<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 000-20202
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CREDIT ACCEPTANCE CORPORATION
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(Exact name of registrant as specified in its charter)
Michigan 38-1999511
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(State or other jurisdiction (IRS Employer Identification)
of incorporation or organization)
25505 West Twelve Mile Road, Suite 3000, Southfield, Michigan 48034-8339
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (248) 353-2700
- -------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
----- -----
Indicate the number of shares outstanding of each of the issuer's class
of common stock, as of the latest practicable date.
Outstanding at
Class May 14, 1997
----- --------------
Common Stock - $.01 par value 46,076,448
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -
As of December 31, 1996 and March 31, 1997 ............................... 1
Consolidated Income Statements -
Three months ended March 31, 1996 and
March 31, 1997 ........................................................... 2
Consolidated Statements of Cash Flows -
Three months ended March 31, 1996 and March 31, 1997 ..................... 3
Consolidated Statement of Shareholders' Equity -
Three months ended March 31, 1997 ........................................ 4
Notes to Consolidated Financial Statements ............................... 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ......................... 6
Item 3. Quantitative and Qualitative
Disclosures About Market Risk ............................................ 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ......................................... 12
Signatures ........................................................................ 13
Index of Exhibits ................................................................. 14
Exhibits .......................................................................... 15
</TABLE>
<PAGE> 3
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of 12/31/96 As of 3/31/97
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(Dollars in thousands) (Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 229 $ 186
Investments 6,320 6,673
Installment contracts receivable 1,042,146 1,132,979
Allowance for credit losses (12,195) (13,665)
---------- ----------
Installment contracts receivable, net 1,029,951 1,119,314
Floor plan receivables 15,493 15,667
Notes receivable 2,663 1,746
Property and equipment, net 14,958 16,553
Other assets, net 4,804 5,117
---------- ----------
TOTAL ASSETS $1,074,418 $1,165,256
========== ==========
LIABILITIES
Senior notes 123,400 195,150
Lines of credit 161,482 127,357
Mortgage loan payable to bank 4,017 3,980
Accounts payable and accrued liabilities 29,121 27,046
Income taxes payable 2,569 8,034
Deferred dealer enrollment fees, net 2,264 2,235
Dealer holdbacks, net 496,434 534,162
Deferred income taxes 8,988 8,225
---------- ----------
TOTAL LIABILITIES 828,275 906,189
---------- ----------
SHAREHOLDERS' EQUITY
Common stock 458 461
Paid-in capital 125,398 128,043
Retained earnings 116,486 128,524
Cumulative translation adjustment 3,801 2,039
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 246,143 259,067
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,074,418 $1,165,256
========== ==========
</TABLE>
1
<PAGE> 4
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands,
except per share data) 3 Months Ended 3 Months Ended
3/31/96 3/31/97
-------------- --------------
<S> <C> <C>
REVENUE
Finance charges $ 20,373 $ 30,691
Interest and other income 2,903 6,905
Dealer enrollment fees 964 1,790
Premiums earned 2,365 2,383
---------- ----------
Total revenue 26,605 41,769
COSTS AND EXPENSES
Salaries and wages 2,740 3,810
General and administrative 3,240 4,179
Provision for credit losses 2,726 7,053
Sales and marketing 902 1,898
Provision for claims 757 803
Interest 2,073 5,669
---------- ----------
Total costs and expenses 12,438 23,412
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OPERATING INCOME 14,167 18,357
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Foreign exchange gain(loss) (2) (20)
---------- ----------
INCOME BEFORE INCOME TAXES 14,165 18,337
Provision for income taxes 4,977 6,299
---------- ----------
NET INCOME $ 9,188 $ 12,038
========== ==========
Net income per common share $ 0.20 $ 0.26
========== ==========
Weighted average shares outstanding 46,436,108 46,902,492
========== ==========
</TABLE>
2
<PAGE> 5
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands) 3 Months Ended 3 Months Ended
3/31/96 3/31/97
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 9,188 $ 12,038
Adjustments to reconcile net income to net cash
provided by operating activities -
Provision for deferred income taxes 135 (763)
Depreciation and amortization 323 478
Provision for credit losses 2,726 7,053
Change in operating assets and liabilities -
Accounts payable and accrued liabilities 3,569 (2,075)
Income taxes payable 3,413 5,465
Unearned insurance premiums, insurance reserves, and fees 568 925
Deferred dealer enrollment fees, net 437 (29)
Other assets 694 (313)
--------- ---------
Net cash provided by operating activities 21,053 22,779
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CASH FLOWS FROM INVESTING ACTIVITIES
Principal collected on installment contracts receivable 65,672 95,967
Purchase of marketable securities (735) (353)
Increase in floor plan receivables (1,242) (174)
Decrease in notes receivable 154 917
Purchase of property and equipment (711) (2,073)
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Net cash provided by investing activities 63,138 94,284
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage loan payable to bank (50) (37)
Advances to dealers and payments of dealer holdback (107,838) (155,580)
Net borrowings (repayment) under line of credit agreement 24,018 (34,125)
Proceeds from sale of senior notes - 71,750
Proceeds from stock options exercised - 2,648
Stock issuance costs (34) -
--------- ---------
Net cash used in financing activities (83,904) (115,344)
--------- ---------
Effect of exchange rate changes on cash (287) (1,762)
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NET DECREASE IN CASH 0 (43)
Cash and cash equivalents - beginning of period 1 229
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Cash and cash equivalents - end of period $ 1 $ 186
--------- ---------
</TABLE>
3
<PAGE> 6
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
Translation Retained
(Dollars in thousands) Common Stock Paid-In Capital Adjustment Earnings
------------ --------------- ----------- --------
<S> <C> <C> <C> <C>
Balance as of December 31, 1996 $458 $125,398 $ 3,801 $116,486
Net income - - - 12,038
Foreign currency translation adjustment - - (1,762) -
Stock options exercised 3 2,645 - -
---- -------- ------- --------
Balance as of March 31, 1997 $461 $128,043 $ 2,039 $128,524
==== ======== ======= ========
</TABLE>
4
<PAGE> 7
CREDIT ACCEPTANCE CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. GENERAL
The unaudited consolidated operating results have been prepared on the
same basis as the audited financial statements and, in the opinion of
management, include all adjustments, consisting of normal recurring items,
necessary for a fair presentation of the periods. The results of operations for
interim periods are not necessarily indicative of actual results achieved for
full fiscal years.
As contemplated by the Securities and Exchange Commission under rule
10-01 of Regulation S-X, the accompanying consolidated financial statements and
related notes have been condensed and do not contain certain information
included in the Company's annual consolidated financial statements and notes
thereto. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
2. NET INCOME PER SHARE
The net income per share amounts are based on the average number of
common shares and common stock equivalents outstanding. All per share amounts
have been adjusted to reflect all stock splits declared by the Company.
3. NEW ACCOUNTING STANDARDS
Effective January 1, 1997 the Company adopted Statement of Financial
Accounting Standard No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." The new accounting
standard provides accounting and reporting guidance for transfers and servicing
of financial assets and extinguishments of liabilities occurring after December
31, 1996 and is applied prospectively. The adoption of this accounting standard
has not affected the Company's financial position or results of operations.
Statement of Financial Accounting Standard No. 128 (SFAS 128), "Earnings
per Share," which supersedes APB Opinion No. 15, "Earnings per Share," was
issued in February 1997. SFAS 128 requires dual presentation of basic and
diluted earnings per share (EPS) for complex capital structures on the face of
the income statement. Basic EPS is computed by dividing income by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution from the exercise or conversion of
securities into common stock, such as stock options. SFAS 128 is required to
be adopted for year-end 1997; earlier application is not permitted. The
Company does not expect EPS measured under SFAS 128 to be materially different
than EPS measured under APB No. 15.
Statement of Financial Accounting Standard No. 129, "Disclosure of
Information About Capital Structure," was issued in February 1997. The Company
does not expect it to result in any material change in its financial statements.
5
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1997
Total Revenue. Total revenue increased from $26.6 million for the three
months ended March 31, 1996 to $41.8 million for the same period in 1997,
representing an increase of 57.0%. This increase is primarily due to an
increase in finance charge revenue resulting from an increase in installment
contracts receivable. The increase in installment contracts receivable is
primarily the result of an increase in the number of dealers participating in
the Company's program and an increase in the average contract size. The
Company's growth in loan originations moderated in the latter part of the first
quarter. The Company enrolled 618 new dealers into the Company's
program during the three months ended March 31, 1997, bringing the total number
of dealers as of March 31, 1997 to 5,879 compared to 3,977 as of March 31,
1996.
The average yield on the Company's installment contract portfolio was
approximately 11.7% and 11.3% for the three months ended March 31, 1996 and
1997, respectively. The decline in the average yield principally resulted from
an increase in the percent of installment contracts which were greater than 120
days contractually past due (which were 33.4% and 35.1% of gross installment
contracts as of March 31, 1996 and March 31, 1997, respectively). The increase
in the level of contractual past due contracts, while significant, is mitigated
by the fact that when an installment contract is 120 days contractually past
due, the Company (I) transfers the contract to a non-accrual status; and (ii)
makes a provision to credit losses equal to the earned but unpaid revenue
previously recognized on such installment contract. In addition, the decline
in the average yield was also the result of an increase in the average
outstanding term of the Company's installment contract portfolio.
Also contributing to the increase in total revenue was interest and other
income which increased, as a percent of total revenue, from 10.9% for the three
months ended March 31, 1996 to 16.5% for the same period in 1997. The increase
is primarily due to an increase in revenue earned from a third party's extended
warranty program as the programs continue to be offered by a greater number of
dealers. Premiums earned declined from 8.9% for the three months ended March
31, 1996 to 5.7% for the same period in 1997. This is due to a decrease, as a
percent of total revenue, in premiums earned from the Company's extended
warranty program. Earned dealer enrollment fees increased, as a percent of
total revenue, from 3.6% for the three months ended March 31, 1996 to 4.3% for
the same period in 1997. The increase is due to the continued increase in the
number of dealers enrolled in the Company's financing program.
Salaries and Wages. Salaries and wages, as a percent of total revenue,
decreased from 10.3% for the three months ended March 31, 1996 to 9.1% for the
same period in 1997. The Company continues to benefit from increased
efficiencies which have allowed it to increase revenue with a less than
proportionate increase in personnel costs.
General and Administrative. General and administrative expenses, as a percent
of total revenue, decreased from 12.2% for the three months ended March 31,
1996 to 10.0% for the same period in 1997. This decrease reflects the
Company's ability to benefit from economies-of-scale, increasing revenue with a
less than proportionate increase in general and administrative costs.
Provision for Credit Losses. The amount provided for credit losses, as a
percent of total revenue, increased from 10.2% for the three months ended March
31, 1996 to 16.9% for the same period in 1997. The Company increased its
reserve against advances to dealers primarily due to the application of more
conservative estimates of amounts to be recovered through collection on the
related advance balance through collections on the related installment contract
receivable portfolio.
Sales and Marketing. Sales and marketing expenses, as a percent of total
revenue, increased from 3.4% during the three months ended March 31, 1996 to
4.5% during the same period in 1997. This increase is primarily the result of
increased sales commissions as a result of the increased enrollment of new
dealers into the
6
<PAGE> 9
Company's program, as well as an increase in other costs directly associated
with the enrollment of new dealers.
Provision for Claims. The amount provided for insurance and service contract
claims, as a percent of total revenue, decreased from 2.8% during the three
months ended March 31, 1996 to 1.9% during the same period in 1997. This
decrease corresponds with a decrease, as a percent of total revenue, in
premiums earned from 8.9% for the three months ended March 31, 1996 to 5.7% for
the same period in 1997.
Interest Expense. Interest expense, as a percent of total revenue, increased
from 7.8% for the three months ended March 31, 1996 to 13.6% for the same
period in 1997. The increase, as a percent of revenue, is a result of an
increase in the amount of average outstanding borrowings. The Company expects
to continue to borrow in future periods to assist in funding the continued
growth of the Company.
Operating Income. As a result of the aforementioned factors, operating income
increased from $14.2 million for the three months ended March 31, 1996 to $18.4
million for the same period in 1997, representing an increase of 29.6%.
Foreign Exchange Loss. The Company incurred a foreign exchange loss of $2,000
for the three months ended March 31, 1996 and a foreign exchange loss of
$20,000 for the same period in 1997. The losses result from the effect
of exchange rate fluctuations between the U.S. dollar and foreign currencies
on unhedged intercompany balances between the Company and its
subsidiaries which operate outside the United States.
Provision for Income Taxes. The provision for income taxes increased from $5.0
million during the three months ended March 31, 1996 to $6.3 million during the
same period in 1997. The increase is due to a higher level of pretax income in
1997. For the three months ended March 31, the effective tax rate was 35.1% in
1996 and 34.5% in 1997. The decrease in the effective tax rate is primarily
due to the a higher level of pretax income earned by the Company's United
Kingdom subsidiary, which is taxed at a lower rate.
7
<PAGE> 10
INSTALLMENT CONTRACTS RECEIVABLE
The following table summarizes the composition of installment contracts
receivable at the dates indicated:
<TABLE>
<CAPTION>
AS OF AS OF
(Dollars in thousands) 12/31/96 03/31/97
---------- ----------
(Unaudited)
<S> <C> <C>
Gross installment contracts receivable $1,251,139 $1,360,899
Unearned finance charges (201,760) (219,762)
Unearned insurance premiums, insurance
reserves, and fees (7,233) (8,158)
---------- ----------
Installment contracts receivable $1,042,146 $1,132,979
========== ==========
Non-accrual installment contracts as a percent
of total gross installment contracts 34.1% 35.1%
===== =====
</TABLE>
A summary of changes in gross installment contracts receivable is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
(Dollars in thousands) MARCH 31, 1996 MARCH 31, 1997
------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Balance, beginning of period $790,607 $1,251,139
Gross amount of installment
contracts accepted 203,926 290,981
Cash collections on installment
contracts receivable (87,278) (127,973)
Charge offs (22,134) (46,277)
Currency Translation (a) (6,971)
-------- ----------
Balance, end of period $885,121 $1,360,899
======== ==========
</TABLE>
(a) immaterial
DEALER HOLDBACKS
The following table summarizes the composition of dealer holdbacks at
the dates indicated:
<TABLE>
<CAPTION>
AS OF AS OF
(Dollars in thousands) 12/31/96 3/31/97
-------- ---------
(Unaudited)
<S> <C> <C>
Dealer holdbacks 998,593 $1,086,855
Less: Advances (net of reserves of $8,754
and $14,168 at December 31, 1996
and March 31, 1997, respectively) (502,159) (552,693)
--------- ----------
Dealer holdbacks, net $ 496,434 $ 534,162
========= ==========
</TABLE>
8
<PAGE> 11
CREDIT POLICY AND EXPERIENCE
The Company maintains an allowance for credit losses which, in the
opinion of management, adequately reserves against expected future losses in
the portfolio of receivables. The risk of loss to the Company related to the
installment contracts receivable balance relates primarily to the earned but
unpaid servicing fee or finance charge recognized on contractually delinquent
accounts. To the extent that the Company does not collect the gross amount of
the contract, the remaining gross installment contracts receivable balance is
charged off against dealer holdbacks, unearned finance charges, and the
allowance for credit losses. The Company also maintains a reserve against
advances to dealers that are not expected to be recovered through collections
on the related installment contract receivable portfolio. Advance balances are
reviewed by management on a monthly basis, and those which are deemed to be
unrecoverable are charged against the reserve. Credit loss experience, changes
in the character and size of the receivables portfolio, the advance balance and
management's judgment are primary factors used in assessing the overall
adequacy of the allowance and advance reserve and the resulting provisions for
credit losses. Ultimate losses may vary from current estimates and the amount
of the provision, which is a current expense, may be either greater or less
than actual charge offs.
Servicing fees, which are booked as finance charges, are recognized
under the interest method of accounting until the underlying obligation is 120
days contractually past due. At such time, the Company suspends the accrual of
revenue and makes a provision for credit losses equal to the earned but unpaid
revenue. In all cases, installment contracts on which no material payment has
been received for one year are charged off against the related dealer holdback
and the allowance for credit losses. As future payments on any remaining
aggregate contracts from a given dealer are available to recover all advances
from such dealer, the risk of loss to the Company is mitigated.
The following tables set forth information relating to charge offs, the
allowance for credit losses, the reserve on advances, and dealer holdbacks.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
(Dollars in thousands) MARCH 31, 1996 MARCH 31, 1997
------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Provision for credit losses-installment contracts $ 1,519 $ 2,553
Provision for credit losses-advances 1,207 4,500
Charged against dealer holdbacks 17,713 36,986
Charged against unearned finance charges 3,915 8,257
Charged against allowance for credit losses 506 1,034
------- -------
Total contracts charged off $22,134 $46,277
======= =======
Net charge offs against the reserve on advances $ 44 $ 327
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
(Dollars in thousands) MARCH 31, 1996 MARCH 31, 1997
------------------ ------------------
(Unaudited)
<S> <C> <C>
ALLOWANCE FOR CREDIT LOSSES
Balance, beginning of period ...................... $ 7,757 $12,194
Provision for loan losses ......................... 1,519 2,553
Charge offs ....................................... (506) (1,034)
Currency translation .............................. (a) (48)
------- -------
Balance, end of period ............................ $ 8,770 $13,665
======= =======
</TABLE>
(a) immaterial
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
(Dollars in thousands) MARCH 31, 1996 MARCH 31, 1997
------------------ ------------------
(Unaudited)
<S> <C> <C>
RESERVE ON ADVANCES
Balance, beginning of period ..................... $3,214 $ 8,754
Provision for advance losses .................... 1,207 4,500
Advance reserve fees ............................. - 1,330
Charge offs ...................................... (44) (327)
Currency translation ............................. (a) (89)
------ -------
Balance, end of period ........................... $4,377 $14,168
====== =======
</TABLE>
(a) immaterial
<TABLE>
<CAPTION>
AS OF AS OF
(Dollars in thousands) MARCH 31, 1996 MARCH 31, 1997
-------------- --------------
(Unaudited)
<S> <C> <C>
Allowance for credit losses as a percent of gross
installment contracts receivable 0.9% 1.0%
Reserve on advances as a percent of advances 1.2% 2.5%
Dealer holdbacks as a percent of gross installment
contracts receivable 79.5% 79.9%
</TABLE>
The Company's relatively low level of amounts charged against the
allowance for credit losses is due to, among other factors:
(i) the requirement that each installment contract accepted must
meet established, formula-based criteria prior to the Company
making an advance on such contract;
(ii) experienced personnel, using computer-assisted accounts
receivable management and collection systems;
(iii) the security interest the Company receives in the vehicle at
the time it accepts an installment contract; and
(iv) the high level of dealer holdbacks, relative to the amount of
installment contracts.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal need for capital is to fund cash advances made
to dealers in connection with the acceptance of installment contracts and for
the payment of dealer holdbacks to dealers who have repaid their advance
balances. These cash outflows to dealers increased from $107.8 million during
the three months ended March 31, 1996 to $155.6 million during the same period
in 1997. These amounts have been funded
10
<PAGE> 13
from cash collections on installment contracts, income from operations,
advances under the Company's credit agreement and the sale of senior notes.
During the first three months of 1997, the Company borrowed approximately $37.6
million to assist in funding the Company's operations. The borrowings were
provided by the Company's line of credit agreements and through the sale of
senior notes. The increased need for capital is primarily a result of the
continued growth in new installment contracts accepted. To a lesser extent, the
increased need for capital is also due to an increase in the amount advanced per
contract, continued increases in dealers' utilization of service contract
products offered by the Company, and amounts needed to fund the continued growth
of the Company's operations in the United Kingdom, Canada and Ireland.
During the quarter ended September 30, 1996, the Company commenced
operations in Canada and Ireland, offering essentially the same programs and
services as are offered in the United States and United Kingdom. The Company
expects, over the longer term, to fund these operations with borrowings from the
Company's available sources, subject to certain limitations in agreements
setting forth the terms of such borrowings. The extent of these operations'
need for capital will depend on the volume of contracts generated from dealers
in Canada and Ireland. The operations in Canada are serviced from the Company's
Southfield, Michigan headquarters and the operations in Ireland are serviced
from the Company's office in the United Kingdom.
The Company has a $250 million credit agreement with a commercial bank
syndicate. The agreement consists of a $150 million line of credit facility
with a commitment period through December 3, 1997 and a $100 million revolving
credit facility with a commitment period through December 4, 1999. Both
facilities are subject to annual extension for additional one year periods at
the request of the Company with the consent of each of the banks in the
facility. The company has requested and has received approval of an extension
of the $150 million facility and the $100 million facility through May 15, 1998
and May 15, 2000, respectively. The borrowings are unsecured with interest
payable at the Eurocurrency rate plus a minimum of 61.25 basis points and a
maximum of 120 basis points (currently 82.5 basis points) dependent on the
Company's debt ratings, or at the prime rate. The Eurocurrency borrowings may
be fixed for periods up to one year. The credit agreement has certain
restrictive covenants, including limits on the ratio of the Company's
debt-to-equity, limits on the Company's investment in its subsidiary in the
United Kingdom, and requirements that the Company maintain a specified minimum
level of net worth. As of March 31, 1997, there was approximately $127.4
million outstanding under these facilities.
