<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14-A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14-a-6(e)(2))
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240. 14-a-11(c) or Section
240. 14-a-12
CREDIT ACCEPTANCE CORPORATION
(Name of registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14-a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:____________________________
(2) Aggregate number of securities to which transaction
applies:____________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth amount on which
the filing fee is calculated and state how it was
determined):________________________
(4) Proposed maximum aggregate value of transaction: _________________
(5) Total fee paid:_____________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid: ____________________________________
(2) Form, schedule or registration statement no.:_______________
(3) Filing party:_______________________________________________
(4) Date filed:_________________________________________________
<PAGE> 2
[CAC LOGO]
CREDIT ACCEPTANCE CORPORATION
25505 West Twelve Mile Road
Suite 3000
Southfield, Michigan 48034-8339
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 18, 1998
-----------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Credit Acceptance Corporation, a Michigan corporation, will be held at 400
Renaissance Center, 23rd Floor, Detroit, Michigan 48243, on Monday, May 18,
1998, at 9:00 a.m., local time, for the following purposes.
1. To elect five directors to serve until the 1999 Annual
Meeting of Shareholders; and
2. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Shareholders of record on April 6, 1998 will be entitled to notice of
and to vote at this meeting. You are invited to attend the meeting.
Whether or not you plan to attend in person, you are urged to sign and
return immediately the enclosed Proxy in the envelope provided. No postage
is required if the envelope is mailed in the United States. The Proxy is
revocable and will not affect your right to vote in person if you attend the
meeting.
By Order of the Board of Directors,
Donald A. Foss
Chairman, President and Chief Executive Officer
Southfield, Michigan
April 15, 1998
<PAGE> 3
[CAC LOGO]
CREDIT ACCEPTANCE CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 18, 1998
-----------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Credit Acceptance Corporation, a Michigan
corporation (the "Company"), to be used at the Annual Meeting of Shareholders
of the Company to be held on Monday, May 18, 1998, for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders and in this Proxy
Statement. This Proxy Statement and the enclosed form of Proxy were first sent
or given to security holders on April 15, 1998.
Only shareholders of record at the close of business on April 6, 1998 (the
"Record Date") will be entitled to vote at the meeting or any adjournment
thereof. Each holder of the 46,113,115 issued and outstanding shares of the
Company's common stock (the "Common Stock") on the Record Date is entitled to
one vote per share. The presence, either in person or by properly executed
proxy, of the holders of a majority of the outstanding shares of Common Stock
is necessary to constitute a quorum at the Annual Meeting.
A proxy may be revoked at any time before it is exercised by giving a
written notice to the Secretary of the Company bearing a later date than the
proxy, by submitting a later-dated proxy or by voting the shares represented by
the proxy in person at the Annual Meeting. Unless revoked, the shares
represented by each duly executed, timely delivered proxy will be voted in
accordance with the specifications made. If no specifications are made, such
shares will be voted for the election of directors as proposed in this Proxy
Statement. The Board of Directors does not intend to present any other matters
at the Annual Meeting. However, should any other matters properly come before
the Annual Meeting, it is the intention of such proxy holders to vote the proxy
in accordance with their best judgment.
The expenses of soliciting proxies will be paid by the Company. In
addition to solicitation by mail, the officers and employees of the Company,
who will receive no extra compensation therefor, may solicit proxies personally
or by telephone. The Company will reimburse brokerage houses, custodians,
nominees and fiduciaries for their expense in mailing proxy material to
principals.
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 31, 1998 concerning
beneficial ownership by all directors and nominees, by each of the executive
officers named in the Summary Compensation Table, by all directors and
executive officers as a group, and by all other beneficial owners of more than
5% of the outstanding shares of Common Stock. The number of shares
beneficially owned is determined under rules of the Securities and Exchange
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which the individual has sole or shared voting power
or investment power and also any shares which the individual has the right to
acquire on March 31, 1998 or within 60 days thereafter through the exercise of
any stock option or other right. Unless otherwise indicated, each holder has
sole investment and voting power with respect to the shares set forth in the
following table.
<PAGE> 4
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
BENEFICIALLY OWNED OUTSTANDING SHARES
------------------ ------------------
<S> <C> <C>
Donald A. Foss ................................................ 24,037,100 (a) 52.1%
Richard E. Beckman ............................................ 282,500 (b) *
Brett A. Roberts .............................................. 167,000 (c) *
Michael W. Knoblauch .......................................... 52,600 (d) *
Robert A. Derwa ............................................... 72,800 (e) *
Harry E. Craig ................................................ 10,000 *
Thomas A. FitzSimmons ......................................... 2,650 *
David T. Harrison ............................................. 4,800 *
Sam M. LaFata ................................................. 9,000 (f) *
All Directors and Executive Officers as a Group (14 persons)... 24,730,075 (g) 53.6%
Thomas W. Smith ............................................... 4,387,800 (h) 9.5%
Thomas N. Tryforos ............................................ 4,051,448 (h) 8.8%
The Capital Group Companies, Inc. ............................. 2,955,500 (i) 6.4%
</TABLE>
- ----------------------
* Less than 1%.
