-----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, P2WvNu9+stTqHChL6d7acYWFPmZYtnbrHcAmcU5TuxBYytMCRoq64ULNIAEd03HZ T1cd8eXBtTRN5ndTQnr1Iw== 0000930661-98-000589.txt : 19980327 0000930661-98-000589.hdr.sgml : 19980327 ACCESSION NUMBER: 0000930661-98-000589 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19980326 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: S-4/A SEC ACT: SEC FILE NUMBER: 333-46993 FILM NUMBER: 98573616 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT FINANCIAL SERVICES INC CENTRAL INDEX KEY: 0001002761 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 752439888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-46993-01 FILM NUMBER: 98573617 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 8173327000 MAIL ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT OPERATING CO INC CENTRAL INDEX KEY: 0001037687 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752313963 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-46993-02 FILM NUMBER: 98573618 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173327000 MAIL ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT CORP OF CALIFORNIA CENTRAL INDEX KEY: 0001037688 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 330011256 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-46993-03 FILM NUMBER: 98573619 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173327000 MAIL ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICREDIT PREMIUM FINANCE INC CENTRAL INDEX KEY: 0001037689 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752447312 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-46993-04 FILM NUMBER: 98573620 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173327000 MAIL ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACF INVESTMENT CORP CENTRAL INDEX KEY: 0001037690 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752442194 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-46993-05 FILM NUMBER: 98573621 BUSINESS ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173327000 MAIL ADDRESS: STREET 1: 200 BAILEY AVE CITY: FORT WORTH STATE: TX ZIP: 76102 S-4/A 1 FORM S-4/A AMENDMENT #1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1998 REGISTRATION NO. 333-46993 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________________________________ AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _________________________________________________ AMERICREDIT CORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TEXAS 75-2291093 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) AMERICREDIT FINANCIAL SERVICES, INC. DELAWARE 75-2439888 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) AMERICREDIT OPERATING CO., INC. DELAWARE 75-2313963 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) ACF INVESTMENT CORP. DELAWARE 75-2442194 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) AMERICREDIT PREMIUM FINANCE, INC. DELAWARE 75-2447312 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) AMERICREDIT CORPORATION OF CALIFORNIA CALIFORNIA 33-0011256 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) 6199 (Primary Standard Industrial Classification Code Number) ________________________________ 200 BAILEY AVENUE FORT WORTH, TEXAS 76107 (817) 332-7000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) _______________________ DANIEL E. BERCE CHIEF FINANCIAL OFFICER AMERICREDIT CORP. 200 BAILEY AVENUE FT. WORTH, TEXAS 76107 (817) 332-7000 (Name, address, including zip code, and telephone number, including area code, of Agent for service) Copies to: L. STEVEN LESHIN JENKENS & GILCHRIST, A PROFESSIONAL CORPORATION 1445 ROSS AVENUE, SUITE 3200 DALLAS, TEXAS 75202 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] _____________________ CALCULATION OF REGISTRATION FEE
================================================================================================================= Proposed Maximum Proposed Maximum Title of Each Class of Amount to Offering Price per Aggregate Amount of Securities to be Registered be Registered Unit (1) Offering Price (1) Registration Fee - ----------------------------------------------------------------------------------------------------------------- 9 1/4% Senior Notes due 2004 $50,000,000 100% $50,000,000 $14,750(2) - ----------------------------------------------------------------------------------------------------------------- AmeriCredit Financial Services, Inc. AmeriCredit Operating Co., Inc. ACF Investment Corp. AmeriCredit Premium Finance, Inc. Americredit Corporation of California $50,000,000 100% $50,000,000 (4) Guarantees (3) ==================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f) under the Securities Act of 1933, as amended. (2) Paid with initial filing of the Registration Statement. (3) Each of these subsidiaries of AmeriCredit Corp. has guaranteed the Notes being registered pursuant hereto. (4) Pursuant to Rule 457(n), no separate fee is payable with respect to guarantees of the Notes being registered. ================================================================================ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. 2 Information contained herein is subject to completion or amendment. A Registration Statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. SUBJECT TO COMPLETION, DATED MARCH 26, 1998 AMERICREDIT CORP. OFFER TO EXCHANGE ALL OUTSTANDING 9 1/4% SENIOR NOTES DUE 2004 ($50,000,000 PRINCIPAL AMOUNT OUTSTANDING) FOR 9 1/4% SENIOR NOTES DUE 2004 The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on April 24, 1998 (as such date may be extended, the "Expiration Date"). AmeriCredit Corp., a Texas corporation ("AmeriCredit" or the "Company"), hereby offers (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus and the accompanying letter of transmittal (the "Letter of Transmittal"), to exchange $1,000 in principal amount of its 9 1/4% Senior Notes due 2004 (the "New Notes") for each $1,000 in principal amount of its outstanding 9 1/4% Senior Notes due 2004 (the "Old Notes") (the Old Notes and the New Notes are collectively referred to herein as the "Notes"). An aggregate principal amount of $50,000,000 of Old Notes is outstanding. See "The Exchange Offer." Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Notes where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business one year after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." The Company will accept for exchange any and all Old Notes that are validly tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal amount of the Old Notes being tendered for exchange. However, the Exchange Offer is subject to the terms and provisions of the C/D Exchange Registration Rights Agreement, dated as of January 29, 1998 (the "Registration Rights Agreement"), among the Company, the Company's Guarantors (as described in the Registration Rights Agreement) and Salomon Brothers Inc and Credit Suisse First Boston (the "Initial Purchasers"). The Old Notes may be tendered only in multiples of $1,000. See "The Exchange Offer." (continued on next page) __________________________ SEE "RISK FACTORS" BEGINNING ON PAGE 10 HEREIN FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM- MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. __________________________ THE DATE OF THIS PROSPECTUS IS MARCH 27, 1998 The Old Notes were issued in a transaction (the "Prior Offering") pursuant to which the Company issued an aggregate of $50,000,000 principal amount of the Old Notes to the Initial Purchasers on January 29, 1998 pursuant to a Purchase Agreement, dated January 26, 1998 (the "Purchase Agreement"), among the Company, the Company's Guarantors and the Initial Purchasers. The Initial Purchasers subsequently resold the Old Notes in reliance on Rule 144A under the Securities Act. The Company and the Initial Purchasers also entered into the Registration Rights Agreement, pursuant to which the Company granted certain registration rights for the benefit of the holders of the Old Notes. The Exchange Offer is intended to satisfy certain of the Company's obligations under the Registration Rights Agreement with respect to the Old Notes. See "The Exchange Offer--Purpose and Effect." The Old Notes were, and the New Notes will be, issued under the Indenture, dated as of January 29, 1998 (the "Indenture"), among the Company and Bank One, N.A., as trustee (in such capacity, the "Trustee"). The terms of the Old Notes were, and the New Notes will be, substantially similar to those of the Company's 9 1/4% Senior Notes due 2004 (the "Original Notes") which were issued under an Indenture dated February 4, 1997 (the "Original Indenture"). The form and terms of the New Notes will be identical in all material respects to the form and terms of the Old Notes, except that (i) the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, (ii) holders of New Notes will not be entitled to liquidated damages equal to $.05 per week per $1,000 principal amount of Old Notes held by such holders (up to a maximum amount of $0.50 per week per $1,000 principal amount) otherwise payable under the terms of the Registration Rights Agreement in respect of the Old Notes held by such holders during any period in which a Registration Default (as defined under "The Exchange Offer--Termination of Certain Rights") is continuing (the "Liquidated Damages") and (iii) holders of New Notes will not be, and upon the consummation of the Exchange Offer, holders of Old Notes will no longer be, entitled to certain rights under the Registration Rights Agreement intended for the holders of unregistered securities. The Exchange Offer shall be deemed consummated upon the occurrence of the delivery by the Company to Bank One, N.A., as registrar of the Old Notes (in such capacity, the "Registrar") under the Indenture of New Notes in the same aggregate principal amount as the aggregate principal amount of Old Notes that are validly tendered by holders thereof pursuant to the Exchange Offer. See "The Exchange Offer --Termination of Certain Rights," "--Procedures for Tendering Old Notes" and "Description of Notes." The New Notes will bear interest at a rate equal to 9 1/4% per annum. Interest on the New Notes is payable semiannually, on February 1 and August 1 of each year, commencing on August 1, 1998 (each, an "Interest Payment Date") and shall accrue from January 29, 1998 or from the most recent Interest Payment Date with respect to the Old Notes to which interest was paid or duly provided for. The New Notes will mature on February 1, 2004. See "Description of Notes." The New Notes will not be redeemable at the Company's option prior to February 1, 2001. Thereafter, the New Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after February 1, 2001 at the redemption prices set forth herein plus accrued and unpaid interest to the date of redemption. In addition, at the option of the Company, up to $16.7 million in aggregate principal amount of Notes may be redeemed prior to February 1, 2000 at a redemption price of 109.25% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date with the net cash proceeds of a public offering of common stock of the Company; provided, however, that at least $33.3 million in aggregate principal amount of Notes remain outstanding following such redemption; and provided, further, that such redemption shall occur within 45 days of the date of closing of such public offering. The Indenture provides that any such optional redemption of Notes shall be accompanied by a proportionate redemption of Original Notes. In the event of a Change of Control (as defined), holders of the New Notes will have the right to require the Company to purchase their New Notes, in whole or in part, at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. The New Notes will be senior unsecured obligations of the Company, will rank pari passu in right of payment with the Original Notes and all other existing and future unsecured senior Indebtedness (as defined) of the Company and will rank senior in right of payment to future subordinated Indebtedness of the Company. At December 31, 1997, on an as adjusted basis after giving effect to the Prior Offering and the application of the net proceeds therefrom, the aggregate principal amount of senior Indebtedness of the Company and its subsidiaries (excluding trade payables and other accrued liabilities) would have been approximately $251.2 million, an aggregate of $57.6 million of which would have been secured Indebtedness outstanding under the Credit Agreement (as defined), the Warehouse Facility (as defined) and the Mortgage Subsidiary Credit Agreement (as defined) and approximately $14.1 million of which would have been asset-backed notes of the Company's Special Purpose Finance Subsidiaries (as defined). All financings under the Warehouse Facility are secured by a first priority lien on the receivables and related assets held by CP Funding Corp., a special purpose subsidiary which is treated as a Securitization Trust (as defined) under the Indenture. The Indenture, which is substantially similar to the Original Indenture, permits the Company and its subsidiaries to incur additional secured Indebtedness. The payment of principal, premium, (i) if any, and interest and Liquidated Damages, if any, on the New Notes will be guaranteed on a senior unsecured basis (the "Subsidiary Guarantees") by all of the Company's current and future Restricted Subsidiaries (the "Guarantors"), which on the date of the Indenture included all of the Company's existing subsidiaries, except the Company's Special Purpose Finance Subsidiaries and AFS Funding Corp and CP Funding Corp. The Subsidiary Guarantees will rank pari passu in right of payment with the Guarantor's Guarantees of the Original Notes (the "Original Guarantees") and all other senior unsecured Indebtedness of the Guarantors. However, the Guarantors' obligations under the Credit Agreement and the Mortgage Subsidiary Credit Agreement are secured by liens on certain assets of the Guarantors and, accordingly, such Indebtedness will rank prior to the New Notes with respect to such assets. The New Notes will effectively be subordinated to the obligations of the Special Purpose Finance Subsidiaries with respect to Existing Indebtedness (as defined), the obligations of AFS Funding Corp. with respect to Credit Enhancement Agreements (as defined) and the obligations of CP Funding Corp. with respect to the Warehouse Facility. Based on existing interpretations of the Securities Act by the Staff of the Securities and Exchange Commission (the "Commission") set forth in "no-action" letters issued to third parties, the Company believes that New Notes issued pursuant to the Exchange Offer to any holder of Old Notes in exchange for Old Notes may be offered for resale, resold and otherwise transferred by such holder (other than a broker-dealer who purchased Old Notes directly from the Company for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such holder is not an affiliate of the Company, is acquiring the New Notes in the ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes. Holders wishing to accept the Exchange Offer must represent to the Company, as required by the Registration Rights Agreement, that such conditions have been met. In addition, if such holder is not a broker-dealer, it must represent that it is not engaged in, and does not intend to engage in, a distribution of the New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "The Exchange Offer--Resales of the New Notes." This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making or other trading activities. As of March 24, 1998, Cede & Co. ("Cede"), as nominee for The Depository Trust Company, New York, New York ("DTC"), was the sole registered holder of the Old Notes and held the Old Notes for 10 of its participants. The Company believes that no such participant is an affiliate (as such term is defined in Rule 405 of the Securities Act) of the Company. There has previously been only a limited secondary market, and no public market, for the Old Notes. The Old Notes are eligible for trading in the Private Offering, Resales and Trading through Automatic Linkages ("PORTAL") market. In addition, the Initial Purchasers have advised the Company that they currently intend to make a market in the New Notes; however, the Initial Purchasers are not obligated to do so and any market making activities may be discontinued by the Initial Purchasers at any time. Therefore, there can be no assurance that an active market for the New Notes will develop. If such a trading market develops for the New Notes, future trading prices will depend on many factors, including, among other things, prevailing interest rates, the Company's results of operations and the market for similar securities. Depending on such factors, the New Notes may trade at a discount from their face value. See "Risk Factors--Absence of Public Market; Restrictions on Transfer." The Company will not receive any proceeds from this Exchange Offer. Pursuant to the Registration Rights Agreement, the Company will bear certain registration expenses. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. The Old Notes were issued originally in global form (the "Global Old Note"). The Global Old Note was deposited with, or on behalf of, DTC, as the initial depository with respect to the Old Notes (in such capacity, the "Depository"). The Global Old Note is registered in the name of Cede & Co., as nominee of DTC, and beneficial interests in the Global Old Note are shown on, and transfers thereof are effected only through, records maintained by the Depository and its participants. The use of the Global Old Note to represent the Old Notes permits the Depository's participants, and anyone holding a beneficial interest in an Old Note registered in the name of such a participant, to transfer interests in the Old Notes electronically in accordance with the Depository's established procedures without the need to transfer a physical (ii) certificate. New Notes issued in exchange for the Global Old Note "will also be issued initially as a note in global form (the "Global New Note," and, together with the Global Old Note, the "Global Note") and be deposited with, or on behalf of, the Depository. After the initial issuance of the Global New Note, New Notes in certificated form will be issued in exchange for a holder's proportionate interest in the Global New Note only as set forth in the Indenture. (iii) TABLE OF CONTENTS
PAGE ---- AVAILABLE INFORMATION......................................... (v) INFORMATION INCORPORATED BY REFERENCE......................... (v) NOTE REGARDING FORWARD-LOOKING INFORMATION.................... (vi) PROSPECTUS SUMMARY............................................ 1 RISK FACTORS.................................................. 10 THE EXCHANGE OFFER............................................ 18 CAPITALIZATION................................................ 25 SELECTED CONSOLIDATED FINANCIAL DATA.......................... 26 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................... 29 BUSINESS...................................................... 41 MANAGEMENT.................................................... 51 PRINCIPAL SHAREHOLDERS........................................ 57 DESCRIPTION OF NOTES.......................................... 59 CERTAIN FEDERAL INCOME TAX CONSEQUENCES....................... 83 DESCRIPTION OF OTHER DEBT..................................... 85 PLAN OF DISTRIBUTION.......................................... 87 LEGAL MATTERS................................................. 88 EXPERTS....................................................... 88 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................... F-1
(iv) AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Such information is available for inspection at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, NW, Washington, DC 20549, and at the regional offices of the Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511 and Seven World Trade Center, Suite 1300, New York, NY 10048. Copies of such information are obtainable, by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, NW, Washington, DC 20549. Such material is also available for inspection at the library of the New York Stock Exchange (the "NYSE"), 20 Broad Street, New York, New York 10005. The Commission maintains a web site (http://www.sec.gov) that contains periodic reports, proxy statements and other information regarding registrants that file documents electronically with the Commission. The Common Stock of the Company is listed and traded on the NYSE under the symbol "ACF." The Company has agreed that, whether or not it is required to do so by the rules and regulations of the Commission, for so long as any of the Notes remain outstanding, it will furnish to the holders of Notes and submit to the Commission (unless the Commission will not accept such materials) (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's independent accountants, and (ii) all reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, for so long as any of the Notes remain outstanding, the Company has agreed to make available to any prospective purchaser of Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act. INFORMATION INCORPORATED BY REFERENCE THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO AMERICREDIT CORP., 200 BAILEY AVENUE, FORT WORTH, TEXAS 76107, ATTENTION: DANIEL E. BERCE, (817) 332-7000. The following AmeriCredit documents are incorporated by reference herein: (1) AmeriCredit's Annual Report on Form 10-K for the year ended June 30, 1997, filed with the Commission; (2) AmeriCredit's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, filed with the Commission; (3) AmeriCredit's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, filed with the Commission; (4) AmeriCredit's Reports on Form 8-K, dated August 28, 1997, January 22, 1998, and January 29, 1998, all as filed with the Commission; and (5) AmeriCredit's Form 8-A, as filed with the Commission on September 5, 1997. All documents filed with the Commission by AmeriCredit pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of effectiveness of the Registration Statement of which this Prospectus forms a part are incorporated herein by reference and such documents will be deemed to be a part hereof from the date of filing of such documents. Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement (v) contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. NOTE REGARDING FORWARD-LOOKING INFORMATION INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECT," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. THE STATEMENTS IN "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES, WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS. (vi) PROSPECTUS SUMMARY The following summary information is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the Consolidated Financial Statements and related notes thereto, appearing elsewhere in this Prospectus. This Prospectus contains certain forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, the factors set forth under "Risk Factors" below. In addition to other information in this Prospectus, the factors set forth under "Risk Factors" below should be considered carefully in evaluating an investment in the Notes offered hereby. Unless the context indicates otherwise, all references herein to "AmeriCredit" or the "Company" refer to AmeriCredit Corp. and its subsidiaries. The Company's fiscal year ends on June 30. References to a particular fiscal year are to the twelve-month period ending on June 30 of that year. THE COMPANY The Company is a consumer finance company specializing in purchasing, securitizing and servicing retail automobile installment sales contracts originated by franchised and select independent dealers in connection with the sale of late model used and to a lesser extent new automobiles. The Company targets borrowers with limited credit histories, modest incomes or those who have experienced prior credit difficulties ("Sub-Prime Borrowers"). With the use of proprietary credit scoring models, the Company underwrites contracts on a decentralized basis through a nationwide branch office network. These credit scoring models, combined with experienced underwriting personnel, enable the Company to implement a risk-based pricing approach to structuring and underwriting individual contracts. The Company's centralized risk management department monitors these underwriting strategies and portfolio performance to balance credit quality and profitability objectives. The loan portfolio is serviced by the Company at centralized facilities located in Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina using automated loan servicing and collection systems. The Company had 108 branch offices as of December 31, 1997. As a result of the Company's expansion strategy, the Company has been able to increase its aggregate volume of automobile installment sales contracts purchased to $906.8 million in fiscal 1997 from $18.3 million in fiscal 1993. The Company has continued this growth during the first six months of fiscal 1998, with purchases aggregating $696.3 million, compared to $359.4 million during the same period in fiscal 1997. The Company purchases contracts originated by dealers at prices ranging from par to a discount of up to 10%. The average discount as a percentage of the contracts purchased by the Company was approximately 3.4% in fiscal 1997. For fiscal 1997, the average principal amount financed and weighted average APR of contracts purchased by the Company were $11,874 and 19.7%, respectively. The Company generates earnings and cash flow primarily through the purchase, retention, securitization and servicing of automobile receivables. In each securitization, the Company sells automobile receivables to a trust or special purpose finance subsidiary that, in turn, sells asset-backed securities to investors. The Company recognizes a gain on the sale of the receivables to the trust and receives monthly excess cash flow distributions from the trust resulting from the difference between the interest received from the obligors on the receivables and the interest on the asset-backed securities paid to investors, net of losses and expenses. The Company typically begins to receive excess cash flow distributions approximately seven to nine months after the receivables are securitized, although these time periods may be shorter or longer depending upon the structure of the securitization. The Company received excess cash flow of $24.0 million from securitization trusts and special purpose finance subsidiaries in fiscal 1997. Due to the time delay associated with distributions of excess cash flow from securitizations, the Company expects to receive increased cash flow distributions in fiscal 1998 from trusts created as a result of securitization transactions occurring in fiscal 1997. Prior to such time as the Company begins to receive excess cash flow, all excess cash flow is utilized to fund credit enhancement requirements to secure financial guaranty insurance policies issued by a monoline insurance company to protect investors in the asset-backed securities from losses. Once predetermined credit enhancement requirements are reached and maintained, excess cash flow is distributed to the Company. In addition to excess cash flow, the Company earns servicing fees of between 2.25% and 2.50% per annum of the outstanding principal balance of receivables securitized. Over the four quarters ended December 31, 1997 the Company completed four securitization transactions totaling $1.2 billion. According to CNW Marketing/Research, an independent automobile finance market research firm, the automobile finance industry is the second largest consumer finance industry in the United States with over $427 billion of loan and 1 lease originations during 1996. The industry is generally segmented according to the type of car sold (new vs. used) and the credit characteristics of the borrower (prime vs. sub-prime). The sub-prime segment of the market accounted for approximately $75 billion of these originations. The Company's principal objective is to continue to build upon its position as a leading indirect lender to Sub-Prime Borrowers. To achieve this objective, the Company employs the following key strategies: Continued Expansion of the Automobile Finance Branch Network. The Company opened five branch offices in fiscal 1993, 13 in fiscal 1994, 13 in fiscal 1995, 20 in fiscal 1996, 34 in fiscal 1997 and 23 in fiscal 1998 through December 31, 1997, bringing its branch office network to 108 offices located in 32 states as of December 31, 1997. Branch office personnel are responsible for the development and maintenance of dealer relationships. As part of its goal of increasing the number of dealers from whom it is purchasing automobile finance contracts, the Company plans to open approximately 17 additional branch offices during the remainder of fiscal 1998. Use of Proprietary Credit Scoring Models for Risk-based Pricing. The Company has developed and implemented a credit scoring system across its branch office network to support the branch level credit approval process. The Company's proprietary credit scoring models are designed to enable AmeriCredit to tailor each loan's pricing and structure to a statistical assessment of the underlying credit risk. Sophisticated Risk Management Techniques. The Company's centralized risk management department is responsible for monitoring the origination process, supporting management's supervision of each branch office, tracking collateral values of the Company's receivables portfolio and monitoring portfolio returns. This risk management department uses proprietary databases to identify concentrations of risk, to price for the risk associated with selected market segments and to endeavor to enhance the credit quality and profitability of the contracts purchased. High Investment in Technology to Support Operating Efficiency and Growth. The use of leading-edge technology in both loan origination and servicing has enabled AmeriCredit to become a low-cost provider in the sub-prime automobile finance market. AmeriCredit's annualized ratio of operating expenses to average managed receivables was 10.0% for fiscal 1995, 7.2% for fiscal 1996, 6.6% for fiscal 1997 and 6.0% for the six months ended December 31, 1997. Leveraging Sub-Prime Lending Expertise. In November 1996, AmeriCredit acquired a small residential mortgage lender which was later renamed Americredit Corporation of California and which conducts business under the name AmeriCredit Mortgage Services ("AMS"). AMS specializes in originating and purchasing home equity mortgage loans made to Sub-Prime Borrowers from a network of mortgage brokers. AMS has originated $105.4 million of mortgage loans from its date of acquisition through December 31, 1997. The Company believes that over time it can leverage its national presence, risk management techniques and state-of-the- art technology to broaden its indirect lending to Sub-Prime Borrowers. AMS's corporate office is located in Orange, California. AMS has historically sold its home equity loans and the related servicing rights to third party investors. Funding and Liquidity Through Securitizations. The Company sells automobile receivables in securitization transactions in order to obtain a cost-effective source of funds for the purchase of additional automobile finance contracts, to reduce the risk of interest rate fluctuations and to utilize capital efficiently. Since the Company's first securitization transaction in December 1994, the Company has securitized approximately $2.0 billion of automobile receivables in private and public offerings of asset-backed securities. AmeriCredit was incorporated in Texas in 1988 and succeeded to the business, assets and liabilities of a predecessor corporation formed under the laws of Texas in 1986. The Company's common stock, $.01 par value per share (the "Common Stock"), is traded on the NYSE under the symbol "ACF." The Company's principal executive offices are located at 200 Bailey Avenue, Fort Worth, Texas 76107 and its telephone number is 817-332-7000. 2 THE PRIOR OFFERING The outstanding $50.0 million principal amount of Old Notes were sold by the Company to the Initial Purchasers on January 29, 1998, pursuant to the Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes in reliance on Rule 144A under the Securities Act. The Company and the Initial Purchasers also entered into the Registration Rights Agreement pursuant to which the Company granted certain registration rights for the benefit of the holders of the Old Notes. The Exchange Offer is intended to satisfy certain of the Company's obligations under the Registration Rights Agreement with respect to the Old Notes. See "The Exchange Offer--Purpose and Effect." THE EXCHANGE OFFER The Exchange Offer............. The Company is offering upon the terms and subject to the conditions set forth herein and in the Letter of Transmittal to exchange the New Notes for the outstanding Old Notes. As of the date of this Prospectus, $50.0 million in aggregate principal amount of the Old Notes is outstanding, the maximum amount authorized by the Indenture for all Notes. As of March 24, 1998, there was one registered holder of the Old Notes, Cede & Co., which held the Old Notes for 10 of its participants. See "The Exchange Offer--Terms of the Exchange Offer." Expiration Date................ 5:00 p.m., New York City time, on April 24, 1998 as the same may be extended. See "The Exchange Offer--Expiration Date; Extensions; Amendments." Conditions of the Exchange Offer............... The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. The only condition to the Exchange Offer is the declaration by the Commission of the effectiveness of the Registration Statement of which this Prospectus constitutes a part (the "Exchange Offer Registration Statement"). See "The Exchange Offer--Conditions of the Exchange Offer." Termination of Certain Rights....................... Pursuant to the Registration Rights Agreement and the Old Notes, holders of Old Notes (i) have rights to receive Liquidated Damages and (ii) have certain rights intended for the holders of unregistered securities. "Liquidated Damages" means damages of $0.05 per week per $1,000 principal amount of Old Notes (up to a maximum of $0.50 per week per $1,000 principal amount) during the period in which a Registration Default is continuing pursuant to the terms of the Registration Rights Agreement. Holders of New Notes will not be and, upon consummation of the Exchange Offer, holders of Old Notes will no longer be, entitled to (i) the right to receive the Liquidated Damages or (ii) certain other rights under the Registration Rights Agreement intended for holders of unregistered securities. See "The Exchange Offer--Termination of Certain Rights" and "Procedures for Tendering Old Notes." Accrued Interest............... The New Notes will bear interest at a rate equal to 9 1/4% per annum. Interest shall accrue from January 29, 1998 or from the most recent Interest Payment Date with respect to the Old Notes to which interest was paid or duly provided for. See "Description of Notes-- Principal, Maturity and Interest." 3 Procedures for Tendering Old Notes.................... Each holder desiring to accept the Exchange Offer must complete and sign the Letter of Transmittal, have the signature thereon guaranteed if required by the Letter of Transmittal, and mail or deliver the Letter of Transmittal, together with the Old Notes or a Notice of Guaranteed Delivery (as defined in the Letter of Transmittal) and any other required documents (such as evidence of authority to act, if the Letter of Transmittal is signed by someone acting in a fiduciary or representative capacity), to the Exchange Agent (as defined under "The Exchange Offer--The Exchange Agent; Assistance") at the address set forth on the back cover page of this Prospectus prior to 5:00 p.m., New York City time, on the Expiration Date. Any Beneficial Owner (as defined under "The Exchange Offer--Procedures for Tendering Old Notes") of the Old Notes whose Old Notes are registered in the name of a nominee, such as a broker, dealer, commercial bank or trust company and who wishes to tender Old Notes in the Exchange Offer, should instruct such entity or person to promptly tender on such Beneficial Owner's behalf. See "The Exchange Offer--Procedures for Tendering Old Notes." Guaranteed Delivery Procedures................... Holders of Old Notes who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, may tender their Old Notes according to the guaranteed delivery procedures set forth in the Letter of Transmittal. See "The Exchange Offer--Guaranteed Delivery Procedures." Acceptance of Old Notes and Delivery of New Notes........ Upon effectiveness of the Exchange Offer Registration Statement of which this Prospectus constitutes a part and consummation of the Exchange Offer, the Company will accept any and all Old Notes that are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly after acceptance of the Old Notes. See "The Exchange Offer-- Acceptance of Old Notes for Exchange; Delivery of New Notes." Withdrawal Rights.............. Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer--Withdrawal Rights." Certain Federal Income Tax Considerations........... There will not be any U.S. Federal income tax consequences to holders exchanging Old Notes for New Notes pursuant to the Exchange Offer. See "Certain Federal Income Tax Consequences." The Exchange Agent............. Bank One, N.A. is the exchange Agent (in such capacity, the "Exchange Agent"). The address and telephone number of the Exchange Agent are set forth in "The Exchange Offer--The Exchange Agent; Assistance." 4 Fees and Expenses.............. All expenses incident to the Company's consummation of the Exchange Offer and compliance with the Registration Rights Agreement will be borne by the Company. The Company will also pay certain transfer taxes applicable to the Exchange Offer. See "The Exchange Offer -- Fees and Expenses." Resales of the New Notes........................ Based on existing interpretations by the Staff of the Commission set forth in "no-action" letters issued to third parties, the Company believes that New Notes issued pursuant to the Exchange Offer to a holder in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder (other than (i) a broker-dealer who purchased the Old Notes directly from the Company for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or (ii) a person that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such holder is acquiring the New Notes in the ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in a distribution of the New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "The Exchange Offer--Resales of the New Notes" and "Plan of Distribution." Effect of Not Tendering Old Notes for Exchange....... Old Notes that are not tendered or that are not properly tendered will, following the expiration of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. The Company will have no further obligations to provide for the registration under the Securities Act of such Old Notes and such Old Notes will, following the expiration of the Exchange Offer, bear interest at the same rate as the New Notes. DESCRIPTION OF NEW NOTES The form and terms of the New Notes will be identical in all material respects to the form and terms of the Old Notes, except that (i) the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, (ii) holders of the New Notes will not be entitled to Liquidated Damages and (iii) holders of the New Notes will not be, and upon consummation of the Exchange Offer, holders of the Old Notes will no longer be, entitled to certain rights under the Registration Rights Agreement intended for the holders of unregistered securities, except in limited circumstances. See "The Exchange Offer--Termination of Certain Rights." The Exchange Offer shall be deemed consummated upon the occurrence of the delivery by the Company to the Registrar under the Indenture of the New Notes in the same aggregate principal amount as the aggregate principal amount of Old Notes that are tendered by holders thereof pursuant to the Exchange Offer. See "The Exchange Offer--Termination of Certain Rights," "-- Procedures for Tendering Old Notes" and "Description of Notes." Securities Offered............. $50 million in aggregate principal amount of 9 1/4% Senior Notes due 2004. Maturity....................... February 1, 2004. Interest....................... The Notes will bear interest at the rate of 9 1/4% per annum, payable semiannually on February 1 and August 1, commencing August 1, 1998. 5 Ranking........................ The Notes will be general unsecured obligations of the Company. The Notes will rank pari passu in right of payment with the Original Notes (as defined) and all other existing and future senior unsecured Indebtedness of the Company and senior in right of payment to all future subordinated Indebtedness of the Company. However, the Company and certain of the Company's subsidiaries are parties to the Credit Agreement and the Mortgage Subsidiary Credit Agreement and all borrowings under the these agreements are secured by first priority liens on certain assets of the Company and certain of the Company's subsidiaries, including the Guarantors. In addition, in October 1997 the Company established a Warehouse Facility. All financings under the Warehouse Facility are secured by a first priority lien on the receivables and related assets held by CP Funding Corp., a special purpose subsidiary which is treated as a Securitization Trust under the Indenture. At December 31, 1997, on an as adjusted basis after giving effect to the Prior Offering and the application of the net proceeds therefrom, the aggregate principal amount of senior Indebtedness of the Company and its subsidiaries (excluding trade payables and other accrued liabilities) would have been approximately $251.2 million, an aggregate of $57.6 million of which would have been secured Indebtedness outstanding under the Credit Agreement, the Warehouse Facility and the Mortgage Subsidiary Credit Agreement and approximately $14.1 million of which would have been asset-backed notes outstanding of the Company's Special Purpose Finance Subsidiaries. The Notes will be effectively subordinated to the obligations of the Special Purpose Finance Subsidiaries with respect to Existing Indebtedness (as defined) and to the obligations of AFS Funding Corp. with respect to Credit Enhancement Agreements (as defined) and to the obligations of CP Funding Corp. with respect to the Warehouse Facility. See "Risk Factors--Holding Company Structure; Effective Subordination," "-- Leverage" and "Description of Other Debt." Subsidiary Guarantees.......... Pursuant to the Subsidiary Guarantees, the Notes will be guaranteed by each existing and future Restricted Subsidiary (as defined) of the Company, except the Company's Special Purpose Finance Subsidiaries, AFS Funding Corp. and CP Funding Corp. The Subsidiary Guarantees will rank pari passu in right of payment with the Guarantor's Guarantees of the Original Notes ("Original Guarantees") and all other existing and future senior unsecured Indebtedness of the Guarantors. The Company's and the Guarantors' obligations under the Credit Agreement and Mortgage Subsidiary Credit Agreement are secured by liens on certain of their assets and, accordingly, such Indebtedness will effectively rank prior to the Notes with respect to such assets. See "Risk Factors--Holding Company Structure; Effective Subordination." 6 Optional Redemption............ The Notes may be redeemed at the option of the Company, in whole or in part, on or after February 1, 2001 at a premium declining to par in 2003, plus accrued and unpaid interest and Liquidated Damages, if any, through the redemption date. Notwithstanding the foregoing, at any time prior to February 1, 2000, the Company may on any one or more occasions redeem up to an aggregate of $16.7 million in principal amount of Notes at a redemption price of 109.25% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of a public offering of common stock of the Company; provided that at least $33.3 million in aggregate principal amount of Notes remain outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 45 days of the date of the closing of such public offering. The Indenture provides that any such optional redemption of Notes shall be accompanied by a proportionate redemption of Original Notes. See "Description of the Notes--Optional Redemption." Change of Control.............. In the event of a Change of Control, the holders of the Notes will have the right to require the Company to purchase their Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Covenants...................... The indenture, pursuant to which the Notes will be issued (the "Indenture"), will be substantially similar to the Original Indenture and will contain certain covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional Indebtedness and issue preferred stock, pay dividends or make other distributions, repurchase Equity Interests (as defined) or subordinated Indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets of the Company or its subsidiaries, issue or sell Equity Interests of the Company's subsidiaries or enter into certain mergers and consolidations. In addition, under certain circumstances, the Company will be required to offer to purchase Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, with the proceeds of certain Asset Sales (as defined). See "Description of the Notes" and "Description of Other Debt--Original Notes." Absence of a Public Market for the New Notes............ The New Notes are a new issue of securities with no established market. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Initial Purchasers have advised the Company that they currently intend to make a market in the New Notes. However, the Initial Purchasers are not obligated to do so, and any market making with respect to the New Notes may be discontinued at any time without notice. The Company does not intend to apply for listing of the New Notes on a securities exchange. RISK FACTORS See "Risk Factors" for a discussion of certain factors that should be considered in evaluating the Exchange Offer. 7 SUMMARY FINANCIAL AND OPERATING INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED ---------------------------------------------------------------------------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, 1993(2) 1994 1995(3) 1996 1997 ---------------- -------------- --------------- -------------- --------------- STATEMENT OF INCOME DATA: Revenue: Finance charge income...................... $ 1,125 $ 7,820 $ 29,039 $ 51,679 $ 44,910 Gain on sale of receivables................ -- -- -- 22,873 67,256 Servicing fee income....................... -- -- -- 3,712 21,024 Investment income.......................... 2,052 2,550 1,284 1,075 2,909 Other income............................... 21,704 5,512 2,761 1,639 1,648 ----------- ----------- ----------- ----------- ----------- Total revenue........................... 24,881 15,882 33,084 80,978 137,747 Costs and expenses............................ 44,247 10,817 23,066 46,722 74,822 ----------- ----------- ----------- ----------- ----------- Income (loss) before taxes.................... (19,366) 5,065 10,018 34,256 62,925 Provision (credit) for taxes.................. -- -- (18,875) 12,665 24,226 ----------- ----------- ----------- ----------- ----------- Net income (loss).......................... $ (19,366) $ 5,065 $ 28,893 $ 21,591 $ 38,699 Basic earnings (loss) per share(1)......... $ (.66) $ .17 $ 1.01 $ .75 $ 1.34 Diluted earnings (loss) per share(1)....... $ (.66) $ .16 $ .95 $ .71 $ 1.26 Weighted average shares outstanding........ 29,267,419 29,067,323 28,730,151 28,824,572 28,887,362 Weighted average shares and assumed incremental shares....................... 29,267,419 31,818,083 30,380,749 30,203,298 30,782,471 CASH FLOW DATA: (Used in) Provided by operating activities.... $ 17,332 $ 3,900 $ 14,637 $ 34,897 $ 66,132 (Used in) Provided by investing activities.... (8,121) (12,174) (144,512) (63,116) (123,076) (Used in) Provided by financing activities.... (5,705) (9,238) 132,433 12,050 60,826 ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents.................................. $ 3,506 $ (17,512) $ 2,558 $ (16,169) $ 3,882 OTHER DATA: Auto receivable originations(2).............. $ 18,317 $ 65,929 $ 230,176 $ 432,442 $ 906,794 Managed auto receivables(2).................. $ 15,964 $ 67,636 $ 240,491 $ 523,981 $ 1,138,255 Average managed auto receivables(2).......... $ 6,880 $ 37,507 $ 141,526 $ 357,966 $ 792,155 Auto loans securitized....................... $ -- $ -- $ 150,170 $ 270,351 $ 817,500 Number of branches........................... 5 18 31 51 85 Average principal amount per managed auto receivable(2).......................... $ 6,878 $ 7,215 $ 7,773 $ 8,746 $ 10,087 Effective yield on owned auto receivables (5)............................. 21.7% 20.9% 20.5% 19.7% 19.9% RATIOS: Ratio of earnings to fixed charges(4)........ (86.6) 31.2 3.5 3.6 4.9 Percentage of total indebtedness to total capitalization.............................. 1.0% 0.3% 47.9% 48.6% 50.9% Return on average common equity(5)........... (14.7)% 4.1% 23.1% 14.3% 20.8% Operating expenses as a percentage of average managed auto receivables(5)......... 18.2% 15.0% 10.0% 7.2% 6.6% Percentage of senior unsecured debt to total equity................................ 0.% 0.% 0.% 0.% 57.7% ASSET QUALITY DATA: Managed auto receivables greater than 60 days delinquent(2).......................... $ 137 $ 1,269 $ 4,907 $ 16,207 $ 36,421 Delinquencies as a percentage of managed auto receivables(2)................. 0.9% 1.9% 2.0% 3.1% 3.2% Net charge-offs.............................. $ 49 $ 1,432 $ 6,409 $ 19,974 $ 43,231 Net charge-offs as a percentage of average managed auto receivables(2)(5)........................... 0.7% 3.8% 4.5% 5.6% 5.5% SIX MONTHS ENDED ----------------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ---------------- ----------------- STATEMENT OF INCOME DATA: Revenue: Finance charge income................................ $ 21,503 $ 26,190 Gain on sale of receivables.......................... 28,151 53,775 Servicing fee income................................. 8,242 19,191 Investment income.................................... 1,152 2,570 Other income......................................... 622 502 ----------- ----------- Total revenue..................................... 59,670 102,228 Costs and expenses...................................... 31,590 57,716 ----------- ----------- Income (loss) before taxes.............................. 28,080 44,512 Provision (credit) for taxes............................ 10,810 17,137 ----------- ----------- Net income (loss).................................... $ 17,270 $ 27,375 Basic earnings (loss) per share(1)................... $ .61 $ .92 Diluted earnings (loss) per share(1)................. $ .57 $ .85 Weighted average shares outstanding.................. 28,513,145 29,684,960 Weighted average shares and assumed incremental shares................................. 30,398,569 32,199,267 CASH FLOW DATA: (Used in) Provided by operating activities.............. $ 23,414 $ 8,950 (Used in) Provided by investing activities.............. (20,820) (42,948) (Used in) Provided by financing activities.............. 352 30,238 ----------- ----------- Net increase (decrease) in cash and cash equivalents............................................ $ 2,946 $ (3,760) OTHER DATA: Auto receivable originations(2)........................ $ 359,407 $ 696,252 Managed auto receivables(2)............................ $ 761,716 $ 1,599,273 Average managed auto receivables(2).................... $ 641,522 $ 1,375,614 Auto loans securitized................................. $ 345,570 $ 682,499 Number of branches..................................... 66 108 Average principal amount per managed auto receivable(2).................................... $ 9,481 $ 10,456 Effective yield on owned auto receivables (5)....................................... 19.6% 20.7% RATIOS: Ratio of earnings to fixed charges(4).................. 5.2 4.7 Percentage of total indebtedness to total capitalization........................................ 46.2% 49.4% Return on average common equity(5)..................... 20.0% 22.9% Operating expenses as a percentage of average managed auto receivables(5)................... 6.7% 6.0% Percentage of senior unsecured debt to total equity.......................................... 0.% 49.0% ASSET QUALITY DATA: Managed auto receivables greater than 60 days delinquent(2).................................... $ 28,251 $ 57,186 Delinquencies as a percentage of managed auto receivables(2)........................... 3.7% 3.6% Net charge-offs........................................ $ 17,749 $ 38,073 Net charge-offs as a percentage of average managed auto receivables(2)(5)..................................... 5.5% 5.5%
8
DECEMBER 31, 1997 ---------------------------------- JUNE 30, JUNE 30, AS 1996 1997 ACTUAL ADJUSTED(6) ----------- ----------- --------------- ---------------- BALANCE SHEET DATA: Cash and cash equivalents.......................... $ 2,145 $ 6,027 $ 2,267 $ 2,267 Excess servicing receivable........................ 33,093 114,376 179,788 179,788 Owned auto receivables............................. 264,086 275,249 261,333 261,333 Total assets....................................... 330,159 493,453 562,295 564,533 Credit Agreement................................... 86,000 71,700 2,100 -- Warehouse Facility................................. -- -- 95,989 50,327 Mortgage Subsidiary Credit Agreement (7)........... -- 345 7,281 7,281 Automobile receivable-backed notes................. 67,847 23,689 14,138 14,138 9 1/4 Senior Notes due 2004 (8).................... -- 125,000 125,000 175,000 Notes payable (9).................................. 418 3,517 4,458 4,458 Total debt......................................... 154,265 224,251 248,966 251,204 Shareholders' equity............................... 163,225 216,536 254,946 254,946
_______________ (1) The Company has adopted the requirements of Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 establishes new standards for computing and presenting earnings per share, replacing existing accounting standards. All earnings per share and related weighted average share amounts for the periods presented in the above table have been restated to conform to the requirements of SFAS 128. (2) The Company engaged in the retail used car sales and finance business until December 31, 1992; effective as of such date, the Company exited the retail used car sales side of its business. For purposes of this summary, revenues from vehicle sales and finance charge income relating to the financing of the sales of vehicles from the Company's former used car sales business are classified as other income. Receivables generated from the former used car sales business are classified as other receivables and not included in managed receivables. (3) As further described in "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Company recognized an income tax benefit in fiscal 1995 equal to the expected future tax savings from using its net operating loss carry forward and other future tax benefits. (4) Represents the ratio of the sum of income before income taxes plus interest expense for the period to interest expense. (5) Data for the six-month periods ended December 31, 1996 and 1997 have been annualized. (6) The as adjusted balance sheet data have been calculated giving effect to the Prior Offering and the application of the net proceeds therefrom as if each occurred on December 31, 1997. (7) Fully guaranteed by the Company and certain of its Subsidiaries. (8) The Notes and the Original Notes have substantially similar terms but were issued under separate Indentures. See "Description of the Notes" and "Description of Other Debt - Original Notes." (9) Consists of certain capitalized equipment leases. 9 RISK FACTORS Prospective investors should carefully consider the specific factors set forth below, as well as the other information included in this Prospectus, in evaluating the Exchange Offer. DEPENDENCE ON FUNDING SOURCES Dependence on Credit Facilities and Warehouse Facilities. The Company depends on credit facilities and warehouse facilities with financial institutions to finance its purchase of contracts pending securitization. At the date of this Prospectus, the Company has two credit facilities with various banks providing for revolving credit borrowings of up to a total of $385 million, subject to defined borrowing bases. The Company's main credit Agreement (the "Credit Agreement"), which provides for up to $310 million of revolving borrowings (subject to a borrowing base), matures in October 1998. The Company's mortgage subsidiary credit Agreement (the "Mortgage Subsidiary Credit Agreement"), which provides for up to $75 million of revolving borrowings (subject to a borrowing base), matures in February 1999. In addition, the Company has a $245 million warehouse facility (the "Warehouse Facility") which expires in October 1998. All financings under the Warehouse Facility are secured by a first priority lien on the receivables and related assets held by CP Funding Corp., a special purpose subsidiary which is treated as a Securitization Trust under the Indenture. Financings under the Warehouse Facility are available pursuant to an advance formula which is subject to downward adjustment upon certain defined financial performance "Trigger Events." See "Description of Other Debt." There can be no assurance that such financing resources will continue to be available to the Company on reasonable terms or at all. To the extent that the Company is unable to extend or replace any of the these facilities and arrange new credit or warehouse facilities, the Company would have to curtail its contract purchasing activities, which would have a material adverse effect on the Company's financial position, liquidity and results of operations. The Company's Credit Agreement, Warehouse Facility and Mortgage Subsidiary Credit Agreement contain more extensive restrictions and covenants than the Indenture and require the Company to maintain specified financial ratios and satisfy certain financial tests. A breach of any of these covenants could result in an event of default under these agreements. Upon the occurrence of an event of default under these agreements, the lenders thereunder could elect to declare all amounts outstanding under these agreements, including accrued interest or other obligations, to be immediately due and payable and/or restrict the Company's ability to obtain additional borrowings under these agreements. The Company's ability to meet those financial ratios and tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those financial ratios and tests. Dependence on Securitization Program. Since December 1994, the Company has relied upon its ability to aggregate and sell receivables in the asset-backed securities market to generate cash proceeds for repayment of credit facilities and to purchase additional contracts from automobile dealers. Further, gains on sales generated by the Company's securitizations represent a significant portion of the Company's revenues. The Company endeavors to effect securitizations of its receivables on at least a quarterly basis. Accordingly, adverse changes in the Company's asset-backed securities program or in the asset-backed securities market for automobile receivables generally could materially adversely affect the Company's ability to purchase and resell loans on a timely basis and upon terms reasonably favorable to the Company. Any delay in the sale of receivables beyond a quarter-end would eliminate the gain on sale in the given quarter and adversely affect the Company's reported earnings for such quarter. Any such adverse changes or delays would have a material adverse effect on the Company's financial position, liquidity and results of operations. Dependence on Credit Enhancement. To date, all of the Company's securitizations have utilized credit enhancement in the form of financial guaranty insurance policies issued by Financial Security Assurance Inc. ("FSA") in order to achieve "AAA/Aaa" ratings, which reduces the costs of securitizations relative to alternative forms of credit enhancement available to the Company. FSA is not required to insure Company-sponsored securitizations and there can be no assurance that it will continue to do so or that future Company- sponsored securitizations will be similarly rated. Likewise, the Company is not required to utilize financial guaranty insurance policies issued by FSA or any other form of credit enhancement in connection with its securitizations. A downgrading of FSA's credit rating or FSA's withdrawal of credit enhancement could result in higher interest costs for future Company-sponsored securitizations. Such events could have a material adverse effect on the Company's financial position, liquidity and results of operations. 10 ABILITY TO SERVICE DEBT; LIQUIDITY AND CAPITAL NEEDS Although the Company believes that cash available from operating, investing and financing activities will be sufficient to enable it to make required interest payments on the Notes, its other debt obligations and other required payments for the foreseeable future, there can be no assurance in this regard. The Company may encounter liquidity problems which could affect its ability to meet such obligations while attempting to withstand competitive pressures or adverse economic conditions. In such circumstances, the value of the Notes could be materially adversely affected. The Company requires substantial amounts of cash to fund its contract purchase and securitization activities. Although the Company recognizes a gain on the sale of receivables upon the closing of a securitization, it typically receives the cash representing such gain over the actual life of the receivables securitized. The Company also incurs significant transaction costs in connection with a securitization and incurs both current and deferred tax liabilities as a result of the gains on sale. Accordingly, the Company's strategy of securitizing substantially all of its newly purchased receivables and increasing the number of contracts purchased will require substantial amounts of cash. The Company expects to continue to require substantial amounts of cash as the volume of the Company's contract purchases increases and its securitization program grows. The Company's primary cash requirements include the funding of: (i) contract purchases pending their securitization and sale; (ii) credit enhancement requirements in connection with the securitization and sale of the receivables; (iii) interest and principal payments under the Credit Agreement, the Mortgage Subsidiary Credit Agreement, the Warehouse Facility and the Original Notes and other indebtedness; (iv) fees and expenses incurred in connection with the securitization of receivables and the servicing of such receivables; (v) ongoing operating expenses; and (vi) tax payments due on receipt of excess cash flows from securitization trusts. The Company's primary sources of liquidity in the future are expected to be existing cash, financings under the Credit Agreement, the Mortgage Subsidiary Credit Agreement and the Warehouse Facility, sales of automobile receivables through securitizations, excess cash flow received from securitization trusts and, subject to capital market conditions, further issuances of debt or equity securities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." The Company's primary sources of liquidity as described in the paragraph above are expected to be sufficient to fund the Company's liquidity requirements for the next 12 months if the Company's future operations are consistent with management's current growth expectations. However, because the Company expects to continue to require substantial amounts of cash for the foreseeable future, it anticipates that it will need to effect debt or equity financings regularly, in addition to quarterly securitizations. The type, timing and terms of financing selected by the Company will be dependent upon the Company's cash needs, the availability of other financing sources and the prevailing conditions in the financial markets. There can be no assurance that any such sources will be available to the Company at any given time or as to the favorableness of the terms on which such sources may be available. LEVERAGE The Company currently has substantial outstanding Indebtedness (as defined in the Indenture) and the Company is significantly leveraged. Although the covenants under the Indenture will restrict the incurrence of Indebtedness by the Company and its Restricted Subsidiaries (as defined in the Indenture), the Indenture does not limit the amount of Indebtedness under Warehouse Facilities, such as the existing Warehouse Facility, that qualify as "Permitted Warehouse Debt" (as defined). Permitted Warehouse Debt will be defined as Indebtedness used exclusively to finance the purchase of automobile and other consumer loans or home mortgage loans by the Company or a Restricted Subsidiary, up to the face amount of the loans financed thereby. All Permitted Warehouse Debt will be secured by the receivables financed thereby. In addition, the Indenture will permit substantial additional secured borrowings under the Credit Agreement, the Mortgage Subsidiary Credit Agreement and other Credit Facilities (as defined in the Indenture), subject to a borrowing base formula. See "Description of the Notes--Certain Definitions." At December 31, 1997, on an as adjusted basis after giving effect to the Prior Offering and the application of the net proceeds therefrom, the aggregate principal amount of senior Indebtedness of the Company and its subsidiaries (excluding trade payables and other accrued liabilities) would have been approximately $251.2 million, an aggregate of $57.6 million of which would have been secured Indebtedness outstanding under the Credit Agreement, the Warehouse 11 Facility and the Mortgage Subsidiary Credit Agreement and approximately $14.1 million of which would have been asset-backed notes outstanding of the Company's Special Purpose Finance Subsidiaries. After giving effect to the Prior Offering and the application of the net proceeds therefrom, as of December 31, 1997, the Company would have had up to $125.3 million available for additional borrowing under the Credit Agreement, pursuant to the borrowing base requirements of such Agreement. All financings under the Warehouse Facility are secured by a first priority lien on the receivables and related assets held by CP Funding Corp., a special purpose subsidiary which is treated as a Securitization Trust under the Indenture. See "--Holding Company Structure; Effective Subordination" and "Description of Other Debt." The Company's ability to make payments of principal or interest on, or to refinance its Indebtedness (including the Notes) will depend on its future operating performance, and its ability to effect additional securitizations and debt and/or equity financings, which to a certain extent is subject to economic, financial, competitive and other factors beyond its control. If the Company is unable to generate sufficient cash flow in the future to service its debt, it may be required to refinance all or a portion of its existing debt, including the Notes, or to obtain additional financing. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained. The inability to obtain additional financing could have a material adverse effect on the Company. The degree to which the Company is leveraged could have important consequences to the holders of the Notes, including: (i) the Company may be more vulnerable to adverse general economic and industry conditions; (ii) the Company may find it more difficult to obtain additional financing for future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes; and (iii) the Company will have to dedicate a substantial portion of the Company's cash resources to the payment of principal and interest on indebtedness outstanding under the Credit Agreement, the Mortgage Subsidiary Credit Agreement, the Warehouse Facility (all of which become due prior to the maturity of the Notes) and the Original Notes, thereby reducing the funds available for operations and future business opportunities. In addition, the Indenture contains certain covenants which could limit the Company's operating and financial flexibility. See "Description of the Notes--Certain Covenants." DEFAULT AND PREPAYMENT RISKS The Company's results of operations, financial condition and liquidity depend, to a material extent, on the performance of contracts purchased and held by the Company prior to their sale in a securitization transaction as well as the subsequent performance of receivables sold to securitization trusts. A portion of the loans acquired by the Company may default or prepay during the period prior to their sale in a securitization transaction or if they remain owned by the Company. The Company bears the full risk of losses resulting from payment defaults during such period. In the event of a payment default, the collateral value of the financed vehicle may not cover the outstanding loan balance and costs of recovery. The Company maintains an allowance for losses on loans held by the Company, which reflects management's estimates of anticipated losses for such loans. If the allowance is inadequate, then the Company would recognize as an expense the losses in excess of such allowance and results of operations could be adversely affected. In addition, under the terms of the Credit Agreement, the Company is not able to borrow against defaulted loans and loans greater than 30 days delinquent held by the Company. Similarly, payment defaults can cause the amount of financings available under the Warehouse Facility to be reduced or terminated. The Company also retains a substantial portion of the default and prepayment risk associated with the receivables that it sells pursuant to Company-sponsored securitizations. A large component of the gain recognized on such sales and the corresponding asset recorded on the Company's balance sheet is excess servicing receivable which is based on the present value of estimated future excess cash flows from the securitized receivables which will be received by the Company. Accordingly, excess servicing receivable is calculated on the basis of management's assumptions concerning, among other things, defaults and prepayments. Actual defaults and prepayments may vary from management's assumptions, possibly to a material degree. In addition, the Company is required to deposit substantial amounts of the cash flows generated by its interests in Company-sponsored securitizations ("restricted cash") into spread accounts which are pledged to FSA as security for the Company's obligation to reimburse FSA for any amounts which may be paid out on financial guarantee insurance policies. The Company regularly measures its default, prepayment and other assumptions against the actual performance of securitized receivables. If the Company were to determine, as a result of such regular review or otherwise, that it underestimated defaults and/or prepayments, or that any other material assumptions were inaccurate, the Company would 12 be required to adjust the carrying value of its excess servicing receivable by making a charge to income and writing down the carrying value of excess servicing receivable on its balance sheet. Future cash flows from securitization trusts may also be less than expected and the Company's results of operations and liquidity would be adversely affected, possibly to a material degree. In addition, an increase in prepayments and defaults would reduce the size of the Company's servicing portfolio which would reduce the Company's servicing fee income further adversely affecting results of operations and cash flow. A material write-down in excess servicing receivable and the corresponding decreases in earnings and cash flow could limit the Company's ability to service debt (including the Notes) and to affect future securitizations and other financings. To date, no material write downs have been required. Although the Company believes that it has made reasonable assumptions as to the future cash flows of the various pools of receivables that have been sold in securitization transactions, actual rates of default or prepayment may differ from those assumed and other assumptions may be required to be revised upon future events. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." As of December 31, 1997, restricted cash and excess servicing receivable were approximately $76.2 million and $179.8 million, respectively. Depending on the Company's growth, restricted cash and excess servicing receivable may become a larger share of the Company's overall assets. PORTFOLIO PERFORMANCE; NEGATIVE IMPACT ON CASH FLOW; RIGHT TO TERMINATE NORMAL SERVICING Generally, the form of credit enhancement agreement entered into in connection with securitization transactions contains specified limits on the delinquency, default and loss rates on the receivables included in each trust. If, at any measuring date, the delinquency, default or loss rate with respect to any trust were to exceed the specified limits, provisions of the credit enhancement agreement would automatically increase the level of credit enhancement requirements for that trust. During the period in which the specified delinquency, default and loss rates were exceeded, excess cash flow, if any, from the trust would be used to fund the increased credit enhancement levels instead of being distributed to the Company, which would have an adverse effect on the Company's cash flow. Further, the credit enhancement requirements for each securitization trust are cross-collateralized to the credit enhancement requirements established in connection with each of the Company's other securitization trusts, such that excess cash flow from a performing securitization trust insured by FSA may be used to support increased credit enhancement requirements for a nonperforming securitization trust insured by FSA, thereby further restricting excess cash flow available to the Company. As of the date of this Prospectus, the Company has on occasion exceeded these specified limits, however, FSA waived each of these occurrences. There can be no assurance that FSA would waive any such future occurrence. The credit enhancement agreements entered into in connection with securitization transactions contain additional specified limits on the delinquency, default and loss rates on the receivables included in each trust which are higher than the limits referred to in the preceding paragraph. If, at any measuring date, the delinquency, default or loss rate with respect to any trust were to exceed these additional specified limits applicable to such trust, provisions of the credit enhancement agreements permit FSA to terminate the Company's servicing rights to the receivables sold to that trust. In addition, the servicing agreements are cross-defaulted so that a default under one servicing agreement would allow FSA to terminate the Company's servicing rights under all of its servicing agreements. Although the Company has never exceeded such delinquency, default or loss rates, there can be no assurance that the Company's servicing rights with respect to the automobile receivables in such trusts, or any other trust which exceeds the specified limits in future periods, will not be terminated. FSA has other rights to terminate the Company as servicer if (i) the Company were to breach its obligations under the servicing agreements, (ii) FSA was required to make payments under its policy or (iii) certain bankruptcy or insolvency events were to occur. As of the date of this Prospectus, no such termination events have occurred with respect to any of the trusts formed by the Company. HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION The Company derives substantially all of its revenues from its subsidiaries and from its interests in securitization trusts. Holders of any secured indebtedness of the Company or its subsidiaries or such securitization trusts will have claims that are prior to the claims of the holders of the Notes with respect to the assets securing most of the Company's other indebtedness. Notably, the Company and certain of its subsidiaries (including the Guarantors) are parties to the Credit Agreement and the Mortgage Subsidiary Credit Agreement which are secured by liens on all of the receivables 13 financed thereby and certain of the Company's and its subsidiaries' other assets. All financings under the Warehouse Facility are secured by a first priority lien on the receivables and related assets held by CP Funding Corp., a special purpose subsidiary which is treated as a Securitization Trust under the Indenture. The Notes will be effectively subordinated to all such secured indebtedness. As of December 31, 1997, on an as adjusted basis after giving effect to the Prior Offering and the application of the net proceeds therefrom, the aggregate amount of secured indebtedness of the Company and its subsidiaries (including borrowings under the Credit Agreement, the Warehouse Facility and the Mortgage Subsidiary Credit Agreement) would have been approximately $251.2 million and approximately $125.3 million would have been available for additional borrowing under the Credit Agreement, pursuant to the borrowing base requirements of such agreement. If the Company defaulted under its obligations under the Credit Agreement, the Warehouse Facility and the Mortgage Subsidiary Credit Agreement, such lenders could proceed against the collateral granted to them to secure that indebtedness. If any senior Indebtedness were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full that indebtedness and the other indebtedness of the Company, including the Notes. See "Description of Other Debt." In addition, although a substantial portion of the Company's business is conducted through AFS Funding Corp. and CP Funding Corp., wholly-owned subsidiaries, AFS Funding Corp. and CP Funding Corp. will not be Guarantors with respect to the Notes. AFS Funding Corp. is a limited purpose corporation established by the Company to facilitate Company-sponsored securitizations and its ability to pay dividends is dependent on the performance of the receivables underlying those securitizations and is subject to substantial contractual restrictions pertaining to the Company-sponsored securitizations. CP Funding Corp. is also a limited purpose corporation established by the Company to facilitate financings under the Warehouse Facility and is subject to substantial contractual restrictions under the Warehouse Facility. Because AFS Funding Corp. and CP Funding Corp. are not Guarantors, the Notes will be effectively subordinated to all indebtedness and other obligations of AFS Funding Corp. and CP Funding Corp. AFS Funding Corp. is also subject to certain contingent claims by FSA relating to the financial guarantee insurance policies issued by FSA in connection with the Company-sponsored securitizations. The Company has agreed to reimburse FSA, on a limited recourse basis, for amounts paid by FSA under these financial guarantee insurance policies. In order to secure such reimbursement obligations, the Company has granted to FSA a lien on the capital stock of, and certain assets of, AFS Funding Corp., most notably the spread accounts and the restricted cash required to be deposited therein. FSA will have claims that are prior to the claims of the holders of the Notes with respect to these assets and the Notes will be effectively subordinated to all such reimbursement rights. Substantially all of AFS Funding Corp.'s other assets are excess servicing receivable consisting of subordinated interests in Company-sponsored securitizations that are effectively subordinated to the asset-backed securities issued in such securitizations. As of December 31, 1997, restricted cash and excess servicing receivable were approximately $76.2 million and $179.8 million, respectively. There can be no assurance that the Company's operations, independent of AFS Funding Corp., will generate sufficient cash flow to support payment of interest or principal on the Notes, or that dividend distributions will be available from AFS Funding Corp. to fund such payments. See "Description of Other Debt--Financial Guarantee Insurance Policies." IMPLEMENTATION OF BUSINESS STRATEGY The Company's financial position and results of operations depend on its ability to execute its business strategy. The Company's ability to execute its business strategy depends on its ability to obtain substantial additional financing, to expand its automobile finance branch network, to attract and retain skilled employees and on the ability of its officers and key employees to manage growth successfully. The failure or inability of the Company to execute its business strategy could materially adversely affect its financial position, liquidity and results of operations. The Company's business strategy also includes leveraging its expertise to broaden its indirect lending to Sub-Prime Borrowers through the 1996 purchase of AMS, the Company's mortgage subsidiary. While not currently representing a material portion of the Company's assets or revenues, management intends over time to devote substantial resources to pursue growth of AMS's business of originating and purchasing home equity loans made to Sub-Prime Borrowers. The conduct of a mortgage finance business requires a substantial amount of cash. Prior to the purchase of AMS, the Company had no prior experience in the residential mortgage business. Further, AMS's business will require substantial additional resources to fund its growth. There can be no assurance that the Company will be able to successfully implement its sub-prime residential mortgage loan business strategy. The failure to effectively implement such strategy or to obtain adequate 14 resources to fund AMS's growth will have material adverse effects on the Company's financial position, liquidity and results of operations. CREDIT-IMPAIRED BORROWERS The Company specializes in purchasing, securitizing and servicing sub-prime receivables. Sub-Prime Borrowers are associated with higher-than-average delinquency and default rates. While the Company believes that it effectively manages such risks with its proprietary credit scoring models, risk-based loan pricing and other underwriting policies and collection methods, no assurance can be given that such criteria or methods will be effective in the future. In the event that the Company underestimates the default risk or under-prices contracts that it purchases, the Company's financial position, liquidity and results of operations would be adversely affected, possibly to a material degree. ECONOMIC CONDITIONS General. Delinquencies, defaults, repossessions and losses generally increase during periods of economic recession. Such periods also may be accompanied by decreased consumer demand for automobiles and declining values of automobiles securing outstanding loans, thereby weakening collateral coverage and increasing the possibility of a loss in the event of default. Significant increases in the inventory of used automobiles during periods of economic recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of such sales. Because the Company focuses on Sub-Prime Borrowers, the actual rates of delinquencies, defaults, repossessions and losses on such loans could be higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn. In addition, during an economic slowdown or recession, the Company's servicing costs may increase without a corresponding increase in its servicing fee income. While the Company believes that the underwriting criteria and collection methods it employs enable it to manage the higher risks inherent in loans made to Sub-Prime Borrowers, no assurance can be given that such criteria or methods will afford adequate protection against such risks. Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could also adversely affect the Company's ability to effect future securitizations and correspondingly, its financial position, liquidity and results of operations. See "--Dependence on Funding Sources." Interest Rates. The Company's profitability may be directly affected by the level of and fluctuations in interest rates, which affect the Company's ability to earn a gross interest rate spread. As the level of interest rates increases, the Company's gross interest rate spread will generally decline since the rates charged on the contracts it purchases from dealers are generally at or near the statutory maximums, affording the Company little opportunity to pass on any increased interest costs. Furthermore, the Company's future gains recognized upon the securitization of automobile receivables will also be affected by interest rates. The Company recognizes a gain in connection with its securitizations based upon the estimated present value of projected future excess cash flows from the securitization trusts, which is largely dependent upon the gross interest rate spread. The Company believes that its profitability and liquidity would be adversely affected during any period of higher interest rates, possibly to a material degree. The Company monitors the interest rate environment and employs pre-funding or other hedging strategies designed to mitigate the impact of changes in interest rates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Hedging and Pre- funding Strategy." There can be no assurance, however, that pre-funding or other hedging strategies will mitigate the impact of changes in interest rates. COMPETITION Competition in the field of sub-prime automobile finance is intense. The automobile finance market is highly fragmented and is served by a variety of financial entities including the captive finance affiliates of major automotive manufacturers, banks, thrifts, credit unions and independent finance companies. Many of these competitors have substantially greater financial resources and lower costs of funds than the Company. Many of these competitors also have long standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer floor plan financing and leasing, which are not provided by the Company. Providers of automobile financing have traditionally competed on the bases of interest rate charged, the quality of credit accepted, the flexibility of loan terms offered and the quality of service provided to dealers and customers. In seeking to establish itself 15 as one of the principal financing sources of the dealers it serves, the Company competes predominately on the basis of its high level of dealer service and strong dealer relationships and by offering flexible loan terms. There can be no assurance that the Company will be able to compete successfully in this market or against such competitors. See "Business--Competition." FRAUDULENT CONVEYANCE STATUTES Under applicable provisions of federal bankruptcy law or comparable provisions of state fraudulent transfer law, if, among other things, the Company or any Guarantor, at the time it incurred the indebtedness evidenced by the Notes or its Subsidiary Guarantee, (i) (a) was or is insolvent or rendered insolvent by reason of such occurrence or (b) was or is engaged in a business or transaction for which the assets remaining with the Company or such Guarantor constituted unreasonably small capital or (c) intended or intends to incur, or believed or believes that it would incur, debts beyond its ability to pay such debts as they mature, and (ii) the Company or such Guarantor received or receives less than reasonably equivalent value or fair consideration for the incurrence of such indebtedness, the Notes and the Subsidiary Guarantees, and any pledge or other security interest securing such indebtedness, could be voided, or claims in respect of the Notes or the Subsidiary Guarantees could be subordinated to all other debts of the Company or such Guarantor, as the case may be. The voiding or subordination of any such indebtedness could result in an Event of Default (as defined in the Indenture) with respect to such indebtedness, which could result in acceleration thereof. In addition, the payment of interest and principal by the Company pursuant to the Notes or the payment of amounts by a Guarantor pursuant to a Subsidiary Guarantee could be voided and required to be returned to the person making such payment, or to a fund for the benefit of the creditors of the Company or such Guarantor, as the case may be. The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, the Company or a Guarantor would be considered insolvent if (i) the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets at a fair valuation or if the present fair saleable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature or (ii) it could not pay its debts as they become due. On the basis of their historical financial information, recent operating history as discussed in "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other factors, the Company and each Guarantor believes that, after giving effect to the indebtedness incurred in connection with the Prior Offering, it (i) will not be insolvent, will not have unreasonably small capital for the businesses in which it is engaged and will not incur debts beyond its ability to pay such debts as they mature and (ii) will have sufficient assets to satisfy any probable money judgment against it in any pending action. There can be no assurance, however, as to what standard a court would apply in making such determinations. REGULATION The Company's business is subject to numerous federal and state consumer protection laws and regulations which, among other things: (i) require the Company to obtain and maintain certain licenses and qualifications; (ii) limit the interest rates, fees and other charges the Company is allowed to charge; (iii) limit or prescribe certain other terms of the Company's automobile installment sales contracts; (iv) require specific disclosures; and (v) define the Company's rights to repossess and sell collateral. The Company believes it is in substantial compliance with all such laws and regulations, and that such laws and regulations have had no material effect on the Company's ability to operate its business. Changes in existing laws or regulations, or in the interpretation thereof, or the promulgation of any additional laws or regulations, could have a material adverse effect on the Company's business. In addition, the Company retains some of the regulatory risk on receivables sold in securitizations as a result of representations and warranties made by the Company in such transactions. See "Business--Regulation." As a result of the consumer-oriented nature of the industry in which the Company operates and uncertainties with respect to the application of various laws and regulations in certain circumstances, industry participants are named from time to time as defendants in litigation involving alleged violations of federal and state consumer lending or other similar laws and regulations. A significant judgment against the Company in connection with any litigation could have a material 16 adverse affect on the Company's financial condition and results of operations. In addition, if it were determined that a material number of loans purchased by the Company involved violations of applicable lending laws by automobile dealers, the Company's financial condition and results of operations could be materially adversely affected. See "Business--Regulation." POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER Upon a Change of Control, the Company will be required to offer to repurchase all outstanding Notes and Original Notes at 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase and Liquidated Damages, if any. However, there can be no assurance that sufficient funds will be available at the time of any Change of Control to make any required repurchases of Notes or Original Notes tendered, or that restrictions in the Credit Agreement or the Mortgage Subsidiary Credit Agreement will allow the Company to make such required repurchases. Notwithstanding these provisions, the Company could enter into certain transactions, including certain recapitalizations, that would not constitute a Change of Control but would increase the amount of debt outstanding at such time. See "Description of the Notes--Repurchase at the Option of Holders." ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER The New Notes are a new issue of securities, have no established trading market and may not be widely distributed. The Company does not intend to list the New Notes on any national securities exchange or to seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Company has been advised by the Initial Purchasers that they presently intend to make a market in the New Notes. However, the Initial Purchasers are not obligated to do so and any market making activities with respect to the New Notes may be discontinued at any time without notice. In addition, such market making activity will be subject to the limitations imposed by the Exchange Act and may be limited during the Exchange Offer and at certain other times. No assurance can be given that an active public or other market will develop for the New Notes or as to the liquidity of or the trading market for the New Notes. If a trading market does not develop or is not maintained, holders of the New Notes may experience difficulty in reselling the New Notes or may be unable to sell them at all. If a market for the New Notes develops, any such market may be discontinued at any time. If a public trading market develops for the New Notes, future trading prices of the New Notes will depend on many factors, including, among other things, prevailing interest rates, the Company's results of operations and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other facts, including the financial condition of the Company, the New Notes may trade at a discount from their principal amount. 17 THE EXCHANGE OFFER PURPOSE AND EFFECT The Old Notes were sold by the Company to the Initial Purchasers on January 29, 1998, pursuant to the Purchase Agreement. The Initial Purchasers subsequently resold the Old Notes in reliance on Rule 144A under the Securities Act. The Company, the Guarantors and the Initial Purchasers also entered into the Registration Rights Agreement, pursuant to which the Company agreed, with respect to the Old Notes and subject to the Company's determination that the Exchange Offer is permitted under applicable law, to (i) cause to be filed, on or prior to February 28, 1998, a registration statement with the Commission under the Securities Act concerning the Exchange Offer, (ii) use its best efforts (a) to cause such registration statement to be declared effective by the Commission on or prior to April 29, 1998, and (b) to cause the Exchange Offer to be consummated on or prior to 30 business days after the date such registration statement is declared effective by the Commission. The Company will keep the Exchange Offer open for a period of not less than 20 business days and not more than 30 business days. This Exchange Offer is intended to satisfy the Company's exchange offer obligations under the Registration Rights Agreement. CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES Following the expiration of the Exchange Offer, holders of Old Notes not tendered, or not properly tendered, will not have any further registration rights and such Old Notes will continue to be subject to the existing restrictions on transfer thereof. Accordingly, the liquidity of the market for a holder's Old Notes could be adversely affected upon expiration of the Exchange Offer if such holder elects to not participate in the Exchange Offer. TERMS OF THE EXCHANGE OFFER The Company hereby offers, upon the terms and subject to the conditions set forth herein and in the accompanying Letter of Transmittal, to exchange $1,000 in principal amount of the New Notes for each $1,000 in principal amount of the outstanding Old Notes. The Company will accept for exchange any and all Old Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders of the Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered for exchange. However, the Exchange Offer is subject to the terms and provisions of the Registration Rights Agreement. See "--Conditions of the Exchange Offer." Old Notes may be tendered only in multiples of $1,000. Subject to the foregoing, holders of Old Notes may tender less than the aggregate principal amount represented by the Old Notes held by them, provided that they appropriately indicate this fact on the Letter of Transmittal accompanying the tendered Old Notes. As of the date of this Prospectus, $50.0 million in aggregate principal amount of the Old Notes is outstanding, the maximum amount authorized by the Indenture for all Notes. As of March 24, 1998, there was one registered holder of the Old Notes, Cede & Co., which held the Old Notes for 10 of its participants. Solely for reasons of administration, the Company has fixed the close of business on March 23, 1998, as the record date (the "Record Date") for purposes of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially. Only a holder of the Old Notes (or such holder's legal representative or attorney-in-fact) may participate in the Exchange Offer. There will be no fixed record date for determining holders of the Old Notes entitled to participate in the Exchange Offer. The Company believes that, as of the date of this Prospectus, no such holder is an affiliate (as defined in Rule 405 under the Securities Act) of the Company . The Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Old Notes and for the purposes of receiving the New Notes from the Company. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. 18 EXPIRATION DATE; EXTENSIONS; AMENDMENTS The Expiration Date shall be April 24, 1998, at 5:00 p.m., New York City time, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the Expiration Date shall be the latest date and time to which the Exchange Offer is extended, but shall not be later than May 8, 1998. In order to extend the Exchange Offer, the Company will notify the Exchange Agent of any extension by oral or written notice and will make a public announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. The Company reserves the right, in its sole discretion, (i) to delay accepting any Old Notes, (ii) to extend the Exchange Offer, (iii) if any of the conditions set forth below under "--Conditions of the Exchange Offer" shall not have been satisfied, to terminate the Exchange Offer, by giving oral or written notice of such delay, extension, or termination to the Exchange Agent, and (iv) to amend the terms of the Exchange Offer in any manner. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendments by means of a prospectus supplement that will be distributed to the registered holders of the Old Notes. Modification of the Exchange Offer, including, but not limited to, (i) extension of the period during which the Exchange Offer is open and (ii) satisfaction of the conditions set forth below under "--Conditions of the Exchange Offer" may require that at least five (5) business days remain in the Exchange Offer. CONDITIONS OF THE EXCHANGE OFFER The Exchange Offer is not conditioned upon any minimum principal amount of the Old Notes being tendered for exchange. However, the Exchange Offer is conditioned upon the declaration by the Commission of the effectiveness of the Exchange Offer Registration Statement of which this Prospectus constitutes a part. TERMINATION OF CERTAIN RIGHTS The Registration Rights Agreement provides that, subject to certain exceptions, in the event of a Registration Default, holders of Old Notes are entitled to receive Liquidated Damages of $0.05 per week per $1,000 principal amount of Old Notes held by such holders (up to a maximum of $0.50 per week per $1,000 principal amount of Old Notes). A "Registration Default" with respect to the Exchange Offer shall occur if: (i) the Exchange Offer Registration Statement has not been filed with the Commission on or prior to February 28, 1998; (ii) the Exchange Offer Registration Statement is not declared effective on or prior to April 29, 1998 (the "Effectiveness Target Date"), (iii) the Company fails to consummate the Exchange Offer within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement, or (d) the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective during the period specified in the Registration Rights Agreement. Holders of New Notes will not be and, upon consummation of the Exchange Offer, holders of Old Notes will no longer be, entitled to (i) the right to receive the Liquidated Damages or (ii) certain other rights under the Registration Rights Agreement intended for holders of Old Notes. The Exchange Offer shall be deemed consummated upon the occurrence of the delivery by the Company to the Registrar under the Indenture of New Notes in the same aggregate principal amount as the aggregate principal amount of Old Notes that are tendered by holders thereof pursuant to the Exchange Offer. ACCRUED INTEREST The New Notes will bear interest at a rate equal to 9 1/4% per annum, which interest shall accrue from January 29, 1998 or from the most recent Interest Payment Date with respect to the Old Notes to which interest was paid or duly provided for. See "Description of Notes--Principal, Maturity and Interest." 19 PROCEDURES FOR TENDERING OLD NOTES The tender of a holder's Old Notes as set forth below and the acceptance thereof by the Company will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Except as set forth below, a holder who wishes to tender Old Notes for exchange pursuant to the Exchange Offer must transmit such Old Notes, together with a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to the Exchange Agent at the address set forth on the back cover page of this Prospectus prior to 5:00 p.m., New York City time, on the Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. Each signature on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Old Notes surrendered for exchange pursuant hereto are tendered (i) by a registered holder of the Old Notes who has not completed either the box entitled "Special Exchange Instructions" or the box entitled "Special Delivery Instructions" in the Letter of Transmittal, or (ii) by an Eligible Institution (as defined under "The Exchange Offer--Procedures for Tendering Old Notes"). In the event that a signature on a Letter of Transmittal or a notice of withdrawal, as the case may be, is required to be guaranteed, such guarantee must be by a firm which is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or otherwise be an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If the Letter of Transmittal is signed by a person other than the registered holder of the Old Notes, the Old Notes surrendered for exchange must either (i) be endorsed by the registered holder, with the signature thereon guaranteed by an Eligible Institution, or (ii) be accompanied by a bond power, in satisfactory form as determined by the Company in its sole discretion, duly executed by the registered holder, with the signature thereon guaranteed by an Eligible Institution. The term "registered holder" as used herein with respect to the Old Notes means any person in whose name the Old Notes are registered on the books of the Registrar. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of Old Notes tendered for exchange will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered and to reject any Old Notes the Company's acceptance of which might, in the judgment of the Company or its counsel, be unlawful. The Company also reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to particular Old Notes either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Old Notes in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) by the Company shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes for exchange must be cured within such period of time as the Company shall determine. The Company will use reasonable efforts to give notification of defects or irregularities with respect to tenders of Old Notes for exchange but shall not incur any liability for failure to give such notification. Tenders of the Old Notes will not be deemed to have been made until such irregularities have been cured or waived. If any Letter of Transmittal, endorsement, bond power, power of attorney or any other document required by the Letter of Transmittal is signed by a trustee, executor, corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company, in its sole discretion, of such person's authority to so act must be submitted. Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such Beneficial Owner's behalf. If such Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to completing and executing the Letter of Transmittal and tendering Old Notes, make appropriate arrangements to register ownership of the Old Notes in such Beneficial Owner's name. Beneficial Owners should be aware that the transfer of registered ownership may take considerable time. 20 By tendering, each registered holder will represent to the Company that, among other things (i) the New Notes to be acquired in connection with the Exchange Offer by the holder and each Beneficial Owner of the Old Notes are being acquired by the holder and each Beneficial Owner in the ordinary course of business of the holder and each Beneficial Owner, (ii) the holder and each Beneficial Owner are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the New Notes, (iii) the holder and each Beneficial Owner acknowledge and agree that any person participating in the Exchange Offer for the purpose of distributing the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction of the New Notes acquired by such person and cannot rely on the position of the Staff of the Commission set forth in "no-action" letters that are discussed herein under "--Resales of the New Notes," (iv) that if the holder is a broker-dealer that acquired Old Notes as a result of market making or other trading activities, it will deliver a prospectus in connection with any resale of New Notes acquired in the Exchange Offer, (v) the holder and each Beneficial Owner understand that a secondary resale transaction described in clause (iii) above should be covered by an effective registration statement containing the selling security holder information required by Item 507 of Regulation S-K of the Securities Act, and (vi) neither the holder nor any Beneficial Owner is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company except as otherwise disclosed to the Company in writing. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, may tender their Old Notes according to the guaranteed delivery procedures set forth in the Letter of Transmittal. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution and a Notice of Guaranteed Delivery (as defined in the Letter of Transmittal) must be signed by such holder, (ii) on or prior to the Expiration Date, the Exchange Agent must have received from the holder and the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number or numbers of the tendered Old Notes, and the principal amount of tendered Old Notes, stating that the tender is being made thereby and guaranteeing that, within five (5) business days after the date of delivery of the Notice of Guaranteed Delivery, the tendered Old Notes, a duly executed Letter of Transmittal and any other required documents will be deposited by the Eligible Institution with the Exchange Agent, and (iii) such properly completed and executed documents required by the Letter of Transmittal and the tendered Old Notes in proper form for transfer must be received by the Exchange Agent within five (5) business days after the Expiration Date. Any Holder who wishes to tender Old Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery and Letter of Transmittal relating to such Old Notes prior to 5:00 p.m., New York City time, on the Expiration Date. ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES Upon satisfaction or waiver of all the conditions to the Exchange Offer, the Company will accept any and all Old Notes that are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly after acceptance of the Old Notes. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Old Notes, when, as, and if the Company has given oral or written notice thereof to the Exchange Agent. In all cases, issuances of New Notes for Old Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of such Old Notes, a properly completed and duly executed Letter of Transmittal and all other required documents; provided, however, that the Company reserves the absolute right to waive any defects or irregularities in the tender or conditions of the Exchange Offer. If any tendered Old Notes are not accepted for any reason, such unaccepted Old Notes will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. 21 WITHDRAWAL RIGHTS Tenders of the Old Notes may be withdrawn by delivery of a written notice to the Exchange Agent, at its address set forth on the back cover page of this Prospectus, at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes, as applicable), (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by a bond power in the name of the person withdrawing the tender, in satisfactory form as determined by the Company in its sole discretion, duly executed by the registered holder, with the signature thereon guaranteed by an Eligible Institution together with the other documents required upon transfer by the Indenture, and (iv) specify the name in which such Old Notes are to be re-registered, if different from the Depositor, pursuant to such documents of transfer. Any questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, in its sole discretion. The Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are withdrawn will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal. Properly withdrawn Old Notes may be retendered by following one of the procedures described under "The Exchange Offer--Procedures for Tendering Old Notes" at any time on or prior to the Expiration Date. THE EXCHANGE AGENT; ASSISTANCE Bank One, N.A. is the Exchange Agent. All tendered Old Notes, executed Letters of Transmittal and other related documents should be directed to the Exchange Agent. Questions and requests for assistance and requests for additional copies of this Prospectus, the Letter of Transmittal and other related documents should be addressed to the Exchange Agent as follows: BY REGISTERED OR CERTIFIED MAIL: Bank One, N.A. 235 West Schrock Road Westerville, Ohio 43081 or Bank One, N.A. c/o First Chicago Trust Company of New York Attention: Corporate Trust Department 14 Wall Street 8th Floor, Window 2 New York, New York 10005 BY HAND OR OVERNIGHT COURIER: Bank One, N.A. 235 West Schrock Road Westerville, Ohio 43081 or 22 Bank One, N.A. c/o First Chicago Trust Company of New York Attention: Corporate Trust Department 14 Wall Street 8th Floor, Window 2 New York, New York 10005 BY FACSIMILE: (614) 248-9987 (OH) or (212) 240-8941 (NY) Confirm by Telephone: (212) 240-8938 (NY) 1-800-346-5153 FEES AND EXPENSES All expenses incident to the Company's consummation of the Exchange Offer and compliance with the Registration Rights Agreement will be borne by the Company, including, without limitation: (i) all registration and filing fees (including fees and expenses of compliance with state securities or Blue Sky laws), (ii) printing expenses (including expenses of printing certificates for the New Notes in a form eligible for deposit with DTC and of printing prospectuses), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) fees and disbursements of independent certified public accountants, (vi) rating agency fees, (vii) internal expenses of the Company (including all salaries and expenses of officers and employees of the Company performing legal or accounting duties), and (viii) fees and expenses, if any, incurred in connection with the listing of the New Notes on a securities exchange. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptance of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Old Notes, as reflected in the Company's accounting records on the date of the exchange. Accordingly, no gain or loss will be recognized by the Company for accounting purposes. The expenses of the Exchange Offer will be amortized over the term of the New Notes. RESALES OF THE NEW NOTES Based on an interpretation by the Staff of the Commission set forth in "no- action" letters issued to third parties, the Company believes that the New Notes issued pursuant to the Exchange Offer to a holder in exchange for Old Notes may be offered for resale, resold and otherwise transferred by such holder (other than (i) a broker-dealer who purchased Old Notes directly from the Company for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act, or (ii) a person that is an affiliate of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities 23 Act, provided that such holder is acquiring the New Notes in the ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the New Notes. The Company has not requested or obtained an interpretive letter from the Staff of the Commission with respect to this Exchange Offer, and the Company and the holders are not entitled to rely on interpretive advice provided by the Staff to other persons, which advice was based on the facts and conditions represented in such letters. However, the Exchange Offer is being conducted in a manner intended to be consistent with the facts and conditions represented in such letters. If any holder acquires New Notes in the Exchange Offer for the purpose of distributing or participating in a distribution of the New Notes, such holder cannot rely on the position of the Staff of the Commission enunciated in Morgan Stanley & Co., Incorporated (available June 5, 1991) and Exxon Capital Holdings Corporation (available April 13, 1989), or interpreted in the Commission's letter to Shearman & Sterling (available July 2, 1993), or similar "no-action" or interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction, unless an exemption from registration is otherwise available. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market making or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." It is expected that the New Notes will be freely transferable by the holders thereof, subject to the limitations described in the immediately preceding paragraph. Sales of New Notes acquired in the Exchange Offer by holders who are "affiliates" of the Company within the meaning of the Securities Act will be subject to certain limitations on resale under Rule 144 of the Securities Act. Such persons will only be entitled to sell New Notes in compliance with the volume limitations set forth in Rule 144, and sales of New Notes by affiliates will be subject to certain Rule 144 requirements as to the manner of sale, notice and the availability of current public information regarding the Company. The foregoing is a summary only of Rule 144 as it may apply to affiliates of the Company. Any such persons must consult their own legal counsel for advice as to any restrictions that might apply to the resale of their Notes. 24 CAPITALIZATION The following table sets forth certain information regarding the Company's debt and capitalization as of December 31, 1997, and as adjusted to give effect to the sale by the Company of the Old Notes and the application of the net proceeds therefrom. This table should be read in conjunction with the Consolidated Financial Statements and related notes thereto included elsewhere in this Prospectus.
DECEMBER 31, 1997 ----------------------- ACTUAL AS ADJUSTED --------- ------------ (IN THOUSANDS) Debt: Credit Agreement (1)............................................................ $ 2,100 $ - Warehouse Facility.............................................................. 95,989 50,327 Mortgage Subsidiary Credit Agreement............................................ 7,281 7,281 Automobile receivables--backed notes(2)......................................... 14,138 14,138 9 1/4% Senior Notes (3)......................................................... 125,000 175,000 Notes payable (4)............................................................... 4,458 4,458 -------- -------- Total debt................................................................. 248,966 251,204 -------- -------- Shareholders' equity: Preferred stock, $.01 par value per share, 20,000,000 shares authorized; none issued................................................................... __ __ Common stock, $.01 par value per share; 120,000,000 shares authorized; 33,841,815 shares issued...................................................... 338 338 Additional paid-in capital...................................................... 213,890 213,890 Unrealized gain on excess servicing receivable, net of income taxes............. 3,410 3,410 Retained earnings............................................................... 60,841 60,841 Treasury stock, at cost (3,921,028 shares)...................................... (23,533) (23,533) -------- -------- Total shareholders' equity................................................... 254,946 254,946 -------- -------- Total capitalization...................................................... $503,912 $506,150 ======== ========
______________ (1) As of December 31, 1997, on an as adjusted basis after giving effect to the Prior Offering, approximately $125.3 million was available for borrowing under the Credit Agreement, pursuant to the borrowing base requirements of such Agreement. See "Description of Other Debt." (2) These secured notes were issued in the Company's second securitization transaction. See "Description of Other Debt--Asset-Backed Securities." (3) The Notes and the Original Notes have substantially similar terms but were issued under separate Indentures. See "Description of the Notes" and "Description of Other Debt--Original Notes." (4) Consists of certain capitalized equipment leases. 25 SELECTED CONSOLIDATED FINANCIAL DATA The following table presents selected unaudited consolidated data for the Company. The historical consolidated financial information under the captions "Statement of Income" and "Balance Sheet Data" for each of the years in the five-year period ended June 30, 1997 have been derived from the Company's consolidated financial statements, which financial statements have been audited by Coopers & Lybrand L.L.P., independent accountants. The consolidated financial statements as of June 30, 1996 and June 30, 1997 and for each of the years in the three-year period ended June 30, 1997, and the report thereon, are included elsewhere herein. The historical consolidated financial information under the captions "Statement of Income" and "Balance Sheet Data" as of December 31, 1996 and December 31, 1997 and for the six months then ended have been derived from the unaudited consolidated financial statements which, except for the consolidated balance sheet as of December 31, 1996, are included elsewhere herein; however, in the opinion of the Company, such information reflects all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations for such periods. The results of operations for the six-months ended December 31, 1997 are not necessarily indicative of the results to be expected for the entire year. The selected financial information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Other Debt" and the Company's Consolidated Financial Statements (including related notes thereto) included elsewhere in this Prospectus. 26 SUMMARY FINANCIAL AND OPERATING INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED ------------------------------------------------------------------------------ JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, 1993(2) 1994 1995(3) 1996 1997 ---------------- ------------- -------------- ------------- -------------- STATEMENT OF INCOME DATA: Revenue: Finance charge income........................... $ 1,125 $ 7,820 $ 29,039 $ 51,679 $ 44,910 Gain on sale of receivables..................... -- -- -- 22,873 67,256 Servicing fee income............................ -- -- -- 3,712 21,024 Investment income............................... 2,052 2,550 1,284 1,075 2,909 Other income.................................... 21,704 5,512 2,761 1,639 1,648 ----------- ------------ ------------ ------------ ------------ Total revenue................................ 24,881 15,882 33,084 80,978 137,747 Costs and expenses................................. 44,247 10,817 23,066 46,722 74,822 ----------- ------------ ------------ ------------ ------------ Income (loss) before taxes......................... (19,366) 5,065 10,018 34,256 62,925 Provision (credit) for taxes....................... -- -- (18,875) 12,665 24,226 ----------- ------------ ------------ ------------ ------------ Net income (loss)............................... $ (19,366) $ 5,065 $ 28,893 $ 21,591 $ 38,699 Basic earnings (loss) per share................. $ (.66) $ .17 $ 1.01 $ .75 $ 1.34 Diluted earnings (loss) per share(1)............ $ (.66) $ .16 $ .95 $ .71 $ 1.26 Weighted average shares outstanding............. 29,267,419 29,067,323 28,730,151 28,824,572 28,887,362 Weighted average shares and assumed incremental shares............................ 29,267,419 31,818,083 30,380,749 30,203,298 30,782,471 CASH FLOW DATA: (Used in) Provided by operating activities......... $ 17,332 $ 3,900 $ 14,637 $ 34,897 $ 66,132 (Used in) Provided by investing activities......... (8,121) (12,174) (144,512) (63,116) (123,076) (Used in) Provided by financing activities......... (5,705) (9,238) 132,433 12,050 60,826 ----------- ------------ ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents....................................... $ 3,506 $ (17,512) $ 2,558 $ (16,169) $ 3,882 OTHER DATA: Auto receivable originations(2)................... $ 18,317 $ 65,929 $ 230,176 $ 432,442 $ 906,794 Managed auto receivables(2)....................... $ 15,964 $ 67,636 $ 240,491 $ 523,981 $ 1,138,255 Average managed auto receivables(2)............... $ 6,880 $ 37,507 $ 141,526 $ 357,966 $ 792,155 Auto loans securitized............................ $ -- $ -- $ 150,170 $ 270,351 $ 817,500 Number of branches................................ 5 18 31 51 85 Average principal amount per managed auto receivable(2)............................... $ 6,878 $ 7,215 $ 7,773 $ 8,746 $ 10,087 Effective yield on owned auto receivables (5)................................ 21.7% 20.9% 20.5% 19.7% 19.9% RATIOS: Ratio of earnings to fixed charges(4)............. (86.6) 31.2 3.5 3.6 4.9 Percentage of total indebtedness to total capitalization................................... 1.0% 0.3% 47.9% 48.6% 50.9% Return on average common equity(5)................ (14.7)% 4.1% 23.1% 14.3% 20.8% Operating expenses as a percentage of average managed auto receivables(5).............. 18.2% 15.0% 10.0% 7.2% 6.6% Percentage of senior unsecured debt to total equity.................................... 0.% 0.% 0.% 0.% 57.7% ASSET QUALITY DATA: Managed auto receivables greater than 60 days delinquent(2)............................... $ 137 $ 1,269 $ 4,907 $ 16,207 $ 36,421 Delinquencies as a percentage of managed auto receivables(2)...................... 0.9% 1.9% 2.0% 3.1% 3.2% Net charge-offs................................... $ 49 $ 1,432 $ 6,409 $ 19,974 $ 43,231 Net charge-offs as a percentage of average managed auto receivables(2)(5)........... 0.7% 3.8% 4.5% 5.6% 5.5% SIX MONTHS ENDED --------------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ---------------- -------------- STATEMENT OF INCOME DATA: Revenue: Finance charge income........................... $ 21,503 $ 26,190 Gain on sale of receivables..................... 28,151 53,775 Servicing fee income............................ 8,242 19,191 Investment income............................... 1,152 2,570 Other income.................................... 622 502 ----------- ------------ Total revenue................................ 59,670 102,228 Costs and expenses................................. 31,590 57,716 ----------- ------------ Income (loss) before taxes......................... 28,080 44,512 Provision (credit) for taxes....................... 10,810 17,137 ----------- ------------ Net income (loss)............................... $ 17,270 $ 27,375 Basic earnings (loss) per share................. $ .61 $ .92 Diluted earnings (loss) per share(1)............ $ .57 $ .85 Weighted average shares outstanding............. 28,513,145 29,684,960 Weighted average shares and assumed incremental shares............................ 30,398,569 32,199,267 CASH FLOW DATA: (Used in) Provided by operating activities......... $ 23,414 $ 8,950 (Used in) Provided by investing activities......... (20,820) (42,948) (Used in) Provided by financing activities......... 352 30,238 ----------- ------------ Net increase (decrease) in cash and cash equivalents....................................... $ 2,946 $ (3,760) OTHER DATA: Auto receivable originations(2)................... $ 359,407 $ 696,252 Managed auto receivables(2)....................... $ 761,716 $ 1,599,273 Average managed auto receivables(2)............... $ 641,522 $ 1,375,614 Auto loans securitized............................ $ 345,570 $ 682,499 Number of branches................................ 66 108 Average principal amount per managed auto receivable(2)............................... $ 9,481 $ 10,456 Effective yield on owned auto receivables (5)................................ 19.6% 20.7% RATIOS: Ratio of earnings to fixed charges(4)............. 5.2 4.7 Percentage of total indebtedness to total capitalization................................... 46.2% 49.4% Return on average common equity(5)................ 20.0% 22.9% Operating expenses as a percentage of average managed auto receivables(5).............. 6.7% 6.0% Percentage of senior unsecured debt to total equity.................................... 0.% 49.0% ASSET QUALITY DATA: Managed auto receivables greater than 60 days delinquent(2)............................... $ 28,251 $ 57,186 Delinquencies as a percentage of managed auto receivables(2)...................... 3.7% 3.6% Net charge-offs................................... $ 17,749 $ 38,073 Net charge-offs as a percentage of average managed auto receivables(2)(5)........... 5.5% 5.5%
27
YEAR ENDED --------------------------------------------------------------------- JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, 1993(2) 1994 1995(3) 1996 1997 ------------ ------------ ------------- ------------ ------------ BALANCE SHEET DATA: Cash and cash equivalents................ $ 33,268 $ 15,756 $ 18,314 $ 2,145 $ 6,027 Excess servicing receivable.............. -- -- -- 33,093 114,376 Owned auto receivables................... 15,964 67,636 240,491 264,086 275,249 Total assets............................. 131,127 122,215 285,725 330,159 493,453 Credit Agreement......................... -- -- -- 86,000 71,700 Warehouse Facility....................... -- -- -- -- -- Mortgage Subsidiary Credit Agreement(6).. -- -- -- -- 345 Automobile receivable-backed notes....... -- -- 134,520 67,847 23,689 9 1/4% Senior Notes due 2004 (7)......... -- -- -- -- 125,000 Notes payable (8)........................ 1,278 388 716 418 3,517 Total debt............................... 1,278 388 135,236 154,265 224,251 Shareholders' equity..................... 122,784 119,501 147,226 163,225 216,536 SIX MONTHS ENDED -------------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ---------------- -------------- BALANCE SHEET DATA: Cash and cash equivalents.................... $ 5,091 $ 2,267 Excess servicing receivable.................. 59,780 179,788 Owned auto receivables....................... 233,792 261,333 Total assets................................. 369,882 562,295 Credit Agreement............................. 114,900 2,100 Warehouse Facility........................... -- 95,989 Mortgage Subsidiary Credit Agreement(6)...... 3,573 7,281 Automobile receivable-backed notes........... 40,543 14,138 9 1/4% Senior Notes due 2004 (7)............. -- 125,000 Notes payable (8)............................ 1,520 4,458 Total debt................................... 160,536 248,966 Shareholders' equity......................... 187,282 254,946
________________ (1) The Company has adopted the requirements of SFAS 128. SFAS 128 establishes new standards for computing and presenting earnings per share, replacing existing accounting standards. All earnings per share and related weighted average share amounts for the periods presented in the above table have been restated to conform to the requirements of SFAS 128. (2) The Company engaged in the retail used car sales and finance business until December 31, 1992; effective as of such date, the Company exited the retail used car sales side of its business. For purposes of this summary, revenues from vehicle sales and finance charge income relating to the financing of the sales of vehicles from the Company's former used car sales business are classified as other income. Receivables generated from the former used car sales business are classified as other receivables and not included in managed receivables. (3) As further described in "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Company recognized an income tax benefit in fiscal 1995 equal to the expected future tax savings from using its net operating loss carry forward and other future tax benefits. (4) Represents the ratio of the sum of income before income taxes plus interest expense for the period to interest expense. (5) Data for the six-month periods ended December 31, 1996 and 1997 have been annualized. (6) Fully guaranteed by the Company and certain of its Subsidiaries. (7) The Notes and the Original Notes have substantially similar terms but were issued under separate Indentures. See "Description of the Notes" and "Description of Other Debt - Original Notes." (8) Consists of certain capitalized equipment leases. 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company generates earnings and cash flow primarily through the purchase, securitization and servicing of auto receivables. The Company purchases auto finance contracts from franchised and select independent automobile dealerships. To fund the acquisition of receivables prior to securitization, the Company utilizes borrowings under the Credit Agreement and the Warehouse Facility. The Company generates finance charge income on its receivables pending securitization ("owned receivables") and pays interest expense on borrowings under the Credit Agreement and the Warehouse Facility. The Company sells receivables to securitization trusts ("Trusts") or special purpose finance subsidiaries that, in turn sell asset-backed securities to investors. By securitizing its receivables, the Company is able to lock in the gross interest rate spread between the yield on such receivables and the interest rate payable on the asset-backed securities. The Company recognizes a gain on the sale of receivables to the Trusts which represents the difference between the sale proceeds to the Company, net of transaction costs, and the Company's net carrying value of the receivables, plus the present value of the estimated future excess cash flows to be received by the Company over the life of the securitization. Excess cash flows result from the difference between the interest received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses. The Company typically begins to receive excess cash flow distributions approximately seven to nine months after the receivables are securitized, although these time periods may be shorter or longer depending upon the structure of the securitization. Prior to such time as the Company begins to receive excess cash flow, excess cash flow is utilized to fund credit enhancement requirements to secure financial guaranty insurance policies issued by an insurance company to protect investors in the asset-backed securities from losses. Once predetermined credit enhancement requirements are reached and maintained, excess cash flow is distributed to the Company. In addition to excess cash flow, the Company earns monthly servicing fee income of between 2.25% and 2.50% per annum of the outstanding principal balance of receivables securitized ("serviced receivables"). In November 1996, the Company acquired AMS, which originates and sells home equity loans. The acquisition was accounted for as a purchase and the results of operations for AMS have been included in the consolidated financial statements since the acquisition date. Receivables originated in this business are referred to as mortgage receivables. Such receivables are generally packaged and sold for cash on a servicing released, whole-loan basis. The Company recognizes a gain at the time of sale. 29 RESULTS OF OPERATIONS Six Months Ended December 31, 1996 as compared to Six Months Ended December 31, 1997 REVENUE The Company's average managed receivables outstanding consisted of the following (in thousands):
SIX MONTHS ENDED DECEMBER 31, --------------------- 1996 1997 --------- ---------- Auto: Owned.......................... $217,156 $ 245,296 Serviced....................... 424,366 1,130,318 -------- ---------- 641,522 1,375,614 Mortgage......................... 4,753 11,534 -------- ---------- $646,275 $1,387,148 ======== ==========
Average managed receivables outstanding increased by 115% as a result of higher loan purchase volume. The Company purchased $359.4 million of auto loans during the six months ended December 31, 1996, compared to purchases of $696.3 million during the six months ended December 31, 1997. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 66 auto lending branch offices as of December 31, 1996, compared to 108 as of December 31, 1997. The Company purchased $51.6 million of mortgage loans during the six months ended December 31, 1997 as compared to $7.7 million from the date of acquisition of AMS through December 31, 1996. Finance charge income consisted of the following (in thousands):
SIX MONTHS ENDED DECEMBER 31, ------------------ 1996 1997 -------- -------- Auto............................. $21,472 $25,645 Mortgage......................... 31 545 ------- ------- $21,503 $26,190 ======= =======
The increase in finance charge income is due primarily to an increase of 13% in average owned auto receivables outstanding for the six months ended December 31, 1997 versus the six months ended December 31, 1996. The Company's effective yield on its owned auto receivables increased from 19.6% for the six months ended December 31, 1996 to 20.7% for the six months ended December 31, 1997. The gain on sale of receivables consists of the following (in thousands):
SIX MONTHS ENDED DECEMBER 31, ------------------ 1996 1997 -------- -------- Auto............................. $27,851 $51,531 Mortgage......................... 300 2,244 ------- ------- $28,151 $53,775 ======= =======
The increase in gain on sale of auto receivables resulted from the sale of $345.6 million of receivables in the six months ended December 31, 1996 as compared to $682.5 million of receivables sold in the six months ended 30 December 31, 1997. The gains amounted to 8.1% and 7.6% of the sales proceeds for the six months ended December 31, 1996 and 1997, respectively. The gain on sale of mortgage receivables resulted from the sale of $48.1 million of mortgage receivables in the six months ended December 31, 1997 as compared to $4.8 million of mortgage receivables sold from the date of acquisition of AMS through December 31, 1996. Servicing fee income increased from $8.2 million, or 3.9% of average serviced auto receivables, for the six months ended December 31, 1996, to $19.2 million, or 3.4% of average serviced auto receivables, for the six months ended December 31, 1997. Servicing fee income represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the auto receivables sold to the Trusts. The growth in servicing fee income is primarily due to the increase in average serviced auto receivables outstanding for the six months ended December 31, 1997 compared to the six months ended December 31, 1996. Investment income increased from $1.2 million for the six months ended December 31, 1996 to $2.6 million for the six months ended December 31, 1997 primarily as a result of higher restricted cash balances. Restricted cash is used as credit enhancement for the Trusts and generally increases as greater amounts of receivables are sold to the Trusts. COSTS AND EXPENSES Operating expenses as an annualized percentage of average managed receivables outstanding decreased from 6.7% (6.6% excluding operating expenses of $.4 million related to the mortgage business) for the six months ended December 31, 1996 to 6.0% (5.7% excluding operating expenses of $2.6 million related to the mortgage business) for the six months ended December 31, 1997. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $20.2 million, or 93%, primarily due to the addition of auto lending branch offices and management, auto loan processing and servicing staff and the recently acquired mortgage business. The provision for losses increased from $3.2 million for the six months ended December 31, 1996 to $3.8 million for the six months ended December 31, 1997 due to higher average owned auto receivables outstanding. Interest expense increased from $6.6 million for the six months ended December 31, 1996 to $12.0 million for the six months ended December 31, 1997 due to higher debt levels and effective interest rates. Average debt outstanding was $165.7 million and $257.6 million for the six months ended December 31, 1996 and 1997, respectively. The Company's effective rate of interest paid on its debt increased from 7.9% to 9.3% as a result of the issuance of the Original Notes in February 1997. The Company's effective income tax rate was 38.5% for the six months ended December 31, 1996 and 1997, respectively. 31 Year Ended June 30, 1996 as compared to Year Ended June 30, 1997 REVENUE The Company's average managed receivables outstanding consisted of the following (in thousands):
YEAR ENDED JUNE 30, -------------------- 1996 1997 --------- --------- Auto Owned.......................... $261,776 $223,351 Serviced....................... 96,190 568,804 -------- -------- 357,966 792,155 Mortgage......................... 8,187 Other............................ 443 -------- -------- $358,409 $800,342 ======== ========
Average managed receivables outstanding increased by 123% as a result of higher loan purchase volume. The Company purchased $432.4 million of auto loans during fiscal 1996, compared to purchases of $906.8 million during fiscal 1997. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 51 auto lending branch offices as of June 30, 1996, compared to 85 as of June 30, 1997. The Company purchased $53.8 million of mortgage loans from the date of acquisition of AMS through June 30, 1997. Finance charge income consisted of the following (in thousands):
YEAR ENDED JUNE 30, ------------------- 1996 1997 --------- -------- Auto............................. $51,679 $44,417 Mortgage......................... 493 Other............................ 27 ------- ------- $51,706 $44,910 ======= =======
The decrease in finance charge income is due to a reduction of 15% in average owned auto receivables outstanding for fiscal 1997 versus fiscal 1996. Prior to December 1995, all of the auto finance contracts purchased by the Company were held as owned auto receivables on the Company's consolidated balance sheets. The Company began selling auto receivables to the Trusts in December 1995, reducing average owned receivables with corresponding increases in average serviced receivables. The Company's effective yield on its owned auto receivables increased from 19.7% for fiscal 1996 to 19.9% for fiscal 1997. The gain on sale of receivables consisted of the following (in thousands):
YEAR ENDED JUNE 30, ------------------- 1996 1997 --------- -------- Auto............................. $22,873 $64,338 Mortgage......................... 2,918 ------- ------- $22,873 $67,256 ======= =======
32 The increase in gain on sale of auto receivables resulted from the sale of $270.4 million of receivables in fiscal 1996 as compared to $817.5 million of receivables sold in fiscal 1997. The gains amounted to 8.5% and 7.9% of the sales proceeds for fiscal 1996 and 1997, respectively. The gain on sale of mortgage receivables resulted from the sale of $52.5 million of mortgage receivables. Servicing fee income increased from $3.7 million, or 3.9% of average serviced auto receivables, for fiscal 1996, to $21.0 million, or 3.7% of average serviced auto receivables, for fiscal 1997. Servicing fee income represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the receivables sold to the Trusts. The growth in servicing fee income is primarily due to the increase in average serviced auto receivables outstanding for fiscal 1997 compared to fiscal 1996. Investment income rose from $1.1 million for fiscal 1996 to $2.9 million for fiscal 1997 primarily as a result of higher restricted cash balances. Restricted cash is used as credit enhancement for the Trusts and increases as greater amounts of receivables are sold to the Trusts. COSTS AND EXPENSES Operating expenses as a percentage of average managed receivables outstanding decreased from 7.2% for fiscal 1996 to 6.6% (6.2% excluding operating expenses of $2.6 million related to the mortgage business) for fiscal 1997. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $26.2 million, or 102%, primarily due to the addition of auto lending branch offices and management, auto loan processing and servicing staff and the recently acquired mortgage business. The provision for losses decreased from $7.9 million for fiscal 1996 to $6.6 million for fiscal 1997 due to lower average owned auto receivables outstanding. Interest expense increased from $13.1 million for fiscal 1996 to $16.3 million for fiscal 1997 due to higher debt levels and effective interest rates. Average debt outstanding was $156.4 million and $187.6 million for fiscal 1996 and 1997, respectively. The Company's effective rate of interest paid on its debt increased from 8.4% to 8.7% as a result of the issuance of the Original Notes in February 1997. The Company's effective income tax rate increased from 37.0% for fiscal 1996 to 38.5% for fiscal 1997 due to a larger portion of the Company's income being generated in states which have higher tax rates. Year Ended June 30, 1995 as compared to Year Ended June 30, 1996 REVENUE The Company's average managed receivables outstanding consisted of the following (in thousands):
YEAR ENDED JUNE 30, -------------------- 1995 1996 --------- --------- Auto: Owned....................... $141,526 $261,776 Serviced.................... 96,190 -------- -------- 141,526 357,966 Other............................ 6,918 443 -------- -------- $148,444 $358,409 ======== ========
Average managed receivables outstanding increased by 141% as a result of higher loan purchase volume. The Company purchased $230.2 million of auto loans during fiscal 1995, compared to purchases of $432.4 million during 33 fiscal 1996. This growth resulted from loan production at branches open during both periods as well as expansion of the Company's loan production capacity. The Company operated 31 branch offices as of June 30, 1995, compared to 51 as of June 30, 1996. Finance charge income consisted of the following (in thousands):
YEAR ENDED JUNE 30, ------------------- 1995 1996 --------- -------- Auto............................. $29,039 $51,679 Other............................ 1,210 27 ------- ------- $30,249 $51,706 ======= =======
The rise in finance charge income is due to an increase of 85% in average owned auto receivables outstanding for fiscal 1996 versus fiscal 1995. The Company's effective yield on its owned auto receivables decreased from 20.5% to 19.7%. The gain on sale of receivables of $22.9 million in fiscal 1996 resulted from the sale of $270.4 million of receivables to the Trusts. The gain amounted to 8.5% of the sales proceeds. The Company's asset-backed securities transactions in fiscal 1995 were structured as debt issuances by subsidiaries of the Company and thus were accounted for as borrowings on the Company's consolidated balance sheets rather than as sales of receivables. Servicing fee income of $3.7 million in fiscal 1996 represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the auto receivables sold to the Trusts. COSTS AND EXPENSES Operating expenses as a percentage of average managed receivables outstanding decreased from 10.0% for fiscal 1995 to 7.2% for fiscal 1996. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $10.9 million, or 74%, primarily due to the addition of auto lending branch offices and management and auto loan processing and servicing staff. The provision for losses increased from $4.3 million for fiscal 1995 to $7.9 million for fiscal 1996 due to higher average owned auto receivables outstanding. Interest expense increased from $4.0 million for fiscal 1995 to $13.1 million for fiscal 1996 due to the higher debt levels necessary to fund the Company's increased loan origination volume. The provision for income taxes in fiscal 1996 resulted primarily from amortization of the Company's deferred tax asset at the federal statutory income tax rate. In the fourth quarter of fiscal 1995, the Company recognized an income tax benefit and a corresponding deferred tax asset equal to the expected future tax savings from using its net operating loss carryforward and other future tax benefits. The deferred tax asset is amortized through a non-cash income tax provision against the Company's earnings as the net operating loss carryforward and other future tax benefits are utilized. Prior to the fourth quarter of fiscal 1995, the Company had offset the deferred tax asset with a valuation allowance. Accordingly, there was no provision for federal income taxes in fiscal 1995. FINANCE RECEIVABLES The Company provides financing in relatively high-risk markets, and therefore, charge-offs are anticipated. The Company records a periodic provision for losses as a charge to operations and a related allowance for losses in the consolidated balance sheets as a reserve against estimated future losses in the owned auto receivables portfolio. The Company typically purchases individual finance contracts for a non-refundable acquisition fee on a non-recourse basis. Such acquisition fees are also recorded in the consolidated balance sheets as an allowance for losses. When the Company 34 sells auto receivables to the Trusts, the calculation of the gain on sale of receivables is reduced by an estimate of future credit losses expected over the life of the auto receivables sold. The Company sells mortgage receivables for cash on a servicing released, whole-loan basis. Such receivables are generally held by the Company for less than 90 days. Accordingly, no allowance for losses has been provided by the Company for the mortgage receivables. The Company reviews static pool origination and charge-off relationships, charge-off experience factors, collection data, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends and other information in order to make the necessary judgments as to the appropriateness of the provisions for losses and the allowance for losses. Although the Company uses many resources to assess the adequacy of the allowance for losses, there is no precise method for accurately estimating the ultimate losses in the receivables portfolio. The following tables present certain data related to the receivables portfolio (dollars in thousands):
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% -------- -------- -------- JUNE 30, 1997 ---------------------------------------------------- -------------- AUTO BALANCE AUTO MANAGED OWNED MORTGAGE SHEET 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 contracts (principal amount) (in dollars).......... $ 10,686 $90,708 $ 9,909 $ 10,087 (2) -------- ------- ----------- ----------- Allowance for losses as a percentage of receivables........................... 4.7% 8.7% 7.7%(2) -------- ----------- -----------
35
DECEMBER 31, 1997 ----------------------------------------------------- ---------------- AUTO BALANCE AUTO MANAGED OWNED MORTGAGE SHEET TOTAL SERVICED PORTFOLIO ---------- -------- ------------ ----------------- ---------------- Principal amount of receivables........... $261,333 $ 7,808 $269,141 $ 1,337,940 $ 1,599,273 (2) Allowance for losses...................... (11,350) (11,350) $ (112,294)(1) $ (123,644)(2) -------- -------- -------- ------------ ------------ Finance receivables, net.............. $249,983 $ 7,808 $257,791 -------- -------- -------- Number of outstanding contracts........... 23,538 72 129,420 152,958 (2) -------- -------- ------------ ------------ Average amount of outstanding contracts (principal amount) (in dollars)........ $ 11,103 $108,444 $ 10,338 $ 10,456 (2) -------- -------- ------------ ------------ Allowance for losses as a percentage of receivables......................... 4.3% 8.4% 7.7%(2) -------- ------------ ------------
___________________ (1) The allowance for losses relating to serviced auto receivables is netted against excess servicing receivable in the Company's consolidated balance sheets. (2) Includes auto receivables only The following is a summary of managed auto receivables which are (i) more than 60 days delinquent, but not in repossession, and (ii) in repossession (dollars in thousands):
JUNE 30, JUNE 30, DECEMBER 31, 1996 1997 1997 --------- --------- ------------- Delinquent contracts........................................ $16,207 $36,421 $57,186 Delinquent contracts as a percentage of managed auto receivables............................................... 3.1% 3.2% 3.6% Contracts in repossession................................... $ 6,751 $14,471 $22,012 Contracts in repossession as a percentage of managed auto receivables.............................................. 1.3% 1.3% 1.4%
The following table presents charge-off data with respect to the Company's managed auto receivables portfolio (dollars in thousands):
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ------------------------------ -------------------- 1995 1996 1997 1996 1997 -------- --------- --------- --------- --------- Net charge-offs: Owned.......................................................... $6,409 $18,322 $16,965 $ 9,065 $ 5,624 Serviced....................................................... 1,652 26,266 8,684 32,449 ------ ------- ------- ------- ------- $6,409 $19,974 $43,231 $17,749 $38,073 ====== ======= ======= ======= ======= Net charge-offs as an annualized percentage of average managed auto receivables outstanding (1)............................... 4.5% 5.6% 5.5% 5.5% 5.5% ====== ======= ======= ======= =======
____________________ (1) Data for the six-month periods ended December 31, 1996 and 1997 have been annualized. The Company began its indirect automobile finance business in September 1992 and has grown its managed receivables portfolio to $1.6 billion as of December 31, 1997. The Company expects that its delinquency and charge-offs will increase over time as the portfolio matures and its portfolio growth rate moderates. Accordingly, the delinquency and charge-off data above is not necessarily indicative of delinquency and charge-off experience that could be expected for a more seasoned portfolio. 36 LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows are summarized as follows (in thousands):
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, --------------------------------- -------------------- 1995 1996 1997 1996 1997 ---------- --------- ---------- --------- --------- Operating activities....................... $ 14,637 $ 34,897 $ 66,132 $ 23,414 $ 8,950 Investing activities....................... (144,512) (63,116) (123,076) (20,820) (42,948) Financing activities....................... 132,433 12,050 60,826 352 30,238 --------- -------- --------- -------- -------- Net increase (decrease) in cash and cash equivalents............................. $ 2,558 $(16,169) $ 3,882 $ 2,946 $ (3,760) ========= ======== ========= ======== ========
The Company's primary sources of cash have been collections and recoveries on its receivables portfolio, borrowings under its warehouse credit facilities, sales of auto receivables to Trusts in securitization transactions, excess cash flow distributions from the Trusts and the issuance of the Original Notes in February 1997. The Company's line of credit arrangement (the "Credit Agreement") with a group of banks provides for borrowings up to $310 million, subject to a defined borrowing base. The Company utilizes the line of credit to fund its auto lending activities and daily operations. The facility matures in October 1998. A total of $2.1 million was outstanding under the Credit Agreement as of December 31, 1997. In October 1997, the Company entered into a funding agreement with a funding agent on behalf of an institutionally managed commercial paper conduit and a group of banks under which up to $245 million of structured warehouse financing is available to the Company (the "Warehouse Facility"). The Company utilizes this facility to fund auto receivables pending securitization. The facility matures in October 1998. A total of $96.0 million was outstanding under the Warehouse Facility as of December 31, 1997. The Company also has a mortgage warehouse facility (the "Mortgage Subsidiary Credit Agreement") with a bank under which the Company may borrow up to $75 million, subject to a defined borrowing base, to fund mortgage loan originations. The facility matures in February 1999. A total of $7.3 million was outstanding under the Mortgage Subsidiary Credit Agreement as of December 31, 1997. The Company has completed 11 securitization transactions through December 31, 1997. The proceeds from the transactions were used in each case to repay borrowings then outstanding under the Company's Credit Agreement and Warehouse Facility. A summary of these transactions is as follows: 37
AMOUNT OUTSTANDING AS OF ORIGINAL AMOUNT DEC. 31, 1997 ACCOUNTING TRANSACTION DATE (IN MILLIONS) (IN MILLIONS) TREATMENT - ------------------------------ --------- ---------------- -------------- ------------------- 1994-A......................... Dec. 1994 $ 51.0 $ 0 Borrowing 1995-A......................... Jun. 1995 99.2 14.1 Borrowing 1995-B......................... Dec. 1995 65.0 16.1 Sale of Receivables 1996-A......................... Mar. 1996 89.4 30.5 Sale of Receivables 1996-B......................... May. 1996 115.9 52.8 Sale of Receivables 1996-C......................... Aug. 1996 175.0 85.5 Sale of Receivables 1996-D......................... Nov. 1996 200.0 119.7 Sale of Receivables 1997-A......................... Mar. 1997 225.0 163.6 Sale of Receivables 1997-B......................... May. 1997 250.0 202.6 Sale of Receivables 1997-C......................... Aug. 1997 325.0 296.2 Sale of Receivables 1997-D......................... Nov. 1997 400.0 395.7 Sale of Receivables -------- -------- $1,995.5 $1,376.8 ======== ========
In February 1997, the Company issued $125 million of 9 1/4% Senior Notes (Original Notes) which are due in February 2004. Interest on the notes is payable semi-annually, in February and August. The notes, which are unsecured, may be redeemed at the option of the Company after February 2001 at a premium declining to par in February 2003. In January 1998, the Company issued an additional $50 million of its 9 1/4% Senior Notes ("Old Notes"). The Company's primary use of cash has been purchases and originations of receivables. The Company purchased $696.3 million of auto finance contracts during the six months ended December 31, 1997 requiring cash of $686.5 million, net of acquisition fees and other items. The Company purchased $906.8 million of auto finance contracts during fiscal 1997 requiring cash of $896.7 million, net of acquisition fees and other items. The Company operated 108 auto lending branch offices as of December 31, 1997 and plans to open 17 additional branches in the remainder of fiscal 1998. The Company may also expand loan production capacity at existing offices where appropriate. While the Company has been able to establish and grow its auto finance business thus far, there can be no assurance that future expansion will be successful due to competitive, regulatory, market, economic or other factors. The Company's Board of Directors has authorized the repurchase of up to 6,000,000 shares of the Company's common stock. A total 4,594,700 shares at an aggregate purchase price of $27.3 million had been purchased pursuant to this program through December 31, 1997, although no common stock has been repurchased since September 30, 1996. Certain restrictions contained in the Indenture pursuant to which the Original Notes were issued limit the amount of common stock which may be repurchased by the Company. As of December 31, 1997, the Company had $8.8 million in cash and cash equivalents and investment securities. The Company also had available borrowing capacity of $125.3 million under the Credit Agreement, as adjusted for the application of the net proceeds from the Prior Offering, pursuant to borrowing base requirements. The Company estimates that it will require additional external capital for the remainder of fiscal 1998 in addition to these existing capital resources and collections and recoveries on its receivables portfolio and excess cash flow distributions from the Trusts in order to fund expansion of its lending activities, capital expenditures, and other costs and expenses. The Company anticipates that such funding will be in the form of additional securitization transactions. There can be no assurance that funding will be available to the Company through these sources, or if available, that it will be on terms acceptable to the Company. FACTORS AFFECTING FUTURE LIQUIDITY The Company's ability to make payments of principal of or interest on, or to refinance its Indebtedness (including the Notes) will depend on its future operating performance, and its ability to effect additional securitizations and debt and/or equity financings, which to a certain extent is subject to economic, financial, competitive and other factors beyond 38 the Company's control. If the Company is unable to generate sufficient cash flow in the future to service its debt, it may be required to refinance all or a portion of its existing debt, including the Notes, or to obtain additional financing. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained. The inability to obtain additional financing could have a material adverse effect on the Company. The degree to which the Company is leveraged could have important consequences to the holders of the Notes, including: (i) the Company may be more vulnerable to adverse general economic and industry conditions; (ii) the Company may find it more difficult to obtain additional financing for future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes; and (iii) the Company will have to dedicate a substantial portion of the Company's cash resources to pay principal and interest on the Credit Agreement, the Mortgage Subsidiary Credit Agreement and the Warehouse Facility (all of which become due prior to the maturity of the Notes), thereby reducing the funds available for operations and future business opportunities. In addition, the Original Indenture, the Indenture, the Credit Agreement, the Warehouse Facility and the Mortgage Subsidiary Credit Agreement contain certain covenants which could limit the Company's operating and financial flexibility. See "Risk Factors." HEDGING AND PRE-FUNDING STRATEGY Since the Company's funding strategy is dependent upon the issuance of interest-bearing securities and the incurrence of debt, fluctuations in interest rates impact the Company's profitability. The Company utilizes several strategies to minimize the risk of interest rate fluctuations including the use of hedging instruments, the regular sale of auto receivables to the Trusts and pre-funding securitizations, whereby the amount of asset-backed securities issued in a securitization exceeds the amount of receivables initially sold to a Trust. The proceeds from the pre-funded portion are held in an escrow account until the Company sells additional receivables to the Trust in amounts up to the balance of the pre-funded escrow account. In pre-funded securitizations, the Company locks in the borrowing costs with respect to the loans it subsequently delivers to the Trust. However, the Company incurs an expense in pre-funded securitizations equal to the difference between the money market yields earned on the proceeds held in escrow prior to subsequent delivery of receivables and the interest rate paid on the asset-backed securities outstanding. There can be no assurance that these strategies will be effective in minimizing interest rate risk or that increases in interest rates will not have an adverse effect on the Company's profitability. RECENT ACCOUNTING DEVELOPMENTS In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income and its components in a full set of financial statements. The new standard requires that all items that are required to be recognized under accounting standards as components of comprehensive income, including an amount representing total comprehensive income, be reported in a financial statement that is displayed with the same prominence as other financial statements. Pursuant to SFAS 130, the Company will be required to display total comprehensive income, including net income and changes in the unrealized gain on excess servicing receivable, in its consolidated financial statements for the year ended June 30, 1999 and thereafter. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards for the way companies report information about operating segments in annual financial statements and requires that enterprises report selected information about operating segments in interim financial reports. The new pronouncement also establishes standards for related disclosures about products and services, geographic areas and major customers. The statement is effective for financial statements for periods beginning after December 15, 1997. The disclosures required by SFAS 131 are generally not applicable, since the Company currently operates in only one reportable segment. YEAR 2000 ISSUE The Company is in the preliminary stages of investigating the impact of the year 2000 issue and developing a remediation plan. The year 2000 issue is whether the Company's or its vendors' computer systems will properly 39 recognize date sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. The Company is in the process of conducting an initial assessment of applicable computer systems to identify the systems that could be affected by the year 2000 issue and has determined that modification or replacement of portions of existing software will be required. The Company is utilizing both internal and external resources to identify, modify or replace and test systems for year 2000 compliance. The Company plans to complete application modifications and upgrades by December 31, 1998, with testing to take place in the first quarter of calendar year 1999. While the Company has not yet fully evaluated the cost of year 2000 compliance, such costs are not expected to be material to the Company's results of operations and liquidity. The Company presently believes that with modifications to existing software and conversion to new software, the year 2000 issue will not pose significant operational problems for the Company's computer systems. However, if such modifications and conversions are not made, or are not completed timely, the year 2000 issue could have a material impact on the operations of the Company. In addition, there can be no assurance that unforeseen problems in the Company's computer systems, or the systems of third parties on which the Company's computers rely, would not have an adverse effect on the Company's systems or operations. 40 BUSINESS GENERAL The Company is a consumer finance company specializing in purchasing, securitizing and servicing retail automobile installment sales contracts originated by franchised and select independent dealers in connection with the sale of late model used and to a lesser extent new automobiles. The Company targets borrowers with limited credit histories, modest incomes or those who have experienced prior credit difficulties ("Sub-Prime Borrowers"). With the use of proprietary credit scoring models, the Company underwrites contracts on a decentralized basis through a nationwide branch office network. These credit scoring models, combined with experienced underwriting personnel, enable the Company to implement a risk-based pricing approach to structuring and underwriting individual contracts. The Company's centralized risk management department monitors these underwriting strategies and portfolio performance to balance credit quality and profitability objectives. The loan portfolio is serviced by the Company at centralized facilities located in Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina using automated loan servicing and collection systems. The Company had 108 branch offices as of December 31, 1997. As a result of the Company's expansion strategy, the Company has been able to increase its aggregate volume of automobile installment sales contracts purchased to $906.8 million in fiscal 1997 from $18.3 million in fiscal 1993. The Company has continued this growth during the first six months of fiscal 1998, with purchases aggregating $696.3 million, compared to $359.4 million during the same period in fiscal 1997. The Company purchases contracts originated by dealers at prices ranging from par to a discount of up to 10%. The average discount as a percentage of the contracts purchased by the Company was approximately 3.4% in fiscal 1997. For fiscal 1997, the average principal amount financed and weighted average APR of contracts purchased by the Company were $11,874 and 19.7%, respectively. The Company generates earnings and cash flow primarily through the purchase, retention, securitization and servicing of automobile receivables. In each securitization, the Company sells automobile receivables to a trust or special purpose finance subsidiary that, in turn, sells asset-backed securities to investors. The Company recognizes a gain on the sale of the receivables to the trust and receives monthly excess cash flow distributions from the trust resulting from the difference between the interest received from the obligors on the receivables and the interest on the asset-backed securities paid to investors, net of losses and expenses. The Company typically begins to receive excess cash flow distributions approximately seven to nine months after the receivables are securitized, although these time periods may be shorter or longer depending upon the structure of the securitization. The Company received excess cash flow of $24.0 million from securitization trusts and special purpose finance subsidiaries in fiscal 1997. Due to the time delay associated with distributions of excess cash flow from securitizations, the Company expects to receive increased cash flow distributions in fiscal 1998 from trusts created as a result of securitization transactions occurring in fiscal 1997. Prior to such time as the Company begins to receive excess cash flow, all excess cash flow is utilized to fund credit enhancement requirements to secure financial guaranty insurance policies issued by a monoline insurance company to protect investors in the asset-backed securities from losses. Once predetermined credit enhancement requirements are reached and maintained, excess cash flow is distributed to the Company. In addition to excess cash flow, the Company earns servicing fees of between 2.25% and 2.50% per annum of the outstanding principal balance of receivables securitized. Over the four quarters ended December 31, 1997 the Company completed four securitization transactions totaling $1.2 billion. BUSINESS STRATEGY The Company's principal objective is to continue to build upon its position as a leading indirect lender to Sub-Prime Borrowers. To achieve this objective, the Company employs the following key strategies: Continued Expansion of the Automobile Finance Branch Network. The Company opened five branch offices in fiscal 1993, 13 in fiscal 1994, 13 in fiscal 1995, 20 in fiscal 1996, 34 in fiscal 1997 and 23 in fiscal 1998 through December 31, 1997, bringing its branch office network to 108 offices located in 32 states as of December 31, 1997. Branch office personnel are responsible for the development and maintenance of dealer relationships. As part of its goal of increasing the number of dealers from whom it is purchasing automobile finance contracts, the Company plans to open approximately 17 additional branch offices during the remainder of fiscal 1998. 41 Use of Proprietary Credit Scoring Models for Risk-based Pricing. The Company has developed and implemented a credit scoring system across its branch office network to support the branch level credit approval process. The Company's proprietary credit scoring models are designed to enable AmeriCredit to tailor each loan's pricing and structure to a statistical assessment of the underlying credit risk. Sophisticated Risk Management Techniques. The Company's centralized risk management department is responsible for monitoring the origination process, supporting management's supervision of each branch office, tracking collateral values of the Company's receivables portfolio and monitoring portfolio returns. This risk management department uses proprietary databases to identify concentrations of risk, to price for the risk associated with selected market segments and to endeavor to enhance the credit quality and profitability of the contracts purchased. High Investment in Technology to Support Operating Efficiency and Growth. The use of leading-edge technology in both loan origination and servicing has enabled AmeriCredit to become a low-cost provider in the sub-prime automobile finance market. AmeriCredit's annualized ratio of operating expenses to average managed receivables was 10.0% for fiscal 1995, 7.2% for fiscal 1996, 6.6% for fiscal 1997 and 6.0% for the six months ended December 31, 1997. Leveraging Sub-Prime Lending Expertise. AMS, a subsidiary acquired in 1996, is a residential mortgage lender specializing in originating and purchasing home equity mortgage loans made to Sub-Prime Borrowers from a network of mortgage brokers. AMS has originated $105.4 million of mortgage loans from its date of acquisition through December 31, 1997. The Company believes that over time it can leverage its national presence, risk management techniques and state-of-the- art technology to broaden its indirect lending to Sub-Prime Borrowers. AMS's corporate office is located in Orange, California. AMS has historically sold its home equity loans and the related servicing rights to third party investors. Funding and Liquidity Through Securitizations. The Company sells automobile receivables in securitization transactions in order to obtain a cost-effective source of funds for the purchase of additional automobile finance contracts, to reduce the risk of interest rate fluctuations and to utilize capital efficiently. Since the Company's first securitization transaction in December 1994, the Company has securitized approximately $2.0 billion of automobile receivables in private and public offerings of asset-backed securities. MARKET AND COMPETITION According to CNW Marketing/Research, an independent automobile finance market research firm, the automobile finance industry is the second largest consumer finance industry in the United States with over $427 billion of franchised dealers loan and lease originations during 1996. The industry is generally segmented according to the type of car sold (new vs. used) and the credit characteristics of the borrower (prime vs. sub-prime segment). The sub-prime segment of the market accounted for approximately $75 billion of these originations. Competition in the field of sub-prime automobile finance is intense. The automobile finance market is highly fragmented and is served by a variety of financial entities including the captive finance affiliates of major automotive manufacturers, banks, thrifts, credit unions and independent finance companies. Many of these competitors have greater financial resources and lower costs of funds than the Company. Many of these competitors also have long standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer floor plan financing and leasing, which are not provided by the Company. Providers of automobile financing have traditionally competed on the basis of interest rates charged, the quality of credit accepted, the flexibility of loan terms offered and the quality of service provided to dealers and customers. In seeking to establish itself as one of the principal financing sources at the dealers it serves, the Company competes predominately on the basis of its high level of dealer service and strong dealer relationships and by offering flexible loan terms. The Company also seeks to offer rates that are competitive and that are consistent with its goal of balancing risk and returns. OPERATIONS Dealership Marketing. Since the Company is an indirect lender, the Company focuses its marketing activities on automobile dealerships. The Company is selective in choosing the dealers with whom it conducts business and primarily pursues manufacturer franchised dealerships with used car operations and select independent dealerships. The 42 Company selects these dealers because they sell the type of used cars the Company prefers to finance, specifically later model, low mileage used cars. Of the contracts purchased by the Company during the fiscal year ended June 30, 1997, approximately 84% were originated by manufacturer franchised dealers with used car operations and 16% by select independent dealers. The Company purchased contracts from 5,657 dealers during the fiscal year ended June 30, 1997. No dealer accounted for more than 2% of the total volume of contracts purchased by the Company for that same period. The Company's financing programs are marketed to dealers through branch office personnel, including branch managers, assistant managers and in some cases marketing representatives. The Company believes that the personal relationships its branch managers and other branch office personnel establish with the dealership personnel are an important factor in creating and maintaining productive relationships with its dealership customer base. Branch office personnel are responsible for the solicitation, enrollment and education of new dealers regarding the Company's financing programs. Branch office personnel visit dealerships to present information regarding the Company's financing programs and capabilities. These personnel explain the Company's underwriting philosophy, including its preference for sub-prime quality contracts secured by later model, lower mileage used vehicles and its practice of underwriting in the local branch office. Prior to entering into a relationship with a dealer, the Company considers the dealer's operating history and reputation in the marketplace. The Company then maintains a non-exclusive relationship with the dealer. This relationship is actively monitored with the objective of maximizing the volume of applications received from the dealer that meet the Company's underwriting standards and profitability objectives. Due to the non-exclusive nature of the Company's relationships with dealerships, the dealerships retain discretion to determine whether to obtain financing from the Company or from another source for a customer seeking to finance a vehicle purchase. Branch managers and other branch office personnel regularly telephone and visit dealers to solicit new business and to answer any questions dealers may have regarding the Company's financing programs and capabilities. To increase the effectiveness of these contacts, the branch managers and other branch office personnel have access to the Company's management information systems which detail current information regarding the number of applications submitted by dealership, the Company's response and the reasons why a particular application was rejected. Finance contracts are generally purchased by the Company without recourse to the dealer, and accordingly, the dealer usually has no liability to the Company if the consumer defaults on the contract. To mitigate the Company's risk from potential credit losses, the Company typically charges dealers an acquisition fee when purchasing finance contracts. Such acquisition fees are negotiated with dealers on a contract-by-contract basis and are usually non- refundable. Although finance contracts are purchased without recourse to the dealer, the dealer typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies the Company against any claims, defenses and set-offs that may be asserted against the Company because of assignment of the contract. Recourse based upon such representations and indemnities would be limited in circumstances in which the dealer has insufficient financial resources to perform upon such representations and indemnities. The Company does not view recourse against the dealer on these representations and indemnities to be of material significance in its decision to purchase finance contracts from a dealer. Branch Office Network. The Company uses a branch office network to market its financing programs to selected dealers and develop relationships with these dealers throughout the country. Additionally, the branch office network is used for the underwriting of contracts submitted by dealerships. The Company believes a local presence enables the Company to more fully service dealers and be more responsive to dealer concerns and local market conditions. The Company selects markets for branch office locations based upon numerous factors, including demographic trends and data, competitive conditions and the regulatory environment in addition to the availability of qualified personnel. Branch offices are typically situated in suburban office buildings which are accessible to local dealers. Each branch office solicits dealers for contracts and maintains the Company's relationship with the dealers in the geographic vicinity of that branch office. Branch office locations are typically staffed by a branch manager, an assistant manager and one or more dealer and customer service representatives. Larger branch offices may also have an additional assistant manager and/or dealer marketing representative. Branch managers are compensated with base salaries, annual incentives based primarily on branch level credit quality and, if the credit quality objectives are met, loan volume. The incentives are typically paid in cash and stock option grants. The branch managers report to regional vice presidents. The Company's regional vice presidents monitor branch office compliance with the Company's underwriting guidelines. The Company's automated application processing system and loan accounting system provide the regional 43 vice presidents access to credit application information enabling them to consult with the branch managers on daily credit decisions and review exceptions to the Company's underwriting guidelines. The regional vice presidents also make periodic visits to the branch offices to conduct operating reviews. The regional vice presidents receive incentives based on the overall performance of the Company. The following table sets forth information with respect to the number of branches, dollar volume of contracts purchased and number of producing dealerships for the periods set forth below.
