-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UDOvLX0tYlrOKmNIoNTKfw6puAnq4wc+7V5rygLPt7Qx22DP2iMWBBzifrm7lK8I toaHz2tEvnG+wJyVQJNAlw== 0000912057-97-031805.txt : 19970929 0000912057-97-031805.hdr.sgml : 19970929 ACCESSION NUMBER: 0000912057-97-031805 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970926 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT CORP CENTRAL INDEX KEY: 0000804269 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 752291093 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-10667 FILM NUMBER: 97686069 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 817-332-70 MAIL ADDRESS: STREET 1: 200 BAILEY AVENUE CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: URCARCO INC DATE OF NAME CHANGE: 19920703 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended JUNE 30, 1997 ------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________________ to ___________________ Commission file number 1-10667 -------------------------------------------------- AMERICREDIT CORP. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Texas 75-2291093 - ------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 Bailey Avenue, Fort Worth, Texas 76107 - ------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 332-7000 --------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, $.01 Par Value New York Stock Exchange ---------------------------- ------------------------ Securities registered pursuant to Section 12(g) of the Act: 9 1/4 % Senior Notes Due 2004/Guarantee of 9 1/4% Senior Notes Due 2004 - ------------------------------------------------------------------------ (Title of class) 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 Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of 23,677,056 shares of the Registrant's Common Stock held by non-affiliates based upon the closing price of the Registrant's Common Stock on the New York Stock Exchange on September 12, 1997 was approximately $696,993,336. For purposes of this computation, all officers, directors and 5 percent beneficial owners of the Registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors and beneficial owners are, in fact, affiliates of the Registrant. There were 29,657,163 shares of Common Stock, $.01 par value outstanding as of September 12, 1997. DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Annual Report to Shareholders for the year ended June 30, 1997 ("the Annual Report") furnished to the Commission pursuant to Rule 14a-3(b) and the definitive Proxy Statement pertaining to the 1997 Annual Meeting of Shareholders ("the Proxy Statement") and filed pursuant to Regulation 14A are incorporated herein by reference into Parts II and IV, and Part III, respectively. AMERICREDIT CORP. INDEX TO FORM 10-K ITEM PAGE NO. NO. - -------------------------------------------------------------------------------- PART I 1. Business 4 2. Properties 25 3. Legal Proceedings 26 4. Submission of Matters to a Vote of Security Holders 26 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 27 6. Selected Financial Data 27 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 27 8. Financial Statements and Supplementary Data 27 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 38 PART III 10. Directors and Executive Officers of the Registrant 39 11. Executive Compensation 39 12. Security Ownership of Certain Beneficial Owners and Management 39 13. Certain Relationships and Related Transactions 39 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 40 SIGNATURES 41 3 PART I ITEM 1. BUSINESS GENERAL AmeriCredit Corp. was incorporated in Texas on May 18, 1988 and succeeded to the business, assets and liabilities of a predecessor corporation formed under the laws of Texas on August 1, 1986. The Company's predecessor began the Company's business in March 1987, and the business has been operated continuously since that time. As used herein, the term "Company" refers to the Company, its wholly owned subsidiaries and its predecessor corporation. The Company's principal executive offices are located at 200 Bailey Avenue, Fort Worth, Texas, 76107 and its telephone number is (817) 332-7000. In July 1992, the Company formed a subsidiary, AmeriCredit Financial Services, Inc. ("AFSI"), a Delaware corporation, to engage in the indirect automobile finance business. AFSI began operating in the indirect automobile finance business in September 1992. Through its AFSI branch network, the Company purchases loans made by franchised and select independent dealers to consumers buying late model used and, to a lesser extent, new automobiles. The Company targets consumers who are typically unable to obtain financing from traditional sources. Funding for the Company's auto lending activities is obtained primarily through the sale of loans in securitization transactions. The Company services its automobile lending portfolio at regional centers using automated loan servicing and collection systems. In November 1996, the Company acquired Americredit Corporation of California (formerly Rancho Vista Mortgage Corporation), a California corporation. This subsidiary, which operates as AmeriCredit Mortgage Services ("AMS"), originates home equity loans and sells the loans and related servicing rights in the wholesale markets. The Company previously operated a chain of "we finance" used car retail lots in Texas, selling used cars and typically financing sales to customers. The Company restructured its operations and withdrew from the retail used car sales business effective December 31, 1992. INDIRECT AUTOMOBILE FINANCE OPERATIONS TARGET MARKET. The Company's indirect lending programs are designed to serve consumers who have limited access to traditional automobile financing. The Company's typical borrowers have experienced prior credit difficulties or have limited credit histories. Because the Company serves consumers who are unable to meet the credit standards imposed by most traditional automobile financing sources, the Company generally charges interest at rates higher than those 4 charged by traditional automobile financing sources. The Company also expects to sustain a higher level of credit losses than traditional automobile financing sources since the Company provides financing in a relatively high risk market. DEALERSHIP MARKETING. Since the Company is an indirect lender, the Company focuses its marketing activities on automobile dealerships. The Company is selective in choosing the dealers with whom it conducts business and primarily pursues manufacturer franchised dealerships with used car operations and select independent dealerships. The Company selects these dealers because they sell the type of used cars the Company prefers to finance, specifically later model, low mileage used cars. Of the contracts purchased by the Company during the fiscal year ended June 30, 1997, approximately 84% were originated by manufacturer franchised dealers with used car operations and 16% by select independent dealers. The Company purchased contracts from 5,657 dealers during the fiscal year ended June 30, 1997. No dealer accounted for more than 2% of the total volume of contracts purchased by the Company for that same period. The Company's financing programs are marketed to dealers through branch office personnel, including branch managers, assistant managers and in some cases marketing representatives. The Company believes that the personal relationships its branch managers and other branch office personnel establish with the dealership personnel are an important factor in creating and maintaining productive relationships with its dealership customer base. Branch office personnel are responsible for the solicitation, enrollment and education of new dealers regarding the Company's financing programs. Branch office personnel visit dealerships to present information regarding the Company's financing programs and capabilities. These personnel explain the Company's underwriting philosophy, including its preference for sub-prime quality contracts secured by later model, lower mileage used vehicles, and its practice of underwriting in the local branch office. Prior to entering into a relationship with a dealer, the Company considers the dealer's operating history and reputation in the marketplace. The Company then maintains a non-exclusive relationship with the dealer. This relationship is actively monitored with the objective of maximizing the volume of applications received from the dealer that meet the Company's underwriting standards and profitability objectives. Due to the non-exclusive nature of the Company's relationships with dealerships, the dealerships retain discretion to determine whether to obtain financing from the Company or from another source for a customer seeking to finance a vehicle purchase. Branch managers and other branch office personnel regularly telephone and visit dealers to solicit new business and to answer any questions dealers may have regarding the Company's financing programs and capabilities. To increase the effectiveness of these contacts, the branch managers and other branch office personnel have access to the Company's management information systems which 5 detail current information regarding the number of applications submitted by dealership, the Company's response and the reasons why a particular application was rejected. Finance contracts are generally purchased by the Company without recourse to the dealer, and accordingly, the dealer usually has no liability to the Company if the consumer defaults on the contract. To mitigate the Company's risk from potential credit losses, the Company typically charges dealers an acquisition fee when purchasing finance contracts. Such acquisition fees are negotiated with dealers on a contract-by-contract basis and are usually non-refundable. Although finance contracts are purchased without recourse to the dealer, the dealer typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies the Company against any claims, defenses and set-offs that may be asserted against the Company because of assignment of the contract. Recourse based upon such representations and indemnities would be limited in circumstances in which the dealer has insufficient financial resources to perform upon such representations and indemnities. The Company does not view recourse against the dealer on these representations and indemnities to be of material significance in its decision to purchase finance contracts from a dealer. BRANCH OFFICE NETWORK. The Company uses a branch office network to market its financing programs to selected dealers and develop relationships with these dealers throughout the country. Additionally, the branch office network is used for the underwriting of contracts submitted by dealerships. The Company believes a local presence enables the Company to more fully service dealers and be more responsive to dealer concerns and local market conditions. The Company selects markets for branch office locations based upon numerous factors, including demographic trends and data, competitive conditions and the regulatory environment, in addition to the availability of qualified personnel. Branch offices are typically situated in suburban office buildings which are accessible to local dealers. Each branch office solicits dealers for contracts and maintains the Company's relationship with the dealers in the geographic vicinity of that branch office. Branch office locations are typically staffed by a branch manager, an assistant manager and one or more dealer and customer service representatives. Larger branch offices may also have an additional assistant manager and/or dealer marketing representative. Branch managers are compensated with base salaries, annual incentives based primarily on branch level credit quality and, if the credit quality objectives are met, loan volume. The incentives are typically paid in cash and stock option grants. The branch manager reports to a regional vice president. The Company's regional vice presidents monitor branch office compliance with the Company's underwriting guidelines. The Company's automated application processing system and loan accounting system provide the regional vice 6 presidents access to credit application information enabling them to consult with the branch managers on daily credit decisions and review exceptions to the Company's underwriting guidelines. The regional vice presidents also make periodic visits to the branch offices to conduct operating reviews. The regional vice presidents receive incentives based on the overall performance of the Company. The following table sets forth information with respect to the number of branches, dollar volume of contracts purchased and number of producing dealerships for the periods set forth below. YEARS ENDED JUNE 30, ----------------------------------- 1997 1996 1995 -------- -------- -------- (dollars in thousands) Number of branch offices 85 51 31 Dollar volume of contracts purchased $906,794 $432,442 $230,176 Number of producing dealerships (1) 5,657 3,262 1,861 (1) A producing dealership refers to a dealership from which the Company had purchased contracts in the relevant period. The Company plans to expand its indirect automobile finance business by adding additional branch offices and increasing dealer penetration at its existing branch offices. The success of this strategy is dependent upon, among other factors, the Company's ability to hire and retain qualified branch managers and other personnel and to develop relationships with more dealers. The Company confronts intense competition in attracting key personnel and establishing relationships with dealers. Dealers often already have favorable sub-prime financing sources, which may restrict the Company's ability to develop dealer relationships and delay the Company's growth. In addition, the competitive conditions in the Company's markets may result in a reduction in the profitability of the contracts that the Company purchases or a decrease in contract acquisition volume, which would adversely affect the Company's results of operations. PROPRIETARY CREDIT SCORING SYSTEM AND RISK-BASED PRICING. The Company has implemented a credit scoring system throughout its branch office network to support the branch level credit approval process. The credit scoring system was developed with the assistance of Fair, Isaac and Co., Inc. from the Company's loan and portfolio databases. Credit scoring is used to differentiate credit applicants and to rank order credit risk in terms of expected default rates, which enables the Company to tailor loan pricing and structure according to this statistical assessment of credit risk. For example, a consumer with a lower score would indicate a higher probability of default and, therefore, the Company could compensate for this higher default 7 risk through the structuring and pricing of the transaction. While the Company employs a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations in evaluating contracts for purchase could adversely affect the credit quality of the Company's receivables portfolio. The credit scoring system contrasts the quality of credit applicant profiles resulting in a statistical assessment of the most predictive characteristics. Factors considered in any loan application include data presented on the application, the credit bureau report and the type of loan the applicant wishes to secure. Specifically, the credit scoring system considers customer residential and employment stability, the customer's financial history, current financial capacity, integrity of meeting historical financial obligations, loan structure and credit bureau information. The scorecard takes these factors into account and produces a statistical assessment of these attributes. This assessment is used to segregate applicant risk profiles and determine whether risk is acceptable and the price the Company should charge for that risk. The credit scorecard is validated on a monthly basis through the comparison of actual versus projected performance by score. The Company will continue to refine its proprietary scorecards based on increased information and identified correlations relating to receivables performance. Through the use of the Company's proprietary credit scoring system, branch office personnel with credit authority are able to more efficiently review and prioritize loan applications. Applications which receive a high score are processed rapidly and credit decisions can be quickly faxed back to the dealer. Applications receiving low scores can be quickly rejected without further processing and review by the Company. This ability to prioritize applications allows for a more effective allocation of resources to those applications requiring more review. DECENTRALIZED LOAN APPROVAL PROCESS. The Company purchases individual contracts through its branch offices based on a decentralized credit approval process tailored to local market conditions. Each branch manager has a specific credit authority based upon his experience and historical loan portfolio results as well as established credit scoring parameters. In certain markets where a branch office is not present, contracts are purchased through the Company's central purchasing office located in the Dallas-Fort Worth area, which underwrites applications solicited by marketing representatives in those markets. Although the credit approval process is decentralized, all credit decisions are guided by the Company's credit scoring strategies, overall credit and underwriting policies and procedures and daily monitoring process. Loan application packages completed by prospective obligors are received via facsimile at the branch offices from dealers. Application data are entered 8 into the Company's automated application processing system. A credit bureau report is automatically generated and a credit score is computed. Branch office personnel with credit authority review the application package and determine whether to approve the application, approve the application subject to conditions that must be met or deny the application. These personnel consider many factors in arriving at a credit decision, relying primarily on the applicant's credit score, but also taking into account the applicant's capacity to pay, stability, character and intent to pay, the contract terms and collateral value. The Company estimates that approximately 60% to 65% of applicants are denied credit by the Company typically because of their credit histories or because their income levels are not sufficient to support the proposed level of monthly payments. As part of the credit decision process, a customer service representative investigates the residence, employment and credit history of the applicant. Dealers are contacted regarding credit decisions by telefax and/or telephone. Declined and conditioned applicants are also provided with appropriate notification of the decision. The Company's underwriting and collateral guidelines as well as credit scoring parameters form the basis for the branch level credit decision; however, the qualitative judgment of the branch office personnel with credit authority with respect to the credit quality of an applicant is a significant factor in the final credit decision. Exceptions to credit policies and authorities must be approved by a regional vice president or other designated credit officer. Completed loan packages are sent by the dealers to the branch office. Loan terms and insurance coverages are generally reverified with the consumer by branch office personnel and the loan packages are forwarded to the Company's centralized loan services department, where the packages are scanned to create electronic copies. Key original documents are stored in a fire-proof vault and the loan packages are further processed in an electronic environment. The loans are reviewed for proper documentation and regulatory compliance and are entered into the Company's loan accounting system. Daily loan reports are generated for final review by senior operations management. Once cleared for funding, the loan services department issues a check or electronically transfers funds to the dealer. Upon funding of the contract, the Company acquires a perfected security interest in the automobile that was financed. All of the Company's contracts are fully amortizing with substantially equal monthly installments. SERVICING AND COLLECTIONS PROCEDURES. The Company services its receivables portfolio at facilities located in Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina utilizing centralized data processing, billing and collection functions. The Company's servicing activities consist of collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent in payment of a receivable installment, maintaining the security interest in the financed vehicle and repossessing and liquidating collateral when necessary. The 9 Company utilizes various automated systems to support its servicing and collections activities. The Company uses monthly billing statements to serve as a reminder to customers as well as an early warning mechanism in the event a customer has failed to notify the Company of an address change. Approximately 15 days before a customer's first payment due date and each month thereafter, the Company mails the customer a billing statement directing the customer to mail payments to a lockbox bank for deposit in a lockbox account. Payment receipt data is electronically transferred from the Company's lockbox bank to the Company for posting to the loan accounting system. Payments may also be received directly by the Company from customers. All payment processing and customer account maintenance is performed centrally in Fort Worth, Texas by the loan services department. The Company receives servicing fees for servicing securitized receivables equal to 2.25% to 2.50% per annum of the outstanding principal balance of such receivables. The Company maintains computerized records with respect to each finance contract to record receipts and disbursements and to prepare related reports. The Company utilizes a predictive dialing system to make phone calls to customers whose payments are past due by less than 30 days. The predictive dialer is a computer-controlled telephone dialing system which dials phone numbers of customers from a file of records extracted from the Company's database. Once a live voice responds to the automated dialer's call, the system automatically transfers the call to a collector and the relevant account information to the collector's computer screen. The system also tracks and notifies collections management of phone numbers that the system has been unable to reach within a specified number of days, thereby promptly identifying for management all customers who cannot be reached by telephone. By eliminating time wasted on attempting to reach customers, the system gives a single collector the ability to speak with a larger number of accounts daily. Once an account becomes more than 30 days delinquent, the account moves to the Company's mid-range collection unit. The objective of these collectors is to prevent the account from becoming further delinquent. After a scheduled payment on an account becomes approximately 60 days past due, the Company typically initiates repossession of the financed vehicle. However, if an account is deemed uncollectible, if the financed vehicle is deemed by collection personnel to be in danger of being damaged, destroyed or hidden, if the customer deals in bad faith or if the customer voluntarily surrenders the financed vehicle, the Company may repossess it without regard to the length of payment delinquency. Payment deferrals are at times offered to customers who have encountered temporary financial difficulty, hindering their ability to pay as contracted, and when other methods of assisting the customer in meeting the contract terms and conditions have been exhausted. A deferral allows the customer to move a delinquent payment to the end of the loan by paying a fee (approximately the 10 interest portion of the payment deferred). The collector must review the past payment history and assess the customer's desire and capacity to make future payments and, before agreeing to a deferral, must comply with the Company's policies and guidelines for deferrals. Exceptions to the Company's policies and guidelines for deferrals must be approved by a collections officer. Deferment transactions are processed by the loan services department. As of June 30, 1997, approximately 10% of the Company's managed receivables had received a deferral. REPOSSESSIONS. The Company follows prescribed legal procedures for repossessions, which include peaceful repossession, one or more consumer notifications, a prescribed waiting period prior to disposition of the repossessed automobile and return of personal items to the consumer. In some jurisdictions, the Company must provide the consumer with reinstatement or redemption rights. Legal requirements, particularly in the event of bankruptcy, may restrict the Company's ability to dispose of the repossessed vehicle. Repossessions are handled by independent repossession firms engaged by the Company. Repossessions must be approved by a collections officer. Upon repossession and after any prescribed waiting period, the repossessed automobile is sold at auction. The Company does not sell any vehicles on a retail basis. The proceeds from the sale of the automobile at auction, and any other recoveries, are credited against the balance of the contract. Auction proceeds from sale of the repossessed vehicle and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged-off. The Company may pursue collection of deficiencies when it deems such action to be appropriate. CHARGE-OFF POLICY. The Company's policy is to charge-off an account in the month in which the account becomes 180 days contractually delinquent even if the Company has not repossessed the related vehicle. On accounts less than 180 days delinquent, the Company charges-off the account when the vehicle securing the delinquent contract is repossessed and disposed of. The charge-off represents the difference between the actual net sales proceeds and the amount of the delinquent contract, including accrued interest. Accrual of finance charge income is suspended on accounts which are more than 60 days contractually delinquent. 11 RISK MANAGEMENT. The Company has developed procedures to evaluate and supervise the operations of each branch office on a centralized basis. The Company's centralized risk management department is responsible for monitoring the contract purchase process and supporting the supervisory role of senior operations management. This department tracks via databases key variables, such as loan applicant data, credit bureau and credit score information, loan structures and terms and payment histories. The risk management department also regularly reviews the performance of the Company's credit scoring system and is involved with third-party vendors in the development and enhancement of credit scorecards for the Company. The risk management department also prepares regular credit indicator packages reviewing portfolio performance at various levels of detail including total Company, branch office and dealer. Various daily reports and analytical data are also generated by the Company's management information systems. This information is used to monitor credit quality as well as to constantly refine the structure and mix of new contract purchases. Portfolio returns are reviewed on a consolidated basis, as well as at the branch office, dealer and contract levels. A behavioral scoring model is used to project the relative probability that an individual account will default and to validate the credit scoring system after the receivable has aged for a sufficient period time (generally six to nine months). Default probabilities are calculated for each account independent of the credit score. The Company believes that, when grouped by credit score at origination, projected default rates from the behavioral scoring model coincide with the credit scoring system. The value of the collateral underlying the Company's receivables portfolio is updated monthly with a loan-by-loan link to national wholesale auction values. This data, along with the Company's own experience relative to mileage and vehicle condition, are used for evaluating collateral disposition activities as well as for reserve analysis models. The Company's risk management department conducts regular compliance audits of branch office operations and the loan services and collections departments. The primary objective of the audits is to measure compliance with the Company's written policies and procedures as well as regulatory matters. Audits of branch office operations are conducted no less than every six months and include a review of compliance with underwriting policies, completeness of loan documentation, assessment of collateral value and extent of applicant data investigation. Written audit reports are distributed to local branch office personnel and the regional vice presidents for response and follow-up. Senior operations management reviews copies of these reports. SECURITIZATION OF LOANS. Since December 1994, the Company has pursued a strategy of securitizing its receivables to diversify its funding, improve 12 liquidity and obtain a cost-effective source of funds for the purchase of additional automobile finance contracts. The Company applies the net proceeds from securitizations to pay down borrowings under its bank line of credit, thereby increasing availability thereunder for further contract purchases. Through June 30, 1997, the Company had securitized approximately $1.3 billion of automobile receivables. In its securitizations, the Company, through a wholly-owned subsidiary, transfers automobile receivables to newly-formed securitization trusts, which issue one or more classes of asset-backed securities. The asset-backed securities are simultaneously sold to investors, except for certain subordinated interests which may be retained by wholly-owned subsidiaries of the Company and which are included in excess servicing receivable in the Company's consolidated financial statements. When receivables are transferred to securitization trusts in securitization transactions, the Company recognizes a gain on sale of receivables and continues to service such receivables. The gain on sale of receivables represents the difference between the sales proceeds, net of transaction costs, and the Company's net carrying value of the receivables sold, plus the present value of estimated excess cash flows. The excess cash flows are the difference between the cash collected from obligors on securitized receivables and the sum of (i) principal and interest paid to investors in the asset-backed securities; (ii) contractual servicing fees; (iii) defaults, net of recoveries; and (iv) other expenses such as trustee fees and financial guarantee insurance premiums. Concurrently with recognizing such gain on sale of receivables, the Company records a corresponding asset, excess servicing receivable, which includes the present value of estimated excess cash flows as described above plus any subordinated interests in the securitization trusts retained by the Company. The calculation of excess servicing receivable includes estimates of future losses and prepayment rates for the remaining term of the receivables sold since these factors impact the amount and timing of future cash collected on the receivables sold. The carrying value of excess servicing receivable is reviewed quarterly by the Company on a disaggregated basis by trust. If future losses and prepayment rates exceed the Company's original estimates, excess servicing receivable will be adjusted through a charge to operations. Through June 30, 1997, no such charge has been made. Favorable credit loss and prepayment experience compared to the Company's original estimates would result in additional income when realized. In connection with the Company's securitization program, the Company arranges for credit enhancement to achieve a desired credit rating on the asset-backed securities issued. The credit enhancement for the Company's securitizations has taken the form of financial guaranty insurance policies issued by Financial Security Assurance Inc. ("FSA"), a monoline insurer, which insures 13 the timely payment of principal and interest due on the asset-backed securities. As of June 30, 1997, FSA had insured all the Company's asset backed securities. The Company has limited reimbursement obligations to FSA; however, credit enhancement requirements, including FSA's encumbrance of certain restricted cash accounts and subordinated interests in trusts, provide a source of funds to cover shortfalls in collections (as described below) and to reimburse FSA for any claims which may be made under the policies issued with respect to the Company's securitizations. The credit enhancement requirements for any securitization include restricted cash accounts which are generally established with an initial deposit and subsequently funded through excess cash flows from securitized receivables. Funds are withdrawn from the restricted cash accounts to cover any shortfalls in amounts payable on the asset-backed securities. Funds are also available to be withdrawn in an event of default to reimburse FSA for draws on its financial guaranty insurance policy. In addition, the restricted cash account for each securitization trust is cross-collateralized to the restricted cash accounts established in connection with the Company's other securitization trusts, such that excess cash flow from a performing securitization trust insured by FSA may be used to support cash flow shortfalls from a non-performing securitization trust insured by FSA, thereby further restricting excess cash flow available to the Company. The Company is entitled to receive amounts from the restricted cash accounts to the extent the amounts deposited exceed predetermined required minimum levels. FSA has taken a pledge of the stock of AFS Funding Corp., the wholly-owned subsidiary of the Company that owns the restricted cash accounts and excess servicing receivable, such that, if the pledge is exercised in the event of a payment under one of its insurance policies or certain material adverse changes in the business of the Company, FSA would control all of the restricted cash accounts and excess servicing receivable. The terms of each securitization also provide that, under certain tests relating to delinquencies, defaults and losses, cash may be retained in the restricted cash account and not released to the Company until increased minimum levels of credit enhancement requirements have been reached. TRADE NAMES. The Company has obtained federal trademark protection for the "AmeriCredit" name and the logo that incorporates the "AmeriCredit" name. COMPETITION. Competition in the field of sub-prime automobile finance is intense. The automobile finance market is highly fragmented and is served by a variety of financial entities including the captive finance affiliates of major automotive manufacturers, banks, thrifts, credit unions and independent finance companies. Many of these competitors have greater financial resources and lower costs of funds than the Company. Many of these competitors also have long standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer 14 floor plan financing and leasing, which are not provided by the Company. Additionally, several independent companies have completed initial public offerings during the last few years in order to fund growth. Providers of automobile financing have traditionally competed on the basis of interest rates charged, the quality of credit accepted, the flexibility of loan terms offered and the quality of service provided to dealers and customers. In seeking to establish itself as one of the principal financing sources at the dealers it serves, the Company competes predominately on the basis of its high level of dealer service and strong dealer relationships and by offering flexible loan terms. The Company also seeks to offer rates that are competitive and that are consistent with its goal of balancing risk and returns. REGULATION. The Company's operations are subject to regulation, supervision and licensing under various federal, state and local statues, ordinances and regulations. In most states in which the Company operates, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as the Company. Such rules and regulations generally provide for licensing of sales finance agencies, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation and restrictions on collection practices and creditors' rights. In certain states, the Company's branch offices are subject to periodic examination by state regulatory authorities. Some states in which the Company operates do not require special licensing or provide extensive regulation of the Company's business. The Company is also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require the Company to provide certain disclosures to prospective borrowers and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system used by the Company must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires the Company to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. 