UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Commission File Number: 0-25760
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the
Quarterly Period ended September 30, 1996.
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the
Transition Period From ______ to _____.
GENERAL ACCEPTANCE CORPORATION
(Exact name of Registrant as specified in its charter)
Indiana 35-1739977
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1025 Acuff Road
Bloomington, Indiana 47404
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number: (812) 337-6000
Indicate by check mark whether the Registrant (1) has filed all reports
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 report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No ____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, no par value, 25,000,000 shares authorized, 6,022,000
shares issued and outstanding as of November 13, 1996.
<PAGE>
FORM 10-Q
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
Page
----
PART I Financial Information 3
Item 1. Financial Statements 3
Balance Sheets 3
Statements of Income 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
7
Revenues 8
Expenses 9
Liquidity and Capital Resources 11
Forward-Looking Statements 12
PART II. Other Information 13
Item 1. Legal Proceedings 13
Item 2. Changes In Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
PART I
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
General Acceptance Corporation
Balance Sheets
<S> <C> <C>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
-------------------- -------------------
(UNAUDITED) (NOTE 1)
ASSETS
Contracts receivable $ 125,177,425 $ 129,392,670
Allowance and discount available for credit losses (16,175,296) (19,512,815)
-------------------- -------------------
Contracts receivable, net 109,002,129 109,879,855
Cash and cash equivalents 1,805,132 557,206
Repossessions 11,416,831 5,223,623
Purchased and trade automobile inventory 2,531,570 811,820
Property and equipment, net 2,491,528 1,672,475
Taxes receivable 1,530,296 2,300,475
Deferred tax asset 2,260,000 2,260,000
Other assets 3,804,708 1,674,847
Total assets $ 134,842,194 $ 124,380,301
==================== ===================
LIABILITIES
Revolving line of credit $ 97,692,466 $ 94,165,243
Bank line of credit 4,300,000 ---
Accounts payable and accrued expenses 5,329,770 1,605,484
Dealer participation reserves available
for credit losses 2,427,350 1,865,681
Total liabilities 109,749,586 97,636,408
STOCKHOLDERS' EQUITY
Preferred stock; no par value; authorized
shares - 5,000,000; no shares issued or outstanding --- ---
Common stock; no par value;
authorized shares - 25,000,000;
issued and outstanding shares - 6,022,000 in 1996
and 1995 29,792,573 29,792,573
Retained earnings (deficit) (4,699,965) (3,048,680)
-------------------- -------------------
Total stockholders' equity 25,092,608 26,743,893
-------------------- -------------------
Total liabilities and stockholders' equity $ 134,842,194 $ 124,380,301
==================== ===================
<FN>
See accompanying notes
</TABLE>
.
<TABLE>
<CAPTION>
General Acceptance Corporation
Statements of Income
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
- ------------------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1996 1995
------------ ----------- ------------ -----------
Revenues:
Interest and discount $ 7,036,378 $ 6,989,693 $20,528,071 $16,817,548
Ancillary products 335,857 82,174 1,391,249 755,400
Other 748,733 390,360 1,578,890 1,129,285
------------ ----------- ------------ -----------
Total revenues 8,120,968 7,462,227 23,498,210 18,702,233
Expenses:
Interest 2,184,597 1,619,654 6,661,289 4,282,860
Salaries and employee benefits 2,275,135 1,403,935 6,575,416 3,405,495
Marketing 468,862 117,200 982,275 359,803
Provision for credit losses 5,493,424 157,781 7,619,558 722,684
Other 1,628,764 1,466,563 4,411,814 3,574,322
Total expenses 12,050,782 4,765,133 26,250,352 12,345,164
------------ ----------- ------------ -----------
Income (loss) before income
tax (3,929,814) 2,697,094 (2,752,142) 6,357,069
Income tax (benefit) (1,571,857) 1,078,590 (1,100,857) 563,000
Net income (loss) $(2,357,957) $ 1,618,504 $(1,651,285) $ 5,794,069
============ =========== ============ ===========
HISTORICAL HISTORICAL HISTORICAL PRO FORMA
------------ ----------- ------------ -----------
Income (loss) before income
tax $(3,929,814) $ 2,697,094 $(2,752,142) $ 6,357,069
Income tax (benefit) (1,571,857) 1,078,590 (1,100,857) 2,542,828
Net income (loss) $(2,357,957) $ 1,618,504 $(1,651,285) $
3,814,241
===========
Net income per share $ (0.39) $ 0.27 $ (0.27) $ 0.68
=========== ============ ===========
Weighted average shares outstanding
6,022,000 6,078,839 6,022,000 5,630,569
============ =========== ============ ===========
<FN>
See accompanying notes
</TABLE>
.
<PAGE>
<TABLE>
<CAPTION>
General Acceptance Corporation
Statements of Cash Flows
(Unaudited)
<S> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
1996 1995
------------- ---------------------------------
OPERATING ACTIVITIES
Net income (loss) $ (1,651,285) $ 5,794,069
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property and equipment 488,699 238,978
Amortization of deferred costs and revenues,
net 122,932 (390,856)
Provision for credit losses 7,619,558 722,684
Deferred income tax --- (1,300,000)
Changes in operating assets and liabilities:
Increase in other assets and
taxes receivable (1,359,682) (1,280,693)
Increase in accounts payable
and accrued expenses 3,724,286 772,116
Net cash provided by operating activities 8,944,508 4,556,298
INVESTING ACTIVITIES
Cost of acquiring or originating contracts receivable (61,290,599) (73,462,548)
Principal collected on contracts receivable 47,074,546 17,534,011
Purchases of property and equipment (1,307,752) (874,086)
Net cash used in investing activities (15,523,805) (56,802,623)
FINANCING ACTIVITIES
Borrowings on revolving line of credit 79,477,381 92,480,901
Repayments of revolving line of credit (75,950,158) (57,200,406)
Borrowings on bank line 4,300,000 ---
Proceeds from issuance of common stock --- 29,739,573
Repayment of notes payable to related parties --- (2,956,998)
Dividends paid --- (9,459,666)
Net cash provided by financing activities 7,827,223 52,603,404
------------- ---------------------------------
Net increase in cash and cash equivalents 1,247,926 357,079
Cash and cash equivalents at beginning of period 557,206 304,185
Cash and cash equivalents at end of period $ 1,805,132 $ 661,264
============= =================================
<FN>
See accompanying notes.
</TABLE>
General Acceptance Corporation
Notes to Financial Statements
(Unaudited)
September 30, 1996
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine
month periods ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. The
balance sheet as of December 31, 1995 has been derived from the audited
financial statements as of that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. For further information, refer to the
financial statements and footnotes included in the Company's annual report on
Form 10-K for the year ended December 31, 1995.
Note 2. Pro Forma Financial Data
Prior to the Company's initial public offering in April 1995, it was an S
Corporation and therefore not subject to income taxes. Pro forma data are
therefore presented for 1995 to reflect a provision for income taxes as if the
Company had been subject to income taxes at an assumed combined rate of 40%.
Note 3. Net Income Per Share
The net income per share amounts for both 1996 periods and for the
three months ended September 30, 1995, are based on the weighted average
number of common shares and dilutive common stock equivalents outstanding
during the periods. The net income per share amount for the nine months ended
September 30, 1995, is based on the weighted average common shares outstanding
increased by the number of shares (assumed issued at $17.00 per share) whose
proceeds would have been used to fund distributable S Corporation earnings.
Note 4. Bank Line of Credit
During the third quarter of 1996 the Company obtained a $4.5 million
revolving line of credit with a bank. Borrowings under the line of credit are
secured by repossessions and purchased and trade automobile inventory. The
line of credit bears interest at the bank's prime rate (8.25% as of September
30, 1996) and expires April 30, 1997. Borrowings under the line were $4.3
million as of September 30, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS
<TABLE>
<CAPTION>
Information regarding the components of contracts receivable, net is
presented below.
<S> <C> <C>
SEPTEMBER 30, DECEMBER 31,
1996 1995
--------------- --------------
Contractually scheduled payments $ 156,845,519 $ 165,865,851
Add (deduct):
Unearned interest income (32,255,229) (36,920,628)
Accrued interest income 537,962 298,059
Unearned insurance commissions (30,201) (128,718)
Net deferred acquisition costs 79,374 278,106
--------------- --------------
Contracts receivable 125,177,425 129,392,670
Allowance and discount available
for credit losses (16,175,296) (19,512,815)
Contracts receivable, net $ 109,002,129 $ 109,879,855
=============== ==============
</TABLE>
<TABLE>
<CAPTION>
Changes in the components of amounts available for credit losses during the three and nine
month periods ended September 30, 1996 are presented below.
<S> <C> <C> <C>
DEALER PARTICIPATION RESERVES
ALLOWANCE AND DISCOUNT
TOTAL
-------------
Balance December 31, 1995 $ 19,512,815 $ 1,865,681 $ 21,378,496
Additions 12,550,274 3,450,240 16,000,514
Charge-offs, net (15,887,793) (2,888,571) (18,776,364)
Balance September 30, 1996 $ 16,175,296 $ 2,427,350 $ 18,602,646
=============================== =============
Balance June 30, 1996 12,949,984 1,877,695 14,827,679
Additions 7,089,898 1,268,996 8,358,894
Charge-offs, net (3,864,586) (719,341) (4,583,927)
------------------------ ------------------------------- -------------
Balance September 30, 1996 $ 16,175,296 $ 2,427,350 $ 18,602,646
======================== =============================== =============
</TABLE>
<TABLE>
<CAPTION>
Information on the Company's total available for credit losses and delinquency
ratio is presented below.