(a) Shares are held of record by the Donald A. Foss Revocable Living Trust
dated January 26, 1984 as to which Mr. Foss is the trustee. Mr. Foss'
business address is 25505 West Twelve Mile Road, Suite 3000, Southfield,
Michigan 48034-8339.
(b) Includes 22,500 shares held by the Richard E. Beckman Revocable Living
Trust as to which Mr. Beckman is the trustee and 260,000 shares which Mr.
Beckman has the right to acquire upon exercise of employee stock options.
(c) Includes 154,000 shares which Mr. Roberts has the right to acquire upon
exercise of employee stock options.
(d) Includes 50,000 shares which Mr. Knoblauch has the right to acquire upon
exercise of employee stock options.
(e) Includes 56,000 shares which Mr. Derwa has the right to acquire upon
exercise of employee stock options.
(f) Shares are held by the Sam M. LaFata Revocable Living Trust as to which Mr.
LaFata is the trustee.
(g) Includes a total of 601,000 shares which such persons have the right to
acquire upon exercise of employee stock options.
(h) The number of shares is based on information contained in a Schedule 13D
filed with the Securities and Exchange Commission by Mr. Thomas W. Smith
and Mr. Thomas N. Tryforos which reflects their beneficial ownership of
shares of Common Stock as of February 2, 1998. Mr. Thomas W. Smith and
Mr. Thomas N. Tryforos reported that they may be deemed to have shared
voting and dispositive power over 4,025,800 shares. Mr. Smith and Mr.
Tryforos each reported that they have sole voting and dispositive power
over 362,000 and 25,648 shares, respectively. The business address of Mr.
Smith and Mr. Tryforos is 323 Railroad Avenue, Greenwich, Connecticut
06830.
(i) The number of shares is based on information contained in a Schedule 13G
filed with the Securities and Exchange Commission by The Capital Group
Companies, Inc. which reflects its beneficial ownership of shares of
Common Stock as of February 10, 1998. The Capital Group reported that it
may be deemed to have sole voting and dispositive power over the entire
2,955,500 shares. The Capital 'Group's business address is 333 South Hope
Street, Los Angeles, California 90071.
2
<PAGE> 5
MATTERS TO COME BEFORE THE MEETING
(1) ELECTION OF DIRECTORS
Five directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting. Each director holds office until the next
annual meeting of shareholders and until his successor has been elected and
qualified. The nominees named below have been selected by the Board of
Directors of the Company. If, due to circumstances not now foreseen, any of
the nominees named below will not be available for election, the proxies will
be voted for such other person or persons as the Board of Directors may select.
Each of the nominees is currently a director of the Company.
The following sets forth information as to each nominee for election at
the Annual Meeting, including his age, present principal occupation, other
business experience during the last five years, directorships in other
publicly-held companies, membership on committees of the Board of Directors and
period of service as a director of the Company. The Board of Directors
recommends a vote FOR each of the nominees for election. THE PERSONS NAMED IN
THE ACCOMPANYING FORM OF PROXY WILL VOTE FOR THE ELECTION OF THE NOMINEES
UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES. The election of
directors requires a plurality of the votes cast.
DONALD A. FOSS; AGE 53; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF THE COMPANY
Mr. Foss is the founder and principal shareholder of the Company, in
addition to owning and controlling an affiliated company. He was formally
named Chairman of the Board and Chief Executive Officer of the Company in March
1992 and became the President as of March 31, 1998.
HARRY E. CRAIG, AGE 70; INDEPENDENT PERSONNEL CONSULTANT
Mr. Craig has been a self-employed consultant providing management
training services since 1986. From 1982 to 1986, Mr. Craig served as Director,
Personnel and Organization Office of Ford Aerospace & Communications
Corporation, previously a subsidiary of Ford Motor Company, and from 1956 to
1982 served in various managerial and other capacities with Ford Motor Company.
Mr. Craig became a director of the Company in June 1992.
THOMAS A. FITZSIMMONS; AGE 54; MANAGING DIRECTOR, CREDIT ACCEPTANCE
CORPORATION UK, LIMITED
Mr. FitzSimmons has been Managing Director of the Company's United Kingdom
operations since joining the Company in October 1997. Before joining the
Company, he had been a principal at William Blair & Company LLC, a full-service
investment banking/brokerage firm headquartered in Chicago from 1983 until June
1997 and most recently served as manager of its Financial Institutions Group
for more than five years. Mr. FitzSimmons became a director of the Company in
February 1994.
