7 million in fiscal 1996 represents accretion of
the present value discount on estimated future excess cash flows from the
Trusts, base servicing fees and other fees earned by the Company as servicer of
the auto receivables sold to the Trusts.
COSTS AND EXPENSES
Operating expenses as a percentage of average managed receivables outstanding
decreased from 10.0% for fiscal 1995 to 7.2% for fiscal 1996. The ratio
improved as a result of economies of scale realized from a growing receivables
portfolio and automation of loan origination, processing and servicing
functions. The dollar amount of operating expenses increased by $10.9 million,
or 74%, primarily due to the addition of auto lending branch offices and
management and auto loan processing and servicing staff.
The provision for losses increased from $4.3 million for fiscal 1995 to $7.9
million for fiscal 1996 due to higher average owned auto receivables
outstanding.
Interest expense increased from $4.0 million for fiscal 1995 to $13.1 million
for fiscal 1996 due to the higher debt levels necessary to fund the Company's
increased loan origination volume.
The provision for income taxes in fiscal 1996 resulted primarily from
amortization of the Company's deferred tax asset at the federal statutory income
tax rate. In the fourth quarter of fiscal 1995, the Company recognized an
income tax benefit and a corresponding deferred tax asset equal to the expected
future tax savings from using its net operating loss carryforward and other
future tax benefits. The deferred tax asset is amortized through a non-cash
income tax provision against the Company's earnings as the net operating loss
carryforward and other future tax benefits are utilized. Prior to the fourth
quarter of fiscal 1995, the Company had offset the deferred tax asset with a
valuation allowance. Accordingly, there was no provision for federal income
taxes in fiscal 1995.
FINANCE RECEIVABLES
The Company provides financing in relatively high-risk markets, and therefore,
charge-offs are anticipated. The Company records a periodic provision for
losses as a charge to operations and a related allowance for losses in the
consolidated balance sheets as a reserve against estimated future losses in the
owned auto receivables portfolio. The Company typically purchases individual
finance contracts for a non-refundable acquisition fee on a non-recourse basis.
Such acquisition fees are also recorded in the consolidated balance sheets as an
allowance for losses. When the Company
34
<PAGE>
sells auto receivables to the Trusts, the calculation of the gain on sale of
receivables is reduced by an estimate of future credit losses expected over the
life of the auto receivables sold.
The Company sells mortgage receivables for cash on a servicing released,
whole-loan basis. Such receivables are generally held by the Company for less
than 90 days. Accordingly, no allowance for losses has been provided by the
Company for the mortgage receivables.
The Company reviews static pool origination and charge-off relationships,
charge-off experience factors, collection data, delinquency reports, estimates
of the value of the underlying collateral, economic conditions and trends and
other information in order to make the necessary judgments as to the
appropriateness of the provisions for losses and the allowance for losses.
Although the Company uses many resources to assess the adequacy of the allowance
for losses, there is no precise method for accurately estimating the ultimate
losses in the receivables portfolio.
The following tables present certain data related to the receivables portfolio
(dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------------
AUTO AUTO MANAGED
OWNED SERVICED PORTFOLIO
--------- ------------ ----------
<S> <C> <C> <C>
Principal amount of receivables............................. $264,086 $259,895 $523,981
Allowance for losses........................................ (13,602) $(25,616)(1) $(39,218)
-------- --------
Finance receivables, net................................ $250,484
--------
Number of outstanding contracts............................. 30,366 29,547 59,913
-------- -------- --------
Average amount of outstanding contract
(principal amount) (in dollars).......................... $ 8,697 $ 8,796 $ 8,746
-------- -------- --------
Allowance for losses as a percentage of receivables......... 5.2% 9.9% 7.5%
-------- -------- --------
<CAPTION>
JUNE 30, 1997
---------------------------------------------------- --------------
AUTO BALANCE AUTO MANAGED
OWNED MORTGAGE SHEET TOTAL SERVICED PORTFOLIO
---------- -------- ------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables............. $275,249 $ 4,354 $279,603 $ 863,006 $ 1,138,255 (2)
Allowance for losses........................ (12,946) (12,946) $ (74,925)(1) $ (87,871)(2)
-------- ------- -------- ----------- -----------
Finance receivables, net................ $262,303 $ 4,354 $266,657
-------- ------- --------
Number of outstanding contracts............. 25,757 48 87,090 112,847 (2)
-------- ------- ----------- -----------
Average amount of outstanding contracts
(principal amount) (in dollars).......... $ 10,686 $90,708 $ 9,909 $ 10,087 (2)
-------- ------- ----------- -----------
Allowance for losses as a percentage
of receivables........................... 4.7% 8.7% 7.7%(2)
-------- ----------- -----------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------- ----------------
AUTO BALANCE AUTO MANAGED
OWNED MORTGAGE SHEET TOTAL SERVICED PORTFOLIO
---------- -------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Principal amount of receivables........... $261,333 $ 7,808 $269,141 $ 1,337,940 $ 1,599,273 (2)
Allowance for losses...................... (11,350) (11,350) $ (112,294)(1) $ (123,644)(2)
-------- -------- -------- ------------ ------------
Finance receivables, net.............. $249,983 $ 7,808 $257,791
-------- -------- --------
Number of outstanding contracts........... 23,538 72 129,420 152,958 (2)
-------- -------- ------------ ------------
Average amount of outstanding contracts
(principal amount) (in dollars)........ $ 11,103 $108,444 $ 10,338 $ 10,456 (2)
-------- -------- ------------ ------------
Allowance for losses as a percentage
of receivables......................... 4.3% 8.4% 7.7%(2)
-------- ------------ ------------
</TABLE>
___________________
(1) The allowance for losses relating to serviced auto receivables is netted
against excess servicing receivable in the Company's consolidated balance
sheets.
(2) Includes auto receivables only
The following is a summary of managed auto receivables which are (i) more than
60 days delinquent, but not in repossession, and (ii) in repossession (dollars
in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1996 1997 1997
--------- --------- -------------
<S> <C> <C> <C>
Delinquent contracts........................................ $16,207 $36,421 $57,186
Delinquent contracts as a percentage of managed auto
receivables............................................... 3.1% 3.2% 3.6%
Contracts in repossession................................... $ 6,751 $14,471 $22,012
Contracts in repossession as a percentage of managed auto
receivables.............................................. 1.3% 1.3% 1.4%
</TABLE>
The following table presents charge-off data with respect to the Company's
managed auto receivables portfolio (dollars in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------ --------------------
1995 1996 1997 1996 1997
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net charge-offs:
Owned.......................................................... $6,409 $18,322 $16,965 $ 9,065 $ 5,624
Serviced....................................................... 1,652 26,266 8,684 32,449
------ ------- ------- ------- -------
$6,409 $19,974 $43,231 $17,749 $38,073
====== ======= ======= ======= =======
Net charge-offs as an annualized percentage of average managed
auto receivables outstanding (1)............................... 4.5% 5.6% 5.5% 5.5% 5.5%
====== ======= ======= ======= =======
</TABLE>
____________________
(1) Data for the six-month periods ended December 31, 1996 and 1997 have been
annualized.
The Company began its indirect automobile finance business in September 1992
and has grown its managed receivables portfolio to $1.6 billion as of December
31, 1997. The Company expects that its delinquency and charge-offs will
increase over time as the portfolio matures and its portfolio growth rate
moderates. Accordingly, the delinquency and charge-off data above is not
necessarily indicative of delinquency and charge-off experience that could be
expected for a more seasoned portfolio.
36
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows are summarized as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
--------------------------------- --------------------
1995 1996 1997 1996 1997
---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating activities....................... $ 14,637 $ 34,897 $ 66,132 $ 23,414 $ 8,950
Investing activities....................... (144,512) (63,116) (123,076) (20,820) (42,948)
Financing activities....................... 132,433 12,050 60,826 352 30,238
--------- -------- --------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................. $ 2,558 $(16,169) $ 3,882 $ 2,946 $ (3,760)
========= ======== ========= ======== ========
</TABLE>
The Company's primary sources of cash have been collections and recoveries on
its receivables portfolio, borrowings under its warehouse credit facilities,
sales of auto receivables to Trusts in securitization transactions, excess cash
flow distributions from the Trusts and the issuance of the Original Notes in
February 1997.
The Company's line of credit arrangement (the "Credit Agreement") with a group
of banks provides for borrowings up to $310 million, subject to a defined
borrowing base. The Company utilizes the line of credit to fund its auto
lending activities and daily operations. The facility matures in October 1998.
A total of $2.1 million was outstanding under the Credit Agreement as of
December 31, 1997.
In October 1997, the Company entered into a funding agreement with a funding
agent on behalf of an institutionally managed commercial paper conduit and a
group of banks under which up to $245 million of structured warehouse financing
is available to the Company (the "Warehouse Facility"). The Company utilizes
this facility to fund auto receivables pending securitization. The facility
matures in October 1998. A total of $96.0 million was outstanding under the
Warehouse Facility as of December 31, 1997.
The Company also has a mortgage warehouse facility (the "Mortgage Subsidiary
Credit Agreement") with a bank under which the Company may borrow up to $75
million, subject to a defined borrowing base, to fund mortgage loan
originations. The facility matures in February 1999. A total of $7.3 million
was outstanding under the Mortgage Subsidiary Credit Agreement as of December
31, 1997.
The Company has completed 11 securitization transactions through December 31,
1997. The proceeds from the transactions were used in each case to repay
borrowings then outstanding under the Company's Credit Agreement and Warehouse
Facility. A summary of these transactions is as follows:
37
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING
AS OF
ORIGINAL AMOUNT DEC. 31, 1997 ACCOUNTING
TRANSACTION DATE (IN MILLIONS) (IN MILLIONS) TREATMENT
- ------------------------------ --------- ---------------- -------------- -------------------
<S> <C> <C> <C> <C>
1994-A......................... Dec. 1994 $ 51.0 $ 0 Borrowing
1995-A......................... Jun. 1995 99.2 14.1 Borrowing
1995-B......................... Dec. 1995 65.0 16.1 Sale of Receivables
1996-A......................... Mar. 1996 89.4 30.5 Sale of Receivables
1996-B......................... May. 1996 115.9 52.8 Sale of Receivables
1996-C......................... Aug. 1996 175.0 85.5 Sale of Receivables
1996-D......................... Nov. 1996 200.0 119.7 Sale of Receivables
1997-A......................... Mar. 1997 225.0 163.6 Sale of Receivables
1997-B......................... May. 1997 250.0 202.6 Sale of Receivables
1997-C......................... Aug. 1997 325.0 296.2 Sale of Receivables
1997-D......................... Nov. 1997 400.0 395.7 Sale of Receivables
-------- --------
$1,995.5 $1,376.8
======== ========
</TABLE>
In February 1997, the Company issued $125 million of 9 1/4% Senior Notes
(Original Notes) which are due in February 2004. Interest on the notes is
payable semi-annually, in February and August. The notes, which are unsecured,
may be redeemed at the option of the Company after February 2001 at a premium
declining to par in February 2003. In January 1998, the Company issued an
additional $50 million of its 9 1/4% Senior Notes ("Old Notes").
The Company's primary use of cash has been purchases and originations of
receivables. The Company purchased $696.3 million of auto finance contracts
during the six months ended December 31, 1997 requiring cash of $686.5 million,
net of acquisition fees and other items. The Company purchased $906.8 million
of auto finance contracts during fiscal 1997 requiring cash of $896.7 million,
net of acquisition fees and other items. The Company operated 108 auto lending
branch offices as of December 31, 1997 and plans to open 17 additional branches
in the remainder of fiscal 1998. The Company may also expand loan production
capacity at existing offices where appropriate. While the Company has been able
to establish and grow its auto finance business thus far, there can be no
assurance that future expansion will be successful due to competitive,
regulatory, market, economic or other factors.
The Company's Board of Directors has authorized the repurchase of up to
6,000,000 shares of the Company's common stock. A total 4,594,700 shares at an
aggregate purchase price of $27.3 million had been purchased pursuant to this
program through December 31, 1997, although no common stock has been repurchased
since September 30, 1996. Certain restrictions contained in the Indenture
pursuant to which the Original Notes were issued limit the amount of common
stock which may be repurchased by the Company.
As of December 31, 1997, the Company had $8.8 million in cash and cash
equivalents and investment securities. The Company also had available borrowing
capacity of $125.3 million under the Credit Agreement, as adjusted for the
application of the net proceeds from the Prior Offering, pursuant to borrowing
base requirements. The Company estimates that it will require additional
external capital for the remainder of fiscal 1998 in addition to these existing
capital resources and collections and recoveries on its receivables portfolio
and excess cash flow distributions from the Trusts in order to fund expansion of
its lending activities, capital expenditures, and other costs and expenses.
The Company anticipates that such funding will be in the form of additional
securitization transactions. There can be no assurance that funding will be
available to the Company through these sources, or if available, that it will be
on terms acceptable to the Company.
FACTORS AFFECTING FUTURE LIQUIDITY
The Company's ability to make payments of principal of or interest on, or to
refinance its Indebtedness (including the Notes) will depend on its future
operating performance, and its ability to effect additional securitizations and
debt and/or equity financings, which to a certain extent is subject to economic,
financial, competitive and other factors beyond
38
<PAGE>
the Company's control. If the Company is unable to generate sufficient cash flow
in the future to service its debt, it may be required to refinance all or a
portion of its existing debt, including the Notes, or to obtain additional
financing. There can be no assurance that any such refinancing would be possible
or that any additional financing could be obtained. The inability to obtain
additional financing could have a material adverse effect on the Company.
The degree to which the Company is leveraged could have important consequences
to the holders of the Notes, including: (i) the Company may be more vulnerable
to adverse general economic and industry conditions; (ii) the Company may find
it more difficult to obtain additional financing for future working capital,
capital expenditures, acquisitions, general corporate purposes or other
purposes; and (iii) the Company will have to dedicate a substantial portion of
the Company's cash resources to pay principal and interest on the Credit
Agreement, the Mortgage Subsidiary Credit Agreement and the Warehouse Facility
(all of which become due prior to the maturity of the Notes), thereby reducing
the funds available for operations and future business opportunities. In
addition, the Original Indenture, the Indenture, the Credit Agreement, the
Warehouse Facility and the Mortgage Subsidiary Credit Agreement contain certain
covenants which could limit the Company's operating and financial flexibility.
See "Risk Factors."
HEDGING AND PRE-FUNDING STRATEGY
Since the Company's funding strategy is dependent upon the issuance of
interest-bearing securities and the incurrence of debt, fluctuations in interest
rates impact the Company's profitability. The Company utilizes several
strategies to minimize the risk of interest rate fluctuations including the use
of hedging instruments, the regular sale of auto receivables to the Trusts and
pre-funding securitizations, whereby the amount of asset-backed securities
issued in a securitization exceeds the amount of receivables initially sold to a
Trust. The proceeds from the pre-funded portion are held in an escrow account
until the Company sells additional receivables to the Trust in amounts up to the
balance of the pre-funded escrow account. In pre-funded securitizations, the
Company locks in the borrowing costs with respect to the loans it subsequently
delivers to the Trust. However, the Company incurs an expense in pre-funded
securitizations equal to the difference between the money market yields earned
on the proceeds held in escrow prior to subsequent delivery of receivables and
the interest rate paid on the asset-backed securities outstanding. There can be
no assurance that these strategies will be effective in minimizing interest rate
risk or that increases in interest rates will not have an adverse effect on the
Company's profitability.
RECENT ACCOUNTING DEVELOPMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for reporting
comprehensive income and its components in a full set of financial statements.
The new standard requires that all items that are required to be recognized
under accounting standards as components of comprehensive income, including an
amount representing total comprehensive income, be reported in a financial
statement that is displayed with the same prominence as other financial
statements. Pursuant to SFAS 130, the Company will be required to display total
comprehensive income, including net income and changes in the unrealized gain on
excess servicing receivable, in its consolidated financial statements for the
year ended June 30, 1999 and thereafter.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for the way companies report
information about operating segments in annual financial statements and requires
that enterprises report selected information about operating segments in interim
financial reports. The new pronouncement also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The statement is effective for financial statements for periods beginning after
December 15, 1997. The disclosures required by SFAS 131 are generally not
applicable, since the Company currently operates in only one reportable segment.
YEAR 2000 ISSUE
The Company is in the preliminary stages of investigating the impact of the
year 2000 issue and developing a remediation plan. The year 2000 issue is
whether the Company's or its vendors' computer systems will properly
39
<PAGE>
recognize date sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous data or
cause a system to fail.
The Company is in the process of conducting an initial assessment of
applicable computer systems to identify the systems that could be affected by
the year 2000 issue and has determined that modification or replacement of
portions of existing software will be required. The Company is utilizing both
internal and external resources to identify, modify or replace and test systems
for year 2000 compliance. The Company plans to complete application
modifications and upgrades by December 31, 1998, with testing to take place in
the first quarter of calendar year 1999. While the Company has not yet fully
evaluated the cost of year 2000 compliance, such costs are not expected to be
material to the Company's results of operations and liquidity.
The Company presently believes that with modifications to existing software
and conversion to new software, the year 2000 issue will not pose significant
operational problems for the Company's computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
year 2000 issue could have a material impact on the operations of the Company.
In addition, there can be no assurance that unforeseen problems in the Company's
computer systems, or the systems of third parties on which the Company's
computers rely, would not have an adverse effect on the Company's systems or
operations.
40
<PAGE>
BUSINESS
GENERAL
The Company is a consumer finance company specializing in purchasing,
securitizing and servicing retail automobile installment sales contracts
originated by franchised and select independent dealers in connection with the
sale of late model used and to a lesser extent new automobiles. The Company
targets borrowers with limited credit histories, modest incomes or those who
have experienced prior credit difficulties ("Sub-Prime Borrowers"). With the use
of proprietary credit scoring models, the Company underwrites contracts on a
decentralized basis through a nationwide branch office network. These credit
scoring models, combined with experienced underwriting personnel, enable the
Company to implement a risk-based pricing approach to structuring and
underwriting individual contracts. The Company's centralized risk management
department monitors these underwriting strategies and portfolio performance to
balance credit quality and profitability objectives. The loan portfolio is
serviced by the Company at centralized facilities located in Fort Worth, Texas,
Tempe, Arizona and Charlotte, North Carolina using automated loan servicing and
collection systems.
The Company had 108 branch offices as of December 31, 1997. As a result of
the Company's expansion strategy, the Company has been able to increase its
aggregate volume of automobile installment sales contracts purchased to $906.8
million in fiscal 1997 from $18.3 million in fiscal 1993. The Company has
continued this growth during the first six months of fiscal 1998, with purchases
aggregating $696.3 million, compared to $359.4 million during the same period in
fiscal 1997. The Company purchases contracts originated by dealers at prices
ranging from par to a discount of up to 10%. The average discount as a
percentage of the contracts purchased by the Company was approximately 3.4% in
fiscal 1997. For fiscal 1997, the average principal amount financed and weighted
average APR of contracts purchased by the Company were $11,874 and 19.7%,
respectively.
The Company generates earnings and cash flow primarily through the purchase,
retention, securitization and servicing of automobile receivables. In each
securitization, the Company sells automobile receivables to a trust or special
purpose finance subsidiary that, in turn, sells asset-backed securities to
investors. The Company recognizes a gain on the sale of the receivables to the
trust and receives monthly excess cash flow distributions from the trust
resulting from the difference between the interest received from the obligors on
the receivables and the interest on the asset-backed securities paid to
investors, net of losses and expenses. The Company typically begins to receive
excess cash flow distributions approximately seven to nine months after the
receivables are securitized, although these time periods may be shorter or
longer depending upon the structure of the securitization. The Company received
excess cash flow of $24.0 million from securitization trusts and special purpose
finance subsidiaries in fiscal 1997. Due to the time delay associated with
distributions of excess cash flow from securitizations, the Company expects to
receive increased cash flow distributions in fiscal 1998 from trusts created as
a result of securitization transactions occurring in fiscal 1997. Prior to such
time as the Company begins to receive excess cash flow, all excess cash flow is
utilized to fund credit enhancement requirements to secure financial guaranty
insurance policies issued by a monoline insurance company to protect investors
in the asset-backed securities from losses. Once predetermined credit
enhancement requirements are reached and maintained, excess cash flow is
distributed to the Company. In addition to excess cash flow, the Company earns
servicing fees of between 2.25% and 2.50% per annum of the outstanding principal
balance of receivables securitized. Over the four quarters ended December 31,
1997 the Company completed four securitization transactions totaling $1.2
billion.
BUSINESS STRATEGY
The Company's principal objective is to continue to build upon its position as
a leading indirect lender to Sub-Prime Borrowers. To achieve this objective, the
Company employs the following key strategies:
Continued Expansion of the Automobile Finance Branch Network. The Company
opened five branch offices in fiscal 1993, 13 in fiscal 1994, 13 in fiscal 1995,
20 in fiscal 1996, 34 in fiscal 1997 and 23 in fiscal 1998 through December 31,
1997, bringing its branch office network to 108 offices located in 32 states as
of December 31, 1997. Branch office personnel are responsible for the
development and maintenance of dealer relationships. As part of its goal of
increasing the number of dealers from whom it is purchasing automobile finance
contracts, the Company plans to open approximately 17 additional branch offices
during the remainder of fiscal 1998.
41
<PAGE>
Use of Proprietary Credit Scoring Models for Risk-based Pricing. The Company
has developed and implemented a credit scoring system across its branch office
network to support the branch level credit approval process. The Company's
proprietary credit scoring models are designed to enable AmeriCredit to tailor
each loan's pricing and structure to a statistical assessment of the underlying
credit risk.
Sophisticated Risk Management Techniques. The Company's centralized risk
management department is responsible for monitoring the origination process,
supporting management's supervision of each branch office, tracking collateral
values of the Company's receivables portfolio and monitoring portfolio returns.
This risk management department uses proprietary databases to identify
concentrations of risk, to price for the risk associated with selected market
segments and to endeavor to enhance the credit quality and profitability of the
contracts purchased.
High Investment in Technology to Support Operating Efficiency and Growth.
The use of leading-edge technology in both loan origination and servicing has
enabled AmeriCredit to become a low-cost provider in the sub-prime automobile
finance market. AmeriCredit's annualized ratio of operating expenses to average
managed receivables was 10.0% for fiscal 1995, 7.2% for fiscal 1996, 6.6% for
fiscal 1997 and 6.0% for the six months ended December 31, 1997.
Leveraging Sub-Prime Lending Expertise. AMS, a subsidiary acquired in 1996,
is a residential mortgage lender specializing in originating and purchasing home
equity mortgage loans made to Sub-Prime Borrowers from a network of mortgage
brokers. AMS has originated $105.4 million of mortgage loans from its date of
acquisition through December 31, 1997. The Company believes that over time it
can leverage its national presence, risk management techniques and state-of-the-
art technology to broaden its indirect lending to Sub-Prime Borrowers. AMS's
corporate office is located in Orange, California. AMS has historically sold its
home equity loans and the related servicing rights to third party investors.
Funding and Liquidity Through Securitizations. The Company sells automobile
receivables in securitization transactions in order to obtain a cost-effective
source of funds for the purchase of additional automobile finance contracts, to
reduce the risk of interest rate fluctuations and to utilize capital
efficiently. Since the Company's first securitization transaction in December
1994, the Company has securitized approximately $2.0 billion of automobile
receivables in private and public offerings of asset-backed securities.
MARKET AND COMPETITION
According to CNW Marketing/Research, an independent automobile finance market
research firm, the automobile finance industry is the second largest consumer
finance industry in the United States with over $427 billion of franchised
dealers loan and lease originations during 1996. The industry is generally
segmented according to the type of car sold (new vs. used) and the credit
characteristics of the borrower (prime vs. sub-prime segment). The sub-prime
segment of the market accounted for approximately $75 billion of these
originations.
Competition in the field of sub-prime automobile finance is intense. The
automobile finance market is highly fragmented and is served by a variety of
financial entities including the captive finance affiliates of major automotive
manufacturers, banks, thrifts, credit unions and independent finance companies.
Many of these competitors have greater financial resources and lower costs of
funds than the Company. Many of these competitors also have long standing
relationships with automobile dealerships and may offer dealerships or their
customers other forms of financing, including dealer floor plan financing and
leasing, which are not provided by the Company. Providers of automobile
financing have traditionally competed on the basis of interest rates charged,
the quality of credit accepted, the flexibility of loan terms offered and the
quality of service provided to dealers and customers. In seeking to establish
itself as one of the principal financing sources at the dealers it serves, the
Company competes predominately on the basis of its high level of dealer service
and strong dealer relationships and by offering flexible loan terms. The Company
also seeks to offer rates that are competitive and that are consistent with its
goal of balancing risk and returns.
OPERATIONS
Dealership Marketing. Since the Company is an indirect lender, the Company
focuses its marketing activities on automobile dealerships. The Company is
selective in choosing the dealers with whom it conducts business and primarily
pursues manufacturer franchised dealerships with used car operations and select
independent dealerships. The
42
<PAGE>
Company selects these dealers because they sell the type of used cars the
Company prefers to finance, specifically later model, low mileage used cars. Of
the contracts purchased by the Company during the fiscal year ended June 30,
1997, approximately 84% were originated by manufacturer franchised dealers with
used car operations and 16% by select independent dealers. The Company purchased
contracts from 5,657 dealers during the fiscal year ended June 30, 1997. No
dealer accounted for more than 2% of the total volume of contracts purchased by
the Company for that same period.
The Company's financing programs are marketed to dealers through branch
office personnel, including branch managers, assistant managers and in some
cases marketing representatives. The Company believes that the personal
relationships its branch managers and other branch office personnel establish
with the dealership personnel are an important factor in creating and
maintaining productive relationships with its dealership customer base. Branch
office personnel are responsible for the solicitation, enrollment and education
of new dealers regarding the Company's financing programs. Branch office
personnel visit dealerships to present information regarding the Company's
financing programs and capabilities. These personnel explain the Company's
underwriting philosophy, including its preference for sub-prime quality
contracts secured by later model, lower mileage used vehicles and its practice
of underwriting in the local branch office.
Prior to entering into a relationship with a dealer, the Company considers
the dealer's operating history and reputation in the marketplace. The Company
then maintains a non-exclusive relationship with the dealer. This relationship
is actively monitored with the objective of maximizing the volume of
applications received from the dealer that meet the Company's underwriting
standards and profitability objectives. Due to the non-exclusive nature of the
Company's relationships with dealerships, the dealerships retain discretion to
determine whether to obtain financing from the Company or from another source
for a customer seeking to finance a vehicle purchase. Branch managers and other
branch office personnel regularly telephone and visit dealers to solicit new
business and to answer any questions dealers may have regarding the Company's
financing programs and capabilities. To increase the effectiveness of these
contacts, the branch managers and other branch office personnel have access to
the Company's management information systems which detail current information
regarding the number of applications submitted by dealership, the Company's
response and the reasons why a particular application was rejected.
Finance contracts are generally purchased by the Company without recourse
to the dealer, and accordingly, the dealer usually has no liability to the
Company if the consumer defaults on the contract. To mitigate the Company's
risk from potential credit losses, the Company typically charges dealers an
acquisition fee when purchasing finance contracts. Such acquisition fees are
negotiated with dealers on a contract-by-contract basis and are usually non-
refundable. Although finance contracts are purchased without recourse to the
dealer, the dealer typically makes certain representations as to the validity of
the contract and compliance with certain laws, and indemnifies the Company
against any claims, defenses and set-offs that may be asserted against the
Company because of assignment of the contract. Recourse based upon such
representations and indemnities would be limited in circumstances in which the
dealer has insufficient financial resources to perform upon such representations
and indemnities. The Company does not view recourse against the dealer on these
representations and indemnities to be of material significance in its decision
to purchase finance contracts from a dealer.
Branch Office Network. The Company uses a branch office network to market
its financing programs to selected dealers and develop relationships with these
dealers throughout the country. Additionally, the branch office network is used
for the underwriting of contracts submitted by dealerships. The Company believes
a local presence enables the Company to more fully service dealers and be more
responsive to dealer concerns and local market conditions. The Company selects
markets for branch office locations based upon numerous factors, including
demographic trends and data, competitive conditions and the regulatory
environment in addition to the availability of qualified personnel. Branch
offices are typically situated in suburban office buildings which are accessible
to local dealers.
Each branch office solicits dealers for contracts and maintains the
Company's relationship with the dealers in the geographic vicinity of that
branch office. Branch office locations are typically staffed by a branch
manager, an assistant manager and one or more dealer and customer service
representatives. Larger branch offices may also have an additional assistant
manager and/or dealer marketing representative. Branch managers are compensated
with base salaries, annual incentives based primarily on branch level credit
quality and, if the credit quality objectives are met, loan volume. The
incentives are typically paid in cash and stock option grants. The branch
managers report to regional vice presidents.
The Company's regional vice presidents monitor branch office compliance
with the Company's underwriting guidelines. The Company's automated application
processing system and loan accounting system provide the regional
43
<PAGE>
vice presidents access to credit application information enabling them to
consult with the branch managers on daily credit decisions and review exceptions
to the Company's underwriting guidelines. The regional vice presidents also make
periodic visits to the branch offices to conduct operating reviews. The regional
vice presidents receive incentives based on the overall performance of the
Company.
The following table sets forth information with respect to the number of
branches, dollar volume of contracts purchased and number of producing
dealerships for the periods set forth below.
<TABLE>
<CAPTION>
SIX-MONTHS
ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------- ------------------
1995 1996 1997 1996 1997
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
($ IN THOUSANDS)
Number of branch offices............................ 31 51 85 66 108
Dollar volume of contracts purchased................ $230,176 $432,442 $906,794 $359,407 $696,252
Number of producing dealerships(1).................. 1,861 3,262 5,657 3,299 5,911
</TABLE>
______________
(1) A producing dealership refers to a dealership from which the Company had
purchased contracts in the relevant period.
The Company plans to expand its indirect automobile finance business by adding
additional branch offices and increasing dealer penetration at its existing
branch offices. The success of this strategy is dependent upon, among other
factors, the Company's ability to hire and retain qualified branch managers and
other personnel and to develop relationships with more dealers. The Company
confronts intense competition in attracting key personnel and establishing
relationships with dealers. Dealers often already have favorable sub-prime
financing sources, which may restrict the Company's ability to develop dealer
relationships and delay the Company's growth. In addition, the competitive
conditions in the Company's markets may result in a reduction in the
profitability of the contracts that the Company purchases or a decrease in
contract acquisition volume, which would adversely affect the Company's results
of operations.
UNDERWRITING AND PURCHASING OF CONTRACTS
Proprietary Credit Scoring System and Risk-based Pricing. The Company has
implemented a credit scoring system throughout its branch office network to
support the branch level credit approval process. The credit scoring system was
developed with the assistance of Fair, Isaac and Co., Inc. from the Company's
loan and portfolio databases. Credit scoring is used to differentiate credit
applicants and to rank order credit risk in terms of expected default rates,
which enables the Company to tailor loan pricing and structure according to this
statistical assessment of credit risk. For example, a consumer with a lower
score would indicate a higher probability of default and, therefore, the Company
could compensate for this higher default risk through the structuring and
pricing of the transaction. While the Company employs a credit scoring system in
the credit approval process, credit scoring does not eliminate credit risk.
Adverse determinations in evaluating contracts for purchase could adversely
affect the credit quality of the Company's receivables portfolio.
The credit scoring system contrasts the quality of credit applicant profiles
resulting in a statistical assessment of the most predictive characteristics.
Factors considered in any loan application include data presented on the
application, the credit bureau report and the type of loan the applicant wishes
to secure. Specifically, the credit scoring system considers customer
residential and employment stability, the customer's financial history, current
financial capacity, integrity of meeting historical financial obligations, loan
structure and credit bureau information. The scorecards take these factors into
account and produce a statistical assessment of these attributes. This
assessment is used to segregate applicant risk profiles and determine whether
risk is acceptable and the price the Company should charge for that risk. The
credit scorecards are validated on a monthly basis through the comparison of
actual versus projected performance by score. The Company will continue to
refine its proprietary scorecards based on increased information and identified
correlations relating to receivables performance.
44
<PAGE>
Through the use of the Company's proprietary credit scoring system, branch
office personnel with credit authority are able to more efficiently review and
prioritize loan applications. Applications which receive a high score are
processed rapidly and credit decisions can be quickly faxed back to the dealer.
Applications receiving low scores can be quickly rejected without further
processing and review by the Company. This ability to prioritize applications
allows for a more effective allocation of resources to those applications
requiring more review.
Decentralized Loan Approval Process. The Company purchases individual
contracts through its branch offices based on a decentralized credit approval
process tailored to local market conditions. Each branch manager has a specific
credit authority based upon his experience and historical loan portfolio results
as well as established credit scoring parameters. In certain markets where a
branch office is not present and with respect to certain large dealer groups,
contracts are purchased through the Company's regional purchasing offices.
Although the credit approval process is decentralized, all credit decisions are
guided by the Company's credit scoring strategies, overall credit and
underwriting policies and procedures and daily monitoring process.
Loan application packages completed by prospective obligors are received via
facsimile at the branch offices from dealers. Application data are entered into
the Company's automated application processing system. A credit bureau report is
automatically generated and credit scores are computed. Branch office personnel
with credit authority review the application package and determine whether to
approve the application, approve the application subject to conditions that must
be met or deny the application. These personnel consider many factors in
arriving at a credit decision, relying primarily on the applicant's credit
score, but also taking into account the applicant's capacity to pay, stability,
character and intent to pay, the contract terms and collateral value. The
Company estimates that approximately 60% to 65% of applicants are denied credit
by the Company typically because of their credit histories or because their
income levels are not sufficient to support the proposed level of monthly
payments. As part of the credit decision process, a customer service
representative investigates the residence, employment and credit history of the
applicant. Dealers are contacted regarding credit decisions by telefax and/or
telephone. Declined and conditioned applicants are also provided with
appropriate notification of the decision.
The Company's underwriting and collateral guidelines as well as credit scoring
parameters form the basis for the branch level credit decision; however, the
qualitative judgment of the branch office personnel with credit authority with
respect to the credit quality of an applicant is a significant factor in the
final credit decision. Exceptions to credit policies and authorities must be
approved by a regional vice president or other designated credit officer.
Completed loan packages are sent by the dealers to the branch office. Loan
terms and insurance coverages are generally reverified with the consumer by
branch office personnel and the loan packages are forwarded to the Company's
centralized loan services department, where the packages are scanned to create
electronic copies. Key original documents are stored in a fire-proof vault and
the loan packages are further processed in an electronic environment. The loans
are reviewed for proper documentation and regulatory compliance and are entered
into the Company's loan accounting system. Daily loan reports are generated for
final review by senior operations management. Once cleared for funding, the loan
services department issues a check or electronically transfers funds to the
dealer. Upon funding of the contract, the Company acquires a perfected security
interest in the automobile that was financed. All of the Company's contracts are
fully amortizing with substantially equal monthly installments.
SERVICING AND COLLECTIONS PROCEDURES
General. The Company services its receivables portfolio at facilities located
in Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina. The
Company's servicing activities consist of collecting and processing customer
payments, responding to customer inquiries, initiating contact with customers
who are delinquent in payment of a receivable installment, maintaining the
security interest in the financed vehicle and repossessing and liquidating
collateral when necessary. The Company utilizes various automated systems to
support its servicing and collections activities. The Company uses monthly
billing statements to serve as a reminder to customers as well as an early
warning mechanism in the event a customer has failed to notify the Company of an
address change. Approximately 15 days before a customer's first payment due date
and each month thereafter, the Company mails the customer a billing statement
directing the customer to mail payments to a lockbox bank for deposit in a
lockbox account. Payment receipt data is electronically transferred from the
Company's lockbox bank to the Company for posting to the loan accounting system.
Payments may also be received directly by the Company from customers. All
payment processing and customer account maintenance
45
<PAGE>
is performed centrally in Fort Worth, Texas by the loan services department. The
Company receives servicing fees for servicing securitized receivables equal to
2.25% to 2.50% per annum of the outstanding principal balance of such
receivables.
The Company maintains computerized records with respect to each finance
contract to record receipts and disbursements and to prepare related reports.
The Company utilizes a predictive dialing system to make phone calls to
customers whose payments are past due by less than 30 days. The predictive
dialer is a computer-controlled telephone dialing system which dials phone
numbers of customers from a file of records extracted from the Company's
database. Once a live voice responds to the automated dialer's call, the system
automatically transfers the call to a collector and the relevant account
information appears on the collector's computer screen. The system also tracks
and notifies collections management of phone numbers that the system has been
unable to reach within a specified number of days, thereby promptly identifying
for management all customers who cannot be reached by telephone. By eliminating
time wasted on attempting to reach customers, the system gives a single
collector the ability to speak with a larger number of accounts daily.
Once an account becomes more than 30 days delinquent, the account moves to the
Company's mid-range collection unit. The objective of these collectors is to
prevent the account from becoming further delinquent. After a scheduled payment
on an account becomes approximately 60 days past due, the Company typically
initiates repossession of the financed vehicle. However, if an account is deemed
uncollectible, if the financed vehicle is deemed by collection personnel to be
in danger of being damaged, destroyed or hidden, if the customer deals in bad
faith or if the customer voluntarily surrenders the financed vehicle, the
Company may repossess it without regard to the length of payment delinquency.
Payment deferrals are at times offered to customers who have encountered
temporary financial difficulty, hindering their ability to pay as contracted,
and when other methods of assisting the customer in meeting the contract terms
and conditions have been exhausted. A deferral allows the customer to move a
delinquent payment to the end of the loan by paying a fee (approximately the
interest portion of the payment deferred). The collector must review the past
payment history and assess the customer's desire and capacity to make future
payments and, before agreeing to a deferral, must comply with the Company's
policies and guidelines for deferrals. Exceptions to the Company's policies and
guidelines for deferrals must be approved by a collections officer. Deferment
transactions are processed by the loan services department. As of December 31,
1997, approximately 11.8% of the Company's managed receivables have ever
received a deferral.
Repossessions. The Company follows prescribed legal procedures for
repossessions, which include peaceful repossession, one or more consumer
notifications, a prescribed waiting period prior to disposition of the
repossessed automobile and return of personal items to the consumer. In some
jurisdictions, the Company must provide the consumer with reinstatement or
redemption rights. Legal requirements, particularly in the event of bankruptcy,
may restrict the Company's ability to dispose of the repossessed vehicle.
Repossessions are handled by independent repossession firms engaged by the
Company. Repossessions must be approved by a collections officer. Upon
repossession and after any prescribed waiting period, the repossessed automobile
is sold at auction. The Company does not sell any vehicles on a retail basis.
The proceeds from the sale of the automobile at auction, and any other
recoveries, are credited against the balance of the contract. Auction proceeds
from the sale of the repossessed vehicle and other recoveries are usually not
sufficient to cover the outstanding balance of the contract, and the resulting
deficiency is charged-off. The Company may pursue collection of deficiencies
when it deems such action to be appropriate.
Charge-Off Policy. The Company's policy is to charge-off an account in the
month in which the account becomes 180 days contractually delinquent even if the
Company has not repossessed the related vehicle. On accounts less than 180 days
delinquent, the Company charges-off the account when the vehicle securing the
delinquent contract is repossessed and disposed of. The charge-off represents
the difference between the actual net sales proceeds and the amount of the
delinquent contract, including accrued interest. Accrual of finance charge
income is suspended on accounts which are more than 60 days contractually
delinquent.
46
<PAGE>
RISK MANAGEMENT
Overview. The Company has developed procedures to evaluate and supervise the
operations of each branch office on a centralized basis. The Company's
centralized risk management department is responsible for monitoring the
contract purchase process and supporting the supervisory role of senior
operations management. This department tracks via databases key variables, such
as loan applicant data, credit bureau and credit score information, loan
structures and terms and payment histories. The risk management department also
regularly reviews the performance of the Company's credit scoring system and is
involved with third-party vendors in the development and enhancement of credit
scorecards for the Company.
The risk management department also prepares regular credit indicator packages
reviewing portfolio performance at various levels of detail including total
Company, branch office and dealer. Various daily reports and analytical data are
also generated by the Company's management information systems. This information
is used to monitor credit quality as well as to constantly refine the structure
and mix of new contract purchases. Portfolio returns are reviewed on a
consolidated basis, as well as at the branch office, dealer and contract levels.
Behavioral Scoring. A behavioral scoring model is used to project the relative
probability that an individual account will default and to validate the credit
scoring system after the receivable has aged for a sufficient period of time
(generally six to nine months). Default probabilities are calculated for each
account independent of the credit score. The Company believes that, when grouped
by credit score at origination, projected default rates from the behavioral
scoring model coincide with the credit scoring system.
Collateral Value Management. The value of the collateral underlying the
Company's receivables portfolio is updated monthly with a loan-by-loan link to
national wholesale auction values. This data, along with the Company's own
experience relative to mileage and vehicle condition, are used for evaluating
collateral disposition activities as well as for reserve analysis models.
Compliance Audits. The Company's risk management department conducts regular
compliance audits of branch office operations and the loan services and
collections departments. The primary objective of the audits is to measure
compliance with the Company's written policies and procedures as well as
regulatory matters. Audits of branch office operations are conducted no less
than every six months and include a review of compliance with underwriting
policies, completeness of loan documentation, assessment of collateral value and
extent of applicant data investigation. Written audit reports are distributed to
local branch office personnel and the regional vice presidents for response and
follow-up. Senior operations management reviews copies of these reports.
SECURITIZATION OF LOANS
Since December 1994, the Company has pursued a strategy of securitizing its
receivables to diversify its funding, improve liquidity and obtain a cost-
effective source of funds for the purchase of additional automobile finance
contracts. The Company applies the net proceeds from securitizations to pay down
borrowings under its Credit Agreement and Warehouse Facility, thereby increasing
availability thereunder for further contract purchases. Through December 31,
1997, the Company had securitized approximately $2.0 billion of automobile
receivables.
In its securitizations, the Company, through wholly-owned subsidiaries,
transfers automobile receivables to newly-formed securitization trusts, which
issue one or more classes of asset-backed securities. The asset-backed
securities are simultaneously sold to investors, except for certain subordinated
interests which may be retained by wholly-owned subsidiaries of the Company and
which are included in excess servicing receivable in the Company's consolidated
financial statements.
When receivables are transferred to securitization trusts in securitization
transactions, the Company recognizes a gain on sale of receivables and continues
to service such receivables. The gain on sale of receivables represents the
difference between the sales proceeds, net of transaction costs, and the
Company's net carrying value of the receivables sold, plus the present value of
estimated excess cash flows. The excess cash flows are the difference between
the cash collected from obligors on securitized receivables and the sum of (i)
principal and interest paid to investors in the asset-backed securities; (ii)
contractual servicing fees; (iii) defaults, net of recoveries; and (iv) other
expenses such as trustee
47
<PAGE>
fees and financial guarantee insurance premiums. Concurrently with recognizing
such gain on sale of receivables, the Company records a corresponding asset,
excess servicing receivable, which includes the present value of estimated
excess cash flows as described above plus any subordinated interests in the
securitization trusts retained by the Company.
The calculation of excess servicing receivable includes estimates of future
losses and prepayment rates for the remaining term of the receivables sold since
these factors impact the amount and timing of future cash collected on the
receivables sold. The carrying value of excess servicing receivable is reviewed
on a quarterly basis. If future losses and prepayment rates exceed the
Company's original estimates, excess servicing receivable will be adjusted
through a charge to operations. Through December 31, 1997, no material charge
has been made. Favorable credit loss and prepayment experience compared to the
Company's original estimates would result in additional income when realized.
See "Risk Factors--Default and Prepayment Risks."
In connection with the Company's securitization program, the Company arranges
for credit enhancement to achieve a desired credit rating on the asset-backed
securities issued. The credit enhancement for the Company's securitizations has
taken the form of financial guaranty insurance policies issued by FSA, a
monoline insurer, which insures the timely payment of principal and interest due
on the asset-backed securities. As of December 31, 1997, FSA had insured all the
Company's asset-backed securities. See "Risk Factors--Dependence on Funding
Sources--Dependence on Securitization Program." The Company has limited
reimbursement obligations to FSA; however, credit enhancement requirements,
including FSA's encumbrance of certain restricted cash accounts and subordinated
interests in trusts, provide a source of funds to cover shortfalls in
collections (as described below) and to reimburse FSA for any claims which may
be made under the policies issued with respect to the Company's securitizations.
The credit enhancement requirements for any securitization include restricted
cash accounts which are generally established with an initial deposit and
subsequently funded through excess cash flows from securitized receivables.
Funds are withdrawn from the restricted cash accounts to cover any shortfalls in
amounts payable on the asset-backed securities. Funds are also available to be
withdrawn in an event of default to reimburse FSA for draws on its financial
guaranty insurance policy. In addition, the restricted cash account for each
securitization trust is cross-collateralized to the restricted cash accounts
established in connection with the Company's other securitization trusts, such
that excess cash flow from a performing securitization trust insured by FSA may
be used to support cash flow shortfalls from a non-performing securitization
trust insured by FSA, thereby further restricting excess cash flow available to
the Company. The Company is entitled to receive amounts from the restricted cash
accounts to the extent the amounts deposited exceed predetermined required
minimum levels.
FSA has taken a pledge of the stock of AFS Funding Corp., the wholly-owned
subsidiary of the Company that owns the restricted cash accounts and excess
servicing receivable, such that, if the pledge is exercised in the event of a
payment under one of its insurance policies or certain material adverse changes
in the business of the Company, FSA would control all of the restricted cash
accounts and excess servicing receivable. The terms of each securitization also
provide that, under certain tests relating to delinquencies, defaults and
losses, cash may be retained in the restricted cash account and not released to
the Company until increased minimum levels of credit enhancement requirements
have been reached.
TRADE NAMES
The Company has obtained federal trademark protection for the "AmeriCredit"
name and the logo that incorporates the "AmeriCredit" name.
REGULATION
The Company's operations are subject to regulation, supervision and licensing
under various federal, state and local statutes, ordinances and regulations.
In most states in which the Company operates, a consumer credit regulatory
agency regulates and enforces laws relating to consumer lenders and sales
finance agencies such as the Company. Such rules and regulations generally
provide for licensing of sales finance agencies, limitations on the amount,
duration and charges, including interest rates, for various categories of loans,
requirements as to the form and content of finance contracts and other
documentation and
48
<PAGE>
restrictions on collection practices and creditors' rights. In certain states,
the Company's branch offices are subject to periodic examination by state
regulatory authorities. Some states in which the Company operates do not require
special licensing or provide extensive regulation of the Company's business.
The Company is also subject to extensive federal regulation, including the
Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit
Reporting Act. These laws require the Company to provide certain disclosures to
prospective borrowers and protect against discriminatory lending practices and
unfair credit practices. The principal disclosures required under the Truth in
Lending Act include the terms of repayment, the total finance charge and the
annual percentage rate charged on each loan. The Equal Credit Opportunity Act
prohibits creditors from discriminating against loan applicants on the basis of
race, color, sex, age or marital status. Pursuant to Regulation B promulgated
under the Equal Credit Opportunity Act, creditors are required to make certain
disclosures regarding consumer rights and advise consumers whose credit
applications are not approved of the reasons for the rejection. In addition, the
credit scoring system used by the Company must comply with the requirements for
such a system as set forth in the Equal Credit Opportunity Act and Regulation B.
The Fair Credit Reporting Act requires the Company to provide certain
information to consumers whose credit applications are not approved on the basis
of a report obtained from a consumer reporting agency.
The dealers who originate automobile loans purchased by the Company also must
comply with both state and federal credit and trade practice statutes and
regulations. Failure of the dealers to comply with such statutes and regulations
could result in consumers having rights of rescission and other remedies that
could have an adverse effect on the Company.
Management believes that the Company maintains all material licenses and
permits required for its current operations and is in substantial compliance
with all applicable local, state and federal regulations. There can be no
assurance, however, that the Company will be able to maintain all requisite
licenses and permits and the failure to satisfy those and other regulatory
requirements could have a material adverse effect on the operations of the
Company. Further, the adoption of additional, or the revision of existing, rules
and regulations could have a material adverse effect on the Company's business.
As a consumer finance company, the Company is subject to various consumer
claims and litigation seeking damages and statutory penalties based upon, among
other theories of liability, usury, wrongful repossession, fraud and
discriminatory treatment of credit applicants, which could take the form of a
plaintiffs class action complaint. The Company, as the assignee of finance
contracts originated by dealers, may also be named as a co-defendant in lawsuits
filed by consumers principally against dealers. The damages and penalties
claimed by consumers in these types of matters can be substantial. Management
believes that the Company has taken prudent steps to address the litigation
risks associated with its business activities. However, there can be no
assurance that the Company will be able to successfully defend against all such
consumer claims, or that the determination of any such claim in a manner adverse
to the Company would not have a material adverse effect on the Company's
indirect automobile finance business.
HOME EQUITY LOAN OPERATIONS
In November 1996, the Company acquired AMS. AMS originates and acquires sub-
prime home equity loans through a network of mortgage brokers. AMS sells its
home equity loans and the related servicing rights in the wholesale markets.
While not currently representing a material portion of the Company's assets or
revenues, management intends over time to devote substantial resources to pursue
growth of AMS's business of originating home equity loans to sub-prime
borrowers. There can be no assurance, however, that the Company will be able to
successfully expand such business or that the failure to effectively expand such
business will not have a material adverse effect on the Company's financial
position, liquidity or results of operations. See "Risk Factors--Implementation
of Business Strategy."
49
<PAGE>
PROPERTIES
The Company's executive offices are located at 200 Bailey Avenue, Fort Worth,
Texas, in a 43,000 square foot building purchased by the Company in February
1994. This building is utilized by the Company for branch office support and
administrative activities. The Company also leases 66,800 square feet of office
space in Tempe, Arizona under a ten year agreement with renewal options that
commenced in 1996, 58,700 square feet of office space in Charlotte, North
Carolina under an eleven year agreement with renewal options that commenced in
1997 and 66,000 square feet of office space in Fort Worth, Texas under
agreements that extend through December 2000. These facilities are used for
various operating activities.