The Company also has a pound 2.0 million British pound sterling line of
credit agreement with a commercial bank in the United Kingdom, which is used to
fund the day to day cash flow requirements of the Company's subsidiary which
operates in the United Kingdom. The borrowings are secured by a letter of
credit issued by the Company's principal commercial bank with interest payable
at the United Kingdom bank's base rate (currently 6.00%) plus 65 basis points or
at the LIBOR rate plus 56.25 basis points. The rates may be fixed for periods
up to six months. As of March 31, 1997, there were no outstanding borrowings
under this facility.
On March 25, 1997, the Company completed the sale of its $71.75 million
7.77% Senior Notes due October 1, 2001 to various insurance companies. The
notes are unsecured and require annual payments of principal and interest
commencing on October 1, 1998. The most restrictive covenants place limits on
the Company's debt-to-equity ratio, limits on the Company's investment in its
subsidiaries and requires the Company to maintain a specified minimum level of
net worth. Net proceeds from the sale were used to reduce outstanding
indebtedness under the Company's $250 million credit agreement.
The Company maintains a significant dealer holdback on installment
contracts accepted which assists the Company in funding its long-term cash flow
requirements. In future periods, the Company's short and long-term cash flow
requirements will continue to be funded primarily through earnings from
operations, cash flow from the collection of installment contracts, and the
Company's credit facilities. The Company will continue to utilize various
sources of debt and equity financing available from time to time to fund the
continuing growth of the Company. The Company believes that such amounts will
be sufficient to meet its short-term and long-term cash flow requirements.
The foregoing discussion and analysis contains a number of "forward
looking statements" within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, both as amended, with respect to expectations
for future periods which are subject to various uncertainties, including
competition from traditional financing sources and from non-traditional
lenders, adverse changes in applicable laws and regulations, adverse changes in
economic conditions, adverse changes in the automobile or finance industries or
in the non-prime consumer finance market and the Company's ability to continue
to increase the volume of installment contracts accepted.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
11
<PAGE> 14
PART II.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index of Exhibits following the signature page.
(b) Reports on Form 8-K
The Company was not required to file a current report on
Form 8-K during the quarter ended March 31, 1997 and none
were filed during that period.
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CREDIT ACCEPTANCE CORPORATION
(Registrant)
Date: May 14, 1997 /S/Brett A. Roberts
--------------------------------------------
Brett A. Roberts
Chief Financial Officer
Signing on behalf of the registrant and as
principal financial officer.
Date: May 14, 1997 /S/John P. Cavanaugh
--------------------------------------------
John P. Cavanaugh
Corporate Controller and Assistant Secretary
Principal accounting officer.
13
<PAGE> 16
INDEX OF EXHIBITS
Exhibit Number Description
- -------------- -----------
4(e) Note Purchase Agreement dated March 25, 1997 between
various insurance companies and the Company and related
form of note
11(1) Statement of Computation of Net Income Per Common Share
27 Financial Data Schedule
14
<PAGE> 1
EXHIBIT 4(e)
================================================================================
CREDIT ACCEPTANCE CORPORATION
---------------------------
NOTE PURCHASE AGREEMENT
---------------------------
DATED AS OF MARCH 25, 1997
$71,750,000 7.77% SENIOR NOTES DUE OCTOBER 1, 2001
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Purchase for Investment; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Failure to Tender, Failure of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Financial Statements; Debt; Material Adverse Change . . . . . . . . . . . . . . . . . . . . . 5
2.3 Subsidiaries and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Title to Properties; Patents, Trademarks, etc. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.8 Corporate Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Charter Instruments, Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Restrictions on Company and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.11 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.13 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.14 Sale of Notes is Legal and Authorized; Obligations are Enforceable . . . . . . . . . . . . . . 10
2.15 Governmental Consent to Sale of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.16 Private Offering of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.17 No Defaults; Transactions Prior to Closing Date . . . . . . . . . . . . . . . . . . . . . . . 11
2.18 Use of Proceeds of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Warranties and Representations True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Officers' Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Legality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Consent of Banks; Consent Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9 1996 Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.10 Company Credit Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11 Limited Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.12 Proceedings Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Other Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Mandatory Principal Amortization Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
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4.3 Offer to Prepay upon Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Pro Rata Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Notation of Notes on Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.6 No Other Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Registration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Issuance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Restricted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Merger and Consolidation; Covenant to Merge CAC International . . . . . . . . . . . . . . . . 24
6.8 Transfers of Property; Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.9 Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.10 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.11 Maintenance of Properties; Corporate Existence; etc. . . . . . . . . . . . . . . . . . . . . . 27
6.12 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.13 Payment of Notes and Maintenance of Office . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.14 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.15 Pro-Rata Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.16 Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.17 Designation of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.18 Amendment of Bank Term Debt or Subordinated Debt Documents; Termination of
Restriction on Bank Term Debt Amendments; No further Restrictions on
Amendments of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. INFORMATION AS TO COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Financial and Business Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3 Accountants' Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1 Nature of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2 Default Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.3 Annulment of Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
CREDIT ACCEPTANCE CORPORATION ii NOTE PURCHASE AGREEMENT
<PAGE> 4
TABLE OF CONTENTS (CONT.)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
9. INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1 Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.3 Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.4 Section Headings and Table of Contents and Construction . . . . . . . . . . . . . . . . . . . 61
9.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.1 Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.2 Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.5 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.6 Payments on Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.7 Entire Agreement; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.8 Duplicate Originals, Execution in Counterpart . . . . . . . . . . . . . . . . . . . . . . . . 66
10.9 Consent to Jurisdiction; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
Annex 1 -- Information as to Purchasers
Annex 2 -- Payment Instructions at Closing
Annex 3 -- Information as to Company
Exhibit A -- Form of 7.77% Senior Note due October 1, 2001
Exhibit B1 -- Form of Company's Counsel Closing Opinion
Exhibit B2 -- Form of Purchasers' Special Counsel Closing Opinion
Exhibit C -- Form of Officers' Certificate
Exhibit D -- Form of Secretary's Certificate
CREDIT ACCEPTANCE CORPORATION iii NOTE PURCHASE AGREEMENT
<PAGE> 5
CREDIT ACCEPTANCE CORPORATION
---------------------------
NOTE PURCHASE AGREEMENT
---------------------------
$71,750,000 7.77% SENIOR NOTES DUE OCTOBER 1, 2001
Dated as of March 25, 1997
[SEPARATELY ADDRESSED TO EACH OF THE
PURCHASERS LISTED ON ANNEX 1 HERETO]
Ladies and Gentlemen:
CREDIT ACCEPTANCE CORPORATION, a Michigan corporation (together with
its successors and assigns, the "Company"), hereby agrees with you as follows:
1. PURCHASE AND SALE OF NOTES
1.1 AUTHORIZATION OF NOTES.
The Company will authorize the issuance of Seventy-One Million
Seven Hundred Fifty Thousand Dollars ($71,750,000) in aggregate
principal amount of its 7.77% Senior Notes due October 1, 2001 (the
"Notes," such term to include each Note delivered from time to time in
accordance with any of the Note Purchase Agreements). Each Note will:
(a) bear interest (computed on the basis of a
360-day year of twelve 30-day months) on the unpaid principal
balance thereof from the date of such Note at the rate of
seven and seventy-seven one-hundredths percent (7.77%) per
annum, payable semi-annually on the first (1st) day of April
and the first (1st) day of October in each year commencing on
the later of October 1, 1997 or the payment date next
succeeding the date of such Note;
(b) bear interest, payable on demand, on any
overdue principal (including any overdue prepayment of
principal) and Make-Whole Amount, if any, and (to the extent
permitted by applicable law) on any overdue installment of
interest, at a rate equal to the lesser of
(i) the highest rate allowed by
applicable law, or
(ii) nine and seventy-seven
one-hundredths percent (9.77%) per annum;
CREDIT ACCEPTANCE CORPORATION 1 NOTE PURCHASE AGREEMENT
<PAGE> 6
(c) mature on October 1, 2001; and
(d) be in the form of the Note set out in
Exhibit A.
The term "Note" as used herein shall include each Note
delivered pursuant to this Agreement and each Note delivered in
substitution or exchange for any such Note pursuant to Section 5.2 or
Section 5.3.
1.2 THE CLOSING.
(a) PURCHASE AND SALE OF NOTES. The Company hereby
agrees to sell to you and you hereby agree to purchase from the
Company, in accordance with the provisions hereof, the aggregate
principal amount of Notes set forth below your name on Annex 1 at one
hundred percent (100%) of the principal amount thereof.
(b) THE CLOSING. The closing (the "Closing") of the
Company's sale of Notes will be held on March 28, 1997 (the "Closing
Date") at 10:00 a.m., local time, at the office of Hebb & Gitlin, One
State Street, Hartford, Connecticut 06103. At the Closing, the
Company will deliver to you one or more Notes (as indicated below your
name on Annex 1), in the denominations indicated on Annex 1, in the
aggregate principal amount of your purchase, dated the Closing Date
and payable to you or payable as indicated on Annex 1, against payment
by federal funds wire transfer in immediately available funds of the
purchase price thereof, as directed by the Company on Annex 2.
(c) OTHER PURCHASERS. Contemporaneously with the
execution and delivery hereof, the Company is entering into a separate
Note Purchase Agreement identical (except for the name and signature
of the purchaser) hereto (this Agreement and such other separate Note
Purchase Agreements, collectively, the "Note Purchase Agreements")
with each other purchaser (collectively, the "Other Purchasers")
listed on Annex 1, providing for the sale to each Other Purchaser of
Notes in the aggregate principal amount set forth below its name on
such Annex. The sales of the Notes to you and to each Other Purchaser
are to be separate sales.
1.3 PURCHASE FOR INVESTMENT; ERISA.
(a) PURCHASE FOR INVESTMENT. You represent to the
Company that you are purchasing the Notes listed on Annex 1 below your
name for your own account for investment and with no present intention
of distributing the Notes or any part thereof, but without prejudice
to your right at all times to:
(i) sell or otherwise dispose of all or any part
of the Notes under a registration statement filed under the
Securities Act, or in a transaction exempt from the
registration requirements of the Securities Act; and
(ii) have control over the disposition of all of
your assets to the fullest extent required by any applicable
insurance law.
It is understood that, in making the representations set out in
Section 2.14(a) and Section 2.15, the Company is relying, to the
extent applicable, upon your representation in the immediately
preceding sentence.
CREDIT ACCEPTANCE CORPORATION 2 NOTE PURCHASE AGREEMENT
<PAGE> 7
(b) ERISA. You represent, with respect to the funds with
which you are acquiring the Notes, that all of such funds are from or
attributable to one or more of:
(i) GENERAL ACCOUNT -- your "insurance company
general account" as defined in Department of Labor Prohibited
Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and
in respect thereof you represent that there is no "employee
benefit plan" (as defined in section 3(3) of ERISA and section
4975(e)(1) of the IRC, treating as a single plan all plans
maintained by the same employer or employee organization or
affiliate thereof) with respect to which the amount of the
reserves and liabilities of all general account contracts held
by or on behalf of such plan exceed ten percent (10%) of the
total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as
set forth in the National Association of Insurance
Commissioners' Annual Statement filed with your state of
domicile and that the acquisition and holding of the Notes is
eligible for and satisfies all requirements of such exemption;
(ii) SEPARATE ACCOUNT -- a "separate account" (as
defined in section 3 of ERISA),
(A) 10% POOLED SEPARATE ACCOUNT -- in
respect of which all requirements for an exemption
under DOL Prohibited Transaction Class Exemption 90-1
are met with respect to the use of such funds to
purchase the Notes,
(B) IDENTIFIED PLAN ASSETS -- that is
comprised of employee benefit plans identified by you
in writing and with respect to which the Company
hereby warrants and represents that, as of the
Closing Date, neither the Company nor any ERISA
Affiliate is a "party in interest" (as defined in
section 3 of ERISA) or a "disqualified person" (as
defined in section 4975 of the IRC) with respect to
any plan so identified, or
(C) GUARANTEED SEPARATE ACCOUNT -- that
is maintained solely in connection with fixed
contractual obligations of an insurance company,
under which any amounts payable, or credited, to any
employee benefit plan having an interest in such
account and to any participant or beneficiary of such
plan (including an annuitant) are not affected in any
manner by the investment performance of the separate
account (as provided by 29 C.F.R. Section 2510.3-
101(h)(1)(iii));
(iii) QUALIFIED PROFESSIONAL ASSET MANAGER -- an
"investment fund" managed by a "qualified professional asset
manager" (as such terms are defined in Part V of DOL
Prohibited Transaction Class Exemption 84-14) and all
requirements for an exemption under such Exemption are met
with respect to the use of such funds to purchase the Notes;
or
(iv) EXCLUDED PLAN -- an employee benefit plan
that is excluded from the provisions of section 406(a) of
ERISA by virtue of section 4(b) of ERISA.
CREDIT ACCEPTANCE CORPORATION 3 NOTE PURCHASE AGREEMENT
<PAGE> 8
1.4 FAILURE TO TENDER, FAILURE OF CONDITIONS.
If at the Closing the Company fails to tender to you the Notes to be
purchased by you at the Closing, or if the conditions specified in Section 3 to
be fulfilled at the Closing have not been fulfilled, you may thereupon elect to
be relieved of all further obligations hereunder. Nothing in this Section 1.4
shall operate to relieve the Company from any of its obligations hereunder or
to waive any of your rights against the Company.
1.5 EXPENSES.
(a) GENERALLY. Whether or not the Notes are sold, the
Company will promptly (and in any event within thirty (30) days of
receiving any statement or invoice therefor) pay all reasonable fees,
expenses and costs relating hereto, including, but not limited to:
(i) the reasonable cost of reproducing this
Agreement, the Notes and the other documents delivered in
connection with the Closing;
(ii) the reasonable fees and disbursements of your
special counsel incurred in connection herewith;
(iii) the reasonable cost of delivering to your
home office or custodian bank, insured to your satisfaction,
the Notes purchased by you at the Closing; and
(iv) the reasonable fees, expenses and costs
incurred in complying with each of the conditions to closing
set forth in Section 3.
(b) COUNSEL. Without limiting the generality of the
foregoing, it is agreed and understood that the Company will pay, at
the Closing, the statement for reasonable fees and disbursements of
your special counsel presented at the Closing and the Company will
also pay upon receipt of any statement therefor each additional
statement for fees and disbursements of your special counsel rendered
after the Closing in connection with the issuance of the Notes or the
matters referred to in Section 1.5(a).
(c) SURVIVAL. The obligations of the Company under this
Section 1.5, Section 5.4, Section 8.2(e) and Section 10.5(d) shall
survive the payment of the Notes and the termination hereof.
2. WARRANTIES AND REPRESENTATIONS
To induce you to enter into this Agreement and to purchase the Notes
listed on Annex 1 below your name, the Company warrants and represents, as of
the Closing Date, as follows:
2.1 NATURE OF BUSINESS.
The Private Placement Memorandum dated June, 1996, prepared by the
Company and the Placement Agent, together with (a) all exhibits and annexes
thereto and (b) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (collectively, the "Placement Memorandum") (copies of
each of which previously have been delivered to you) correctly describe in all
material respects the general nature of the business and principal Properties
of the Company and the Subsidiaries as of the Closing Date. The
CREDIT ACCEPTANCE CORPORATION 4 NOTE PURCHASE AGREEMENT
<PAGE> 9
aforesaid Annual Report on Form 10-K does not differ in any material respect
from the substantially final draft thereof previously delivered to you.
2.2 FINANCIAL STATEMENTS; DEBT; MATERIAL ADVERSE CHANGE.
(a) FINANCIAL STATEMENTS. The Company has provided you
with its financial statements described in Part 2.2(a) of Annex 3.
Such financial statements have been prepared in accordance with GAAP
consistently applied (provided that the quarterly financial statements
do not include footnotes and are subject to year-end adjustments), and
present fairly, in all material respects, the consolidated financial
position of the Company and its consolidated subsidiaries as of such
dates and the results of their operations and cash flows for such
periods.
(b) DEBT. Part 2.2(b) of Annex 3 lists all Debt of the
Company and the Subsidiaries as of the Closing Date, and provides the
following information with respect to each item of such Debt:
(i) the type thereof,
(ii) the holder thereof,
(iii) the outstanding amount,
(iv) the current portion, if any, and
(v) the collateral securing such Debt, if any.
(c) MATERIAL ADVERSE CHANGE. Since December 31, 1996,
there has been no change in the business, Properties or financial
condition of the Company or any of the Subsidiaries except changes
that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect.
2.3 SUBSIDIARIES AND AFFILIATES.
Part 2.3 of Annex 3 sets forth:
(a) the name of each Subsidiary, its jurisdiction of
incorporation and the percentage of its Voting Stock owned by the
Company and each other Subsidiary, and
(b) to the best knowledge of the Company as of the date
hereof, the name of each Affiliate (other than individuals) and the
nature of its affiliation.
Each of the Company and the Subsidiaries has good and marketable title to all
of the shares it purports to own of the stock of each Subsidiary, free and
clear in each case of any Lien. All such shares have been duly issued and are
fully paid and nonassessable.
2.4 TITLE TO PROPERTIES; PATENTS, TRADEMARKS, ETC.
(a) Each of the Company and the Subsidiaries has good and
marketable title to all of the real Property, and good title to all of
the other Property, reflected in the most recent audited statement of
financial condition referred to in Part 2.2(a) of Annex 3 (except as
sold or otherwise
CREDIT ACCEPTANCE CORPORATION 5 NOTE PURCHASE AGREEMENT
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disposed of in the ordinary course of business), except for such
failures to have such good and marketable title as are immaterial to
such financial statements and that, in the aggregate for all such
failures, could not reasonably be expected to have a Material Adverse
Effect. All such Property is free from Liens not permitted by Section
6.6.
(b) Each of the Company and the Subsidiaries owns,
possesses or has the right to use all of the patents, trademarks,
service marks, trade names, copyrights and licenses, and rights with
respect thereto, necessary for the present and currently planned
future conduct of its business, without any known conflict with the
rights of others, except for such failures to own, possess, or have
the right to use, that, in the aggregate for all such failures, could
not reasonably be expected to have a Material Adverse Effect.
2.5 TAXES.
(a) RETURNS FILED; TAXES PAID.
(i) All tax returns required to be filed by each
of the Company and each Subsidiary and any other Person with
which the Company or any Subsidiary files or has filed a
consolidated return in any jurisdiction have been filed on a
timely basis, and all taxes, assessments, fees and other
governmental charges upon each of the Company, such Subsidiary
and any such Person, and upon any of their respective
Properties, income or franchises, that are due and payable
have been paid, except for such failures to file tax returns
or pay taxes, assessments, fees and other governmental charges
that, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect.
(ii) All liabilities of each of the Company, the
Subsidiaries and the other Persons referred to in the
preceding clause (i) with respect to federal income taxes have
been finally determined except for the fiscal years 1993
through 1996, the only years not closed by the completion of
an audit or the expiration of the statute of limitations.
(b) BOOK PROVISIONS ADEQUATE.
(i) The amount of the liability for taxes
reflected in each of the statements of financial condition
referred to in Part 2.2(a) of Annex 3 is in each case an
adequate provision for taxes as of the dates of such
statements of financial condition (including, without
limitation, any payment due pursuant to any tax sharing
agreement) as are or may become payable by any one or more of
the Company and the other Persons consolidated with the
Company in such financial statements in respect of all tax
periods ending on or prior to such dates.
(ii) The Company does not know of any proposed
additional tax assessment against it or any such Person that
is not reflected in full in the most recent statement of
financial condition referred to in Part 2.2(a) of Annex 3.
2.6 PENDING LITIGATION.
(a) There are no proceedings, actions or investigations
pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary in any court or before any
Governmental Authority or arbitration board or tribunal that, in the
aggregate for all such
CREDIT ACCEPTANCE CORPORATION 6 NOTE PURCHASE AGREEMENT
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proceedings, actions and investigations, could reasonably be expected
to have a Material Adverse Effect. Part 2.6(a) of Annex 3 sets forth
information with respect to certain proceedings and actions against or
affecting the Company, none of which could reasonably be expected to
have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default
with respect to any judgment, order, writ, injunction or decree of any
court, Governmental Authority, arbitration board or tribunal that, in
the aggregate for all such defaults, could reasonably be expected to
have a Material Adverse Effect.
2.7 FULL DISCLOSURE.
The financial statements referred to in Part 2.2(a) of Annex 3 do not,
nor does this Agreement, the Placement Memorandum or any other written
statement furnished by or on behalf of the Company to you in connection with
the negotiation or the closing of the sale of the Notes, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein and herein not misleading.
2.8 CORPORATE ORGANIZATION AND AUTHORITY.
Each of the Company and the Subsidiaries (other than Quick Quote,
Inc., a Georgia corporation, and Mardan of Georgia, Inc., a Georgia
corporation):
(a) is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of
incorporation;
(b) has all corporate power and authority to own and
operate its Properties and to carry on its business as now conducted
and as presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises
and other governmental authorizations necessary to own and operate its
Properties and to carry on its business as now conducted and as
presently proposed to be conducted, except where the failure to have
such licenses, certificates, permits, franchises and other
governmental authorizations, in the aggregate for all such failures,
could not reasonably be expected to have a Material Adverse Effect;
and
(d) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation, in each state where the failure to be so qualified or
licensed and authorized and in good standing, in the aggregate for all
such failures, could reasonably be expected to have a Material Adverse
Effect.