<S> <C> <C>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------- ------------------
Total available for credit losses as a
percentage of contracts receivable (1) 14.86% 16.50%
Delinquency ratio (2) 1.67% 3.60%
<FN>
(1) Total available for credit losses is defined as the sum of allowance and
discount available for credit losses and dealer participation reserves available for
credit losses.
(2) Delinquency ratio is defined as contracts receivable, gross relating to
contracts which were contractually past due 60 days or more, as a percentage of
</TABLE>
THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996, COMPARED TO THREE AND
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995
Revenues
Interest and discount revenue remained flat at $7.0 million in both the
third quarter of 1995 and 1996, and increased from $16.8 million for the first
nine months of 1995 to $20.5 million for the same period of 1996. The
increase in the first nine months of 1996 over the comparable 1995 period was
due primarily to a higher level of contracts receivable owned by the Company,
particularly during the early part of 1996, partially offset by a lower
average yield on the contracts. As of September 30, 1996, contracts
receivable totaled $125.2 million as compared to $124.6 million as of
September 30, 1995. The number of active dealers (defined as dealers from
whom the Company purchased a contract that was outstanding as of the end of a
period) was 1,460 as of September 30, 1996 as compared to 1,145 as of
September 30, 1995.
The average yield on contracts receivable for the third quarter of 1995
was 24.2% compared to 22.2% for the same period of 1996, and was 24.0% for the
first nine months of 1995 compared to 21.7% for the same period of 1996. The
lower yields in both 1996 periods as compared to the same 1995 periods were
due primarily to the Company's decision, effective May 1995, to enter into
agreements with its dealers to apply the difference, if any, between the
contract interest rate and the rate estimated by the Company as necessary to
produce a satisfactory return on the contract, to a dealer participation
reserve available for credit losses. The average yield on contracts
receivable is expected to remain in the 21-22% range through the end of 1996.
Ancillary products revenue increased from $82,000 for the third quarter
of 1995 to $336,000 for the same period of 1996, or 308.7%, and from $755,000
for the first nine months of 1995 to $1.4 million for the same period of 1996,
or 84.2%. The increase in the third quarter of 1996 over the comparable
period of 1995 was primarily due to increased net revenues from a secured Visa
credit card offered by the Company as co-brander and, to a lesser extent, to
an increase in revenues from a warranty program offered by the Company. The
increase in ancillary products revenue for the first nine months of 1996 as
compared to the same period of 1995 was due to an increase in net revenues
from the secured Visa credit card and to an increase in revenues from the
warranty program offered by the Company, partially offset by the Company's
decision to discontinue offering, effective March 22, 1995, a Gap protection
product as a result of regulatory uncertainties surrounding the product.
For the first nine months of 1996, the secured Visa credit card, together
with another product with which it is packaged, generated net revenues of
approximately $776,000. These net revenues were primarily derived from the
sale of the product package to customers who currently have contracts
outstanding with the Company. It is expected that net revenues derived from
the sale of this product package to customers who currently have contracts
outstanding with the Company will be lower in 1997 than in 1996. In the
fourth quarter of 1996, the Company began marketing a similar program to
consumers who do not have contracts outstanding with the Company. The success
of this program can not yet be estimated.
Other revenues increased from $390,000 for the third quarter of 1995 to
$749,000 for the same period of 1996, or 91.8%, and increased from $1.1
million for the first nine months of 1995 to $1.6 million for the same period
of 1996, of 39.8%. The increase in the third quarter of 1996 from the
comparable period of 1995 was due to higher gross profit generated by the sale
of purchased and trade inventory at the GAC sales lots, partially offset by
lower training fees earned by the Company. The increase for the first nine
months of 1996 from the comparable period of 1995 was due to higher gross
profit generated by the sale of purchased and trade inventory at the GAC sales
lots, and to a $250,000 reduction in the special reserve for losses on
receivables from a dealer as a result of the reduction of amounts owed to the
Company by that dealer, partially offset by lower training fees earned by the
Company. Effective January 1, 1996, the training fee was replaced with a $35
per contract training and processing fee, which is deferred and amortized into
income over the estimated average life of the contracts. The previous
training fee, charged for new dealers in a $2,500 lump sum or $100 per
contract for the first 35 contracts, was recognized as income upon receipt.
Expenses
Interest expense increased from $1.6 million for the third quarter of
1995 to $2.2 million for the same period of 1996, or 34.9%, and from $4.3
million for the first nine months of 1995 to $6.7 million for the same period
of 1996, or 55.5%. The increase in the third quarter of 1996 over the
comparable 1995 period was due to the higher average level of borrowings
required to fund the higher level of contracts receivable in 1996, and
interest on borrowings under a new bank line of credit closed during the third
quarter of 1996, partially offset by a lower interest rate environment in 1996
as compared to 1995. The increase for the first nine months of 1996 over the
comparable period of 1995 was due to the higher average level of borrowings
required to fund the higher level of contracts receivable in 1996, an increase
in the interest rate charged by the Company's primary lender for borrowings on
the line of credit from LIBOR plus 3.0% to LIBOR plus 4.0% for the period from
March 15, 1996 to June 30, 1996, partially offset by a lower interest rate
environment in 1996 compared to 1995. Average borrowings on the Company's
$100.0 million revolving line of credit with GE Capital (the "Line") were
$76.2 million for the third quarter of 1995 compared to $97.2 million for the
same period of 1996, and $61.7 million for the first nine months of 1995
compared to $97.1 million for the same period of 1996. As of September 30,
1996, the interest rate on the Line was LIBOR plus 3.0%, which was equivalent
to 8.43%. See "Liquidity and Capital Resources" for additional information.
Salaries and employee benefits increased from $1.4 million for the third
quarter of 1995 to $2.3 million for the same period of 1996, or 62.1%, and
from $3.4 million for the first nine months of 1995 to $6.6 million for the
same period of 1996, or 93.1%. The increases were due to an increase in the
number of full time equivalent employees from 227 as of September 30, 1995 to
376 as of September 30, 1996. The increase in full time equivalent employees
was attributable to the development and staffing of the Company's branch
offices and GAC sales lots and, to a lesser extent, to additional management
and headquarters support personnel.
Marketing costs increased from $117,000 for the third quarter of 1995 to
$469,000 for the same period of 1996, or 300.1%, and from $360,000 for the
first nine months of 1995 to $982,000 for the same period of 1996, or 173.0%.
The increase in both periods of 1996 over the comparable periods of 1995 was
due to increased advertising for the GAC sales lots and to increased expenses
associated with promoting the Company's secured Visa credit card program.
The provision for credit losses increased from $158,000 for the third
quarter of 1995 to $5.5 million for the same period of 1996, and from $723,000
for the first nine months of 1995 to $7.6 million for the same period of 1996.
In the third quarter and first nine months of 1995, the provision for credit
losses consisted entirely of amounts provided for contracts originated at the
GAC sales lots. As there is no discount associated with these contracts, in
order to develop an allowance for future losses a charge directly to earnings
was required. The increase in the provision for credit losses in the third
quarter and first nine months of 1996, as compared to the same periods of
1995, relates primarily to the Company's strategic decision to accelerate the
disposal, primarily through auto auctions, of a significant portion of its
repossession inventory, and to a lesser extent, to an additional provision
deemed necessary related to contracts purchased from dealers to restore the
allowance and discount for credit losses to an acceptable level, as well as to
an increased volume of contracts originated by the GAC sales lots. The
additional provision for credit losses to restore the allowance and discount
for credit losses to an acceptable level in the third quarter and first nine
months of 1996 was due primarily to net charge-offs experienced by the Company
during the third quarter of 1996, which although lower than in prior quarters
of 1996, were higher than anticipated.
Until the third quarter of 1996 it was the Company's policy to maximize
recoveries from its repossessed vehicles by selling the majority of the
vehicles at retail through its GAC sales lots. It became apparent in the
third quarter of 1996 that the GAC sales lots would not be able to quickly
dispose of the vehicles repossessed earlier in 1996. In order to more quickly
realize the value of that inventory and use the funds to purchase new
contracts, an initiative was undertaken to dispose of approximately 30% of the
vehicle inventory through wholesale channels before the end of 1996. While
this method will achieve a more rapid disposition of the inventory, proceeds
from sale will also be reduced. The loss provision recorded in the third
quarter reflects management's estimate of the reduced amount anticipated to be
recovered from existing repossession inventory that will be disposed of
through wholesale channels. Upon completion of this process by the end of the
fourth quarter of 1996, the Company intends to retail an increased percentage
of the vehicles it repossesses through its expanded GAC sales lot network.