The Company's branch office facilities are generally leased under agreements
with original terms of three to five years. Such facilities are typically
located in a suburban office building and consist of between 1,000 and 2,000
square feet of space.
EMPLOYEES
At December 31, 1997, the Company employed approximately 1,200 persons.
LEGAL PROCEEDINGS
In the normal course of its business, the Company is named as a defendant in
legal proceedings. These cases include claims for alleged truth-in-lending
violations, nondisclosures, misrepresentations and deceptive trade practices,
among other things. The relief requested by the plaintiffs varies but includes
requests for compensatory, statutory and punitive damages. In the opinion of
management, the resolution of these proceedings will not have a material adverse
effect on the consolidated financial position, results of operations or
liquidity of the Company.
50
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the current
directors and executive officers of the Company as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Clifton H. Morris, Jr. ... 62 Chairman of the Board and Chief Executive Officer
Michael R. Barrington .... 39 Vice Chairman of the Board, President and Chief Operating Officer
Daniel E. Berce .......... 44 Vice Chairman of the Board and Chief Financial Officer
Edward H. Esstman ........ 57 President and Chief Operating Officer of AmeriCredit Financial
Services, Inc., Executive Vice President--Auto Finance Division
and Director
Chris A. Choate .......... 34 Senior Vice President, General Counsel and Secretary
Cheryl L. Miller ......... 33 Senior Vice President, Director of Collections and
Customer Service of AmeriCredit Financial Services, Inc.
Michael T. Miller ........ 36 Senior Vice President and Chief Credit Officer
Preston A. Miller ........ 34 Senior Vice President and Treasurer
James H. Greer ........... 71 Director
Gerald W. Haddock ........ 50 Director
Douglas K. Higgins ....... 48 Director
Kenneth H. Jones, Jr. .... 62 Director
</TABLE>
Clifton H. Morris, Jr. has been Chairman of the Board and Chief Executive
Officer of the Company since May 1988, and was also President of the Company
from such date until April 1991 and from April 1992 to November 1996. Mr.
Morris is also a director of Service Corporation International, a publicly held
company which owns and operates funeral homes and related businesses.
Michael R. Barrington has been Vice Chairman, President and Chief Operating
Officer of the Company since November 1996 and was Executive Vice President and
Chief Operating Officer of the Company from November 1994 until November 1996.
Mr. Barrington was a Vice President of the Company from May 1991 until November
1994. From its formation in July 1992 until November 1996, Mr. Barrington was
also the President and Chief Operating Officer of AmeriCredit Financial
Services, Inc. ("AFSI"), a subsidiary of the Company.
Daniel E. Berce has been Vice Chairman and Chief Financial Officer of the
Company since November 1996 and was Executive Vice President, Chief Financial
Officer and Treasurer for the Company from November 1994 until November 1996.
Mr. Berce was Vice President, Chief Financial Officer and Treasurer of the
Company from May 1991 until November 1994.
Edward H. Esstman has been President and Chief Operating Officer of AFSI since
November 1996. Mr. Esstman was Executive Vice President, Director of Consumer
Finance Operations of AFSI from November 1994 until November 1996 and was Senior
Vice President, Director of Consumer Finance of AFSI from AFSI's formation in
July 1992 until November 1994. Mr. Esstman has also been Executive Vice
President--Auto Finance Division for the Company since November 1996 and Senior
Vice President and Chief Credit Officer for the Company from November 1994 until
November 1996.
Chris A. Choate has been Senior Vice President, General Counsel and Secretary
of the Company since November 1996 and was Vice President, General Counsel and
Secretary of the Company from November 1994 until November 1996 and General
Counsel and Secretary of the Company from January 1993 until November 1994.
From July 1991 until January 1993, Mr. Choate was Assistant General Counsel.
Cheryl L. Miller has been Senior Vice President, Collections and Customer
Service of AFSI since March 1996 and Vice President, Collections and Customer
Service of AFSI from October 1994 until March 1996. From May 1994 until
51
<PAGE>
October 1994, Ms. Miller acted in other management capacities for AFSI. Prior to
that, Ms. Miller was with Ford Motor Credit Company, most recently as customer
service supervisor of the Dallas branch.
Michael T. Miller has been Senior Vice President and Chief Credit Officer of
the Company since November 1996. Mr. Miller has also been Senior Vice President,
Risk Management, Credit Policy and Planning and Chief of Staff of AFSI since
November 1994 and Vice President, Risk Management, Credit Policy and Planning of
AFSI from AFSI's formation in July 1992 until November 1994.
Preston A. Miller has been Senior Vice President and Treasurer of the Company
since November 1996. Mr. Miller was Vice President and Controller of the
Company from November 1994 until November 1996 and was Controller of the Company
from September 1989 until November 1994.
James H. Greer is the Chairman of the Board of Shelton W. Greer Co., Inc.
which engineers, manufactures, fabricates and installs building specialty
products, and has been such for more than five years. Mr. Greer is also a
director of Service Corporation International and Tanknology Environmental,
Inc., a publicly held company engaged in the environmental services industry.
Gerald W. Haddock is President and Chief Executive Officer of Crescent Real
Estate Equities Company ("Crescent"), a publicly held real estate investment
trust, and has been in such position since December 1996. From May 1994 until
December 1996, Mr. Haddock was President of Crescent. From June 1990 until
December 1993, Mr. Haddock was a partner with the Fort Worth, Texas law firm of
Jackson & Walker, L.L.P. and, from January 1994 until April 1994, was of counsel
to such firm. Mr. Haddock is also a director of ENSCO International
Incorporated, a publicly held oil and natural gas services company.
Douglas K. Higgins is a private investor and owner of Higgins & Associates and
has been in such position since July 1994. In 1983, Mr. Higgins founded H & M
Food Systems Company, Inc., a manufacturer of meat-based products for the food
service industry, and was employed by such company as President until his
retirement in July 1994.
Kenneth H. Jones, Jr. is Vice Chairman of KBK Capital Corporation, a publicly
held non-bank commercial finance company, and has been in such position since
January 1995. Prior to January 1995, Mr. Jones was a shareholder in the Decker,
Jones, McMackin, McClane, Hall & Bates, P.C. law firm in Fort Worth, Texas, and
was with such firm and its predecessor or otherwise involved in the private
practice of law in Fort Worth, Texas for more than five years. Mr. Jones is
also a director of Hallmark Financial Services, Inc., a publicly held company
engaged in the insurance business.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with all of its Named
Executive Officers. Messrs. Clifton H. Morris, Jr., Michael R. Barrington and
Daniel E. Berce entered into employment agreements with the Company during
fiscal 1991. These agreements, as amended, contain terms that renew annually
for successive five year periods (ten years in the case of Mr. Morris), and the
compensation thereunder is determined annually by the Company's Board of
Directors, subject to minimum annual compensation for Messrs. Morris, Barrington
and Berce of $500,000, $345,000 and $345,000, respectively. Included in each
agreement is a covenant of the employee not to compete with the Company during
the term of his employment and for a period of three years thereafter. The
employment agreements also provide that if the employee is terminated by the
Company other than for cause, the Company will pay to the employee the remainder
of his current year's salary (undiscounted) plus the discounted present value
(employing an interest rate of 8%) of two additional years' salary. In the
event the employee resigns or is terminated other than for cause within twelve
months after a "change in control" of the Company (as that term is defined in
the employment agreements), the employee will be entitled to earned and vested
bonuses at the date of termination plus the remainder of his current year's
salary (undiscounted) plus the present value (employing an interest rate of 8%)
of two additional years' salary (for which purpose "salary" includes the annual
rate of compensation immediately prior to the "change in control" plus the
average annual cash bonus for the immediately preceding three year period).
Mr. Edward H. Esstman entered into an employment agreement with the Company in
October 1996 (which agreement replaced a prior employment agreement with Mr.
Esstman). Mr. Esstman's agreement, as amended, contains
52
<PAGE>
terms substantially identical to those contained in the agreements for Messrs.
Barrington and Berce and provides for minimum annual compensation of $300,000.
Mr. Michael T. Miller entered into an employment agreement with the Company in
July 1997 (which agreement replaced a prior employment agreement with Mr.
Miller). Mr. Miller's employment agreement contains a term that renews annually
for successive three year periods and provides for minimum annual compensation
of $165,000. Included in Mr. Miller's agreement is a covenant not to compete
with the Company during the term of his employment and for a period of one year
thereafter. In the event Mr. Miller is terminated by the Company other than for
cause, the Company is obligated to pay him an amount equal to one year's salary
(undiscounted). Mr. Miller's Agreement contains "change in control" provisions
similar to those contained in the employment agreements with the other Named
Executive Officers.
In addition to the employment agreements described above, the terms of all
stock options granted to the Named Executive Officers provide that such options
will become immediately vested and exercisable upon the occurrence of a change
in control as defined in the stock option agreements evidencing such grants.
The provisions and terms contained in these employment and option agreements
could have the effect of increasing the cost of a change in control of the
Company and thereby delay or hinder such a change in control.
BOARD COMMITTEES AND MEETINGS
Standing committees of the Board include the Audit Committee and the Stock
Option/Compensation Committee.
The Audit Committee's principal responsibilities consist of (i) recommending
the selection of independent auditors, (ii) reviewing the scope of the audit
conducted by such auditors, as well as the audit itself, and (iii) reviewing the
Company's internal audit activities and matters concerning financial reporting,
accounting and audit procedures, and policies generally. Members consist of
Messrs. Greer, Haddock, Higgins and Jones.
The Stock Option/Compensation Committee (i) administers the Company's employee
stock option plans and reviews and approves the granting of stock options and
(ii) reviews and approves compensation for executive officers. Members consist
of Messrs. Greer, Haddock, Higgins and Jones.
The Board of Directors held five regularly scheduled meetings during the
fiscal year ended June 30, 1997. Various matters were also approved during the
last fiscal year by unanimous written consent of the Board of Directors. No
director attended fewer than 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all committees of the Board on which such director served, other than Mr.
Haddock who attended 67% of all such meetings.
COMPENSATION OF DIRECTORS
Members of the Board of Directors currently receive a $2,000 quarterly
retainer fee and an additional $3,500 fee for attendance at each meeting of the
Board. Members of Committees of the Board of Directors are paid $1,500 per
quarter for participation in all committee meetings held during that quarter.
At the 1990 Annual Meeting of Shareholders, the Company adopted the 1990 Stock
Option Plan for Non-Employee Directors of AmeriCredit Corp. (the "1990 Director
Plan"), which provides for grants to the Company's nonemployee directors of
nonqualified stock options and reserves, in the aggregate, a total of 750,000
shares of Common Stock for issuance upon exercise of stock options granted under
such plan. Under the 1990 Director Plan, each nonemployee director receives,
upon election as a Director and thereafter on the first business day after the
date of each annual meeting of shareholders of the Company, an option to
purchase 10,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. Each option is fully
vested upon the date of grant but may not be exercised prior to the expiration
of six months after the date of grant. On November 5, 1997, options to purchase
10,000 shares of Common Stock were granted under the 1990 Director Plan to each
of Messrs. Greer, Haddock, Higgins and Jones at an exercise price of $29.25 per
share. The exercise price for the options granted to Messrs. Greer,
53
<PAGE>
Haddock, Higgins and Jones is equal to the last reported sale price of the
Common Stock on the New York Stock Exchange ("NYSE") on the day preceding the
date of grant.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following sets forth information concerning the compensation of the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company (the "Named Executive Officers")
for the fiscal years shown.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------- -----------------------
SHARES OF
COMMON STOCK
UNDERLYING STOCK ALL OTHER
OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#) ($)(1)
- ------------------------------------------- ---- --------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Clifton H. Morris, Jr...................... 1997 397,230 379,230 --- 116,771
Chairman and CEO.......................... 1996 320,921 181,764 300,000 41,771
1995 287,620 128,070 150,000 41,771
Michael R. Barrington...................... 1997 276,704 258,704 --- 43,326
Vice Chairman, President................... 1996 223,832 123,506 200,000 5,758
and Chief Operating Officer............... 1995 201,204 73,281 162,500 5,737
Daniel E. Berce............................ 1997 276,704 258,704 --- 44,120
Vice Chairman and.......................... 1996 223,832 123,506 200,000 6,620
Chief Financial Officer.................... 1995 201,204 73,281 125,000 6,615
Edward H. Esstman.......................... 1997 246,473 171,355 --- 45,655
President and Chief........................ 1996 186,758 91,385 150,000 10,305
Operating Officer--AFSI................... 1995 162,666 65,067 100,000 10,305
Michael T. Miller.......................... 1997 119,822 59,911 70,000 730
Senior Vice President...................... 1996 97,500 39,000 15,000 624
and Chief Credit Officer................... 1995 78,750 25,594 15,000 571
</TABLE>
________
(1) The amounts disclosed in this column for fiscal 1997 include:
(a) Company contributions, made in the form of the Company's Common Stock,
to 401(k) retirement plans on behalf of each executive officer as
follows: Messrs. Morris, Barrington, Berce and Esstman, $4,500 and Mr.
Miller, $550;
(b) Payment by the Company of premiums for term or whole life insurance on
behalf of each executive officer or their dependents, as follows: Mr.
Morris, $37,271; Mr. Barrington, $1,326; Mr. Berce, $2,120; Mr.
Esstman, $3,655; and Mr. Miller, $180; and
(c) Annual premium payments under split-dollar life insurance policies on
Mr. Morris, $75,000; and Messrs. Barrington, Berce and Esstman, $37,500
each.
54
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all individual grants of stock options to the Named
Executive Officers of the Company during the fiscal year ended June 30, 1997.
<TABLE>
<CAPTION>
SHARES OF % OF TOTAL
COMMON STOCK OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
(#) FISCAL YEAR ($/SH) DATE VALUE ($)(1)
------------------ ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Clifton H. Morris, Jr...................... --- --- --- --- ---
Chairman and CEO
Michael R. Barrington...................... --- --- --- --- ---
Vice Chairman, President and
Chief Operating Officer
Daniel E. Berce............................ --- --- --- --- ---
Vice Chairman and Chief
Financial Officer
Edward H. Esstman.......................... --- --- --- --- ---
President and Chief Operating
Officer--AFSI
Michael T. Miller.......................... 50,000(2) 4.06 17.50 10/22/2006 $266,500
Senior Vice President and Chief.......... 20,000(3) 1.62 14.50 4/22/2007 $ 88,200
Credit Officer
</TABLE>
______________
(1) As suggested by the SEC's rules on executive compensation disclosure, the
Company used the Black-Scholes model of option valuation to determine grant
date pre-tax present value. The Company does not advocate or necessarily
agree that the Black-Scholes model can properly determine the value of an
option. Calculations are based on a ten year option term for all grants and
upon the following assumptions: annual dividend growth of 0 percent,
volatility of approximately 20 percent and a risk-free rate of return based
on the published Treasury yield curve effective on the grant date. There can
be no assurance that the amounts reflected in this column will be achieved.
(2) These options were granted to Mr. Miller for 50,000 shares, which expire ten
years after the date of grant, become exercisable on the earlier of (i)
October 22, 2003, (ii) the next business day (the "Acceleration Date") after
the conclusion of a period of 20 consecutive trading days during which the
average of the closing prices of the Company's Common Stock for such 20 day
period is equal to or greater than $25 per share, provided that the
Acceleration Date must occur, if at all, on or before October 22, 1999, or
(iii) the occurrence of a change in control of the Company. As of December
31, 1997, the Acceleration Date has occurred and these options have become
exercisable.
(3) The options granted to Mr. Miller, for 20,000 shares, which expire ten
years after the date of grant, become exercisable 20% on date of grant and
in 20% increments thereafter on the anniversary date of the grant date.
55
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Shown below is information with respect to the Named Executive Officers
regarding option exercises during the fiscal year ended June 30, 1997, and the
value of unexercised options held as of June 30, 1997.
<TABLE>
<CAPTION>
SHARES OF COMMON VALUE OF
STOCK UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#)(2) FY-END ($)(2)
-------------------- --------------------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
--------------- -------------- ------------------ ----------------------
<S> <C> <C> <C> <C>
Clifton H. Morris, Jr............... --0-- N/A 883,999/350,000 $14,215,276/$2,406,250
Chairman and CEO
Michael R. Barrington............... 90,167 $1,268,882 358,440/200,000 $ 4,744,430/$1,000,000
Vice Chairman and President and
Chief Operating Officer
Daniel E. Berce..................... 25,000 $ 367,575 473,607/200,000 $ 6,701,415/$1,000,000
Vice Chairman and Chief
Financial Officer
Edward H. Esstman................... 19,000 $ 370,500 295,333/170,000 $ 4,461,568/$1,092,500
President and Chief
Operating Officer--AFSI
Michael T. Miller................... 13,500 $ 170,400 10,000/88,500 $ 65,000/$518,775
Senior Vice President and Chief
Credit Officer
</TABLE>
_________________
(1) The "value realized" represents the difference between the exercise price of
the option shares and the market price of the option shares on the date the
options were exercised. The value realized was determined without
considering any taxes which may have been owed.
(2) Values stated are pre-tax, net of cost and are based upon the closing price
of $21.00 per share of the Company's Common Stock on the NYSE on June 30,
1997, the last trading day of the fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Stock Option/Compensation Committee is or has been an officer
or employee of the Company or any of its subsidiaries or had any relationship
requiring disclosure pursuant to Item 404 of Regulation S-K promulgated by the
Securities and Exchange Commission ("SEC"). No member of the Stock
Option/Compensation Committee served on the compensation committee, or as a
director, of another corporation, one of whose directors or executive officers
served on the Stock Option/Compensation Committee or whose executive officers
served on the Company's Board of Directors.
56
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table and the notes thereto set forth certain information
regarding the beneficial ownership of the Company's Common Stock as of September
12, 1997, by (i) each current director of the Company; (ii) each Named Executive
Officer; (iii) all present executive officers and directors of the Company as a
group; and (iv) each other person known to the Company to own beneficially more
than five percent of the presently outstanding Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK OWNED PERCENT OF CLASS OWNED
BENEFICIALLY(1) BENEFICIALLY(1)
---------------------- -------------------------
<S> <C> <C>
Regan Partners, L.P..................................... 2,335,200(2) 7.93%
Montgomery Asset Management, L.P........................ 1,885,000(3) 6.40%
Gardner Lewis Asset Management.......................... 1,503,500(4) 5.10%
Clifton H. Morris, Jr................................... 1,322,261(5) 4.31%
Michael R. Barrington................................... 515,973(6) 1.72%
Daniel E. Berce......................................... 698,897(7) 2.32%
Edward H. Esstman....................................... 490,506(8) 1.64%
James H. Greer.......................................... 220,000(9) *
Gerald W. Haddock....................................... 80,000(10) *
Douglas K. Higgins...................................... 80,000(11) *
Kenneth H. Jones, Jr.................................... 276,000(12) *
Michael T. Miller....................................... 34,576(13) *
All Present Executive Officers and Directors as a Group
(12 Persons)(5)(6)(7)(8)(9)(10)(11)(12)(13).......... 3,899,786 11.78%
</TABLE>
- --------------------------
*Less than 1%
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to the shares of Common Stock
shown as beneficially owned by them. Beneficial ownership as reported in
the above table has been determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
percentages are based upon 29,457,163 shares outstanding as of September
12, 1997, except for certain parties who hold options that are presently
exercisable or exercisable within 60 days of September 12, 1997. The
percentages for those parties who hold options that are presently
exercisable or exercisable within 60 days of September 12, 1997 are based
upon the sum of 29,457,163 shares outstanding plus the number of shares
subject to options that are presently exercisable or exercisable within 60
days of September 12, 1997 held by them, as indicated in the following
notes.
(2) As of August 31, 1996, the Company has been informed that Regan Partners,
L.P. ("Regan Partners"), Athena Partners, L.P. ("Athena"), Basil P. Regan,
Lenore Robins and Lee R. Robins hold an aggregate of 2,335,200 shares. An
additional 116,700 shares are held by certain trusts and other investment
funds controlled by such group of persons, as to which beneficial ownership
is disclaimed. The address of Regan Partners and Basil P. Regan is 6 East
43rd Street, New York, New York 10017; the address of Athena, Lenore Robins
and Lee R. Robins is 32 East 57th Street, New York, New York 10022.
(3) As of March 31, 1997, the Company has been informed that Montgomery Asset
Management, L.P. ("Montgomery") holds an aggregate of 1,885,000 shares in
various investment funds for which Montgomery serves as investment advisor
and over which Montgomery has sole or shared voting and investment power.
The address of Montgomery is 3200 Cherry Creek Drive S., #370, Denver,
Colorado 80209.
(4) As of September 12, 1997, the Company has been informed that Gardner Lewis
Asset Management ("Gardner Lewis") holds an aggregate of 1,503,500 shares
in various investment funds for which Gardner Lewis serves as investment
advisor and over which Gardner Lewis has sole or shared voting and
investment power. The address of Gardner Lewis is 285 Wilmington-West
Chester Pike, Chadds Ford, Pennsylvania 19317.
57
<PAGE>
(5) This amount includes 1,233,999 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount also
includes 38,136 shares of Common Stock in the name of Sheridan C. Morris,
Mr. Morris' wife.
(6) This amount includes 508,440 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(7) This amount includes 673,607 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(8) This amount includes 465,333 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(9) This amount includes 220,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount does not
include 19,606 shares of Common Stock held by Mr. Greer's wife as separate
property, as to which Mr. Greer disclaims any beneficial interest.
(10) This amount includes 70,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(11) This amount includes 20,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days. This amount does not
include 12,000 shares held in trust for the benefit of certain family
members of Mr. Higgins, as to which Mr. Higgins disclaims any beneficial
interest.
(12) This amount includes 236,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
(13) This amount includes 34,000 shares subject to stock options that are
currently exercisable or exercisable within 60 days.
58
<PAGE>
DESCRIPTION OF NOTES
Except as otherwise indicated below, the following summary applies to both the
Old Notes and the New Notes. As used herein, the term "Notes" shall mean the
Old Notes and the New Notes, unless otherwise indicated.
The form and terms of the New Notes are substantially identical to the form
and terms of the Old Notes, except that (i) the exchange of the New Notes
pursuant to the Exchange Offer will be registered under the Securities Act, (ii)
the New Notes will not provide for payment of penalty interest as Liquidated
Damages, which terminate upon consummation of the Exchange Offer, and (iii) the
New Notes will not bear any legends restricting transfer thereof. The New Notes
will be issued solely in exchange for an equal principal amount of Old Notes.
As of the date hereof, $50.0 million aggregate principal amount of Old Notes is
outstanding. See "The Exchange Offer."
GENERAL
The Old Notes are, and the New Notes will be, issued pursuant to an Indenture
(the "Indenture") between the Company, all current Guarantors and Bank One,
N.A., as trustee (the "Trustee"). See "Notice to Investors." The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Note Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. The definitions
of certain terms used in the following summary are set forth below under "--
Certain Definitions." For purposes of this summary, the term "Company" refers
only to AmeriCredit Corp. and not to any of its Subsidiaries.
The Old Notes are, and the New Notes will be general unsecured obligations of
the Company and will rank pari passu in right of payment with the Original Notes
and all other current and future unsecured senior Indebtedness of the Company.
However, the Old Notes are, and the New Notes will be effectively subordinated
to secured Indebtedness of the Company and its Subsidiaries, Indebtedness of
Securitization Trusts and certain obligations under Credit Enhancement
Agreements. The Company and certain of its Subsidiaries are parties to the
Credit Agreement and the Mortgage Subsidiary Credit Agreement and all borrowings
under these agreements are secured by first priority Liens on certain assets of
the Company and certain of its Subsidiaries. All financings under the Warehouse
Facility are secured by a first priority lien on the receivables and related
assets held by CP Funding Corp., a special purpose subsidiary which is treated
as a Securitization Trust under the Indenture. As of December 31, 1997,
approximately $105.4 million was outstanding under these agreements and an
additional $77.5 million was available for borrowing thereunder in accordance
with borrowing base requirements. The Indenture will permit additional
borrowings by the Company and its Subsidiaries under the Credit Agreement, the
Mortgage Subsidiary Credit Agreement and other Credit Facilities in the future,
subject to certain restrictions, and unlimited additional borrowings under
Warehouse Facilities for the purpose of financing or refinancing the purchase or
origination of Receivables. In addition, the Special Purpose Finance
Subsidiaries also have outstanding Indebtedness secured by certain automobile
receivables. As of December 31, 1997, the Indebtedness of the Special Purpose
Finance Subsidiaries amounted to approximately $14.1 million. See "Description
of Other Debt." The Company's and its Subsidiaries' interests in Securitization
Trusts are also subordinated to the asset backed securities issued thereby. The
spread accounts (and the restricted cash therein) maintained by a Restricted
Subsidiary of the Company as well as the capital stock of such Restricted
Subsidiary (which also owns the excess servicing receivable recorded on the
Company's consolidated balance sheet) are also subject to Liens in favor of
Financial Security Assurance Inc. pursuant to Credit Enhancement Agreements. As
of December 31, 1997, the Company and its Subsidiaries had approximately $76.2
million of restricted cash in such spread accounts. See "Risk Factors--Holding
Company Structure; Effective Subordination."
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. All of the
Company's current and future Restricted Subsidiaries, other than AFS Funding
Corp. and CP Funding Corp. and the Special Purpose Finance Subsidiaries, will
guarantee the Company's payment obligations under the Notes on a senior
unsecured basis. AFS Funding Corp., CP Funding Corp. and the Special Purpose
Finance Subsidiaries hold substantial assets. See "Risk Factors--Holding Company
Structure; Effective Subordination."
59
<PAGE>
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $50.0 million and will
mature on February 1, 2004. Interest on the Notes will accrue at the rate of 9
1/4% per annum and will be payable semi-annually in arrears on February 1 and
August 1, commencing on August 1, 1998, to Holders of record on the immediately
preceding January 15 and July 15. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
interest and Liquidated Damages on the Notes will be payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders of the Notes at their
respective addresses set forth in the register of Holders of Notes; provided
that all payments of principal, premium, interest and Liquidated Damages with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Notes will be
issued in denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes will be jointly and
severally guaranteed on a senior unsecured basis (the "Subsidiary Guarantees")
by the Guarantors. The Subsidiary Guarantees will rank pari passu with the
Original Guarantees. The obligations of each Guarantor under its Subsidiary
Guarantee will be limited so as not to constitute a fraudulent conveyance under
applicable law. See, however, "Risk Factors--Fraudulent Conveyance Statutes."
The Indenture provides that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes and the Indenture; (ii) immediately after giving effect
to such transaction, no Default or Event of Default exists; (iii) such
Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth (immediately after giving effect to
such transaction), equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; and (iv) the Company would be
permitted by virtue of the Company's pro forma Consolidated Leverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Leverage Ratio test set
forth in the covenant described below under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of its obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Repurchase at
the Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to February 1,
2001. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
60
<PAGE>
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on February 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001.......................... 104.625%
2002.......................... 102.313%
2003 and thereafter........... 100.000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after January 30,
1997, the Company may on any one or more occasions redeem up to an aggregate of
$16.7 million in principal amount of Notes at a redemption price of 109.25% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of a
public offering of common stock of the Company; provided that at least $33.3
million in aggregate principal amount of Notes remain outstanding immediately
after the occurrence of such redemption; and provided, further, that such
redemption shall occur within 45 days of the date of the closing of such public
offering.
Notwithstanding the preceding two paragraphs, the Company will not be
permitted to redeem any portion of the Original Notes unless, substantially
concurrently with such redemption, the Company redeems an aggregate principal
amount of Notes (rounded to the nearest integral multiple of $1,000) equal to
the product of (1) a fraction, the numerator of which is the aggregate principal
amount of Original Notes to be so redeemed and the denominator of which is the
aggregate principal amount of Original Notes outstanding immediately prior to
such proposed redemption, and (2) the aggregate principal amount of Notes
outstanding immediately prior to such proposed redemption. The Company will also
not be permitted to redeem any portion of the Notes unless, substantially
concurrently with such redemption, the Company redeems an aggregate principal
amount of Original Notes (rounded to the nearest integral multiple 1,000) equal
to the product of (1) a fraction, the numerator of which is the aggregate
principal amount of Notes outstanding immediately prior to such proposed
redemption, and (2) the aggregate principal amount of Original Notes outstanding
immediately prior to such proposed redemption.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
61
<PAGE>
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within ten days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent lawful,
(1) accept for payment all Notes or portions thereof properly tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Notes or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Company's other senior Indebtedness contains prohibitions of certain
events that would constitute a Change of Control. In addition, the exercise by
the Holders of Notes of their right to require the Company to repurchase the
Notes could cause a default under such other senior Indebtedness, even if the
Change of Control itself does not, due to the financial effect of such
repurchases on the Company. Finally, the Company's ability to pay cash to the
Holders of Notes upon a repurchase may be limited by the Company's then existing
financial resources. See "Risk Factors--Potential Inability to Fund a Change of
Control Offer."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than in the ordinary course of business; (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company;
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares); (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors; or (v) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the
62
<PAGE>
Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance); provided, however, that this clause (v)
shall not apply to any such consolidation or merger if, immediately after the
consummation of such transaction and after giving effect thereto, the ratings
assigned to the Notes by Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group are equal to or higher than Baa3 (or the equivalent) and BBB- (or
the equivalent), respectively.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 85% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
cash; provided that the amount of (x) any liabilities (as shown on the Company's
or such Restricted Subsidiary's most recent balance sheet), of the Company or
any Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any Guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation Agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds (a) to permanently reduce Specified Senior
Indebtedness of the Company and its Restricted Subsidiaries including the
Original Notes; provided, however, that such Net Proceeds shall be applied to
all Specified Senior Indebtedness of the Company and its Restricted Subsidiaries
on a pro rata basis, or (b) to an Investment, the making of a capital
expenditure or the acquisition of Receivables or other tangible assets, in each
case, in or with respect to a Permitted Business. Pending the final application
of any such Net Proceeds, the Company may temporarily reduce Indebtedness under
Credit Facilities and/or Warehouse Facilities or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will
be required to make an offer to all Holders of Original Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Original Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set
63
<PAGE>
forth in the Original Indenture. To the extent that the aggregate amount of
Original Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company will be required to make an offer to all Holders of Notes
("Secondary Asset Sale Offer") to purchase the maximum principal amount of Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to a Secondary Asset Sale Offer
is less than the remaining Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Original Notes or Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Original Notes or Notes
to be purchased on a pro rata basis. Upon completion of such offer to purchase
Notes, the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company) or to the direct or indirect holders of the Company's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or any
direct or indirect parent of the Company or other Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly-Owned
Restricted Subsidiary of the Company); (iii) make any payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after giving
pro forma effect thereto, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Leverage Ratio test set
forth in the first paragraph of the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by the Company and its Subsidiaries after February 4,
1997 (excluding Restricted Payments permitted by clause (ii) of the next
succeeding paragraph), is less than the sum of (i) 25% of the aggregate
cumulative Consolidated Net Income of the Company for the period (taken as one
accounting period) from and after March 31, 1997 to the end of the Company's
most recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company from the issue or
sale since February 4, 1997 of Equity Interests of the Company (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or convertible debt securities
that have been converted into Disqualified Stock), plus (iii) to the extent that
any Restricted Investment that was made after February 4, 1997 is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness with the net cash proceeds from
an incurrence of Permitted
64
<PAGE>
Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its common Equity Interests on a pro
rata basis; and (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Restricted
Subsidiary of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription Agreement or stock option Agreement in effect as of the date of the
Indenture; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $250,000 in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction.
The Board of Directors of the Company may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a Default;
provided that in no event shall the business currently operated by AmeriCredit
Financial Services, Inc. be transferred to or held by an Unrestricted
Subsidiary. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greater of (y) the net book value of such Investments at the time
of such designation or (z) the fair market value of such Investments at the time
of such designation. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors of the Company whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $10.0 million. Not later
than 15 days after the end of any fiscal quarter during which any Restricted
Payment is made, the Company shall deliver to the Trustee an Officers'
Certificate stating that all Restricted Payments made during such fiscal quarter
were permitted and setting forth the basis upon which the calculations required
by the covenant "Restricted Payments" were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company and the Guarantors may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock or preferred
stock if the Consolidated Leverage Ratio of the Company, calculated on a pro
forma basis after giving effect to the incurrence or issuance of the additional
Indebtedness to be incurred or the Disqualified Stock or preferred stock to be
issued, would have been less than 2.0 to 1.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the existence of Credit Facilities and the Guarantees thereof by the
Guarantors and the incurrence by the Company and/or any of the Guarantors of
revolving credit Indebtedness pursuant to one or more Credit Facilities the
proceeds of which are applied to purchase or originate Receivables; provided
that the aggregate principal amount of all revolving credit Indebtedness
outstanding under all Credit Facilities after giving effect to such incurrence,
including all Permitted Refinancing Indebtedness incurred to refund, refinance,
defease, renew or replace any Indebtedness incurred pursuant to this clause (i)
and with letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Restricted Subsidiaries
thereunder, does not at any time exceed the amount of the Borrowing Base (any
such outstanding Indebtedness that exceeds the amount of the Borrowing Base as
of the close of any Business Day shall cease to be Permitted Debt pursuant to
this clause (i) as of the close of business on the third Business Day thereafter
and shall be deemed to be an incurrence of such Indebtedness that is not
permitted by this clause (i) by the Company or such Guarantor, as applicable, as
of such third Business Day);
65
<PAGE>
(ii) the existence of Warehouse Facilities, regardless of amount, and the
incurrence by the Company or any of its Restricted Subsidiaries of Permitted
Warehouse Debt in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted Subsidiaries thereunder)
not to exceed 100% of the aggregate principal amount (exclusive of Acquisition
Fees included therein) of all Eligible Receivables owned by the Company and its
Restricted Subsidiaries (or such Warehouse Facilities in the case of Permitted
Warehouse Debt in the form of repurchase agreements) at such time;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Original Notes and the Notes and the incurrence by the Guarantors of the
Original Subsidiary Guarantees and the Subsidiary Guarantees;
(v) obligations of the Company and its Restricted Subsidiaries under Credit
Enhancement Agreements;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance, defease, renew or replace any Indebtedness (other
than Permitted Warehouse Debt or intercompany Indebtedness) that was permitted
by the Indenture to be incurred;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of the
Guarantors; provided, however, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the Notes and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Guarantor and
(B) any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Guarantor shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be, that was not permitted by this clause (vii);
(viii) the issuance by a Restricted Subsidiary of preferred stock to the
Company or to any of the Guarantors; provided, however, that any subsequent
event or issuance or transfer of any Capital Stock that results in the owner of
such preferred stock ceasing to be a Guarantor of the Company or any subsequent
transfer of such preferred stock to a Person other than the Company or any of
the Guarantors, shall be deemed to be an issuance of preferred stock by such
Restricted Subsidiary that was not permitted by this clause (viii);
(ix) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred (y) for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding or (z) for the
purpose of hedging, fixing or capping interest rate risk in connection with any
completed or pending Securitization;
(x) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was permitted to
be incurred by another provision of this covenant;
(xi) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (xi); and
(xii) the incurrence by the Company of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness incurred pursuant to this
clause (xii), not to exceed $5.0 million.
The Indenture will also provide that the Company will not, and will not permit
any Restricted Subsidiary of the Company to, incur any Indebtedness that is
contractually subordinated to any Indebtedness of the Company or any such
Restricted Subsidiary unless such Indebtedness is also contractually
subordinated to the Notes, or the Subsidiary Guarantee of such Restricted
Subsidiary (as applicable), on substantially identical terms; provided, however,
that no Indebtedness shall be deemed to be contractually subordinated to any
other Indebtedness solely by virtue of being unsecured.
66
<PAGE>
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof.
Liens
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind (other than Permitted
Liens) upon any of their property or assets, now owned or hereafter acquired,
unless all payments due under the Indenture and the Notes are secured on an
equal and ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the Indenture
and the Notes, (b) applicable law, (c) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (d) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (e) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (f) Permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive than those contained
in the agreements governing the Indebtedness being refinanced, (g) the
requirements of any Securitization that are exclusively applicable to any
bankruptcy remote special purpose Restricted Subsidiary of the Company formed in
connection therewith, (h) the requirements of any Credit Enhancement Agreement,
or (i) in the case of clause (iii) above, restrictions contained in security
agreements securing Indebtedness of Guarantors relating to the properties or
assets of Guarantors subject to the Liens created thereby, provided that such
Liens were otherwise permitted to be incurred under the Indenture.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately before and
after such transaction no Default or Event of Default exists; and (iv) except in
the case of a merger of the Company with or into a Wholly-Owned Restricted
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the
67
<PAGE>
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the end of the applicable fiscal
quarter, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Leverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, Agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the Company and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing; provided that (x) any employment Agreement entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such Restricted
Subsidiary, (y) transactions between or among the Company and/or its Restricted
Subsidiaries and (z) Restricted Payments that are permitted by the provisions of
the Indenture described above under the caption "--Restricted Payments," in each
case, shall not be deemed Affiliate Transactions.
Limitation on Issuances and Sales of Capital Stock of Wholly-Owned Restricted
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit any
Wholly-Owned Restricted Subsidiary of the Company to, transfer, convey, sell,
lease or otherwise dispose of any Capital Stock of any Wholly-Owned Restricted
Subsidiary of the Company to any Person (other than the Company or a Wholly-
Owned Restricted Subsidiary of the Company that is a Guarantor), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly-Owned Restricted Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "--Asset Sales,"
and (ii) will not permit any Wholly-Owned Restricted Subsidiary of the Company
to issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly-Owned Restricted Subsidiary of the Company.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Subsidiaries shall
acquire or create another Subsidiary after the date of the Indenture, then such
newly acquired or created Subsidiary shall execute a Subsidiary Guarantee and
deliver an opinion of counsel, in accordance with the terms of the Indenture;
provided, that the foregoing shall not apply to Subsidiaries that (i) have
properly been designated as Unrestricted Subsidiaries in accordance with the
Indenture for so long as they continue to constitute Unrestricted Subsidiaries
or (ii) qualify as Securitization Trusts for so long as they continue to
constitute Securitization Trusts.
Business Activities
The Indenture provides that the Company will not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses, except to
such extent as would not be material to the Company and its Subsidiaries taken
as a whole.
68
<PAGE>
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or Agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separately from the financial condition and results of operations
of the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request. In addition, the Company and the
Guarantors have agreed that, for so long as any Notes remain outstanding, they
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
Limitation on Investment Company Status
The Indenture provides that the Company and its Subsidiaries shall not take
any action, or otherwise permit to exist any circumstance, that would require
the Company to register as an "investment company" under the Investment Company
Act of 1940, as amended.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Subsidiaries to comply with its obligations in the
covenants or other agreements described above under the captions "--Repurchase
at the Option of Holders," "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," or "--Dividend and Other Payment Restrictions
Affecting Subsidiaries;" (iv) failure by the Company or any of its Subsidiaries
for 30 days after notice from the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding to comply with any of
the other covenants or agreements in the Indenture; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million or more; (vi) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $2.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; (vii) except as permitted by
the Indenture, any Subsidiary Guarantee shall be held in an judicial proceeding
to be unenforceable or invalid or shall cease for any reason to be in full
69
<PAGE>
force and effect or any Guarantor, or any Person acting in behalf of any
Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to February 1,
2001 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to February 1, 2001, then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company, as
such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or the Registration Rights Agreement or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation
70
<PAGE>
and insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material Agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or the
Notes may be amended or supplemented with the consent of the Holders of at least
a majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes), and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes).
71
<PAGE>
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption "--
Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to Holders of Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to AmeriCredit Corp.,
200 Bailey Drive, Fort Worth, Texas 76107, Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the date of consummation of
the Exchange Offer (the "Closing Date") with, or on behalf of, The Depository
Trust Company (the "Depository") and registered in the name of Cede & Co., as
nominee of the Depository (such nominee being referred to herein as the "Global
Note Holder").
Notes that were issued as described below under "Certificated Securities,"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Upon the transfer to a qualified institutional buyer
of Certificated Securities initially issued to a Non-Global Purchaser, such
Certificated Securities may, unless the Global Note has
72
<PAGE>
previously been exchanged for Certificated Securities, be exchanged for an
interest in the Global Note representing the principal amount of Notes being
transferred.
The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depository's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depository's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depository's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depository's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depository only thorough the Depository's
Participants or the Depository's Indirect Participants.
The Company expects that pursuant to procedures established by the Depository
(i) upon deposit of the Global Note, the Depository will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Note and (ii) ownership of the Notes evidenced by the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by the Depository (with respect to the
interests of the Depository's Participants), the Depository's Participants and
the Depository's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain Persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depository or for maintaining, supervising or reviewing
any records of the Depository relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the Persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company believes, however, that it is currently the policy of the
Depository to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depository. Payments by the Depository's Participants and the Depository's
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depository's Participants or the Depository's Indirect Participants.
Certificated Securities
Subject to certain conditions, any Person having a beneficial interest in the
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in the form of Certificated Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of, and
cause the same to be delivered to, such Person or Persons (or the nominee of any
thereof). In addition, if (i) the Company notifies the Trustee in writing that
the Depository is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Notes in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Notes in such form will be issued to each Person that the Global Note Holder and
the Depository identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the Global
Note Holder or the Depository in identifying the beneficial owners of Notes and
the Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note Holder or the Depository for all
purposes.
73
<PAGE>
Same Day Settlement and Payment
The Indenture will require that payments in respect of the Notes represented
by the Global Note (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
(same day) funds to the accounts specified by the Global Note Holder. With
respect to Certificated Securities, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available (same day) funds to the accounts specified by
the Holders thereof or, if no such account is specified, by mailing a check to
each such Holder's registered address.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Acquisition Fees" means, with respect to any Eligible Receivables as of any
date, the discount or cash payments received by the Company from dealers and
other Persons with respect to the Eligible Receivables purchased from such
dealer or other Person and owned by the Company or its Restricted Subsidiaries
as of such date.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by Agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of any
assets or rights (including, without limitation, by way of a sale and leaseback)
other than sales of Receivables in connection with Securitizations, Warehouse
Facilities or Credit Facilities in the ordinary course of business consistent
with past practices (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $500,000 or (b) for net proceeds in excess
of $500,000. Notwithstanding the foregoing: (i) a transfer of assets by the
Company to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned Restricted
Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the
Company or to another Wholly-Owned Restricted Subsidiary, and (iii) a Restricted
Payment that is permitted by the covenant described above under the caption "--
Restricted Payments" will not be deemed to be Asset Sales.
"Board of Directors" means the Board of Directors or other governing body
charged with the ultimate management of any Person, or any duly authorized
committee thereof.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i) 80%
of the aggregate amount of Receivables (other than loans secured by residential
mortgages) owned by the Company and its Wholly-Owned Restricted Subsidiaries as
of such date that are not in default, excluding (A) any Receivables that were
acquired or originated with Permitted Warehouse Debt, (B) any Receivables that
are held by a Securitization Trust, and (C) any Receivables that are subject to
Liens other than Liens securing Obligations under Credit Facilities; (ii) 60% of
the book value (determined on a consolidated basis in accordance with GAAP) of
interests in portfolios of securitized Receivables that are owned by the
74
<PAGE>
Company and its Wholly-Owned Restricted Subsidiaries as of such date and that
are not subject to any Liens other than Liens to secure Obligations under Credit
Facilities; and (iii) 98% of the aggregate amount of Receivables that consist of
loans secured by residential mortgages owned by the Company and its Wholly-Owned
Restricted Subsidiaries as of such date that are not in default, excluding (A)
any such loans that were acquired or originated with Permitted Warehouse Debt,
(B) any such loans that are held by a Securitization Trust, and (C) any such
loans that are subject to Liens other than Liens securing Obligations under
Credit Facilities.
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would at
such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii)
in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, (iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six months
from the date of acquisition, (iii) certificates of deposit and Eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition.
"Consolidated Indebtedness" means, with respect to any Person as of any date
of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total
amount of Indebtedness of any other Person, to the extent that such Indebtedness
has been Guaranteed by the referent Person or one or more of its Restricted
Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified
Stock of such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Leverage Ratio" means, with respect to any Person, as of any
date of determination, the ratio of (i) the Consolidated Indebtedness of such
Person as of such date, excluding, however, all (A) borrowings under Credit
Facilities that constitute Permitted Debt, (B) Permitted Warehouse Debt and (C)
Hedging Obligations that constitute Permitted Debt to (ii) the Consolidated Net
Worth of such Person as of such date.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
(for such period, on a consolidated basis, determined in accordance with GAAP)
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly-Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any Agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date, the
sum of (i) the consolidated equity of the common stockholders of such Person and
its consolidated Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with respect to any
series of preferred stock (other than
75
<PAGE>
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Credit Agreement" means the Second Restated Revolving Credit Agreement, dated
as of October 7, 1996, by and among the Company, certain of its Restricted
Subsidiaries and the several banks named therein, providing for up to $240
million of revolving credit borrowings, including all related notes, Guarantees,
security agreements, collateral documents, and other instruments and agreements
executed in connection therewith.
"Credit Enhancement Agreements" means, collectively, any documents,
instruments or agreements entered into by the Company, any of its Restricted
Subsidiaries or any of the Securitization Trusts exclusively for the purpose of
providing credit support for the Securitization Trusts or any of their
respective Indebtedness or asset-backed securities.
"Credit Facilities" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Credit Agreement) with banks or other institutional lenders
providing for revolving credit loans; provided that in no event will any such
facility that constitutes a Warehouse Facility be deemed to qualify as a Credit
Facility.
"Default" means any event that is or with the passage of time or the giving of
notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Eligible Receivables" means, at any time, all Receivables owned by the
Company or any of its Restricted Subsidiaries that meet the sale or loan
eligibility criteria set forth in the Warehouse Facility pursuant to which the
applicable Receivables were financed; excluding, however, any Receivables that
are pledged to secure, or were acquired or originated with, borrowings under a
Credit Facility and excluding any such Receivables held by a Securitization
Trust.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $39.5 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Agreement, the Original Notes and the Original
Guarantees) in existence on February 4, 1997, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time and consistently applied.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) AmeriCredit Financial Services, Inc., a
Delaware corporation, AmeriCredit Operating Co., Inc., a Delaware corporation,
ACF Investment Corp., a Delaware corporation, Americredit Corporation of
California, f/k/a Rancho Vista Mortgage Corporation, a California corporation
and AmeriCredit Premium Finance,
76
<PAGE>
Inc., a Delaware corporation, and (ii) any other subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention Agreement, any lease in the nature
thereof, any option or other Agreement to sell or give a security interest in
and any filing of or Agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect
of preferred stock dividends, excluding, however, (i) any gain (but not loss),
together with any related provision for taxes on such gain (but not loss),
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (b) the disposition
of any securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
77
<PAGE>
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, Agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Original Guarantees" means each of the Guarantees of the Original Notes by
the Guarantors pursuant to the Original Indenture.
"Original Indenture" means the Indenture, dated as of February 4, 1997, among
the Company, Bank One, Columbus, NA, as trustee, and the Guarantors, with
respect to the Original Notes and the Original Guarantees.
"Original Notes" means the $125,000,000 in aggregate principal amount of the
Company's 9 1/4% Senior Notes due 2004, issued pursuant to the Original
Indenture on February 4, 1997.
"Permitted Business" means the business of purchasing, originating, brokering
and marketing, pooling and selling, securitizing and servicing Receivables, and
entering into agreements and engaging in transactions incidental to the
foregoing.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Wholly-Owned Restricted Subsidiary of the Company and a
Guarantor that is engaged in a Permitted Business or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly-Owned
Restricted Subsidiary of the Company that is a Guarantor and that is engaged in
a Permitted Business; (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales;" (e) any acquisition of assets
solely in exchange for the issuance of Equity Interests (other than Disqualified
Stock) of the Company; (f) Investments by the Company or any of its Subsidiaries
in Securitization Trusts in the ordinary course of business in connection with
or arising out of Securitizations; (g) purchases of all remaining outstanding
asset-backed securities of any Securitization Trust for the purpose of relieving
the Company or a Subsidiary of the Company of the administrative expense of
servicing such Securitization Trust, but only if 90% or more of the aggregate
principal amount of the original asset-backed securities of such Securitization
Trust have previously been retired; and (h) other Investments by the Company or
any of its Subsidiaries in any Person (other than an Affiliate of the Company
that is not also a Subsidiary of the Company) that do not exceed $5.0 million in
the aggregate at any one time outstanding (measured as of the date made and
without giving effect to subsequent changes in value).