Without limiting the generality of Section 2.8(d), the Company
warrants and represents that it is qualified to do business in 47 states
(excluding Alaska, Nevada and South Dakota) and the District of Columbia; that
its Subsidiary, Buyers Vehicle Protection Plan, Inc., is qualified to do
business in 49 states (excluding Alaska) and the District of Columbia; and that
the Company's other Subsidiaries are not qualified to do business in states
other than their respective states of incorporation.
CREDIT ACCEPTANCE CORPORATION 7 NOTE PURCHASE AGREEMENT
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2.9 CHARTER INSTRUMENTS, OTHER AGREEMENTS.
Neither the Company nor any Subsidiary is in violation in any respect
of any term of its respective charter instrument or bylaws. Neither the
Company nor any Subsidiary is in violation in any respect of any term in any
agreement or other instrument to which it is a party or by which it or any of
its Properties may be bound except for such failures that, in the aggregate for
all such failures, could not reasonably be expected to have a Material Adverse
Effect.
2.10 RESTRICTIONS ON COMPANY AND SUBSIDIARIES.
Neither the Company nor any Subsidiary:
(a) is a party to any contract or agreement, or subject
to any charter or other corporate restriction that, in the aggregate
for all such contracts, agreements, charters and corporate
restrictions, could reasonably be expected to have a Material Adverse
Effect;
(b) is a party to any contract or agreement that
restricts the right or ability of such corporation to incur Debt,
other than this Agreement and the agreements listed in Part 2.10(b) of
Annex 3, none of which restricts the issuance and sale of the Notes or
the performance of the Company hereunder or under the Notes, and true,
correct and complete copies of each of which have been provided to
you; or
(c) has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its
Property, whether now owned or hereafter acquired, to be subject to a
Lien not permitted by Section 6.6.
2.11 COMPLIANCE WITH LAW.
Neither the Company nor any Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, which
violations, in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
2.12 PENSION PLANS.
(a) DISCLOSURE. The only ERISA retirement plan
maintained by the Company is an IRC Section 401(k) plan (the "401(k)
Plan"). The 401(k) Plan meets the requirements for qualification
under IRC Section 401 and is exempt from taxation under IRC Section
501(a). The IRS has issued a favorable determination letter with
respect to the tax qualified status of the 401(k) Plan and has not
taken any action to revoke such letter. The Company has performed all
material obligations required to be performed by it under the 401(k)
Plan and is in substantial compliance with the requirements prescribed
by any and all statutes or regulations applicable to the 401(k) Plan.
There are no suits or material claims pending against the 401(k) Plan.
As of the Closing Date, the Company has made all required employer
contributions (salary deferrals and matching contributions) to the
401(k) Plan.
(b) PROHIBITED TRANSACTIONS. Neither the execution of
this Agreement nor the purchase of the Notes by you will constitute a
"prohibited transaction" (as such term is defined in section 406 of
ERISA or section 4975 of the IRC). The representation by the Company
in the immediately preceding sentence is made in reliance upon and
subject to the accuracy of the representations in Section 1.3(b) as to
the source of funds used by you.
CREDIT ACCEPTANCE CORPORATION 8 NOTE PURCHASE AGREEMENT
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(c) MULTIEMPLOYER PLANS. Neither the Company nor any
ERISA Affiliate has ever been an employer required to contribute to
any Multiemployer Plan.
(d) MULTIPLE EMPLOYER PENSION PLANS. Neither the Company
nor any ERISA Affiliate has ever been a "contributing sponsor" (as
such term is defined in section 4001 of ERISA) in any Multiple
Employer Pension Plan.
(e) FOREIGN PENSION PLANS. The Company has no Foreign
Pension Plans.
2.13 ENVIRONMENTAL COMPLIANCE.
(a) COMPLIANCE. Each of the Company and the Subsidiaries
is in compliance with all applicable Environmental Protection Laws in
effect in each jurisdiction where it is presently doing business and
with which the failure so to comply, in the aggregate for all such
failures, could reasonably be expected to have a Material Adverse
Effect.
(b) LIABILITY. Neither the Company nor any Subsidiary is
subject to any liability under any applicable Environmental Protection
Law that, in the aggregate for all such liabilities, could reasonably
be expected to have a Material Adverse Effect.
(c) NOTICES. Neither the Company nor any Subsidiary has
received any:
(i) notice from any Governmental Authority by
which any of its present or previously-owned or leased
Properties has been identified in any manner by any
Governmental Authority as a hazardous substance disposal or
removal site, "Super Fund" clean-up site or candidate for
removal or closure pursuant to any applicable Environmental
Protection Law;
(ii) notice of any Lien arising under or in
connection with any applicable Environmental Protection Law
that has attached to any revenues of, or to, any of its owned
or leased Properties; or
(iii) communication, written or oral, from any
Governmental Authority concerning action or omission by the
Company or such Subsidiary in connection with its ownership or
leasing of any Property resulting in the release of any
Hazardous Substance resulting in any violation of any
applicable Environmental Protection Law;
where the effect of which, in the aggregate for all such notices and
communications, could reasonably be expected to have a Material
Adverse Effect.
2.14 SALE OF NOTES IS LEGAL AND AUTHORIZED; OBLIGATIONS ARE
ENFORCEABLE.
(a) SALE OF NOTES IS LEGAL AND AUTHORIZED. Each of the
issuance, sale and delivery of the Notes by the Company, the execution
and delivery hereof by the Company and compliance by the Company with
all of the provisions hereof and of the Notes:
(i) is within the corporate powers of the
Company; and
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(ii) is legal and does not conflict with, result
in any breach of any of the provisions of, constitute a
default under, or result in the creation of any Lien upon any
Property of the Company or any Subsidiary under the provisions
of, any agreement, charter instrument, bylaw or other
instrument to which it is a party or by which it or any of its
Properties may be bound.
(b) OBLIGATIONS ARE ENFORCEABLE. Each of this Agreement
and the Notes has been duly authorized by all necessary action on the
part of the Company, has been executed and delivered by duly
authorized officers of the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its
terms, except that the enforceability hereof and of the Notes may be:
(i) limited by applicable bankruptcy,
reorganization, arrangement, insolvency, moratorium or other
similar laws affecting the enforceability of creditors' rights
generally; and
(ii) subject to the availability of equitable
remedies.
2.15 GOVERNMENTAL CONSENT TO SALE OF NOTES.
Neither the nature of the Company or any Subsidiary, or of any of
their respective businesses or Properties, nor any relationship between the
Company or any Subsidiary and any other Person, nor any circumstance in
connection with the offer, issuance, sale or delivery of the Notes and the
execution and delivery of this Agreement, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with,
any Governmental Authority on the part of the Company as a condition to the
execution and delivery of this Agreement or the offer, issuance, sale or
delivery of the Notes. Neither the Company nor any Subsidiary is subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Transportation Acts, as
amended, or the Federal Power Act, as amended.
2.16 PRIVATE OFFERING OF NOTES.
Neither the Company nor the Placement Agent (the only Person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Notes or any similar Security of
the Company, other than employees of the Company) has offered any of the Notes
or any similar Security of the Company for sale to, or solicited offers to buy
any thereof from, or otherwise approached or negotiated with respect thereto
with, any prospective purchaser, other than thirty-four (34) institutional
investors (including the Purchasers), each of whom was offered all or a portion
of the Notes at private sale for investment.
2.17 NO DEFAULTS; TRANSACTIONS PRIOR TO CLOSING DATE.
(a) No event has occurred and no condition exists that,
upon the execution and delivery of this Agreement and the issuance of
the Notes, would constitute a Default or an Event of Default.
(b) The Company has not entered into any transaction
since the date of the most recent statement of financial condition
referred to in Part 2.2(a) of Annex 3 that would have been prohibited
by Section 6.4 through Section 6.10, inclusive, had such Sections
applied since such date.
CREDIT ACCEPTANCE CORPORATION 10 NOTE PURCHASE AGREEMENT
<PAGE> 15
(c) As the result of the execution and delivery by CAC
International of certain Guaranties (collectively, the "CACI
Guaranty") in favor of certain of the Banks or their agents, the
Company failed or may have from time to time failed, and may continue
to fail, to be in compliance with the provisions of Section 6.1(d) of
(i) the 1994 Note Purchase Agreement and (ii) the 1996 Note Purchase
Agreement. Any Event of Default resulting from the Company's failure
to comply, at any and all times prior to May 15, 1997, with Section
6.1(d) of each of the 1994 Note Purchase Agreement and 1996 Note
Purchase Agreement, due solely to the existence of the CACI Guaranty,
has been waived pursuant to certain Limited Waivers in accordance with
the provisions of Section 3.11. The Company has fully informed its
auditors, Arthur Andersen LLP, and the Banks of the facts and
circumstances related to the matters described in this Section
2.17(c).
2.18 USE OF PROCEEDS OF NOTES.
(a) USE OF PROCEEDS. The Company will apply the proceeds
from the sale of the Notes in the manner specified in Part 2.18(a) of
Annex 3.
(b) MARGIN SECURITIES. None of the transactions
contemplated herein and in the Notes (including, without limitation,
the use of the proceeds from the sale of the Notes) violates, will
violate or will result in a violation of section 7 of the Exchange Act
or any regulations issued pursuant thereto, including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II. The obligations of the
Company under this Agreement and the Notes are not and will not be
directly or indirectly secured (within the meaning of such Regulation
G) by any Margin Security, and no Notes are being sold on the basis of
any such collateral.
(c) ABSENCE OF FOREIGN OR ENEMY STATUS. Neither the
Company nor any Subsidiary is an "enemy" or an "ally of the enemy"
within the meaning of section 2 of the Trading with the Enemy Act (50
U.S.C. App. Section Section 1 et seq.), as amended. Neither the
Company nor any Subsidiary is in violation of, and neither the
issuance and sale of the Notes by the Company nor its use of the
proceeds thereof as contemplated by this Agreement will violate, the
Trading with the Enemy Act, as amended, or any executive orders,
proclamations or regulations issued pursuant thereto, including,
without limitation, regulations administered by the Office of Foreign
Asset Control of the Department of the Treasury (31 C.F.R., Subtitle
B, Chapter V).
3. CLOSING CONDITIONS
Your obligation to purchase and pay for the Notes to be delivered to
you at the Closing is subject to the following conditions precedent:
3.1 OPINIONS OF COUNSEL.
You shall have received from
(a) Dykema Gossett PLLC, counsel for the Company, and
(b) Hebb & Gitlin, a Professional Corporation, your
special counsel,
closing opinions, each dated as of the Closing Date, substantially in the
respective forms set forth in Exhibit B1 and Exhibit B2 and as to such other
matters as you may reasonably request. This Section 3.1 shall
CREDIT ACCEPTANCE CORPORATION 11 NOTE PURCHASE AGREEMENT
<PAGE> 16
constitute direction by the Company to such counsel named in the foregoing
clause (a) to deliver such closing opinion to you.
3.2 WARRANTIES AND REPRESENTATIONS TRUE.
The warranties and representations contained in Section 2 shall be
true on the Closing Date with the same effect as though made on and as of that
date.
3.3 OFFICERS' CERTIFICATES.
You shall have received:
(a) a certificate dated the Closing Date and signed by
two Senior Officers, substantially in the form of Exhibit C; and
(b) a certificate dated the Closing Date and signed by
the Secretary or an Assistant Secretary of the Company, substantially
in the form of Exhibit D.
3.4 LEGALITY.
The Notes shall on the Closing Date qualify as a legal investment for
you under applicable insurance law (without regard to any "basket" or "leeway"
provisions), and such acquisition shall not subject you to any penalty or other
onerous condition in or pursuant to any such law or regulation, and you shall
have received such evidence as you may reasonably request to establish
compliance with this condition.
3.5 PRIVATE PLACEMENT NUMBER.
The Company shall have obtained or caused to be obtained a private
placement number for the Notes from the CUSIP Service Bureau of Standard &
Poor's, a division of McGraw-Hill, Inc., and you shall have been informed of
such private placement number.
3.6 EXPENSES.
All fees and disbursements required to be paid pursuant to Section
1.5(b) shall have been paid in full.
3.7 COMPLIANCE WITH THIS AGREEMENT.
Each of the Company and the Subsidiaries shall have performed and
complied with all agreements and conditions contained herein that are required
to be performed or complied with by the Company and the Subsidiaries on or
prior to the Closing Date, and such performance and compliance shall remain in
effect on the Closing Date.
3.8 CONSENT OF BANKS; CONSENT EFFECTIVE.
The Company shall have obtained from the banks that are parties to the
Credit Agreement (collectively, the "Banks"), and you shall have received a
copy of, the Banks' acknowledgement of and consent to (i) the Debt being
incurred by the Company hereunder and under the Notes and (ii) the provisions
of this Agreement and the Notes. Such consent shall acknowledge that, for
purposes of the Credit Agreement, the Notes shall constitute "Long Term Notes,"
and the Debt evidenced thereby shall constitute
CREDIT ACCEPTANCE CORPORATION 12 NOTE PURCHASE AGREEMENT
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"Future Debt," thereunder. You shall have received a letter from Comerica
Bank, as agent for the Banks, dated the Closing Date and certifying that all
conditions to the effectiveness of such consent have been satisfied and that
such consent is in full force and effect.
3.9 1996 ANNUAL REPORT.
The Company shall have delivered to you, at least seven (7) days prior
to the Closing Date, a draft copy of its Annual Report for the fiscal year
ended December 31, 1996 on Securities and Exchange Commission Form 10-K, and
such report shall be satisfactory to you.
3.10 COMPANY CREDIT RATING.
The Company shall have delivered to you written evidence that certain
of its unsecured senior debt shall have been rated "Baa3" or higher by Moody's
Investors Service, Inc. or "BBB-" or higher by Standard & Poor's Ratings Group.
3.11 LIMITED WAIVERS.
(a) Each of the Company and the holders of its 8.87%
Senior Notes Due November 1, 2001 constituting the "Required Holders"
thereof shall have executed and delivered a Limited Waiver, in form
and substance satisfactory to you and your special counsel, in respect
of the 1994 Note Purchase Agreement.
(b) Each of the Company and the holders of its 7.99%
Senior Notes Due July 1, 2001 constituting the "Required Holders"
thereof shall have executed and delivered a Limited Waiver, in form
and substance satisfactory to you and your special counsel, in respect
of the 1996 Note Purchase Agreement.
3.12 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the issuance and sale of the
Notes and all documents and papers relating thereto shall be satisfactory to
you and your special counsel. You and your special counsel shall have received
copies of such documents and papers as you or they may reasonably request in
connection therewith or in connection with your special counsel's closing
opinion, all in form and substance satisfactory to you and your special
counsel.
3.13 OTHER PURCHASERS.
None of the Other Purchasers shall have failed to execute and deliver
a Note Purchase Agreement or to accept delivery of or make payment for the
Notes to be purchased by it on the Closing Date.
4. PAYMENTS
4.1 MANDATORY PRINCIPAL AMORTIZATION PAYMENTS.
The Company shall pay, and there shall become due and payable on the
dates set forth in the following table, the principal amount of the Notes set
forth opposite such dates (each, a "Mandatory Principal Amortization Payment"):
CREDIT ACCEPTANCE CORPORATION 13 NOTE PURCHASE AGREEMENT
<PAGE> 18
<TABLE>
<CAPTION>
Date Mandatory Principal
Amortization Payment
<S> <C>
October 1, 1998 $17,385,000
October 1, 1999 $17,735,000
October 1, 2000 $18,110,000
October 1, 2001 $18,520,000
</TABLE>
Each Mandatory Principal Amortization Payment shall be at one hundred
percent (100%) of the principal amount payable, together with unpaid
interest accrued thereon to the date of payment. Without limitation
of the foregoing, all of the principal of the Notes remaining
outstanding on October 1, 2001 (if any), together with unpaid interest
accrued thereon, shall become due and payable on October 1, 2001.
4.2 OPTIONAL PREPAYMENTS.
(a) OPTIONAL PREPAYMENTS. The Company may at any time
after the Closing Date prepay the principal amount of the Notes, in
part (in an amount for each such partial prepayment of Two Million
Dollars ($2,000,000) or any integral multiple of One Hundred Thousand
Dollars ($100,000) in excess of Two Million Dollars ($2,000,000)), or
in whole, in each case together with:
(i) an amount equal to the Make-Whole Amount at
such time in respect of the principal amount of the Notes
being so prepaid; and
(ii) interest on such principal amount then being
prepaid accrued to the prepayment date.
(b) NOTICE OF OPTIONAL PREPAYMENT. The Company will give
notice of any optional prepayment of the Notes to each holder of Notes
not less than thirty (30) days or more than sixty (60) days before the
date fixed for prepayment, specifying:
(i) such date;
(ii) the Section hereof under which the prepayment
is to be made;
(iii) the principal amount of each Note to be
prepaid on such date;
(iv) the interest to be paid on each such Note,
accrued to the date fixed for prepayment; and
(v) a reasonably detailed calculation of an
estimated Make-Whole Amount for such Notes, if any (calculated
as if the date of such notice were the date of prepayment),
due in connection with such prepayment.
Notice of prepayment having been so given, the aggregate principal
amount of the Notes to be prepaid specified in such notice, together
with the Make-Whole Amount as of the specified
CREDIT ACCEPTANCE CORPORATION 14 NOTE PURCHASE AGREEMENT
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prepayment date with respect thereto, if any, and accrued interest
thereon shall become due and payable on the specified prepayment date.
Two (2) Business Days prior to the making of such prepayment, the
Company shall deliver to each holder of Notes by facsimile
transmission a certificate of a Senior Financial Officer specifying
the details of the calculation of such Make-Whole Amount as of the
specified prepayment date, together with a copy of the Applicable H.15
if it is used in determining the Make-Whole Discount Rate (as both
such terms are defined in the definition of Make-Whole Amount) in
respect of such prepayment.
(c) EFFECT OF PARTIAL PREPAYMENTS. The amount of each
partial prepayment of the principal of the Notes made under this
Section 4.2 shall be applied against and reduce the then unpaid
Mandatory Principal Amortization Payments in the inverse order of the
due dates of such payments.
4.3 OFFER TO PREPAY UPON CHANGE IN CONTROL.
(a) NOTICE AND OFFER. In the event of either
(i) a Change in Control, or
(ii) the obtaining of knowledge of a Control Event
by any Senior Officer (including, without limitation, via the
receipt of notice of a Control Event from any holder of
Notes),
the Company will, within three (3) Business Days of the occurrence of
either of such events (or, in the case of any Change in Control the
consummation or finalization of which would involve any action of the
Company, at least thirty (30) days prior to such Change in Control),
give written notice of such Change in Control or Control Event to each
holder of Notes by registered mail and, simultaneously with the
sending of such written notice, send a copy of such notice to each
such holder via an overnight courier of national reputation. In the
event of a Change in Control, such written notice shall contain, and
such written notice shall constitute, an irrevocable offer to prepay
all, but not less than all, the Notes held by such holder on a date
specified in such notice (the "Control Prepayment Date") that is not
less than thirty (30) days and not more than sixty (60) days after the
date of such notice. If the Control Prepayment Date shall not be
specified in such notice, the Control Prepayment Date shall be the
thirtieth (30th) day after the date of such holder's receipt of such
notice. In no event will the Company take any action to consummate or
finalize a Change in Control unless the Company has given the notice
required by this Section 4.3(a) and, contemporaneously with such
action, the Company prepays all Notes required to be prepaid in
accordance with Section 4.3(b).
(b) ACCEPTANCE AND PAYMENT. To accept such offered
prepayment, a holder of Notes shall cause a notice of such acceptance
to be delivered to the Company not later than twenty (20) days after
the date of receipt by such holder of the latest written offer of such
prepayment (it being understood that the failure by a holder to
respond to such written offer of prepayment within such period of
twenty (20) days shall be deemed to constitute an acceptance of such
offer). If so accepted, such offered prepayment shall be due and
payable on the Control Prepayment Date. Such offered prepayment shall
be made at one hundred percent (100%) of the principal amount of such
Notes, together with any Make-Whole Amount as of the Control
Prepayment Date with respect thereto and interest on the Notes then
being prepaid accrued to the Control Prepayment Date. Two (2)
Business Days prior to the making of any such prepayment, the Company
shall deliver to each
CREDIT ACCEPTANCE CORPORATION 15 NOTE PURCHASE AGREEMENT
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holder of such Notes by facsimile transmission a certificate of a
Senior Financial Officer specifying the details of the calculation of
such Make-Whole Amount as of the specified Control Prepayment Date,
together with a copy of the Applicable H.15 used in determining the
Make-Whole Discount Rate (as both such terms are defined in the
definition of Make-Whole Amount) in respect of such prepayment.
(c) OFFICER'S CERTIFICATE. Each offer to prepay the
Notes pursuant to this Section 4.3 shall be accompanied by a
certificate, executed by a Senior Officer and dated the date of such
offer, specifying:
(i) the Control Prepayment Date;
(ii) the Section hereof under which such offer is
made;
(iii) the principal amount of each Note offered to
be prepaid;
(iv) the unpaid interest that would be due on each
such Note offered to be prepaid, accrued to the date fixed for
payment;
(v) a reasonably detailed calculation of an
estimated Make-Whole Amount, if any (calculated as if the date
of such notice was the date of prepayment), that would be due
in connection with such offered prepayment;
(vi) that the conditions of this Section 4.3 have
been fulfilled; and
(vii) in reasonable detail, the nature and date or
proposed date of the Change in Control.
