<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended December 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from ________________ to ________________
Commission File Number: 0-24286
EAGLE FINANCE CORP.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2464365
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1425 TRI-STATE PARKWAY, GURNEE, ILLINOIS 60031-4060
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 855-7150
- -------------------------------------------------- --------------
Securities registered pursuant to Section 12(b) of the Act:
- ----------------------------------------------------------
Name of each Exchange
Title of each class on which registered
------------------- ---------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
- ----------------------------------------------------------
COMMON STOCK, $0.01 PAR VALUE PER SHARE
---------------------------------------
(Title of Class)
DISCLOSURE ITEMS OMITTED:
- ------------------------
Items: 6, 7, 7A, 8, 9, 14(a)(1), 14(a)(2), 14(d)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this 10-K or
any amendment to this form 10-K. [X]
<PAGE>
The aggregate market value of voting common stock of Registrant held by
non-affiliates as of March 30, 1998 was approximately $1,134,000(1). At March
31, 1998, the total number of shares of common stock outstanding was
4,228,690.
DOCUMENTS INCORPORATED BY REFERENCE
None
_______________
(1) Based on the closing price of Registrant's common stock on March 30, 1998
on the Nasdaq National Market, and reports of beneficial ownership filed
by directors and executive officers of Registrant and by beneficial owners
of more than 5% of the outstanding shares of common stock of Registrant;
however, such determination of shares owned by affiliates does not
constitute an admission of affiliate status or beneficial interest in
shares of common stock of Registrant.
<PAGE>
EAGLE FINANCE CORP.
1997 FORM 10-K ANNUAL REPORT
________________________
TABLE OF CONTENTS
________________________
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C>
PART I
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 5
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . 6
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . 6
Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . 7
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . 7
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . 7
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . 7
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . 7
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . 8
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 8
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . 8
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . 8
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Eagle Finance Corp., a Delaware corporation (the "Company" or "Eagle"),
is a specialized financial services company. The Company's business consists
primarily of acquiring and servicing automobile retail installment sale
contracts ("Installment Contracts") for purchases of late model used
automobiles (cars and light trucks) by "non-prime" consumers, who typically
have limited access to traditional credit sources. To a lesser extent, the
Company's business consists of making direct consumer loans and finance
leases and purchases other retail installment sale contracts (collectively,
"Other Loans"), and offering, as agent, insurance and other consumer
finance-related products (collectively, "Insurance Products") to consumers
with whom it has financing relationships.
The Company maintains its corporate headquarters and a regional office
near Chicago in Gurnee, Illinois and operates a regional office in Tampa,
Florida. Although the Company has not acquired finance receivables since
October 1997, prior to such time, the Company had active relationships (I.E.,
the Company purchased Installment Contracts from such dealers during the
preceding 90 days) with approximately 149 dealers located primarily in
Illinois, Georgia, Florida, South Carolina and Wisconsin.
RECENT INDUSTRY DEVELOPMENTS
Easy access to capital in the mid-nineties created a significant
increase in competition. The increased competition created circumstances
where companies were acquiring loans of lesser quality in order to increase
market share. The lowering of underwriting standards was compounded by an
influx of inexperienced and under-trained employees unfamiliar with how to
buy and collect sub-prime finance receivables. Essentially the principles of
profitability were abandoned in favor of a growth strategy.
The Company belives that it recognized earlier than the rest of the
industry that loss rates on new business were increasing significantly.
Eagle exited certain markets, reduced volume and developed a proprietary
credit scoring index ("ECI") that enabled it, by early 1997, to better
identify loan applications that were unlikely to achieve satisfactory
profitability.
During 1997 and early 1998 there has been a major shakeout in the
sub-prime industry. Several major companies have announced plans to exit the
business and others have experienced serious financial difficulties. As a
result used car dealers have significantly fewer sources of sub-prime
financing.
As a result of its inability to obtain funding, Eagle ceased approving
and purchasing new finance receivables in October 1997 while honoring the
flow of previously approved transactions. The Company is presently engaged
in efforts to undertake a reorganization that would include the following
actions: (i) the conversion of a portion or all of the Company's
subordinated debt to equity; (ii) the infusion of additional equity; and
(iii) the replacement of the Company's source of financing. If Eagle's
efforts to reorganize are successful, it will resume acquiring new finance
receivables.
SERVICING AND COLLECTION
Consumers obligated under the Company's Installment Contracts are
expected to remit their monthly payments using a coupon book or a monthly
statement provided to them by the Company. In the event a consumer is
delinquent on one or more of his or her first three scheduled payments, the
Company attempts to contact the consumer by telephone within one day of the
payment due date. Addressing delinquencies early in its relationship with a
consumer provides the collection staff an opportunity to assess the
consumer's financial situation and the
<PAGE>
likelihood that the consumer will continue to be delinquent. If a payment
other than one of the first three scheduled payments is not received on its
due date, the Company mails a computer-generated written notice to the
consumer within five days of the due date and typically contacts the consumer
by telephone as a follow-up to the written notice. In the event of a
delinquency, the Company's trained collection specialists attempt to stay in
regular contact with the consumer until the delinquency is cured. If the
consumer does not cure the delinquency and misses a subsequent payment, the
Company typically repossesses the automobile promptly. In situations where
the delinquency is caused by the failure of the automobile to be in driveable
condition, the Company may make an accommodation to the consumer that will
allow the consumer to pay for repairs to the automobile. Accommodations may
also be made in certain circumstances where a consumer has previously
demonstrated a strong payment history.