"Permitted Liens" means (i) Liens existing on the date of the Indenture; (ii)
Liens on Eligible Receivables and the proceeds thereof to secure Permitted
Warehouse Debt or permitted Guarantees thereof; (iii) Liens to secure revolving
credit borrowings under Credit Facilities, provided that such borrowings were
permitted by the Indenture to be incurred; (iv) Liens on Receivables and the
proceeds thereof incurred in connection with Securitizations or permitted
Guarantees thereof; (v) Liens on spread accounts and excess servicing
receivable, Liens on the stock of Restricted Subsidiaries of the Company
substantially all of the assets of which are spread accounts and excess
servicing receivable and Liens on interests in Securitization Trusts, in each
case incurred in connection with Credit Enhancement Agreements; (vi) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (vii) Liens on property
existing at the time of acquisition thereof by the Company or any Restricted
78
<PAGE>
Subsidiary of the Company, provided that such Liens were in existence prior to
the contemplation of such acquisition; (viii) Liens securing Indebtedness
incurred to finance the construction or purchase of property of the Company or
any of its Wholly-Owned Restricted Subsidiaries (but excluding Capital Stock of
another Person); provided, however, that any such Lien may not extend to any
other property owned by the Company or any of its Restricted Subsidiaries at the
time the Lien is incurred, and the Indebtedness secured by the Lien may not be
incurred more than 180 days after the latter of the acquisition or completion of
construction of the property subject to the Lien; provided, further, that the
Amount of Indebtedness secured by such Liens do not exceed the fair market value
(as evidenced by a resolution of the Board of Directors of the Company set forth
in an Officers' Certificate delivered to the Trustee) of the property purchased
or constructed with the proceeds of such Indebtedness; (ix) Liens to secure any
Permitted Refinancing Indebtedness incurred to refinance any Indebtedness
secured by any Lien referred to in the foregoing clauses (i) through (viii),
provided, however, that such new Lien shall be limited to all or part of the
same property that secured the original Lien and the Indebtedness secured by
such Lien at such time is not increased to any amount greater than the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (i) through (viii), as the case may be, at
the time the original Lien became a permitted Lien; (x) Liens in favor of the
Company; (xi) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations that do
not exceed $1.0 million in the aggregate at any one time outstanding; (xii)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business (including, without limitation, landlord Liens on
leased properties); (xiii) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefor; (xiv) Liens on assets of
Guarantors to secure Senior Guarantor Debt of such Guarantors that was permitted
by the Indenture to be incurred; and (xv) Liens on assets of Unrestricted
Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries (other than
Permitted Warehouse Debt or intercompany Indebtedness); provided that: (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Permitted Warehouse Debt" means Indebtedness of the Company or a Restricted
Subsidiary of the Company outstanding under one or more Warehouse Facilities;
provided, however, that (i) the assets purchased with proceeds of such warehouse
debt are or, prior to any funding under the Warehouse Facility with respect to
such assets, were eligible to be recorded as held for sale on the consolidated
balance sheet of the Company in accordance with GAAP, (ii) such warehouse debt
will be deemed Permitted Warehouse Debt (a) in the case of a Purchase Facility,
only to the extent the holder of such warehouse debt has no contractual recourse
to the Company and/or its Restricted Subsidiaries to satisfy claims in respect
of such warehouse debt in excess of the realizable value of the Receivables
financed thereby, and (b) in the case of any other Warehouse Facility, only to
the lesser of (A) the amount advanced by the lender with respect to the
Receivables financed under such Warehouse Facility, and (B) the principal amount
of such Receivables and (iii) any such Indebtedness has not been outstanding in
excess of 364 days.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust, joint venture, or a governmental
agency or political subdivision thereof.
79
<PAGE>
"Purchase Facility" means any Warehouse facility in the form of a purchase and
sale facility pursuant to which the Company or any of its Subsidiaries sells
Receivables to a financial institution and retains the right of first refusal
upon the subsequent resale of such Receivables by such financial institution.
"Receivables" means (i) consumer installment sale contracts and loans
evidenced by promissory notes secured by new and used automobiles and light
trucks, (ii) other consumer installment sale contracts or lease contracts and
(iii) loans secured by residential mortgages, in the case of each of the clauses
(i), (ii) and (iii), that are purchased or originated in the ordinary course of
business by the Company or any Restricted Subsidiary of the Company; provided,
however, that for purposes of determining the amount of a Receivable at any
time, such amount shall be determined in accordance with GAAP, consistently
applied, as of the most recent practicable date.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Securitization" means a public or private transfer of Receivables in the
ordinary course of business and by which the Company or any of its Restricted
Subsidiaries directly or indirectly securitizes a pool of specified Receivables
including any such transaction involving the sale of specified Receivables to a
Securitization Trust.
"Securitization Trust" means any Person (whether or not a Subsidiary of the
Company) established exclusively for the purpose of issuing securities in
connection with any Securitization, the obligations of which are without
recourse to the Company or any of the Guarantors (including, without limitation,
any special purpose Subsidiary of the Company formed exclusively for the purpose
of satisfying the requirements of Credit Enhancement Agreements and regardless
of whether such Subsidiary is an issuer of securities), provided that such
Person is not an obligor with respect to any Indebtedness of the Company or any
Guarantor other than under Credit Enhancement Agreements. As of the date of the
Indenture, AFS Funding Corp. and CP Funding Corp. shall be deemed to satisfy the
requirements of the foregoing definition.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Special Purpose Finance Subsidiaries" means AmeriCredit Receivables Finance
Corp. and AmeriCredit Receivables Finance Corp. 1995-A.
"Specified Senior Indebtedness" means (i) the Indebtedness of any Person,
whether outstanding on the date of the Indenture or thereafter incurred and (ii)
accrued and unpaid interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to such Person to
the extent post filing interest is allowed in such proceeding) in respect of (A)
Indebtedness of such Person for money borrowed and (B) Indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable unless, in the case of either clause (i) or
(ii), in the instrument creating or evidencing the same pursuant to which the
same is outstanding, it is provided that such obligations are subordinate in
right of payment to the Notes; provided, however, that Specified Senior
Indebtedness shall not include (1) any obligation of such Person to any
Subsidiary of such Person, (2) any liability for Federal, state, local or other
taxes owed or owing by such Person, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (4) any
obligations in respect of Capital Stock of such Person or (5) that portion of
any Indebtedness which at the time of incurrence is incurred in violation of the
Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly
80
<PAGE>
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any Agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such Agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants--Restricted Payments." If,
at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall
be in default of such covenant). The Board of Directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Consolidated Leverage
Ratio test set forth in the first paragraph of the covenant described under the
caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the end of the applicable fiscal quarter, and (ii) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Warehouse Facility" means any funding arrangement with a financial
institution or other lender or purchaser to the extent (and only to the extent)
funding thereunder is used exclusively to finance or refinance the purchase or
origination of Receivables by the Company or a Restricted Subsidiary of the
Company for the purpose of (i) pooling such Receivables prior to Securitization
or (ii) sale, in each case in the ordinary course of business, including
Purchase Facilities.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person.
81
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Jenkens & Gilchrist, a Professional Corporation, the
following are the material U.S. federal income tax consequences of exchanging
Old Notes for New Notes pursuant to the Exchange Offer. The following opinion
is based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed regulations thereunder, Internal Revenue Service ("IRS") rulings
and pronouncements, reports of congressional committees, judicial decisions and
current administrative rulings and practice, all as in effect on the date
hereof, all of which are subject to change at any time, and any such change may
be applied retroactively in a manner that could adversely affect the tax
consequences described below.
This opinion applies only to Notes held as "capital assets" within the meaning
of section 1221 of the Code (generally property held for investment and not for
sale to customers in the ordinary course of a trade or business) by holders who
or which are (i) citizens or residents of the United States, (ii) domestic
corporations, partnerships or other entities or (iii) otherwise subject to U.S.
federal income taxation on a net income basis in respect of income and gain from
the Notes. This opinion does not address aspects of U.S. federal income taxation
that may be applicable to holders that are subject to special tax rules, such as
certain financial institutions, tax-exempt organizations, insurance companies,
dealers in securities, foreign corporations and nonresident alien individuals.
Moreover, this summary does not address any of the U.S. federal income tax
consequences of holders that do not acquire New Notes pursuant to the Exchange
Offer, nor does it address the applicability or effect of any state, local or
foreign tax laws.
The Company has not sought and will not seek any rulings from the IRS with
respect to the position of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of exchanging Old Notes for New Notes.
EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an "exchange" for U.S. federal income tax purposes because the
New Notes will not be considered to differ materially in kind or extent from the
Old Notes. New Notes received by a holder of Old Notes will be treated as a
continuation of the Old Notes in the hands of such holder. Accordingly, there
will not be any U.S. federal income tax consequences to holders exchanging Old
Notes for New Notes pursuant to the Exchange Offer. A holder's holding period
of New Notes will include the holding period of the Old Notes exchanged
therefor.
POTENTIAL CONTINGENT PAYMENTS
Holders of New Notes should be aware that it is possible that the IRS could
assert that the Liquidated Damages which the Company would have been obligated
to pay if the Exchange Offer registration statement had not been filed or is not
declared effective within the time periods set forth herein (or certain other
actions are not taken) (as described above under "Termination of Certain
Rights") are "contingent payments" for U.S. federal income tax purposes. If so
treated, the New Notes would be treated as contingent payment debt instruments
and a holder of a New Note would be required to accrue interest income over the
term of such New Note under the "noncontingent bond method" set forth in the
U.S. Treasury Regulations issued by the IRS (the "Contingent Debt Regulations").
Under the Contingent Debt Regulations, any gain recognized by a holder on the
sale, exchange or retirement of a New Note could be treated as interest income.
However, the Contingent Debt Regulations provide that, for purposes of
determining whether a debt instrument is a contingent payment debt instrument,
remote or incidental contingencies are ignored.
On the date of issue, the Company believed and has represented that to the
best knowledge of the Company, prior to and on the date the New Notes are
issued, the possibility of the payment of Liquidated Damages on the Old Notes is
remote. Assuming this representation, counsel is of the opinion that the Old
Notes will not be treated as contingent payment debt instruments. Accordingly,
based on this representation, the Old Notes should not be treated as contingent
payment debt instruments.
82
<PAGE>
EACH HOLDER SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED ABOVE TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS.
83
<PAGE>
DESCRIPTION OF OTHER DEBT
THE CREDIT AGREEMENT
AmeriCredit, AmeriCredit Financial Services, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company, and AmeriCredit Operating Co., Inc., a
Delaware corporation and wholly-owned subsidiary of the Company are the
borrowers under the Credit Agreement, pursuant to which the borrowers may borrow
up to $310 million on a revolving basis for the acquisition of automobile
finance contracts, working capital and general corporate purposes, subject to a
borrowing base limitation based on a percentage of the aggregate eligible
finance receivables owned by AmeriCredit and certain of its subsidiaries.
Borrowings under the Credit Agreement are guaranteed by certain subsidiaries of
AmeriCredit and are secured by certain of the assets of the borrowers and the
Company's principal operating subsidiaries and the pledge by AmeriCredit of all
of its equity interests in and loans to its subsidiaries, except for the Special
Purpose Finance Subsidiaries and certain other subsidiaries. The Credit
Agreement matures in October 1998. As of December 31, 1997, outstanding
borrowings under the Credit Agreement aggregated $2.1 million and approximately
$77.5 million was available for borrowing under the Credit Agreement pursuant to
the terms of such Agreement in accordance with borrowing base requirements.
Amounts outstanding under the Credit Agreement bear interest, at the Company's
option, at either: (i) the higher of (a) the Wells Fargo Bank, N.A. prime rate
or (b) the federal funds rate plus 0.50% per annum or (ii) reserve adjusted
LIBOR plus 1.25% to 1.55% per annum based on the rating of the Credit Agreement
given by one of various rating agencies. The borrowers are also required to pay
an annual commitment fee equal to 0.25% per annum of the unused portion of the
Credit Agreement.
The Credit Agreement contains covenants and provisions that will restrict,
among other things, any of the borrowers' ability to: (i) merge or consolidate
with another entity; (ii) incur liens on its property other than Permitted Liens
(as defined in the Credit Agreement); (iii) engage in certain asset sales or
other dispositions; (iv) engage in material acquisitions and other investments;
(v) pay dividends, repurchase stock or make other restricted payments; (vi)
engage in certain transactions with affiliates; (vii) make certain changes in
its line of business and (viii) enter into any negative pledges. The Credit
Agreement also requires the satisfaction of certain financial performance
criteria, including: (i) that the ratio of recourse indebtedness to tangible net
worth not exceed 2.5 to 1.0; (ii) that the sum of EBIT (as defined in the Credit
Agreement) and the amortization of excess servicing receivable less the gain on
sale of receivables divided by interest expense on a trailing 12-month basis not
be less than 2.2 to 1.0; (iii) that AmeriCredit not incur a net loss on a
consolidated basis during any calendar quarter; (iv) that the ratio of Net
Credit Losses (as defined in the Credit Agreement) for any 12-month period to
the sum of month end balances of Net Indirect Loans (as defined in the Credit
Agreement) over the prior 13 months divided by 13 be less than 0.10 to 1.0; and
(v) that the ratio of Delinquent and Repossessed Loans (as defined in the Credit
Agreement) to Net Indirect Loans be less than 0.075 to 1.0. Additional
borrowings under the Credit Agreement are subject to the absence of a default
under such covenants.
Events of default under the Credit Agreement include, among other things: (i)
any failure of the borrowers to pay principal, interest or fees thereunder when
due; (ii) payment default or other default under other Indebtedness; (iii)
noncompliance with or breach of certain covenants contained in the Credit
Agreement and certain related documents; (iv) material inaccuracy of any
representation or warranty when made by borrowers in the Credit Agreement and
certain related documents; (v) certain events of bankruptcy or insolvency; and
(vi) imposition of judgment or ERISA liens.
THE WAREHOUSE FACILITY
In October 1997 the Company established a $245 million warehouse facility (the
"Warehouse Facility") which expires in October 1998. Under the Warehouse
Facility, AmeriCredit Financial Services, Inc., a subsidiary of the Company
sells auto receivables to CP Funding Corp., a special purpose subsidiary which
is treated as a Securitization Trust under the Indenture. AmeriCredit Financial
Services, Inc., in turn agrees to manage, service, administer and make
collections on such auto receivables. CP Funding Corp. finances the purchase of
the auto receivables with borrowings under the Warehouse Facility.
The amount of financing available under the Warehouse Facility is governed by
an advance formula equal to 88% of the principal amount of the receivables
financed thereby subject to downward adjustment upon certain defined financial
84
<PAGE>
performance ("Trigger Events"). Aggregate borrowings of $96.0 million were
outstanding as of December 31, 1997. All financings under the Warehouse Facility
are secured by a first priority lien on the receivables and related assets held
by CP Funding Corp. and bear interest at rates based on the funding source plus
specified fees. While CP Funding Corp. is a consolidated subsidiary of the
Company, CP Funding Corp. is a separate legal entity and the auto receivables
sold to CP Funding Corp. and the other assets of CP Funding Corp. are legally
owned by CP Funding Corp. and are not available to satisfy the claims of
creditors of AmeriCredit or its other subsidiaries.
THE MORTGAGE SUBSIDIARY CREDIT AGREEMENT
The Company's subsidiary, AMS, has a credit Agreement (the "Mortgage
Subsidiary Credit Agreement") with a bank, which provides AMS with revolving
credit borrowings of up to $75.0 million, subject to specified borrowing base
requirements, to fund AMS's origination and acquisition of sub-prime residential
mortgage loans until those loans are sold in the secondary market. Borrowings by
AMS under this facility are collateralized by a first lien security interest on
the mortgage loans and related assets originated or acquired by AMS, and are
guaranteed by the Company and certain of the Company's Subsidiaries. Aggregate
borrowings of $7.3 million were outstanding as of December 31, 1997. Borrowings
under the facility bear interest, at AMS's option, at either: (i) a base rate
established by the lender, or (ii) LIBOR plus 1.00%, and require AMS to pay an
annual commitment fee of 1/8% of the unused portion of the facility. The
facility expires in February 1999.
The Mortgage Subsidiary Credit Agreement contains covenants and provisions
typical of a revolving credit facility, including restrictions on AMS's ability
to: (i) incur additional indebtedness, including guarantees, (ii) incur liens on
its properties, (iii) make loans and advances to and investments in entities
other than affiliates, (iv) pay dividends and other distributions to entities
other than affiliates, (v) merge or consolidate, (vi) liquidate or otherwise
dispose of its assets, (vii) engage in transactions with affiliates, or (viii)
engage in any new business. The Mortgage Subsidiary Credit Agreement also
contains covenants which require AMS to satisfy certain financial criteria.
ASSET-BACKED SECURITIES
At the date of this Prospectus, the Special Purpose Finance Subsidiaries of
the Company have one issue of automobile receivables-backed notes outstanding,
the Series 1995-A notes. The Series 1995-A notes were issued in June 1995 and
initially aggregated $99,170,000. The Series 1995-A notes were issued by a
wholly-owned Special Purpose Finance Subsidiary which holds the related finance
receivables. Principal and interest on the Series 1995-A notes are payable
monthly from cash collections on the pool of finance receivables which are
collateral for the notes.
As of December 31, 1997, $14.1 million was outstanding on the Series 1995-A
notes.
FINANCIAL GUARANTEE INSURANCE POLICIES
The Company has procured financial guarantee insurance policies from FSA for
the benefit of the holders of the asset-backed securities issued in Company-
sponsored securitizations in order to reduce the cost of such securitizations by
enhancing their credit ratings. The Company has agreed to reimburse FSA, on a
limited recourse basis, for amounts paid by FSA under such financial guarantee
insurance policies. In order to secure such reimbursement obligations, the
Company has granted to FSA a lien on the capital stock of, and certain assets
of, AFS Funding Corp., most notably the spread accounts and the restricted cash
required to be deposited therein and on the capital stock of the Special Purpose
Finance Subsidiaries. The Company's obligations to FSA with respect to each
individual securitization are cross-collateralized to all of the collateral
pledged to FSA. As a result, the restricted cash in the spread accounts from all
of the Company-sponsored securitizations, as well as the capital stock of AFS
Funding Corp. (which owns all of the spread accounts and all of the excess
servicing receivable associated with all such securitizations) is available to
reimburse FSA in connection with any individual Company-sponsored
securitizations.
In addition, AFS Funding Corp. is a limited purpose corporation established by
the Company to facilitate Company-sponsored securitizations and the credit
enhancement thereof and its ability to pay dividends is effectively restricted
to a substantial degree by the terms of the Company-sponsored securitizations
and the FSA financial guarantee arrangements.
85
<PAGE>
Specifically, AFS Funding Corp. has agreed to be last in the order of payment
priority with respect to cash distributions from Company-sponsored
securitizations and is not entitled to receive any cash from Company-sponsored
securitizations or access restricted cash in the spread accounts until the
asset-backed security holders, FSA and others have received all amounts due to
them and the spread accounts have the requisite amounts of restricted cash
deposited therein. FSA will have claims that are prior to the claims of the
holders of the Notes with respect to the assets securing its reimbursement
rights and the Notes will be effectively subordinated to all such reimbursement
rights. As of December 31, 1997, restricted cash was approximately $76.2 million
(all of which was held in spread accounts owned by AFS Funding Corp.) and AFS
Funding Corp.'s other principal asset, excess servicing receivable, was $179.8
million. See "Risk Factors--Holding Company Structure; Effective Subordination."
ORIGINAL NOTES
On February 4, 1997, the Company issued $125 million in aggregate principal
amount of Original Notes pursuant to the Original Indenture, among the Company,
the Guarantors and Bank One, N.A., as trustee. The Original Notes are
guaranteed on a senior unsecured basis by each of the Guarantors. The terms of
the Notes and Guarantees offered hereby will be substantially similar to the
terms of the Original Notes and Original Guarantees except that the Company must
offer to repurchase Original Notes with Excess Proceeds (as defined in the
Indenture) resulting from an "Asset Sale" (as defined in the Indenture) prior to
making any such offer with respect to the Notes. In addition, holders of Notes
and holders of Original Notes shall constitute separate classes with respect to
acting under an Event of Default (as defined in the Indenture) and with respect
to amendments, supplements and waivers.
CAPITALIZED EQUIPMENT LEASES
The Company has, from time to time, financed the acquisition of data
processing and telecommunications equipment with capitalized equipment leases.
As of December 31, 1997, such leases totaled $4.5 million.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date and
ending on the close of business one year after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until April 24, 1998, all
dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sales of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit of any such resale of New Notes and any
commissions or concessions received by such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in
86
<PAGE>
the Letter of Transmittal. The Company has agreed to pay all expenses incident
to the Exchange Offer (including the expenses of one counsel for the holders of
the Notes) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
Smith Barney Inc. acted as one of the Initial Purchasers of the Original Notes
issued in February 1997.
LEGAL MATTERS
The legality of the Notes offered hereby will be passed upon for the Company
and the Guarantors by Jenkens & Gilchrist, a Professional Corporation, Dallas,
Texas.
EXPERTS
The consolidated balance sheets as of June 30, 1996 and 1997 and the
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended June 30, 1997, included in this
Registration Statement, have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
87
<PAGE>
AMERICREDIT CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants .................................................................. F-2
Consolidated Balance Sheets as of June 30, 1996 and 1997 ........................................... F-3
Consolidated Statements of Income for the years ended June 30, 1995, 1996 and 1997 ................. F-4
Consolidated Statements of Shareholders' Equity for the years ended June 30, 1995, 1996 and 1997 ... F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1996 and 1997 ............. F-6
Notes to Consolidated Financial Statements ......................................................... F-7
Report of Independent Accountants on Supplementary Information....................................... F-21
Consolidating Balance Sheets as of June 30, 1996 and 1997............................................ F-23
Consolidating Income Statements for the years ended June 30, 1995, 1996 and 1997..................... F-25
Consolidating Statements of Cash Flow for the years ended June 30, 1995, 1996 and 1997............... F-28
Consolidated Balance Sheets as of June 30, 1997 and December 31, 1997 (unaudited) .................. F-31
Consolidated Statements of Income for the six months ended December 31, 1996 and 1997 (unaudited) .. F-32
Consolidated Statements of Cash Flows for the six months ended December 31, 1996 and 1997
(unaudited) ..................................................................................... F-33
Notes to Consolidated Financial Statements (unaudited) ............................................. F-34
Consolidating Balance Sheet as of December 31, 1997 (unaudited) ..................................... F-38
Consolidating Income Statements for the six months ended December 31, 1996 and 1997 (unaudited) ..... F-39
Consolidating Statements of Cash Flows for the six months ended December 31, 1996 and 1997
(unaudited) ......................................................................................... F-41
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
AmeriCredit Corp.
We have audited the accompanying consolidated balance sheets of AmeriCredit
Corp. as of June 30, 1997 and 1996, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended June 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AmeriCredit Corp.
as of June 30, 1997 and 1996, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended June 30, 1997, in
conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, in 1997,
AmeriCredit Corp. changed its method of accounting for transfers and servicing
of financial assets and extinguishment of liabilities.
COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
August 6, 1997
F-2
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................................ $ 2,145 $ 6,027
Investment securities................................................................ 6,558 6,500
Finance receivables, net............................................................. 250,484 266,657
Excess servicing receivable.......................................................... 33,093 114,376
Restricted cash...................................................................... 15,304 67,895
Property and equipment, net.......................................................... 7,670 13,884
Goodwill............................................................................. 7,260
Deferred income taxes................................................................ 9,995
Other assets......................................................................... 4,910 10,854
-------- --------
Total assets.............................................................. $330,159 $493,453
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit ......................................................... $ 86,000 $ 71,700
Mortgage warehouse facility................................................... 345
Automobile receivables-backed notes ......................................... 67,847 23,689
9 1/4% Senior Notes........................................................... 125,000
Notes payable ............................................................... 418 3,517
Accrued taxes and expenses .................................................. 12,669 39,362
Deferred income taxes ....................................................... 13,304
-------- --------
Total liabilities ....................................................... 166,934 276,917
-------- --------
Commitment and contingencies (Note 8)
Shareholders' equity:
Preferred stock, $.01 par value per share, 20,000,000 shares authorized; none
issued......................................................................
Common stock, $.01 par value per share, 120,000,000 shares authorized;
32,640,963 and 33,255,173 shares issued ................................... 326 333
Additional paid-in capital .................................................. 190,005 203,544
Unrealized gain or excess servicing receivables, net of income taxes ........ 2,954
Retained earnings (deficit) ................................................. (5,233) 33,466
-------- --------
185,098 240,297
Treasury stock, at cost (4,120,483 and 3,959,071 shares) ......................... (21,873) (23,761)
-------- --------
Total shareholders' equity ................................................... 163,225 216,536
-------- --------
Total liabilities and shareholders' equity .............................. $330,159 $493,453
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
REVENUE JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
------------ ----------- -----------
<S> <C> <C> <C>
Finance charge income.......................... $ 30,249 $ 51,706 $ 44,910
Gain on sale of receivables.................... 22,873 67,256
Servicing fee income........................... 3,712 21,024
Investment income.............................. 1,284 1,075 2,909
Other income................................... 1,551 1,612 1,648
----------- ----------- -----------
33,084 80,978 137,747
----------- ----------- -----------
COSTS AND EXPENSES
Operating expenses............................. 14,773 25,681 51,915
Provision for losses........................... 4,278 7,912 6,595
Interest expense............................... 4,015 13,129 16,312
----------- ----------- -----------
23,066 46,722 74,822
----------- ----------- -----------
Income before income taxes..................... 10,018 34,256 62,925
Income tax provision (benefit)................. (18,875) 12,665 24,226
----------- ----------- -----------
Net income..................................... $ 28,893 $ 21,591 $ 38,699
=========== =========== ===========
Earnings per share............................. $0.95 $0.71 $1.26
=========== =========== ===========
Weighted average shares and share equivalents.. 30,380,749 30,203,298 30,782,471
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED RETAINED
COMMON STOCK PAID-IN CAPITAL GAIN EARNINGS TREASURY STOCK
------------------ --------------- ----------- --------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1994 31,757,333 $318 183,588 $(55,717) 3,008,360 $ (8,688)
Common stock issued on exercise of
options.............................. 359,868 3 1,302
Income tax benefit from exercise of
options.............................. 683
Purchase of treasury stock.............. 433,200 (3,412)
Common stock issued for employee
benefit plans........................ (41,521) 256
Net income.............................. 28,893
---------- ---- -------- --------- -------- --------- --------
BALANCE AT JUNE 30, 1995................ 32,117,201 321 185,573 (26,824) 3,400,039 (11,844)
Common stock issued on exercise of
options.............................. 523,762 5 3,045
Income tax benefit from exercise of
options.............................. 1,387
Purchase of treasury stock.............. 829,000 (10,710)
Common stock issued for employee
benefit plans........................ (108,556) 681
Net income.............................. 21,591
---------- ---- -------- --------- -------- --------- --------
BALANCE AT JUNE 30, 1996................ 32,640,963 326 190,005 (5,233) 4,120,483 (21,873)
Common stock issued on exercise of
options.............................. 614,210 7 5,646
Common stock issued for acquisition..... 4,700 (400,000) 2,400
Income tax benefit from exercise of
options.............................. 2,652
Purchase of treasury stock.............. 315,200 (4,387)
Unrealized gain on excess of servicing
receivable, net of income taxes
of $1,848............................ $ 2,954
Common stock issued for employee........ 541 (76,612) 99
benefit plans
Net income.............................. 38,699
---------- ---- -------- --------- -------- --------- --------
BALANCE AT JUNE 30, 1997................ 33,255,173 $333 $203,544 $ 2,954 $ 33,466 3,959,071 $(23,761)
========== ==== ======== ========= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 28,893 $ 21,591 $ 38,699
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 1,317 1,528 2,203
Provision for losses...................................... 4,278 7,912 6,595
Deferred income taxes..................................... (18,954) 11,681 24,428
Gain on sale of auto receivables.......................... (22,873) (64,338)
Amortization of excess servicing receivable............... 6,636 34,393
Changes in assets and liabilities:
Other assets.......................................... (1,834) (984) (2,341)
Accrued taxes and expenses............................ 937 9,406 26,493
--------- --------- ---------
Net cash provided by operating activities................. 14,637 34,897 66,132
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables................................. (225,350) (417,235) (896,711)
Originations of mortgage receivables.......................... (53,770)
Principal collections and recoveries on receivables........... 71,334 94,948 64,389
Net proceeds from sale of auto receivables.................... 268,923 767,571
Net proceeds from sale of mortgage receivables................ 52,489
Purchases of property and equipment........................... (1,730) (3,162) (4,511)
Proceeds from sales and maturities of investment securities... 16,241 3,707 58
Increase in restricted cash................................... (5,007) (10,297) (52,591)
--------- --------- ---------
Net cash used by investing activities..................... (144,512) (63,116) (123,076)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit............................. 83,900 342,600 745,500
Payments on bank line of credit............................... (83,900) (256,600) (759,800)
Net increase in mortgage warehouse facility................... (2,964)
Proceeds from issuance of 9 1/4% Senior Notes................. 120,894
Proceeds from issuance of automobile receivables-backed notes. 150,170
Payments on automobile receivables-backed notes............... (15,650) (66,673) (44,158)
Payments on notes payable..................................... (236) (298) (552)
Proceeds from issuance of common stock........................ 1,561 3,731 6,293
Purchase of treasury stock.................................... (3,412) (10,710) (4,387)
--------- --------- ---------
Net cash provided by financing activities................. 132,433 12,050 60,826
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........... 2,558 (16,169) 3,882
Cash and cash equivalents at beginning of year................. 15,756 18,314 2,145
--------- --------- ---------
Cash and cash equivalents at end of year....................... $ 18,314 $ 2,145 $ 6,027
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Operations
AmeriCredit Corp. ("the Company") was formed on August 1, 1986 and, since
September 1992, has been in the business of purchasing, securitizing and
servicing automobile sales finance contracts. The Company operated 85 auto
lending branch offices in 30 states as of June 30, 1997. The Company also
acquired a subsidiary in November 1996 which originates and sells home equity
loans.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
which affect the reported amounts of assets and liabilities and the disclosures
of contingent assets and liabilities as of the date of the financial statements
and the amount of revenue and costs and expenses during the reporting periods.
Actual results could differ from those estimates. These estimates include, among
other things, anticipated prepayments and credit losses on finance receivables
sold in securitization transactions and the determination of the allowance for
losses on finance receivables.
Cash Equivalents
Investments in highly liquid securities with original maturities of 90 days or
less are included in cash and cash equivalents.
Investment Securities
Investment securities are classified as held-to-maturity and are carried at
amortized cost.
Finance Receivables
Finance charge income related to finance receivables is recognized using the
interest method. Accrual of finance charge income is suspended on finance
contracts which are more than 60 days delinquent. Fees and commissions received
and direct costs of originating loans are deferred and amortized over the term
of the related finance contracts also using the interest method.
Provisions for losses are charged to operations in amounts sufficient to
maintain the allowance for losses at a level considered adequate to cover
estimated losses in the finance receivables portfolio owned by the Company.
Automobile finance sales contracts are typically purchased by the Company for a
non-refundable acquisition fee on a non-recourse basis, and such acquisition
fees are also added to the allowance for losses. The Company reviews historical
origination and charge-off relationships, charge-off experience factors,
collection data, delinquency reports, estimates of the value of the underlying
collateral, economic conditions and trends and other information in order to
make the necessary judgments as to the appropriateness of the provision for
losses and the allowance for losses. Finance contracts are charged-off to the
allowance for losses when the Company repossesses and disposes of the collateral
or the account is otherwise deemed uncollectible.
F-7
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Excess Servicing Receivable
The Company periodically sells finance receivables to certain special purpose
financing trusts (the "Trusts"), and the Trusts in turn issue asset-backed
securities to investors. The Company retains an interest in the finance
receivables sold in the form of a residual or interest-only strip and may also
retain other subordinated interests in the Trusts. The residual or interest-
only strips represent the present value of future excess cash flows resulting
from the difference between the finance charge income received from the obligors
on the finance receivables and the interest paid to the investors in the asset-
backed securities, net of credit losses, servicing fees and other expenses.
Upon the transfer of finance receivables to the Trusts, the Company removes
the net book value of the finance receivables sold from its consolidated balance
sheets and allocates such carrying value between the assets transferred and the
interests retained, based upon their relative fair values at the settlement
date. The difference between the sales proceeds, net of transaction costs, and
the allocated basis of the assets transferred is recognized as a gain on sale of
receivables.
The allocated basis of the interests retained, including the residual or
interest-only strip is recognized as excess servicing receivable in the
Company's consolidated balance sheets. Since such asset can be contractually
prepaid or otherwise settled in such a way that the holder would not recover all
of its recorded investment, excess servicing receivable is classified as
available for-sale and is measured at fair value. Unrealized holding gains or
temporary holding losses are reported net of income tax effects as a separate
component of shareholders' equity until realized. If a decline in fair value
were deemed other than temporary, excess servicing receivable would be written
down through a charge to operations.
The fair value of excess servicing receivable is estimated by calculating the
present value of the future excess cash flows related to such interests using a
discount rate commensurate with the risks involved. Such calculations include
estimates of future credit losses and prepayment rates for the remaining term of
the finance receivables transferred to the Trusts since these factors impact the
amount and timing of future excess cash flows. If future credit losses and
prepayment rates exceed the Company's original estimates, excess servicing
receivable would be written down through a charge to operations. Favorable
credit loss and prepayment experience compared to the Company's original
estimates would result in additional earnings when realized.
Restricted Cash
A financial guaranty insurance company (the "Insurer") has provided a
financial guaranty insurance policy for the benefit of the investors in each
series of asset-backed securities issued by the Trusts or special purpose
financing subsidiaries of the Company. In connection with the issuance of the
policies, the Company was required to establish a separate cash account with a
trustee for the benefit of the Insurer for each series of securities and related
finance receivables pools. Monthly collections and recoveries from the pools of
finance receivables in excess of required principal and interest payments on the
securities and servicing fees and other expenses are either added to the
restricted cash accounts or used to repay the outstanding securities on an
accelerated basis, thus creating additional credit enhancement for the Insurer.
When the credit enhancement levels reach specified percentages of the pools of
finance receivables, excess cash flows are distributed to the Company. In the
event that monthly collections and recoveries from any pool of finance
receivables are insufficient to make required principal and interest payments to
the investors and pay servicing fees and other expenses, any shortfall would be
drawn from the restricted cash accounts.
Certain agreements with the Insurer provide that if delinquency, default and
net loss ratios in the pools of finance receivables supporting the asset-backed
securities exceed certain amounts, the specified levels of credit enhancement
would be increased and, in certain cases, the Company would be removed as
servicer of the finance receivables.
F-8
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Property and Equipment
Property and equipment are carried at cost. Depreciation is generally
provided on a straight-line basis over the estimated useful lives of the assets.
The cost of assets sold or retired and the related accumulated depreciation
are removed from the accounts at the time of disposition, and any resulting gain
or loss is included in operations. Maintenance, repairs, and minor replacements
are charged to operations as incurred; major replacements and betterments are
capitalized.
Off Balance Sheet Financial Instruments
The Company periodically enters into hedging arrangements to manage the
gross interest rate spread on its securitization transactions. The Company's
hedging strategies include the use of Forward U.S. Treasury Rate Lock and
Interest Rate Swap Agreements. The face amount and terms of the Forward U.S.
Treasury Rate Lock Agreements generally correspond to the principal amount and
average maturities of finance receivables expected to be sold to the Trusts and
the related securities to be issued by the Trusts. Gains or losses on these
agreements are deferred and recognized as a component of the gain on sale of
receivables at the time that finance receivables are transferred to the Trusts.
The Interest Rate Swap Agreements are used to convert the interest rates on
floating rate securities issued by the Trusts in securitization transactions to
a fixed rate. The notional amount of these agreements approximates the
outstanding balance of the floating rate securities. The estimated differential
payments required under these agreements are recognized as a component of the
gain on sale of receivables at the time that finance receivables are transferred
to the Trusts.
Income Taxes
Deferred income taxes are provided in accordance with the asset and
liability method of accounting for income taxes to recognize the tax effects of
temporary differences between financial statement and income tax accounting.
Earnings Per Share
Earnings per share is based upon the weighted average number of shares
outstanding during each year, adjusted for any dilutive effect of options using
the treasury stock method.
Recent Accounting Developments
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125
establishes accounting and reporting standards for transfers of financial assets
and applies to the Company's periodic sales of finance receivables to the
Trusts. Adoption of SFAS 125, which was applied prospectively to transactions
occurring subsequent to December 1996, resulted in increases of $4,802,000 in
excess servicing receivable, $1,848,000 in deferred income taxes and $2,954,000
in shareholders' equity as of June 30, 1997.
Effective July 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 establishes financial accounting and reporting standards for
stock-based compensation plans such as stock purchase plans and stock options.
The new standard allows companies either to continue to account for stock based
employee compensation plans under existing accounting standards or adopt a fair
value-based method of accounting for stock-based awards as compensation expense
over the service period, which is usually the vesting period. SFAS 123 requires
that if a company continues to account for stock options under existing
accounting standards, pro forma net income and earnings per share information
must be provided as if the new fair value approach had been adopted. The Company
has elected to continue to account for stock-based employee compensation under
existing accounting standards. Accordingly, no compensation expense has been
recognized for options granted under stock based employee compensation plans.
Had compensation expense for the Company's plans been determined
F-9
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
using the fair value-based method under SFAS 123, pro forma net income would
have been $15,224,000 and $33,217,000, and pro forma earnings per share would
have been $0.50 and $1.08, for the years ended June 30, 1996 and 1997,
respectively.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). SFAS 128 establishes standards for computing and presenting earnings per
share, replacing existing accounting standards. The new standard requires dual
presentation of basic and diluted earnings per share and a reconciliation
between the two amounts. Basic earnings per share excludes dilution and diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock. SFAS 128 is effective for financial statements issued for
periods ending after December 15, 1997. The Company's basic earnings per share
computed pursuant to the new standard would have been $1.01, $0.76 and $1.34 for
the years ended June 30, 1995, 1996 and 1997, respectively. Diluted earnings
per share computed pursuant to the new standard would not be materially
different from earnings per share presented in the consolidated statements of
income.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for reporting comprehensive income and its components in a full set of
financial statements. The new standard requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income, including an amount representing total comprehensive
income, be reported in a financial statement that is displayed with the same
prominence as other financial statements. Pursuant to SFAS 130, the Company will
be required to display total comprehensive income, including net income and
changes in the unrealized gain on excess servicing receivable, in its
consolidated financial statements for the year ended June 30, 1999 and
thereafter.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for the way companies report
information about operating segments in annual financial statements and requires
that enterprises report selected information about operating segments in interim
financial reports. The new pronouncement also establishes standards for related
disclosures about products and services, geographic areas and major customers.
The statement is effective for financial statements for periods beginning after
December 15, 1997. The disclosures required by SFAS 131 would generally not be
applicable since the Company currently operates in only one reportable segment.
2. INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities as of
June 30, 1996, by issuer type, are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
-------------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
U.S. Government obligations........ $5,000 $ $304 $4,696
Mortgage-backed securities......... 1,558 ------ 1,558
------ ---- ------
$6,558 $ $304 $6,254
====== ====== ==== ======
</TABLE>
The amortized cost and estimated fair value of investment securities as of
June 30, 1997, by issuer type, are as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE
-------------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
U.S. Government obligations........ $5,000 $ $ 75 $4,925
Mortgage-backed securities......... 1,500 ------ 62 1,438
------ ---- ------
$6,500 $ $137 $6,363
====== ====== ==== ======
</TABLE>
F-10
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The amortized cost and estimated fair value of investment securities as of
June 30, 1997, by contractual maturity, are shown below (in thousands). Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
<S> <C> <C>
Due within one year................................. $5,000 $4,925
Mortgage-backed securities.......................... 1,500 1,438
------ ------
$6,500 $6,363
====== ======
</TABLE>
3. FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
<S> <C> <C>
Auto receivables.................................. $264,086 $275,249
Less allowance for losses......................... (13,602) (12,946)
-------- --------
Auto receivables, net............................. 250,484 262,303
Mortgage receivables.............................. 4,354
-------- --------
Finance receivables, net.......................... $250,484 $266,657
======== ========
</TABLE>
Auto receivables are collateralized by vehicle titles and the Company has the
right to repossess the vehicle in the event that the consumer defaults on the
payment terms of the contract. Mortgage receivables are collateralized by
liens on real property and the Company has the right to foreclose in the event
that the consumer defaults on the payment terms of the contract.
The accrual of finance charge income has been suspended on $17,339,000 and
$12,704,000 of delinquent auto receivables as of June 30, 1996 and 1997,
respectively.
A summary of the allowance for losses is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
===============================
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
========= ========= =========
<S> <C> <C> <C>
Balance at beginning of year....................... $ 9,330 $ 19,951 $ 13,602
Provision for losses............................... 4,278 7,912 6,595
Acquisition fees................................... 13,908 18,097 30,688
Allowance related to receivables sold to Trusts.... (13,461) (20,974)
Net charge-offs-auto receivables................... (6,409) (18,322) (16,965)
Net charge-offs-other.............................. (1,156) (575)
------- -------- --------
Balance at end of year............................. $19,951 $ 13,602 $ 12,946
======= ======== ========
</TABLE>
F-11
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
4. EXCESS SERVICING RECEIVABLE
As of June 30, 1996 and 1997, the Company was servicing $259,895,000 and
$863,006,000, respectively, of auto receivables which have been sold to the
Trusts.
The components of excess servicing receivable are as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S> <C> <C>
Interest only strips............................................... $11,819 $ 59,933
Subordinated interests:
Retained asset-backed securities................................. 21,274 12,589
Excess of auto receivables in Trusts over........................ 41,854
asset-backed securities outstanding............................ -------- --------
$ 33,093 $114,376
======== ========
</TABLE>
Excess servicing receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- ---------
<S> <C> <C>
Estimated future excess cash flows before allowance for credit losses... $ 63,457 $200,869
Allowance for credit losses.............................................. (25,616) (74,925)
-------- --------
Estimated future excess cash flows....................................... 37,841 125,944
Discount to present value................................................ (4,748) (11,568)
-------- --------
$ 33,093 $114,376
======== ========
</TABLE>
A summary of excess servicing receivable is as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S>...................................................................... <C> <C>
Balance at beginning of year............................................. $ $ 33,093
Additions................................................................ 39,729 110,874
Increase in unrealized gain.............................................. 4,802
Amortization............................................................. (6,636) (34,393)
-------- --------
Balance at end of year................................................... $ 33,093 $114,376
======== ========
</TABLE>
5. ACQUISITION
In November 1996, the Company acquired AmeriCredit Mortgage Services
("AMS", formerly Rancho Vista Mortgage Corporation), which originates and sells
home equity loans. The purchase price of $7,434,000 consisted of 400,000 shares
of the Company's common stock and assumption of certain liabilities. The
acquisition has been accounted for as a purchase and the excess of the purchase
price over net assets acquired was assigned to goodwill. Goodwill is being
amortized over a 25 year period. The results of operations of AMS have been
included in the consolidated financial statements since the acquisition date.
F-12
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S> <C> <C>
Land............................................. $ 600 $ 600
Buildings and improvements....................... 1,973 2,319
Equipment........................................ 6,994 12,869
Furniture and fixtures........................... 828 1,935
------- -------
10,395 17,723
Less accumulated depreciation and amortization (2,725) (3,839)
------- -------
$ 7,670 $13,884
======= =======
</TABLE>
7. DEBT
The Company has a revolving credit Agreement with a group of banks under
which the Company may borrow up to $240 million, subject to a defined borrowing
base. Aggregate borrowings of $86,000,000 and $71,700,000 were outstanding as of
June 30, 1996 and 1997, respectively. Borrowings under the credit Agreement are
collateralized by certain auto receivables and bear interest, based upon the
Company's option, at either the prime rate (8.50% as of June 30, 1997) or
various market London Interbank Offered Rates plus 1.25%. The Company is also
required to pay an annual commitment fee equal to 1/4% of the unused portion of
the credit Agreement. The credit Agreement, which expires in October 1997,
contains various restrictive covenants requiring certain minimum financial
ratios and results and placing certain limitations on the incurrence of
additional debt, capital expenditures, cash dividends and repurchase of common
stock.
The Company also has a mortgage warehouse facility with a bank under which
the Company may borrow up to $75 million, subject to a defined borrowing base.
Aggregate borrowings of $345,000 were outstanding as of June 30, 1997.
Borrowings under the facility are collateralized by certain mortgage receivables
and bear interest, based upon the Company's option, at either the prime rate or
LIBOR plus 1.25%. The Company is also required to pay an annual commitment fee
equal to 1/8% of the unused portion of the facility. The facility expires in
February 1998.
In February 1997, the Company issued $125 million of 9 1/4% Senior Notes
which are due in February 2004. Interest on the notes is payable semi-annually,
commencing in August 1997. The notes, which are unsecured, may be redeemed at
the option of the Company after February 2001 at a premium declining to par in
February 2003. The Indenture pursuant to which the notes were issued contains
restrictions including limitations on the Company's ability to incur additional
indebtedness other than certain secured indebtedness, pay cash dividends and
repurchase common stock. Original debt issuance costs of $4,106,000 are being
amortized over the term of the 9 1/4% Senior Notes and are included in other
assets in the consolidated balance sheets.
Automobile receivables-backed notes consist of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------- --------
<S> <C> <C>
Series 1995-A notes, interest at 6.55%, collateralized by certain auto
receivables in the principal amount of $23,589, final maturity in
September 2000................................................... $ 54,176 $ 23,689
Series 1994-A notes, paid in full in April 1997...................... 13,671
-------- --------
$ 67,847 $ 23,689
======== ========
</TABLE>
F-13
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
Maturities of the automobile receivables-backed notes, based on the
contractual maturities of the underlying auto receivables, for years ending June
30 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $16,585
1999........................................................ 6,015
2000........................................................ 1,089
-------
$23,689
=======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Branch lending offices are generally leased for terms of up to five years
with certain rights to extend for additional periods. The Company also leases
office space for its loan servicing facilities under leases with terms up to 10
years with renewal options. Lease expense was $422,000, $875,000 and $2,132,000
for the years ended June 30, 1995, 1996 and 1997, respectively. Lease
commitments for years ending June 30 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 2,935
1999........................................................ 2,691
2000........................................................ 2,244
2001........................................................ 1,897
2002........................................................ 1,061
Thereafter.................................................. 3,085
-------
$13,913
=======
</TABLE>
As of June 30, 1997, the Company had Forward U.S. Treasury Rate Lock
Agreements to sell $200 million of U.S. Treasury Notes due May 1999 and $200
million of U.S. Treasury Notes due November 1999. The Agreements expire August
29, 1997 and November 26, 1997, respectively. Any gain or loss on these hedging
positions will be recognized as a component of the gain on sale of receivables
upon transfers of receivables to the Trusts subsequent to June 30, 1997.
As of June 30, 1996, the Company had a Forward U.S. Treasury Rate Lock
Agreement to sell $100 million of U.S. Treasury Notes which was settled in
August 1996.
The Company services auto receivables for its own account and for the
Trusts. These contracts are with consumers residing throughout the United
States, with borrowers located in Texas and California accounting for 13% and
12%, respectively, of the total managed auto receivables portfolio as of June
30, 1997. Borrowers located in Texas accounted for 18% of total managed auto
receivables as of June 30, 1996. No other state accounted for more than 10% of
total managed auto receivables.
In the normal course of its business, the Company is named as defendant in
legal proceedings. These cases include claims for alleged truth-in-lending
violations, nondisclosures, misrepresentations and deceptive trade practices,
among other things. The relief requested by the plaintiffs varies but includes
requests for compensatory, statutory and punitive damages. Two unrelated
proceedings in which the Company is a defendant have been brought as putative
class actions and are pending in federal district courts in Connecticut and
Illinois, respectively. Classes have not been certified in either case and the
Company has filed motions to dismiss in both cases which are presently pending.
In the opinion of management, the resolution of these proceedings will not have
a material adverse effect on the consolidated financial position, results of
operations or liquidity of the Company.
F-14
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
9. STOCK OPTIONS
General
-------
The Company has certain stock-based compensation plans for employees, non-
employee directors and key executive officers.
A total of 6,000,000 shares are authorized for grants of options under the
employee plans, including 2,000,000 shares available for grants of options or
other equity instruments. The exercise price of each option must equal the
market price of the Company's stock on the date of grant and the maximum term of
each option is ten years. The vesting period is typically four years. Option
grants, vesting periods and the term of each option are determined by a
committee of the Company's board of directors.
A total of 2,100,000 shares are authorized for grants of options under the
non-employee director plans. The exercise price of each option must equal the
market price of the Company's stock on the date of grant and the maximum term of
each option is ten years. Option grants, vesting periods and the term of each
option are established by the terms of the plans.
A total of 850,000 shares are authorized for grants of options under the
key executive officer plan. The exercise price of each option under this plan is
$16 per share and the term of each option is seven years. These options vest
upon the earlier of seven years from the date of grant or the time that the
Company's common stock trades above certain targeted price levels.
The following tables present information related to the Company's stock-
based compensation plans. The fair value of each option grant was estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
-----------------------------------
<S> <C> <C> <C>
Expected dividends.................. 0 0 0
Expected volatility................. 20% 20% 20%
Risk-free interest rate............. 5.87% 5.87% 5.87%
Expected life....................... 5 Years 5 Years 5 Years
</TABLE>
F-15
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
Employee Plans
--------------
A summary of stock option activity under the Company's employee plans is as
follows (shares in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
-------------------- ---------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year... 2,681 $4.20 3,410 $ 5.00 3,664 $ 7.22
Granted............................ 1,080 8.20 672 13.59 1,251 15.47
Exercised.......................... (189) 4.27 (373) 5.22 (423) 7.91
Forfeited.......................... (162) 7.76 (45) 6.96 (116) 11.68
----- ----- ----- ------ ----- ------
Outstanding at end of year......... 3,410 $5.00 3,664 $ 7.22 4,376 $ 9.35
===== ===== ===== ====== ===== ======
Options exercisable at end of year. 2,132 $4.50 2,811 $ 4.51 3,161 $ 7.77
===== ===== ===== ====== ===== ======
Weighted average fair value of
options granted during year..... $2.24 $ 3.72 $ 4.21
===== ====== ======
</TABLE>
A summary of options outstanding under employee plans as of June 30, 1997
is as follows (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------- ----------------------------
WEIGHTED AVERAGE
YEARS OF WEIGHTED WEIGHTED
RANGE OF EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- ----------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.50 to 4.63 1,183 4.21 $ 3.44 1,113 $ 3.46
$5.50 to 9.13 1,337 7.33 7.24 1,207 7.24
$11.00 to 15.75 1,357 8.55 14.01 697 13.80
$16.38 to 18.38 499 9.49 16.93 144 16.79
----- -----
4,376 3,161
===== =====
</TABLE>
Non-employee Director Plans
---------------------------
A summary of stock option activity under the Company's non-employee
director plans is as follows (shares in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
-------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........ 1,079 $2.80 946 $ 2.80 913 $ 3.60
Granted................................. 30 6.50 40 12.88 40 18.75
Exercised............................... (163) 2.80 (73) 2.80 (99) 2.80
----- ----- --- ------ --- ------
Outstanding at end of year.............. 946 $2.80 913 $ 3.60 854 $ 4.41
===== ===== === ====== === ======
Options exercisable at end of year...... 886 $2.80 873 $ 3.53 854 $ 4.41
===== ===== === ====== === ======
Weighted average fair value of options
granted during year.................. $1.78 $ 3.53 $ 5.14
===== ====== ======
</TABLE>
F-16
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
A summary of options outstanding under non-employee director plans as of
June 30, 1997 is as follows (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------- ---------------------------
WEIGHTED AVERAGE
YEARS OF WEIGHTED WEIGHTED
RANGE OF EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- ----------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.80 to 6.50 774 4.07 $ 3.22 774 $ 3.22
$12.88 to 18.75 80 8.90 15.86 80 15.86
--- ---
854 854
=== ===
</TABLE>
Key Executive Officer Plan
--------------------------
A summary of stock option activity under the Company's key executive
officer plan is as follows (shares in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------
JUNE 30, JUNE 30,
1996 1997
----------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............................ 850 $16.00
Granted..................................................... 850 $16.00
--- ------ --- ------
Outstanding at end of year (none exercisable)............... 850 $16.00 850 $16.00
=== ====== === ======
Weighted average fair value of options granted during year.. $ 4.38
======
</TABLE>
A summary of options outstanding under the key executive officer plan at
June 30, 1997 is as follows (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------------------------
WEIGHTED AVERAGE
YEARS OF WEIGHTED
RANGE OF EXERCISE NUMBER REMAINING AVERAGE
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE
----------------- ----------- ---------------- --------------
<S> <C> <C> <C>
$16.00 850 5.81 $16.00
</TABLE>
10. EMPLOYEE BENEFIT PLANS
The Company has a defined contribution retirement plan covering
substantially all employees. The Company's contributions to the plan, which were
made in Company common stock, were $99,000, $133,000 and $201,000 for the years
ended June 30, 1995, 1996 and 1997, respectively.