DAVID T. HARRISON; AGE 55; PRESIDENT OF PINNACLE APPRAISAL GROUP, INC. AND
SUMMIT PROPERTIES & DEVELOPMENT COMPANY
Mr. Harrison has been the President of Pinnacle Appraisal Group, Inc., a
real estate appraisal firm, since founding that Company in July 1991 and has
also been the President of Summit Properties & Development Company, a
residential builder, since November 1993. Prior to that time, Mr. Harrison was
President and Chief Executive Officer of First of America Bank-Southeast
Michigan, N.A. (the successor bank of First of America-Oakland/Macomb, N.A.), a
wholly-owned subsidiary of First of America Bank Corporation, for more than
five years. Mr. Harrison has served as a director of the Company since June
1992.
SAM M. LAFATA; AGE 64; GENERAL MANAGER OF MANHEIM METRO DETROIT AUTO
AUCTION
Mr. LaFata has been General Manager of Manheim Metro Detroit Auto Auction
since February 1991. From 1987 through 1990, Mr. LaFata served as an
automotive consultant for General Electric Capital Corp., Mercedes-Benz of
North America, Inc. and Toyota Motor Corp. Prior to that time, Mr. LaFata
served as President of an auto auction
3
<PAGE> 6
business he founded in 1969. Mr. LaFata sold this business in 1983 and
continued as President through 1986. Mr. LaFata has served as a director of the
Company since June 1992.
OTHER EXECUTIVE OFFICERS
ALLAN V. APPLE; AGE 57; SECRETARY
Mr. Apple, a certified public accountant, has been employed by the Company
since January 1992. From 1987 to 1991, he served as Chief Financial Officer of
the Company and was named to his present position in March 1992. He also
served as Executive Vice President from March 1992 until August 1995.
DOUGLAS W. BUSK; AGE 37; VICE PRESIDENT - FINANCE AND TREASURER
Mr. Busk joined the Company in November 1996 and has been Vice President -
Finance and Treasurer since January 1997. Previously, Mr. Busk was a Vice
President and Loan Officer of Comerica Bank from 1990 to 1996.
JOHN P. CAVANAUGH; AGE 32; CORPORATE CONTROLLER AND ASSISTANT SECRETARY
Mr. Cavanaugh has been employed by the Company since October 1993. He was
named to his present position in August 1995. Prior to joining the Company,
Mr. Cavanaugh was employed at KPMG Peat Marwick LLP in the audit division for
four years.
ROBERT A. DERWA; AGE 61; VICE PRESIDENT - OPERATIONS
Mr. Derwa has been Vice President - Operations since August 1995. He
served as President of the Company from 1989 until August 1995, and has been
employed by the Company since 1981 in various managerial capacities.
MICHAEL W. KNOBLAUCH; AGE 34; VICE PRESIDENT - COLLECTIONS
Mr. Knoblauch has been employed by the Company since 1992. He was named
Vice President - Collections in August 1995 and served as the Company's
collection manager from May 1994 to August 1995. Previously, he was the
Company's controller in charge of an affiliated company. Before joining the
Company, Mr. Knoblauch was on the financial staff of General Motors
Corporation, Service Parts Division, from 1989 to 1992.
CHARLES A. PEARCE; AGE 33; VICE PRESIDENT AND GENERAL COUNSEL
Mr. Pearce has been the Company's general counsel since January 1996 and
was named to his present position in January 1997. Mr. Pearce was associated
with the law firm of Rhoades, McKee, Boer, Goodrich and Titta from May 1990
until joining the Company in January 1996.
BRETT A. ROBERTS; AGE 31; EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
Mr. Roberts, a certified public accountant, joined the Company in 1991 as
Corporate Controller and was named Assistant Treasurer in March 1992 and Vice
President - Finance in April 1993. He was named Chief Financial Officer and
Treasurer in August 1995 and to his present position in January 1997. Before
joining the Company, he was employed at Arthur Andersen LLP in the audit
division for three years.
DAVID S. SIMMET; AGE 33; VICE PRESIDENT - INFORMATION SYSTEMS
Mr. Simmet has been employed by the Company since 1992. He was named Vice
President - Information Systems in October 1997. He served as the Company's
Director of Information Systems from April 1995 to October 1997 and as Manager
of Information Systems from August 1992 to April 1995. Before joining the
Company, Mr. Simmet was employed at Arthur Andersen LLP in the business systems
consulting practice for four years.
4
<PAGE> 7
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held eleven meetings during 1997. Standing
committees of the Board include the Audit Committee and the Executive
Compensation Committee. The current members of the committees are Messrs.
Craig, Harrison and LaFata. Mr. Fitzsimmons was also a member of these
committees until he joined the Company in October 1997.
The Audit Committee's principal responsibilities include: (a)
recommending the selection of the Company's independent public accountants, (b)
reviewing the scope of audits made by the independent public accountants, (c)
reviewing the audit reports submitted by the independent public accountants,
and (d) reviewing the Company's internal audit activities and matters
concerning financial reporting, accounting and audit procedures. The Audit
Committee held two meetings during 1997.
The Executive Compensation Committee's principal responsibilities include:
(a) reviewing on an annual basis the compensation of all executive officers of
the Company, (b) making recommendations to the Board regarding compensation of
executive officers, (c) reviewing all employee benefit plans pursuant to which
securities (including stock options) are granted to the Company's executive
officers, and (d) administering the Company's 1992 Stock Option Plan (the
"Option Plan"). The Executive Compensation Committee held two meetings during
1997.