Typically, 25% to 35% of the Installment Contracts serviced by the
Company require some collection efforts each month. The Company's target is
to have each collection employee service approximately 150 collection
accounts. As of December 31, 1997, the Company was meeting this target. All
collection activities are handled in the company's two regional offices.
Deficiency accounts and accounts that have been charged off are serviced by a
separate group of collectors who have repossession and recovery experience.
Repossessed automobiles are typically offered to dealers for bidding or
they are auctioned after the lapse of the applicable redemption period, if
any. Installment Contracts are charged off prior to becoming 90 days
contractually delinquent or, if earlier, upon repossession of the automobile.
Once an automobile is repossessed, the automobile is carried on the
Company's books as a repossession on hand at a value equal to the lower of
cost or market. In certain situations, automobiles may be reconditioned
and/or repaired prior to sale.
REGULATION
The Company's operations are subject to extensive supervision and
regulation under state and federal laws and regulations, which, among other
things, require that the Company obtain and maintain certain licenses and
qualifications, limit the interest rates, fees and other charges the Company
is allowed to charge, limit or prescribe certain other terms of the Company's
financings, require specified disclosures to consumers, govern the sale and
terms of insurance products offered by the Company and the insurers for which
it acts as agent, and limit the Company's rights to repossess and sell
collateral.
The Company is regulated in the states where it purchases Installment
Contracts and makes Other Loans. In addition, the repossession of
automobiles and other collateral is generally governed by the law of the
state in which the repossession takes place. In general, the Company's
business is conducted under licenses issued by individual states, and the
Company is subject to periodic examination by the individual states. State
licenses are generally revocable for cause.
The Company is also subject to state regulations governing insurance
agents in connection with its sales of credit and other insurance, which
require that insurance agents (such as the Company's personnel) be licensed,
govern the commissions that may be paid to agents in connection with the sale
of credit insurance and limit the premium amount charged for insurance.
THE INDUSTRY AND COMPETITION
The year 1996 through the first quarter of 1998 was a period of dramatic
upheaval in the indirect used auto lending segment of the non-prime
automobile finance industry. The indirect used auto lending segment is
relatively young, and has attracted many new publicly traded participants.
Within the segment, competition for new lending opportunities fostered growth
to the detriment of credit quality and altered pricing discipline. The
combination of deteriorating credit quality among consumers and declining
yields on new loans has contributed to reduced operating returns and results.
Many industry participants, including the Company, have adjusted their
operating strategies to improve credit quality and financial returns.
2
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The non-prime credit segment of the automobile finance industry is
highly fragmented and competitive. The prospect of high returns in this
segment has caused many finance companies to focus their operations more
heavily on the non-prime automobile finance business. During the last few
years, a number of finance companies have undertaken an initial public
offering, thereby improving their ability to compete. While other finance
companies represent substantial competition for the Company, the Company does
not believe that any finance company owns direct loans or installment
contracts representing more than 2% of the total volume of non-prime
automobile financing in the United States.
Existing and potential competitors also include a variety of financial
entities, including captive finance arms of major automobile manufacturers,
banks, savings and loans, independent finance companies, small loan
companies, industrial thrifts and leasing companies. Many of these financial
organizations do not consistently solicit business in, or have withdrawn
from, this credit market. The Company believes that captive finance
companies generally focus their marketing efforts on this market when
inventory control and/or production scheduling requirements of their parent
organizations dictate a need to enhance sales volumes and then exit the
market once these sales volumes are satisfied. The Company also believes that
increased regulatory oversight and capital requirements imposed by market
conditions and governmental agencies have limited the activities of many
banks and savings and loans in this credit market.
The Company believes that its established relationships with dealers,
prompt and consistent review of credit applications, prompt payment of
purchase prices for Installment Contracts, and high level of service enable
it to compete effectively for the purchase of Installment Contracts.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company and their ages and positions are as
follows:
<TABLE>
<CAPTION>
AGE AT
NAME APRIL 1, 1997 POSITION WITH THE COMPANY
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<S> <C> <C>
Charles F. Wonderlic 59 Chairman, Chief Executive Officer and
Director
Ronald B. Clonts 65 Vice Chairman and Director
Robert J. Braasch 51 President and Chief Financial Officer
Samuel M. Keith 50 Chief Operating Officer
Richard E. Wonderlic 32 Executive Vice President and Director
</TABLE>
CHARLES F. WONDERLIC has been the Chief Executive Officer of the Company
since 1980 and Chairman since 1984. He has served the Company in various
capacities since 1962, including President, Chief Financial Officer, Vice
President and Treasurer. He was named a Director in 1962. Prior to joining
the Company, he was employed by General Finance Loan Company. Mr. Wonderlic
currently is a member of the Executive Committee of the American Financial
Services Association and has continuously served as a Director of that
organization since 1974. Mr. Wonderlic received his M.B.A. degree from
Northwestern University, Evanston, Illinois.