The Company also has an employee stock purchase plan that allows
participating employees to purchase, through payroll deductions, shares of the
Company's common stock at 85% of the fair market value at specified dates. A
total of 500,000 shares have been reserved for issuance under the plan. Shares
purchased under the plan were 31,361, 97,143 and 104,215 for the years ended
June 30, 1995, 1996 and 1997, respectively.
F-17
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
11. INCOME TAXES
The income tax provision (benefit) consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
---------- -------- ---------
<S> <C> <C> <C>
$ 79 $ 984 $ (202)
Current................................ (18,954) 11,681 24,428
Deferred............................... -------- ------- -------
$(18,875) $12,665 $24,226
======== ======= =======
</TABLE>
The Company's effective income tax rate on income before income taxes
differs from the U.S. statutory tax rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
------------------------------
<S> <C> <C> <C>
U.S. statutory tax rate................... 35% 35% 35%
Change in valuation allowance............. (226)
Other..................................... 3 2 3
----- ---- ----
(188)% 37% 38%
===== ==== ====
</TABLE>
The deferred income tax provision (benefit) consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
------------------------------
<S> <C> <C> <C>
Net operating loss carry forward.......... $ 2,266 $ 8,387 $ 5,501
Gain on sale of receivables............... 14,824
Change in valuation allowance............. (22,615) (320)
Allowance for losses...................... 32 1,556 (1,046)
Other..................................... 1,363 2,058 5,149
-------- ------- -------
$(18,954) $11,681 $24,428
======== ======= =======
</TABLE>
F-18
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1997
-------------------
Deferred tax liabilities:
<S> <C> <C>
Gain on sale of receivables..................... $ $14,824
Unrealized gain on excess servicing receivable.. 1,848
Allowance for losses............................ 405
Other........................................... 707 2,614
-------- -------
1,112 19,286
-------- -------
Deferred tax assets:
Net operating loss carry forward................ (8,969) (3,468)
Alternative minimum tax credits................. (1,548) (1,873)
Allowance for losses............................ (641)
Other........................................... (590)
-------- -------
(11,107) (5,982)
-------- -------
Net deferred tax liability (asset) ............... $ (9,995) $13,304
======== =======
</TABLE>
As of June 30, 1997, the Company has a net operating loss carryforward of
approximately $3,000,000 for federal income tax reporting purposes which expires
between 2007 and 2009 and an alternative minimum tax carryforward of
approximately $1,900,000 with no expiration date.
12. SUPPLEMENTAL INFORMATION
Cash payments for interest costs and income taxes consist of the following
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997
----------------------------
<S> <C> <C> <C>
Interest costs (none capitalized).............. $5,167 $12,179 $15,196
Income taxes................................... 151 1,447 599
</TABLE>
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107"), requires disclosure of fair
value information about financial instruments, whether or not recognized in the
Company's consolidated balance sheets. Fair values are based on estimates using
present value or other valuation techniques in cases where quoted market prices
are not available. Those techniques are significantly affected by the
assumptions used, including the discount rate and the estimated timing and
amount of future cash flows. Therefore, the estimates of fair value may differ
substantially from amounts which ultimately may be realized or paid at
settlement or maturity of the financial instruments. SFAS 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
F-19
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED)
Estimated fair values, carrying values and various methods and assumptions
used in valuing the Company's financial instruments as of June 30, 1996 and 1997
are set forth below (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1997
------------------------ ------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ----------- -------- -------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents and restricted cash (a)............. $ 17,449 $ 17,449 $ 73,922 $ 73,922
Investment securities (b)..................................... 6,558 6,254 6,500 6,363
Finance receivables (c)....................................... 250,484 283,760 266,657 283,386
Excess servicing receivable (d)............................... 33,093 35,009 114,376 114,376
Financial liabilities:
Bank line of credit and mortgage warehouse facility(e)........ 86,000 86,000 72,045 72,045
Automobile receivables-backed notes (f)....................... 67,847 68,055 23,689 24,782
9 1/4% Senior Notes (g)....................................... 125,000 123,825
Interest rate swaps (h)......................................... 735 236
Unrecognized financial instruments:
Forward U.S. Treasury Note sales (i).......................... (700) 164
</TABLE>
_______________
(a) The carrying value of cash and cash equivalents and restricted cash is
considered to be a reasonable estimate of fair value.
(b) The fair value of investment securities is estimated based on market prices
for similar securities.
(c) Since the Company periodically sells its finance receivables, fair value is
estimated by discounting future net cash flows expected to be realized from
the finance receivables using interest rate, prepayment and credit loss
assumptions similar to the Company's historical experience.
(d) The fair value of excess servicing receivable is estimated by discounting
the associated future net cash flows using discount rate, prepayment and
credit loss assumptions similar to the Company's historical experience.
(e) The bank line of credit and mortgage warehouse facility have variable rates
of interest and maturities of less than one year. Therefore, carrying value
is considered to be a reasonable estimate of fair value.
(f) The fair value of automobile receivables-backed notes is estimated based on
rates currently available for debt with similar terms and remaining
maturities.
(g) The fair value of the 9 1/4% Senior Notes is based on the quoted market
price.
(h) The fair value of the interest rate swap is based on the quoted termination
cost.
(i) The fair value of the forward U.S. Treasury Note sales are estimated based
upon market prices for similar financial instruments.
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON SUPPLEMENTARY INFORMATION
Board of Directors and Shareholders
AmeriCredit Corp.
Our report on the audits of the consolidated financial statements of AmeriCredit
Corp. as of June 30, 1997 and June 30, 1996, and for the three years ended June
30, 1997, 1996 and 1995 have been included by reference in this Form 10-K from
page 30 of the 1997 Annual Report to Shareholders of AmeriCredit Corp. These
audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The related financial statement schedules
are presented for purposes of additional analysis and are not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated, in all material respects, in relation to the
financial statements taken as a whole.
/s/ COOPERS & LYBRAND L.L.P.
Fort Worth, Texas
August 6, 1997
F-21
<PAGE>
AMERICREDIT CORP.
GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS
The payment of principal, premium, if any, and interest on the Company's 9
1/4% Senior Notes is guaranteed by certain of the Company's subsidiaries (the
"Subsidiary Guarantors"). The separate financial statements of the Subsidiary
Guarantors are not included herein because the Subsidiary Guarantors are wholly-
owned consolidated subsidiaries of the Company and are jointly, severally and
unconditionally liable for the obligations represented by the 9 1/4% Senior
Notes. The Company believes that the condensed consolidating financial
information for the Company, the combined Subsidiary Guarantors and the combined
Non-Guarantor Subsidiaries provide information that is more meaningful in
understanding the financial position of the Subsidiary Guarantors than separate
financial statements of the Subsidiary Guarantors. Therefore, the separate
financial statements of the Subsidiary Guarantors are not deemed material.
The following supplementary schedules present consolidating financial
information for (i) the Company (on a parent only basis), (ii) the combined
Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an
elimination column for adjustments to arrive at the information for the Company
and its subsidiaries on a consolidated basis and (v) the Company and its
subsidiaries on a consolidated basis as of June 30, 1996 and 1997 and for the
three years in the period ended June 30, 1997.
Investments in subsidiaries are accounted for by the parent company on the
equity method for purposes of the presentation set forth below. Earnings of
subsidiaries are therefore reflected in the parent company's investment accounts
and earnings. The principal elimination entries set forth below eliminate
investments in subsidiaries and intercompany balances and transactions.
F-22
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING BALANCE SHEET
June 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.............. $ (4,913) $ (87) $ 7,145 $ 2,145
Investment securities.................. $ 6,558 6,558
Finance receivables, net............... 183,023 67,461 250,484
Excess servicing receivable............ 16,856 16,237 33,093
Restricted cash........................ 15,304 15,304
Property and equipment, net............ 83 7,587 7,670
Deferred income taxes.................. 6,360 3,635 9,995
Other assets........................... 1,761 2,221 928 4,910
Due (to) from affiliates............... 124,527 (106,986) (17,541)
Investment in affiliates............... 32,320 $ (32,320)
-------- --------- -------- --------- --------
Total assets........................ $166,696 $ 106,249 $ 89,534 $ (32,320) $330,159
======== ========= ======== ========= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit.................. $ 86,000 $ 86,000
Automobile receivables-backed notes.. $ 67,847 67,847
Notes payable........................ $ 418 418
Accrued taxes and expenses........... 3,053 9,709 (93) 12,669
-------- --------- -------- --------- --------
Total liabilities................... 3,471 95,709 67,754 166,934
-------- --------- -------- --------- --------
Shareholders' equity:
Common stock......................... 326 175 3 $ (178) 326
Additional paid-in capital........... 190,005 112,112 (112,112) 190,005
Retained earnings (deficit).......... (5,233) (101,747) 21,777 79,970 (5,233)
-------- --------- -------- --------- --------
185,098 10,540 21,780 (32,320) 185,098
Treasury stock......................... (21,873) (21,873)
-------- --------- -------- --------- --------
Total shareholders' equity............. 163,225 10,540 21,780 (32,320) 163,225
-------- --------- -------- --------- --------
Total liabilities and shareholders'
equity............................ $166,696 $ 106,249 $ 89,534 $ (32,320) $330,159
======== ========= ======== ========= ========
</TABLE>
F-23
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING BALANCE SHEET
June 30, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.................... $ 3,988 $ 2,039 $ 6,027
Investment securities........................ $ 6,500 6,500
Finance receivables, net..................... 240,912 25,745 266,657
Excess servicing receivable.................. (777) 12,096 103,057 114,376
Restricted cash.............................. 67,895 67,895
Property and equipment, net.................. 136 13,748 13,884
Goodwill..................................... 7,260 7,260
Other assets................................. 4,447 5,304 1,103 10,854
Due (to) from affiliates..................... 277,369 (197,656) (79,713)
Investment in affiliates..................... 56,764 $(56,764)
-------- --------- -------- -------- --------
Total assets.............................. $344,439 $ 85,652 $120,126 $(56,764) $493,453
======== ========= ======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit........................ $ 71,700 $ 71,700
Mortgage warehouse facility................ 345 345
Automobile receivables-backed notes........ $ 23,689 23,689
9 1/4% Senior Notes........................ $125,000 125,000
Notes payable.............................. 3,484 33 3,517
Deferred income taxes...................... (8,669) (5,547) 27,520 13,304
Accrued taxes and expenses................. 8,088 27,987 3,287 39,362
-------- --------- -------- -------- --------
Total liabilities......................... 127,903 94,518 54,496 276,917
-------- --------- -------- -------- --------
Shareholders' equity:
Common stock............................... 333 203 3 $ (206) 333
Additional paid-in capital................. 203,544 98,336 (98,336) 203,544
Unrealized gain on excess servicing........ 2,954 2,954 (2,954) 2,954
receivable
Retained earnings (deficit)................ 33,466 (107,405) 62,673 44,732 33,466
-------- --------- -------- -------- --------
240,297 (8,866) 65,630 (56,764) 240,297
Treasury stock............................... (23,761) (23,761)
-------- --------- -------- -------- --------
Total shareholders' equity................... 216,536 (8,866) 65,630 (56,764) 216,536
-------- --------- -------- -------- --------
Total liabilities and shareholders'.......... $344,439 $ 85,652 $120,126 $(56,764) $493,453
equity.................................. ======== ========= ======== ======== ========
</TABLE>
F-24
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income............ $25,048 $5,201 $ 30,249
Investment income................ $ 12,264 96 224 $(11,300) 1,284
Servicing fee income............. 844 (844)
Other income..................... 1,019 (1,232) 1,764 1,551
Equity in income of affiliates... 1,596 (1,596)
-------- ------- ------ -------- --------
14,879 24,756 7,189 (13,740) 33,084
-------- ------- ------ -------- --------
COSTS AND EXPENSES
Operating expenses.............. 2,627 12,143 847 (844) 14,773
Provision for losses............ 4,278 4,278
Interest expense................ 1,532 10,561 3,222 (11,300) 4,015
-------- ------- ------ -------- --------
4,159 26,982 4,069 (12,144) 23,066
-------- ------- ------ -------- --------
Income before income taxes........ 10,720 (2,226) 3,120 (1,596) 10,018
Provision for income taxes........ (18,173) (702) (18,875)
-------- ------- ------ -------- --------
Net income..................... $ 28,893 $(1,524) $3,120 $ (1,596) $ 28,893
======== ======= ====== ======== ========
</TABLE>
F-25
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income........... $32,050 $19,656 $51,706
Gain on sale of receivables..... 12,449 10,424 22,873
Servicing fee income............ 26,329 50 $(22,667) 3,712
Investment income............... $11,395 337 643 (11,300) 1,075
Other income.................... 104 1,489 19 1,612
Equity in income of affiliates.. 25,914 (25,914)
------- ------- ------- -------- -------
37,413 72,654 30,792 (59,881) 80,978
------- ------- ------- -------- -------
COSTS AND EXPENSES
Operating expenses............. 3,700 41,359 3,289 (22,667) 25,681
Provision for losses........... 7,912 7,912
Interest expense............... 371 15,212 8,846 (11,300) 13,129
------- ------- ------- -------- -------
4,071 64,483 12,135 (33,967) 46,722
------- ------- ------- -------- -------
Income before income taxes....... 33,342 8,171 18,657 (25,914) 34,256
Provision for income taxes....... 11,751 914 12,665
------- ------- ------- -------- -------
Net income.................... $21,591 $ 7,257 $18,657 $(25,914) $21,591
======= ======= ======= ======== =======
</TABLE>
F-26
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF INCOME
Year Ended June 30, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income............ $ 36,633 $ 8,277 $ 44,910
Gain on sale of receivables...... $ (855) 2,939 65,172 67,256
Servicing fee income............. 55,994 4,111 $(39,081) 21,024
Investment income................ 18,262 147 2,411 (17,911) 2,909
Other income..................... 86 1,344 218 1,648
Equity in income of affiliates... 33,374 (33,374)
------- -------- ------- -------- --------
50,867 97,057 80,189 (90,366) 137,747
------- -------- ------- -------- --------
COSTS AND EXPENSES
Operating expenses............... 5,282 83,997 1,717 (39,081) 51,915
Provision for losses............. 6,595 6,595
Interest expense................. 5,116 17,202 11,905 (17,911) 16,312
------- -------- ------- -------- --------
10,398 107,794 13,622 (56,992) 74,822
------- -------- ------- -------- --------
Income before income taxes......... 40,469 (10,737) 66,567 (33,374) 62,925
Provision for income taxes......... 1,770 (3,217) 25,673 24,226
------- -------- ------- -------- --------
Net income..................... $38,699 $ (7,520) $40,894 $(33,374) $ 38,699
======= ======== ======= ======== ========
</TABLE>
F-27
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 28,893 $ (1,524) $ 3,120 $ (1,596) $ 28,893
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 161 1,156 1,317
Provision for losses........................ 4,278 4,278
Deferred income taxes....................... (18,252) (702) (18,954)
Equity in income of affiliates.............. (1,596) 1,596
Changes in assets and liabilities
Other assets.............................. (795) 400 (1,439) (1,834)
Accrued taxes and expenses................ 170 387 380 937
-------- --------- --------- --------- ---------
Net cash provided by operating activities..... 8,581 3,995 2,061 14,637
-------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables............... (225,350) (148,452) 148,452 (225,350)
Principal collections and recoveries on
receivables.............................. 53,210 18,124 71,334
Net proceeds from sale of auto receivables.. 148,452 (148,352)
Purchase of property and equipment.......... 947 (2,677) (1,730)
Proceeds from sales and maturities of
investment securities.................... 16,241 16,241
Increase in restricted cash................. (5,007) (5,007)
Net change in investment in affiliates...... (7,126) 7,126
-------- --------- --------- --------- ---------
Net cash used by investment activities.... 10,062 (19,239) (135,335) (144,512)
-------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit........... 83,900 83,900
Payments on bank line of credit............. (83,900) (83,900)
Proceeds from issuance of automobile
receivables-backed notes................. 150,170 150,170
Payments on automobile receivables-
backed notes............................. (15,650) (15,650)
Payments on notes payable................... (236) (236)
Net change in due (to) from affiliates...... (18,037) 11,762 6,275
Proceeds from issuance of common stock...... 1,561 1,561
Purchase of treasury stock.................. (3,412) (3,412)
-------- --------- --------- --------- ---------
Net cash provided by financing activities....... (20,124) 11,762 140,795 132,433
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (1,481) (3,482) 7,521 2,558
Cash and equivalents at beginning of year....... 18,668 (2,912) 15,756
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of year........ $ 17,187 $ (6,394) $ 7,521 $ $ 18,314
======== ========= ========= ========= =========
</TABLE>
F-28
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 21,591 $ 7,257 $ 18,657 $ (25,914) $ 21,591
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 49 1,479 1,528
Provision for losses........................ 7,912 7,912
Deferred income taxes....................... 14,113 (2,432) 11,681
Gain on sale of auto receivables............ (12,449) (10,424) (22,873)
Amortization of excess servicing
receivable................................ 6,636 6,636
Equity in income of affiliates.............. (25,914) 25,914
Changes in assets and liabilities
Other assets.............................. 362 (1,857) 511 (984)
Accrued taxes and expenses................ 1,273 8,606 (473) 9,406
-------- --------- --------- ---------- ---------
Net cash provided by operating activities... 11,474 15,152 8,271 34,897
-------- --------- --------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables............... (417,235) (115,646) 115,646 (417,235)
Principal collections and recoveries on
receivables.............................. 37,894 57,054 94,948
Net proceeds from sale of auto receivables.. 268,923 115,646 (115,646) 268,923
Purchase of property and equipment.......... 2,536 (5,698) (3,162)
Proceeds from sales and maturities of
investment securities.................... 3,707 3,707
Increase in restricted cash................. (10,297) (10,297)
Net change in investment in affiliates.......... (2,746) 2,743 3
-------- --------- --------- ---------- ---------
Net cash used by investment activities.......... 3,497 (113,373) 46,760 (63,116)
-------- --------- --------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit........... 342,600 342,600
Payments on bank line of credit............. (256,600) (256,600)
Payments on automobile receivables-
backed notes.............................. (66,673) (66,673)
Payments on notes payable................... (298) (298)
Net change in due (to) from affiliates.......... (29,794) 18,528 11,266
Proceeds from issuance of common stock...... 3,731 3,731
Purchase of treasury stock.................. (10,710) (10,710)
-------- --------- --------- ---------- ---------
Net cash provided by financing activities.. (37,071) 104,528 (55,407) 12,050
-------- --------- --------- ---------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (22,100) 6,307 (376) (16,169)
Cash and equivalents at beginning of year....... 17,187 (6,394) 7,521 18,314
-------- --------- --------- ---------- ---------
Cash and cash equivalents at end of year........ $ (4,913) $ (87) $ 7,145 $ $ 2,145
======== ========= ========= ========== =========
</TABLE>
F-29
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended June 30, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------------ ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 38,699 $ (7,520) $ 40,894 $ (33,374) $ 38,699
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 28 2,175 2,203
Provision for losses........................ 6,595 6,595
Deferred income taxes....................... (1,180) (1,912) 27,520 24,428
Gain on sale of auto receivables............ (64,338) (64,338)
Amortization of excess servicing
receivable................................ 4,760 29,633 34,393
Equity in income of affiliates.............. (33,374) 33,374
Changes in assets and liabilities...........
Other assets.............................. 917 (3,083) (175) (2,341)
Accrued taxes and expenses................ 4,835 18,278 3,380 26,493
--------- --------- --------- --------- ---------
Net cash provided by operating activities... 9,925 19,293 36,914 66,132
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables............... (896,711) (814,107) 814,107 (896,711)
Originations of mortgage receivables........ (53,770) (53,770)
Principal collections and recoveries on
receivables.............................. 22,672 41,717 64,389
Net proceeds from sale of auto receivables.. 814,107 767,571 (814,107) 767,571
Net proceeds from sale of mortgage
receivables.............................. 52,489 52,489
Purchase of property and equipment.......... (81) (4,430) (4,511)
Proceeds from sales and maturities of
investment securities.................... 58 58
Increase in restricted cash................. (52,591) (52,591)
Net change in investment in affiliates.......... 25,605 (22,981) (2,624)
--------- --------- --------- --------- ---------
Net cash used by investment activities.......... 25,582 (88,624) (60,034) (123,076)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit........... 745,500 745,500
Payments on bank line of credit............. (759,800) (759,800)
Net increase in mortgage warehouse
facility.................................. (2,964) (2,964)
Proceeds from issuance of 9 1/4% Senior
Notes..................................... 120,894 120,894
Payments on automobile receivables-
backed notes.............................. (44,158) (44,158)
Payments on notes payable................... (552) (552)
Purchase of treasury stock.................. (4,387) (4,387)
Proceeds from issuance of common stock...... 6,293 6,293
Net change in due (to) from affiliates...... (152,842) 90,670 62,172
--------- --------- --------- --------- ---------
Net cash provided by financing activities... (30,594) 73,406 18,014 60,826
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. 4,913 4,075 (5,106) 3,882
Cash and equivalents at beginning of year....... (4,913) (87) 7,145 2,145
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year........ $ $ 3,988 $ 2,039 $ $ 6,027
========= ========= ========= ========= =========
</TABLE>
F-30
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1997
---------- ------------
ASSETS
<S> <C> <C>
Cash and cash equivalents..................................................... $ 6,027 $ 2,267
Investment securities......................................................... 6,500 6,500
Finance receivables, net...................................................... 266,657 257,791
Excess servicing receivable................................................... 114,376 179,788
Restricted cash............................................................... 67,895 76,170
Property and equipment, net................................................... 13,884 17,232
Goodwill...................................................................... 7,260 7,112
Other assets.................................................................. 10,854 15,435
-------- --------
Total assets........................................................... $493,453 $562,295
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit.................................................... $ 71,700 $ 2,100
Commercial paper warehouse facility.................................... 95,989
Mortgage warehouse facility............................................ 345 7,281
Automobile receivables-backed notes.................................... 23,689 14,138
9 1/4% Senior Notes.................................................... 125,000 125,000
Notes payable.......................................................... 3,517 4,458
Accrued taxes and expenses............................................. 39,362 38,619
Deferred income taxes.................................................. 13,304 19,764
-------- --------
Total liabilities................................................... 276,917 307,349
-------- --------
Shareholders' equity:
Common stock, $.01 par value per share; 120,000,000 shares authorized;
33,255,173 and 33,841,815 shares issued.............................. 333 338
Additional paid-in capital............................................. 203,544 213,890
Unrealized gain on excess servicing receivable, net of income taxes.... 2,954 3,410
Retained earnings...................................................... 33,466 60,841
-------- --------
240,297 278,479
Treasury stock, at cost (3,959,071 and 3,921,028 shares)............... (23,761) (23,533)
-------- --------
Total shareholders' equity.......................................... 216,536 254,946
-------- --------
Total liabilities and shareholders' equity............................. $493,453 $562,295
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
REVENUE
Finance charge income................................. $ 21,503 $ 26,190
Gain on sale of receivables........................... 28,151 53,775
Servicing fee income.................................. 8,242 19,191
Investment income..................................... 1,152 2,570
Other income.......................................... 622 502
----------- -----------
59,670 102,228
----------- -----------
COSTS AND EXPENSES
Operating expenses.................................... 21,747 41,916
Provision for losses.................................. 3,231 3,755
Interest expense...................................... 6,612 12,045
----------- -----------
31,590 57,716
----------- -----------
Income before income taxes.............................. 28,080 44,512
Income tax provision.................................... 10,810 17,137
----------- -----------
Net income............................................ $ 17,270 $ 27,375
=========== ===========
Earnings per share
Basic................................................. $ .61 $ .92
----------- -----------
Diluted............................................... $ .57 $ .85
----------- -----------
Weighted average shares outstanding..................... 28,513,145 29,684,960
----------- -----------
Weighted average shares and assumed incremental shares.. 30,398,569 32,199,267
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE>
AMERICREDIT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................................... $ 17,270 $ 27,375
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................... 904 1,914
Provision for losses.............................................................. 3,231 3,755
Deferred income taxes............................................................. 10,682 9,643
Gain on sale of auto receivables.................................................. (27,851) (51,531)
Amortization of excess servicing receivable....................................... 12,117 23,118
Changes in assets and liabilities:
Other assets................................................................... (2,134) (4,581)
Accrued taxes and expenses..................................................... 9,195 (743)
--------- ---------
Net cash provided by operating activities............................................ 23,414 8,950
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables........................................................ (354,448) (686,543)
Originations of mortgage receivables................................................. (7,748) (51,572)
Principal collections and recoveries on receivables.................................. 36,147 14,862
Net proceeds from sale of auto receivables........................................... 332,982 644,022
Net proceeds from sale of mortgage receivables....................................... 4,839 48,129
Purchases of property and equipment.................................................. (1,624) (3,571)
Proceeds from maturities of investment securities.................................... 55
Increase in restricted cash.......................................................... (31,023) (8,275)
--------- ---------
Net cash used by investing activities................................................ (20,820) (42,948)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit.................................................... 304,400 514,500
Payments on bank line of credit...................................................... (275,500) (584,100)
Net increase in commercial paper warehouse facility.................................. 95,989
Net increase in mortgage warehouse receivable........................................ 264 6,936
Payments on automobile receivables-backed notes...................................... (27,304) (9,551)
Payments on notes payable............................................................ (221) (602)
Proceeds from issuance of common stock............................................... 3,100 7,066
Purchase of treasury stock........................................................... (4,387)
--------- ---------
Net cash provided by financing activities............................................ 352 30,238
--------- ---------
Net (decrease) increase in cash and cash equivalents................................... 2,946 (3,760)
Cash and cash equivalents at beginning of period....................................... 2,145 6,027
--------- ---------
Cash and cash equivalents at end of period............................................. $ 5,091 $ 2,267
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
AmeriCredit Corp. and its wholly-owned subsidiaries ("the Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The consolidated financial statements as of December 31, 1997 and for the
periods ended December 31, 1996 and 1997 are unaudited, but in management's
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such interim
periods. The results for interim periods are not necessarily indicative of
results for a full year.
The interim period financial statements, including the notes thereto, are
condensed and do not include all disclosures required by generally accepted
accounting principles. Such interim period financial statements should be read
in conjunction with the Company's consolidated financial statements which were
included in the Company's 1997 Annual Report to Shareholders.
The Company adopted the requirements of Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128") effective for the periods
ended December 31, 1997. SFAS 128 establishes new standards for computing and
presenting earnings per share, replacing existing accounting standards. All
prior period earnings per share and related weighted average share amounts have
been restated to conform to the requirements of SFAS 128.
NOTE 2--FINANCE RECEIVABLES
Finance receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Auto receivables................................... $275,249 $261,333
Less allowance for losses.......................... (12,946) (11,350)
-------- --------
Auto receivables, net.............................. 262,303 249,983
Mortgage receivables............................... 4,354 7,808
-------- --------
Finance receivables, net........................... $266,657 $257,791
======== ========
</TABLE>
A summary of the allowance for losses is as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Balance at beginning of period ................... $ 13,602 $ 12,946
Provision for losses ............................. 3,231 3,755
Acquisition fees ................................. 12,809 22,046
Allowance related to auto receivables sold
to Trusts........................................ (8,404) (21,773)
Net charge-offs .................................. (9,065) (5,624)
-------- --------
Balance at end of period ......................... $ 12,173 $ 11,350
======== ========
</TABLE>
F-34
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
NOTE 3--EXCESS SERVICING RECEIVABLE
As of June 30, 1997 and December 31, 1997, the Company was servicing $863.0
million and $1,337.9 million, respectively, of auto receivables which have been
sold to certain special purpose financing trusts (the "Trusts").
<TABLE>
<CAPTION>
The components of excess servicing receivable are as follows (in thousands):
JUNE 30, DECEMBER 31,
1997 1997
--------- ------------
<S> <C> <C>
Interest-only strips.................................... $ 59,933 $ 101,357
Subordinated interests:
Retained asset-backed securities...................... 12,589 10,424
Excess of auto receivables in Trusts over asset-backed
securities outstanding............................. 41,854 68,007
--------- ---------
$ 114,376 $ 179,788
========= =========
<CAPTION>
Excess servicing receivable consists of the following (in thousands):
JUNE 30, DECEMBER 31,
1997 1997
--------- ------------
<S> <C> <C>
Estimated future excess cash flows before
allowance for credit losses.......................... $ 200,869 $ 311,354
Allowance for credit losses............................ (74,925) (112,294)
--------- ---------
Estimated future excess cash flows..................... 125,944 199,060
Discount to present value.............................. (11,568) (19,272)
--------- ---------
$ 114,376 $ 179,788
========= =========
<CAPTION>
A summary of excess servicing receivable is as follows (in thousands):
SIX MONTHS ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Balance at beginning of period......................... $ 33,093 $ 114,376
Additions.............................................. 38,804 87,789
Increase in unrealized gain............................ 741
Amortization........................................... (12,117) (23,118)
--------- ---------
Balance at end of period............................... $ 59,780 $ 179,788
========= =========
</TABLE>
NOTE 4--DEBT
In October 1997, the Company entered into a restated revolving credit
agreement with a group of banks under which the Company may borrow up to $310
million, subject to a defined borrowing base. Aggregate borrowings of $71.7
million and $2.1 million were outstanding as of June 30, 1997 and December 31,
1997, respectively. Borrowings under the credit agreement are collateralized by
certain auto receivables and bear interest at various market London Interbank
Offered Rates ("LIBOR") plus 1.25%. The Company is also required to pay an
annual commitment fee equal to 1/4% of the unused portion of the credit
agreement. The credit agreement, which expires in October 1998, contains
various
F-35
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
restrictive covenants requiring certain minimum financial ratios and results and
placing certain limitations on payment of cash dividends and repurchase of
common stock.
In October 1997, the Company entered into a funding agreement with a funding
agent on behalf of an institutionally managed commercial paper conduit and a
group of banks under which up to $245 million of structured warehouse financing
is available to the Company. Aggregate borrowings of $96.0 million were
outstanding as of December 31, 1997. Under the funding agreement, the Company
transfers auto receivables to CP Funding Corp. ("CPFC"), a special purpose
finance subsidiary of the Company, and CPFC in turn issues a note,
collateralized by such auto receivables, to the funding agent. The funding
agent provides funding under the note to CPFC pursuant to an advance formula and
CPFC forwards the funds to the Company in consideration for the transfer of auto
receivables. While CPFC is a consolidated subsidiary of the Company, CPFC is a
separate legal entity and the auto receivables transferred to CPFC and the other
assets of CPFC are legally owned by CPFC and not available to creditors of
AmeriCredit Corp. or its other subsidiaries. Advances under the note bear
interest at commercial paper, LIBOR or prime rates plus specified fees depending
upon the source of funds provided by the funding agent to CPFC. The funding
agreement, which expires in October 1998, contains various covenants requiring
certain minimum financial ratios and results.
The Company also has a mortgage warehouse facility with a bank under which the
Company may borrow up to $75 million, subject to a defined borrowing base.
Aggregate borrowings of $.3 million and $7.3 million were outstanding as of June
30, 1997 and December 31, 1997, respectively. Borrowings under the facility are
collateralized by certain mortgage receivables and bear interest at LIBOR plus
1%. The Company is also required to pay an annual commitment fee equal to 1/8%
of the unused portion of the facility. In February 1998, the Company extended
the maturity of the facility to February 1999.
NOTE 5--SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest costs and income taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Interest costs (none capitalized).... $6,456 $12,661
Income taxes......................... 228 7,412
</TABLE>
During the six months ended December 31, 1996 and 1997, the Company entered
into capital lease obligations of $1,258,000 and $1,543,000, respectively, for
the purchase of certain equipment.
NOTE 6--GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS
The payment of principal, premium, if any, and interest on the Company's
9 1/4% Senior Notes is guaranteed by certain of the Company's subsidiaries (the
"Subsidiary Guarantors"). The separate financial statements of the Subsidiary
Guarantors are not included herein because the Subsidiary Guarantors are wholly-
owned consolidated subsidiaries of the Company and are jointly, severally and
unconditionally liable for the obligations represented by the 9 1/4% Senior
Notes. The Company believes that the condensed consolidating financial
information for the Company, the combined Subsidiary Guarantors and the combined
Non-Guarantor Subsidiaries provide information that is more meaningful in
understanding the financial position of the Subsidiary Guarantors than separate
financial statements of the Subsidiary Guarantors. Therefore, the separate
financial statements of the Subsidiary Guarantors are not deemed material.
The following supplemental schedules present consolidating financial
information for (i) AmeriCredit Corp. (on a parent only basis), (ii) the
combined Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries,
(iv) an
F-36
<PAGE>
AMERICREDIT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
elimination column for adjustments to arrive at the information for the Company
and its subsidiaries on a consolidated basis and (v) the Company and its
subsidiaries on a consolidated basis.
Investment in subsidiaries are accounted for by the parent company on the
equity method for purposes of the presentation set forth below. Earnings of
subsidiaries are therefore reflected in the parent company's investment accounts
and earnings. The principal elimination entries set forth below eliminate
investments in subsidiaries and intercompany balances and transactions.
F-37
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $ $ (1,025) $ 3,292 $ $ 2,267
Investment securities............... 6,500 6,500
Finance receivables, net............ 125,421 132,370 257,791
Excess servicing receivable......... (1,560) 10,670 170,678 179,788
Restricted cash..................... 76,170 76,170
Property and equipment, net......... 137 17,095 17,232
Goodwill............................ 7,112 7,112
Other assets........................ 5,409 6,915 3,111 15,435
Due (to) from affiliates............ 267,917 (161,635) (106,282)
Investment in affiliates............ 95,361 13,921 2 (109,284)
-------- --------- --------- --------- --------
Total assets.................. $373,764 $ 18,474 $ 279,341 $(109,284) $562,295
======== ========= ========= ========= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Bank line of credit................. $ $ 2,100 $ $ $ 2,100
Mortgage warehouse facility......... 7,281 7,281
Commercial paper warehouse facility. 95,989 95,989
Automobile receivables-backed notes. 14,138 14,138
9 1/4% Senior Notes................. 125,000 125,000
Notes payable....................... 4,429 29 4,458
Accrued taxes and expenses.......... 9,341 27,398 1,880 38,619
Deferred income taxes............... (19,952) (11,034) 50,750 19,764
-------- --------- --------- --------- --------
Total liabilities............. 118,818 25,774 162,757 307,349
-------- --------- --------- --------- --------
Shareholders' equity:
Common stock........................ 338 203 3 (206) 338
Additional paid-in capital.......... 213,890 108,336 13,921 (122,257) 213,890
Unrealized gain on excess servicing
receivable....................... 3,410 3,410 (3,410) 3,410
Retained earnings (deficit)......... 60,841 (115,839) 99,250 16,589 60,841
-------- --------- --------- --------- --------
278,479 (7,300) 116,584 (109,284) 278,479
Treasury stock...................... (23,533) (23,533)
-------- --------- --------- --------- --------
Total shareholders' equity..... 254,946 (7,300) 116,584 (109,284) 254,946
-------- --------- --------- --------- --------
Total liabilities and shareholders'
equity......................... $373,764 $ 18,474 $ 279,341 $(109,284) $562,295
======== ========= ========= ========= ========
</TABLE>
F-38
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING INCOME STATEMENT
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income............ $ $16,339 $ 5,164 $ $ 21,503
Gain on sale of receivables...... 300 27,851 28,151
Servicing fee income............. 24,032 1,625 (17,415) 8,242
Investment income................ 6,775 89 904 (6,616) 1,152
Other income..................... 28 260 334 622
Equity in income of affiliates... 13,593 (13,593)
------- ------- ------- -------- --------
20,396 41,020 35,878 (37,624) 59,670
------- ------- ------- -------- --------
COSTS AND EXPENSES
Operating expenses.............. 2,144 35,885 1,133 (17,415) 21,747
Provision for losses............ 3,231 3,231
Interest expense................ 26 7,839 5,363 (6,616) 6,612
------- ------- ------- -------- --------
2,170 46,955 6,496 (24,031) 31,590
------- ------- ------- -------- --------
Income before income taxes.......... 18,226 (5,935) 29,382 (13,593) 28,080
Provision for income taxes.......... 956 139 9,715 10,810
------- ------- ------- -------- --------
Net income.................... $17,270 $(6,074) $19,667 $(13,593) $ 17,270
======= ======= ======= ======== ========
</TABLE>
F-39
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING INCOME STATEMENT
SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Finance charge income............ $ $ 20,213 $ 5,977 $ $ 26,190
Gain on sale of receivables...... (4,903) 3,321 55,357 53,775
Servicing fee income............. 42,256 3,721 (26,786) 19,191
Investment income................ 14,920 127 2,211 (14,688) 2,570
Other income..................... 344 158 502
Equity in income of affiliates... 28,143 (28,143)
------- -------- ------- -------- --------
38,160 66,261 67,424 (69,617) 102,228
------- -------- ------- -------- --------
COSTS AND EXPENSES
Operating expenses.............. 4,948 63,758 (4) (26,786) 41,916
Provision for losses............ 3,755 3,755
Interest expense................ 6,318 12,462 7,953 (14,688) 12,045
------- -------- ------- -------- --------
11,266 79,975 7,949 (41,474) 57,716
------- -------- ------- -------- --------
Income before income taxes.......... 26,894 (13,714) 59,475 (28,143) 44,512
Provision for income taxes.......... (481) (5,280) 22,898 17,137
------- -------- ------- -------- --------
Net income.................... $27,375 $ (8,434) $36,577 $(28,143) $ 27,375
======= ======== ======= ======== ========
</TABLE>
F-40
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOW
SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................... $ 17,270 $ (6,074) $ 19,667 $ (13,593) $ 17,270
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................. 16 888 904
Provision for losses.......................... 3,231 3,231
Deferred income taxes......................... 3,718 (3,174) 10,138 10,682
Gain on sale of auto receivables.............. (27,851) (27,851)
Amortization of excess servicing receivable... 2,943 9,174 12,117
Equity in income of affiliates................ (13,593) 13,593
Changes in assets and liabilities:
Other assets.............................. (487) (119) (1,528) (2,134)
Accrued taxes and expenses................ (1,974) 11,037 132 9,195
-------- --------- --------- --------- ---------
Net cash provided by operating activities..... 4,950 8,732 9,732 23,414
-------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables................. (354,448) (343,935) 343,935 (354,448)
Originations of mortgage receivables.......... (7,748) (7,748)
Principal collections and recoveries on
receivables................................. 13,484 22,663 36,147
Net proceeds from sale of auto receivables.... 343,935 332,982 (343,935) 332,982
Net proceeds from sale of mortgage
receivables.................................. 4,839 4,839
Purchase of property and equipment............ 1,273 (2,897) (1,624)
Proceeds from maturities of investment
securities................................. 55 55
Increase in restricted cash................... (31,023) (31,023)
Net change in investment in affiliates........ 942 (942)
-------- --------- --------- --------- ---------
Net cash provided (used) by investment
activities.................................. 2,270 (3,777) (19,313) (20,820)
-------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit............ 304,400 304,400
Payments on bank line of credit.............. (275,500) (275,500)
Net increase in mortgage warehouse facility.. 264 264
Payments on automobile receivables-
backed notes............................. (27,304) (27,304)
Payments on notes payable.................... (221) (221)
Net change in due (to) from affiliates....... (9,178) (25,570) 34,748
Proceeds from issuance of common stock....... 3,100 3,100
Purchase of treasury stock................... (4,387) (4,387)
-------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities................................... (10,686) 3,594 7,444 352
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents.................................. (3,466) 8,549 (2,137) 2,946
Cash and cash equivalents at beginning of
period........................................ (4,913) (87) 7,145 2,145
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period...... $ (8,379) $ 8,462 $ 5,008 $ $ 5,091
======== ========= ========= ========= =========
</TABLE>
F-41
<PAGE>
AMERICREDIT CORP.
CONSOLIDATING STATEMENT OF CASH FLOW
SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICREDIT
CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................... $ 27,375 $ (8,434) $ 36,577 $ (28,143) $ 27,375
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................... 22 1,892 1,914
Provision for losses............................ 3,755 3,755
Deferred income taxes........................... (7,771) (5,487) 22,901 9,643
Gain on sale of auto receivables................ 4,903 (1,077) (55,357) (51,531)
Amortization of excess servicing receivable..... (4,120) 2,503 24,735 23,118
Equity in income of affiliates.................. (28,143) 28,143
Changes in assets and liabilities:
Other assets................................ (962) (1,611) (2,008) (4,581)
Accrued taxes and expenses.................. 1,253 (589) (1,407) (743)
-------- --------- --------- --------- ---------
Net cash provided by operating activities....... (7,443) (9,048) 25,441 8,950
-------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of auto receivables................... (686,543) (795,637) 795,637 (686,543)
Originations of mortgage receivables............ (51,572) (51,572)
Principal collections and recoveries on
receivables.................................... 6,085 8,777 14,862
Net proceeds from sale of auto receivables...... 795,637 644,022 (795,637) 644,022
Net proceeds from sale of mortgage
receivables.................................... 48,129 48,129
Purchase of property and equipment.............. (23) (3,548) (3,571)
Increase in restricted cash..................... (8,275) (8,275)
Net change in investment in affiliates.......... (9,998) (3,921) (2) 13,921
-------- --------- --------- --------- ---------
Net cash provided (used) by investment
activities..................................... (10,021) 104,267 (151,115) 13,921 (42,948)
-------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank line of credit............. 514,500 514,500
Payments on bank line of credit............... (584,100) (584,100)
Net increase in commercial paper
warehouse facility.......................... 95,989 95,989
Net increase in mortgage warehouse facility... 6,936 6,936
Payments on automobile receivables-
backed notes................................ (9,551) (9,551)
Payments on notes payable....................... (598) (4) (602)
Net change in due (to) from affiliates.......... 10,996 (37,564) 26,568
Proceeds from issuance of common stock.......... 7,066 13,921 (13,921) 7,066
-------- --------- --------- --------- ---------
Net cash provided (used) by financing
activities....................................... 17,464 (100,232) 126,927 (13,921) 30,238
-------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents...................................... (5,013) 1,253 (3,760)
Cash and cash equivalents at beginning of
period........................................... 3,988 2,039 6,027
-------- --------- --------- --------- ---------
Cash and cash equivalents at end of period........ $ $ (1,025) $ 3,292 $ $ 2,267
======== ========= ========= ========= =========
</TABLE>
F-42
<PAGE>
ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED
DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR
ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE
AGENT AS FOLLOWS:
BY REGISTERED OR CERTIFIED MAIL:
Bank One, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
Bank One, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor, Window 2
New York, New York 10005
BY HAND OR OVERNIGHT COURIER:
Bank One, N.A.
235 West Schrock Road
Westerville, Ohio 43081
or
Bank One, N.A.
c/o First Chicago Trust
Company of New York
Attention: Corporate Trust Department
14 Wall Street
8th Floor Window 2
New York, New York 10005
BY FACSIMILE:
(614) 248-5088 (OH)
or
(212) 240-8938 (NY)
Confirm by Telephone: (212) 240-8841 (NY)
1-800-346-5153
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight courier, or registered or certified mail)
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR BY THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
OFFER TO EXCHANGE ALL OUTSTANDING 9 1/4%
SENIOR NOTES DUE 2004
($50,000,000 PRINCIPAL AMOUNT) FOR 9 1/4%
SENIOR NOTES DUE 2004
AMERICREDIT CORP.
----------------------
PROSPECTUS
----------------------
March 27, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS; LIMITATION OF LIABILITY FOR
MONETARY DAMAGES
(a) The Articles of Incorporation, as amended to date (the "Articles of
Incorporation"), of AmeriCredit Corp. (the "Company"), together with its Bylaws,
provide that the Company shall indemnify officers and directors, and may
indemnify its other employees and agents, to the fullest extent permitted by
law. The laws of the State of Texas permit, and in some cases require,
corporations to indemnify officers, directors, agents and employees who are or
have been a party to or are threatened to be made a party to litigation against
judgements, fines, settlements and reasonable expenses under certain
circumstances.
(b) The Company has also adopted provisions in its Articles of
Incorporation that limit the liability of its directors to the fullest extent
permitted by the laws of the State of Texas. Under the Company's Articles of
Incorporation, and as permitted by the laws of the State of Texas, a director is
not liable to the Company or its shareholders for breach of fiduciary duty. Such
limitation does not affect liability for: (i) a breach of the director's duty of
loyalty to the Company or its shareholders or members; (ii) an act or omission
not in good faith that constitutes a breach of duty of the director to the
Company or an act or omission that involves intentional misconduct or a knowing
violation of the law; (iii) a transaction from which the director received an
improper benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office; or (iv) an act or omission for which
the liability of a director is expressly provided by an applicable statute.
II-1
<PAGE>
ITEM 21. EXHIBITS.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
3.1 (1) -- Articles of Incorporation of the Company, filed May 18,
1988, and Articles of Amendment to Articles of
Incorporation, filed August 24, 1988 (Exhibit 3.1)
3.2 (1) -- Amendment to Articles of Incorporation, filed October
18, 1989 (Exhibit 3.2)
3.3 (5) -- Articles of Amendment to Articles of Incorporation of
the Company, filed November 12, 1992 (Exhibit 3.3)
3.4 (12) -- Bylaws of the Company, as amended (Exhibit 3.4)
4.1 (4) -- Specimen stock certificate evidencing the Common
4.2 (14) -- Rights Agreement, dated August 28, 1997, between the
Company and ChaseMellon Shareholder Services, L.L.C.
(Exhibit 1)
5.1 (17) -- Opinion of Jenkens & Gilchrist, a Professional
Corporation
10.1 (1) -- 1989 Stock Option Plan for Non-Employee Directors of
the Company (Exhibit 10.4)
10.2 (1) -- 1989 Stock Option Plan (with Stock Appreciation Rights)
for the Company (Exhibit 10.5)
10.3 (2) -- Amendment No. 1 to the 1989 Stock Option Plan the
Company (Exhibit 4.6)
10.4 (3) -- 1990 Stock Option Plan for Non-Employee Directors of
the Company (Exhibit 10.14)
10.5 (4) -- 1991 Key Employee Stock Option Plan of the Company
(Exhibit 10.10)
10.6 (4) -- 1991 Non-employee Director Stock Option Plan of the
Company (Exhibit 10.11)
10.7 (4) -- Executive Employment Agreement, dated January 30, 1991,
between the Company and Clifton H. Morris, Jr. (Exhibit
10.18)
10.7.1 (12) -- Amendment No. 1 to Executive Employment Agreement,
dated May 1, 1997, between the Company and Clifton H.
Morris, Jr. (Exhibit 10.7.1)
10.8 (4) -- Executive Employment Agreement, dated January 30, 1991,
between the Company and Michael R. Barrington (Exhibit
10.19)
10.8.1 (12) -- Amendment No. 1 to Executive Employment Agreement,
dated May 1, 1997, between the Company and Michael R.
Barrington (Exhibit 10.8.1)
10.9 (4) -- Executive Employment Agreement, dated January 30, 1991
between the Company and Daniel E. Berce (Exhibit 10.20)
10.9.1 (12) -- Amendment No. 1 to Executive Employment Agreement
between the Company and Daniel E. Berce dated May 1,
1997 (Exhibit 10.9.1)
10.10 (12) -- Amended and Restated Employment Agreement, dated
October 15, 1996, between the Company and Edward H.