The credit quality of the Company's portfolio of contracts receivable
continued to improve during the third quarter as evidenced by lower net
charge-offs than in prior quarters of 1996. This improvement in credit
quality was in part achieved by the tightening of underwriting standards
effective January 1, 1996. The total available for credit losses as a percent
of contracts receivable was 14.86% as of September 30, 1996, compared to
12.07% as of June 30, 1996, 14.29% as of March 31, 1996 and 16.50% as of
December 31, 1995. Net charge-offs in the third quarter of 1996 were $4.6
million, compared to $6.2 million in the second quarter of 1996 and $8.0
million in the first quarter of 1996. The Company's 60-day contractual
delinquency ratio was 1.67% as of September 30, 1996, compared to 1.68% as of
June 30, 1996, 1.72% as of March 31, 1996, and 3.60% as of December 31, 1995.
Other expenses increased from $1.5 million for the third quarter of 1995
to $1.6 million for the same period of 1996, or 11.1%, and from $3.6 million
for the first nine months of 1995 to $4.4 million for the same period of 1996,
or 23.4%. The increase in both 1996 periods over the comparable 1995 periods
was attributable to higher costs associated with a larger network of branch
offices and GAC sales lots, including higher rent and depreciation expense.
As a result of the foregoing factors, pre-tax income decreased from $2.7
million for the third quarter of 1995 to a ($3.9 million) loss for the same
period of 1996, and from $6.4 million for the first nine months of 1995 to a
($2.8 million) loss for the same period of 1996.
Income tax expense was $1.1 million for the third quarter of 1995
compared to a credit of $1.6 million for the same period of 1996, and was $2.5
million on a pro forma basis for the first nine months of 1995 compared to a
credit of $1.1 million for the same period of 1996. In conjunction with the
initial public offering of its shares, the Company terminated its S
Corporation status, and as a result, became subject to federal and state
corporate income taxation from April 10, 1995 forward. For both 1996 periods,
the income tax credit was recorded at a combined federal and state income tax
rate of 40%. For the third quarter of 1995, income tax expense was recorded
at a combined federal and state income tax rate of 40%. The income tax
expense recorded for the first nine months of 1995 is the result of a $1.3
million tax credit related to cumulative temporary differences as of April 10,
1995, partially offset by a $737,000 expense representing income taxes at a
combined federal and state income tax rate of 40% for the period from April
10, 1995 through September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal need for cash is to fund advances made to dealers
in connection with the acquisition of contracts. Cash used for this purpose
was $73.5 million for the first nine months of 1995 compared to $61.3 million
for the same period of 1996. During 1996, the Company funded its contract
purchases with borrowings on the Line. The Line provides for interest at an
amount over the one-month LIBOR rate (which was 5.43% as of September 30,
1996). This amount was 3.0% through September 30, 1996, except for the period
from March 15, 1996 to June 30, 1996, when it was 4.0%. Effective October 30,
1996, the amount increased to 3.75%. As of September 30, 1996, borrowings on
the Line were $97.7 million.
During the fourth quarter of 1995, the Company experienced sharply
increased loan losses and delinquency rates, which exceeded certain loan
covenant requirements. Accordingly, on January 17, 1996, GE Capital notified
the Company of an event of default under its loan and security agreement
("Agreement"). GE Capital continued to fund the Company under the Line while
the Company and GE Capital negotiated a mutually acceptable plan of action.
On March 20, 1996, GE Capital and the Company signed a letter agreement (the
"Forbearance Agreement") under which, assuming no further events of default,
GE Capital agreed to forbear from exercising its rights under the Agreement
through December 31, 1996, subject to the Company meeting certain terms and
conditions. Since signing of the Forbearance Agreement, the Company has
complied with all its terms and conditions, except that during the first
quarter of 1996, net charge-offs exceeded maximum permitted levels under the
Forbearance Agreement. The higher than permitted net charge-offs were due to
the Company's aggressive collection efforts during the first quarter of 1996
which were successful in producing substantial declines in delinquency rates,
but resulted also in higher than anticipated net charge-offs. GE Capital
provided the Company with a letter which amends the maximum charge-off levels
in the Forbearance Agreement, and with which the Company is in compliance.
In conjunction with the Company's initiative to dispose of a portion of its
repossession inventory through wholesale channels, the Company requested, and
GE Capital provided on October 29, 1996, a letter further amending the
Forbearance Agreement to provide for anticipated fourth quarter 1996
charge-offs which would have otherwise exceeded permitted levels. As a result
of the amendment to the Forbearance Agreement, GE Capital has elected to
continue the Forbearance Agreement, which runs through December 31, 1996,
rather than amending and increasing the Line, and as a result, the Company's
growth will be curtailed into the first quarter of 1997 while the Company
works toward its first securitization. Based on the aforementioned funding
limitations, the Company expects that its contracts receivable will remain
near current levels during the fourth quarter of 1996 and into the first
quarter of 1997. If the Company and GE Capital do not agree on a mutually
acceptable loan agreement to supersede the Agreement and the Forbearance
Agreement, and if the Company is not successful in completing a securitization
of a portion of its contracts receivable, there is no assurance that the
Company will be successful in locating additional financing.
As a result of the Company's increased collection efforts during the
first nine months of 1996, repossession inventory grew from $5.2 million as of
December 31, 1995 to $11.4 million as of September 30, 1996, an increase of
$6.2 million. Repossession inventory is expected to decline significantly
during the fourth quarter of 1996 as a result of an acceleration in the
Company's sales efforts, both retail and wholesale. In August 1996, the
Company obtained a $4.5 million revolving line of credit with a bank.
Borrowings under the line are secured by repossession and purchased and trade
automobile inventory. The line of credit bears interest at the bank's prime
rate (8.25% as of September 30, 1996) and expires April 30, 1997. Borrowings
under the line were $4.3 million as of September 30, 1996.
On October 15, 1996, the Company borrowed $1.0 million from Malvin L. Algood,
its Chairman, Chief Executive Officer and a significant shareholder. The loan
is unsecured, and bears interest at 12% per annum. Although the loan is
payable upon demand, Mr. Algood's intention is to not request repayment until
such time as the Company has completed the securitization of a portion of its
contracts receivable portfolio. Subsequent to the date of the loan, in
conjunction with the October 29, 1996 amendment to the Forbearance Agreement
granted by GE Capital, Mr. Algood agreed to subordinate repayment of the note
to GE Capital until the earlier of (i) the completion of a securitization of
a portion of the Company's contracts receivable portfolio, or (ii) the
execution of a new loan agreement between the Company and GE Capital.
FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements include statements about the Company's expected average yield on
contracts, its expected revenues to be derived from the sale of Visa credit
cards, its expected charge-offs to be incurred in the fourth quarter of 1996,
the Company's ability to complete its first securitization, and other phrases
characterized by "expects" or "expected." These statements, and any other
forward looking statements included herein, are subject to risk, including
risks outside of the Company's control, that could cause results to vary
materially from the statements set forth herein. The Company's average yield
on contracts may vary depending on such factors as actual interest rates,
general economic conditions and competition for such contracts. The Company's
expected fourth quarter results may vary depending on factors including the
Company's ability to execute its internal underwriting and production goals,
to timely dispose of repossessed vehicles, the number of repossessions made by
the Company as well as factors outside the Company's control. Also, there
can be no assurance that the Company will be able to close on the
securitization due to any number of factors including the negotiation of terms
and pricing acceptable to the Company, market conditions and the economy in
general.
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any litigation that is expected to have a
material adverse effect on the Company. The Company regularly initiates legal
proceedings as a plaintiff in connection with its routine collection
activities.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.66 Revolving Loan and Security Agreement dated August 27, 1996, between
Fifth and
Third Bank of Central Indiana and General Acceptance Corporation.
10.67 Promissory Note dated October 15, 1996, in the principal amount of
$1 million payable
by General Acceptance Corporation to Malvin L. Algood.
10.68 Letter Agreement dated October 29, 1996, between General Electric
Capital Corporation
and General Acceptance Corporation.
11.1 Statement Re: Computation of Per Share Earnings.
27.0 Financial Data Schedule.
b) The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1996.
<TABLE>
<CAPTION>
SIGNATURES
Pursuant to the requirements 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.
<S> <C> <C>
GENERAL ACCEPTANCE CORPORATION
Date November 13, 1996 /s/ Russell E. Algood
----------------- ------------------------------
Russell. E. Algood
President and
Chief Operating Officer
Date November 13, 1996 /s/ Martin C. Bozarth
----------------- ------------------------------
Martin C. Bozarth
Chief Financial Officer
</TABLE>
Exhibit 10.66
<PAGE>
REVOLVING LOAN & SECURITY AGREEMENT
This Revolving Loan & Security Agreement ("Agreement") is entered into as
of the 27th day of August, 1996 by and between GENERAL ACCEPTANCE CORPORATION,
an Indiana corporation ("GAC"), and FIFTH THIRD BANK OF CENTRAL INDIANA, an
Indiana banking corporation ("Bank").
1. Definitions. Certain capitalized terms have the meanings
set forth on Exhibit A hereto. All financial terms used in this Agreement
but not defined in Exhibit A or in this Agreement have the meanings given to
them by generally accepted accounting principles. All other undefined terms
have the meanings given to them in the Indiana Uniform Commercial Code.
2. Revolving Credit Loans.
(a) In General. Subject to the terms and conditions hereof,
Bank hereby extends to GAC a line of credit facility (the "Facility") under
which Bank may make loans (each, a "Revolving Loan," and collectively, the
"Revolving Loans") to GAC at GAC's request, from time to time, during the term
of the Facility in a principal amount not to exceed $4,500,000 (the "Limit").