During a portion of 1997, the Board also had a standing Stock Option
Committee comprised of Messrs. Craig, Harrison and LaFata, which was
responsible for administering the Option Plan. The Stock Option Committee
held two meetings in 1997.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY
The following table sets forth certain summary information for the years
indicated concerning the compensation awarded to, earned by, or paid to the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company (based on combined salary and bonus for 1997)
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL ------------
COMPENSATION AWARDS
------------------------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($)(a) COMPENSATION($)(b) OPTIONS/SARS(#) COMPENSATION($)(c)
- ------------------------ ---- --------- ----------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Foss ................ 1997 $450,000 $ - $16,076 - $ 625
Chairman of the 1996 400,000 150,000 10,000 - 625
Board, President and Chief 1995 400,000 - 4,929 - 625
Executive Officer
Richard E. Beckman (d) ........ 1997 $300,000 $ - $22,384 350,000 (e) $1,495
Former President, 1996 250,000 100,000 21,825 300,000 1,495
Chief Operating Officer, 1995 250,000 - 24,004 50,000 1,495
and Director
Brett A. Roberts .......... 1997 $225,000 $ - $ - 350,000 (e) $ 895
Executive Vice President 1996 150,000 135,000 - - 895
and Chief Financial Officer 1995 96,250 - - 100,000 865
Michael W. Knoblauch ...... 1997 $170,000 $ - $ - 300,000 (e) $ 895
Vice President - 1996 120,000 125,000 - - 895
Collections 1995 69,056 1,228 - 100,000 895
Robert A. Derwa ........... 1997 $105,000 $ - $ 1,177 50,000 (e) $4,135
Vice President - 1996 100,000 36,000 2,800 - 2,875
Operations 1995 100,000 1,228 1,800 20,000 2,875
</TABLE>
- -----------------
(a) Annual bonus amounts are earned and accrued during the fiscal years
indicated and paid in the following year. See "Compensation of Executive
Officers - Report of the Executive Compensation Committee."
(b) The amounts disclosed in this column are comprised of tax "gross-ups"
relating to automobile allowances and, in the case of Mr. Beckman, an
interest reimbursement of $24,004, $21,825 and $22,384 in 1995, 1996 and
1997, respectively. See Note (d).
(c) The amounts disclosed in this column for 1997 are comprised of the
Company's matching contribution for the 401(k) Profit Sharing Plan of
$625 for each officer and of amounts paid for split beneficiary life
insurance policies of $870, $270, $270 and $3,510 for Messrs. Beckman,
Roberts, Knoblauch and Derwa, respectively.
(d) Mr. Beckman ceased to be an executive officer and director on March 31,
1998. A portion of the services for which Mr. Beckman was compensated by
the Company were rendered on behalf of an affiliated company and the
Company was reimbursed a pro rata portion of his salary. See "Certain
Relationships and Transactions - Services". As an inducement to commence
employment with the Company, the Company loaned Mr. Beckman $228,000,
which is the highest amount outstanding during the term of such loan,
with interest paid annually at the Internal Revenue Service allowed rate
of interest (as in effect from time to time). The Company agreed to
reimburse Mr. Beckman for such interest payments. The indebtedness
became due and payable upon termination of Mr. Beckman's employment by
Mr. Beckman for any reason or by the Company for cause. If the Company
terminated Mr. Beckman's employment other than for cause, the
indebtedness would be forgiven. The Company assigned the related
promissory note to an affiliated company effective December 31, 1991.
Upon Mr. Beckman's resignation, the loan and all accrued interest was
forgiven.
6
<PAGE> 9
(e) Amounts include new option grants, options granted in prior years and
repriced, and options granted in the current year and repriced but does
not deduct options granted previously and subsequently cancelled pursuant
to a repricing. The following table summarizes option activity for the
named executive officers (other than Mr. Foss) during 1997. See also
"Compensation of Executive Officers - Options - Option/SAR Grants in Last
Fiscal Year".