15 The dealers who originate automobile loans purchased by the Company also must comply with both state and federal credit and trade practice statutes and regulations. Failure of the dealers to comply with such statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on the Company. Management believes that the Company maintains all material licenses and permits required for its current operations and is in substantial compliance with all applicable local, state and federal regulations. There can be no assurance, however, that the Company will be able to maintain all requisite licenses and permits and the failure to satisfy those and other regulatory requirements could have a material adverse effect on the operations of the Company. Further, the adoption of additional, or the revision of existing, rules and regulations could have a material adverse effect on the Company's business. As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties based upon, among other theories of liability, usury, wrongful repossession, fraud and discriminatory treatment of credit applicants, which could take the form of a plaintiffs class action complaint. The Company, as the assignee of finance contracts originated by dealers, may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. Management believes that the Company has taken prudent steps to address the litigation risks associated with its business activities. However, there can be no assurance that the Company will be able to successfully defend against all such consumer claims, or that the determination of any such claim in a manner adverse to the Company would not have a material adverse effect on the Company's indirect automobile finance business. HOME EQUITY LOAN OPERATIONS In November 1996, the Company acquired all of the issued and outstanding stock of AMS in consideration for 400,000 shares of the Company's common stock. AMS originates and acquires sub-prime home equity loans through a network of mortgage brokers. AMS sells its home equity loans and the related servicing rights in the wholesale markets. While not currently representing a material portion of the Company's assets or revenues, management intends over time to devote substantial resources to pursue growth of AMS's business of originating home equity loans to sub-prime borrowers. There can be no assurance, however, that the Company will be able to successfully expand such business or that the failure to effectively expand such business will not have a material adverse effect on the Company's financial position, liquidity or results of operations. 16 RISK FACTORS DEPENDENCE ON CREDIT FACILITIES. The Company depends on credit facilities with financial institutions to finance its purchase of contracts pending securitization. At June 30, 1997, the Company has a credit facility (the "Credit Agreement") with various banks providing for revolving credit borrowings of up to $240 million, subject to a defined borrowing base. The Credit Agreement matures in October 1997. The Company's ability to execute its business strategy may require increases in the level of warehouse financing resources. There can be no assurance that such financing resources will continue to be available to the Company on reasonable terms or at all. To the extent that the Company is unable to extend or replace the Credit Agreement, and arrange new credit or warehouse facilities, the Company would have to curtail its contract purchasing activities, which would have a material adverse effect on the Company's financial position, liquidity and results of operations. The Credit Agreement contains certain restrictions and covenants and requires the Company to maintain specified financial ratios and satisfy certain financial tests. A breach of any of these convenants could result in an event of default under the Credit Agreement. Upon the occurrence of an event of default under the Credit Agreement, the lenders thereunder could elect to declare all amounts outstanding under the Credit Agreement, including accrued interest or other obligations, to be immediately due and payable and/or restrict the Company's ability to obtain additional borrowings under the Credit Agreement. The Company's ability to meet those financial ratios and tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those financial ratios and tests. DEPENDENCE ON SECURITIZATION PROGRAM. Since December 1994, the Company has relied upon its ability to aggregate and sell receivables in the asset-backed securities market to generate cash proceeds for repayment of credit facilities and to purchase additional contracts from automobile dealers. Further, gains on sales generated by the Company's securitizations represent a significant portion of the Company's revenues. The Company endeavors to effect securitizations of its receivables on at least a quarterly basis. Accordingly, adverse changes in the Company's asset-backed securities program or in the asset-backed securities market for automobile receivables generally could materially adversely affect the Company's ability to purchase and resell loans on a timely basis and upon terms reasonably favorable to the Company. Any delay in the sale of receivables beyond a quarter-end would eliminate the gain on sale in the given quarter and adversely affect the Company's reported earnings for such quarter. Any such adverse changes or delays would have a material adverse effect on the Company's financial position, liquidity and results of operations. 17 DEPENDENCE ON CREDIT ENHANCEMENT. To date, all of the Company's securitizations have utilized credit enhancement in the form of financial guaranty insurance policies issued by FSA in order to achieve "AAA/Aaa" ratings on the asset-backed securities issued by the securitization trusts. FSA is not required to insure Company-sponsored securitizations and there can be no assurance that it will continue to do so or that future Company-sponsored securitizations will be similarly rated. Likewise, the Company is not required to utilize financial guaranty insurance policies issued by FSA or any other form of credit enhancement in connection with its securitizations. A downgrading of FSA's credit rating or FSA's withdrawal of credit enhancement could result in higher interest costs for future Company-sponsored securitizations. Such events could have a material adverse effect on the Company's financial position, liquidity and results of operations. LIQUIDITY AND CAPITAL NEEDS. The Company requires substantial amounts of cash to fund its contract purchase and securitization activities. Although the Company recognizes a gain on the sale of receivables upon the closing of a securitization, it typically receives the cash representing such gain over the actual life of the receivables securitized. The Company also incurs significant transaction costs in connection with a securitization and incurs both current and deferred tax liabilities as a result of the gains on sale. Accordingly, the Company's strategy of securitizing substantially all of its newly purchased receivables and increasing the number of contracts purchased will require substantial amounts of cash. The Company expects to continue to require substantial amounts of cash as the volume of the Company's contract purchases increases and its securitization program grows. The Company's primary cash requirements include the funding of: (i) contract purchases pending their securitization and sale; (ii) credit enhancement requirements in connection with the securitization and sale of the receivables; (iii) interest and principal payments under the Credit Agreement and other indebtedness; (iv) fees and expenses incurred in connection with the securitization of receivables and the servicing of such receivables; (v) ongoing operating expenses; and (vi) income tax payments due on receipt of excess cash flows from securitization trusts. The Company's primary sources of liquidity in the future are expected to be existing cash, borrowings under its Credit Agreement, the implementation of other warehouse financing facilities, sales of automobile receivables through securitizations, excess cash flow received from securitization trusts and, subject to capital market conditions, issuances of other debt or equity securities. The Company's primary sources of liquidity as described in the paragraph above are expected to be sufficient to fund the Company's liquidity requirements for the year ended June 30, 1998 if the Company's future operations are consistent with management's current growth expectations. However, because the Company 18 expects to continue to require substantial amounts of cash for the foreseeable future, it anticipates that it will need to effect debt or equity financings regularly, in addition to quarterly securitizations. The type, timing and terms of financing selected by the Company will be dependent upon the Company's cash needs, the availability of other financing sources and the prevailing conditions in the financial markets. There can be no assurance that any such sources will be available to the Company at any given time or as to the favorableness of the terms on which such sources may be available. LEVERAGE. The Company currently has substantial outstanding indebtedness and is significantly leveraged. The Company's ability to make payments of principal or interest on, or to refinance its indebtedness will depend on its future operating performance, and its ability to effect additional securitizations and debt and/or equity financings, which to a certain extent is subject to economic, financial, competitive and other factors beyond its control. If the Company is unable to generate sufficient cash flow in the future to service its debt, it may be required to refinance all or a portion of its existing debt, or to obtain additional financing. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained. The inability to obtain additional financing could have a material adverse effect on the Company. The degree to which the Company is leveraged creates substantial risks including: (i) the Company may be more vulnerable to adverse general economic and industry conditions; (ii) the Company may find it more difficult to obtain additional financing for future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes; and (iii) the Company will have to dedicate a substantial portion of the Company's cash resources to the payment of principal and interest on indebtedness outstanding thereby reducing the funds available for operations and future business opportunities. In addition, the Credit Agreement and Indenture pursuant to which the Company's 9 1/4% Senior Notes were issued contain certain convenants which could limit the Company's operating and financial flexibility. DEFAULT AND PREPAYMENT RISKS. The Company's results of operations, financial condition and liquidity depend, to a material extent, on the performance of contracts purchased and held by the Company prior to their sale in a securitization transaction as well as the subsequent performance of receivables sold to securitization trusts. A portion of the loans purchased by the Company may default or prepay during the period prior to their sale in a securitization transaction or if they remain owned by the Company. The Company bears the full risk of losses resulting from payment defaults during such period. In the event of a payment default, the collateral value of the financed vehicle may not cover the outstanding loan balance and costs of recovery. The Company maintains an allowance for losses on loans held by the Company, which reflects management's estimates of anticipated losses for such loans. If the allowance is inadequate, then the Company would recognize as an 19 expense the losses in excess of such allowance and results of operations could be adversely affected. In addition, under the terms of the Credit Agreement, the Company is not able to borrow against defaulted loans and loans greater than 30 days delinquent held by the Company. The Company also retains a substantial portion of the default and prepayment risk associated with the receivables that it sells pursuant to Company-sponsored securitizations. A large component of the gain recognized on such sales and the corresponding asset recorded on the Company's balance sheet is excess servicing receivable which is based on the present value of estimated future excess cash flows from the securitized receivables which will be received by the Company. Accordingly, excess servicing receivable is calculated on the basis of management's assumptions concerning, among other things, defaults and prepayments. Actual defaults and prepayments may vary from management's assumptions, possibly to a material degree. In addition, the Company is required to deposit substantial amounts of the cash flows generated by its interests in Company sponsored securitizations ("restricted cash") into spread accounts which are pledged to FSA as security for any amounts which may be paid out by FSA on financial guarantee insurance policies. The Company regularly measures its default, prepayment and other assumptions against the actual performance of securitized receivables. If the Company were to determine, as a result of such regular review or otherwise, that it underestimated defaults and/or prepayments, or that any other material assumptions were inaccurate, the Company would be required to adjust the carrying value of its excess servicing receivable by making a charge to income and writing down the carrying value of excess servicing receivable on its balance sheet. Future cash flows from securitization trusts may also be less than expected and the Company's results of operations and liquidity would be adversely affected, possibly to a material degree. In addition, an increase in prepayments and defaults would reduce the size of the Company's servicing portfolio which would reduce the Company's servicing fee income, further adversely affecting results of operations and cash flow. A write-down of excess servicing receivable and the corresponding decreases in earnings and cash flow could limit the Company's ability to service debt and to affect future securitizations and other financings. To date, no such write downs have been required. Although the Company believes that it has made reasonable assumptions as to the future cash flows of the various pools of receivables that have been sold in securitization transactions, actual rates of default or prepayment may differ from those assumed and other assumptions may be required to be revised upon future events. PORTFOLIO PERFORMANCE; NEGATIVE IMPACT ON CASH FLOWS; RIGHT TO TERMINATE NORMAL SERVICING. Generally, the form of credit enhancement agreement entered into in connection with securitization transactions contains specified limits on the delinquency, default and loss rates on the receivables included in each 20 trust. If, at any measurement date, the delinquency, default or loss rate with respect to any trust were to exceed the specified limits, provisions of the credit enhancement agreement would automatically increase the level of credit enhancement requirements for that trust. During the period in which the specified delinquency, default or loss rate was exceeded, excess cash flow, if any, from the trust would be used to fund the increased credit enhancement levels instead of being distributed to the Company, which would have an adverse effect on the Company's cash flow. Further, the credit enhancement requirements for each securitization trust are cross-collateralized to the credit enhancement requirements established in connection with each of the Company's other securitization trusts, such that excess cash flow from a performing securitization trust insured by FSA may be used to support increased credit enhancement requirements for a non-performing securitization trust insured by FSA, thereby further restricting excess cash flow available to the Company. The Company has periodically exceeded these specified limits; however, FSA waived these occurrences. There can be no assurance that FSA would waive any such future occurrences. The credit enhancement agreements entered into in connection with securitization transactions contain additional specified limits on the delinquency, default and loss rates on the receivables included in each trust which are higher than the limits referred to in the preceding paragraph. If, at any measurement date, the delinquency, default or loss rate with respect to any trust were to exceed these additional specified limits applicable to such trust, provisions of the credit enhancement agreements permit FSA to terminate the Company's servicing rights with respect to the receivables sold to that trust. In addition, the servicing agreements are cross-defaulted so that a default under one servicing agreement would allow FSA to terminate the Company's servicing rights under all of its servicing agreements. Although the Company has never exceeded such delinquency, default or loss rates, there can be no assurance that the Company's servicing rights with respect to the automobile receivables in such trusts, or any other trust which exceeds the specified limits in future periods, will not be terminated. FSA has other rights to terminate the Company as servicer if (i) the Company were to breach its obligations under the servicing agreements, (ii) FSA was required to make payments under its policy or (iii) certain bankruptcy or insolvency events were to occur. As of June 30, 1997, no such termination events have occurred with respect to any of the trusts formed by the Company. 21 IMPLEMENTATION OF BUSINESS STRATEGY. The Company's financial position and results of operations depend on its ability to execute its business strategy. Execution of such business strategy is dependent on the Company's ability to obtain substantial additional financing, expand its automobile finance branch network, attract and retain skilled employees and on the ability of its officers and key employees to manage growth successfully. The failure or inability of the Company to execute its business strategy could materially adversely affect its financial position, liquidity and results of operations. The Company's business strategy also includes leveraging its expertise to broaden its indirect lending to sub-prime borrowers through the purchase of AMS. While not currently representing a material portion of the Company's assets or revenues, management intends over time to devote substantial resources to pursue growth of AMS's business of originating home equity loans to sub-prime borrowers. The conduct of a mortgage finance business requires a substantial amount of cash. The Company has no prior experience in the home equity mortgage business. Further, AMS's business will require substantial additional resources to fund growth. There can be no assurance that the Company will be able to successfully implement its sub-prime home equity loan business strategy. The failure to effectively implement such strategy or to obtain adequate resources to fund AMS's growth will have material adverse effects on the Company's financial position, liquidity and results of operations. CREDIT-IMPAIRED BORROWERS. The Company specializes in purchasing, securitizing and servicing sub-prime receivables. Sub-prime borrowers are associated with higher-than-average delinquency and default rates. While the Company believes that it effectively manages such risks with its proprietary credit scoring system, risk-based loan pricing and other underwriting policies and collection methods, no assurance can be given that such criteria or methods will be effective in the future. In the event that the Company underestimates the default risk or under-prices contracts that it purchases, the Company's financial position, liquidity and results of operations would be adversely affected, possibly to a material degree. ECONOMIC CONDITIONS. Delinquencies, defaults, repossessions and losses generally increase during periods of economic recession. Such periods also may be accompanied by decreased consumer demand for automobiles and declining values of automobiles securing outstanding loans, thereby weakening collateral coverage and increasing the possibility of a loss in the event of default. Significant increases in the inventory of used automobiles during periods of economic recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of such sales. Because the Company focuses on sub-prime borrowers, the actual rates of delinquencies, defaults, repossessions and losses on such loans could be higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn. In addition, during an 22 economic slowdown or recession, the Company' servicing costs may increase without a corresponding increase in its servicing fee income. While the Company believes that the underwriting criteria and collection methods it employs enable it to manage the higher risk inherent in loans made to sub-prime borrowers, no assurance can be given that such criteria or methods will afford adequate protection against such risks. Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could also adversely affect the Company's ability to complete future securitizations and correspondingly, its financial position, liquidity and results of operations. INTEREST RATES. The Company's profitability may be directly affected by the level of and fluctuations in interest rates, which affect the Company's ability to earn a gross interest rate spread between the rate charged consumers and the rate paid on its indebtedness. As interest rates rise, the Company would have to increase the rates charged on new contract purchases in order to preserve the gross interest rate spread. However, the rates on many of the contracts purchased by the Company are already are at or near the statutory maximums, affording the Company limited opportunity to pass on any increased interest costs. Furthermore, the Company's future gains recognized upon the securitization of automobile receivables will also be affected by interest rates. The Company recognizes a gain in connection with its securitizations based upon the estimated present value of projected future excess cash flows from the securitization trusts, which is largely dependent upon the gross interest rate spread. The Company believes that its profitability and liquidity would be adversely affected during any period of higher interest rates, possibly to a material degree. The Company monitors the interest rate environment and employs pre-funding or other hedging strategies designed to mitigate the impact of changes in interest rates. COMPETITION. Reference should be made to Item 1. "Business - Indirect Automobile Finance Operations - Competition" for a discussion of competitive risk factors. REGULATION. Reference should be made to Item 1. "Business - Indirect Automobile Finance Operations - Regulation" for a discussion of regulatory risk factors. EMPLOYEES At June 30, 1997, the Company employed approximately 900 persons. 23 EXECUTIVE OFFICERS The following sets forth certain data concerning the executive officers of the Company, all of whom are elected on an annual basis. NAME AGE POSITION ---- --- -------- Clifton H. Morris, Jr. 62 Chairman of the Board and Chief Executive Officer Michael R. Barrington 38 Vice Chairman, President and Chief Operating Officer Daniel E. Berce 43 Vice Chairman and Chief Financial Officer Edward H. Esstman 56 Executive Vice President - Auto Finance Division; President of AFSI Chris A. Choate 34 Senior Vice President, General Counsel and Secretary Cheryl L. Miller 33 Senior Vice President, Director of Collections and Customer Service of AFSI Michael T. Miller 36 Senior Vice President and Chief Credit Officer Preston A. Miller 33 Senior Vice President and Treasurer CLIFTON H. MORRIS, JR. has been Chairman of the Board and Chief Executive Officer of the Company since May 1988, and was also President of the Company from such date until April 1991 and from April 1992 to November 1996. Mr. Morris is also a director of Service Corporation International, a publicly held company which owns and operates funeral homes and related businesses. MICHAEL R. BARRINGTON has been Vice Chairman, President and Chief Operating Officer of the Company since November 1996 and was Executive Vice President and Chief Operating Officer of the Company from November 1994 until November 1996. Mr. Barrington was a Vice President of the Company from May 1991 until November 1994. From its formation in July 1992 until November 1996, Mr. Barrington was also the President and Chief Operating Officer of AFSI. 24 DANIEL E. BERCE has been Vice Chairman and Chief Financial Officer of the Company since November 1996 and was Executive Vice President, Chief Financial Officer and Treasurer of the Company from November 1994 until November 1996. Mr. Berce was Vice President, Chief Financial Officer and Treasurer of the Company from May 1991 until November 1994. EDWARD H. ESSTMAN has been President and Chief Operating Officer of AFSI since November 1996. Mr. Esstman was Executive Vice President, Director of Consumer Finance Operations of AFSI from November 1994 until November 1996 and was Senior Vice President, Director of Consumer Finance of AFSI from AFSI's formation in July 1992 until November 1994. Mr. Esstman has also been Executive Vice President - Auto Finance Division of the Company since November 1996 and Senior Vice President and Chief Credit Officer of the Company from November 1994 until November 1996. CHRIS A. CHOATE has been Senior Vice President, General Counsel and Secretary of the Company since November 1996 and was Vice President, General Counsel and Secretary of the Company from November 1994 until November 1996 and General Counsel and Secretary of the Company from January 1993 until November 1994. From July 1991 until January 1993, Mr. Choate was Assistant General Counsel. CHERYL L. MILLER has been Senior Vice President, Collections and Customer Service of AFSI since March 1996 and Vice President, Collections and Customer Service of AFSI from October 1994 until March 1996. From May 1994 until October 1994, Ms. Miller acted in other management capacities for AFSI. Prior to that, Ms. Miller was with Ford Motor Credit Company, most recently as customer service supervisor of the Dallas branch. MICHAEL T. MILLER has been Senior Vice President and Chief Credit Officer of the Company since November 1996. Mr. Miller has also been Senior Vice President, Risk Management, Credit Policy and Planning and Chief of Staff of AFSI since November 1994 and Vice President, Risk Management, Credit Policy and Planning of AFSI from AFSI's formation in July 1992 until November 1994. PRESTON A. MILLER has been Senior Vice President and Treasurer of the Company since November 1996. Mr. Miller was Vice President and Controller of the Company from November 1994 until November 1996 and was Controller of the Company from September 1989 until November 1994. ITEM 2. PROPERTIES The Company's executive offices are located at 200 Bailey Avenue, Fort Worth, Texas, in a 43,000 square foot building purchased by the Company in February 1994. This building is utilized by the Company for branch office support and administrative activities. The Company also leases 25,000 square feet of office space in Tempe, Arizona under a ten year agreement with renewal options that commenced in 1996, 35,000 square feet of office space in Charlotte, North 25 Carolina under a ten year agreement with renewal options that commenced in 1997 and 37,250 square feet of office space in Fort Worth, Texas under four year agreements that commenced in 1997. These facilities are used for loan servicing and collections activities. The Company's branch office facilities are generally leased under agreements with original terms of three to five years. Such facilities are typically located in a suburban office building and consist of between 1,000 and 2,000 square feet of space. ITEM 3. LEGAL PROCEEDINGS In the normal course of its business, the Company is named as a defendant in legal proceedings. These cases include claims for alleged truth-in-lending violations, nondisclosures, misrepresentations and deceptive trade practices, among other things. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages. Two unrelated proceedings in which the company is a defendant have been brought as putative class actions and are pending in federal district courts in Connecticut and Illinois, respectively. Classes have not been certified in either case and the Company has filed motions to dismiss in both cases which are presently pending. In the opinion of management, the resolution of these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the Company's security holders during the fourth quarter ended June 30, 1997. 26 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company has never paid cash dividends on its common stock. The Company's Credit Agreement and Indenture pursuant to which its 9 1/4% Senior Notes were issued contain certain restrictions on the payment of dividends. The Company presently intends to retain future earnings, if any, for purposes of funding operations. Information contained under the caption "Common Stock Data" in the Annual Report is incorporated herein by reference in further response to this Item 5. ITEM 6. SELECTED FINANCIAL DATA Information contained under the caption "Summary Financial and Operating Information" in the Annual Report is incorporated herein by reference in response to this Item 6. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information contained under the caption "Financial Review" in the Annual Report is incorporated herein by reference in response to this Item 7. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements of the Company included in the Annual Report and information contained under the caption "Quarterly Data" in the Annual Report are incorporated herein by reference in response to this Item 8. The payment of principal, premium, if any, and interest on the Company's 9 1/4% Senior Notes is guaranteed by certain of the Company's subsidiaries (the "Subsidiary Guarantors"). The separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are wholly- owned consolidated subsidiaries of the Company and are jointly, severally and unconditionally liable for the obligations represented by the 9 1/4% Senior Notes. The Company believes that the condensed consolidating financial information for the Company, the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries provide information that is more meaningful in understanding the financial position of the Subsidiary Guarantors than separate financial statements of the Subsidiary Guarantors. Therefore, the separate financial statements of the Subsidiary Guarantors are not deemed material. 27 The following supplementary schedules present consolidating financial information for (i) the Company (on a parent only basis), (ii) the combined Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an elimination column for adjustments to arrive at the information for the Company and its subsidiaries on a consolidated basis and (v) the Company and its subsidiaries on a consolidated basis as of June 30, 1997 and 1996 and for the three years in the period ended June 30, 1997. Investments in subsidiaries are accounted for by the parent company on the equity method for purposes of the presentation set forth below. Earnings of subsidiaries are therefore reflected in the parent company's investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions. 28 AmeriCredit Corp. Supplementary Information Consolidating Balance Sheet June 30, 1997 (Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ ASSETS Cash and cash equivalents $ 3,988 $ 2,039 $ 6,027 Investment securities $ 6,500 6,500 Finance receivables, net 240,912 25,745 266,657 Excess servicing receivable (777) 12,096 103,057 114,376 Restricted cash 67,895 67,895 Property and equipment, net 136 13,748 13,884 Goodwill 7,260 7,260 Other assets 4,447 5,304 1,103 10,854 Due (to) from affiliates 277,369 (197,656) (79,713) Investment in affiliates 56,764 $(56,764) -------- --------- -------- -------- -------- Total assets $344,439 $ 85,652 $120,126 $(56,764) $493,453 -------- --------- -------- -------- -------- -------- --------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit $71,700 $ 71,700 Mortgage warehouse facility 345 345 Automobile receivables-backed notes $ 23,689 23,689 9 1/4% Senior Notes $125,000 125,000 Notes payable 3,484 33 3,517 Deferred income taxes (8,669) (5,547) 27,520 13,304 Accrued taxes and expenses 8,088 27,987 3,287 39,362 -------- --------- -------- -------- -------- Total liabilities 127,903 94,518 54,496 276,917 -------- --------- -------- -------- -------- Shareholders' equity: Common stock 333 203 3 $ (206) 333 Additional paid-in capital 203,544 98,336 (98,336) 203,544 Unrealized gain on excess servicing receivable 2,954 2,954 (2,954) 2,954 Retained earnings (deficit) 33,466 (107,405) 62,673 44,732 33,466 -------- --------- -------- -------- -------- 240,297 (8,866) 65,630 (56,764) 240,297 Treasury stock (23,761) (23,761) -------- --------- -------- -------- -------- Total shareholders' equity 216,536 (8,866) 65,630 (56,764) 216,536 -------- --------- -------- -------- -------- Total liabilities and shareholders' equity $344,439 $ 85,652 $120,126 $(56,764) $493,453 -------- --------- -------- -------- -------- -------- --------- -------- -------- --------
29 AmeriCredit Corp. Supplementary Information Consolidating Balance Sheet June 30, 1996 (Dollars in Thousands) AmeriCredit Corp. Guarantors Non-guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ ASSETS Cash and cash equivalents $ (4,913) $ (87) $ 7,145 $ 2,145 Investment securities 6,558 6,558 Finance receivables, net 183,023 67,461 250,484 Excess servicing receivable 16,856 16,237 33,093 Restricted cash 15,304 15,304 Property and equipment, net 83 7,587 7,670 Deferred income taxes 6,360 3,635 9,995 Other assets 1,761 2,221 928 4,910 Due (to) from affiliates 124,527 (106,986) (17,541) Investment in affiliates 32,320 $(32,320) -------- -------- -------- --------- -------- Total assets $166,696 $106,249 $ 89,534 $(32,320) $330,159 -------- -------- -------- --------- -------- -------- -------- -------- --------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit $86,000 $ 86,000 Automobile receivables-backed notes $67,847 67,847 Notes payable $ 418 418 Accrued taxes and expenses 3,053 9,709 (93) 12,669 -------- -------- -------- --------- -------- Total liabilities 3,471 95,709 67,754 166,934 -------- -------- -------- --------- -------- Shareholders' equity: Common stock 326 175 3 $ (178) 326 Additional paid-in capital 190,005 112,112 (112,112) 190,005 Retained earnings (deficit) (5,233) (101,747) 21,777 79,970 (5,233) -------- -------- -------- --------- -------- 185,098 10,540 21,780 (32,320) 185,098 Treasury stock (21,873) (21,873) -------- -------- -------- --------- -------- Total shareholders' equity 163,225 10,540 21,780 (32,320) 163,225 -------- -------- -------- --------- -------- Total liabilities and shareholders' equity $166,696 $106,249 $ 89,534 $(32,320) $330,159 -------- -------- -------- --------- -------- -------- -------- -------- --------- --------