However, Bank will have discretion at all times as to whether or not to make
any Revolving Loan. Bank may create and maintain reserves, from time to time,
based on such credit and collateral considerations as Bank may deem
appropriate. GAC may borrow, prepay (without penalty or charge), and reborrow
under the Facility so long as the Limit is not exceeded, GAC is not in Default
hereunder, and the other terms and conditions hereof are satisfied. If the
amount of Revolving Loans outstanding at any time under the Facility exceeds
the Limit, GAC will immediately pay the amount of such excess to Bank in cash.
(b) Borrowing Base Formula. On the tenth day of each
calendar month during the term of the Facility (or the next Business Day, if
such day falls on other than a Business Day), GAC shall complete and submit to
Bank and GECC a Borrowing Base Certificate in the form of Exhibit B1 hereto
indicating, among other things, the aggregate average "Black Book" wholesale
value of its Eligible Inventory and the number of units comprising such
inventory. Subject at all times to the unused portion of Limit, GAC may
request Revolving Loans under the Facility according to a borrowing base
advance formula that limits any requested Revolving Loan to a maximum amount
equal to fifty percent (50%) of the aggregate average "Black Book" wholesale
value of such Eligible Inventory plus $400 per unit for reconditioning
expense.
(c) Term of Facility. The maturity date of the Facility is
April 30, 1997, unless such maturity date is accelerated by reason of an Event
of Default.
(d) Interest Rate. Interest on the outstanding principal
balance of the Facility will accrue at a rate per annum equal to the Prime
Rate as in effect from time to time. The interest rate charged will change
automatically upon each change in the Prime Rate. Interest will be calculated
on the basis of a year of 360 days and charged for the actual number of days
elapsed. Interest will be payable in immediately available funds at the
principal office of Bank on the first day of each calendar month. After
maturity, whether by acceleration or otherwise, and after the occurrence of an
Event of Default (with or without notice to GAC), interest will accrue at a
rate per annum equal to the Default Rate (computed and adjusted in the same
manner as the Prime Rate).
(e) Repayment. Accrued and unpaid interest will be due and
payable on the first day of the calendar month following execution and
delivery of this Agreement by GAC and continuing on the first day of each
calendar month thereafter during the term of the Facility. The unpaid
principal balance of the Facility and accrued and unpaid interest will be due
and payable on the maturity date of the Facility. Bank may, at its option,
charge any interest payments to GAC's account with Bank. Interest that is not
paid when due shall thereupon become principal hereunder and shall thereafter
accrue interest as provided in this Agreement. If any scheduled payment
hereunder becomes due and payable on a day other than a Business Day, the
maturity thereof will be extended to the next Business Day, and interest will
be payable at the rate provided in this Agreement during the extension period.
(f) Application of Payments. All payments received by Bank
will be applied first to Advances, second to accrued interest, and third to
principal.
(g) Revolving Loan Requests. GAC may request a Revolving
Loan by written or telephone notice to Bank. If such request is by telephone
notice to Bank, GAC shall promptly follow-up the telephone notice by
completing and delivering to Bank an Advance Request Confirmation Certificate
in the form of Exhibit B2 hereto. Eligibility of GAC for any Revolving Loan
will be made on the basis of the then current Borrowing Base Certificate
submitted by GAC pursuant to Section 2(a) of this Agreement and the amount, if
any, of the unused portion of the Limit at the time the request is made. Bank
may make Revolving Loans by crediting the amount thereof to GAC's account at
Bank.
3. Collateral. In order to secure the performance of the
covenants and agreements contained herein and the payment and performance of
all amounts owed by GAC to Bank hereunder, whether now existing or hereinafter
arising (collectively, the "Obligations"), GAC hereby grants to Bank a
continuing security interest in the collateral described in Exhibit C hereto
(collectively, the "Collateral").
4. Financial Statements. GAC agrees to maintain a standard
and modern system for accounting and will furnish to Bank:
(a) Within 90 days after the end of each fiscal year, a copy
of GAC's consolidated financial statement for that year audited by Ernst &
Young, LLP or any other firm of independent certified public accountants
acceptable to Bank (which acceptance will not be unreasonably withheld), and
accompanied by a standard audit opinion of such accountants without
significant qualification;
(b) Within 30 days after the end of each calendar month, a
copy of GAC's monthly interim consolidated financial statements prepared in
accordance with generally accepted accounting principles;
(c) With the statements submitted under (a) and (b) above, a
certificate signed by the principal financial officer of GAC, (i) stating he
is familiar with all documents relating to Bank and that no Event of Default
specified in this Agreement, nor any event which upon notice or lapse of time,
or both would constitute such an Event of Default, has occurred, or if any
such condition or event existed or exists, specifying it and describing what
action GAC has taken or proposes to take with respect thereto, and (ii)
setting forth, in summary form, figures showing the financial status of GAC in
respect of the financial restrictions contained in this Agreement;
<PAGE>
(d) Forthwith upon any officer of GAC obtaining knowledge of
any condition or event which constitutes or, after notice or lapse of time or
both, constitute an Event of Default, a certificate of such person specifying
the nature and period of the existence thereof, and what action GAC has taken
or is taking or proposes to take in respect thereof;
(e) As soon as practicable, but in any event within 10 days
after the filing with the Securities and Exchange Commission, or any successor
thereto, or any state securities governmental authority, copies of all
registration statements and all periodic and special reports required or
permitted to be filed under federal or state securities laws and regulations;
and
(f) Upon request, copies of all federal, state and local
income tax returns and such other information as Bank may reasonably request.
If at any time GAC acquires subsidiaries which have financial
statements that could be consolidated with those of GAC under generally
accepted accounting principles, the financial statements required by
subsections (a) and (b) above will be the financial statements of GAC and all
such subsidiaries prepared on a consolidated and consolidating basis.
5. Insurance. GAC agrees to insure its Motor Vehicle
Inventory against loss or damage of the kinds and amounts customarily insured
against by corporations with established reputations engaged in the same or
similar business as GAC. All such policies will (a) be issued by financially
sound and reputable insurers (such insurers having, in any case, an overall
rating of at least "A" according to A.M. Best), (b) name Bank as an additional
insured and, where applicable, as loss payee under a lender loss payable
endorsement satisfactory to Bank, and (c) will provide for thirty (30) days
written notice to Bank before such policy is altered or canceled all of which
will be evidenced by a certificate of insurance delivered to Bank by GAC on
the date of execution of this Agreement.
6. Taxes. GAC agrees to pay when due all taxes, assessments
and other governmental charges imposed upon it or its assets, franchises,
business, income or profits before any penalty or interest accrues thereon,
and all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which by law might be a lien or charge upon
any of its assets, provided that (unless any material item or property would
be lost, forfeited or materially damaged as a result thereof) no such charge
or claim need be paid if it is being diligently contested in good faith, if
Bank is notified in advance of such contest, and if GAC establishes an
adequate reserve or other appropriate provision required by generally accepted
accounting principles and deposits with Bank cash or bond in an amount
acceptable to Bank.
7. Financial Covenants. During the term of the Facility, GAC
hereby agrees to maintain the following ratios, percentages, or minimum dollar
amounts, as applicable, on a consolidated basis:
(a) (Minimum) Net Worth: $20,000,000
(b) (Maximum) Debt Ratio: 5.0 to 1.0
(c) (Maximum) Rolling Average Delinquency: 7.0%
(d) (Maximum) Rolling Average Charge-Off: 1.4%
<PAGE>
The respective meanings of the foregoing financial terms shall be
interpreted in conformity with those terms as used in the GECC Facility.
8. Existence/Qualification. Borrower agrees to maintain its
corporate existence and at all times to be qualified to transact business in
all jurisdictions in which it presently transacts business and such
qualification is required.
9. Compliance with Laws. GAC agrees to comply with all
federal, state and local laws, rules, ordinances, regulations and orders
applicable to GAC or its assets (collectively, "Laws"), including but not
limited to all Laws regulating the environment, health, safety, securities,
and the sales and financing of motor vehicles in all respects material to
GAC's business, assets or prospects, and immediately notify Bank of any
violation of any such Laws or any complaint or notifications received by GAC
regarding any such Laws.
10. Depository Services. So long as any Obligations are
outstanding, GAC agrees to maintain with Bank its retail lockbox account
established in connection with the Indebtedness in favor of GECC under the
GECC Facility.
11. Indebtedness. Except for the Indebtedness in favor of
GECC under the GECC Facility, any Indebtedness that is unsecured, or any
Indebtedness incurred in the ordinary course of business for small leases and
loans in individual amounts not exceeding $50,000 and in the aggregate not
exceeding $500,000, GAC agrees not to incur, create, assume or permit to exist
any additional Indebtedness for borrowed money (other than the Obligations).
12. Pledge or Encumbrance of Assets. Other than the Permitted
Liens, GAC agrees not to create, incur, assume or permit to exist, arise or
attach any Lien in any present or future Motor Vehicle Inventory.
13. Guarantees and Loans. GAC agrees that it will not enter
into any direct or indirect guarantees other than by endorsement of checks for
deposit or other than in the ordinary course of business nor make any advance
or loan other than in the ordinary course of business as presently conducted,
including, without limitation, loans and advances to employees of GAC.