SIX-MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, ----------------------------- ------------------ 1995 1996 1997 1996 1997 -------- -------- --------- -------- -------- ($ IN THOUSANDS) Number of branch offices............................ 31 51 85 66 108 Dollar volume of contracts purchased................ $230,176 $432,442 $906,794 $359,407 $696,252 Number of producing dealerships(1).................. 1,861 3,262 5,657 3,299 5,911
______________ (1) A producing dealership refers to a dealership from which the Company had purchased contracts in the relevant period. The Company plans to expand its indirect automobile finance business by adding additional branch offices and increasing dealer penetration at its existing branch offices. The success of this strategy is dependent upon, among other factors, the Company's ability to hire and retain qualified branch managers and other personnel and to develop relationships with more dealers. The Company confronts intense competition in attracting key personnel and establishing relationships with dealers. Dealers often already have favorable sub-prime financing sources, which may restrict the Company's ability to develop dealer relationships and delay the Company's growth. In addition, the competitive conditions in the Company's markets may result in a reduction in the profitability of the contracts that the Company purchases or a decrease in contract acquisition volume, which would adversely affect the Company's results of operations. UNDERWRITING AND PURCHASING OF CONTRACTS Proprietary Credit Scoring System and Risk-based Pricing. The Company has implemented a credit scoring system throughout its branch office network to support the branch level credit approval process. The credit scoring system was developed with the assistance of Fair, Isaac and Co., Inc. from the Company's loan and portfolio databases. Credit scoring is used to differentiate credit applicants and to rank order credit risk in terms of expected default rates, which enables the Company to tailor loan pricing and structure according to this statistical assessment of credit risk. For example, a consumer with a lower score would indicate a higher probability of default and, therefore, the Company could compensate for this higher default risk through the structuring and pricing of the transaction. While the Company employs a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations in evaluating contracts for purchase could adversely affect the credit quality of the Company's receivables portfolio. The credit scoring system contrasts the quality of credit applicant profiles resulting in a statistical assessment of the most predictive characteristics. Factors considered in any loan application include data presented on the application, the credit bureau report and the type of loan the applicant wishes to secure. Specifically, the credit scoring system considers customer residential and employment stability, the customer's financial history, current financial capacity, integrity of meeting historical financial obligations, loan structure and credit bureau information. The scorecards take these factors into account and produce a statistical assessment of these attributes. This assessment is used to segregate applicant risk profiles and determine whether risk is acceptable and the price the Company should charge for that risk. The credit scorecards are validated on a monthly basis through the comparison of actual versus projected performance by score. The Company will continue to refine its proprietary scorecards based on increased information and identified correlations relating to receivables performance. 44 Through the use of the Company's proprietary credit scoring system, branch office personnel with credit authority are able to more efficiently review and prioritize loan applications. Applications which receive a high score are processed rapidly and credit decisions can be quickly faxed back to the dealer. Applications receiving low scores can be quickly rejected without further processing and review by the Company. This ability to prioritize applications allows for a more effective allocation of resources to those applications requiring more review. Decentralized Loan Approval Process. The Company purchases individual contracts through its branch offices based on a decentralized credit approval process tailored to local market conditions. Each branch manager has a specific credit authority based upon his experience and historical loan portfolio results as well as established credit scoring parameters. In certain markets where a branch office is not present and with respect to certain large dealer groups, contracts are purchased through the Company's regional purchasing offices. Although the credit approval process is decentralized, all credit decisions are guided by the Company's credit scoring strategies, overall credit and underwriting policies and procedures and daily monitoring process. Loan application packages completed by prospective obligors are received via facsimile at the branch offices from dealers. Application data are entered into the Company's automated application processing system. A credit bureau report is automatically generated and credit scores are computed. Branch office personnel with credit authority review the application package and determine whether to approve the application, approve the application subject to conditions that must be met or deny the application. These personnel consider many factors in arriving at a credit decision, relying primarily on the applicant's credit score, but also taking into account the applicant's capacity to pay, stability, character and intent to pay, the contract terms and collateral value. The Company estimates that approximately 60% to 65% of applicants are denied credit by the Company typically because of their credit histories or because their income levels are not sufficient to support the proposed level of monthly payments. As part of the credit decision process, a customer service representative investigates the residence, employment and credit history of the applicant. Dealers are contacted regarding credit decisions by telefax and/or telephone. Declined and conditioned applicants are also provided with appropriate notification of the decision. The Company's underwriting and collateral guidelines as well as credit scoring parameters form the basis for the branch level credit decision; however, the qualitative judgment of the branch office personnel with credit authority with respect to the credit quality of an applicant is a significant factor in the final credit decision. Exceptions to credit policies and authorities must be approved by a regional vice president or other designated credit officer. Completed loan packages are sent by the dealers to the branch office. Loan terms and insurance coverages are generally reverified with the consumer by branch office personnel and the loan packages are forwarded to the Company's centralized loan services department, where the packages are scanned to create electronic copies. Key original documents are stored in a fire-proof vault and the loan packages are further processed in an electronic environment. The loans are reviewed for proper documentation and regulatory compliance and are entered into the Company's loan accounting system. Daily loan reports are generated for final review by senior operations management. Once cleared for funding, the loan services department issues a check or electronically transfers funds to the dealer. Upon funding of the contract, the Company acquires a perfected security interest in the automobile that was financed. All of the Company's contracts are fully amortizing with substantially equal monthly installments. SERVICING AND COLLECTIONS PROCEDURES General. The Company services its receivables portfolio at facilities located in Fort Worth, Texas, Tempe, Arizona and Charlotte, North Carolina. The Company's servicing activities consist of collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent in payment of a receivable installment, maintaining the security interest in the financed vehicle and repossessing and liquidating collateral when necessary. The Company utilizes various automated systems to support its servicing and collections activities. The Company uses monthly billing statements to serve as a reminder to customers as well as an early warning mechanism in the event a customer has failed to notify the Company of an address change. Approximately 15 days before a customer's first payment due date and each month thereafter, the Company mails the customer a billing statement directing the customer to mail payments to a lockbox bank for deposit in a lockbox account. Payment receipt data is electronically transferred from the Company's lockbox bank to the Company for posting to the loan accounting system. Payments may also be received directly by the Company from customers. All payment processing and customer account maintenance 45 is performed centrally in Fort Worth, Texas by the loan services department. The Company receives servicing fees for servicing securitized receivables equal to 2.25% to 2.50% per annum of the outstanding principal balance of such receivables. The Company maintains computerized records with respect to each finance contract to record receipts and disbursements and to prepare related reports. The Company utilizes a predictive dialing system to make phone calls to customers whose payments are past due by less than 30 days. The predictive dialer is a computer-controlled telephone dialing system which dials phone numbers of customers from a file of records extracted from the Company's database. Once a live voice responds to the automated dialer's call, the system automatically transfers the call to a collector and the relevant account information appears on the collector's computer screen. The system also tracks and notifies collections management of phone numbers that the system has been unable to reach within a specified number of days, thereby promptly identifying for management all customers who cannot be reached by telephone. By eliminating time wasted on attempting to reach customers, the system gives a single collector the ability to speak with a larger number of accounts daily. Once an account becomes more than 30 days delinquent, the account moves to the Company's mid-range collection unit. The objective of these collectors is to prevent the account from becoming further delinquent. After a scheduled payment on an account becomes approximately 60 days past due, the Company typically initiates repossession of the financed vehicle. However, if an account is deemed uncollectible, if the financed vehicle is deemed by collection personnel to be in danger of being damaged, destroyed or hidden, if the customer deals in bad faith or if the customer voluntarily surrenders the financed vehicle, the Company may repossess it without regard to the length of payment delinquency. Payment deferrals are at times offered to customers who have encountered temporary financial difficulty, hindering their ability to pay as contracted, and when other methods of assisting the customer in meeting the contract terms and conditions have been exhausted. A deferral allows the customer to move a delinquent payment to the end of the loan by paying a fee (approximately the interest portion of the payment deferred). The collector must review the past payment history and assess the customer's desire and capacity to make future payments and, before agreeing to a deferral, must comply with the Company's policies and guidelines for deferrals. Exceptions to the Company's policies and guidelines for deferrals must be approved by a collections officer. Deferment transactions are processed by the loan services department. As of December 31, 1997, approximately 11.8% of the Company's managed receivables have ever received a deferral. Repossessions. The Company follows prescribed legal procedures for repossessions, which include peaceful repossession, one or more consumer notifications, a prescribed waiting period prior to disposition of the repossessed automobile and return of personal items to the consumer. In some jurisdictions, the Company must provide the consumer with reinstatement or redemption rights. Legal requirements, particularly in the event of bankruptcy, may restrict the Company's ability to dispose of the repossessed vehicle. Repossessions are handled by independent repossession firms engaged by the Company. Repossessions must be approved by a collections officer. Upon repossession and after any prescribed waiting period, the repossessed automobile is sold at auction. The Company does not sell any vehicles on a retail basis. The proceeds from the sale of the automobile at auction, and any other recoveries, are credited against the balance of the contract. Auction proceeds from the sale of the repossessed vehicle and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged-off. The Company may pursue collection of deficiencies when it deems such action to be appropriate. Charge-Off Policy. The Company's policy is to charge-off an account in the month in which the account becomes 180 days contractually delinquent even if the Company has not repossessed the related vehicle. On accounts less than 180 days delinquent, the Company charges-off the account when the vehicle securing the delinquent contract is repossessed and disposed of. The charge-off represents the difference between the actual net sales proceeds and the amount of the delinquent contract, including accrued interest. Accrual of finance charge income is suspended on accounts which are more than 60 days contractually delinquent. 46 RISK MANAGEMENT Overview. The Company has developed procedures to evaluate and supervise the operations of each branch office on a centralized basis. The Company's centralized risk management department is responsible for monitoring the contract purchase process and supporting the supervisory role of senior operations management. This department tracks via databases key variables, such as loan applicant data, credit bureau and credit score information, loan structures and terms and payment histories. The risk management department also regularly reviews the performance of the Company's credit scoring system and is involved with third-party vendors in the development and enhancement of credit scorecards for the Company. The risk management department also prepares regular credit indicator packages reviewing portfolio performance at various levels of detail including total Company, branch office and dealer. Various daily reports and analytical data are also generated by the Company's management information systems. This information is used to monitor credit quality as well as to constantly refine the structure and mix of new contract purchases. Portfolio returns are reviewed on a consolidated basis, as well as at the branch office, dealer and contract levels. Behavioral Scoring. A behavioral scoring model is used to project the relative probability that an individual account will default and to validate the credit scoring system after the receivable has aged for a sufficient period of time (generally six to nine months). Default probabilities are calculated for each account independent of the credit score. The Company believes that, when grouped by credit score at origination, projected default rates from the behavioral scoring model coincide with the credit scoring system. Collateral Value Management. The value of the collateral underlying the Company's receivables portfolio is updated monthly with a loan-by-loan link to national wholesale auction values. This data, along with the Company's own experience relative to mileage and vehicle condition, are used for evaluating collateral disposition activities as well as for reserve analysis models. Compliance Audits. The Company's risk management department conducts regular compliance audits of branch office operations and the loan services and collections departments. The primary objective of the audits is to measure compliance with the Company's written policies and procedures as well as regulatory matters. Audits of branch office operations are conducted no less than every six months and include a review of compliance with underwriting policies, completeness of loan documentation, assessment of collateral value and extent of applicant data investigation. Written audit reports are distributed to local branch office personnel and the regional vice presidents for response and follow-up. Senior operations management reviews copies of these reports. SECURITIZATION OF LOANS Since December 1994, the Company has pursued a strategy of securitizing its receivables to diversify its funding, improve liquidity and obtain a cost- effective source of funds for the purchase of additional automobile finance contracts. The Company applies the net proceeds from securitizations to pay down borrowings under its Credit Agreement and Warehouse Facility, thereby increasing availability thereunder for further contract purchases. Through December 31, 1997, the Company had securitized approximately $2.0 billion of automobile receivables. In its securitizations, the Company, through wholly-owned subsidiaries, transfers automobile receivables to newly-formed securitization trusts, which issue one or more classes of asset-backed securities. The asset-backed securities are simultaneously sold to investors, except for certain subordinated interests which may be retained by wholly-owned subsidiaries of the Company and which are included in excess servicing receivable in the Company's consolidated financial statements. When receivables are transferred to securitization trusts in securitization transactions, the Company recognizes a gain on sale of receivables and continues to service such receivables. The gain on sale of receivables represents the difference between the sales proceeds, net of transaction costs, and the Company's net carrying value of the receivables sold, plus the present value of estimated excess cash flows. The excess cash flows are the difference between the cash collected from obligors on securitized receivables and the sum of (i) principal and interest paid to investors in the asset-backed securities; (ii) contractual servicing fees; (iii) defaults, net of recoveries; and (iv) other expenses such as trustee 47 fees and financial guarantee insurance premiums. Concurrently with recognizing such gain on sale of receivables, the Company records a corresponding asset, excess servicing receivable, which includes the present value of estimated excess cash flows as described above plus any subordinated interests in the securitization trusts retained by the Company. The calculation of excess servicing receivable includes estimates of future losses and prepayment rates for the remaining term of the receivables sold since these factors impact the amount and timing of future cash collected on the receivables sold. The carrying value of excess servicing receivable is reviewed on a quarterly basis. If future losses and prepayment rates exceed the Company's original estimates, excess servicing receivable will be adjusted through a charge to operations. Through December 31, 1997, no material charge has been made. Favorable credit loss and prepayment experience compared to the Company's original estimates would result in additional income when realized. See "Risk Factors--Default and Prepayment Risks." In connection with the Company's securitization program, the Company arranges for credit enhancement to achieve a desired credit rating on the asset-backed securities issued. The credit enhancement for the Company's securitizations has taken the form of financial guaranty insurance policies issued by FSA, a monoline insurer, which insures the timely payment of principal and interest due on the asset-backed securities. As of December 31, 1997, FSA had insured all the Company's asset-backed securities. See "Risk Factors--Dependence on Funding Sources--Dependence on Securitization Program." The Company has limited reimbursement obligations to FSA; however, credit enhancement requirements, including FSA's encumbrance of certain restricted cash accounts and subordinated interests in trusts, provide a source of funds to cover shortfalls in collections (as described below) and to reimburse FSA for any claims which may be made under the policies issued with respect to the Company's securitizations. The credit enhancement requirements for any securitization include restricted cash accounts which are generally established with an initial deposit and subsequently funded through excess cash flows from securitized receivables. Funds are withdrawn from the restricted cash accounts to cover any shortfalls in amounts payable on the asset-backed securities. Funds are also available to be withdrawn in an event of default to reimburse FSA for draws on its financial guaranty insurance policy. In addition, the restricted cash account for each securitization trust is cross-collateralized to the restricted cash accounts established in connection with the Company's other securitization trusts, such that excess cash flow from a performing securitization trust insured by FSA may be used to support cash flow shortfalls from a non-performing securitization trust insured by FSA, thereby further restricting excess cash flow available to the Company. The Company is entitled to receive amounts from the restricted cash accounts to the extent the amounts deposited exceed predetermined required minimum levels. FSA has taken a pledge of the stock of AFS Funding Corp., the wholly-owned subsidiary of the Company that owns the restricted cash accounts and excess servicing receivable, such that, if the pledge is exercised in the event of a payment under one of its insurance policies or certain material adverse changes in the business of the Company, FSA would control all of the restricted cash accounts and excess servicing receivable. The terms of each securitization also provide that, under certain tests relating to delinquencies, defaults and losses, cash may be retained in the restricted cash account and not released to the Company until increased minimum levels of credit enhancement requirements have been reached. TRADE NAMES The Company has obtained federal trademark protection for the "AmeriCredit" name and the logo that incorporates the "AmeriCredit" name. REGULATION The Company's operations are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations. In most states in which the Company operates, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as the Company. Such rules and regulations generally provide for licensing of sales finance agencies, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation and 48 restrictions on collection practices and creditors' rights. In certain states, the Company's branch offices are subject to periodic examination by state regulatory authorities. Some states in which the Company operates do not require special licensing or provide extensive regulation of the Company's business. The Company is also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require the Company to provide certain disclosures to prospective borrowers and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system used by the Company must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires the Company to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. The dealers who originate automobile loans purchased by the Company also must comply with both state and federal credit and trade practice statutes and regulations. Failure of the dealers to comply with such statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on the Company. Management believes that the Company maintains all material licenses and permits required for its current operations and is in substantial compliance with all applicable local, state and federal regulations. There can be no assurance, however, that the Company will be able to maintain all requisite licenses and permits and the failure to satisfy those and other regulatory requirements could have a material adverse effect on the operations of the Company. Further, the adoption of additional, or the revision of existing, rules and regulations could have a material adverse effect on the Company's business. As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties based upon, among other theories of liability, usury, wrongful repossession, fraud and discriminatory treatment of credit applicants, which could take the form of a plaintiffs class action complaint. The Company, as the assignee of finance contracts originated by dealers, may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. Management believes that the Company has taken prudent steps to address the litigation risks associated with its business activities. However, there can be no assurance that the Company will be able to successfully defend against all such consumer claims, or that the determination of any such claim in a manner adverse to the Company would not have a material adverse effect on the Company's indirect automobile finance business. HOME EQUITY LOAN OPERATIONS In November 1996, the Company acquired AMS. AMS originates and acquires sub- prime home equity loans through a network of mortgage brokers. AMS sells its home equity loans and the related servicing rights in the wholesale markets. While not currently representing a material portion of the Company's assets or revenues, management intends over time to devote substantial resources to pursue growth of AMS's business of originating home equity loans to sub-prime borrowers. There can be no assurance, however, that the Company will be able to successfully expand such business or that the failure to effectively expand such business will not have a material adverse effect on the Company's financial position, liquidity or results of operations. See "Risk Factors--Implementation of Business Strategy." 49 PROPERTIES The Company's executive offices are located at 200 Bailey Avenue, Fort Worth, Texas, in a 43,000 square foot building purchased by the Company in February 1994. This building is utilized by the Company for branch office support and administrative activities. The Company also leases 66,800 square feet of office space in Tempe, Arizona under a ten year agreement with renewal options that commenced in 1996, 58,700 square feet of office space in Charlotte, North Carolina under an eleven year agreement with renewal options that commenced in 1997 and 66,000 square feet of office space in Fort Worth, Texas under agreements that extend through December 2000. These facilities are used for various operating activities. The Company's branch office facilities are generally leased under agreements with original terms of three to five years. Such facilities are typically located in a suburban office building and consist of between 1,000 and 2,000 square feet of space. EMPLOYEES At December 31, 1997, the Company employed approximately 1,200 persons. LEGAL PROCEEDINGS In the normal course of its business, the Company is named as a defendant in legal proceedings. These cases include claims for alleged truth-in-lending violations, nondisclosures, misrepresentations and deceptive trade practices, among other things. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages. In the opinion of management, the resolution of these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. 50 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information regarding the current directors and executive officers of the Company as of December 31, 1997:
NAME AGE POSITION WITH THE COMPANY - --------------------------- --- ----------------------------------------------------------------- Clifton H. Morris, Jr. ... 62 Chairman of the Board and Chief Executive Officer Michael R. Barrington .... 39 Vice Chairman of the Board, President and Chief Operating Officer Daniel E. Berce .......... 44 Vice Chairman of the Board and Chief Financial Officer Edward H. Esstman ........ 57 President and Chief Operating Officer of AmeriCredit Financial Services, Inc., Executive Vice President--Auto Finance Division and Director Chris A. Choate .......... 34 Senior Vice President, General Counsel and Secretary Cheryl L. Miller ......... 33 Senior Vice President, Director of Collections and Customer Service of AmeriCredit Financial Services, Inc. Michael T. Miller ........ 36 Senior Vice President and Chief Credit Officer Preston A. Miller ........ 34 Senior Vice President and Treasurer James H. Greer ........... 71 Director Gerald W. Haddock ........ 50 Director Douglas K. Higgins ....... 48 Director Kenneth H. Jones, Jr. .... 62 Director
Clifton H. Morris, Jr. has been Chairman of the Board and Chief Executive Officer of the Company since May 1988, and was also President of the Company from such date until April 1991 and from April 1992 to November 1996. Mr. Morris is also a director of Service Corporation International, a publicly held company which owns and operates funeral homes and related businesses. Michael R. Barrington has been Vice Chairman, President and Chief Operating Officer of the Company since November 1996 and was Executive Vice President and Chief Operating Officer of the Company from November 1994 until November 1996. Mr. Barrington was a Vice President of the Company from May 1991 until November 1994. From its formation in July 1992 until November 1996, Mr. Barrington was also the President and Chief Operating Officer of AmeriCredit Financial Services, Inc. ("AFSI"), a subsidiary of the Company. Daniel E. Berce has been Vice Chairman and Chief Financial Officer of the Company since November 1996 and was Executive Vice President, Chief Financial Officer and Treasurer for the Company from November 1994 until November 1996. Mr. Berce was Vice President, Chief Financial Officer and Treasurer of the Company from May 1991 until November 1994. Edward H. Esstman has been President and Chief Operating Officer of AFSI since November 1996. Mr. Esstman was Executive Vice President, Director of Consumer Finance Operations of AFSI from November 1994 until November 1996 and was Senior Vice President, Director of Consumer Finance of AFSI from AFSI's formation in July 1992 until November 1994. Mr. Esstman has also been Executive Vice President--Auto Finance Division for the Company since November 1996 and Senior Vice President and Chief Credit Officer for the Company from November 1994 until November 1996. Chris A. Choate has been Senior Vice President, General Counsel and Secretary of the Company since November 1996 and was Vice President, General Counsel and Secretary of the Company from November 1994 until November 1996 and General Counsel and Secretary of the Company from January 1993 until November 1994. From July 1991 until January 1993, Mr. Choate was Assistant General Counsel. Cheryl L. Miller has been Senior Vice President, Collections and Customer Service of AFSI since March 1996 and Vice President, Collections and Customer Service of AFSI from October 1994 until March 1996. From May 1994 until 51 October 1994, Ms. Miller acted in other management capacities for AFSI. Prior to that, Ms. Miller was with Ford Motor Credit Company, most recently as customer service supervisor of the Dallas branch. Michael T. Miller has been Senior Vice President and Chief Credit Officer of the Company since November 1996. Mr. Miller has also been Senior Vice President, Risk Management, Credit Policy and Planning and Chief of Staff of AFSI since November 1994 and Vice President, Risk Management, Credit Policy and Planning of AFSI from AFSI's formation in July 1992 until November 1994. Preston A. Miller has been Senior Vice President and Treasurer of the Company since November 1996. Mr. Miller was Vice President and Controller of the Company from November 1994 until November 1996 and was Controller of the Company from September 1989 until November 1994. James H. Greer is the Chairman of the Board of Shelton W. Greer Co., Inc. which engineers, manufactures, fabricates and installs building specialty products, and has been such for more than five years. Mr. Greer is also a director of Service Corporation International and Tanknology Environmental, Inc., a publicly held company engaged in the environmental services industry. Gerald W. Haddock is President and Chief Executive Officer of Crescent Real Estate Equities Company ("Crescent"), a publicly held real estate investment trust, and has been in such position since December 1996. From May 1994 until December 1996, Mr. Haddock was President of Crescent. From June 1990 until December 1993, Mr. Haddock was a partner with the Fort Worth, Texas law firm of Jackson & Walker, L.L.P. and, from January 1994 until April 1994, was of counsel to such firm. Mr. Haddock is also a director of ENSCO International Incorporated, a publicly held oil and natural gas services company. Douglas K. Higgins is a private investor and owner of Higgins & Associates and has been in such position since July 1994. In 1983, Mr. Higgins founded H & M Food Systems Company, Inc., a manufacturer of meat-based products for the food service industry, and was employed by such company as President until his retirement in July 1994. Kenneth H. Jones, Jr. is Vice Chairman of KBK Capital Corporation, a publicly held non-bank commercial finance company, and has been in such position since January 1995. Prior to January 1995, Mr. Jones was a shareholder in the Decker, Jones, McMackin, McClane, Hall & Bates, P.C. law firm in Fort Worth, Texas, and was with such firm and its predecessor or otherwise involved in the private practice of law in Fort Worth, Texas for more than five years. Mr. Jones is also a director of Hallmark Financial Services, Inc., a publicly held company engaged in the insurance business. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS The Company has entered into employment agreements with all of its Named Executive Officers. Messrs. Clifton H. Morris, Jr., Michael R. Barrington and Daniel E. Berce entered into employment agreements with the Company during fiscal 1991. These agreements, as amended, contain terms that renew annually for successive five year periods (ten years in the case of Mr. Morris), and the compensation thereunder is determined annually by the Company's Board of Directors, subject to minimum annual compensation for Messrs. Morris, Barrington and Berce of $500,000, $345,000 and $345,000, respectively. Included in each agreement is a covenant of the employee not to compete with the Company during the term of his employment and for a period of three years thereafter. The employment agreements also provide that if the employee is terminated by the Company other than for cause, the Company will pay to the employee the remainder of his current year's salary (undiscounted) plus the discounted present value (employing an interest rate of 8%) of two additional years' salary. In the event the employee resigns or is terminated other than for cause within twelve months after a "change in control" of the Company (as that term is defined in the employment agreements), the employee will be entitled to earned and vested bonuses at the date of termination plus the remainder of his current year's salary (undiscounted) plus the present value (employing an interest rate of 8%) of two additional years' salary (for which purpose "salary" includes the annual rate of compensation immediately prior to the "change in control" plus the average annual cash bonus for the immediately preceding three year period). Mr. Edward H. Esstman entered into an employment agreement with the Company in October 1996 (which agreement replaced a prior employment agreement with Mr. Esstman). Mr. Esstman's agreement, as amended, contains 52 terms substantially identical to those contained in the agreements for Messrs. Barrington and Berce and provides for minimum annual compensation of $300,000. Mr. Michael T. Miller entered into an employment agreement with the Company in July 1997 (which agreement replaced a prior employment agreement with Mr. Miller). Mr. Miller's employment agreement contains a term that renews annually for successive three year periods and provides for minimum annual compensation of $165,000. Included in Mr. Miller's agreement is a covenant not to compete with the Company during the term of his employment and for a period of one year thereafter. In the event Mr. Miller is terminated by the Company other than for cause, the Company is obligated to pay him an amount equal to one year's salary (undiscounted). Mr. Miller's Agreement contains "change in control" provisions similar to those contained in the employment agreements with the other Named Executive Officers. In addition to the employment agreements described above, the terms of all stock options granted to the Named Executive Officers provide that such options will become immediately vested and exercisable upon the occurrence of a change in control as defined in the stock option agreements evidencing such grants. The provisions and terms contained in these employment and option agreements could have the effect of increasing the cost of a change in control of the Company and thereby delay or hinder such a change in control. BOARD COMMITTEES AND MEETINGS Standing committees of the Board include the Audit Committee and the Stock Option/Compensation Committee. The Audit Committee's principal responsibilities consist of (i) recommending the selection of independent auditors, (ii) reviewing the scope of the audit conducted by such auditors, as well as the audit itself, and (iii) reviewing the Company's internal audit activities and matters concerning financial reporting, accounting and audit procedures, and policies generally. Members consist of Messrs. Greer, Haddock, Higgins and Jones. The Stock Option/Compensation Committee (i) administers the Company's employee stock option plans and reviews and approves the granting of stock options and (ii) reviews and approves compensation for executive officers. Members consist of Messrs. Greer, Haddock, Higgins and Jones. The Board of Directors held five regularly scheduled meetings during the fiscal year ended June 30, 1997. Various matters were also approved during the last fiscal year by unanimous written consent of the Board of Directors. No director attended fewer than 75% of the aggregate of (i) the total number of meetings of the Board of Directors and (ii) the total number of meetings held by all committees of the Board on which such director served, other than Mr. Haddock who attended 67% of all such meetings. COMPENSATION OF DIRECTORS Members of the Board of Directors currently receive a $2,000 quarterly retainer fee and an additional $3,500 fee for attendance at each meeting of the Board. Members of Committees of the Board of Directors are paid $1,500 per quarter for participation in all committee meetings held during that quarter. At the 1990 Annual Meeting of Shareholders, the Company adopted the 1990 Stock Option Plan for Non-Employee Directors of AmeriCredit Corp. (the "1990 Director Plan"), which provides for grants to the Company's nonemployee directors of nonqualified stock options and reserves, in the aggregate, a total of 750,000 shares of Common Stock for issuance upon exercise of stock options granted under such plan. Under the 1990 Director Plan, each nonemployee director receives, upon election as a Director and thereafter on the first business day after the date of each annual meeting of shareholders of the Company, an option to purchase 10,000 shares of Common Stock at an exercise price equal to the fair market value of the Common Stock on the date of grant. Each option is fully vested upon the date of grant but may not be exercised prior to the expiration of six months after the date of grant. On November 5, 1997, options to purchase 10,000 shares of Common Stock were granted under the 1990 Director Plan to each of Messrs. Greer, Haddock, Higgins and Jones at an exercise price of $29.25 per share. The exercise price for the options granted to Messrs. Greer, 53 Haddock, Higgins and Jones is equal to the last reported sale price of the Common Stock on the New York Stock Exchange ("NYSE") on the day preceding the date of grant. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following sets forth information concerning the compensation of the Company's Chief Executive Officer and each of the other four most highly compensated executive officers of the Company (the "Named Executive Officers") for the fiscal years shown.
LONG TERM ANNUAL COMPENSATION COMPENSATION AWARDS --------------------- ----------------------- SHARES OF COMMON STOCK UNDERLYING STOCK ALL OTHER OPTIONS COMPENSATION NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#) ($)(1) - ------------------------------------------- ---- --------- -------- ---------------- ------------ Clifton H. Morris, Jr...................... 1997 397,230 379,230 --- 116,771 Chairman and CEO.......................... 1996 320,921 181,764 300,000 41,771 1995 287,620 128,070 150,000 41,771 Michael R. Barrington...................... 1997 276,704 258,704 --- 43,326 Vice Chairman, President................... 1996 223,832 123,506 200,000 5,758 and Chief Operating Officer............... 1995 201,204 73,281 162,500 5,737 Daniel E. Berce............................ 1997 276,704 258,704 --- 44,120 Vice Chairman and.......................... 1996 223,832 123,506 200,000 6,620 Chief Financial Officer.................... 1995 201,204 73,281 125,000 6,615 Edward H. Esstman.......................... 1997 246,473 171,355 --- 45,655 President and Chief........................ 1996 186,758 91,385 150,000 10,305 Operating Officer--AFSI................... 1995 162,666 65,067 100,000 10,305 Michael T. Miller.......................... 1997 119,822 59,911 70,000 730 Senior Vice President...................... 1996 97,500 39,000 15,000 624 and Chief Credit Officer................... 1995 78,750 25,594 15,000 571
________ (1) The amounts disclosed in this column for fiscal 1997 include: (a) Company contributions, made in the form of the Company's Common Stock, to 401(k) retirement plans on behalf of each executive officer as follows: Messrs. Morris, Barrington, Berce and Esstman, $4,500 and Mr. Miller, $550; (b) Payment by the Company of premiums for term or whole life insurance on behalf of each executive officer or their dependents, as follows: Mr. Morris, $37,271; Mr. Barrington, $1,326; Mr. Berce, $2,120; Mr. Esstman, $3,655; and Mr. Miller, $180; and (c) Annual premium payments under split-dollar life insurance policies on Mr. Morris, $75,000; and Messrs. Barrington, Berce and Esstman, $37,500 each. 54 OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table shows all individual grants of stock options to the Named Executive Officers of the Company during the fiscal year ended June 30, 1997.
SHARES OF % OF TOTAL COMMON STOCK OPTIONS UNDERLYING GRANTED TO EXERCISE GRANT DATE OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT (#) FISCAL YEAR ($/SH) DATE VALUE ($)(1) ------------------ ------------ --------- ---------- -------------- Clifton H. Morris, Jr...................... --- --- --- --- --- Chairman and CEO Michael R. Barrington...................... --- --- --- --- --- Vice Chairman, President and Chief Operating Officer Daniel E. Berce............................ --- --- --- --- --- Vice Chairman and Chief Financial Officer Edward H. Esstman.......................... --- --- --- --- --- President and Chief Operating Officer--AFSI Michael T. Miller.......................... 50,000(2) 4.06 17.50 10/22/2006 $266,500 Senior Vice President and Chief.......... 20,000(3) 1.62 14.50 4/22/2007 $ 88,200 Credit Officer
______________ (1) As suggested by the SEC's rules on executive compensation disclosure, the Company used the Black-Scholes model of option valuation to determine grant date pre-tax present value. The Company does not advocate or necessarily agree that the Black-Scholes model can properly determine the value of an option. Calculations are based on a ten year option term for all grants and upon the following assumptions: annual dividend growth of 0 percent, volatility of approximately 20 percent and a risk-free rate of return based on the published Treasury yield curve effective on the grant date. There can be no assurance that the amounts reflected in this column will be achieved. (2) These options were granted to Mr. Miller for 50,000 shares, which expire ten years after the date of grant, become exercisable on the earlier of (i) October 22, 2003, (ii) the next business day (the "Acceleration Date") after the conclusion of a period of 20 consecutive trading days during which the average of the closing prices of the Company's Common Stock for such 20 day period is equal to or greater than $25 per share, provided that the Acceleration Date must occur, if at all, on or before October 22, 1999, or (iii) the occurrence of a change in control of the Company. As of December 31, 1997, the Acceleration Date has occurred and these options have become exercisable. (3) The options granted to Mr. Miller, for 20,000 shares, which expire ten years after the date of grant, become exercisable 20% on date of grant and in 20% increments thereafter on the anniversary date of the grant date. 55 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES Shown below is information with respect to the Named Executive Officers regarding option exercises during the fiscal year ended June 30, 1997, and the value of unexercised options held as of June 30, 1997.
SHARES OF COMMON VALUE OF STOCK UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS AT FY-END (#)(2) FY-END ($)(2) -------------------- -------------------------- SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/ ON EXERCISE (#) ($)(1) UNEXERCISABLE UNEXERCISABLE --------------- -------------- ------------------ ---------------------- Clifton H. Morris, Jr............... --0-- N/A 883,999/350,000 $14,215,276/$2,406,250 Chairman and CEO Michael R. Barrington............... 90,167 $1,268,882 358,440/200,000 $ 4,744,430/$1,000,000 Vice Chairman and President and Chief Operating Officer Daniel E. Berce..................... 25,000 $ 367,575 473,607/200,000 $ 6,701,415/$1,000,000 Vice Chairman and Chief Financial Officer Edward H. Esstman................... 19,000 $ 370,500 295,333/170,000 $ 4,461,568/$1,092,500 President and Chief Operating Officer--AFSI Michael T. Miller................... 13,500 $ 170,400 10,000/88,500 $ 65,000/$518,775 Senior Vice President and Chief Credit Officer
_________________ (1) The "value realized" represents the difference between the exercise price of the option shares and the market price of the option shares on the date the options were exercised. The value realized was determined without considering any taxes which may have been owed. (2) Values stated are pre-tax, net of cost and are based upon the closing price of $21.00 per share of the Company's Common Stock on the NYSE on June 30, 1997, the last trading day of the fiscal year. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No member of the Stock Option/Compensation Committee is or has been an officer or employee of the Company or any of its subsidiaries or had any relationship requiring disclosure pursuant to Item 404 of Regulation S-K promulgated by the Securities and Exchange Commission ("SEC"). No member of the Stock Option/Compensation Committee served on the compensation committee, or as a director, of another corporation, one of whose directors or executive officers served on the Stock Option/Compensation Committee or whose executive officers served on the Company's Board of Directors. 56 PRINCIPAL SHAREHOLDERS The following table and the notes thereto set forth certain information regarding the beneficial ownership of the Company's Common Stock as of September 12, 1997, by (i) each current director of the Company; (ii) each Named Executive Officer; (iii) all present executive officers and directors of the Company as a group; and (iv) each other person known to the Company to own beneficially more than five percent of the presently outstanding Common Stock.