30 AmeriCredit Corp. Supplementary Information Consolidating Statement of Income Year Ended June 30, 1997 (Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Revenue: Finance charge income $ 36,633 $ 8,277 $ 44,910 Gain on sale of receivables $ (855) 2,939 65,172 67,256 Servicing fee income 55,994 4,111 $(39,081) 21,024 Investment income 18,262 147 2,411 (17,911) 2,909 Other income 86 1,344 218 1,648 Equity in income of affiliates 33,374 (33,374) ------- -------- -------- -------- -------- 50,867 97,057 80,189 (90,366) 137,747 ------- -------- -------- -------- -------- Costs and expenses: Operating expenses 5,282 83,997 1,717 (39,081) 51,915 Provision for losses 6,595 6,595 Interest expense 5,116 17,202 11,905 (17,911) 16,312 ------- -------- -------- -------- -------- 10,398 107,794 13,622 (56,992) 74,822 ------- -------- -------- -------- -------- Income before income taxes 40,469 (10,737) 66,567 (33,374) 62,925 Provision for income taxes 1,770 (3,217) 25,673 24,226 ------- -------- -------- -------- -------- Net income $38,699 $ (7,520) $40,894 $(33,374) $ 38,699 ------- -------- -------- -------- -------- ------- -------- -------- -------- --------
31 AmeriCredit Corp. Supplementary Information Consolidating Statement of Income Year Ended June 30, 1996 (Dollars in Thousands) AmeriCredit Corp. Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Revenue: Finance charge income $32,050 $19,656 $51,706 Gain on sale of receivables 12,449 10,424 22,873 Servicing fee income 26,329 50 $(22,667) 3,712 Investment income $11,395 337 643 (11,300) 1,075 Other income 104 1,489 19 1,612 Equity in income of affiliates 25,914 (25,914) ------- ------- ------- -------- ------- 37,413 72,654 30,792 (59,881) 80,978 ------- ------- ------- -------- ------- Costs and expenses: Operating expenses 3,700 41,359 3,289 (22,667) 25,681 Provision for losses 7,912 7,912 Interest expense 371 15,212 8,846 (11,300) 13,129 ------- ------- ------- -------- ------- 4,071 64,483 12,135 (33,967) 46,722 ------- ------- ------- -------- ------- Income before income taxes 33,342 8,171 18,657 (25,914) 34,256 Provision for income taxes 11,751 914 12,665 ------- ------- ------- -------- ------- Net income $21,591 $ 7,257 $18,657 $(25,914) $21,591 ------- ------- ------- -------- ------- ------- ------- ------- -------- -------
32 AmeriCredit Corp. Supplementary Information Consolidating Statement of Income Year Ended June 30, 1995 (Dollars in Thousands) AMERICREDIT CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- -------------- ------------ ------------ Revenue: Finance charge income $25,048 $5,201 $30,249 Investment income $12,264 96 224 $(11,300) 1,284 Servicing fee income 844 (844) Other income 1,019 (1,232) 1,764 1,551 Equity in income of affiliates 1,596 (1,596) ------- ------- ------ -------- ------- 14,879 24,756 7,189 (13,740) 33,084 ------- ------- ------ -------- ------- Costs and expenses: Operating expenses 2,627 12,143 847 (844) 14,773 Provision for losses 4,278 4,278 Interest expense 1,532 10,561 3,222 (11,300) 4,015 ------- ------- ------ -------- ------- 4,159 26,982 4,069 (12,144) 23,066 ------- ------- ------ -------- ------- Income before income taxes 10,720 (2,226) 3,120 (1,596) 10,018 Provision for income taxes (18,173) (702) (18,875) ------- ------- ------ -------- ------- Net income $28,893 $(1,524) $3,120 $ (1,596) $28,893 ------- ------- ------ -------- ------- ------- ------- ------ -------- -------
33 AmeriCredit Corp. Supplementary Information Consolidating Statement of Cash Flows Year Ended June 30, 1997 (Dollars in Thousands) AMERICREDIT NON- CORP GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- ---------- ------------ ------------ Cash flows from operating activities Net income $ 38,699 $ (7,520) $ 40,894 $ (33,374) $ 38,699 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28 2,175 2,203 Provision for losses 6,595 6,595 Deferred income taxes (1,180) (1,912) 27,520 24,428 Gain on sale of auto receivables (64,338) (64,338) Amortization of excess servicing receivable 4,760 29,633 34,393 Equity in income of affiliates (33,374) 33,374 Changes in assets and liabilities Other assets 917 (3,083) (175) (2,341) Accrued taxes and expenses 4,835 18,278 3,380 26,493 --------- --------- --------- --------- --------- Net cash provided by operating activities 9,925 19,293 36,914 66,132 --------- --------- --------- --------- --------- Cash flows from investing activities Purchases of auto receivables (896,711) (814,107) 814,107 (896,711) Originations of mortgage receivables (53,770) (53,770) Principal collections and recoveries on receivables 22,672 41,717 64,389 Net proceeds from sale of auto receivables 814,107 767,571 (814,107) 767,571 Net proceeds from sale of mortgage receivables 52,489 52,489 Purchase of property and equipment (81) (4,430) (4,511) Proceeds from sales and maturities of investment securities 58 58 Increase in restricted cash (52,591) (52,591) Net change in investment in affiliates 25,605 (22,981) (2,624) --------- --------- --------- --------- --------- Net cash used by investment activities 25,582 (88,624) (60,034) (123,076) --------- --------- --------- --------- --------- Cash flows from financing activities Borrowings on bank line of credit 745,500 745,500 Payments on bank line of credit (759,800) (759,800) Net increase in mortgage warehouse facility (2,964) (2,964) Proceeds from issuance of 9 1/4% Senior Notes 120,894 120,894 Payments on automobile receivables-backed notes (44,158) (44,158) Payments on notes payable (552) (552) Purchase of treasury stock (4,387) (4,387) Proceeds from issuance of common stock 6,293 6,293 Net change in due (to) from affiliates (152,842) 90,670 62,172 --------- --------- --------- --------- --------- Net cash provided by financing activities (30,594) 73,406 18,014 60,826 --------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents 4,913 4,075 (5,106) 3,882 Cash and equivalents at beginning of year (4,913) (87) 7,145 2,145 --------- --------- --------- --------- --------- Cash and cash equivalents at end of year $ $ 3,988 $ 2,039 $ $ 6,027 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
34 AmeriCredit Corp. Supplementary Information Consolidating Statement of Cash Flows Year Ended June 30, 1996 (Dollars in Thousands) AmeriCredit Non- Corp Guarantors Guarantors Eliminations Consolidated ----------- ---------- ---------- ------------ ------------ Cash flows from operating activities Net income $ 21,591 $ 7,257 $ 18,657 $ (25,914) $ 21,591 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 49 1,479 1,528 Provision for losses 7,912 7,912 Deferred income taxes 14,113 (2,432) 11,681 Gain on sale of auto receivables (12,449) (10,424) (22,873) Amortization of excess servicing receivable 6,636 6,636 Equity in income of affiliates (25,914) 25,914 Changes in assets and liabilities Other assets 362 (1,857) 511 (984) Accrued taxes and expenses 1,273 8,606 (473) 9,406 -------- --------- --------- --------- --------- Net cash provided by operating activities 11,474 15,152 8,271 34,897 -------- --------- --------- --------- --------- Cash flows from investing activities Purchases of auto receivables (417,235) (115,646) 115,646 (417,235) Principal collections and recoveries on receivables 37,894 57,054 94,948 Net proceeds from sale of auto receivables 268,923 115,646 (115,646) 268,923 Purchase of property and equipment 2,536 (5,698) (3,162) Proceeds from sales and maturities of investment securities 3,707 3,707 Increase in restricted cash (10,297) (10,297) Net change in investment in affiliates (2,746) 2,743 3 -------- --------- --------- --------- --------- Net cash used by investment activities 3,497 (113,373) 46,760 (63,116) -------- --------- --------- --------- --------- Cash flows from financing activities Borrowings on bank line of credit 342,600 342,600 Payments on bank line of credit (256,600) (256,600) Payments on automobile receivables- backed notes (66,673) (66,673) Payments on notes payable (298) (298) Net change in due (to) from affiliates (29,794) 18,528 11,266 Proceeds from issuance of common stock 3,731 3,731 Purchase of treasury stock (10,710) (10,710) -------- --------- --------- --------- --------- Net cash provided by financing activities (37,071) 104,528 (55,407) 12,050 -------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents (22,100) 6,307 (376) (16,169) Cash and equivalents at beginning of year 17,187 (6,394) 7,521 18,314 -------- --------- --------- --------- --------- Cash and cash equivalents at end of year $ (4,913) $ (87) $ 7,145 $ $ 2,145 -------- --------- --------- --------- --------- -------- --------- --------- --------- ---------
35 AmeriCredit Corp. Supplementary Information Consolidating Statement of Cash Flows Year Ended June 30, 1995 (Dollars in Thousands) AmeriCredit Corp Guarantors Non-Guarantors Eliminations Consolidated ----------- ---------- -------------- ------------ ------------ Cash flows from operating activities Net income $ 28,893 $ (1,524) $ 3,120 $ (1,596) $ 28,893 Adjustments to reconcile net income to net cash provided by operating activities: cash provided by operating activities: Depreciation and amortization 161 1,156 1,317 Provision for losses 4,278 4,278 Deferred income taxes (18,252) (702) (18,954) Equity in income of affiliates (1,596) 1,596 Changes in assets and liabilities Other assets (795) 400 (1,439) (1,834) Accrued taxes and expenses 170 387 380 937 -------- --------- --------- --------- --------- Net cash provided by operating activities 8,581 3,995 2,061 14,637 -------- --------- --------- --------- --------- Cash flows from investing activities Purchases and originations of receivables (225,350) (148,452) 148,452 (225,350) Principal collections and recoveries on receivables 53,210 18,124 71,334 Net proceeds from sale of auto receivables 148,452 (148,452) Purchase of property and equipment 947 (2,677) (1,730) Proceeds from sales and maturities of investment securities 16,241 16,241 Increase in restricted cash (5,007) (5,007) Net change in investment in affiliates (7,126) 7,126 -------- --------- --------- --------- --------- Net cash used by investment activities 10,062 (19,239) (135,335) (144,512) -------- --------- --------- --------- --------- Cash flows from financing activities Borrowings on bank line of credit 83,900 83,900 Payments on bank line of credit (83,900) (83,900) Proceeds from issuance of automobile receivables-backed notes 150,170 150,170 Payments on automobile receivables-backed notes (15,650) (15,650) Payments on notes payable (236) (236) Net change in due (to) from affiliates (18,037) 11,762 6,275 Proceeds from issuance of common stock 1,561 1,561 Purchase of treasury stock (3,412) (3,412) -------- --------- --------- --------- --------- Net cash provided by financing activities (20,124) 11,762 140,795 132,433 -------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents (1,481) (3,482) 7,521 2,558 Cash and equivalents at beginning of year 18,668 (2,912) 15,756 -------- --------- --------- --------- --------- Cash and cash equivalents at end of year $ 17,187 $ (6,394) $ 7,521 $ $ 18,314 -------- --------- --------- --------- --------- -------- --------- --------- --------- ---------
36 REPORT ON INDEPENDENT ACCOUNTANTS ON SUPPLEMENTARY INFORMATION Board of Directors and Shareholders AmeriCredit Corp. Our report on the audits of the consolidated financial statements of AmeriCredit Corp. as of June 30, 1997 and 1996 and for the three years ended June 30, 1997, 1996 and 1995 have been included by reference in this Form 10-K from page 30 of the 1997 Annual Report to Shareholders of AmeriCredit Corp. These audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The related financial statement schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. 37 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company had no disagreements on accounting or financial disclosure matters with its independent accountants to report under this Item 9. 38 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information contained under the caption "Election of Directors" in the Proxy Statement is incorporated herein by reference in response to this Item 10. See Item 1. "Business - Executive Officers" for information concerning executive officers. ITEM 11. EXECUTIVE COMPENSATION Information contained under the captions "Executive Compensation" and "Election of Directors" in the Proxy Statement is incorporated herein by reference in response to this Item 11. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information contained under the caption "Principal Shareholders and Stock Ownership of Management" in the Proxy Statement is incorporated herein by reference in response to this Item 12. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is no information requiring disclosure pursuant to Item 404 of Regulation S-K. Accordingly, no information is furnished in response to this Item 13. 39 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (1) The following Consolidated Financial Statements of the Company and Report of Independent Accountants are contained in the Annual Report and are incorporated herein by reference. CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets as of June 30, 1997 and 1996. Consolidated Statements of Income for the years ended June 30, 1997, 1996 and 1995. Consolidated Statements of Shareholders' Equity for the years ended June 30, 1997, 1996 and 1995. Consolidated Statements of Cash Flows for the years ended June 30, 1997, 1996 and 1995. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS (2) Consolidating financial information for AmeriCredit Corp. (on a parent only basis), the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries is included herein under Item 8. (3) All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are either not required under the related instructions, are inapplicable, or the required information is included elsewhere in the Consolidated Financial Statements and incorporated herein by reference. (4) The exhibits filed in response to Item 601 of Regulation S-K are listed in the Index to Exhibits on pages 42 through 45. (5) The Company did not file any reports on Form 8-K during the quarterly period ended June 30, 1997. Certain subsidiaries and affiliates of the Company filed reports on Form 8-K during the quarterly period ended June 30, 1997 reporting monthly information related to securitization trusts. 40 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 September 25, 1997. AMERICREDIT CORP. BY: /s/ Clifton H. Morris, Jr. ------------------------------- Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Clifton H. Morris, Jr. Chairman of the Board and September 25, 1997 - --------------------------- Chief Executive Officer CLIFTON H. MORRIS, JR. /s/ Daniel E. Berce Vice Chairman and September 25, 1997 - --------------------------- Chief Financial Officer DANIEL E. BERCE /s/ Michael R. Barrington Vice Chairman, President September 25, 1997 - --------------------------- and Chief Operating Officer MICHAEL R. BARRINGTON /s/ Edward H. Esstman Executive Vice President, September 25, 1997 - --------------------------- Auto Finance Division and EDWARD H. ESSTMAN Director /s/ James H. Greer Director September 25, 1997 - --------------------------- JAMES H. GREER /s/ Gerald W. Haddock Director September 25, 1997 - --------------------------- GERALD W. HADDOCK /s/ Douglas K. Higgins Director September 25, 1997 - --------------------------- DOUGLAS K. HIGGINS /s/ Kenneth H. Jones, Jr. Director September 25, 1997 - --------------------------- KENNETH H. JONES, JR. 41 INDEX TO EXHIBITS The following documents are filed as a part of this report. Those exhibits previously filed and incorporated herein by reference are identified by the letters in parenthesis under the Exhibit Number column. Documents filed with this report are identified by the symbol "@" under the Exhibit Number column. EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1(a) -- Articles of Incorporation of the Company, filed May 18, 1988, and Articles of Amendment to Articles of Incorporation, filed August 24, 1988 (Exhibit 3.1) 3.2(a) -- Amendment to Articles of Incorporation, filed October 18, 1989 (Exhibit 3.2) 3.3(e) -- Articles of Amendment to Articles of Incorporation of the Company, filed November 12, 1992 (Exhibit 3.3) 3.4@ -- Bylaws of the Company, as amended 4.1(d) -- Specimen stock certificate evidencing the Common Stock (Exhibit 4.1) 4.2(n) -- Rights Agreement, dated August 28, 1997, between the Company and ChaseMellon Shareholder Services, L.L.C. (Exhibit 1) 10.1(a) -- 1989 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.4) 10.2(a) -- 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 10.5) 10.3(b) -- Amendment No. 1 to the 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 4.6) 10.4(c) -- 1990 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.14) 10.5(d) -- 1991 Key Employee Stock Option Plan of the Company (Exhibit 10.10) 10.6(d) -- 1991 Non-employee Director Stock Option Plan of the Company (Exhibit 10.11) 10.7(d) -- Executive Employment Agreement, dated January 30, 1991, between the Company and Clifton H. Morris, Jr. (Exhibit 10.18) 10.7.1@ -- Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Clifton H. Morris, Jr. 10.8(d) -- Executive Employment Agreement, dated January 30, 1991, between the Company and Michael R. Barrington (Exhibit 10.19) 10.8.1@ -- Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Michael R. Barrington 42 INDEX TO EXHIBITS (Continued) 10.9(d) -- Executive Employment Agreement, dated January 30, 1991 between the Company and Daniel E. Berce (Exhibit 10.20) 10.9.1@ -- Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Daniel E. Berce 10.10@ -- Amended and Restated Employment Agreement, dated October 15, 1996, between the Company and Edward H. Esstman 10.10.1@ -- Amendment No. 1 to Amended and Restated Employment Agreement, dated May 1, 1997, between the Company and Edward H. Esstman 10.11@ -- Amended and Restated Employment Agreement, dated July 1, 1997, between the Company and Michael T. Miller 10.12(f) -- Indenture, dated June 1, 1995, between AmeriCredit Receivables Finance Corp. 1995-A and LaSalle National Bank (Exhibit 10.15) 10.13(f) -- Sale and Servicing Agreement, dated June 1, 1995, between AmeriCredit Receivables Finance Corp. 1995-A, AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.16) 10.14(l) -- Second Restated Revolving Credit Agreement, dated October 7, 1996, between AmeriCredit Corp. and subsidiaries and Wells Fargo Bank (Texas), National Association, Bank One, Texas, N.A., LaSalle National Bank, The Sumitomo Bank Limited, Harris Trust and Savings Bank, Comerica Bank - Texas, Texas Commerce Bank National Association, BankAmerica Business Credit, Inc. and The Bank of Nova Scotia, as amended by that certain First Amendment to Second Restated Revolving Credit Agreement, dated January 22, 1997, between the same parties (Exhibit 10.1) 10.15(l) -- Indenture, dated February 4, 1997, between AmeriCredit Corp. and subsidiaries and Bank One, Columbus, NA, with form of 9 1/4% Senior Notes due 2004 attached as exhibit (Exhibit 10.2) 10.16(l) -- Purchase Agreement, dated January 30, 1997, between AmeriCredit Corp. and subsidiaries and Smith Barney Inc., Montgomery Securities, Piper Jaffray Inc. and Wheat First Butcher Singer (Exhibit 10.3) 10.17(l) -- A/B Exchange Registration Rights Agreement, dated February 4, 1997, between AmeriCredit Corp. and subsidiaries and Smith Barney Inc., Montgomery Securities, Piper Jaffray Inc. and Wheat First Butcher Singer (Exhibit 10.4) 10.18(g) -- 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp. 10.19(m) -- Amendment No. 1 to 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp 43 INDEX TO EXHIBITS (Continued) 10.20(h) -- Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1995-B, dated November 20, 1995, among AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.1) 10.21(i) -- Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1996-A, dated February 12, 1996, among AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.1) 10.22(j) -- Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1996-B, dated April 30, 1996, among AmeriCredit Financial Services, Inc., AFS Funding Corp. and LaSalle National Bank (Exhibit 4.1) 10.23(k) -- 1996 Limited Stock Option Plan for AmeriCredit Corp. 11.1@ -- Statement Re Computation of Per Share Earnings 12.1@ -- Statement of Re Computation of Ratios 13.1@ -- 1997 Annual Report to Shareholders of the Company 21.1@ -- Subsidiaries of the Registrant 23.1@ -- Consent of Coopers & Lybrand 27.1@ -- Financial Data Schedule - ------------------------------------------------------------------------------ (a) Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-31220 on Form S-1 filed by the Company with the Securities and Exchange Commission. (b) Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-41203 on Form S-8 filed by the Company with the Securities and Exchange Commission. (c) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1990 filed by the Company with the Securities and Exchange Commission. (d) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1991 filed by the Company with the Securities and Exchange Commission. (e) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1993 filed by the Company with the Securities and Exchange Commission. (f) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year 44 ended June 30, 1995 filed by the Company with the Securities and Exchange Commission. (g) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1995 filed by the Company with the Securities and Exchange Commission. (h) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1995 filed by the Company with the Securities and Exchange Commission. (i) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996 filed by Company with the Securities and Exchange Commission. (j) Incorporated by reference to the exhibit shown in parenthesis included in a Report on Form 8-K, dated May 16, 1996, filed by the AmeriCredit Automobile Receivables Trust 1996-B with the Securities and Exchange Commission. (k) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1996 filed by the Company with the Securities and Exchange Commission. (l) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1996 filed by the Company with the Securities and Exchange Commission. (m) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1997 filed by the Company with the Securities and Exchange Commission. (n) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Report on Form 8-K, dated August 28, 1997, filed by the Company with the Securities and Exchange Commission. @ Filed herewith. 45 EX-3.4 2 EXHIBIT 3.4 AMERICREDIT CORP. BYLAW AMENDMENTS adopted August 28, 1997 1. AMENDMENT TO BYLAWS TO REQUIRE ADVANCE WRITTEN NOTICE OF NOMINATION OF DIRECTORS. New Section 11 is added to Article II of the Bylaws: Section 11. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES. (1) Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible to serve as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Bylaw, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Bylaw. (2) Nominations by stockholders shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the earlier of the date on which notice of the date of the meeting was mailed or public disclosure was made, and (b) in the case of a special meeting at which directors are to be elected, not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder and also which are owned of record by such stockholder; and (c) as to the beneficial owner, if any, on whose behalf the nomination is made, (i) the name and address of such person and (ii) the class and number of shares of the Corporation which are beneficially owned by such person. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. (3) No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Bylaw. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. 2. AMENDMENT TO BYLAWS TO REQUIRE ADVANCE WRITTEN NOTICE OF MATTERS TO BE BROUGHT BEFORE THE STOCKHOLDERS. New Section 12 is added to Article III of the Bylaws: Section 12. NOTICE OF STOCKHOLDER BUSINESS (1) At an annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) pursuant to the Corporation's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who is a stockholder of record at the time of giving of the notice provided for in this Bylaw, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Bylaw. (2) For business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph 1 of this Bylaw, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the meeting is changed by more than 30 days from such anniversary date, notice by the stockholder to be timely must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made. A stockholder's notice to the secretary shall set forth, as to each matter the stockholder proposes to being before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (c) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder of record and by the beneficial owner, if any, on whose behalf the proposal is made and (d) any material interest of such stockholder of record and the beneficial owner, if any, on whose behalf the proposal is made in such business. (3) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Bylaw. The Chairman of the meeting shah, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Bylaw. 3. AMENDMENT TO BYLAWS TO DELETE REQUIREMENT THAT SHAREHOLDERS BE PROVIDED WITH WRITTEN NOTICE OF AMENDMENTS TO THE BYLAWS. Section I under Article IX of the Bylaws is hereby amended by DELETING the following sentence from such Section: "Where the Bylaws are amended or repealed by the Board of Directors, a notice of such change, setting forth the nature thereof, shall be mailed to each shareholder at the address which shall appear upon the books of the corporation, within ten (10) days after such amendment or repeal." WHEREAS, the foregoing Bylaw Amendments were adopted by the Board of Directors of AmeriCredit Corp. on this the 28th day of August, 1997. -------------------------------------- Chris A. Choate Secretary FIRST AMENDMENT TO BYLAWS OF AMERICREDIT CORP. By Resolution No. 2 adopted by unanimous written consent of the Board of Directors at a Special Meeting Held Effective as of January 8, 1988, the Board of Directors of AMERICREDIT CORP. amended Section 1 of Article III of the Bylaws of the corporation to specify that the number of directors shall be not less than three (3) nor more than fifteen (15). Subsequently, at the Annual Meeting of the Shareholders of the Corporation held on January 19, 1988, the Shareholders also adopted and ratified the same Amendment to the Bylaws of the Corporation. Accordingly, Section 1 of Article III of the Bylaws is hereby amended to read as follows: "Section 1. NUMBER. The number of directors constituting the entire Board of Directors of the Company shall be not less than three (3), nor more than fifteen (15)." Dated this the ____ day of January, 1988. AMERICREDIT CORP. By: ---------------------------- A. W. Pierce, III Its Secretary B Y L A W S OF AMERICREDIT CORP. ARTICLE I OFFICES Section 1. Principal OFFICES. The principal office of this corporation shall be maintained at 4304 Kirkland Drive, Fort Worth, Texas 76109, which shall be the headquarters for the transaction of all business, but, in the discretion of the Board of Directors, the location of the principal office may change from time to time and branch offices may be established at other places. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 1. ANNUAL MEETINGS. The annual meeting of the shareholders of this corporation shall be held at the principal office of the corporation, on the fourth Wednesday in September of each year, beginning with the year 1989, at 10:00 a.m., or at such time and place within or without the state of Texas as may be designated by the Board of Directors, at which meeting directors shall be selected for the current year and such other business transacted as may properly come before said meeting. SECTION 2. SPECIAL MEETINGS. All special meetings of shareholders shall be held at the principal office of the corporation or at any place designated in the notice upon call by a majority of the directors, or upon written request signed by shareholders holding one-tenth (1/10) of the voting stock of the corporation, or at the call of the President. No other business shall be transacted thereat except by unanimous consent of all the shareholders present, whether in person or by proxy. SECTION 3. NOTICE OF MEETINGS. Written or printed notice stating the-date, place and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary or the officer or person calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the share-holder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. SECTION 4. QUORUM. The presence at any meeting, in person or by proxy, of the holders of record of a majority of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except where provided otherwise by statute. SECTION 5. ADJOURNMENTS. In the absence of a quorum, a majority in interest of the shareholders entitled to vote, present in person or by proxy, or, if no shareholder entitled to vote is present in person or by proxy, any officer entitled to preside or act as secretary of such meeting, may adjourn the meeting from time to time until a quorum shall be present. SECTION 6. VOTING. Directors shall be chosen by a plurality of the votes cast at the election, and, except where otherwise provided by statute, all other questions shall be determined by a majority of the votes cast on such question. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to vote at a meeting of share-holders, except where provided otherwise by statute or the articles of incorporation of the corporation. only such persons shall be permitted to vote at any meeting of shareholders, either in person or by proxy, as shall have appeared on the books of the corporation as shareholders thereof for at least ten (10) days prior to such meeting. SECTION 7. PROXIES. Any shareholder entitled to vote may vote by a proxy, provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegraphing or cabling) by the shareholder himself or by his duly authorized attorney. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. A proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law. SECTION 8. JUDGES OF ELECTION. The Board of Directors may appoint judges of election to serve at any election of directors and at balloting on any other matter that may properly come before a meeting of shareholders. If no such appointment shall be made, or if any of the judges so appointed shall fail to attend, or refuse or be unable to serve, then such appointment may be made by the presiding officer at the meeting. SECTION 9. INFORMAL ACTION. Any action required by law to be taken at a meeting of the shareholders of a corporation, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a unanimous vote of shareholders, and may be stated as such in any articles or document filed with the Secretary of State. SECTION 10. PARTICIPATION IN MEETING. Shareholders may participate in and hold a meeting of such shareholders by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE III DIRECTORS SECTION 1. NUMBER. The number of directors which shall constitute the whole Board of Directors shall be fixed from time to time by resolution of the Board of Directors or shareholders (any such resolution of either the Board of Directors or shareholders being subject to any later resolution of either of them), but shall not be less than three (3) nor more than fifteen (15) and the original directors shall be those specified in the Articles of Incorporation, and shall serve until the next annual election of directors or until their successors are appointed and qualified. The number of directors may be increased or decreased from time to time by amendment to these Bylaws as provided in ARTICLE IX hereof. SECTION 2. ELECTION AND TERM OF OFFICE. The directors shall be elected at the annual meeting of the shareholders. Each director (whether elected at an annual meeting or to fill a vacancy or otherwise) shall continue in office until his successor shall have been elected or until his earlier death, resignation or removal in the manner hereinafter provided. SECTION 3. VACANCIES AND ADDITIONAL DIRECTORSHIPS. If any vacancy shall occur among the directors for any reason, the vacancy may be filled by action of a majority of the remaining directors at any annual or special meeting or, in default of such meetings or action of the remaining directors thereat, may be filled by the shareholders at any annual or special meeting. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. In the event the entire Board of Directors shall resign or die, any shareholder of the corporation may call a special shareholders' meeting in a manner provided in 'ARTICLE II, Section 2 hereof, at which meeting a new Board of Directors may be elected, but no other business shall be transacted except as set forth in said notice. SECTION 4.- REMOVAL. Any director or the entire Board of Directors may be removed at any meeting of shareholders called expressly for that purpose, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors. Any director may be removed by a majority vote of the Board of Directors at any regular meeting or special meeting called for that purpose. SECTION 5. RESIGNATION. Any director may resign at any time by giving written notice of such resignation to the Board of Directors, the President, any Vice President or the Secretary. Any such resignation shall take effect at any time specified therein, or, if no time be specified, upon receipt thereof by the Board of Directors or one of the above named officers; and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. ANNUAL OR SPECIAL MEETINGS. An annual meeting of the Board of Directors shall be held at the termination of the annual meeting of the shareholders, for the purpose of electing officers and for the transaction of such other business as may properly come before the meeting. Special meetings of the Board may be called by the President upon one (1) day's notice, verbally, or in writing; and such special meeting shall be called by the Secretary upon written request of any director. At any annual or special meeting of the Board, a chairman of the meeting and a secretary of the meeting shall be elected. SECTION 7. PLACE OF MEETING. All meetings of the Board of Directors shall be held at the principal office of the corporation, but may be held, on notice given to each director, at any place designated in such notice, either within or without the State of Texas. SECTION 8. QUORUM. At any annual or special meeting of the Board of Directors, a majority of the Board of Directors shall constitute a quorum for the transaction of business. The majority of voices shall decide the vote of the Board at any annual or special meeting. SECTION 9. INFORMAL ACTION. Any action required by law to be taken at a meeting of the Board of Directors of a corporation, or any action which may be taken at a meeting of the Board of Directors, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the Board of Directors, and such consent shall have the same force and effect as a unanimous vote of the Board of Directors, and may be stated as such in any document or instrument filed with the Secretary of State. SECTION 10. PARTICIPATION IN MEETING. Members of the Board of Directors may participate in and hold a meeting of such Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE IV COMMITTEES OF THE BOARD SECTION 1. DESIGNATION, POWER, ALTERNATE MEMBERS AND TERM OF OFFICE. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. Any such committee, to the extent provided in such resolution and to the extent allowed by law, shall have and may exercise the power of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. The Board may designate one or more directors as alternate members of any committee, who, in the order specified by the Board, may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one or more of the members thereof should be absent or disqualified, and if either the Board of Directors has not so designated any alternate member or members, or the number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualifed from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to these Bylaws; provided, however, that any committee member who ceases to be a member of the Board shall ipso facto cease to be a committee member. Each committee shall appoint a secretary, who may be the Secretary of the Corporation or any Assistant Secretary thereof. SECTION 2. MEETINGS, NOTICES AND RECORDS. Each committee may provide for the holding of regular meetings, with or without notice, and may fix the time and place at which such meetings shall be held. Special meetings of each committee shall be held upon call by or at the direction of its chairman, or, if there is no chairman, by or at the direction of any two of its members, at the time and place specified in the respective notices or waivers of notice thereof. Notice of each special meeting of a committee shall be mailed to each member of such committee, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be sent by telegram, radio or cable, addressed to him at such place, or telephoned or delivered to him personally, not later than the day before the day on which the meeting is to be held. Notice of any meeting of a committee need not be given to any member thereof who shall attend the meeting in person or who shall waive notice thereof by telegram, radio, cable or other writing. Notice of any adjourned meeting need not be given. Each committee shall keep a record of its proceedings. SECTION 3. QUORUM AND MANNER OF ACTING. At each meeting of any committee the presence of one-third but not less than two of its members then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee; in the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present. Subject to the foregoing and other provisions of these Bylaws and except as otherwise determined by the Board of Directors, each committee may make rules for the conduct of its business. Any determination made in writing and signed by all the members of such committee shall be as effective as if made by such committee at a meeting. SECTION 4. RESIGNATIONS. Any member of a committee may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman of the Board, the President or the Secretary of the Corporation. Unless otherwise specified in such notice, such resignation shall take effect upon receipt thereof by the Board or any such officer. SECTION 5. REMOVAL. Any member of any committee may be removed at any time by the Board of Directors with or without cause. SECTION 6. VACANCIES. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, though less than a quorum, shall continue to act until such vacancy is filled by the Board of Directors. SECTION 7. COMPENSATION. Committee members shall receive such reasonable compensation for their services as such, whether in the form of salary or a fixed fee for attendance at meetings, with expenses, if any, as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any committee member from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE V OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be a President, one or more Vice Presidents, a Secretary, a Treasurer and, if the Board of Directors so determines, a Chairman of the Board, and such other officers as may be appointed in accordance with the provisions of Section 3 of this ARTICLE V. SECTION 2. ELECTION AND TERM OF OFFICE. Each officer (except such officers as may be appointed in accordance with the provisions of section 3 of this ARTICLE V) shall be elected by the Board of Directors. The Board of Directors may combine any two or more offices to be held by the same person. Each officer (whether elected at the first meeting of the Board of Directors after the annual meeting of shareholders or to fill a vacancy or otherwise) shall hold his office until the first meeting of the Board of Directors after the next annual meeting of shareholders and until his successor shall have been elected, or until his death, or until he shall have resigned in the manner provided in Section 4 of this ARTICLE V or shall have been removed in the manner provided in Section 5 of this ARTICLE V. SECTION 3. SUBORDINATE OFFICERS AND AGENTS. The Board of Directors from time to time may appoint other officers or agents (including one or more Assistant Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers) to hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as may be provided in the resolutions appointing them. The Board of Directors may delegate to any officer or agent the power to appoint any such subordinate officers or agents and to prescribe their respective terms of office, authorities and duties. SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, the President, a Vice President or the Secretary. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or any such officer. SECTION 5. REMOVAL. Any officer specifically designated in Section 1 of his ARTICLE V may be removed at any time, either with or without cause, at any meeting of the Board of Directors by the vote of a majority of all the directors then in office. Any officer or agent appointed in accordance with the provisions of section 3 of this ARTICLE V may be removed, either with or without cause, by the Board of Directors at any meeting, by the vote of a majority of the directors at such meeting, or by any superior officer or agent upon whom such power of removal shall have been conferred by the Board of Directors. SECTION 6. VACANCIES. A vacancy in any office by reason of death, resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election or appointment to such office. SECTION 7. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the corporation shall be either the Chairman of the Board or the President, as the Board of Directors shall determine. Subject to the direction of the Board of Directors, he shall have general charge of the business, affairs and property of the corporation and general supervision over its officers and agents. As such Chief Executive Officer, if present, he shall preside at all meetings of shareholders and he shall see that all orders and resolutions of the Board of Directors are carried into effect. He may sign, with any other officer thereunto duly authorized, certificates of stock of the corporation, the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature), and may sign and execute in the name of the corporation deeds, mortgages, bonds, contracts, agreements or other instruments duly authorized by the Board of Directors except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent. From time to time he shall report to the Board of Directors all matters within his knowledge which the interest of the corporation may require to be brought to its attention. He shall also perform such other duties as are given to him by these Bylaws or as from time to time may be assigned to him by the Board of Directors. SECTION 8. THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is appointed, shall preside at all meetings of the directors and shall have such other powers and duties as shall be prescribed by the Board of Directors. The Chairman of the Board shall be a member, ex officio, of all committees appointed by the Board. SECTION 9. THE PRESIDENT. The President, in the absence of the Chairman of the Board, shall perform the duties and exercise the powers of the Chairman of the Board; he shall have such power as may be by statute exclusively conferred upon the President and he shall have such other powers and duties as shall be prescribed by the Board of Directors. The President shall be a member, ex officio, of all committees appointed by the Board. SECTION 10. THE VICE PRESIDENTS. At the request of the President or in his absence or disability, the Vice President designated by the President (or in the absence of such designation, the Vice President designated by the Board of Directors) shall perform all the duties of the President and, when so acting, shall have all the powers of and be subject to all restrictions upon the President. Any Vice President may also sign, with any other officer thereunto duly authorized, certificates of stock of the corporation, the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature), and may sign and execute in the name of the corporation deeds, mortgages, bonds and other instruments duly authorized by the Board of Directors, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent. Each Vice President shall perform such other duties as are given to him by these Bylaws or as from time to time may be assigned to him by the Board of Directors or the Chief Executive officer. SECTION 11. THE SECRETARY. The Secretary shall (a) record all the proceedings of the meetings of the shareholders, the Board of Directors, and any committees in a book or books to be kept for that purpose; (b) cause all notices to be duly given in accordance with the provisions of these Bylaws and as required by statute; (c) whenever any committee shall be appointed in pursuance of a resolution of the Board of Directors, furnish the chairman of such committee with a copy of such resolution; (d) be custodian of the records and of the seal of the corporation, and cause such seal to be affixed to all certificates representing stock of the corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the corporation under its seal shall have been duly authorized; (e) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (f) have charge of the stock and transfer books of the corporation, and exhibit such stock book at all reasonable times to such persons as are entitled by statute to have access thereto; (g) sign (unless the Treasurer or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing stock of the corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (h) in general, perform all duties incident to the office of Secretary and such other duties as are given to him by these Bylaws or as from time to time may be assigned to him by the Board of Directors or the Chief Executive officer. SECTION 12. ASSISTANT SECRETARIES. At the request of the Secretary or in his absence or disability, the Assistant Secretary designated by him (or in the absence of such designation, the Assistant Secretary designated by the Board of Directors or the Chief Executive officer) shall perform all the duties of the Secretary, and, when so acting, shall have all the powers of and be subject to all restrictions upon the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them respectively by the Board of Directors, the Chief Executive Officer or the Secretary. SECTION 13. THE TREASURER. The Treasurer shall (a) have charge of and supervision over and be responsible for the funds, securities, receipts and disbursements of the corporation; (b) cause the moneys and other valuable effects of the corporation to be deposited in the name and to the credit of the corporation in such banks or trust companies or with such bankers or other depositories as the Board of Directors may select or to be otherwise dealt with in such manner as the Board of Directors may direct; (c) cause the funds of the corporation to be disbursed by checks or drafts upon the authorized depositories of the corporation, and cause to be taken and preserved proper vouchers for all moneys disbursed; (d) render to the Board of Directors or the Chief Executive Officer, whenever requested, a statement of the financial condition of the corporation and of all his transactions as Treasurer; (e) cause to be kept at the corporation's principal office correct books of account of all its business and transactions and such duplicate books of account as he shall determine and upon application cause such books or duplicates thereof to be exhibited to any director; (f) be empowered, from time to time, to require from the officers or agents of the corporation reports or statements giving such information as he may desire with respect to any and all financial transactions of the corporation; (g) sign (unless the Secretary or an Assistant Secretary or an Assistant Treasurer shall sign) certificates representing stock of the corporation the issuance of which shall have been duly authorized (the signature to which may be a facsimile signature); and (h) in general, perform all duties incident to the office of Treasurer and such other duties as are given to him by these Bylaws or as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer. SECTION 14. ASSISTANT TREASURERS. At the request of the Treasurer or in his absence or disability, the Assistant Treasurer designated by him (or in the absence of such designation, the Assistant Treasurer designated by the Board of Directors or the Chief Executive Officer) shall perform all the duties of the Treasurer, and, when so acting, shall have all the powers and be subject to all restrictions upon the Treasurer. The Assistant Treasurers shall perform such other duties as from time to time may be assigned to them respectively by the Board of Directors, the Chief Executive Officer or the Treasurer. SECTION 15. SALARIES. The salaries of the officers of the corporation shall be fixed from time to time by the Board of Directors, except that the Board of Directors may delegate to any person the power to fix the salaries or other compensation of any officers or agents appointed in accordance with the provisions of Section 3 of this ARTICLE V. No officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. SECTION 16. SURETY BONDS. If the Board of Directors shall so require, any officer or agent of the corporation shall execute to the corporation a bond in such sum and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful discharge of his duties, including responsibility for negligence and for the accounting for all property, funds or securities of the corporation which may come into his hands. ARTICLE VI CAPITAL STOCK SECTION 1. SUBSCRIPTIONS. Subscriptions to the capital stock of the corporation shall be paid in such manner and at such time as the Board of Directors may require, and failure to pay any installment when required shall work a forfeiture of the stock so in arrears. No stock, however, shall be declared forfeited by the directors until after notice in writing shall have been given to such shareholder in person or by mail directed to his last address as the same appears upon the books of the company which notice shall require the shareholder to make payment at the time and place specified in such notice, and stating that if he fails to make such payment his stock and all dividends thereon will be forfeited for the use of the corporation, which notice must be given at least thirty (30) days prior to the date such stock will be declared forfeited. SECTION 2. PAYMENT. The Board of Directors may in its discretion accept property, real or personal, in payment for stock and may issue stock in consideration of labor performed. SECTION 3. CERTIFICATES. Certificates of stock shall be numbered in the order issued and shall be signed by the President and countersigned by the Secretary and shall bear the imprint of the corporate seal. All certificates shall be bound in book form and shall be issued therefrom consecutively, and on the stub of such book shall be entered the name and address of the person owning the shares represented by each certificate issued, with a statement of the number of shares represented by such certificate and the date of its issuance. No certificate shall be issued for any share of stock until such share has been fully paid up. SECTION 4. TRANSFERS. Transfers of shares shall be made only on the books of the corporation by the holder in person,, and if made by any other person his authority to do so shall be evidenced by power of attorney from the owner; and no certificate shall be issued until the older certificates have been surrendered and canceled. All certificates returned or exchanged shall be immediately marked "canceled" and the date of such cancellation noted on such certificate by the Secretary, and the certificate thus canceled shall be pasted into said book opposite the stub bearing memoranda of its original issuance. SECTION 5. LOST CERTIFICATE. In the event an original certificate shall have been lost by the shareholder it shall be the privilege of the corporation to demand an adequate bond of indemnity before issuing stock, by the owner; and where there shall be conflicting claim as to the ownership of stock the corporation may refuse to make a transfer until such conflicting claims shall have been adjusted by litigation or otherwise. SECTION 6. DIVIDENDS. Dividends may be declared and paid out of the net profits of the corporation whenever in the judgment of the Board of Directors such dividends may be declared without impairing the corporation's business operations. The Board of Directors may, if it deems it in the best interest of the corporation, declare no dividends but permit the profits to accumulate for use in the corporation's business or to enable it to purchase any of its own capital stock. ARTICLE VII SEAL SECTION 1. SEAL. The seal of the corporation shall bear the full corporate name of the corporation, with the word "Seal" noted thereon; provided, however, that if the full corporate name is too long, it may be abbreviated in the seal. ARTICLE VIII INDEMNITY FOR OFFICERS AND DIRECTORS SECTION 1. INDEMNIFICATION. The corporation agrees to indemnify each person who is an officer or director of the corporation or any person who was an officer or director of the corporation against expenses which such person has reasonably incurred, including, but not limited to, attorneys' fees in connection with any action, suit, or proceeding in which such person has or may be made a party by reason of his having been such director or officer, except in relation to such matters as to which he shall be adjudged in such action, suit or proceedings to have been derelict in the performance of his duty as such director or officer; provided, however, that in the event of the settlement of such action, suit or proceeding such person shall be indemnified by the corporation against such expense incurred by such person only to such extent, if any, as may be determined in or in connection with such settlement, and then only if such determination shall have been approved by a court of competent jurisdiction or by resolution duly adopted by a majority of the whole Board of Directors of the corporation, and no director included in such majority shall have or shall at any time have had any financial interest adverse to the corporation in the action, suit or proceeding or the subject matter or the outcome thereof. The foregoing right of indemnification shall not be exclusive of other rights to which any person who is a director or officer of the corporation may be entitled as a matter of law or otherwise, nor shall it be a derogation of the liability of such officer and director as imposed by the Texas Business Corporation Act. ARTICLE IX AMENDMENTS SECTION 1. AMENDMENT BY BOARD OF DIRECTORS. The Board of Directors shall have power to make, amend, or repeal these Bylaws by vote of a majority of all the directors at any annual or special meeting, provided notice of intention to make such changes at said meeting shall have been previously given to each director, and may be made without such notice by a unanimous vote of all directors. Where the Bylaws are amended or repealed by the Board of Directors, a notice of such change, setting forth the nature thereof, shall be mailed to each shareholder at the address which shall appear upon the books of the corporation, within ten (10) days after such amendment or repeal. SECTION 2. AMENDMENT BY SHAREHOLDERS. These Bylaws shall be subject to amendment, alteration or repeal at any annual meeting of the shareholders or at any special meeting called for that purpose. ATTEST: - ------------------------------------ Secretary EX-10.7-1 3 EXHIBIT 10.7.1 AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT THIS AMENDMENT NO. 1, dated as of May 1, 1997, is made and entered into by and between AmeriCredit Corp., a Texas corporation formerly known as "URCARCO, INC.," having an office at 200 Bailey Avenue, Fort Worth, Texas 76107 (hereinafter referred to as "Employer"), and Clifton H. Morris, Jr., an executive employee of Employer (hereinafter referred to as "Executive"). WHEREAS, Employer and Executive have previously entered into that certain Executive Employment Agreement dated as of January 30, 1991 (the "Employment Agreement"). WHEREAS, since the execution of the Employment Agreement, due to the growth and financial success of Employer, the responsibilities and compensation of Executive have increased above the provisions and levels set forth in the Employment Agreement; Employer and Executive desire to amend certain provisions of the Employment Agreement to reflect such changes and to better specify the terms and conditions of Executive's employment relationship with Employer. NOW, THEREFORE, in consideration of Executive's continued employment by Employer and the mutual promises and covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, Employer and Executive intend by this Amendment No. 1 to modify and amend the Employment Agreement as herein provided. 1. AMENDMENT TO SECTION 1.1 - "GENERAL DUTIES OF EMPLOYER AND EMPLOYEE." The last sentence of Section 1.1 is hereby amended and modified so as to reflect Executive's current position as Chairman of the Board and Chief Executive Officer (until such time as such position may be changed as provided in Section 1.1). 2. AMENDMENT TO SECTION 2.1 - "COMPENSATION AND BENEFITS." The first sentence of Section 2.1 is hereby amended and modified so as to reflect Executive's current salary as $500,000 per annum. 3. AMENDMENT TO SECTION 7.3 - "EFFECT OF TERMINATION." The first sentence of Section 7.3 is hereby amended to read in its entirety as follows: If Employer (i) terminates the employment of Executive other than pursuant to Section 6.2 hereof for "due cause" or other than for a disability or death pursuant to Section 6.3 hereof, (ii) demotes the Executive to a nonexecutive position, or (iii) decreases Executive's salary below its then current level, as such salary level may have been increased from time to time above the initial level specified in Section 2.1 hereof, as amended, or reduces the employee benefits and perquisites below the levels provided for by the terms of Section 2 hereof, other than as a result of any amendment or termination of any employee and/or executive benefit plan or arrangement, which amendment or termination is applicable to all executives of Employer, then such action by Employer, unless consented to in writing by Executive, shall be deemed to be a constructive termination by Employer of Executive's employment (a "Constructive Termination"). 4. AMENDMENT TO SECTION 11.1 - "MISCELLANEOUS - NOTICES." The address for notices and other communications, for both Employer and for Executive, is 200 Bailey Avenue, Fort Worth, Texas 76107. 5. EFFECT OF AMENDMENTS; ENFORCEABILITY OF EMPLOYMENT AGREEMENT. This Amendment No. 1 replaces all previous agreements and discussions relating to the same or similar subject matters between Executive and Employer with respect to the subject matter of this Amendment No. 1. Except as otherwise expressly and specifically amended or modified by this Amendment No. 1, the terms and provisions of the Employment Agreement shall continue in full force and effect on and after the date hereof. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. AMERICREDIT CORP. By: ------------------------------------- Michael R. Barrington, Vice Chairman, President and Chief Operating Officer EXECUTIVE: ---------------------------------------- Clifton H. Morris, Jr. WITNESS: By: ------------------------------------- Gerald W. Haddock, Chairman of the Compensation Committee EX-10.8-1 4 EXHIBIT 10.8.1 AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT THIS AMENDMENT NO. 1, dated as of May 1, 1997, is made and entered into by and between AmeriCredit Corp., a Texas corporation formerly known as "URCARCO, INC.," having an office at 200 Bailey Avenue, Fort Worth, Texas 76107 (hereinafter referred to as "Employer"), and Michael R. Barrington, an executive employee of Employer (hereinafter referred to as "Executive"). WHEREAS, Employer and Executive have previously entered into that certain Executive Employment Agreement dated as of January 30, 1991 (the "Employment Agreement"). WHEREAS, since the execution of the Employment Agreement, due to the growth and financial success of Employer, the responsibilities and compensation of Executive have increased above the provisions and levels set forth in the Employment Agreement; Employer and Executive desire to amend certain provisions of the Employment Agreement to reflect such changes and to better specify the terms and conditions of Executive's employment relationship with Employer. NOW, THEREFORE, in consideration of Executive's continued employment by Employer and the mutual promises and covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, Employer and Executive intend by this Amendment No. 1 to modify and amend the Employment Agreement as herein provided. 1. AMENDMENT TO SECTION 1.1 - "GENERAL DUTIES OF EMPLOYER AND EMPLOYEE." The last sentence of Section 1.1 is hereby amended and modified so as to reflect Executive's current position as Vice Chairman, President and Chief Operating Officer (until such time as such position may be changed as provided in Section 1.1). 2. AMENDMENT TO SECTION 2.1 - "COMPENSATION AND BENEFITS." The first sentence of Section 2.1 is hereby amended and modified so as to reflect Executive's current salary as $345,000 per annum. 3. AMENDMENT TO SECTION 7.3 - "EFFECT OF TERMINATION." The first sentence of Section 7.3 is hereby amended to read in its entirety as follows: If Employer (i) terminates the employment of Executive other than pursuant to Section 6.2 hereof for "due cause" or other than for a disability or death pursuant to Section 6.3 hereof, (ii) demotes the Executive to a nonexecutive position, or (iii) decreases Executive's salary below its then current level, as such salary level may have been increased from time to time above the initial level specified in Section 2.1 hereof, as amended, or reduces the employee benefits and perquisites below the levels provided for by the terms of Section 2 hereof, other than as a result of any amendment or termination of any employee and/or executive benefit plan or arrangement, which amendment or termination is applicable to all executives of Employer, then such action by Employer, unless consented to in writing by Executive, shall be deemed to be a constructive termination by Employer of Executive's employment (a "Constructive Termination"). 4. AMENDMENT TO SECTION 11.1 - "MISCELLANEOUS - NOTICES." The address for notices and other communications, for both Employer and for Executive, is 200 Bailey Avenue, Fort Worth, Texas 76107. 5. EFFECT OF AMENDMENTS; ENFORCEABILITY OF EMPLOYMENT AGREEMENT. This Amendment No. 1 replaces all previous agreements and discussions relating to the same or similar subject matters between Executive and Employer with respect to the subject matter of this Amendment No. 1. Except as otherwise expressly and specifically amended or modified by this Amendment No. 1, the terms and provisions of the Employment Agreement shall continue in full force and effect on and after the date hereof. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. AMERICREDIT CORP. By: ------------------------------------- Clifton H. Morris, Jr., Chairman of the Board and Chief Executive Officer EXECUTIVE: ---------------------------------------- Michael R. Barrington WITNESS: By: ------------------------------------- Gerald W. Haddock, Chairman of the Compensation Committee EX-10.9-1 5 EXHIBIT 10.9.1 AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT THIS AMENDMENT NO. 1, dated as of May 1, 1997, is made and entered into by and between AmeriCredit Corp., a Texas corporation formerly known as "URCARCO, INC.," having an office at 200 Bailey Avenue, Fort Worth, Texas 76107 (hereinafter referred to as "Employer"), and Daniel E. Berce, an executive employee of Employer (hereinafter referred to as "Executive"). WHEREAS, Employer and Executive have previously entered into that certain Executive Employment Agreement dated as of January 30, 1991 (the "Employment Agreement"). WHEREAS, since the execution of the Employment Agreement, due to the growth and financial success of Employer, the responsibilities and compensation of Executive have increased above the provisions and levels set forth in the Employment Agreement; Employer and Executive desire to amend certain provisions of the Employment Agreement to reflect such changes and to better specify the terms and conditions of Executive's employment relationship with Employer. NOW, THEREFORE, in consideration of Executive's continued employment by Employer and the mutual promises and covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, Employer and Executive intend by this Amendment No. 1 to modify and amend the Employment Agreement as herein provided. 1. AMENDMENT TO SECTION 1.1 - "GENERAL DUTIES OF EMPLOYER AND EMPLOYEE." The last sentence of Section 1.1 is hereby amended and modified so as to reflect Executive's current position as Vice Chairman and Chief Financial Officer (until such time as such position may be changed as provided in Section 1.1). 2. AMENDMENT TO SECTION 2.1 - "COMPENSATION AND BENEFITS." The first sentence of Section 2.1 is hereby amended and modified so as to reflect Executive's current salary as $345,000 per annum. 3. AMENDMENT TO SECTION 7.3 - "EFFECT OF TERMINATION." The first sentence of Section 7.3 is hereby amended to read in its entirety as follows: If Employer (i) terminates the employment of Executive other than pursuant to Section 6.2 hereof for "due cause" or other than for a disability or death pursuant to Section 6.3 hereof, (ii) demotes the Executive to a nonexecutive position, or (iii) decreases Executive's salary below its then current level, as such salary level may have been increased from time to time above the initial level specified in Section 2.1 hereof, as amended, or reduces the employee benefits and perquisites below the levels provided for by the terms of Section 2 hereof, other than as a result of any amendment or termination of any employee and/or executive benefit plan or arrangement, which amendment or termination is applicable to all executives of Employer, then such action by Employer, unless consented to in writing by Executive, shall be deemed to be a constructive termination by Employer of Executive's employment (a "Constructive Termination"). 4. AMENDMENT TO SECTION 11.1 - "MISCELLANEOUS - NOTICES." The address for notices and other communications, for both Employer and for Executive, is 200 Bailey Avenue, Fort Worth, Texas 76107. 5. EFFECT OF AMENDMENTS; ENFORCEABILITY OF EMPLOYMENT AGREEMENT. This Amendment No. 1 replaces all previous agreements and discussions relating to the same or similar subject matters between Executive and Employer with respect to the subject matter of this Amendment No. 1. Except as otherwise expressly and specifically amended or modified by this Amendment No. 1, the terms and provisions of the Employment Agreement shall continue in full force and effect on and after the date hereof. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. AMERICREDIT CORP. By: --------------------------------------- Clifton H. Morris, Jr., Chairman of the Board and Chief Executive Officer EXECUTIVE: ------------------------------------------ Daniel E. Berce WITNESS: By: -------------------------------------- Gerald W. Haddock, Chairman of the Compensation Committee EX-10.10 6 EXHIBIT 10.10 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AGREEMENT, dated and effective as of October 15, 1996, is made and entered into by and between AmeriCredit Corp., a Texas corporation, having an office at 200 Bailey Avenue, Fort Worth, Texas 76107 (hereinafter referred to as "Employer"), AmeriCredit Financial Services, Inc., a wholly-owned subsidiary of Employer ("Subsidiary"), and EDWARD H. ESSTMAN (hereinafter referred to as "Employee"). WHEREAS, Employee is employed by Employer in the capacity of Senior Vice President and Chief Credit Officer and by Subsidiary in the capacity of Executive Vice President, Director of Consumer Finance Operations, and Employee has agreed to continue as an employee of Employer and of Subsidiary pursuant to the terms of this Agreement. WHEREAS, Employer and Subsidiary desire that Employee continue as an executive of Employer and Subsidiary to provide the necessary leadership and management skills that are important to the success of Employer and Subsidiary. Employer and Subsidiary believe that retaining Employee's services as an executive and the benefits of his business experience are of material importance to Employer and Subsidiary. WHEREAS, Employer, Subsidiary and Employee have previously entered into that certain Employment Agreement dated and effective as of May 20, 1993 (the "Prior Agreement"). The parties hereto now desire to amend and restate the terms and provisions of the Prior Agreement and to set forth their agreements herein. NOW, THEREFORE, in consideration of Employee's employment by Employer and Subsidiary and the mutual promises and covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties hereto intend by this Agreement to amend and restate the prior Agreement and specify the terms and conditions of Employee's employment relationship with Employer and Subsidiary and the post-employment obligations of Employee. 1. GENERAL DUTIES OF EMPLOYER AND EMPLOYEE: 1.1. Employer and Subsidiary agree to employ Employee and Employee agrees to accept employment and to serve in the capacities of Senior Vice President and Chief Credit Officer of Employer and as Executive Vice President, Director of Consumer Finance Operations of Subsidiary upon the terms and conditions set forth herein. The duties and responsibilities of Employee shall include such duties as may from time-to-time be assigned to Employee by the Boards of Directors of Employer and Subsidiary, any duly authorized committees thereof or an authorized officer of Employer or Subsidiary. The executive capacity that Employee shall hold during the term hereof shall be those positions determined by the Boards of Directors of Employer and/or Subsidiary or any duly authorized committees thereof from time-to-time in their sole discretion. The initial positions that Employee shall hold (until such time as such positions may be changed as aforesaid) shall be the positions of Senior Vice President and Chief Credit Officer of Employer and Executive Vice President, Director of Consumer Finance Operations of Subsidiary. 1.2. While employed hereunder, Employee shall obey the lawful directions of the Boards of Directors of Employer and Subsidiary, any duly authorized committees thereof or any authorized officers of Employer or Subsidiary and shall use his best efforts to promote the interests of Employer and Subsidiary and to maintain and to promote the reputation thereof. While employed hereunder, Employee shall devote his time, efforts, skills and attention to the affairs of Employer and Subsidiary in order that he shall faithfully perform his duties and obligations hereunder and such as may be assigned to or vested in him by the Boards of Directors of Employer and Subsidiary, any duly authorized committees thereof or any duly authorized officer of Employer or Subsidiary. 