14. Merger Disposition of Assets; Sale of Stock. GAC agrees
that it will not (a) change its capital structure, (b) merge or consolidate
with any corporation, (c) amend or change its Articles of Incorporation or
Code of Regulations/Bylaws, (d) sell, transfer or otherwise dispose of all or
any substantial part of its assets, whether now owned or hereafter acquired,
(e) permit the direct or indirect sale or transfer of a majority of the voting
stock of GAC, or (f) permit GAC to purchase its own stock; provided,
however, the foregoing prohibitions shall not prohibit GAC from undertaking
the securitization and sale of its portfolio of retail installment sales
contracts evidencing the sale of motor vehicles.
15. Management. GAC agrees that either Russell E. Algood or
Malvin L. Algood will remain actively employed by GAC and actively engaged in
the management of GAC.
<PAGE>
16. Representations on Schedule I. GAC states that the
representations and warranties contained in Schedule I hereto entitled the
"Specific Representation Schedule" are true and correct as of the date hereof.
Further, by making a request for a Revolving Loan hereunder, GAC shall be
deemed to have reaffirmed the truth and correctness of the representations and
warranties contained in Schedule I as of the date of such request.
17. Provisions Concerning Motor Vehicle Inventory. GAC agrees
that:
(a) the Motor Vehicle Inventory subject to Bank's Lien
hereunder will be held by GAC for the sole purpose of storing and exhibiting
the same for sale or resale in the ordinary course of GAC's business.
(b) GAC will keep its Motor Vehicle Inventory subject to
inspection by Bank at all reasonable times, and to pay Bank for any and all
out-of-pocket expenses incurred by Bank in connection with periodic
unannounced audits of GAC's Motor Vehicle Inventory, such payment to be made
by GAC within 10 days after written demand therefor by Bank.
(c) if any of the Motor Vehicle Inventory is evidenced or
represented by a document of title, Bank may, at its discretion, require GAC
to deliver that document of title to Bank.
(d) prior to the occurrence of an Event of Default, GAC may
use, consume, and sell the Motor Vehicle Inventory in any lawful manner in the
ordinary course of its business (which shall not include sales subject to bulk
transfer laws or transfers in partial or total satisfaction of a debt).
(e) GAC will keep accurate records pertaining to each unit of
the Motor Vehicle Inventory in accordance with generally accepted accounting
principles and to furnish Bank, from time to time, upon Bank's request, a true
and complete itemization thereof and/or report of all sales of any and all of
GAC's Motor Vehicle Inventory. Bank shall have the right, at any time and
from time to time, to examine the books and records of GAC, copy, make
abstracts from any such books and records and such other information which
might be helpful to Bank in evaluating the status of the Revolving Loans and
to verify GAC's financial condition or existence.
(f) the risk of loss or damage to GAC's Motor Vehicle
Inventory shall at all times be on GAC, who agrees to hold Bank harmless from
any loss resulting therefrom. Insurance proceeds may be applied by Bank
towards payment of the Obligations, whether or not due, in such order of
application as Bank may determine, and no insurance coverage or payment of
proceeds thereof shall otherwise relieve GAC from any of the Obligations.
18. Filing. GAC agrees to execute and deliver such financing
statements, amendments thereto, supplements thereto or other instruments as
Bank may, from time to time, require in order to preserve, protect, and
enforce the Lien of Bank in the Collateral and to reimburse Bank for any and
all fees and taxes advanced by Bank in connection therewith.
19. Powers. Bank is hereby appointed GAC's attorney-in-fact,
and in connection therewith, the following powers are given to Bank, are
coupled with an interest, are irrevocable until the Obligations are paid and
satisfied in full and the Facility is terminated, and may be exercised by
Bank, in its sole discretion, from time to time and at any time, whether or
not GAC is in Default hereunder:
(a) To perform any obligation of GAC hereunder in GAC's name
or otherwise, including obligations to prepare, execute, file, and deliver
financing statements, amendments thereto, supplements thereto or other
instruments; to endorse and deliver insurance claims; to release security; to
resort to security in any order; and to do all acts and things and execute all
documents in the name of GAC as deemed by Bank to be necessary, proper and
convenient in connection with the preservation, perfection, or enforcement of
its rights hereunder.
(b) Bank may, upon the occurrence of an Event of Default, to
protect the Collateral: obtain insurance, pay taxes, assessments, liens, fees,
charges or encumbrances; or order and pay for repairs or spend any amounts
necessary to maintain the Collateral in GAC's exclusive possession and in good
condition. All amounts so extended by Bank shall be added to the Obligations,
with interest to accrue thereon at the Default Rate, from the date of
expenditure until paid.
(c) Subject to Section 2(f) of this Agreement, all amounts
received by Bank may be applied on such of the Obligations and in such order
as Bank, in its sole discretion, shall determine.
20. Miscellaneous Fees and Charges Due Bank. GAC agrees to
pay Bank, in addition to those specified hereinabove, the following fees and
charges, as specified hereinbelow:
(a) a one-time commitment fee of $4,500, payable upon the
execution and delivery hereof by GAC;
(b) legal fees for outside counsel retained by Bank in the
preparation and negotiation of this Agreement and related documents and to
represent the Bank at the closing of the transactions contemplated hereby,
payable upon the execution and delivery hereof by GAC; and
(c) all reasonable expenses of any kind whatsoever, including
attorneys' fees, incurred by Bank in the preservation, realization,
enforcement or exercise of its rights, remedies, or powers hereunder or under
applicable law, payable upon demand by Bank.
21. Conditions Precedent.
21.1 Conditions to Closing. As conditions precedent to
Bank's offering of the Facility or permitting the making of any Revolving
Loans under this Agreement:
(a) GAC may not be in Default under any other Indebtedness
(excluding, however, any default that has been addressed in a written
forbearance agreement between GAC and GECC in effect as of the date hereof and
as such forbearance agreement may be amended from time to time);
(b) GAC shall have paid to Bank the sums described in Section
20(a) and 20(b) hereof;
(c) GAC shall have delivered to Bank a favorable opinion of
counsel, in form and substance satisfactory to Bank, addressing those matters
reasonably requested by Bank;
<PAGE>
(d) GAC shall have delivered to Bank the certificates of
insurance referenced in Section 5 hereof;
(e) GAC shall have executed and delivered to Banking those
financing statements requested by Bank;
(f) GAC shall have delivered to Bank (i) appropriate corporate
resolutions approving, in all respects, the execution, delivery, and
performance of this Agreement (ii) copies of its current articles of
incorporation and bylaws, and (iii) a recent Certificate of Existence issued
by the Secretary of State of the State of Indiana;
(g) Bank shall have received from GECC an executed facsimile
of an Intercreditor Agreement between Bank and GECC, in form and substance
satisfactory to Bank; and
(h) GAC shall have delivered to Bank such additional
information, materials, and documents as Bank may reasonably request.
21.2 Conditions to Each Revolving Loan. As conditions
precedent to the making of each Revolving Loan under this Agreement:
(a) GAC shall be in compliance with each and all of its
covenants and agreements herein as of the date each such Revolving Loan is
requested;
(b) GAC shall not be in Default under any other Indebtedness
(excluding, however, any default that has been addressed in a written
forbearance agreement between GAC and GECC in effect as of the date hereof and
as such forbearance agreement may be amended from time to time);
(c) All of the representations and warranties contained herein
are true, accurate, and correct in all material respects as of the date each
such Revolving Loan is requested; and
(d) The aggregate outstanding principal balance of the
Facility after giving effect to such Revolving Loan will not exceed the lesser
of the Limit or the borrowing base formula contained in Section 2(b) hereof.
By requesting a Revolving Loan under this Agreement, GAC will be
deemed to have certified the occurrence or existence of each of the foregoing
conditions precedent.
22. Payment Obligations. GAC agrees to pay to Bank or to its
order the sums specified herein at the times specified herein, all without
relief from any otherwise applicable valuation and appraisement laws. GAC
hereby waives presentment for payment, demand, notice of dishonor, protest,
notice of protest, and all other demands and notices in connection with the
delivery, performance, and enforcement of this Agreement and any extensions,
modifications, or renewals of this Agreement.
<PAGE>
23. Rights and Remedies. Upon the occurrence of an Event of
Default and at any time thereafter, Bank may, at its option and without notice
to GAC, declare all of the Obligations to be immediately due and payable
and/or cease making Revolving Loans hereunder, and Bank shall have the rights,
options, duties and remedies of a secured party, and GAC shall have the rights
and duties of a debtor under the Uniform Commercial Code. Without limitation
thereto, Bank shall have the following specific rights; Bank may:
(a) enter any premises of GAC, with or without legal process,
and take possession of the Collateral and remove it and any records pertaining
thereto and/or remain on such premises and use it for the purpose of
collecting, preparing and disposing of the Collateral;
(b) take immediate possession of the Collateral without notice
or resort to legal process, or at its option to render such Collateral
unusable;
(c) require GAC to assemble the Collateral or any part thereof
and make it available to Bank at a place, to then be designated by Bank, which
is reasonably convenient to both parties;
(d) at its sole option, retain the Collateral in satisfaction
of the obligations secured hereunder by sending written notice of such
election to GAC; but unless such written notice is sent by Bank as aforesaid,
retention of said Collateral shall not be in satisfaction of any Obligations
hereunder;
(e) apply the proceeds realized from disposition of the
Collateral according to law and to payment of costs of collection, including
reasonable attorneys' fees and legal expenses incurred by Bank, whether or not
suit be filed. If the proceeds realized from disposition of the Collateral
shall fail to satisfy all the Obligations in full, GAC shall forthwith pay any
deficiency balance to Bank;
(f) ship, reclaim, recover, finish, maintain and repair the
Collateral or any part thereof; and
(g) sell the Collateral or any part thereof at public or
private sale, and GAC will be credited with the net proceeds of such sale only
when they are actually received by Bank, any requirement of reasonable notice
of any disposition of such Collateral will be satisfied if such notice is sent
to GAC 10 days prior to such disposition.