<TABLE>
<CAPTION>
Richard E. Beckman Brett A. Roberts Michael W. Knoblauch Robert A. Derwa
------------------ ---------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Beginning of year
options held................ 650,000 254,000 160,000 115,000
New option grants........... - 125,000 100,000 15,000
Options cancelled........... (350,000) (225,000) (200,000) (35,000)
Options repriced............ 350,000 225,000 200,000 35,000
Options exercised........... (40,000) - (10,000) (39,000)
------- ------- -------- --------
End of year options held.... 610,000 379,000 250,000 91,000
======= ======= ======== ========
</TABLE>
OPTIONS
The following table provides information on option grants and repricings
during 1997 to the Named Executive Officers. All such options were granted
under the Company's Option Plan. Options granted prior to 1997 but repriced
during 1997 are indicated with an asterisk.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
PERCENT POTENTIAL REALIZABLE VALUE
OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF SECURITIES OPTIONS/SARS OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS/ GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION FOR OPTION TERM (e)
NAME SARS GRANTED (#) IN FISCAL YEAR ($/SHARE) DATE ---------------------------
---- -------------------- ------------------- -------------- ---------- 5% ($) 10% ($)
------ -------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Foss....... - - $ - - $ - $ -
Richard E. Beckman... 350,000 (a)* 11.59% 6.00 11/03/07 1,106,886 3,006,430
Brett A. Roberts..... 125,000 (b) 4.14% 22.00 01/06/07 1,818,540(b) 4,524,637(b)
100,000 (c)* 3.31% 6.00 11/03/07 316,222 858,894
125,000 (d) 4.14% 6.00 11/03/07 395,348 1,073,811
Michael W. Knoblauch. 100,000 (b) 3.31% 22.00 01/06/07 1,454,832(b) 3,619,710(b)
100,000 (c)* 3.31% 6.00 11/03/07 316,222 858,894
100,000 (d) 3.31% 6.00 11/03/07 316,222 858,894
Robert A. Derwa...... 15,000 (b) 0.50% 22.00 01/06/07 218,225(b) 542,956(b)
20,000 (c)* 0.66% 6.00 11/03/07 63,248 171,787
15,000 (d) 0.50% 6.00 11/03/07 47,441 128,856
</TABLE>
- ---------------
(a) These options, which were originally granted prior to 1997, were repriced
on November 3, 1997 and were scheduled to become exercisable in three equal
annual installments beginning one year after the repricing date, or
immediately upon a change of control of the Company. Mr. Beckman ceased to
be an executive officer of the Company on March 31, 1998 and the options
terminated.
(b) These options were cancelled on November 3, 1997 and thus have no current
value. See Note (d).
(c) These options, which were originally granted prior to 1997, were repriced
on November 3, 1997 and become exercisable in three equal annual
installments beginning one year after the repricing date, or immediately
upon a change in control of the Company.
(d) These options were originally granted on January 6, 1997 and were
originally scheduled to become exercisable in three equal annual
installments beginning one year after the grant date, or immediately upon a
change in control of the Company. See Note (b). The options were repriced
on November 3, 1997. The repriced options become exercisable in three equal
annual installments beginning one year after the repricing date, or
immediately upon a change in control of the Company.
(e) Represents the value of such option at the end of its 10-year term (without
discounting to present value), assuming the market price of the Common
Stock appreciates from the exercise price beginning on the grant date at an
annually compounded rate of 5% or 10%. These amounts represent assumed
rates of appreciation only. Actual gains, if any, will be dependent on
overall market conditions and on the future performance of the Common
Stock. There can be no assurance that the price appreciation reflected in
this table will be achieved.
7
<PAGE> 10
The following table provides information with respect to the options
exercised during 1997 and the unexercised options held as of December 31, 1997
by the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(a)
SHARES ACQUIRED ------------------------------ --------------------------
NAME ON EXERCISE (#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Foss .............. - $ - - - $ - $ -
Richard E. Beckman........... 40,000 898,336 260,000 350,000 893,344 612,500
Brett A. Roberts............. - - 154,000 225,000 301,504 393,750
Michael W. Knoblauch......... 10,000 115,000 50,000 200,000 0 350,000
Robert A. Derwa.............. 39,000 832,003 56,000 35,000 284,753 1,250
</TABLE>
(a) Values are based on the December 31, 1997 closing price of $7.75 per
share on The Nasdaq Stock Market's National Market.
The following table provides information concerning all repricing of
options to purchase Common Stock held by any executive officer of the Company
since June 5, 1992, the date of the Company's initial public offering.
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF MARKET PRICE EXERCISE OPTION TERM
SECURITIES OF STOCK AT PRICE AT REMAINING AT
UNDERLYING TIME OF TIME OF DATE OF
OPTIONS/SARS REPRICING OR REPRICING OR NEW REPRICING OR
REPRICED OR AMENDMENT AMENDMENT EXERCISE AMENDMENT
NAME DATE AMENDED (#) ($) ($) PRICE ($) (# OF MONTHS)
---- ---- ------------ ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Beckman.......
Former President and Chief 11/03/97 50,000 $5.63 $19.31 $6.00 97
Operating Officer, Director 11/03/97 300,000 5.63 18.75 6.00 105
Brett A. Roberts.........
Executive Vice President 11/03/97 100,000 $5.63 $19.31 $6.00 97
and Chief Financial Officer 11/03/97 125,000 5.63 22.00 6.00 110
Michael W. Knoblauch..... 11/03/97 100,000 $5.63 $19.31 $6.00 97
Vice President - Collections 11/03/97 100,000 5.63 22.00 6.00 110
Robert A. Derwa.......... 11/03/97 20,000 $5.63 $19.31 $6.00 97
Vice President - Operations 11/03/97 15,000 5.63 22.00 6.00 110
Douglas W. Busk..........