RONALD B. CLONTS has been Vice Chairman of the Company since July, 1996.
Previously, since 1992, he was the Company's President. He was named a
Director of the Company in 1994. Prior to 1992 he served as Executive Vice
President or Vice President since joining the Company in 1962. He was
previously employed by General Finance Loan Company. Mr. Clonts received his
M.B.A. degree from Northwestern University, Evanston, Illinois. Mr. Clonts
is the brother-in-law of Charles F. Wonderlic.
3
<PAGE>
ROBERT J. BRAASCH was named President of the Company in July, 1996. He
joined the Company in January, 1994 as Chief Financial Officer and Treasurer
and was also named Senior Vice President in April, 1994. Prior to joining
the Company, Mr. Braasch spent seven years with USA Financial Services, Inc.
as Chief Financial Officer and subsequently Chief Executive Officer. Mr.
Braasch spent his previous 12 years in various positions with Household
Finance Corporation including six years as Treasurer. Mr. Braasch graduated
from DePaul University, Chicago, Illinois.
SAMUEL M. KEITH joined the company in August, 1996 as Chief Operating
Officer. Prior to joining the Company, Mr. Keith spent 24 years with General
Electric Capital Corporation. Mr. Keith held management positions in the
sales and marketing, credit administration, customer service, operations and
collections functions. Mr. Keith graduated from the University of
Mississippi, Oxford, Mississippi.
RICHARD E. WONDERLIC formally joined the Company in May, 1988 following
graduation from the University of Iowa and was named a Director of the
Company in 1994. The son of Charles F. Wonderlic, he became Executive Vice
President of the Company in April, 1994. Mr. Wonderlic supervises the
Company's operations serviced from its Gurnee, Illinois location. Mr.
Wonderlic has served in various Company locations as Assistant Supervisor,
Manager and Vice President and was instrumental in the development of the
Company's automobile finance program.
Officers are appointed by the Board of Directors and, except for those
officers with whom the Company has entered into employment agreements
(Messrs. Charles Wonderlic, Clonts and Braasch), serve at the pleasure of the
Board. Each employment agreement has a one-year term, with one-year
extensions thereafter unless the agreement is terminated, or the Company or
executive officer has provided a notice of non-renewal at least 180 days
prior to the anniversary thereof.
EMPLOYEES
The Company employs personnel experienced in areas of credit
origination, documentation, collection, recovery and administration. Most
traditional financing companies utilize personnel with multiple
responsibilities. In order to maximize efficiency, the Company employs
specialists in each area with a minimal crossover of duties. With
custom-designed software and sufficient staffing levels, the Company believes
it achieves prompt and effective communication with automobile dealers.
As of December 31, 1997, the Company had 152 full-time equivalent
employees, 30 of whom were involved in management, administration,
information systems or accounting, 7 in marketing and 115 in credit
processing, documentation, collection and recovery. The Company's five most
senior officers have an average of 26 years experience in the consumer
finance industry. None of the Company's employees is represented by a union
and the Company considers employee relations to be excellent.
ITEM 2. PROPERTIES
As of December 31, 1997, the Company maintained its corporate
headquarters and a regional office in Gurnee, Illinois, and also operated a
regional office located in Tampa, Florida. The Company recently closed its
Orlando regional office and consolidated the operations of the Orlando office
into the operations of the Tampa regional office. The following table sets
forth certain information with respect to the Company's offices:
4
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<TABLE>
<CAPTION>
YEAR OFFICE APPROXIMATE BASE
LOCATION OPENED SQUARE FEET MONTHLY RENT
- --------- ------ ----------- ------------
<S> <C> <C> <C>
Gurnee, IL (2) 1995 20,125 $ 19,820
Tampa, FL (3) 1968 11,000 $ 9,003
</TABLE>
Total property rental expense for the Company approximated $423,000,
$412,000 and $341,000 in 1997, 1996 and 1995, respectively.
ITEM 3. LEGAL PROCEEDINGS
In addition to the lawsuits described below, the Company is involved in
litigation in the normal course of business. The Company believes that the
resolution of such normal-course-of-business matters will not have a material
adverse effect on its financial position or results of operations. The
Company regularly initiates legal proceedings as a plaintiff in connection
with its routine collection activities.
1. REHM V. EAGLE FINANCE CORP. is pending in the United States
District Court for the Northern District of Illinois and is designated by
case number 96 C 2455. The plaintiff has filed a class action complaint
alleging that the Company and three of its directors and officers have
violated Section 10(b) of the Securities and Exchange Act and Rule 10b-5
promulgated thereunder. The litigation is still in its initial stages
although it has been pending for almost two years. The parties have
attempted to negotiate a settlement, and, while those attempts were
unsuccessful, a further attempt to settle will be made. Discovery is
beginning, and a schedule has been set for class certification. If there is
no settlement, the Company intends to defend vigorously the claims made in
the complaint.