(d) EFFECT OF PREPAYMENT. Each prepayment of the Notes
pursuant to this Section 4.3 shall be applied to reduce ratably each
of the Mandatory Principal Amortization Payments remaining after the
date of such prepayment.
4.4 PRO RATA PAYMENTS.
If at the time any required prepayment or optional prepayment of the
principal of the Notes made pursuant to Section 4.1 or Section 4.2 is due there
is more than one Note outstanding, the aggregate principal amount of each
required or optional partial prepayment of the Notes shall be allocated among
the holders of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts of the Notes then
outstanding, with adjustments, to the extent practicable, to equalize for any
prior prepayments not in such proportion. For the purposes of this Section 4.4
only, any Notes reacquired by the Company or acquired by any Restricted
Subsidiary or any Affiliate shall be deemed to be outstanding for purposes of
allocating Mandatory Principal Amortization Payments made pursuant to Section
4.1 and the Company, any such Restricted Subsidiary or any such Affiliate shall
be deemed to be the holder thereof.
4.5 NOTATION OF NOTES ON PREPAYMENT.
Upon any partial prepayment of a Note, such Note may, at the option of
the holder thereof, be:
CREDIT ACCEPTANCE CORPORATION 16 NOTE PURCHASE AGREEMENT
<PAGE> 21
(a) surrendered to the Company pursuant to Section 5.2 in
exchange for a new Note in a principal amount equal to the principal
amount remaining unpaid on the surrendered Note;
(b) made available to the Company for notation thereon of
the portion of the principal so prepaid; or
(c) marked by such holder with a notation thereon of the
portion of the principal so prepaid.
In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
4.6 NO OTHER OPTIONAL PREPAYMENTS.
Except as provided in Section 4.2 or in accordance with an offer made
in compliance with Section 6.15, the Company may not make any optional
prepayment (whether directly or indirectly by purchase or other acquisition) in
respect of the Notes.
5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
5.1 REGISTRATION OF NOTES.
The Company will cause to be kept at its office maintained pursuant to
Section 6.13 a register for the registration and transfer of Notes. The name
and address of each holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered in
such register. The Person in whose name any Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes hereof.
5.2 EXCHANGE OF NOTES.
(a) Upon surrender of any Note at the office of the
Company maintained pursuant to Section 6.13 duly endorsed or
accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder's attorney duly
authorized in writing, the Company will execute and, within five (5)
Business Days after such surrender, deliver, at the Company's expense
(except as provided below), new Notes in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Such instrument of transfer shall be deemed to be a
representation by the registered holder of the Note being transferred
that such transfer is in compliance with all applicable state and
federal securities laws. Each such new Note shall be payable to such
Person as such holder may request, shall be substantially in the form
of Exhibit A and shall include the restrictive legend set forth on
Exhibit A. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall
have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes.
(b) The Company will pay the cost of delivering to or
from such holder's home office or custodian bank from or to the
Company, insured to the reasonable satisfaction of such holder, the
surrendered Note and any Note issued in substitution or replacement
for the surrendered Note.
CREDIT ACCEPTANCE CORPORATION 17 NOTE PURCHASE AGREEMENT
<PAGE> 22
(c) Each holder of Notes agrees that, in the event it
shall sell or transfer any Note without surrendering such Note to the
Company as set forth in Section 5.2(a), it shall:
(i) prior to the delivery of such Note, make a
notation thereon of all principal, if any, paid on such Note
and shall also indicate thereon the date to which interest
shall have been paid on such Note; and
(ii) promptly notify (or cause the transferee of
any such Note to notify) the Company of the name and address
of the transferee of any such Note so transferred and the
effective date of such transfer.
5.3 REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, an
affidavit of an authorized officer of such Institutional Investor of such
ownership (or of ownership by such Institutional Investor's nominee) and such
loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company (provided that if the
holder of such Note is an Institutional Investor or a nominee of such
Institutional Investor, such Institutional Investor's own unsecured
agreement of indemnity shall be deemed to be satisfactory for such
purpose), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense will execute and, within ten (10) Business Days
after such receipt, deliver, in lieu thereof, a new Note, dated and bearing
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid thereon.
5.4 ISSUANCE TAXES.
The Company will pay all taxes (if any) due in connection with and as
the result of the initial issuance and sale of the Notes and in connection with
any modification of this Agreement or the Notes (other than any taxes due in
connection with a modification of this Agreement or the Notes resulting from a
negotiation or request initiated by, and for the benefit of, the holders of the
Notes) and shall save each holder of Notes harmless without limitation as to
time against any and all liabilities with respect to all such taxes, provided
that this Section 5.4 shall not be construed to require the Company to pay, or
to save any holder of Notes harmless against any liabilities with respect to,
any income tax imposed on any holder of Notes. The obligations of the Company
under this Section 5.4 shall survive the payment or prepayment of the Notes and
the termination hereof.
CREDIT ACCEPTANCE CORPORATION 18 NOTE PURCHASE AGREEMENT
<PAGE> 23
6. COVENANTS
The Company covenants that on and after the Closing Date and so long
as any of the Notes shall be outstanding:
6.1 DEBT.
(a) TOTAL DEBT. The Company will not at any time permit
Consolidated Total Debt to exceed two hundred seventy-five percent
(275%) of Consolidated Tangible Net Worth at such time.
(b) SENIOR FUNDED DEBT. The Company will not at any time
permit Consolidated Senior Funded Debt to exceed either
(i) two hundred percent (200%) of Consolidated
Tangible Net Worth at such time, or
(ii) (A) Net Installment Contract Receivables
minus Net Dealer Holdbacks, in each case at such
time, divided by
(B) 1.10.
(c) SUBORDINATED FUNDED DEBT. The Company will not at
any time permit Consolidated Subordinated Funded Debt to exceed one
hundred fifty percent (150%) of Consolidated Tangible Net Worth at
such time.
(d) RESTRICTED SUBSIDIARY DEBT. The Company will not at
any time permit the sum of (i) Total Restricted Subsidiary Debt at
such time plus, without duplication, (ii) the aggregate amount of all
Debt and other obligations outstanding at such time secured by Liens
permitted by clause (v), clause (vi) and clause (vii) of Section
6.6(a) to exceed (A) on or before July 31, 1997, fifteen percent (15%)
of Consolidated Tangible Net Worth or (B) on or after August 1, 1997,
twenty percent (20%) of Consolidated Tangible Net Worth.
(e) COMMERCIAL PAPER. The Company will not, and will not
permit any Restricted Subsidiary to, issue commercial paper unless the
obligations of the Company or such Restricted Subsidiary with respect
to such commercial paper are backed by a Letter of Credit Facility.
6.2 FIXED CHARGE COVERAGE.
The Company will not at any time permit the ratio of
(a) Consolidated Income Available for Fixed Charges for
the period of four (4) consecutive fiscal quarters of the Company most
recently ended at such time to
(b) Consolidated Fixed Charges for such period
to be less than 2.5 to 1.0.
6.3 CONSOLIDATED TANGIBLE NET WORTH.
CREDIT ACCEPTANCE CORPORATION 19 NOTE PURCHASE AGREEMENT
<PAGE> 24
The Company will not at any time permit Consolidated Tangible Net
Worth, determined at such time, to be less than the result of
(a) One Hundred Fifty Million Dollars ($150,000,000),
plus
(b) fifty percent (50%) of Consolidated Net Income for
each fiscal year ended during the period beginning on January 1, 1996
and ending on such date (unless Consolidated Net Income shall be a
loss in any fiscal year, in which event the amount determined pursuant
to this clause (b) for such fiscal year shall be zero).
6.4 SALE AND LEASEBACK TRANSACTIONS.
The Company will not, and will not permit any Restricted Subsidiary
to, enter into, at any time, any Sale and Leaseback Transaction unless,
(a) after giving effect thereto,
(i) the sale of Property in connection with such
Sale and Leaseback Transaction is permitted pursuant to
Section 6.8 and
(ii) the Debt to be secured by a Lien on the
Property to be leased in connection with such Sale and
Leaseback Transaction is permitted pursuant to the provisions
of Section 6.1 and Section 6.6, and
(b) the lease of such Property constitutes a Capital
Lease.
6.5 RESTRICTED INVESTMENTS.
The Company will not, and will not permit any Restricted Subsidiary
to, make any Restricted Investment.
6.6 LIENS.
(a) NEGATIVE PLEDGE. The Company will not, and will not
permit any Restricted Subsidiary to, cause or permit to exist, or
agree or consent to cause or permit to exist in the future (upon the
happening of a contingency or otherwise), any of their Property,
whether now owned or hereafter acquired, to be subject to any Lien
except:
(i) Liens securing Property taxes, assessments or
governmental charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, vendors,
landlords and other like Persons, provided that the payment
thereof is not at the time required by Section 6.12;
(ii) Liens
(A) arising from judicial attachments
and judgments,
(B) securing appeal bonds or supersedeas
bonds, and
CREDIT ACCEPTANCE CORPORATION 20 NOTE PURCHASE AGREEMENT
<PAGE> 25
(C) arising in connection with court
proceedings (including, without limitation, surety
bonds and letters of credit or any other instrument
serving a similar purpose),
provided that (1) the execution or other enforcement of such
Liens is effectively stayed, (2) the claims secured thereby
are being contested in good faith and by appropriate
proceedings, (3) adequate book reserves in accordance with
GAAP shall have been established and maintained and shall
exist with respect thereto, (4) such Liens do not in the
aggregate detract from the value of such Property and (5) the
title of the Company or the Restricted Subsidiary, as the case
may be, to, and its right to use, such Property, is not
materially adversely affected thereby;
(iii) Liens incurred or deposits made in the
ordinary course of business
(A) in connection with workers'
compensation, unemployment insurance, social security
and other like laws, and
(B) to secure the performance of letters
of credit, bids, tenders, sales contracts, leases,
statutory obligations, surety and performance bonds
(of a type other than set forth in Section
6.6(a)(ii)) and other similar obligations not
incurred in connection with the borrowing of money,
the obtaining of advances or the payment of the
deferred purchase price of Property;
(iv) Liens in the nature of reservations,
exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other similar
title exceptions or encumbrances affecting real Property,
provided that (1) such exceptions and encumbrances do not in
the aggregate materially detract from the value of such
Property and (2) title of the Company or the Restricted
Subsidiary, as the case may be, to, and the right to use, such
Property, is not materially adversely affected thereby;
(v) Liens in existence on the Closing Date
securing Debt, provided that such Liens are described in Part
6.6(a)(v) of Annex 3;
(vi) Purchase Money Liens, if, after giving effect
thereto and to any concurrent transactions:
(A) each such Purchase Money Lien
secures Debt in an amount not exceeding the cost of
acquisition or construction of the particular
Property to which such Debt relates; and
(B) immediately after giving effect
thereto, no Default or Event of Default would exist;
and
(vii) Liens on Property not otherwise permitted
under clause (i) through clause (vi) of this Section 6.6(a) if
the obligations secured by such Liens, when added to (A) the
obligations secured by Liens pursuant to clause (v) and clause
(vi) of this Section 6.6(a) plus, without duplication, (B)
Total Restricted Subsidiary Debt at such time, do not exceed
(1) on or before July 31, 1997, fifteen percent (15%) of
Consolidated Tangible Net Worth
CREDIT ACCEPTANCE CORPORATION 21 NOTE PURCHASE AGREEMENT
<PAGE> 26
or (2) on or after August 1, 1997, twenty percent (20%) of
Consolidated Tangible Net Worth.
(b) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any
Property shall be subjected to a Lien in violation of this Section
6.6, the Company will immediately make or cause to be made, to the
fullest extent permitted by applicable law, provision whereby the
Notes will be secured equally and ratably with all other obligations
secured thereby pursuant to such agreements and instruments as shall
be approved by the Required Holders, and the Company will cause to be
delivered to each holder of a Note an opinion, satisfactory in form
and substance to the Required Holders, of independent counsel to the
effect that such agreements and instruments are enforceable in
accordance with their terms, and in any such case the Notes shall have
the benefit, to the fullest extent that, and with such priority as,
the holders of Notes may be entitled thereto under applicable law, of
an equitable Lien on such Property securing the Notes (provided that,
notwithstanding the foregoing, each holder of Notes shall have the
right to elect at any time, by delivery of written notice of such
election to the Company, to cause the Notes held by such holder not to
be secured by such Lien or such equitable Lien). A violation of this
Section 6.6 will constitute an Event of Default, whether or not any
such provision is made pursuant to this Section 6.6(b).
(c) FINANCING STATEMENTS. The Company will not, and will
not permit any Restricted Subsidiary to, sign or file a financing
statement under the Uniform Commercial Code of any jurisdiction that
names the Company or such Restricted Subsidiary as debtor, or sign any
security agreement authorizing any secured party thereunder to file
any such financing statement, except, in any such case, a financing
statement filed or to be filed to perfect or protect a security
interest that the Company or such Restricted Subsidiary is permitted
to create, assume or incur, or permit to exist, under the foregoing
provisions of this Section 6.6 or to evidence for informational
purposes a lessor's interest in Property leased to the Company or any
such Restricted Subsidiary.
6.7 MERGER AND CONSOLIDATION; COVENANT TO MERGE CAC INTERNATIONAL.
(a) MERGER AND CONSOLIDATION. The Company will not, and
will not permit any Restricted Subsidiary to, merge or consolidate
with or into, or sell, lease, transfer or otherwise dispose of all or
substantially all of its Property to, any other Person or permit any
other Person to merge or consolidate with or into it (the Company, the
Restricted Subsidiary or such other Person that is the surviving
corporation or transferee being herein referred to as the "Surviving
Corporation"), provided that the foregoing restrictions shall not
apply to:
(i) the merger or consolidation of the Company
with or into, or the sale of all or substantially all of the
Property of the Company to, another corporation, if:
(A) the Surviving Corporation is solvent
and is organized under the laws of the United States
of America or any state thereof;
(B) the due and punctual payment of the
principal of and Make-Whole Amount, if any, and
interest on all of the Notes, according to their
tenor, and the due and punctual performance and
observance of all the covenants in the Notes and this
Agreement to be performed or observed by the Company,
are expressly assumed or acknowledged by the
Surviving Corporation in a manner satisfactory to the
Required Holders, and the Company causes to be
delivered to each holder of Notes an opinion of
independent counsel, in form, scope and substance
satisfactory
CREDIT ACCEPTANCE CORPORATION 22 NOTE PURCHASE AGREEMENT
<PAGE> 27
to the Required Holders, to the effect that such
assumption or acknowledgement is enforceable in
accordance with its terms; and
(C) immediately prior to, and
immediately after the consummation of the
transaction, and after giving effect thereto, no
Default or Event of Default exists or would exist; or
(ii) the merger or consolidation of a Restricted
Subsidiary with or into, or the sale of all or substantially
all of the Property of such Restricted Subsidiary to, the
Company, another Restricted Subsidiary or any other Person
that concurrently with such merger, consolidation or sale
becomes a Restricted Subsidiary, if:
(A) the Surviving Corporation is
organized under the laws of the United States of
America or any state thereof; and
(B) immediately prior to, and
immediately after the consummation of the
transaction, and after giving effect thereto, no
Default or Event of Default exists or would exist.
(b) COVENANT TO MERGE CAC INTERNATIONAL. The Company
covenants and agrees that it shall merge CAC International with and
into the Company (with the Company being the survivor) on or before
May 15, 1997, in accordance with Section 6.7(a).
6.8 TRANSFERS OF PROPERTY; SUBSIDIARY STOCK.
(a) TRANSFERS OF PROPERTY. Except as permitted under
Section 6.7(a), the Company will not, and will not permit any
Restricted Subsidiary to, sell, lease as lessor, transfer or otherwise
dispose of any Property (including, without limitation, Restricted
Subsidiary Stock) (collectively, "Transfers"), except:
(i) Transfers from a Restricted Subsidiary to the
Company or to a Wholly-Owned Restricted Subsidiary; and
(ii) any other Transfer at any time of any
Property to a Person, other than an Affiliate, for an
Acceptable Consideration, if each of the following conditions
would be satisfied with respect to such Transfer:
(A) the result of
(1) the sum of
(aa) the current book value
of such Property, plus
(bb) the aggregate book
value of all other Property of the
Company and the Restricted
Subsidiaries, determined on a
consolidated basis, Transferred (other
than in Transfers referred to in the
foregoing clause (i) (the "Excluded
Transfers"), but including Transfers
pursuant to Section 6.8(b)) during the
twelve
CREDIT ACCEPTANCE CORPORATION 23 NOTE PURCHASE AGREEMENT
<PAGE> 28
(12) month period ended immediately
prior to the date of such Transfer,
minus
(2) the aggregate cost of all
Capital Assets acquired by the Company and
the Restricted Subsidiaries, determined on a
consolidated basis, during such twelve (12)
month period,
would not exceed ten percent (10%) of Consolidated
Net Tangible Assets determined as at the end of the
most recently ended fiscal year of the Company prior
to giving effect to such Transfer, and
(B) immediately before and after the
consummation of such Transfer, and after giving
effect thereto, no Default or Event of Default would
exist.
(b) TRANSFERS OF SUBSIDIARY STOCK. The Company will not,
and will not permit any Restricted Subsidiary to, Transfer any shares
of the stock (or any warrants, rights or options to purchase stock or
other Securities exchangeable for or convertible into stock) of a
Restricted Subsidiary (such stock, warrants, rights, options and other
Securities herein called "Restricted Subsidiary Stock"), nor will any
Restricted Subsidiary issue, sell or otherwise dispose of any shares
of its own Restricted Subsidiary Stock, provided that the foregoing
restrictions do not apply to:
(i) the issuance by a Restricted Subsidiary of
shares of its own Restricted Subsidiary Stock to the Company
or a Wholly-Owned Restricted Subsidiary;
(ii) Transfers by the Company or a Restricted
Subsidiary of shares of Restricted Subsidiary Stock to the
Company or a Wholly-Owned Restricted Subsidiary;
(iii) the issuance by a Restricted Subsidiary of
directors' qualifying shares; and
(iv) the Transfer of all of the Restricted
Subsidiary Stock of a Restricted Subsidiary owned by the
Company and the other Restricted Subsidiaries if:
(A) such Transfer satisfies the
requirements of Section 6.8(a)(ii);
(B) in connection with such Transfer the
entire Investment (whether represented by stock,
Debt, claims or otherwise) of the Company and the
other Restricted Subsidiaries in such Restricted
Subsidiary is Transferred to a Person other than the
Company or a Restricted Subsidiary not simultaneously
being disposed of;
(C) the Restricted Subsidiary being
disposed of has no continuing Investment in any other
Restricted Subsidiary not simultaneously being
disposed of or in the Company; and
(D) immediately before and after the
consummation of such Transfer, and after giving
effect thereto, no Default or Event of Default would
exist.
For purposes of determining the book value of Property constituting
Restricted Subsidiary Stock being Transferred as provided in clause
(iv) above, such book value shall be deemed to be the
CREDIT ACCEPTANCE CORPORATION 24 NOTE PURCHASE AGREEMENT
<PAGE> 29
aggregate book value of all assets of the Restricted Subsidiary that
shall have issued such Restricted Subsidiary Stock. Any Transfer of
Restricted Subsidiary Stock pursuant to clause (iv) above shall be
deemed to be a Transfer of the accounts receivable of such Restricted
Subsidiary which must satisfy the requirements of Section 6.8(c).
(c) ACCOUNTS RECEIVABLE. Notwithstanding the provisions
of Section 6.8(a), neither the Company nor any Restricted Subsidiary
will Transfer any accounts receivable if the sum of
(i) the face value of the accounts receivable
proposed to be Transferred, plus
(ii) the face value of accounts receivable
Transferred by the Company and all Restricted Subsidiaries
during the then current fiscal year of the Company,
would exceed five percent (5%) of the face value of the accounts
receivable of the Company and the Restricted Subsidiaries determined
on a consolidated basis as at the end of the most recently ended
fiscal year of the Company prior to giving effect to such Transfer.
6.9 LINE OF BUSINESS.
The Company will not, and will not permit any Restricted Subsidiary
to, engage in, or make any Investment in any business engaged in, the provision
of property and casualty insurance unless the Company or such Restricted
Subsidiary shall maintain reinsurance of its underwriting risk, with one or
more reinsurers rated "A-" or better by Standard & Poor's Ratings Group or "A3"
or better by Moody's Investors Service, Inc., for all of the Company's or such
Restricted Subsidiary's exposure in excess of one hundred percent (100%) of the
premiums written by the Company or such Restricted Subsidiary. In addition to
the foregoing, the Company will not, and will not permit any Restricted
Subsidiary to, engage in any business if, after giving effect thereto, the
general nature of the businesses of the Company and the Restricted
Subsidiaries, taken as a whole, would no longer be the provision of financing
programs for the purchase of used motor vehicles, motor vehicle service
protection programs, credit life, accident and health insurance programs and
other programs related to the foregoing (it being understood that, in the
course of the provision of such programs, the Company may be obligated to remit
monies held by it in connection with dealer holdbacks, claims or refunds under
insurance policies, claims or refunds under service contracts, and to make
deposits in trust or otherwise as required under reinsurance agreements or
pursuant to state regulatory requirements). The Company shall manage and
operate such businesses in substantially the same manner that they are managed
and operated as of the date hereof.
6.10 TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary
to, enter into any transaction, including, without limitation, the purchase,
sale or exchange of Property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of the Company's or such Restricted Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Restricted
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person not an Affiliate.