Vice President - Finance and 11/03/97 100,000 $5.63 $26.63 $6.00 108
Treasurer 11/03/97 5,000 5.63 22.00 6.00 110
John P. Cavanaugh........
Corporate Controller and 11/03/97 30,000 $5.63 $19.31 $6.00 97
Assistant Secretary 11/03/97 25,000 5.63 22.00 6.00 110
Charles A. Pearce........
Vice President and 11/03/97 5,000 $5.63 $19.31 $6.00 97
General Counsel 11/03/97 15,000 5.63 22.00 6.00 110
David S. Simmet..........
Vice President - Information 11/03/97 50,000 $5.63 $19.31 $6.00 97
Systems 11/03/97 50,000 5.63 22.00 6.00 110
</TABLE>
8
<PAGE> 11
EXECUTIVE COMPENSATION COMMITTEE REPORT ON STOCK OPTION REPRICINGS
During the fourth quarter of 1997, the Executive Compensation Committee
observed that stock options held by the Company's executive officers were
exercisable at prices significantly in excess of then-current trading prices for
the Common Stock. These options no longer served the purpose for which they were
intended and provided no real long-term incentive to these executive officers.
As a result, the Committee determined it appropriate to reprice all of the
options granted to the executive officers in 1995 and 1996, so that these
options would once again provide realistic incentive to the Company's executive
officers. In addition, by repricing options, the Company provided the executive
officers with an opportunity to increase their stock holdings in order to
further align their interest with those of the Company shareholders.
Accordingly, in November 1997, the Company offered to amend existing
options to purchase an aggregate of 1,090,000 shares of Common Stock under the
Option Plan held by the executive officers by reducing the exercise price of
such options to $6.00 per share, which exceeded the then current fair market
value of the Common Stock, as defined in the Option Plan. Previously, such
repriced options had exercise prices ranging from $18.75 to $26.63. In exchange
for the repricing of existing stock options, the executive officers agreed that
the repriced options would become unexercisable and would vest in three equal
annual installments beginning one year after the repricing date.
EXECUTIVE COMPENSATION COMMITTEE:
HARRY E. CRAIG DAVID T. HARRISON SAM M. LAFATA
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Harry E. Craig, Thomas A. FitzSimmons, David T. Harrison and Sam M. LaFata
served on the Executive Compensation Committee of the Board of Directors during
1997. Mr. FitzSimmons was also a Partner of William Blair & Company LLC,
an investment banking/brokerage firm. William Blair & Company LLC is a
principal market maker for the Common Stock and served as placement agent for
the sale of the Company's $71,750,000 7.77% Senior Note due October 1, 2001.
Upon joining the Company in October 1997 as Managing Director of the Company's
subsidiary which operates in the United Kingdom, Mr. FitzSimmons ceased to
serve on the Executive Compensation Committee.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee, comprised of directors who are not
employees of the Company, annually reviews and makes recommendations to the
Board of Directors regarding executive compensation. It is the philosophy of the
Committee that the executive compensation program should align the financial
interests of the Company's executives with the long term interests of the
Company and its shareholders and should attract and retain qualified executives
to lead the Company toward its goals. The key elements of the Company's current
program include a base salary, a bonus plan linked to the Company's financial
performance and equity participation through stock options.
BASE SALARY.
The Executive Compensation Committee's policy with respect to salaries is
to establish base compensation levels for executives which are competitive in
relation to other companies of similar size within the Company's industry. The
Executive Compensation Committee will also take into consideration the
executive's responsibilities, experience level, and individual performance.
Salaries are reviewed annually and are adjusted based on the recommendation of
management.
9
<PAGE> 12
BONUS PLAN.
The Company's executive officers and certain other key employees
participate in a bonus program which is intended to provide a direct link
between executive compensation and the performance of both the individual and
the Company. The bonus program has been designed so that the size of the annual
bonus pool is equal to a specified portion of the Company's net income in excess
of the earnings goal established under the plan and reviewed and approved by the
Executive Compensation Committee. An executive's share of this pool will be
based in part on that executive's overall performance grade and salary level and
in part on that executive's performance measured through achievement of specific
objectives. Each executive's performance is evaluated by the Executive
Compensation Committee based upon the report and recommendation of management.
The Executive Compensation Committee reserves the right to award only a portion
of the total bonus pool should individual objectives not be met.
STOCK OPTIONS.
Under the Option Plan, the Executive Compensation Committee may grant
options to purchase Common Stock to employees of the Company, including
executive officers. Option grants become exercisable over a period of time and
generally have an exercise price equal to the fair market value of the Common
Stock on the grant date, creating long term incentives to enhance the value of
the Company's Common Stock. Generally, the Executive Compensation Committee
considers the grant of options to executive officers and key managers on an
annual basis. The number of options awarded and the related vesting period are
determined based upon management's recommendation and are generally a function
of the position held by an executive and his expected contribution to the
Company's future growth and profitability.
THE CHIEF EXECUTIVE OFFICER'S 1997 COMPENSATION.