2. CLEVELAND V. WALLACE AUTO SALES, INC. ET AL. was filed on September
19, 1996 in the United States District Court for the Northern District of
Illinois and is designated by Case Number 96 C 6045. The complaint alleges
that the Company has violated the Illinois Consumer Fraud Act, the Illinois
Sales Finance Agency Act and the Federal Racketeer Influenced and Corrupt
Organizations Act arising out of the Company's purchase of retail installment
sales contracts through which the plaintiffs purchased a used automobile.
The complaint is alleged as a class action, and includes unnamed, and still
unknown, directors and officers of the Company. The Company has filed a
Motion to Dismiss, and the parties are awaiting a ruling from the court.
Written discovery has been taken. The Company intends to defend vigorously
the claims made in the complaint.
3. SOLARMAR SYSTEMS CORP V. EAGLE FINANCE CORP., RONALD B. CLONTS ET
AL. was filed on September 14, 1995 in Circuit Court of the Eleventh Judicial
Circuit, Dade County, Florida, and is designated as Case No. 95-18056-CA-01.
This suit arose out of a settlement agreement entered in 1988 between the
plaintiff and the predecessor to the Company (the "Settlement Agreement"),
following the plaintiff's bankruptcy. The Company (E.F. Wonderlic &
Associates, Inc.) purchased promissory notes from the plaintiff that the
plaintiff had received in connection with the sale of hot water heating
systems to Florida homeowners. The complaint filed against the Company
alleges that the Company breached the Settlement Agreement and fraudulently
induced the plaintiff to enter into it. The plaintiff's complaint was
dismissed in June, 1996, with leave to amend, primarily on the
- ------------------------
(2) The information presented reflects the combined data for the Company's
headquarters (5,064 square feet) and the Illinois regional office (16,053
square feet), which are located in the same building, and a Kenosha,
Wisconsin payment processing office (827 square feet). The Gurnee facility
is leased from an unrelated party under three leases. One lease has a term
which expires on May 31, 2001; one has a term which expires on April 30,
2001; and one has a term which expires on November 30, 2000. Each lease
provides for a three-year extensions at the option of the Company. Initial
occupancy occurred on March 1, 1995.
(3)The Tampa office is leased from unrelated parties. The lease for the
Tampa office has a five-year term that expires on December 31, 2000.
4
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grounds that the claims were time-barred by the applicable Florida statute of
limitations. The plaintiff filed an amended complaint in June, 1996, which
asserted essentially the same claims of fraud, violations of the Federal
Racketeer Influenced and Corrupt Organizations Act and fraud in the
inducement. The Company filed a motion for summary judgment on the ground
that Solarmar's claims are barred by the applicable statute of limitations.
The Court partially granted the motion by dismissing the three breach of
contract claims. All other causes of action were not dismissed. The parties
are currently engaged in discovery and no trial date has been set. The
Company intends to defend vigorously the claims made in the complaint.
4. DRAKE V. EAGLE FINANCE CORP., was filed on June 13, 1997 in the
Circuit Court of Cook County, Illinois, and is designated as Case No. 97 L
6521. The class action Complaint alleges that he Company has violated the
Uniform Commercial Code and the Illinois Sales Finance Agency Act arising out
of the notice that the Company sent to the plaintiff's after the Company
repossessed their car. The Company has responded to the written discovery
initiated by the plaintiffs and has filed its answer, affirmative defenses
and counterclaim to the plaintiffs' second amended complaint. In its
counterclaim and affirmative defenses, the Company assets that it is entitled
to a set-off due to the plaintiffs' failures to comply with the terms of
their respective retail installment sales contracts. Due to the early stage
of the litigation, it is not possible to determine the likelihood of an
unfavorable outcome, however, the Company intends to defend vigorously the
claims made in the Complaint.
5. HALL V. EAGLE FINANCE CORP., was filed on July 28, 1997 in the
Circuit Court of Cook County, Illinois, and is designated as Case No. 97 CH
9328. The class action Complaint alleges that the Company has violated the
Illinois Wage Assignment Act arising out of the Company's attempt to enforce
the wage assignment that the plaintiff executed when he purchased a car. The
case is in its initial pleading stage, and no discovery has been taken. The
parties have reached a class wide settlement which must be approved by the
court. The approval process is proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed for quotation on the National
Market tier of the Nasdaq Stock Market-SM- under the symbol "EFCW." On
February 12, 1998, the Company was advised by NASD that the NASD's rule may
require the Company's stock be delisted during mid-May unless the trading
price increases to required levels. The high and low bid quotations for the
common stock during 1996 and 1997, as reported by the National Association of
Securities Dealers, Inc., are set forth in the following table. Such
over-the-counter bid quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
1997 1996
------------------ ----------------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
March 31 . . . . . . . . . . . . . $4 1/2 $2 3/4 $14 1/4 $8 1/2
June 30 . . . . . . . . . . . . . . $2 3/8 $1 3/4 $ 9 1/4 $6 1/2
September 30 . . . . . . . . . . . $5 $1 5/8 $ 6 7/8 $5 1/4
December 31 . . . . . . . . . . . . $1 3/4 $ 3/4 $ 8 1/4 $5
</TABLE>
6
<PAGE>
Harris Trust and Savings Bank serves as the transfer agent for the
Company's common stock. As of March 25, 1998, the Company had 233
stockholders of record, exclusive of holders who own their shares in "street"
or nominee names and approximately 1,100 beneficial stockholders.