CREDIT ACCEPTANCE CORPORATION 25 NOTE PURCHASE AGREEMENT
<PAGE> 30
6.11 MAINTENANCE OF PROPERTIES; CORPORATE EXISTENCE; ETC.
The Company will, and will cause each Restricted Subsidiary to:
(a) PROPERTY -- maintain, preserve and keep its Property
in good condition and working order, ordinary wear and tear excepted,
and make all necessary repairs, renewals, replacements, additions,
betterments and improvements thereto, except where the failure to do
so could not reasonably be expected to have a Material Adverse Effect;
(b) INSURANCE -- maintain, with financially sound and
reputable insurers, insurance with respect to its Property and
business against such casualties and contingencies, of such types
(including, without limitation, insurance with respect to losses
arising out of Property loss or damage, public liability, business
interruption, larceny, workers' compensation, embezzlement or other
criminal misappropriation) and in such amounts as is customary in the
case of corporations of established reputations engaged in the same or
a similar business and similarly situated, provided that such
insurance is commercially available, it being understood that the
Company and the Restricted Subsidiaries may self-insure against
hazards and risks with respect to which, and in such amounts as, the
Company in good faith determines to be prudent and consistent with
sound financial and business practice;
(c) FINANCIAL RECORDS -- keep accurate and complete books
of records and accounts in which accurate and complete entries shall
be made of all its business transactions and that will permit the
provision of accurate and complete financial statements in accordance
with GAAP;
(d) CORPORATE EXISTENCE AND RIGHTS --
(i) do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises,
except where the failure to do so, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, and
(ii) to maintain each Subsidiary as a Subsidiary,
in each case except as permitted or required by Section 6.7(a) and
Section 6.8(b); and
(e) COMPLIANCE WITH LAW -- not be in violation of any
law, ordinance or governmental rule or regulation to which it is
subject (including, without limitation, any Environmental Protection
Law and OSHA) and not fail to obtain any license, certificate, permit,
franchise or other governmental authorization necessary to the
ownership of its Properties or to the conduct of its business if such
violations or failures to obtain, in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
6.12 PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each Subsidiary to, pay before they
become delinquent:
(a) all taxes, assessments and governmental charges or
levies imposed upon it or its Property; and
CREDIT ACCEPTANCE CORPORATION 26 NOTE PURCHASE AGREEMENT
<PAGE> 31
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, vendors, landlords and other like Persons
that, if unpaid, might result in the creation of a Lien upon its
Property;
provided, that items of the foregoing description need not be paid
(i) while being contested in good faith and by
appropriate proceedings as long as adequate book reserves have
been established and maintained and exist with respect
thereto, and
(ii) so long as the title of the Company or the
Subsidiary, as the case may be, to, and its right to use, such
Property, is not materially adversely affected thereby.
6.13 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Company will punctually pay, or cause to be paid, the principal of
and interest (and Make-Whole Amount, if any) on, the Notes, as and when the
same shall become due according to the terms hereof and of the Notes, and will
maintain an office at the address of the Company set forth in Section 10.1
where notices, presentations and demands in respect hereof or of the Notes may
be made upon it. Such office will be maintained at such address until such
time as the Company shall notify the holders of the Notes in writing of any
change of location of such office, which will in any event be located within
the United States of America.
6.14 PENSION PLANS.
(a) COMPLIANCE. The Company will, and will cause each
ERISA Affiliate to, at all times with respect to each Pension Plan,
make timely payment of contributions required to meet the minimum
funding standard set forth in ERISA or the IRC with respect thereto,
and to comply with all other applicable provisions of ERISA and the
IRC.
(b) RELATIONSHIP OF VESTED BENEFITS TO PENSION PLAN
ASSETS. The Company will not at any time permit the present value of
all employee benefits vested under each Pension Plan to exceed the
assets of such Pension Plan allocable to such vested benefits at such
time, in each case determined pursuant to Section 6.14(c).
(c) VALUATIONS. All assumptions and methods used to
determine the actuarial valuation of vested employee benefits under
Pension Plans and the present value of assets of Pension Plans will be
reasonable in the good faith judgment of the Company and will comply
with all requirements of law.
(d) PROHIBITED ACTIONS. The Company will not, and will
not permit any ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as
defined in section 406 of ERISA or section 4975 of the IRC)
that would result in the imposition of a material tax or
penalty;
(ii) incur with respect to any Pension Plan any
"accumulated funding deficiency" (as defined in section 302 of
ERISA), whether or not waived;
CREDIT ACCEPTANCE CORPORATION 27 NOTE PURCHASE AGREEMENT
<PAGE> 32
(iii) terminate any Pension Plan in a manner that
could result in the imposition of a Lien on the Property of
the Company or any Subsidiary pursuant to section 4068 of
ERISA or the creation of any liability under section 4062 of
ERISA;
(iv) fail to make any payment required by section
515 of ERISA; or
(v) at any time be an "employer" (as defined in
section 3(5) of ERISA) required to contribute to any
Multiemployer Plan or a "substantial employer" (as defined in
section 4001 of ERISA) required to contribute to any Multiple
Employer Pension Plan if, at such time, it could reasonably be
expected that the Company or any Subsidiary will incur
withdrawal liability in respect of such Multiemployer Plan or
Multiple Employer Pension Plan and such liability, if
incurred, together with the aggregate amount of all other
withdrawal liability as to which there is a reasonable
expectation of incurrence by the Company or any Subsidiary
under any one or more Multiemployer Plans or Multiple Employer
Pension Plans, could reasonably be expected to have a Material
Adverse Effect.
6.15 PRO-RATA OFFERS.
The Company will not, and will not permit any Subsidiary or any
Affiliate to, directly or indirectly, acquire or make any offer to acquire any
Notes unless the Company or such Subsidiary or Affiliate shall have offered to
acquire Notes, pro rata, from all holders of the Notes and upon the same terms.
In case the Company acquires any Notes, such Notes will immediately thereafter
be cancelled and no Notes will be issued in substitution therefor. Each
purchase of the Notes pursuant to this Section 6.15 shall be applied to reduce
ratably each of the Mandatory Principal Amortization Payments remaining after
the date of such purchase.
6.16 PRIVATE OFFERING.
The Company will not, and will not permit any Person acting on its
behalf to, offer the Notes or any part thereof or any similar Securities for
issuance or sale to, or solicit any offer to acquire any of the same from, any
Person so as to bring the issuance and sale of the Notes within the provisions
of section 5 of the Securities Act.
6.17 DESIGNATION OF SUBSIDIARIES.
(a) RIGHT OF DESIGNATION. Subject to the satisfaction of
the requirements of Section 6.17(c), the Company shall have the right
to designate any newly acquired or formed Subsidiary as an
Unrestricted Subsidiary by delivering to each holder of Notes a
writing, signed by a Vice President or the President of the Company,
so designating such Subsidiary within thirty (30) days of the
acquisition or formation of such Subsidiary by the Company or any
Restricted Subsidiary. Any such Subsidiary so designated within such
thirty (30) day period shall be deemed to have been an Unrestricted
Subsidiary as of the date of such acquisition or formation and any
such Subsidiary not so designated within such thirty (30) day period
shall be deemed to have been a Restricted Subsidiary as of the date of
such acquisition or formation. For all purposes of this Agreement,
each Subsidiary designated as an Unrestricted Subsidiary in Part
6.17(a) of Annex 3 shall, subject to Section 6.17(b), be an
Unrestricted Subsidiary and all other Subsidiaries, if any, listed in
Part 2.3 of Annex 3 shall be Restricted Subsidiaries.
CREDIT ACCEPTANCE CORPORATION 28 NOTE PURCHASE AGREEMENT
<PAGE> 33
(b) RIGHT OF REDESIGNATION. No Restricted Subsidiary
shall be redesignated as an Unrestricted Subsidiary. Subject to the
satisfaction of the requirements of Section 6.17(c), the Company may
at any time designate any Unrestricted Subsidiary as a Restricted
Subsidiary by delivering a written notice to such effect, signed by a
Vice President or the Chairman, President or Treasurer of the Company,
to each holder of Notes.
(c) DESIGNATION CRITERIA.
(i) No corporation acquired or formed after the
Closing Date shall be designated as a Restricted Subsidiary
(including deemed designation pursuant to Section 6.17(a))
unless:
(A) such Subsidiary at such time meets
all of the requirements of a "Restricted Subsidiary"
as set forth in the definition thereof; and
(B) immediately before and after, and
after giving effect to such designation, no Default
or Event of Default exists or would exist.
(ii) No Subsidiary shall at any time after the
Closing Date be designated as an Unrestricted Subsidiary
pursuant to Section 6.17(a) unless:
(A) immediately before and after, and
after giving effect to such designation, no Default
or Event of Default exists or would exist; and
(B) such Subsidiary does not own,
directly or indirectly, any Funded Debt or capital
stock of any Restricted Subsidiary.
(d) EFFECTIVENESS. Any designation under Section 6.17(b)
that satisfies all of the conditions set forth in Section 6.17(c)
shall become effective, for purposes of this Agreement, on the day
that notice thereof shall have been mailed (postage prepaid, by
registered or certified mail, return receipt requested) by the Company
to each holder of Notes at the addresses as provided in Section 10.1.
6.18 AMENDMENT OF BANK TERM DEBT OR SUBORDINATED DEBT DOCUMENTS;
TERMINATION OF RESTRICTION ON BANK TERM DEBT AMENDMENTS; NO
FURTHER RESTRICTIONS ON AMENDMENTS OF THIS AGREEMENT.
(a) AMENDMENT OF BANK TERM DEBT OR SUBORDINATED DEBT
DOCUMENTS. The Company will not amend, modify or otherwise alter (or
suffer to be amended, modified or altered), or waive (or permit to be
waived), in any material respect, any of the terms or provisions of
any document or instrument:
(i) evidencing or otherwise relating to any Bank
Term Debt so as to shorten the maturity or original
amortization of such Bank Term Debt, or
(ii) evidencing or otherwise relating to any
Subordinated Debt so as to increase the original interest rate
on, or the principal amount of, such Subordinated Debt,
shorten the original amortization of such Subordinated Debt,
change any other repayment terms or any
CREDIT ACCEPTANCE CORPORATION 29 NOTE PURCHASE AGREEMENT
<PAGE> 34
default or remedial provisions in any such document or
instrument, or change the subordination provisions contained
in any such document or instrument,
in each case without the prior written approval of the Required
Holders.
(b) TERMINATION OF RESTRICTION ON BANK TERM DEBT
AMENDMENTS. Subject to Section 6.18(c), the provisions of Section
6.18(a), insofar as such provisions relate to amendments,
modifications, alterations or waivers of Bank Term Debt, will
terminate and be of no further force or effect at such time as the
Company causes to be delivered to each holder of Notes a duly executed
copy of an amendment or modification of the Credit Agreement (or any
new agreement contemplated by Section 6.18(c)(ii) below) deleting
Section 8.13 of the Credit Agreement (or the comparable provision in
such new agreement) effective on or prior to the date of such
delivery.
(c) NO FURTHER RESTRICTIONS ON AMENDMENTS OF THIS
AGREEMENT. The Company will not:
(i) amend, modify or otherwise alter (or suffer
to be amended, modified or altered) the Credit Agreement
(including, without limitation, Section 8.13 thereof) or any
document or instrument relating thereto to include any
covenant or other provision (other than Section 8.13 of the
Credit Agreement as in effect on the Closing Date) that
requires, as a condition to the amendment of any term or
provision of this Agreement, or the waiver of any term or
provision herein, the approval or consent of any other
creditor of the Company; or
(ii) enter into any other agreement (or suffer to
be amended, modified or altered any other agreement to which
the Company is a party) that requires, as a condition to the
amendment of any term or provision of this Agreement, or the
waiver of any term or provision herein, the approval or
consent of any other creditor of the Company; provided that if
(A) any such agreement is entered into to replace, refinance
or supplement the Credit Agreement and (B) Section 8.13 of the
Credit Agreement (as in effect on the Closing Date) shall not
have been deleted from the Credit Agreement as of the time
such new agreement is to be entered into, such new agreement
may include a covenant substantially the same as (and not more
onerous on the Company than) Section 8.13 of the Credit
Agreement (as in effect on the Closing Date).
7. INFORMATION AS TO COMPANY
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company will deliver to each holder of Notes:
(a) QUARTERLY STATEMENTS -- as soon as practicable after
the end of each quarterly fiscal period in each fiscal year of the
Company (other than the last quarterly fiscal period of each such
fiscal year), and in any event within sixty (60) days thereafter,
duplicate copies of
(i) a consolidated balance sheet of the Company
and its consolidated subsidiaries and consolidated and
consolidating balance sheets of the Company and the Restricted
Subsidiaries, as at the end of such quarter, and
CREDIT ACCEPTANCE CORPORATION 30 NOTE PURCHASE AGREEMENT
<PAGE> 35
(ii) consolidated statements of income and cash
flows of the Company and its consolidated subsidiaries and
consolidated and consolidating statements of income and cash
flows of the Company and the Restricted Subsidiaries, for such
quarter and (in the case of the second and third quarters) for
the portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the immediately preceding fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to
quarterly financial statements generally, and accompanied by the
certificate required by Section 7.2, and, in the case of the financial
statements relating to the Company and its Restricted Subsidiaries,
certified as complete and correct, subject to changes resulting from
year-end adjustments, by a Senior Financial Officer, and, in the case
of the financial statements relating to the Company and its
consolidated subsidiaries at any time when a Quarterly Report on Form
10-Q is not filed by the Company with the Securities and Exchange
Commission and delivered to the holders of the Notes pursuant to
clause (d) of this Section 7.1, certified as complete and correct,
subject to changes resulting from year-end adjustments, by a Senior
Financial Officer;
(b) ANNUAL STATEMENTS -- as soon as practicable after the
end of each fiscal year of the Company, and in any event within one
hundred twenty (120) days thereafter, duplicate copies of
(i) a consolidated balance sheet of the Company
and its consolidated subsidiaries and consolidated and
consolidating balance sheets of the Company and the Restricted
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income,
shareholders' equity and cash flows of the Company and its
consolidated subsidiaries and consolidated and consolidating
statements of income, shareholders' equity and cash flows of
the Company and the Restricted Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
immediately preceding fiscal year, all in reasonable detail, prepared
in accordance with GAAP, and accompanied by
(A) in the case of the financial
statements relating to the Company and its
consolidated subsidiaries, an opinion of independent
certified public accountants of recognized national
standing, which opinion shall, without qualification,
state that such financial statements present fairly,
in all material respects, the financial position of
the companies being reported upon and their results
of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of
such accountants in connection with such financial
statements has been made in accordance with generally
accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the
circumstances, and
(B) in the case of the financial
statements relating to the Company and its Restricted
Subsidiaries, certified as complete and correct by a
Senior Financial Officer, and
(C) the certificate required by Section
7.2 and, in the case of the financial statements
relating to the Company and its consolidated
subsidiaries, the certificate required by Section
7.3;
CREDIT ACCEPTANCE CORPORATION 31 NOTE PURCHASE AGREEMENT
<PAGE> 36
(c) AUDIT REPORTS -- promptly upon receipt thereof, a
copy of each other report submitted to the Company or any Restricted
Subsidiary by independent accountants in connection with any
management report, special audit report or comparable analysis
prepared by them with respect to the books of the Company or any
Restricted Subsidiary;
(d) SEC AND OTHER REPORTS -- promptly upon their becoming
available, a copy of each financial statement, report (including,
without limitation, each Quarterly Report on Form 10-Q, each Annual
Report on Form 10-K and each Current Report on Form 8-K), notice or
proxy statement sent by the Company or any Subsidiary to stockholders
generally and of each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters), and each amendment thereto, in respect thereof filed by the
Company or any Subsidiary with, or received by, such Person in
connection therewith from, the National Association of Securities
Dealers, any securities exchange or the Securities and Exchange
Commission or any successor agency;
(e) ERISA --
(i) immediately upon becoming aware of the
occurrence of any
(A) "reportable event" (as defined in
section 4043 of ERISA), excluding, however, such
events as to which the PBGC by regulation shall have
waived the requirement of section 4043(a) of ERISA
that it be notified within thirty (30) days of the
occurrence of such event (provided that a failure to
meet the minimum funding standard of section 412 of
the IRC and of section 302 of ERISA shall not be so
excluded regardless of the issuance of any such
waiver of the notice requirement in accordance with
either section 4043(a) of ERISA or section 412(d) of
the IRC), or
(B) "prohibited transaction" (as defined
in section 406 of ERISA or section 4975 of the IRC),
in connection with any Pension Plan or any trust created
thereunder, a written notice specifying the nature thereof,
what action the Company is taking or proposes to take with
respect thereto and, when known, any action taken by the IRS,
the DOL or the PBGC with respect thereto, and
(ii) prompt written notice of and, where
applicable, a description of
(A) any notice from the PBGC in respect
of the commencement of any proceedings pursuant to
section 4042 of ERISA to terminate any Pension Plan
or for the appointment of a trustee to administer any
Pension Plan,
(B) any distress termination notice
delivered to the PBGC under section 4041 of ERISA in
respect of any Pension Plan, and any determination of
the PBGC in respect thereof,
(C) the placement of any Multiemployer
Plan in reorganization status under Title IV of ERISA,
CREDIT ACCEPTANCE CORPORATION 32 NOTE PURCHASE AGREEMENT
<PAGE> 37
(D) any Multiemployer Plan becoming
"insolvent" (as defined in section 4245 of ERISA)
under Title IV of ERISA, and
(E) the whole or partial withdrawal of
the Company or any ERISA Affiliate from any
Multiemployer Plan or Multiple Employer Pension Plan
and the withdrawal liability incurred in connection
therewith;
(f) ACTIONS, PROCEEDINGS -- promptly after the
commencement thereof, notice of any action or proceeding relating to
the Company or any Subsidiary in any court or before any Governmental
Authority or arbitration board or tribunal as to which there is a
reasonable possibility of an adverse determination and that, if
adversely determined, would have a Material Adverse Effect;
(g) CERTAIN ENVIRONMENTAL MATTERS -- prompt written
notice of and a description of any event or circumstance that, had
such event or circumstance occurred or existed immediately prior to
the Closing Date, would have been required to be disclosed as an
exception to any statement set forth in Section 2.13;
(h) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- immediately
upon becoming aware of the existence of any condition or event that
constitutes a Default or an Event of Default, a written notice
specifying the nature and period of existence thereof and what action
the Company is taking or proposes to take with respect thereto;
(i) NOTICE OF CLAIMED DEFAULT -- immediately upon
becoming aware that the holder of any Note, or of any Debt or any
Security of the Company or any Subsidiary, shall have given notice or
taken any other action with respect to a claimed Default, Event of
Default, default or event of default, a written notice specifying the
notice given or action taken by such holder and the nature of the
claimed Default, Event of Default, default or event of default and
what action the Company is taking or proposes to take with respect
thereto; and
(j) REQUESTED INFORMATION -- with reasonable promptness,
such other data and information as from time to time may be reasonably
requested by any holder of Notes, including, without limitation,
(i) copies of any statement, report or
certificate furnished to any holder of any Debt or any
Security of the Company or any Subsidiary,
(ii) information requested to comply with any
request of the National Association of Insurance Commissioners
in respect of the designation of the Notes, and
(iii) information requested to comply with 17
C.F.R. Section 230.144A, as amended from time to time;
provided that any such request with respect to any of the data and
information referred to in the foregoing clauses (i), (ii) and (iii)
shall be deemed to be reasonable for purposes of this Section 7.1(j).
CREDIT ACCEPTANCE CORPORATION 33 NOTE PURCHASE AGREEMENT
<PAGE> 38
7.2 OFFICER'S CERTIFICATES.
Each set of financial statements delivered to each holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including
detailed calculations) required in order to establish whether the
Company was in compliance with the requirements of Section 6.1 through
Section 6.8, inclusive, during the period covered by the income
statement then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amounts, ratio or
percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that the signer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and the Subsidiaries from the beginning of
the accounting period covered by the income statements being delivered
therewith to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition
or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Company shall have
taken or proposes to take with respect thereto.
7.3 ACCOUNTANTS' CERTIFICATES.
Each set of annual financial statements relating to the Company and
its consolidated subsidiaries delivered pursuant to Section 7.1(b) shall be
accompanied by a certificate of the accountants who certify such financial
statements stating that they have reviewed this Agreement and stating further,
whether, in making their audit, such accountants have become aware of any
condition or event that then constitutes a Default or an Event of Default, and,
if such accountants are aware that any such condition or event then exists,
specifying the nature and period of existence thereof.
7.4 INSPECTION.
The Company will permit the representatives of each holder of Notes,
at the expense of the Company at any time when a Default or an Event of Default
has occurred and is in existence, and otherwise at the expense of such holder,
to visit and inspect any of the Properties of the Company or any Subsidiary, to
examine all of their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants (and by this provision the Company authorizes
such accountants to discuss the finances and affairs of the Company and the
Subsidiaries), all at such reasonable times and as often as may be reasonably
requested.