GAC will, upon request, assemble the Collateral and any records
pertaining thereto and make them available at a place designated by Bank. No
remedy set forth herein is exclusive of any other available remedy or
remedies, but each is cumulative and in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in equity or by
statute. Bank may proceed to protect and enforce its rights by an action at
law, in equity or by any other appropriate proceedings. No failure on the
part of Bank to enforce any of the rights hereunder shall be deemed a waiver
of such rights or of any Event of Default and no waiver of any Event of
Default hereunder will be deemed to be a waiver of any subsequent Event of
Default. Any written notice required to be given to GAC, if mailed by
ordinary mail postage prepaid to GAC's mailing address given below shall be
deemed reasonable notification.
<PAGE>
24. Miscellaneous Provisions:
(a) All rights of Bank shall inure to the benefit of its
successors and assigns and all obligations of GAC shall bind the heirs,
executors, administrators, successors and assigns of GAC.
(b) Excepted as may be restricted in any Intercreditor
Agreement between GECC and Bank, GAC acknowledges and agrees that, in addition
to the security interests granted herein, Bank has a banker's lien and common
law right of set-off in and to GAC's deposits, accounts and credits held by
Bank and Bank may apply or set-off such deposits or other sums against the
Obligations upon the occurrence of an Event of Default; provided, however,
such rights may not be exercised against any Subsidiary Account.
(c) This Agreement contains the entire Agreement of the
parties and no oral Agreement whatsoever, whether made contemporaneously
herewith or hereafter, shall amend, modify or otherwise affect the terms of
this Agreement.
(d) This Agreement and all rights and liabilities hereunder
shall be governed and limited by and construed in accordance with the internal
laws of the State of Indiana, except to the extent laws governing perfection
and the effect of perfection or nonperfection and remedies against Collateral
located outside of the State of Indiana may be mandatorily effective.
(e) Any provision herein which may prove limited or
unenforceable under any law or judicial ruling shall not affect the validity
or enforceability of the remainder of this Agreement.
(f) All representations, warranties, covenants and agreements
made by GAC herein will survive the execution and delivery of this Agreement.
(g) GAC agrees that the state and federal courts in the County
of Bank's principal place of Business, or any other court in which Bank
initiates proceedings have exclusive jurisdiction over all matters arising out
of this Agreement, and that service of process in any such proceeding will be
effective if mailed to GAC at its mailing address given below. BANK AND GAC
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, GAC and Bank have executed this Agreement by their
duly authorized officers as of the date first above written.
FIFTH THIRD GENERAL ACCEPTANCE
BANK OF CENTRAL INDIANA CORPORATION
251 North Illinois Street, Suite 1000 1025 Acuff Road, Suite 400
Indianapolis, Indiana 46204 Bloomington, Indiana 47404
By: /s/ Jonathan O. Speers By: /s/ Martin C.
Bozarth
Jonathan O. Speers, Vice President Martin C. Bozarth,
Chief Financial
Officer
STATE OF INDIANA )
) SS:
COUNTY OF MARION )
Before me, a Notary Public, in and for said County and State, personally
appeared Martin C. Bozarth, Chief Financial Officer of General Acceptance
Corporation, who executed the foregoing instrument in my presence, this 27th
day of August, 1996.
Witness my hand and Notarial Seal this 27th day of August, 1996.
/s/ Penny M. Witte Notary Public
residing in Hamilton County, Indiana
My Commission Expires:
8-27-96
<PAGE>
EXHIBIT "A"
DEFINITIONS
As used in this Agreement and/or herein, the following terms will have
the meanings set forth below:
"Advances" means those sums designated in Sections 18, 19, and 20 of
this Agreement as well as those other fees and charges due Bank from GAC under
this Agreement, except interest.
"Borrowing Base Certificate" means a report required to be submitted
monthly to GECC and Bank in the form of Exhibit B to this Agreement.
"Business Day" means a day on which Bank is open to conduct
substantially all of its business.
"Default" means any Event of Default or the occurrence of any event
which would be an Event of Default upon the passage of time and the failure to
cure within any applicable cure period.
"Default Rate" means a rate of interest equal to 400 basis points
above the Prime Rate, as established from time to time.
"Eligible Inventory" means the Motor Vehicle Inventory of GAC that
has been in possession of GAC or its designee(s) for less than six months.
"Event of Default" means any of the following events:
(a) any representation or warranty herein by GAC is incorrect when
made or reaffirmed;
(b) GAC fails to keep its Motor Vehicle Inventory insured as
required in this Agreement or a material uninsured damage to or loss, theft or
destruction of the Collateral;
(c) GAC fails to make any required payment of principal and/or
interest within seven (7) days of its scheduled due date;
(d) GAC fails to observe or perform any covenant, condition, or
agreement in the Agreement and the failure or inability of GAC to cure such
failure within 30 days of the occurrence thereof, provided that such 30 day
grace period will not apply to (i) a breach of any covenant which in Bank's
good faith judgment is incapable of cure, (ii) any failure to maintain
insurance or permit inspection of the Motor Vehicle Inventory or GAC's books
and records, (iii) a payment default described in clause (c), or (iv) any
breach of any covenant that has already occurred;
(e) the occurrence of an Event of Default under the GECC Facility;
(f) the modification of or the amendment to the GECC Facility as in
effect on the date hereof, without prior written notice to and the consent of
Bank (which consent shall not unreasonably be withheld);
(g) the providing of misleading, untruthful or materially
inaccurate information on any Borrowing Base Certificate;
(h) the failure of GECC to provide Bank with an executed
original of the Intercreditor Agreement between Bank and GECC referenced in
Section 21.1(g) of this Agreement within three days after the date of this
Agreement; or
(i) the occurrence of a Material Adverse Change in GAC's business
operations, financial condition, or financing activities.
"GECC" means General Electric Capital Corporation.
"GECC Facility" means the "Loan and Security Agreement" together
with the Loan Documents defined therein between GECC and GAC Credit
Corporation dated on or about May 1, 1992, as such may be amended or modified
from time to time, and includes any replacement to such loan facility entered
into between GECC and GAC.
"Indebtedness" means (a) all items (except items of capital stock,
of capital surplus, of general contingency reserves or of retained earnings,
deferred income taxes, and amount attributable to minority interests, if any)
which in accordance with generally accepted accounting principles would be
included in determining total liabilities on a consolidated basis as shown on
the liability side of a balance sheet as of the date on which Indebtedness is
to be determined, (b) all indebtedness secured by any mortgage, pledge, lien
or conditional sale or other title retention agreement to which any property
or asset owned or held is subject, whether or not the indebtedness secured
thereby will have been assumed (excluding non-capitalized leases which may
amount to title retention agreements but including capitalized leases), and
(c) all indebtedness of others which GAC or any subsidiary had directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which GAC or any subsidiary has agreed to apply or advance funds
(whether by way of loan, stock purchase, capital contribution or otherwise) or
otherwise to become directly or indirectly liable; provided, however, such
term excludes any indebtedness of GAC under that certain existing lease of
GAC's corporate headquarters between Russell E. Algood as lessor and GAC as
lessee.
"Lien" means any security interest, mortgage, pledge, assignment,
lien or other encumbrances of any kind, whether consensual or nonconsensual,
including interests of vendors or lessors under conditional sales contracts
and capitalized leases.
"Loanable Vehicle" means a Repossessed Vehicle, a Purchased Vehicle,
or a Trade-In Vehicle which is designated as a "Loanable Vehicle" by GAC in a
Borrowing Base Certificate submitted to GECC and Bank.
"Material Adverse Change" means a change which Bank, in good faith,
determines will or might have a material adverse impact on GAC's ability to
meet and satisfy the Obligations.
"Motor Vehicle Inventory" means all vehicles of GAC held or acquired
for ultimate sale or resale, whether now owned or hereinafter acquired, that
are Repossessed Vehicles, Purchased Vehicles or Trade-In Vehicles.
"Permitted Liens" mean the Lien of GECC under the GECC Facility
against the Motor Vehicle Inventory and the unexpired right of redemption by
an existing customer of GAC, in the case of a Repossessed Vehicle.
"Prime Rate" means the rate of interest per annum announced to be
its prime rate from time to time by Bank at its principal office in
Indianapolis, Indiana, whether or not Bank will at times lend to borrowers at
lower rates of interest., or, if there is no such prime rate, then its base
rate or such other rate as may be substituted by Bank for the prime rate.
"Purchased Vehicle" means a vehicle which is acquired by GAC for
resale, other than a Repossessed Vehicle or a Trade-In Vehicle.