1.3. During the term of this Agreement, Employee may from time to time engage in any businesses or activities that do not compete directly and materially with Employer or Subsidiary and any of their subsidiaries, provided that such businesses or activities do not materially interfere with his performance of the duties assigned to him in compliance with this Agreement by the Boards of Directors of Employer and Subsidiary, any duly authorized committees thereof or any authorized officer of Employer or Subsidiary. In any event, Employee is permitted to (i) invest his personal assets as a passive investor in such form or manner as will not contravene the best interests of Employer or Subsidiary, (ii) participate in various charitable efforts, or (iii) serve as a director or officer of any other entity or organization when such position has previously been approved by the Boards of Directors of Employer and Subsidiary. 2. COMPENSATION AND BENEFITS. 2.1. As compensation for services to Employer and Subsidiary, Employer shall pay to Employee during the term of this Agreement a salary at an annual rate to be fixed from time to time by the Board of Directors of Employer or any duly authorized committee thereof, which annual rate shall in no event be less than $211,200.00 per annum. The salary shall be payable in equal biweekly installments, subject only to such payroll and withholding deductions as may be required by law and other deductions applied generally to employees of Employer for insurance and other employee benefit plans. The Board of Directors of Employer, or any authorized -2- committee or officer of Employer, shall review Employee's overall annual compensation at least annually, with a view to ascertaining the adequacy thereof and such compensation may be increased by the Board of Directors of Employer from time to time by an amount that in the opinion of the Board of Directors of Employer is justified by Employee's performance. In addition, Employee shall be eligible to receive cash bonuses or other incentive compensation as may be determined by the Board of Directors of Employer from time-to-time. 2.2. Upon Employee furnishing to Employer customary and reasonable documentary support (such as receipts or paid bills) evidencing costs and expenses incurred by him in the performance of his services and duties hereunder (including, without limitation, travel and entertainment expenses) and containing sufficient information to establish the amount, date, place and essential character of the expenditure, Employee shall be reimbursed for such costs and expenses in accordance with Employer's normal expense reimbursement policy. Employee shall be entitled to participate in all group life, health and medical insurance plans, stock option plans and other stock programs and compensation plans and such other benefits, plans or programs as may be from time to time specifically adopted and approved by Employer for Employee and/or for employees generally. 2.3. Employee shall be entitled to such vacation (in no event less than three weeks per year), holiday, and (subject to the provisions of Section 6.3 hereof) other paid or unpaid leave of absence as is consistent with Employer's normal policies or as otherwise approved by the Board of Directors of Employer. 2.4. As long as this Agreement is in effect, Employer agrees to provide and maintain life insurance coverage on the life of Employee in the face amount of $500,000, with proceeds thereunder payable to such beneficiaries as Employee may designate, and Employer agrees to pay all premiums on such policy. Coverage shall continue throughout the employment term hereof. Such coverage may consist of term, whole life or any other form of life insurance coverage selected by Employer and may be with such insurers as Employee may select, provided that such insurer is reasonably satisfactory to Employer. 2.5. While Employee is employed hereunder, Employer agrees to provide an allowance to Employee of $5,000 per annum for costs and expenses incurred by Employee for professional legal and/or accounting services rendered personally to Employee, which amount shall be paid to Employee on December 1 of each year (or such earlier time that Employee and Employer may otherwise agree). 3. PRESERVATION OF BUSINESS; FIDUCIARY RESPONSIBILITY; Employee shall use his best efforts to preserve the business and organization of Employer and Subsidiary, to keep available to Employer and Subsidiary the services of present employees and to -3- preserve the business relations of Employer and Subsidiary with dealers, retailers, suppliers, distributors, customers and others. The Employee shall not commit any act, or in any way assist others to commit any act, that would injure Employer or Subsidiary. So long as the Employee is employed by Employer or Subsidiary, Employee shall observe and fulfill proper standards of fiduciary responsibility attendant upon his service and office. 4. EMPLOYEE'S OBLIGATION TO REFRAIN FROM USING OR DISCLOSING INFORMATION: 4.1. As part of Employee's fiduciary duties to Employer and Subsidiary, Employee agrees, both during the term of this Agreement and thereafter, to protect, preserve the confidentiality of and safeguard Employer's and Subsidiary's secret or confidential information, knowledge, ideas, concepts, improvements, discoveries and inventions, and, except as may be expressly required by Employer, Employee shall not, either during his employment by Employer or Subsidiary or thereafter, directly or indirectly, use for his own benefit or for the benefit of another, or disclose to another, any of such information, ideas, concepts, improvements, discoveries or inventions. 4.2. Upon termination of his employment with Employer and Subsidiary, or at any other time upon request, Employee shall immediately deliver to Employer all documents embodying any of Employer's or Subsidiary's secret or confidential information, ideas, concepts, improvements, discoveries and inventions. 5. INITIAL TERM; EXTENSIONS OF THE TERM: 5.1. The term of this Agreement shall commence on the effective date hereof and shall end on October 31, 2001. 5.2. The term of this Agreement shall automatically be extended for additional one-year periods commencing on November 1, 1997 and on each November 1 thereafter, unless either Employee or Employer gives written notice to the other on or before September 1, 1997 or any September 1 thereafter of his or its intention not to extend this Agreement. 6. TERMINATION OTHER THAN BY EXPIRATION OF THE TERM: Employer or Employee may terminate Employee's employment under this Agreement at any time, but only on the following terms: 6.1. Employee may terminate his employment under this Agreement at any time upon at least ninety (90) days' prior written notice to Employer. 6.2. Employer may terminate Employee's employment under this Agreement at any time, without prior notice, for "due cause" upon the good faith determination by the Board of Directors of -4- Employer or Subsidiary that "due cause" exists for the termination of the employment relationship. As used herein, the term "due cause" shall mean any of the following events: (i) any intentional misapplication by Employee of Employer's or Subsidiary's funds, or any other act of dishonesty injurious to Employer or Subsidiary committed by Employee; or (ii) Employee's conviction of a crime involving moral turpitude; or (iii) Employee's use or possession of any controlled substance or abuse of alcoholic beverages; or (iv) Employee's breach, non-performance or non-observance of any of the terms of this Agreement if such breach, non-performance or non-observance shall continue beyond a period of ten (10) days immediately after notice thereof by Employer to Employee; or (v) any other action by the Employee involving willful and deliberate malfeasance or gross negligence in the performance of Employee's duties. 6.3. In the event Employee is incapacitated by accident, sickness or otherwise so as to render Employee mentally or physically incapable of performing the services required under SECTION 1 of this Agreement for a period of one hundred eighty (180) consecutive days, and such incapacity is confirmed by the written opinion of two (2) practicing medical doctors licensed by and in good standing in the state in which they maintain offices for the practice of medicine, upon the expiration of such period or at any time reasonably thereafter, Employer may terminate Employee's employment under this Agreement upon giving Employee or his legal representative written notice at least thirty (30) day's prior to the termination date. In addition to the foregoing, this Agreement shall terminate immediately upon the death of Employee. Employee agrees, after written notice by the Board of Directors of Employer or Subsidiary, a duly authorized committee thereof or any officer of Employer or Subsidiary, to submit to examinations by such practicing medical doctors selected by the Board of Directors of Employer or Subsidiary, a duly authorized committee thereof or any officer of Employer or Subsidiary. 6.4. Employer may terminate Employee's employment under this Agreement at any time for any reason whatsoever, even without "due cause," by giving a written notice of termination to Employee, in which case the employment relationship shall terminate immediately upon the giving of such notice. 7. EFFECT OF TERMINATION: -5- 7.1. In the event the employment relationship is terminated (a) by Employee upon ninety (90) days' written notice pursuant to Section 6.1 hereof, (b) by Employer for "due cause" pursuant to Section 6.2 hereof, or (c) by Employee breaching this Agreement by refusing to continue his employment and failing to give the requisite ninety (90) days' written notice, all compensation and benefits shall cease as of the date of termination, other than: (i) those benefits that are provided by retirement and benefit plans and programs specifically adopted and approved by Employer or Subsidiary for Employee that are earned and vested by the date of termination, and (ii) Employee's pro rata annual salary plus all earned and vested bonuses through the date of termination. Employee's right to exercise stock options and Employee's rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plan. 7.2. If Employee's employment relationship is terminated pursuant to Section 6.3 hereof due to Employee's incapacity or death, Employee (or, in the event of Employee's death, Employee's legal representative) will be entitled to those benefits that are provided by retirement and benefits plans and programs specifically adopted and approved by Employer or Subsidiary for Employee that are earned and vested at the date of termination and, even though no longer employed by Employer or Subsidiary, shall continue to receive the salary compensation (payable in the manner as prescribed in the second sentence of Section 2.1) for one (1) year following the date of termination. Employee (or, in the event of Employee's death, Employee's legal representative) shall not, however, be entitled to any bonuses not yet paid at the date of the termination of employment. Employee's right to exercise stock options and Employee's rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plans. 7.3. If Employer (i) terminates the employment of Employee other than pursuant to Section 6.2 hereof for "due cause" or other than for a disability or death pursuant to Section 6.3 hereof, (ii) demotes Employee to a nonexecutive position, or (iii) decreases Employee's salary or reduces the employee benefits and perquisites below the level provided for by the terms of Section 2 hereof, other than as a result of any amendment or termination of any employee and/or executive benefit plan or arrangement, which amendment or termination is applicable to all employees of Employer or Subsidiary, then such action by Employer, unless consented to in writing by Employee, shall be deemed to be a constructive termination by Employer of Employee's employment (a "Constructive Termination"). In the event of a Constructive Termination, Employee shall be entitled to receive, in a lump sum within 30 days after the date of the Constructive Termination, an amount equal to the remainder of Employee's current year's salary (undiscounted) plus the present value (employing a discount rate of 8%) of two additional years salary in effect immediately prior to the event giving rise to the -6- Constructive Termination. For purposes of this Section 7.3, the term "salary" shall mean the sum of (i) the annual rate of compensation, excluding any bonuses, provided to Employee under Section 2.1 hereof immediately prior to the event giving rise to the Constructive Termination, plus (ii) the average annual cash bonuses or other cash incentive compensation paid to Employee by Employer for the three years in the three year period immediately preceding the year in which there shall occur a Constructive Termination. In the event of such Constructive Termination, all other rights and benefits Employee may have under the employee benefit plans and arrangements of Employer generally shall be determined in accordance with the terms and conditions of such plans and arrangements. 8. CHANGE OF CONTROL: 8.1 Notwithstanding anything to the contrary otherwise provided herein, if a "change of control" (as defined below) of Employer occurs and within twelve (12) months from the date of such "change of control", Employee voluntarily terminates the employment relationship under this Agreement by giving ninety (90) days' written notice to Employer and Subsidiary under Section 6.1 hereof or within such twelve (12) month period Employer or Subsidiary gives written notice to Employee to terminate Employee's employment relationship without "due cause" pursuant to Section 6.4, then Employee, even though no longer employed by Employer, shall be entitled to earned and vested bonuses at the date of termination plus a payment in the amount of the remainder of Employee's current year's salary (undiscounted) plus the present value (employing a discount rate of 8%) of two additional years' salary, based on the salary in effect immediately prior to the "change of control", payable at the option of the Employee in either a lump sum within 30 days after the date of termination or annually over a three-year period. For purposes of this Section 8.1, the term "salary" shall mean the sum of (i) the annual rate of compensation provided to Employee under Section 2.1 hereof immediately prior to the "change of control", plus (ii) the average annual cash bonuses or other cash incentive compensation paid to Employee by Employer for the three years in the three year period immediately preceding the year in which there shall occur a "change of control". Employee's right to exercise stock options and Employee's rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plan. "Change of control" shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), becomes the beneficial owner, directly or indirectly, of securities of Employer representing 30% or more of the combined voting power of Employer's then outstanding securities, (ii) during any period of 12 months, individuals who at the beginning of such period constitute the Board of Directors of Employer cease for any reason to constitute a majority thereof unless the election, or the nomination for election by Employer's stockholders of each new director was approved by a vote of at least a majority of the -7- directors then still in office who were directors at the beginning of the period or (iii) a person (as defined in clause (i) above) acquires (or, during the 12-month period ending on the date of the most recent acquisition by such person or group or persons, has acquired) gross assets of Employer that have an aggregate fair market value greater than or equal to over 50% of the fair market value of all of the gross assets of Employer immediately prior to such acquisition or acquisitions. 8.2. Notwithstanding any other provision of this Agreement, if (a) there is a change in the ownership or effective control of Employer or in the ownership of a substantial portion of the assets of Employer [within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code (the "Code")], and (b) the payments otherwise to be made pursuant to Section 8.1 and any other payments or benefits otherwise to be paid to Employee in the nature of compensation to be received by or for the benefit of Employee and contingent upon such event (the "Termination Payments") would create an "excess parachute payment" within the meaning of Section 280G of the Code, then Employer shall make the Termination Payments in substantially equal installments, the first installment being due within thirty days after the date of termination and each subsequent installment being due on January 31 of each year, such that the aggregate present value of all Termination Payments, whether pursuant to this Agreement or otherwise, will be as close as possible to, but not exceed, 299% of the Employee's base amount, within the meaning of Section 280G. 9. EMPLOYEE'S NON-COMPETITION OBLIGATION: 9.1. Employee acknowledges and agrees that he serves in a special capacity for Employer and Subsidiary pursuant to which he will acquire unique knowledge of the operations and business of Employer and Subsidiary and, as such, will not be engaged in a common calling. During the existence of Employee's employment by Employer and Subsidiary hereunder and, if the employment of Employee is terminated by Employer for any reason pursuant to Section 6.2 or Employee voluntarily terminates his employment pursuant to Section 6.1 (unless such voluntary termination occurs within twelve months after a "change in control", as defined in Section 8.1), for a period of three (3) years from the date on which he shall cease to be employed by Employer or Subsidiary, Employee shall not, acting alone or in conjunction with others, directly or indirectly, and whether as principal, agent, officer, director, partner, employee, consultant, broker, dealer or otherwise, in any of the Business Territories (as defined below), engage in any business in competition with the business conducted by Employer, Subsidiary or any subsidiary of Employer or Subsidiary, whether for his own account or otherwise, or solicit, canvass or accept any business or transaction for or from any other company or business in competition with such business of Employer or Subsidiary in any of the Business Territories. For purposes hereof, the term "Business Territories" means the -8- geographical regions within the geographic borders of each State in which Employer or Subsidiary is doing business during the term of this Agreement and (in the case of post-employment non-competition obligations) at the date of the termination of Employee's employment with Employer and Subsidiary and any State in which Employer had reasonable prospects of engaging in business during the three-year noncompetition period following termination of employment. 9.2. It is the desire and intent of the parties that the provisions of Section 9.1 shall be enforced to the fullest extent permissible under the laws and public policies of the State of Texas. Accordingly, if any particular portion of Section 9.1 shall be adjudicated to be invalid or unenforceable, Section 9.1 shall be deemed amended to (i) reform the particular portion to provide for such maximum restrictions as will be valid and enforceable or if that is not possible, then (ii) delete therefrom the portion thus adjudicated to be invalid or unenforceable. 10. OBLIGATIONS TO REFRAIN FROM COMPETING UNFAIRLY: 10.1. In addition to the other obligations agreed to by Employee in this Agreement, Employee agrees that during his employment with Employer or Subsidiary and following the termination of his employment by Employer and Subsidiary he shall not at any time, directly or indirectly, (a) induce, entice, or solicit any employee of Employer or Subsidiary to leave his employment, or (b) contact, communicate or solicit any customer of Employer or Subsidiary derived from any customer list, customer lead, mail, printed matter or other information secured from Employer, Subsidiary or their present or past employees, or (c) in any other manner use any customer lists or customer leads, mail, telephone numbers, printed material or material of Employer or Subsidiary relating thereto. 11. MISCELLANEOUS: 11.1. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when mailed by registered mail or certified mail, return receipt requested, as follows (provided that notice of change of address shall be deemed given only when received): If to Employer or Subsidiary, then notice must be given to both: AmeriCredit Corp. 200 Bailey Avenue Fort Worth, Texas 76107 Attention: Chairman and AmeriCredit Financial Services, Inc. -9- 200 Bailey Avenue Fort Worth, Texas 76107 Attention: President If to Employee, to: Edward H. Esstman 200 Bailey Avenue Fort Worth, Texas 76107 or to such other names or addresses as Employer, Subsidiary or Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section 10.1. 11.2. This Agreement shall be binding upon and inure to the benefit of Employer, its successors, legal representatives and assigns, and upon Employee, his heirs, executors, administrators, representatives and assigns. Employee agrees that his rights and obligations hereunder are personal to him and may not be assigned without the express written consent of Employer and Subsidiary. 11.3. This Agreement replaces and merges all previous agreements and discussions relating to the same or similar subject matters between Employee, Employer and Subsidiary with respect to the subject matter of this Agreement, including, without limitation, that certain Employment Agreement, dated and effective as of May 20, 1993, by and between Employer and Employee. This Agreement may not be modified in any respect by any verbal statement, representation or agreement made by any employee, officer, or representative of Employer or Subsidiary or by any written agreement unless signed by an officer of Employer who is expressly authorized by Employer to execute such document. 11.4. (a) If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. (b) Without intending to limit the remedies available to Employer or Subsidiary, it is mutually understood and agreed that Employee's services are of a special, unique, unusual, extraordinary and intellectual character giving them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law, and, therefore, in the event of a breach by Employee, Employer shall be entitled to equitable relief by way of injunction or otherwise. (c) Employee acknowledges that Sections 4, 9 and 10 are expressly for the benefit of Employer and Subsidiary, that Employer and Subsidiary would be irreparably injured by a -10- violation of Section 4, 9 and/or 10 and that Employer or Subsidiary would have no adequate remedy at law in the event of such violation. Therefore, Employee acknowledges and agrees that injunctive relief, specific performance or any other appropriate equitable remedy (without any bond or other security being required) are appropriate remedies to enforce compliance by Employer with Section 4, Section 9 and Section 10. 11.5. Employee acknowledges that, from time to time, Employer or Subsidiary may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of Employer or Subsidiary may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of Employer or Subsidiary (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature shall be construed to modify this Agreement or to create express or implied obligations of any nature to Employee. 11.6. The laws of the State of Texas will govern the interpretation, validity and effect of this Agreement without regard to the place of execution or the place for performance thereof, and Employer and Employee agree that the state and federal courts situated in Tarrant County, Texas shall have personal jurisdiction over Employer and Employee to hear all disputes arising under this Agreement. This Agreement is to be at least partially performed in Tarrant County, Texas, and, as such, Employer and Employee agree that venue shall be proper with the state or federal courts in Tarrant County, Texas to hear such disputes. In the event either Employer or Employee is not able to effect service of process upon the other with respect to such disputes, Employer and Employee expressly agree that the Secretary of State for the State of Texas shall be an agent of Employer and/or the Employee to receive service of process on behalf of Employer and/or the Employee with respect to such disputes. 12. ADDITIONAL INSTRUMENTS: Employee and Employer shall execute and deliver any and all additional instruments and agreements that may be necessary or proper to carry out the purposes of this Agreement. -11- IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. WITNESS: AmeriCredit Corp. By: - ------------------------------ ---------------------------------- Gerald W. Haddock, Chairman Clifton H. Morris, Jr. of the Stock Option/ Chairman, President and Compensation Committee of Chief Executive Officer AmeriCredit Corp. AmeriCredit Financial Services, Inc. By: ---------------------------------- Michael R. Barrington President and Chief Operating Officer EMPLOYEE By: ---------------------------------- Edward H. Esstman -12- EX-10.10-1 7 EXHIBIT 10.10.1 AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDMENT NO. 1, dated as of May 1, 1997, is made and entered into by and between AmeriCredit Corp., a Texas corporation ("Employer"), AmeriCredit Financial Services, Inc., a Delaware corporation ("Subsidiary"), both having an office at 200 Bailey Avenue, Fort Worth, Texas 76107, and Edward H. Esstman, an executive employee of Employer and Subsidiary (hereinafter referred to as "Executive"). WHEREAS, Employer, Subsidiary and Executive have previously entered into that certain Amended and Restated Employment Agreement dated as of October 15, 1996 (the "Employment Agreement"). WHEREAS, since the execution of the Employment Agreement, due to the growth and financial success of Employer, the responsibilities and compensation of Executive have increased above the provisions and levels set forth in the Employment Agreement; Employer and Executive desire to amend certain provisions of the Employment Agreement to reflect such changes and to better specify the terms and conditions of Executive's employment relationship with Employer. NOW, THEREFORE, in consideration of Executive's continued employment by Employer and the mutual promises and covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, Employer and Executive intend by this Amendment No. 1 to modify and amend the Employment Agreement as herein provided. 1. AMENDMENT TO SECTION 1.1 - "GENERAL DUTIES OF EMPLOYER AND EMPLOYEE." The first and last sentences of Section 1.1 are hereby amended and modified so as to reflect Executive's current position as Executive Vice President - Auto Finance Division of Employer and President and Chief Operating Officer of Subsidiary (until such time as such positions may be changed as provided in Section 1.1). 2. AMENDMENT TO SECTION 2.1 - "COMPENSATION AND BENEFITS." The first sentence of Section 2.1 is hereby amended and modified so as to reflect Executive's current salary as $300,000 per annum. 3. AMENDMENT TO SECTION 7.3 - "EFFECT OF TERMINATION." The first sentence of Section 7.3 is hereby amended to read in its entirety as follows: If Employer (i) terminates the employment of Executive other than pursuant to Section 6.2 hereof for "due cause" or other than for a disability or death pursuant to Section 6.3 hereof, (ii) demotes the Executive to a nonexecutive position, or (iii) decreases Executive's salary below its then current level, as such salary level may have been increased from time to time above the initial level specified in Section 2.1 hereof, as amended, or reduces the employee benefits and perquisites below the levels provided for by the terms of Section 2 hereof, other than as a result of any amendment or termination of any employee and/or executive benefit plan or arrangement, which amendment or termination is applicable to all executives of Employer, then such action by Employer, unless consented to in writing by Executive, shall be deemed to be a constructive termination by Employer of Executive's employment (a "Constructive Termination"). 4. EFFECT OF AMENDMENTS; ENFORCEABILITY OF EMPLOYMENT AGREEMENT. This Amendment No. 1 replaces all previous agreements and discussions relating to the same or similar subject matters between Executive and Employer with respect to the subject matter of this Amendment No. 1. Except as otherwise expressly and specifically amended or modified by this Amendment No. 1, the terms and provisions of the Employment Agreement shall continue in full force and effect on and after the date hereof. IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. AMERICREDIT CORP. By: -------------------------------------- Michael R. Barrington, Vice Chairman, President and Chief Operating Officer AMERICREDIT FINANCIAL SERVICES, INC. By: -------------------------------------- Michael R. Barrington, Vice Chairman and Chief Executive Officer EXECUTIVE: ----------------------------------------- Edward H. Esstman WITNESS: By: -------------------------------------- Gerald W. Haddock, Chairman of the Compensation Committee EX-10.11 8 EXHIBIT 10.11 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated and effective as of July 1, 1997, is made and entered into by and between AmeriCredit Corp., a Texas corporation, having an office at 200 Bailey Avenue, Fort Worth, Texas 76107 (hereinafter referred to as "Employer"), each subsidiary corporation of Employer whether executing this Agreement or not (each, a "Subsidiary"), and Michael T. Miller (hereinafter referred to as "Employee"). WHEREAS, Employer desires that the Employee continue as an employee to provide the necessary leadership and management skills that are important to the success of Employer and Subsidiary. Employer believes that retaining the Employee's services as an employee of Employer and Subsidiary and the benefits of his business experience are of material importance to Employer and Subsidiary. WHEREAS, Employer, AmeriCredit Financial Services, Inc. and Employee have previously entered into that certain Employment Agreement dated and effective as of November 1, 1993 (the "Prior Agreement"). The parties hereto now desire to amend and restate the terms and provisions of the Prior Agreement and to set forth their agreements herein. NOW, THEREFORE, in consideration of Employee's employment by Employer and Subsidiary and the mutual promises and covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties hereto intend by this Agreement to amend and restate the Prior Agreement and specify the terms and conditions of Employee's employment relationship with Employer and Subsidiary and the post-employment obligations of Employee. 1. GENERAL DUTIES OF EMPLOYER AND EMPLOYEE: 1.1. Employer agrees to employ Employee and Employee agrees to accept employment by Employer and to serve Employer and Subsidiary in the following capacity, upon the terms and conditions set forth herein: Senior Vice President and Chief Credit Officer - AmeriCredit Corp. Executive Vice President, and Chief Credit Officer and Chief of Staff - AmeriCredit Financial Services, Inc. and Americredit Corporation of California The duties and responsibilities of Employee shall include such duties as may from time-to-time be assigned to Employee by the Board of Directors of Employer or Subsidiary, any duly authorized committees thereof or an authorized officer of Employer or Subsidiary. The executive capacity that Employee shall hold during the term hereof shall be that position as determined by the Board of Directors of Employer or Subsidiary or any duly authorized committees thereof from time-to-time in their sole discretion. While employed hereunder, the initial position that Employee shall hold (until such time as such position may be changed as aforesaid) shall be the position set forth above in this Section 1.1. 1.2. While employed hereunder, Employee shall obey the lawful directions of the Board of Directors of Employer or Subsidiary, any duly authorized committees thereof or any authorized officers of Employer or Subsidiary and shall use his best efforts to promote the interests of Employer and Subsidiary and to maintain and to promote the reputation thereof. While employed hereunder, Employee shall devote his time, efforts, skills and attention to the affairs of Employer and Subsidiary in order that he shall faithfully perform his duties and obligations hereunder and such as may be assigned to or vested in him by the Board of Directors of Employer or Subsidiary, any duly authorized committees thereof or any duly authorized officer of Employer or Subsidiary. 1.3. During the term of this Agreement, Employee may from time to time engage in any businesses or activities that do not compete directly and materially with Employer or Subsidiary and any of their subsidiaries, provided that such businesses or activities do not materially interfere with his performance of the duties assigned to him in compliance with this Agreement by the Board of Directors of Employer or Subsidiary, any duly authorized committees thereof or any authorized officer of Employer or Subsidiary. In any event, Employee is permitted to (i) invest his personal assets as a passive investor in such form or manner as will not contravene the best interests of Employer or Subsidiary, (ii) participate in various charitable efforts, or (iii) serve as a director or officer of any other entity or organization when such position has previously been approved by the Board of Directors of Employer or Subsidiary. 2. COMPENSATION AND BENEFITS: 2.1. As compensation for services to Employer and Subsidiary, Employer shall pay to Employee during the term of this Agreement a salary at an annual rate to be fixed from time to time by the Board of Directors of Employer or any duly authorized committee thereof, which annual rate shall initially be $165,000 on a per annum basis. The salary shall be payable in equal biweekly installments, subject only to such payroll and withholding deductions as may be required by law and other deductions applied generally to employees of Employer for insurance and other employee benefit plans. The Board of Directors of Employer, or any authorized committee or officer of Employer, shall review Employee's overall annual compensation at least annually, with a view to ascertaining the adequacy thereof and such compensation may be increased (but not decreased) by the Board of Directors of Employer from time to time by an amount that in the opinion of the Board of Directors of Employer is justified by Employee's performance. 2.2. Upon Employee furnishing to Employer customary and reasonable documentary support (such as receipts or paid bills) evidencing costs and expenses incurred by him in the performance of his services and duties hereunder (including, without limitation, travel and entertainment expenses) and containing sufficient information to establish the amount, date, place and essential character of the expenditure, Employee shall be reimbursed for such costs and expenses in accordance with Employer's normal expense reimbursement policy. Employee shall be entitled to participate in all group life, health and medical insurance plans, stock option plans and other stock programs and compensation plans and such other benefits, plans or programs as may be from time to time specifically adopted and approved by Employer for employees generally. 2.3 Employee shall be entitled to such vacation, holiday, and (subject to the provisions of Section 6.3 hereof) other paid or unpaid leave of absence as is consistent with Employer's normal policies or as otherwise approved by the Board of Directors of Employer; provided, that, in no event shall Employee be entitled to less than three weeks of vacation. -2- 2.4 As long as this Agreement in is effect, Employer agrees to provide and maintain life insurance coverage on the life of Employee in the face amount of $300,000, with proceeds thereunder payable to such beneficiaries as Employee may designate, and Employer agrees to pay all premiums on such policy. Coverage shall continue throughout the employment term hereof. Such coverage may consist of term, group term, whole life or any other form of coverage selected by Employer in its sole discretion and may be with such insurers as Employer may select. 