7.5 CONFIDENTIAL INFORMATION.
You will employ reasonable procedures and standards designed to
maintain the confidential nature of all data and information that has been or
in the future is furnished to or obtained by you in connection with this
Agreement (provided that you shall be deemed to have complied with the
foregoing requirement if in respect of such data and information you shall
employ your customary business practices as used respecting your own
proprietary business records), except such data and information that was or is
available to the public or was not or is not treated as confidential by any one
or more of the Company, the Subsidiaries or
CREDIT ACCEPTANCE CORPORATION 34 NOTE PURCHASE AGREEMENT
<PAGE> 39
the Affiliates. Notwithstanding the foregoing, you may disclose any data and
information furnished to or obtained by you in connection with this Agreement
and the Notes:
(a) the disclosure of which is, in your sole good faith
business and/or legal judgment, required in connection with regulatory
requirements (including, without limitation, the requirements of the
National Association of Insurance Commissioners) or other legal
requirements related to your affairs, including, without limitation,
the disclosure of such data and information in connection with or in
response to (i) compliance with any law, ordinance or governmental
order, regulation, rule, policy, subpoena, investigation or request,
or (ii) any order, decree, judgment, subpoena, notice of discovery or
similar ruling, or pleading issued, filed, served or purported on its
face to be issued, filed or served (A) by or under authority of any
court, tribunal, arbitration board or any governmental agency,
commission, authority, board or similar entity or (B) in connection
with any proceeding (including, without limitation, any proceeding to
enforce the obligations of the Company under this Agreement or the
Notes), cause or matter pending (or on its face purported to be
pending) before any court, tribunal, arbitration board or any
governmental agency, commission, authority, board or similar entity;
(b) to any one or more of your employees, officers,
directors, agents, attorneys, accountants or professional consultants
who would have access to such data and information in the normal
course of the performance of such Person's duties for you, so long as
you employ reasonable procedures and standards designed to maintain
the confidential nature of all such data and information that is
disclosed to such Persons (provided that you shall be deemed to have
complied with the foregoing requirement if in respect of such data and
information you shall employ your customary business practices as used
respecting your own proprietary business records);
(c) to Moody's Investors Service, Inc., Standard & Poor's
Ratings Group or any other nationally recognized financial rating
service that is reviewing the credit rating of any holder of Notes or
is rating or reviewing the rating of the Notes; and
(d) to any prospective purchaser, securities broker or
dealer or investment banker (who shall have agreed in writing, prior
to such disclosure, to be bound by the provisions of this Section 7.5)
in connection with the resale or proposed resale of all or any portion
of the Notes by you.
You will not be liable for the breach of this Section 7.5 by any other holder
of Notes or by any Person to which any confidential data or information shall
be delivered in accordance with this Section 7.5.
8. EVENTS OF DEFAULT
8.1 NATURE OF EVENTS.
An "Event of Default" shall exist if any of the following occurs and
is continuing at any time:
(a) PRINCIPAL PAYMENTS -- the Company shall fail to make
any payment of principal on any Note on or before the date such
payment is due;
(b) INTEREST OR MAKE-WHOLE AMOUNT PAYMENTS -- the Company
shall fail to make any payment of interest or Make-Whole Amount on any
Note on or before five (5) Business Days after the date such payment
is due;
CREDIT ACCEPTANCE CORPORATION 35 NOTE PURCHASE AGREEMENT
<PAGE> 40
(c) PARTICULAR COVENANT DEFAULTS -- the Company or any
Subsidiary shall fail to perform or observe any covenant contained in
Section 6.1 through Section 6.8, inclusive, or in Section 6.18,
Section 7.1(h) or Section 7.1(i) of this Agreement;
(d) OTHER DEFAULTS -- the Company or any Subsidiary shall
fail to comply with any other provision hereof, and such failure shall
continue for more than thirty (30) days after the earlier of the date
on which (i) such failure shall first become known to any officer of
the Company or (ii) the Company shall have received written notice
from any holder of Notes;
(e) WARRANTIES OR REPRESENTATIONS -- any warranty,
representation or other statement by or on behalf of the Company
contained herein or in any certificate or instrument furnished in
compliance with or in reference hereto shall have been false or
misleading in any respect when made;
(f) DEFAULT ON DEBT OR SECURITY -- any event shall occur
or any condition shall exist in respect of any Debt (other than
Non-Recourse Debt) or any Security of the Company or any Restricted
Subsidiary (including, without limitation, the failure to make any
payment on such Debt or Security when due), or under any agreement
securing or relating to any such Debt or Security, that immediately or
with any one or more of the passage of time, the giving of notice or
the expiration of waivers or modifications granted in respect of such
event or condition:
(i) causes (or permits any one or more of the
holders thereof or a trustee therefor to cause) such Debt or
Security, or a portion thereof, to become due prior to its
stated maturity or prior to its regularly scheduled date or
dates of payment; or
(ii) permits any one or more of the holders
thereof or a trustee therefor to require the Company or any
Restricted Subsidiary to repurchase such Debt or Security from
such holder;
provided that the aggregate amount of all obligations in respect of
all such Debt and Securities referred to in this clause (f) exceeds at
such time Two Million Dollars ($2,000,000);
(g) INVOLUNTARY BANKRUPTCY PROCEEDINGS --
(i) a receiver, liquidator, custodian or trustee
of the Company or any Restricted Subsidiary, or of all or any
part of the Property of the Company or any Restricted
Subsidiary, shall be appointed by court order and such order
shall remain in effect for more than sixty (60) days, or an
order for relief shall be entered with respect to the Company
or any Restricted Subsidiary, or the Company or any Restricted
Subsidiary shall be adjudicated a bankrupt or insolvent;
(ii) any of the Property of the Company or any
Restricted Subsidiary shall be sequestered by court order and
such order shall remain in effect for more than sixty (60)
days; or
(iii) a petition shall be filed against the Company
or any Restricted Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether
now or hereafter in effect, and shall not be dismissed within
sixty (60) days after such filing;
CREDIT ACCEPTANCE CORPORATION 36 NOTE PURCHASE AGREEMENT
<PAGE> 41
(h) VOLUNTARY PETITIONS -- the Company or any Restricted
Subsidiary shall file a petition in voluntary bankruptcy or seeking
relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, or shall consent to the filing of any petition against it
under any such law;
(i) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -- the
Company or any Restricted Subsidiary shall make an assignment for the
benefit of its creditors, or shall admit in writing its inability, or
shall fail, to pay its debts generally as they become due, or shall
consent to the appointment of a receiver, liquidator or trustee of the
Company or any Restricted Subsidiary or of all or any part of the
Property of the Company or any Restricted Subsidiary; or
(j) UNDISCHARGED FINAL JUDGMENTS -- a final judgment or
final judgments for the payment of money aggregating in excess of Two
Million Dollars ($2,000,000) shall be outstanding against any one or
more of the Company and the Restricted Subsidiaries and any one of
such judgments shall have been outstanding for more than thirty (30)
days from the date of its entry, except to the extent that any such
judgment is being contested in good faith by appropriate proceedings
which provide for a stay of any enforcement action against the Company
or such Restricted Subsidiary during the pendency of such proceedings
and for which adequate reserves have been established and where
nonpayment of such judgment could not reasonably be expected to have a
Material Adverse Effect.
8.2 DEFAULT REMEDIES.
(a) ACCELERATION ON EVENT OF DEFAULT.
(i) If an Event of Default specified in clause
(g), clause (h) or clause (i) of Section 8.1 shall exist, all
of the Notes at the time outstanding shall automatically
become immediately due and payable, together with interest
accrued thereon and the Make-Whole Amount at such time with
respect to such principal amount of such Notes, in each case
without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived.
(ii) If an Event of Default other than those
specified in clause (g), clause (h) and clause (i) of Section
8.1 shall exist, the holder or holders of at least thirty-five
percent (35%) in principal amount of the Notes then
outstanding (exclusive of Notes then owned by any one or more
of the Company, any Subsidiary or any Affiliate) may exercise
any right, power or remedy permitted to such holder or holders
by law and shall have, in particular, without limiting the
generality of the foregoing, the right to declare the entire
principal of, and all interest accrued on, all the Notes then
outstanding to be, and such Notes shall thereupon become,
immediately due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived, and the Company shall immediately pay to the
holder or holders of all the Notes then outstanding the entire
principal of, and interest accrued on, the Notes and, to the
extent permitted by applicable law, the Make-Whole Amount on
the date of such declaration with respect to such principal
amount of such Notes.
(b) ACCELERATION ON PAYMENT DEFAULT. During the
existence of an Event of Default described in Section 8.1(a) or
Section 8.1(b), and irrespective of whether the Notes then outstanding
CREDIT ACCEPTANCE CORPORATION 37 NOTE PURCHASE AGREEMENT
<PAGE> 42
shall have been declared to be due and payable pursuant to Section
8.2(a)(ii), any holder of Notes that shall have not consented to any
waiver with respect to such Event of Default may, at such holder's
option, by notice in writing to the Company, declare the Notes then
held by such holder to be, and such Notes shall thereupon become,
immediately due and payable together with all interest accrued
thereon, without any presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived, and the Company
shall immediately pay to such holder the entire principal of and
interest accrued on such Notes and, to the extent permitted by
applicable law, the Make-Whole Amount at such time with respect to
such principal amount of such Notes.
(c) VALUABLE RIGHTS. The Company acknowledges, and the
parties hereto agree, that the right of each holder to maintain its
investment in the Notes free from repayment by the Company (except as
herein specifically provided for) is a valuable right and that the
provision for payment of a Make-Whole Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an
Event of Default, is intended to provide compensation for the
deprivation of such right under such circumstances.
(d) OTHER REMEDIES. During the existence of an Event of
Default and irrespective of whether the Notes then outstanding shall
have been declared to be due and payable pursuant to Section
8.2(a)(ii) and irrespective of whether any holder of Notes then
outstanding shall otherwise have pursued or be pursuing any other
rights or remedies, any holder of Notes may proceed to protect and
enforce its rights hereunder and under such Notes by exercising such
remedies as are available to such holder in respect thereof under
applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any agreement contained herein or
in aid of the exercise of any power granted herein, provided that the
maturity of such holder's Notes may be accelerated only in accordance
with Section 8.2(a) and Section 8.2(b).
(e) NONWAIVER AND EXPENSES. No course of dealing on the
part of any holder of Notes nor any delay or failure on the part of
any holder of Notes to exercise any right shall operate as a waiver of
such right or otherwise prejudice such holder's rights, powers and
remedies. If the Company shall fail to pay when due any principal of,
or Make-Whole Amount or interest on, any Note, or shall fail to comply
with any other provision hereof, or if there shall be a controversy or
potential controversy between the Company and one or more holders of
Notes as to any of the provisions of this Agreement or the Notes, the
Company shall pay to each holder of Notes, to the extent permitted by
applicable law, such further amounts as shall be sufficient to cover
the costs and expenses (including, without limitation, reasonable
attorneys' fees) incurred by each such holder in collecting any sums
due on such Notes or in otherwise assessing, analyzing or enforcing
any rights or remedies that are or may be available to it.
8.3 ANNULMENT OF ACCELERATION OF NOTES.
If a declaration is made pursuant to Section 8.2(a)(ii), then and in
every such case, the holders of at least sixty-six percent (66%) in aggregate
principal amount of the Notes then outstanding (exclusive of Notes then owned
by any one or more of the Company, any Subsidiary or any Affiliate) may, by
written instrument filed with the Company, rescind and annul such declaration
and the consequences thereof, provided that at the time such declaration is
annulled and rescinded:
(a) no judgment or decree shall have been entered for the
payment of any moneys due on or pursuant hereto or the Notes;
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(b) all arrears of interest upon all the Notes and all
other sums payable hereunder and under the Notes (except any principal
of, or interest or Make-Whole Amount on, the Notes that shall have
become due and payable by reason of such declaration under Section
8.2(a)(ii)) shall have been duly paid; and
(c) each and every other Default and Event of Default
shall have been waived pursuant to Section 10.5 or otherwise made good
or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right
consequent thereon.
9. INTERPRETATION OF THIS AGREEMENT
9.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
ACCEPTABLE CONSIDERATION -- means, with respect to any Transfer of any
Property of the Company or a Restricted Subsidiary, cash consideration,
promissory notes or such other consideration (or any combination of the
foregoing) received by such Person in connection with such Transfer as is, in
each case, determined by the Board of Directors, in its good faith opinion, to
be in the best interests of the Company and to reflect the Fair Market Value of
such Property. It is understood that the Company's or such Restricted
Subsidiary's acceptance of any such consideration in connection with such
Transfer will constitute an Investment and may, depending upon the form of such
consideration, constitute a Restricted Investment made by the Company or such
Restricted Subsidiary.
AFFILIATE -- means, at any time, a Person (other than a Restricted
Subsidiary):
(a) that directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with, the Company;
(b) that beneficially owns or holds five percent (5%) or
more of any class of the Voting Stock of the Company;
(c) five percent (5%) or more of the Voting Stock (or in
the case of a Person that is not a corporation, five percent (5%) or
more of the equity interest) of which is beneficially owned or held by
the Company or a Subsidiary; or
(d) that is an officer or director (or a member of the
immediate family of an officer or director) of the Company or any
Subsidiary;
at such time.
As used in this definition:
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Control -- means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
AGREEMENT, THIS -- means this agreement, as it may be amended and
restated from time to time.
BANK TERM DEBT -- means term Debt of the Company or any Restricted
Subsidiary owed to banks and having an initial maturity of more than one (1)
year and a fixed amortization schedule, but in any event excluding any Debt
which by its terms is permitted to be readvanced or reborrowed, whether or not
subject to mandatory reductions or stepdowns in the availability thereof.
BANKS -- Section 3.8.
BOARD OF DIRECTORS -- means the board of directors of the Company or
any committee thereof that, in the instance, shall have the lawful power to
exercise the power and authority of such board of directors.
BUSINESS DAY -- means, at any time, a day other than a Saturday, a
Sunday or a day on which the bank designated by the holder of a Note to receive
(for such holder's account) payments on such Note is required by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
CAC INTERNATIONAL -- means CAC International, Inc., a wholly-owned
Subsidiary of the Company.
CACI GUARANTY -- Section 2.17(c).
CAC LIFE -- means Credit Acceptance Corporation Life Insurance
Company, a Wholly-Owned Restricted Subsidiary of the Company.
CAC UK -- means Credit Acceptance Corporation UK Limited, a
wholly-owned Subsidiary of the Company incorporated under the laws of England
for the purpose of acquiring substantially all of the assets of CAC
International.
CAPITAL ASSETS -- means all assets of a Person other than Intangible
Assets, inventories, accounts receivable and Investments (as defined in clause
(a) of the definition of such term) in and Securities of any other Person.
CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee is required by GAAP to recognize the acquisition of an asset and the
incurrence of a liability at such time.
CHANGE IN CONTROL -- means, at any time, either
(a) the failure of Donald A. Foss, his wife and children,
or trusts for his or their benefit, to beneficially own, in the
aggregate, at least thirty-five percent (35%) (by number of votes) of
the Voting Stock of the Company outstanding at such time (excluding
for such purpose Persons who own shares through any employee benefit
plan of the Company or any trust established in connection therewith),
or
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(b) except for the individuals and trusts identified in
the foregoing clause (a), the acquisition, holding or control (whether
directly or indirectly) by
(i) any "person" (as such term is used in section
13(d) and section 14(d)(2) of the Exchange Act as in effect on
the Closing Date), or
(ii) related Persons constituting a "group" (as
such term is used in Rule 13d-5 under the Exchange Act as in
effect on the Closing Date),
of beneficial ownership of more than twenty-five percent (25%) (by
number of votes) of the Voting Stock of the Company outstanding at
such time (excluding for such purpose Persons who own shares through
any employee benefit plan of the Company or any trust established in
connection therewith), or
(c) all or substantially all of the assets of the Company
are sold or otherwise transferred, in a single transaction or in a
series of related transactions, to any "person" or "group of persons"
(as such terms are used in section 13(d)(3) of the Exchange Act as in
effect on the Closing Date).
CLOSING -- Section 1.2(b).
CLOSING DATE -- Section 1.2(b).
COMPANY -- introductory paragraph hereof.
CONSOLIDATED CURRENT LIABILITIES -- means, at any time, the aggregate
amount of current liabilities of the Company and the Restricted Subsidiaries,
determined at such time after eliminating inter-company transactions among the
Company and the Restricted Subsidiaries.
CONSOLIDATED FIXED CHARGES -- means, for any period, the sum of
(a) Consolidated Interest Expense for such period, plus
(b) the amount payable in respect of such period with
respect to Operating Rentals payable by the Company and the Restricted
Subsidiaries, determined after eliminating intercompany transactions
among the Company and the Restricted Subsidiaries.
CONSOLIDATED INCOME AVAILABLE FOR FIXED CHARGES -- means, for any
period, the sum of
(a) Consolidated Net Income, plus
(b) the aggregate amount of income taxes, depreciation,
amortization and Consolidated Fixed Charges (to the extent, and only
to the extent, that such aggregate amount was reflected in the
computation of Consolidated Net Income for such period),
in each case accrued for such period by the Company and the Restricted
Subsidiaries, determined on a consolidated basis for such Persons.
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CONSOLIDATED INTEREST EXPENSE -- means, for any period, the amount of
interest accrued or capitalized on, or with respect to, Consolidated Total Debt
for such period, including, without limitation, amortization of debt discount,
imputed interest on Capital Leases and interest on the Notes.
CONSOLIDATED NET INCOME -- means, for any period, net earnings (or
loss) after income taxes of the Company and the Restricted Subsidiaries,
determined on a consolidated basis for such Persons, but excluding:
(a) net earnings (or loss) of any Restricted Subsidiary
accrued prior to the date it became a Restricted Subsidiary;
(b) any gain or loss (net of tax effects applicable
thereto) resulting from the sale, conversion or other disposition of
Capital Assets other than in the ordinary course of business;
(c) any extraordinary or nonrecurring gains or losses;
(d) any gain arising from any reappraisal or write-up of
assets;
(e) any portion of the net earnings of any Restricted
Subsidiary that for any reason is unavailable for payment of dividends
to the Company or a Restricted Subsidiary, provided that the net
earnings of CAC Life that are unavailable (due to regulatory
requirements applicable to CAC Life) for the payment of dividends to
the Company may be included in the determination of Consolidated Net
Income, to the extent that such unavailable net earnings do not exceed
five percent (5%) of Consolidated Net Income (determined without
giving effect to this proviso), and provided, further that so long as
the net earnings of CAC Life shall be included in Consolidated Net
Income pursuant to the preceding proviso, CAC Life shall not have
outstanding any Debt, regardless of whether any other Restricted
Subsidiary may be permitted to have Debt outstanding at such time by
reason of a waiver of or an amendment to Section 6.1(d);
(f) any gain or loss (net of tax effects applicable
thereto) during such period resulting from the receipt of any proceeds
of any insurance policy;
(g) any earnings of any Person acquired by the Company or
any Restricted Subsidiary through purchase, merger or consolidation or
otherwise, or earnings of any Person substantially all of whose assets
have been acquired by the Company or any Restricted Subsidiary, for
any period prior to the date of acquisition;
(h) net earnings of any Person (other than a Restricted
Subsidiary) in which the Company or any Restricted Subsidiary shall
have an ownership interest unless such net earnings shall have
actually been received by the Company or such Restricted Subsidiary in
the form of cash distributions; and
(i) any restoration during such period to income of any
contingency reserve, except to the extent that provision for such
reserve
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(i) was made during such period out of income
accrued during such period,
(ii) was made in connection with the Company's
program of financing installment contract receivables
(A) to provide for warranty claims for
which the Company may be responsible, or
(B) to cover credit losses in connection
with advances to dealers, or
(iii) is required by applicable law with respect to
reserves for claims related to the operation of CAC Life,
provided that the aggregate restoration to income during any period
from reserves described in clause (ii) and clause (iii) above shall
not exceed ten percent (10%) of Consolidated Net Income for such
period, prior to giving effect to such restoration.
CONSOLIDATED NET TANGIBLE ASSETS -- means, at any time, the remainder
of
(a) Consolidated Total Assets at such time minus
(b) the sum of
(i) Consolidated Current Liabilities at such
time, plus
(ii) Intangible Assets of the Company and the
Restricted Subsidiaries as would be reflected on a
consolidated balance sheet of such Persons at such time.
CONSOLIDATED SENIOR FUNDED DEBT -- means, at any time, Funded Debt of
the Company and the Restricted Subsidiaries, other than Subordinated Funded
Debt, determined on a consolidated basis for such Persons at such time.
CONSOLIDATED SUBORDINATED FUNDED DEBT -- means, at any time, the
aggregate amount of Subordinated Funded Debt of the Company and the Restricted
Subsidiaries, determined on a consolidated basis for such Persons at such time.
CONSOLIDATED TANGIBLE NET WORTH -- means, at any time, the result of
(a) the shareholders' equity of the Company and its
Subsidiaries, minus
(b) the retained earnings of the Unrestricted
Subsidiaries, minus
(c) all Intangible Assets of the Company and the
Subsidiaries,
in each case as would be reflected on a consolidated balance sheet of such
Persons at such time.
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CONSOLIDATED TOTAL ASSETS -- means, at any time, all assets of the
Company and the Restricted Subsidiaries, determined on a consolidated basis for
such Persons at such time.
CONSOLIDATED TOTAL DEBT -- means, at any time, the aggregate amount of
Funded Debt and Current Debt of the Company and the Restricted Subsidiaries,
determined on a consolidated basis for such Persons at such time.
CONTROL EVENT -- means the execution of any written agreement that,
when fully performed by the parties thereto, would result in a Change in
Control.
CONTROL PREPAYMENT DATE -- Section 4.3(a).