The Company has not paid and does not presently intend to pay cash
dividends on its common stock. The Company anticipates that its earnings for
the foreseeable future will be retained for use in the operation and
expansion of its business. Payment of cash dividends, if any, in the future
will be at the sole discretion of the Company's Board of Directors and will
depend upon the Company's financial condition, earnings, current and
anticipated capital requirements, terms of indebtedness and other factors
deemed relevant by the Company's Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
Omitted pursuant to Rule 12b-25 promulgated under the Securities Exchange
Act of 1934, as amended ("Rule 12b-25")
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Omitted pursuant to Rule 12b-25.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted pursuant to Rule 12b-25.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Omitted pursuant to Rule 12b-25.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Omitted pursuant to Rule 12b-25.
7
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company hereby incorporates by reference the information called for
by Item 10 of this Form 10-K regarding directors of the Company from the
section entitled "Election of Directors" of the Company's 1998 Proxy
Statement. The required information with respect to the Company's executive
officers is provided in Item 1 hereof under the heading "Executive officers
of the Company."
ITEM 11. EXECUTIVE COMPENSATION
The Company hereby incorporates by reference the information called for
by Item 11 of this Form 10-K from the section entitled "Executive
Compensation": of the Company's 1998 Proxy Statement; provided, however, the
section entitled "Board Compensation Committee Report on Executive
Compensation" is specifically not incorporated into this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company hereby incorporates by reference the information called for
by Item 12 of this Form 10-K from the section entitled "Security Ownership Of
Certain Beneficial Owners" of the Company's 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company hereby incorporates by reference the information called for
by Item 13 of this Form 10-K from the section entitled "Transactions with
Directors, Officers and Associates" of the Company's 1998 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
(a) 1. Financial Statements:
Omitted pursuant to Rule 12b-25.
2. The following financial schedules for the years 1995, 1994
and 1993 are submitted herewith:
Omitted pursuant to Rule 12b-25.
3. Exhibits.
</TABLE>
The following list sets forth the exhibits to this Form 10-K as required by
Item 601 of Regulation S-K. Certain exhibits are filed herewith, while the
remaining exhibits are hereby incorporated by reference to documents
previously filed with the Securities and Exchange Commission. Exhibits
hereto incorporated by reference to such other filed documents are
indicated by an asterisk (*).
8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO DESCRIPTION
- ------- -----------
<S> <C>
3.1* Restated Certificate of Incorporation of the Company
3.2* Restated Bylaws of the Company
4.1* Form of certificate evidencing Common Stock of the Company
4.2* Indenture dated as of April 15, 1995 between the Company and LaSalle
National Bank, as Trustee
4.3* First Supplemental Indenture dated as of April 28, 1995 between the
Company and LaSalle National Bank, as Trustee, including form of note
10.1* Lease Agreements dated June 1, 1993 between Upland Farms and Wonderlic
& Associates, Inc.
10.2* Intercompany Services Agreement dated as of January 1, 1994
10.3* Tax Indemnification Agreement
10.4* Servicing Agreement dated February 26, 1993 between Wonderlic &
Associates, Inc. and General Electric Capital Corporation
10.5* Amendment No. 1 to Servicing Agreement dated March 22, 1993 between
Wonderlic & Associates, Inc. and General Electric Capital Corporation
10.6* Interest Rate Protection Agreement dated July 1, 1992 between the
Company and Harris Trust and Savings Bank
10.7* Eagle Finance Corp. 1994 Stock Incentive Plan
10.8* Form of Stock Option Agreement
10.9* Form of Employment Agreement of Charles F. Wonderlic
10.10* Form of Employment Agreement of Ronald B. Clonts
10.10(a)* Amendment to Employment Agreement of Ronald B. Clonts, dated January
1, 1997.
10.11* Form of Employment Agreement of Robert J. Braasch
10.12* Form of Indemnification Agreement
10.13* Computer System Lease dated July 31, 1993 between Wonderlic Personnel
Test, Inc. and Wonderlic & Associates, Inc.
10.14* Master Note Agreement dated as of January 1, 1994 between Wonderlic &
Associates, Inc. and Prominent Mortgage Corp.
10.15* First Amendment to Master Note Agreement dated as of August 1, 1994
between Eagle Finance Corp. and Prominent Mortgage Corp.