COMMON STOCK OWNED PERCENT OF CLASS OWNED BENEFICIALLY(1) BENEFICIALLY(1) ---------------------- ------------------------- Regan Partners, L.P..................................... 2,335,200(2) 7.93% Montgomery Asset Management, L.P........................ 1,885,000(3) 6.40% Gardner Lewis Asset Management.......................... 1,503,500(4) 5.10% Clifton H. Morris, Jr................................... 1,322,261(5) 4.31% Michael R. Barrington................................... 515,973(6) 1.72% Daniel E. Berce......................................... 698,897(7) 2.32% Edward H. Esstman....................................... 490,506(8) 1.64% James H. Greer.......................................... 220,000(9) * Gerald W. Haddock....................................... 80,000(10) * Douglas K. Higgins...................................... 80,000(11) * Kenneth H. Jones, Jr.................................... 276,000(12) * Michael T. Miller....................................... 34,576(13) * All Present Executive Officers and Directors as a Group (12 Persons)(5)(6)(7)(8)(9)(10)(11)(12)(13).......... 3,899,786 11.78%
- -------------------------- *Less than 1% (1) Except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to the shares of Common Stock shown as beneficially owned by them. Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The percentages are based upon 29,457,163 shares outstanding as of September 12, 1997, except for certain parties who hold options that are presently exercisable or exercisable within 60 days of September 12, 1997. The percentages for those parties who hold options that are presently exercisable or exercisable within 60 days of September 12, 1997 are based upon the sum of 29,457,163 shares outstanding plus the number of shares subject to options that are presently exercisable or exercisable within 60 days of September 12, 1997 held by them, as indicated in the following notes. (2) As of August 31, 1996, the Company has been informed that Regan Partners, L.P. ("Regan Partners"), Athena Partners, L.P. ("Athena"), Basil P. Regan, Lenore Robins and Lee R. Robins hold an aggregate of 2,335,200 shares. An additional 116,700 shares are held by certain trusts and other investment funds controlled by such group of persons, as to which beneficial ownership is disclaimed. The address of Regan Partners and Basil P. Regan is 6 East 43rd Street, New York, New York 10017; the address of Athena, Lenore Robins and Lee R. Robins is 32 East 57th Street, New York, New York 10022. (3) As of March 31, 1997, the Company has been informed that Montgomery Asset Management, L.P. ("Montgomery") holds an aggregate of 1,885,000 shares in various investment funds for which Montgomery serves as investment advisor and over which Montgomery has sole or shared voting and investment power. The address of Montgomery is 3200 Cherry Creek Drive S., #370, Denver, Colorado 80209. (4) As of September 12, 1997, the Company has been informed that Gardner Lewis Asset Management ("Gardner Lewis") holds an aggregate of 1,503,500 shares in various investment funds for which Gardner Lewis serves as investment advisor and over which Gardner Lewis has sole or shared voting and investment power. The address of Gardner Lewis is 285 Wilmington-West Chester Pike, Chadds Ford, Pennsylvania 19317. 57 (5) This amount includes 1,233,999 shares subject to stock options that are currently exercisable or exercisable within 60 days. This amount also includes 38,136 shares of Common Stock in the name of Sheridan C. Morris, Mr. Morris' wife. (6) This amount includes 508,440 shares subject to stock options that are currently exercisable or exercisable within 60 days. (7) This amount includes 673,607 shares subject to stock options that are currently exercisable or exercisable within 60 days. (8) This amount includes 465,333 shares subject to stock options that are currently exercisable or exercisable within 60 days. (9) This amount includes 220,000 shares subject to stock options that are currently exercisable or exercisable within 60 days. This amount does not include 19,606 shares of Common Stock held by Mr. Greer's wife as separate property, as to which Mr. Greer disclaims any beneficial interest. (10) This amount includes 70,000 shares subject to stock options that are currently exercisable or exercisable within 60 days. (11) This amount includes 20,000 shares subject to stock options that are currently exercisable or exercisable within 60 days. This amount does not include 12,000 shares held in trust for the benefit of certain family members of Mr. Higgins, as to which Mr. Higgins disclaims any beneficial interest. (12) This amount includes 236,000 shares subject to stock options that are currently exercisable or exercisable within 60 days. (13) This amount includes 34,000 shares subject to stock options that are currently exercisable or exercisable within 60 days. 58 DESCRIPTION OF NOTES Except as otherwise indicated below, the following summary applies to both the Old Notes and the New Notes. As used herein, the term "Notes" shall mean the Old Notes and the New Notes, unless otherwise indicated. The form and terms of the New Notes are substantially identical to the form and terms of the Old Notes, except that (i) the exchange of the New Notes pursuant to the Exchange Offer will be registered under the Securities Act, (ii) the New Notes will not provide for payment of penalty interest as Liquidated Damages, which terminate upon consummation of the Exchange Offer, and (iii) the New Notes will not bear any legends restricting transfer thereof. The New Notes will be issued solely in exchange for an equal principal amount of Old Notes. As of the date hereof, $50.0 million aggregate principal amount of Old Notes is outstanding. See "The Exchange Offer." GENERAL The Old Notes are, and the New Notes will be, issued pursuant to an Indenture (the "Indenture") between the Company, all current Guarantors and Bank One, N.A., as trustee (the "Trustee"). See "Notice to Investors." The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of the material provisions of the Note Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions therein of certain terms used below. The definitions of certain terms used in the following summary are set forth below under "-- Certain Definitions." For purposes of this summary, the term "Company" refers only to AmeriCredit Corp. and not to any of its Subsidiaries. The Old Notes are, and the New Notes will be general unsecured obligations of the Company and will rank pari passu in right of payment with the Original Notes and all other current and future unsecured senior Indebtedness of the Company. However, the Old Notes are, and the New Notes will be effectively subordinated to secured Indebtedness of the Company and its Subsidiaries, Indebtedness of Securitization Trusts and certain obligations under Credit Enhancement Agreements. The Company and certain of its Subsidiaries are parties to the Credit Agreement and the Mortgage Subsidiary Credit Agreement and all borrowings under these agreements are secured by first priority Liens on certain assets of the Company and certain of its Subsidiaries. All financings under the Warehouse Facility are secured by a first priority lien on the receivables and related assets held by CP Funding Corp., a special purpose subsidiary which is treated as a Securitization Trust under the Indenture. As of December 31, 1997, approximately $105.4 million was outstanding under these agreements and an additional $77.5 million was available for borrowing thereunder in accordance with borrowing base requirements. The Indenture will permit additional borrowings by the Company and its Subsidiaries under the Credit Agreement, the Mortgage Subsidiary Credit Agreement and other Credit Facilities in the future, subject to certain restrictions, and unlimited additional borrowings under Warehouse Facilities for the purpose of financing or refinancing the purchase or origination of Receivables. In addition, the Special Purpose Finance Subsidiaries also have outstanding Indebtedness secured by certain automobile receivables. As of December 31, 1997, the Indebtedness of the Special Purpose Finance Subsidiaries amounted to approximately $14.1 million. See "Description of Other Debt." The Company's and its Subsidiaries' interests in Securitization Trusts are also subordinated to the asset backed securities issued thereby. The spread accounts (and the restricted cash therein) maintained by a Restricted Subsidiary of the Company as well as the capital stock of such Restricted Subsidiary (which also owns the excess servicing receivable recorded on the Company's consolidated balance sheet) are also subject to Liens in favor of Financial Security Assurance Inc. pursuant to Credit Enhancement Agreements. As of December 31, 1997, the Company and its Subsidiaries had approximately $76.2 million of restricted cash in such spread accounts. See "Risk Factors--Holding Company Structure; Effective Subordination." The operations of the Company are conducted through its Subsidiaries and, therefore, the Company is dependent upon the cash flow of its Subsidiaries to meet its obligations, including its obligations under the Notes. All of the Company's current and future Restricted Subsidiaries, other than AFS Funding Corp. and CP Funding Corp. and the Special Purpose Finance Subsidiaries, will guarantee the Company's payment obligations under the Notes on a senior unsecured basis. AFS Funding Corp., CP Funding Corp. and the Special Purpose Finance Subsidiaries hold substantial assets. See "Risk Factors--Holding Company Structure; Effective Subordination." 59 As of the date of the Indenture, all of the Company's Subsidiaries will be Restricted Subsidiaries. However, under certain circumstances, the Company will be able to designate current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the restrictive covenants set forth in the Indenture. PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $50.0 million and will mature on February 1, 2004. Interest on the Notes will accrue at the rate of 9 1/4% per annum and will be payable semi-annually in arrears on February 1 and August 1, commencing on August 1, 1998, to Holders of record on the immediately preceding January 15 and July 15. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal, premium, if any, interest and Liquidated Damages on the Notes will be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, interest and Liquidated Damages with respect to Notes the Holders of which have given wire transfer instructions to the Company will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. SUBSIDIARY GUARANTEES The Company's payment obligations under the Notes will be jointly and severally guaranteed on a senior unsecured basis (the "Subsidiary Guarantees") by the Guarantors. The Subsidiary Guarantees will rank pari passu with the Original Guarantees. The obligations of each Guarantor under its Subsidiary Guarantee will be limited so as not to constitute a fraudulent conveyance under applicable law. See, however, "Risk Factors--Fraudulent Conveyance Statutes." The Indenture provides that no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another corporation, Person or entity whether or not affiliated with such Guarantor unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; (iii) such Guarantor, or any Person formed by or surviving any such consolidation or merger, would have Consolidated Net Worth (immediately after giving effect to such transaction), equal to or greater than the Consolidated Net Worth of such Guarantor immediately preceding the transaction; and (iv) the Company would be permitted by virtue of the Company's pro forma Consolidated Leverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock." The Indenture provides that in the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor) will be released and relieved of its obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture. See "--Repurchase at the Option of Holders--Asset Sales." OPTIONAL REDEMPTION The Notes will not be redeemable at the Company's option prior to February 1, 2001. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more 60 than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2001.......................... 104.625% 2002.......................... 102.313% 2003 and thereafter........... 100.000%
Notwithstanding the foregoing, during the first 36 months after January 30, 1997, the Company may on any one or more occasions redeem up to an aggregate of $16.7 million in principal amount of Notes at a redemption price of 109.25% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of a public offering of common stock of the Company; provided that at least $33.3 million in aggregate principal amount of Notes remain outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 45 days of the date of the closing of such public offering. Notwithstanding the preceding two paragraphs, the Company will not be permitted to redeem any portion of the Original Notes unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Notes (rounded to the nearest integral multiple of $1,000) equal to the product of (1) a fraction, the numerator of which is the aggregate principal amount of Original Notes to be so redeemed and the denominator of which is the aggregate principal amount of Original Notes outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Notes outstanding immediately prior to such proposed redemption. The Company will also not be permitted to redeem any portion of the Notes unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Original Notes (rounded to the nearest integral multiple 1,000) equal to the product of (1) a fraction, the numerator of which is the aggregate principal amount of Notes outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Original Notes outstanding immediately prior to such proposed redemption. SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. MANDATORY REDEMPTION Except as set forth below under "Repurchase at the Option of Holders," the Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. 61 REPURCHASE AT THE OPTION OF HOLDERS Change of Control Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Company's other senior Indebtedness contains prohibitions of certain events that would constitute a Change of Control. In addition, the exercise by the Holders of Notes of their right to require the Company to repurchase the Notes could cause a default under such other senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchases on the Company. Finally, the Company's ability to pay cash to the Holders of Notes upon a repurchase may be limited by the Company's then existing financial resources. See "Risk Factors--Potential Inability to Fund a Change of Control Offer." The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than in the ordinary course of business; (ii) the adoption of a plan relating to the liquidation or dissolution of the Company; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares); (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or (v) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the 62 Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance); provided, however, that this clause (v) shall not apply to any such consolidation or merger if, immediately after the consummation of such transaction and after giving effect thereto, the ratings assigned to the Notes by Moody's Investors Service, Inc. and Standard & Poor's Ratings Group are equal to or higher than Baa3 (or the equivalent) and BBB- (or the equivalent), respectively. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of the Company and its Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. Asset Sales The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors of the Company set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 85% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation Agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds (a) to permanently reduce Specified Senior Indebtedness of the Company and its Restricted Subsidiaries including the Original Notes; provided, however, that such Net Proceeds shall be applied to all Specified Senior Indebtedness of the Company and its Restricted Subsidiaries on a pro rata basis, or (b) to an Investment, the making of a capital expenditure or the acquisition of Receivables or other tangible assets, in each case, in or with respect to a Permitted Business. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Indebtedness under Credit Facilities and/or Warehouse Facilities or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be required to make an offer to all Holders of Original Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Original Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set 63 forth in the Original Indenture. To the extent that the aggregate amount of Original Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company will be required to make an offer to all Holders of Notes ("Secondary Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to a Secondary Asset Sale Offer is less than the remaining Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Original Notes or Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Original Notes or Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase Notes, the amount of Excess Proceeds shall be reset at zero. CERTAIN COVENANTS Restricted Payments The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly-Owned Restricted Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in the first paragraph of the covenant described below under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Subsidiaries after February 4, 1997 (excluding Restricted Payments permitted by clause (ii) of the next succeeding paragraph), is less than the sum of (i) 25% of the aggregate cumulative Consolidated Net Income of the Company for the period (taken as one accounting period) from and after March 31, 1997 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since February 4, 1997 of Equity Interests of the Company (other than Disqualified Stock) or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after February 4, 1997 is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment. The foregoing provisions do not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted 64 Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; and (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription Agreement or stock option Agreement in effect as of the date of the Indenture; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $250,000 in any twelve-month period and no Default or Event of Default shall have occurred and be continuing immediately after such transaction. The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default; provided that in no event shall the business currently operated by AmeriCredit Financial Services, Inc. be transferred to or held by an Unrestricted Subsidiary. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greater of (y) the net book value of such Investments at the time of such designation or (z) the fair market value of such Investments at the time of such designation. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors of the Company whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $10.0 million. Not later than 15 days after the end of any fiscal quarter during which any Restricted Payment is made, the Company shall deliver to the Trustee an Officers' Certificate stating that all Restricted Payments made during such fiscal quarter were permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed, together with a copy of any fairness opinion or appraisal required by the Indenture. Incurrence of Indebtedness and Issuance of Preferred Stock The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company will not issue any Disqualified Stock and will not permit any of its Subsidiaries to issue any shares of preferred stock; provided, however, that the Company and the Guarantors may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock or preferred stock if the Consolidated Leverage Ratio of the Company, calculated on a pro forma basis after giving effect to the incurrence or issuance of the additional Indebtedness to be incurred or the Disqualified Stock or preferred stock to be issued, would have been less than 2.0 to 1. The provisions of the first paragraph of this covenant do not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the existence of Credit Facilities and the Guarantees thereof by the Guarantors and the incurrence by the Company and/or any of the Guarantors of revolving credit Indebtedness pursuant to one or more Credit Facilities the proceeds of which are applied to purchase or originate Receivables; provided that the aggregate principal amount of all revolving credit Indebtedness outstanding under all Credit Facilities after giving effect to such incurrence, including all Permitted Refinancing Indebtedness incurred to refund, refinance, defease, renew or replace any Indebtedness incurred pursuant to this clause (i) and with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder, does not at any time exceed the amount of the Borrowing Base (any such outstanding Indebtedness that exceeds the amount of the Borrowing Base as of the close of any Business Day shall cease to be Permitted Debt pursuant to this clause (i) as of the close of business on the third Business Day thereafter and shall be deemed to be an incurrence of such Indebtedness that is not permitted by this clause (i) by the Company or such Guarantor, as applicable, as of such third Business Day); 65 (ii) the existence of Warehouse Facilities, regardless of amount, and the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Warehouse Debt in an aggregate principal amount at any time outstanding (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed 100% of the aggregate principal amount (exclusive of Acquisition Fees included therein) of all Eligible Receivables owned by the Company and its Restricted Subsidiaries (or such Warehouse Facilities in the case of Permitted Warehouse Debt in the form of repurchase agreements) at such time; (iii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iv) the incurrence by the Company of Indebtedness represented by the Original Notes and the Notes and the incurrence by the Guarantors of the Original Subsidiary Guarantees and the Subsidiary Guarantees; (v) obligations of the Company and its Restricted Subsidiaries under Credit Enhancement Agreements; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance, defease, renew or replace any Indebtedness (other than Permitted Warehouse Debt or intercompany Indebtedness) that was permitted by the Indenture to be incurred; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of the Guarantors; provided, however, that (i) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Guarantor and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Guarantor shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vii); (viii) the issuance by a Restricted Subsidiary of preferred stock to the Company or to any of the Guarantors; provided, however, that any subsequent event or issuance or transfer of any Capital Stock that results in the owner of such preferred stock ceasing to be a Guarantor of the Company or any subsequent transfer of such preferred stock to a Person other than the Company or any of the Guarantors, shall be deemed to be an issuance of preferred stock by such Restricted Subsidiary that was not permitted by this clause (viii); (ix) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred (y) for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or (z) for the purpose of hedging, fixing or capping interest rate risk in connection with any completed or pending Securitization; (x) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; (xi) the incurrence by the Company's Unrestricted Subsidiaries of Non- Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (xi); and (xii) the incurrence by the Company of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xii), not to exceed $5.0 million. The Indenture will also provide that the Company will not, and will not permit any Restricted Subsidiary of the Company to, incur any Indebtedness that is contractually subordinated to any Indebtedness of the Company or any such Restricted Subsidiary unless such Indebtedness is also contractually subordinated to the Notes, or the Subsidiary Guarantee of such Restricted Subsidiary (as applicable), on substantially identical terms; provided, however, that no Indebtedness shall be deemed to be contractually subordinated to any other Indebtedness solely by virtue of being unsecured. 66 For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xii) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness will be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Liens The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under the Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. Dividend and Other Payment Restrictions Affecting Subsidiaries The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) the Indenture and the Notes, (b) applicable law, (c) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred, (d) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (e) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (f) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, (g) the requirements of any Securitization that are exclusively applicable to any bankruptcy remote special purpose Restricted Subsidiary of the Company formed in connection therewith, (h) the requirements of any Credit Enhancement Agreement, or (i) in the case of clause (iii) above, restrictions contained in security agreements securing Indebtedness of Guarantors relating to the properties or assets of Guarantors subject to the Liens created thereby, provided that such Liens were otherwise permitted to be incurred under the Indenture. Merger, Consolidation, or Sale of Assets The Indenture provides that the Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately before and after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly-Owned Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the 67 Consolidated Net Worth of the Company immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the end of the applicable fiscal quarter, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in the first paragraph of the covenant described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock." Transactions with Affiliates The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, Agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors of the Company set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that (x) any employment Agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, (y) transactions between or among the Company and/or its Restricted Subsidiaries and (z) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption "--Restricted Payments," in each case, shall not be deemed Affiliate Transactions. Limitation on Issuances and Sales of Capital Stock of Wholly-Owned Restricted Subsidiaries The Indenture provides that the Company (i) will not, and will not permit any Wholly-Owned Restricted Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly-Owned Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly- Owned Restricted Subsidiary of the Company that is a Guarantor), unless (a) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Wholly-Owned Restricted Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with the covenant described above under the caption "--Asset Sales," and (ii) will not permit any Wholly-Owned Restricted Subsidiary of the Company to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly-Owned Restricted Subsidiary of the Company. Additional Subsidiary Guarantees The Indenture provides that if the Company or any of its Subsidiaries shall acquire or create another Subsidiary after the date of the Indenture, then such newly acquired or created Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the terms of the Indenture; provided, that the foregoing shall not apply to Subsidiaries that (i) have properly been designated as Unrestricted Subsidiaries in accordance with the Indenture for so long as they continue to constitute Unrestricted Subsidiaries or (ii) qualify as Securitization Trusts for so long as they continue to constitute Securitization Trusts. Business Activities The Indenture provides that the Company will not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole. 68 Payments for Consent The Indenture provides that neither the Company nor any of its Subsidiaries will, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or Agreement. Reports The Indenture provides that, whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separately from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Limitation on Investment Company Status The Indenture provides that the Company and its Subsidiaries shall not take any action, or otherwise permit to exist any circumstance, that would require the Company to register as an "investment company" under the Investment Company Act of 1940, as amended. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by the Company or any of its Subsidiaries to comply with its obligations in the covenants or other agreements described above under the captions "--Repurchase at the Option of Holders," "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," or "--Dividend and Other Payment Restrictions Affecting Subsidiaries;" (iv) failure by the Company or any of its Subsidiaries for 30 days after notice from the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding to comply with any of the other covenants or agreements in the Indenture; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $2.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in an judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full 69 force and effect or any Guarantor, or any Person acting in behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to February 1, 2001 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to February 1, 2001, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes, the Indenture or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation 70 and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material Agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (viii) the Company must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). 71 Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under the caption "--Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain a copy of the Indenture and Registration Rights Agreement without charge by writing to AmeriCredit Corp., 200 Bailey Drive, Fort Worth, Texas 76107, Attention: Chief Financial Officer. BOOK-ENTRY, DELIVERY AND FORM The New Notes will initially be issued in the form of one Global Note (the "Global Note"). The Global Note will be deposited on the date of consummation of the Exchange Offer (the "Closing Date") with, or on behalf of, The Depository Trust Company (the "Depository") and registered in the name of Cede & Co., as nominee of the Depository (such nominee being referred to herein as the "Global Note Holder"). Notes that were issued as described below under "Certificated Securities," will be issued in the form of registered definitive certificates (the "Certificated Securities"). Upon the transfer to a qualified institutional buyer of Certificated Securities initially issued to a Non-Global Purchaser, such Certificated Securities may, unless the Global Note has 72 previously been exchanged for Certificated Securities, be exchanged for an interest in the Global Note representing the principal amount of Notes being transferred. The Depository is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants" or the "Depository's Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depository's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depository's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants" or the "Depository's Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depository only thorough the Depository's Participants or the Depository's Indirect Participants. The Company expects that pursuant to procedures established by the Depository (i) upon deposit of the Global Note, the Depository will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Note and (ii) ownership of the Notes evidenced by the Global Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depository (with respect to the interests of the Depository's Participants), the Depository's Participants and the Depository's Indirect Participants. Prospective purchasers are advised that the laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer Notes evidenced by the Global Note will be limited to such extent. So long as the Global Note Holder is the registered owner of any Notes, the Global Note Holder will be considered the sole Holder under the Indenture of any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the Global Note will not be considered the owners or Holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records of the Depository or for maintaining, supervising or reviewing any records of the Depository relating to the Notes. Payments in respect of the principal of, premium, if any, interest and Liquidated Damages, if any, on any Notes registered in the name of the Global Note Holder on the applicable record date will be payable by the Trustee to or at the direction of the Global Note Holder in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the Persons in whose names Notes, including the Global Note, are registered as the owners thereof for the purpose of receiving such payments. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes. The Company believes, however, that it is currently the policy of the Depository to immediately credit the accounts of the relevant Participants with such payments, in amounts proportionate to their respective holdings of beneficial interests in the relevant security as shown on the records of the Depository. Payments by the Depository's Participants and the Depository's Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practice and will be the responsibility of the Depository's Participants or the Depository's Indirect Participants. Certificated Securities Subject to certain conditions, any Person having a beneficial interest in the Global Note may, upon request to the Trustee, exchange such beneficial interest for Notes in the form of Certificated Securities. Upon any such issuance, the Trustee is required to register such Certificated Securities in the name of, and cause the same to be delivered to, such Person or Persons (or the nominee of any thereof). In addition, if (i) the Company notifies the Trustee in writing that the Depository is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in the form of Certificated Securities under the Indenture, then, upon surrender by the Global Note Holder of its Global Note, Notes in such form will be issued to each Person that the Global Note Holder and the Depository identify as being the beneficial owner of the related Notes. Neither the Company nor the Trustee will be liable for any delay by the Global Note Holder or the Depository in identifying the beneficial owners of Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or the Depository for all purposes. 73 Same Day Settlement and Payment The Indenture will require that payments in respect of the Notes represented by the Global Note (including principal, premium, if any, interest and Liquidated Damages, if any) be made by wire transfer of immediately available (same day) funds to the accounts specified by the Global Note Holder. With respect to Certificated Securities, the Company will make all payments of principal, premium, if any, interest and Liquidated Damages, if any, by wire transfer of immediately available (same day) funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Acquisition Fees" means, with respect to any Eligible Receivables as of any date, the discount or cash payments received by the Company from dealers and other Persons with respect to the Eligible Receivables purchased from such dealer or other Person and owned by the Company or its Restricted Subsidiaries as of such date. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by Agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of Receivables in connection with Securitizations, Warehouse Facilities or Credit Facilities in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "--Change of Control" and/or the provisions described above under the caption "--Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the Company or any of its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $500,000 or (b) for net proceeds in excess of $500,000. Notwithstanding the foregoing: (i) a transfer of assets by the Company to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary, and (iii) a Restricted Payment that is permitted by the covenant described above under the caption "-- Restricted Payments" will not be deemed to be Asset Sales. "Board of Directors" means the Board of Directors or other governing body charged with the ultimate management of any Person, or any duly authorized committee thereof. "Borrowing Base" means, as of any date, an amount equal to the sum of (i) 80% of the aggregate amount of Receivables (other than loans secured by residential mortgages) owned by the Company and its Wholly-Owned Restricted Subsidiaries as of such date that are not in default, excluding (A) any Receivables that were acquired or originated with Permitted Warehouse Debt, (B) any Receivables that are held by a Securitization Trust, and (C) any Receivables that are subject to Liens other than Liens securing Obligations under Credit Facilities; (ii) 60% of the book value (determined on a consolidated basis in accordance with GAAP) of interests in portfolios of securitized Receivables that are owned by the 74 Company and its Wholly-Owned Restricted Subsidiaries as of such date and that are not subject to any Liens other than Liens to secure Obligations under Credit Facilities; and (iii) 98% of the aggregate amount of Receivables that consist of loans secured by residential mortgages owned by the Company and its Wholly-Owned Restricted Subsidiaries as of such date that are not in default, excluding (A) any such loans that were acquired or originated with Permitted Warehouse Debt, (B) any such loans that are held by a Securitization Trust, and (C) any such loans that are subject to Liens other than Liens securing Obligations under Credit Facilities. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and Eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition. "Consolidated Indebtedness" means, with respect to any Person as of any date of determination, the sum, without duplication, of (i) the total amount of Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total amount of Indebtedness of any other Person, to the extent that such Indebtedness has been Guaranteed by the referent Person or one or more of its Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified Stock of such Person and all preferred stock of Restricted Subsidiaries of such Person, in each case, determined on a consolidated basis in accordance with GAAP. "Consolidated Leverage Ratio" means, with respect to any Person, as of any date of determination, the ratio of (i) the Consolidated Indebtedness of such Person as of such date, excluding, however, all (A) borrowings under Credit Facilities that constitute Permitted Debt, (B) Permitted Warehouse Debt and (C) Hedging Obligations that constitute Permitted Debt to (ii) the Consolidated Net Worth of such Person as of such date. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries (for such period, on a consolidated basis, determined in accordance with GAAP) provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly-Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any Agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than 75 Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Credit Agreement" means the Second Restated Revolving Credit Agreement, dated as of October 7, 1996, by and among the Company, certain of its Restricted Subsidiaries and the several banks named therein, providing for up to $240 million of revolving credit borrowings, including all related notes, Guarantees, security agreements, collateral documents, and other instruments and agreements executed in connection therewith. "Credit Enhancement Agreements" means, collectively, any documents, instruments or agreements entered into by the Company, any of its Restricted Subsidiaries or any of the Securitization Trusts exclusively for the purpose of providing credit support for the Securitization Trusts or any of their respective Indebtedness or asset-backed securities. "Credit Facilities" means, with respect to the Company or any of its Restricted Subsidiaries, one or more debt facilities (including, without limitation, the Credit Agreement) with banks or other institutional lenders providing for revolving credit loans; provided that in no event will any such facility that constitutes a Warehouse Facility be deemed to qualify as a Credit Facility. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. "Eligible Receivables" means, at any time, all Receivables owned by the Company or any of its Restricted Subsidiaries that meet the sale or loan eligibility criteria set forth in the Warehouse Facility pursuant to which the applicable Receivables were financed; excluding, however, any Receivables that are pledged to secure, or were acquired or originated with, borrowings under a Credit Facility and excluding any such Receivables held by a Securitization Trust. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Existing Indebtedness" means up to $39.5 million in aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement, the Original Notes and the Original Guarantees) in existence on February 4, 1997, until such amounts are repaid. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time and consistently applied. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means each of (i) AmeriCredit Financial Services, Inc., a Delaware corporation, AmeriCredit Operating Co., Inc., a Delaware corporation, ACF Investment Corp., a Delaware corporation, Americredit Corporation of California, f/k/a Rancho Vista Mortgage Corporation, a California corporation and AmeriCredit Premium Finance, 76 Inc., a Delaware corporation, and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "--Restricted Payments." "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention Agreement, any lease in the nature thereof, any option or other Agreement to sell or give a security interest in and any filing of or Agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. 77 "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, Agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Notes being offered hereby) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Original Guarantees" means each of the Guarantees of the Original Notes by the Guarantors pursuant to the Original Indenture. "Original Indenture" means the Indenture, dated as of February 4, 1997, among the Company, Bank One, Columbus, NA, as trustee, and the Guarantors, with respect to the Original Notes and the Original Guarantees. "Original Notes" means the $125,000,000 in aggregate principal amount of the Company's 9 1/4% Senior Notes due 2004, issued pursuant to the Original Indenture on February 4, 1997. "Permitted Business" means the business of purchasing, originating, brokering and marketing, pooling and selling, securitizing and servicing Receivables, and entering into agreements and engaging in transactions incidental to the foregoing. "Permitted Investments" means (a) any Investment in the Company or in a Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly-Owned Restricted Subsidiary of the Company and a Guarantor that is engaged in a Permitted Business or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor and that is engaged in a Permitted Business; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "-- Repurchase at the Option of Holders--Asset Sales;" (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) Investments by the Company or any of its Subsidiaries in Securitization Trusts in the ordinary course of business in connection with or arising out of Securitizations; (g) purchases of all remaining outstanding asset-backed securities of any Securitization Trust for the purpose of relieving the Company or a Subsidiary of the Company of the administrative expense of servicing such Securitization Trust, but only if 90% or more of the aggregate principal amount of the original asset-backed securities of such Securitization Trust have previously been retired; and (h) other Investments by the Company or any of its Subsidiaries in any Person (other than an Affiliate of the Company that is not also a Subsidiary of the Company) that do not exceed $5.0 million in the aggregate at any one time outstanding (measured as of the date made and without giving effect to subsequent changes in value). "Permitted Liens" means (i) Liens existing on the date of the Indenture; (ii) Liens on Eligible Receivables and the proceeds thereof to secure Permitted Warehouse Debt or permitted Guarantees thereof; (iii) Liens to secure revolving credit borrowings under Credit Facilities, provided that such borrowings were permitted by the Indenture to be incurred; (iv) Liens on Receivables and the proceeds thereof incurred in connection with Securitizations or permitted Guarantees thereof; (v) Liens on spread accounts and excess servicing receivable, Liens on the stock of Restricted Subsidiaries of the Company substantially all of the assets of which are spread accounts and excess servicing receivable and Liens on interests in Securitization Trusts, in each case incurred in connection with Credit Enhancement Agreements; (vi) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (vii) Liens on property existing at the time of acquisition thereof by the Company or any Restricted 78 Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (viii) Liens securing Indebtedness incurred to finance the construction or purchase of property of the Company or any of its Wholly-Owned Restricted Subsidiaries (but excluding Capital Stock of another Person); provided, however, that any such Lien may not extend to any other property owned by the Company or any of its Restricted Subsidiaries at the time the Lien is incurred, and the Indebtedness secured by the Lien may not be incurred more than 180 days after the latter of the acquisition or completion of construction of the property subject to the Lien; provided, further, that the Amount of Indebtedness secured by such Liens do not exceed the fair market value (as evidenced by a resolution of the Board of Directors of the Company set forth in an Officers' Certificate delivered to the Trustee) of the property purchased or constructed with the proceeds of such Indebtedness; (ix) Liens to secure any Permitted Refinancing Indebtedness incurred to refinance any Indebtedness secured by any Lien referred to in the foregoing clauses (i) through (viii), provided, however, that such new Lien shall be limited to all or part of the same property that secured the original Lien and the Indebtedness secured by such Lien at such time is not increased to any amount greater than the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (i) through (viii), as the case may be, at the time the original Lien became a permitted Lien; (x) Liens in favor of the Company; (xi) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $1.0 million in the aggregate at any one time outstanding; (xii) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business (including, without limitation, landlord Liens on leased properties); (xiii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (xiv) Liens on assets of Guarantors to secure Senior Guarantor Debt of such Guarantors that was permitted by the Indenture to be incurred; and (xv) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than Permitted Warehouse Debt or intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Permitted Warehouse Debt" means Indebtedness of the Company or a Restricted Subsidiary of the Company outstanding under one or more Warehouse Facilities; provided, however, that (i) the assets purchased with proceeds of such warehouse debt are or, prior to any funding under the Warehouse Facility with respect to such assets, were eligible to be recorded as held for sale on the consolidated balance sheet of the Company in accordance with GAAP, (ii) such warehouse debt will be deemed Permitted Warehouse Debt (a) in the case of a Purchase Facility, only to the extent the holder of such warehouse debt has no contractual recourse to the Company and/or its Restricted Subsidiaries to satisfy claims in respect of such warehouse debt in excess of the realizable value of the Receivables financed thereby, and (b) in the case of any other Warehouse Facility, only to the lesser of (A) the amount advanced by the lender with respect to the Receivables financed under such Warehouse Facility, and (B) the principal amount of such Receivables and (iii) any such Indebtedness has not been outstanding in excess of 364 days. "Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust, joint venture, or a governmental agency or political subdivision thereof. 79 "Purchase Facility" means any Warehouse facility in the form of a purchase and sale facility pursuant to which the Company or any of its Subsidiaries sells Receivables to a financial institution and retains the right of first refusal upon the subsequent resale of such Receivables by such financial institution. "Receivables" means (i) consumer installment sale contracts and loans evidenced by promissory notes secured by new and used automobiles and light trucks, (ii) other consumer installment sale contracts or lease contracts and (iii) loans secured by residential mortgages, in the case of each of the clauses (i), (ii) and (iii), that are purchased or originated in the ordinary course of business by the Company or any Restricted Subsidiary of the Company; provided, however, that for purposes of determining the amount of a Receivable at any time, such amount shall be determined in accordance with GAAP, consistently applied, as of the most recent practicable date. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Securitization" means a public or private transfer of Receivables in the ordinary course of business and by which the Company or any of its Restricted Subsidiaries directly or indirectly securitizes a pool of specified Receivables including any such transaction involving the sale of specified Receivables to a Securitization Trust. "Securitization Trust" means any Person (whether or not a Subsidiary of the Company) established exclusively for the purpose of issuing securities in connection with any Securitization, the obligations of which are without recourse to the Company or any of the Guarantors (including, without limitation, any special purpose Subsidiary of the Company formed exclusively for the purpose of satisfying the requirements of Credit Enhancement Agreements and regardless of whether such Subsidiary is an issuer of securities), provided that such Person is not an obligor with respect to any Indebtedness of the Company or any Guarantor other than under Credit Enhancement Agreements. As of the date of the Indenture, AFS Funding Corp. and CP Funding Corp. shall be deemed to satisfy the requirements of the foregoing definition. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "Special Purpose Finance Subsidiaries" means AmeriCredit Receivables Finance Corp. and AmeriCredit Receivables Finance Corp. 1995-A. "Specified Senior Indebtedness" means (i) the Indebtedness of any Person, whether outstanding on the date of the Indenture or thereafter incurred and (ii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person to the extent post filing interest is allowed in such proceeding) in respect of (A) Indebtedness of such Person for money borrowed and (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the case of either clause (i) or (ii), in the instrument creating or evidencing the same pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Notes; provided, however, that Specified Senior Indebtedness shall not include (1) any obligation of such Person to any Subsidiary of such Person, (2) any liability for Federal, state, local or other taxes owed or owing by such Person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (4) any obligations in respect of Capital Stock of such Person or (5) that portion of any Indebtedness which at the time of incurrence is incurred in violation of the Indenture. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly 80 or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any Agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such Agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant described above under the caption "Certain Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Consolidated Leverage Ratio test set forth in the first paragraph of the covenant described under the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the end of the applicable fiscal quarter, and (ii) no Default or Event of Default would be in existence following such designation. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Warehouse Facility" means any funding arrangement with a financial institution or other lender or purchaser to the extent (and only to the extent) funding thereunder is used exclusively to finance or refinance the purchase or origination of Receivables by the Company or a Restricted Subsidiary of the Company for the purpose of (i) pooling such Receivables prior to Securitization or (ii) sale, in each case in the ordinary course of business, including Purchase Facilities. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly-Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Restricted Subsidiaries of such Person. 81 CERTAIN FEDERAL INCOME TAX CONSEQUENCES GENERAL In the opinion of Jenkens & Gilchrist, a Professional Corporation, the following are the material U.S. federal income tax consequences of exchanging Old Notes for New Notes pursuant to the Exchange Offer. The following opinion is based on the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed regulations thereunder, Internal Revenue Service ("IRS") rulings and pronouncements, reports of congressional committees, judicial decisions and current administrative rulings and practice, all as in effect on the date hereof, all of which are subject to change at any time, and any such change may be applied retroactively in a manner that could adversely affect the tax consequences described below. This opinion applies only to Notes held as "capital assets" within the meaning of section 1221 of the Code (generally property held for investment and not for sale to customers in the ordinary course of a trade or business) by holders who or which are (i) citizens or residents of the United States, (ii) domestic corporations, partnerships or other entities or (iii) otherwise subject to U.S. federal income taxation on a net income basis in respect of income and gain from the Notes. This opinion does not address aspects of U.S. federal income taxation that may be applicable to holders that are subject to special tax rules, such as certain financial institutions, tax-exempt organizations, insurance companies, dealers in securities, foreign corporations and nonresident alien individuals. Moreover, this summary does not address any of the U.S. federal income tax consequences of holders that do not acquire New Notes pursuant to the Exchange Offer, nor does it address the applicability or effect of any state, local or foreign tax laws. The Company has not sought and will not seek any rulings from the IRS with respect to the position of the Company discussed below. There can be no assurance that the IRS will not take a different position concerning the tax consequences of exchanging Old Notes for New Notes. EXCHANGE OFFER The exchange of Old Notes for New Notes pursuant to the Exchange Offer will not be treated as an "exchange" for U.S. federal income tax purposes because the New Notes will not be considered to differ materially in kind or extent from the Old Notes. New Notes received by a holder of Old Notes will be treated as a continuation of the Old Notes in the hands of such holder. Accordingly, there will not be any U.S. federal income tax consequences to holders exchanging Old Notes for New Notes pursuant to the Exchange Offer. A holder's holding period of New Notes will include the holding period of the Old Notes exchanged therefor. POTENTIAL CONTINGENT PAYMENTS Holders of New Notes should be aware that it is possible that the IRS could assert that the Liquidated Damages which the Company would have been obligated to pay if the Exchange Offer registration statement had not been filed or is not declared effective within the time periods set forth herein (or certain other actions are not taken) (as described above under "Termination of Certain Rights") are "contingent payments" for U.S. federal income tax purposes. If so treated, the New Notes would be treated as contingent payment debt instruments and a holder of a New Note would be required to accrue interest income over the term of such New Note under the "noncontingent bond method" set forth in the U.S. Treasury Regulations issued by the IRS (the "Contingent Debt Regulations"). Under the Contingent Debt Regulations, any gain recognized by a holder on the sale, exchange or retirement of a New Note could be treated as interest income. However, the Contingent Debt Regulations provide that, for purposes of determining whether a debt instrument is a contingent payment debt instrument, remote or incidental contingencies are ignored. On the date of issue, the Company believed and has represented that to the best knowledge of the Company, prior to and on the date the New Notes are issued, the possibility of the payment of Liquidated Damages on the Old Notes is remote. Assuming this representation, counsel is of the opinion that the Old Notes will not be treated as contingent payment debt instruments. Accordingly, based on this representation, the Old Notes should not be treated as contingent payment debt instruments. 82 EACH HOLDER SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED ABOVE TO THEIR PARTICULAR SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS. 83 DESCRIPTION OF OTHER DEBT THE CREDIT AGREEMENT AmeriCredit, AmeriCredit Financial Services, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, and AmeriCredit Operating Co., Inc., a Delaware corporation and wholly-owned subsidiary of the Company are the borrowers under the Credit Agreement, pursuant to which the borrowers may borrow up to $310 million on a revolving basis for the acquisition of automobile finance contracts, working capital and general corporate purposes, subject to a borrowing base limitation based on a percentage of the aggregate eligible finance receivables owned by AmeriCredit and certain of its subsidiaries. Borrowings under the Credit Agreement are guaranteed by certain subsidiaries of AmeriCredit and are secured by certain of the assets of the borrowers and the Company's principal operating subsidiaries and the pledge by AmeriCredit of all of its equity interests in and loans to its subsidiaries, except for the Special Purpose Finance Subsidiaries and certain other subsidiaries. The Credit Agreement matures in October 1998. As of December 31, 1997, outstanding borrowings under the Credit Agreement aggregated $2.1 million and approximately $77.5 million was available for borrowing under the Credit Agreement pursuant to the terms of such Agreement in accordance with borrowing base requirements. Amounts outstanding under the Credit Agreement bear interest, at the Company's option, at either: (i) the higher of (a) the Wells Fargo Bank, N.A. prime rate or (b) the federal funds rate plus 0.50% per annum or (ii) reserve adjusted LIBOR plus 1.25% to 1.55% per annum based on the rating of the Credit Agreement given by one of various rating agencies. The borrowers are also required to pay an annual commitment fee equal to 0.25% per annum of the unused portion of the Credit Agreement. The Credit Agreement contains covenants and provisions that will restrict, among other things, any of the borrowers' ability to: (i) merge or consolidate with another entity; (ii) incur liens on its property other than Permitted Liens (as defined in the Credit Agreement); (iii) engage in certain asset sales or other dispositions; (iv) engage in material acquisitions and other investments; (v) pay dividends, repurchase stock or make other restricted payments; (vi) engage in certain transactions with affiliates; (vii) make certain changes in its line of business and (viii) enter into any negative pledges. The Credit Agreement also requires the satisfaction of certain financial performance criteria, including: (i) that the ratio of recourse indebtedness to tangible net worth not exceed 2.5 to 1.0; (ii) that the sum of EBIT (as defined in the Credit Agreement) and the amortization of excess servicing receivable less the gain on sale of receivables divided by interest expense on a trailing 12-month basis not be less than 2.2 to 1.0; (iii) that AmeriCredit not incur a net loss on a consolidated basis during any calendar quarter; (iv) that the ratio of Net Credit Losses (as defined in the Credit Agreement) for any 12-month period to the sum of month end balances of Net Indirect Loans (as defined in the Credit Agreement) over the prior 13 months divided by 13 be less than 0.10 to 1.0; and (v) that the ratio of Delinquent and Repossessed Loans (as defined in the Credit Agreement) to Net Indirect Loans be less than 0.075 to 1.0. Additional borrowings under the Credit Agreement are subject to the absence of a default under such covenants. Events of default under the Credit Agreement include, among other things: (i) any failure of the borrowers to pay principal, interest or fees thereunder when due; (ii) payment default or other default under other Indebtedness; (iii) noncompliance with or breach of certain covenants contained in the Credit Agreement and certain related documents; (iv) material inaccuracy of any representation or warranty when made by borrowers in the Credit Agreement and certain related documents; (v) certain events of bankruptcy or insolvency; and (vi) imposition of judgment or ERISA liens. THE WAREHOUSE FACILITY In October 1997 the Company established a $245 million warehouse facility (the "Warehouse Facility") which expires in October 1998. Under the Warehouse Facility, AmeriCredit Financial Services, Inc., a subsidiary of the Company sells auto receivables to CP Funding Corp., a special purpose subsidiary which is treated as a Securitization Trust under the Indenture. AmeriCredit Financial Services, Inc., in turn agrees to manage, service, administer and make collections on such auto receivables. CP Funding Corp. finances the purchase of the auto receivables with borrowings under the Warehouse Facility. The amount of financing available under the Warehouse Facility is governed by an advance formula equal to 88% of the principal amount of the receivables financed thereby subject to downward adjustment upon certain defined financial 84 performance ("Trigger Events"). Aggregate borrowings of $96.0 million were outstanding as of December 31, 1997. All financings under the Warehouse Facility are secured by a first priority lien on the receivables and related assets held by CP Funding Corp. and bear interest at rates based on the funding source plus specified fees. While CP Funding Corp. is a consolidated subsidiary of the Company, CP Funding Corp. is a separate legal entity and the auto receivables sold to CP Funding Corp. and the other assets of CP Funding Corp. are legally owned by CP Funding Corp. and are not available to satisfy the claims of creditors of AmeriCredit or its other subsidiaries. THE MORTGAGE SUBSIDIARY CREDIT AGREEMENT The Company's subsidiary, AMS, has a credit Agreement (the "Mortgage Subsidiary Credit Agreement") with a bank, which provides AMS with revolving credit borrowings of up to $75.0 million, subject to specified borrowing base requirements, to fund AMS's origination and acquisition of sub-prime residential mortgage loans until those loans are sold in the secondary market. Borrowings by AMS under this facility are collateralized by a first lien security interest on the mortgage loans and related assets originated or acquired by AMS, and are guaranteed by the Company and certain of the Company's Subsidiaries. Aggregate borrowings of $7.3 million were outstanding as of December 31, 1997. Borrowings under the facility bear interest, at AMS's option, at either: (i) a base rate established by the lender, or (ii) LIBOR plus 1.00%, and require AMS to pay an annual commitment fee of 1/8% of the unused portion of the facility. The facility expires in February 1999. The Mortgage Subsidiary Credit Agreement contains covenants and provisions typical of a revolving credit facility, including restrictions on AMS's ability to: (i) incur additional indebtedness, including guarantees, (ii) incur liens on its properties, (iii) make loans and advances to and investments in entities other than affiliates, (iv) pay dividends and other distributions to entities other than affiliates, (v) merge or consolidate, (vi) liquidate or otherwise dispose of its assets, (vii) engage in transactions with affiliates, or (viii) engage in any new business. The Mortgage Subsidiary Credit Agreement also contains covenants which require AMS to satisfy certain financial criteria. ASSET-BACKED SECURITIES At the date of this Prospectus, the Special Purpose Finance Subsidiaries of the Company have one issue of automobile receivables-backed notes outstanding, the Series 1995-A notes. The Series 1995-A notes were issued in June 1995 and initially aggregated $99,170,000. The Series 1995-A notes were issued by a wholly-owned Special Purpose Finance Subsidiary which holds the related finance receivables. Principal and interest on the Series 1995-A notes are payable monthly from cash collections on the pool of finance receivables which are collateral for the notes. As of December 31, 1997, $14.1 million was outstanding on the Series 1995-A notes. FINANCIAL GUARANTEE INSURANCE POLICIES The Company has procured financial guarantee insurance policies from FSA for the benefit of the holders of the asset-backed securities issued in Company- sponsored securitizations in order to reduce the cost of such securitizations by enhancing their credit ratings. The Company has agreed to reimburse FSA, on a limited recourse basis, for amounts paid by FSA under such financial guarantee insurance policies. In order to secure such reimbursement obligations, the Company has granted to FSA a lien on the capital stock of, and certain assets of, AFS Funding Corp., most notably the spread accounts and the restricted cash required to be deposited therein and on the capital stock of the Special Purpose Finance Subsidiaries. The Company's obligations to FSA with respect to each individual securitization are cross-collateralized to all of the collateral pledged to FSA. As a result, the restricted cash in the spread accounts from all of the Company-sponsored securitizations, as well as the capital stock of AFS Funding Corp. (which owns all of the spread accounts and all of the excess servicing receivable associated with all such securitizations) is available to reimburse FSA in connection with any individual Company-sponsored securitizations. In addition, AFS Funding Corp. is a limited purpose corporation established by the Company to facilitate Company-sponsored securitizations and the credit enhancement thereof and its ability to pay dividends is effectively restricted to a substantial degree by the terms of the Company-sponsored securitizations and the FSA financial guarantee arrangements. 85 Specifically, AFS Funding Corp. has agreed to be last in the order of payment priority with respect to cash distributions from Company-sponsored securitizations and is not entitled to receive any cash from Company-sponsored securitizations or access restricted cash in the spread accounts until the asset-backed security holders, FSA and others have received all amounts due to them and the spread accounts have the requisite amounts of restricted cash deposited therein. FSA will have claims that are prior to the claims of the holders of the Notes with respect to the assets securing its reimbursement rights and the Notes will be effectively subordinated to all such reimbursement rights. As of December 31, 1997, restricted cash was approximately $76.2 million (all of which was held in spread accounts owned by AFS Funding Corp.) and AFS Funding Corp.'s other principal asset, excess servicing receivable, was $179.8 million. See "Risk Factors--Holding Company Structure; Effective Subordination." ORIGINAL NOTES On February 4, 1997, the Company issued $125 million in aggregate principal amount of Original Notes pursuant to the Original Indenture, among the Company, the Guarantors and Bank One, N.A., as trustee. The Original Notes are guaranteed on a senior unsecured basis by each of the Guarantors. The terms of the Notes and Guarantees offered hereby will be substantially similar to the terms of the Original Notes and Original Guarantees except that the Company must offer to repurchase Original Notes with Excess Proceeds (as defined in the Indenture) resulting from an "Asset Sale" (as defined in the Indenture) prior to making any such offer with respect to the Notes. In addition, holders of Notes and holders of Original Notes shall constitute separate classes with respect to acting under an Event of Default (as defined in the Indenture) and with respect to amendments, supplements and waivers. CAPITALIZED EQUIPMENT LEASES The Company has, from time to time, financed the acquisition of data processing and telecommunications equipment with capitalized equipment leases. As of December 31, 1997, such leases totaled $4.5 million. PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business one year after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until April 24, 1998, all dealers effecting transactions in the New Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sales of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker- dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of New Notes and any commissions or concessions received by such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in 86 the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. Smith Barney Inc. acted as one of the Initial Purchasers of the Original Notes issued in February 1997. LEGAL MATTERS The legality of the Notes offered hereby will be passed upon for the Company and the Guarantors by Jenkens & Gilchrist, a Professional Corporation, Dallas, Texas. EXPERTS The consolidated balance sheets as of June 30, 1996 and 1997 and the consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1997, included in this Registration Statement, have been included herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. 87 AMERICREDIT CORP. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Accountants .................................................................. F-2 Consolidated Balance Sheets as of June 30, 1996 and 1997 ........................................... F-3 Consolidated Statements of Income for the years ended June 30, 1995, 1996 and 1997 ................. F-4 Consolidated Statements of Shareholders' Equity for the years ended June 30, 1995, 1996 and 1997 ... F-5 Consolidated Statements of Cash Flows for the years ended June 30, 1995, 1996 and 1997 ............. F-6 Notes to Consolidated Financial Statements ......................................................... F-7 Report of Independent Accountants on Supplementary Information....................................... F-21 Consolidating Balance Sheets as of June 30, 1996 and 1997............................................ F-23 Consolidating Income Statements for the years ended June 30, 1995, 1996 and 1997..................... F-25 Consolidating Statements of Cash Flow for the years ended June 30, 1995, 1996 and 1997............... F-28 Consolidated Balance Sheets as of June 30, 1997 and December 31, 1997 (unaudited) .................. F-31 Consolidated Statements of Income for the six months ended December 31, 1996 and 1997 (unaudited) .. F-32 Consolidated Statements of Cash Flows for the six months ended December 31, 1996 and 1997 (unaudited) ..................................................................................... F-33 Notes to Consolidated Financial Statements (unaudited) ............................................. F-34 Consolidating Balance Sheet as of December 31, 1997 (unaudited) ..................................... F-38 Consolidating Income Statements for the six months ended December 31, 1996 and 1997 (unaudited) ..... F-39 Consolidating Statements of Cash Flows for the six months ended December 31, 1996 and 1997 (unaudited) ......................................................................................... F-41
F-1 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders AmeriCredit Corp. We have audited the accompanying consolidated balance sheets of AmeriCredit Corp. as of June 30, 1997 and 1996, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AmeriCredit Corp. as of June 30, 1997 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 1997, in conformity with generally accepted accounting principles. As discussed in note 1 to the consolidated financial statements, in 1997, AmeriCredit Corp. changed its method of accounting for transfers and servicing of financial assets and extinguishment of liabilities. COOPERS & LYBRAND L.L.P. Fort Worth, Texas August 6, 1997 F-2 AMERICREDIT CORP. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, JUNE 30, 1996 1997 --------- --------- ASSETS Cash and cash equivalents............................................................ $ 2,145 $ 6,027 Investment securities................................................................ 6,558 6,500 Finance receivables, net............................................................. 250,484 266,657 Excess servicing receivable.......................................................... 33,093 114,376 Restricted cash...................................................................... 15,304 67,895 Property and equipment, net.......................................................... 7,670 13,884 Goodwill............................................................................. 7,260 Deferred income taxes................................................................ 9,995 Other assets......................................................................... 4,910 10,854 -------- -------- Total assets.............................................................. $330,159 $493,453 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit ......................................................... $ 86,000 $ 71,700 Mortgage warehouse facility................................................... 345 Automobile receivables-backed notes ......................................... 67,847 23,689 9 1/4% Senior Notes........................................................... 125,000 Notes payable ............................................................... 418 3,517 Accrued taxes and expenses .................................................. 12,669 39,362 Deferred income taxes ....................................................... 13,304 -------- -------- Total liabilities ....................................................... 166,934 276,917 -------- -------- Commitment and contingencies (Note 8) Shareholders' equity: Preferred stock, $.01 par value per share, 20,000,000 shares authorized; none issued...................................................................... Common stock, $.01 par value per share, 120,000,000 shares authorized; 32,640,963 and 33,255,173 shares issued ................................... 326 333 Additional paid-in capital .................................................. 190,005 203,544 Unrealized gain or excess servicing receivables, net of income taxes ........ 2,954 Retained earnings (deficit) ................................................. (5,233) 33,466 -------- -------- 185,098 240,297 Treasury stock, at cost (4,120,483 and 3,959,071 shares) ......................... (21,873) (23,761) -------- -------- Total shareholders' equity ................................................... 163,225 216,536 -------- -------- Total liabilities and shareholders' equity .............................. $330,159 $493,453 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-3 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED REVENUE JUNE 30, JUNE 30, JUNE 30, 1995 1996 1997 ------------ ----------- ----------- Finance charge income.......................... $ 30,249 $ 51,706 $ 44,910 Gain on sale of receivables.................... 22,873 67,256 Servicing fee income........................... 3,712 21,024 Investment income.............................. 1,284 1,075 2,909 Other income................................... 1,551 1,612 1,648 ----------- ----------- ----------- 33,084 80,978 137,747 ----------- ----------- ----------- COSTS AND EXPENSES Operating expenses............................. 14,773 25,681 51,915 Provision for losses........................... 4,278 7,912 6,595 Interest expense............................... 4,015 13,129 16,312 ----------- ----------- ----------- 23,066 46,722 74,822 ----------- ----------- ----------- Income before income taxes..................... 10,018 34,256 62,925 Income tax provision (benefit)................. (18,875) 12,665 24,226 ----------- ----------- ----------- Net income..................................... $ 28,893 $ 21,591 $ 38,699 =========== =========== =========== Earnings per share............................. $0.95 $0.71 $1.26 =========== =========== =========== Weighted average shares and share equivalents.. 30,380,749 30,203,298 30,782,471 =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-4 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
ADDITIONAL UNREALIZED RETAINED COMMON STOCK PAID-IN CAPITAL GAIN EARNINGS TREASURY STOCK ------------------ --------------- ----------- --------- -------------------------- SHARES AMOUNT 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 Purchase of treasury stock.............. 315,200 (4,387) Unrealized gain on excess of servicing receivable, net of income taxes of $1,848............................ $ 2,954 Common stock issued for employee........ 541 (76,612) 99 benefit plans Net income.............................. 38,699 ---------- ---- -------- --------- -------- --------- -------- BALANCE AT JUNE 30, 1997................ 33,255,173 $333 $203,544 $ 2,954 $ 33,466 3,959,071 $(23,761) ========== ==== ======== ========= ======== ========= ========