3. PRESERVATION OF BUSINESS; FIDUCIARY RESPONSIBILITY: Employee shall use his best efforts to preserve the business and organization of Employer and Subsidiary, to keep available to Employer and Subsidiary the services of present employees and to preserve the business relations of Employer and Subsidiary with dealers, retailers, suppliers, distributors, customers and others. Employee shall not commit any act, or in any way assist others to commit any act, that would injure Employer or Subsidiary. So long as Employee is employed by Employer or Subsidiary, Employee shall observe and fulfill proper standards of fiduciary responsibility attendant upon his service and office. 4. EMPLOYEE'S OBLIGATION TO REFRAIN FROM USING OR DISCLOSING INFORMATION: 4.1. As part of Employee's fiduciary duties to Employer and Subsidiary, Employee agrees, both during the term of this Agreement and thereafter, to protect, preserve the confidentiality of and safeguard Employer's and Subsidiary's secret or confidential information, knowledge, ideas, concepts, improvements, discoveries and inventions, and, except as may be expressly required by Employer, Employee shall not, either during his employment by Employer or Subsidiary or thereafter, directly or indirectly, use for his own benefit or for the benefit of another, or disclose to another, any of such information, ideas, concepts, improvements, discoveries or inventions. 4.2. Upon termination of his employment with Employer and Subsidiary, or at any other time upon request, Employee shall immediately deliver to Employer all documents embodying any of Employer's or Subsidiary's secret or confidential information, ideas, concepts, improvements, discoveries and inventions. 5. INITIAL TERM; EXTENSIONS OF THE TERM: 5.1. The term of this Agreement shall commence on the effective date hereof and shall end on the third anniversary of the effective date. 5.2. The term of this Agreement shall automatically be extended for additional one-year periods commencing on the anniversary date hereof and on each anniversary thereafter, unless either Employee or Employer gives written notice to the other on or before any March 1 of his or its intention not to extend this Agreement. Notwithstanding anything to the contrary contained herein, it is the intention of the parties hereto that, unless and until such notice of non-extension is provided by either Employer or Employee as provided in the immediately preceding sentence (or unless this Agreement is terminated pursuant to the terms hereof), as of each anniversary date hereafter the term of this Agreement shall be extended for one year so as to provide for a prospective three-year employment term as of each such anniversary date. 6. TERMINATION OTHER THAN BY EXPIRATION OF THE TERM: Employer or Employee may terminate Employee's employment under this Agreement at any time, but only on the following terms: 6.1. Employee may terminate his employment under this Agreement at any time upon at least ninety (90) days' prior written notice to Employer. -3- 6.2. Employer may terminate Employee's employment under this Agreement at any time, without prior notice, for "due cause" upon the good faith determination by the Board of Directors of Employer or Subsidiary that "due cause" exists for the termination of the employment relationship. As used herein, the term "due cause" shall mean any of the following events: (i) any intentional misapplication by Employee of Employer's or Subsidiary's funds, or any other act of dishonesty injurious to Employer or Subsidiary committed by Employee; or (ii) Employee's conviction of a crime involving moral turpitude; or (iii) Employee's use or possession of any controlled substance or abuse of alcoholic beverages; or (iv) Employee's breach, non-performance or non-observance of any of the terms of this Agreement if such breach, non-performance or non-observance shall continue beyond a period of ten (10) days immediately after notice thereof by Employer to Employee; or (v) any other action by the Employee involving willful and deliberate malfeasance or gross negligence in the performance of Employee's duties. 6.3. In the event Employee is incapacitated by accident, sickness or otherwise so as to render Employee mentally or physically incapable of performing the services required under SECTION 1 of this Agreement for a period of one hundred eighty (180) consecutive days, and such incapacity is confirmed by the written opinion of two (2) practicing medical doctors licensed by and in good standing in the state in which they maintain offices for the practice of medicine, upon the expiration of such period or at any time reasonably thereafter, or in the event of Employee's death, Employer may terminate Employee's employment under this Agreement upon giving Employee or his legal representative written notice at least thirty (30) day's prior to the termination date. Employee agrees, after written notice by the Board of Directors of Employer or Subsidiary, a duly authorized committee thereof or any officer of Employer or Subsidiary, to submit to examinations by such practicing medical doctors selected by the Board of Directors of Employer or Subsidiary, a duly authorized committee thereof or any officer of Employer or Subsidiary. 6.4. Employer may terminate Employee's employment under this Agreement at any time for any reason whatsoever, even without "due cause," by giving a written notice of termination to Employee, in which case the employment relationship shall terminate immediately upon the giving of such notice. 7. EFFECT OF TERMINATION: 7.1. In the event the employment relationship is terminated (a) by Employee's refusal to continue his employment under the terms and conditions of this Agreement, or (b) by Employer for "due cause" pursuant to Section 6.2 hereof, all compensation and benefits shall cease as of the date of termination, other than: (i) those benefits that are provided by retirement and benefit plans and programs specifically adopted and approved by Employer or Subsidiary for Employee that are earned and vested by the date of termination, and (ii) Employee's pro rata annual salary through the date of termination. Employee's right to exercise stock options and Employee's rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plan. -4- 7.2. If Employee's employment relationship is terminated pursuant to Section 6.3 hereof due to Employee's incapacity or death, Employee (or, in the event of Employee's death, Employee's legal representative) will be entitled to those benefits that are provided by retirement and benefits plans and programs specifically adopted and approved by Employer or Subsidiary for Employee that are earned and vested at the date of termination and, even though no longer employed by Employer or Subsidiary, shall continue to receive the salary compensation (payable in the manner as prescribed in the second sentence of Section 2.1) for six (6) months following the date of termination. Employee (or, in the event of Employee's death, Employee's legal representative) shall not, however, be entitled to any bonuses not yet paid at the date of the termination of employment. Employee's right to exercise stock options and Employee's rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plans. 7.3. IF Employer (i) terminates the employment of Employee other than pursuant to Section 6.2 hereof for "due cause" or other than for a disability or death pursuant to Section 6.3 hereof or (ii) decreases Employee's salary below its then current level, as such salary level may have been increased from time to time above the initial level specified in Section 2.1, or reduces any other employee benefits and perquisites below the levels provided for by the terms of Section 2 hereof, other than as a result of any amendment or termination of any employee and/or executive benefit plan or arrangement, which amendment or termination is applicable to all employees of Employer or Subsidiary, THEN such action by Employer, unless consented to in writing by Employee, shall be deemed to be a constructive termination by Employer of Employee's employment (a "Constructive Termination"). In the event of a Constructive Termination, the Employee shall be entitled to receive, in a lump sum within 30 days after the date of the Constructive Termination, an amount equal to one year's salary (undiscounted) in effect immediately prior to the event giving rise to the Constructive Termination. For purposes of this Section 7.3, the term "salary" shall mean the annual rate of compensation, excluding any bonuses, provided to Employee under Section 2.1 hereof immediately prior to the event giving rise to the Constructive Termination. In the event of such Constructive Termination, all other rights and benefits Employee may have under the employee benefit plans and arrangements of Employer generally shall be determined in accordance with the terms and conditions of such plans and arrangements. 8. EMPLOYEE'S NON-COMPETITION OBLIGATION: 8.1. Employee acknowledges and agrees that he serves in a special capacity for Employer and Subsidiary pursuant to which he will acquire unique knowledge of the operations and business of Employer and Subsidiary and, as such, will not be engaged in a common calling. During the existence of Employee's employment by Employer and Subsidiary hereunder and, if the employment of Employee is terminated by Employer for any reason pursuant to Section 6.2 or Section 6.4, or Employee voluntarily terminates his employment, for a period of one year from the date on which he shall cease to be employed by Employer or Subsidiary, Employee shall not, acting alone or in conjunction with others, directly or indirectly, and whether as principal, agent, officer, director, partner, employee, consultant, broker, dealer or otherwise, in any of the Business Territories (as defined below), engage in any business in competition with the business conducted by Employer, Subsidiary or any subsidiary of Employer or Subsidiary, whether for his own account or otherwise, or solicit, canvass or accept any business or transaction for or from any other company or business in competition with such business of Employer or Subsidiary in any of the Business Territories. For purposes hereof, the term "Business Territories" means the geographical regions within the geographic borders of each State in which Employer or Subsidiary is doing business during the term of this Agreement and (in the case of post-employment non-competition obligations) at the date of the termination of Employee's employment with Employer and Subsidiary and any state in which Employer and Subsidiary had reasonable prospects of engaging in business during the noncompetition period following termination of employment. -5- 8.2. It is the desire and intent of the parties that the provisions of Section 8.1 shall be enforced to the fullest extent permissible under the laws and public policies of the State of Texas. Accordingly, if any particular portion of Section 8.1 shall be adjudicated to be invalid or unenforceable, Section 8.1 shall be deemed amended to (i) reform the particular portion to provide for such maximum restrictions as will be valid and enforceable or if that is not possible, then (ii) delete therefrom the portion thus adjudicated to be invalid or unenforceable. 8A. CHANGE IN CONTROL 8A.1 Notwithstanding anything to the contrary otherwise provided herein, if a "change in control" (as defined below) of Employer occurs and within twelve (12) months from the date of such "change in control," Employee voluntarily terminates the employment relationship under this Agreement by giving ninety (90) days' written notice to Employer and Subsidiary under Section 6.1 hereof or within such twelve (12) month period Employer or Subsidiary terminates Employee's employment without "due cause" pursuant to Section 6.4, then Employee, even though no longer employed by Employer, shall be entitled to earned and vested bonuses at the date of termination plus a payment in the amount of the remainder of Employee's current year's salary (undiscounted) plus the present value (employing a discount of 8%) of two additional years' salary, based on the salary in effect immediately prior to the "change in control," payable at the option of the Employee in either a lump sum within 30 days after the date of termination or annually over a three-year period. For purposes of this Section 8A.1, the term "salary" shall mean the sum of (i) the annual rate of compensation provided to Employee under Section 2.1 hereof immediately prior to the "change in control," plus (ii) the average annual cash bonuses or other cash incentive compensation paid to Employee by Employer for the three years in the three year period immediately preceding the year in which there shall occur a "change in control." Employee's right to exercise stock options and Employee's rights in other stock plans, if any, shall remain governed by the terms and conditions of the appropriate stock plan. "Change in control" shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), becomes the beneficial owner, directly or indirectly, of securities of Employer representing 30% or more of the combined voting power of Employer's then outstanding securities, (ii) during any period of 12 months, individuals who at the beginning of such period constitute the Board of Directors of Employer cease for any reason to constitute a majority thereof unless the election, or the nomination for election by Employer's stockholders of each new director was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of the period, or (iii) a person (as defined in clause (i) above) acquires (or, during the 12-month period ending on the date of the most recent acquisition by such person or group of persons has acquired) gross assets of Employer that have an aggregate fair market value greater than or equal to over 50% of the fair market value of all of the gross assets of Employer immediately prior to such acquisition or acquisitions. 8A.2 Notwithstanding any other provision of this Agreement, if (a) there is a change in the ownership or effective control of Employer or in the ownership of a substantial portion of the assets of Employer [within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code (the "Code")], and (b) the payments otherwise to be made pursuant to Section 8A.1 and any other payments or benefits otherwise to be paid to Employee in the nature of compensation to be received by or for the benefit of Employee and contingent upon such event (the "Termination Payments") would create an "excess parachute payment" within the meaning of Section 280G of the Code, then Employer shall make the Termination Payments in substantially equal installments, the first installment being due within thirty days after the date of termination and each subsequent installment being due on January 31 of each year, such that the aggregate present value of all Termination Payments, whether pursuant to this Agreement or otherwise, will be as close as possible to, but not exceed, 299% of the Employee's base amount, within the meaning of Section 280G. 9. OBLIGATIONS TO REFRAIN FROM COMPETING UNFAIRLY: -6- 9.1. In addition to the other obligations agreed to by Employee in this Agreement, Employee agrees that during his employment with Employer or Subsidiary and following the termination of his employment by Employer and Subsidiary he shall not at any time, directly or indirectly, (a) induce, entice, or solicit any employee of Employer or Subsidiary to leave his employment, or engage in any discussions or communications with any employee of Employer or Subsidiary concerning such employee's employment or the possibility of such employee's leaving his employment or (b) contact, communicate or solicit any customer of Employer or Subsidiary derived from any customer list, customer lead, mail, printed matter or other information secured from Employer, Subsidiary or their present or past employees, or (c) in any other manner use any customer lists or customer leads, mail, telephone numbers, printed material or material of Employer or Subsidiary relating thereto. 10. MISCELLANEOUS: 10.1. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when mailed by registered mail or certified mail, return receipt requested, as follows (provided that notice of change of address shall be deemed given only when received): If to Employer or Subsidiary, then notice must be given to: AmeriCredit Corp. 200 Bailey Avenue Fort Worth, Texas 76107 Attention: Michael R. Barrington Vice Chairman, President and Chief Operating Officer If to Employee, to: Michael T. Miller 3105 Clear Lake Lane Highland Village, Texas 75067 or to such other names or addresses as Employer, Subsidiary or Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section 10.1. 10.2. This Agreement shall be binding upon and inure to the benefit of Employer, its successors, legal representatives and assigns, and upon Employee, his heirs, executors, administrators, representatives and assigns. Employee agrees that his rights and obligations hereunder are personal to him and may not be assigned without the express written consent of Employer and Subsidiary. 10.3. This Agreement may not be modified in any respect by any verbal statement, representation or agreement made by any employee, officer, or representative of Employer or Subsidiary or by any written agreement unless signed by an officer of Employer who is expressly authorized by Employer to execute such document. 10.4. (a) If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. -7- (b) Without intending to limit the remedies available to Employer or Subsidiary, it is mutually understood and agreed that Employee's services are of a special, unique, unusual, extraordinary and intellectual character giving them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law, and, therefore, in the event of a breach by Employee, Employer shall be entitled to equitable relief by way of injunction or otherwise. (c) Employee acknowledges that Sections 4, 8 and 9 are expressly for the benefit of Employer and Subsidiary, that Employer and Subsidiary would be irreparably injured by a violation of Section 4, 8 and/or 9 and that Employer or Subsidiary would have no adequate remedy at law in the event of such violation. Therefore, Employee acknowledges and agrees that injunctive relief, specific performance or any other appropriate equitable remedy (without any bond or other security being required) are appropriate remedies to enforce compliance by Employer with Section 4, Section 8 and Section 9. 10.5. Employee acknowledges that, from time to time, Employer or Subsidiary may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of Employer or Subsidiary may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of Employer or Subsidiary (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature shall be construed to modify this Agreement or to create express or implied obligations of any nature to Employee. 10.6. The laws of the State of Texas will govern the interpretation, validity and effect of this Agreement without regard to the place of execution or the place for performance thereof, and Employer and Employee agree that the state and federal courts situated in Tarrant County, Texas shall have personal jurisdiction over Employer and Employee to hear all disputes arising under this Agreement. This Agreement is to be at least partially performed in Tarrant County, Texas, and, as such, Employer and Employee agree that venue shall be proper with the state or federal courts in Tarrant County, Texas to hear such disputes. In the event either Employer or Employee is not able to effect service of process upon the other with respect to such disputes, Employer and Employee expressly agree that the Secretary of State for the State of Texas shall be an agent of Employer and/or the Employee to receive service of process on behalf of Employer and/or the Employee with respect to such disputes. 11. ADDITIONAL INSTRUMENTS: Employee and Employer shall execute and deliver any and all additional instruments and agreements that may be necessary or proper to carry out the purposes of this Agreement. -8- IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first written above. AmeriCredit Corp. By: ---------------------------------- Michael R. Barrington Vice Chairman, President and Chief Operating Officer EMPLOYEE By: ---------------------------------- Michael T. Miller -9- EX-11.1 9 EXHIBIT 11.1 EXHIBIT 11.1 AMERICREDIT CORP. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (dollars in thousands, except per share amounts) Years Ended June 30, -------------------------------- 1997 1996 1995 ---- ---- ---- PRIMARY: Average common shares outstanding 28,887,362 28,524,571 28,730,151 Common share equivalents resulting from assumed exercise of stock options and warrants 1,895,109 1,678,727 1,650,598 ---------- ---------- ---------- Average common shares and share equivalents outstanding 30,782,471 30,203,298 30,380,749 ---------- ---------- ---------- ---------- ---------- ---------- FULLY DILUTED: Average common shares outstanding 28,887,362 28,524,571 28,730,151 Common share equivalents resulting from assumed exercise of stock options and warrants 2,219,201 1,881,793 2,405,317 ---------- ---------- ---------- Average common shares and share equivalents outstanding 31,106,563 30,406,364 31,135,468 ---------- ---------- ---------- ---------- ---------- ---------- NET INCOME $ 38,699 $ 21,591 $ 28,893 ------ ------ ------ ------ ------ ------ EARNINGS PER SHARE Primary $ 1.26 $ .71 $ .95 ---- --- --- ---- --- --- Fully Diluted $ 1.24 $ .71 $ .93 ---- --- --- ---- --- --- 46 Primary earnings per share has been computed by dividing net income by the average common shares and share equivalents outstanding. Common share equivalents were computed using the treasury stock method. The average common stock market price for the period was used to determine the number of common share equivalents. Fully diluted earnings per share has been computed in the same manner as primary earnings per share except that the higher of the average or end of period common stock market price was used to determine the number of common share equivalents. 47 EX-12.1 10 EXHIBIT 12.1 EXHIBIT 12.1 AMERICREDIT CORP. STATEMENT RE COMPUTATION OF RATIOS (dollars in thousands) Years Ended June 30, ----------------------------------- 1997 1996 1995 ------- ------- ------- COMPUTATION OF EARNINGS: Income before income taxes $62,925 $34,256 $10,018 Interest expense (none capitalized) 16,312 13,129 4,015 ------- ------- ------- $79,237 $47,385 $14,033 ------- ------- ------- ------- ------- ------- COMPUTATION OF FIXED CHARGES: Interest expenses $16,312 $13,129 $ 4,015 ------- ------- ------- Total fixed charges $16,312 $13,129 $ 4,015 ------- ------- ------- ------- ------- ------- RATIO OF EARNINGS TO FIXED CHARGES 4.9x 3.6x 3.5x ------- ------- ------- ------- ------- ------- 48 EX-13.1 11 EXHIBIT 13.1 CORPORATE PROFILE AmeriCredit Corp. is a national consumer finance company specializing in purchasing, securitizing and servicing automobile loans and originating and selling home equity loans. The Company is headquartered in Fort Worth, Texas, and its common shares are traded on the New York Stock Exchange. Through its AmeriCredit Financial Services branch network, the Company purchases loans made by franchised and select independent dealers to consumers buying late model used, and to a lesser extent, new automobiles. The Company targets borrowers who are typically unable to obtain financing from traditional sources. Funding for the Company's auto lending activities is obtained primarily through the sale of loans in securitization transactions. The Company services its automobile loan portfolio at regional centers, using automated loan servicing and collection systems. The Company's AmeriCredit Mortgage Services operation originates home equity loans and sells the loans and related servicing rights in the wholesale markets. 1 LETTER TO SHAREHOLDERS AmeriCredit Corp. posted record operating results and strong receivables growth, while maintaining stable credit quality in the fiscal year ended June 30, 1997. Our successful performance in fiscal 1997 was the cumulative result of the disciplines and strategies we adopted and have adhered to over the last five years. Development of empirical models, such as credit scorecards, application of leading edge technology and maintenance of a solid infrastructure staffed by skilled people have differentiated AmeriCredit and allowed us to prosper in a very competitive environment. With further plans to strengthen these core competencies, AmeriCredit remains well positioned to capture an increasing share of the growing sub-prime auto finance market. FISCAL 1997 RESULTS AmeriCredit earned a record $38.7 million in fiscal 1997, an increase of 79% over net income of $21.6 million for fiscal 1996. On a per share basis, the Company earned $1.26 for fiscal 1997, up 77% over earnings per share of $0.71 last year. These record operating results were driven by strong portfolio growth and our risk management efforts. RECEIVABLES GROWTH AmeriCredit attained growth of 117% in managed auto receivables for fiscal 1997, increasing the portfolio to $1,138.3 million at June 30, 1997 from $524.0 million at June 30, 1996. We purchased $906.8 million of new loans in fiscal 1997, up 110% compared to loan originations of $432.4 million for fiscal 1996. Our loan volumes benefited from new branch openings in fiscal 1997 as well as higher average new loan production from existing branch locations. We recently concluded our annual dealer marketing survey which is conducted by an independent marketing research firm. The current survey indicates that automobile dealers continue to place the highest values on price, service and consistency when selecting a sub-prime finance source. Our ratings in each of these crucial categories improved from the last round of research with dealers increasingly citing AmeriCredit as one of the best in consistency of approvals and declines, immediate response times and competitive programs. Our ability to increase our dealer base supports these findings as AmeriCredit purchased loans from 5,657 dealers in fiscal 1997, up 73% from 3,262 dealers last year. Most importantly, 85% of the automobile dealers surveyed expect to increase their volume of sub-prime finance activity over the next two years and over half expect to do more business with AmeriCredit. 2 BRANCH EXPANSION AmeriCredit opened 34 branches in fiscal 1997, and at June 30, 1997, had a total of 85 auto lending offices located in 30 states. We were doing business in 45 states at fiscal year end. We are comfortable opening 40 new branches in fiscal 1998 based on the success of our previous expansion efforts and demonstrated ability to attract, develop and retain quality personnel. Our largest source of new branch managers is now promotions from within AmeriCredit, attesting to the effectiveness of our training programs. Additionally, our infrastructure has again been augmented to accommodate growth. We recently relocated our Fort Worth customer service center to a larger site and opened a third facility in Charlotte. These customer service centers, along with our Tempe location, provide adequate capacity to handle our expected portfolio growth through fiscal 1998. RISK MANAGEMENT AND PORTFOLIO PERFORMANCE New account credit scoring used in conjunction with risk based pricing models are key components of our credit origination process. While these tools have proven to be very effective, it is the development and integration of a comprehensive risk management effort that makes AmeriCredit unique in the sub-prime auto finance sector. Detailed information reporting, proprietary data bases, behavioral scorecards, residual value monitoring and static pool analysis are among the wide array of risk management techniques we employ. It is the execution of all of these strategies that have enabled AmeriCredit to report favorable portfolio performance. Net charge-offs represented 5.5% of average managed auto receivables for fiscal 1997, down from net charge-offs of 5.6% of the average portfolio for fiscal 1996. In fact, our annualized net charge-off rate for each quarter of fiscal 1997 was 5.5%. Accounts more than sixty days past due were 3.2% of the portfolio at June 30, 1997, compared to 3.1% at June 30, 1996. Even with the success of our current risk management platform, we are constantly striving to improve our tools. During fiscal 1997, we implemented an additional scorecard for accounts with limited credit bureau history in order to minimize risk associated with that segment of the applicant population. Additionally, we recently completed another scorecard aimed at identifying accounts with high bankruptcy potential. As the size and diversity of our portfolio increases, we plan to develop further enhancements in our credit scoring models. 3 TECHNOLOGY AND EFFICIENCY Our extensive use of technology and scale of operations have enabled AmeriCredit to be a low cost provider in our markets. AmeriCredit's ratio of operating expenses to average managed auto receivables decreased to 6.2% for fiscal 1997 from 7.2% for fiscal 1996. We expect this ratio to decrease further as we benefit from continued portfolio growth and new systems developments planned for fiscal 1998. We are midway through a two year project to implement Fair Isaac & Co., Inc.'s Triad Account Management System. Once integrated into our automated collection system, Triad will facilitate multiple collection strategies based on behavioral assessment at the account level. In addition, vendor selection is currently being finalized for a new automated application processing system to replace our existing version. AmeriCredit is committed to remaining at the forefront of consumer finance technology. DIVERSIFICATION In November 1996, AmeriCredit acquired a small home equity lender in exchange for 400,000 shares of our common stock. This acquisition provides us an entry into another lending business similar in market size and potential returns to auto finance. Our current focus is on building infrastructure and risk management capabilities, a process which could take the better part of fiscal 1998. We do not plan to expand this business until the appropriate people, processes and systems are in place. FINANCE ACTIVITY AmeriCredit's growth creates the need for additional capital from both existing and new sources. We continued to access the securitization market as our primary source of capital in fiscal 1997, raising $850 million in four transactions. Investor recognition of AmeriCredit as a quality issuer of asset-backed securities and larger transaction sizes have resulted in reduced overall funding costs for the Company. Early in fiscal 1997, we expanded our bank line of credit, which we use to warehouse auto receivables pending securitization, to $240 million. We plan to renew this facility in fiscal 1998 and implement additional warehouse capacity through participation in the asset-backed commercial paper market. Finally, we issued $125 million of senior unsecured notes in February 1997 to supplement our strong equity capitalization. These notes, which are rated by three of the major credit rating agencies, bear interest at 9 1/4% per year and are due in 2004. 4 OUTLOOK AmeriCredit's prospects for fiscal 1998 and beyond are bright. The auto finance sector in which we compete is still large and highly fragmented and offers attractive fundamentals. Several factors are driving strong growth in our industry. Used car demand is being positively influenced by better product quality and availability and the inability of many consumers to afford a new car. In addition, more Americans are becoming sub-prime credit applicants as overall consumer delinquencies and bankruptcies rise. The competitive environment for sub-prime auto finance has also improved. Many of our competitors have been weakened by deteriorating credit quality and finances, encouraging dealers to seek consistent, stable lenders. AmeriCredit has the ability to capitalize on these dynamics and become the dominant player in sub-prime auto finance. We are grateful for the interest, support and loyalty of all of our employees, customers and shareholders. Sincerely, Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer September 12, 1997 5 AMERICREDIT CORP. SUMMARY FINANCIAL AND OPERATING INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Years Ended ------------------------------------------------------------------------ June 30, June 30, June 30, June 30, June 30, 1997 1996 1995 (a) 1994 1993 (b) ---- ---- ---- ---- ---- OPERATING DATA: Finance charge income $ 44,910 $ 51,706 $ 30,249 $ 12,788 $ 13,904 Gain on sale of receivables 67,256 22,873 Servicing fee income 21,024 3,712 Income (loss) before income taxes 62,925 34,256 10,018 5,065 (19,366) Net income (loss) 38,699 21,591 28,893 5,065 (19,366) Earnings (loss) per share 1.26 .71 .95 .16 (.66) Weighted average shares and share equivalents 30,782,471 30,203,298 30,380,749 31,818,083 29,267,419 June 30, June 30, June 30, June 30, June 30, 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- BALANCE SHEET DATA: Cash and cash equivalents and investment securities $ 80,422 $ 24,007 $ 33,586 $ 42,262 $ 68,425 Finance receivables, net 266,657 250,484 221,888 72,150 43,889 Excess servicing receivable 114,376 33,093 Total assets 493,453 330,159 285,725 122,215 131,127 Total liabilities 276,917 166,934 138,499 2,714 8,343 Shareholders' equity 216,536 163,225 147,226 119,501 122,784 Managed auto receivables 1,138,255 523,981 240,491 67,636 15,964