10.16* Form of Debenture Agreement
10.17* Form of Subordinated Debentures
10.18* Form of Subordinated Notes
10.19* Form of Dealer Agreement
10.20* Form of Company Credit Application
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO DESCRIPTION
- ------- -----------
<S> <C>
10.21* Asset Purchase Agreement dated as of September 27, 1994 between
General Electric Capital Corporation and Eagle Finance Corp.
10.22* Amendment No. 1 to Asset Purchase Agreement, dated as of March 31,
1995, between General Electric Capital Corporation and Eagle Finance
Corp.
10.23* Form of Master Lease Agreement
10.24* Assignment and Assumption Agreement dated as of August 1, 1994 between
Wonderlic Personnel Test, Inc. and Eagle Finance Corp.
10.25* Asset Purchase Agreement dated as of June 25, 1996 between General
Electric Capital Corporation and Eagle Finance Corp.
10.26* Amended and Restated Servicing Agreement dated as of June 25, 1996
between General Electric Capital Corporation and Eagle Finance Corp.
10.27* Pooling and Servicing Agreement dated as of September 1, 1996 among
Eagle Auto Funding Corp., Eagle Finance Corp. and Harris Trust and
Savings Bank
10.28* Loan Sale and Contribution Agreement dated as of September 1, 1996
between Eagle Finance Corp. and Eagle Auto Funding Corp.
10.29* Waiver Letter from General Electric Capital Corporation dated March
26, 1997
10.30 Waiver Letter from General Electric Capital Corporation dated January
29, 1998
11 Statement Regarding Computation of Net Earnings Per Share. Omitted
pursuant to Rule 12b-25.
12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
Omitted pursuant to Rule 12b-25.
23 Consent of KPMG Peat Marwick LLP. Omitted pursuant to Rule 12b-25.
27 Financial Data Schedule. Omitted pursuant to Rule 12b-25.
(b) The Company did not file any Current Report on Form 8-K during the
fourth quarter of 1997.
(c) Exhibits - those exhibits listed above without an asterisk are filed
herewith.
(d) The following financial statement schedules have been excluded from
the annual report to stockholders by Rule 14a-3(b) and are filed
herewith: Omitted pursuant to Rule 12b-25.
</TABLE>
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 31, 1998.
EAGLE FINANCE CORP.
By: CHARLES F. WONDERLIC
------------------------------------------
Charles F. Wonderlic
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
CHARLES F. WONDERLIC Chairman, Chief Executive )
- ------------------------- Officer and Director )
Charles F. Wonderlic (Principal Executive Officer) )
)
RONALD B. CLONTS Vice Chairman and Director )
- ------------------------- )
Ronald B. Clonts )
)
ROBERT J. BRAASCH President and Chief Financial )
- ------------------------- Officer (Principal Financial )
Robert J. Braasch and Accounting Officer) )
)
RICHARD E. WONDERLIC Executive Vice President )
- ------------------------- and Director ) March 31, 1998
Richard E. Wonderlic )
)
ROBERT H. ARNOLD Director )
- ------------------------- )
Robert H. Arnold )
)
ROBERT L. JOOSS Director )
- ------------------------- )
Robert L. Jooss )
)
WALTER J. O'BRIEN Director )
- ------------------------- )
Walter J. O'Brien )
)
E. BRUCE FREDRIKSON Director )
- ------------------------- )
E. Bruce Fredrikson )
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO DESCRIPTION
- ------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit No. 3.1 to Registration Statement on Form S-1,
File No. 33-77828)
3.2 Restated Bylaws of the Company (incorporated by reference to Exhibit
No. 3.2 to Registration Statement on Form S-1, File No. 33-77828)
4.1 Form of certificate evidencing Common Stock of the Company
(incorporated by reference to Exhibit No. 4.1 to Registration
Statement on Form S-1, File No. 33-77828)
4.2 Indenture dated as of April 15, 1995 between the Company and LaSalle
National Bank, as Trustee (incorporated by reference to Exhibit No. 2
to Current Report on Form 8-K, dated May 5, 1995)
4.3 First Supplemental Indenture dated as of April 28, 1995 between the
Company and LaSalle National Bank, as Trustee, including form of note
(incorporated by reference to Exhibit No. 3 to Current Report on Form
8-K, dated May 5, 1995)
10.1 Lease Agreements dated June 1, 1993 between Upland Farms and Wonderlic
& Associates, Inc. (incorporated by reference to Exhibit No. 10.1 to
Registration Statement on Form S-1, File No. 33-77828)
10.2 Intercompany Services Agreement dated as of January 1, 1994
(incorporated by reference to Exhibit No. 10.2 to Registration
Statement on Form S-1, File No. 33-77828)
10.3 Tax Indemnification Agreement (incorporated by reference to Exhibit
No. 10.3 to Registration Statement on Form S-1, File No. 33-77828)
10.4 Servicing Agreement dated February 26, 1993 between Wonderlic &
Associates, Inc. and General Electric Capital Corporation
(incorporated by reference to Exhibit No. 10.4 to Registration
Statement on Form S-1, File No. 33-77828)
10.5 Amendment No. 1 to Servicing Agreement dated March 22, 1993 between
Wonderlic & Associates, Inc. and General Electric Capital Corporation
(incorporated by reference to Exhibit No. 10.5 to Registration
Statement on Form S-1, File No. 33-77828)
10.6 Interest Rate Protection Agreement dated July 1, 1992 between the
Company and Harris Trust and Savings Bank (incorporated by reference
to Exhibit No. 10.11 to Registration Statement on Form S-1, File No.