The Executive Compensation Committee's approach to Mr. Foss' compensation
is consistent with the Executive Compensation Committee's approach to all other
executive officers. Mr. Foss receives a base salary based upon his
responsibilities and experience and which the Executive Compensation Committee
believes is comparable to the salaries of other chief executive officers at
similar companies. In determining Mr. Foss' compensation, the Executive
Compensation Committee considered the Company's financial performance for the
prior year and Mr. Foss' contribution to the short- and long-term objectives of
the Company. The Executive Compensation Committee considered the Company's
financial performance in 1996 to be strong, with net income increasing 40.4%
over 1995 and earnings per share increasing 30.1% over 1995. As a result of the
Executive Compensation Committee's review of Mr. Foss' 1996 performance, his
1997 base salary was established at $450,000, representing a 12.5% increase
over the previous year's base salary of $400,000. Mr. Foss is eligible for the
Company's bonus and stock option programs. Mr. Foss did not receive a bonus for
1997 as the Company did not meet the specific earnings per share targets
established under the bonus plan. Due to Mr. Foss' substantial equity position,
he did not accept any stock options during 1997.
The Executive Compensation Committee believes that the above elements
assist the Company in meeting its short-term and long-term business objectives
and appropriately relate executive compensation to the Company's performance.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION.
Section 162(m) of the Internal Revenue Code of 1986, as amended, restricts
the deductibility of executive compensation paid to the Company's Chief
Executive Officer and any of the four other most highly compensated executive
officers at the end of any fiscal year to not more than $1 million in annual
compensation (including gains from the exercise of certain stock option
grants). Certain performance-based compensation is exempt from this limitation
if it complies with the various conditions described in Section 162(m). The
Option Plan contains a restriction on the number of options that may be granted
which is intended to cause compensation realized in connection with the
exercise of options granted under the Option Plan to comply with these
conditions and be exempt from the Section 162(m) restriction on deductibility.
10
<PAGE> 13
The Executive Compensation Committee does not believe that other
components of the Company's compensation program are likely to result in
payments to any executive officer in any year which would be subject to the
restriction on deductibility and has concluded that no further action with
respect to qualifying such compensation for deductibility is necessary at this
time. The Executive Compensation Committee intends to continue to evaluate from
time to time the advisability of qualifying future executive compensation
programs for exemption from the Section 162(m) restriction on deductibility.
EXECUTIVE COMPENSATION COMMITTEE:
HARRY E. CRAIG DAVID T. HARRISON SAM M. LaFATA THOMAS A FITZSIMMONS
DIRECTOR COMPENSATION
For 1997, all outside Board members received $1,500 for each Board
meeting attended plus $500 for each Committee meeting attended and were
reimbursed for travel related expenses.
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
shareholder return on the Company's Common Stock during the period beginning on
January 1, 1993 and ending on December 31, 1997 with the cumulative total return
on the Nasdaq Market index and a peer group index based upon the approximately
150 companies included in the Dow Jones - Diversified Financial Services
Industry Group. The comparison assumes that $100 was invested on December 31,
1992 in the Company's Common Stock and in the foregoing indices and assumes the
reinvestment of dividends.
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Credit Acceptance Corporation $100.00 $217.67 $315.40 $368.71 $417.57 $137.71
Nasdaq Market Index $100.00 $119.95 $125.94 $163.35 $202.99 $248.30
Peer Group $100.00 $118.63 $113.08 $173.14 $231.10 $341.86
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In the normal course of business, the Company has maintained business
relationships and engaged in certain transactions with an investment banking
firm with which one director was previously affiliated (see "Compensation of
Executive Officers - Compensation Committee Interlocks and Insider
Participation") and with an affiliated company owned by the Company's Chairman
(the "affiliated company") which operates certain affiliated dealers.
CONTRACT ASSIGNMENTS
As part of its business, the Company regularly accepts installment
contracts originated by the affiliated company, which aggregated approximately
$13.4 million in 1997, and represented approximately 4% of gross installment
contracts receivable as of December 31, 1997. The Company accepted contracts
from the affiliated company on the same terms as those accepted from
unaffiliated dealers.
12
<PAGE> 15
INDEBTEDNESS
As of December 31, 1997, the affiliated company was indebted to the
Company in the amount of $531,000 for borrowings used for working capital
purposes. The largest amount of such indebtedness outstanding during 1997 was
$1,219,234. Such indebtedness is due on demand and is secured by cash
collections on contracts accepted from the affiliated company.
Pursuant to floor plan arrangements, as of December 31, 1997, the
affiliated company was indebted to the Company for $11.7 million. The largest
amount of such indebtedness outstanding during 1997, including accrued interest,
was $12.4 million. Such indebtedness is due as the vehicles securing such
indebtedness are sold, and bears interest at 4% above the prime rate, with a
minimum of 12%. These arrangements are secured by the related inventory and
future cash collections on installment contracts accepted from the affiliated
company.
These loans are made on the same terms and conditions as loans made to
unaffiliated dealers.