CREDIT AGREEMENT -- means the Credit Agreement described in Part
2.2(b) of Annex 3, as may be amended, restated or otherwise modified from time
to time.
CURRENT DEBT -- means, with respect to any Person, at any time, all
Debt of such Person other than Funded Debt.
DEBT -- means, with respect to any Person, without duplication:
(a) its liabilities for borrowed money (whether or not
evidenced by a Security);
(b) any liabilities secured by any Lien existing on
Property owned by such Person (whether or not such liabilities have
been assumed);
(c) its liabilities in respect of Capital Leases;
(d) the present value of all payments due under any
arrangement for retention of title or any conditional sale agreement
(other than a Capital Lease) discounted at the implicit rate, if
known, with respect thereto or, if unknown, at eight and eighty-seven
one-hundredths percent (8.87%) per annum; and
(e) its Guaranties of any liabilities of another Person
constituting liabilities of a type set forth above.
Dealer holdbacks shall not be considered Debt of the Company.
DEFAULT -- means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default.
DOL -- means the Department of Labor and any successor agency.
DOLLARS or $ -- means United States of America dollars.
ENVIRONMENTAL PROTECTION LAWS -- means any federal, state, county,
regional or local law, statute or regulation (including, without limitation,
CERCLA, RCRA and SARA) enacted in connection with or relating to the protection
or regulation of the environment, including, without limitation, those laws,
statutes and regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing or transporting of Hazardous
Substances, and any
CREDIT ACCEPTANCE CORPORATION 44 NOTE PURCHASE AGREEMENT
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regulations issued or promulgated in connection with such statutes by any
Governmental Authority, and any orders, decrees or judgments issued by any
court of competent jurisdiction in connection with any of the foregoing.
As used in this definition:
CERCLA -- means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time
(by SARA or otherwise), and all rules and regulations promulgated in
connection therewith.
RCRA -- means the Resource Conservation and Recovery Act of
1976, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
SARA -- means the Superfund Amendments and Reauthorization Act
of 1986, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA AFFILIATE -- means any corporation or trade or business that:
(a) is a member of the same controlled group of
corporations (within the meaning of section 414(b) of the IRC) as the
Company; or
(b) is under common control (within the meaning of
section 414(c) of the IRC) with the Company.
EVENT OF DEFAULT -- Section 8.1.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended.
EXCLUDED TRANSFERS -- Section 6.8(a).
FAIR MARKET VALUE -- means, at any time, with respect to any Property,
the sale value of such Property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller under no compulsion to buy or sell, respectively.
FOREIGN PENSION PLAN -- means any plan, fund or other similar program
(a) established or maintained outside of the United
States of America by any one or more of the Company or the
Subsidiaries primarily for the benefit of the employees (substantially
all of whom are aliens not residing in the United States of America)
of the Company or such Subsidiaries which plan, fund or other similar
program provides for retirement income for such employees or results
in a deferral of income for such employees in contemplation of
retirement, and
(b) not otherwise subject to ERISA.
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401(K) PLAN -- Section 2.12(a).
FUNDED DEBT -- means, at any time of determination, with respect to
any borrower, all Debt of such borrower that is expressed to mature more than
one (1) year from the date of the creation thereof or that is extendible or
renewable at the option of such borrower to a time more than one (1) year after
the date of the creation thereof (whether or not at such time of determination
such Debt is payable within one (1) year).
GAAP -- means accounting principles as promulgated from time to time
in statements, opinions and pronouncements by the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board and
in such statements, opinions and pronouncements of such other entities with
respect to financial accounting of for-profit entities as shall be accepted by
a substantial segment of the accounting profession in the United States.
GOVERNMENTAL AUTHORITY -- means:
(a) the government of
(i) the United States of America and any state or
other political subdivision thereof, or
(ii) any other jurisdiction (y) in which the
Company or any Subsidiary conducts all or any part of its
business or (z) that asserts jurisdiction over the conduct of
the affairs or Properties of the Company or any Subsidiary;
and
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
any such government.
GUARANTY -- means, with respect to any Person (for the purposes of
this definition, the "Guarantor"), any obligation (except the endorsement in
the ordinary course of business of negotiable instruments for deposit or
collection) of the Guarantor guaranteeing or in effect guaranteeing (including,
without limitation, by means of a surety bond, letter of credit or other
similar instrument, whether or not designated as a "guaranty") any
indebtedness, dividend or other obligation of any other Person (the "Primary
Obligor") in any manner, whether directly or indirectly, including, without
limitation, obligations incurred through an agreement, contingent or otherwise,
by the Guarantor:
(a) to purchase such indebtedness or obligation or any
Property constituting security therefor;
(b) to advance or supply funds
(i) for the purpose of payment of such
indebtedness or obligation, or
(ii) to maintain working capital or other balance
sheet (or statement of financial condition) condition or any
income statement condition of the Primary Obligor or otherwise
to advance or make available funds for the purchase or payment
of such indebtedness or obligation;
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(c) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner
of such indebtedness or obligation of the ability of the Primary
Obligor to make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty in connection with any
computation of indebtedness or other liability, it shall be assumed that the
indebtedness or other liabilities that are the subject of such Guaranty are
direct obligations of the issuer of such Guaranty. Without limiting the
generality of the foregoing, it is agreed and understood that each general
partner of a partnership shall be deemed to be a Guarantor of all indebtedness
and other obligations of such partnership and such partnership shall be deemed
to be the Primary Obligor in respect of such indebtedness and other
obligations. For purposes of the immediately preceding sentence, a Person
shall be deemed to be a general partner of any so-called "joint venture" or
other arrangement (whether or not constituting a partnership), and such joint
venture or other arrangement shall be deemed to be a partnership, if, pursuant
to applicable law, by contract or otherwise, such Person is liable, directly or
indirectly, contingently or otherwise, either individually or jointly with one
or more other Persons, for the indebtedness or other obligations of such joint
venture or other arrangement.
HAZARDOUS SUBSTANCES -- means any and all pollutants, contaminants,
toxic or hazardous wastes and any other substances that might pose a hazard to
health or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage
or filtration of which is or shall be, in each of the foregoing cases,
restricted, prohibited or penalized by any applicable law.
INSTITUTIONAL INVESTOR -- means the Purchasers, any affiliate of any
of the Purchasers and any holder or beneficial owner of Notes that is an
"accredited investor" as defined in section 2(15) of the Securities Act or a
"qualified institutional buyer" as defined in 17 C.F.R Section 230.144A, as
amended from time to time.
INTANGIBLE ASSETS -- means any assets of a Person that would be
classified as "intangible assets" under GAAP, including, without limitation,
goodwill, trademarks, trade names, patents, copyrights, franchises and other
intangible assets of such Person.
INVESTMENT -- means any investment, made in cash or by delivery of
Property, by the Company or any Restricted Subsidiary:
(a) in any Person, whether by acquisition of stock,
indebtedness or other obligation or Security, or by loan, Guaranty,
advance, capital contribution or otherwise; or
(b) in any Property.
Investments shall be valued at cost less any net return of capital through the
sale or liquidation thereof or other return of capital thereon. Any
designation of a Subsidiary as an Unrestricted Subsidiary pursuant to Section
6.17 shall be deemed to be an Investment, in an amount equal to the net worth
of such Subsidiary, at the time of such designation and any Investments of a
Person
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existing at the time it shall become a Restricted Subsidiary shall be deemed to
have been made immediately after such time.
IRC -- means the Internal Revenue Code of 1986, together with all
rules and regulations promulgated pursuant thereto, as amended from time to
time.
IRS -- means the Internal Revenue Service and any successor agency.
LETTER OF CREDIT FACILITY -- means a letter of credit issued by a
commercial bank for the account of the Company or a Restricted Subsidiary,
solely in support of the Company's or such Restricted Subsidiary's obligations
in respect of commercial paper issued by the Company or such Restricted
Subsidiary.
LIEN -- means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including, but
not limited to, the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale, sale with recourse or a trust receipt,
or a lease, consignment or bailment for security purposes. The term "Lien"
includes, without limitation, reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting real Property and includes, without
limitation, with respect to stock, stockholder agreements, voting trust
agreements, buy-back agreements and all similar arrangements. For the purposes
hereof, the Company and each Subsidiary shall be deemed to be the owner of any
Property that it shall have acquired or holds subject to a conditional sale
agreement, Capital Lease or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes, and such retention or vesting is deemed a Lien. The term "Lien" does
not include negative pledge clauses in agreements relating to the borrowing of
money or the obligation of the Company (a) to remit monies held by it in
connection with dealer holdbacks, claims or refunds under insurance policies,
or claims or refunds under service contracts or (b) to make deposits in trust
or otherwise as required under reinsurance agreements or pursuant to state
regulatory requirements, unless the Company has encumbered its interest in such
monies or deposits or in other Property of the Company to secure such
obligations.
MAKE-WHOLE AMOUNT -- means, with respect to any date (a "Prepayment
Date") and any principal amount ("Prepaid Principal") of Notes required for any
reason to be paid prior to the regularly scheduled maturity thereof on such
Prepayment Date, the greater of
(a) Zero Dollars ($0), and
(b) (i) the sum of the present values of the then
remaining scheduled payments of principal and interest that
would be payable in respect of such Prepaid Principal but for
such prepayment or acceleration, minus
(ii) the sum of
(A) the amount of such Prepaid
Principal, plus
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(B) the amount of interest accrued on
such Prepaid Principal since the scheduled interest
payment date immediately preceding such Prepayment
Date.
In determining such present values, a discount rate equal to the Make-Whole
Discount Rate with respect to such Prepayment Date and Prepaid Principal
divided by two (2), and a discount period of six (6) months of thirty (30) days
each, shall be used.
As used in this definition:
Make-Whole Discount Rate -- means, with respect to any
Prepayment Date and Prepaid Principal, the sum of
(a) the per annum percentage rate (rounded to the
nearest three (3) decimal places) equal to the bond equivalent
yield to maturity derived from the Bloomberg Rate with respect
to such Prepaid Principal, or if such Bloomberg Rate is not
then available, the Applicable H.15 Rate, in either case,
determined as of the date that is two (2) Business Days prior
to such Payment Date, plus
(b) fifty one-hundredths percent (0.50%) per
annum.
For purposes of clause (a) of the preceding sentence, if no United
States Treasury obligation with a Treasury Constant Maturity
corresponding exactly to the Weighted Average Life to Maturity of such
Prepaid Principal is listed, the yields for the two (2) published
United States Treasury obligations with Treasury Constant Maturities
most closely corresponding to such Weighted Average Life to Maturity
(one (1) with a longer maturity and one (1) with a shorter maturity,
if available) shall be calculated pursuant to the immediately
preceding sentence and the Make-Whole Discount Rate shall be
interpolated or extrapolated from such yields on a straight-line
basis.
Applicable H.15 -- means, at any time, United States Federal
Reserve Statistical Release H.15(519) or its successor publication
then most recently published and available to the public or, if no
such successor publication is available, then any other source of
current information in respect of interest rates on securities of the
United States of America that is generally available and, in the
judgment of the Required Holders, provides information reasonably
comparable to the H.15(519) report.
Applicable H.15 Rate -- means, at any time with respect to any
Prepaid Principal, the then most current annual yield to maturity of
the hypothetical United States Treasury obligation listed in the
Applicable H.15 for the then most recently available day in such
Applicable H.15 with a Treasury Constant Maturity (as defined in such
Applicable H.15) equal to the Weighted Average Life to Maturity of
such Prepaid Principal determined as of such Prepayment Date. If no
such United States Treasury obligation with a Treasury Constant
Maturity corresponding exactly to such Weighted Average Life to
Maturity is listed, then the yields for the two (2) published United
States Treasury obligations with Treasury Constant Maturities most
closely corresponding to such Weighted Average Life to Maturity (one
(1) with a longer maturity and one (1) with a shorter maturity, if
available) shall be calculated pursuant to the immediately preceding
sentence and the Make-Whole Discount Rate shall be interpolated or
extrapolated from such yields on a straight-line basis.
CREDIT ACCEPTANCE CORPORATION 49 NOTE PURCHASE AGREEMENT
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Bloomberg Rate -- means, on any date, with respect to any
Prepaid Principal, the yields reported, as of 10:00 A.M. (New York
City time) on such date with respect to such Prepaid Principal, on the
display designated as "UST" on the Bloomberg Financial Market Service
(or such other display as may replace Page UST on the Bloomberg
Financial Market Service) for actively traded U.S. Treasury securities
having a maturity equal to the Weighted Average Life to Maturity of
such Prepaid Principal as of such date. If no such U.S. Treasury
security with a maturity corresponding exactly to the Weighted Average
Life to Maturity of such Prepaid Principal is reported, then the
yields for the two (2) U.S. Treasury securities with maturities most
closely corresponding to the Weighted Average Life to Maturity of such
Prepaid Principal (one (1) with a longer maturity and one (1) with a
shorter maturity, if available) shall be calculated pursuant to the
immediately preceding sentence and the Make-Whole Discount Rate shall
be interpolated or extrapolated from such yields on a straight-line
basis.
Weighted Average Life to Maturity -- means, with respect to
any Prepayment Date and Prepaid Principal, the number of years
obtained by dividing the Remaining Dollar-Years of such Prepaid
Principal determined on such Prepayment Date by such Prepaid
Principal.
Remaining Dollar-Years -- means, with respect to any
Prepayment Date and Prepaid Principal, the result obtained by
(a) multiplying, in the case of each required
payment of principal (including payment at maturity) that
would be payable in respect of such Prepaid Principal but for
such prepayment,
(i) an amount equal to such required
payment of principal, by
(ii) the number of years (calculated to
the nearest one-twelfth (1/12)) that will elapse
between such Prepayment Date and the date such
required principal payment would be due if such
Prepaid Principal had not been so prepaid, and
(b) calculating the sum of each of the products
obtained in the preceding subsection (a).
MANDATORY PRINCIPAL AMORTIZATION PAYMENT -- Section 4.1.
MARGIN SECURITY -- means "margin stock" within the meaning of
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II, as amended from time to time.
MATERIAL ADVERSE EFFECT -- means a material adverse effect on the
business, profits, Properties or financial condition of the Company and the
Restricted Subsidiaries, taken as a whole, or on the ability of the Company to
perform its obligations set forth herein and in the Notes.
MULTIEMPLOYER PLAN -- means any "multiemployer plan" (as defined in
section 3 of ERISA) in respect of which the Company or any ERISA Affiliate is
an "employer" (as defined in section 3 of ERISA).
CREDIT ACCEPTANCE CORPORATION 50 NOTE PURCHASE AGREEMENT
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MULTIPLE EMPLOYER PENSION PLAN -- means any "employee benefit plan"
within the meaning of section 3(3) of ERISA (other than a Multiemployer Plan),
subject to Title IV of ERISA, constituting a "single-employer plan" (as defined
in section 4001 of ERISA) which has two (2) or more "contributing sponsors" (as
defined in section 4001 of ERISA), at least two (2) of which are not under
"common control" (as defined in section 4001 of ERISA) and to which the Company
or any ERISA Affiliate contribute.
NET DEALER HOLDBACKS -- means, at any time, (a) dealer holdbacks minus
(b) Advances, as such amounts would appear in the footnotes to the financial
statements of the Company and the Restricted Subsidiaries prepared in
accordance with GAAP at such time.
As used in this definition:
Advances -- means, at any time, the dollar amount of advances,
as such amount would appear in the footnotes to the financial
statements of the Company and the Restricted Subsidiaries prepared in
accordance with GAAP at such time, provided that Advances shall not
include Charged-Off Advances to the extent that such Charged-Off
Advances exceed the portion of the Company's allowance for credit
losses related to reserves against advances not expected to be
recovered, as such allowance would appear in the footnotes to the
financial statements of the Company and the Restricted Subsidiaries
prepared in accordance with GAAP at such time.
Charged-Off Advances -- means, with respect to an Established
Dealer, at any time, the dollar amount of the advance balance related
to the pool of installment contract receivables of such Established
Dealer which exceeds the Trailing Twelve Months Payments for such pool
multiplied by three (3).
Established Dealer -- means, at any time, a dealer that has
participated in the Company's program of financing and collecting
installment contract receivables for the immediately preceding period
of twelve (12) consecutive complete calendar months and has an advance
balance in excess of Ten Thousand Dollars ($10,000) at such time.
Trailing Twelve Months Payments -- means, at any time, the
gross amount of payments on installment contract receivables received
by the Company for the account of an Established Dealer during the
immediately preceding period of twelve (12) consecutive complete
calendar months.
NET INSTALLMENT CONTRACT RECEIVABLES -- means, at any time,
installment contract receivables, net, as such amount would appear on a
consolidated balance sheet of the Company and the Restricted Subsidiaries
prepared in accordance with GAAP at such time and computed as the result of (a)
gross installment contract receivables minus (b) unearned finance charges minus
(c) allowance for credit losses.
1994 NOTE PURCHASE AGREEMENT -- means and includes the separate Note
Purchase Agreements, each dated as of October 1, 1994, between the Company and
each of the holders, from time to time, of the Company's 8.87% Senior Notes due
November 1, 2001 issued pursuant thereto, each as amended by the First
Amendment to Note Purchase Agreement dated as of November 15, 1995 and the
Second Amendment to Note Purchase Agreement dated as of August 29, 1996.
CREDIT ACCEPTANCE CORPORATION 51 NOTE PURCHASE AGREEMENT
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1996 NOTE PURCHASE AGREEMENT -- means and includes the separate Note
Purchase Agreements, each dated as of August 1, 1996, between the Company and
each of the holders, from time to time, of the Company's 7.99% Senior Notes due
July 1, 2001 issued pursuant thereto
NON-RECOURSE DEBT -- means Debt of a partnership, joint venture or
similar entity in which the Company or a Restricted Subsidiary is a
participant, so long as the holder or holders of such Debt shall have no rights
or recourse against any Property of the Company or any Restricted Subsidiary,
other than Property used solely in connection with such partnership, joint
venture or similar entity.
NOTE PURCHASE AGREEMENTS -- Section 1.2(c).
NOTES -- Section 1.1.
OPERATING LEASE -- means, with respect to any Person, any lease other
than a Capital Lease.
OPERATING RENTALS -- means all fixed payments that the lessee is
required to make by the terms of any Operating Lease.
OSHA -- means the Occupational Safety and Health Act of 1970, together
with all rules, regulations and standards promulgated pursuant thereto, all as
amended from time to time.
OTHER PURCHASERS -- Section 1.2(c).
PBGC -- means the Pension Benefit Guaranty Corporation and any
successor corporation or governmental agency.
PENSION PLAN -- means, at any time, any "employee pension benefit
plan" (as defined in section 3 of ERISA) maintained at such time by the Company
or any ERISA Affiliate for employees of the Company or such ERISA Affiliate,
excluding any Multiemployer Plan, but including any Multiple Employer Pension
Plan.
PERSON -- means an individual, sole proprietorship, partnership,
corporation, limited liability company, trust, joint venture, unincorporated
organization, or a government or agency or political subdivision thereof.
PLACEMENT AGENT -- means William Blair & Company, L.L.C.
PLACEMENT MEMORANDUM -- Section 2.1.
PROPERTY -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
PURCHASE MONEY LIEN -- means a Lien held by any Person (whether or not
the seller of such Property) on tangible Property (or a group of related items
of Property the substantial portion of which is tangible) acquired or
constructed by the Company or any Restricted Subsidiary, which Lien secures all
or a portion of the related purchase price or construction costs of such
Property, provided that such Lien
CREDIT ACCEPTANCE CORPORATION 52 NOTE PURCHASE AGREEMENT
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(a) is created contemporaneously with, or within thirty
(30) days of, such acquisition or construction,
(b) encumbers only Property purchased or constructed
after the Closing Date and acquired with the proceeds of the Debt
secured thereby, and
(c) is not thereafter extended to any other Property.
PURCHASERS -- means you and the Other Purchasers.
REQUIRED HOLDERS -- means, at any time, the holders of at least
sixty-six and two-thirds percent (66- 2/3%) in principal amount of the Notes at
the time outstanding (exclusive of Notes then owned by any one or more of the
Company, any Restricted Subsidiary and any Affiliate).