33-77828)
10.7 Eagle Finance Corp. 1994 Stock Incentive Plan (incorporated by
reference to Exhibit No. 10.12 to Registration Statement on Form S-1,
File No. 33-77828)
10.8 Form of Stock Option Agreement (incorporated by reference to Exhibit
No. 4.4 to Registration Statement on Form S-8, File No. 33-89132)
10.9 Form of Employment Agreement of Charles F. Wonderlic (incorporated by
reference to Exhibit No. 10.13 to Registration Statement on Form S-1,
File No. 33-77828)
10.10 Form of Employment Agreement of Ronald B. Clonts (incorporated by
reference to Exhibit No. 10.14 to Registration Statement on Form S-1,
File No. 33-77828)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO DESCRIPTION
- ------- -----------
<S> <C>
10.10(a) Amendment to Employment Agreement of Ronald B. Clonts, dated
January 1, 1997 (incorporated by reference to Exhibit No. 10.11(a)
to Form 10-K for the Year Ended December 31, 1996)
10.11 Form of Employment Agreement of Robert J. Braasch (incorporated by
reference to Exhibit No. 10.15 to Registration Statement on Form S-1,
File No. 33-77828)
10.12 Form of Indemnification Agreement (incorporated by reference to
Exhibit No. 10.16 to Registration Statement on Form S-1, File No.
33-77828)
10.13 Computer System Lease dated July 31, 1993 between Wonderlic Personnel
Test, Inc. and Wonderlic & Associates, Inc. (incorporated by reference
to Exhibit No. 10.17 to Registration Statement on Form S-1, File No.
33-77828)
10.14 Master Note Agreement dated as of January 1, 1994 between Wonderlic &
Associates, Inc. and Prominent Mortgage Corp. (incorporated by
reference to Exhibit No. 10.18 to Registration Statement on Form S-1,
File No. 33-77828)
10.15 First Amendment to Master Note Agreement dated as of August 1, 1994
between Eagle Finance Corp. and Prominent Mortgage Corp. (incorporated
by reference to Exhibit No. 10.18(a) to the Quarterly Report on Form
10-Q for the Quarterly Period Ended September 30, 1994)
10.16 Form of Debenture Agreement (incorporated by reference to Exhibit No.
10.19 to Registration Statement on Form S-1, File No. 33-77828)
10.17 Form of Subordinated Debentures (incorporated by reference to Exhibit
No. 10.20 to Registration Statement on Form S-1, File No. 33-77828)
10.18 Form of Subordinated Notes (incorporated by reference to Exhibit No.
10.21 to Registration Statement on Form S-1, File No. 33-77828)
10.19 Form of Dealer Agreement (incorporated by reference to Exhibit No.
10.22 to Registration Statement on Form S-1, File No. 33-77828)
10.20 Form of Company Credit Application (incorporated by reference to
Exhibit No. 10.23 to Registration Statement on Form S-1, File No.
33-77828)
10.21 Asset Purchase Agreement dated as of September 27, 1994 between
General Electric Capital Corporation and Eagle Finance Corp.
(incorporated by reference to Exhibit No. 10.26 to the Quarterly
Report on Form 10-Q for the Quarterly Period ending September 30,
1994)
10.22 Amendment No. 1 to the Asset Purchase Agreement, dated as of March 31,
1995, between General Electric Capital Corporation and Eagle Finance
Corp. (incorporated by reference to Exhibit No. 10.25(a) to
Registration Statement on Form S-1, File No. 33-90754)
10.23 Form of Master Lease Agreement (incorporated by reference to Exhibit
No. 10.26 to the Annual Report on Form 10-K for the Year ended
December 31, 1994)
10.24 Assignment and Assumption Agreement dated as of August 1, 1994 between
Wonderlic Personnel Test, Inc. and Eagle Finance Corp. (incorporated
by reference to Exhibit No. 10.27 to the Annual Report on Form 10-K
for the Year Ended December 31, 1994)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO DESCRIPTION
- ------- -----------
<S> <C>
10.25 Asset Purchase Agreement dated as of June 25, 1996 between General
Electric Capital Corporation and Eagle Finance Corp. (incorporated by
reference to Exhibit No. 10.3 to the Quarterly Report on Form 10-Q for
the Quarterly Period Ended June 30, 1996)
10.26 Amended and Restated Servicing Agreement dated as of June 25, 1996
between General Electric Capital Corporation and Eagle Finance Corp.