SERVICES
The Company and the affiliated company have entered into a Services
Agreement (the "Services Agreement") which provides that the Company will render
specified services to the affiliated company, including services relating to
insurance management, payroll, tax return preparation and retaining
professionals. The affiliated company pays a monthly fee to the Company for such
services which is approximately equivalent to the Company's cost of rendering
such services and is calculated based on: (i) a percentage of the monthly salary
of certain Company employees; (ii) a fee for any tax return prepared and filed
by the Company on behalf of the affiliated company (ranging from $300 to $3,000
depending on the type of return); and (iii) an additional amount equal to the
allocable share of fees for professional services and insurance premiums and
deductibles paid by the Company during the preceding month, less the Company?s
share of any such fees paid by the affiliated company during the preceding
month. The monthly fee includes a fee for the cost of office space owned by the
Company and used by the affiliated company. The Services Agreement continues
until terminated by the Company or the affiliated company upon 30 days prior
written notice. During 1997, the Company charged the affiliated company
approximately $247,000 and was charged approximately $45,000 under the Services
Agreement.
INDEPENDENT ACCOUNTANTS
The accounting firm of Arthur Andersen LLP acted as independent
accountants to audit the financial statements of the Company and its
consolidated subsidiaries for 1997 and has conducted the audits for the Company
since 1986. The Audit Committee has not yet completed its evaluation of the 1997
audit process. As a result, the selection of the independent accountants to
audit the financial statements of the Company for the fiscal year ended December
31, 1998 will be made by the Board of Directors at a later date. Representatives
of Arthur Andersen LLP are expected to be at the annual meeting and to be
available to respond to appropriate questions. Such representatives will have
the opportunity to make a statement if they desire to do so.
OTHER BUSINESS MATTERS
The only matters which management intends to present to the meeting are
set forth in the Notice of Annual Meeting. Management knows of no other matters
which will be brought before the meeting by any other person. However, if any
other matters are properly brought before the meeting, the persons named on the
enclosed form of proxy intend to vote on such matters in accordance with their
best judgment on such matters.
Enclosed with this Notice of Annual Meeting and Proxy Statement is a
copy of the Company's 1997 Annual Report on Form 10-K. The Company has also
published a formal annual report which is available without charge to
shareholders upon request. Address all requests, in writing, to the Investor
Relations Department, Credit Acceptance Corporation, P.O. Box 513, Southfield,
Michigan 48037.
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<PAGE> 16
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals by shareholders which are intended to be presented at the
1999 Annual Meeting of Shareholders must be submitted to the Secretary of the
Company no later than December 16, 1998 in order to be considered for inclusion
in the Company's 1999 proxy materials.
By Order of the Board of Directors,
Donald A. Foss
Chairman, President and Chief Executive Officer
April 15, 1998
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<PAGE> 17
<TABLE>
<S><C>
[ ]
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote *EXCEPTIONS
listed below [X] for all nominees listed below [X] [X]
Nominees: Donald A. Foss, Harry E. Craig, Thomas A. FitzSimmons, David T. Harrison and Sam M. LaFata.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.)
*Exceptions
------------------------------------------------------------------------------------------------------------------------
Change of Address and
or Comments Mark Here [X]
NOTE: Please sign exactly as name(s) appear(s) on stock records. When
signing as attorney, administrator, trustee, guardian or corporate officer,
please so indicate
Signature
------------------------------------------------------------------
Date
-----------------------------------------------------------------------
Signature
------------------------------------------------------------------
Date
-----------------------------------------------------------------------
VOTES MUST BE INDICATED
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE (X) IN BLACK OR BLUE INK. [ ]
ENCLOSED POSTAGE PREPAID ENVELOPE.)
</TABLE>
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CREDIT ACCEPTANCE CORPORATION
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CREDIT ACCEPTANCE CORPORATION
The undersigned hereby constitutes and appoints Donald A. Foss and
Thomas A. FitzSimmons, and each of them, attorneys, agents and proxies
with power of substitution to vote all of the shares of Common Stock of Credit
Acceptance Corporation (the "Company") that the undersigned is entitled to vote
at the Annual Meeting of Shareholders of the Company, to be held at 400
Renaissance Center, 23rd Floor, Detroit, Michigan on May 18, 1998 at 9:00 a.m.,
local time, and at any adjournments thereof, upon the following matter proposed
by the Company.
This Proxy when properly executed will be voted in the manner directed.
In their discretion the proxies are also authorized to vote upon such other
matters as may properly come before the meeting, including the election of any
person to the Board of Directors where a nominee named in the Proxy Statement
dated April 15, 1998 is unable to serve or, for good cause, will not serve.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement dated April 15, 1998 and ratifies all that
the proxies or either of them on their substitutes may lawfully do or cause to
be done by virtue hereof and revokes all former proxies.
(Continued and to be Signed on Other Side.) CREDIT ACCEPTANCE CORPORATION
P.O. BOX 11382
NEW YORK, N.Y. 10203-0382
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