Esstman (Exhibit 10.10)
10.10.1 (12) -- Amendment No. 1 to Amended and Restated Employment
Agreement, between the Company and Edward H. Esstman,
dated May 1, 1997 (Exhibit 10.10.1)
10.11 (12) -- Amended and Restated Employment Agreement, dated July
1, 1997, between the Company and Michael T. Miller
(Exhibit 10.11)
10.12 (6) -- Indenture, dated June 1, 1995, between AmeriCredit
Receivables Finance Corp. 1995-A and LaSalle National
Bank (Exhibit 10.15)
10.13 (6) -- Sale and Servicing Agreement, dated June 1, 1995,
between AmeriCredit Receivables Finance Corp. 1995-A,
AmeriCredit Financial Services, Inc., AmeriCredit
Receivables Corp. and LaSalle National Bank (Exhibit
10.16)
10.14 (15) -- Restated Revolving Credit Agreement, dated as of
October 3, 1997, between AmeriCredit Corp. And
subsidiaries, Wells Fargo Bank (Texas), National
Association, Bank One Texas, N.A. and other banks named
therein (Exhibit 10.1)
10.15 (7) -- 1995 Omnibus Stock and Incentive Plan for AmeriCredit
Corp.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.16 (13) -- Amendment No. 1 to 1995 Omnibus Stock and Incentive
Plan for AmeriCredit Corp. (Exhibit 10.19)
10.17 (8) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1995-B, dated November 20,
1995, among AmeriCredit Financial Services, Inc.,
AmeriCredit Receivables Corp. and LaSalle National Bank
(Exhibit 10.1)
10.18 (9) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1996-A, dated February 12,
1996, among AmeriCredit Financial Services, Inc.,
AmeriCredit Receivables Corp. and LaSalle National Bank
(Exhibit 10.1)
10.19 (10) -- Pooling and Servicing Agreement relating to AmeriCredit
Automobile Receivables Trust 1996-B, dated April 30,
1996, among AmeriCredit Financial Services, Inc., AFS
Funding Corp. and LaSalle National Bank (Exhibit 4.1)
10.20 (11) -- 1996 Limited Stock Option Plan for AmeriCredit
Corp.
10.21 (16) -- Indenture, dated as of February 4, 1997, between
AmeriCredit Corp. and subsidiaries and Bank One,
Columbus, NA, with form of 9 1/4% Senior Notes due
2004 attached as exhibit (Exhibit 10.2)
10.22 (16) -- Purchase Agreement, dated as of January 30, 1997,
between AmeriCredit Corp. and subsidiaries and Smith
Barney Inc., Montgomery Securities, Piper Jaffray
Inc. and Wheat First Butcher Singer (Exhibit 10.3)
10.23 (16) -- A/B Exchange Registration Rights Agreement, dated as
of February 4, 1997, between AmeriCredit Corp. and
subsidiaries and Smith Barney Inc., Montgomery
Securities, Piper Jaffray Inc. and Wheat First Butcher
Singer (Exhibit 10.4)
10.24 (17) -- Indenture, dated as of January 29, 1998, between
AmeriCredit Corp. and subsidiaries and Bank One,
NA, with form of 9 1/4% Senior Notes due 2004 attached
as exhibit
10.25 (17) -- Purchase Agreement, dated as of January 26, 1998,
between AmeriCredit Corp. and subsidiaries and Salomon
Brothers Inc and Credit Suisse First Boston
10.26 (17) -- C/D Exchange Registration Rights Agreement, dated as of
January 29, 1998, between AmeriCredit Corp. and
subsidiaries and Salomon Brothers Inc and Credit Suisse
First Boston
10.27 (15) -- Sale and Servicing Agreement, dated as of October 8,
1997, between CP Funding Corp., AmeriCredit Financial
Services, Inc., and The Chase Manhattan Bank (Exhibit
10.2)
10.28 (15) -- Funding Agreement, dated as of October 8, 1997, between
CP Funding Corp, Park Avenue Receivables Corporation,
The Chase Manhattan Bank, and other financial
institutions named therein (Exhibit 10.3)
10.29 (15) -- Financial Data Schedule
11.1 (15) -- Statement Re Computation of Per Share Earnings
12.1 (17) -- Statement Re Computation of Ratios
21.1 (17) -- Subsidiaries of the Company
23.1 (17) -- Consent of Coopers & Lybrand L.L.P.
23.2 (17) -- Consent of Jenkens & Gilchrist, a Professional
Corporation (included in its opinion filed in Exhibit
5.1)
24.1 (17) -- Power of Attorney (included on signature page hereto)
25.1 (17) -- Statement of Eligibility under the Trust Indenture Act
of 1939 on Form T-1
________________________________________________________________________________
</TABLE>
(1) Incorporated by reference to the exhibit shown in parenthesis included in
Registration Statement No. 33-31220 on Form S-1 filed by the Company with
the Securities and Exchange Commission.
(2) Incorporated by reference to the exhibit shown in parenthesis included in
Registration Statement No. 33-41203 on Form S-8 filed by the Company with
the Securities and Exchange Commission.
(3) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30, 1990
filed by the Company with the Securities and Exchange Commission.
II-3
<PAGE>
(4) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30,
1991, filed by the Company with the Securities and Exchange Commission.
(5) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30,
1993, filed by the Company with the Securities and Exchange Commission.
(6) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-K for the year ended June 30,
1995, filed by the Company with the Securities and Exchange Commission.
(7) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1995, filed by the Company with the Securities and
Exchange Commission.
(8) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 1995, filed by the Company with the Securities and
Exchange Commission.
(9) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1996, filed by Company with the Securities and Exchange
Commission.
(10) Incorporated by reference to the exhibit shown in parenthesis included in
Form 8-K, dated May 16, 1996, filed by the AmeriCredit Automobile
Receivables Trust 1996-B with the Securities and Exchange Commission.
(11) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1996, filed by the Company with the Securities and
Exchange Commission.
(12) Incorporated by reference to exhibit shown in parenthesis included in the
Company's Annual Report on Form 10-K for the period ended June 30, 1997,
filed by the Company with the Securities and Exchange Commission.
(13) Incorporated by reference from the Company's Proxy Statement for the year
ended June 30, 1997, filed by the Company with the Securities and
Exchange Commission.
(14) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Report on Form 8-K, dated August 28, 1997, filed by the
Company with the Securities and Exchange Commission.
(15) Incorporated by reference to exhibit shown in parenthesis included in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1997 filed by the Company with the Securities and Exchange
Commission.
(16) Incorporated by reference to the exhibit shown in parenthesis included
in the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997 filed by the Company with the Securities and
Exchange Commission.
(17) Filed herewith.
__________________
II-4
<PAGE>
(b) Financial Schedules.
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are either not required
under the related instructions, are inapplicable, or the required information is
included elsewhere in the Consolidated Financial Statements and incorporated
herein by reference.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers, and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of 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
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned Company hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Exchange Offer Registration
Statement through the date of responding to the request.
(c) The undersigned Company hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Exchange Offer Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas, on March 25, 1998.
AMERICREDIT CORP.
By: /s/ Clifton H. Morris, Jr.
----------------------------------------------
Clifton H. Morris, Jr.
Chairman of the Board and Chief Executive
Officer
Each individual whose signature appears below hereby designates and
appoints Clifton H. Morris, Jr., Daniel E. Berce, Chris A. Choate, and each of
them, any one of whom may act without the joinder of the other, as such person's
true and lawful attorney-in-fact and agents (the "Attorneys-in-Fact") with full
power of substitution and resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, which
amendments may make such changes in this Registration Statement as any Attorney-
in-Fact deems appropriate, and any registration statement relating to the same
offering filed pursuant to Rule 462(b) under the Securities Act of 1933 and
requests to accelerate the effectiveness of such registration statements, and to
file each such amendment with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such Attorneys-in-Fact and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as such person might or
could do in person, hereby ratifying and confirming all that such Attorneys-in-
Fact or either of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed below by the
following persons in their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive March 25, 1998
- ---------------------------- Officer
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ Michael R. Barrington Vice Chairman of the Board, Chief Operating March 25, 1998
- ---------------------------- Officer and President
Michael R. Barrington
/s/ Daniel E. Berce Vice Chairman of the Board and Chief March 25, 1998
- ---------------------------- Financial Officer
Daniel E. Berce (Principal Financial and Accounting Officer)
/s/ Edward H. Esstman President of AmeriCredit Financial March 25, 1998
- ---------------------------- Services, Inc., Executive Vice President-Auto
Edward H. Esstman Finance Division and Director
Director March __, 1998
- ----------------------------
James A. Greer
Director March __, 1998
- ----------------------------
Gerald W. Haddock
Director March __, 1998
- ----------------------------
Douglas K. Higgins
/s/ Kenneth H. Jones, Jr. Director March 25, 1998
- ----------------------------
Kenneth H. Jones, Jr.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas, on March 25, 1998.
AMERICREDIT FINANCIAL SERVICES, INC.
By: /s/ Michael R. Barrington
----------------------------------------------
Michael R. Barrington
Vice Chairman of the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed below by the
following persons in their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael R. Barrington Vice Chairman of the Board and Chief Executive March 25, 1998
- ---------------------------- Officer
Michael R. Barrington (Principal Executive Officer)
/s/ Daniel E. Berce Vice Chairman of the Board and Chief Financial March 25, 1998
- ---------------------------- Officer
Daniel E. Berce (Principal Financial and Accounting Officer)
/s/ Edward H. Esstman President, Chief Operating Officer and Director March 25, 1998
- ----------------------------
Edward H. Esstman
/s/ Clifton H. Morris, Jr. Chairman of the Board March 25, 1998
- ----------------------------
Clifton H. Morris, Jr.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas, on March 25, 1998.
AMERICREDIT OPERATING CO., INC.
By: /s/ Clifton H. Morris, Jr.
----------------------------------------------
Clifton H. Morris, Jr.
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed below by the
following persons in their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board March 25, 1998
- ----------------------------
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ Michael R. Barrington Vice Chairman of the Board and Chief March 25, 1998
- ----------------------------
Michael R. Barrington Executive Officer
/s/ Daniel E. Berce Vice Chairman of the Board and Chief March 25, 1998
- ----------------------------
Daniel E. Berce Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas, on March 25, 1998.
ACF INVESTMENT CORP.
By: /s/ Clifton H. Morris, Jr.
----------------------------------------------
Clifton H. Morris, Jr.
Chairman of the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed below by the
following persons in their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive March 25, 1998
- ---------------------------- Officer
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ Daniel E. Berce Vice Chairman of the Board and Chief March 25, 1998
- ---------------------------- Financial Officer
Daniel E. Berce (Principal Financial and Accounting Officer)
/s/ Michael R. Barrington Vice Chairman of the Board, President and March 25, 1998
- ---------------------------- Chief Operating Officer
Michael R. Barrington
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas, on March 25, 1998.
AMERICREDIT PREMIUM FINANCE, INC.
By: /s/ Clifton H. Morris, Jr.
----------------------------------------------
Clifton H. Morris, Jr.
Chairman of the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed below by the
following persons in their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive March 25, 1998
- ---------------------------- Officer
Clifton H. Morris, Jr. (Principal Executive Officer)
/s/ Michael R. Barrington Director March 25, 1998
- ----------------------------
Michael R. Barrington
/s/ Daniel E. Berce President, Chief Financial Officer, Treasurer March 25, 1998
- ---------------------------- and Director
Daniel E. Berce (Principal Financial and Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Tarrant, State of Texas, on March 25, 1998.
AMERICREDIT CORPORATION OF CALIFORNIA
By: /s/ Michael R. Barrington
----------------------------------------------
Michael R. Barrington
Vice Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed below by the
following persons in their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Clifton H. Morris, Jr. Chairman of the Board March 25, 1998
- ----------------------------
Clifton H. Morris, Jr.
/s/ Michael R. Barrington Vice Chairman of the Board March 25, 1998
- ---------------------------- (Principal Executive Officer)
Michael R. Barrington
/s/ Daniel E. Berce Vice Chairman of the Board and Chief March 25, 1998
- ---------------------------- Financial Officer
Daniel E. Berce (Principal Financial and Accounting Officer)
Executive Vice President and Director March __, 1998
- ----------------------------
Michael Hughes
</TABLE>
<PAGE>
Exhibit 5.1
March 25, 1998
AmeriCredit Corp.
200 Bailey Avenue
Fort Worth, Texas 76107
Re: Registration Statement on Form S-4; File No. 333-46993; $50,000,000
Aggregate Principal Amount of 9 1/4% Senior Notes due 2004
Dear Ladies and Gentlemen:
In connection with the registration of $50,000,000 aggregate principal
amount of 9 1/4% Senior Notes due 2004 (the "Notes") by AmeriCredit Corp. (the
"Company") under the Securities Act of 1933, as amended (the "Act"), on Form S-4
filed with the Securities and Exchange Commission on February 27, 1998 (File No.
333-46993), as amended by Amendment No. 1 (the "Registration Statement") and the
concurrent registration of guarantees (the "Subsidiary Guarantees") of the Notes
by AmeriCredit Financial Services, Inc., AmeriCredit Operating Co., Inc., ACF
Investment Corp., AmeriCredit Premium Finance, Inc., and Americredit Corporation
of California (collectively, the "Guarantors"), you have requested our opinion
with respect to the matters set forth below. The Notes and Subsidiary
Guarantees will be issued pursuant to an indenture (the "Indenture") among the
Company, the Guarantors and Bank One, N.A., as Trustee (the "Trustee").
In our capacity as your special counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company and the Guarantors in connection with the authorization and
issuance of the Notes and Subsidiary Guarantees, and, for the purposes of this
opinion, have assumed such proceedings will be timely completed in the manner
presently proposed. In addition, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies.
<PAGE>
AmeriCredit Corp.
March 25, 1998
Page 2
We are opining herein as to the effect on the subject transaction only of
the internal laws of the State of Texas and the Delaware General Corporation
law, and we express no opinion with respect to the applicability thereto, or the
effect thereon of the laws of any other jurisdiction or as to any matters of
municipal law or the laws of any other local agencies within any state.
Subject to the foregoing and the other matters set forth herein, it is our
opinion that, as of the date hereof:
1. When executed and delivered by or on behalf of the Company and
authenticated by the Trustee in accordance with the terms of the Indenture, the
Notes will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms.
2. When executed and delivered by or on behalf of the Guarantors, the
Subsidiary Guarantees will constitute valid and binding obligations of the
Guarantors, enforceable against the Guarantors in accordance with their terms.
The opinions rendered in paragraphs 1 and 2 above relating to the
enforceability of the Notes and Subsidiary Guarantees are subject to the
following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors generally; (ii) the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity or at law, and the discretion of the court before which any proceeding
therefor may be brought; and (iii) we express no opinion concerning the
enforceability of any waivers of rights or defenses or indemnification
provisions of the Indenture where such waivers or provisions are contrary to
public policy.
To the extent that the obligations of the Company and the Guarantors under
the Indenture may be dependent upon such matters, we assume for purposes of this
opinion that the Trustee is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee is
duly qualified to engage in the activities contemplated by the Indenture; that
the Indenture has been duly authorized, executed and delivered by the Trustee
and constitutes the legally valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms; that the Trustee
is in compliance, generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Trustee has
the requisite organizational and legal power and authority to perform its
obligations under the Indenture.
<PAGE>
AmeriCredit Corp.
March 25, 1998
Page 3
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Maters" in the Registration Statement and in the Prospectus included therein.
In giving such consent, we do not admit that we come within the category of
persons whose consent is required by Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
JENKENS & GILCHRIST,
A Professional Corporation
/s/ L. STEVEN LESHIN
---------------------------
By: L. Steven Leshin
GJS/dc
<PAGE>
EXHIBIT 10.24
L&W DRAFT - JANUARY 26, 1998
SALOMON SMITH BARNEY - AMERICREDIT
================================================================================
------------------------------------
AmeriCredit Corp.
As Issuer
AmeriCredit Financial Services, Inc.,
AmeriCredit Operating Co., Inc.,
AmeriCredit Premium Finance, Inc.,
Americredit Corporation of California, and
ACF Investment Corp.
As Guarantors
------------------------------------
$50,000,000
SERIES C AND SERIES D
9 1/4% SENIOR NOTES DUE 2004
------------------------------------
INDENTURE
Dated as of January 29, 1998
------------------------------------
------------------------------------
Bank One, N.A.
As Trustee
------------------------------------
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1)............................... 7.10
(a)(2)............................... 7.10
(a)(3)............................... N.A.
(a)(4)............................... N.A.
(a)(5)............................... 7.10
(b).................................. 7.10
(c).................................. N.A.
311(a).................................. 7.11
(b).................................. 7.11
(c).................................. N.A.
312(a).................................. 2.05
(b).................................. 11.03
(c).................................. 11.03
313(a).................................. 7.06
(b)(2)............................... 7.07
(c).................................. 7.06;11.02
(d).................................. 7.06
314(a).................................. 4.03;11.02
(c)(1)............................... 11.04
(c)(2)............................... 11.04
(c)(3)............................... N.A.
(e).................................. 11.05
(f).................................. N.A.
315(a).................................. 7.01
(b).................................. 7.05,11.02
(c).................................. 7.01
(d).................................. 7.01
(e).................................. 6.11
316(a)(last sentence)................... 2.09
(a)(1)(A)............................ 6.05
(a)(1)(B)............................ 6.04
(a)(2)............................... N.A.
(b).................................. 6.07
(c).................................. 2.12
317(a)(1)............................... 6.08
(a)(2)............................... 6.09
(b).................................. 2.04
318(a).................................. 11.01
(b).................................. N.A.
(c).................................. 11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 - DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.......................................... 1
Section 1.02. Other Definitions.................................... 15
Section 1.03. Incorporation by Reference of Trust Indenture Act.... 15
Section 1.04. Rules of Construction................................ 16
ARTICLE 2 - THE NOTES Section 2.01. Form and Dating............................. 16
Section 2.02. Execution and Authentication......................... 17
Section 2.03. Registrar and Paying Agent........................... 17
Section 2.04. Paying Agent to Hold Money in Trust.................. 18
Section 2.05. Holder Lists......................................... 18
Section 2.06. Transfer and Exchange................................ 18
Section 2.07. Replacement Notes.................................... 23
Section 2.09. Treasury Notes....................................... 24
Section 2.10. Temporary Notes...................................... 24
Section 2.11. Cancellation......................................... 25
Section 2.12. Defaulted Interest................................... 25
ARTICLE 3 - REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee................................... 25
Section 3.02. Selection of Notes to Be Redeemed.................... 25
Section 3.03. Notice of Redemption................................. 26
Section 3.04. Effect of Notice of Redemption....................... 27
Section 3.05. Deposit of Redemption Price.......................... 27
Section 3.06. Notes Redeemed in Part............................... 27
Section 3.07. Optional Redemption.................................. 27
Section 3.08. Mandatory Redemption................................. 28
Section 3.09. Offer to Purchase by Application of Excess Proceeds.. 28
ARTICLE 4 - COVENANTS
Section 4.01. Payment of Notes..................................... 30
Section 4.02. Maintenance of Office or Agency...................... 30
Section 4.03. Reports 31
Section 4.04. Compliance Certificate............................... 31
Section 4.05. Taxes 32
Section 4.06. Stay, Extension and Usury Laws....................... 32
Section 4.07. Restricted Payments.................................. 32
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries...................................... 34
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock............................................. 35
Section 4.10. Asset Sales.......................................... 37
Section 4.11. Transactions with Affiliates......................... 39
Section 4.12. Liens 38
Section 4.13. Line of Business..................................... 38
Section 4.14. Corporate Existence.................................. 39
Section 4.15. Offer to Repurchase Upon Change of Control........... 39
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.16. Limitation on Issuances and Sales of Capital Stock of
Wholly Owned Subsidiaries......................... 40
Section 4.17. Payments for Consent................................. 41
Section 4.18. Limitation on Investment Company Status.............. 41
Section 4.19. Additional Subsidiary Guarantees..................... 41
ARTICLE 5 - SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets............. 41
Section 5.02. Successor Corporation Substituted.................... 42
ARTICLE 6 - DEFAULTS AND REMEDIES
Section 6.01. Events of Default.................................... 42
Section 6.02. Acceleration......................................... 44
Section 6.03. Other Remedies....................................... 45
Section 6.04. Waiver of Past Defaults.............................. 45
Section 6.05. Control by Majority.................................. 45
Section 6.06. Limitation on Suits.................................. 45
Section 6.07. Rights of Holders of Notes to Receive Payment........ 46
Section 6.08. Collection Suit by Trustee........................... 46
Section 6.09. Trustee May File Proofs of Claim..................... 46
Section 6.10. Priorities........................................... 47
Section 6.11. Undertaking for Costs................................ 47
ARTICLE 7 - TRUSTEE
Section 7.01. Duties of Trustee.................................... 47
Section 7.02. Rights of Trustee.................................... 48
Section 7.03. Individual Rights of Trustee......................... 49
Section 7.04. Trustee's Disclaimer................................. 49
Section 7.05. Notice of Defaults................................... 49
Section 7.06. Reports by Trustee to Holders of the Notes........... 49
Section 7.07. Compensation and Indemnity........................... 50
Section 7.08. Replacement of Trustee............................... 50
Section 7.09. Successor Trustee by Merger, etc..................... 51
Section 7.10. Eligibility; Disqualification........................ 51
Section 7.11. Preferential Collection of Claims Against Company.... 52
ARTICLE 8 - LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance........................................ 52
Section 8.02. Legal Defeasance and Discharge....................... 52
Section 8.03. Covenant Defeasance.................................. 53
Section 8.04. Conditions to Legal or Covenant Defeasance........... 53
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions..... 54
Section 8.06. Repayment to Company................................. 55
Section 8.07. Reinstatement........................................ 55
ARTICLE 9 - AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.................. 55
Section 9.02. With Consent of Holders of Notes..................... 56
Section 9.03. Compliance with Trust Indenture Act.................. 57
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 9.04. Revocation and Effect of Consents.................... 57
Section 9.05. Notation on or Exchange of Notes..................... 58
Section 9.06. Trustee to Sign Amendments, etc...................... 58
ARTICLE 10 - SUBSIDIARY GUARANTEES
Section 10.01. Subsidiary Guarantees................................ 58
Section 10.02. Execution and Delivery of Subsidiary Guarantees...... 59
Section 10.03. Guarantors May Consolidate, etc., on Certain Terms... 59
Section 10.04. Releases Following Sale of Assets.................... 60
Section 10.05. Limitation on Guarantor Liability.................... 61
Section 10.06. "Trustee" to Include Paying Agent.................... 61
ARTICLE 11 - MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls......................... 61
Section 11.02. Notices 61
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes.................................. 63
Section 11.04. Certificate and Opinion as to Conditions Precedent... 63
Section 11.05. Statements Required in Certificate or Opinion........ 63
Section 11.06. Rules by Trustee and Agents.......................... 63
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders........................ 64
Section 11.08. Governing Law........................................ 64
Section 11.09. No Adverse Interpretation of Other Agreements........ 64
Section 11.10. Successors........................................... 64
Section 11.11. Severability......................................... 64
Section 11.12. Counterpart Originals................................ 64
Section 11.13. Table of Contents, Headings, etc..................... 64
</TABLE>
iii
<PAGE>
INDENTURE dated as of January 29, 1998 between AmeriCredit Corp., a Texas
corporation (the "Company"), AmeriCredit Financial Services, Inc., a Delaware
corporation, AmeriCredit Operating Co., Inc., a Delaware corporation, ACF
Investment Corp., a Delaware corporation, AmeriCredit Premium Finance, Inc., a
Delaware corporation, and Americredit Corporation of California, a California
corporation (together with all other Persons who execute a Subsidiary Guarantee
pursuant to the terms of this Indenture, the "Guarantors") and Bank One, N.A.,
as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 9 1/4% Series C Senior Notes due 2004 (the "Series C Notes") and the 9 1/4%
Series D Senior Notes due 2004 (the "Series D Notes" and, together with the
Series C Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"accreted value" means, with respect to discount Indebtedness, as of any
date of determination prior to the end of the "discount" or "zero coupon" period
for such discount Indebtedness, the sum of (a) the initial offering price of
such Indebtedness and (b) that portion of the excess of the principal amount at
maturity of such Indebtedness over such initial offering price as shall have
been accreted thereon from the date of issuance of such discount Indebtedness
through the date of determination.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Acquisition Fees" means, with respect to any Eligible Receivables as of
any date, the discount or cash payments received by the Company from dealers and
other Persons with respect to the Eligible Receivables purchased from such
dealer or other Person and owned by the Company or its Restricted Subsidiaries
as of such date.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depository that apply to such transfer or exchange.
<PAGE>
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of Receivables in connection with Securitizations,
Warehouse Facilities or Credit Facilities in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by Section 4.15 hereof and/or
Section 5.01 hereof and not by the provisions of Section 4.10 hereof), and (ii)
the issue or sale by the Company or any of its Subsidiaries of Equity Interests
of any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $500,000 or (b) for net proceeds in excess
of $500,000. Notwithstanding the foregoing: (i) a transfer of assets by the
Company to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned Restricted
Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the
Company or to another Wholly-Owned Restricted Subsidiary, and (iii) a Restricted
Payment that is permitted by Section 4.07 hereof will not be deemed to be Asset
Sales.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Board of Directors or other governing body
charged with the ultimate management of any Person, or any duly authorized
committee thereof.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
80% of the aggregate amount of Receivables (other than loans secured by
residential mortgages) owned by the Company and its Wholly-Owned Restricted
Subsidiaries as of such date that are not in default, excluding (A) any
Receivables that were acquired or originated with Permitted Warehouse Debt, (B)
any Receivables that are held by a Securitization Trust, and (C) any Receivables
that are subject to Liens other than Liens securing Obligations under Credit
Facilities; (ii) 60% of the book value (determined on a consolidated basis in
accordance with GAAP) of interests in portfolios of securitized Receivables that
are owned by the Company and its Wholly-Owned Restricted Subsidiaries as of such
date and that are not subject to any Liens other than Liens to secure
Obligations under Credit Facilities; and (iii) 98% of the aggregate amount of
Receivables that consist of loans secured by residential mortgages owned by the
Company and its Wholly-Owned Restricted Subsidiaries as of such date that are
not in default, excluding (A) any such loans that were acquired or originated
with Permitted Warehouse Debt, (B) any such loans that are held by a
Securitization Trust, and (C) any such loans that are subject to Liens other
than Liens securing Obligations under Credit Facilities.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
2
<PAGE>
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
Eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than in the ordinary course of business; (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company;
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares); (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors; or (v) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance); provided, however, that this clause (v) shall not apply to any such
consolidation or merger if, immediately after the consummation of such
transaction and after giving effect thereto, the ratings assigned to the Notes
by Moody's Investors Service, Inc. and Standard & Poor's Ratings Group are equal
to or higher than Baa3 (or the equivalent) and BBB- (or the equivalent),
respectively.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total
amount of Indebtedness of any other Person, to the extent that such Indebtedness
has been Guaranteed by the referent Person or one or more of its Restricted
Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified
Stock of such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Leverage Ratio" means, with respect to any Person, as of any
date of determination, the ratio of (i) the Consolidated Indebtedness of such
Person as of such date, excluding, however, all (A) borrowings under Credit
Facilities that constitute Permitted Debt, (B) Permitted Warehouse Debt and (C)
3
<PAGE>
Hedging Obligations that constitute Permitted Debt to (ii) the Consolidated Net
Worth of such Person as of such date.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries (for such period, on a consolidated basis, determined in accordance
with GAAP); provided that (i) the Net Income (but not loss) of any Person that
is not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly-Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreement" means the Second Restated Revolving Credit Agreement,
dated as of October 7, 1996, by and among the Company, certain of its
Restricted Subsidiaries and the several banks named therein, providing for up to
$240 million of revolving credit borrowings, including all related notes,
Guarantees, security agreements, collateral documents, and other instruments and
agreements executed in connection therewith.
"Credit Enhancement Agreements" means, collectively, any documents,
instruments or agreements entered into by the Company, any of its Restricted
Subsidiaries or any of the Securitization Trusts exclusively
4
<PAGE>
for the purpose of providing credit support for the Securitization Trusts or any
of their respective Indebtedness or asset-backed securities.
"Credit Facilities" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Credit Agreement) with banks or other institutional lenders
providing for revolving credit loans; provided that in no event will any such
facility that constitutes a Warehouse Facility be deemed to qualify as a Credit
Facility.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of Exhibit A hereto, except that such Note shall not have the
information called for by footnotes 1 and 2 thereof.
"Depository" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Eligible Receivables" means, at any time, all Receivables owned by the
Company or any of its Restricted Subsidiaries that meet the sale or loan
eligibility criteria set forth in the Warehouse Facility pursuant to which the
applicable Receivables were financed; excluding, however, any Receivables that
are pledged to secure, or were acquired or originated with, borrowings under a
Credit Facility and excluding any such Receivables held by a Securitization
Trust.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means up to $39.5 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the Credit Agreement, the Original Notes and the Original
Guarantees) in existence on February 4, 1997, until such amounts are repaid.
5
<PAGE>
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time and consistently applied.
"Global Note" means the global note in the form of Exhibit A hereto
bearing the Private Placement Legend and deposited with and registered in the
name of the Depository or its nominee that will be issued in a denomination
equal to the outstanding principal amount of the Notes sold in reliance on Rule
144A.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) AmeriCredit Financial Services, Inc., a
Delaware corporation, AmeriCredit Operating Co., Inc., a Delaware corporation,
ACF Investment Corp., a Delaware corporation, Americredit Corporation of
California, a California corporation and AmeriCredit Premium Finance, Inc., a
Delaware corporation, and (ii) any other subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of Section 4.19 hereof, and their
respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
6
<PAGE>
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined in accordance with Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts
7
<PAGE>
required to be applied to the repayment of Indebtedness secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, a vice chairman, the principal financial officer, the
treasurer or the principal accounting officer of the Company, that meets the
requirements of Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Original Guarantees" means each of the Guarantees of the Original Notes
by the Guarantors pursuant to the Original Indenture.
"Original Indenture" means the Indenture, dated as of February 4, 1997,
among the Company, Bank One, N.A., as trustee, and the Guarantors, with respect
to the Original Notes and the Original Guarantees.
"Original Notes" means the $125,000,000 in aggregate principal amount of
the Company's 9 1/4% Senior Notes due 2004, issued pursuant to the Original
Indenture on February 4, 1997.
"Participant" means, with respect to DTC, a Person who has an account with
DTC.
8
<PAGE>
"Permitted Business" means the business of purchasing, originating,
brokering and marketing, pooling and selling, securitizing and servicing
Receivables, and entering into agreements and engaging in transactions
incidental to the foregoing.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Wholly-Owned Restricted Subsidiary of the Company and a
Guarantor that is engaged in a Permitted Business or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Wholly-Owned
Restricted Subsidiary of the Company that is a Guarantor and that is engaged in
a Permitted Business; (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.10 hereof; (e) any acquisition of assets solely
in exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; (f) Investments by the Company or any of its Subsidiaries in
Securitization Trusts in the ordinary course of business in connection with or
arising out of Securitizations; (g) purchases of all remaining outstanding
asset-backed securities of any Securitization Trust for the purpose of relieving
the Company or a Subsidiary of the Company of the administrative expense of
servicing such Securitization Trust, but only if 90% or more of the aggregate
principal amount of the original asset-backed securities of such Securitization
Trust have previously been retired; and (h) other Investments by the Company or
any of its Subsidiaries in any Person (other than an Affiliate of the Company
that is not also a Subsidiary of the Company) that do not exceed $5.0 million in
the aggregate at any one time outstanding (measured as of the date made and
without giving effect to subsequent changes in value).
"Permitted Liens" means (i) Liens existing on the date of this Indenture;
(ii) Liens on Eligible Receivables and the proceeds thereof to secure Permitted
Warehouse Debt or permitted Guarantees thereof; (iii) Liens to secure revolving
credit borrowings under Credit Facilities, provided that such borrowings were
permitted by this Indenture to be incurred; (iv) Liens on Receivables and the
proceeds thereof incurred in connection with Securitizations or permitted
Guarantees thereof; (v) Liens on spread accounts and excess servicing
receivable, Liens on the stock of Restricted Subsidiaries of the Company
substantially all of the assets of which are spread accounts and excess
servicing receivable and Liens on interests in Securitization Trusts, in each
case incurred in connection with Credit Enhancement Agreements; (vi) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (vii) Liens on property
existing at the time of acquisition thereof by the Company or any Restricted
Subsidiary of the Company, provided that such Liens were in existence prior to
the contemplation of such acquisition; (viii) Liens securing Indebtedness
incurred to finance the construction or purchase of property of the Company or
any of its Wholly-Owned Restricted Subsidiaries (but excluding Capital Stock of
another Person); provided, however, that any such Lien may not extend to any
other property owned by the Company or any of its Restricted Subsidiaries at the
time the Lien is incurred, and the Indebtedness secured by the Lien may not be
incurred more than 180 days after the latter of the acquisition or completion of
construction of the property subject to the Lien; provided, further, that the
Amount of Indebtedness secured by such Liens do not exceed the fair market value
(as evidenced by a resolution of the Board of Directors of the Company set forth
in an Officers' Certificate delivered to the Trustee) of the property purchased
or constructed with the proceeds of such Indebtedness; (ix) Liens to secure any
Permitted Refinancing Indebtedness incurred to refinance any Indebtedness
secured by any Lien referred to in the foregoing clauses
9
<PAGE>
(i) through (viii), provided, however, that such new Lien shall be limited to
all or part of the same property that secured the original Lien and the
Indebtedness secured by such Lien at such time is not increased to any amount
greater than the outstanding principal amount or, if greater, committed amount
of the Indebtedness described under clauses (i) through (viii), as the case may
be, at the time the original Lien became a permitted Lien; (x) Liens in favor of
the Company; (xi) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company with respect to obligations
that do not exceed $1.0 million in the aggregate at any one time outstanding;
(xii) Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business (including, without limitation, landlord Liens on
leased properties); (xiii) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (xiv) Liens on assets of
Guarantors to secure Senior Guarantor Debt of such Guarantors that was permitted
by this Indenture to be incurred; and (xv) Liens on assets of Unrestricted
Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than Permitted Warehouse Debt or intercompany Indebtedness); provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Permitted Warehouse Debt" means Indebtedness of the Company or a
Restricted Subsidiary of the Company outstanding under one or more Warehouse
Facilities; provided, however, that (i) the assets purchased with proceeds of
such warehouse debt are or, prior to any funding under the Warehouse Facility
with respect to such assets, were eligible to be recorded as held for sale on
the consolidated balance sheet of the Company in accordance with GAAP, (ii) such
warehouse debt will be deemed Permitted Warehouse Debt (a) in the case of a
Purchase Facility, only to the extent the holder of such warehouse debt has no
contractual recourse to the Company and/or its Restricted Subsidiaries to
satisfy claims in respect of such warehouse debt in excess of the realizable
value of the Receivables financed thereby, and (b) in the case of any other
Warehouse Facility, only to the lesser of (A) the amount advanced by the lender
with respect to the Receivables financed under such Warehouse Facility, and (B)
the principal amount of such Receivables and (iii) any such Indebtedness has not
been outstanding in excess of 364 days.
10
<PAGE>
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust, joint venture, or a governmental
agency or political subdivision thereof.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except as
otherwise permitted by the provisions of this Indenture.
"Purchase Facility" means any Warehouse facility in the form of a purchase
and sale facility pursuant to which the Company or any of its Subsidiaries sells
Receivables to a financial institution and retains the right of first refusal
upon the subsequent resale of such Receivables by such financial institution.
"Receivables" means (i) consumer installment sale contracts and loans
evidenced by promissory notes secured by new and used automobiles and light
trucks, (ii) other consumer installment sale contracts or lease contracts and
(iii) loans secured by residential mortgages, in the case of each of the clauses
(i), (ii) and (iii), that are purchased or originated in the ordinary course of
business by the Company or any Restricted Subsidiary of the Company; provided,
however, that for purposes of determining the amount of a Receivable at any
time, such amount shall be determined in accordance with GAAP, consistently
applied, as of the most recent practicable date.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of February 4, 1997, by and among the Company, the Guarantors and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization" means a public or private transfer of Receivables in the
ordinary course of business and by which the Company or any of its Restricted
Subsidiaries directly or indirectly securitizes a pool of specified Receivables
including any such transaction involving the sale of specified Receivables to a
Securitization Trust.
11
<PAGE>
"Securitization Trust" means any Person (whether or not a Subsidiary of
the Company) established exclusively for the purpose of issuing securities in
connection with any Securitization, the obligations of which are without
recourse to the Company or any of the Guarantors (including, without limitation,
any special purpose Subsidiary of the Company formed exclusively for the purpose
of satisfying the requirements of Credit Enhancement Agreements and regardless
of whether such Subsidiary is an issuer of securities), provided that such
Person is not an obligor with respect to any Indebtedness of the Company or any
Guarantor other than under Credit Enhancement Agreements. As of the date of
this Indenture, AFS Funding Corp. and CP Funding Corp. shall be deemed to
satisfy the requirements of the foregoing definition.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Special Purpose Finance Subsidiaries" means AmeriCredit Receivables
Finance Corp. and AmeriCredit Receivables Finance Corp. 1995-A.
"Specified Senior Indebtedness" means (i) the Indebtedness of any Person,
whether outstanding on the date of this Indenture or thereafter incurred and
(ii) accrued and unpaid interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating to such
Person to the extent post filing interest is allowed in such proceeding) in
respect of (A) Indebtedness of such Person for money borrowed and (B)
Indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable unless, in the
case of either clause (i) or (ii), in the instrument creating or evidencing the
same pursuant to which the same is outstanding, it is provided that such
obligations are subordinate in right of payment to the Notes; provided, however,
that Specified Senior Indebtedness shall not include (1) any obligation of such
Person to any Subsidiary of such Person, (2) any liability for Federal, state,
local or other taxes owed or owing by such Person, (3) any accounts payable or
other liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (4)
any obligations in respect of Capital Stock of such Person or (5) that portion
of any Indebtedness which at the time of incurrence is incurred in violation of
this Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
12
<PAGE>
"Subsidiary Guarantee" means the Guarantee of the Notes by each of the
Guarantors pursuant to Article 11 hereof and in the form of Guarantee attached
hereto as Exhibit C and any additional Guarantee of the Notes to be executed by
any Restricted Subsidiary pursuant to Section 4.19 hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.06(g) hereof.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Global Note" means one or more global Notes that do not and
are not required to bear the Private Placement Legend and are deposited with and
registered in the name of the Depository or its nominee.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to
a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant in
Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Company as of such date (and, if such Indebtedness
is not permitted to be incurred as of such date under the covenant in Section
4.09, the Company shall be in default of such covenant). The Board of Directors
of the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under Consolidated
Leverage Ratio test set forth in the first paragraph of Section 4.09, calculated
on a pro forma basis as if such designation had
13
<PAGE>
occurred at the end of the applicable fiscal quarter, and (ii) no Default or
Event of Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Warehouse Facility" means any funding arrangement with a financial
institution or other lender or purchaser to the extent (and only to the extent)
funding thereunder is used exclusively to finance or refinance the purchase or
origination of Receivables by the Company or a Restricted Subsidiary of the
Company for the purpose of (i) pooling such Receivables prior to Securitization
or (ii) sale, in each case in the ordinary course of business, including
Purchase Facilities.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly-Owned Restricted
Subsidiaries of such Person.
Section 1.02. Other Definitions.
Defined in
Term Section
"Affiliate Transaction"........... 4.11
"Asset Sale Offer"................ 3.09
"Change of Control Offer"......... 4.15
"Change of Control Payment"....... 4.15
"Change of Control Payment Date".. 4.15
"Covenant Defeasance"............. 8.03
"DTC"............................. 2.03
"Event of Default"................ 6.01
"Excess Proceeds"................. 4.10
"incur"........................... 4.09
"insolvent"....................... 10.05
"Legal Defeasance"................ 8.02
"Offer Amount".................... 3.09
"Offer Period".................... 3.09
"Paying Agent".................... 2.03
"Permitted Debt".................. 4.09
"Purchase Date"................... 3.09
"Registrar"....................... 2.03
14
<PAGE>
"Restricted Payments"............. 4.07
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
15
<PAGE>
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may be issued in the
form of Definitive Notes or Global Notes, as specified by the Company. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
Notes issued in global form shall be substantially in the form of Exhibit
A attached hereto (including the text referred to in footnote 1 and 2 thereto).
Notes issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (but without including the text referred to in footnote 1 and 2
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes. Notes to be so issued shall be
either Definitive Notes or Global Notes, as specified by the Company in such
order. The aggregate principal amount of Notes outstanding at any time may not
exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this
16
<PAGE>
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
Holders or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes are
presented by a Holder to the Registrar with a request:
17
<PAGE>
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount
of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer Restricted
Security, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification to that effect
from such Holder (in substantially the form of Exhibit B
hereto); or
(B) if such Transfer Restricted Security is being transferred to
a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Rule 904 under
the Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that
effect from such Holder (in substantially the form of Exhibit
B hereto); or
(C) if such Transfer Restricted Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect from such Holder (in substantially the form of Exhibit
B hereto) and an Opinion of Counsel from such Holder or the
transferee reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance
with the Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a Global
Note. A Definitive Note may not be exchanged for a beneficial interest in a
Global Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Definitive Note is a Transfer Restricted Security, a
certification from the Holder thereof (in substantially the form of
Exhibit B hereto) to the effect that such Definitive Note is being
transferred by such Holder to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act; and
18
<PAGE>
(ii) whether or not such Definitive Note is a Transfer Restricted
Security, written instructions from the Holder thereof directing the
Trustee to make, or to direct the Note Custodian to make, an
endorsement on the Global Note to reflect an increase in the
aggregate principal amount of the Notes represented by the Global
Note,
in which case the Trustee shall cancel such Definitive Note in accordance with
Section 2.11 hereof and cause, or direct the Note Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depository and the Note Custodian, the aggregate principal amount of Notes
represented by the Global Note to be increased accordingly. If no Global Notes
are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a Definitive
Note.
(i) Any Person having a beneficial interest in a Global Note may
upon request exchange such beneficial interest for a Definitive
Note. Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the
Depository, from the Depository or its nominee on behalf of any
Person having a beneficial interest in a Global Note, and, in
the case of a Transfer Restricted Security, the following
additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial
owner, a certification to that effect from such Person (in
substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Rule 904 under
the Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that
effect from the transferor (in substantially the form of
Exhibit B hereto); or
(C) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of
the Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B hereto)
and an Opinion of Counsel from the transferee or transferor
reasonably acceptable to the Company and to the Registrar to
the effect that such transfer is in compliance with the
Securities Act,
in which case the Trustee or the Note Custodian, at the
direction of the Trustee, shall, in accordance with the standing
instructions and procedures existing between the Depository and
the Note Custodian, cause the aggregate principal amount of
Global Notes to be
19
<PAGE>
reduced accordingly and, following such reduction, the Company
shall execute and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall
authenticate and deliver to the transferee a Definitive Note in
the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial interest in
a Global Note pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized denominations as
the Depository, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee.
The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) Authentication of Definitive Notes in Absence of Depository. If at
any time:
(i) the Depository for the Notes notifies the Company that the
Depository is unwilling or unable to continue as Depository for
the Global Notes and a successor Depository for the Global Notes
is not appointed by the Company within 90 days after delivery of
such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Notes
under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends. The following legend shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraphs (ii) and (iii) below,
each Global Note and each Definitive Note (and all Notes
issued in exchange therefor or substitution thereof) shall
bear the legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED
20
<PAGE>
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR
(d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY, OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a
Global Note) pursuant to Rule 144 under the Securities Act or
pursuant to an effective registration statement under the
Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Security for a
Definitive Note that does not bear the first legend set
forth in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security represented
by a Global Note, such Transfer Restricted Security shall
not be required to bear the first legend set forth in (i)
above, but shall continue to be subject to the provisions of
Section 2.06(c) hereof; provided, however, that with respect
to any request for an exchange of a Transfer Restricted
Security that is represented by a Global Note for a
Definitive Note that does not bear the first legend set
forth in (i) above, which request is made in reliance upon
Rule 144, the Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to Rule
144 (such certification to be substantially in the form of
Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the Exchange
Offer, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the
Trustee shall authenticate Series D Notes in exchange for Series
C Notes accepted for exchange in the Exchange Offer, which
Series D Notes shall not bear the legend set forth in (i) above,
and the Registrar shall rescind any restriction on the transfer
of such Notes, in each case unless the Holder of such Series C
Notes is either (A) a broker-
21
<PAGE>
dealer, (B) a Person participating in the distribution of the
Series C Notes or (C) a Person who is an affiliate (as defined
in Rule 144A) of the Company.
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in Global Notes have been exchanged for Definitive Notes,
redeemed, repurchased or cancelled, all Global Notes shall be returned to or
retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive
Notes and Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company may require payment of
a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.07, 4.10, 4.15
and 9.05 hereto).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed
in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or
Global Notes shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Definitive Notes or Global Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange Notes
during a period beginning at the opening of business 15 days
before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of
business on the day of selection; or
(B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part; or
(C) to register the transfer of or to exchange a Note between a
record date and the next succeeding interest payment date.
22
<PAGE>
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment
of principal of and interest on such Notes, and neither the
Trustee, any Agent nor the Company shall be affected by notice
to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and Global
Notes in accordance with the provisions of Section 2.02 hereof.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying
23
<PAGE>
on any such direction, waiver or consent, only Notes that a Trustee knows are so
owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be
delivered to the Company. The Company may not issue new Notes to replace Notes
that it has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or,
upon the written request of the Company, the Trustee in the name and at the
expense of the Company) shall mail or cause to be mailed to Holders a notice
that states the special record date, the related payment date and the amount of
such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (a) the clause of this Indenture pursuant to which the
24
<PAGE>
redemption shall occur, (b) the redemption date, (c) the principal amount of
Notes to be redeemed and (d) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
25
<PAGE>
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to February 1, 2001. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on February 1 of the
years indicated below:
26
<PAGE>
YEAR PERCENTAGE
---- ----------
2001.................................. 104.625%
2002.................................. 102.313%
2003 and thereafter................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time prior to February 1, 2000, the Company may on any one or more occasions
redeem up to an aggregate of $16.67 million in principal amount of Notes at a
redemption price of 109.25% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of a public offering of common stock of the Company;
provided that at least $33.33 million in aggregate principal amount of Notes
remain outstanding immediately after the occurrence of such redemption; and
provided, further, that such redemption shall occur within 45 days of the date
of the closing of such public offering.
Notwithstanding the provisions of clauses (a) and (b) of this Section
3.07, the Company shall not redeem any portion of the Original Notes unless,
substantially concurrently with such redemption, the Company redeems an
aggregate principal amount of Notes (rounded to the nearest integral multiple of
$1,000) equal to the product of (1) a fraction, the numerator of which is the
aggregate principal amount of Original Notes to be so redeemed and the
denominator of which is the aggregate principal amount of Original Notes
outstanding immediately prior to such proposed redemption, and (2) the aggregate
principal amount of Notes outstanding immediately prior to such proposed
redemption. The Company will also not be permitted to redeem any portion of the
Notes unless, substantially concurrently with such redemption, the Company
redeems an aggregate principal amount of Original Notes (rounded to the nearest
integral multiple $1,000) equal to the product of (1) a fraction, the numerator
of which is the aggregate principal amount of Notes outstanding immediately
prior to such proposed redemption, and (2) the aggregate principal amount of
Original Notes outstanding immediately prior to such proposed redemption.
(c) Any redemption of Notes pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall
not be required to make mandatory redemption payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes
27
<PAGE>
tendered in response to the Asset Sale Offer. Payment for any Notes so purchased
shall be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a depository,
if appointed by the Company, or a Paying Agent at the address specified in
the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depository or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
28
<PAGE>
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depository or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
29
<PAGE>
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not the Company is required by the rules and regulations
of the SEC, so long as any Notes are outstanding, the Company shall furnish to
the Holders of Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q and 10-
K if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, either on the face
of the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separately from the financial condition and results of operations
of the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the SEC, the
Company shall file a copy of all such information and reports with the SEC for
public availability (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
(b) For so long as any Notes remain outstanding, the Company and the
Subsidiary Guarantors shall furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
30
<PAGE>
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly-Owned Restricted
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
31
<PAGE>
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Consolidated Leverage Ratio test
set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after
February 4, 1997 (excluding Restricted Payments permitted by clause (ii) of
the next succeeding paragraph), is less than the sum of (i) 25% of the
aggregate cumulative Consolidated Net Income of the Company for the period
(taken as one accounting period) from and after March 31, 1997 to the end of
the Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since February 4, 1997 of Equity Interests of
the Company (other than Disqualified Stock) or of Disqualified Stock or debt
securities of the Company that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company and other than Disqualified
Stock or convertible debt securities that have been converted into
Disqualified Stock), plus (iii) to the extent that any Restricted Investment
that was made after February 4, 1997 is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (A) the cash return of capital with respect
to such Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Restricted Subsidiary of the Company to the holders of its common
Equity Interests on a pro rata basis; and (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
or any Restricted Subsidiary of the Company held by any member of the Company's
(or any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement in effect as of the date
of this Indenture; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after such transaction.
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default; provided that in no event shall the business currently operated by
AmeriCredit Financial Services, Inc. be transferred to or held by an
Unrestricted
32
<PAGE>
Subsidiary. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted
Payments at the time of such designation and shall reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments shall be deemed to constitute Investments in an amount
equal to the greater of (y) the net book value of such Investments at the time
of such designation or (z) the fair market value of such Investments at the time
of such designation. Such designation shall only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors of the Company whose resolution with respect thereto shall be
delivered to the Trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $10.0 million. Not later
than 15 days after the end of any fiscal quarter during which any Restricted
Payment is made, the Company shall deliver to the Trustee an Officers'
Certificate stating that all Restricted Payments made during such fiscal quarter
were permitted and setting forth the basis upon which the calculations required
by this Section 4.07 hereof were computed, together with a copy of any fairness
opinion or appraisal required by this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reason of (a) this Indenture and the Notes,
(b) applicable law, (c) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred, (d) by
reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (e) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (f) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced, (g) the requirements of any
Securitization that are exclusively applicable to any bankruptcy remote special
purpose Restricted Subsidiary of the Company formed in connection therewith, (h)
the requirements of any Credit Enhancement Agreement or (i) in the case of
clause (iii) above, restrictions contained in security agreements securing
Indebtedness of Guarantors relating to the properties or assets of Guarantors
subject to the Liens created thereby, provided that such Liens were otherwise
permitted to be incurred under this Indenture.
33
<PAGE>
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company and the Guarantors may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock or preferred stock if the Consolidated
Leverage Ratio of the Company, calculated on a pro forma basis after giving
effect to the incurrence or issuance of the additional Indebtedness to be
incurred or the Disqualified Stock or preferred stock to be issued, would have
been less than 2.0 to 1.