The accompanying notes are an integral part of these consolidated financial statements. F-5 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEARS ENDED ---------------------------------- JUNE 30, JUNE 30, JUNE 30, 1995 1996 1997 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................. $ 28,893 $ 21,591 $ 38,699 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................. 1,317 1,528 2,203 Provision for losses...................................... 4,278 7,912 6,595 Deferred income taxes..................................... (18,954) 11,681 24,428 Gain on sale of auto receivables.......................... (22,873) (64,338) Amortization of excess servicing receivable............... 6,636 34,393 Changes in assets and liabilities: Other assets.......................................... (1,834) (984) (2,341) Accrued taxes and expenses............................ 937 9,406 26,493 --------- --------- --------- Net cash provided by operating activities................. 14,637 34,897 66,132 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of auto receivables................................. (225,350) (417,235) (896,711) Originations of mortgage receivables.......................... (53,770) Principal collections and recoveries on receivables........... 71,334 94,948 64,389 Net proceeds from sale of auto receivables.................... 268,923 767,571 Net proceeds from sale of mortgage receivables................ 52,489 Purchases of property and equipment........................... (1,730) (3,162) (4,511) Proceeds from sales and maturities of investment securities... 16,241 3,707 58 Increase in restricted cash................................... (5,007) (10,297) (52,591) --------- --------- --------- Net cash used by investing activities..................... (144,512) (63,116) (123,076) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on bank line of credit............................. 83,900 342,600 745,500 Payments on bank line of credit............................... (83,900) (256,600) (759,800) Net increase in mortgage warehouse facility................... (2,964) Proceeds from issuance of 9 1/4% Senior Notes................. 120,894 Proceeds from issuance of automobile receivables-backed notes. 150,170 Payments on automobile receivables-backed notes............... (15,650) (66,673) (44,158) Payments on notes payable..................................... (236) (298) (552) Proceeds from issuance of common stock........................ 1,561 3,731 6,293 Purchase of treasury stock.................................... (3,412) (10,710) (4,387) --------- --------- --------- Net cash provided by financing activities................. 132,433 12,050 60,826 --------- --------- --------- Net increase (decrease) in cash and cash equivalents........... 2,558 (16,169) 3,882 Cash and cash equivalents at beginning of year................. 15,756 18,314 2,145 --------- --------- --------- Cash and cash equivalents at end of year....................... $ 18,314 $ 2,145 $ 6,027 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-6 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES History and Operations AmeriCredit Corp. ("the Company") was formed on August 1, 1986 and, since September 1992, has been in the business of purchasing, securitizing and servicing automobile sales finance contracts. The Company operated 85 auto lending branch offices in 30 states as of June 30, 1997. The Company also acquired a subsidiary in November 1996 which originates and sells home equity loans. Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and costs and expenses during the reporting periods. Actual results could differ from those estimates. These estimates include, among other things, anticipated prepayments and credit losses on finance receivables sold in securitization transactions and the determination of the allowance for losses on finance receivables. Cash Equivalents Investments in highly liquid securities with original maturities of 90 days or less are included in cash and cash equivalents. Investment Securities Investment securities are classified as held-to-maturity and are carried at amortized cost. Finance Receivables Finance charge income related to finance receivables is recognized using the interest method. Accrual of finance charge income is suspended on finance contracts which are more than 60 days delinquent. Fees and commissions received and direct costs of originating loans are deferred and amortized over the term of the related finance contracts also using the interest method. Provisions for losses are charged to operations in amounts sufficient to maintain the allowance for losses at a level considered adequate to cover estimated losses in the finance receivables portfolio owned by the Company. Automobile finance sales contracts are typically purchased by the Company for a non-refundable acquisition fee on a non-recourse basis, and such acquisition fees are also added to the allowance for losses. The Company reviews historical origination and charge-off relationships, charge-off experience factors, collection data, delinquency reports, estimates of the value of the underlying collateral, economic conditions and trends and other information in order to make the necessary judgments as to the appropriateness of the provision for losses and the allowance for losses. Finance contracts are charged-off to the allowance for losses when the Company repossesses and disposes of the collateral or the account is otherwise deemed uncollectible. F-7 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Excess Servicing Receivable The Company periodically sells finance receivables to certain special purpose financing trusts (the "Trusts"), and the Trusts in turn issue asset-backed securities to investors. The Company retains an interest in the finance receivables sold in the form of a residual or interest-only strip and may also retain other subordinated interests in the Trusts. The residual or interest- only strips represent the present value of future excess cash flows resulting from the difference between the finance charge income received from the obligors on the finance receivables and the interest paid to the investors in the asset- backed securities, net of credit losses, servicing fees and other expenses. Upon the transfer of finance receivables to the Trusts, the Company removes the net book value of the finance receivables sold from its consolidated balance sheets and allocates such carrying value between the assets transferred and the interests retained, based upon their relative fair values at the settlement date. The difference between the sales proceeds, net of transaction costs, and the allocated basis of the assets transferred is recognized as a gain on sale of receivables. The allocated basis of the interests retained, including the residual or interest-only strip is recognized as excess servicing receivable in the Company's consolidated balance sheets. Since such asset can be contractually prepaid or otherwise settled in such a way that the holder would not recover all of its recorded investment, excess servicing receivable is classified as available for-sale and is measured at fair value. Unrealized holding gains or temporary holding losses are reported net of income tax effects as a separate component of shareholders' equity until realized. If a decline in fair value were deemed other than temporary, excess servicing receivable would be written down through a charge to operations. The fair value of excess servicing receivable is estimated by calculating the present value of the future excess cash flows related to such interests using a discount rate commensurate with the risks involved. Such calculations include estimates of future credit losses and prepayment rates for the remaining term of the finance receivables transferred to the Trusts since these factors impact the amount and timing of future excess cash flows. If future credit losses and prepayment rates exceed the Company's original estimates, excess servicing receivable would be written down through a charge to operations. Favorable credit loss and prepayment experience compared to the Company's original estimates would result in additional earnings when realized. Restricted Cash A financial guaranty insurance company (the "Insurer") has provided a financial guaranty insurance policy for the benefit of the investors in each series of asset-backed securities issued by the Trusts or special purpose financing subsidiaries of the Company. In connection with the issuance of the policies, the Company was required to establish a separate cash account with a trustee for the benefit of the Insurer for each series of securities and related finance receivables pools. Monthly collections and recoveries from the pools of finance receivables in excess of required principal and interest payments on the securities and servicing fees and other expenses are either added to the restricted cash accounts or used to repay the outstanding securities on an accelerated basis, thus creating additional credit enhancement for the Insurer. When the credit enhancement levels reach specified percentages of the pools of finance receivables, excess cash flows are distributed to the Company. In the event that monthly collections and recoveries from any pool of finance receivables are insufficient to make required principal and interest payments to the investors and pay servicing fees and other expenses, any shortfall would be drawn from the restricted cash accounts. Certain agreements with the Insurer provide that if delinquency, default and net loss ratios in the pools of finance receivables supporting the asset-backed securities exceed certain amounts, the specified levels of credit enhancement would be increased and, in certain cases, the Company would be removed as servicer of the finance receivables. F-8 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Property and Equipment Property and equipment are carried at cost. Depreciation is generally provided on a straight-line basis over the estimated useful lives of the assets. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is included in operations. Maintenance, repairs, and minor replacements are charged to operations as incurred; major replacements and betterments are capitalized. Off Balance Sheet Financial Instruments The Company periodically enters into hedging arrangements to manage the gross interest rate spread on its securitization transactions. The Company's hedging strategies include the use of Forward U.S. Treasury Rate Lock and Interest Rate Swap Agreements. The face amount and terms of the Forward U.S. Treasury Rate Lock Agreements generally correspond to the principal amount and average maturities of finance receivables expected to be sold to the Trusts and the related securities to be issued by the Trusts. Gains or losses on these agreements are deferred and recognized as a component of the gain on sale of receivables at the time that finance receivables are transferred to the Trusts. The Interest Rate Swap Agreements are used to convert the interest rates on floating rate securities issued by the Trusts in securitization transactions to a fixed rate. The notional amount of these agreements approximates the outstanding balance of the floating rate securities. The estimated differential payments required under these agreements are recognized as a component of the gain on sale of receivables at the time that finance receivables are transferred to the Trusts. Income Taxes Deferred income taxes are provided in accordance with the asset and liability method of accounting for income taxes to recognize the tax effects of temporary differences between financial statement and income tax accounting. Earnings Per Share Earnings per share is based upon the weighted average number of shares outstanding during each year, adjusted for any dilutive effect of options using the treasury stock method. Recent Accounting Developments Effective January 1, 1997, the Company adopted Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125 establishes accounting and reporting standards for transfers of financial assets and applies to the Company's periodic sales of finance receivables to the Trusts. Adoption of SFAS 125, which was applied prospectively to transactions occurring subsequent to December 1996, resulted in increases of $4,802,000 in excess servicing receivable, $1,848,000 in deferred income taxes and $2,954,000 in shareholders' equity as of June 30, 1997. Effective July 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and reporting standards for stock-based compensation plans such as stock purchase plans and stock options. The new standard allows companies either to continue to account for stock based employee compensation plans under existing accounting standards or adopt a fair value-based method of accounting for stock-based awards as compensation expense over the service period, which is usually the vesting period. SFAS 123 requires that if a company continues to account for stock options under existing accounting standards, pro forma net income and earnings per share information must be provided as if the new fair value approach had been adopted. The Company has elected to continue to account for stock-based employee compensation under existing accounting standards. Accordingly, no compensation expense has been recognized for options granted under stock based employee compensation plans. Had compensation expense for the Company's plans been determined F-9 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) using the fair value-based method under SFAS 123, pro forma net income would have been $15,224,000 and $33,217,000, and pro forma earnings per share would have been $0.50 and $1.08, for the years ended June 30, 1996 and 1997, respectively. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards for computing and presenting earnings per share, replacing existing accounting standards. The new standard requires dual presentation of basic and diluted earnings per share and a reconciliation between the two amounts. Basic earnings per share excludes dilution and diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997. The Company's basic earnings per share computed pursuant to the new standard would have been $1.01, $0.76 and $1.34 for the years ended June 30, 1995, 1996 and 1997, respectively. Diluted earnings per share computed pursuant to the new standard would not be materially different from earnings per share presented in the consolidated statements of income. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income and its components in a full set of financial statements. The new standard requires that all items that are required to be recognized under accounting standards as components of comprehensive income, including an amount representing total comprehensive income, be reported in a financial statement that is displayed with the same prominence as other financial statements. Pursuant to SFAS 130, the Company will be required to display total comprehensive income, including net income and changes in the unrealized gain on excess servicing receivable, in its consolidated financial statements for the year ended June 30, 1999 and thereafter. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards for the way companies report information about operating segments in annual financial statements and requires that enterprises report selected information about operating segments in interim financial reports. The new pronouncement also establishes standards for related disclosures about products and services, geographic areas and major customers. The statement is effective for financial statements for periods beginning after December 15, 1997. The disclosures required by SFAS 131 would generally not be applicable since the Company currently operates in only one reportable segment. 2. INVESTMENT SECURITIES The amortized cost and estimated fair value of investment securities as of June 30, 1996, by issuer type, are as follows (in thousands):
GROSS GROSS ESTIMATED AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR 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 issuer type, are as follows (in thousands):
GROSS GROSS ESTIMATED AMORTIZED COST UNREALIZED GAINS UNREALIZED LOSSES FAIR VALUE -------------- ---------------- ----------------- ---------- U.S. Government obligations........ $5,000 $ $ 75 $4,925 Mortgage-backed securities......... 1,500 ------ 62 1,438 ------ ---- ------ $6,500 $ $137 $6,363 ====== ====== ==== ======
F-10 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The amortized cost and estimated fair value of investment securities as of June 30, 1997, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
AMORTIZED ESTIMATED COST FAIR VALUE Due within one year................................. $5,000 $4,925 Mortgage-backed securities.......................... 1,500 1,438 ------ ------ $6,500 $6,363 ====== ======
3. FINANCE RECEIVABLES Finance receivables consist of the following (in thousands):
JUNE 30, JUNE 30, 1996 1997 Auto receivables.................................. $264,086 $275,249 Less allowance for losses......................... (13,602) (12,946) -------- -------- Auto receivables, net............................. 250,484 262,303 Mortgage receivables.............................. 4,354 -------- -------- Finance receivables, net.......................... $250,484 $266,657 ======== ========
Auto receivables are collateralized by vehicle titles and the Company has the right to repossess the vehicle in the event that the consumer defaults on the payment terms of the contract. Mortgage receivables are collateralized by liens on real property and the Company has the right to foreclose in the event that the consumer defaults on the payment terms of the contract. The accrual of finance charge income has been suspended on $17,339,000 and $12,704,000 of delinquent auto receivables as of June 30, 1996 and 1997, respectively. A summary of the allowance for losses is as follows (in thousands):
YEARS ENDED =============================== JUNE 30, JUNE 30, JUNE 30, 1995 1996 1997 ========= ========= ========= Balance at beginning of year....................... $ 9,330 $ 19,951 $ 13,602 Provision for losses............................... 4,278 7,912 6,595 Acquisition fees................................... 13,908 18,097 30,688 Allowance related to receivables sold to Trusts.... (13,461) (20,974) Net charge-offs-auto receivables................... (6,409) (18,322) (16,965) Net charge-offs-other.............................. (1,156) (575) ------- -------- -------- Balance at end of year............................. $19,951 $ 13,602 $ 12,946 ======= ======== ========
F-11 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) 4. EXCESS SERVICING RECEIVABLE As of June 30, 1996 and 1997, the Company was servicing $259,895,000 and $863,006,000, respectively, of auto receivables which have been sold to the Trusts. The components of excess servicing receivable are as follows (in thousands):
JUNE 30, JUNE 30, 1996 1997 -------- -------- Interest only strips............................................... $11,819 $ 59,933 Subordinated interests: Retained asset-backed securities................................. 21,274 12,589 Excess of auto receivables in Trusts over........................ 41,854 asset-backed securities outstanding............................ -------- -------- $ 33,093 $114,376 ======== ========
Excess servicing receivable consists of the following (in thousands):
JUNE 30, JUNE 30, 1996 1997 -------- --------- Estimated future excess cash flows before allowance for credit losses... $ 63,457 $200,869 Allowance for credit losses.............................................. (25,616) (74,925) -------- -------- Estimated future excess cash flows....................................... 37,841 125,944 Discount to present value................................................ (4,748) (11,568) -------- -------- $ 33,093 $114,376 ======== ========
A summary of excess servicing receivable is as follows (in thousands):
JUNE 30, JUNE 30, 1996 1997 -------- -------- ...................................................................... Balance at beginning of year............................................. $ $ 33,093 Additions................................................................ 39,729 110,874 Increase in unrealized gain.............................................. 4,802 Amortization............................................................. (6,636) (34,393) -------- -------- Balance at end of year................................................... $ 33,093 $114,376 ======== ========
5. ACQUISITION In November 1996, the Company acquired AmeriCredit Mortgage Services ("AMS", formerly Rancho Vista Mortgage Corporation), which originates and sells home equity loans. The purchase price of $7,434,000 consisted of 400,000 shares of the Company's common stock and assumption of certain liabilities. The acquisition has been accounted for as a purchase and the excess of the purchase price over net assets acquired was assigned to goodwill. Goodwill is being amortized over a 25 year period. The results of operations of AMS have been included in the consolidated financial statements since the acquisition date. F-12 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) 6. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands):
JUNE 30, JUNE 30, 1996 1997 -------- -------- Land............................................. $ 600 $ 600 Buildings and improvements....................... 1,973 2,319 Equipment........................................ 6,994 12,869 Furniture and fixtures........................... 828 1,935 ------- ------- 10,395 17,723 Less accumulated depreciation and amortization (2,725) (3,839) ------- ------- $ 7,670 $13,884 ======= =======
7. DEBT The Company has a revolving credit Agreement with a group of banks under which the Company may borrow up to $240 million, subject to a defined borrowing base. Aggregate borrowings of $86,000,000 and $71,700,000 were outstanding as of June 30, 1996 and 1997, respectively. Borrowings under the credit Agreement are collateralized by certain auto receivables and bear interest, based upon the Company's option, at either the prime rate (8.50% as of June 30, 1997) or various market London Interbank Offered Rates plus 1.25%. The Company is also required to pay an annual commitment fee equal to 1/4% of the unused portion of the credit Agreement. The credit Agreement, which expires in October 1997, contains various restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on the incurrence of additional debt, capital expenditures, cash dividends and repurchase of common stock. The Company also has a mortgage warehouse facility with a bank under which the Company may borrow up to $75 million, subject to a defined borrowing base. Aggregate borrowings of $345,000 were outstanding as of June 30, 1997. Borrowings under the facility are collateralized by certain mortgage receivables and bear interest, based upon the Company's option, at either the prime rate or LIBOR plus 1.25%. The Company is also required to pay an annual commitment fee equal to 1/8% of the unused portion of the facility. The facility expires in February 1998. In February 1997, the Company issued $125 million of 9 1/4% Senior Notes which are due in February 2004. Interest on the notes is payable semi-annually, commencing in August 1997. The notes, which are unsecured, may be redeemed at the option of the Company after February 2001 at a premium declining to par in February 2003. The Indenture pursuant to which the notes were issued contains restrictions including limitations on the Company's ability to incur additional indebtedness other than certain secured indebtedness, pay cash dividends and repurchase common stock. Original debt issuance costs of $4,106,000 are being amortized over the term of the 9 1/4% Senior Notes and are included in other assets in the consolidated balance sheets. Automobile receivables-backed notes consist of the following (in thousands):
JUNE 30, JUNE 30, 1996 1997 -------- -------- Series 1995-A notes, interest at 6.55%, collateralized by certain auto receivables in the principal amount of $23,589, final maturity in September 2000................................................... $ 54,176 $ 23,689 Series 1994-A notes, paid in full in April 1997...................... 13,671 -------- -------- $ 67,847 $ 23,689 ======== ========
F-13 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) Maturities of the automobile receivables-backed notes, based on the contractual maturities of the underlying auto receivables, for years ending June 30 are as follows (in thousands): 1998........................................................ $16,585 1999........................................................ 6,015 2000........................................................ 1,089 ------- $23,689 =======
8. COMMITMENTS AND CONTINGENCIES Branch lending offices are generally leased for terms of up to five years with certain rights to extend for additional periods. The Company also leases office space for its loan servicing facilities under leases with terms up to 10 years with renewal options. Lease expense was $422,000, $875,000 and $2,132,000 for the years ended June 30, 1995, 1996 and 1997, respectively. Lease commitments for years ending June 30 are as follows (in thousands): 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 Company has filed motions to dismiss in both cases which are presently pending. In the opinion of management, the resolution of these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. F-14 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) 9. STOCK OPTIONS General ------- The Company has certain stock-based compensation plans for employees, non- employee directors and key executive officers. A total of 6,000,000 shares are authorized for grants of options under the employee plans, including 2,000,000 shares available for grants of options or other equity instruments. The exercise price of each option must equal the market price of the Company's stock on the date of grant and the maximum term of each option is ten years. The vesting period is typically four years. Option grants, vesting periods and the term of each option are determined by a committee of the Company's board of directors. A total of 2,100,000 shares are authorized for grants of options under the non-employee director plans. The exercise price of each option must equal the market price of the Company's stock on the date of grant and the maximum term of each option is ten years. Option grants, vesting periods and the term of each option are established by the terms of the plans. A total of 850,000 shares are authorized for grants of options under the key executive officer plan. The exercise price of each option under this plan is $16 per share and the term of each option is seven years. These options vest upon the earlier of seven years from the date of grant or the time that the Company's common stock trades above certain targeted price levels. The following tables present information related to the Company's stock- based compensation plans. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
YEARS ENDED ----------------------------------- JUNE 30, JUNE 30, JUNE 30, 1995 1996 1997 ----------------------------------- 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
F-15 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) Employee Plans -------------- A summary of stock option activity under the Company's employee plans is as follows (shares in thousands):
YEARS ENDED ----------------------------------------------------------------- JUNE 30, JUNE 30, JUNE 30, 1995 1996 1997 -------------------- ---------------------- ------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ -------- ------ -------- ------ -------- Outstanding at beginning of year... 2,681 $4.20 3,410 $ 5.00 3,664 $ 7.22 Granted............................ 1,080 8.20 672 13.59 1,251 15.47 Exercised.......................... (189) 4.27 (373) 5.22 (423) 7.91 Forfeited.......................... (162) 7.76 (45) 6.96 (116) 11.68 ----- ----- ----- ------ ----- ------ Outstanding at end of year......... 3,410 $5.00 3,664 $ 7.22 4,376 $ 9.35 ===== ===== ===== ====== ===== ====== Options exercisable at end of year. 2,132 $4.50 2,811 $ 4.51 3,161 $ 7.77 ===== ===== ===== ====== ===== ====== Weighted average fair value of options granted during year..... $2.24 $ 3.72 $ 4.21 ===== ====== ======
A summary of options outstanding under employee plans as of June 30, 1997 is as follows (shares in thousands):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------------------------- ---------------------------- WEIGHTED AVERAGE YEARS OF WEIGHTED WEIGHTED RANGE OF EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE - ----------------- ----------- ---------------- -------------- ----------- -------------- $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 ===== =====
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, 1995 1996 1997 ------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ------ -------- ------ -------- ------ -------- Outstanding at beginning of year........ 1,079 $2.80 946 $ 2.80 913 $ 3.60 Granted................................. 30 6.50 40 12.88 40 18.75 Exercised............................... (163) 2.80 (73) 2.80 (99) 2.80 ----- ----- --- ------ --- ------ Outstanding at end of year.............. 946 $2.80 913 $ 3.60 854 $ 4.41 ===== ===== === ====== === ====== Options exercisable at end of year...... 886 $2.80 873 $ 3.53 854 $ 4.41 ===== ===== === ====== === ====== Weighted average fair value of options granted during year.................. $1.78 $ 3.53 $ 5.14 ===== ====== ======
F-16 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) A summary of options outstanding under non-employee director plans as of June 30, 1997 is as follows (shares in thousands):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ---------------------------------------------------------------------- --------------------------- WEIGHTED AVERAGE YEARS OF WEIGHTED WEIGHTED RANGE OF EXERCISE NUMBER REMAINING AVERAGE NUMBER AVERAGE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE - ----------------- ----------- ---------------- -------------- ----------- -------------- $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 === ===
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, 1996 1997 ---------------------------------- 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 exercisable)............... 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 AVERAGE YEARS OF WEIGHTED RANGE OF EXERCISE NUMBER REMAINING AVERAGE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE 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 $99,000, $133,000 and $201,000 for the years ended June 30, 1995, 1996 and 1997, respectively. The Company also has an employee stock purchase plan that allows participating employees to purchase, through payroll deductions, shares of the Company's common stock at 85% of the fair market value at specified dates. A total of 500,000 shares have been reserved for issuance under the plan. Shares purchased under the plan were 31,361, 97,143 and 104,215 for the years ended June 30, 1995, 1996 and 1997, respectively. F-17 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) 11. INCOME TAXES The income tax provision (benefit) consists of the following (in thousands):
YEARS ENDED ------------------------------- JUNE 30, JUNE 30, JUNE 30, 1995 1996 1997 ---------- -------- --------- $ 79 $ 984 $ (202) Current................................ (18,954) 11,681 24,428 Deferred............................... -------- ------- ------- $(18,875) $12,665 $24,226 ======== ======= =======
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, 1995 1996 1997 ------------------------------ U.S. statutory tax rate................... 35% 35% 35% Change in valuation allowance............. (226) Other..................................... 3 2 3 ----- ---- ---- (188)% 37% 38% ===== ==== ====
The deferred income tax provision (benefit) consists of the following (in thousands):
YEARS ENDED ------------------------------ JUNE 30, JUNE 30, JUNE 30, 1995 1996 1997 ------------------------------ Net operating loss carry forward.......... $ 2,266 $ 8,387 $ 5,501 Gain on sale of receivables............... 14,824 Change in valuation allowance............. (22,615) (320) Allowance for losses...................... 32 1,556 (1,046) Other..................................... 1,363 2,058 5,149 -------- ------- ------- $(18,954) $11,681 $24,428 ======== ======= =======
F-18 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows (in thousands):
JUNE 30, JUNE 30, 1996 1997 ------------------- Deferred tax liabilities: Gain on sale of receivables..................... $ $14,824 Unrealized gain on excess servicing receivable.. 1,848 Allowance for losses............................ 405 Other........................................... 707 2,614 -------- ------- 1,112 19,286 -------- ------- Deferred tax assets: Net operating loss carry forward................ (8,969) (3,468) Alternative minimum tax credits................. (1,548) (1,873) Allowance for losses............................ (641) Other........................................... (590) -------- ------- (11,107) (5,982) -------- ------- Net deferred tax liability (asset) ............... $ (9,995) $13,304 ======== =======
As of June 30, 1997, the Company has a net operating loss carryforward of approximately $3,000,000 for federal income tax reporting purposes which expires between 2007 and 2009 and an alternative minimum tax carryforward of approximately $1,900,000 with no expiration date. 12. SUPPLEMENTAL INFORMATION Cash payments for interest costs and income taxes consist of the following (in thousands):
YEARS ENDED ---------------------------- JUNE 30, JUNE 30, JUNE 30, 1995 1996 1997 ---------------------------- Interest costs (none capitalized).............. $5,167 $12,179 $15,196 Income taxes................................... 151 1,447 599
13. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS 107"), requires disclosure of fair value information about financial instruments, whether or not recognized in the Company's consolidated balance sheets. Fair values are based on estimates using present value or other valuation techniques in cases where quoted market prices are not available. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts which ultimately may be realized or paid at settlement or maturity of the financial instruments. SFAS 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. F-19 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(C0NTINUED) Estimated fair values, carrying values and various methods and assumptions used in valuing the Company's financial instruments as of June 30, 1996 and 1997 are set forth below (in thousands):
JUNE 30, 1996 JUNE 30, 1997 ------------------------ ------------------------ CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE -------- ----------- -------- ------------- Financial assets: Cash and cash equivalents and restricted cash (a)............. $ 17,449 $ 17,449 $ 73,922 $ 73,922 Investment securities (b)..................................... 6,558 6,254 6,500 6,363 Finance receivables (c)....................................... 250,484 283,760 266,657 283,386 Excess servicing receivable (d)............................... 33,093 35,009 114,376 114,376 Financial liabilities: Bank line of credit and mortgage warehouse facility(e)........ 86,000 86,000 72,045 72,045 Automobile receivables-backed notes (f)....................... 67,847 68,055 23,689 24,782 9 1/4% Senior Notes (g)....................................... 125,000 123,825 Interest rate swaps (h)......................................... 735 236 Unrecognized financial instruments: Forward U.S. Treasury Note sales (i).......................... (700) 164
_______________ (a) The carrying value of cash and cash equivalents and restricted cash is considered to be a reasonable estimate of fair value. (b) The fair value of investment securities is estimated based on market prices for similar securities. (c) Since the Company periodically sells its finance receivables, fair value is estimated by discounting future net cash flows expected to be realized from the finance receivables using interest rate, prepayment and credit loss assumptions similar to the Company's historical experience. (d) The fair value of excess servicing receivable is estimated by discounting the associated future net cash flows using discount rate, prepayment and credit loss assumptions similar to the Company's historical experience. (e) The bank line of credit and mortgage warehouse facility have variable rates of interest and maturities of less than one year. Therefore, carrying value is considered to be a reasonable estimate of fair value. (f) The fair value of automobile receivables-backed notes is estimated based on rates currently available for debt with similar terms and remaining maturities. (g) The fair value of the 9 1/4% Senior Notes is based on the quoted market price. (h) The fair value of the interest rate swap is based on the quoted termination cost. (i) The fair value of the forward U.S. Treasury Note sales are estimated based upon market prices for similar financial instruments. F-20 REPORT OF INDEPENDENT ACCOUNTANTS ON SUPPLEMENTARY INFORMATION Board of Directors and Shareholders AmeriCredit Corp. Our report on the audits of the consolidated financial statements of AmeriCredit Corp. as of June 30, 1997 and June 30, 1996, and for the three years ended June 30, 1997, 1996 and 1995 have been included by reference in this Form 10-K from page 30 of the 1997 Annual Report to Shareholders of AmeriCredit Corp. These audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The related financial statement schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. /s/ COOPERS & LYBRAND L.L.P. Fort Worth, Texas August 6, 1997 F-21 AMERICREDIT CORP. GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS The payment of principal, premium, if any, and interest on the Company's 9 1/4% Senior Notes is guaranteed by certain of the Company's subsidiaries (the "Subsidiary Guarantors"). The separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are wholly- owned consolidated subsidiaries of the Company and are jointly, severally and unconditionally liable for the obligations represented by the 9 1/4% Senior Notes. The Company believes that the condensed consolidating financial information for the Company, the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries provide information that is more meaningful in understanding the financial position of the Subsidiary Guarantors than separate financial statements of the Subsidiary Guarantors. Therefore, the separate financial statements of the Subsidiary Guarantors are not deemed material. The following supplementary schedules present consolidating financial information for (i) the Company (on a parent only basis), (ii) the combined Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an elimination column for adjustments to arrive at the information for the Company and its subsidiaries on a consolidated basis and (v) the Company and its subsidiaries on a consolidated basis as of June 30, 1996 and 1997 and for the three years in the period ended June 30, 1997. Investments in subsidiaries are accounted for by the parent company on the equity method for purposes of the presentation set forth below. Earnings of subsidiaries are therefore reflected in the parent company's investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions. F-22 AMERICREDIT CORP. 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 ======== ========= ======== ========= ========
F-23 AMERICREDIT CORP. 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........ 2,954 2,954 (2,954) 2,954 receivable Retained earnings (deficit)................ 33,466 (107,405) 62,673 44,732 33,466 -------- --------- -------- -------- -------- 240,297 (8,866) 65,630 (56,764) 240,297 Treasury stock............................... (23,761) (23,761) -------- --------- -------- -------- -------- Total shareholders' equity................... 216,536 (8,866) 65,630 (56,764) 216,536 -------- --------- -------- -------- -------- Total liabilities and shareholders'.......... $344,439 $ 85,652 $120,126 $(56,764) $493,453 equity.................................. ======== ========= ======== ======== ========
F-24 AMERICREDIT CORP. 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 ======== ======= ====== ======== ========
F-25 AMERICREDIT CORP. 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 ======= ======= ======= ======== =======
F-26 AMERICREDIT CORP. 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 ======= ======== ======= ======== ========
F-27 AMERICREDIT CORP. 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: Depreciation and amortization............... 161 1,156 1,317 Provision for losses........................ 4,278 4,278 Deferred income taxes....................... (18,252) (702) (18,954) Equity in income of affiliates.............. (1,596) 1,596 Changes in assets and liabilities Other assets.............................. (795) 400 (1,439) (1,834) Accrued taxes and expenses................ 170 387 380 937 -------- --------- --------- --------- --------- Net cash provided by operating activities..... 8,581 3,995 2,061 14,637 -------- --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of auto receivables............... (225,350) (148,452) 148,452 (225,350) Principal collections and recoveries on receivables.............................. 53,210 18,124 71,334 Net proceeds from sale of auto receivables.. 148,452 (148,352) Purchase of property and equipment.......... 947 (2,677) (1,730) Proceeds from sales and maturities of investment securities.................... 16,241 16,241 Increase in restricted cash................. (5,007) (5,007) Net change in investment in affiliates...... (7,126) 7,126 -------- --------- --------- --------- --------- Net cash used by investment activities.... 10,062 (19,239) (135,335) (144,512) -------- --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on bank line of credit........... 83,900 83,900 Payments on bank line of credit............. (83,900) (83,900) Proceeds from issuance of automobile receivables-backed notes................. 150,170 150,170 Payments on automobile receivables- backed notes............................. (15,650) (15,650) Payments on notes payable................... (236) (236) Net change in due (to) from affiliates...... (18,037) 11,762 6,275 Proceeds from issuance of common stock...... 1,561 1,561 Purchase of treasury stock.................. (3,412) (3,412) -------- --------- --------- --------- --------- Net cash provided by financing activities....... (20,124) 11,762 140,795 132,433 -------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents.................................. (1,481) (3,482) 7,521 2,558 Cash and equivalents at beginning of year....... 18,668 (2,912) 15,756 -------- --------- --------- --------- --------- Cash and cash equivalents at end of year........ $ 17,187 $ (6,394) $ 7,521 $ $ 18,314 ======== ========= ========= ========= =========
F-28 AMERICREDIT CORP. CONSOLIDATING STATEMENT OF CASH FLOWS Year Ended June 30, 1996 (dollars in thousands)
AMERICREDIT CORP. GUARANTORS NON-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 ======== ========= ========= ========== =========
F-29 AMERICREDIT CORP. CONSOLIDATING STATEMENT OF CASH FLOWS Year Ended June 30, 1997 (dollars in thousands)
AMERICREDIT CORP. GUARANTORS NON-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 ========= ========= ========= ========= =========
F-30 AMERICREDIT CORP. CONSOLIDATED BALANCE SHEETS (UNAUDITED, DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, 1997 1997 ---------- ------------ ASSETS Cash and cash equivalents..................................................... $ 6,027 $ 2,267 Investment securities......................................................... 6,500 6,500 Finance receivables, net...................................................... 266,657 257,791 Excess servicing receivable................................................... 114,376 179,788 Restricted cash............................................................... 67,895 76,170 Property and equipment, net................................................... 13,884 17,232 Goodwill...................................................................... 7,260 7,112 Other assets.................................................................. 10,854 15,435 -------- -------- Total assets........................................................... $493,453 $562,295 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit.................................................... $ 71,700 $ 2,100 Commercial paper warehouse facility.................................... 95,989 Mortgage warehouse facility............................................ 345 7,281 Automobile receivables-backed notes.................................... 23,689 14,138 9 1/4% Senior Notes.................................................... 125,000 125,000 Notes payable.......................................................... 3,517 4,458 Accrued taxes and expenses............................................. 39,362 38,619 Deferred income taxes.................................................. 13,304 19,764 -------- -------- Total liabilities................................................... 276,917 307,349 -------- -------- Shareholders' equity: Common stock, $.01 par value per share; 120,000,000 shares authorized; 33,255,173 and 33,841,815 shares issued.............................. 333 338 Additional paid-in capital............................................. 203,544 213,890 Unrealized gain on excess servicing receivable, net of income taxes.... 2,954 3,410 Retained earnings...................................................... 33,466 60,841 -------- -------- 240,297 278,479 Treasury stock, at cost (3,959,071 and 3,921,028 shares)............... (23,761) (23,533) -------- -------- Total shareholders' equity.......................................... 216,536 254,946 -------- -------- Total liabilities and shareholders' equity............................. $493,453 $562,295 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-31 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED -------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ REVENUE Finance charge income................................. $ 21,503 $ 26,190 Gain on sale of receivables........................... 28,151 53,775 Servicing fee income.................................. 8,242 19,191 Investment income..................................... 1,152 2,570 Other income.......................................... 622 502 ----------- ----------- 59,670 102,228 ----------- ----------- COSTS AND EXPENSES Operating expenses.................................... 21,747 41,916 Provision for losses.................................. 3,231 3,755 Interest expense...................................... 6,612 12,045 ----------- ----------- 31,590 57,716 ----------- ----------- Income before income taxes.............................. 28,080 44,512 Income tax provision.................................... 10,810 17,137 ----------- ----------- Net income............................................ $ 17,270 $ 27,375 =========== =========== Earnings per share Basic................................................. $ .61 $ .92 ----------- ----------- Diluted............................................... $ .57 $ .85 ----------- ----------- Weighted average shares outstanding..................... 28,513,145 29,684,960 ----------- ----------- Weighted average shares and assumed incremental shares.. 30,398,569 32,199,267 ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. F-32 AMERICREDIT CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, DOLLARS IN THOUSANDS)
SIX MONTHS ENDED --------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income........................................................................... $ 17,270 $ 27,375 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................................................... 904 1,914 Provision for losses.............................................................. 3,231 3,755 Deferred income taxes............................................................. 10,682 9,643 Gain on sale of auto receivables.................................................. (27,851) (51,531) Amortization of excess servicing receivable....................................... 12,117 23,118 Changes in assets and liabilities: Other assets................................................................... (2,134) (4,581) Accrued taxes and expenses..................................................... 9,195 (743) --------- --------- Net cash provided by operating activities............................................ 23,414 8,950 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of auto receivables........................................................ (354,448) (686,543) Originations of mortgage receivables................................................. (7,748) (51,572) Principal collections and recoveries on receivables.................................. 36,147 14,862 Net proceeds from sale of auto receivables........................................... 332,982 644,022 Net proceeds from sale of mortgage receivables....................................... 4,839 48,129 Purchases of property and equipment.................................................. (1,624) (3,571) Proceeds from maturities of investment securities.................................... 55 Increase in restricted cash.......................................................... (31,023) (8,275) --------- --------- Net cash used by investing activities................................................ (20,820) (42,948) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on bank line of credit.................................................... 304,400 514,500 Payments on bank line of credit...................................................... (275,500) (584,100) Net increase in commercial paper warehouse facility.................................. 95,989 Net increase in mortgage warehouse receivable........................................ 264 6,936 Payments on automobile receivables-backed notes...................................... (27,304) (9,551) Payments on notes payable............................................................ (221) (602) Proceeds from issuance of common stock............................................... 3,100 7,066 Purchase of treasury stock........................................................... (4,387) --------- --------- Net cash provided by financing activities............................................ 352 30,238 --------- --------- Net (decrease) increase in cash and cash equivalents................................... 2,946 (3,760) Cash and cash equivalents at beginning of period....................................... 2,145 6,027 --------- --------- Cash and cash equivalents at end of period............................................. $ 5,091 $ 2,267 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-33 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1--BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of AmeriCredit Corp. and its wholly-owned subsidiaries ("the Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements as of December 31, 1997 and for the periods ended December 31, 1996 and 1997 are unaudited, but in management's opinion, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. The results for interim periods are not necessarily indicative of results for a full year. The interim period financial statements, including the notes thereto, are condensed and do not include all disclosures required by generally accepted accounting principles. Such interim period financial statements should be read in conjunction with the Company's consolidated financial statements which were included in the Company's 1997 Annual Report to Shareholders. The Company adopted the requirements of Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") effective for the periods ended December 31, 1997. SFAS 128 establishes new standards for computing and presenting earnings per share, replacing existing accounting standards. All prior period earnings per share and related weighted average share amounts have been restated to conform to the requirements of SFAS 128. NOTE 2--FINANCE RECEIVABLES Finance receivables consist of the following (in thousands):
JUNE 30, DECEMBER 31, 1996 1997 ------------ ------------ Auto receivables................................... $275,249 $261,333 Less allowance for losses.......................... (12,946) (11,350) -------- -------- Auto receivables, net.............................. 262,303 249,983 Mortgage receivables............................... 4,354 7,808 -------- -------- Finance receivables, net........................... $266,657 $257,791 ======== ========
A summary of the allowance for losses is as follows (in thousands):
SIX MONTHS ENDED ------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Balance at beginning of period ................... $ 13,602 $ 12,946 Provision for losses ............................. 3,231 3,755 Acquisition fees ................................. 12,809 22,046 Allowance related to auto receivables sold to Trusts........................................ (8,404) (21,773) Net charge-offs .................................. (9,065) (5,624) -------- -------- Balance at end of period ......................... $ 12,173 $ 11,350 ======== ========
F-34 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) NOTE 3--EXCESS SERVICING RECEIVABLE As of June 30, 1997 and December 31, 1997, the Company was servicing $863.0 million and $1,337.9 million, respectively, of auto receivables which have been sold to certain special purpose financing trusts (the "Trusts").
The components of excess servicing receivable are as follows (in thousands): JUNE 30, DECEMBER 31, 1997 1997 --------- ------------ Interest-only strips.................................... $ 59,933 $ 101,357 Subordinated interests: Retained asset-backed securities...................... 12,589 10,424 Excess of auto receivables in Trusts over asset-backed securities outstanding............................. 41,854 68,007 --------- --------- $ 114,376 $ 179,788 ========= ========= Excess servicing receivable consists of the following (in thousands): JUNE 30, DECEMBER 31, 1997 1997 --------- ------------ Estimated future excess cash flows before allowance for credit losses.......................... $ 200,869 $ 311,354 Allowance for credit losses............................ (74,925) (112,294) --------- --------- Estimated future excess cash flows..................... 125,944 199,060 Discount to present value.............................. (11,568) (19,272) --------- --------- $ 114,376 $ 179,788 ========= ========= A summary of excess servicing receivable is as follows (in thousands): SIX MONTHS ENDED --------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Balance at beginning of period......................... $ 33,093 $ 114,376 Additions.............................................. 38,804 87,789 Increase in unrealized gain............................ 741 Amortization........................................... (12,117) (23,118) --------- --------- Balance at end of period............................... $ 59,780 $ 179,788 ========= =========
NOTE 4--DEBT In October 1997, the Company entered into a restated revolving credit agreement with a group of banks under which the Company may borrow up to $310 million, subject to a defined borrowing base. Aggregate borrowings of $71.7 million and $2.1 million were outstanding as of June 30, 1997 and December 31, 1997, respectively. Borrowings under the credit agreement are collateralized by certain auto receivables and bear interest at various market London Interbank Offered Rates ("LIBOR") plus 1.25%. The Company is also required to pay an annual commitment fee equal to 1/4% of the unused portion of the credit agreement. The credit agreement, which expires in October 1998, contains various F-35 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) restrictive covenants requiring certain minimum financial ratios and results and placing certain limitations on payment of cash dividends and repurchase of common stock. In October 1997, the Company entered into a funding agreement with a funding agent on behalf of an institutionally managed commercial paper conduit and a group of banks under which up to $245 million of structured warehouse financing is available to the Company. Aggregate borrowings of $96.0 million were outstanding as of December 31, 1997. Under the funding agreement, the Company transfers auto receivables to CP Funding Corp. ("CPFC"), a special purpose finance subsidiary of the Company, and CPFC in turn issues a note, collateralized by such auto receivables, to the funding agent. The funding agent provides funding under the note to CPFC pursuant to an advance formula and CPFC forwards the funds to the Company in consideration for the transfer of auto receivables. While CPFC is a consolidated subsidiary of the Company, CPFC is a separate legal entity and the auto receivables transferred to CPFC and the other assets of CPFC are legally owned by CPFC and not available to creditors of AmeriCredit Corp. or its other subsidiaries. Advances under the note bear interest at commercial paper, LIBOR or prime rates plus specified fees depending upon the source of funds provided by the funding agent to CPFC. The funding agreement, which expires in October 1998, contains various covenants requiring certain minimum financial ratios and results. The Company also has a mortgage warehouse facility with a bank under which the Company may borrow up to $75 million, subject to a defined borrowing base. Aggregate borrowings of $.3 million and $7.3 million were outstanding as of June 30, 1997 and December 31, 1997, respectively. Borrowings under the facility are collateralized by certain mortgage receivables and bear interest at LIBOR plus 1%. The Company is also required to pay an annual commitment fee equal to 1/8% of the unused portion of the facility. In February 1998, the Company extended the maturity of the facility to February 1999. NOTE 5--SUPPLEMENTAL CASH FLOW INFORMATION Cash payments for interest costs and income taxes consist of the following (in thousands):
SIX MONTHS ENDED -------------------------- DECEMBER 31, DECEMBER 31, 1996 1997 ------------ ------------ Interest costs (none capitalized).... $6,456 $12,661 Income taxes......................... 228 7,412
During the six months ended December 31, 1996 and 1997, the Company entered into capital lease obligations of $1,258,000 and $1,543,000, respectively, for the purchase of certain equipment. NOTE 6--GUARANTOR CONSOLIDATING FINANCIAL STATEMENTS The payment of principal, premium, if any, and interest on the Company's 9 1/4% Senior Notes is guaranteed by certain of the Company's subsidiaries (the "Subsidiary Guarantors"). The separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are wholly- owned consolidated subsidiaries of the Company and are jointly, severally and unconditionally liable for the obligations represented by the 9 1/4% Senior Notes. The Company believes that the condensed consolidating financial information for the Company, the combined Subsidiary Guarantors and the combined Non-Guarantor Subsidiaries provide information that is more meaningful in understanding the financial position of the Subsidiary Guarantors than separate financial statements of the Subsidiary Guarantors. Therefore, the separate financial statements of the Subsidiary Guarantors are not deemed material. The following supplemental schedules present consolidating financial information for (i) AmeriCredit Corp. (on a parent only basis), (ii) the combined Subsidiary Guarantors, (iii) the combined Non-Guarantor Subsidiaries, (iv) an F-36 AMERICREDIT CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (UNAUDITED) elimination column for adjustments to arrive at the information for the Company and its subsidiaries on a consolidated basis and (v) the Company and its subsidiaries on a consolidated basis. Investment in subsidiaries are accounted for by the parent company on the equity method for purposes of the presentation set forth below. Earnings of subsidiaries are therefore reflected in the parent company's investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions. F-37 AMERICREDIT CORP. CONSOLIDATING BALANCE SHEET DECEMBER 31, 1997 (UNAUDITED, DOLLARS IN THOUSANDS)
AMERICREDIT CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- -------------- ------------ ------------ ASSETS Cash and cash equivalents........... $ $ (1,025) $ 3,292 $ $ 2,267 Investment securities............... 6,500 6,500 Finance receivables, net............ 125,421 132,370 257,791 Excess servicing receivable......... (1,560) 10,670 170,678 179,788 Restricted cash..................... 76,170 76,170 Property and equipment, net......... 137 17,095 17,232 Goodwill............................ 7,112 7,112 Other assets........................ 5,409 6,915 3,111 15,435 Due (to) from affiliates............ 267,917 (161,635) (106,282) Investment in affiliates............ 95,361 13,921 2 (109,284) -------- --------- --------- --------- -------- Total assets.................. $373,764 $ 18,474 $ 279,341 $(109,284) $562,295 ======== ========= ========= ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Bank line of credit................. $ $ 2,100 $ $ $ 2,100 Mortgage warehouse facility......... 7,281 7,281 Commercial paper warehouse facility. 95,989 95,989 Automobile receivables-backed notes. 14,138 14,138 9 1/4% Senior Notes................. 125,000 125,000 Notes payable....................... 4,429 29 4,458 Accrued taxes and expenses.......... 9,341 27,398 1,880 38,619 Deferred income taxes............... (19,952) (11,034) 50,750 19,764 -------- --------- --------- --------- -------- Total liabilities............. 118,818 25,774 162,757 307,349 -------- --------- --------- --------- -------- Shareholders' equity: Common stock........................ 338 203 3 (206) 338 Additional paid-in capital.......... 213,890 108,336 13,921 (122,257) 213,890 Unrealized gain on excess servicing receivable....................... 3,410 3,410 (3,410) 3,410 Retained earnings (deficit)......... 60,841 (115,839) 99,250 16,589 60,841 -------- --------- --------- --------- -------- 278,479 (7,300) 116,584 (109,284) 278,479 Treasury stock...................... (23,533) (23,533) -------- --------- --------- --------- -------- Total shareholders' equity..... 254,946 (7,300) 116,584 (109,284) 254,946 -------- --------- --------- --------- -------- Total liabilities and shareholders' equity......................... $373,764 $ 18,474 $ 279,341 $(109,284) $562,295 ======== ========= ========= ========= ========
F-38 AMERICREDIT CORP. CONSOLIDATING INCOME STATEMENT SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED, DOLLARS IN THOUSANDS)
AMERICREDIT CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- -------------- ------------ ------------ REVENUE Finance charge income............ $ $16,339 $ 5,164 $ $ 21,503 Gain on sale of receivables...... 300 27,851 28,151 Servicing fee income............. 24,032 1,625 (17,415) 8,242 Investment income................ 6,775 89 904 (6,616) 1,152 Other income..................... 28 260 334 622 Equity in income of affiliates... 13,593 (13,593) ------- ------- ------- -------- -------- 20,396 41,020 35,878 (37,624) 59,670 ------- ------- ------- -------- -------- COSTS AND EXPENSES Operating expenses.............. 2,144 35,885 1,133 (17,415) 21,747 Provision for losses............ 3,231 3,231 Interest expense................ 26 7,839 5,363 (6,616) 6,612 ------- ------- ------- -------- -------- 2,170 46,955 6,496 (24,031) 31,590 ------- ------- ------- -------- -------- Income before income taxes.......... 18,226 (5,935) 29,382 (13,593) 28,080 Provision for income taxes.......... 956 139 9,715 10,810 ------- ------- ------- -------- -------- Net income.................... $17,270 $(6,074) $19,667 $(13,593) $ 17,270 ======= ======= ======= ======== ========
F-39 AMERICREDIT CORP. CONSOLIDATING INCOME STATEMENT SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED, DOLLARS IN THOUSANDS)
AMERICREDIT CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- -------------- ------------ ------------ REVENUE Finance charge income............ $ $ 20,213 $ 5,977 $ $ 26,190 Gain on sale of receivables...... (4,903) 3,321 55,357 53,775 Servicing fee income............. 42,256 3,721 (26,786) 19,191 Investment income................ 14,920 127 2,211 (14,688) 2,570 Other income..................... 344 158 502 Equity in income of affiliates... 28,143 (28,143) ------- -------- ------- -------- -------- 38,160 66,261 67,424 (69,617) 102,228 ------- -------- ------- -------- -------- COSTS AND EXPENSES Operating expenses.............. 4,948 63,758 (4) (26,786) 41,916 Provision for losses............ 3,755 3,755 Interest expense................ 6,318 12,462 7,953 (14,688) 12,045 ------- -------- ------- -------- -------- 11,266 79,975 7,949 (41,474) 57,716 ------- -------- ------- -------- -------- Income before income taxes.......... 26,894 (13,714) 59,475 (28,143) 44,512 Provision for income taxes.......... (481) (5,280) 22,898 17,137 ------- -------- ------- -------- -------- Net income.................... $27,375 $ (8,434) $36,577 $(28,143) $ 27,375 ======= ======== ======= ======== ========
F-40 AMERICREDIT CORP. CONSOLIDATING STATEMENT OF CASH FLOW SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED, DOLLARS IN THOUSANDS)
AMERICREDIT CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- -------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................... $ 17,270 $ (6,074) $ 19,667 $ (13,593) $ 17,270 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................. 16 888 904 Provision for losses.......................... 3,231 3,231 Deferred income taxes......................... 3,718 (3,174) 10,138 10,682 Gain on sale of auto receivables.............. (27,851) (27,851) Amortization of excess servicing receivable... 2,943 9,174 12,117 Equity in income of affiliates................ (13,593) 13,593 Changes in assets and liabilities: Other assets.............................. (487) (119) (1,528) (2,134) Accrued taxes and expenses................ (1,974) 11,037 132 9,195 -------- --------- --------- --------- --------- Net cash provided by operating activities..... 4,950 8,732 9,732 23,414 -------- --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of auto receivables................. (354,448) (343,935) 343,935 (354,448) Originations of mortgage receivables.......... (7,748) (7,748) Principal collections and recoveries on receivables................................. 13,484 22,663 36,147 Net proceeds from sale of auto receivables.... 343,935 332,982 (343,935) 332,982 Net proceeds from sale of mortgage receivables.................................. 4,839 4,839 Purchase of property and equipment............ 1,273 (2,897) (1,624) Proceeds from maturities of investment securities................................. 55 55 Increase in restricted cash................... (31,023) (31,023) Net change in investment in affiliates........ 942 (942) -------- --------- --------- --------- --------- Net cash provided (used) by investment activities.................................. 2,270 (3,777) (19,313) (20,820) -------- --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on bank line of credit............ 304,400 304,400 Payments on bank line of credit.............. (275,500) (275,500) Net increase in mortgage warehouse facility.. 264 264 Payments on automobile receivables- backed notes............................. (27,304) (27,304) Payments on notes payable.................... (221) (221) Net change in due (to) from affiliates....... (9,178) (25,570) 34,748 Proceeds from issuance of common stock....... 3,100 3,100 Purchase of treasury stock................... (4,387) (4,387) -------- --------- --------- --------- --------- Net cash provided (used) by financing activities................................... (10,686) 3,594 7,444 352 -------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents.................................. (3,466) 8,549 (2,137) 2,946 Cash and cash equivalents at beginning of period........................................ (4,913) (87) 7,145 2,145 -------- --------- --------- --------- --------- Cash and cash equivalents at end of period...... $ (8,379) $ 8,462 $ 5,008 $ $ 5,091 ======== ========= ========= ========= =========
F-41 AMERICREDIT CORP. CONSOLIDATING STATEMENT OF CASH FLOW SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED, DOLLARS IN THOUSANDS)
AMERICREDIT CORP. GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ---------- -------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income...................................... $ 27,375 $ (8,434) $ 36,577 $ (28,143) $ 27,375 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................... 22 1,892 1,914 Provision for losses............................ 3,755 3,755 Deferred income taxes........................... (7,771) (5,487) 22,901 9,643 Gain on sale of auto receivables................ 4,903 (1,077) (55,357) (51,531) Amortization of excess servicing receivable..... (4,120) 2,503 24,735 23,118 Equity in income of affiliates.................. (28,143) 28,143 Changes in assets and liabilities: Other assets................................ (962) (1,611) (2,008) (4,581) Accrued taxes and expenses.................. 1,253 (589) (1,407) (743) -------- --------- --------- --------- --------- Net cash provided by operating activities....... (7,443) (9,048) 25,441 8,950 -------- --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of auto receivables................... (686,543) (795,637) 795,637 (686,543) Originations of mortgage receivables............ (51,572) (51,572) Principal collections and recoveries on receivables.................................... 6,085 8,777 14,862 Net proceeds from sale of auto receivables...... 795,637 644,022 (795,637) 644,022 Net proceeds from sale of mortgage receivables.................................... 48,129 48,129 Purchase of property and equipment.............. (23) (3,548) (3,571) Increase in restricted cash..................... (8,275) (8,275) Net change in investment in affiliates.......... (9,998) (3,921) (2) 13,921 -------- --------- --------- --------- --------- Net cash provided (used) by investment activities..................................... (10,021) 104,267 (151,115) 13,921 (42,948) -------- --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on bank line of credit............. 514,500 514,500 Payments on bank line of credit............... (584,100) (584,100) Net increase in commercial paper warehouse facility.......................... 95,989 95,989 Net increase in mortgage warehouse facility... 6,936 6,936 Payments on automobile receivables- backed notes................................ (9,551) (9,551) Payments on notes payable....................... (598) (4) (602) Net change in due (to) from affiliates.......... 10,996 (37,564) 26,568 Proceeds from issuance of common stock.......... 7,066 13,921 (13,921) 7,066 -------- --------- --------- --------- --------- Net cash provided (used) by financing activities....................................... 17,464 (100,232) 126,927 (13,921) 30,238 -------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents...................................... (5,013) 1,253 (3,760) Cash and cash equivalents at beginning of period........................................... 3,988 2,039 6,027 -------- --------- --------- --------- --------- Cash and cash equivalents at end of period........ $ $ (1,025) $ 3,292 $ $ 2,267 ======== ========= ========= ========= =========
F-42 ALL TENDERED OLD NOTES, EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE AGENT. QUESTIONS AND REQUESTS FOR ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES OF THE PROSPECTUS, THE LETTER OF TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE ADDRESSED TO THE EXCHANGE AGENT AS FOLLOWS: BY REGISTERED OR CERTIFIED MAIL: Bank One, N.A. 235 West Schrock Road Westerville, Ohio 43081 or Bank One, N.A. c/o First Chicago Trust Company of New York Attention: Corporate Trust Department 14 Wall Street 8th Floor, Window 2 New York, New York 10005 BY HAND OR OVERNIGHT COURIER: Bank One, N.A. 235 West Schrock Road Westerville, Ohio 43081 or Bank One, N.A. c/o First Chicago Trust Company of New York Attention: Corporate Trust Department 14 Wall Street 8th Floor Window 2 New York, New York 10005 BY FACSIMILE: (614) 248-5088 (OH) or (212) 240-8938 (NY) Confirm by Telephone: (212) 240-8841 (NY) 1-800-346-5153 (Originals of all documents submitted by facsimile should be sent promptly by hand, overnight courier, or registered or certified mail) NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. OFFER TO EXCHANGE ALL OUTSTANDING 9 1/4% SENIOR NOTES DUE 2004 ($50,000,000 PRINCIPAL AMOUNT) FOR 9 1/4% SENIOR NOTES DUE 2004 AMERICREDIT CORP. ---------------------- PROSPECTUS ---------------------- March 27, 1998 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS; LIMITATION OF LIABILITY FOR MONETARY DAMAGES (a) The Articles of Incorporation, as amended to date (the "Articles of Incorporation"), of AmeriCredit Corp. (the "Company"), together with its Bylaws, provide that the Company shall indemnify officers and directors, and may indemnify its other employees and agents, to the fullest extent permitted by law. The laws of the State of Texas permit, and in some cases require, corporations to indemnify officers, directors, agents and employees who are or have been a party to or are threatened to be made a party to litigation against judgements, fines, settlements and reasonable expenses under certain circumstances. (b) The Company has also adopted provisions in its Articles of Incorporation that limit the liability of its directors to the fullest extent permitted by the laws of the State of Texas. Under the Company's Articles of Incorporation, and as permitted by the laws of the State of Texas, a director is not liable to the Company or its shareholders for breach of fiduciary duty. Such limitation does not affect liability for: (i) a breach of the director's duty of loyalty to the Company or its shareholders or members; (ii) an act or omission not in good faith that constitutes a breach of duty of the director to the Company or an act or omission that involves intentional misconduct or a knowing violation of the law; (iii) a transaction from which the director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office; or (iv) an act or omission for which the liability of a director is expressly provided by an applicable statute. II-1 ITEM 21. EXHIBITS. (a) Exhibits.
Exhibit No. Description 3.1 (1) -- Articles of Incorporation of the Company, filed May 18, 1988, and Articles of Amendment to Articles of Incorporation, filed August 24, 1988 (Exhibit 3.1) 3.2 (1) -- Amendment to Articles of Incorporation, filed October 18, 1989 (Exhibit 3.2) 3.3 (5) -- Articles of Amendment to Articles of Incorporation of the Company, filed November 12, 1992 (Exhibit 3.3) 3.4 (12) -- Bylaws of the Company, as amended (Exhibit 3.4) 4.1 (4) -- Specimen stock certificate evidencing the Common 4.2 (14) -- Rights Agreement, dated August 28, 1997, between the Company and ChaseMellon Shareholder Services, L.L.C. (Exhibit 1) 5.1 (17) -- Opinion of Jenkens & Gilchrist, a Professional Corporation 10.1 (1) -- 1989 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.4) 10.2 (1) -- 1989 Stock Option Plan (with Stock Appreciation Rights) for the Company (Exhibit 10.5) 10.3 (2) -- Amendment No. 1 to the 1989 Stock Option Plan the Company (Exhibit 4.6) 10.4 (3) -- 1990 Stock Option Plan for Non-Employee Directors of the Company (Exhibit 10.14) 10.5 (4) -- 1991 Key Employee Stock Option Plan of the Company (Exhibit 10.10) 10.6 (4) -- 1991 Non-employee Director Stock Option Plan of the Company (Exhibit 10.11) 10.7 (4) -- Executive Employment Agreement, dated January 30, 1991, between the Company and Clifton H. Morris, Jr. (Exhibit 10.18) 10.7.1 (12) -- Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Clifton H. Morris, Jr. (Exhibit 10.7.1) 10.8 (4) -- Executive Employment Agreement, dated January 30, 1991, between the Company and Michael R. Barrington (Exhibit 10.19) 10.8.1 (12) -- Amendment No. 1 to Executive Employment Agreement, dated May 1, 1997, between the Company and Michael R. Barrington (Exhibit 10.8.1) 10.9 (4) -- Executive Employment Agreement, dated January 30, 1991 between the Company and Daniel E. Berce (Exhibit 10.20) 10.9.1 (12) -- Amendment No. 1 to Executive Employment Agreement between the Company and Daniel E. Berce dated May 1, 1997 (Exhibit 10.9.1) 10.10 (12) -- Amended and Restated Employment Agreement, dated October 15, 1996, between the Company and Edward H. Esstman (Exhibit 10.10) 10.10.1 (12) -- Amendment No. 1 to Amended and Restated Employment Agreement, between the Company and Edward H. Esstman, dated May 1, 1997 (Exhibit 10.10.1) 10.11 (12) -- Amended and Restated Employment Agreement, dated July 1, 1997, between the Company and Michael T. Miller (Exhibit 10.11) 10.12 (6) -- Indenture, dated June 1, 1995, between AmeriCredit Receivables Finance Corp. 1995-A and LaSalle National Bank (Exhibit 10.15) 10.13 (6) -- Sale and Servicing Agreement, dated June 1, 1995, between AmeriCredit Receivables Finance Corp. 1995-A, AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.16) 10.14 (15) -- Restated Revolving Credit Agreement, dated as of October 3, 1997, between AmeriCredit Corp. And subsidiaries, Wells Fargo Bank (Texas), National Association, Bank One Texas, N.A. and other banks named therein (Exhibit 10.1) 10.15 (7) -- 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp.
II-2 10.16 (13) -- Amendment No. 1 to 1995 Omnibus Stock and Incentive Plan for AmeriCredit Corp. (Exhibit 10.19) 10.17 (8) -- Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1995-B, dated November 20, 1995, among AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.1) 10.18 (9) -- Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1996-A, dated February 12, 1996, among AmeriCredit Financial Services, Inc., AmeriCredit Receivables Corp. and LaSalle National Bank (Exhibit 10.1) 10.19 (10) -- Pooling and Servicing Agreement relating to AmeriCredit Automobile Receivables Trust 1996-B, dated April 30, 1996, among AmeriCredit Financial Services, Inc., AFS Funding Corp. and LaSalle National Bank (Exhibit 4.1) 10.20 (11) -- 1996 Limited Stock Option Plan for AmeriCredit Corp. 10.21 (16) -- Indenture, dated as of February 4, 1997, between AmeriCredit Corp. and subsidiaries and Bank One, Columbus, NA, with form of 9 1/4% Senior Notes due 2004 attached as exhibit (Exhibit 10.2) 10.22 (16) -- Purchase Agreement, dated as of January 30, 1997, between AmeriCredit Corp. and subsidiaries and Smith Barney Inc., Montgomery Securities, Piper Jaffray Inc. and Wheat First Butcher Singer (Exhibit 10.3) 10.23 (16) -- A/B Exchange Registration Rights Agreement, dated as of February 4, 1997, between AmeriCredit Corp. and subsidiaries and Smith Barney Inc., Montgomery Securities, Piper Jaffray Inc. and Wheat First Butcher Singer (Exhibit 10.4) 10.24 (17) -- Indenture, dated as of January 29, 1998, between AmeriCredit Corp. and subsidiaries and Bank One, NA, with form of 9 1/4% Senior Notes due 2004 attached as exhibit 10.25 (17) -- Purchase Agreement, dated as of January 26, 1998, between AmeriCredit Corp. and subsidiaries and Salomon Brothers Inc and Credit Suisse First Boston 10.26 (17) -- C/D Exchange Registration Rights Agreement, dated as of January 29, 1998, between AmeriCredit Corp. and subsidiaries and Salomon Brothers Inc and Credit Suisse First Boston 10.27 (15) -- Sale and Servicing Agreement, dated as of October 8, 1997, between CP Funding Corp., AmeriCredit Financial Services, Inc., and The Chase Manhattan Bank (Exhibit 10.2) 10.28 (15) -- Funding Agreement, dated as of October 8, 1997, between CP Funding Corp, Park Avenue Receivables Corporation, The Chase Manhattan Bank, and other financial institutions named therein (Exhibit 10.3) 10.29 (15) -- Financial Data Schedule 11.1 (15) -- Statement Re Computation of Per Share Earnings 12.1 (17) -- Statement Re Computation of Ratios 21.1 (17) -- Subsidiaries of the Company 23.1 (17) -- Consent of Coopers & Lybrand L.L.P. 23.2 (17) -- Consent of Jenkens & Gilchrist, a Professional Corporation (included in its opinion filed in Exhibit 5.1) 24.1 (17) -- Power of Attorney (included on signature page hereto) 25.1 (17) -- Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 ________________________________________________________________________________
(1) Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-31220 on Form S-1 filed by the Company with the Securities and Exchange Commission. (2) Incorporated by reference to the exhibit shown in parenthesis included in Registration Statement No. 33-41203 on Form S-8 filed by the Company with the Securities and Exchange Commission. (3) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1990 filed by the Company with the Securities and Exchange Commission. II-3 (4) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1991, filed by the Company with the Securities and Exchange Commission. (5) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1993, filed by the Company with the Securities and Exchange Commission. (6) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the year ended June 30, 1995, filed by the Company with the Securities and Exchange Commission. (7) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1995, filed by the Company with the Securities and Exchange Commission. (8) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1995, filed by the Company with the Securities and Exchange Commission. (9) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996, filed by Company with the Securities and Exchange Commission. (10) Incorporated by reference to the exhibit shown in parenthesis included in Form 8-K, dated May 16, 1996, filed by the AmeriCredit Automobile Receivables Trust 1996-B with the Securities and Exchange Commission. (11) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1996, filed by the Company with the Securities and Exchange Commission. (12) Incorporated by reference to exhibit shown in parenthesis included in the Company's Annual Report on Form 10-K for the period ended June 30, 1997, filed by the Company with the Securities and Exchange Commission. (13) Incorporated by reference from the Company's Proxy Statement for the year ended June 30, 1997, filed by the Company with the Securities and Exchange Commission. (14) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Report on Form 8-K, dated August 28, 1997, filed by the Company with the Securities and Exchange Commission. (15) Incorporated by reference to exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1997 filed by the Company with the Securities and Exchange Commission. (16) Incorporated by reference to the exhibit shown in parenthesis included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997 filed by the Company with the Securities and Exchange Commission. (17) Filed herewith. __________________ II-4 (b) Financial Schedules. All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are either not required under the related instructions, are inapplicable, or the required information is included elsewhere in the Consolidated Financial Statements and incorporated herein by reference. ITEM 22. UNDERTAKINGS (a) Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Securities Act"), may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) The undersigned Company hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this Exchange Offer Registration Statement through the date of responding to the request. (c) The undersigned Company hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this Exchange Offer Registration Statement when it became effective. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Company has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Tarrant, State of Texas, on March 25, 1998. AMERICREDIT CORP. By: /s/ Clifton H. Morris, Jr. ---------------------------------------------- Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer Each individual whose signature appears below hereby designates and appoints Clifton H. Morris, Jr., Daniel E. Berce, Chris A. Choate, and each of them, any one of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agents (the "Attorneys-in-Fact") with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, which amendments may make such changes in this Registration Statement as any Attorney- in-Fact deems appropriate, and any registration statement relating to the same offering filed pursuant to Rule 462(b) under the Securities Act of 1933 and requests to accelerate the effectiveness of such registration statements, and to file each such amendment with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto such Attorneys-in-Fact and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that such Attorneys-in- Fact or either of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in their capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive March 25, 1998 - ---------------------------- Officer Clifton H. Morris, Jr. (Principal Executive Officer) /s/ Michael R. Barrington Vice Chairman of the Board, Chief Operating March 25, 1998 - ---------------------------- Officer and President Michael R. Barrington /s/ Daniel E. Berce Vice Chairman of the Board and Chief March 25, 1998 - ---------------------------- Financial Officer Daniel E. Berce (Principal Financial and Accounting Officer) /s/ Edward H. Esstman President of AmeriCredit Financial March 25, 1998 - ---------------------------- Services, Inc., Executive Vice President-Auto Edward H. Esstman Finance Division and Director Director March __, 1998 - ---------------------------- James A. Greer Director March __, 1998 - ---------------------------- Gerald W. Haddock Director March __, 1998 - ---------------------------- Douglas K. Higgins /s/ Kenneth H. Jones, Jr. Director March 25, 1998 - ---------------------------- Kenneth H. Jones, Jr.
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Tarrant, State of Texas, on March 25, 1998. AMERICREDIT FINANCIAL SERVICES, INC. By: /s/ Michael R. Barrington ---------------------------------------------- Michael R. Barrington Vice Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in their capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Michael R. Barrington Vice Chairman of the Board and Chief Executive March 25, 1998 - ---------------------------- Officer Michael R. Barrington (Principal Executive Officer) /s/ Daniel E. Berce Vice Chairman of the Board and Chief Financial March 25, 1998 - ---------------------------- Officer Daniel E. Berce (Principal Financial and Accounting Officer) /s/ Edward H. Esstman President, Chief Operating Officer and Director March 25, 1998 - ---------------------------- Edward H. Esstman /s/ Clifton H. Morris, Jr. Chairman of the Board March 25, 1998 - ---------------------------- Clifton H. Morris, Jr.