"Repossessed Vehicle" means a vehicle previously sold and financed
by GAC (or a vehicle whose sale was financed by GAC but sold by a third party)
the possession of which has been reacquired or acquired, as applicable, by GAC
pursuant to voluntary or involuntary repossession (whether or not the
applicable redemption period with respect to such vehicle has expired).
"Subsidiary Account" means any account maintained at Bank under the
name of a subsidiary of GAC.
"Trade-In Vehicle" means a vehicle which is acquired by GAC on trade
in connection with the sale to a customer of a Repossessed Vehicle or a
Purchased Vehicle or any vehicle which is acquired by GAC on trade.
"Vehicle Report" means a report, in form and substance satisfactory
to Bank, that is to be attached to each Borrowing Base Certificate.
<PAGE>
EXHIBIT "B1"
BORROWING BASE CERTIFICATE
Date of Certificate:
Based upon Vehicle Report dated: (attached hereto)
Value of Eligible Inventory of Loanable Vehicles This Period $
Number of Units in Eligible Inventory of Loanable Vehicles This Period
Value of Eligible Inventory of Loanable Vehicles This Period $
x 50% = $
$400 x Number of Units in Eligible Inventory of Loanable
Vehicles This Period = + $
Maximum Revolving Loan Principal this Period Subject to $4,500,000 Overall
Limit. = $
By submitting this Borrowing Base Certificate to GECC and Bank, the
undersigned Chief Financial Officer of GAC hereby certifies that to the best
of his knowledge and belief, the foregoing information is accurate and
complete and, unless specifically disclosed herein or herewith, there exists
no Default under the Agreement or any other Indebtedness (excluding, however,
any default that has been addressed in a written forbearance agreement between
GAC and GECC). (Capitalized terms used herein have the meanings set forth in
the Revolving Loan & Security Agreement between GAC and Bank to which this
Borrowing Base Certificate relates.)
Dated this day of , 199 .
GENERAL ACCEPTANCE CORPORATION
By:
Martin C. Bozarth, Chief
Financial Officer
<PAGE>
EXHIBIT "B2"
ADVANCE REQUEST CONFIRMATION CERTIFICATE
Fifth Third Bank of Central Indiana
251 North Illinois Street, Suite 1000
Indianapolis, IN 46204
Gentlemen:
Pursuant to the Revolving Loan & Security Agreement dated August 27, 1996 by
and between General Acceptance Corporation ("Borrower") and Fifth Third Bank
of Central Indiana ("Lender"), application is hereby made for a Revolving Loan
advance in the principal amount of $ . Borrower's records
indicate that the principal balance of advances to the date hereof, exclusive
of the advance hereby requested, totals $ and that the
total outstanding indebtedness (including the advance requested hereby) will
not exceed the "Maximum Revolving Loan Principal this Period", per the most
recent Borrowing Base Certificate, and in no event more than $4,500,000.00.
Please disperse the advance as follows:
( ) by wire transfer to Account # in the name of
GE Capital Corporation with
(bank name).
( ) by issuing an official Bank check in the amount of the advance
hereby requested made payable to
.
( ) by crediting the advance to Account #
maintained by Borrower with Lender.
( ) by crediting Account # maintained by GE
Capital Corporation with Lender.
By making this request, the undersigned certifies on behalf of Borrower
that no Event of Default, as this term is defined in the Revolving Loan &
Security Agreement, has occurred and is continuing.
GENERAL ACCEPTANCE CORPORATION
By:
Date: Printed Name:
Title:
<PAGE>
EXHIBIT "C"
DESCRIPTION OF COLLATERAL
This Revolving Loan & Security Agreement covers the following property of
GAC whether now owned or existing or hereafter acquired or arising regardless
of where it is located (collectively referred to herein as the "Collateral").
(a) all accounts, accounts receivable, contract rights,
instruments, documents, chattel paper, and all obligations in any form
including but not limited to those arising out of the sale or lease of goods
or the rendition of services by GAC; all guaranties, letters of credit, and
other security for any of the above; all merchandise returned to or reclaimed
by GAC, and all books and records (including computer programs, tapes and data
processing software) evidencing an interest in or relating to the above.
(b) all equipment, machinery, machine tools, fixtures, office
equipment, furniture, furnishings, motors, motor vehicles, tools, dies, parts,
jigs, goods (including, without limitation, each of the items of equipment set
forth on any schedule which is either now or in the future attached to Bank's
copy of this Agreement), and all attachments, accessories, accessions,
replacements, substitutions, additions and improvements thereto, and all
supplies used or useful in connection therewith.
(c) all general intangibles, chooses in action, causes of action,
obligations or indebtedness owed to GAC from any source whatsoever, and all
other intangible personal property of every kind and nature (other than
Accounts) including without limitation patents, trademarks, trade names,
service marks, copyrights and applications for any of the above, and goodwill,
trade secrets, licenses, franchises, rights under agreement, tax refund
claims, and all books and records including all computer programs, disks,
tapes, printouts, customer lists, credit files and other business and
financial records, and the equipment containing any such information.
(d) all inventory (including motor vehicle inventory wherever
located), goods, supplies, wares, merchandises and other tangible personal
property, including raw materials, work in progress, supplies and components,
and finished goods, whether held for sale or lease, or furnished or to be
furnished under any contract for service, and also including products of and
accessions to inventory, packing and shipping materials, and all documents of
title, whether negotiable or non-negotiable representing any of the foregoing.
(e) all proceeds and products of the Collateral and all additions
and accessions to, replacements of, insurance or condemnation proceeds of, and
documents covering the Collateral, all tort or other claims against third
parties arising out of damage or destruction of Collateral, all property
received wholly or partly in trade or exchange for Collateral, all fixtures,
all leases of Collateral and all rents, revenues, issues, profits and proceeds
arising from the sale, lease, license, encumbrance, collection, or any other
temporary or permanent disposition, of the Collateral or any interest therein.
(f) all instruments, chattel paper, documents, investment property
(including, securities whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts, and commodity
accounts), money, cash, letters of credit, warrants, dividends, distributions,
contracts, agreements, contract rights or other property, owned by GAC or in
which GAC has an interest, including but not limited to, those which now are
or at any time hereafter will be in the possession or control of Bank or in
transit by mail or carrier to or in the possession of any third party acting
on behalf of Bank, without regard to whether Bank received the same in pledge,
for safekeeping, as agent for collection or transmission or otherwise or
whether Bank had conditionally released the same, and the proceeds thereof,
all rights to payment from, and all claims against Bank, and any deposit
accounts of GAC with Bank, including all demand, time, savings, passbook or
other accounts (excluding, however, any Subsidiary Account) and all deposits
therein.
<PAGE>
SCHEDULE I
SPECIFIC REPRESENTATION SCHEDULE
1. The exact legal name of Borrower is: General Acceptance
Corporation .
2. If Borrower has changed its name since it was incorporated, its
past legal names were: GAC Credit Corporation .
3. Borrower uses in its business and owns the following trade names:
G.A.C. Sales Outlet; Auto Sales Outlet .
4. Borrower was incorporated on May 6, 1988 , under the laws
of the State of Indiana , and is in good standing under those laws.
5. Borrower is qualified to transact business in the following
states: Indiana; Illinois; Ohio; Florida; Missouri; Michigan; Pennsylvania;
Kentucky; Georgia; Arizona; New Jersey; Colorado; Delaware; Iowa; Maryland;
Nevada; New Mexico; North Carolina; Virginia; Washington
.
6. Borrower has its chief executive office and principal place of
business at: 1025 Acuff Rd., Bloomington, Indiana 47404 .
Borrower maintains all of its records with respect to the Collateral at that
address, except: None
.
7. Borrower also has places of business at the locations specified
in Attachment No. 1 and Attachment No. 2 hereto .
8. All of the Motor Vehicle Inventory will be located at the
locations set forth above, except: the locations specified in Attachment No.
3 hereto
.
9. In the past five years, Borrower has never maintained its chief
executive office or principal place of business or records with respect to the
Motor Vehicle Inventory at any locations except those set forth above and
except 5015 W. State Road 46, Bloomington, Indiana 47404 .
10. Borrower's equipment and fixtures are located at the locations
specified in No. 6 (above) and in Attachment No. 1 and Attachment No. 2
hereto .
11. The following entities (a) have been merged into Borrower or (b)
have sold substantially all of their assets to Borrower outside the ordinary
course of their business since Borrower was incorporated: Algood Motor Co.
.
12. Borrower does not have any subsidiaries, or own stock in any
other corporations, or own an interest in any partnerships or joint ventures,
except: General Acceptance Corporation Reinsurance, LTD
.
13. Borrower is not a plaintiff or defendant in any litigation except
as follows: See Attachment No. 4 hereto .
Exhibit 10.67
<PAGE>
PROMISSORY NOTE
Date: October 15, 1996
Due: Demand
Amount: $1,000,000.00
For Value Received, the undersigned, General Acceptance Corporation, an
Indiana Corporation (Borrower) promises to pay to the order of M. L. Algood at
Bloomington, Indiana, or such other place as the holder hereof may designate
in writing, the principal sum of one million dollars or so much thereof as may
be advanced and outstanding from time to time, together with interest on the
unpaid principal balance existing from time to time:
(1) From the date of delivery hereof until maturity, whether by
acceleration or otherwise at the rate of 12%.