The provisions of the first paragraph of this covenant shall not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the existence of Credit Facilities and the Guarantees thereof by the
Guarantors and the incurrence by the Company and/or any of the Guarantors of
revolving credit Indebtedness pursuant to one or more Credit Facilities the
proceeds of which are applied to purchase or originate Receivables; provided
that the aggregate principal amount of all revolving credit Indebtedness
outstanding under all Credit Facilities after giving effect to such
incurrence, including all Permitted Refinancing Indebtedness incurred to
refund, refinance, defease, renew or replace any Indebtedness incurred
pursuant to this clause (i) and with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company and
its Restricted Subsidiaries thereunder, does not at any time exceed the
amount of the Borrowing Base (any such outstanding Indebtedness that exceeds
the amount of the Borrowing Base as of the close of any Business Day shall
cease to be Permitted Debt pursuant to this clause (i) as of the close of
business on the third Business Day thereafter and shall be deemed to be an
incurrence of such Indebtedness that is not permitted by this clause (i) by
the Company or such Guarantor, as applicable, as of such third Business Day);
(ii) the existence of Warehouse Facilities, regardless of amount, and the
incurrence by the Company or any of its Restricted Subsidiaries of Permitted
Warehouse Debt in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Restricted Subsidiaries
thereunder) not to exceed 100% of the aggregate principal amount (exclusive
of Acquisition Fees included therein) of all Eligible Receivables owned by
the Company and its Restricted Subsidiaries (or such Warehouse Facilities in
the case of Permitted Warehouse Debt in the form of repurchase agreements) at
such time;
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Original Notes and the Notes and the incurrence by the Guarantors of the
Original Guarantees and the Subsidiary Guarantees;
(v) obligations of the Company and its Restricted Subsidiaries under
Credit Enhancement Agreements;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance, defease, renew
34
<PAGE>
or replace any Indebtedness (other than Permitted Warehouse Debt or
intercompany Indebtedness) that was permitted by this Indenture to be
incurred;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of the
Guarantors; provided, however, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results
in any such Indebtedness being held by a Person other than the Company or a
Guarantor and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Guarantor shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (vii);
(viii) the issuance by a Restricted Subsidiary of preferred stock to the
Company or to any of the Guarantors; provided, however, that any subsequent
event or issuance or transfer of any Capital Stock that results in the owner
of such preferred stock ceasing to be a Guarantor of the Company or any
subsequent transfer of such preferred stock to a Person other than the
Company or any of the Guarantors, shall be deemed to be an issuance of
preferred stock by such Restricted Subsidiary that was not permitted by this
clause (viii);
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred (y) for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding or (z) for
the purpose of hedging, fixing or capping interest rate risk in connection
with any completed or pending Securitization;
(x) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was permitted
to be incurred by another provision of this Section 4.09;
(xi) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (xi); and
(xii) the incurrence by the Company of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness incurred pursuant to this
clause (xii), not to exceed $5.0 million.
The Company shall not, and shall not permit any Restricted Subsidiary of
the Company to, incur any Indebtedness that is contractually subordinated to any
Indebtedness of the Company or any such Restricted Subsidiary unless such
Indebtedness is also contractually subordinated to the Notes, or the Subsidiary
Guarantee of such Restricted Subsidiary (as applicable), on substantially
identical terms; provided, however, that no Indebtedness shall be deemed to be
contractually subordinated to any other Indebtedness solely by virtue of being
unsecured.
35
<PAGE>
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness shall be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 85% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
cash; provided that the amount of (x) any liabilities (as shown on the Company's
or such Restricted Subsidiary's most recent balance sheet), of the Company or
any Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any Guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 180 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds (a) to permanently reduce Specified
Senior Indebtedness of the Company and its Restricted Subsidiaries including the
Original Notes; provided, however, that such Net Proceeds shall be applied to
all Specified Senior Indebtedness of the Company and its Restricted Subsidiaries
on a pro rata basis, or (b) to an Investment, the making of a capital
expenditure or the acquisition of Receivables or other tangible assets, in each
case, in or with respect to a Permitted Business. Pending the final application
of any such Net Proceeds, the Company may temporarily reduce Indebtedness under
Credit Facilities and/or Warehouse Facilities or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company shall be required to make an offer to all Holders of Original Notes
(an "Asset Sale Offer") to purchase the maximum principal amount of Original
Notes that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase,
in accordance with the procedures set forth in this Indenture. To the extent
that the aggregate amount of Original Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company will be required to make an
offer to all Holders of Notes ("Secondary Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
the Indenture. To the extent that the aggregate amount of Notes tendered
pursuant to a Secondary Asset Sale Offer is less than the remaining Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Original Notes or Notes
surrendered by Holders thereof exceeds the amount of
36
<PAGE>
Excess Proceeds, the Trustee shall select the Original Notes or Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the Company and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing; provided that (x) any employment agreement entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such Restricted
Subsidiary, (y) transactions between or among the Company and/or its Restricted
Subsidiaries and (z) Restricted Payments that are permitted by Section 4.07
hereof, in each case, shall not be deemed Affiliate Transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired, unless all payments
due under this Indenture and the Notes are secured on an equal and ratable basis
with the obligations so secured until such time as such obligations are no
longer secured by a Lien.
Section 4.13. Line of Business.
The Company shall not, and shall not permit any or its Restricted
Subsidiaries to, engage in any business other than Permitted Businesses, except
to such extent as would not be material to the Company and its Subsidiaries
taken as a whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of
37
<PAGE>
any of its Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries, taken as a whole, and that the loss thereof is
not adverse in any material respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within ten days following any Change of
Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"). The notice, which shall govern
the terms of the Change of Control Offer, shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered will be accepted for
payment;
(2) the amount of the Change of Control Payment and the Change of
Control Payment Date, which date shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed;
(3) that any Notes not tendered will continue to accrue interest in
accordance with the terms of the Indenture;
(4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that Holders electing to have Securities purchased pursuant to the
Change of Control Offer will be required to surrender their Notes,
with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the
Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Notes the Holder
delivered for purchase, and a statement that such Holder is
withdrawing its election to have such Notes purchased;
(7) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple
thereof; and
38
<PAGE>
(8) the circumstances and relevant facts regarding such Change of
Control (including, but not limited to, if available, information
which respect to pro forma historical and projected financial
information after giving effect to such Change of Control,
information regarding the Person or Persons acquiring control and
such Person's or Persons' business plans going forward).
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
Section 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly
Owned Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly-Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly-Owned Restricted Subsidiary
of the Company to any Person (other than the Company or a Wholly-Owned
Restricted Subsidiary of the Company that is a Guarantor), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly-Owned Restricted Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof, and (ii) shall not permit any Wholly-Owned
Restricted Subsidiary of the Company to issue any of its Equity Interests (other
than, if necessary, shares of its Capital Stock constituting directors'
qualifying shares) to any Person other than to the Company or a Wholly-Owned
Restricted Subsidiary of the Company.
Section 4.17. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
39
<PAGE>
Section 4.18. Limitation on Investment Company Status.
The Company and its Subsidiaries shall not take any action, or otherwise
permit to exist any circumstance, that would require the Company to register as
an "investment company" under the Investment Company Act of 1940, as amended.
Section 4.19. Additional Subsidiary Guarantees.
If the Company or any of its Subsidiaries shall acquire or create another
Subsidiary after the date of this Indenture, then such newly acquired or created
Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of
counsel, in accordance with the terms of this Indenture; provided, that the
foregoing shall not apply to Subsidiaries that (i) have properly been designated
as Unrestricted Subsidiaries in accordance with this Indenture for so long as
they continue to constitute Unrestricted Subsidiaries or (ii) qualify as
Securitization Trusts for so long as they continue to constitute Securitization
Trusts.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately before and after such transaction
no Default or Event of Default exists; and (iv) except in the case of a merger
of the Company with or into a Wholly-Owned Restricted Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
end of the applicable fiscal quarter, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated Leverage Ratio test set
forth in the first paragraph of Section 4.09 hereof.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which
40
<PAGE>
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all or
substantially all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following constitutes an "Event of Default:"
(i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes;
(ii) default in payment when due of the principal of or premium, if any,
on the Notes;
(iii) failure by the Company or any of its Subsidiaries to comply with its
obligations in the covenants or other agreements contained in Sections
4.08, 4.09, 4.10 or 4.15 hereof;
(iv) failure by the Company or any of its Subsidiaries for 30 days after
notice from the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding to comply with any of the
other covenants or agreements in this Indenture;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is
created after the date of this Indenture, which default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such
default (a "Payment Default"), or
(b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(vi) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $2.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
41
<PAGE>
(vii) any Subsidiary Guarantee shall be held in an judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full
force and effect or any Guarantor, or any Person acting in behalf of any
Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee; and
(viii) the Company or any of its Subsidiaries pursuant to or within the
meaning of Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; or
(ix) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(a) is for relief against the Company or any of its
Subsidiaries in an involuntary case;
(b) appoints a custodian of the Company or any of its
Subsidiaries or for all or substantially all of the
property of the Company or any of its Subsidiaries; or
(c) orders the liquidation of the Company or any of its
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
this Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising under clauses (viii) and
(ix) of Section 6.01 hereof with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes shall become due and payable
without further action or notice. Holders of the Notes shall not enforce this
Indenture or the Notes except as provided in this Indenture. Subject to the
limitations set forth in this Indenture, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
42
<PAGE>
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of this Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
February 1, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to February 1, 2001, then the
premium specified in below shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
YEAR PERCENTAGE
---- ----------
1997....................................... 116.190%
1998....................................... 113.877%
1999....................................... 111.564%
2000....................................... 109.251%
2001....................................... 106.938%
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any
43
<PAGE>
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any
loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(i) or (ii) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders
44
<PAGE>
of the Notes allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and, the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any, and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
45
<PAGE>
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holders shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
46
<PAGE>
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expenses that might
be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
47
<PAGE>
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA (S) 313(a) (but if no event described in TIA (S)
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA (S)
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA (S) 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
48
<PAGE>
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The
49
<PAGE>
successor Trustee shall mail a notice of its succession to Holders of the Notes.
The retiring Trustee shall promptly transfer all property held by it as Trustee
to the successor Trustee, provided all sums owing to the Trustee hereunder have
been paid and subject to the Lien provided for in Section 7.07 hereof.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Company's obligations under Section 7.07 hereof shall continue for the benefit
of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
50
<PAGE>
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (b) the Company's obligations with respect to such Notes under Article
2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's obligations in connection therewith
and (d) this Article 8. Subject to compliance with this Article 8, the Company
may exercise its option under this Section 8.02 notwithstanding the prior
exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15 and 4.16 hereof with respect to the outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that,
with respect to the outstanding Notes, the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(iv) through 6.01(ix) hereof shall not
constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-
callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and
Liquidated Damages, if any, and interest on the outstanding Notes on the
stated date for payment thereof or on the applicable redemption date, as
the case may be;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee
51
<PAGE>
confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date
of this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Notes pursuant to this
Article 8 concurrently with such incurrence) or insofar as Sections
6.01(viii) or 6.01(ix) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that on the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
52
<PAGE>
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter, as an unsecured
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
53
<PAGE>
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes in the case of a merger or consolidation pursuant to
Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Notes; or
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15
hereof) and the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a tender
offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture affects the
54
<PAGE>
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes except as provided above with respect to Sections 3.09, 4.10 and
4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes and a waiver of
the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note other than a
payment required by Sections 3.09, 4.10 and 4.15; or
(h) make any change in the foregoing amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
55
<PAGE>
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental Indenture until the Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall
be fully protected in relying upon, an Officer's Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01. Subsidiary Guarantees.
Each of the Guarantors hereby, jointly and severally, unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the Obligations of the
Company hereunder or thereunder, that: (a) the principal of and interest and
Liquidated Damages, if any, on the Notes shall be promptly paid in full when
due, whether at maturity, by acceleration, redemption, repurchase or otherwise,
and interest on the overdue principal of and interest and Liquidated Damages, if
any, on the Notes, if lawful, and all other Obligations of the Company to the
Holders or the Trustee hereunder or thereunder shall be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
Obligations, that same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration, redemption, repurchase or otherwise. Failing payment
when due of any amount so guaranteed or any performance so guaranteed for
whatever reason, the Guarantors shall be jointly and severally
56
<PAGE>
obligated to pay the same immediately. The Guarantors hereby agree that their
Obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
Guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenant that this Subsidiary
Guarantee shall not be discharged except by complete performance of the
Obligations contained in the Notes and this Indenture. If any Holder of Notes or
the Trustee is required by any court or otherwise to return to the Company or
Guarantors, or any custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or Guarantors, any amount paid either
to the Trustee or such Holder, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor agrees that it shall not be entitled to any right of subrogation in
relation to the Holders of Notes in respect of any Obligations guaranteed hereby
until payment in full of all Obligations guaranteed hereby. Each Guarantor
further agrees that, as between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Article 6 hereof for the
purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby and (y) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Subsidiary Guarantee. The Guarantors shall have the
right to seek contribution from any non-paying Guarantor so long as the exercise
of such right does not impair the rights of the Holders under the Subsidiary
Guarantees.
Section 10.02. Execution and Delivery of Subsidiary Guarantees.
To evidence its Subsidiary Guarantee set forth in Section 10.01 hereof,
each Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form of Exhibit C (executed by the manual or facsimile
signature of one of its Officers) shall be endorsed by an Officer of such
Guarantor on each Note authenticated and delivered by the Trustee and that this
Indenture shall be executed on behalf of such Guarantor by an Officer of such
Guarantor.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 10.01 hereof shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall
be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Guarantors.
Section 10.03. Guarantors May Consolidate, etc., on Certain Terms.
(a) Except as set forth in Articles 4 and 5 hereof, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or merger
of a Guarantor with or into the Company or another
57
<PAGE>
Guarantor or shall prevent any sale or conveyance of the property of a
Guarantor, as an entirety or substantially as an entirety, to the Company.
(b) Except as provided in Section 10.03(a) hereof or in a transaction
referred to in Section 10.04 hereof, no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, another corporation, Person or entity
unless: (i) subject to the provisions of Section 10.04 hereof, the Person formed
by or surviving any such consolidation or merger (if other than such Guarantor)
shall assume all the Obligations of such Guarantor pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
the Notes and this Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; (iii) such Guarantor, or any
Person formed by or surviving and such consolidation or merger, would have a
Consolidated Net Worth (immediately after giving effect to such transaction)
equal to or greater than the Consolidated Net Worth of such Guarantor
immediately prior to such transaction; and (iv) the Company would be permitted
by virtue of the Company's pro forma Consolidated Leverage Ratio, immediately
after giving effect to such transaction, to incur at least $1.00 of additional
Indebtedness (other than Permitted Debt) pursuant to Section 4.09 hereof.
Subject to Section 10.04 hereof, in case of any such consolidation, merger, sale
or conveyance and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Guarantor, such successor corporation shall
succeed to and be substituted for the Guarantor with the same effect as if it
had been named herein as a Guarantor. Such successor corporation thereupon may
cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon
all of the Notes issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
Section 10.04. Releases Following Sale of Assets.
Concurrently with any sale of assets of any Guarantor (including, if
applicable, all of the Capital Stock of any Guarantor), any Liens in favor of
the Trustee in the assets sold thereby shall be released; provided that in the
event of an Asset Sale, the Net Proceeds from such sale or other disposition are
treated in accordance with the provisions of Section 4.10 hereof. In the event
of a sale or other disposition of all of the assets of any Guarantor, by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the Capital Stock of such Guarantor in accordance with the provisions of this
Indenture) or the corporation acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor), shall be released and
relieved of its Obligations under its Subsidiary Guarantee and Section 10.03
hereof; provided that in the event of an Asset Sale, the Net Proceeds from such
sale or other disposition are treated in accordance with the provisions of
Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including, without limitation, Section 4.10 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
any Guarantor from its Obligations under its Subsidiary Guarantee. Any Guarantor
not released from its Obligations under its Subsidiary Guarantee shall remain
liable for the full
58
<PAGE>
amount of principal of and interest and Liquidated Damages, if any, on the Notes
and for the other Obligations of any Guarantor under this Indenture as provided
in this Article 10. The release of any Guarantor pursuant to this Section 10.04
shall be effective whether or not such release shall be noted on any Note then
outstanding or thereafter authenticated and delivered.
Section 10.05. Limitation on Guarantor Liability.
For purposes hereof, each Guarantor's liability shall be that amount from
time to time equal to the aggregate liability of such Guarantor thereunder, but
shall be limited to the lesser of (i) the aggregate amount of the Obligations of
the Company under the Notes and this Indenture and (ii) the amount, if any,
which would not have (A) rendered such Guarantor "insolvent" (as such term is
defined in the federal Bankruptcy Law and in the debtor and creditor law of the
State of New York) or (B) left it with unreasonably small capital at the time
its Subsidiary Guarantee was entered into, after giving effect to the incurrence
of existing Indebtedness immediately prior to such time; provided that, it shall
be a presumption in any lawsuit or other proceeding in which such Guarantor is a
party that the amount guaranteed pursuant to its Subsidiary Guarantee is the
amount set forth in clause (i) above unless any creditor, or representative of
creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of
such Guarantor, otherwise proves in such a lawsuit that the aggregate liability
of such Guarantor is limited to the amount set forth in clause (ii). In making
any determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
Section 10.06. "Trustee" to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 10 shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named in this Article 10 in place of the Trustee.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
59
<PAGE>
If to the Company or any Guarantor:
AmeriCredit Corp.
200 Bailey Avenue
Fort Worth, TX 76107
Telecopier No.: (817) 882-7101
Attention: Chief Financial Officer
With a copy to:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, TX 75202
Telecopier No.: (214) 855-4300
Attention: L. Steven Leshin
If to the Trustee:
Bank One, N.A.
c/o Banc One Trust Company, NA
100 East Broad Street, 8th Floor
Columbus, OH 43215
Telecopier No.: (614) 248-5195
Attention: John Beacham
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
60
<PAGE>
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
61
<PAGE>
Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 11.10. Successors.
All agreements of the Company and each Guarantor in this Indenture and the
Notes shall bind their respective successors, except as expressly provided
otherwise herein. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[signature page follows]
62
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
AmeriCredit Corp. AmeriCredit Premium Finance, Inc.
By By
----------------------------------- -------------------------------------
Daniel E. Berce Daniel E. Berce
Vice Chairman and Chief Financial President, Chief Financial
Officer Officer and Treasurer
AmeriCredit Financial Services, Inc. Americredit Corporation of California
By By
----------------------------------- -------------------------------------
Daniel E. Berce Daniel E. Berce
Vice Chairman and Chief Financial Vice Chairman and Chief Financial
Officer Officer
AmeriCredit Operating Co., Inc. ACF Investment Corp.
By By
----------------------------------- -------------------------------------
Daniel E. Berce Daniel E. Berce
Vice Chairman and Chief Financial Vice Chairman and Chief Financial
Officer Officer
Bank One, N.A.
By
-----------------------------------
Name:
Title:
63
<PAGE>
EXHIBIT A
(Face of Note)
================================================================================
CUSIP/CINS ____________
9 1/4% [Series C] [Series D] Senior Notes due 2004
No. ___ $__________
AMERICREDIT CORP.
promises to pay to _________________________________________________
or registered assigns,
the principal sum of _______________________________________________
Dollars on February 1, 2004.
Interest Payment Dates: August 1, and February 1
Record Dates: July 15, and January 15
Dated: _______________, 199__
AMERICREDIT CORP.
By:
--------------------------------
Name:
Title:
(SEAL)
By:
--------------------------------
Name:
Title:
(SEAL)
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
Bank One, N.A.
as Trustee
By:
----------------------------
Name:
Title:
================================================================================
A-1
<PAGE>
(Back of Note)
9 1/4% [Series C] [Series D] Senior Notes due 2004
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. AmeriCredit Corp., a Texas corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 9 1/4% per
annum from and including January 29, 1998 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on August 1 and February 1 of each year, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be August 1, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the July 15 or January 15 next
preceding the Interest Payment Date, even if such Notes are cancelled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium and Liquidated Damages, if any, and interest
at the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to
- ---------------------
1. This paragraph should be included only if the Note is issued in global form.
A-2
<PAGE>
principal of and interest, premium and Liquidated Damages on, all Global Notes
and all other Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts
3. Paying Agent and Registrar. Initially, Bank One, N.A., the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as of
January 29, 1998 ("Indenture") between the Company, the Guarantors named therein
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts
with the express provisions of the Indenture, the provisions of the Indenture
shall govern and be controlling. The Notes are general unsecured obligations of
the Company limited to $50 million in aggregate principal amount, plus amounts,
if any, sufficient to pay interest, premium and Liquidated Damages on
outstanding Notes as set forth in Paragraph 2 hereof.
5. Optional Redemption.
(a) Except as set forth in clause (b) of this Paragraph 5, the Company
shall not have the option to redeem the Notes prior to February 1, 2001.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on February 1 of the years
indicated below:
YEAR PERCENTAGE
---- ----------
2001 .................................... 104.625%
2002 .................................... 102.313%
2003 and thereafter ..................... 100.000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at any
time prior to February 1, 2000, the Company may on any one or more occasions
redeem up to an aggregate of $16.67 million in principal amount of Notes at a
redemption price of 109.25% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of a public offering of common stock of the Company;
provided that at least $33.33 million in aggregate principal amount of Notes
remain outstanding immediately after the occurrence of such redemption; and
provided, further, that such redemption shall occur within 45 days of the date
of the closing of such public offering.
Notwithstanding the provisions of clauses (a) and (b) of this Paragraph
5, the Company shall not redeem any portion of the Original Notes unless,
substantially concurrently with such redemption, the Company redeems an
aggregate principal amount of Notes (rounded to the nearest integral multiple of
$1,000) equal to the product of (1) a fraction, the numerator of which is the
aggregate principal amount of Original Notes to be so redeemed and the
denominator of which is the aggregate principal amount of Original Notes
A-3
<PAGE>
outstanding immediately prior to such proposed redemption, and (2) the aggregate
principal amount of Notes outstanding immediately prior to such proposed
redemption. The Company will also not be permitted to redeem any portion of the
Notes unless, substantially concurrently with such redemption, the Company
redeems an aggregate principal amount of Original Notes (rounded to the nearest
integral multiple $1,000) equal to the product of (1) a fraction, the numerator
of which is the aggregate principal amount of Notes outstanding immediately
prior to such proposed redemption, and (2) the aggregate principal amount of
Original Notes outstanding immediately prior to such proposed redemption.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase. Within
10 days following any Change of Control, the Company shall mail a notice to each
Holder as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales and the
aggregate amount of Excess Proceeds exceeds $10 million, the Company shall
commence an offer to all Holders of Original Notes (an "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to purchase the maximum principal
amount of Original Notes that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, to the date
fixed for the closing of such offer, in accordance with the procedures set forth
in the Indenture. To the extent that the aggregate amount of Original Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company will be required to make an offer to all Holders of Notes ("Secondary
Asset Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to a Secondary Asset Sale Offer is less than
the Excess Proceeds, the Company may use such deficiency for general corporate
purposes. If the aggregate principal amount of Original Notes or Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Original Notes or Notes to be purchased on a pro rata
basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
(c) The Company shall not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
8. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000,
A-4
<PAGE>
unless all of the Notes held by a Holder are to be redeemed. On and after the
redemption date interest ceases to accrue on Notes or portions thereof called
for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies. Each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company or any of its Subsidiaries to comply with its obligations under
covenants and agreements set forth in Sections 4.08, 4.09, 4.10 or 4.15 of the
Indenture; (iv) failure by the Company or any of its Subsidiaries for 30 days
after notice from the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding to comply with any of the other
covenants or agreements in the Indenture; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or Guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $2.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary
Guarantee shall be held in an judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect or any Guarantor,
or any Person acting in behalf of any Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries.
If any Event of Default occurs and is
A-5
<PAGE>
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee, incorporator
or stockholder, of the Company, as such, shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
C/D Exchange Registration Rights Agreement dated as of January 29, 1998, between
the Company, the Guarantors and the other parties named on the signature pages
thereof (the "Registration Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
A-6
<PAGE>
AmeriCredit Corp.
200 Bailey Avenue
Fort Worth, TX 76107
Attention: Chief Financial Officer
A-7
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date:
---------------------
Your Signature:
-------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
A-8
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
--------------------- -----------------------------
(Sign exactly as your name appears
on the face of this Note)
Tax Identification No.:
-----------------------------------
Signature Guarantee.
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE/2/
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ----------------- --------------------- --------------------- ------------------------ ---------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------
2. This should be included only if the Note is issued in global form.
A-10
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: 9 1/4% Senior Notes due 2004 of AmeriCredit Corp.
This Certificate relates to $_____ principal amount of Notes held in *
________ book-entry or *_______ definitive form by ________________ (the
"Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depository a Note or Notes in
definitive, registered form of authorized denominations in an aggregate
principal amount equal to its beneficial interest in such Global Note (or the
portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:*
[ ] Such Note is being acquired for the Transferor's own account, without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of
the Indenture).
[ ] Such Note is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(A) or Section 2.06(d)(i) (B) of the Indenture)
or pursuant to an exemption from registration in accordance with Rule 904 under
the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture.)
_______________
*Check applicable box.
B-1
<PAGE>
[ ] Such Note is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
[ ] Such Note is being transferred in reliance on and in compliance with an
exemption from the registration requirements of the Securities Act, other than
Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of Counsel to
the effect that such transfer does not require registration under the Securities
Act accompanies this Certificate (in satisfaction of Section 2.06(a)(ii)(C) or
Section 2.06(d)(i)(C) of the Indenture).
-------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------
Date:
-----------------------------
_______________
*Check applicable box.
B-2
<PAGE>
EXHIBIT C
SUBSIDIARY GUARANTEE
Each Guarantor hereby, jointly and severally, unconditionally guarantees to
each Holder of Notes authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of the Indenture, the Notes or the Obligations of the Company to
the Holders or the Trustee under the Notes or under the Indenture, that: (a) the
principal of, and premium and Liquidated Damages, if any, and interest on the
Notes shall be promptly paid in full when due, whether at maturity, by
acceleration, redemption, repurchase or otherwise, and interest on overdue
principal of interest and Liquidated Damages if any, on any Note, if any, if
lawful and all other Obligations of the Company to the Holders or the Trustee
under the Indenture or under the Notes shall be promptly paid in full or
performed, all in accordance with the terms thereof; and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
Obligations, the same will be promptly paid in full when due in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed, for whatever reason, the Guarantors will be jointly and severally
obligated to pay the same immediately.
The Obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture, and reference is hereby made to such Indenture
for the precise terms of this Subsidiary Guarantee. The terms of Article 10 of
the Indenture are incorporated herein by reference.
No director, officer, employee, incorporator or stockholder, as such, past,
present or future, of each of the Guarantors shall have any personal liability
under this Subsidiary Guarantee by reason of its status as such director,
officer, employee incorporator or stockholder.
This is a continuing Subsidiary Guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its respective successors
and assigns to the extent set forth in the Indenture until full and final
payment of all of the Company's Obligations under the Notes and the Indenture
and shall inure to the benefit of the successors and assigns of the Trustee and
the Holders of Notes and, in the event of any transfer or assignment of rights
by any Holder of Notes or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof.
In certain circumstances more fully described in the Indenture, any Guarantor
may be released from its liability under this Subsidiary Guarantee, and any such
release will be effective whether or not noted hereon.
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
For purposes hereof, each Guarantor's liability will be that amount from time
to time equal to the aggregate liability of such Guarantor hereunder, but shall
be limited to the lesser of (i) the aggregate amount of the Obligations of the
Company under the Notes and the Indenture and (ii) the amount, if any, which
would not have (A) rendered such Guarantor "insolvent" (as such term is defined
in the federal Bankruptcy Law and in the debtor and creditor law of the State of
New York) or (B) left it with unreasonably small capital at the time its
Subsidiary Guarantee of the Notes was entered into, after giving effect to the
incurrence of existing Indebtedness immediately prior to such time; provided
that, it shall be a presumption in any lawsuit or other
C-1
<PAGE>
proceeding in which such Guarantor is a party that the amount guaranteed
pursuant to its Subsidiary Guarantee is the amount set forth in clause (i) above
unless any creditor, or representative of creditors of such Guarantor, or debtor
in possession or trustee in bankruptcy of such Guarantor, otherwise proves in
such a lawsuit that the aggregate liability of such Guarantor is limited to the
amount set forth in clause (ii). The Indenture provides that, in making any
determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given in the Indenture
unless otherwise indicated.
AmeriCredit Premium Finance, Inc.
By________________________________________________
Daniel E. Berce
President, Chief Financial
Officer and Treasurer
AmeriCredit Financial Services, Inc. Americredit Corporation of California
By________________________________ By_________________________________
Daniel E. Berce Daniel E. Berce
Vice Chairman and Chief Financial Vice Chairman and Chief Financial
Officer Officer
AmeriCredit Operating Co., Inc. ACF Investment Corp.
By________________________________ By_________________________________
Daniel E. Berce Daniel E. Berce
Vice Chairman and Chief Financial Vice Chairman and Chief Financial
Officer Officer
C-2
<PAGE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF SUBSIDIARY GUARANTEE
<PAGE>
L&W DRAFT - JANUARY 26,1998
SALOMON SMITH BARNEY - AMERICREDIT
----------------------------------
$50,000,000
AMERICREDIT CORP.
9 1/4% SENIOR NOTES DUE 2004
PURCHASE AGREEMENT
------------------
JANUARY 26, 1998
SALOMON BROTHERS INC
CREDIT SUISSE FIRST BOSTON CORPORATION
C/O SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Dear Sirs:
AmeriCredit Corp., a Texas corporation (the "Company"), proposes, upon
the terms and conditions set forth herein, to issue and sell to you, as the
initial purchasers (the "Initial Purchasers"), $50,000,000 in aggregate
principal amount of its 9 1/4% Series C Senior Notes due 2004 (the "Series C
Notes"). The Company's obligations under the Series C Notes, including the due
and punctual payment of principal and interest on the Series C Notes, will be
unconditionally guaranteed (the "Series C Subsidiary Guarantees") by each of
AmeriCredit Financial Services, Inc., a Delaware corporation, AmeriCredit
Operating Co., Inc., a Delaware corporation, ACF Investment Corp., a Delaware
corporation, AmeriCredit Premium Finance, Inc., a Delaware corporation, and
Americredit Corporation of California, a California corporation (collectively
the "Guarantors"). As used herein, the term "Series C Notes" shall include the
Series C Subsidiary Guarantees thereof by the Guarantors, unless the context
otherwise requires. The Guarantors and AmeriCredit Receivables Finance Corp., a
Delaware corporation, AmeriCredit Receivables Finance Corp. 1995-A, a Delaware
corporation, AFS Funding Corp., a Nevada corporation, and CP Funding Corp., a
Nevada corporation, are collectively referred to herein as the "Subsidiaries."
The Series C Notes will (i) have the terms and provisions which are summarized
in the Offering Memorandum (as defined herein), (ii) be in the forms specified
by the Initial Purchasers pursuant to Section 3 hereof, and (iii) be issued
pursuant to the provisions of an Indenture, to be dated as of January 29, 1998
(the "Indenture"), between the Company, the Guarantors and Bank One, N.A., as
Trustee (the "Trustee").
The Company and the Guarantors wish to confirm as follows their
agreement with you the Initial Purchasers in connection with the purchase and
resale of the Series C Notes.
<PAGE>
1. Preliminary Offering Memorandum and Offering Memorandum. The
Series C Notes will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance on an exemption pursuant to Section 4(2) under the Act. The Company and
the Guarantors have prepared a preliminary offering memorandum, dated January
22, 1998 (the "Preliminary Offering Memorandum"), and an offering memorandum,
dated January 26, 1998 (the "Offering Memorandum"), setting forth information
regarding the Company, the Guarantors, the Series C Notes and the Series D Notes
(as defined herein). Any references herein to the Preliminary Offering
Memorandum and the Offering Memorandum shall be deemed to include all amendments
and supplements thereto. The Company and the Guarantors hereby confirm that they
have authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Series C Notes by
the Initial Purchasers.
The Company and the Guarantors understand that the Initial Purchasers
propose to make offers (the "Exempt Resales") of the Series C Notes purchased by
the Initial Purchasers hereunder only on the terms set forth in the Offering
Memorandum, and Section 2 hereof, as soon as the Initial Purchasers deem
advisable after this Agreement has been executed and delivered, solely to
persons whom the Initial Purchasers reasonably believe to be "qualified
institutional buyers" as defined in Rule 144A under the Act (referred to herein
as "QIBs" or "Eligible Purchasers").
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, the Series C Notes (and all securities issued in
exchange therefor, in substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES
FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY, OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
2
<PAGE>
It is also understood and acknowledged that holders (including
subsequent transferees) of the Series C Notes will have the registration rights
set forth in the registration rights agreement (the "Registration Rights
Agreement"), to be dated the Closing Date, in substantially the form of Exhibit
A hereto, for so long as such Series C Notes constitute "Transfer Restricted
Securities" (as defined in the Registration Rights Agreement). Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission under the circumstances set forth therein,
(i) a registration statement under the Act relating to the Company's 9 1/4%
Series D Notes due 2004 (the "Series D Notes") and the guarantees thereof (the
"Series D Subsidiary Guarantees") by the Guarantors to be offered in exchange
for the Series C Notes (the "Registered Exchange Offer") and (ii) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the Act
relating to the resale by certain holders of the Series C Notes, and to use its
best efforts to cause such registration statements to be declared effective. As
used herein, the term "Series D Notes" shall include the Series D Subsidiary
Guarantees thereof by the Guarantors, unless the context otherwise requires and
the Series C Notes and the Series D Notes, are hereinafter referred to
collectively as the "Notes." This Agreement, the Indenture, the Notes, the
Series C Subsidiary Guarantees, the Series D Subsidiary Guarantees and the
Registration Rights Agreement are hereinafter referred to collectively as the
"Operative Documents."
2. Agreements to Sell, Purchase and Resell. (a) The Company and the
Guarantors hereby agree, on the basis of the representations, warranties and
agreements of the Initial Purchasers contained herein and subject to all the
terms and conditions set forth herein, to issue and sell to the Initial
Purchasers and, upon the basis of the representations, warranties and agreements
of the Company and the Guarantors herein contained and subject to all the terms
and conditions set forth herein, each Initial Purchaser agrees, severally and
not jointly, to purchase from the Company, at a purchase price of 96.124% of the
principal amount thereof, the principal amount of Series C Notes set forth
opposite the name of such Initial Purchaser in Schedule 1 hereto. The Company
and the Guarantors shall not be obligated to deliver any of the securities to be
delivered hereunder except upon payment for all of the securities to be
purchased as provided herein.
(b) Each of the Initial Purchasers hereby represents and warrants to
the Company and the Guarantors that it will offer the Series C Notes for sale
upon the terms and conditions set forth in this Agreement and in the Offering
Memorandum. Each of the Initial Purchasers hereby represents and warrants to,
and agrees with, the Company and the Guarantors that such Initial Purchaser (i)
is either a QIB or an institutional "accredited investor," as defined in Rule
501(a)(1), (2), (3) and (7) under the Act, in either case with such knowledge
and experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series C Notes; (ii) is
purchasing the Series C Notes pursuant to a private sale exempt from
registration under the Act; (iii) in connection with the Exempt Resales, will
solicit offers to buy the Notes only from, and will offer to sell the Notes only
to, the Eligible Purchasers in accordance with this Agreement and on the terms
contemplated by the Offering Memorandum; and (iv) will not offer or sell the
Notes, nor has it offered or sold the Notes by, or otherwise engaged in, any
form of general solicitation or general advertising (within the meaning of
Regulation D; including, but not limited to, advertisements, articles, notices
or other communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) in
connection with the offering of the Series C Notes. The Initial Purchasers have
advised the Company that they will offer the Series C Notes to Eligible
Purchasers at a price initially equal to 98.785% of the principal amount
thereof, plus accrued interest, if any, from the date of issuance of the Series
C Notes. Such price may be changed by the Initial Purchasers at any time
thereafter without notice.
Each of the Initial Purchasers understands that the Company and the
Guarantors and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Sections 7(d) and 7(g) hereof, counsel to the Company and
counsel to the Initial Purchasers, will rely upon the accuracy and truth of the
foregoing representations, warranties and agreements and the Initial Purchasers
hereby consents to such reliance.
3
<PAGE>
3. Delivery of the Series C Notes and Payment Therefor. Delivery to
the Initial Purchasers of and payment for the Series C Notes shall be made at
the office of Jenkens & Gilchrist, P.C., 1445 Ross Avenue, Dallas, TX, at 9:00
A.M., New York City time, on January 29, 1998 (the "Closing Date"). The place of
closing for the Series C Notes and the Closing Date may be varied by agreement
between the Initial Purchasers and the Company.
The Series C Notes will be delivered to the Initial Purchasers against
payment of the purchase price therefor in immediately available funds. The
Series C Notes will be evidenced by a single global security in definitive form
(the "Global Note") and/or by additional definitive securities, and will be
registered, in the case of the Global Note, in the name of Cede & Co. as nominee
of The Depository Trust Company ("DTC"), and in the other cases, in such names
and in such denominations as the Initial Purchasers shall request prior to 9:30
A.M., New York City time, on the second business day preceding the Closing Date.
The Series C Notes to be delivered to the Initial Purchasers shall be made
available to the Initial Purchasers in New York City for inspection and
packaging not later than 9:30 A.M., New York City time, on the business day next
preceding the Closing Date.
4. Agreements of the Company and the Guarantors. The Company and the
Guarantors jointly and severally agree with each Initial Purchaser as follows:
(a) The Company and the Guarantors will furnish to the Initial
Purchasers, without charge, as of the date of the Offering Memorandum, such
number of copies of the Offering Memorandum as may then be amended or
supplemented as they may reasonably request.
(b) The Company and the Guarantors will not make any amendment or
supplement to the Preliminary Offering Memorandum or to the Offering Memorandum
of which the Initial Purchasers shall not previously have been advised or to
which they shall reasonably object after being so advised.
(c) Prior to the execution and delivery of this Agreement, the
Company and the Guarantors shall have delivered or will deliver to the Initial
Purchasers, without charge, in such quantities as the Initial Purchasers shall
have requested or may hereafter reasonably request, copies of the Preliminary
Offering Memorandum. The Company and each of the Guarantors consent to the use,
in accordance with the securities or Blue Sky laws of the jurisdictions in which
the Series C Notes are offered by the Initial Purchasers and by dealers, prior
to the date of the Offering Memorandum, of each Preliminary Offering Memorandum
so furnished by the Company and the Guarantors. The Company and each of the
Guarantors consent to the use of the Offering Memorandum in accordance with the
securities or Blue Sky laws of the jurisdictions in which the Series C Notes are
offered by the Initial Purchasers and by all dealers to whom Series C Notes may
be sold, in connection with the offering and sale of the Series C Notes.
(d) If, at any time prior to completion of the distribution of the
Series C Notes by the Initial Purchasers to Eligible Purchasers, any event shall
occur that in the judgment of the Company, any of the Guarantors or in the
opinion of counsel for the Initial Purchasers should be set forth in the
Offering Memorandum in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Offering Memorandum in order to comply with any law,
the Company and the Guarantors will forthwith prepare an appropriate supplement
or amendment thereto or such document, and will expeditiously furnish to the
Initial Purchasers and dealers a reasonable number of copies thereof.
(e) The Company and each of the Guarantors will cooperate with the
Initial Purchasers and with their counsel in connection with the qualification
of the Series C Notes for offering and sale by the Initial Purchasers and by
dealers under the securities or Blue Sky laws of such jurisdictions as the
Initial
4
<PAGE>
Purchasers may designate and will file such consents to service of process or
other documents necessary or appropriate in order to effect such qualification;
provided, that in no event shall the Company or any of the Guarantors be
obligated to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to service of process in
suits, other than those arising out of the offering or sale of the Series C
Notes, in any jurisdiction where it is not now so subject.
(f) So long as any of the Notes are outstanding, the Company and the
Guarantors will furnish to the Initial Purchasers (i) as soon as available, a
copy of each report of the Company mailed to stockholders generally or filed
with any stock exchange or regulatory body and (ii) from time to time such other
information concerning the Company and/or the Guarantors as the Initial
Purchasers may reasonably request.
(g) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Initial Purchasers terminating this Agreement pursuant to
Section 10 hereof) or if this Agreement shall be terminated by the Initial
Purchasers because of any failure or refusal on the part of the Company or any
of the Guarantors to comply with the terms or fulfill any of the conditions of
this Agreement, the Company and the Guarantors agree to reimburse the Initial
Purchasers for all out-of-pocket expenses (including reasonable fees and
expenses of its counsel) reasonably incurred by it in connection herewith, but
without any further obligation on the part of the Company or any of the
Guarantors for loss of profits or otherwise.
(h) The Company and the Guarantors will apply the net proceeds from
the sale of the Series C Notes to be sold by it hereunder substantially in
accordance with the description set forth in the Offering Memorandum under the
caption "Use of Proceeds."
(i) Except as stated in this Agreement and in the Preliminary
Offering Memorandum and Offering Memorandum, the Company and the Guarantors have
not taken, nor will any of them take, directly or indirectly, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Notes to facilitate the sale
or resale of the Notes. Except as permitted by the Act, the Company and the
Guarantors will not distribute any offering material in connection with the
Exempt Resales.
(j) The Company and the Guarantors will use their best efforts to
permit the Notes to be designated Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
relating to trading in the PORTAL Market and to permit the Notes to be eligible
for clearance and settlement through DTC.
(k) From and after the Closing Date, so long as any of the Notes are
outstanding and are "restricted securities" within the meaning of the Rule
144(a)(3) under the Act or, if earlier, until three years after the Closing
Date, and during any period in which the Company is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
the Company and the Guarantors will furnish to holders of the Notes and
prospective purchasers of Notes designated by such holders, upon request of such
holders or such prospective purchasers, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Act to permit compliance with Rule 144A
in connection with resale of the Notes.
(l) The Company and the Guarantors have complied and will comply
with all provisions of Florida Statutes Section 517.075 relating to issuers
doing business with Cuba.
(m) The Company and the Guarantors agree not to sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Act) that would be integrated with the
5
<PAGE>
sale of the Series C Notes in a manner that would require the registration
under the Act of the sale to the Initial Purchasers or the Eligible Purchasers
of the Series C Notes.
(n) The Company and the Guarantors agree to comply with all the terms
and conditions of the Registration Rights Agreement and all agreements set forth
in the representation letters of the Company and the Guarantors to DTC relating
to the approval of the Notes by DTC for "book entry" transfer.
(o) The Company and the Guarantors agree to cause the Exchange
Offer, if available, to be made in the appropriate form, as contemplated by the
Registration Rights Agreement, to permit registration of the Series D Notes to
be offered in exchange for the Series C Notes, and to comply with all applicable
federal and state securities laws in connection with the Registered Exchange
Offer.
(p) The Company and the Guarantors agree that prior to any
registration of the Notes pursuant to the Registration Rights Agreement, or at
such earlier time as may be required, the Indenture shall be qualified under the
Trust Indenture Act of 1939 (the "1939 Act") and any necessary supplemental
indentures will be entered into in connection therewith.
(q) The Company and the Guarantors will not voluntarily claim, and
will resist actively all attempts to claim, the benefit of any usury laws
against holders of the Notes.
(r) The Company and the Guarantors will do and perform all things
required or necessary to be done and performed under this Agreement by them
prior to the Closing Date, and to satisfy all conditions precedent to the
Initial Purchasers' obligations hereunder to purchase the Series C Notes.
5. Representations and Warranties of the Company and each of the
Guarantors. The Company and each of the Guarantors, represent and warrant to
each of the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and Offering Memorandum
with respect to the Series C Notes have been prepared by the Company and the
Guarantors for use by the Initial Purchasers in connection with the Exempt
Resales. No order or decree preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any order asserting that the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act has been issued and no proceeding for that purpose has
commenced or is pending or, to the knowledge of the Company or any of the
Guarantors, is contemplated.
(b) The Preliminary Offering Memorandum and the Offering Memorandum
as of their respective dates and the Offering Memorandum as of the Closing Date,
did not or will not at any time contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, except that this representation and
warranty does not apply to statements in or omissions from the Preliminary
Offering Memorandum and Offering Memorandum made in reliance upon and in
conformity with information relating to the Initial Purchasers furnished to the
Company in writing by or on behalf of the Initial Purchasers expressly for use
therein.
(c) The market-related and customer-related data and estimates
included under the captions "Offering Memorandum Summary-The Company" and
"Business-Market and Competition" in the Preliminary Offering Memorandum and the
Offering Memorandum are based on or derived from sources which the Company
believes to be reliable and accurate.
(d) The Indenture has been duly and validly authorized by the Company
and the
6
<PAGE>
Guarantors, and upon its execution and delivery and, assuming due authorization,
execution and delivery by the Trustee, will constitute the valid and binding
agreement of the Company and the Guarantors, enforceable against the Company and
the Guarantors in accordance with its terms, subject to the qualification that
the enforceability of the Company's and the Guarantors' obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles; no qualification of the Indenture under the
1939 Act is required in connection with the offer and sale of the Series C Notes
contemplated hereby or in connection with the Exempt Resales.
(e) The Series C Notes have been duly and validly authorized by the
Company and when duly executed by the Company in accordance with the terms of
the Indenture and, assuming due authentication of the Series C Notes by the
Trustee, upon delivery to the Initial Purchasers against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Company entitled to the
benefits of the Indenture, enforceable against the Company in accordance with
their terms, subject to the qualification that the enforceability of the
Company's obligations thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally and by general equitable principles.
(f) The Series D Notes have been duly and validly authorized by the
Company and if and when duly issued and authenticated in accordance with the
terms of the Indenture and delivered in accordance with the Exchange Offer
provided for in the Registration Rights Agreement, will constitute valid and
binding obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, subject to the
qualification that the enforceability of the Company's obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles.
(g) The Series C Subsidiary Guarantees have been duly and validly
authorized by the Guarantors and when duly executed and delivered by the
Guarantors in accordance with the terms of the Indenture and upon the due
execution, authentication and delivery of the Series C Notes in accordance with
the Indenture and the issuance of the Series C Notes in the sale to the Initial
Purchasers contemplated by this Agreement, will constitute valid and binding
obligations of the Guarantors, enforceable against the Guarantors in accordance
with their terms, subject to the qualification that the enforceability of the
Guarantors' obligations thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally and by general equitable principles.
(h) The Series D Subsidiary Guarantees have been duly and validly
authorized by the Guarantors and if and when duly executed and delivered by the
Guarantors in accordance with the terms of the Indenture and upon the due
execution and authentication of the Series D Notes in accordance with the
Indenture and the issuance and delivery of the Series D Notes in the Exchange
Offer contemplated by the Registration Rights Agreement, will constitute valid
and binding obligations of the Guarantors, enforceable against the Guarantors in
accordance with their terms, subject to the qualification that the
enforceability of the Guarantors' obligations thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles.
(i) The Company, AmeriCredit Financial Services, Inc., AmeriCredit
Operating Co., Inc., AmeriCredit Premium Finance, Inc. and ACF Investment Corp.
(collectively the "Borrowers"), have entered into an agreement (the "Credit
Agreement Amendment"), dated as of January 21, 1998, with Wells Fargo Bank
(Texas), National Association and certain other banks named therein. The Credit
Agreement Amendment became effective on January 21, 1998 and amended Section
9.11 of the credit agreement (the "Credit
7
<PAGE>
Agreement"), dated as of October 3, 1997, by and among the Borrowers and Wells
Fargo Bank (Texas), National Association and certain other banks named therein,
to clarify that the Credit Agreement does not prohibit or conflict with any
grant of negative pledge in the Indenture or any of the other Operative
Documents. Americredit Corporation of California received a letter (the
"Mortgage Subsidiary Credit Agreement Waiver"), dated as of January 21, 1998,
from Texas Commerce Bank National Association. The Mortgage Subsidiary Credit
Agreement Waiver became effective on January 21, 1998 and waived compliance with
Section 8.11(i) of the credit agreement (the "Mortgage Facility Credit
Agreement"), dated as of February 5, 1997, by and among the Americredit
Corporation of California and Chase Bank of Texas National Association to
clarify that the Mortgage Subsidiary Credit Agreement does not prohibit or
conflict with Americredit Corporation of California's guarantee of the Series C
Notes or the Series D Notes.
(j) (A) The Credit Agreement constitutes the valid and binding
obligation of the Borrowers, enforceable against the Borrowers in accordance
with its terms, subject to the qualification that the enforceability of the
Borrowers' obligations thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally and by general equitable principles;
(B) the Borrowers will have at least $50.0 million of borrowings available to
them under the Credit Agreement (giving effect to the borrowing base
requirements of the Credit Agreement) after the Closing of the sale of the
Series C Notes hereunder, the receipt by the Company of the proceeds therefore
and the application of such proceeds as described under the caption "Use of
Proceeds" in the Offering Memorandum; (C) all representations and warranties
made by the Borrowers in Article VII of the Credit Agreement are true and
correct in all material respects as of the date hereof, (D) the Mortgage
Facility Credit Agreement constitutes the valid and binding obligation of the
Americredit Corporation of California, enforceable against the Americredit
Corporation of California in accordance with its terms, subject to the
qualification that the enforceability of Americredit Corporation of California's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles; and (E) all
representations and warranties made by Americredit Corporation of California in
Section 6 of the Mortgage Subsidiary Credit Agreement are true and correct in
all material respects as of the date hereof.
(k) The Company and the Guarantors have obtained, in writing, all
consents and waivers required under the terms of the Credit Agreement, the
Mortgage Subsidiary Credit Agreement and existing Credit Enhancement Agreements
(as defined in the Indenture) necessary to ensure that the execution and
delivery of, and the performance of all of the transactions contemplated by, the
Operative Documents will not conflict with or constitute a breach of, or a
default under, the Credit Agreement, the Mortgage Subsidiary Credit Agreement or
any Credit Enhancement Agreement.