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Tarrant, State of Texas, on March 25, 1998. AMERICREDIT OPERATING CO., INC. By: /s/ Clifton H. Morris, Jr. ---------------------------------------------- Clifton H. Morris, Jr. Chairman of the Board Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in their capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Clifton H. Morris, Jr. Chairman of the Board March 25, 1998 - ---------------------------- Clifton H. Morris, Jr. (Principal Executive Officer) /s/ Michael R. Barrington Vice Chairman of the Board and Chief March 25, 1998 - ---------------------------- Michael R. Barrington Executive Officer /s/ Daniel E. Berce Vice Chairman of the Board and Chief March 25, 1998 - ---------------------------- Daniel E. Berce Financial Officer (Principal Financial and Accounting Officer)
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Tarrant, State of Texas, on March 25, 1998. ACF INVESTMENT CORP. By: /s/ Clifton H. Morris, Jr. ---------------------------------------------- Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in their capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive March 25, 1998 - ---------------------------- Officer Clifton H. Morris, Jr. (Principal Executive Officer) /s/ Daniel E. Berce Vice Chairman of the Board and Chief March 25, 1998 - ---------------------------- Financial Officer Daniel E. Berce (Principal Financial and Accounting Officer) /s/ Michael R. Barrington Vice Chairman of the Board, President and March 25, 1998 - ---------------------------- Chief Operating Officer Michael R. Barrington
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Tarrant, State of Texas, on March 25, 1998. AMERICREDIT PREMIUM FINANCE, INC. By: /s/ Clifton H. Morris, Jr. ---------------------------------------------- Clifton H. Morris, Jr. Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in their capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Clifton H. Morris, Jr. Chairman of the Board and Chief Executive March 25, 1998 - ---------------------------- Officer Clifton H. Morris, Jr. (Principal Executive Officer) /s/ Michael R. Barrington Director March 25, 1998 - ---------------------------- Michael R. Barrington /s/ Daniel E. Berce President, Chief Financial Officer, Treasurer March 25, 1998 - ---------------------------- and Director Daniel E. Berce (Principal Financial and Accounting Officer)
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Tarrant, State of Texas, on March 25, 1998. AMERICREDIT CORPORATION OF CALIFORNIA By: /s/ Michael R. Barrington ---------------------------------------------- Michael R. Barrington Vice Chairman of the Board Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Registration Statement has been signed below by the following persons in their capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Clifton H. Morris, Jr. Chairman of the Board March 25, 1998 - ---------------------------- Clifton H. Morris, Jr. /s/ Michael R. Barrington Vice Chairman of the Board March 25, 1998 - ---------------------------- (Principal Executive Officer) Michael R. Barrington /s/ Daniel E. Berce Vice Chairman of the Board and Chief March 25, 1998 - ---------------------------- Financial Officer Daniel E. Berce (Principal Financial and Accounting Officer) Executive Vice President and Director March __, 1998 - ---------------------------- Michael Hughes
EX-5.1 2 OPINION OF JENKINS & GILCHRIST Exhibit 5.1 March 25, 1998 AmeriCredit Corp. 200 Bailey Avenue Fort Worth, Texas 76107 Re: Registration Statement on Form S-4; File No. 333-46993; $50,000,000 Aggregate Principal Amount of 9 1/4% Senior Notes due 2004 Dear Ladies and Gentlemen: In connection with the registration of $50,000,000 aggregate principal amount of 9 1/4% Senior Notes due 2004 (the "Notes") by AmeriCredit Corp. (the "Company") under the Securities Act of 1933, as amended (the "Act"), on Form S-4 filed with the Securities and Exchange Commission on February 27, 1998 (File No. 333-46993), as amended by Amendment No. 1 (the "Registration Statement") and the concurrent registration of guarantees (the "Subsidiary Guarantees") of the Notes by AmeriCredit Financial Services, Inc., AmeriCredit Operating Co., Inc., ACF Investment Corp., AmeriCredit Premium Finance, Inc., and Americredit Corporation of California (collectively, the "Guarantors"), you have requested our opinion with respect to the matters set forth below. The Notes and Subsidiary Guarantees will be issued pursuant to an indenture (the "Indenture") among the Company, the Guarantors and Bank One, N.A., as Trustee (the "Trustee"). In our capacity as your special counsel in connection with such registration, we are familiar with the proceedings taken and proposed to be taken by the Company and the Guarantors in connection with the authorization and issuance of the Notes and Subsidiary Guarantees, and, for the purposes of this opinion, have assumed such proceedings will be timely completed in the manner presently proposed. In addition, we have made such legal and factual examinations and inquiries, including an examination of originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and instruments, as we have deemed necessary or appropriate for purposes of this opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies. AmeriCredit Corp. March 25, 1998 Page 2 We are opining herein as to the effect on the subject transaction only of the internal laws of the State of Texas and the Delaware General Corporation law, and we express no opinion with respect to the applicability thereto, or the effect thereon of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any other local agencies within any state. Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof: 1. When executed and delivered by or on behalf of the Company and authenticated by the Trustee in accordance with the terms of the Indenture, the Notes will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 2. When executed and delivered by or on behalf of the Guarantors, the Subsidiary Guarantees will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms. The opinions rendered in paragraphs 1 and 2 above relating to the enforceability of the Notes and Subsidiary Guarantees are subject to the following exceptions, limitations and qualifications: (i) the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting the rights and remedies of creditors generally; (ii) the effect of general principles of equity, whether enforcement is considered in a proceeding in equity or at law, and the discretion of the court before which any proceeding therefor may be brought; and (iii) we express no opinion concerning the enforceability of any waivers of rights or defenses or indemnification provisions of the Indenture where such waivers or provisions are contrary to public policy. To the extent that the obligations of the Company and the Guarantors under the Indenture may be dependent upon such matters, we assume for purposes of this opinion that the Trustee is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; that the Trustee is duly qualified to engage in the activities contemplated by the Indenture; that the Indenture has been duly authorized, executed and delivered by the Trustee and constitutes the legally valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms; that the Trustee is in compliance, generally and with respect to acting as a trustee under the Indenture, with all applicable laws and regulations; and that the Trustee has the requisite organizational and legal power and authority to perform its obligations under the Indenture. AmeriCredit Corp. March 25, 1998 Page 3 We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the use of our name under the caption "Legal Maters" in the Registration Statement and in the Prospectus included therein. In giving such consent, we do not admit that we come within the category of persons whose consent is required by Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, JENKENS & GILCHRIST, A Professional Corporation /s/ L. STEVEN LESHIN --------------------------- By: L. Steven Leshin GJS/dc EX-10.24 3 INDENTURE EXHIBIT 10.24 L&W DRAFT - JANUARY 26, 1998 SALOMON SMITH BARNEY - AMERICREDIT ================================================================================ ------------------------------------ AmeriCredit Corp. As Issuer AmeriCredit Financial Services, Inc., AmeriCredit Operating Co., Inc., AmeriCredit Premium Finance, Inc., Americredit Corporation of California, and ACF Investment Corp. As Guarantors ------------------------------------ $50,000,000 SERIES C AND SERIES D 9 1/4% SENIOR NOTES DUE 2004 ------------------------------------ INDENTURE Dated as of January 29, 1998 ------------------------------------ ------------------------------------ Bank One, N.A. As Trustee ------------------------------------ ================================================================================ CROSS-REFERENCE TABLE* Trust Indenture Act Section Indenture Section 310(a)(1)............................... 7.10 (a)(2)............................... 7.10 (a)(3)............................... N.A. (a)(4)............................... N.A. (a)(5)............................... 7.10 (b).................................. 7.10 (c).................................. N.A. 311(a).................................. 7.11 (b).................................. 7.11 (c).................................. N.A. 312(a).................................. 2.05 (b).................................. 11.03 (c).................................. 11.03 313(a).................................. 7.06 (b)(2)............................... 7.07 (c).................................. 7.06;11.02 (d).................................. 7.06 314(a).................................. 4.03;11.02 (c)(1)............................... 11.04 (c)(2)............................... 11.04 (c)(3)............................... N.A. (e).................................. 11.05 (f).................................. N.A. 315(a).................................. 7.01 (b).................................. 7.05,11.02 (c).................................. 7.01 (d).................................. 7.01 (e).................................. 6.11 316(a)(last sentence)................... 2.09 (a)(1)(A)............................ 6.05 (a)(1)(B)............................ 6.04 (a)(2)............................... N.A. (b).................................. 6.07 (c).................................. 2.12 317(a)(1)............................... 6.08 (a)(2)............................... 6.09 (b).................................. 2.04 318(a).................................. 11.01 (b).................................. N.A. (c).................................. 11.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS
Page ARTICLE 1 - DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions.......................................... 1 Section 1.02. Other Definitions.................................... 15 Section 1.03. Incorporation by Reference of Trust Indenture Act.... 15 Section 1.04. Rules of Construction................................ 16 ARTICLE 2 - THE NOTES Section 2.01. Form and Dating............................. 16 Section 2.02. Execution and Authentication......................... 17 Section 2.03. Registrar and Paying Agent........................... 17 Section 2.04. Paying Agent to Hold Money in Trust.................. 18 Section 2.05. Holder Lists......................................... 18 Section 2.06. Transfer and Exchange................................ 18 Section 2.07. Replacement Notes.................................... 23 Section 2.09. Treasury Notes....................................... 24 Section 2.10. Temporary Notes...................................... 24 Section 2.11. Cancellation......................................... 25 Section 2.12. Defaulted Interest................................... 25 ARTICLE 3 - REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee................................... 25 Section 3.02. Selection of Notes to Be Redeemed.................... 25 Section 3.03. Notice of Redemption................................. 26 Section 3.04. Effect of Notice of Redemption....................... 27 Section 3.05. Deposit of Redemption Price.......................... 27 Section 3.06. Notes Redeemed in Part............................... 27 Section 3.07. Optional Redemption.................................. 27 Section 3.08. Mandatory Redemption................................. 28 Section 3.09. Offer to Purchase by Application of Excess Proceeds.. 28 ARTICLE 4 - COVENANTS Section 4.01. Payment of Notes..................................... 30 Section 4.02. Maintenance of Office or Agency...................... 30 Section 4.03. Reports 31 Section 4.04. Compliance Certificate............................... 31 Section 4.05. Taxes 32 Section 4.06. Stay, Extension and Usury Laws....................... 32 Section 4.07. Restricted Payments.................................. 32 Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries...................................... 34 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock............................................. 35 Section 4.10. Asset Sales.......................................... 37 Section 4.11. Transactions with Affiliates......................... 39 Section 4.12. Liens 38 Section 4.13. Line of Business..................................... 38 Section 4.14. Corporate Existence.................................. 39 Section 4.15. Offer to Repurchase Upon Change of Control........... 39
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Section 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Subsidiaries......................... 40 Section 4.17. Payments for Consent................................. 41 Section 4.18. Limitation on Investment Company Status.............. 41 Section 4.19. Additional Subsidiary Guarantees..................... 41 ARTICLE 5 - SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets............. 41 Section 5.02. Successor Corporation Substituted.................... 42 ARTICLE 6 - DEFAULTS AND REMEDIES Section 6.01. Events of Default.................................... 42 Section 6.02. Acceleration......................................... 44 Section 6.03. Other Remedies....................................... 45 Section 6.04. Waiver of Past Defaults.............................. 45 Section 6.05. Control by Majority.................................. 45 Section 6.06. Limitation on Suits.................................. 45 Section 6.07. Rights of Holders of Notes to Receive Payment........ 46 Section 6.08. Collection Suit by Trustee........................... 46 Section 6.09. Trustee May File Proofs of Claim..................... 46 Section 6.10. Priorities........................................... 47 Section 6.11. Undertaking for Costs................................ 47 ARTICLE 7 - TRUSTEE Section 7.01. Duties of Trustee.................................... 47 Section 7.02. Rights of Trustee.................................... 48 Section 7.03. Individual Rights of Trustee......................... 49 Section 7.04. Trustee's Disclaimer................................. 49 Section 7.05. Notice of Defaults................................... 49 Section 7.06. Reports by Trustee to Holders of the Notes........... 49 Section 7.07. Compensation and Indemnity........................... 50 Section 7.08. Replacement of Trustee............................... 50 Section 7.09. Successor Trustee by Merger, etc..................... 51 Section 7.10. Eligibility; Disqualification........................ 51 Section 7.11. Preferential Collection of Claims Against Company.... 52 ARTICLE 8 - LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance........................................ 52 Section 8.02. Legal Defeasance and Discharge....................... 52 Section 8.03. Covenant Defeasance.................................. 53 Section 8.04. Conditions to Legal or Covenant Defeasance........... 53 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions..... 54 Section 8.06. Repayment to Company................................. 55 Section 8.07. Reinstatement........................................ 55 ARTICLE 9 - AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes.................. 55 Section 9.02. With Consent of Holders of Notes..................... 56 Section 9.03. Compliance with Trust Indenture Act.................. 57
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Section 9.04. Revocation and Effect of Consents.................... 57 Section 9.05. Notation on or Exchange of Notes..................... 58 Section 9.06. Trustee to Sign Amendments, etc...................... 58 ARTICLE 10 - SUBSIDIARY GUARANTEES Section 10.01. Subsidiary Guarantees................................ 58 Section 10.02. Execution and Delivery of Subsidiary Guarantees...... 59 Section 10.03. Guarantors May Consolidate, etc., on Certain Terms... 59 Section 10.04. Releases Following Sale of Assets.................... 60 Section 10.05. Limitation on Guarantor Liability.................... 61 Section 10.06. "Trustee" to Include Paying Agent.................... 61 ARTICLE 11 - MISCELLANEOUS Section 11.01. Trust Indenture Act Controls......................... 61 Section 11.02. Notices 61 Section 11.03. Communication by Holders of Notes with Other Holders of Notes.................................. 63 Section 11.04. Certificate and Opinion as to Conditions Precedent... 63 Section 11.05. Statements Required in Certificate or Opinion........ 63 Section 11.06. Rules by Trustee and Agents.......................... 63 Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders........................ 64 Section 11.08. Governing Law........................................ 64 Section 11.09. No Adverse Interpretation of Other Agreements........ 64 Section 11.10. Successors........................................... 64 Section 11.11. Severability......................................... 64 Section 11.12. Counterpart Originals................................ 64 Section 11.13. Table of Contents, Headings, etc..................... 64
iii INDENTURE dated as of January 29, 1998 between AmeriCredit Corp., a Texas corporation (the "Company"), AmeriCredit Financial Services, Inc., a Delaware corporation, AmeriCredit Operating Co., Inc., a Delaware corporation, ACF Investment Corp., a Delaware corporation, AmeriCredit Premium Finance, Inc., a Delaware corporation, and Americredit Corporation of California, a California corporation (together with all other Persons who execute a Subsidiary Guarantee pursuant to the terms of this Indenture, the "Guarantors") and Bank One, N.A., as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 9 1/4% Series C Senior Notes due 2004 (the "Series C Notes") and the 9 1/4% Series D Senior Notes due 2004 (the "Series D Notes" and, together with the Series C Notes, the "Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "accreted value" means, with respect to discount Indebtedness, as of any date of determination prior to the end of the "discount" or "zero coupon" period for such discount Indebtedness, the sum of (a) the initial offering price of such Indebtedness and (b) that portion of the excess of the principal amount at maturity of such Indebtedness over such initial offering price as shall have been accreted thereon from the date of issuance of such discount Indebtedness through the date of determination. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Acquisition Fees" means, with respect to any Eligible Receivables as of any date, the discount or cash payments received by the Company from dealers and other Persons with respect to the Eligible Receivables purchased from such dealer or other Person and owned by the Company or its Restricted Subsidiaries as of such date. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depository that apply to such transfer or exchange. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of Receivables in connection with Securitizations, Warehouse Facilities or Credit Facilities in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by Section 4.15 hereof and/or Section 5.01 hereof and not by the provisions of Section 4.10 hereof), and (ii) the issue or sale by the Company or any of its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $500,000 or (b) for net proceeds in excess of $500,000. Notwithstanding the foregoing: (i) a transfer of assets by the Company to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary, and (iii) a Restricted Payment that is permitted by Section 4.07 hereof will not be deemed to be Asset Sales. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors or other governing body charged with the ultimate management of any Person, or any duly authorized committee thereof. "Borrowing Base" means, as of any date, an amount equal to the sum of (i) 80% of the aggregate amount of Receivables (other than loans secured by residential mortgages) owned by the Company and its Wholly-Owned Restricted Subsidiaries as of such date that are not in default, excluding (A) any Receivables that were acquired or originated with Permitted Warehouse Debt, (B) any Receivables that are held by a Securitization Trust, and (C) any Receivables that are subject to Liens other than Liens securing Obligations under Credit Facilities; (ii) 60% of the book value (determined on a consolidated basis in accordance with GAAP) of interests in portfolios of securitized Receivables that are owned by the Company and its Wholly-Owned Restricted Subsidiaries as of such date and that are not subject to any Liens other than Liens to secure Obligations under Credit Facilities; and (iii) 98% of the aggregate amount of Receivables that consist of loans secured by residential mortgages owned by the Company and its Wholly-Owned Restricted Subsidiaries as of such date that are not in default, excluding (A) any such loans that were acquired or originated with Permitted Warehouse Debt, (B) any such loans that are held by a Securitization Trust, and (C) any such loans that are subject to Liens other than Liens securing Obligations under Credit Facilities. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 2 "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and Eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than in the ordinary course of business; (ii) the adoption of a plan relating to the liquidation or dissolution of the Company; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares); (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or (v) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance); provided, however, that this clause (v) shall not apply to any such consolidation or merger if, immediately after the consummation of such transaction and after giving effect thereto, the ratings assigned to the Notes by Moody's Investors Service, Inc. and Standard & Poor's Ratings Group are equal to or higher than Baa3 (or the equivalent) and BBB- (or the equivalent), respectively. "Consolidated Indebtedness" means, with respect to any Person as of any date of determination, the sum, without duplication, of (i) the total amount of Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total amount of Indebtedness of any other Person, to the extent that such Indebtedness has been Guaranteed by the referent Person or one or more of its Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified Stock of such Person and all preferred stock of Restricted Subsidiaries of such Person, in each case, determined on a consolidated basis in accordance with GAAP. "Consolidated Leverage Ratio" means, with respect to any Person, as of any date of determination, the ratio of (i) the Consolidated Indebtedness of such Person as of such date, excluding, however, all (A) borrowings under Credit Facilities that constitute Permitted Debt, (B) Permitted Warehouse Debt and (C) 3 Hedging Obligations that constitute Permitted Debt to (ii) the Consolidated Net Worth of such Person as of such date. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries (for such period, on a consolidated basis, determined in accordance with GAAP); provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly-Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, and (iv) the cumulative effect of a change in accounting principles shall be excluded. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of this Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Indenture or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 11.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means the Second Restated Revolving Credit Agreement, dated as of October 7, 1996, by and among the Company, certain of its Restricted Subsidiaries and the several banks named therein, providing for up to $240 million of revolving credit borrowings, including all related notes, Guarantees, security agreements, collateral documents, and other instruments and agreements executed in connection therewith. "Credit Enhancement Agreements" means, collectively, any documents, instruments or agreements entered into by the Company, any of its Restricted Subsidiaries or any of the Securitization Trusts exclusively 4 for the purpose of providing credit support for the Securitization Trusts or any of their respective Indebtedness or asset-backed securities. "Credit Facilities" means, with respect to the Company or any of its Restricted Subsidiaries, one or more debt facilities (including, without limitation, the Credit Agreement) with banks or other institutional lenders providing for revolving credit loans; provided that in no event will any such facility that constitutes a Warehouse Facility be deemed to qualify as a Credit Facility. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto, except that such Note shall not have the information called for by footnotes 1 and 2 thereof. "Depository" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depository with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provision of this Indenture, and, thereafter, "Depository" shall mean or include such successor. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. "Eligible Receivables" means, at any time, all Receivables owned by the Company or any of its Restricted Subsidiaries that meet the sale or loan eligibility criteria set forth in the Warehouse Facility pursuant to which the applicable Receivables were financed; excluding, however, any Receivables that are pledged to secure, or were acquired or originated with, borrowings under a Credit Facility and excluding any such Receivables held by a Securitization Trust. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means up to $39.5 million in aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement, the Original Notes and the Original Guarantees) in existence on February 4, 1997, until such amounts are repaid. 5 "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time and consistently applied. "Global Note" means the global note in the form of Exhibit A hereto bearing the Private Placement Legend and deposited with and registered in the name of the Depository or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means each of (i) AmeriCredit Financial Services, Inc., a Delaware corporation, AmeriCredit Operating Co., Inc., a Delaware corporation, ACF Investment Corp., a Delaware corporation, Americredit Corporation of California, a California corporation and AmeriCredit Premium Finance, Inc., a Delaware corporation, and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of Section 4.19 hereof, and their respective successors and assigns. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest, and (ii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. 6 "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined in accordance with Section 4.07 hereof. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "Liquidated Damages" means all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts 7 required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a person who is not a U.S. Person. "Note Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering" means the Offering of the Notes by the Company. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, a vice chairman, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 11.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 11.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Original Guarantees" means each of the Guarantees of the Original Notes by the Guarantors pursuant to the Original Indenture. "Original Indenture" means the Indenture, dated as of February 4, 1997, among the Company, Bank One, N.A., as trustee, and the Guarantors, with respect to the Original Notes and the Original Guarantees. "Original Notes" means the $125,000,000 in aggregate principal amount of the Company's 9 1/4% Senior Notes due 2004, issued pursuant to the Original Indenture on February 4, 1997. "Participant" means, with respect to DTC, a Person who has an account with DTC. 8 "Permitted Business" means the business of purchasing, originating, brokering and marketing, pooling and selling, securitizing and servicing Receivables, and entering into agreements and engaging in transactions incidental to the foregoing. "Permitted Investments" means (a) any Investment in the Company or in a Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly-Owned Restricted Subsidiary of the Company and a Guarantor that is engaged in a Permitted Business or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor and that is engaged in a Permitted Business; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) Investments by the Company or any of its Subsidiaries in Securitization Trusts in the ordinary course of business in connection with or arising out of Securitizations; (g) purchases of all remaining outstanding asset-backed securities of any Securitization Trust for the purpose of relieving the Company or a Subsidiary of the Company of the administrative expense of servicing such Securitization Trust, but only if 90% or more of the aggregate principal amount of the original asset-backed securities of such Securitization Trust have previously been retired; and (h) other Investments by the Company or any of its Subsidiaries in any Person (other than an Affiliate of the Company that is not also a Subsidiary of the Company) that do not exceed $5.0 million in the aggregate at any one time outstanding (measured as of the date made and without giving effect to subsequent changes in value). "Permitted Liens" means (i) Liens existing on the date of this Indenture; (ii) Liens on Eligible Receivables and the proceeds thereof to secure Permitted Warehouse Debt or permitted Guarantees thereof; (iii) Liens to secure revolving credit borrowings under Credit Facilities, provided that such borrowings were permitted by this Indenture to be incurred; (iv) Liens on Receivables and the proceeds thereof incurred in connection with Securitizations or permitted Guarantees thereof; (v) Liens on spread accounts and excess servicing receivable, Liens on the stock of Restricted Subsidiaries of the Company substantially all of the assets of which are spread accounts and excess servicing receivable and Liens on interests in Securitization Trusts, in each case incurred in connection with Credit Enhancement Agreements; (vi) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (vii) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (viii) Liens securing Indebtedness incurred to finance the construction or purchase of property of the Company or any of its Wholly-Owned Restricted Subsidiaries (but excluding Capital Stock of another Person); provided, however, that any such Lien may not extend to any other property owned by the Company or any of its Restricted Subsidiaries at the time the Lien is incurred, and the Indebtedness secured by the Lien may not be incurred more than 180 days after the latter of the acquisition or completion of construction of the property subject to the Lien; provided, further, that the Amount of Indebtedness secured by such Liens do not exceed the fair market value (as evidenced by a resolution of the Board of Directors of the Company set forth in an Officers' Certificate delivered to the Trustee) of the property purchased or constructed with the proceeds of such Indebtedness; (ix) Liens to secure any Permitted Refinancing Indebtedness incurred to refinance any Indebtedness secured by any Lien referred to in the foregoing clauses 9 (i) through (viii), provided, however, that such new Lien shall be limited to all or part of the same property that secured the original Lien and the Indebtedness secured by such Lien at such time is not increased to any amount greater than the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (i) through (viii), as the case may be, at the time the original Lien became a permitted Lien; (x) Liens in favor of the Company; (xi) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $1.0 million in the aggregate at any one time outstanding; (xii) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business (including, without limitation, landlord Liens on leased properties); (xiii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (xiv) Liens on assets of Guarantors to secure Senior Guarantor Debt of such Guarantors that was permitted by this Indenture to be incurred; and (xv) Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than Permitted Warehouse Debt or intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Permitted Warehouse Debt" means Indebtedness of the Company or a Restricted Subsidiary of the Company outstanding under one or more Warehouse Facilities; provided, however, that (i) the assets purchased with proceeds of such warehouse debt are or, prior to any funding under the Warehouse Facility with respect to such assets, were eligible to be recorded as held for sale on the consolidated balance sheet of the Company in accordance with GAAP, (ii) such warehouse debt will be deemed Permitted Warehouse Debt (a) in the case of a Purchase Facility, only to the extent the holder of such warehouse debt has no contractual recourse to the Company and/or its Restricted Subsidiaries to satisfy claims in respect of such warehouse debt in excess of the realizable value of the Receivables financed thereby, and (b) in the case of any other Warehouse Facility, only to the lesser of (A) the amount advanced by the lender with respect to the Receivables financed under such Warehouse Facility, and (B) the principal amount of such Receivables and (iii) any such Indebtedness has not been outstanding in excess of 364 days. 10 "Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust, joint venture, or a governmental agency or political subdivision thereof. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except as otherwise permitted by the provisions of this Indenture. "Purchase Facility" means any Warehouse facility in the form of a purchase and sale facility pursuant to which the Company or any of its Subsidiaries sells Receivables to a financial institution and retains the right of first refusal upon the subsequent resale of such Receivables by such financial institution. "Receivables" means (i) consumer installment sale contracts and loans evidenced by promissory notes secured by new and used automobiles and light trucks, (ii) other consumer installment sale contracts or lease contracts and (iii) loans secured by residential mortgages, in the case of each of the clauses (i), (ii) and (iii), that are purchased or originated in the ordinary course of business by the Company or any Restricted Subsidiary of the Company; provided, however, that for purposes of determining the amount of a Receivable at any time, such amount shall be determined in accordance with GAAP, consistently applied, as of the most recent practicable date. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of February 4, 1997, by and among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "Regulation S" means Regulation S promulgated under the Securities Act. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 under the Securities Act. "Rule 144A" means Rule 144A under the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securitization" means a public or private transfer of Receivables in the ordinary course of business and by which the Company or any of its Restricted Subsidiaries directly or indirectly securitizes a pool of specified Receivables including any such transaction involving the sale of specified Receivables to a Securitization Trust. 11 "Securitization Trust" means any Person (whether or not a Subsidiary of the Company) established exclusively for the purpose of issuing securities in connection with any Securitization, the obligations of which are without recourse to the Company or any of the Guarantors (including, without limitation, any special purpose Subsidiary of the Company formed exclusively for the purpose of satisfying the requirements of Credit Enhancement Agreements and regardless of whether such Subsidiary is an issuer of securities), provided that such Person is not an obligor with respect to any Indebtedness of the Company or any Guarantor other than under Credit Enhancement Agreements. As of the date of this Indenture, AFS Funding Corp. and CP Funding Corp. shall be deemed to satisfy the requirements of the foregoing definition. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof. "Special Purpose Finance Subsidiaries" means AmeriCredit Receivables Finance Corp. and AmeriCredit Receivables Finance Corp. 1995-A. "Specified Senior Indebtedness" means (i) the Indebtedness of any Person, whether outstanding on the date of this Indenture or thereafter incurred and (ii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person to the extent post filing interest is allowed in such proceeding) in respect of (A) Indebtedness of such Person for money borrowed and (B) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the case of either clause (i) or (ii), in the instrument creating or evidencing the same pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Notes; provided, however, that Specified Senior Indebtedness shall not include (1) any obligation of such Person to any Subsidiary of such Person, (2) any liability for Federal, state, local or other taxes owed or owing by such Person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (4) any obligations in respect of Capital Stock of such Person or (5) that portion of any Indebtedness which at the time of incurrence is incurred in violation of this Indenture. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). 12 "Subsidiary Guarantee" means the Guarantee of the Notes by each of the Guarantors pursuant to Article 11 hereof and in the form of Guarantee attached hereto as Exhibit C and any additional Guarantee of the Notes to be executed by any Restricted Subsidiary pursuant to Section 4.19 hereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa- 77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Transfer Restricted Securities" means securities that bear or are required to bear the legend set forth in Section 2.06(g) hereof. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Global Note" means one or more global Notes that do not and are not required to bear the Private Placement Legend and are deposited with and registered in the name of the Depository or its nominee. "Unrestricted Definitive Note" means one or more Definitive Notes that do not and are not required to bear the Private Placement Legend. "Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (c) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant in Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant in Section 4.09, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Consolidated Leverage Ratio test set forth in the first paragraph of Section 4.09, calculated on a pro forma basis as if such designation had 13 occurred at the end of the applicable fiscal quarter, and (ii) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Warehouse Facility" means any funding arrangement with a financial institution or other lender or purchaser to the extent (and only to the extent) funding thereunder is used exclusively to finance or refinance the purchase or origination of Receivables by the Company or a Restricted Subsidiary of the Company for the purpose of (i) pooling such Receivables prior to Securitization or (ii) sale, in each case in the ordinary course of business, including Purchase Facilities. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly-Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Restricted Subsidiaries of such Person. Section 1.02. Other Definitions. Defined in Term Section "Affiliate Transaction"........... 4.11 "Asset Sale Offer"................ 3.09 "Change of Control Offer"......... 4.15 "Change of Control Payment"....... 4.15 "Change of Control Payment Date".. 4.15 "Covenant Defeasance"............. 8.03 "DTC"............................. 2.03 "Event of Default"................ 6.01 "Excess Proceeds"................. 4.10 "incur"........................... 4.09 "insolvent"....................... 10.05 "Legal Defeasance"................ 8.02 "Offer Amount".................... 3.09 "Offer Period".................... 3.09 "Paying Agent".................... 2.03 "Permitted Debt".................. 4.09 "Purchase Date"................... 3.09 "Registrar"....................... 2.03 14 "Restricted Payments"............. 4.07 Section 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; "obligor" on the Notes means the Company and any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. 15 ARTICLE 2 THE NOTES Section 2.01. Form and Dating. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may be issued in the form of Definitive Notes or Global Notes, as specified by the Company. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the text referred to in footnote 1 and 2 thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without including the text referred to in footnote 1 and 2 thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. Section 2.02. Execution and Authentication. Two Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers, authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. Notes to be so issued shall be either Definitive Notes or Global Notes, as specified by the Company in such order. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this 16 Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. Section 2.04. Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA (S) 312(a). Section 2.06. Transfer and Exchange. (a) Transfer and Exchange of Definitive Notes. When Definitive Notes are presented by a Holder to the Registrar with a request: 17 (x) to register the transfer of the Definitive Notes; or (y) to exchange such Definitive Notes for an equal principal amount of Definitive Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met; provided, however, that the Definitive Notes presented or surrendered for register of transfer or exchange: (i) shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing; and (ii) in the case of a Definitive Note that is a Transfer Restricted Security, such request shall be accompanied by the following additional information and documents, as applicable: (A) if such Transfer Restricted Security is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto); or (B) if such Transfer Restricted Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 or Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto); or (C) if such Transfer Restricted Security is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B hereto) and an Opinion of Counsel from such Holder or the transferee reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act. (b) Transfer of a Definitive Note for a Beneficial Interest in a Global Note. A Definitive Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (i) if such Definitive Note is a Transfer Restricted Security, a certification from the Holder thereof (in substantially the form of Exhibit B hereto) to the effect that such Definitive Note is being transferred by such Holder to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act; and 18 (ii) whether or not such Definitive Note is a Transfer Restricted Security, written instructions from the Holder thereof directing the Trustee to make, or to direct the Note Custodian to make, an endorsement on the Global Note to reflect an increase in the aggregate principal amount of the Notes represented by the Global Note, in which case the Trustee shall cancel such Definitive Note in accordance with Section 2.11 hereof and cause, or direct the Note Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Note Custodian, the aggregate principal amount of Notes represented by the Global Note to be increased accordingly. If no Global Notes are then outstanding, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate a new Global Note in the appropriate principal amount. (c) Transfer and Exchange of Global Notes. The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture and the procedures of the Depository therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. (d) Transfer of a Beneficial Interest in a Global Note for a Definitive Note. (i) Any Person having a beneficial interest in a Global Note may upon request exchange such beneficial interest for a Definitive Note. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depository, from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Note, and, in the case of a Transfer Restricted Security, the following additional information and documents (all of which may be submitted by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification to that effect from such Person (in substantially the form of Exhibit B hereto); or (B) if such beneficial interest is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 or Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B hereto); or (C) if such beneficial interest is being transferred in reliance on another exemption from the registration requirements of the Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B hereto) and an Opinion of Counsel from the transferee or transferor reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act, in which case the Trustee or the Note Custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Depository and the Note Custodian, cause the aggregate principal amount of Global Notes to be 19 reduced accordingly and, following such reduction, the Company shall execute and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate and deliver to the transferee a Definitive Note in the appropriate principal amount. (ii) Definitive Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.06(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. (e) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding any other provision of this Indenture (other than the provisions set forth in subsection (f) of this Section 2.06), a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) Authentication of Definitive Notes in Absence of Depository. If at any time: (i) the Depository for the Notes notifies the Company that the Depository is unwilling or unable to continue as Depository for the Global Notes and a successor Depository for the Global Notes is not appointed by the Company within 90 days after delivery of such notice; or (ii) the Company, at its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Notes under this Indenture, then the Company shall execute, and the Trustee shall, upon receipt of an authentication order in accordance with Section 2.02 hereof, authenticate and deliver, Definitive Notes in an aggregate principal amount equal to the principal amount of the Global Notes in exchange for such Global Notes. (g) Legends. The following legend shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraphs (ii) and (iii) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED 20 HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY, OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Note that does not bear the first legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security represented by a Global Note, such Transfer Restricted Security shall not be required to bear the first legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.06(c) hereof; provided, however, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Note for a Definitive Note that does not bear the first legend set forth in (i) above, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form of Exhibit B hereto). (iii) Notwithstanding the foregoing, upon consummation of the Exchange Offer, the Company shall issue and, upon receipt of an authentication order in accordance with Section 2.02 hereof, the Trustee shall authenticate Series D Notes in exchange for Series C Notes accepted for exchange in the Exchange Offer, which Series D Notes shall not bear the legend set forth in (i) above, and the Registrar shall rescind any restriction on the transfer of such Notes, in each case unless the Holder of such Series C Notes is either (A) a broker- 21 dealer, (B) a Person participating in the distribution of the Series C Notes or (C) a Person who is an affiliate (as defined in Rule 144A) of the Company. (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in Global Notes have been exchanged for Definitive Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Definitive Notes, redeemed, repurchased or cancelled, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee or the Note Custodian, at the direction of the Trustee, to reflect such reduction. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Notes and Global Notes at the Registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.07, 4.10, 4.15 and 9.05 hereto). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Definitive Notes and Global Notes issued upon any registration of transfer or exchange of Definitive Notes or Global Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Definitive Notes or Global Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required: (A) to issue, to register the transfer of or to exchange Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection; or (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. 22 (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes, and neither the Trustee, any Agent nor the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Definitive Notes and Global Notes in accordance with the provisions of Section 2.02 hereof. Section 2.07. Replacement Notes. If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08. Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying 23 on any such direction, waiver or consent, only Notes that a Trustee knows are so owned shall be so disregarded. Section 2.10. Temporary Notes. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon a written order of the Company signed by two Officers of the Company. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (a) the clause of this Indenture pursuant to which the 24 redemption shall occur, (b) the redemption date, (c) the principal amount of Notes to be redeemed and (d) the redemption price. Section 3.02. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03. Notice of Redemption. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and 25 (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05. Deposit of Redemption Price. One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07. Optional Redemption. (a) Except as set forth in clause (b) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to February 1, 2001. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below: 26 YEAR PERCENTAGE ---- ---------- 2001.................................. 104.625% 2002.................................. 102.313% 2003 and thereafter................... 100.000% (b) Notwithstanding the provisions of clause (a) of this Section 3.07, at any time prior to February 1, 2000, the Company may on any one or more occasions redeem up to an aggregate of $16.67 million in principal amount of Notes at a redemption price of 109.25% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of a public offering of common stock of the Company; provided that at least $33.33 million in aggregate principal amount of Notes remain outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 45 days of the date of the closing of such public offering. Notwithstanding the provisions of clauses (a) and (b) of this Section 3.07, the Company shall not redeem any portion of the Original Notes unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Notes (rounded to the nearest integral multiple of $1,000) equal to the product of (1) a fraction, the numerator of which is the aggregate principal amount of Original Notes to be so redeemed and the denominator of which is the aggregate principal amount of Original Notes outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Notes outstanding immediately prior to such proposed redemption. The Company will also not be permitted to redeem any portion of the Notes unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Original Notes (rounded to the nearest integral multiple $1,000) equal to the product of (1) a fraction, the numerator of which is the aggregate principal amount of Notes outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Original Notes outstanding immediately prior to such proposed redemption. (c) Any redemption of Notes pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08. Mandatory Redemption. Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall not be required to make mandatory redemption payments with respect to the Notes. Section 3.09. Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes 27 tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depository, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depository or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). 28 On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depository or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4 COVENANTS Section 4.01. Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. 29 The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. Section 4.03. Reports. (a) Whether or not the Company is required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10- K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries (showing in reasonable detail, either on the face of the financial statements or in the footnotes thereto and in Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separately from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company) and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information and reports with the SEC for public availability (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (b) For so long as any Notes remain outstanding, the Company and the Subsidiary Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04. Compliance Certificate. (a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. 30 (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05. Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06. Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07. Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly-Owned Restricted Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being 31 collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Subsidiaries after February 4, 1997 (excluding Restricted Payments permitted by clause (ii) of the next succeeding paragraph), is less than the sum of (i) 25% of the aggregate cumulative Consolidated Net Income of the Company for the period (taken as one accounting period) from and after March 31, 1997 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since February 4, 1997 of Equity Interests of the Company (other than Disqualified Stock) or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after February 4, 1997 is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment. The foregoing provisions shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; and (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement in effect as of the date of this Indenture; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $250,000 in any twelve-month period and no Default or Event of Default shall have occurred and be continuing immediately after such transaction. The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation would not cause a Default; provided that in no event shall the business currently operated by AmeriCredit Financial Services, Inc. be transferred to or held by an Unrestricted 32 Subsidiary. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted Payments at the time of such designation and shall reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments shall be deemed to constitute Investments in an amount equal to the greater of (y) the net book value of such Investments at the time of such designation or (z) the fair market value of such Investments at the time of such designation. Such designation shall only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors of the Company whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $10.0 million. Not later than 15 days after the end of any fiscal quarter during which any Restricted Payment is made, the Company shall deliver to the Trustee an Officers' Certificate stating that all Restricted Payments made during such fiscal quarter were permitted and setting forth the basis upon which the calculations required by this Section 4.07 hereof were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) this Indenture and the Notes, (b) applicable law, (c) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (d) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (e) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (f) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, (g) the requirements of any Securitization that are exclusively applicable to any bankruptcy remote special purpose Restricted Subsidiary of the Company formed in connection therewith, (h) the requirements of any Credit Enhancement Agreement or (i) in the case of clause (iii) above, restrictions contained in security agreements securing Indebtedness of Guarantors relating to the properties or assets of Guarantors subject to the Liens created thereby, provided that such Liens were otherwise permitted to be incurred under this Indenture. 33 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and the Company shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of preferred stock; provided, however, that the Company and the Guarantors may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock or preferred stock if the Consolidated Leverage Ratio of the Company, calculated on a pro forma basis after giving effect to the incurrence or issuance of the additional Indebtedness to be incurred or the Disqualified Stock or preferred stock to be issued, would have been less than 2.0 to 1. The provisions of the first paragraph of this covenant shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the existence of Credit Facilities and the Guarantees thereof by the Guarantors and the incurrence by the Company and/or any of the Guarantors of revolving credit Indebtedness pursuant to one or more Credit Facilities the proceeds of which are applied to purchase or originate Receivables; provided that the aggregate principal amount of all revolving credit Indebtedness outstanding under all Credit Facilities after giving effect to such incurrence, including all Permitted Refinancing Indebtedness incurred to refund, refinance, defease, renew or replace any Indebtedness incurred pursuant to this clause (i) and with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder, does not at any time exceed the amount of the Borrowing Base (any such outstanding Indebtedness that exceeds the amount of the Borrowing Base as of the close of any Business Day shall cease to be Permitted Debt pursuant to this clause (i) as of the close of business on the third Business Day thereafter and shall be deemed to be an incurrence of such Indebtedness that is not permitted by this clause (i) by the Company or such Guarantor, as applicable, as of such third Business Day); (ii) the existence of Warehouse Facilities, regardless of amount, and the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Warehouse Debt in an aggregate principal amount at any time outstanding (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed 100% of the aggregate principal amount (exclusive of Acquisition Fees included therein) of all Eligible Receivables owned by the Company and its Restricted Subsidiaries (or such Warehouse Facilities in the case of Permitted Warehouse Debt in the form of repurchase agreements) at such time; (iii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iv) the incurrence by the Company of Indebtedness represented by the Original Notes and the Notes and the incurrence by the Guarantors of the Original Guarantees and the Subsidiary Guarantees; (v) obligations of the Company and its Restricted Subsidiaries under Credit Enhancement Agreements; (vi) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance, defease, renew 34 or replace any Indebtedness (other than Permitted Warehouse Debt or intercompany Indebtedness) that was permitted by this Indenture to be incurred; (vii) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of the Guarantors; provided, however, that (i) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Guarantor and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Guarantor shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (vii); (viii) the issuance by a Restricted Subsidiary of preferred stock to the Company or to any of the Guarantors; provided, however, that any subsequent event or issuance or transfer of any Capital Stock that results in the owner of such preferred stock ceasing to be a Guarantor of the Company or any subsequent transfer of such preferred stock to a Person other than the Company or any of the Guarantors, shall be deemed to be an issuance of preferred stock by such Restricted Subsidiary that was not permitted by this clause (viii); (ix) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred (y) for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or (z) for the purpose of hedging, fixing or capping interest rate risk in connection with any completed or pending Securitization; (x) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; (xi) the incurrence by the Company's Unrestricted Subsidiaries of Non- Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (xi); and (xii) the incurrence by the Company of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (xii), not to exceed $5.0 million. The Company shall not, and shall not permit any Restricted Subsidiary of the Company to, incur any Indebtedness that is contractually subordinated to any Indebtedness of the Company or any such Restricted Subsidiary unless such Indebtedness is also contractually subordinated to the Notes, or the Subsidiary Guarantee of such Restricted Subsidiary (as applicable), on substantially identical terms; provided, however, that no Indebtedness shall be deemed to be contractually subordinated to any other Indebtedness solely by virtue of being unsecured. 35 For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (xii) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness shall be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Section 4.10. Asset Sales. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors of the Company set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 85% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet), of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds (a) to permanently reduce Specified Senior Indebtedness of the Company and its Restricted Subsidiaries including the Original Notes; provided, however, that such Net Proceeds shall be applied to all Specified Senior Indebtedness of the Company and its Restricted Subsidiaries on a pro rata basis, or (b) to an Investment, the making of a capital expenditure or the acquisition of Receivables or other tangible assets, in each case, in or with respect to a Permitted Business. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Indebtedness under Credit Facilities and/or Warehouse Facilities or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph shall be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall be required to make an offer to all Holders of Original Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Original Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in this Indenture. To the extent that the aggregate amount of Original Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company will be required to make an offer to all Holders of Notes ("Secondary Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to a Secondary Asset Sale Offer is less than the remaining Excess Proceeds, the Company may use any remaining Excess Proceeds for general corporate purposes. If the aggregate principal amount of Original Notes or Notes surrendered by Holders thereof exceeds the amount of 36 Excess Proceeds, the Trustee shall select the Original Notes or Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. Section 4.11. Transactions with Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors of the Company set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; provided that (x) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary, (y) transactions between or among the Company and/or its Restricted Subsidiaries and (z) Restricted Payments that are permitted by Section 4.07 hereof, in each case, shall not be deemed Affiliate Transactions. Section 4.12. Liens. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. Section 4.13. Line of Business. The Company shall not, and shall not permit any or its Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole. Section 4.14. Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of 37 any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.15. Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Company shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"). The notice, which shall govern the terms of the Change of Control Offer, shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the amount of the Change of Control Payment and the Change of Control Payment Date, which date shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed; (3) that any Notes not tendered will continue to accrue interest in accordance with the terms of the Indenture; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have Securities purchased pursuant to the Change of Control Offer will be required to surrender their Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase, and a statement that such Holder is withdrawing its election to have such Notes purchased; (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof; and 38 (8) the circumstances and relevant facts regarding such Change of Control (including, but not limited to, if available, information which respect to pro forma historical and projected financial information after giving effect to such Change of Control, information regarding the Person or Persons acquiring control and such Person's or Persons' business plans going forward). The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Section 4.16. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Subsidiaries. The Company (i) shall not, and shall not permit any Wholly-Owned Restricted Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of any Wholly-Owned Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly-Owned Restricted Subsidiary of the Company that is a Guarantor), unless (a) such transfer, conveyance, sale, lease or other disposition is of all the Capital Stock of such Wholly-Owned Restricted Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 4.10 hereof, and (ii) shall not permit any Wholly-Owned Restricted Subsidiary of the Company to issue any of its Equity Interests (other than, if necessary, shares of its Capital Stock constituting directors' qualifying shares) to any Person other than to the Company or a Wholly-Owned Restricted Subsidiary of the Company. Section 4.17. Payments for Consent. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. 39 Section 4.18. Limitation on Investment Company Status. The Company and its Subsidiaries shall not take any action, or otherwise permit to exist any circumstance, that would require the Company to register as an "investment company" under the Investment Company Act of 1940, as amended. Section 4.19. Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries shall acquire or create another Subsidiary after the date of this Indenture, then such newly acquired or created Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the terms of this Indenture; provided, that the foregoing shall not apply to Subsidiaries that (i) have properly been designated as Unrestricted Subsidiaries in accordance with this Indenture for so long as they continue to constitute Unrestricted Subsidiaries or (ii) qualify as Securitization Trusts for so long as they continue to constitute Securitization Trusts. ARTICLE 5 SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately before and after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly-Owned Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the end of the applicable fiscal quarter, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in the first paragraph of Section 4.09 hereof. Section 5.02. Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which 40 such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all or substantially all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01. Events of Default. Each of the following constitutes an "Event of Default:" (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by the Company or any of its Subsidiaries to comply with its obligations in the covenants or other agreements contained in Sections 4.08, 4.09, 4.10 or 4.15 hereof; (iv) failure by the Company or any of its Subsidiaries for 30 days after notice from the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding to comply with any of the other covenants or agreements in this Indenture; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, which default: (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"), or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $2.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; 41 (vii) any Subsidiary Guarantee shall be held in an judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting in behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) the Company or any of its Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is not paying its debts as they become due; or (ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any of its Subsidiaries in an involuntary case; (b) appoints a custodian of the Company or any of its Subsidiaries or for all or substantially all of the property of the Company or any of its Subsidiaries; or (c) orders the liquidation of the Company or any of its Subsidiaries; and the order or decree remains unstayed and in effect for 60 consecutive days; or The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under this Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. Section 6.02. Acceleration. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under clauses (viii) and (ix) of Section 6.01 hereof with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes shall become due and payable without further action or notice. Holders of the Notes shall not enforce this Indenture or the Notes except as provided in this Indenture. Subject to the limitations set forth in this Indenture, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. 42 In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of this Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to February 1, 2001 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to February 1, 2001, then the premium specified in below shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. YEAR PERCENTAGE ---- ---------- 1997....................................... 116.190% 1998....................................... 113.877% 1999....................................... 111.564% 2000....................................... 109.251% 2001....................................... 106.938% Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04. Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on, the Notes (including in connection with an offer to purchase) (provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05. Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any 43 trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06. Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07. Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(i) or (ii) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders 44 of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and, the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any, and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. 45 ARTICLE 7 TRUSTEE Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holders shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. 46 Section 7.02. Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expenses that might be incurred by it in compliance with such request or direction. Section 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. 47 Section 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06. Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA (S) 313(a) (but if no event described in TIA (S) 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA (S) 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA (S) 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. 48 To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the extent applicable. Section 7.08. Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The 49 successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10. Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b). Section 7.11. Preferential Collection of Claims Against Company. The Trustee is subject to TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02. Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other 50 obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03. Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15 and 4.16 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(iv) through 6.01(ix) hereof shall not constitute Events of Default. Section 8.04. Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non- callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and Liquidated Damages, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee 51 confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(viii) or 6.01(ix) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; and (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the 52 Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06. Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. 53 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's obligations to the Holders of the Notes in the case of a merger or consolidation pursuant to Article 5 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Notes; or (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02. With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15 hereof) and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the 54 Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note other than a payment required by Sections 3.09, 4.10 and 4.15; or (h) make any change in the foregoing amendment and waiver provisions. Section 9.03. Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. 55 Section 9.04. Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05. Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBSIDIARY GUARANTEES Section 10.01. Subsidiary Guarantees. Each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the Obligations of the Company hereunder or thereunder, that: (a) the principal of and interest and Liquidated Damages, if any, on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption, repurchase or otherwise, and interest on the overdue principal of and interest and Liquidated Damages, if any, on the Notes, if lawful, and all other Obligations of the Company to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, redemption, repurchase or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally 56 obligated to pay the same immediately. The Guarantors hereby agree that their Obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee shall not be discharged except by complete performance of the Obligations contained in the Notes and this Indenture. If any Holder of Notes or the Trustee is required by any court or otherwise to return to the Company or Guarantors, or any custodian, Trustee, liquidator or other similar official acting in relation to either the Company or Guarantors, any amount paid either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders of Notes in respect of any Obligations guaranteed hereby until payment in full of all Obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby and (y) in the event of any declaration of acceleration of such Obligations as provided in Article 6 hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantees. Section 10.02. Execution and Delivery of Subsidiary Guarantees. To evidence its Subsidiary Guarantee set forth in Section 10.01 hereof, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit C (executed by the manual or facsimile signature of one of its Officers) shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by an Officer of such Guarantor. Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 10.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. Section 10.03. Guarantors May Consolidate, etc., on Certain Terms. (a) Except as set forth in Articles 4 and 5 hereof, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another 57 Guarantor or shall prevent any sale or conveyance of the property of a Guarantor, as an entirety or substantially as an entirety, to the Company. (b) Except as provided in Section 10.03(a) hereof or in a transaction referred to in Section 10.04 hereof, no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another corporation, Person or entity unless: (i) subject to the provisions of Section 10.04 hereof, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) shall assume all the Obligations of such Guarantor pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes and this Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; (iii) such Guarantor, or any Person formed by or surviving and such consolidation or merger, would have a Consolidated Net Worth (immediately after giving effect to such transaction) equal to or greater than the Consolidated Net Worth of such Guarantor immediately prior to such transaction; and (iv) the Company would be permitted by virtue of the Company's pro forma Consolidated Leverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to Section 4.09 hereof. Subject to Section 10.04 hereof, in case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Section 10.04. Releases Following Sale of Assets. Concurrently with any sale of assets of any Guarantor (including, if applicable, all of the Capital Stock of any Guarantor), any Liens in favor of the Trustee in the assets sold thereby shall be released; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 hereof. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor in accordance with the provisions of this Indenture) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Guarantor), shall be released and relieved of its Obligations under its Subsidiary Guarantee and Section 10.03 hereof; provided that in the event of an Asset Sale, the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including, without limitation, Section 4.10 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its Obligations under its Subsidiary Guarantee. Any Guarantor not released from its Obligations under its Subsidiary Guarantee shall remain liable for the full 58 amount of principal of and interest and Liquidated Damages, if any, on the Notes and for the other Obligations of any Guarantor under this Indenture as provided in this Article 10. The release of any Guarantor pursuant to this Section 10.04 shall be effective whether or not such release shall be noted on any Note then outstanding or thereafter authenticated and delivered. Section 10.05. Limitation on Guarantor Liability. For purposes hereof, each Guarantor's liability shall be that amount from time to time equal to the aggregate liability of such Guarantor thereunder, but shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and this Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the federal Bankruptcy Law and in the debtor and creditor law of the State of New York) or (B) left it with unreasonably small capital at the time its Subsidiary Guarantee was entered into, after giving effect to the incurrence of existing Indebtedness immediately prior to such time; provided that, it shall be a presumption in any lawsuit or other proceeding in which such Guarantor is a party that the amount guaranteed pursuant to its Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that the aggregate liability of such Guarantor is limited to the amount set forth in clause (ii). In making any determination as to the solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantor to contribution from other Guarantors and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account. Section 10.06. "Trustee" to Include Paying Agent. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article 10 shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully and for all intents and purposes as if such Paying Agent were named in this Article 10 in place of the Trustee. ARTICLE 11 MISCELLANEOUS Section 11.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA (S)318(c), the imposed duties shall control. Section 11.02. Notices. Any notice or communication by the Company or the Trustee to the others is duly given if in writing and delivered in person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: 59 If to the Company or any Guarantor: AmeriCredit Corp. 200 Bailey Avenue Fort Worth, TX 76107 Telecopier No.: (817) 882-7101 Attention: Chief Financial Officer With a copy to: Jenkens & Gilchrist, P.C. 1445 Ross Avenue, Suite 3200 Dallas, TX 75202 Telecopier No.: (214) 855-4300 Attention: L. Steven Leshin If to the Trustee: Bank One, N.A. c/o Banc One Trust Company, NA 100 East Broad Street, 8th Floor Columbus, OH 43215 Telecopier No.: (614) 248-5195 Attention: John Beacham The Company or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA (S) 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. 60 Section 11.03. Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA (S) 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (S) 312(c). Section 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S) 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 11.06. Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. 61 Section 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 11.08. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES. Section 11.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 11.10. Successors. All agreements of the Company and each Guarantor in this Indenture and the Notes shall bind their respective successors, except as expressly provided otherwise herein. All agreements of the Trustee in this Indenture shall bind its successors. Section 11.11. Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 11.12. Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 11.13. Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [signature page follows] 62 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. AmeriCredit Corp. AmeriCredit Premium Finance, Inc. By By ----------------------------------- ------------------------------------- Daniel E. Berce Daniel E. Berce Vice Chairman and Chief Financial President, Chief Financial Officer Officer and Treasurer AmeriCredit Financial Services, Inc. Americredit Corporation of California By By ----------------------------------- ------------------------------------- Daniel E. Berce Daniel E. Berce Vice Chairman and Chief Financial Vice Chairman and Chief Financial Officer Officer AmeriCredit Operating Co., Inc. ACF Investment Corp. By By ----------------------------------- ------------------------------------- Daniel E. Berce Daniel E. Berce Vice Chairman and Chief Financial Vice Chairman and Chief Financial Officer Officer Bank One, N.A. By ----------------------------------- Name: Title: 63 EXHIBIT A (Face of Note) ================================================================================ CUSIP/CINS ____________ 9 1/4% [Series C] [Series D] Senior Notes due 2004 No. ___ $__________ AMERICREDIT CORP. promises to pay to _________________________________________________ or registered assigns, the principal sum of _______________________________________________ Dollars on February 1, 2004. Interest Payment Dates: August 1, and February 1 Record Dates: July 15, and January 15 Dated: _______________, 199__ AMERICREDIT CORP. By: -------------------------------- Name: Title: (SEAL) By: -------------------------------- Name: Title: (SEAL) This is one of the [Global] Notes referred to in the within-mentioned Indenture: Bank One, N.A. as Trustee By: ---------------------------- Name: Title: ================================================================================ A-1 (Back of Note) 9 1/4% [Series C] [Series D] Senior Notes due 2004 [Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]/1/ [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. Interest. AmeriCredit Corp., a Texas corporation (the "Company"), promises to pay interest on the principal amount of this Note at 9 1/4% per annum from and including January 29, 1998 until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages semi-annually on August 1 and February 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be August 1, 1998. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the July 15 or January 15 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Liquidated Damages, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to - --------------------- 1. This paragraph should be included only if the Note is issued in global form. A-2 principal of and interest, premium and Liquidated Damages on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts 3. Paying Agent and Registrar. Initially, Bank One, N.A., the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. Indenture. The Company issued the Notes under an Indenture dated as of January 29, 1998 ("Indenture") between the Company, the Guarantors named therein and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general unsecured obligations of the Company limited to $50 million in aggregate principal amount, plus amounts, if any, sufficient to pay interest, premium and Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof. 5. Optional Redemption. (a) Except as set forth in clause (b) of this Paragraph 5, the Company shall not have the option to redeem the Notes prior to February 1, 2001. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below: YEAR PERCENTAGE ---- ---------- 2001 .................................... 104.625% 2002 .................................... 102.313% 2003 and thereafter ..................... 100.000% (b) Notwithstanding the provisions of clause (a) of this paragraph 5, at any time prior to February 1, 2000, the Company may on any one or more occasions redeem up to an aggregate of $16.67 million in principal amount of Notes at a redemption price of 109.25% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date, with the net cash proceeds of a public offering of common stock of the Company; provided that at least $33.33 million in aggregate principal amount of Notes remain outstanding immediately after the occurrence of such redemption; and provided, further, that such redemption shall occur within 45 days of the date of the closing of such public offering. Notwithstanding the provisions of clauses (a) and (b) of this Paragraph 5, the Company shall not redeem any portion of the Original Notes unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Notes (rounded to the nearest integral multiple of $1,000) equal to the product of (1) a fraction, the numerator of which is the aggregate principal amount of Original Notes to be so redeemed and the denominator of which is the aggregate principal amount of Original Notes A-3 outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Notes outstanding immediately prior to such proposed redemption. The Company will also not be permitted to redeem any portion of the Notes unless, substantially concurrently with such redemption, the Company redeems an aggregate principal amount of Original Notes (rounded to the nearest integral multiple $1,000) equal to the product of (1) a fraction, the numerator of which is the aggregate principal amount of Notes outstanding immediately prior to such proposed redemption, and (2) the aggregate principal amount of Original Notes outstanding immediately prior to such proposed redemption. 6. Mandatory Redemption. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. Repurchase at Option of Holder. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. Within 10 days following any Change of Control, the Company shall mail a notice to each Holder as required by the Indenture. (b) If the Company or a Subsidiary consummates any Asset Sales and the aggregate amount of Excess Proceeds exceeds $10 million, the Company shall commence an offer to all Holders of Original Notes (an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Original Notes that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Original Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company will be required to make an offer to all Holders of Notes ("Secondary Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes tendered pursuant to a Secondary Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Original Notes or Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Original Notes or Notes to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. (c) The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, A-4 unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. 11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 12. Defaults and Remedies. Each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes; (ii) default in payment when due of the principal of or premium, if any, on the Notes; (iii) failure by the Company or any of its Subsidiaries to comply with its obligations under covenants and agreements set forth in Sections 4.08, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 30 days after notice from the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding to comply with any of the other covenants or agreements in the Indenture; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $2.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in an judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting in behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Subsidiaries. If any Event of Default occurs and is A-5 continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. No Recourse Against Others. A director, officer, employee, incorporator or stockholder, of the Company, as such, shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. Additional Rights of Holders of Transfer Restricted Securities. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transferred Restricted Securities shall have all the rights set forth in the C/D Exchange Registration Rights Agreement dated as of January 29, 1998, between the Company, the Guarantors and the other parties named on the signature pages thereof (the "Registration Rights Agreement"). 18. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: A-6 AmeriCredit Corp. 200 Bailey Avenue Fort Worth, TX 76107 Attention: Chief Financial Officer A-7 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint -------------------------------------------------------- to transfer this Note on the books of the Company. The agent may substitute another to act for him. - ------------------------------------------------------------------------------- Date: --------------------- Your Signature: ------------------------------------------- (Sign exactly as your name appears on the face of this Note) Signature Guarantee. A-8 Option of Holder to Elect Purchase If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $___________ Date: Your Signature: --------------------- ----------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ----------------------------------- Signature Guarantee. A-9 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE/2/ The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of Signature of Amount of decrease in Amount of increase in this Global Note authorized officer of Principal Amount of Principal Amount of following such decrease Trustee or Note Date of Exchange this Global Note this Global Note (or increase) Custodian - ----------------- --------------------- --------------------- ------------------------ ---------------------