(a) As further described in the Financial Review, the Company recognized an income tax benefit in fiscal 1995 equal to the expected future tax savings from using its net operating loss carryforward and other future tax benefits. (b) The Company withdrew from the retail used car sales business effective December 31, 1992. 6 AMERICREDIT LOCATIONS (as of June 30, 1997) State City - ----- ---- AUTOMOBILE FINANCE BRANCHES: Arizona Phoenix, Tucson California San Francisco, Los Angeles, Concord, Sacramento, Pasadena, Irvine, San Diego, Encino, Stockton, Riverside, San Jose, Fresno Colorado Colorado Springs, Denver Florida Fort Lauderdale, Orlando, Jacksonville, Tampa Georgia Atlanta (3) Illinois Chicago (4), Springfield Indiana Indianapolis Kentucky Louisville Maryland Baltimore (2) Massachusetts Boston Michigan Detroit (2), Grand Rapids Minnesota Minneapolis Missouri Kansas City, St. Louis (2) Nevada Las Vegas New Jersey Somerset, Tinton Falls, Marlton, Paramus New Mexico Albuquerque New York Albany, White Plains, Rochester, Buffalo, Syracuse North Carolina Raleigh, Winston-Salem, Charlotte Ohio Cleveland, Akron, Dayton, Cincinnati, Columbus Oklahoma Oklahoma City Oregon Portland Pennsylvania Pittsburgh, Allentown, Harrisburg, Philadelphia Rhode Island Providence South Carolina Columbia, Charleston Tennessee Nashville, Memphis Texas Austin, Houston (2), San Antonio, Dallas, Fort Worth Utah Salt Lake City Virginia Norfolk, Fredericksburg, Richmond, Arlington, Newport News Washington Seattle, Tacoma Wisconsin Milwaukee AUTOMOBILE LOAN SERVICING CENTERS: Arizona Tempe Texas Fort Worth HOME EQUITY LENDING: California Orange 7 FINANCIAL REVIEW GENERAL The Company generates earnings and cash flow primarily through the purchase, securitization and servicing of auto receivables. The Company purchases auto finance contracts from franchised and select independent automobile dealerships. To fund the acquisition of receivables prior to securitization, the Company utilizes borrowings under its bank line of credit. The Company generates finance charge income on its receivables pending securitization ("owned receivables") and pays interest expense on borrowings under the line of credit. The Company sells receivables to securitization trusts ("Trusts") or special purpose finance subsidiaries that, in turn sell asset-backed securities to investors. By securitizing its receivables, the Company is able to lock in the gross interest rate spread between the yield on such receivables and the interest rate payable on the asset-backed securities. The Company recognizes a gain on the sale of receivables to the Trusts which represents the difference between the sale proceeds to the Company, net of transaction costs, and the Company's net carrying value of the receivables, plus the present value of the estimated future excess cash flows to be received by the Company over the life of the securitization. Excess cash flows result from the difference between the interest received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses. The Company typically begins to receive excess cash flow distributions approximately seven to nine months after the receivables are securitized, although these time periods may be shorter or longer depending upon the structure of the securitization. Prior to such time as the Company begins to receive excess cash flow, excess cash flow is utilized to fund credit enhancement requirements to secure financial guaranty insurance policies issued by an insurance company to protect investors in the asset-backed securities from losses. Once predetermined credit enhancement requirements are reached and maintained, excess cash flow is distributed to the Company. In addition to excess cash flow, the Company earns monthly servicing fee income of between 2.25% and 2.50% per annum of the outstanding principal balance of receivables securitized ("serviced receivables"). In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS", formerly Rancho Vista Mortgage Company), which originates and sells home equity loans. The acquisition was accounted for as a purchase and the results of operations for AMS have been included in the consolidated financial statements since the acquisition date. Receivables originated in this business are referred to as mortgage receivables. Such receivables are generally packaged 8 and sold for cash on a servicing released, whole-loan basis. The Company recognizes a gain at the time of sale. While the Company has been primarily involved in the above activities since September 1992, the Company had previously operated in other businesses. For purposes of the following discussion, receivables originated in businesses formerly operated by the Company are referred to as other receivables and revenue earned therein is referred to as other finance charge income. RESULTS OF OPERATIONS YEAR ENDED JUNE 30, 1997 AS COMPARED TO YEAR ENDED JUNE 30, 1996 REVENUE: The Company's average managed receivables outstanding consisted of the following (in thousands): Years Ended June 30, ----------------------------- 1997 1996 ---- ---- Auto: Owned $223,351 $261,776 Serviced 568,804 96,190 -------- -------- 792,155 357,966 Mortgage 8,187 Other 443 -------- -------- $800,342 $358,409 -------- -------- -------- -------- Average managed receivables outstanding increased by 123% as a result of higher loan purchase volume. The Company purchased $906.8 million of auto loans during fiscal 1997, compared to purchases of $432.4 million during fiscal 1996. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 85 auto lending branch offices as of June 30, 1997, compared to 51 as of June 30, 1996. The Company purchased $53.8 million of mortgage loans from the date of acquisition of AMS through June 30, 1997. 9 Finance charge income consisted of the following (in thousands): Years Ended June 30, --------------------------- 1997 1996 ---- ---- Auto $ 44,417 $ 51,679 Mortgage 493 Other 27 -------- -------- $ 44,910 $ 51,706 -------- -------- -------- -------- The decrease in finance charge income is due to a reduction of 15% in average owned auto receivables outstanding for fiscal 1997 versus fiscal 1996. Prior to December 1995, all of the auto finance contracts purchased by the Company were held as owned auto receivables on the Company's consolidated balance sheets. The Company began selling auto receivables to the Trusts in December 1995, reducing average owned receivables with corresponding increases in average serviced receivables. The Company's effective yield on its owned auto receivables increased to 19.9% for fiscal 1997 from 19.7% for fiscal 1996. The gain on sale of receivables consisted of the following (in thousands): Years Ended June 30, --------------------------- 1997 1996 ---- ---- Auto $ 64,338 $ 22,873 Mortgage 2,918 -------- -------- $ 67,256 $ 22,873 -------- -------- -------- -------- The increase in gain on sale of auto receivables resulted from the sale of $817.5 million of receivables in fiscal 1997 as compared to $270.4 million of receivables sold in fiscal 1996. The gains amounted to 7.9% and 8.5% of the sales proceeds for fiscal 1997 and 1996, respectively. The gain on sale of mortgage receivables resulted from the sale of $52.5 million of mortgage receivables. Servicing fee income increased to $21.0 million or 3.7% of average serviced auto receivables, for fiscal 1997, as compared to $3.7 million or 3.9% of average serviced auto receivables, for fiscal 1996. Servicing fee income 10 represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the auto receivables sold to the Trusts. The growth in servicing fee income is primarily due to the increase in average serviced auto receivables outstanding for fiscal 1997 compared to fiscal 1996. Investment income rose to $2.9 million for fiscal 1997 from $1.1 million for fiscal 1996 primarily as a result of higher restricted cash balances. Restricted cash is used as credit enhancement for the Trusts and increases as greater amounts of receivables are sold to the Trusts. COSTS AND EXPENSES: Operating expenses as a percentage of average managed receivables outstanding decreased to 6.6% (6.2% excluding operating expenses of $2.6 million related to the mortgage business) for fiscal 1997 as compared to 7.2% for fiscal 1996. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $26.2 million, or 102%, primarily due to the addition of auto lending branch offices and management, auto loan processing and servicing staff and the recently acquired mortgage business. The provision for losses decreased to $6.6 million for fiscal 1997 from $7.9 million for fiscal 1996 due to lower average owned auto receivables outstanding. Interest expense increased to $16.3 million for fiscal 1997 from $13.1 million for fiscal 1996 due to higher debt levels and effective interest rates. Average debt outstanding was $187.6 million and $156.4 million for fiscal 1997 and 1996, respectively. The Company's effective rate of interest paid on its debt increased to 8.7% from 8.4% as a result of the issuance of the 9 1/4% Senior Notes in February 1997. The Company's effective income tax rate increased to 38.5% for fiscal 1997 from 37.0% for fiscal 1996 due to a larger portion of the Company's income being generated in states which have higher tax rates. 11 YEAR ENDED JUNE 30, 1996 AS COMPARED TO YEAR ENDED JUNE 30, 1995 REVENUE: The Company's average managed receivables outstanding consisted of the following (in thousands): Years Ended June 30, ------------------------------ 1996 1995 -------- -------- Auto: Owned $261,776 $141,526 Serviced 96,190 -------- -------- 357,966 141,526 Other 443 6,918 -------- -------- $358,409 $148,444 -------- -------- -------- -------- Average managed receivables outstanding increased by 141% as a result of higher loan purchase volume. The Company purchased $432.4 million of auto loans during fiscal 1996, compared to purchases of $230.2 million during fiscal 1995. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 51 auto lending branch offices as of June 30, 1996, compared to 31 as of June 30, 1995. Finance charge income consisted of the following (in thousands): Years Ended June 30, ----------------------------- 1996 1995 ------- ------- Auto $51,679 $29,039 Other 27 1,210 ------- ------- $51,706 $30,249 ------- ------- ------- ------- The rise in finance charge income is due to an increase of 85% in average owned auto receivables outstanding for fiscal 1996 versus fiscal 1995. The Company's effective yield on its owned auto receivables decreased to 19.7% from 20.5%. The gain on sale of receivables of $22.9 million in fiscal 1996 resulted from the sale of $270.4 million of auto receivables to the Trusts. The gain amounted to 8.5% of the sales proceeds. The Company's asset-backed securities transactions in fiscal 1995 were structured as debt issuances by subsidiaries of the Company and thus were accounted for as borrowings on the Company's consolidated balance sheets rather than as sales of receivables. 12 Servicing fee income of $3.7 million in fiscal 1996 represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the auto receivables sold to the Trusts. COSTS AND EXPENSES: Operating expenses as a percentage of average managed receivables outstanding decreased to 7.2% for fiscal 1996 as compared to 10.0% for fiscal 1995. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $10.9 million, or 74%, primarily due to the addition of auto lending branch offices and management and auto loan processing and servicing staff. The provision for losses increased to $7.9 million for fiscal 1996 from $4.3 million for fiscal 1995 due to higher average owned auto receivables outstanding. Interest expense increased to $13.1 million for fiscal 1996 from $4.0 million for fiscal 1995 due to the higher debt levels necessary to fund the Company's increased loan origination volume. The provision for income taxes in fiscal 1996 resulted primarily from amortization of the Company's deferred tax asset at the federal statutory income tax rate. In the fourth quarter of fiscal 1995, the Company recognized an income tax benefit and a corresponding deferred tax asset equal to the expected future tax savings from using its net operating loss carryforward and other future tax benefits. The deferred tax asset is amortized through a non-cash income tax provision against the Company's earnings as the net operating loss carryforward and other future tax benefits are utilized. Prior to the fourth quarter of fiscal 1995, the Company had offset the deferred tax asset with a valuation allowance. Accordingly, there was no provision for federal income taxes in fiscal 1995. FINANCE RECEIVABLES The Company provides financing in relatively high-risk markets, and therefore, charge-offs are anticipated. The Company records a periodic provision for losses as a charge to operations and a related allowance for losses in the consolidated balance sheets as a reserve against estimated future losses in the owned auto receivables portfolio. The Company typically purchases individual finance contracts for a non-refundable acquisition fee on a non-recourse basis. Such acquisition fees are also recorded in the consolidated balance sheets as an allowance for losses. When the Company sells auto receivables to the Trusts, the calculation of the gain on sale of receivables is reduced by an 13 estimate of future credit losses over the expected life of the auto receivables sold. The Company sells mortgage receivables for cash on a servicing released, whole- loan basis. Such receivables are generally held by the Company for less than 90 days. Accordingly, no allowance for losses has been provided by the Company for the mortgage receivables. The Company reviews static pool origination and charge-off relationships, charge-off experience factors, collection data, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends and other information in order to make the necessary judgments as to the appropriateness of the provisions for losses and the allowance for losses. Although the Company uses many resources to assess the adequacy of the allowance for losses, there is no precise method for accurately estimating the ultimate losses in the receivables portfolio. 14 The following table presents certain data related to the receivables portfolio (dollars in thousands): June 30, 1997 -------------------------------------------------------- Balance Auto Sheet Auto Managed Owned Mortgage Total Serviced Portfolio -------- -------- -------- -------- ---------- Principal amount of receivables $275,249 $ 4,354 $279,603 $863,006 $1,138,255 (2) -------- ---------- -------- ---------- Allowance for losses (12,946) (12,946) $(74,925)(1) $ (87,871)(2) -------- ------- -------- -------- ---------- -------- ---------- Finance receivables, net $262,303 $ 4,354 $266,657 -------- ------- -------- -------- ------- -------- Number of outstanding contracts 25,757 48 87,090 112,847 (2) -------- ------- -------- ---------- -------- ------- -------- ---------- Average amount of outstanding contract (principal amount) (in dollars) $ 10,686 $90,708 $ 9,909 $ 10,087 (2) -------- ------- -------- ---------- -------- ------- -------- ---------- Allowance for losses as a percentage of receivables 4.7% 8.7% 7.7%(2) -------- -------- ---------- -------- -------- ----------
June 30, 1996 ----------------------------------- Auto Auto Managed Owned Serviced Portfolio -------- -------- --------- Principal amount of receivables $264,086 $259,895 $523,981 -------- -------- -------- -------- Allowance for losses (13,602) $(25,616)(1) $(39,218) -------- -------- -------- -------- -------- Finance receivables, net $250,484 -------- -------- Number of outstanding contracts 30,366 29,547 59,913 -------- -------- -------- -------- -------- -------- Average amount of outstanding contract (principal amount) (in dollars) $ 8,697 $ 8,796 $ 8,746 -------- -------- -------- -------- -------- -------- Allowance for losses as a percentage of receivables 5.2% 9.9% 7.5% -------- -------- -------- -------- -------- --------
(1) The allowance for losses related to serviced auto receivables is netted against excess servicing receivable in the Company's consolidated balance sheets. (2) Includes auto receivables only. 15 The following is a summary of managed auto receivables which are (i) more than 60 days delinquent, but not yet in repossession, and (ii) in repossession (dollars in thousands): June 30, June 30, 1997 1996 -------- ------- Delinquent contracts $ 36,421 $16,207 Delinquent contracts as a percentage of managed auto receivables 3.2% 3.1% Contracts in repossession $ 14,471 $ 6,751 Contracts in repossession as a percentage of managed auto receivables 1.3% 1.3% The following table presents charge-off data with respect to the Company's managed auto receivables portfolio (dollars in thousands): Years Ended June 30, ---------------------------- 1997 1996 1995 ------- ------- ------ Net charge-offs: Owned $16,965 $18,322 $6,409 Serviced 26,266 1,652 ------- ------- ------ $43,231 $19,974 $6,409 ------- ------- ------ ------- ------- ------ Net charge-offs as a percentage of average managed auto receivables outstanding 5.5% 5.6% 4.5% ------- ------- ------ ------- ------- ------ The Company began its indirect automobile finance business in September 1992 and has grown its managed auto receivables portfolio to $1.1 billion as of June 30, 1997. The Company expects that its delinquency and charge-offs will increase over time as the portfolio matures and its portfolio growth rate moderates. Accordingly, the delinquency and charge-off data above is not necessarily indicative of delinquency and charge-off experience that could be expected for a more seasoned portfolio. 16 LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands): Years Ended June 30, ---------------------------------- 1997 1996 1995 --------- -------- --------- Operating activities $ 66,132 $ 34,897 $ 14,637 Investing activities (123,076) (63,116) (144,512) Financing activities 60,826 12,050 132,433 --------- -------- --------- Net increase (decrease) in cash and cash equivalents $ 3,882 $(16,169) $ 2,558 --------- -------- --------- --------- -------- --------- The Company's primary sources of cash have been collections and recoveries on its receivables portfolio, borrowings under its bank line of credit, sales of auto receivables to Trusts in securitization transactions, excess cash flow distributions from the Trusts and the issuance of its 9 1/4% Senior Notes. The Company's line of credit arrangement with a group of banks provides for borrowings up to $240 million, subject to a defined borrowing base. The Company utilizes the line of credit to fund its auto lending activities and daily operations. The facility matures in October 1997. A total of $71.7 million was outstanding under the line of credit as of June 30, 1997. The Company also has a mortgage warehouse facility with a bank under which the Company may borrow up to $75 million, subject to a defined borrowing base, to fund home equity loan originations. The facility expires in February 1998. A total of $345,000 was outstanding under the mortgage warehouse facility as of June 30, 1997. The Company has completed nine auto receivables securitization transactions through June 30, 1997. The proceeds from the transactions were used in each case to repay a portion of the borrowings then outstanding under the Company's bank line of credit. 17 A summary of these transactions is as follows: Original Balance at Amount June 30, 1997 Accounting Transaction Date (in millions) (in millions) Treatment - ----------- ---- ------------ ------------- ---------- 1994-A December 1994 $ 51.0 $ 0 Borrowing 1995-A June 1995 99.2 23.7 Borrowing 1995-B December 1995 65.0 25.0 Sale 1996-A March 1996 89.4 44.7 Sale 1996-B May 1996 115.9 72.7 Sale 1996-C August 1996 175.0 116.3 Sale 1996-D November 1996 200.0 159.0 Sale 1997-A March 1997 225.0 208.2 Sale 1997-B May 1997 250.0 245.5 Sale -------- ------ $1,270.5 $895.1 -------- ------ -------- ------
In February 1997, the Company issued $125 million of 9 1/4% Senior Notes which are due in February 2004. Interest on the notes is payable semi-annually, commencing in August 1997. The notes, which are unsecured, may be redeemed at the option of the Company after February 2001 at a premium declining to par in February 2003. The Company's primary use of cash has been purchases and originations of receivables. The Company purchased $906.8 million of auto finance contracts during fiscal 1997 requiring cash of $896.7 million, net of acquisition fees and other items. The Company operated 85 auto lending branch offices as of June 30, 1997 and plans to open forty additional branches in fiscal 1998. The Company may also expand loan production capacity at existing offices where appropriate. While the Company has been able to establish and grow its auto finance business thus far, there can be no assurance that future expansion will be successful due to competitive, regulatory, market, economic or other factors. The Company's Board of Directors has authorized the repurchase of up to 6,000,000 shares of the Company's common stock. A total 4,594,700 shares at an aggregate purchase price of $27.4 million had been purchased pursuant to this program through June 30, 1997. Certain restrictions contained in the Indenture pursuant to which the 9 1/4% Senior Notes were issued limit the amount of common stock which may be repurchased. As of June 30, 1997, the Company had $12.5 million in cash and cash equivalents and investment securities. The Company also had available borrowing capacity of $110.7 million under its bank line of credit pursuant to the borrowing base requirement of such credit agreement. The Company estimates that it will require additional external capital for fiscal 1998 in addition to these existing capital resources and collections and recoveries on its receivables 18 portfolio and excess cash flow distributions from the Trusts in order to fund expansion of its lending activities, capital expenditures, and other costs and expenses. The Company anticipates that such funding will be in the form of additional securitization transactions, renewal of its bank line of credit, the implementation of other warehouse financing facilities and the incurrence of other debt. There can be no assurance that funding will be available to the Company through these sources, or if available, that it will be on terms acceptable to the Company. Since the Company's funding strategy is dependent upon the issuance of interest- bearing securities and the incurrence of debt, fluctuations in interest rates impact the Company's profitability. The Company utilizes several strategies to minimize the risk of interest rate fluctuations including the use of hedging instruments, the regular sale of auto receivables to the Trusts and pre-funding securitizations, whereby the amount of asset-backed securities issued in a securitization exceeds the amount of receivables initially sold to a Trust. The proceeds from the pre-funded portion are held in an escrow account until the Company sells additional receivables to the Trust in amounts up to the balance of the pre-funded escrow account. In pre-funded securitizations, the Company locks in the borrowing costs with respect to the loans it subsequently delivers to the Trust. However, the Company incurs an expense in pre-funded securitizations equal to the difference between the money market yields earned on the proceeds held in escrow prior to subsequent delivery of receivables and the interest rate paid on the asset-backed securities outstanding. There can be no assurance that these strategies will be effective in minimizing interest rate risk or that increases in interest rates will not have an adverse effect on the Company's profitability. 19 AMERICREDIT CORP. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) ASSETS June 30, June 30, 1997 1996 --------- --------- Cash and cash equivalents $ 6,027 $ 2,145 Investment securities 6,500 6,558 Finance receivables, net 266,657 250,484 Excess servicing receivable 114,376 33,093 Restricted cash 67,895 15,304 Property and equipment, net 13,884 7,670 Goodwill 7,260 Other assets 10,854 4,910 Deferred income taxes 9,995 -------- -------- Total assets $493,453 $330,159 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit $ 71,700 $ 86,000 Mortgage warehouse facility 345 Automobile receivables-backed notes 23,689 67,847 9 1/4% Senior Notes 125,000 Notes payable 3,517 418 Accrued taxes and expenses 39,362 12,669 Deferred income taxes 13,304 -------- -------- Total liabilities 276,917 166,934 -------- -------- Commitments and contingencies (Note 8) Shareholders' equity: Preferred stock, $.01 par value per share, 20,000,000 shares authorized; none issued Common stock, $.01 par value per share, 120,000,000 shares authorized; 33,255,173 and 32,640,963 shares issued 333 326 Additional paid-in capital 203,544 190,005 Unrealized gain on excess servicing receivable, net of income taxes 2,954 Retained earnings (deficit) 33,466 (5,233) -------- -------- 240,297 185,098 Treasury stock, at cost (3,959,071 and 4,120,483 shares) (23,761) (21,873) -------- -------- Total shareholders' equity 216,536 163,225 -------- -------- Total liabilities and shareholders' equity $493,453 $330,159 -------- -------- -------- -------- The accompanying notes are an integral part of these consolidated financial statements 20 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Years Ended ---------------------------------- June 30, June 30, June 30, 1997 1996 1995 --------- --------- -------- Revenue: Finance charge income $ 44,910 $ 51,706 $ 30,249 Gain on sale of receivables 67,256 22,873 Servicing fee income 21,024 3,712 Investment income 2,909 1,075 1,284 Other income 1,648 1,612 1,551 -------- -------- -------- 137,747 80,978 33,084 -------- -------- -------- Costs and expenses: Operating expenses 51,915 25,681 14,773 Provision for losses 6,595 7,912 4,278 Interest expense 16,312 13,129 4,015 -------- -------- -------- 74,822 46,722 23,066 -------- -------- -------- Income before income taxes 62,925 34,256 10,018 Income tax provision (benefit) 24,226 12,665 (18,875) -------- -------- -------- Net income $ 38,699 $ 21,591 $ 28,893 -------- -------- -------- -------- -------- -------- Earnings per share $ 1.26 $ .71 $ .95 -------- -------- -------- -------- -------- -------- Weighted average shares and share equivalents 30,782,471 30,203,298 30,380,749 ---------- ---------- ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these consolidated financial statements 21 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS) Common Stock Additional Retained Treasury Stock ------------------ Paid-in Unrealized Earnings -------------- Shares Amount Capital Gain (Deficit) Shares Amount ------ ------ --------- -------- --------- ------ ------ Balance at July 1, 1994 31,757,333 $ 318 $ 183,588 $(55,717) 3,008,360 $ (8,688) Common stock issued on exercise of options 359,868 3 1,302 Income tax benefit from exercise of options 683 Purchase of treasury stock 433,200 (3,412) Common stock issued for employee benefit plans (41,521) 256 Net income 28,893 ---------- ------ --------- ------ -------- --------- --------- Balance at June 30, 1995 32,117,201 321 185,573 (26,824) 3,400,039 (11,844) Common stock issued on exercise of options 523,762 5 3,045 Income tax benefit from exercise of options 1,387 Purchase of treasury stock 829,000 (10,710) Common stock issued for employee benefit plans (108,556) 681 Net income 21,591 ---------- ------ --------- ------ -------- --------- --------- Balance at June 30, 1996 32,640,963 326 190,005 (5,233) 4,120,483 (21,873) Common stock issued on exercise of options 614,210 7 5,646 Common stock issued for acquisition 4,700 (400,000) 2,400 Income tax benefit from exercise of options 2,652 Unrealized gain on excess servicing receivable, net of income taxes of $1,848 $2,954 Purchase of treasury stock 315,200 (4,387) Common stock issued for employee benefit plans 541 (76,612) 99 Net income 38,699 ---------- ------ --------- ------ -------- --------- --------- Balance at June 30, 1997 33,255,173 $ 333 $ 203,544 $2,954 $ 33,466 3,959,071 $(23,761) ---------- ------ --------- ------ -------- --------- --------- ---------- ------ --------- ------ -------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements 22 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) Years Ended ---------------------------------------- June 30, June 30, June 30, 1997 1996 1995 --------- --------- ---------- Cash flows from operating activities: Net income $ 38,699 $ 21,591 $ 28,893 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,203 1,528 1,317 Provision for losses 6,595 7,912 4,278 Deferred income taxes 24,428 11,681 (18,954) Gain on sale of auto receivables (64,338) (22,873) Amortization of excess servicing receivable 34,393 6,636 Changes in assets and liabilities: Other assets (2,341) (984) (1,834) Accrued taxes and expenses 26,493 9,406 937 --------- --------- --------- Net cash provided by operating activities 66,132 34,897 14,637 --------- --------- --------- Cash flows from investing activities: Purchases of auto receivables (896,711) (417,235) (225,350) Originations of mortgage receivables (53,770) Principal collections and recoveries on receivables 64,389 94,948 71,334 Net proceeds from sale of auto receivables 767,571 268,923 Net proceeds from sale of mortgage receivables 52,489 Purchases of property and equipment (4,511) (3,162) (1,730) Proceeds from sales and maturities of investment securities 58 3,707 16,241 Increase in restricted cash (52,591) (10,297) (5,007) --------- --------- --------- Net cash used by investing activities (123,076) (63,116) (144,512) --------- --------- --------- Cash flows from financing activities: Borrowings on bank line of credit 745,500 342,600 83,900 Payments on bank line of credit (759,800) (256,600) (83,900) Net increase in mortgage warehouse facility (2,964) Proceeds from issuance of 9 1/4% Senior Notes 120,894 Proceeds from issuance of automobile receivables-backed notes 150,170 Payments on automobile receivables-backed notes (44,158) (66,673) (15,650) Payments on notes payable (552) (298) (236) Proceeds from issuance of common stock 6,293 3,731 1,561 Purchase of treasury stock (4,387) (10,710) (3,412) --------- --------- --------- Net cash provided by financing activities 60,826 12,050 132,433 --------- --------- --------- Net increase (decrease) in cash and cash equivalents 3,882 (16,169) 2,558 Cash and cash equivalents at beginning of year 2,145 18,314 15,756 --------- --------- --------- Cash and cash equivalents at end of year $ 6,027 $ 2,145 $ 18,314 --------- --------- --------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements 23 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES HISTORY AND OPERATIONS AmeriCredit Corp. ("the Company") was formed on August 1, 1986 and, since September 1992, has been in the business of purchasing, securitizing and servicing automobile sales finance contracts. The Company operated 85 auto lending branch offices in 30 states as of June 30, 1997. The Company also acquired a subsidiary in November 1996 which originates and sells home equity loans. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and costs and expenses during the reporting periods. Actual results could differ from those estimates. These estimates include, among other things, anticipated prepayments and credit losses on finance receivables sold in securitization transactions and the determination of the allowance for losses on finance receivables. CASH EQUIVALENTS Investments in highly liquid securities with original maturities of 90 days or less are included in cash and cash equivalents. INVESTMENT SECURITIES Investment securities are classified as held-to-maturity and are carried at amortized cost. 24 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FINANCE RECEIVABLES Finance charge income related to finance receivables is recognized using the interest method. Accrual of finance charge income is suspended on finance contracts which are more than 60 days delinquent. Fees and commissions received and direct costs of originating loans are deferred and amortized over the term of the related finance contracts using the interest method. Provisions for losses are charged to operations in amounts sufficient to maintain the allowance for losses at a level considered adequate to cover estimated losses in the finance receivables portfolio owned by the Company. Automobile finance sales contracts are typically purchased by the Company for a non-refundable acquisition fee on a non-recourse basis, and such acquisition fees are also added to the allowance for losses. The Company reviews historical origination and charge-off relationships, charge-off experience factors, collection data, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends and other information in order to make the necessary judgments as to the appropriateness of the provision for losses and the allowance for losses. Finance contracts are charged-off to the allowance for losses when the Company repossesses and disposes of the collateral or the account is otherwise deemed uncollectible. EXCESS SERVICING RECEIVABLE The Company periodically sells finance receivables to certain special purpose financing trusts (the "Trusts"), and the Trusts in turn issue asset-backed securities to investors. The Company retains an interest in the finance receivables sold in the form of a residual or interest-only strip and may also retain other subordinated interests in the Trusts. The residual or interest-only strips represent the present value of future excess cash flows resulting from the difference between the finance charge income received from the obligors on the finance receivables and the interest paid to the investors in the asset-backed securities, net of credit losses, servicing fees and other expenses. Upon the transfer of finance receivables to the Trusts, the Company removes the net book value of the finance receivables sold from its consolidated balance sheets and allocates such carrying value between the assets transferred and the interests retained, based upon their relative fair values at the settlement date. The difference between the sales proceeds, net of transaction costs, and the allocated basis of the assets transferred is recognized as a gain on sale of receivables. 25 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EXCESS SERVICING RECEIVABLE (CONT.) The allocated basis of the interests retained, including the residual or interest-only strip is recognized as excess servicing receivable in the Company's consolidated balance sheets. Since such asset can be contractually prepaid or otherwise settled in such a way that the holder would not recover all of its recorded investment, excess servicing receivable is classified as available for-sale and is measured at fair value. Unrealized holding gains or temporary holding losses are reported net of income tax effects as a separate component of shareholders' equity until realized. If a decline in fair value were deemed other than temporary, excess servicing receivable would be written down through a charge to operations. The fair value of excess servicing receivable is estimated by calculating the present value of the future excess cash flows related to such interests using a discount rate commensurate with the risks involved. Such calculations include estimates of future credit losses and prepayment rates for the remaining term of the finance receivables transferred to the Trusts since these factors impact the amount and timing of future excess cash flows. If future credit losses and prepayment rates exceed the Company's original estimates, excess servicing receivable would be written down through a charge to operations. Favorable credit loss and prepayment experience compared to the Company's original estimates would result in additional earnings when realized. RESTRICTED CASH A financial guaranty insurance company (the "Insurer") has provided a financial guaranty insurance policy for the benefit of the investors in each series of asset-backed securities issued by the Trusts or special purpose financing subsidiaries of the Company. In connection with the issuance of the policies, the Company was required to establish a separate cash account with a trustee for the benefit of the Insurer for each series of securities and related finance receivables pools. Monthly collections and recoveries from the pools of finance receivables in excess of required principal and interest payments on the securities and servicing fees and other expenses are either added to the restricted cash accounts or used to repay the outstanding securities on an accelerated basis, thus creating additional credit enhancement for the Insurer. When the credit enhancement levels reach specified percentages of the pools of finance receivables, excess cash flows are distributed to the Company. In the event that monthly collections and recoveries from any pool of finance receivables are insufficient to make required principal and interest payments to the investors and pay servicing fees and other expenses, any shortfall would be drawn from the restricted cash accounts. 26 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS RESTRICTED CASH (CONT.) Certain agreements with the Insurer provide that if delinquency, default and net loss ratios in the pools of finance receivables supporting the asset-backed securities exceed certain amounts, the specified levels of credit enhancement would be increased and, in certain cases, the Company would be removed as servicer of the finance receivables. PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation is generally provided on a straight-line basis over the estimated useful lives of the assets. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is included in operations. Maintenance, repairs, and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. OFF BALANCE SHEET FINANCIAL INSTRUMENTS The Company periodically enters into hedging arrangements to manage the gross interest rate spread on its securitization transactions. The Company's hedging strategies include the use of Forward U.S. Treasury Rate Lock and Interest Rate Swap Agreements. The face amount and terms of the Forward U.S. Treasury Rate Lock Agreements generally correspond to the principal amount and average maturities of finance receivables expected to be sold to the Trusts and the related securities to be issued by the Trusts. Gains or losses on these agreements are deferred and recognized as a component of the gain on sale of receivables at the time that finance receivables are transferred to the Trusts. The Interest Rate Swap Agreements are used to convert the interest rates on floating rate securities issued by the Trusts in securitization transactions to a fixed rate. The notional amount of these agreements approximates the outstanding balance of the floating rate securities. The estimated differential payments required under these agreements are recognized as a component of the gain on sale of receivables at the time that finance receivables are transferred to the Trusts. INCOME TAXES Deferred income taxes are provided in accordance with the asset and liability method of accounting for income taxes to recognize the tax effects of temporary differences between financial statement and income tax accounting. 27 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EARNINGS PER SHARE Earnings per share is based upon the weighted average number of shares outstanding during each year, adjusted for any dilutive effect of options using the treasury stock method. RECENT ACCOUNTING DEVELOPMENTS Effective January 1, 1997, the Company adopted Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125 establishes accounting and reporting standards for transfers of financial assets and applies to the Company's periodic sales of finance receivables to the Trusts. Adoption of SFAS 125, which was applied prospectively to transactions occurring subsequent to December 1996, resulted in increases of $4,802,000 in excess servicing receivable, $1,848,000 in deferred income taxes and $2,954,000 in shareholders' equity. There was no material effect on the Company's results of operations. Effective July 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and reporting standards for stock-based compensation plans such as stock purchase plans and stock options. The new standard allows companies either to continue to account for stock based employee compensation plans under existing accounting standards or adopt a fair value-based method of accounting for stock-based awards as compensation expense over the service period, which is usually the vesting period. SFAS 123 requires that if a company continues to account for stock options under existing accounting standards, pro forma net income and earnings per share information must be provided as if the new fair value approach had been adopted. The Company has elected to continue to account for stock-based employee compensation under existing accounting standards. Accordingly, no compensation expense has been recognized for options granted under stock based employee compensation plans. Had compensation expense for the Company's plans been determined using the fair value-based method under SFAS 123, pro forma net income would have been $33,217,000 and $15,224,000, and pro forma earnings per share would have been $1.08 and $0.50, for the years ended June 30, 1997 and 1996, respectively. 28 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS RECENT ACCOUNTING DEVELOPMENTS (CONT.) In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards for computing and presenting earnings per share, replacing existing accounting standards. The new standard requires dual presentation of basic and diluted earnings per share and a reconciliation between the two amounts. Basic earnings per share excludes dilution and diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997. The Company's basic earnings per share computed pursuant to the new standard would have been $1.34, $0.76 and $1.01 for the years ended June 30, 1997, 1996 and 1995, respectively. Diluted earnings per share computed pursuant to the new standard would not be materially different from earnings per share presented in the consolidated statements of income. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income and its components in a full set of financial statements. The new standard requires that all items that are required to be recognized under accounting standards as components of comprehensive income, including an amount representing total comprehensive income, be reported in a financial statement that is displayed with the same prominence as other financial statements. Pursuant to SFAS 130, the Company will be required to display total comprehensive income, including net income and changes in the unrealized gain on excess servicing receivable, in its consolidated financial statements for the year ended June 30, 1999 and thereafter. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards for the way companies report information about operating segments in annual financial statements and requires that enterprises report selected information about operating segments in interim financial reports. The new pronouncement also establishes standards for related disclosures about products and services, geographic areas and major customers. The statement is effective for financial statements for periods beginning after December 15, 1997. The disclosures required by SFAS 131 would generally not be applicable since the Company currently operates in only one reportable segment. 29 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. INVESTMENT SECURITIES The amortized cost and estimated fair value of investment securities as of June 30, 1997, by issuer type, are as follows (in thousands): Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ----------- ---------- --------- U.S. Government obligations $5,000 $ $ 75 $4,925 Mortgage-backed securities 1,500 62 1,438 ------ ------ ------- ------ $6,500 $ $ 137 $6,363 ------ ------ ------- ------ ------ ------ ------- ------ The amortized cost and estimated fair value of investment securities as of June 30, 1996, by issuer type, are as follows (in thousands): Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ----------- ---------- --------- U.S. Government obligations $5,000 $ $ 304 $4,696 Mortgage-backed securities 1,558 1,558 ------ ------ ------- ------ $6,558 $ $ 304 $6,254 ------ ------ ------- ------ ------ ------ ------- ------ The amortized cost and estimated fair value of investment securities as of June 30, 1997, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Estimated Amortized Fair Cost Value --------- ---------- Due within one year $5,000 $4,925 Mortgage-backed securities 1,500 1,438 ------ ------ $6,500 $6,363 ------ ------ ------ ------ 30 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. FINANCE RECEIVABLES Finance receivables consist of the following (in thousands): June 30, June 30, 1997 1996 ---- ---- Auto receivables $275,249 $264,086 Less allowance for losses (12,946) (13,602) -------- -------- Auto receivables, net 262,303 250,484 Mortgage receivables 4,354 -------- -------- Finance receivables, net $266,657 $250,484 -------- -------- -------- -------- Auto receivables are collateralized by vehicle titles and the Company has the right to repossess the vehicle in the event that the consumer defaults on the payment terms of the contract. Mortgage receivables are collateralized by liens on real property and the Company has the right to foreclose in the event that the consumer defaults on the payment terms of the contract. The accrual of finance charge income has been suspended on $12,704,000 and $17,339,000 of delinquent auto receivables as of June 30, 1997 and 1996, respectively. 31 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. FINANCE RECEIVABLES (CONT.) A summary of the allowance for losses is as follows (in thousands): Years Ended ------------------------------------ June 30, June 30, June 30, 1997 1996 1995 -------- -------- ------- Balance at beginning of year $ 13,602 $ 19,951 $ 9,330 Provision for losses 6,595 7,912 4,278 Acquisition fees 30,688 18,097 13,908 Allowance related to receivables sold to Trusts (20,974) (13,461) Net charge-offs-auto receivables (16,965) (18,322) (6,409) Net charge-offs-other (575) (1,156) -------- -------- ------- Balance at end of year $ 12,946 $ 13,602 $19,951 -------- -------- ------- -------- -------- ------- 4. EXCESS SERVICING RECEIVABLE As of June 30, 1997 and 1996, the Company was servicing $863,006,000 and $259,895,000, respectively, of auto receivables which have been sold to the Trusts. The components of excess servicing receivable are as follows (in thousands): June 30, June 30, 1997 1996 -------- -------- Interest only strips $ 59,933 $ 11,819 Subordinated interests: Retained asset-backed securities 12,589 21,274 Excess of auto receivables in Trusts over asset-backed securities outstanding 41,854 -------- -------- $114,376 $ 33,093 -------- -------- -------- -------- 32 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. EXCESS SERVICING RECEIVABLE (CONT.) Excess servicing receivable consists of the following (in thousands): June 30, June 30, 1997 1996 -------- -------- Estimated future excess cash flows before allowance for credit losses $200,869 $ 63,457 Allowance for credit losses (74,925) (25,616) -------- -------- Estimated future excess cash flows 125,944 37,841 Discount to present value (11,568) (4,748) -------- -------- $114,376 $ 33,093 -------- -------- -------- -------- A summary of excess servicing receivable is as follows (in thousands): Years Ended ----------------------- June 30, June 30, 1997 1996 -------- -------- Balance at beginning of year $ 33,093 Additions 110,874 $39,729 Increase in unrealized gain 4,802 Amortization (34,393) (6,636) -------- ------- Balance at end of year $114,376 $33,093 -------- ------- -------- ------- 5. ACQUISITION In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS", formerly Rancho Vista Mortgage Corporation), which originates and sells home equity loans. The purchase price of $7,434,000 consisted of 400,000 shares of the Company's common stock and assumption of certain liabilities. The acquisition has been accounted for as a purchase and the excess of the purchase price over net assets acquired was assigned to goodwill. Goodwill is being amortized over a 25 year period. The results of operations of AMS have been included in the consolidated financial statements since the acquisition date. 33 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands): June 30, June 30, 1997 1996 -------- ------- Land $ 600 $ 600 Buildings and improvements 2,319 1,973 Equipment 12,869 6,994 Furniture and fixtures 1,935 828 -------- ------- 17,723 10,395 Less accumulated depreciation and amortization (3,839) (2,725) -------- ------- $13,884 $ 7,670 -------- ------- -------- ------- 7. DEBT The Company has a revolving credit agreement with a group of banks under which the Company may borrow up to $240 million, subject to a defined borrowing base. Aggregate borrowings of $71,700,000 and $86,000,000 were outstanding as of June 30, 1997 and 1996, respectively. Borrowings under the credit agreement are collateralized by certain auto receivables and bear interest, based upon the Company's option, at either the prime rate (8.50% as of June 30, 1997) or various market London Interbank Offered Rates ("LIBOR") plus 1.25%. The Company is also required to pay an annual commitment fee equal to 1/4% of the unused portion of the credit agreement. The credit agreement, which expires in October 1997, contains various restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on the incurrence of additional debt, capital expenditures, cash dividends and repurchase of common stock. The Company also has a mortgage warehouse facility with a bank under which the Company may borrow up to $75 million, subject to a defined borrowing base. Aggregate borrowings of $345,000 were outstanding as of June 30, 1997. Borrowings under the facility are collateralized by certain mortgage receivables and bear interest, based upon the Company's option, at either the prime rate or LIBOR plus 1.25%. The Company is also required to pay an annual commitment fee equal to 1/8% of the unused portion of the facility. The facility expires in February 1998. In February 1997, the Company issued $125 million of 9 1/4% Senior Notes which are due in February 2004. Interest on the notes is payable semi-annually, commencing in August 1997. The notes, which are unsecured, may be redeemed at the option of the Company after February 2001 at a premium declining to par in February 2003. The Indenture pursuant to which the notes were issued contains 34 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. DEBT (CONT.) restrictions including limitations on the Company's ability to incur additional indebtedness other than certain secured indebtedness, pay cash dividends and repurchase common stock. Original debt issuance costs of $4,106,000 are being amortized over the term of the 9 1/4% Senior Notes and are included in other assets in the consolidated balance sheets. Automobile receivables-backed notes consist of the following (in thousands): June 30, June 30, 1997 1996 --------- -------- Series 1995-A notes, interest at 6.55%, collateralized by certain auto receivables in the principal amount of $23,589, final maturity in September 2000 $ 23,689 $ 54,176 Series 1994-A notes, paid in full in April 1997 13,671 --------- -------- $ 23,689 $ 67,847 --------- -------- --------- -------- Maturities of the automobile receivables-backed notes, based on the contractual maturities of the underlying auto receivables, for years ending June 30 are as follows (in thousands): 1998 $ 16,585 1999 6,015 2000 1,089 -------- $ 23,689 -------- -------- 35 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. COMMITMENTS AND CONTINGENCIES Branch lending offices are generally leased for terms of up to five years with certain rights to extend for additional periods. The Company also leases office space for its loan servicing facilities under leases with terms up to ten years with renewal options. Lease expense was $2,132,000, $875,000 and $422,000 for the years ended June 30, 1997, 1996 and 1995, respectively. Lease commitments for years ending June 30 are as follows (in thousands): 1998 $ 2,935 1999 2,691 2000 2,244 2001 1,897 2002 1,061 Thereafter 3,085 ------- $13,913 ------- ------- As of June 30, 1997, the Company had Forward U.S. Treasury Rate Lock Agreements to sell $200 million of U.S. Treasury Notes due May 1999 and $200 million of U.S. Treasury Notes due November 1999. The Agreements expire August 29, 1997 and November 26, 1997, respectively. Any gain or loss on these hedging positions will be recognized as a component of the gain on sale of receivables upon transfers of receivables to the Trusts subsequent to June 30, 1997. As of June 30, 1996, the Company had a Forward U.S. Treasury Rate Lock Agreement to sell $100 million of U.S. Treasury Notes which was settled in August 1996. The Company services auto receivables for its own account and for the Trusts. These contracts are with consumers residing throughout the United States, with borrowers located in Texas and California accounting for 13% and 12%, respectively, of the total managed auto receivables portfolio as of June 30, 1997. Borrowers located in Texas accounted for 18% of total managed auto receivables as of June 30, 1996. No other state accounted for more than 10% of total managed auto receivables. In the normal course of its business, the Company is named as defendant in legal proceedings. These cases include claims for alleged truth-in-lending violations, nondisclosures, misrepresentations and deceptive trade practices, among other things. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages. Two unrelated proceedings in which the Company is a defendant have been brought as putative class actions and are pending in federal district courts in Connecticut and Illinois, respectively. Classes have not been certified in either case and the 36 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. COMMITMENTS AND CONTINGENCIES (CONT.) Company has filed motions to dismiss in both cases which are presently pending. In the opinion of management, the resolution of these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. 9. STOCK OPTIONS General - ------- The Company has certain stock-based compensation plans for employees, non- employee directors and key executive officers. A total of 6,000,000 shares are authorized for grants of options under the employee plans, including 2,000,000 shares available for grants of options or other equity instruments. The exercise price of each option must equal the market price of the Company's stock on the date of grant and the maximum term of each option is ten years. The vesting period is typically four years. Option grants, vesting periods and the term of each option are determined by a committee of the Company's board of directors. A total of 2,100,000 shares are authorized for grants of options under the non- employee director plans. The exercise price of each option must equal the market price of the Company's stock on the date of grant and the maximum term of each option is ten years. Option grants, vesting periods and the term of each option are established by the terms of the plans. A total of 850,000 shares are authorized for grants of options under the key executive officer plan. The exercise price of each option under this plan is $16 per share and the term of each option is seven years. These options vest upon the earlier of seven years from the date of grant or the time that the Company's common stock trades above certain targeted price levels. The following tables present information related to the Company's stock-based compensation plans. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: Years Ended --------------------------------- June 30, June 30, June 30, 1997 1996 1995 ---- ---- ---- Expected dividends 0 0 0 Expected volatility 20% 20% 20% Risk-free interest rate 5.87% 5.87% 5.87% Expected life 5 Years 5 Years 5 Years 37 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. STOCK OPTIONS (CONT.) Employee Plans - -------------- A summary of stock option activity under the Company's employee plans is as follows (shares in thousands): Years Ended ----------------------------------------------------------- June 30, June 30, June 30, 1997 1996 1995 --------- -------- -------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ---------------- ----------------- ------------------ Outstanding at beginning of year 3,664 $ 7.22 3,410 $ 5.00 2,681 $ 4.20 Granted 1,251 15.47 672 13.59 1,080 8.20 Exercised (423) 7.91 (373) 5.22 (189) 4.27 Forfeited (116) 11.68 (45) 6.96 (162) 7.76 ----- ------ ----- ------ ----- ------ Outstanding at end of year 4,376 $ 9.35 3,664 $ 7.22 3,410 $ 5.00 ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ Options exerciseable at end of year 3,161 $ 7.77 2,811 $ 4.51 2,132 $ 4.50 ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ Weighted average fair value of options granted during year $ 4.21 $ 3.72 $ 2.24 ------ ------ ------ ------ ------ ------
A summary of options outstanding under employee plans as of June 30, 1997 is as follows (shares in thousands): Options Outstanding Options Exerciseable ------------------- --------------------- Weighted Weighted Weighted Average Years Average Average Range of Number of Remaining Exercise Number Exercise Exercise Prices Outstanding Contractual Life Price Outstanding Price - --------------- ----------- ---------------- -------- ----------- -------- $2.50 to 4.63 1,183 4.21 $ 3.44 1,113 $ 3.46 $5.50 to 9.13 1,337 7.33 7.24 1,207 7.24 $11.00 to 15.75 1,357 8.55 14.01 697 13.80 $16.38 to 18.38 499 9.49 16.93 144 16.79 ----- ----- 4,376 3,161 ----- ----- ----- -----
38 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. STOCK OPTIONS (CONT.) NON-EMPLOYEE DIRECTOR PLANS A summary of stock option activity under the Company's non-employee director plans is as follows (shares in thousands): Years Ended ------------------------------------------------------------ June 30, June 30, June 30, 1997 1996 1995 -------- -------- -------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ---------------- ---------------- ----------------- Outstanding at beginning of year 913 $ 3.60 946 $ 2.80 1,079 $ 2.80 Granted 40 18.75 40 12.88 30 6.50 Exercised (99) 2.80 (73) 2.80 (163) 2.80 --- ------ --- ------ ----- ------ Outstanding at end of year 854 $ 4.41 913 $ 3.60 946 $ 2.80 --- ------ --- ------ ----- ------ --- ------ --- ------ ----- ------ Options exerciseable at end of year 854 $ 4.41 873 $ 3.53 886 $ 2.80 --- ------ --- ------ ----- ------ --- ------ --- ------ ----- ------ Weighted average fair value of options granted during year $ 5.14 $ 3.53 $ 1.78 ------ ------ ------ ------ ------ ------
A summary of options outstanding under non-employee director plans as of June 30, 1997 is as follows (shares in thousands): Options Outstanding Options Exerciseable ------------------- -------------------- Weighted Weighted Weighted Average Years Average Average Range of Number of Remaining Exercise Number Exercise Exercise Prices Outstanding Contractual Life Price Outstanding Price - --------------- ----------- ---------------- -------- ----------- -------- $2.80 to 6.50 774 4.07 $ 3.22 774 $ 3.22 $12.88 to 18.75 80 8.90 15.86 80 15.86 --- --- 854 854 --- --- --- ---
39 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. STOCK OPTIONS (CONT.) Key Executive Officer Plan - -------------------------- A summary of stock option activity under the Company's key executive officer plan is as follows (shares in thousands): Years Ended ------------------------------------------ June 30, June 30, 1997 1996 ---- ---- Weighted Weighted Average Average Exercise Exercise Shares Price Shares Price ------ -------- ------ -------- Outstanding at beginning of year 850 $16.00 Granted 850 $16.00 --- ------ --- ------ Outstanding at end of year (none exerciseable) 850 $16.00 850 $16.00 --- ------ --- ------ --- ------ --- ------ Weighted average fair value of options granted during year $ 4.38 ------ ------ A summary of options outstanding under the key executive officer plan at June 30, 1997 is as follows (shares in thousands): Options Outstanding ------------------- Weighted Weighted Average Years Average Range of Number of Remaining Exercise Exercise Prices Outstanding Contractual Life Price - --------------- ----------- ------------------- -------- $16.00 850 5.81 $16.00 10. EMPLOYEE BENEFIT PLANS The Company has a defined contribution retirement plan covering substantially all employees. The Company's contributions to the plan, which were made in Company common stock, were $201,000, $133,000 and $99,000 for the years ended June 30, 1997, 1996 and 1995, respectively. The Company also has an employee stock purchase plan that allows participating employees to purchase, through payroll deductions, shares of the Company's common stock at 85% of the market value at specified dates. A total of 500,000 shares have been reserved for issuance under the plan. Shares purchased under 40 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. EMPLOYEE BENEFIT PLANS (CONT.) the plan were 104,215, 97,143 and 31,361 for the years ended June 30, 1997, 1996 and 1995, respectively. 11. INCOME TAXES The income tax provision (benefit) consists of the following (in thousands): Years Ended --------------------------------- June 30, June 30, June 30, 1997 1996 1995 ------- ------- -------- Current $ (202) $ 984 $ 79 Deferred 24,428 11,681 (18,954) ------- ------- -------- $24,226 $12,665 $(18,875) ------- ------- -------- ------- ------- -------- The Company's effective income tax rate on income before income taxes differs from the U.S. statutory tax rate as follows: Years Ended ---------------------------------- June 30, June 30, June 30, 1997 1996 1995 ---- ---- ---- U.S. statutory tax rate 35% 35% 35% Change in valuation allowance (226) Other 3 2 3 ---- ---- ----- 38% 37% (188%) ---- ---- ----- ---- ---- ----- The deferred income tax provision (benefit) consists of the following (in thousands): Years Ended ---------------------------------- June 30, June 30, June 30, 1997 1996 1995 ---- ---- ---- Net operating loss carryforward $ 5,501 $ 8,387 $ 2,266 Allowance for losses (1,046) 1,556 32 Gain on sale of receivables 14,824 Change in valuation allowance (320) (22,615) Other 5,149 2,058 1,363 ------- ------- -------- $24,428 $11,681 $(18,954) ------- ------- -------- ------- ------- -------- 41 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. INCOME TAXES (CONT.) The tax effects of temporary differences that give rise to deferred tax liabilities and assets are as follows (in thousands): June 30, June 30, 1997 1996 ---- ---- Deferred tax liabilities: Gain on sale of receivables $14,824 $ Unrealized gain on excess servicing receivable 1,848 Allowance for losses 405 Other 2,614 707 ------- ------- 19,286 1,112 ------- ------- Deferred tax assets: Net operating loss carryforward (3,468) (8,969) Alternative minimum tax credits (1,873) (1,548) Allowance for losses (641) Other (590) ------- ------- (5,982) (11,107) ------- ------- Net deferred tax liability (asset) $13,304 $(9,995) ------- ------- ------- ------- As of June 30, 1997, the Company has a net operating loss carryforward of approximately $3,000,000 for federal income tax reporting purposes which expires between 2007 and 2009 and an alternative minimum tax credit carryforward of approximately $1,900,000 with no expiration date. 12. SUPPLEMENTAL INFORMATION Cash payments for interest costs and income taxes consist of the following (in thousands): Years Ended ------------------------------- June 30, June 30, June 30, 1997 1996 1995 -------- -------- -------- Interest costs (none capitalized) $15,196 $12,179 $ 5,167 Income taxes 599 1,447 151 42 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS 107"), requires disclosure of fair value information about financial instruments, whether or not recognized in the Company's consolidated balance sheets. Fair values are based on estimates using present value or other valuation techniques in cases where quoted market prices are not available. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts which ultimately may be realized or paid at settlement or maturity of the financial instruments. SFAS 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. Estimated fair values, carrying values and various methods and assumptions used in valuing the Company's financial instruments as of June 30, 1997 and 1996 are set forth below (in thousands): June 30, 1997 June 30, 1996 --------------------------- ----------------------- Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value -------- ---------- -------- ---------- Financial assets: Cash and cash equivalents and restricted cash (a) $ 73,922 $ 73,922 $ 17,449 $ 17,449 Investment securities (b) 6,500 6,363 6,558 6,254 Finance receivables (c) 266,657 283,386 250,484 283,760 Excess servicing receivable (d) 114,376 114,376 33,093 35,009 Financial liabilities: Bank line of credit and mortgage warehouse facility (e) 72,045 72,045 86,000 86,000 Automobile receivables- backed notes (f) 23,689 24,782 67,847 68,055 9 1/4% Senior Notes (g) 125,000 123,825 Interest rate swaps (h) 735 236 Unrecognized financial instruments: Forward U.S. Treasury Note Sales (i) 164 (700)
(a) The carrying value of cash and cash equivalents and restricted cash is considered to be a reasonable estimate of fair value. 43 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONT.) (b) The fair value of investment securities is estimated based on market prices for similar securities. (c) Since the Company periodically sells its finance receivables, fair value is estimated by discounting future net cash flows expected to be realized from the finance receivables using interest rate, prepayment and credit loss assumptions similar to the Company's historical experience. (d) The fair value of excess servicing receivable is estimated by discounting the associated future net cash flows using discount rate, prepayment and credit loss assumptions similar to the Company's historical experience. (e) The bank line of credit and mortgage warehouse facility have variable rates of interest and maturities of less than one year. Therefore, carrying value is considered to be a reasonable estimate of fair value. (f) The fair value of automobile receivables-backed notes is estimated based on rates currently available for debt with similar terms and remaining maturities. (g) The fair value of the 9 1/4% Senior Notes is based on the quoted market price. (h) The fair value of the interest rate swaps is based on the quoted termination cost. (i) The fair value of the forward U.S. Treasury Note sales are estimated based upon market prices for similar financial instruments. 44 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders AmeriCredit Corp. We have audited the accompanying consolidated balance sheets of AmeriCredit Corp. as of June 30, 1997 and 1996, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AmeriCredit Corp. as of June 30, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1997, in conformity with generally accepted accounting principles. As discussed in note 1 to the consolidated financial statements, in 1997, AmeriCredit Corp. changed its method of accounting for transfers and servicing of financial assets and extinguishment of liabilities. COOPERS & LYBRAND L.L.P. Fort Worth, Texas August 6, 1997 45 AMERICREDIT CORP. COMMON STOCK DATA The Company's common stock trades on the New York Stock Exchange under the symbol ACF. There were 29,296,102 shares of common stock outstanding as of June 30, 1997. The following table sets forth the range of the high, low and closing sale prices for the Company's common stock as reported on the Composite Tape of New York Stock Exchange Listed Issues. Fiscal year ended June 30, 1996: High Low Close ------ ------ ------ First Quarter $15.00 $ 9.63 $14.88 Second Quarter 16.25 10.75 13.63 Third Quarter 14.25 10.38 13.88 Fourth Quarter 16.50 13.25 15.63 Fiscal year ended June 30, 1997: High Low Close ------ ------ ------ First Quarter $18.63 $12.00 $18.38 Second Quarter 20.50 16.63 20.50 Third Quarter 22.75 15.13 17.38 Fourth Quarter 21.25 11.88 21.00 As of June 30, 1997, there were approximately 350 shareholders of record of the Company's common stock. 46 AMERICREDIT CORP. QUARTERLY DATA (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- -------- Fiscal year ended June 30, 1997 Finance charge income $ 10,764 $ 10,739 $ 12,101 $ 11,306 Gain on sale of receivables 12,590 15,561 17,757 21,348 Servicing fee income 3,643 4,599 5,644 7,138 Income before income taxes 13,125 14,955 16,464 18,381 Net income 8,072 9,198 10,126 11,303 Earnings per share .27 .30 .33 .36 Weighted average shares and 30,118,939 30,678,189 31,033,230 31,098,326 share equivalents Fiscal year ended June 30, 1996 Finance charge income $ 13,377 $ 13,852 $ 12,650 $ 11,827 Gain on sale of receivables 5,621 7,725 9,527 Servicing fee income 215 1,105 2,392 Income before income taxes 3,938 8,830 10,119 11,369 Net income 2,520 5,586 6,312 7,173 Earnings per share .08 .18 .21 .24 Weighted average shares and 30,223,551 31,120,461 30,082,193 30,273,327 share equivalents
47 SHAREHOLDER INFORMATION CORPORATE HEADQUARTERS: 200 Bailey Avenue Fort Worth, Texas 76107 (817) 332-7000 INVESTOR RELATIONS INFORMATION: For financial/investment data and general information about AmeriCredit Corp., write the Investor Relations Department at the above address, or telephone (817) 882-7009. SHAREHOLDER SERVICES: For shareholder account information and other shareholder services, write the Corporate Secretary at the above address, or telephone (817) 882-7139. ANNUAL MEETING: The Annual Meeting of the Company will be held on November 5, 1997 at 10:00 a.m. at the Fort Worth Club, 306 West Seventh Street, Fort Worth, Texas. All shareholders are cordially invited to attend. TRANSFER AGENT AND REGISTRAR: ChaseMellon Shareholder Services Stock Transfer Department 85 Challenger Rd., Overpeck Centre Ridgefield Park, NJ 07660 (800) 635-9270 http://www.chasemellon.com INDEPENDENT ACCOUNTANTS: Coopers & Lybrand L.L.P. 301 Commerce Street, Suite 1900 Fort Worth, Texas 76102-4119 FORM 10-K: SHAREHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY WRITING TO THE INVESTOR RELATIONS DEPARTMENT AT THE CORPORATE HEADQUARTERS ADDRESS. 48 DIRECTORS Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER AmeriCredit Corp. Michael R. Barrington VICE CHAIRMAN, PRESIDENT AND CHIEF OPERATING OFFICER AmeriCredit Corp. Daniel E. Berce VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER AmeriCredit Corp. Edward H. Esstman EXECUTIVE VICE PRESIDENT, AUTO FINANCE DIVISION AmeriCredit Corp. James H. Greer CHAIRMAN OF THE BOARD Shelton W. Greer Co., Inc. Gerald W. Haddock PRESIDENT AND CHIEF EXECUTIVE OFFICER Crescent Real Estate Equities Limited, L.P. Douglas K. Higgins OWNER Higgins & Associates Kenneth H. Jones, Jr. VICE CHAIRMAN KBK Capital Corporation 49 OFFICERS AMERICREDIT CORP.: Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER Michael R. Barrington VICE CHAIRMAN, PRESIDENT AND CHIEF OPERATING OFFICER Daniel E. Berce VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER Edward H. Esstman EXECUTIVE VICE PRESIDENT, AUTO FINANCE DIVISION Randy K. Benefield SENIOR VICE PRESIDENT, DIRECTOR OF MANAGEMENT INFORMATION SYSTEMS Chris A. Choate SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY Patricia A. Jones SENIOR VICE PRESIDENT, DIRECTOR OF HUMAN RESOURCES Michael T. Miller SENIOR VICE PRESIDENT AND CHIEF CREDIT OFFICER Preston A. Miller SENIOR VICE PRESIDENT AND TREASURER 50 AMERICREDIT FINANCIAL SERVICES, INC.: Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD Michael R. Barrington VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER Daniel E. Berce VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER Edward H. Esstman PRESIDENT AND CHIEF OPERATING OFFICER Philip A. Alberti EXECUTIVE VICE PRESIDENT, DIRECTOR OF CONSUMER FINANCE OPERATIONS Christopher M. Barry SENIOR VICE PRESIDENT, BRANCH OPERATIONS Jan G. Gisburne SENIOR VICE PRESIDENT, BRANCH OPERATIONS Cheryl L. Miller SENIOR VICE PRESIDENT, DIRECTOR OF COLLECTIONS AND CUSTOMER SERVICE Todd M. Patin SENIOR VICE PRESIDENT, BRANCH OPERATIONS Cinde C. Perales SENIOR VICE PRESIDENT, DIRECTOR OF LOAN SERVICES Nils L. Wirstrom SENIOR VICE PRESIDENT, BRANCH OPERATIONS 51 AMERICREDIT MORTGAGE SERVICES: Clifton H. Morris, Jr. CHAIRMAN OF THE BOARD Michael R. Barrington VICE CHAIRMAN Daniel E. Berce VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER Michael G. Hughes PRESIDENT Renee L. Jacobs SENIOR VICE PRESIDENT, REGIONAL MANAGER Mark L. Kittle SENIOR VICE PRESIDENT, OPERATIONS 52 EX-21.1 12 EXHIBIT 21.1 EXHIBIT 21.1 AMERICREDIT CORP. SUBSIDIARIES OF THE REGISTRANT STATE OF SUBSIDIARY OWNERSHIP % INCORPORATION - ---------- ----------- ------------- AmeriCredit Operating Co., Inc. 100% Delaware AmeriCredit Financial Services, Inc. 100% Delaware ACF Investment Corp. 100% Delaware AmeriCredit Premium Finance, Inc. 100% Delaware AFS Funding Corp. 100% Nevada AmeriCredit Receivables Finance Corp. 100% Delaware AmeriCredit Receivables Finance Corp. 1995-A 100% Delaware Americredit Corporation of California 100% Delaware 49 EX-23.1 13 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of AmeriCredit Corp. on Form S-8 (File Nos. 33-41203, 33-48162, 33-56501 and 33-01111) and Form S-3 (File Nos. 33-57517 and 33-52679) of our report dated August 6, 1997, on our audits of the consolidated financial statements of AmeriCredit Corp. as of June 30, 1997 and 1996, and for the three years in the period ended June 30, 1997, which report is incorporated by reference in this Annual Report on Form 10-K. /s/ Coopers & Lybrand L.L.P. - ------------------------------- Coopers & Lybrand L.L.P. Fort Worth, Texas September 26, 1997 EX-27.1 14 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF AMERICREDIT CORP. INCORPORATED BY REFERENCE IN ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUN-30-1997 JUL-01-1996 JUN-30-1997 73,922 6,500 279,603 (12,946) 0 0 17,723 (3,839) 493,453 0 224,251 0 0 333 216,203 493,453 0 137,747 0 51,915 0 6,595 16,312 62,925 24,226 0 0 0 0 38,699 1.26 0
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