(l) All the shares of capital stock of the Company outstanding
prior to the issuance of the Series C Notes have been duly authorized and
validly issued and are fully paid and nonassessable; the authorized capital
stock of the Company conforms to the description thereof under the caption
"Capitalization" in the Offering Memorandum.
(m) The Company is a corporation duly incorporated and validly
existing and in good standing under the laws of Texas with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum, and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify or to be in good standing does not have a material adverse
effect on the condition (financial or other), business, prospects, properties,
net worth or results of operations of the Company and the Subsidiaries taken as
a whole (a "Material Adverse Effect").
8
<PAGE>
(n) Neither the Company nor any of the Subsidiaries owns capital
stock of any corporation or entity (excluding interests in Company-sponsored
securitizations) other than the Subsidiaries and a 10% interest in PNL Asset
Management Company. Each of the Subsidiaries is a corporation duly incorporated
and validly existing and in good standing under the laws of the jurisdiction of
its incorporation, with all requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Offering Memorandum, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction or place where the nature
of its properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or be in good
standing does not have a Material Adverse Effect. All the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are wholly owned by the Company
directly, or indirectly through one of the other Subsidiaries, free and clear of
any lien, adverse claim, security interest, equity or other encumbrance, except
as specifically described in the Offering Memorandum under the Caption
"Description Of Other Debt."
(o) There are no legal or governmental proceedings pending or, to
the knowledge of the Company or any of the Guarantors, threatened, against the
Company or any of the Subsidiaries or to which the Company or any of the
Subsidiaries or to which any of their respective properties, is subject, that
are not disclosed in the Offering Memorandum and which, if adversely decided,
are reasonably likely to cause a Material Adverse Effect or to materially affect
the issuance of the Notes or the consummation of the other transactions
contemplated by the Operative Documents. The Offering Memorandum contains
accurate summaries of all material agreements, contracts, indentures, leases or
other instruments required to be described or summarized therein. Neither the
Company nor any of the Subsidiaries is involved in any strike, job action or
labor dispute with any group of employees, and, to the Company's knowledge, no
such action or dispute is threatened.
(p) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation or by-laws or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries except where any such
violation or violations in the aggregate would not have a Material Adverse
Effect or (ii) in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other instrument
to which the Company or any of the Subsidiaries is a party or by which any of
them or any of their respective properties may be bound, except as may be
disclosed in the Offering Memorandum.
(q) None of the issuance, offer or sale of the Series C Notes, the
execution, delivery or performance by the Company and the Guarantors of this
Agreement or the other Operative Documents, compliance by the Company and the
Guarantors with the provisions hereof or thereof nor consummation by the Company
and the Guarantors of the transactions contemplated hereby or thereby (i)
requires any consent, approval, authorization or other order of, or registration
or filing with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required in
connection with the registration under the Act of the Series D Notes in
accordance with the Registration Rights Agreement, qualification of the
Indenture under the 1939 Act and compliance with the securities or Blue Sky laws
of various jurisdictions), or conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, the certificate or articles of
incorporation or bylaws, or other organizational documents, of the Company or
any of the Subsidiaries or (ii) conflicts or will conflict with or constitutes
or will constitute a breach of, or a default under any material agreement,
indenture, lease or other instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, or violates or will violate any statute, law,
regulation or filing or judgment, injunction, order or decree applicable to the
Company or any of the Subsidiaries or any of their respective properties, or
will result
9
<PAGE>
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries pursuant to the
terms of any agreement or instrument to which any of them is a party or by which
any of them may be bound or to which any of the property or assets of any of
them is subject.
(r) The accountants, Coopers & Lybrand L.L.P., who have certified the
financial statements included as part of the Offering Memorandum, are
independent public accountants under Rule 101 of the AICPA's Code of
Professional Conduct, and its interpretation and rulings.
(s) The financial statements, together with related notes forming
part of the Offering Memorandum,present fairly in all material respects the
consolidated financial position, results of operations, shareholders' equity and
cash flows of the Company and the Subsidiaries on the basis stated in the
Offering Memorandum at the respective dates or for the respective periods to
which they apply; such statements and related notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein, and meet the
requirements of Regulation S-X under the Act for registration statements on Form
S-1; and the other financial and statistical information and data set forth in
the Offering Memorandum is accurately presented and, to the extent such
information and data is derived from the financial books and records of the
Company, is prepared on a basis consistent with such financial statements and
the books and records of the Company.
(t) The Company and the Guarantors have all requisite power and
authority to execute, deliver and perform their obligations under this Agreement
and the Registration Rights Agreement; the execution and delivery of, and the
performance by the Company and the Guarantors of their obligations under this
Agreement and the Registration Rights Agreement have been duly and validly
authorized by the Company and the Guarantors; this Agreement has been duly
executed and delivered by the Company and the Guarantors and constitutes the
valid and binding agreements of the Company and the Guarantors, enforceable
against the Company and the Guarantors in accordance with their terms, except as
the enforcement hereof and thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and except as
rights to indemnity and contribution hereunder and thereunder may be limited by
Federal or state securities laws or principles of public policy; and the
Registration Rights Agreement, when duly executed and delivered by the Company
and the Guarantors, will constitute the valid and binding agreements of the
Company and the Guarantors, enforceable against the Company and the Guarantors
in accordance with their terms, except as the enforcement hereof and thereof may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to the applicability of
general principles of equity, and except as rights to indemnity and contribution
hereunder and thereunder may be limited by Federal or state securities laws or
principles of public policy.
(u) Except as disclosed in, or specifically contemplated by, the
Offering Memorandum, subsequent to the date as of which such information is
given in the Offering Memorandum, neither the Company nor any of the
Subsidiaries has incurred any liability or obligation (including, without
limitation, any liability or obligation in connection with the securitization of
Receivables or Credit Enhancement Agreements (as such terms are defined in the
Indenture)), direct or contingent, or entered into any transaction, in each case
not in the ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any material change in the
capital stock, or material increase in the short-term or long-term debt, of the
Company or any of the Subsidiaries or any material adverse change, or any
development involving or which would reasonably be expected to involve a
prospective material adverse change, in the condition (financial or other),
business, properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(v) Each of the Company and the Subsidiaries has good and
indefeasible title to all
10
<PAGE>
property (real and personal) described in the Offering Memorandum as being
owned by it, free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Offering Memorandum and all the
material property described in the Offering Memorandum as being held under lease
by each of the Company and the Subsidiaries is held by it under valid,
subsisting and enforceable leases, with only such exceptions as in the aggregate
are not materially burdensome and do not interfere with the conduct of the
business of the Company and the Subsidiaries taken as a whole.
(w) Except as permitted by the Act, the Company and the Guarantors
have not distributed and, prior to the later to occur of the Closing Date and
completion of the distribution of the Series C Notes, will not distribute any
offering material in connection with the offering and sale of the Series C Notes
other than the Preliminary Offering Memorandum and Offering Memorandum.
(x) Each of the Company and the Subsidiaries has such permits,
licenses, franchises, certificates of need and other approvals or authorizations
of governmental or regulatory authorities ("Permits") as are necessary under
applicable law to own their respective properties and to conduct their
respective businesses in the manner described in the Offering Memorandum, except
to the extent that the failure to have such Permits would not have a Material
Adverse Effect; the Company and each of the Subsidiaries have fulfilled and
performed in all material respects, all their respective material obligations
with respect to the Permits, and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any such
Permit, subject in each case to such qualification as may be set forth in the
Offering Memorandum and except to the extent that any such revocation or
termination would not have a Material Adverse Effect; and, except as described
in the Offering Memorandum, none of the Permits contains any restriction that is
materially burdensome to the Company or any of the Subsidiaries.
(y) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(z) Neither the Company nor any of the Subsidiaries nor, to the
Company's knowledge, any employee or agent of the Company or any of the
Subsidiaries has made any payment of funds of the Company or any of the
Subsidiaries or received or retained any funds in violation of any law, rule or
regulation, which violation would have a Material Adverse Effect.
(aa) Except as disclosed in the Offering Memorandum, the Company and
each of the Subsidiaries have filed all tax returns required to be filed, which
returns are true and correct in all material respects, and neither the Company
nor any of the Subsidiaries is in default in the payment of any taxes which were
payable pursuant to said returns or any assessments with respect thereto, except
where the failure to file such returns and make such payments would not have a
Material Adverse Effect.
11
<PAGE>
(bb) No holder of any security of the Company or any of the
Subsidiaries has any right to request or demand registration of shares of common
stock or any other security of the Company because of the consummation of the
transactions contemplated by this Agreement or the Registration Rights
Agreement. Except as described in or contemplated by the Offering Memorandum,
there are no outstanding options, warrants or other rights calling for the
issuance of, and there are no commitments, plans or arrangements to issue, any
shares of capital stock of any of the Subsidiaries or any security convertible
into or exchangeable or exercisable for capital stock of any of the
Subsidiaries.
(cc) The Company and each of the Subsidiaries own or possess all
patents, trademarks, trademark registration, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Offering Memorandum as being owned by any of them or
necessary for the conduct of their respective businesses, and the Company is not
aware of any claim to the contrary or any challenge by any other person to the
rights of the Company and the Subsidiaries with respect to the foregoing.
(dd) The Company and the Guarantors are not and, upon sale of the
Series C Notes to be issued and sold thereby in accordance herewith and the
application of the net proceeds to the Company of such sale as described in the
Offering Memorandum under the caption "Use of Proceeds," will not be an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(ee) When the Series C Notes are issued and delivered pursuant to
this Agreement, such Series C Notes will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the Company that
is listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated interdealer
quotation system.
(ff) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D ("Regulation D") under the Act) of the Company has
directly, or through any agent (provided that no representation is made as to
the Initial Purchasers or any person acting on its behalf), (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Act) which is or will be integrated with the
offering and sale of the Notes in a manner that would require the registration
of the Series C Notes under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D;
including, but not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) in
connection with the offering of the Series C Notes.
(gg) The Company and the Guarantors are not required to deliver the
information specified in Rule 144A(d)(4) in connection with the offering and
resale of the Series C Notes by the Initial Purchasers.
(hh) Assuming (i) that the representations and warranties in Section
2 hereof are true, (ii) the Initial Purchasers comply with the covenants set
forth in Section 2 hereof and (iii) that each person to whom the Initial
Purchasers offer, sell or deliver the Series C Notes is a QIB, the purchase and
sale of the Series C Notes pursuant hereto (including the Initial Purchasers'
proposed offering of the Series C Notes on the terms and in the manner set forth
in the Offering Memorandum and Section 2 hereof) is exempt from the registration
requirements of the Act.
(ii) The execution and delivery of this Agreement and the other
Operative Documents and the sale of the Series C Notes to the Initial Purchasers
or by the Initial Purchasers to Eligible Purchasers will not involve any
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of
12
<PAGE>
the Code. The representation made by the Company and the Guarantors in the
preceding sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made by the
Eligible Purchasers as set forth in the Offering Memorandum under the section
entitled "Notice to Investors."
(jj) The Company and the Subsidiaries have regular and ongoing
regulatory compliance programs and procedures that are adequate to ensure that
all requirements of applicable federal, state and local laws, and regulations
thereunder (including, without limitation, usury laws, the Federal Truth-in-
Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the
Federal Trade Commission Act) with respect to Receivables owned and/or serviced
by the Company or its Subsidiaries have been complied with in all material
respects and to the Company's knowledge, all such Receivables now comply with
all such applicable legal requirements.
6. Indemnification and Contribution. (a) The Company and each
Guarantor jointly and severally agree to indemnify and hold harmless each
Initial Purchaser and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or Offering Memorandum, or arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information relating to
the Initial Purchasers furnished in writing to the Company by or on behalf of
the Initial Purchasers expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with respect
to the Preliminary Offering Memorandum shall not inure to the benefit of any
Initial Purchaser (or to the benefit of any person controlling such Initial
Purchaser) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Series C Notes by such Initial Purchaser to any
person if the untrue statement or alleged untrue statement or omission or
alleged omission of a material fact contained in the Preliminary Offering
Memorandum was corrected in the Offering Memorandum and the Initial Purchaser
sold Series C Notes to that person without sending or giving at or prior to the
written confirmation of such sale, a copy of the Offering Memorandum (as then
amended or supplemented) if the Company has previously furnished sufficient
copies thereof to the Initial Purchaser on a timely basis to permit such sending
or giving. The foregoing indemnity agreement shall be in addition to any
liability which the Company and the Guarantors may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Initial Purchasers or any person controlling the Initial Purchasers in respect
of which indemnity may be sought against the Company and the Guarantors, the
Initial Purchasers or such controlling person shall promptly notify the parties
against whom indemnification is being sought (the "indemnifying parties"), and
such indemnifying parties shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. The Initial
Purchasers or any such controlling person shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Initial Purchasers or such controlling person unless (i) the
indemnifying parties have agreed in writing to pay such fees and expenses, (ii)
the indemnifying parties have failed to assume the defense and employ counsel,
or (iii) the named parties to any such action, suit or proceeding (including any
impleaded parties) include both the Initial Purchasers or such controlling
person and the indemnifying parties and the Initial Purchasers or such
controlling person shall have been advised in writing by its counsel that
representation of such indemnified party and any indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the
13
<PAGE>
same counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding on behalf of the Initial
Purchasers or such controlling person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the Initial Purchasers and controlling persons not having actual or potential
differing interests with the Initial Purchasers or among themselves, which firm
shall be designated in writing by Salomon Brothers Inc, and that all such fees
and expenses shall be reimbursed as they are incurred. The indemnifying parties
shall not be liable for any settlement of any such action, suit or proceeding
effected without their written consent, but if settled with such written
consent, or if there be a final judgment for the plaintiff in any such action,
suit or proceeding, the indemnifying parties agree to indemnify and hold
harmless the Initial Purchasers, to the extent provided in paragraph (a), and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
(c) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company and the Guarantors, and their directors
and officers, and any person who controls the Company or any Guarantor within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the
same extent as the indemnity from the Company and the Guarantors to the Initial
Purchasers set forth in paragraph (a) hereof, but only with respect to
information relating to the Initial Purchasers furnished in writing by or on
behalf of the Initial Purchasers expressly for use in the Preliminary Offering
Memorandum or Offering Memorandum. If any action, suit or proceeding shall be
brought against the Company or the Guarantors, any of their directors or
officers, or any such controlling person based on the Preliminary Offering
Memorandum or Offering Memorandum, and in respect of which indemnity may be
sought against the Initial Purchasers pursuant to this paragraph (c), the
Initial Purchasers shall have the rights and duties given to the Company and the
Guarantors by paragraph (b) above (except that if the Company and the Guarantors
shall have assumed the defense thereof the Initial Purchasers shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
Initial Purchasers' expense), and the Company and the Guarantors, their
directors and officers, and any such controlling person shall have the rights
and duties given to the Initial Purchasers by paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability which the Initial
Purchasers may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable (except if inapplicable according to its terms) to an indemnified
party under paragraphs (a) or (c) hereof in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then an indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors on the one hand and the Initial Purchasers on the other hand from the
offering of the Series C Notes, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Guarantors on the one hand and
the Initial Purchasers on the other in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Guarantors on the one hand and the
Initial Purchasers on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company bear to the total underwriting discounts received by the Initial
Purchasers, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Guarantors on the
one hand and the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material
14
<PAGE>
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Guarantors on the one hand or by the
Initial Purchasers on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company, the Guarantors and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 6
were determined by a pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (d) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such action,
suit or proceeding. Notwithstanding the provisions of this Section 6, the
Initial Purchasers shall not be required to contribute any amount in excess of
the amount by which the total price of the Series C Notes underwritten by it and
distributed to the public exceeds the amount of any damages which the Initial
Purchasers have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred but only to
the extent that such losses, claims, damages, liabilities or expenses are
required to be paid by an indemnified party. The indemnity and contribution
agreements contained in this Section 6 and the representations and warranties of
the Company and the Guarantors set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of the Initial Purchasers or any person controlling the Initial
Purchasers, the Company and the Guarantors, their directors or officers or any
person controlling the Company or the Guarantors, (ii) acceptance of any Series
C Notes and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to the Initial Purchasers or any person controlling the
Initial Purchasers, or to the Company and the Guarantors, their directors or
officers or any person controlling the Company or the Guarantors, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
7. Conditions of the Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers to purchase the Series C Notes hereunder
are subject to the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum, or any
order asserting that the transactions contemplated by this Agreement are subject
to the registration requirements of the Act shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending or,
to the knowledge of the Company or any of the Guarantors, be contemplated. No
stop order suspending the sale of the Series C Notes in any jurisdiction
designated by the Initial Purchasers shall have been issued and no proceedings
for that purpose shall have been commenced or shall be pending or, to the
knowledge of the Company or any of the Guarantors, shall be contemplated.
15
<PAGE>
(b) Subsequent to the date as of which information is given in the
Offering Memorandum, except as otherwise stated in the Offering Memorandum,
there shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Offering Memorandum, which in the opinion
of the Initial Purchasers, would materially adversely affect the market for the
Series C Notes, or (ii) any event or development relating to or involving the
Company, any of its Subsidiaries or any officer or director of the Company or
any of its Subsidiaries which makes any statement made in the Offering
Memorandum untrue or which, in the opinion of the Company, the Guarantors and
their counsel or the Initial Purchasers and their counsel, requires the making
of any addition to or change in the Offering Memorandum in order to state a
material fact required by any law to be stated therein or necessary in order to
make the statements therein not misleading, if amending or supplementing the
Offering Memorandum to reflect such event or development would, in the opinion
of the Initial Purchasers, materially adversely affect the market for the Series
C Notes.
(c) The Final Offering Memorandum shall have been printed and copies
thereof distributed to the Initial Purchasers in such quantities as shall have
been previously specified by them not later than 9:00 a.m., New York City time,
on January 27, 1998, or at such later date and time as the Initial Purchasers
may approve in writing.
(d) The Initial Purchasers shall have received on the Closing Date an
opinion of Jenkens & Gilchrist, P.C., counsel for the Company, dated the Closing
Date and addressed to the Initial Purchasers, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of Texas with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Offering Memorandum;
(ii) Each of the Subsidiaries is a corporation duly
incorporated and validly existing and in good standing under the laws of its
jurisdiction of incorporation, with all requisite power and authority to own,
lease, and operate its properties and to conduct its business as described in
the Offering Memorandum; and all the outstanding shares of capital stock of each
of the Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable, and to the knowledge of such counsel, are wholly owned by the
Company directly, or indirectly through one of the other Subsidiaries, free and
clear of any security interest, lien, adverse claim, equity or other
encumbrance, except as specifically described in the Offering Memorandum under
the caption "Description Of Other Debt;"
(iii) The authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Offering Memorandum;
(iv) The Company and each of the Guarantors have the corporate
power and authority to enter into this Agreement and the Registration Rights
Agreement and to issue, sell and deliver the Series C Notes to be sold to the
Initial Purchasers as provided herein, and this Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
by the Company and the Guarantors and constitute the valid and binding
agreements of the Company and the Guarantors, enforceable against the Company
and the Guarantors in accordance with their terms, except (A) as enforcement of
rights to indemnity and contribution hereunder and thereunder may be limited by
Federal or state securities laws or principles of public policy and (B) subject
to the qualification that the enforceability of the Company's and the
Guarantors' obligations hereunder and thereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights generally and by general equitable
principles;
16
<PAGE>
(v) The Indenture has been duly and validly authorized,
executed and delivered by the Company and the Guarantors and, assuming due
authorization, execution and delivery by the Trustee, constitutes the valid and
binding agreement of the Company and the Guarantors, enforceable against the
Company and the Guarantors in accordance with its terms, subject to the
qualification that the enforceability of the Company's and the Guarantors'
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles; no
qualification of the Indenture under the 1939 Act is required in connection with
the offer and sale of the Series C Notes contemplated hereby or in connection
with the Exempt Resales;
(vi) The Series C Notes have been duly and validly authorized
by the Company and when duly executed by the Company in accordance with the
terms of the Indenture and, assuming due authentication of the Series C Notes by
the Trustee, upon delivery to the Initial Purchasers against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and binding obligations of the Company entitled to the
benefits of the Indenture, enforceable against the Company in accordance with
their terms, subject to the qualification that the enforceability of the
Company's obligations thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally and by general equitable principles;
(vii) The Series D Notes have been duly and validly authorized
by the Company and if and when duly issued and authenticated in accordance with
the terms of the Indenture and delivered in accordance with the Exchange Offer
provided for in the Registration Rights Agreement, will constitute valid and
binding obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, subject to the
qualification that the enforceability of the Company's obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles;
(viii) The Series C Subsidiary Guarantees have been duly and
validly authorized by the Guarantors and when duly executed and delivered by the
Guarantors in accordance with the terms of the Indenture and upon the due
execution, authentication and delivery of the Series C Notes in accordance with
the Indenture and the issuance of the Series C Notes in the sale to the Initial
Purchasers contemplated by this Agreement, will constitute valid and binding
obligations of the Guarantors, enforceable against the Guarantors in accordance
with their terms, subject to the qualification that the enforceability of the
Guarantors' obligations thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally and by general equitable principles;
(ix) The Series D Subsidiary Guarantees have been duly and
validly authorized by the Guarantors and if and when duly executed and delivered
by the Guarantors in accordance with the terms of the Indenture and upon the due
execution, authentication and delivery of the Series D Notes in accordance with
the Indenture and the issuance and delivery of the Series D Notes in the
Exchange Offer contemplated by the Registration Rights Agreement, will
constitute valid and binding obligations of the Guarantors, enforceable against
the Guarantors in accordance with their terms, subject to the qualification that
the enforceability of the Guarantors' obligations thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles;
(x) None of the issuance, offer or sale of the Series C Notes
and Series C Subsidiary Guarantees, the execution, delivery or performance by
the Company and the Guarantors of this
17
<PAGE>
Agreement or the other Operative Documents, compliance by the Company and the
Guarantors with the provisions hereof or thereof nor consummation by the Company
and the Guarantors of the transactions contemplated hereby or thereby conflicts
or will conflict with or constitutes or will constitute a breach of, or a
default under the certificate or articles of incorporation or bylaws or other
organizational documents of the Company or any of the Subsidiaries or the Credit
Agreement, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the Subsidiaries
pursuant to the terms of the Credit Agreement nor will any such action result in
any violation of any existing law, or any regulation, ruling (assuming
compliance with all applicable state securities and Blue Sky laws and, in the
case of the Registration Rights Agreement, the Act, the Exchange Act and the
1939 Act), judgment, injunction, order or decree known to such counsel,
applicable to the Company or the Subsidiaries or any of their respective
properties;
(xi) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency, or official is required on the part of the
Company or the Guarantors for the valid issuance and sale of the Series C Notes
to the Initial Purchasers and the issuance of the Series C Subsidiary Guarantees
in connection therewith as contemplated by this Agreement (other than as may be
required by applicable state securities and Blue Sky laws, as to which counsel
need express no opinions);
(xii) To the knowledge of such counsel, (A) other than as
described or contemplated in the Offering Memorandum, there are no legal or
governmental proceedings pending or threatened against the Company, the
Guarantors or any of the other Subsidiaries or to which the Company or any of
the Subsidiaries or any of their properties, are subject, which are not
disclosed in the Offering Memorandum and which, if adversely decided, are
reasonably likely to cause a Material Adverse Effect or materially affect the
issuance of the Notes or the consummation of the other transactions contemplated
by the Operative Documents and (B) there are no material agreements, contracts,
indentures, leases or other instruments, that are not described in the Offering
Memorandum;
(xiii) The statements under the captions "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," "Description of Other Debt," and "Certain Federal
Income Tax Consequences" in the Offering Memorandum, insofar as they are
descriptions of contracts, agreements or other legal documents, (excluding
contracts, agreements or other legal documents pertaining to Company-sponsored
securitizations) or refer to statements of law or legal conclusions, are
accurate in all material respects and present fairly the information required to
be shown;
(xiv) Such counsel does not know of any person who has the
right, contractual or otherwise, to cause the Company to sell or otherwise issue
to them, or to permit them to underwrite the sale of, any of the Notes or the
right, as a result of the consummation of the transactions contemplated by the
Operative Documents, to require registration under the Act of any shares of
Common Stock or other securities of the Company;
(xv) When the Series C Notes are issued and delivered
pursuant to this Agreement, such Series C Notes will not be of the same class
(within the meaning of Rule 144A(d)(3) under the Act) as any security of the
Company that is listed on a national securities exchange registered under
Section 6 of the Exchange Act or that is quoted in a United States automated
interdealer quotation system;
(xvi) No registration of the Series C Notes under the Act is
required for the sale of the Series C Notes to the Initial Purchasers as
contemplated in this Agreement or for the Exempt Resales (assuming (A) that any
Eligible Purchaser who buys the Series C Notes in the Exempt Resales is a QIB
and (B) the accuracy of the Initial Purchasers' representations and those of the
Company and the Guarantors in this
18
<PAGE>
Agreement (it being understood that no opinion is being expressed as to any
resale subsequent to the Exempt Resales or any resale of securities by any
person other than the Initial Purchasers);
(xvii) The Company and the Guarantors are not required to
deliver the information specified in Rule 144A(d)(4) in connection with the
offering and resale of the Series C Notes by the Initial Purchasers;
(xviii) The Company is not required to obtain stockholder consent
for the issuance or offering of the Notes; and
In addition, such counsel shall also state that such counsel has
participated in conferences with officers and representatives of the Company and
the Guarantors, representatives of the independent public accountants for the
Company and the Guarantors and the Initial Purchasers at which the contents of
the Offering Memorandum and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for and has
not verified the accuracy, completeness or fairness of the statements contained
in the Offering Memorandum, and has not made any independent check or
verification thereof, on the basis of the foregoing (relying as to materiality
to the extent such counsel deemed appropriate upon facts provided by officers
and other representatives of the Company and the Guarantors), no facts have come
to the attention of such counsel that lead such counsel to believe that the
Offering Memorandum, as of its date or as of the Closing Date, contained or
contains any untrue statement of material fact or omitted or omits to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no belief or opinion with respect to the
financial statements and other financial and statistical data included therein).
The opinion of such counsel may be limited to the laws of the state of
Texas, the laws of the states of New York and California, the General
Corporation Law of the State of Delaware and the federal laws of the United
States. Such counsel may rely as to matters of New York and California law, as
it relates to the authorization and enforceability of the Operative Documents
only, on the opinion of Latham & Watkins described below in Section 7(g).
(e) The Initial Purchasers shall have received on the Closing Date an
opinion of Chris A. Choate, Esq., General Counsel of the Company, dated the
Closing Date and addressed to the Initial Purchasers to the effect that:
(i) The Company is duly registered and qualified to conduct its
business and is in good standing as a foreign corporation in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify or to be in good standing does not have a Material Adverse
Effect;
(ii) Each of the Guarantors is duly registered and qualified to
conduct its business and is in good standing as a foreign corporation in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify or to be in good standing does not have a Material
Adverse Effect;
(iii) Neither the Company nor any of the Subsidiaries is in
violation of its respective certificate or articles of incorporation or bylaws,
or other organizational documents, or to the best knowledge of such counsel
after reasonable inquiry, is in default in the performance of any material
obligation, agreement or condition contained in any bond, debenture, note or
other evidence of indebtedness or in any material agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is
19
<PAGE>
a party or by which any of them or any of their respective properties may be
bound, except as disclosed in the Offering Memorandum and except to the extent
that any such violation or default would not have a Material Adverse Effect;
(iv) None of the issuance, offer or sale of the Series C Notes
and Series C Subsidiary Guarantees, the execution, delivery or performance by
the Company and the Guarantors of this Agreement or the other Operative
Documents, compliance by the Company and the Guarantors with the provisions
hereof or thereof nor consummation by the Company and the Guarantors of the
transactions contemplated hereby or thereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under the certificate
or articles of incorporation or bylaws or other organizational documents of the
Company or any of the Subsidiaries or any material agreement, indenture, lease
or other instrument to which the Company or any of the Subsidiaries is a party
or by which any of them or any of their respective properties is bound, or will
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or the Subsidiaries pursuant to the terms of
any material agreement or instrument to which any of them is a party or by which
any of them may be bound or to which any of the property or assets of them is
subject, nor will any such action result in any violation of any existing law,
or any regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws and, in the case of the Registration Rights
Agreement, the Act, the Exchange Act and the 1939 Act), judgment, injunction,
order or decree known to such counsel, applicable to the Company or the
Subsidiaries or any of their respective properties;
(v) The statements under the caption "Management" in the
Offering Memorandum, insofar as they are descriptions of contracts, agreements
or other legal documents or refer to statements of law or legal conclusions, are
accurate in all material respects and present fairly the information required to
be shown;
(vi) To the best knowledge of such counsel after reasonable
inquiry, neither the Company nor any of the Subsidiaries is in violation of any
law, ordinance, administrative or governmental rule or regulation applicable to
the Company or any of the Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any of the
Subsidiaries, except to the extent that any such violation would not have a
Material Adverse Effect;
(vii) The Company and the Subsidiaries have all Permits that are
required under applicable law to own their respective properties and to conduct
their respective businesses as now being conducted as described in the Offering
Memorandum except where the failure to have any such Permits would not,
individually or in the aggregate, have a Material Adverse Effect;
(viii) The statements in the Offering Memorandum, insofar as
they are descriptions of contracts, agreements or other legal documents
pertaining to the Company's $245 million Warehouse Facility, are accurate in all
material respects and present fairly the Company's and the Guarantors' rights,
obligations and liabilities in connection with such Warehouse Facility; and
(ix) None of the issuance, offer or sale of the Series C
Notes, the execution, delivery or performance by the Company and the Guarantors
of this Agreement or the other Operative Documents, compliance by the Company
and the Guarantors with the provisions hereof or thereof nor consummation by the
Company and the Guarantors of the transactions contemplated hereby or thereby
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under any material agreement, indenture, or other instrument
pertaining to the Company's $245 Warehouse Facility, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms of any
material agreement or instrument pertaining to the Company's Warehouse Facility.
20
<PAGE>
(f) The Initial Purchasers shall have received on the Closing Date an
opinion of Dewey Ballantine, special securitization counsel for the Company and
its Subsidiaries, dated the Closing Date, and addressed to the Initial
Purchasers to the effect that:
(i) The statements in the Offering Memorandum, insofar as they
are descriptions of contracts, agreements or other legal documents pertaining to
Company-sponsored securitizations, are accurate in all material respects and
present fairly the Company's and the Guarantors' rights, obligations and
liabilities in connection with such securitizations; and
(ii) None of the issuance, offer or sale of the Series C Notes,
the execution, delivery or performance by the Company and the Guarantors of this
Agreement or the other Operative Documents, compliance by the Company and the
Guarantors with the provisions hereof or thereof nor consummation by the Company
and the Guarantors of the transactions contemplated hereby or thereby conflicts
or will conflict with or constitutes or will constitute a breach of, or a
default under any material agreement, indenture, or other instrument pertaining
to a Company-sponsored securitization, or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of the Subsidiaries pursuant to the terms of any material
agreement or instrument pertaining to a Company-sponsored securitization.
The opinion of such counsel may exclude opinions with respect to the
$51 million Company-sponsored securitization effected in December 1994 through
AmeriCredit Receivables Finance Corp.
(g) The Initial Purchasers shall have received on the Closing date an
opinion, of Latham & Watkins, counsel for the Initial Purchasers, dated the
Closing date, and addressed to the Initial Purchasers, with respect to the
Offering Memorandum and such other related matters as the Initial Purchasers may
reasonably request, and such counsel shall have received such certificates,
documents and information as they may reasonably request to enable them to pass
upon such matters.
(h) The Initial Purchasers shall have received letters addressed to
the Initial Purchasers, and dated the date hereof and the Closing Date from
Coopers & Lybrand L.L.P., independent certified public accountants,
substantially in the forms heretofore approved by the Initial Purchasers.
(i) (i) There shall not have been any decrease in stockholders'
equity of the Company nor any material increase in the short-term or long-term
debt of the Company (other than in the ordinary course of business) from that
set forth or specifically contemplated in the Offering Memorandum; (ii) the
Company and the Subsidiaries shall not have any liabilities or obligations,
direct or contingent (whether or not in the ordinary course of business), that
are material to the Company and the Subsidiaries, taken as a whole, other than
those reflected in the Offering Memorandum; and (iii) all the representations
and warranties of the Company and the Guarantors contained in this Agreement
shall be true and correct in all material respects on and as of the date hereof
and on and as of the Closing Date as if made on and as of the Closing Date, and
the Initial Purchasers shall have received a certificate, dated the Closing Date
and signed by the Chief Executive Officer and the Chief Financial Officer of the
Company (or such other officers as are acceptable to the Initial Purchasers), to
the effect set forth in this Section 7(i) and in Section 7(j) hereof.
(j) The Company and the Guarantors shall not have failed at or prior
to the Closing Date to have performed or complied in all material respects with
any of its agreements herein contained and required to be performed or complied
with by it hereunder at or prior to the Closing Date.
(k) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (i) it is downgrading its rating
21
<PAGE>
assigned to any class of securities of the Company or any asset-backed
securities of any Company-sponsored Securitization Trust (as such term is
defined in the Indenture), or (ii) it is reviewing its ratings assigned to any
class of securities of the Company or any asset-backed security of any Company-
sponsored Securitization Trust with a view to possible downgrading, or with
negative implications, or direction not determined.
(l) The Series C Notes shall have been approved for trading in the
PORTAL Market.
(m) The Company and the Guarantors shall have obtained, in writing,
all consents and waivers required under the terms of the Credit Agreement, the
Mortgage Subsidiary Credit Agreement and existing Credit Enhancement Agreements
necessary to ensure that the transactions contemplated by this Agreement and the
other Operative Documents will not conflict with or constitute a breach of, or a
default under the Credit Agreement, the Mortgage Subsidiary Credit Agreement or
any Credit Enhancement Agreement. The Company and the Guarantors shall have
furnished photocopies of such waivers and consents to the Initial Purchasers.
(n) The Company and the Guarantors shall have entered into the Credit
Agreement Amendment and shall have furnished photocopies of such Credit
Agreement Amendment to the Initial Purchasers. The Company shall have received
the Mortgage Subsidiary Credit Agreement Waiver and shall have furnished
photocopies of such Mortgage Subsidiary Credit Agreement Waiver to the Initial
Purchasers.
(o) The Company and Guarantors shall have furnished or caused to be
furnished to the Initial Purchasers such further certificates and documents as
the Initial Purchasers or their counsel shall have requested.
All such opinions, certificates, letters, consents, waivers amendments
and other documents will be in compliance with the provisions hereof only if
they are reasonably satisfactory in form and substance to the Initial Purchasers
and counsel for the Initial Purchasers. Any certificate or document signed by
any officer of the Company or a Guarantor and delivered to the Initial
Purchasers, or to counsel for the Initial Purchasers, shall be deemed a
representation and warranty by the Company or Guarantor, as the case may be, to
the Initial Purchasers as to the statements made therein.
8. Expenses. The Company and the Guarantors jointly and severally
agree to pay the following costs, expenses and fees and all other costs and
expenses incident to the performance by any of them of any of their obligations
hereunder: (i) the preparation and reproduction of the Preliminary Offering
Memorandum and the Final Offering Memorandum (including, without limitation,
financial statements thereto), and each amendment or supplement to any of them,
this Agreement and the Indenture; (ii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Final Offering Memorandum, the Preliminary
Offering Memorandum, and all amendments or supplements to any of them as may be
reasonably requested for use in connection with the offering and sale of the
Series C Notes; (iii) the preparation, printing, authentication, issuance and
delivery of certificates for the Notes, including any stamp taxes in connection
with the original issuance and sale of the Notes; (iv) the printing (or
reproduction) and delivery of this Agreement, the preliminary and supplemental
Blue Sky Memoranda and all other agreements or documents printed (or reproduced)
and delivered in connection with the offering of the Notes; (v) the application
for quotation of the Notes on the PORTAL Market; (vi) the qualification of the
Notes for offer and sale under the securities or Blue Sky laws of the several
states as provided in Section 4(f) hereof (including the reasonable fees,
expenses and disbursements of counsel for the Initial Purchasers relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such qualification); (vii) the performance
by the Company of its obligations under the Registration Rights Agreement;
(viii) fees and expenses of the Trustee and its counsel; (ix) the transportation
and other expenses incurred by or on behalf of the Company representatives in
22
<PAGE>
connection with presentations to prospective purchasers of the Series C Notes;
and (x) the fees and expenses of the Company's and the Guarantors' accountants
and the fees and expenses of counsel (including local and special counsel, if
any) for the Company and the Guarantors. The Company and each of the Guarantors
hereby agree that they will pay in full on the Closing Date the fees and
expenses referred to in clause (vi) of this Section 8 by delivering to counsel
for the Initial Purchasers on such date a check payable to such counsel in the
requisite amount.
9. Effective Date of Agreement. This Agreement shall become
effective upon the execution and delivery hereof by all the parties hereto.
10. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of any of the Initial Purchasers to the Company or any of
the Guarantors, by notice to the Company, if prior to the Closing Date, (i)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National market shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York or Texas shall have been declared, or (iii) there shall have
occurred any outbreak or escalation of hostilities involving the United States
or other domestic, foreign or international calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in the judgment of
the Initial Purchasers, impracticable or inadvisable to commence or continue the
offering of the Series C Notes on the terms set forth on the cover page of the
Offering Memorandum or to enforce contracts for the resale of the Series C Notes
by the Initial Purchasers. Notice of such termination may be given to the
Company by telegram, telecopy or telephone and shall be subsequently confirmed
by letter.
11. Information Furnished by the Initial Purchasers. The statements
set forth in the stabilization legend on the inside front cover and the last
paragraph on the cover page of the Preliminary Offering Memorandum and Offering
Memorandum, constitute the only information furnished by or on behalf of the
Initial Purchasers as such information is referred to in Sections 5(b) and 6
hereof.
12. Miscellaneous. Except as otherwise provided in Sections 4, 9 and
10 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company or the Guarantors, at the
office of the Company at 200 Bailey Avenue, Fort Worth TX 76107, Attention:
Chief Financial Officer with a copy to Jenkens & Gilchrist, P.C., 1445 Ross
Avenue, Suite 3200, Dallas, TX 75202, Attention: L. Steven Leshin, or (ii) if to
the Initial Purchasers, care of Salomon Brothers Inc, Seven World Trade Center,
New York, NY 10048, Attention: Manager, Investment Banking Division with a copy
to Latham & Watkins, 885 Third Avenue, New York, New York 10022, Attention: Kirk
A. Davenport.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Company, the Guarantors and their respective directors,
officers and the controlling persons referred to in Section 6 hereof and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from the Initial Purchasers of any of
the Series C Notes in his status as such purchaser.
13. Applicable Law; Counterparts This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York and without
regard to the conflicts of law principles thereof.
23
<PAGE>
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
[signature page follows]
24
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
AMERICREDIT CORP. AMERICREDIT PREMIUM FINANCE, INC.
By By
--------------------------- ---------------------------------
DANIEL E. BERCE DANIEL E. BERCE
VICE CHAIRMAN AND CHIEF PRESIDENT, CHIEF FINANCIAL
FINANCIAL OFFICER OFFICER AND TREASURER
AMERICREDIT FINANCIAL SERVICES, INC. AMERICREDIT CORPORATION OF CALIFORNIA
By By
--------------------------- ---------------------------------
DANIEL E. BERCE DANIEL E. BERCE
VICE CHAIRMAN AND CHIEF VICE CHAIRMAN AND CHIEF
FINANCIAL OFFICER FINANCIAL OFFICER
AMERICREDIT OPERATING CO., INC. ACF INVESTMENT CORP.
By By
--------------------------- ---------------------------------
DANIEL E. BERCE DANIEL E. BERCE
VICE CHAIRMAN AND CHIEF VICE CHAIRMAN AND CHIEF
FINANCIAL OFFICER FINANCIAL OFFICER
Confirmed as of the date first
above mentioned.
SALOMON BROTHERS INC
CREDIT SUISSE FIRST BOSTON CORPORATION
BY: SALOMON BROTHERS INC
By
-------------------------------
NAME:
TITLE
<PAGE>
SCHEDULE I
AMERICREDIT CORP.
Principal Amount
Initial Purchaser of Notes
- ----------------- --------
Salomon Brothers Inc.......................................... $32,500,000
Credit Suisse First Boston Corporation........................ $17,500,000
-----------
Total.................................................... $50,000,000
===========
<PAGE>
EXHIBIT 10.26
L&W DRAFT - JANUARY 26, 1998
SALOMON SMITH BARNEY - AMERICREDIT
----------------------------------
EXHIBIT A
================================================================================
C/D EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of January 29, 1998
relating to
$50,000,000 in Aggregate Principal Amount
of 9 1/4% Senior Notes due 2004
by and among
AmeriCredit Corp. and the Guarantors named herein
and
Salomon Brothers Inc and
Credit Suisse First Boston Corporation
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of January 29, 1998 by and among AmeriCredit Corp., a Texas corporation
(the "Company"); AmeriCredit Financial Services, Inc., a Delaware corporation,
AmeriCredit Operating Co., Inc., a Delaware corporation, ACF Investment Corp., a
Delaware corporation, AmeriCredit Premium Finance, Inc., a Delaware corporation,
and Americredit Corporation of California, a California corporation
(collectively the "Guarantors"); and Salomon Brothers Inc and Credit Suisse
First Boston Corporation (collectively the "Initial Purchasers"), each of whom
have agreed to purchase the Company's 9 1/4% Series C Senior Notes due 2004 (the
"Series C Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated January
26, 1998 (the "Purchase Agreement"), by and among the Company, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Series C Senior Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 2 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Closing Date: The date of this Agreement.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: A registered Exchange Offer shall be deemed "Consummated" for
----------
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series D Senior Notes to be issued in the Exchange Offer, (ii)
the maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Series D Senior Notes in the same
aggregate principal amount as the aggregate principal amount of Series C Senior
Notes that were tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series C Senior Notes, each
--------------------
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
<PAGE>
Exchange Offer: The registration by the Company under the Act of the
--------------
Series D Senior Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Series D Senior Notes in an aggregate principal amount equal
to the aggregate principal amount of the Transfer Restricted Securities tendered
in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
-------------------------------------
to the Exchange Offer, including the related Prospectus.
Holder: As defined in Section 2(b) hereof.
------
Indenture: The Indenture, dated as of January 29, 1998, among the Company,
---------
Bank One, N.A., as trustee (the "Trustee"), and the Guarantors, pursuant to
which the Senior Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: As defined in the preamble hereto.
------------------
Interest Payment Date: As defined in the Indenture and the Senior Notes.
---------------------
NASD: National Association of Securities Dealers, Inc.
----
Person: An individual, partnership, corporation, trust or unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating to Senior
-------------
Notes, each Person who is a Holder of Senior Notes on the record date with
respect to the Interest Payment Date on which such Damages Payment Date shall
occur.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company relating
----------------------
to (a) an offering of Series D Senior Notes pursuant to an Exchange Offer or (b)
the registration for resale of Transfer Restricted Securities pursuant to the
Shelf Registration Statement, which is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Senior Notes: The Series C Senior Notes and the Series D Senior Notes,
------------
including the guarantees thereof by the Guarantors.
2
<PAGE>
Series D Senior Notes: The Company's 9 1/4% Series D Senior Notes due
---------------------
2004, including the guarantees thereof by the Guarantors, to be issued pursuant
to the Indenture in the Exchange Offer.
Shelf Filing Deadline: As defined in Section 4 hereof.
---------------------
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
---
effect on the date of the Indenture.
Transfer Restricted Securities: Each Senior Note, until the earliest to
------------------------------
occur of (a) the date on which such Senior Note is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Senior Note has been effectively registered under the Act and
disposed of in accordance with a Shelf Registration Statement and (c) the date
on which such Senior Note is distributed to the public pursuant to Rule 144
under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including delivery of
the Prospectus contained therein).
Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
------------------------------
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
-----------------------------------------
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), the Company and the Guarantors shall (i) cause to be
filed with the Commission as soon as practicable after the Closing Date, but in
no event later than 30 days after the Closing Date, a Registration Statement
under the Act relating to the Series D Senior Notes and the Exchange Offer, (ii)
use their best efforts to cause such Registration Statement to become effective
at the earliest possible time, but in no event later than 90 days after the
Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective
amendments to such Registration Statement as may be necessary in order to cause
such Registration Statement to become effective, (B) if applicable, a post-
effective amendment to such Registration Statement pursuant to Rule 430A under
the Act and (C) cause all necessary filings in connection with the registration
and qualification of the Series D Senior Notes to be made under the Blue Sky
laws of such
3
<PAGE>
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Registration Statement, commence the
Exchange Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series D Senior Notes to be offered in exchange for the
Transfer Restricted Securities and to permit resales of Senior Notes held by
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement to
be effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Senior Notes shall be included in the
Exchange Offer Registration Statement. The Company shall use its best efforts to
cause the Exchange Offer to be Consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series C Senior Notes that are
Transfer Restricted Securities and that were acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company), may exchange
such Series C Senior Notes pursuant to the Exchange Offer; however, such Broker-
Dealer may be deemed to be an "underwriter" within the meaning of the Act and
must, therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Series D Senior Notes received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such resales by
Broker-Dealers that the Commission may require in order to permit such resales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Senior Notes held by any such Broker-
Dealer except to the extent required by the Commission as a result of a change
in policy after the date of this Agreement.
The Company and the Guarantors shall use their best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Senior Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of one year from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time during such one-
year period in order to facilitate such resales.
4
<PAGE>
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
------------------
Exchange Offer Registration Statement or to Consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 business days following the Consummation of the Exchange Offer
(A) that such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
Series D Senior Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Series C Senior
Notes acquired directly from the Company or one of its affiliates, then the
Company and the Guarantors shall
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement") on or prior to the earliest to occur of (1) the 30th day after
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement, (2) the 30th day after the date
on which the Company receives notice from a Holder of Transfer Restricted
Securities as contemplated by clause (ii) above, and (3) the 60th day after
the Closing Date (such earliest date being the "Shelf Filing Deadline"),
which Shelf Registration Statement shall provide for resales of all
Transfer Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration Statement
to be declared effective by the Commission on or before the 60th day after
the Shelf Filing Deadline.
The Company and the Guarantors shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Senior Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least three years following the
Closing Date.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the
5
<PAGE>
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within two business days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself declared effective within two business days (each
such event referred to in clauses (i) through (iv), a "Registration Default"),
the Company and the Guarantors hereby jointly and severally agree to pay
liquidated damages to each Holder of Transfer Restricted Securities with respect
to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. All accrued liquidated damages shall
be paid to Record Holders by the Company by wire transfer of immediately
available funds or by federal funds check on each Damages Payment Date, as
provided in the Indenture. Following the cure of all Registration Defaults
relating to any particular Transfer Restricted Securities, the accrual of
liquidated damages with respect to such Transfer Restricted Securities will
cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Company and the Guarantors shall comply with all of the provisions of
Section 6(c) below, shall use their best efforts to effect such exchange to
permit the sale of Transfer Restricted Securities being sold in accordance with
the intended method or methods of distribution thereof, and shall comply with
all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there is a
question as to whether the Exchange Offer is permitted by applicable law, the
Company and the Guarantors
6
<PAGE>
hereby agree to seek a no-action letter or other favorable decision from the
Commission allowing the Company and the Guarantors to Consummate an Exchange
Offer for such Series C Senior Notes. The Company and the Guarantors each hereby
agrees to pursue the issuance of such a decision to the Commission staff level
but shall not be required to take commercially unreasonable action to effect a
change of Commission policy. The Company and the Guarantors each hereby agrees,
however, to (A) participate in telephonic conferences with the Commission, (B)
deliver to the Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has concluded
that such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each Holder of Transfer Restricted Securities
shall furnish, upon the request of the Company, prior to the Consummation
thereof, a written representation to the Company (which may be contained in the
letter of transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the Series D
Senior Notes to be issued in the Exchange Offer and (C) it is acquiring the
Series D Senior Notes in its ordinary course of business. In addition, all such
Holders of Transfer Restricted Securities shall otherwise cooperate in the
Company's preparations for the Exchange Offer. Each Holder hereby acknowledges
and agrees that any Broker-Dealer and any such Holder using the Exchange Offer
to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the date of
this Agreement rely on the position of the Commission enunciated in Morgan
------
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
- -------------------- ----------------------
Corporation (available May 13, 1988), as interpreted in the Commission's letter
- -----------
to Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including any no-action letter obtained pursuant to clause (i) above), and (2)
must comply with the registration and prospectus delivery requirements of the
Act in connection with a secondary resale transaction and that such a secondary
resale transaction should be covered by an effective registration statement
containing the selling security holder information required by Item 507 or 508,
as applicable, of Regulation S-K if the resales are of Series D Senior Notes
obtained by such Holder in exchange for Series C Senior Notes acquired by such
Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration Statement,
the Company and the Guarantors shall provide a supplemental letter to the
Commission (A) stating that the Company and the Guarantors are registering the
Exchange Offer in reliance on the position of the Commission enunciated in Exxon
-----
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co.,
- ---------------------------- ---------------------
Inc. (available June 5, 1991) and, if applicable, any no-action letter obtained
pursuant to clause (i) above and (B) including a representation that neither the
Company nor the Guarantors has entered into any arrangement or understanding
with any Person to distribute the Series D Senior Notes to be received in the
Exchange Offer and that, to the best of the Company's information and belief,
each Holder participating in the Exchange Offer is acquiring the Series D Senior
Notes in its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series D Senior Notes
received in the Exchange Offer.