- ---------------------- 2. This should be included only if the Note is issued in global form. A-10 EXHIBIT B CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES Re: 9 1/4% Senior Notes due 2004 of AmeriCredit Corp. This Certificate relates to $_____ principal amount of Notes held in * ________ book-entry or *_______ definitive form by ________________ (the "Transferor"). The Transferor*: [ ] has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Note held by the Depository a Note or Notes in definitive, registered form of authorized denominations in an aggregate principal amount equal to its beneficial interest in such Global Note (or the portion thereof indicated above); or [ ] has requested the Trustee by written order to exchange or register the transfer of a Note or Notes. In connection with such request and in respect of each such Note, the Transferor does hereby certify that Transferor is familiar with the Indenture relating to the above captioned Notes and as provided in Section 2.06 of such Indenture, the transfer of this Note does not require registration under the Securities Act (as defined below) because:* [ ] Such Note is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of the Indenture). [ ] Such Note is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section 2.06(a)(ii)(B), Section 2.06(b)(A) or Section 2.06(d)(i) (B) of the Indenture) or pursuant to an exemption from registration in accordance with Rule 904 under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the Indenture.) _______________ *Check applicable box. B-1 [ ] Such Note is being transferred in accordance with Rule 144 under the Securities Act, or pursuant to an effective registration statement under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the Indenture). [ ] Such Note is being transferred in reliance on and in compliance with an exemption from the registration requirements of the Securities Act, other than Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of Counsel to the effect that such transfer does not require registration under the Securities Act accompanies this Certificate (in satisfaction of Section 2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the Indenture). ------------------------------------- [INSERT NAME OF TRANSFEROR] By: --------------------------------- Date: ----------------------------- _______________ *Check applicable box. B-2 EXHIBIT C SUBSIDIARY GUARANTEE Each Guarantor hereby, jointly and severally, unconditionally guarantees to each Holder of Notes authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the Obligations of the Company to the Holders or the Trustee under the Notes or under the Indenture, that: (a) the principal of, and premium and Liquidated Damages, if any, and interest on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption, repurchase or otherwise, and interest on overdue principal of interest and Liquidated Damages if any, on any Note, if any, if lawful and all other Obligations of the Company to the Holders or the Trustee under the Indenture or under the Notes shall be promptly paid in full or performed, all in accordance with the terms thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. The Obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Subsidiary Guarantee. The terms of Article 10 of the Indenture are incorporated herein by reference. No director, officer, employee, incorporator or stockholder, as such, past, present or future, of each of the Guarantors shall have any personal liability under this Subsidiary Guarantee by reason of its status as such director, officer, employee incorporator or stockholder. This is a continuing Subsidiary Guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders of Notes and, in the event of any transfer or assignment of rights by any Holder of Notes or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. In certain circumstances more fully described in the Indenture, any Guarantor may be released from its liability under this Subsidiary Guarantee, and any such release will be effective whether or not noted hereon. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. For purposes hereof, each Guarantor's liability will be that amount from time to time equal to the aggregate liability of such Guarantor hereunder, but shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Notes and the Indenture and (ii) the amount, if any, which would not have (A) rendered such Guarantor "insolvent" (as such term is defined in the federal Bankruptcy Law and in the debtor and creditor law of the State of New York) or (B) left it with unreasonably small capital at the time its Subsidiary Guarantee of the Notes was entered into, after giving effect to the incurrence of existing Indebtedness immediately prior to such time; provided that, it shall be a presumption in any lawsuit or other C-1 proceeding in which such Guarantor is a party that the amount guaranteed pursuant to its Subsidiary Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that the aggregate liability of such Guarantor is limited to the amount set forth in clause (ii). The Indenture provides that, in making any determination as to the solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantor to contribution from other Guarantors and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. AmeriCredit Premium Finance, Inc. By________________________________________________ Daniel E. Berce President, Chief Financial Officer and Treasurer AmeriCredit Financial Services, Inc. Americredit Corporation of California By________________________________ By_________________________________ Daniel E. Berce Daniel E. Berce Vice Chairman and Chief Financial Vice Chairman and Chief Financial Officer Officer AmeriCredit Operating Co., Inc. ACF Investment Corp. By________________________________ By_________________________________ Daniel E. Berce Daniel E. Berce Vice Chairman and Chief Financial Vice Chairman and Chief Financial Officer Officer C-2 EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF SUBSIDIARY GUARANTEE EX-10.25 4 PURCHASE AGREEMENT L&W DRAFT - JANUARY 26,1998 SALOMON SMITH BARNEY - AMERICREDIT ---------------------------------- $50,000,000 AMERICREDIT CORP. 9 1/4% SENIOR NOTES DUE 2004 PURCHASE AGREEMENT ------------------ JANUARY 26, 1998 SALOMON BROTHERS INC CREDIT SUISSE FIRST BOSTON CORPORATION C/O SALOMON BROTHERS INC Seven World Trade Center New York, New York 10048 Dear Sirs: AmeriCredit Corp., a Texas corporation (the "Company"), proposes, upon the terms and conditions set forth herein, to issue and sell to you, as the initial purchasers (the "Initial Purchasers"), $50,000,000 in aggregate principal amount of its 9 1/4% Series C Senior Notes due 2004 (the "Series C Notes"). The Company's obligations under the Series C Notes, including the due and punctual payment of principal and interest on the Series C Notes, will be unconditionally guaranteed (the "Series C Subsidiary Guarantees") by each of AmeriCredit Financial Services, Inc., a Delaware corporation, AmeriCredit Operating Co., Inc., a Delaware corporation, ACF Investment Corp., a Delaware corporation, AmeriCredit Premium Finance, Inc., a Delaware corporation, and Americredit Corporation of California, a California corporation (collectively the "Guarantors"). As used herein, the term "Series C Notes" shall include the Series C Subsidiary Guarantees thereof by the Guarantors, unless the context otherwise requires. The Guarantors and AmeriCredit Receivables Finance Corp., a Delaware corporation, AmeriCredit Receivables Finance Corp. 1995-A, a Delaware corporation, AFS Funding Corp., a Nevada corporation, and CP Funding Corp., a Nevada corporation, are collectively referred to herein as the "Subsidiaries." The Series C Notes will (i) have the terms and provisions which are summarized in the Offering Memorandum (as defined herein), (ii) be in the forms specified by the Initial Purchasers pursuant to Section 3 hereof, and (iii) be issued pursuant to the provisions of an Indenture, to be dated as of January 29, 1998 (the "Indenture"), between the Company, the Guarantors and Bank One, N.A., as Trustee (the "Trustee"). The Company and the Guarantors wish to confirm as follows their agreement with you the Initial Purchasers in connection with the purchase and resale of the Series C Notes. 1. Preliminary Offering Memorandum and Offering Memorandum. The Series C Notes will be offered and sold to the Initial Purchasers without registration under the Securities Act of 1933, as amended (the "Act"), in reliance on an exemption pursuant to Section 4(2) under the Act. The Company and the Guarantors have prepared a preliminary offering memorandum, dated January 22, 1998 (the "Preliminary Offering Memorandum"), and an offering memorandum, dated January 26, 1998 (the "Offering Memorandum"), setting forth information regarding the Company, the Guarantors, the Series C Notes and the Series D Notes (as defined herein). Any references herein to the Preliminary Offering Memorandum and the Offering Memorandum shall be deemed to include all amendments and supplements thereto. The Company and the Guarantors hereby confirm that they have authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Series C Notes by the Initial Purchasers. The Company and the Guarantors understand that the Initial Purchasers propose to make offers (the "Exempt Resales") of the Series C Notes purchased by the Initial Purchasers hereunder only on the terms set forth in the Offering Memorandum, and Section 2 hereof, as soon as the Initial Purchasers deem advisable after this Agreement has been executed and delivered, solely to persons whom the Initial Purchasers reasonably believe to be "qualified institutional buyers" as defined in Rule 144A under the Act (referred to herein as "QIBs" or "Eligible Purchasers"). It is understood and acknowledged that upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Act, the Series C Notes (and all securities issued in exchange therefor, in substitution thereof) shall bear the following legend: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY, OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." 2 It is also understood and acknowledged that holders (including subsequent transferees) of the Series C Notes will have the registration rights set forth in the registration rights agreement (the "Registration Rights Agreement"), to be dated the Closing Date, in substantially the form of Exhibit A hereto, for so long as such Series C Notes constitute "Transfer Restricted Securities" (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company will agree to file with the Securities and Exchange Commission under the circumstances set forth therein, (i) a registration statement under the Act relating to the Company's 9 1/4% Series D Notes due 2004 (the "Series D Notes") and the guarantees thereof (the "Series D Subsidiary Guarantees") by the Guarantors to be offered in exchange for the Series C Notes (the "Registered Exchange Offer") and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Act relating to the resale by certain holders of the Series C Notes, and to use its best efforts to cause such registration statements to be declared effective. As used herein, the term "Series D Notes" shall include the Series D Subsidiary Guarantees thereof by the Guarantors, unless the context otherwise requires and the Series C Notes and the Series D Notes, are hereinafter referred to collectively as the "Notes." This Agreement, the Indenture, the Notes, the Series C Subsidiary Guarantees, the Series D Subsidiary Guarantees and the Registration Rights Agreement are hereinafter referred to collectively as the "Operative Documents." 2. Agreements to Sell, Purchase and Resell. (a) The Company and the Guarantors hereby agree, on the basis of the representations, warranties and agreements of the Initial Purchasers contained herein and subject to all the terms and conditions set forth herein, to issue and sell to the Initial Purchasers and, upon the basis of the representations, warranties and agreements of the Company and the Guarantors herein contained and subject to all the terms and conditions set forth herein, each Initial Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 96.124% of the principal amount thereof, the principal amount of Series C Notes set forth opposite the name of such Initial Purchaser in Schedule 1 hereto. The Company and the Guarantors shall not be obligated to deliver any of the securities to be delivered hereunder except upon payment for all of the securities to be purchased as provided herein. (b) Each of the Initial Purchasers hereby represents and warrants to the Company and the Guarantors that it will offer the Series C Notes for sale upon the terms and conditions set forth in this Agreement and in the Offering Memorandum. Each of the Initial Purchasers hereby represents and warrants to, and agrees with, the Company and the Guarantors that such Initial Purchaser (i) is either a QIB or an institutional "accredited investor," as defined in Rule 501(a)(1), (2), (3) and (7) under the Act, in either case with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Series C Notes; (ii) is purchasing the Series C Notes pursuant to a private sale exempt from registration under the Act; (iii) in connection with the Exempt Resales, will solicit offers to buy the Notes only from, and will offer to sell the Notes only to, the Eligible Purchasers in accordance with this Agreement and on the terms contemplated by the Offering Memorandum; and (iv) will not offer or sell the Notes, nor has it offered or sold the Notes by, or otherwise engaged in, any form of general solicitation or general advertising (within the meaning of Regulation D; including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) in connection with the offering of the Series C Notes. The Initial Purchasers have advised the Company that they will offer the Series C Notes to Eligible Purchasers at a price initially equal to 98.785% of the principal amount thereof, plus accrued interest, if any, from the date of issuance of the Series C Notes. Such price may be changed by the Initial Purchasers at any time thereafter without notice. Each of the Initial Purchasers understands that the Company and the Guarantors and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 7(d) and 7(g) hereof, counsel to the Company and counsel to the Initial Purchasers, will rely upon the accuracy and truth of the foregoing representations, warranties and agreements and the Initial Purchasers hereby consents to such reliance. 3 3. Delivery of the Series C Notes and Payment Therefor. Delivery to the Initial Purchasers of and payment for the Series C Notes shall be made at the office of Jenkens & Gilchrist, P.C., 1445 Ross Avenue, Dallas, TX, at 9:00 A.M., New York City time, on January 29, 1998 (the "Closing Date"). The place of closing for the Series C Notes and the Closing Date may be varied by agreement between the Initial Purchasers and the Company. The Series C Notes will be delivered to the Initial Purchasers against payment of the purchase price therefor in immediately available funds. The Series C Notes will be evidenced by a single global security in definitive form (the "Global Note") and/or by additional definitive securities, and will be registered, in the case of the Global Note, in the name of Cede & Co. as nominee of The Depository Trust Company ("DTC"), and in the other cases, in such names and in such denominations as the Initial Purchasers shall request prior to 9:30 A.M., New York City time, on the second business day preceding the Closing Date. The Series C Notes to be delivered to the Initial Purchasers shall be made available to the Initial Purchasers in New York City for inspection and packaging not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date. 4. Agreements of the Company and the Guarantors. The Company and the Guarantors jointly and severally agree with each Initial Purchaser as follows: (a) The Company and the Guarantors will furnish to the Initial Purchasers, without charge, as of the date of the Offering Memorandum, such number of copies of the Offering Memorandum as may then be amended or supplemented as they may reasonably request. (b) The Company and the Guarantors will not make any amendment or supplement to the Preliminary Offering Memorandum or to the Offering Memorandum of which the Initial Purchasers shall not previously have been advised or to which they shall reasonably object after being so advised. (c) Prior to the execution and delivery of this Agreement, the Company and the Guarantors shall have delivered or will deliver to the Initial Purchasers, without charge, in such quantities as the Initial Purchasers shall have requested or may hereafter reasonably request, copies of the Preliminary Offering Memorandum. The Company and each of the Guarantors consent to the use, in accordance with the securities or Blue Sky laws of the jurisdictions in which the Series C Notes are offered by the Initial Purchasers and by dealers, prior to the date of the Offering Memorandum, of each Preliminary Offering Memorandum so furnished by the Company and the Guarantors. The Company and each of the Guarantors consent to the use of the Offering Memorandum in accordance with the securities or Blue Sky laws of the jurisdictions in which the Series C Notes are offered by the Initial Purchasers and by all dealers to whom Series C Notes may be sold, in connection with the offering and sale of the Series C Notes. (d) If, at any time prior to completion of the distribution of the Series C Notes by the Initial Purchasers to Eligible Purchasers, any event shall occur that in the judgment of the Company, any of the Guarantors or in the opinion of counsel for the Initial Purchasers should be set forth in the Offering Memorandum in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Offering Memorandum in order to comply with any law, the Company and the Guarantors will forthwith prepare an appropriate supplement or amendment thereto or such document, and will expeditiously furnish to the Initial Purchasers and dealers a reasonable number of copies thereof. (e) The Company and each of the Guarantors will cooperate with the Initial Purchasers and with their counsel in connection with the qualification of the Series C Notes for offering and sale by the Initial Purchasers and by dealers under the securities or Blue Sky laws of such jurisdictions as the Initial 4 Purchasers may designate and will file such consents to service of process or other documents necessary or appropriate in order to effect such qualification; provided, that in no event shall the Company or any of the Guarantors be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to service of process in suits, other than those arising out of the offering or sale of the Series C Notes, in any jurisdiction where it is not now so subject. (f) So long as any of the Notes are outstanding, the Company and the Guarantors will furnish to the Initial Purchasers (i) as soon as available, a copy of each report of the Company mailed to stockholders generally or filed with any stock exchange or regulatory body and (ii) from time to time such other information concerning the Company and/or the Guarantors as the Initial Purchasers may reasonably request. (g) If this Agreement shall terminate or shall be terminated after execution and delivery pursuant to any provisions hereof (otherwise than by notice given by the Initial Purchasers terminating this Agreement pursuant to Section 10 hereof) or if this Agreement shall be terminated by the Initial Purchasers because of any failure or refusal on the part of the Company or any of the Guarantors to comply with the terms or fulfill any of the conditions of this Agreement, the Company and the Guarantors agree to reimburse the Initial Purchasers for all out-of-pocket expenses (including reasonable fees and expenses of its counsel) reasonably incurred by it in connection herewith, but without any further obligation on the part of the Company or any of the Guarantors for loss of profits or otherwise. (h) The Company and the Guarantors will apply the net proceeds from the sale of the Series C Notes to be sold by it hereunder substantially in accordance with the description set forth in the Offering Memorandum under the caption "Use of Proceeds." (i) Except as stated in this Agreement and in the Preliminary Offering Memorandum and Offering Memorandum, the Company and the Guarantors have not taken, nor will any of them take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Notes to facilitate the sale or resale of the Notes. Except as permitted by the Act, the Company and the Guarantors will not distribute any offering material in connection with the Exempt Resales. (j) The Company and the Guarantors will use their best efforts to permit the Notes to be designated Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. relating to trading in the PORTAL Market and to permit the Notes to be eligible for clearance and settlement through DTC. (k) From and after the Closing Date, so long as any of the Notes are outstanding and are "restricted securities" within the meaning of the Rule 144(a)(3) under the Act or, if earlier, until three years after the Closing Date, and during any period in which the Company is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company and the Guarantors will furnish to holders of the Notes and prospective purchasers of Notes designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Act to permit compliance with Rule 144A in connection with resale of the Notes. (l) The Company and the Guarantors have complied and will comply with all provisions of Florida Statutes Section 517.075 relating to issuers doing business with Cuba. (m) The Company and the Guarantors agree not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) that would be integrated with the 5 sale of the Series C Notes in a manner that would require the registration under the Act of the sale to the Initial Purchasers or the Eligible Purchasers of the Series C Notes. (n) The Company and the Guarantors agree to comply with all the terms and conditions of the Registration Rights Agreement and all agreements set forth in the representation letters of the Company and the Guarantors to DTC relating to the approval of the Notes by DTC for "book entry" transfer. (o) The Company and the Guarantors agree to cause the Exchange Offer, if available, to be made in the appropriate form, as contemplated by the Registration Rights Agreement, to permit registration of the Series D Notes to be offered in exchange for the Series C Notes, and to comply with all applicable federal and state securities laws in connection with the Registered Exchange Offer. (p) The Company and the Guarantors agree that prior to any registration of the Notes pursuant to the Registration Rights Agreement, or at such earlier time as may be required, the Indenture shall be qualified under the Trust Indenture Act of 1939 (the "1939 Act") and any necessary supplemental indentures will be entered into in connection therewith. (q) The Company and the Guarantors will not voluntarily claim, and will resist actively all attempts to claim, the benefit of any usury laws against holders of the Notes. (r) The Company and the Guarantors will do and perform all things required or necessary to be done and performed under this Agreement by them prior to the Closing Date, and to satisfy all conditions precedent to the Initial Purchasers' obligations hereunder to purchase the Series C Notes. 5. Representations and Warranties of the Company and each of the Guarantors. The Company and each of the Guarantors, represent and warrant to each of the Initial Purchasers that: (a) The Preliminary Offering Memorandum and Offering Memorandum with respect to the Series C Notes have been prepared by the Company and the Guarantors for use by the Initial Purchasers in connection with the Exempt Resales. No order or decree preventing the use of the Preliminary Offering Memorandum or the Offering Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Act has been issued and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company or any of the Guarantors, is contemplated. (b) The Preliminary Offering Memorandum and the Offering Memorandum as of their respective dates and the Offering Memorandum as of the Closing Date, did not or will not at any time contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except that this representation and warranty does not apply to statements in or omissions from the Preliminary Offering Memorandum and Offering Memorandum made in reliance upon and in conformity with information relating to the Initial Purchasers furnished to the Company in writing by or on behalf of the Initial Purchasers expressly for use therein. (c) The market-related and customer-related data and estimates included under the captions "Offering Memorandum Summary-The Company" and "Business-Market and Competition" in the Preliminary Offering Memorandum and the Offering Memorandum are based on or derived from sources which the Company believes to be reliable and accurate. (d) The Indenture has been duly and validly authorized by the Company and the 6 Guarantors, and upon its execution and delivery and, assuming due authorization, execution and delivery by the Trustee, will constitute the valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, subject to the qualification that the enforceability of the Company's and the Guarantors' obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; no qualification of the Indenture under the 1939 Act is required in connection with the offer and sale of the Series C Notes contemplated hereby or in connection with the Exempt Resales. (e) The Series C Notes have been duly and validly authorized by the Company and when duly executed by the Company in accordance with the terms of the Indenture and, assuming due authentication of the Series C Notes by the Trustee, upon delivery to the Initial Purchasers against payment therefor in accordance with the terms hereof, will have been validly issued and delivered, and will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, subject to the qualification that the enforceability of the Company's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles. (f) The Series D Notes have been duly and validly authorized by the Company and if and when duly issued and authenticated in accordance with the terms of the Indenture and delivered in accordance with the Exchange Offer provided for in the Registration Rights Agreement, will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, subject to the qualification that the enforceability of the Company's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles. (g) The Series C Subsidiary Guarantees have been duly and validly authorized by the Guarantors and when duly executed and delivered by the Guarantors in accordance with the terms of the Indenture and upon the due execution, authentication and delivery of the Series C Notes in accordance with the Indenture and the issuance of the Series C Notes in the sale to the Initial Purchasers contemplated by this Agreement, will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, subject to the qualification that the enforceability of the Guarantors' obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles. (h) The Series D Subsidiary Guarantees have been duly and validly authorized by the Guarantors and if and when duly executed and delivered by the Guarantors in accordance with the terms of the Indenture and upon the due execution and authentication of the Series D Notes in accordance with the Indenture and the issuance and delivery of the Series D Notes in the Exchange Offer contemplated by the Registration Rights Agreement, will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, subject to the qualification that the enforceability of the Guarantors' obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles. (i) The Company, AmeriCredit Financial Services, Inc., AmeriCredit Operating Co., Inc., AmeriCredit Premium Finance, Inc. and ACF Investment Corp. (collectively the "Borrowers"), have entered into an agreement (the "Credit Agreement Amendment"), dated as of January 21, 1998, with Wells Fargo Bank (Texas), National Association and certain other banks named therein. The Credit Agreement Amendment became effective on January 21, 1998 and amended Section 9.11 of the credit agreement (the "Credit 7 Agreement"), dated as of October 3, 1997, by and among the Borrowers and Wells Fargo Bank (Texas), National Association and certain other banks named therein, to clarify that the Credit Agreement does not prohibit or conflict with any grant of negative pledge in the Indenture or any of the other Operative Documents. Americredit Corporation of California received a letter (the "Mortgage Subsidiary Credit Agreement Waiver"), dated as of January 21, 1998, from Texas Commerce Bank National Association. The Mortgage Subsidiary Credit Agreement Waiver became effective on January 21, 1998 and waived compliance with Section 8.11(i) of the credit agreement (the "Mortgage Facility Credit Agreement"), dated as of February 5, 1997, by and among the Americredit Corporation of California and Chase Bank of Texas National Association to clarify that the Mortgage Subsidiary Credit Agreement does not prohibit or conflict with Americredit Corporation of California's guarantee of the Series C Notes or the Series D Notes. (j) (A) The Credit Agreement constitutes the valid and binding obligation of the Borrowers, enforceable against the Borrowers in accordance with its terms, subject to the qualification that the enforceability of the Borrowers' obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; (B) the Borrowers will have at least $50.0 million of borrowings available to them under the Credit Agreement (giving effect to the borrowing base requirements of the Credit Agreement) after the Closing of the sale of the Series C Notes hereunder, the receipt by the Company of the proceeds therefore and the application of such proceeds as described under the caption "Use of Proceeds" in the Offering Memorandum; (C) all representations and warranties made by the Borrowers in Article VII of the Credit Agreement are true and correct in all material respects as of the date hereof, (D) the Mortgage Facility Credit Agreement constitutes the valid and binding obligation of the Americredit Corporation of California, enforceable against the Americredit Corporation of California in accordance with its terms, subject to the qualification that the enforceability of Americredit Corporation of California's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; and (E) all representations and warranties made by Americredit Corporation of California in Section 6 of the Mortgage Subsidiary Credit Agreement are true and correct in all material respects as of the date hereof. (k) The Company and the Guarantors have obtained, in writing, all consents and waivers required under the terms of the Credit Agreement, the Mortgage Subsidiary Credit Agreement and existing Credit Enhancement Agreements (as defined in the Indenture) necessary to ensure that the execution and delivery of, and the performance of all of the transactions contemplated by, the Operative Documents will not conflict with or constitute a breach of, or a default under, the Credit Agreement, the Mortgage Subsidiary Credit Agreement or any Credit Enhancement Agreement. (l) All the shares of capital stock of the Company outstanding prior to the issuance of the Series C Notes have been duly authorized and validly issued and are fully paid and nonassessable; the authorized capital stock of the Company conforms to the description thereof under the caption "Capitalization" in the Offering Memorandum. (m) The Company is a corporation duly incorporated and validly existing and in good standing under the laws of Texas with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify or to be in good standing does not have a material adverse effect on the condition (financial or other), business, prospects, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole (a "Material Adverse Effect"). 8 (n) Neither the Company nor any of the Subsidiaries owns capital stock of any corporation or entity (excluding interests in Company-sponsored securitizations) other than the Subsidiaries and a 10% interest in PNL Asset Management Company. Each of the Subsidiaries is a corporation duly incorporated and validly existing and in good standing under the laws of the jurisdiction of its incorporation, with all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify or be in good standing does not have a Material Adverse Effect. All the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and are wholly owned by the Company directly, or indirectly through one of the other Subsidiaries, free and clear of any lien, adverse claim, security interest, equity or other encumbrance, except as specifically described in the Offering Memorandum under the Caption "Description Of Other Debt." (o) There are no legal or governmental proceedings pending or, to the knowledge of the Company or any of the Guarantors, threatened, against the Company or any of the Subsidiaries or to which the Company or any of the Subsidiaries or to which any of their respective properties, is subject, that are not disclosed in the Offering Memorandum and which, if adversely decided, are reasonably likely to cause a Material Adverse Effect or to materially affect the issuance of the Notes or the consummation of the other transactions contemplated by the Operative Documents. The Offering Memorandum contains accurate summaries of all material agreements, contracts, indentures, leases or other instruments required to be described or summarized therein. Neither the Company nor any of the Subsidiaries is involved in any strike, job action or labor dispute with any group of employees, and, to the Company's knowledge, no such action or dispute is threatened. (p) Neither the Company nor any of the Subsidiaries is (i) in violation of its certificate or articles of incorporation or by-laws or other organizational documents, or of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of the Subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries except where any such violation or violations in the aggregate would not have a Material Adverse Effect or (ii) in default in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any material agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, except as may be disclosed in the Offering Memorandum. (q) None of the issuance, offer or sale of the Series C Notes, the execution, delivery or performance by the Company and the Guarantors of this Agreement or the other Operative Documents, compliance by the Company and the Guarantors with the provisions hereof or thereof nor consummation by the Company and the Guarantors of the transactions contemplated hereby or thereby (i) requires any consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may be required in connection with the registration under the Act of the Series D Notes in accordance with the Registration Rights Agreement, qualification of the Indenture under the 1939 Act and compliance with the securities or Blue Sky laws of various jurisdictions), or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company or any of the Subsidiaries or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under any material agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company or any of the Subsidiaries or any of their respective properties, or will result 9 in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of the property or assets of any of them is subject. (r) The accountants, Coopers & Lybrand L.L.P., who have certified the financial statements included as part of the Offering Memorandum, are independent public accountants under Rule 101 of the AICPA's Code of Professional Conduct, and its interpretation and rulings. (s) The financial statements, together with related notes forming part of the Offering Memorandum,present fairly in all material respects the consolidated financial position, results of operations, shareholders' equity and cash flows of the Company and the Subsidiaries on the basis stated in the Offering Memorandum at the respective dates or for the respective periods to which they apply; such statements and related notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein, and meet the requirements of Regulation S-X under the Act for registration statements on Form S-1; and the other financial and statistical information and data set forth in the Offering Memorandum is accurately presented and, to the extent such information and data is derived from the financial books and records of the Company, is prepared on a basis consistent with such financial statements and the books and records of the Company. (t) The Company and the Guarantors have all requisite power and authority to execute, deliver and perform their obligations under this Agreement and the Registration Rights Agreement; the execution and delivery of, and the performance by the Company and the Guarantors of their obligations under this Agreement and the Registration Rights Agreement have been duly and validly authorized by the Company and the Guarantors; this Agreement has been duly executed and delivered by the Company and the Guarantors and constitutes the valid and binding agreements of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with their terms, except as the enforcement hereof and thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and subject to the applicability of general principles of equity, and except as rights to indemnity and contribution hereunder and thereunder may be limited by Federal or state securities laws or principles of public policy; and the Registration Rights Agreement, when duly executed and delivered by the Company and the Guarantors, will constitute the valid and binding agreements of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with their terms, except as the enforcement hereof and thereof may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and subject to the applicability of general principles of equity, and except as rights to indemnity and contribution hereunder and thereunder may be limited by Federal or state securities laws or principles of public policy. (u) Except as disclosed in, or specifically contemplated by, the Offering Memorandum, subsequent to the date as of which such information is given in the Offering Memorandum, neither the Company nor any of the Subsidiaries has incurred any liability or obligation (including, without limitation, any liability or obligation in connection with the securitization of Receivables or Credit Enhancement Agreements (as such terms are defined in the Indenture)), direct or contingent, or entered into any transaction, in each case not in the ordinary course of business, that is material to the Company and the Subsidiaries taken as a whole, and there has not been any material change in the capital stock, or material increase in the short-term or long-term debt, of the Company or any of the Subsidiaries or any material adverse change, or any development involving or which would reasonably be expected to involve a prospective material adverse change, in the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole. (v) Each of the Company and the Subsidiaries has good and indefeasible title to all 10 property (real and personal) described in the Offering Memorandum as being owned by it, free and clear of all liens, claims, security interests or other encumbrances except such as are described in the Offering Memorandum and all the material property described in the Offering Memorandum as being held under lease by each of the Company and the Subsidiaries is held by it under valid, subsisting and enforceable leases, with only such exceptions as in the aggregate are not materially burdensome and do not interfere with the conduct of the business of the Company and the Subsidiaries taken as a whole. (w) Except as permitted by the Act, the Company and the Guarantors have not distributed and, prior to the later to occur of the Closing Date and completion of the distribution of the Series C Notes, will not distribute any offering material in connection with the offering and sale of the Series C Notes other than the Preliminary Offering Memorandum and Offering Memorandum. (x) Each of the Company and the Subsidiaries has such permits, licenses, franchises, certificates of need and other approvals or authorizations of governmental or regulatory authorities ("Permits") as are necessary under applicable law to own their respective properties and to conduct their respective businesses in the manner described in the Offering Memorandum, except to the extent that the failure to have such Permits would not have a Material Adverse Effect; the Company and each of the Subsidiaries have fulfilled and performed in all material respects, all their respective material obligations with respect to the Permits, and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit, subject in each case to such qualification as may be set forth in the Offering Memorandum and except to the extent that any such revocation or termination would not have a Material Adverse Effect; and, except as described in the Offering Memorandum, none of the Permits contains any restriction that is materially burdensome to the Company or any of the Subsidiaries. (y) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (z) Neither the Company nor any of the Subsidiaries nor, to the Company's knowledge, any employee or agent of the Company or any of the Subsidiaries has made any payment of funds of the Company or any of the Subsidiaries or received or retained any funds in violation of any law, rule or regulation, which violation would have a Material Adverse Effect. (aa) Except as disclosed in the Offering Memorandum, the Company and each of the Subsidiaries have filed all tax returns required to be filed, which returns are true and correct in all material respects, and neither the Company nor any of the Subsidiaries is in default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto, except where the failure to file such returns and make such payments would not have a Material Adverse Effect. 11 (bb) No holder of any security of the Company or any of the Subsidiaries has any right to request or demand registration of shares of common stock or any other security of the Company because of the consummation of the transactions contemplated by this Agreement or the Registration Rights Agreement. Except as described in or contemplated by the Offering Memorandum, there are no outstanding options, warrants or other rights calling for the issuance of, and there are no commitments, plans or arrangements to issue, any shares of capital stock of any of the Subsidiaries or any security convertible into or exchangeable or exercisable for capital stock of any of the Subsidiaries. (cc) The Company and each of the Subsidiaries own or possess all patents, trademarks, trademark registration, service marks, service mark registrations, trade names, copyrights, licenses, inventions, trade secrets and rights described in the Offering Memorandum as being owned by any of them or necessary for the conduct of their respective businesses, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company and the Subsidiaries with respect to the foregoing. (dd) The Company and the Guarantors are not and, upon sale of the Series C Notes to be issued and sold thereby in accordance herewith and the application of the net proceeds to the Company of such sale as described in the Offering Memorandum under the caption "Use of Proceeds," will not be an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (ee) When the Series C Notes are issued and delivered pursuant to this Agreement, such Series C Notes will not be of the same class (within the meaning of Rule 144A(d)(3) under the Act) as any security of the Company that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated interdealer quotation system. (ff) Neither the Company nor any affiliate (as defined in Rule 501(b) of Regulation D ("Regulation D") under the Act) of the Company has directly, or through any agent (provided that no representation is made as to the Initial Purchasers or any person acting on its behalf), (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Act) which is or will be integrated with the offering and sale of the Notes in a manner that would require the registration of the Series C Notes under the Act or (ii) engaged in any form of general solicitation or general advertising (within the meaning of Regulation D; including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) in connection with the offering of the Series C Notes. (gg) The Company and the Guarantors are not required to deliver the information specified in Rule 144A(d)(4) in connection with the offering and resale of the Series C Notes by the Initial Purchasers. (hh) Assuming (i) that the representations and warranties in Section 2 hereof are true, (ii) the Initial Purchasers comply with the covenants set forth in Section 2 hereof and (iii) that each person to whom the Initial Purchasers offer, sell or deliver the Series C Notes is a QIB, the purchase and sale of the Series C Notes pursuant hereto (including the Initial Purchasers' proposed offering of the Series C Notes on the terms and in the manner set forth in the Offering Memorandum and Section 2 hereof) is exempt from the registration requirements of the Act. (ii) The execution and delivery of this Agreement and the other Operative Documents and the sale of the Series C Notes to the Initial Purchasers or by the Initial Purchasers to Eligible Purchasers will not involve any prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of 12 the Code. The representation made by the Company and the Guarantors in the preceding sentence is made in reliance upon and subject to the accuracy of, and compliance with, the representations and covenants made or deemed made by the Eligible Purchasers as set forth in the Offering Memorandum under the section entitled "Notice to Investors." (jj) The Company and the Subsidiaries have regular and ongoing regulatory compliance programs and procedures that are adequate to ensure that all requirements of applicable federal, state and local laws, and regulations thereunder (including, without limitation, usury laws, the Federal Truth-in- Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the Federal Trade Commission Act) with respect to Receivables owned and/or serviced by the Company or its Subsidiaries have been complied with in all material respects and to the Company's knowledge, all such Receivables now comply with all such applicable legal requirements. 6. Indemnification and Contribution. (a) The Company and each Guarantor jointly and severally agree to indemnify and hold harmless each Initial Purchaser and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or Offering Memorandum, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information relating to the Initial Purchasers furnished in writing to the Company by or on behalf of the Initial Purchasers expressly for use in connection therewith; provided, however, that the indemnification contained in this paragraph (a) with respect to the Preliminary Offering Memorandum shall not inure to the benefit of any Initial Purchaser (or to the benefit of any person controlling such Initial Purchaser) on account of any such loss, claim, damage, liability or expense arising from the sale of the Series C Notes by such Initial Purchaser to any person if the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in the Preliminary Offering Memorandum was corrected in the Offering Memorandum and the Initial Purchaser sold Series C Notes to that person without sending or giving at or prior to the written confirmation of such sale, a copy of the Offering Memorandum (as then amended or supplemented) if the Company has previously furnished sufficient copies thereof to the Initial Purchaser on a timely basis to permit such sending or giving. The foregoing indemnity agreement shall be in addition to any liability which the Company and the Guarantors may otherwise have. (b) If any action, suit or proceeding shall be brought against the Initial Purchasers or any person controlling the Initial Purchasers in respect of which indemnity may be sought against the Company and the Guarantors, the Initial Purchasers or such controlling person shall promptly notify the parties against whom indemnification is being sought (the "indemnifying parties"), and such indemnifying parties shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. The Initial Purchasers or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Initial Purchasers or such controlling person unless (i) the indemnifying parties have agreed in writing to pay such fees and expenses, (ii) the indemnifying parties have failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both the Initial Purchasers or such controlling person and the indemnifying parties and the Initial Purchasers or such controlling person shall have been advised in writing by its counsel that representation of such indemnified party and any indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the 13 same counsel has been proposed) due to actual or potential differing interests between them (in which case the indemnifying party shall not have the right to assume the defense of such action, suit or proceeding on behalf of the Initial Purchasers or such controlling person). It is understood, however, that the indemnifying parties shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for the Initial Purchasers and controlling persons not having actual or potential differing interests with the Initial Purchasers or among themselves, which firm shall be designated in writing by Salomon Brothers Inc, and that all such fees and expenses shall be reimbursed as they are incurred. The indemnifying parties shall not be liable for any settlement of any such action, suit or proceeding effected without their written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the indemnifying parties agree to indemnify and hold harmless the Initial Purchasers, to the extent provided in paragraph (a), and any such controlling person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment. (c) Each Initial Purchaser, severally and not jointly, agrees to indemnify and hold harmless the Company and the Guarantors, and their directors and officers, and any person who controls the Company or any Guarantor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the indemnity from the Company and the Guarantors to the Initial Purchasers set forth in paragraph (a) hereof, but only with respect to information relating to the Initial Purchasers furnished in writing by or on behalf of the Initial Purchasers expressly for use in the Preliminary Offering Memorandum or Offering Memorandum. If any action, suit or proceeding shall be brought against the Company or the Guarantors, any of their directors or officers, or any such controlling person based on the Preliminary Offering Memorandum or Offering Memorandum, and in respect of which indemnity may be sought against the Initial Purchasers pursuant to this paragraph (c), the Initial Purchasers shall have the rights and duties given to the Company and the Guarantors by paragraph (b) above (except that if the Company and the Guarantors shall have assumed the defense thereof the Initial Purchasers shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the Initial Purchasers' expense), and the Company and the Guarantors, their directors and officers, and any such controlling person shall have the rights and duties given to the Initial Purchasers by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Initial Purchasers may otherwise have. (d) If the indemnification provided for in this Section 6 is unavailable (except if inapplicable according to its terms) to an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Initial Purchasers on the other hand from the offering of the Series C Notes, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors on the one hand and the Initial Purchasers on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts received by the Initial Purchasers, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault of the Company and the Guarantors on the one hand and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material 14 fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or by the Initial Purchasers on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by a pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 6, the Initial Purchasers shall not be required to contribute any amount in excess of the amount by which the total price of the Series C Notes underwritten by it and distributed to the public exceeds the amount of any damages which the Initial Purchasers have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 6 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred but only to the extent that such losses, claims, damages, liabilities or expenses are required to be paid by an indemnified party. The indemnity and contribution agreements contained in this Section 6 and the representations and warranties of the Company and the Guarantors set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Initial Purchasers or any person controlling the Initial Purchasers, the Company and the Guarantors, their directors or officers or any person controlling the Company or the Guarantors, (ii) acceptance of any Series C Notes and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to the Initial Purchasers or any person controlling the Initial Purchasers, or to the Company and the Guarantors, their directors or officers or any person controlling the Company or the Guarantors, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 6. (g) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. 7. Conditions of the Initial Purchasers' Obligations. The several obligations of the Initial Purchasers to purchase the Series C Notes hereunder are subject to the following conditions: (a) At the time of execution of this Agreement and on the Closing Date, no order or decree preventing the use of the Offering Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Act shall have been issued and no proceedings for that purpose shall have been commenced or shall be pending or, to the knowledge of the Company or any of the Guarantors, be contemplated. No stop order suspending the sale of the Series C Notes in any jurisdiction designated by the Initial Purchasers shall have been issued and no proceedings for that purpose shall have been commenced or shall be pending or, to the knowledge of the Company or any of the Guarantors, shall be contemplated. 15 (b) Subsequent to the date as of which information is given in the Offering Memorandum, except as otherwise stated in the Offering Memorandum, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting the condition (financial or other), business, properties, net worth, or results of operations of the Company or the Subsidiaries not contemplated by the Offering Memorandum, which in the opinion of the Initial Purchasers, would materially adversely affect the market for the Series C Notes, or (ii) any event or development relating to or involving the Company, any of its Subsidiaries or any officer or director of the Company or any of its Subsidiaries which makes any statement made in the Offering Memorandum untrue or which, in the opinion of the Company, the Guarantors and their counsel or the Initial Purchasers and their counsel, requires the making of any addition to or change in the Offering Memorandum in order to state a material fact required by any law to be stated therein or necessary in order to make the statements therein not misleading, if amending or supplementing the Offering Memorandum to reflect such event or development would, in the opinion of the Initial Purchasers, materially adversely affect the market for the Series C Notes. (c) The Final Offering Memorandum shall have been printed and copies thereof distributed to the Initial Purchasers in such quantities as shall have been previously specified by them not later than 9:00 a.m., New York City time, on January 27, 1998, or at such later date and time as the Initial Purchasers may approve in writing. (d) The Initial Purchasers shall have received on the Closing Date an opinion of Jenkens & Gilchrist, P.C., counsel for the Company, dated the Closing Date and addressed to the Initial Purchasers, to the effect that: (i) The Company is a corporation duly incorporated and validly existing in good standing under the laws of Texas with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum; (ii) Each of the Subsidiaries is a corporation duly incorporated and validly existing and in good standing under the laws of its jurisdiction of incorporation, with all requisite power and authority to own, lease, and operate its properties and to conduct its business as described in the Offering Memorandum; and all the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and to the knowledge of such counsel, are wholly owned by the Company directly, or indirectly through one of the other Subsidiaries, free and clear of any security interest, lien, adverse claim, equity or other encumbrance, except as specifically described in the Offering Memorandum under the caption "Description Of Other Debt;" (iii) The authorized capital stock of the Company is as set forth under the caption "Capitalization" in the Offering Memorandum; (iv) The Company and each of the Guarantors have the corporate power and authority to enter into this Agreement and the Registration Rights Agreement and to issue, sell and deliver the Series C Notes to be sold to the Initial Purchasers as provided herein, and this Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and delivered by the Company and the Guarantors and constitute the valid and binding agreements of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with their terms, except (A) as enforcement of rights to indemnity and contribution hereunder and thereunder may be limited by Federal or state securities laws or principles of public policy and (B) subject to the qualification that the enforceability of the Company's and the Guarantors' obligations hereunder and thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; 16 (v) The Indenture has been duly and validly authorized, executed and delivered by the Company and the Guarantors and, assuming due authorization, execution and delivery by the Trustee, constitutes the valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, subject to the qualification that the enforceability of the Company's and the Guarantors' obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; no qualification of the Indenture under the 1939 Act is required in connection with the offer and sale of the Series C Notes contemplated hereby or in connection with the Exempt Resales; (vi) The Series C Notes have been duly and validly authorized by the Company and when duly executed by the Company in accordance with the terms of the Indenture and, assuming due authentication of the Series C Notes by the Trustee, upon delivery to the Initial Purchasers against payment therefor in accordance with the terms hereof, will have been validly issued and delivered, and will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, subject to the qualification that the enforceability of the Company's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; (vii) The Series D Notes have been duly and validly authorized by the Company and if and when duly issued and authenticated in accordance with the terms of the Indenture and delivered in accordance with the Exchange Offer provided for in the Registration Rights Agreement, will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, subject to the qualification that the enforceability of the Company's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; (viii) The Series C Subsidiary Guarantees have been duly and validly authorized by the Guarantors and when duly executed and delivered by the Guarantors in accordance with the terms of the Indenture and upon the due execution, authentication and delivery of the Series C Notes in accordance with the Indenture and the issuance of the Series C Notes in the sale to the Initial Purchasers contemplated by this Agreement, will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, subject to the qualification that the enforceability of the Guarantors' obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; (ix) The Series D Subsidiary Guarantees have been duly and validly authorized by the Guarantors and if and when duly executed and delivered by the Guarantors in accordance with the terms of the Indenture and upon the due execution, authentication and delivery of the Series D Notes in accordance with the Indenture and the issuance and delivery of the Series D Notes in the Exchange Offer contemplated by the Registration Rights Agreement, will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, subject to the qualification that the enforceability of the Guarantors' obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles; (x) None of the issuance, offer or sale of the Series C Notes and Series C Subsidiary Guarantees, the execution, delivery or performance by the Company and the Guarantors of this 17 Agreement or the other Operative Documents, compliance by the Company and the Guarantors with the provisions hereof or thereof nor consummation by the Company and the Guarantors of the transactions contemplated hereby or thereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under the certificate or articles of incorporation or bylaws or other organizational documents of the Company or any of the Subsidiaries or the Credit Agreement, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or the Subsidiaries pursuant to the terms of the Credit Agreement nor will any such action result in any violation of any existing law, or any regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws and, in the case of the Registration Rights Agreement, the Act, the Exchange Act and the 1939 Act), judgment, injunction, order or decree known to such counsel, applicable to the Company or the Subsidiaries or any of their respective properties; (xi) No consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Company or the Guarantors for the valid issuance and sale of the Series C Notes to the Initial Purchasers and the issuance of the Series C Subsidiary Guarantees in connection therewith as contemplated by this Agreement (other than as may be required by applicable state securities and Blue Sky laws, as to which counsel need express no opinions); (xii) To the knowledge of such counsel, (A) other than as described or contemplated in the Offering Memorandum, there are no legal or governmental proceedings pending or threatened against the Company, the Guarantors or any of the other Subsidiaries or to which the Company or any of the Subsidiaries or any of their properties, are subject, which are not disclosed in the Offering Memorandum and which, if adversely decided, are reasonably likely to cause a Material Adverse Effect or materially affect the issuance of the Notes or the consummation of the other transactions contemplated by the Operative Documents and (B) there are no material agreements, contracts, indentures, leases or other instruments, that are not described in the Offering Memorandum; (xiii) The statements under the captions "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "Description of Other Debt," and "Certain Federal Income Tax Consequences" in the Offering Memorandum, insofar as they are descriptions of contracts, agreements or other legal documents, (excluding contracts, agreements or other legal documents pertaining to Company-sponsored securitizations) or refer to statements of law or legal conclusions, are accurate in all material respects and present fairly the information required to be shown; (xiv) Such counsel does not know of any person who has the right, contractual or otherwise, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, any of the Notes or the right, as a result of the consummation of the transactions contemplated by the Operative Documents, to require registration under the Act of any shares of Common Stock or other securities of the Company; (xv) When the Series C Notes are issued and delivered pursuant to this Agreement, such Series C Notes will not be of the same class (within the meaning of Rule 144A(d)(3) under the Act) as any security of the Company that is listed on a national securities exchange registered under Section 6 of the Exchange Act or that is quoted in a United States automated interdealer quotation system; (xvi) No registration of the Series C Notes under the Act is required for the sale of the Series C Notes to the Initial Purchasers as contemplated in this Agreement or for the Exempt Resales (assuming (A) that any Eligible Purchaser who buys the Series C Notes in the Exempt Resales is a QIB and (B) the accuracy of the Initial Purchasers' representations and those of the Company and the Guarantors in this 18 Agreement (it being understood that no opinion is being expressed as to any resale subsequent to the Exempt Resales or any resale of securities by any person other than the Initial Purchasers); (xvii) The Company and the Guarantors are not required to deliver the information specified in Rule 144A(d)(4) in connection with the offering and resale of the Series C Notes by the Initial Purchasers; (xviii) The Company is not required to obtain stockholder consent for the issuance or offering of the Notes; and In addition, such counsel shall also state that such counsel has participated in conferences with officers and representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors and the Initial Purchasers at which the contents of the Offering Memorandum and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for and has not verified the accuracy, completeness or fairness of the statements contained in the Offering Memorandum, and has not made any independent check or verification thereof, on the basis of the foregoing (relying as to materiality to the extent such counsel deemed appropriate upon facts provided by officers and other representatives of the Company and the Guarantors), no facts have come to the attention of such counsel that lead such counsel to believe that the Offering Memorandum, as of its date or as of the Closing Date, contained or contains any untrue statement of material fact or omitted or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief or opinion with respect to the financial statements and other financial and statistical data included therein). The opinion of such counsel may be limited to the laws of the state of Texas, the laws of the states of New York and California, the General Corporation Law of the State of Delaware and the federal laws of the United States. Such counsel may rely as to matters of New York and California law, as it relates to the authorization and enforceability of the Operative Documents only, on the opinion of Latham & Watkins described below in Section 7(g). (e) The Initial Purchasers shall have received on the Closing Date an opinion of Chris A. Choate, Esq., General Counsel of the Company, dated the Closing Date and addressed to the Initial Purchasers to the effect that: (i) The Company is duly registered and qualified to conduct its business and is in good standing as a foreign corporation in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify or to be in good standing does not have a Material Adverse Effect; (ii) Each of the Guarantors is duly registered and qualified to conduct its business and is in good standing as a foreign corporation in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify or to be in good standing does not have a Material Adverse Effect; (iii) Neither the Company nor any of the Subsidiaries is in violation of its respective certificate or articles of incorporation or bylaws, or other organizational documents, or to the best knowledge of such counsel after reasonable inquiry, is in default in the performance of any material obligation, agreement or condition contained in any bond, debenture, note or other evidence of indebtedness or in any material agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is 19 a party or by which any of them or any of their respective properties may be bound, except as disclosed in the Offering Memorandum and except to the extent that any such violation or default would not have a Material Adverse Effect; (iv) None of the issuance, offer or sale of the Series C Notes and Series C Subsidiary Guarantees, the execution, delivery or performance by the Company and the Guarantors of this Agreement or the other Operative Documents, compliance by the Company and the Guarantors with the provisions hereof or thereof nor consummation by the Company and the Guarantors of the transactions contemplated hereby or thereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under the certificate or articles of incorporation or bylaws or other organizational documents of the Company or any of the Subsidiaries or any material agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties is bound, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or the Subsidiaries pursuant to the terms of any material agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of the property or assets of them is subject, nor will any such action result in any violation of any existing law, or any regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws and, in the case of the Registration Rights Agreement, the Act, the Exchange Act and the 1939 Act), judgment, injunction, order or decree known to such counsel, applicable to the Company or the Subsidiaries or any of their respective properties; (v) The statements under the caption "Management" in the Offering Memorandum, insofar as they are descriptions of contracts, agreements or other legal documents or refer to statements of law or legal conclusions, are accurate in all material respects and present fairly the information required to be shown; (vi) To the best knowledge of such counsel after reasonable inquiry, neither the Company nor any of the Subsidiaries is in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of the Subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries, except to the extent that any such violation would not have a Material Adverse Effect; (vii) The Company and the Subsidiaries have all Permits that are required under applicable law to own their respective properties and to conduct their respective businesses as now being conducted as described in the Offering Memorandum except where the failure to have any such Permits would not, individually or in the aggregate, have a Material Adverse Effect; (viii) The statements in the Offering Memorandum, insofar as they are descriptions of contracts, agreements or other legal documents pertaining to the Company's $245 million Warehouse Facility, are accurate in all material respects and present fairly the Company's and the Guarantors' rights, obligations and liabilities in connection with such Warehouse Facility; and (ix) None of the issuance, offer or sale of the Series C Notes, the execution, delivery or performance by the Company and the Guarantors of this Agreement or the other Operative Documents, compliance by the Company and the Guarantors with the provisions hereof or thereof nor consummation by the Company and the Guarantors of the transactions contemplated hereby or thereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under any material agreement, indenture, or other instrument pertaining to the Company's $245 Warehouse Facility, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries pursuant to the terms of any material agreement or instrument pertaining to the Company's Warehouse Facility. 20 (f) The Initial Purchasers shall have received on the Closing Date an opinion of Dewey Ballantine, special securitization counsel for the Company and its Subsidiaries, dated the Closing Date, and addressed to the Initial Purchasers to the effect that: (i) The statements in the Offering Memorandum, insofar as they are descriptions of contracts, agreements or other legal documents pertaining to Company-sponsored securitizations, are accurate in all material respects and present fairly the Company's and the Guarantors' rights, obligations and liabilities in connection with such securitizations; and (ii) None of the issuance, offer or sale of the Series C Notes, the execution, delivery or performance by the Company and the Guarantors of this Agreement or the other Operative Documents, compliance by the Company and the Guarantors with the provisions hereof or thereof nor consummation by the Company and the Guarantors of the transactions contemplated hereby or thereby conflicts or will conflict with or constitutes or will constitute a breach of, or a default under any material agreement, indenture, or other instrument pertaining to a Company-sponsored securitization, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries pursuant to the terms of any material agreement or instrument pertaining to a Company-sponsored securitization. The opinion of such counsel may exclude opinions with respect to the $51 million Company-sponsored securitization effected in December 1994 through AmeriCredit Receivables Finance Corp. (g) The Initial Purchasers shall have received on the Closing date an opinion, of Latham & Watkins, counsel for the Initial Purchasers, dated the Closing date, and addressed to the Initial Purchasers, with respect to the Offering Memorandum and such other related matters as the Initial Purchasers may reasonably request, and such counsel shall have received such certificates, documents and information as they may reasonably request to enable them to pass upon such matters. (h) The Initial Purchasers shall have received letters addressed to the Initial Purchasers, and dated the date hereof and the Closing Date from Coopers & Lybrand L.L.P., independent certified public accountants, substantially in the forms heretofore approved by the Initial Purchasers. (i) (i) There shall not have been any decrease in stockholders' equity of the Company nor any material increase in the short-term or long-term debt of the Company (other than in the ordinary course of business) from that set forth or specifically contemplated in the Offering Memorandum; (ii) the Company and the Subsidiaries shall not have any liabilities or obligations, direct or contingent (whether or not in the ordinary course of business), that are material to the Company and the Subsidiaries, taken as a whole, other than those reflected in the Offering Memorandum; and (iii) all the representations and warranties of the Company and the Guarantors contained in this Agreement shall be true and correct in all material respects on and as of the date hereof and on and as of the Closing Date as if made on and as of the Closing Date, and the Initial Purchasers shall have received a certificate, dated the Closing Date and signed by the Chief Executive Officer and the Chief Financial Officer of the Company (or such other officers as are acceptable to the Initial Purchasers), to the effect set forth in this Section 7(i) and in Section 7(j) hereof. (j) The Company and the Guarantors shall not have failed at or prior to the Closing Date to have performed or complied in all material respects with any of its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the Closing Date. (k) There shall not have been any announcement by any "nationally recognized statistical rating organization," as defined for purposes of Rule 436(g) under the Act, that (i) it is downgrading its rating 21 assigned to any class of securities of the Company or any asset-backed securities of any Company-sponsored Securitization Trust (as such term is defined in the Indenture), or (ii) it is reviewing its ratings assigned to any class of securities of the Company or any asset-backed security of any Company- sponsored Securitization Trust with a view to possible downgrading, or with negative implications, or direction not determined. (l) The Series C Notes shall have been approved for trading in the PORTAL Market. (m) The Company and the Guarantors shall have obtained, in writing, all consents and waivers required under the terms of the Credit Agreement, the Mortgage Subsidiary Credit Agreement and existing Credit Enhancement Agreements necessary to ensure that the transactions contemplated by this Agreement and the other Operative Documents will not conflict with or constitute a breach of, or a default under the Credit Agreement, the Mortgage Subsidiary Credit Agreement or any Credit Enhancement Agreement. The Company and the Guarantors shall have furnished photocopies of such waivers and consents to the Initial Purchasers. (n) The Company and the Guarantors shall have entered into the Credit Agreement Amendment and shall have furnished photocopies of such Credit Agreement Amendment to the Initial Purchasers. The Company shall have received the Mortgage Subsidiary Credit Agreement Waiver and shall have furnished photocopies of such Mortgage Subsidiary Credit Agreement Waiver to the Initial Purchasers. (o) The Company and Guarantors shall have furnished or caused to be furnished to the Initial Purchasers such further certificates and documents as the Initial Purchasers or their counsel shall have requested. All such opinions, certificates, letters, consents, waivers amendments and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to the Initial Purchasers and counsel for the Initial Purchasers. Any certificate or document signed by any officer of the Company or a Guarantor and delivered to the Initial Purchasers, or to counsel for the Initial Purchasers, shall be deemed a representation and warranty by the Company or Guarantor, as the case may be, to the Initial Purchasers as to the statements made therein. 8. Expenses. The Company and the Guarantors jointly and severally agree to pay the following costs, expenses and fees and all other costs and expenses incident to the performance by any of them of any of their obligations hereunder: (i) the preparation and reproduction of the Preliminary Offering Memorandum and the Final Offering Memorandum (including, without limitation, financial statements thereto), and each amendment or supplement to any of them, this Agreement and the Indenture; (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Final Offering Memorandum, the Preliminary Offering Memorandum, and all amendments or supplements to any of them as may be reasonably requested for use in connection with the offering and sale of the Series C Notes; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Notes, including any stamp taxes in connection with the original issuance and sale of the Notes; (iv) the printing (or reproduction) and delivery of this Agreement, the preliminary and supplemental Blue Sky Memoranda and all other agreements or documents printed (or reproduced) and delivered in connection with the offering of the Notes; (v) the application for quotation of the Notes on the PORTAL Market; (vi) the qualification of the Notes for offer and sale under the securities or Blue Sky laws of the several states as provided in Section 4(f) hereof (including the reasonable fees, expenses and disbursements of counsel for the Initial Purchasers relating to the preparation, printing or reproduction, and delivery of the preliminary and supplemental Blue Sky Memoranda and such qualification); (vii) the performance by the Company of its obligations under the Registration Rights Agreement; (viii) fees and expenses of the Trustee and its counsel; (ix) the transportation and other expenses incurred by or on behalf of the Company representatives in 22 connection with presentations to prospective purchasers of the Series C Notes; and (x) the fees and expenses of the Company's and the Guarantors' accountants and the fees and expenses of counsel (including local and special counsel, if any) for the Company and the Guarantors. The Company and each of the Guarantors hereby agree that they will pay in full on the Closing Date the fees and expenses referred to in clause (vi) of this Section 8 by delivering to counsel for the Initial Purchasers on such date a check payable to such counsel in the requisite amount. 9. Effective Date of Agreement. This Agreement shall become effective upon the execution and delivery hereof by all the parties hereto. 10. Termination of Agreement. This Agreement shall be subject to termination in the absolute discretion of the Initial Purchasers, without liability on the part of any of the Initial Purchasers to the Company or any of the Guarantors, by notice to the Company, if prior to the Closing Date, (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National market shall have been suspended or materially limited, (ii) a general moratorium on commercial banking activities in New York or Texas shall have been declared, or (iii) there shall have occurred any outbreak or escalation of hostilities involving the United States or other domestic, foreign or international calamity, crisis or change in political, financial or economic conditions, the effect of which on the financial markets of the United States is such as to make it, in the judgment of the Initial Purchasers, impracticable or inadvisable to commence or continue the offering of the Series C Notes on the terms set forth on the cover page of the Offering Memorandum or to enforce contracts for the resale of the Series C Notes by the Initial Purchasers. Notice of such termination may be given to the Company by telegram, telecopy or telephone and shall be subsequently confirmed by letter. 11. Information Furnished by the Initial Purchasers. The statements set forth in the stabilization legend on the inside front cover and the last paragraph on the cover page of the Preliminary Offering Memorandum and Offering Memorandum, constitute the only information furnished by or on behalf of the Initial Purchasers as such information is referred to in Sections 5(b) and 6 hereof. 