RESTRICTED INVESTMENT -- means, at any time, all Investments except
the following:
(a) Investments in Property to be used in the ordinary
course of business of the Company and the Restricted Subsidiaries;
(b) subject to clause (k) of this definition, Investments
in receivables and advances arising from the sale of goods and
services in the ordinary course of business of the Company and the
Restricted Subsidiaries;
(c) Investments by the Company in the ordinary course of
its business in one or more Restricted Subsidiaries or any corporation
that concurrently with such Investment becomes a Restricted
Subsidiary, provided that the aggregate amount of all Investments made
pursuant to this paragraph (c) and paragraph (d) of this definition
(excluding Guaranties by the Company of Debt of Restricted
Subsidiaries) does not at any time exceed twenty-five percent (25%) of
Consolidated Tangible Net Worth (it being understood that loans and
advances to any Restricted Subsidiary by any Person other than the
Company or any other Restricted Subsidiary, regardless of whether such
loans and advances are guaranteed by the Company or any other
Restricted Subsidiary, shall not be taken into account in determining
the aggregate amount of Investments made pursuant to this paragraph
(c) and paragraph (d) of this definition);
(d) Investments consisting of loans by the Company or any
Restricted Subsidiary, and advances from the Company or any Restricted
Subsidiary, in each case to the Company or any Restricted Subsidiary
in the ordinary course of business of the Company and the Restricted
Subsidiaries, provided that the aggregate amount of all Investments
made pursuant to paragraph (c) of this definition and this paragraph
(d) (excluding Guarantees by the Company of Debt of Restricted
Subsidiaries) does not at any time exceed twenty-five percent (25%) of
Consolidated Tangible Net Worth (it being understood that loans and
advances to any Restricted Subsidiary by any Person other than the
Company or any other Restricted Subsidiary, regardless of whether such
loans and advances are guaranteed by the Company or any other
Restricted Subsidiary, shall not be taken into account in determining
the aggregate amount of Investments made pursuant to this paragraph
(d) and paragraph (c) of this definition);
CREDIT ACCEPTANCE CORPORATION 53 NOTE PURCHASE AGREEMENT
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(e) Investments in direct obligations of, or obligations
guarantied by, the United States of America or any agency of the
United States of America the obligations of which agency carry the
full faith and credit of the United States of America, provided that
such obligations (other than Investments by CAC Life in such
obligations made to match liabilities incurred in the ordinary course
of business) mature within one (1) year from the date of acquisition
thereof;
(f) Investments in any obligation of any state or
municipality thereof that at the time of acquisition thereof have an
assigned rating of "A" or higher by Standard & Poor's Ratings Group
(or an equivalent or higher rating by another credit rating agency of
recognized national standing in the United States of America),
provided that such obligations (other than Investments by CAC Life in
such obligations made to match liabilities incurred in the ordinary
course of business) mature within one (1) year from the date of
acquisition thereof;
(g) Investments in negotiable certificates of deposit
issued by commercial banks organized under the laws of the United
States of America or any state thereof, having capital, surplus and
undivided profits aggregating at least Fifty Million Dollars
($50,000,000) and the long-term unsecured debt obligations of which
are rated "A" or higher by Standard & Poor's Ratings Group (or an
equivalent or higher rating by another credit rating agency of
recognized national standing in the United States of America),
provided that such certificates of deposit (other than Investments by
CAC Life in such certificates of deposit made to match liabilities
incurred in the ordinary course of business) mature within one (1)
year from the date of acquisition thereof;
(h) Investments in corporate debt obligations of
corporations organized under the laws of the United States of America
or any state thereof that at the time of acquisition thereof have an
assigned rating of "A" or higher by Standard & Poor's Ratings Group
(or an equivalent or higher rating by another credit rating agency of
recognized national standing in the United States of America);
(i) Investments in preferred stock of corporations
organized under the laws of the United States of America or any state
thereof that have an assigned rating of "A" or higher by Standard &
Poor's Ratings Group (or an equivalent or higher rating by another
credit rating agency of recognized national standing in the United
States of America);
(j) Investments in loans or advances, in the ordinary
course of business and necessary to carrying on the business of the
Company or any Restricted Subsidiary, to officers, directors and
employees of the Company and the Restricted Subsidiaries, provided
that the aggregate amount of all such Investments does not at any time
exceed One Million Dollars ($1,000,000);
(k) Investments in receivables arising from floor plan
receivables and note receivables due from dealers in the ordinary
course of business of the Company and the Restricted Subsidiaries,
provided that the aggregate amount of all such Investments does not at
any time exceed ten percent (10%) of Consolidated Total Assets; and
CREDIT ACCEPTANCE CORPORATION 54 NOTE PURCHASE AGREEMENT
<PAGE> 59
(l) Investments not otherwise included in clause (a)
through clause (k) of this definition, provided that the aggregate
amount of all such Investments does not at any time exceed One Million
Dollars ($1,000,000).
RESTRICTED SUBSIDIARY -- means any Subsidiary (a) in respect of which
the Company owns, directly or indirectly, (i) at least eighty percent (80%) (by
number of votes) of each class of such Subsidiary's Voting Stock, or (ii) in
the case of CAC Insurance Agency of Ohio, Inc., at least 99% of the shares of
capital stock issued and outstanding of all classes in the aggregate, (b) that
is organized under the laws of the United States of America or any jurisdiction
thereof, the United Kingdom or any jurisdiction thereof (including, without
limitation, England, Scotland and Wales), Canada or any jurisdiction thereof or
the Republic of Ireland or any jurisdiction thereof, and that conducts all of
its business in, and has all of its Property located in, the United States of
America, the United Kingdom, Canada and/or the Republic of Ireland and (c) that
is not an Unrestricted Subsidiary. Any Restricted Subsidiary in compliance
with the requirements set forth in the first sentence of this definition and
designated as a Restricted Subsidiary on the Closing Date shall be deemed to
have been a Restricted Subsidiary for all periods prior to the Closing Date.
Notwithstanding any provision in Section 6.17 to the contrary, CAC
International and CAC UK shall be deemed Restricted Subsidiaries as of October
1, 1995 and CAC of Canada Limited and any Subsidiary formed by the Company to
provide property and casualty insurance shall each be deemed a Restricted
Subsidiary as of the date of its formation.
RESTRICTED SUBSIDIARY STOCK -- Section 6.8(b).
SALE AND LEASEBACK TRANSACTION -- means any transaction or series of
related transactions in which the Company or a Restricted Subsidiary sells or
transfers any of its Property to any Person (other than to the Company or to a
Restricted Subsidiary) and concurrently with such sale or transfer, or
thereafter, rents or leases such transferred Property or substantially similar
Property from any Person.
SECURITIES ACT -- means the Securities Act of 1933, as amended.
SECURITY -- means "security" as defined in section 2(1) of the
Securities Act.
SENIOR FINANCIAL OFFICER -- means the chief financial officer, the
principal accounting officer, the controller or the treasurer of the Company.
SENIOR OFFICER -- means the chief executive officer, the president or
the chief financial officer of the Company.
STANDARD & POOR'S RATINGS GROUP -- means Standard & Poor's Ratings
Group, a division of McGraw-Hill, Inc.
SUBORDINATED DEBT -- means, at any time, unsecured Debt of the Company
that is junior and subordinate in right of payment to the Notes on terms and
conditions satisfactory to the Required Holders, as evidenced by their written
consent.
SUBORDINATED FUNDED DEBT -- means, at any time, Funded Debt of the
Company or any Restricted Subsidiary that is:
CREDIT ACCEPTANCE CORPORATION 55 NOTE PURCHASE AGREEMENT
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(a) junior and subordinate in right of payment to the
Notes on terms and conditions satisfactory to the Required Holders, as
evidenced by their written consent thereto,
(b) not subject to any sinking fund or required
prepayment provisions that would result in its having at any time an
average life to maturity, computed in accordance with accepted
financial practice, shorter than the Weighted Average Life to Maturity
(as defined in the definition of "Make-Whole Amount") of the Notes at
such time or a final maturity earlier than the stated final maturity
of the Notes, and
(c) not secured by a Lien on the Property of the Company
or any Restricted Subsidiary (whether or not such Funded Debt is
recourse to the Company or any Restricted Subsidiary).
SUBSIDIARY -- means, at any time, a corporation of which the Company
owns, directly or indirectly, more than fifty percent (50%) (by number of
votes) of each class of the Voting Stock at such time.
SURVIVING CORPORATION -- Section 6.7(a).
TOTAL RESTRICTED SUBSIDIARY DEBT -- means, at any time, the aggregate
amount of Debt of all Restricted Subsidiaries determined at such time after
eliminating intercompany transactions among the Company and the Restricted
Subsidiaries. For the avoidance of doubt, the Company hereby acknowledges that
Total Restricted Subsidiary Debt includes the amount of Debt of any Restricted
Subsidiary attributable to its Guaranty of any liabilities of another Person
(including the Company or any Subsidiary) made in favor of any Person other
than the Company or another Restricted Subsidiary. Notwithstanding the
foregoing, the term "Total Restricted Subsidiary Debt" shall not, at any time
prior to May 15, 1997 (but shall, at all times from and after May 15, 1997), be
deemed to include any Debt of CAC International attributable to its Guaranty,
for the benefit of the Banks, of the liabilities of the Company and certain
Subsidiaries under the Credit Agreement.
TRANSFERS -- Section 6.8(a).
UNRESTRICTED SUBSIDIARY -- means any Subsidiary that, as of the date
of this Agreement, is designated in Part 6.17(a) of Annex 3 as an Unrestricted
Subsidiary or, after the date of this Agreement, has been designated as an
Unrestricted Subsidiary as provided in Section 6.17.
VOTING STOCK -- means capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors (or Persons performing
similar functions).
WHOLLY-OWNED RESTRICTED SUBSIDIARY -- means, at any time, any
Restricted Subsidiary one hundred percent (100%) of all of the equity
Securities (except directors' qualifying shares) and voting Securities of which
are owned by, and all of the Debt of which is held by, any one or more of the
Company and the other Wholly-Owned Restricted Subsidiaries at such time.
CREDIT ACCEPTANCE CORPORATION 56 NOTE PURCHASE AGREEMENT
<PAGE> 61
9.2 GAAP.
Where the character or amount of any asset or liability or item of
income or expense, or any consolidation or other accounting computation is
required to be made for any purpose hereunder, it shall, unless otherwise
specified, be done in accordance with GAAP, provided, that if any term defined
herein includes or excludes amounts, items or concepts that would not be
included in or excluded from such term if such term were defined with reference
solely to GAAP, such term will be deemed to include or exclude such amounts,
items or concepts as set forth herein.
9.3 DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be taken by any Person,
or that such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
9.4 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The
titles of the Sections of this Agreement and the Table of Contents of
this Agreement appear as a matter of convenience only, do not
constitute a part hereof and shall not affect the construction hereof.
The words "herein," "hereof," "hereunder" and "hereto" refer to this
Agreement as a whole and not to any particular Section or other
subdivision. Unless otherwise specified, references to Sections are
to Sections of this Agreement, references to Annexes are to Annexes to
this Agreement and references to Exhibits are to Exhibits to this
Agreement.
(b) CONSTRUCTION. Each covenant contained herein shall
be construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
9.5 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.
10. MISCELLANEOUS
10.1 COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder or
under the Notes shall be in writing and shall be delivered (w) by hand
delivery, or (x) by deposit into the United States mail (registered or
certified mail), postage prepaid, or (y) by overnight courier, or (z)
by facsimile transmission (confirmed by sending a duplicate copy by
overnight courier on the day of such transmission); and shall be
addressed,
CREDIT ACCEPTANCE CORPORATION 57 NOTE PURCHASE AGREEMENT
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(i) if to the Company,
Credit Acceptance Corporation
25505 West Twelve Mile Road
Suite 3000
Southfield, Michigan 48034-8339
Attention: Brett A. Roberts
Chief Financial Officer
Facsimile: (810) 827-8513
or at such other address as the Company shall have furnished
in writing to all holders of the Notes at the time
outstanding, and
(ii) if to any of the holders of the Notes,
(A) if such holders are the Purchasers,
at their respective addresses set forth on Annex 1,
and further including any parties referred to on
Annex 1 that are required to receive notices in
addition to such holders of the Notes, and
(B) if such holders are not the
Purchasers, at their respective addresses set forth
in the register for the registration and transfer of
Notes maintained pursuant to Section 6.13,
or to any such party at such other address as such party may
designate by notice duly given in accordance with this Section
10.1 to the Company (which other address shall be entered in
such register).
(b) WHEN GIVEN. Any communication so addressed and
deposited in the United States mail, postage prepaid, by registered or
certified mail (in each case, with return receipt requested) shall be
deemed to be received on the third (3rd) succeeding Business Day after
the day of such deposit (not including the date of such deposit). Any
communication so addressed and otherwise delivered shall be deemed to
be received when actually received at the address of the addressee.
(c) CERTIFICATES, ETC. Whenever under this Agreement any
certificate or other writing is given by any director, officer or
employee of the Company or any Subsidiary, such certificate or other
writing shall be delivered by such director, officer or employee on
behalf of the Company or such Subsidiary in his or her capacity as
such director, officer or employee, and not in his or her individual
capacity.
10.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation,
(a) consents, waivers and modifications that may
hereafter be executed,
(b) documents received by you at the closing of your
purchase of the Notes (except the Notes themselves), and
CREDIT ACCEPTANCE CORPORATION 58 NOTE PURCHASE AGREEMENT
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(c) financial statements, certificates and other
information previously or hereafter furnished to you or any other
holder of Notes,
may be reproduced by any holder of Notes by any photographic, photostatic,
microfilm, micro-card, miniature photographic, digital or other similar process
and each holder of Notes may destroy any original document so reproduced. The
Company agrees and stipulates that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such holder of Notes in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. Nothing in this Section
10.2 shall prohibit the Company or any holder of Notes from contesting the
validity or the accuracy of any such reproduction.
10.3 SURVIVAL.
(a) All warranties, representations, certifications and
covenants made by the Company herein or in any certificate or other
instrument delivered by it or on its behalf hereunder shall be
considered to have been relied upon by you and shall survive the
delivery to you of the Notes regardless of any investigation made by
you or on your behalf. All statements in any such certificate or
other instrument shall constitute warranties and representations by
the Company hereunder.
(b) All warranties and representations made by you herein
shall be considered to have been relied upon by the Company and shall
survive the execution and delivery of this Agreement regardless of any
investigation made by the Company or on its behalf.
10.4 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. Subject to the last
sentence of Section 5.1, the provisions hereof are intended to be for the
benefit of all holders, from time to time, of Notes, and shall be enforceable
by any such holder, whether or not an express assignment to such holder of
rights hereunder shall have been made by you or your successor or assign.
10.5 AMENDMENT AND WAIVER.
(a) REQUIREMENTS. This Agreement may be amended, and the
observance of any term hereof may be waived, with (and only with) the
written consent of the Company and the Required Holders; provided that
no such amendment or waiver of any of the provisions of Section 1
through Section 4, inclusive, or any defined term used therein, shall
be effective as to any holder of Notes unless consented to by such
holder in writing; and provided further that no such amendment or
waiver shall, without the written consent of the holders of all Notes
(exclusive of Notes held by the Company, any Subsidiary or any
Affiliate) at the time outstanding,
(i) subject to Section 8, change the amount or
time of any prepayment or payment of principal or Make-Whole
Amount or the rate or time of payment of interest,
(ii) amend Section 8,
(iii) amend the definition of Required Holders, or
CREDIT ACCEPTANCE CORPORATION 59 NOTE PURCHASE AGREEMENT
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(iv) amend this Section 10.5.
(b) SOLICITATION OF NOTEHOLDERS.
(i) SOLICITATION. The Company shall not solicit,
request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions hereof or the
Notes unless each holder of the Notes (irrespective of the
amount of Notes then owned by it) shall be provided by the
Company with sufficient information to enable it to make an
informed decision with respect thereto. Executed or true and
correct copies of any waiver or consent effected pursuant to
the provisions of this Section 10.5 shall be delivered by the
Company to each holder of outstanding Notes immediately
following the date on which the same shall have been executed
and delivered by all holders of outstanding Notes required to
consent or agree to such waiver or consent.
(ii) PAYMENT. The Company shall not, directly or
indirectly, pay or cause to be paid any remuneration, whether
by way of supplemental or additional interest, fee or
otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by
any holder of Notes of any waiver or amendment of any of the
terms and provisions hereof unless such remuneration is
concurrently paid, or security is concurrently granted, on the
same terms, ratably to the holders of all Notes then
outstanding.
(iii) SCOPE OF CONSENT. Any consent made pursuant
to this Section 10.5 by a holder of Notes that has transferred
or has agreed to transfer its Notes to the Company, any
Subsidiary or any Affiliate and has provided or has agreed to
provide such written consent as a condition to such transfer
shall be void and of no force and effect except solely as to
such holder, and any amendments effected or waivers granted or
to be effected or granted that would not have been or would
not be so effected or granted but for such consent (and the
consents of all other holders of Notes that were acquired
under the same or similar conditions) shall be void and of no
force and effect, retroactive to the date such amendment or
waiver initially took or takes effect, except solely as to
such holder.
(c) BINDING EFFECT. Except as provided in Section
10.5(b)(iii), any amendment or waiver consented to as provided in this
Section 10.5 shall apply equally to all holders of Notes and shall be
binding upon them and upon each future holder of any Note and upon the
Company whether or not such Note shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall extend to
or affect any obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or impair any right consequent
thereon.
(d) EXPENSES. The Company shall pay when billed your
reasonable expenses relating to the consideration, negotiation,
preparation or execution of any amendments, waivers or consents
pursuant to the provisions hereof (including, without limitation, the
allocated cost of your counsel who are your employees or your
affiliates' employees), whether or not any such amendments, waivers or
consents are executed, including, without limitation, any amendments,
waivers or consents resulting from any work-out, restructuring or
similar proceedings relating to the performance by the Company of its
obligations under this Agreement or the Notes.
CREDIT ACCEPTANCE CORPORATION 60 NOTE PURCHASE AGREEMENT
<PAGE> 65
10.6 PAYMENTS ON NOTES.
(a) MANNER OF PAYMENT. The Company shall pay all amounts
payable with respect to each Note (without any presentment of such
Notes and without any notation of such payment being made thereon) by
crediting, by federal funds bank wire transfer, the account of the
holder thereof in any bank in the United States of America as may be
designated in writing by such holder, or in such other manner as may
be reasonably directed or to such other address in the United States
of America as may be reasonably designated in writing by such holder.
Annex 1 shall be deemed to constitute notice, direction or designation
(as appropriate) to the Company with respect to payments as aforesaid.
In the absence of such written direction, all amounts payable with
respect to each Note shall be paid by check mailed and addressed to
the registered holder of such Note at the address shown in the
register maintained by the Company pursuant to Section 5.1.
(b) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or
with respect to, any Note shall fall due on a day other than a
Business Day, then such payment shall be made on the first (1st)
Business Day immediately preceding the day on which such payment shall
have so fallen due.
(c) PAYMENTS, WHEN RECEIVED. Any payment to be made to
the holders of Notes hereunder or under the Notes shall be deemed to
have been made on the Business Day such payment actually becomes
available to such holder at such holder's bank prior to 11:00 a.m.
(local time of such bank).
10.7 ENTIRE AGREEMENT; SEVERABILITY.
This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms. In case
any one or more of the provisions contained in this Agreement or in any Note,
or any application thereof, shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein, and any other application thereof, shall not in
any way be affected or impaired thereby.
10.8 DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two (2) or more duplicate originals hereof may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Agreement may be executed in one
or more counterparts and shall be effective when at least one counterpart shall
have been executed by each party hereto, and each set of counterparts that,
collectively, show execution by each party hereto shall constitute one
duplicate original.
10.9 CONSENT TO JURISDICTION; ETC.
(a) CONSENT TO JURISDICTION. ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE
DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY
ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN
RESPECT OF ANY BREACH UNDER THIS AGREEMENT OR ANY DOCUMENT OR
AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY
FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR ANY NEW
YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY
IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION
CREDIT ACCEPTANCE CORPORATION 61 NOTE PURCHASE AGREEMENT
<PAGE> 66
AND DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION
OF EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
AND AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY
OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT
TO THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH
OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT OR
TRANSACTION CONTEMPLATED HEREBY BROUGHT IN ANY SUCH COURT, AND HEREBY
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(b) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY
AGREES THAT PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED
MAIL AT THE ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO
THE EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY
ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN
RESPECT OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT
CONTEMPLATED HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE
CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY
THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
(c) OTHER FORUMS. NOTHING HEREIN SHALL IN ANY WAY BE
DEEMED TO LIMIT THE ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS,
PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO
OBTAIN JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND
IN SUCH OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
[REMAINDER OF PAGE INTENTIONALLY BLANK; NEXT PAGE IS SIGNATURE PAGE.]
CREDIT ACCEPTANCE CORPORATION 62 NOTE PURCHASE AGREEMENT
<PAGE> 67
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding
between us in accordance with its terms.
Very truly yours,
CREDIT ACCEPTANCE CORPORATION
By
-------------------------------
Name:
Title:
Accepted:
[PURCHASERS]
By
--------------------------
Name:
Title:
CREDIT ACCEPTANCE CORPORATION NOTE PURCHASE AGREEMENT
<PAGE> 1
CREDIT ACCEPTANCE CORPORATION Exhibit 11(1)
STATEMENT OF COMPUTATION OF NET
INCOME PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
----------- -----------
<S> <C> <C>
Actual
- ------
Net income .................................. $ 9,188 $ 12,038
Weighted average common shares outstanding .. 45,505,038 46,076,448
Common stock equivalents .................... 931,070 826,044
Weighted average common shares and
common stock equivalents ................. 46,436,108 46,902,492
----------- -----------
Net earnings per share ...................... $.20 $.26
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 186
<SECURITIES> 6,673
<RECEIVABLES> 1,132,979
<ALLOWANCES> 13,665
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 20,765
<DEPRECIATION> 4,212
<TOTAL-ASSETS> 1,165,256
<CURRENT-LIABILITIES> 0
<BONDS> 3,980
0
0
<COMMON> 461
<OTHER-SE> 258,606
<TOTAL-LIABILITY-AND-EQUITY> 1,165,256
<SALES> 0
<TOTAL-REVENUES> 41,769
<CGS> 0
<TOTAL-COSTS> 9,907
<OTHER-EXPENSES> 803
<LOSS-PROVISION> 7,053
<INTEREST-EXPENSE> 5,669
<INCOME-PRETAX> 18,337
<INCOME-TAX> 6,299
<INCOME-CONTINUING> 12,038
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,038
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