Accrued interest shall be due and payable on the first day of each month
commencing November 1, 1996.
In any and all events the entire remaining unpaid principal balance of
the Note, together with any remaining accrued but unpaid interest thereon
shall be due and payable on demand.
Interest shall accrue on the basis of a three hundred sixty (360) day
year and be paid for the actual number of days outstanding.
Borrower may prepay the outstanding principal of this Note in whole or
part without premium
or penalty.
1
<PAGE>
If default is made in the payment of any installment or installments of
interest or principal and interest, as herein provided, when due, or in the
performance of any of the terms, agreements, covenants or conditions contained
in the Note or under any other agreement Borrower has then in any such events,
or at any time thereafter, the entire principal of this Note, irrespectively
of the maturity date specified herein, together with attorney's fees incurred
in collection or enforcing payment or performance hereof and interest from the
date of such default on the unpaid principal balance hereof at the default
rate hereinabove specified, shall at the election of the holder hereof, and
without relief from valuation or appraisement laws, become immediately due and
payable.
The rights and remedies of the holder hereof as provided in this Note
shall be cumulative and concurrent, and may be pursued singly, successively or
together. The failure to exercise any such right or remedy on any one or more
occasions shall in no event be constructed as a waiver of the right to the
later exercise thereof, or as the release thereof.
Borrower waives demand, presentment for payment, notice of dishonor,
protest and notice of protest, and expressly agrees that this Note and any
payment coming due under it may be extended or otherwise modified, from time
to time without in any way affecting its liability hereunder.
This note shall be constructed according to and governed by the laws of
the State of Indiana.
2
IN WITNESS WHEREOF, Borrower has executed this Note as of the date first
hereinabove written.
General Acceptance Corporation
BY: /s/ Martin C. Bozarth
Martin C. Bozarth CFO
Printed Name Title
3
<PAGE>
Exhibit 10.68
<PAGE>
GE CAPITAL
Asset Based Financing
A unit of General Electric Capital Corporation
1000 Hart Road, Suite 345, Barrington, IL 60010
800-688-7579
October 29, 1996
VIA FACSIMILE & FEDERAL EXPRESS
Mr. Malvin Algood
Chief Executive Officer
General Acceptance Corporation
1025 Acuff Rd., Suite 400
Bloomington, In 47404
RE: Loan & Security Agreement Between General Acceptance Corporation
("Borrower") and General Electric Capital Corporation ("Lender")
Dear Mr. Algood:
Reference is made to that certain Loan and Security Agreement dated as of May
1, 1992, as amended, between Borrower and Lender (the "Loan Agreement") and to
the Forbearance Agreement executed by the parties in the form of a letter
dated March 20, 1996 (the "Forbearance"), as amended, (together, the
"Agreement"). All terms used in this letter without definition shall have the
meaning given to such terms in the Agreement.
Borrower has informed Lender of its desire to liquidate its repossession
inventory on an accelerated basis. The accelerated liquidation of the subject
inventory will cause Borrower to exceed the maximum charge-off covenant as
defined in the Agreement. Conditioned upon Borrower's acceptance of the
following terms and conditions, Lender is willing to amend the Forbearance
charge-off covenant as outlined on the attached Exhibit E. Upon acceptance,
Exhibit E of the Forbearance will be deleted in its entirety and a new Exhibit
E (attached hereto) will be substituted therefore. Borrower has accepted the
following conditions precedent to Lender's amendment of the charge-off
covenant:
1. Section 2.4 of the Agreement, General Interest Rate, is hereby
amended to read as follows:
"2.4 General Interest Rate. Except as modified by Section 2.6 and
15.2, the Loan shall
bear interest, calculated daily on the basis of a 365-day year, at a per annum
rate equal to three and three quarters percent (3.75%) plus the LIBOR Rate."
The change in the interest rate shall be effective upon acceptance
of this letter.
2. The loan from M. L. Algood ("Algood") to Borrower in the amount of
$1,000,000, as evidenced by the Promissory Note between Mr. Algood and
Borrower dated October 15, 1996, will be subordinated in all material respects
to Borrower's loan payable to Lender. The subordination will remain in effect
until the earlier occurrence of either of the following events:
i. Borrower reduces its loan obligation to Lender below the amount of
$55,000,000; or
ii. Borrower and Lender negotiate and execute a new Loan and Security
Agreement.
Upon acceptance of this letter, Lender will prepare a subordination
agreement for
execution by Algood. The subject subordination agreement must be executed no
later than
November 8, 1996.
3. Should Borrower reduce the loan balance to Lender below $55,000,000,
then Lender will have the right to review and approve any bulk acquisitions of
accounts in excess of $1,000,000.
All other terms and conditions of the Agreement shall remain unchanged and in
full force and effect.
Very truly yours,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ W. Jerome McDermott
Its: Account Executive-----
Attachment
WJM:jll-10-23JM1.doc
ACKNOWLEDGED AND AGREED
GENERAL ACCEPTANCE CORPORATION
By: /s/ Malvin L. Algood
Its: CEO
EXHIBIT E
DELINQUENCY AND LOSSES
Borrower's Rolling Average Delinquency, as defined in subsection (G) of
Section 14.2 of the Agreement, shall not exceed seven percent (7%) in the
measurement period beginning July 1, 1996 through December 31, 1996. Until
the first six calendar months have elapsed, the Rolling Average Delinquency
shall be computed for the actual number of calendar months which have expired.
Borrower's cumulative monthly net charge-off levels for the months of
October 1996 through December 1996 shall not exceed maximum levels set forth
below.
Cumulative Net Charge-Off Level
Calendar Month-End 1996
October $5,063,000
November $6,626,000
December $8,189,000
10-23JM2.DOC
<PAGE>
<TABLE>
<CAPTION>
GENERAL ACCEPTANCE CORPORATION
Statement Re: Computation of Per Share Earnings
Exhibit 11.1
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
- ---------------------------------------------------------- -------------------
<S> <C> <C> <C> <C>
1996 1995 1996
------------- ------------- -------------
(HISTORICAL) (HISTORICAL) (HISTORICAL)
Primary:
Weighted average shares outstanding 6,022,000 6,022,000 6,022,000
Net effect of dilutive stock options - based on the
treasury stock method using the average
market price --- 56,839 ---
Adjustment for shares required to pay
undistributed S Corporation earnings using
the initial public offering price --- --- ---
Total weighted average shares outstanding 6,022,000 6,078,839 6,022,000
Net income (loss) $ (2,357,957) $ 1,618,504 $ (1,651,285)
Per share amount $ (0.39) $ 0.27 $ (0.27)
============= ============= =============
Fully diluted:
Weighted average shares outstanding 6,022,000 6,022,000 6,022,000
Net effect of dilutive stock options - based on the
treasury stock method using the period-end
market price, if greater than average market
price --- 63,994 ---
Adjustment for shares required to pay
undistributed S Corporation earnings using
the initial public offering price --- --- ---
------------- ------------- -------------
Total weighted average shares outstanding 6,022,000 6,085,994 6,022,000
Net income (loss) $ (2,357,957) $ 1,618,504 $ (1,651,285)
Per share amount $ (0.39) $ 0.27 $ (0.27)
============= ============= =============
THREE MONTHS
ENDED SEPTEMBER 30,
- ----------------------------------------------------------
<S> <C>
1995
------------
(PRO FORMA)
Primary:
Weighted average shares outstanding 5,311,956
Net effect of dilutive stock options - based on the
treasury stock method using the average
market price 31,012
Adjustment for shares required to pay
undistributed S Corporation earnings using
the initial public offering price 287,601
Total weighted average shares outstanding 5,630,569
Net income (loss) $ 3,814,241
Per share amount $ 0.68
============
Fully diluted:
Weighted average shares outstanding 5,311,956
Net effect of dilutive stock options - based on the
treasury stock method using the period-end
market price, if greater than average market
price 39,569
Adjustment for shares required to pay
undistributed S Corporation earnings using
the initial public offering price 287,601
------------
Total weighted average shares outstanding 5,639,126
Net income (loss) $ 3,814,241
Per share amount $ 0.68
============
</TABLE>
Exhibit 11.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the company's
unaudited financial statements as of and for the three months ended
September 30,1996, and is qualified in its entirety by refernece to such
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,085,132
<SECURITIES> 0
<RECEIVABLES> 125,177,425
<ALLOWANCES> (16,175,296)
<INVENTORY> 13,948,401
<CURRENT-ASSETS> 0
<PP&E> 2,491,528
<DEPRECIATION> 0
<TOTAL-ASSETS> 134,842,194
<CURRENT-LIABILITIES> 0
<BONDS> 101,992,466
0
0
<COMMON> 29,792,573
<OTHER-SE> (4,699,965)
<TOTAL-LIABILITY-AND-EQUITY> 134,842,194
<SALES> 0
<TOTAL-REVENUES> 8,120,968
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,372,761
<LOSS-PROVISION> 5,493,424
<INTEREST-EXPENSE> 2,184,597
<INCOME-PRETAX> (3,929,814)
<INCOME-TAX> (1,571,857)
<INCOME-CONTINUING> (2,357,957)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,357,957)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
</TABLE>