12. Miscellaneous. Except as otherwise provided in Sections 4, 9 and 10 hereof, notice given pursuant to any provision of this Agreement shall be in writing and shall be delivered (i) if to the Company or the Guarantors, at the office of the Company at 200 Bailey Avenue, Fort Worth TX 76107, Attention: Chief Financial Officer with a copy to Jenkens & Gilchrist, P.C., 1445 Ross Avenue, Suite 3200, Dallas, TX 75202, Attention: L. Steven Leshin, or (ii) if to the Initial Purchasers, care of Salomon Brothers Inc, Seven World Trade Center, New York, NY 10048, Attention: Manager, Investment Banking Division with a copy to Latham & Watkins, 885 Third Avenue, New York, New York 10022, Attention: Kirk A. Davenport. This Agreement has been and is made solely for the benefit of the Initial Purchasers, the Company, the Guarantors and their respective directors, officers and the controlling persons referred to in Section 6 hereof and their respective successors and assigns, to the extent provided herein, and no other person shall acquire or have any right under or by virtue of this Agreement. Neither the term "successor" nor the term "successors and assigns" as used in this Agreement shall include a purchaser from the Initial Purchasers of any of the Series C Notes in his status as such purchaser. 13. Applicable Law; Counterparts This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York and without regard to the conflicts of law principles thereof. 23 This Agreement may be signed in various counterparts which together constitute one and the same instrument. If signed in counterparts, this Agreement shall not become effective unless at least one counterpart hereof shall have been executed and delivered on behalf of each party hereto. [signature page follows] 24 Please confirm that the foregoing correctly sets forth the agreement between the Company, the Guarantors and the Initial Purchasers. Very truly yours, AMERICREDIT CORP. AMERICREDIT PREMIUM FINANCE, INC. By By --------------------------- --------------------------------- DANIEL E. BERCE DANIEL E. BERCE VICE CHAIRMAN AND CHIEF PRESIDENT, CHIEF FINANCIAL FINANCIAL OFFICER OFFICER AND TREASURER AMERICREDIT FINANCIAL SERVICES, INC. AMERICREDIT CORPORATION OF CALIFORNIA By By --------------------------- --------------------------------- DANIEL E. BERCE DANIEL E. BERCE VICE CHAIRMAN AND CHIEF VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER FINANCIAL OFFICER AMERICREDIT OPERATING CO., INC. ACF INVESTMENT CORP. By By --------------------------- --------------------------------- DANIEL E. BERCE DANIEL E. BERCE VICE CHAIRMAN AND CHIEF VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER FINANCIAL OFFICER Confirmed as of the date first above mentioned. SALOMON BROTHERS INC CREDIT SUISSE FIRST BOSTON CORPORATION BY: SALOMON BROTHERS INC By ------------------------------- NAME: TITLE SCHEDULE I AMERICREDIT CORP. Principal Amount Initial Purchaser of Notes - ----------------- -------- Salomon Brothers Inc.......................................... $32,500,000 Credit Suisse First Boston Corporation........................ $17,500,000 ----------- Total.................................................... $50,000,000 =========== EX-10.26 5 C/D EXCHANGE REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.26 L&W DRAFT - JANUARY 26, 1998 SALOMON SMITH BARNEY - AMERICREDIT ---------------------------------- EXHIBIT A ================================================================================ C/D EXCHANGE REGISTRATION RIGHTS AGREEMENT Dated as of January 29, 1998 relating to $50,000,000 in Aggregate Principal Amount of 9 1/4% Senior Notes due 2004 by and among AmeriCredit Corp. and the Guarantors named herein and Salomon Brothers Inc and Credit Suisse First Boston Corporation ================================================================================ This Registration Rights Agreement (this "Agreement") is made and entered into as of January 29, 1998 by and among AmeriCredit Corp., a Texas corporation (the "Company"); AmeriCredit Financial Services, Inc., a Delaware corporation, AmeriCredit Operating Co., Inc., a Delaware corporation, ACF Investment Corp., a Delaware corporation, AmeriCredit Premium Finance, Inc., a Delaware corporation, and Americredit Corporation of California, a California corporation (collectively the "Guarantors"); and Salomon Brothers Inc and Credit Suisse First Boston Corporation (collectively the "Initial Purchasers"), each of whom have agreed to purchase the Company's 9 1/4% Series C Senior Notes due 2004 (the "Series C Notes") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated January 26, 1998 (the "Purchase Agreement"), by and among the Company, the Guarantors and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Series C Senior Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 2 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Act: The Securities Act of 1933, as amended. --- Broker-Dealer: Any broker or dealer registered under the Exchange Act. ------------- Closing Date: The date of this Agreement. ------------ Commission: The Securities and Exchange Commission. ---------- Consummate: A registered Exchange Offer shall be deemed "Consummated" for ---------- purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Series D Senior Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Series D Senior Notes in the same aggregate principal amount as the aggregate principal amount of Series C Senior Notes that were tendered by Holders thereof pursuant to the Exchange Offer. Damages Payment Date: With respect to the Series C Senior Notes, each -------------------- Interest Payment Date. Effectiveness Target Date: As defined in Section 5. ------------------------- Exchange Act: The Securities Exchange Act of 1934, as amended. ------------ Exchange Offer: The registration by the Company under the Act of the -------------- Series D Senior Notes pursuant to a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Series D Senior Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating ------------------------------------- to the Exchange Offer, including the related Prospectus. Holder: As defined in Section 2(b) hereof. ------ Indenture: The Indenture, dated as of January 29, 1998, among the Company, --------- Bank One, N.A., as trustee (the "Trustee"), and the Guarantors, pursuant to which the Senior Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Initial Purchasers: As defined in the preamble hereto. ------------------ Interest Payment Date: As defined in the Indenture and the Senior Notes. --------------------- NASD: National Association of Securities Dealers, Inc. ---- Person: An individual, partnership, corporation, trust or unincorporated ------ organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as ---------- amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Record Holder: With respect to any Damages Payment Date relating to Senior ------------- Notes, each Person who is a Holder of Senior Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5 hereof. -------------------- Registration Statement: Any registration statement of the Company relating ---------------------- to (a) an offering of Series D Senior Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Senior Notes: The Series C Senior Notes and the Series D Senior Notes, ------------ including the guarantees thereof by the Guarantors. 2 Series D Senior Notes: The Company's 9 1/4% Series D Senior Notes due --------------------- 2004, including the guarantees thereof by the Guarantors, to be issued pursuant to the Indenture in the Exchange Offer. Shelf Filing Deadline: As defined in Section 4 hereof. --------------------- Shelf Registration Statement: As defined in Section 4 hereof. ---------------------------- TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in --- effect on the date of the Indenture. Transfer Restricted Securities: Each Senior Note, until the earliest to ------------------------------ occur of (a) the date on which such Senior Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Senior Note has been effectively registered under the Act and disposed of in accordance with a Shelf Registration Statement and (c) the date on which such Senior Note is distributed to the public pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). Underwritten Registration or Underwritten Offering: A registration in ------------------------- --------------------- which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the ------------------------------ benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a ----------------------------------------- holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 30 days after the Closing Date, a Registration Statement under the Act relating to the Series D Senior Notes and the Exchange Offer, (ii) use their best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 90 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post- effective amendment to such Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings in connection with the registration and qualification of the Series D Senior Notes to be made under the Blue Sky laws of such 3 jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Series D Senior Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Senior Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Senior Notes shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 business days thereafter. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus contained in the Exchange Offer Registration Statement that any Broker-Dealer who holds Series C Senior Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Series C Senior Notes pursuant to the Exchange Offer; however, such Broker- Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any resales of the Series D Senior Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Senior Notes held by any such Broker- Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company and the Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Senior Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the date on which the Exchange Offer Registration Statement is declared effective. The Company shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such one- year period in order to facilitate such resales. 4 SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company is not required to file an ------------------ Exchange Offer Registration Statement or to Consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within 20 business days following the Consummation of the Exchange Offer (A) that such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) that such Holder may not resell the Series D Senior Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) that such Holder is a Broker-Dealer and holds Series C Senior Notes acquired directly from the Company or one of its affiliates, then the Company and the Guarantors shall (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement") on or prior to the earliest to occur of (1) the 30th day after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement, (2) the 30th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above, and (3) the 60th day after the Closing Date (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use their best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 60th day after the Shelf Filing Deadline. The Company and the Guarantors shall use their best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Senior Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least three years following the Closing Date. (b) Provision by Holders of Certain Information in Connection with the ------------------------------------------------------------------ Shelf Registration Statement. No Holder of Transfer Restricted Securities may - ---------------------------- include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the 5 Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within two business days by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective within two business days (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors hereby jointly and severally agree to pay liquidated damages to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued liquidated damages shall be paid to Record Holders by the Company by wire transfer of immediately available funds or by federal funds check on each Damages Payment Date, as provided in the Indenture. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of liquidated damages with respect to such Transfer Restricted Securities will cease. All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange ------------------------------------- Offer, the Company and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company and the Guarantors 6 hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Series C Senior Notes. The Company and the Guarantors each hereby agrees to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Company and the Guarantors each hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Series D Senior Notes to be issued in the Exchange Offer and (C) it is acquiring the Series D Senior Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan ------ Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings - -------------------- ---------------------- Corporation (available May 13, 1988), as interpreted in the Commission's letter - ----------- to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Series D Senior Notes obtained by such Holder in exchange for Series C Senior Notes acquired by such Holder directly from the Company. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Company and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon ----- Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., - ---------------------------- --------------------- Inc. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above and (B) including a representation that neither the Company nor the Guarantors has entered into any arrangement or understanding with any Person to distribute the Series D Senior Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Exchange Offer is acquiring the Series D Senior Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Series D Senior Notes received in the Exchange Offer. 7 (b) Shelf Registration Statement. In connection with the Shelf ---------------------------- Registration Statement, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) General Provisions. In connection with any Registration Statement and ------------------ any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Senior Notes by Broker-Dealers), the Company shall: (i) use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Act or any regulation thereunder, financial statements of the Guarantors) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post- effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the 8 Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to each of the selling Holders and each of the underwriter(s), if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s), if any, for a period of at least three business days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object within three business days after the receipt thereof; (v) promptly after the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s), if any, make the Company's representatives available (and representatives of the Guarantors) for discussion of such document and other customary due diligence matters, and include such information in such document promptly after the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with 9 respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Senior Notes covered thereby or the underwriter(s), if any; (ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into, and cause the Guarantors to enter into, such agreements (including an underwriting agreement), and make, and cause the Guarantors to make, such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by any Initial Purchaser or by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) furnish to each Initial Purchaser, each selling Holder and each underwriter, if any, in such substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of each of the Company and the Guarantors, confirming, as of the date thereof, the matters set forth in paragraphs (i) and (j) of Section 7 10 of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors, covering the matters set forth in paragraphs (d), (e) and (f) of Section 7 of the Purchase Agreement and such other matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the Initial Purchasers' representatives and the Initial Purchasers' counsel in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, and although such counsel has not independently verified the accuracy, completeness or fairness of such statements, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Company and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the exhibits, financial statements, notes and schedules and other financial or statistical data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 7(h) of the Purchase Agreement, without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and 11 (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company pursuant to this clause (xi), if any. If at any time the Company or the Guarantors become aware that the representations and warranties of the Company and the Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company or the Guarantors shall so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with, and cause the Guarantors to cooperate with, the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s) may reasonably request and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor the Guarantors shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) shall issue, upon the request of any Holder of Series C Senior Notes covered by the Shelf Registration Statement, Series D Senior Notes, having an aggregate principal amount equal to the aggregate principal amount of Series C Senior Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Series D Senior Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Senior Notes, as the case may be; in return, the Series C Senior Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with, and cause the Guarantors to cooperate with, the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (viii) above; (xvi) if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement 12 or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use its reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate, and cause the Guarantors to cooperate, with the Trustee and the Holders of Senior Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and cause the Guarantors to execute, and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; and (xxi) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by 13 the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's or the Guarantors' performance of or compliance with this Agreement will be borne by the Company or the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Series D Senior Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing Senior Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION 14 (a) The Company and each Guarantor jointly and severally agree to indemnify and hold harmless each Holder and each Person, if any, who controls any Holder within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information relating to the Holders furnished in writing to the Company by the Holders expressly for use in connection therewith. The foregoing indemnity agreement shall be in addition to any liability which the Company and the Guarantors may otherwise have. (b) If any action, suit or proceeding shall be brought against the Holders or any Person controlling the Holders in respect of which indemnity may be sought against the Company and the Guarantors, the Holders or such controlling Person shall promptly notify the parties against whom indemnification is being sought (the "indemnifying parties"), and such indemnifying parties shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. The Holders or any such controlling Person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Holders or such controlling Person unless (i) the indemnifying parties have agreed in writing to pay such fees and expenses, (ii) the indemnifying parties have failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both the Holders or such controlling Person and the indemnifying parties and the Holders or such controlling Person shall have been advised in writing by its counsel that representation of such indemnified party and any indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the indemnifying party shall not have the right to assume the defense of such action, suit or proceeding on behalf of the Holders or such controlling Person). It is understood, however, that the indemnifying parties shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for the Holders and controlling Persons not having actual or potential differing interests with the Holders or among themselves, which firm shall be designated in writing by the Holders, and that all such fees and expenses shall be reimbursed as they are incurred but only to the extent that such losses, claims, damages, liabilities or expenses are required to be paid by and indemnified party. The indemnifying parties shall not be liable for any settlement of any such action, suit or proceeding effected without their written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the indemnifying parties agree to indemnify and hold harmless the Holders, to the extent provided in paragraph (a), and any such controlling Person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment. 15 (c) Each Holder, severally and not jointly, agrees to indemnify and hold harmless the Company and the Guarantors, and their directors and officers, and any Person who controls the Company or any Guarantor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the same extent as the indemnity from the Company and the Guarantors to the Holders set forth in paragraph (a) hereof, but only with respect to information relating to the Holders furnished in writing by or on behalf of the Holders expressly for use in the Registration Statement or Prospectus. If any action, suit or proceeding shall be brought against the Company or the Guarantors, any of their directors or officers, or any such controlling Person based on any Registration Statement or Prospectus, and in respect of which indemnity may be sought against the Holders pursuant to this paragraph (c), the Holders shall have the rights and duties given to the Company and the Guarantors by paragraph (b) above (except that if the Company and the Guarantors shall have assumed the defense thereof the Holders shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the Holders' expense), and the Company and the Guarantors, their directors and officers, and any such controlling Person shall have the rights and duties given to the Holders by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Holders may otherwise have. (d) If the indemnification provided for in this Section 8 is unavailable (except if inapplicable according to its terms) to an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Holders on the other hand from their sale of Senior Notes (it being expressly understood and agreed that the relative benefits received by the Company and the Guarantors from the sale of the Senior Notes shall be equal to the amount of net proceeds received by the Company and the Guarantors from the sale of the Series C Notes to the Initial Purchasers), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors on the one hand and the Holders on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors on the one hand and the Holders on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or by the Holders on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Guarantors and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by a pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 8, the Holders shall not be required to 16 contribute any amount in excess of the amount by which the net proceeds received by them in connection with the sale of the Senior Notes exceeds the amount of any damages which the Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 8 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 8 and the representations and warranties of the Company and the Guarantors set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Holders or any Person controlling the Holders, the Company and the Guarantors, their directors or officers or any Person controlling the Company or the Guarantors, (ii) acceptance of any Series C Notes and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to the Holders or any Person controlling the Holders, or to the Company and the Guarantors, their directors or officers or any Person controlling the Company or the Guarantors, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 8. (g) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. SECTION 9. RULE 144A The Company hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. 17 SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Guarantors agree that monetary damages -------- (including the liquidated damages contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not, and will cause the -------------------------- Guarantors not to, on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor the Guarantors has previously entered into any agreement granting any registration rights with respect to its securities to any Person which remains in effect as of the date hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Senior Notes. The Company will not take any -------------------------------------- action, or permit any change to occur, with respect to the Senior Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be ---------------------- amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered. (e) Notices. All notices and other communications provided for or ------- permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and 18 (ii) if to the Company or a Guarantor: AmeriCredit Corp. 200 Bailey Avenue Fort Worth, TX 76107 Telecopier No.: (817) 882-7101 Attention: Chief Financial Officer With a copy to: Jenkens & Gilchrist, P.C. 1445 Ross Avenue, Suite 3200 Dallas, TX 75202 Telecopier No.: (214) 855-4300 Attention: L. Steven Leshin, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of ---------------------- and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ------------- ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions ------------ contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, 19 legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the other Operative ---------------- Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [signature page follows] 20 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. AmeriCredit Corp. AmeriCredit Premium Finance, Inc. By________________________ By_______________________ Daniel E. Berce Daniel E. Berce Vice Chairman and Chief Financial Officer President, Chief Financial Officer and Treasurer AmeriCredit Financial Services, Inc. Americredit Corporation of California By________________________ By_______________________ Daniel E. Berce Daniel E. Berce Vice Chairman and Chief Financial Officer Vice Chairman and Chief Financial Officer AmeriCredit Operating Co., Inc. ACF Investment Corp. By________________________ By_______________________ Daniel E. Berce Daniel E. Berce Vice Chairman and Chief Financial Officer Vice Chairman and Chief Financial Officer Salomon Brothers Inc Credit Suisse First Boston Corporation By: Salomon Brothers Inc By________________________ Director 21 EX-12.1 6 COMPUTATION OF RATIOS EXHIBIT 12.1 AMERICREDIT CORP. STATEMENT RE COMPUTATION OF RATIOS (dollars in thousands)
SIX MONTHS ENDED YEARS ENDED JUNE 30, DECEMBER 31, -------------------------------------- ---------------------- 1995 1996 1997 1996 1997 ------ ------ ------ ------ ------ COMPUTATION OF EARNINGS: Income before income taxes $10,018 $34,256 $62,925 $28,080 $44,512 Interest expense (none) capitalized) 4,015 13,129 16,312 6,612 12,045 ------- ------- ------- ------- ------- $14,033 $47,385 $79,237 $34,692 $56,557 ======= ======= ======= ======= ======= COMPUTATION OF FIXED CHARGES: Interest expenses $ 4,015 $13,129 $16,312 $ 6,612 $12,045 ------- ------- ------- ------- ------- Total fixed charges $ 4,015 $13,129 $16,312 $ 6,612 $12,045 ======= ======= ======= ======= ======= RATIO OF EARNINGS TO FIXED CHARGES 3.5x 3.6x 4.9x 5.2x 4.7x ---- ---- ---- ---- ----
EX-21.1 7 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1 AMERICREDIT CORP. SUBSIDIARIES OF THE COMPANY Subsidiary Ownership % State of Incorporation ---------- ----------- ---------------------- AmeriCredit Operating Co., Inc. 100% Delaware AmeriCredit Financial Services, Inc. 100% Delaware ACF Investment Corp. 100% Delaware AmeriCredit Premium Finance, Inc. 100% Delaware AmeriCredit Receivables Finance Corp. 100% Delaware AFS Funding Corp. 100% Nevada AmeriCredit Receivables Finance Corp. 1995-A 100% Delaware Americredit Corporation of California 100% California CP Funding Corp. 100% Nevada EX-23.1 8 CONSENT OF COOPERS & LYBRAND L.L.P. Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this registration statement on Form S-4 (Registration No. 333-46993) of our report, which includes an explanatory paragraph regarding AmeriCredit Corp. changing its method of accounting for transfers and servicing of financial assets and extinguishment of liabilities, dated August 6, 1997, on our audits of the consolidated financial statements of AmeriCredit Corp. as of June 30, 1997 and 1996, and for the years ended June 30, 1997, 1996 and 1995. We also consent to the reference to our firm under the caption "Experts." /s/Coopers & Lybrand L.L.P. Fort Worth, Texas March 25, 1998 EX-25.1 9 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE EXHIBIT 25.1 Registration No. 33-60067 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE BANK ONE, N.A. f/k/a BANK ONE, COLUMBUS, N.A. Not Applicable 31-4148768 (State of Incorporation (I.R.S. Employer if not a national bank) Identification No.) 100 East Broad Street, Columbus, Ohio 43271-0181 (Address of trustee's principal (Zip Code) executive offices) Jon Beacham c/o Bank One Trust Company, NA 100 East Broad Street Columbus, Ohio 43271-0181 (614) 248-6229 (Name, address and telephone number of agent for service) AMERICREDIT CORPORATION (Exact name of obligor as specified in its charter) Texas 75-2291093 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 200 Bailey Avenue 76107 Fort Worth, Texas (Zip Code) (Address of principal executive office) 9 1/4% SERIES C AND SERIES D SENIOR NOTES DUE 2004 (Title of the Indenture securities) GENERAL 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. Comptroller of the Currency, Washington, D.C. Federal Reserve Bank of Cleveland, Cleveland, Ohio Federal Deposit Insurance Corporation, Washington, D.C. The Board of Governors of the Federal Reserve System, Washington, D.C. (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. The trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee. 16. LIST OF EXHIBITS LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBITS HERETO.) Exhibit 1 - A copy of the Articles of Association of the trustee as now in effect. Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and Exchange Commission File No. 33-50709. Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3 relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and Exchange Commission File No. 33-50709. Exhibit 4 - A copy of the Bylaws of the trustee as now in effect. Exhibit 5 - Not applicable. Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended. Exhibit 7 - Report of Condition of the trustee as of the close of business on June 30, 1997, published pursuant to the requirements of the Comptroller of the Company, see Exhibit 7 to Form T-1, filed in connection with Form S-4 relating to National Energy Group, Inc.10 3/4% Senior Notes due 2006, Securities and Exchange Commission File No. 333-38075. Exhibit 8 - Not applicable. Exhibit 9 - Not applicable. Items 3 through 15 are not answered pursuant to General Instruction B which requires responses to Item 1, 2 and 16 only, if the obligor is not in default. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, Bank One, NA, a national banking association organized under the National Banking Act, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in Columbus, Ohio, on March 18, 1998. Bank One, NA By: /s/ Jon Beacham ---------------------- Jon Beacham Authorized Signer Exhibit 1 BANK ONE, COLUMBUS, NATIONAL ASSOCIATION ARTICLES OF ASSOCIATION ----------------------- For the purpose of organizing an association to carry on the business of banking under the laws of the United States, the following Articles of Association are entered into: FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL ----- ASSOCIATION. SECOND. The main office of the Association shall be in Columbus, County of ------ Franklin, State of Ohio. The general business of the Association shall be conducted at its main office and its branches. THIRD. The Board of Directors of this Association shall consist of not less ----- than five nor more than twenty-five Directors, the exact number of Directors within such minimum and maximum limits to be fixed and determined from time-to-time by resolution of the shareholders at any annual or special meeting thereof, provided, however, that the Board of Directors, by resolution of a majority thereof, shall be authorized to increase the number of its members by not more than two between regular meetings of the shareholders. Each Director, during the full term of his directorship, shall own, as qualifying shares, the minimum number of shares of either this Association or of its parent bank holding company in accordance with the provisions of applicable law. Unless otherwise provided by the laws of the United States, any vacancy in the Board of Directors for any -- 9/13/91 reason, including an increase in the number thereof, may be filled by action of the Board of Directors. -- 9/13/91 FOURTH. The annual meeting of the shareholders for the election of Directors ------ and the transaction of whatever other business may be brought before said meeting shall be held at the main office of this Association or such other place as the Board of Directors may designate, on the day of each year specified therefor in the By-Laws, but if no election is held on that day, it may be held on any subsequent business day according to the provisions of law; and all elections shall be held according to such lawful regulations as may be prescribed by the Board of Directors. FIFTH. The authorized amount of capital stock of this Association shall be ----- 2,073,750 shares of common stock of the par value of Ten Dollars ($10) each; but said capital stock may be increased or decreased from time-to- time, in accordance with the provisions of the laws of the United States. No holder of shares of the capital stock of any class of the Association shall have the preemptive or preferential right of subscription to any share of any class of stock of this Association, whether now or hereafter authorized or to any obligations convertible into stock of this Association, issued or sold, nor any right of subscription to any thereof other than such, if any, as the Board of Directors, in its discretion, may from time-to-time determine and at such price as the Board of Directors may from time-to-time fix. This Association, at any time and from time-to-time, may authorize and issue debt obligations, whether or not subordinated, without the approval of the shareholders. -- 9/13/91 SIXTH. The Board of Directors shall appoint one of its members President of ----- the Association, who shall be Chairman of the Board, unless the Board appoints another director to be the Chairman. The Board of Directors shall have the power to appoint one or more Vice Presidents and to appoint a Secretary and such other officers and employees as may be required to transact the business of this Association. The Board of Directors shall have the power to define the duties of the officers and employees of this Association; to fix the salaries to be paid to them; to dismiss them; to require bonds from them and to fix the penalty thereof; to regulate the manner in which any increase of the capital of this Association shall be made; to manage and administer the business and affairs of this Association; to make all By-Laws that it may be lawful for them to make; and generally to do and perform all acts that it may be legal for a Board of Directors to do and perform. SEVENTH. The Board of Directors shall have the power to change the location ------- of the main office to any other place within the limits of the City of Columbus, Ohio, without the approval of the shareholders but subject to the approval of the Comptroller of the Currency; and shall have the power to establish or change the location of any branch or branches of this Association to any other location, without the approval of the shareholders but subject to the approval of the Comptroller of the Currency. EIGHTH. The corporate existence of this Association shall continue until ------ terminated in accordance with the laws of the United States. -- 9/13/91 NINTH. The Board of Directors of this Association, or any three or more ----- shareholders owning, in the aggregate, not less than 10 percent of the stock of this Association, may call a special meeting of shareholders at any time. Unless otherwise provided by the laws of the United States, a notice of the time, place and purpose of every annual and special meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least ten days prior to the date of such meeting to each shareholder of record at his address as shown upon the books of this Association. -- 9/13/91 TENTH. Every person who is or was a Director, officer or employee of the ----- Association or of any other corporation which he served as a Director, officer or employee at the request of the Association as part of his regularly assigned duties may be indemnified by the Association in accordance with the provisions of this paragraph against all liability (including, without limitation, judgments, fines, penalties and settlements) and all reasonable expenses (including, without limitation, attorneys' fees and investigative expenses) that may be incurred or paid by him in connection with any claim, action, suit or proceeding, whether civil, criminal or administrative (all referred to hereafter in this paragraphs as "Claims") or in connection with any appeal relating thereto in which he may become involved as a party or otherwise or with which he may be threatened by reason of his being or having been a Director, officer or employee of the Association or such other corporation, or by reason of any action taken or omitted by him in his capacity as such Director, officer or employee, whether or not he continues to be such at the time such liability or expenses are incurred, provided that nothing contained in this paragraph shall be construed to permit indemnification of any such person who is adjudged guilty of, or liable for, willful misconduct, gross neglect of duty or criminal acts, unless, at the time such indemnification is sought, such indemnification in such instance is permissible under applicable law and regulations, including published rulings of the Comptroller of the Currency or other appropriate supervisory or regulatory authority, and provided further that there shall be no indemnification of directors, officers, or employees against expenses, penalties, or other payments incurred in an administrative proceeding or action instituted by an appropriate regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative -- 9/13/91 action by an individual or individuals in the form of payments to the Association. Every person who may be indemnified under the provisions of this paragraph and who has been wholly successful on the merits with respect to any Claim shall be entitled to indemnification as of right. Except as provided in the preceding sentence, any indemnification under this paragraph shall be at the sole discretion of the Board of Directors and shall be made only if the Board of Directors or the Executive Committee acting by a quorum consisting of Directors who are not parties to such Claim shall find or if independent legal counsel (who may be the regular counsel of the Association) selected by the Board of Directors or Executive Committee whether or not a disinterested quorum exists shall render their opinion that in view of all of the circumstances then surrounding the Claim, such indemnification is equitable and in the best interests of the Association. Among the circumstances to be taken into consideration in arriving at such a finding or opinion is the existence or non-existence of a contract of insurance or indemnity under which the Association would be wholly or partially reimbursed for such indemnification, but the existence or non-existence of such insurance is not the sole circumstance to be considered nor shall it be wholly determinative of whether such indemnification shall be made. In addition to such finding or opinion, no indemnification under this paragraph shall be made unless the Board of Directors or the Executive Committee acting by a quorum consisting of Directors who are not parties to such Claim shall find or if independent legal counsel (who may be the regular counsel of the Association) selected by the Board of Directors or Executive Committee whether or not a disinterested quorum exists shall render their opinion that the Director, officer or employee acted in good faith in what he reasonably believed to be the best interests of the Association or such other corporation and further in the case of any criminal action or proceeding, that the Director, officer or employee reasonably -- 9/13/91 believed his conduct to be lawful. Determination of any Claim by judgment adverse to a Director, officer or employee by settlement with or without Court approval or conviction upon a plea of guilty or of nolocontendere or -------------- its equivalent shall not create a presumption that a Director, officer or employee failed to meet the standards of conduct set forth in this paragraph. Expenses incurred with respect to any Claim may be advanced by the Association prior to the final disposition thereof upon receipt of an undertaking satisfactory to the Association by or on behalf of the recipient to repay such amount unless it is ultimately determined that he is entitled to indemnification under this paragraph. The rights of indemnification provided in this paragraph shall be in addition to any rights to which any Director, officer or employee may otherwise be entitled by contract or as a matter of law. -- 9/13/91 Every person who shall act as a Director, officer or employee of this Association shall be conclusively presumed to be doing so in reliance upon the right of indemnification provided for in this paragraph. ELEVENTH. These Articles of Association may be amended at any regular or -------- special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of this Association, unless the vote of the holders of a greater amount of stock is required by law, and in that case by the vote of the holders of such greater amount. -- 9/13/91 Exhibit 4 BY-LAWS ------- OF -- BANK ONE, COLUMBUS, NATIONAL ASSOCIATION ---------------------------------------- ARTICLE I --------- MEETING OF SHAREHOLDERS ----------------------- SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders - ----------------------------- of the Bank for the election of Directors and for the transaction of such business as may properly come before the meeting shall be held at its main banking house, or other convenient place duly authorized by the Board of Directors, on the third Monday of January of each year, or on the next succeeding banking day, if the day fixed falls on a legal holiday. If from any cause, an election of directors is not made on the day fixed for the regular meeting of shareholders or, in the event of a legal holiday, on the next succeeding banking day, the Board of Directors shall order the election to be held on some subsequent day, as soon thereafter as practicable, according to the provisions of law; and notice thereof shall be given in the manner herein provided for the annual meeting. Notice of such annual meeting shall be given by or under the direction of the Secretary or such other officer as may be designated by the Chief Executive Officer by first-class mail, postage prepaid, to all shareholders of record of the Bank at their respective addresses as shown upon the books of the Bank mailed not less than ten days prior to the date fixed for such meeting. SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this - ------------------------------- Bank may be called at any time by the Board of Directors or by any three or more shareholders owning, in the aggregate, not less than ten percent of the stock of this Bank. The notice of any special meeting of the shareholders called by the Board of Directors, stating the time, place and purpose of the meeting, shall be given by or under the direction of the Secretary, or such other officer as is designated by the Chief Executive Officer, by first-class mail, postage prepaid, to all shareholders of record of the Bank at their respective addresses as shown upon the books of the Bank, mailed not less than ten days prior to the date fixed for such meeting. -- 1/18/94 Any special meeting of shareholders shall be conducted and its proceedings recorded in the manner prescribed in these By-Laws for annual meetings of shareholders. SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may - ------------------------------------------------- designate a person to be the Secretary of the meetings of shareholders. In the absence of a presiding officer, as designated in these By-Laws, the Board of Directors may designate a person to act as the presiding officer. In the event the Board of Directors fails to designate a person to preside at a meeting of shareholders and a Secretary of such meeting, the shareholders present or represented shall elect a person to preside and a person to serve as Secretary of the meeting. The Secretary of the meetings of shareholders shall cause the returns made by the judges and election and other proceedings to be recorded in the minute book of the Bank. The presiding officer shall notify the directors-elect of their election and to meet forthwith for the organization of the new board. The minutes of the meeting shall be signed by the presiding officer and the Secretary designated for the meeting. SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many - --------------------------------- as three shareholders to be judges of the election, who shall hold and conduct the same, and who shall, after the election has been held, notify, in writing over their signatures, the secretary of the shareholders' meeting of the result thereof and the names of the Directors elected; provided, however, that upon failure for any reason of any judge or judges of election, so appointed by the directors, to serve, the presiding officer of the meeting shall appoint other shareholders or their proxies to fill the vacancies. The judges of election at the request of the chairman of the meeting, shall act as tellers of any other vote by ballot taken at such meeting, and shall notify, in writing over their signatures, the secretary of the Board of Directors of the result thereof. SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of - ---------------------- record, who is qualified to vote under the provisions of Federal Law, shall have the right to vote the number of shares of record in his name for as many persons as there are Directors to be elected, or to cumulate such shares as provided by Federal Law. In deciding all other questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock of record in his name. Shareholders may vote by proxy duly authorized in writing. All proxies used at the annual meeting shall be secured for that meeting only, or any adjournment thereof, and shall be dated, and if not dated -- 1/18/94 by the shareholder, shall be dated as of the date of receipt thereof. No officer or employee of this Bank may act as proxy. SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the - --------------------- capital stock of the Bank, eligible to be voted, present either in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of shareholders, but shareholders present at any meeting and constituting less than a quorum may, without further notice, adjourn the meeting from time to time until a quorum is obtained. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association. -- 1/18/94 ARTICLE II ---------- DIRECTORS --------- SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be - ------------------------------------- managed by the Board of Directors. Each director of the Bank shall be the beneficial owner of a substantial number of shares of BANC ONE CORPORATION and shall be employed either in the position of Chief Executive Officer or active leadership within his or her business, professional or community interest which shall be located within the geographic area in which the Bank operates, or as an executive officer of the Bank. A director shall not be eligible for nomination and re-election as a director of the Bank if such person's executive or leadership position within his or her business, professional or community interests which qualifies such person as a director of Bank terminates. The age of 70 is the mandatory retirement age as a director of the Bank. When a person's eligibility as director of the Bank terminates, whether because of change in share ownership, position, residency or age, within 30 days after such termination, such person shall submit his resignation as a director to be effective at the pleasure of the Board provided, however, that in no event shall such person be nominated or elected as a director. Provided, however, following a person's retirement or resignation as a director because of the age limitations herein set forth with respect to election or re-election as a director, such person may, in special or unusual circumstances, and at the discretion of the Board, be elected by the directors as a Director Emeritus of the Bank for a limited period of time. A Director Emeritus shall have the right to participate in board meetings but shall be without the power to vote and shall be subject to re-election by the Board at its organizational meeting following the Bank's annual meeting of shareholders. SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification - ----------------------------- prescribed by law. No person elected a director may exercise any of the powers of his office until he has taken the oath of such office. SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until the - ---------------------------------------- annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to his prior death, resignation, or removal from office. Whenever any vacancy shall occur among the directors, the remaining directors shall constitute the directors of the Bank until such vacancy is filled by the remaining directors, and any director so appointed shall hold office for the unexpired -- 1/18/94 term of his or her successor. Notwithstanding the foregoing, each director shall hold office and serve at the pleasure of the Board. SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share- - ----------------------------------- holders shall meet for organization of the new board at the time fixed by the presiding officer of the annual meeting. If at the time fixed for such meeting there is no quorum present, the Directors in attendance may adjourn from time to time until a quorum is obtained. A majority of the number of Directors elected by the shareholders shall constitute a quorum for the transaction of business. SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of Directors - ------------------------------- shall be held on the third Monday of each calendar month excluding March and July, which meeting will be held at 4:00 p.m. When any regular meeting of the Board falls on a holiday, the meeting shall be held on such other day as the Board may previously designate or should the Board fail to so designate, on such day as the Chairman of the Board of President may fix. Whenever a quorum is not present, the directors in attendance shall adjourn the meeting to a time not later than the date fixed by the Bylaws for the next succeeding regular meeting of the Board. SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors - ------------------------------- shall be held at the call of the Chairman of the Board or President, or at the request of two or more Directors. Any special meeting may be held at such place in Franklin County, Ohio, and at such time as may be fixed in the call. Written or oral notice shall be given to each Director not later than the day next preceding the day on which special meeting is to be held, which notice may be waived in writing. -- 1/18/94 The presence of a Director at any meeting of the Board shall be deemed a waiver of notice thereof by him. Whenever a quorum is not present the Directors in attendance shall adjourn the special meeting from day to day until a quorum is obtained. SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum at - --------------------- any meeting, except when otherwise provided by law; but a lesser number may adjourn any meeting, from time-to-time, and the meeting may be held, as adjourned, without further notice. When, however, less than a quorum as herein defined, but at least one-third and not less than two of the authorized number of Directors are present at a meeting of the Directors, business of the Bank may be transacted and matters before the Board approved or disapproved by the unanimous vote of the Directors present. SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall - --------------------------- receive such fees for, and transportation expenses incident to, attendance at Board and Board Committee Meetings and such fees for service as a Director irrespective of meeting attendance as from time to time are fixed by resolution of the Board; provided, however, that payment hereunder shall not be made to a Director for meetings attended and/or Board service which are not for the Bank's sole benefit and which are concurrent and duplicative with meetings attended or board service for an affiliate of the Bank for which the Director receives payment; and provided further, that payment hereunder shall not be made in the case of any Director in the regular employment of the Bank or of one of its affiliates. SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the - ---------------------------------- Board of Directors known as the Executive Committee which shall possess and exercise, when the Board is not in session, all powers of the Board that may lawfully be delegated. The Executive Committee shall also exercise the powers of the Board of Directors in accordance with the Provisions of the "Employees Retirement Plan" and the "Agreement and Declaration of Trust" as the same now exist or may be amended hereafter. The Executive Committee shall consist of not fewer than four board members, including the Chairman of the Board and President of the Bank, one of whom, as hereinafter required by these By-laws, shall be the Chief Executive Officer. The other members of the Committee shall be appointed by the Chairman of the Board or by the President, with the approval of the Board and shall continue as members of the Executive Committee until their successors are appointed, provided, however, that any member of the Executive Committee may be removed -- 1/18/94 by the Board upon a majority vote thereof at any regular or special meeting of the Board. The Chairman or President shall fill any vacancy in the Committee by the appointment of another Director, subject to the approval of the Board of Directors. The regular meetings of the Executive Committee shall be held on a regular basis as scheduled by the Board of Directors. Special meetings of the Executive Committee shall be held at the call of the Chairman or President or any two members thereof at such time or times as may be designated. In the event of the absence of any member or members of the Committee, the presiding member may appoint a member or members of the Board to fill the place or places of such absent member or members to serve during such absence. Not fewer than three members of the Committee must be present at any meeting of the Executive Committee to constitute a quorum, provided, however that with regard to any matters on which the Executive Committee shall vote, a majority of the Committee members present at the meeting at which a vote is to be taken shall not be officers of the Bank and, provided further, that if, at any meeting at which the Chairman of the Board and President are both present, Committee members who are not officers are not in the majority, then the Chairman of the Board or President, which ever of such officers is not also the Chief Executive Officer, shall not be eligible to vote at such meeting and shall not be recognized for purposes of determining if a quorum is present at such meeting. When neither the Chairman of the Board nor President are present, the Committee shall appoint a presiding officer. The Executive Committee shall keep a record of its proceedings and report its proceedings and the action taken by it to the Board of Directors. SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE. There - ------------------------------------------------------------------------ shall be a standing committee of the Board of Directors known as the Community Reinvestment Act and Compliance Policy Committee the duties of which shall be, at least once in each calendar year, to review, develop and recommend policies and programs related to the Bank's Community Reinvestment Act Compliance and regulatory compliance with all existing statutes, rules and regulations affecting the Bank under state and federal law. Such Committee shall provide and promptly make a full report of such review of current Bank policies with regard to Community Reinvestment Act and regulatory compliance in writing to the Board, with recommendations, if any, which may be necessary to correct any unsatisfactory conditions. Such Committee may, in its discretion, in fulfilling its duties, utilize the Community Reinvestment Act officers of the Bank, Banc One Ohio Corporation and Banc One Corporation and may engage outside Community Reinvestment Act experts, as approved by the Board, to review, develop and recommend policies and programs as herein required. The Community Reinvestment Act and regulatory compliance policies and procedures established and the -- 1/18/94 recommendations made shall be consistent with, and shall supplement, the Community Reinvestment Act and regulatory compliance programs, policies and procedures of Banc One Corporation and Banc One Ohio Corporation. The Community Reinvestment Act and Compliance Policy Committee shall consist of not fewer than four board members, one of whom shall be the Chief Executive Officer and a majority of whom are not officers of the Bank. Not fewer than three members of the Committee, a majority of whom are not officers of the Bank, must be present to constitute a quorum. The Chairman of the Board or President of the Bank, whichever is not the Chief Executive Officer, shall be an ex officio member of the Community Reinvestment Act and Compliance Policy Committee. The Community Reinvestment Act and Compliance Policy Committee, whose chairman shall be appointed by the Board, shall keep a record of its proceedings and report its proceedings and the action taken by it to the Board of Directors. SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known - ------------------------------- as the Trust Management Committee and the Trust Examination Committee appointed as hereinafter provided. SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such - ------------------------------- special committees from time to time as are in its judgment necessary in the interest of the Bank. -- 1/18/94 ARTICLE III ----------- OFFICERS, MANAGEMENT STAFF AND EMPLOYEES ---------------------------------------- SECTION 3.01. OFFICERS AND MANAGEMENT STAFF. - -------------------------------------------- (a) The officers of the Bank shall include a President, Secretary and Security Officer and may include a Chairman of the Board, one or more Vice Chairmen, one or more Vice Presidents (which may include one or more Executive Vice Presidents and/or Senior Vice Presidents) and one or more Assistant Secretaries, all of whom shall be elected by the Board. All other officers may be elected by the Board or appointed in writing by the Chief Executive Officer. The salaries of all officers elected by the Board shall be fixed by the Board. The Board from time-to-time shall designate the President or Chairman of the Board to serve as the Bank's Chief Executive Officer. (b) The Chairman of the Board, if any, and the President shall be elected by the Board from their own number. The President and Chairman of the Board shall be re-elected by the Board annually at the organizational meeting of the Board of Directors following the Annual Meeting of Shareholders. Such officers as the Board shall elect from their own number shall hold office from the date of their election as officers until the organization meeting of the Board of Directors following the next Annual Meeting of Shareholders, provided, however, that such officers may be relieved of their duties at any time by action of the Board in which event all the powers incident to their office shall immediately terminate. (c) Except as provided in the case of the elected officers who are members of the Board, all officers, whether elected or appointed, shall hold office at the pleasure of the Board. Except as otherwise limited by law or these By- laws, the Board assigns to Chief Executive Officer and/or his designees the authority to appoint and dismiss any elected or appointed officer or other member of the Bank's management staff and other employees of the Bank, as the person in charge of and responsible for any branch office, department, section, operation, function, assignment or duty in the Bank. -- 1/18/94 (d) The management staff of the Bank shall include officers elected by the Board, officers appointed by the Chief Executive Officer, and such other persons in the employment of the Bank who, pursuant to written appointment and authorization by a duly authorized officer of the Bank, perform management functions and have management responsibilities. Any two or more offices may be held by the same person except that no person shall hold the office of Chairman of the Board and/or President and at the same time also hold the office of Secretary. (e) The Chief Executive Officer of the Bank and any other officer of the Bank, to the extent that such officer is authorized in writing by the Chief Executive Officer, may appoint persons other than officers who are in the employment of the Bank to serve in management positions and in connection therewith, the appointing officer may assign such title, salary, responsibilities and functions as are deemed appropriate by him, provided, however, that nothing contained herein shall be construed as placing any limitation on the authority of the Chief Executive Officer as provided in this and other sections of these By-Laws. SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Bank - -------------------------------------- shall have general and active management of the business of the Bank and shall see that all orders and resolutions of the Board of Directors are carried into effect. Except as otherwise prescribed or limited by these By- Laws, the Chief Executive Officer shall have full right, authority and power to control all personnel, including elected and appointed officers, of the Bank, to employ or direct the employment of such personnel and officers as he may deem necessary, including the fixing of salaries and the dismissal of them at pleasure, and to define and prescribe the duties and responsibility of all Officers of the Bank, subject to such further limitations and directions as he may from time-to- time deem proper. The Chief Executive Officer shall perform all duties incident to his office and such other and further duties, as may, from time-to-time, be required of him by the Board of Directors or the shareholders. The specification of authority in these By-Laws wherever and to whomever granted shall not be construed to limit in any manner the general powers of delegation granted to the Chief Executive Officer in conducting the business of the Bank. The Chief Executive Officer or, in his absence, the Chairman of the Board or President of the Bank, as designated by the Chief Executive Officer, shall preside at all meetings of shareholders and -- 1/18/94 meetings of the Board. In the absence of the Chief Executive Officer, such officer as is designated by the Chief Executive Officer shall be vested with all the powers and perform all the duties of the Chief Executive Officer as defined by these By-Laws. When designating an officer to serve in his absence, the Chief Executive Officer shall select an officer who is a member of the Board of Directors whenever such officer is available. SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive - ------------------------------------------------------ Officer, the Chairman of the Board, the President, and those officers so designated and authorized by the Chief Executive Officer are authorized for an on behalf of the Bank, and to the extent permitted by law, to make loans and discounts; to purchase or acquire drafts, notes, stock, bonds, and other securities for investment of funds held by the Bank; to execute and purchase acceptances; to appoint, empower and direct all necessary agents and attor-neys; to sign and give any notice required to be given; to demand payment and/or to declare due for any default any debt or obligation due or payable to the Bank upon demand or authorized to be declared due; to foreclose any mort- gages, to exercise any option, privilege or election to forfeit, terminate, extend or renew any lease; to authorize and direct any proceedings for the collection of any money or for the enforcement of any right or obligation; to adjust, settle and compromise all claims of every kind and description in favor of or against the Bank, and to give receipts, releases and discharges therefor; to borrow money and in connection therewith to make, execute and deliver notes, bonds or other evidences of indebtedness; to pledge or hypothe- cate any securities or any stocks, bonds, notes or any property real or personal held or owned by the Bank, or to rediscount any notes or other obligations held or owned by the Bank, to employ or direct the employment of all personnel, including elected and appointed officers, and the dismissal of them at pleasure, and in furtherance of and in addition to the powers hereinabove set forth to do all such acts and to take all such proceedings as in his judgment are necessary and incidental to the operation of the Bank. Other persons in the employment of the Bank, including but not limited to officers and other members of the management staff, may be authorized by the Chief Executive Officer, or by an officer so designated and authorized by the chief Executive Officer, to perform the powers set forth above, subject, however, to such limitations and conditions as are set forth in the authorization given to such persons. -- 1/18/94 SECTION 3.04. SECRETARY. The Secretary or such other officers as may be - ------------------------ designated by the Chief Executive Officer shall have supervision and control of the records of the Bank and, subject to the direction of the Chief Executive Officer, shall undertake other duties and functions usually performed by a corporate secretary. Other officers may be designated by the Chief Executive Officer or the Board of Directors as Assistant Secretary to perform the duties of the Secretary. SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of - ------------------------------------- the Board, President, any officer being a member of the Bank's management staff who is also a person in charge of and responsible for any department within the Bank and any other officer to the extent such officer is so designated and authorized by the Chief Executive Officer, the Chairman of the Board, the President, or any other officer who is a member of the Bank's management staff who is in charge of and responsible for any department within the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease, mortgage, transfer, deliver and convey any real or personal property now or hereafter owned by or standing in the name of the Bank or its nominee, or held by this Bank as collateral security, and to execute and deliver such deeds, contracts, leases, assignments, bills of sale, transfers or other papers or documents as may be appropriate in the circumstances; to execute any loan agreement, security agreement, commitment letters and financing statements and other documents on behalf of the Bank as a lender; to execute purchase orders, documents and agreements entered into by the Bank in the ordinary course of business, relating to purchase, sale, exchange or lease of services, tangible personal property, materials and equipment for the use of the Bank; to execute powers of attorney to perform specific or general functions in the name of or on behalf of the Bank; to execute promissory notes or other instruments evidencing debt of the Bank; to execute instruments pledging or releasing securities for public funds, documents submitting public fund bids on behalf of the Bank and public fund contracts; to purchase and acquire any real or personal property including loan portfolios and to execute and deliver such agreements, contracts or other papers or documents as may be appropriate in the circumstances; to execute any indemnity and fidelity bonds, proxies or other papers or documents of like or different character necessary, desirable or incidental to the conduct of its banking business; to execute and deliver settlement agreements or other papers or documents as may be appropriate in connection with a dismissal authorized by Section 3.01(c) of these By-laws; to execute agreements, instruments, documents, contracts or other papers of like or difference character necessary, desirable or incidental to the conduct of its banking business; and to execute and deliver partial releases from -- 1/18/94 and discharges or assignments of mortgages, financing statements and assignments or surrender of insurance policies, now or hereafter held by this Bank. The Chief Executive Officer, Chairman of the Board, President, any officer being a member of the Bank's management staff who is also a person in charge of and responsible for any department within the Bank, and any other officer of the Bank so designated and authorized by the Chief Executive Officer, Chairman of the Board, President or any officer who is a member of the Bank's management staff who is in charge of and responsible for any department within the Bank are authorized for and on behalf of the Bank to sign and issue checks, drafts, and certificates of deposit; to sign and endorse bills of exchange, to sign and countersign foreign and domestic letters of credit, to receive and receipt for payments of principal, interest, dividends, rents, fees and payments of every kind and description paid to the Bank, to sign receipts for property acquired by or entrusted to the Bank, to guarantee the genuineness of signatures on assignments of stocks, bonds or other securities, to sign certifications of checks, to endorse and deliver checks, drafts, warrants, bills, notes, certificates of deposit and acceptances in all business transactions of the Bank. Other persons in the employment of the Bank and of its subsidiaries, including but not limited to officers and other members of the management staff, may be authorized by the Chief Executive Officer, Chairman of the Board, President or by an officer so designated by the Chief Executive Officer, Chairman of the Board, or President to perform the acts and to execute the documents set forth above, subject, however, to such limitations and conditions as are contained in the authorization given to such person. SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall - ------------------------------- be bonded for the honest and faithful performance of their duties for such amount as may be prescribed by the Board of Directors. -- 1/18/94 ARTICLE IV ---------- TRUST DEPARTMENT ---------------- SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to - ------------------------------- this Bank under the provisions of Federal Law and Regulations of the Comptroller of the Currency, there shall be maintained a separate Trust Department of the Bank, which shall be operated in the manner specified herein. SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee - ----------------------------------------- known as the Trust Management Committee, consisting of at least five members, a majority of whom shall not be officers of the Bank. The Committee shall consist of the Chairman of the Board who shall be Chairman of the Com-mittee, the President, and at least three other Directors appointed by the Board of Directors and who shall continue as members of the Committee until their successors are appointed. Any vacancy in the Trust Management Committee may be filled by the Board at any regular or special meeting. In the event of the absence of any member or members, such Committee may, in its discretion, appoint members of the Board to fill the place of such absent members to serve during such absence. Three members of the Committee shall constitute a quorum. Any member of the Committee may be removed by the Board by a majority vote at any regular or special meeting of the Board. The Committee shall meet at such times as it may determine or at the call of the Chairman, or President or any two members thereof. The Trust Management Committee, under the general direction of the Board of Directors, shall supervise the policy of the Trust Department which shall be formulated and executed in accordance with Law, Regulations of the Comptroller of the Currency, and sound fiduciary principles. -- 1/18/94 SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Commit- - ------------------------------------------ tee known as the Trust Examination Committee, consisting of three directors appointed by the Board of Directors and who shall continue as members of the committee until their successors are appointed. Such members shall not be active officers of the Bank. Two members of the Committee shall constitute a quorum. Any member of the Committee may be removed by the Board by a majority vote at any regular or special meeting of the Board. The Committee shall meet at such times as it may determine or at the call of two members thereof. This Committee shall, at least once during each calendar year and within fifteen months of the last such audit, or at such other time(s) as may be required by Regulations of the Comptroller of the Currency, make suitable audits of the Trust Department or cause suitable audits to be made by auditors responsible only to the Board of Directors, and at such time shall ascertain whether the Department has been administered in accordance with Law, Regula- tions of the Comptroller of the Currency and sound fiduciary principles. The Committee shall promptly make a full report of such audits in writing to the Board of Directors of the Bank, together with a recommendation as to what action, if any, may be necessary to correct any unsatisfactory condition. A report of the audits together with the action taken thereon shall be noted in the Minutes of the Board of Directors and such report shall be a part of the records of this Bank. SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management - ------------------------- and supervision of an officer of the Bank or of the trust affiliate of the Bank designated by and subject to the advice and direction of the Chief Executive Officer. Such officer having supervisory responsibility over the Trust Department shall do or cause to be done all things necessary or proper in carrying on the business of the Trust Department in accordance with provisions of law and applicable regulations. SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may - ---------------------------------- be carried in the name of the Bank in its fiduciary capacity, in the name of Bank, or in the name of a nominee or nominees. -- 1/18/94 SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary - -------------------------------- capacity awaiting investment or distribution shall not be held uninvested or undistributed any longer than is reasonable for the proper management of the account and shall be invested in accordance with the instrument establishing a fiduciary relationship and local law. Where such instrument does not specify the character or class of investments to be made and does not vest in the Bank any discretion in the matter, funds held pursuant to such instrument shall be invested in any investment which corporate fiduciaries may invest under local law. The investments of each account in the Trust Department shall be kept separate from the assets of the Bank, and shall be placed in the joint custody or control of not less than two of the officers or employees of the Bank or of the trust affiliate of the Bank designated for the purpose by the Trust Management Committee. SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of - ------------------------------------- the Board, President, any officer of the Trust Department, and such other officers of the trust affiliate of the Bank as are specifically designated and authorized by the Chief Executive Officer, the President, or the officer in charge of the Trust Department, are hereby authorized, on behalf of this Bank, to sell, assign, lease, mortgage, transfer, deliver and convey any real property or personal property and to purchase and acquire any real or personal property and to execute and deliver such agreements, contracts, or other papers and documents as may be appropriate in the circumstances for property now or hereafter owned by or standing in the name of this Bank, or its nominee, in any fiduciary capacity, or in the name of any principal for whom this Bank may now or hereafter be acting under a power of attorney, or as agent and to execute and deliver partial releases from any discharges or assignments or mortgages and assignments or surrender of insurance policies, to execute and deliver deeds, contracts, leases, assignments, bills of sale, transfers or such other papers or documents as may be appropriate in the circumstances for property now or hereafter held by this Bank in any fiduciary capacity or owned by any principal for whom this Bank may now or hereafter be acting under a power of attorney or as agent; to execute and deliver settlement agreements or other papers or documents as may be appropriate in connection with a dismissal authorized by Section 3.01(c) of these By-laws; provided that the signature of any such person shall be attested in each case by any officer of the Trust Department or by any other person who is specifically authorized by the Chief Executive Officer, the President or the officer in charge of the Trust Department. -- 1/18/94 The Chief Executive Officer, Chairman of the Board, President, any officer of the Trust Department and such other officers of the trust affiliate of the Bank as are specifically designated and authorized by the Chief Executive Officer, the President, or the officer in charge of the Trust Department, or any other person or corporation as is specifically authorized by the Chief Executive Officer, the President or the officer in charge of the Trust Department, are hereby authorized on behalf of this Bank, to sign any and all pleadings and papers in probate and other court proceedings, to execute any indemnity and fidelity bonds, trust agreements, proxies or other papers or documents of like or different character necessary, desirable or incidental to the appointment of the Bank in any fiduciary capacity and the conduct of its business in any fiduciary capacity; also to foreclose any mortgage, to execute and deliver receipts for payments of principal, interest, dividends, rents, fees and payments of every kind and description paid to the Bank; to sign receipts for property acquired or entrusted to the Bank; also to sign stock or bond certificates on behalf of this Bank in any fiduciary capacity and on behalf of this Bank as transfer agent or registrar; to guarantee the genuineness of signatures on assignments of stocks, bonds or other securities, and to authenticate bonds, debentures, land or lease trust certificates or other forms of security issued pursuant to any indenture under which this Bank now or hereafter is acting as Trustee. Any such person, as well as such other persons as are specifically authorized by the Chief Executive Officer or the officer in charge of the Trust Department, may sign checks, drafts and orders for the payment of money executed by the Trust Department in the course of its business. SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any - ------------------------------ officer of the Trust Department, any officer of the trust affiliate of the Bank and such other persons as may be specifically authorized by Resolution of the Trust Management Committee or the Board of Directors, may vote shares of stock of a corporation of record on the books of the issuing company in the name of the Bank or in the name of the Bank as fiduciary, or may grant proxies for the voting of such stock of the granting if same is permitted by the instrument under which the Bank is acting in a fiduciary capacity, or by the law applicable to such fiduciary account. In the case of shares of stock which are held by a nominee of the Bank, such shares may be voted by such person(s) authorized by such nominee. -- 1/18/94 ARTICLE V --------- STOCKS AND STOCK CERTIFICATES ----------------------------- SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be - --------------------------------- evidenced by certificates which shall bear the signature of the Chairman of the Board, the President, or a Vice President (which signature may be engraved, printed or impressed), and shall be signed manually by the Secretary, or any other officer appointed by the Chief Executive Officer for that purpose. In case any such officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such before such certificate is issued, it may be issued by the Bank with the same effect as if such officer had not ceased to be such at the time of its issue. Each such certificate shall bear the corporate seal of the Bank, shall recite on its fact that the stock represented thereby is transferable only upon the books of the Bank properly endorsed and shall recite such other information as is required by law and deemed appropriate by the Board. The corporate seal may be facsimile engraved or printed. SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall - --------------------------------------- be transferable only upon the stock transfer books of the Bank and except as hereinafter provided, no transfer shall be made or new certificates issued except upon the surrender for cancellation of the certificate or certificates previously issued therefor. In the case of the loss, theft, or destruction of any certificate, a new certificate may be issued in place of such certificate upon the furnishing of any affidavit setting forth the circumstances of such loss, theft, or destruction and indemnity satisfactory to the Chairman of the Board, the President, or a Vice President. The Board of Directors, or the Chief Executive Officer, may authorize the issuance of a new certificate therefor without the furnishing of indemnity. Stock Transfer Books, in which all transfers of stock shall be recorded, shall be provided. The stock transfer books may be closed for a reasonable period and under such conditions as the Board of Directors may at any time determine for any meeting of shareholders, the payment of dividends or any other lawful purpose. In lieu of closing the transfer books, the Board may, in its discretion, fix a record date -- 1/18/94 and hour constituting a reasonable period prior to the day designated for the holding of any meeting of the shareholders or the day appointed for the payment of any dividend or for any other purpose at the time as of which shareholders entitled to notice of and to vote at any such meeting or to receive such dividend or to be treated as shareholders for such other purpose shall be determined, and only shareholders of record at such time shall be entitled to notice of or to vote at such meeting or to receive such dividends or to be treated as shareholders for such other purpose. -- 1/18/94 ARTICLE VI ---------- MISCELLANEOUS PROVISIONS ------------------------ SECTION 6.01. SEAL. The impression made below is an impression of the seal - ------------------- adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL ASSOCIATION. The Seal may be affixed by any officer of the Bank to any document executed by an authorized officer on behalf of the Bank, and any officer may certify any act, proceedings, record, instrument or authority of the Bank. SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive - ---------------------------- Committee, the Bank and each of its Branches shall be open for business on such days and during such hours as the Chief Executive Officer of the Bank shall, from time to time, prescribe. SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles - -------------------------- of Association, the returns of the judges of elections, the By-Laws and any amendments thereto, the proceedings of all regular and special meetings of the shareholders and of the Board of Directors, and reports of the committees of the Board of Directors shall be recorded in the minute book of the Bank. The minutes of each such meeting shall be signed by the presiding Officer and attested by the secretary of the meetings. SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a - ----------------------------------- majority of the Directors. -- 1/18/94 EXHIBIT 6 Securities and Exchange Commission Washington, D.C. 20549 CONSENT ------- The undersigned, designated to act as Trustee under the Indenture for Americredit Corporation described in the attached Statement of Eligibility and Qualification, does hereby consent that reports of examinations by Federal, State, Territorial, or District Authorities may be furnished by such authorities to the Commission upon the request of the Commission. This Consent is given pursuant to the provision of Section 321(b) of the Trust Indenture Act of 1939, as amended. Bank One, NA Dated: March 18, 1998 By: /s/ Jon Beacham -------------------- Jon Beacham Authorized Signer -- 1/18/94 -----END PRIVACY-ENHANCED MESSAGE-----