7
<PAGE>
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
------------------
any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Senior Notes
by Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of the Guarantors) for the period specified in Section 3 or 4 of
this Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company shall file promptly an
appropriate amendment to such Registration Statement, in the case of clause
(A), correcting any such misstatement or omission, and, in the case of
either clause (A) or (B), use its best efforts to cause such amendment to
be declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, to confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement
or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
8
<PAGE>
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the Commission shall
issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state securities
or Blue Sky laws, the Company and the Guarantors shall use their best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review of
such Holders and underwriter(s), if any, for a period of at least three
business days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by such Registration Statement or the underwriter(s), if
any, shall reasonably object within three business days after the receipt
thereof;
(v) promptly after the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Company's representatives available (and
representatives of the Guarantors) for discussion of such document and
other customary due diligence matters, and include such information in such
document promptly after the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the selling
Holders, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
the Guarantors and cause the Company's and the Guarantors' officers,
directors and employees to supply all information reasonably requested by
any such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s), if
any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with
9
<PAGE>
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Senior Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s), if
any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantors hereby
consent to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xi) enter into, and cause the Guarantors to enter into, such
agreements (including an underwriting agreement), and make, and cause the
Guarantors to make, such representations and warranties, and take all such
other actions in connection therewith in order to expedite or facilitate
the disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such extent
as may be reasonably requested by any Initial Purchaser or by any Holder of
Transfer Restricted Securities or underwriter in connection with any sale
or resale pursuant to any Registration Statement contemplated by this
Agreement; and whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten Registration, the
Company and the Guarantors shall:
(A) furnish to each Initial Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may reasonably
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the Consummation of the
Exchange Offer and, if applicable, the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, signed by (y) the President or any
Vice President and (z) a principal financial or accounting officer of
each of the Company and the Guarantors, confirming, as of the date
thereof, the matters set forth in paragraphs (i) and (j) of Section 7
10
<PAGE>
of the Purchase Agreement and such other matters as such parties may
reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Guarantors, covering the matters set forth in paragraphs (d), (e) and
(f) of Section 7 of the Purchase Agreement and such other matters as
such parties may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the
Company, the Initial Purchasers' representatives and the Initial
Purchasers' counsel in connection with the preparation of such
Registration Statement and the related Prospectus and have considered
the matters required to be stated therein and the statements
contained therein, and although such counsel has not independently
verified the accuracy, completeness or fairness of such statements,
on the basis of the foregoing (relying as to materiality to a large
extent upon facts provided to such counsel by officers and other
representatives of the Company and without independent check or
verification), no facts came to such counsel's attention that caused
such counsel to believe that the applicable Registration Statement,
at the time such Registration Statement or any post-effective
amendment thereto became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such Registration
Statement as of its date and, in the case of the opinion dated the
date of Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy, completeness
or fairness of the exhibits, financial statements, notes and
schedules and other financial or statistical data included in any
Registration Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness of
the Shelf Registration Statement, as the case may be, from the
Company's independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters by
underwriters in connection with primary underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 7(h) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
11
<PAGE>
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with clause (A)
above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company pursuant to this
clause (xi), if any.
If at any time the Company or the Guarantors become aware that the
representations and warranties of the Company and the Guarantors
contemplated in clause (A)(1) above cease to be true and correct, the
Company or the Guarantors shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with, and cause the Guarantors to cooperate with, the selling
Holders, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the Shelf Registration Statement;
provided, however, that neither the Company nor the Guarantors shall be
required to register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it to the service
of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Series C Senior
Notes covered by the Shelf Registration Statement, Series D Senior Notes,
having an aggregate principal amount equal to the aggregate principal
amount of Series C Senior Notes surrendered to the Company by such Holder
in exchange therefor or being sold by such Holder; such Series D Senior
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Senior Notes, as the case may be; in return, the
Series C Senior Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xiv) cooperate with, and cause the Guarantors to cooperate with, the
selling Holders and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and enable
such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
request at least two business days prior to any sale of Transfer Restricted
Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted Securities
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (viii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement
12
<PAGE>
or related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement and provide
the Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
for the twelve-month period (A) commencing at the end of any fiscal quarter
in which Transfer Restricted Securities are sold to underwriters in a firm
or best efforts Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate, and cause the
Guarantors to cooperate, with the Trustee and the Holders of Senior Notes
to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute, and cause the Guarantors to execute, and use its best efforts to
cause the Trustee to execute, all documents that may be required to effect
such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely
manner; and
(xxi) provide promptly to each Holder upon request each document filed
with the Commission pursuant to the requirements of Section 13 and Section
15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Company of the existence of any fact of the
kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by
13
<PAGE>
the Company, each Holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Transfer Restricted Securities that was current
at the time of receipt of such notice. In the event the Company shall give any
such notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including
the date when each selling Holder covered by such Registration Statement shall
have received the copies of the supplemented or amended Prospectus contemplated
by Section 6(c)(xvi) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or the Guarantors' performance
of or compliance with this Agreement will be borne by the Company or the
Guarantors, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Initial Purchaser or Holder with the NASD (and,
if applicable, the fees and expenses of any "qualified independent underwriter"
and its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series D Senior Notes to be issued in the Exchange Offer
and printing of Prospectuses), messenger and delivery services and telephone;
(iv) all fees and disbursements of counsel for the Company, the Guarantors and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing Senior Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
14
<PAGE>
(a) The Company and each Guarantor jointly and severally agree to indemnify
and hold harmless each Holder and each Person, if any, who controls any Holder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to the Holders
furnished in writing to the Company by the Holders expressly for use in
connection therewith. The foregoing indemnity agreement shall be in addition to
any liability which the Company and the Guarantors may otherwise have.
(b) If any action, suit or proceeding shall be brought against the Holders
or any Person controlling the Holders in respect of which indemnity may be
sought against the Company and the Guarantors, the Holders or such controlling
Person shall promptly notify the parties against whom indemnification is being
sought (the "indemnifying parties"), and such indemnifying parties shall assume
the defense thereof, including the employment of counsel and payment of all fees
and expenses. The Holders or any such controlling Person shall have the right to
employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Holders or such controlling Person unless (i) the
indemnifying parties have agreed in writing to pay such fees and expenses, (ii)
the indemnifying parties have failed to assume the defense and employ counsel,
or (iii) the named parties to any such action, suit or proceeding (including any
impleaded parties) include both the Holders or such controlling Person and the
indemnifying parties and the Holders or such controlling Person shall have been
advised in writing by its counsel that representation of such indemnified party
and any indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (in which case the indemnifying party shall not have the
right to assume the defense of such action, suit or proceeding on behalf of the
Holders or such controlling Person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the Holders and controlling Persons not having actual or potential differing
interests with the Holders or among themselves, which firm shall be designated
in writing by the Holders, and that all such fees and expenses shall be
reimbursed as they are incurred but only to the extent that such losses, claims,
damages, liabilities or expenses are required to be paid by and indemnified
party. The indemnifying parties shall not be liable for any settlement of any
such action, suit or proceeding effected without their written consent, but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the indemnifying parties agree
to indemnify and hold harmless the Holders, to the extent provided in paragraph
(a), and any such controlling Person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
15
<PAGE>
(c) Each Holder, severally and not jointly, agrees to indemnify and hold
harmless the Company and the Guarantors, and their directors and officers, and
any Person who controls the Company or any Guarantor within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act to the same extent as
the indemnity from the Company and the Guarantors to the Holders set forth in
paragraph (a) hereof, but only with respect to information relating to the
Holders furnished in writing by or on behalf of the Holders expressly for use in
the Registration Statement or Prospectus. If any action, suit or proceeding
shall be brought against the Company or the Guarantors, any of their directors
or officers, or any such controlling Person based on any Registration Statement
or Prospectus, and in respect of which indemnity may be sought against the
Holders pursuant to this paragraph (c), the Holders shall have the rights and
duties given to the Company and the Guarantors by paragraph (b) above (except
that if the Company and the Guarantors shall have assumed the defense thereof
the Holders shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the Holders' expense), and the Company and the
Guarantors, their directors and officers, and any such controlling Person shall
have the rights and duties given to the Holders by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which the
Holders may otherwise have.
(d) If the indemnification provided for in this Section 8 is unavailable
(except if inapplicable according to its terms) to an indemnified party under
paragraphs (a) or (c) hereof in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then an indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors on the one hand and
the Holders on the other hand from their sale of Senior Notes (it being
expressly understood and agreed that the relative benefits received by the
Company and the Guarantors from the sale of the Senior Notes shall be equal to
the amount of net proceeds received by the Company and the Guarantors from the
sale of the Series C Notes to the Initial Purchasers), or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Guarantors on the one hand and the Holders on the other in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company and the Guarantors on the one hand and the
Holders on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Guarantors on the one hand or by the Holders on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Company, the Guarantors and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 8 were determined by
a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, the Holders shall
not be required to
16
<PAGE>
contribute any amount in excess of the amount by which the net proceeds received
by them in connection with the sale of the Senior Notes exceeds the amount of
any damages which the Holders have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and the Guarantors set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of the Holders or any Person
controlling the Holders, the Company and the Guarantors, their directors or
officers or any Person controlling the Company or the Guarantors, (ii)
acceptance of any Series C Notes and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to the Holders or any Person
controlling the Holders, or to the Company and the Guarantors, their directors
or officers or any Person controlling the Company or the Guarantors, shall be
entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 8.
(g) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
17
<PAGE>
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors agree that monetary damages
--------
(including the liquidated damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, and will cause the
--------------------------
Guarantors not to, on or after the date of this Agreement enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Neither the Company nor the Guarantors has previously entered
into any agreement granting any registration rights with respect to its
securities to any Person which remains in effect as of the date hereof. The
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of the Company's
securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Senior Notes. The Company will not take any
--------------------------------------
action, or permit any change to occur, with respect to the Senior Notes that
would materially and adversely affect the ability of the Holders to Consummate
any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
18
<PAGE>
(ii) if to the Company or a Guarantor:
AmeriCredit Corp.
200 Bailey Avenue
Fort Worth, TX 76107
Telecopier No.: (817) 882-7101
Attention: Chief Financial Officer
With a copy to:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, TX 75202
Telecopier No.: (214) 855-4300
Attention: L. Steven Leshin, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity,
19
<PAGE>
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement together with the other Operative
----------------
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[signature page follows]
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
AmeriCredit Corp. AmeriCredit Premium Finance, Inc.
By________________________ By_______________________
Daniel E. Berce Daniel E. Berce
Vice Chairman and Chief Financial Officer President, Chief Financial
Officer and Treasurer
AmeriCredit Financial Services, Inc. Americredit Corporation of California
By________________________ By_______________________
Daniel E. Berce Daniel E. Berce
Vice Chairman and Chief Financial Officer Vice Chairman and Chief
Financial Officer
AmeriCredit Operating Co., Inc. ACF Investment Corp.
By________________________ By_______________________
Daniel E. Berce Daniel E. Berce
Vice Chairman and Chief Financial Officer Vice Chairman and Chief
Financial Officer
Salomon Brothers Inc
Credit Suisse First Boston Corporation
By: Salomon Brothers Inc
By________________________
Director
21
<PAGE>
EXHIBIT 12.1
AMERICREDIT CORP.
STATEMENT RE COMPUTATION OF RATIOS
(dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
-------------------------------------- ----------------------
1995 1996 1997 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF EARNINGS:
Income before
income taxes $10,018 $34,256 $62,925 $28,080 $44,512
Interest expense (none)
capitalized) 4,015 13,129 16,312 6,612 12,045
------- ------- ------- ------- -------
$14,033 $47,385 $79,237 $34,692 $56,557
======= ======= ======= ======= =======
COMPUTATION OF FIXED CHARGES:
Interest expenses $ 4,015 $13,129 $16,312 $ 6,612 $12,045
------- ------- ------- ------- -------
Total fixed charges $ 4,015 $13,129 $16,312 $ 6,612 $12,045
======= ======= ======= ======= =======
RATIO OF EARNINGS TO
FIXED CHARGES 3.5x 3.6x 4.9x 5.2x 4.7x
---- ---- ---- ---- ----
</TABLE>
<PAGE>
EXHIBIT 21.1
AMERICREDIT CORP.
SUBSIDIARIES OF THE COMPANY
Subsidiary Ownership % State of Incorporation
---------- ----------- ----------------------
AmeriCredit Operating Co., Inc. 100% Delaware
AmeriCredit Financial Services, Inc. 100% Delaware
ACF Investment Corp. 100% Delaware
AmeriCredit Premium Finance, Inc. 100% Delaware
AmeriCredit Receivables Finance Corp. 100% Delaware
AFS Funding Corp. 100% Nevada
AmeriCredit Receivables Finance Corp. 1995-A 100% Delaware
Americredit Corporation of California 100% California
CP Funding Corp. 100% Nevada
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(Registration No. 333-46993) of our report, which includes an explanatory
paragraph regarding AmeriCredit Corp. changing its method of accounting for
transfers and servicing of financial assets and extinguishment of liabilities,
dated August 6, 1997, on our audits of the consolidated financial statements of
AmeriCredit Corp. as of June 30, 1997 and 1996, and for the years ended June 30,
1997, 1996 and 1995. We also consent to the reference to our firm under the
caption "Experts."
/s/Coopers & Lybrand L.L.P.
Fort Worth, Texas
March 25, 1998
<PAGE>
EXHIBIT 25.1
Registration No. 33-60067
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, N.A. f/k/a BANK ONE, COLUMBUS, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code) executive offices)
Jon Beacham
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6229
(Name, address and telephone number of agent for service)
AMERICREDIT CORPORATION
(Exact name of obligor as specified in its charter)
Texas 75-2291093
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
200 Bailey Avenue 76107
Fort Worth, Texas (Zip Code)
(Address of principal executive
office)
9 1/4% SERIES C AND SERIES D SENIOR NOTES DUE 2004
(Title of the Indenture securities)
<PAGE>
GENERAL
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY
AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES, ON FILE WITH THE
COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh
<PAGE>
Corporation 9 3/8% Senior Notes due 2003, Securities and Exchange
Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
June 30, 1997, published pursuant to the requirements of the Comptroller of
the Company, see Exhibit 7 to Form T-1, filed in connection with Form S-4
relating to National Energy Group, Inc.10 3/4% Senior Notes due 2006,
Securities and Exchange Commission File No. 333-38075.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in
default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the Trustee, Bank One, NA, a national banking association organized under
the National Banking Act, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in Columbus, Ohio, on March 18, 1998.
Bank One, NA
By: /s/ Jon Beacham
----------------------
Jon Beacham
Authorized Signer
<PAGE>
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
-----------------------
For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL
-----
ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County of
------
Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not less
-----
than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined
from time-to-time by resolution of the shareholders at any annual or
special meeting thereof, provided, however, that the Board of Directors, by
resolution of a majority thereof, shall be authorized to increase the
number of its members by not more than two between regular meetings of the
shareholders. Each Director, during the full term of his directorship,
shall own, as qualifying shares, the minimum number of shares of either
this Association or of its parent bank holding company in accordance with
the provisions of applicable law. Unless otherwise provided by the laws of
the United States, any vacancy in the Board of Directors for any
--
9/13/91
<PAGE>
reason, including an increase in the number thereof, may be filled by
action of the Board of Directors.
--
9/13/91
<PAGE>
FOURTH. The annual meeting of the shareholders for the election of Directors
------
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year
specified therefor in the By-Laws, but if no election is held on that day,
it may be held on any subsequent business day according to the provisions
of law; and all elections shall be held according to such lawful
regulations as may be prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall be
-----
2,073,750 shares of common stock of the par value of Ten Dollars ($10)
each; but said capital stock may be increased or decreased from time-to-
time, in accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association
shall have the preemptive or preferential right of subscription to any
share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this
Association, issued or sold, nor any right of subscription to any thereof
other than such, if any, as the Board of Directors, in its discretion, may
from time-to-time determine and at such price as the Board of Directors may
from time-to-time fix.
This Association, at any time and from time-to-time, may authorize and
issue debt obligations, whether or not subordinated, without the approval
of the shareholders.
--
9/13/91
<PAGE>
SIXTH. The Board of Directors shall appoint one of its members President of
-----
the Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall
have the power to appoint one or more Vice Presidents and to appoint a
Secretary and such other officers and employees as may be required to
transact the business of this Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of this Association; to fix the salaries to be paid
to them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of
this Association shall be made; to manage and administer the business and
affairs of this Association; to make all By-Laws that it may be lawful for
them to make; and generally to do and perform all acts that it may be legal
for a Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the location
-------
of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this
Association to any other location, without the approval of the shareholders
but subject to the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
------
terminated in accordance with the laws of the United States.
--
9/13/91
<PAGE>
NINTH. The Board of Directors of this Association, or any three or more
-----
shareholders owning, in the aggregate, not less than 10 percent of the
stock of this Association, may call a special meeting of shareholders at
any time. Unless otherwise provided by the laws of the United States, a
notice of the time, place and purpose of every annual and special meeting
of the shareholders shall be given by first-class mail, postage prepaid,
mailed at least ten days prior to the date of such meeting to each
shareholder of record at his address as shown upon the books of this
Association.
--
9/13/91
<PAGE>
TENTH. Every person who is or was a Director, officer or employee of the
-----
Association or of any other corporation which he served as a Director,
officer or employee at the request of the Association as part of his
regularly assigned duties may be indemnified by the Association in
accordance with the provisions of this paragraph against all liability
(including, without limitation, judgments, fines, penalties and
settlements) and all reasonable expenses (including, without limitation,
attorneys' fees and investigative expenses) that may be incurred or paid by
him in connection with any claim, action, suit or proceeding, whether
civil, criminal or administrative (all referred to hereafter in this
paragraphs as "Claims") or in connection with any appeal relating thereto
in which he may become involved as a party or otherwise or with which he
may be threatened by reason of his being or having been a Director, officer
or employee of the Association or such other corporation, or by reason of
any action taken or omitted by him in his capacity as such Director,
officer or employee, whether or not he continues to be such at the time
such liability or expenses are incurred, provided that nothing contained in
this paragraph shall be construed to permit indemnification of any such
person who is adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty or criminal acts, unless, at the time such indemnification
is sought, such indemnification in such instance is permissible under
applicable law and regulations, including published rulings of the
Comptroller of the Currency or other appropriate supervisory or regulatory
authority, and provided further that there shall be no indemnification of
directors, officers, or employees against expenses, penalties, or other
payments incurred in an administrative proceeding or action instituted by
an appropriate regulatory agency which proceeding or action results in a
final order assessing civil money penalties or requiring affirmative
--
9/13/91
<PAGE>
action by an individual or individuals in the form of payments to the
Association. Every person who may be indemnified under the provisions of
this paragraph and who has been wholly successful on the merits with
respect to any Claim shall be entitled to indemnification as of right.
Except as provided in the preceding sentence, any indemnification under
this paragraph shall be at the sole discretion of the Board of Directors
and shall be made only if the Board of Directors or the Executive Committee
acting by a quorum consisting of
Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested
quorum exists shall render their opinion that in view of all of the
circumstances then surrounding the Claim, such indemnification is equitable
and in the best interests of the Association. Among the circumstances to be
taken into consideration in arriving at such a finding or opinion is the
existence or non-existence of a contract of insurance or indemnity under
which the Association would be wholly or partially reimbursed for such
indemnification, but the existence or non-existence of such insurance is
not the sole circumstance to be considered nor shall it be wholly
determinative of whether such indemnification shall be made. In addition to
such finding or opinion, no indemnification under this paragraph shall be
made unless the Board of Directors or the Executive Committee acting by a
quorum consisting of Directors who are not parties to such Claim shall find
or if independent legal counsel (who may be the regular counsel of the
Association) selected by the Board of Directors or Executive Committee
whether or not a disinterested quorum exists shall render their opinion
that the Director, officer or employee acted in good faith in what he
reasonably believed to be the best interests of the Association or such
other corporation and further in the case of any criminal action or
proceeding, that the Director, officer or employee reasonably
--
9/13/91
<PAGE>
believed his conduct to be lawful. Determination of any Claim by judgment
adverse to a Director, officer or employee by settlement with or without
Court approval or conviction upon a plea of guilty or of nolocontendere or
--------------
its equivalent shall not create a presumption that a Director, officer or
employee failed to meet the standards of conduct set forth in this
paragraph. Expenses incurred with respect to any Claim may be advanced by
the Association prior to the final disposition thereof upon receipt of an
undertaking satisfactory to the Association by or on behalf of the
recipient to repay such amount unless it is ultimately determined that he
is entitled to indemnification under this paragraph. The rights of
indemnification provided in this paragraph shall be in addition to any
rights to which any Director, officer or employee may otherwise be entitled
by contract or as a matter of law.
--
9/13/91
<PAGE>
Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon
the right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular or
--------
special meeting of the shareholders by the affirmative vote of the holders
of a majority of the stock of this Association, unless the vote of the
holders of a greater amount of stock is required by law, and in that case
by the vote of the holders of such greater amount.
--
9/13/91
<PAGE>
Exhibit 4
BY-LAWS
-------
OF
--
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
----------------------------------------
ARTICLE I
---------
MEETING OF SHAREHOLDERS
-----------------------
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders
- -----------------------------
of the Bank for the election of Directors and for the transaction of such
business as may properly come before the meeting shall be held at its main
banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from
any cause, an election of directors is not made on the day fixed for the
regular meeting of shareholders or, in the event of a legal holiday, on the
next succeeding banking day, the Board of Directors shall order the
election to be held on some subsequent day, as soon thereafter as
practicable, according to the provisions of law; and notice thereof shall
be given in the manner herein provided for the annual meeting. Notice of
such annual meeting shall be given by or under the direction of the
Secretary or such other officer as may be designated by the Chief Executive
Officer by first-class mail, postage prepaid, to all shareholders of record
of the Bank at their respective addresses as shown upon the books of the
Bank mailed not less than ten days prior to the date fixed for such
meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
- -------------------------------
Bank may be called at any time by the Board of Directors or by any three or
more shareholders owning, in the aggregate, not less than ten percent of
the stock of this Bank. The notice of any special meeting of the
shareholders called by the Board of Directors, stating the time, place and
purpose of the meeting, shall be given by or under the direction of the
Secretary, or such other officer as is designated by the Chief Executive
Officer, by first-class mail, postage prepaid, to all shareholders of
record of the Bank at their respective addresses as shown upon the books of the
Bank, mailed not less than ten days prior to the date fixed for such
meeting.
--
1/18/94
<PAGE>
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
- -------------------------------------------------
designate a person to be the Secretary of the meetings of shareholders. In
the absence of a presiding officer, as designated in these By-Laws, the
Board of Directors may designate a person to act as the presiding officer.
In the event the Board of Directors fails to designate a person to preside
at a meeting of shareholders and a Secretary of such meeting, the
shareholders present or represented shall elect a person to preside and a
person to serve as Secretary of the meeting.
The Secretary of the meetings of shareholders shall cause the returns made by
the judges and election and other proceedings to be recorded in the minute
book of the Bank. The presiding officer shall notify the directors-elect of
their election and to meet forthwith for the organization of the new board.
The minutes of the meeting shall be signed by the presiding officer and the
Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many
- ---------------------------------
as three shareholders to be judges of the election, who shall hold and
conduct the same, and who shall, after the election has been held, notify,
in writing over their signatures, the secretary of the shareholders'
meeting of the result thereof and the names of the Directors elected;
provided, however, that upon failure for any reason of any judge or judges
of election, so appointed by the directors, to serve, the presiding officer
of the meeting shall appoint other shareholders or their proxies to fill
the vacancies. The judges of election at the request of the chairman of the
meeting, shall act as tellers of any other vote by ballot taken at such meeting,
and shall notify, in writing over their signatures, the secretary of the
Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
- ----------------------
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as
many persons as there are Directors to be elected, or to cumulate such
shares as provided by Federal Law. In deciding all other questions at
meetings of shareholders, each shareholder shall be entitled to one vote on
each share of stock of record in his name. Shareholders may vote by proxy
duly authorized in writing. All proxies used at the annual meeting shall be
secured for that meeting only, or any adjournment thereof, and shall be
dated, and if not dated
--
1/18/94
<PAGE>
by the shareholder, shall be dated as of the date of receipt thereof. No
officer or employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
- ---------------------
capital stock of the Bank, eligible to be voted, present either in person
or by proxy, shall constitute a quorum for the transaction of business at
any meeting of shareholders, but shareholders present at any meeting and
constituting less than a quorum may, without further notice, adjourn the
meeting from time to time until a quorum is obtained. A majority of the
votes cast shall decide every question or matter submitted to the
shareholders at any meeting, unless otherwise provided by law or by the
Articles of Association.
--
1/18/94
<PAGE>
ARTICLE II
----------
DIRECTORS
---------
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
- -------------------------------------
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION
and shall be employed either in the position of Chief Executive Officer or
active leadership within his or her business, professional or community
interest which shall be located within the geographic area in which the
Bank operates, or as an executive officer of the Bank. A director shall not
be eligible for nomination and re-election as a director of the Bank if
such person's executive or leadership position within his or her business,
professional or community interests which qualifies such person as a
director of Bank terminates. The age of 70 is the mandatory retirement age
as a director of the Bank. When a person's eligibility as director of the
Bank terminates, whether because of change in share ownership, position,
residency or age, within 30 days after such termination, such person shall
submit his resignation as a director to be effective at the pleasure of the
Board provided, however, that in no event shall such person be nominated or
elected as a director. Provided, however, following a person's retirement
or resignation as a director because of the age limitations herein set
forth with respect to election or re-election as a director, such person
may, in special or unusual circumstances, and at the discretion of the
Board, be elected by the directors as a Director Emeritus of the Bank for a
limited period of time. A Director Emeritus shall have the right to
participate in board meetings but shall be without the power to vote and
shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
- -----------------------------
prescribed by law. No person elected a director may exercise any of the
powers of his office until he has taken the oath of such office.
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until the
- ----------------------------------------
annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to his
prior death, resignation, or removal from office. Whenever any vacancy
shall occur among the directors, the remaining directors shall constitute
the directors of the Bank until such vacancy is filled by the remaining
directors, and any director so appointed shall hold office for the
unexpired
--
1/18/94
<PAGE>
term of his or her successor. Notwithstanding the foregoing, each director
shall hold office and serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
- -----------------------------------
holders shall meet for organization of the new board at the time fixed by
the presiding officer of the annual meeting. If at the time fixed for such
meeting there is no quorum present, the Directors in attendance may adjourn
from time to time until a quorum is obtained. A majority of the number of
Directors elected by the shareholders shall constitute a quorum for the
transaction of business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of Directors
- -------------------------------
shall be held on the third Monday of each calendar month excluding March
and July, which meeting will be held at 4:00 p.m. When any regular meeting
of the Board falls on a holiday, the meeting shall be held on such other
day as the Board may previously designate or should the Board fail to so
designate, on such day as the Chairman of the Board of President may fix.
Whenever a quorum is not present, the directors in attendance shall adjourn
the meeting to a time not later than the date fixed by the Bylaws for the
next succeeding regular meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
- -------------------------------
shall be held at the call of the Chairman of the Board or President, or at
the request of two or more Directors. Any special meeting may be held at
such place in Franklin County, Ohio, and at such time as may be fixed in
the call. Written or oral notice shall be given to each Director not later
than the day next preceding the day on which special meeting is to be held,
which notice may be waived in writing.
--
1/18/94
<PAGE>
The presence of a Director at any meeting of the Board shall be deemed a waiver
of notice thereof by him. Whenever a quorum is not present the Directors in
attendance shall adjourn the special meeting from day to day until a quorum
is obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum at
- ---------------------
any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as
herein defined, but at least one-third and not less than two of the
authorized number of Directors are present at a meeting of the Directors,
business of the Bank may be transacted and matters before the Board
approved or disapproved by the unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
- ---------------------------
receive such fees for, and transportation expenses incident to, attendance
at Board and Board Committee Meetings and such fees for service as a
Director irrespective of meeting attendance as from time to time are fixed
by resolution of the Board; provided, however, that payment hereunder shall
not be made to a Director for meetings attended and/or Board service which
are not for the Bank's sole benefit and which are concurrent and
duplicative with meetings attended or board service for an affiliate of the
Bank for which the Director receives payment; and provided further, that
payment hereunder shall not be made in the case of any Director in the
regular employment of the Bank or of one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
- ----------------------------------
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that
may lawfully be delegated. The Executive Committee shall also exercise the
powers of the Board of Directors in accordance with the Provisions of the
"Employees Retirement Plan" and the "Agreement and Declaration of Trust" as
the same now
exist or may be amended hereafter. The Executive Committee shall consist of not
fewer than four board members, including the Chairman of the Board and
President of the Bank, one of whom, as hereinafter required by these
By-laws, shall be the Chief Executive Officer. The other members of the
Committee shall be appointed by the Chairman of the Board or by the
President, with the approval of the Board and shall continue as members of
the Executive Committee until their successors are appointed, provided,
however, that any member of the Executive Committee may be removed
--
1/18/94
<PAGE>
by the Board upon a majority vote thereof at any regular or special meeting
of the Board. The Chairman or President shall fill any vacancy in the
Committee by the appointment of another Director, subject to the approval
of the Board of Directors. The regular meetings of the Executive Committee
shall be held on a regular basis as scheduled by the Board of Directors.
Special meetings of the Executive Committee shall be held at the call of
the Chairman or President or any two members thereof at such time or times
as may be designated. In the event of the absence of any member or members
of the Committee, the presiding member may appoint a member or members of
the Board to fill the place or places of such absent member or members to
serve during such absence. Not fewer than three members of the Committee
must be present at any meeting of the Executive Committee to constitute a
quorum, provided, however that with regard to any matters on which the
Executive Committee shall vote, a majority of the Committee members present
at the meeting at which a vote is to be taken shall not be officers of the
Bank and, provided further, that if, at any meeting at which the Chairman
of the Board and President are both present, Committee members who are not
officers are not in the majority, then the Chairman of the Board or
President, which ever of such officers is not also the Chief Executive
Officer, shall not be eligible to vote at such meeting and shall not be
recognized for purposes of determining if a quorum is present at such
meeting. When neither the Chairman of the Board nor President are present,
the Committee shall appoint a presiding officer. The Executive Committee
shall keep a record of its proceedings and report its proceedings and the
action taken by it to the Board of Directors.
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE. There
- ------------------------------------------------------------------------
shall be a standing committee of the Board of Directors known as the
Community Reinvestment Act and Compliance Policy Committee the duties of
which shall be, at least once in each calendar year, to review, develop and
recommend policies and programs related to the Bank's Community
Reinvestment Act Compliance and regulatory compliance with all existing
statutes, rules and regulations affecting the Bank under state and federal
law. Such Committee shall provide and promptly make a full report of such
review of current Bank policies with regard to Community Reinvestment Act
and regulatory compliance in writing to the Board, with recommendations, if
any, which may be necessary to correct any unsatisfactory conditions. Such
Committee may, in its discretion, in fulfilling its duties, utilize the
Community Reinvestment Act officers of the Bank, Banc One Ohio Corporation
and Banc One Corporation and may engage outside Community Reinvestment Act
experts, as approved by the Board, to review, develop and recommend
policies and programs as herein required. The Community Reinvestment Act
and regulatory compliance policies and procedures established and the
--
1/18/94
<PAGE>
recommendations made shall be consistent with, and shall supplement, the
Community Reinvestment Act and regulatory compliance programs, policies and
procedures of Banc One Corporation and Banc One Ohio Corporation. The
Community Reinvestment Act and Compliance Policy Committee shall consist of
not fewer than four board members, one of whom shall be the Chief Executive
Officer and a majority of whom are not officers of the Bank. Not fewer than
three members of the Committee, a majority of whom are not officers of the
Bank, must be present to constitute a quorum. The Chairman of the Board or
President of the Bank, whichever is not the Chief Executive Officer, shall
be an ex officio member of the Community Reinvestment Act and Compliance
Policy Committee. The Community Reinvestment Act and Compliance Policy
Committee, whose chairman shall be appointed by the Board, shall keep a
record of its proceedings and report its proceedings and the action taken
by it to the Board of Directors.
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known
- -------------------------------
as the Trust Management Committee and the Trust Examination Committee
appointed as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
- -------------------------------
special committees from time to time as are in its judgment necessary in
the interest of the Bank.
--
1/18/94
<PAGE>
ARTICLE III
-----------
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
----------------------------------------
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
- --------------------------------------------
(a)
The officers of the Bank shall include a President, Secretary and Security
Officer and may include a Chairman of the Board, one or more Vice Chairmen,
one or more Vice Presidents (which may include one or more Executive Vice
Presidents and/or Senior Vice Presidents) and one or more Assistant
Secretaries, all of whom shall be elected by the Board. All other officers
may be elected by the Board or appointed in writing by the Chief Executive
Officer. The salaries of all officers elected by the Board shall be fixed
by the Board. The Board from time-to-time shall designate the President or
Chairman of the Board to serve as the Bank's Chief Executive Officer.
(b)
The Chairman of the Board, if any, and the President shall be elected by
the Board from their own number. The President and Chairman of the Board
shall be re-elected by the Board annually at the organizational meeting of
the Board of Directors following the Annual Meeting of Shareholders. Such
officers as the Board shall elect from their own number shall hold office
from the date of their election as officers until the organization meeting
of the Board of Directors following the next Annual Meeting of
Shareholders, provided, however, that such officers may be relieved of
their duties at any time by action of the Board in which event all the
powers incident to their office shall immediately terminate.
(c)
Except as provided in the case of the elected officers who are members of
the Board, all officers, whether elected or appointed, shall hold office at
the pleasure of the Board. Except as otherwise limited by law or these By-
laws, the Board assigns to Chief Executive Officer and/or his
designees the authority to appoint and dismiss any elected or appointed officer
or other member of the Bank's management staff and other employees of the
Bank, as the person in charge of and responsible for any branch office,
department, section, operation, function, assignment or duty in the Bank.
--
1/18/94
<PAGE>
(d)
The management staff of the Bank shall include officers elected by the
Board, officers appointed by the Chief Executive Officer, and such other
persons in the employment of the Bank who, pursuant to written appointment
and authorization by a duly authorized officer of the Bank, perform
management functions and have management responsibilities. Any two or more
offices may be held by the same person except that no person shall hold the
office of Chairman of the Board and/or President and at the same time also
hold the office of Secretary.
(e)
The Chief Executive Officer of the Bank and any other officer of the Bank,
to the extent that such officer is authorized in writing by the Chief
Executive Officer, may appoint persons other than officers who are in the
employment of the Bank to serve in management positions and in connection
therewith, the appointing officer may assign such title, salary,
responsibilities and functions as are deemed appropriate by him, provided,
however, that nothing contained herein shall be construed as placing any
limitation on the authority of the Chief Executive Officer as provided in
this and other sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Bank
- --------------------------------------
shall have general and active management of the business of the Bank and
shall see that all orders and resolutions of the Board of Directors are
carried into effect. Except as otherwise prescribed or limited by these By-
Laws, the Chief Executive Officer shall have full right, authority and
power to control all personnel, including elected and appointed officers,
of the Bank, to employ or direct the
employment of such personnel and officers as he may deem necessary, including
the fixing of salaries and the dismissal of them at pleasure, and to define
and prescribe the duties and responsibility of all Officers of the Bank,
subject to such further limitations and directions as he may from time-to-
time deem proper. The Chief Executive Officer shall perform all duties
incident to his office and such other and further duties, as may, from
time-to-time, be required of him by the Board of Directors or the
shareholders. The specification of authority in these By-Laws wherever and
to whomever granted shall not be construed to limit in any manner the
general powers of delegation granted to the Chief Executive Officer in
conducting the business of the Bank. The Chief Executive Officer or, in his
absence, the Chairman of the Board or President of the Bank, as designated
by the Chief Executive Officer, shall preside at all meetings of
shareholders and
--
1/18/94
<PAGE>
meetings of the Board. In the absence of the Chief Executive Officer, such
officer as is designated by the Chief Executive Officer shall be vested
with all the powers and perform all the duties of the Chief Executive
Officer as defined by these By-Laws. When designating an officer to serve
in his absence, the Chief Executive Officer shall select an officer who is
a member of the Board of Directors whenever such officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
- ------------------------------------------------------
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for
an on behalf of the Bank, and to the extent permitted by law, to make loans
and discounts; to purchase or acquire drafts, notes, stock, bonds, and
other securities for investment of funds held by the Bank; to execute and
purchase acceptances; to appoint, empower and direct all necessary agents
and attor-neys; to sign and give any notice required to be given; to demand
payment and/or to declare due for any default any debt or obligation due or
payable to the Bank upon demand or authorized to be declared due; to
foreclose any mort- gages, to exercise any option, privilege or election to
forfeit, terminate, extend or renew any lease; to authorize and direct any
proceedings for the collection of any money or for the enforcement
of any right or obligation; to adjust, settle and compromise all claims of every
kind and description in favor of or against the Bank, and to give receipts,
releases and discharges therefor; to borrow money and in connection
therewith to make, execute and deliver notes, bonds or other evidences of
indebtedness; to pledge or hypothe- cate any securities or any stocks,
bonds, notes or any property real or personal held or owned by the Bank, or
to rediscount any notes or other obligations held or owned by the Bank, to
employ or direct the employment of all personnel, including elected and
appointed officers, and the dismissal of them at pleasure, and in
furtherance of and in addition to the powers hereinabove set forth to do
all such acts and to take all such proceedings as in his judgment are
necessary and incidental to the operation of the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by
the Chief Executive Officer, or by an officer so designated and authorized
by the chief Executive Officer, to perform the powers set forth above,
subject, however, to such limitations and conditions as are set forth in
the authorization given to such persons.
--
1/18/94
<PAGE>
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
- ------------------------
designated by the Chief Executive Officer shall have supervision and
control of the records of the Bank and, subject to the direction of the
Chief Executive Officer, shall undertake other duties and functions usually
performed by a corporate secretary. Other officers may be designated by the
Chief Executive Officer or the Board of Directors as Assistant Secretary to
perform the duties of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
- -------------------------------------
the Board, President, any officer being a member of the Bank's management
staff who is also a person in charge of and responsible for any department
within the Bank and any other officer to the extent such officer is so
designated and authorized by the Chief Executive Officer, the Chairman of
the
Board, the President, or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department
within the Bank, are hereby authorized on behalf of the Bank to sell,
assign, lease, mortgage, transfer, deliver and convey any real or personal
property now or hereafter owned by or standing in the name of the Bank or
its nominee, or held by this Bank as collateral security, and to execute
and deliver such deeds, contracts, leases, assignments, bills of sale,
transfers or other papers or documents as may be appropriate in the
circumstances; to execute any loan agreement, security agreement,
commitment letters and financing statements and other documents on behalf
of the Bank as a lender; to execute purchase orders, documents and
agreements entered into by the Bank in the ordinary course of business,
relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to
execute powers of attorney to perform specific or general functions in the
name of or on behalf of the Bank; to execute promissory notes or other
instruments evidencing debt of the Bank; to execute instruments pledging or
releasing securities for public funds, documents submitting public fund
bids on behalf of the Bank and public fund contracts; to purchase and
acquire any real or personal property including loan portfolios and to
execute and deliver such agreements, contracts or other papers or documents
as may be appropriate in the circumstances; to execute any indemnity and
fidelity bonds, proxies or other papers or documents of like or different
character necessary, desirable or incidental to the conduct of its banking
business; to execute and deliver settlement agreements or other papers or
documents as may be appropriate in connection with a dismissal authorized
by Section 3.01(c) of these By-laws; to execute agreements, instruments,
documents, contracts or other papers of like or difference character
necessary, desirable or incidental to the conduct of its banking business;
and to execute and deliver partial releases from
--
1/18/94
<PAGE>
and discharges or assignments of mortgages, financing statements and
assignments or surrender of insurance policies, now or hereafter held by
this Bank.
The Chief Executive Officer, Chairman of the Board, President, any officer being
a member of the Bank's management staff who is also a person in charge of
and responsible for any department within the Bank, and any other officer
of the Bank so designated and authorized by the Chief Executive Officer,
Chairman of the Board, President or any officer who is a member of the
Bank's management staff who is in charge of and responsible for any
department within the Bank are authorized for and on behalf of the Bank to
sign and issue checks, drafts, and certificates of deposit; to sign and
endorse bills of exchange, to sign and countersign foreign and domestic
letters of credit, to receive and receipt for payments of principal,
interest, dividends, rents, fees and payments of every kind and description
paid to the Bank, to sign receipts for property acquired by or entrusted to
the Bank, to guarantee the genuineness of signatures on assignments of
stocks, bonds or other securities, to sign certifications of checks, to
endorse and deliver checks, drafts, warrants, bills, notes, certificates of
deposit and acceptances in all business transactions of the Bank.
Other persons in the employment of the Bank and of its subsidiaries, including
but not limited to officers and other members of the management staff, may
be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and
conditions as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall
- -------------------------------
be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.
--
1/18/94
<PAGE>
ARTICLE IV
----------
TRUST DEPARTMENT
----------------
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
- -------------------------------
this Bank under the provisions of Federal Law and Regulations of the
Comptroller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified
herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
- -----------------------------------------
known as the Trust Management Committee, consisting of at least five
members, a majority of whom shall not be officers of the Bank. The
Committee shall consist of the Chairman of the Board who shall be Chairman
of the Com-mittee, the President, and at least three other Directors
appointed by the Board of Directors and who shall continue as members of
the Committee until their successors are appointed. Any vacancy in the
Trust Management Committee may be filled by the Board at any regular or
special meeting. In the event of the absence of any member or members, such
Committee may, in its discretion, appoint members of the Board to fill the
place of such absent members to serve during such absence. Three members of
the Committee shall constitute a quorum. Any member of the Committee may be
removed by the Board by a majority vote at any regular or special meeting
of the Board. The Committee shall meet at such times as it may determine or
at the call of the Chairman, or President or any two members thereof.
The Trust Management Committee, under the general direction of the Board of
Directors, shall supervise the policy of the Trust Department which shall
be formulated and executed in accordance with Law, Regulations of the
Comptroller of the Currency, and sound fiduciary principles.
--
1/18/94
<PAGE>
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Commit-
- ------------------------------------------
tee known as the Trust Examination Committee, consisting of three directors
appointed by the Board of Directors and who shall continue as members of
the committee until their successors are appointed. Such members shall not
be active officers of the Bank. Two members of the Committee shall
constitute a quorum. Any member of the Committee may be removed by the
Board by a majority vote at any regular or special meeting of the Board.
The Committee shall meet at such times as it may determine or at the call
of two members thereof.
This Committee shall, at least once during each calendar year and within fifteen
months of the last such audit, or at such other time(s) as may be required
by Regulations of the Comptroller of the Currency, make suitable audits of
the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall
ascertain whether the Department has been administered in accordance with
Law, Regula- tions of the Comptroller of the Currency and sound fiduciary
principles.
The Committee shall promptly make a full report of such audits in writing to the
Board of Directors of the Bank, together with a recommendation as to what
action, if any, may be necessary to correct any unsatisfactory condition. A
report of the audits together with the action taken thereon shall be noted
in the Minutes of the Board of Directors and such report shall be a part of
the records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management
- -------------------------
and supervision of an officer of the Bank or of the trust affiliate of the
Bank designated by and subject to the advice and direction of the Chief
Executive Officer. Such officer having supervisory responsibility over the
Trust Department shall do or cause to be done all things necessary or
proper in carrying on the business of the Trust Department in accordance
with provisions of law and applicable regulations.
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may
- ----------------------------------
be carried in the name of the Bank in its fiduciary capacity, in the name
of Bank, or in the name of a nominee or nominees.
--
1/18/94
<PAGE>
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
- --------------------------------
capacity awaiting investment or distribution shall not be held uninvested
or undistributed any longer than is reasonable for the proper management of
the account and shall be invested in accordance with the instrument
establishing a fiduciary relationship and local law. Where such instrument
does not specify the character or class of investments to be made and does
not vest in the Bank any discretion in the matter, funds held pursuant to
such instrument shall be invested in any investment which corporate
fiduciaries may invest under local law.
The investments of each account in the Trust Department shall be kept separate
from the assets of the Bank, and shall be placed in the joint custody or
control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
- -------------------------------------
the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated
and authorized by the Chief Executive Officer, the President, or the
officer in charge of the Trust Department, are hereby authorized, on behalf
of this Bank, to sell, assign, lease, mortgage, transfer, deliver and
convey any real property or personal property and to purchase and acquire
any real or personal property and to execute and deliver such agreements,
contracts, or other papers and documents as may be appropriate in the
circumstances for property now or hereafter owned by or standing in the
name of this Bank, or its nominee, in any fiduciary capacity, or in the
name of any principal for whom this Bank may now or hereafter be acting
under a power of attorney, or as agent and to execute and deliver partial
releases from
any discharges or assignments or mortgages and assignments or surrender of
insurance policies, to execute and deliver deeds, contracts, leases,
assignments, bills of sale, transfers or such other papers or documents as
may be appropriate in the circumstances for property now or hereafter held
by this Bank in any fiduciary capacity or owned by any principal for whom
this Bank may now or hereafter be acting under a power of attorney or as
agent; to execute and deliver settlement agreements or other papers or
documents as may be appropriate in connection with a dismissal authorized
by Section 3.01(c) of these By-laws; provided that the signature of any
such person shall be attested in each case by any officer of the Trust
Department or by any other person who is specifically authorized by the
Chief Executive Officer, the President or the officer in charge of the
Trust Department.
--
1/18/94
<PAGE>
The Chief Executive Officer, Chairman of the Board, President, any officer of
the Trust Department and such other officers of the trust affiliate of the
Bank as are specifically designated and authorized by the Chief Executive
Officer, the President, or the officer in charge of the Trust Department,
or any other person or corporation as is specifically authorized by the
Chief Executive Officer, the President or the officer in charge of the
Trust Department, are hereby authorized on behalf of this Bank, to sign any
and all pleadings and papers in probate and other court proceedings, to
execute any indemnity and fidelity bonds, trust agreements, proxies or
other papers or documents of like or different character necessary,
desirable or incidental to the appointment of the Bank in any fiduciary
capacity and the conduct of its business in any fiduciary capacity; also to
foreclose any mortgage, to execute and deliver receipts for payments of
principal, interest, dividends, rents, fees and payments of every kind and
description paid to the Bank; to sign receipts for property acquired or
entrusted to the Bank; also to sign stock or bond certificates on behalf of
this Bank in any fiduciary capacity and on behalf of this Bank as transfer
agent or registrar; to guarantee the genuineness of signatures on
assignments of stocks, bonds or other securities, and to authenticate
bonds, debentures, land or lease trust certificates or other forms of
security issued pursuant to any indenture under which this Bank now or
hereafter is acting as
Trustee. Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the
Trust Department, may sign checks, drafts and orders for the payment of
money executed by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
- ------------------------------
officer of the Trust Department, any officer of the trust affiliate of the
Bank and such other persons as may be specifically authorized by Resolution
of the Trust Management Committee or the Board of Directors, may vote
shares of stock of a corporation of record on the books of the issuing
company in the name of the Bank or in the name of the Bank as fiduciary, or
may grant proxies for the voting of such stock of the granting if same is
permitted by the instrument under which the Bank is acting in a fiduciary
capacity, or by the law applicable to such fiduciary account. In the case
of shares of stock which are held by a nominee of the Bank, such shares may
be voted by such person(s) authorized by such nominee.
--
1/18/94
<PAGE>
ARTICLE V
---------
STOCKS AND STOCK CERTIFICATES
-----------------------------
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
- ---------------------------------
evidenced by certificates which shall bear the signature of the Chairman of
the Board, the President, or a Vice President (which signature may be
engraved, printed or impressed), and shall be signed manually by the
Secretary, or any other officer appointed by the Chief Executive Officer
for that purpose.
In case any such officer who has signed or whose facsimile signature has been
placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as
if such officer had not ceased to be such at the time of its issue. Each
such certificate shall bear the corporate seal of the Bank, shall recite on
its fact that the stock represented thereby is transferable only upon the
books of the Bank properly endorsed and shall recite such other information
as is required by law and deemed appropriate by the Board. The corporate
seal may be facsimile engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
- ---------------------------------------
be transferable only upon the stock transfer books of the Bank and except
as hereinafter provided, no transfer shall be made or new certificates
issued except upon the surrender for cancellation of the certificate or
certificates previously issued therefor. In the case of the loss, theft, or
destruction of any certificate, a new certificate may be issued in place of
such certificate upon the furnishing of any affidavit setting forth the
circumstances of such loss, theft, or destruction and indemnity
satisfactory to the Chairman of the Board, the President, or a Vice
President. The Board of Directors, or the Chief Executive Officer, may
authorize the issuance of a new certificate therefor without the furnishing
of indemnity. Stock Transfer Books, in which all transfers of stock shall
be recorded, shall be provided.
The stock transfer books may be closed for a reasonable period and under such
conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful
purpose. In lieu of closing the transfer books, the Board may, in its
discretion, fix a record date
--
1/18/94
<PAGE>
and hour constituting a reasonable period prior to the day designated for
the holding of any meeting of the shareholders or the day appointed for the
payment of any dividend or for any other purpose at the time as of which
shareholders entitled to notice of and to vote at any such meeting or to
receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time
shall be entitled to notice of or to vote at such meeting or to receive
such dividends or to be treated as shareholders for such other purpose.
--
1/18/94
<PAGE>
ARTICLE VI
----------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 6.01. SEAL. The impression made below is an impression of the seal
- -------------------
adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION. The Seal may be affixed by any officer of the Bank to any
document executed by an authorized officer on behalf of the Bank, and any
officer may certify any act, proceedings, record, instrument or authority
of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
- ----------------------------
Committee, the Bank and each of its Branches shall be open for business on
such days and during such hours as the Chief Executive Officer of the Bank
shall, from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
- --------------------------
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of
the shareholders and of the Board of Directors, and reports of the
committees of the Board of Directors shall be recorded in the minute book
of the Bank. The minutes of each such meeting shall be signed by the
presiding Officer and attested by the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
- -----------------------------------
majority of the Directors.
--
1/18/94
<PAGE>
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
-------
The undersigned, designated to act as Trustee under the Indenture for
Americredit Corporation described in the attached Statement of Eligibility
and Qualification, does hereby consent that reports of examinations by
Federal, State, Territorial, or District Authorities may be furnished by
such authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One, NA
Dated: March 18, 1998 By: /s/ Jon Beacham
--------------------
Jon Beacham
Authorized Signer
--
1/18/94