(incorporated by reference to Exhibit No. 10.4 to the Quarterly Report
on Form 10-Q for the Quarterly Period Ended June 30, 1996)
10.27 Pooling and Servicing Agreement dated as of September 1, 1996 among
Eagle Auto Funding Corp., Eagle Finance Corp. and Harris Trust and
Savings Bank (incorporated by reference to Exhibit No. 10.32 to Form
10-K for the Year Ended December 31, 1996)
10.28 Loan Sale and Contribution Agreement dated as of September 1, 1996
between Eagle Finance Corp. and Eagle Auto Funding Corp. (incorporated
by reference to Exhibit No. 10.33 to Form 10-K for the Year Ended
December 31, 1996)
10.29 Waiver Letter from General Electric Capital Corporation dated March
26, 1997 (incorporated by reference to Exhibit No. 10.34 to Form 10-K
for the Year Ended December 31, 1996)
10.30 Waiver Letter from General Electric Capital Corporation dated January
29, 1998
11 Statement Regarding Computation of Net Earnings Per Share. Omitted
pursuant to Rule 12b-25
12 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
Omitted pursuant to Rule 12b-25
23 Consent of KPMG Peat Marwick LLP. Omitted pursuant to Rule 12b-25
27 Financial Data Schedule. Omitted pursuant to Rule 12b-25
</TABLE>
\<PAGE>
[LETTERHEAD OF GECC]
January 29, 1998
BY FACSIMILE
Robert J. Braasch
Chief Financial Officer
Eagle Finance Corp.
1425 Tri-State Parkway
Suite 140
Gurnee, IL 60031
Dear Robert:
Eagle Finance Corp. ("Eagle") and General Electric Capital Corporation
("GE Capital") entered into a certain Asset Purchase Agreement dated
September 27, 1994 and June 25, 1996 (the "Asset Purchase Agreements"), and
the Amended and Restated Servicing Agreement, dated as of June 25, 1996 (the
"Servicing Agreement") pursuant to which GE capital agreed to (i) purchase
from time to time portfolios of motor vehicle retail installment contracts
from Eagle, and (ii) permit Eagle to service such Contracts, all pursuant to
the terms and conditions set forth in the Asset Purchase Agreements and the
Servicing Agreement (collectively, the "Agreements"). Any capitalized terms
used herein without definition shall have the meaning given to such terms in
the Agreements.
Section 9.0(g) of the Servicing Agreement requires that Eagle's Interest
Coverage shall not be less than 1.15. Eagle's Interest Coverage for the
quarter ended September 30, 1997 was -0.08, was -0.58 for the month ending
October 31, 1997, and was -0.61 for the month ending November 30, 1997.
Eagle has requested that GE Capital waive the defaults arising upon those
covenant violations. In consideration for the terms set forth in this letter
agreement, GE Capital agrees and hereby does waive, effective as of September
30, 1997, compliance by Eagle with the provisions set forth in Section 9.0(g)
of the Servicing Agreement for the period from July 1, 1997 through and
including November 30, 1997. From and after December 1, 1997, Eagle must be
in compliance with the Interest Coverage requirement as stated in Section
9.0(g) of the Servicing Agreement.
In consideration for the accommodations granted herein, the parties
agree as follows:
(1) Eagle shall provide monthly financial statements within thirty (30)
calendar days from each month end;
(2) Financial covenant compliance will be measured on a monthly basis;
<PAGE>
(3) Going forward, Interest Coverage will be calculated on a year to date
basis. However, for the remaining of fiscal year 1997, Interest
Coverage will exclude all performance prior to October 1, 1997;
(4) In the event that Eagle is purchased, or the ownership or management
structure of Eagle changes materially (the materiality of which shall
be determined in GE Capital's sole and reasonable discretion) and
unless GE Capital consents to the proposed change in management or
ownership of Eagle (which consent shall be given to GE Capital's sold
and reasonable discretion), then GE Capital shall be entitled to
remove or replace Eagle as servicer of the Contracts.
Without in any way limiting GE Capital's rights under paragraph four above, it
is GE Capital's present intention to evaluate its right to exercise paragraph
four above based upon the proposed owner, manager or servicer's ability to
service GE Capital's portfolio in a manner consistent with GE Capital's
expectations and requirements which shall be determined in its sole discretion.
Eagle acknowledges and agrees that the expression of GE Capital's present
intention shall not limit GE Capital's rights under paragraph four above or be
the basis for any claim, counterclaim of any kind against GE Capital.
Except as expressly provided in this waiver, all terms and conditions of
the Agreement shall continue in full force and effect. This waiver shall be
effective only in the specific instance, for the specific provisions, and for
the specific period for which it has been given.
This waiver may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute one and the same instrument.
Very truly yours,
General Electric Capital Corporation
By: /S/ JODY FILUT
-------------------------
Jody Filut
Title: Account Executive
Acknowledged, accepted and agreed:
Eagle Finance Corp.
By: /S/ ROBERT J. BRAASCH
--------------------------
Robert J. Braasch
Title: President
